AETNA INC, S-4/A, 1996-06-13

AETNA INC
S-4/A, 1996-06-13
HOSPITAL & MEDICAL SERVICE PLANS

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<PAGE> 1

REGISTRATION NO. 333-05791

- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 1
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

AETNA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
CONNECTICUT 6719 02-0488491
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</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)
------------------------

RICHARD L. HUBER
VICE PRESIDENT
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> <C>
DAVID F. SIMON, ESQ. STEPHEN M. BANKER, ESQ. ZOE DAVID L. CAPLAN, ESQ.
U.S. HEALTHCARE, INC. SKADDEN, ARPS, SLATE, BAIRD, DAVIS POLK & WARDWELL
980 JOLLY ROAD MEAGHER & FLOM ESQ. 450 LEXINGTON AVENUE
P.O. BOX 1180 919 THIRD AVENUE AETNA NEW YORK, NY 10017
BLUE BELL, PA 19422 NEW YORK, NY 10022 LIFE (212) 450-4000
(215) 628-4800 (212) 735-3000 AND
CASUALTY
COMPANY
151
FARMINGTON
AVENUE
HARTFORD,
CT 06156
(860)
273-0123
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the mergers (including the receipt of certain regulatory
approvals) contemplated by the Agreement and Plan of Merger, dated as of March
30, 1996, as amended, described in the enclosed Joint Proxy
Statement/Prospectus, have been satisfied or waived.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share........... 153,579,780 shares (3) (3) (4)*
- ------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights.................. 153,579,780 rights (3) (3) (4)*
- ------------------------------------------------------------------------------------------------------------------------------
6.25% Class C Voting Preferred Stock, par value
$.01 per share................................. 11,839,108 shares (3) (3) (4)*
- ------------------------------------------------------------------------------------------------------------------------------
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) (4)*
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Based upon the assumed number of shares that may be issued in the mergers
described herein. Such assumed number is based upon the number of shares of
(i) Common Stock, par value $.01 per share, of the Registrant ("Parent
Common Stock") expected to be issued on the closing date of the mergers
based on the exchange ratio of 0.2246 shares of Parent 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 an exchange ratio of one share of Parent Common Stock
for each share of Common Stock, without par value, of Aetna Life and
Casualty Company ("Aetna Common Stock") and (ii) 6.25% Class C Voting
Preferred Stock, par value $.01 per share, of the Registrant ("Parent
Mandatorily Convertible Preferred Stock") expected to be issued on the
closing date of the mergers based on the exchange ratio of 0.0749 shares of
Parent Preferred Stock for each share of U.S. Healthcare Stock.
(2) There are being registered hereunder such presently indeterminate number of
shares of Parent Common Stock into which shares of Parent 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) $53.88 (the average of the high and low prices of U.S. Healthcare
Common Stock on June 7, 1996 on the NASDAQ Stock Market) times (ii)
143,636,098 (the aggregate number of shares of U.S. Healthcare Common Stock
outstanding and reserved for issuance upon the exercise of outstanding
options to purchase U.S. Healthcare Common Stock), (b) the product of (i)
$.005 (the book value of U.S. Healthcare Class B Stock computed as of June
3, 1996) times (ii) 14,429,426 (the aggregate number of shares of U.S.
Healthcare Class B Stock outstanding and (c) the product of (i) $72.19 (the
average of the high and low prices of Aetna Common Stock on June 7, 1996 on
the New York Stock Exchange) times (ii) 118,078,263 (the aggregate number of
shares of Aetna Common Stock outstanding and reserved for issuance upon the
exercise of options to purchase Aetna Common Stock and the vesting of Aetna
Common Stock grants) minus the sum of (a) the product of (i) $34.20 times
(ii) 143,636,098 (the aggregate number of shares of U.S. Healthcare Common
Stock outstanding and reserved for issuance upon the exercise of options to
purchase U.S. Healthcare Common Stock) and (b) the product of (i) $34.20
times (ii) 14,429,426 (the aggregate number of shares of U.S. Healthcare
Class B Stock outstanding).
(4) $3,743,935.86 (in accordance with Rule 457 under the Securities Act of 1933,
as amended, the fee of $3,241,929.67 paid by Aetna Life and Casualty Company
and U.S. Healthcare, Inc. pursuant to Section 14(g)(1)(A) of the Securities
Exchange Act of 1934, as amended, upon the filing of their preliminary proxy
material relating to the mergers has been credited against the registration
fee payable in connection with this filing).
* Has been previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

AETNA INC.

CROSS REFERENCE SHEET PURSUANT TO RULE 404(a) OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND ITEM 501(B) OF REGULATION S-K, SHOWING THE LOCATION IN THIS JOINT
PROXY STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4

<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION IN JOINT
NO. FORM S-4 CAPTION PROXY STATEMENT/PROSPECTUS
- ----- ---------------------------------------------- ----------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.............. Facing Page of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Joint Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................. Available Information; Incorporation of
Certain Documents by Reference; Inside
Front Cover Page of Joint Proxy
Statement/ Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............... Summary; The Companies; The Mergers;
Unaudited Pro Forma Financial
Information; Other Matters
4. Terms of the Transaction...................... Summary; The Mergers; The Aetna Special
Meeting; The U.S. Healthcare Annual
Meeting; The Amended Merger Agreement;
Description of Parent Capital Stock;
Comparison of Rights of Shareholders;
The Amended Aetna Certificate of
Incorporation; Other Matters
5. Pro Forma Financial Information............... Summary; Unaudited Pro Forma Financial
Information
6. Material Contracts with the Company Being
Acquired.................................... Summary; The Mergers; The Amended Merger
Agreement
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to Be
Underwriters................................ Not Applicable
8. Interests of Named Experts and Counsel........ Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................. Not Applicable
10. Information with Respect to S-3 Registrants... Available Information; Incorporation of
Certain Documents by Reference; The
Companies
11. Incorporation of Certain Information by
Reference................................... Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or
S-3 Registrants............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants................. Not Applicable
</TABLE>
<PAGE> 3

<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION IN JOINT
NO. FORM S-4 CAPTION PROXY STATEMENT/PROSPECTUS
- ----- ---------------------------------------------- ----------------------------------------
<C> <S> <C>
15. Information with Respect to S-3 Companies..... Available Information; Incorporation of
Certain Documents by Reference; The
Companies
16. Information with Respect to S-2 or
S-3 Companies............................... Not Applicable
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies................... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited.......... Summary; The Companies; The Aetna
Special Meeting; The U.S. Healthcare
Annual Meeting; The Mergers; The Amended
Merger Agreement; Management; Other
Information for U.S. Healthcare Annual
Meeting
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer........................... Not Applicable
</TABLE>

2
<PAGE> 4

LOGO

June 12, 1996

DEAR SHAREHOLDER:

You are cordially invited to attend a Special Meeting of Shareholders of
Aetna Life and Casualty Company ("Aetna") to be held at our Corporate
Headquarters, 151 Farmington Avenue, Hartford, Connecticut, on Thursday, July
18, 1996, at 3:00 p.m., Eastern Daylight Time.

At this meeting you will be asked to consider and vote upon, among other
proposals, the proposed merger of Aetna and U.S. Healthcare, Inc. ("U.S.
Healthcare"). Upon consummation of the merger, (i) each of Aetna and U.S.
Healthcare will become a wholly-owned subsidiary of a new holding company named
Aetna Inc. ("Parent"), (ii) each outstanding share of Aetna Common Capital Stock
will be converted into the right to receive one share of Parent Common Stock,
together with one right (a "Parent Right") issued pursuant to a Rights Agreement
effective as of the consummation of the merger and (iii) each outstanding share
of U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock will be
converted into the right to receive (A) 0.2246 shares of Parent Common Stock,
together with 0.2246 Parent Rights, (B) 0.0749 shares of Parent 6.25% Class C
Voting Preferred Stock and (C) $34.20 in cash.

The proposed merger is contingent upon, among other things, the approval of
the shareholders of Aetna and U.S. Healthcare and the receipt of required
regulatory approvals. The proposed merger would be consummated shortly after
such approvals are obtained and the other conditions to the merger are satisfied
or waived.

Your Board of Directors believes that the merger is in the best interests
of Aetna including its shareholders, and will create a strong new company. The
merger, which follows the recently completed sale of our property-casualty
operations to an affiliate of The Travelers Insurance Group Inc., represents the
second step of our previously announced strategic decision to focus our
resources on pursuing growth opportunities in our health care business and
evaluating opportunities for growth and development of our financial services
and international operations. BY A UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT AT
A MEETING HELD ON MARCH 29, 1996, YOUR BOARD OF DIRECTORS APPROVED THE MERGER
AND RECOMMENDS THAT YOU VOTE FOR THE MERGER.

At the Special Meeting of Shareholders you will also be asked to consider
and approve each of (i) the adoption of the Aetna Inc. 1996 Stock Incentive
Plan, (ii) the adoption of the Aetna Inc. Annual Incentive Plan and (iii) the
assumption by Parent of Aetna's Non-Employee Director Deferred Stock and
Deferred Compensation Plan (together, the "Incentive Plans"). Both the Aetna
Inc. Annual Incentive Plan and the Non-Employee Director Deferred Stock and
Deferred Compensation Plan being adopted and/or assumed by Parent are
substantially identical to the Aetna Annual Incentive Plan (certain terms of
which were approved by Aetna shareholders at Aetna's 1996 Annual Meeting) and
the Aetna Non-Employee Director Deferred Stock Plan (approved by Aetna
shareholders at the Aetna 1996 Annual Meeting). The Aetna Inc. 1996 Stock
Incentive Plan is closely modeled on Aetna's 1994 Stock Incentive Plan (approved
by Aetna shareholders in 1994), with certain differences (which are described
under "Aetna Inc. 1996 Stock Incentive Plan") aimed at combining features from
existing U.S. Healthcare plans with the 1994 Stock Incentive Plan. Consummation
of the merger is not conditioned on approval of the adoption or assumption, as
applicable, of the Incentive Plans, but the adoption and assumption, as
applicable, of the Incentive Plans is contingent on the consummation of the
merger. BY A UNANIMOUS VOTE OF THE DIRECTORS AT A MEETING HELD ON APRIL 26,
1996, YOUR BOARD OF DIRECTORS APPROVED THE ADOPTION AND ASSUMPTION, AS
APPLICABLE, OF THE INCENTIVE PLANS AND RECOMMENDS THAT YOU VOTE FOR THE ADOPTION
AND ASSUMPTION, AS APPLICABLE, OF THE INCENTIVE PLANS.

<PAGE> 5

Lastly, you will be asked to consider and approve the adoption of a new
Aetna Certificate of Incorporation in connection with Aetna's reincorporation as
a general business corporation, the surrender of its license as an insurance
company in Connecticut and the related change of Aetna's name to Aetna Services,
Inc., as well as a change of the par value of Aetna's Common Capital Stock to
$.01. The proposed changes are intended generally to facilitate the transactions
contemplated by the Merger Agreement. All other material provisions of Aetna's
existing Certificate of Incorporation will remain the same, and the delicensing
will not have a material impact on the business of Aetna. BY A UNANIMOUS WRITTEN
CONSENT DATED MAY 30, 1996, YOUR BOARD OF DIRECTORS APPROVED THE NEW AETNA
CERTIFICATE OF INCORPORATION AND RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF
THE NEW AETNA CERTIFICATE OF INCORPORATION.

Attached is a Joint Proxy Statement/Prospectus which provides you with a
detailed description of, among other things, the Special Meeting of
Shareholders, the proposed merger, the Incentive Plans and the new Aetna
Certificate of Incorporation. You are urged to read this Joint Proxy
Statement/Prospectus carefully and in its entirety.

Approval of the merger requires the affirmative vote of 66 2/3% of the
outstanding shares of Aetna Common Stock. Approval of the adoption or
assumption, as applicable, of each of the Incentive Plans requires the
affirmative vote of a majority of the shares of Aetna Common Stock present at
the Special Meeting of Shareholders in person or by proxy and entitled to vote.
Approval and adoption of the new Aetna Certificate of Incorporation requires the
affirmative vote of a majority of the outstanding shares of Aetna Common Stock.

THE SPECIAL MEETING OF SHAREHOLDERS IS OPEN TO ALL SHAREHOLDERS OR THEIR
AUTHORIZED REPRESENTATIVES. IN ORDER TO ATTEND THE MEETING, YOU MUST PRESENT AN
ADMISSION TICKET. IF YOU HOLD SHARES OF AETNA COMMON CAPITAL STOCK IN YOUR OWN
NAME, PLEASE COMPLETE AND RETURN THE ENCLOSED POSTAGE-PAID RESERVATION CARD
DIRECTLY TO AETNA. AN ADMISSION TICKET WILL THEN BE MAILED TO YOU. IF YOUR
SHARES ARE HELD OF RECORD BY A BROKER OR OTHER NOMINEE IN STREET NAME OR THE
NAME OF ANOTHER PERSON AND YOU WISH TO ATTEND THE MEETING, YOUR BROKER OR
NOMINEE MUST GIVE WRITTEN NOTICE TO AETNA THAT YOU ARE ITS AUTHORIZED
REPRESENTATIVE FOR THOSE SHARES. AN ADMISSION TICKET WILL THEN BE ISSUED TO YOU.

Whether or not you plan to attend the Special Meeting of Shareholders,
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE. Your prompt cooperation is greatly
appreciated.

If you are present at the Special Meeting of Shareholders, you may, of
course, vote your shares in person.

Very truly yours,

/s/ Ronald E. Compton

----------------------
RONALD E. COMPTON
Chairman

2
<PAGE> 6

LOGO

U.S. HEALTHCARE, INC.

980 JOLLY ROAD

BLUE BELL, PA 19422

June 12, 1996

DEAR SHAREHOLDER:

You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of U.S. Healthcare, Inc. ("U.S. Healthcare") to be held at U.S. Healthcare's
Auditorium at the Customer Service Center (Building 2), 1425 Union Meeting Road,
Blue Bell, Pennsylvania, on Thursday, July 18, 1996 at 10:00 a.m., Eastern
Daylight Time.

At this meeting you will be asked to consider and vote upon, among other
proposals, the proposed merger of Aetna Life and Casualty Company ("Aetna") and
U.S. Healthcare. Upon consummation of the merger, (i) each of Aetna and U.S.
Healthcare will become a wholly-owned subsidiary of a new holding company named
Aetna Inc. ("Parent"), (ii) each outstanding share of U.S. Healthcare Common
Stock and U.S. Healthcare Class B Stock will be converted into the right to
receive (A) 0.2246 shares of Parent Common Stock, together with 0.2246 rights
(each a "Parent Right") issued pursuant to a Rights Agreement effective as of
the date of the consummation of the merger, (B) 0.0749 shares of Parent 6.25%
Class C Voting Preferred Stock and (C) $34.20 in cash and (iii) each outstanding
share of Aetna Common Capital Stock will be converted into the right to receive
one share of Parent Common Stock, together with one Parent Right.

The proposed merger is contingent upon, among other things, the approval of
the shareholders of U.S. Healthcare and Aetna and the receipt of required
regulatory approvals. The proposed merger would be consummated shortly after
such approvals are obtained and the other conditions to the merger are satisfied
or waived.

Your Board of Directors believes that the merger is fair to and in the best
interests of U.S. Healthcare and its shareholders and will create a strong new
company as well as provide shareholders the opportunity to receive cash in
consideration for a portion of their shares of U.S. Healthcare. YOUR BOARD OF
DIRECTORS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
MERGER.

I have agreed to vote my shares of U.S. Healthcare Class B
Stock -- representing approximately 83.7% of the total voting power of U.S.
Healthcare's outstanding capital stock -- in favor of the merger. See "The
Mergers -- Interests of Certain Persons in the Mergers" in the Joint Proxy
Statement/Prospectus for a description of the interests of certain directors and
officers of U.S. Healthcare in the merger.

At the 1996 Annual Meeting of Shareholders you will also be asked to
consider and approve each of (i) the adoption of the Aetna Inc. 1996 Stock
Incentive Plan, (ii) the adoption of the Aetna Inc. Annual Incentive Plan and
(iii) the assumption by Parent of Aetna's Non-Employee Director Deferred Stock
and Deferred Compensation Plan (together, the "Incentive Plans"). Consummation
of the merger is not conditioned on approval of the adoption or assumption, as
applicable, of the Incentive Plans, but the adoption and assumption, as
applicable, of the Incentive Plans is contingent on the consummation of the
merger. YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE ADOPTION AND
ASSUMPTION, AS APPLICABLE, OF THE INCENTIVE PLANS AND RECOMMENDS THAT YOU VOTE
FOR THE ADOPTION AND ASSUMPTION OF THE INCENTIVE PLANS.
<PAGE> 7

Lastly, you will be asked to elect two Class III directors to hold office
until the 1999 Annual Meeting of Shareholders or until their respective
successors are duly elected and qualified. Your Board of Directors has nominated
David B. Soll, M.D. to be re-elected as a Class III director by the holders of
shares of U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock, voting
together as a single class, and has nominated Timothy T. Weglicki to be
re-elected as a Class III director by the holders of shares of U.S. Healthcare
Common Stock. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE ELECTION OF DAVID B. SOLL, M.D. AND TIMOTHY T. WEGLICKI. If the mergers are
consummated, the Board of Directors of U.S. Healthcare (which will then be a
wholly-owned subsidiary of Parent) after the consummation of the mergers will be
designated by Parent and will include the two Co-Presidents of U.S. Healthcare.

Attached is a Joint Proxy Statement/Prospectus which provides you with a
detailed description of, among other things, the 1996 Annual Meeting of
Shareholders, the proposed merger, the Parent stock to be issued upon
consummation of the merger, the Incentive Plans and information on the Class III
director nominees. You are urged to read the Joint Proxy Statement/Prospectus
carefully and in its entirety.

Approval of the merger requires the affirmative vote of a majority of the
voting power of the outstanding shares of U.S. Healthcare Common Stock and U.S.
Healthcare Class B Stock, voting together as a single class. Approval of the
adoption or assumption, as applicable, of each of the Incentive Plans and the
re-election of David B. Soll, M.D. require the affirmative vote of a majority of
the votes which the holders of U.S. Healthcare Common Stock and U.S. Healthcare
Class B Stock present at the 1996 Annual Meeting of Shareholders in person or by
proxy are entitled to cast, voting together as a single class. The re-election
of Timothy T. Weglicki requires the affirmative vote of a majority of the votes
which the holders of U.S. Healthcare Common Stock present at the 1996 Annual
Meeting of Shareholders in person or by proxy are entitled to cast.

Shareholders will be admitted to the 1996 Annual Meeting of Shareholders
only upon presentation of proof of stock ownership, which may include a current
brokerage statement or letter from their bank or broker.

Whether or not you plan to attend the 1996 Annual Meeting of Shareholders,
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE. Your prompt cooperation is greatly
appreciated.

If you are present at the 1996 Annual Meeting of Shareholders, you may, of
course, vote your shares in person.

Very truly yours,

/s/ Leonard Abramson

LEONARD ABRAMSON
Chairman

2
<PAGE> 8

LOGO

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD JULY 18, 1996

TO THE SHAREHOLDERS OF AETNA LIFE AND CASUALTY COMPANY:

A Special Meeting of Shareholders of Aetna Life and Casualty Company
("Aetna") will be held at the Corporate Headquarters of the Company, 151
Farmington Avenue, Hartford, Connecticut, on Thursday, July 18, 1996, at 3:00
p.m., Eastern Daylight Time, for the purpose of considering and voting upon the
following:

1. The approval and adoption of an Agreement and Plan of Merger, dated
as of March 30, 1996, among Aetna, U.S. Healthcare, Inc. ("U.S.
Healthcare"), Aetna Inc. ("Parent"), Antelope Sub, Inc., a wholly-owned
subsidiary of Parent ("Aetna Sub"), and New Merger Corporation, a
wholly-owned subsidiary of Parent ("U.S. Healthcare Sub"), as amended by
Amendment No. 1 thereto dated as of May 30, 1996, (as so amended, the
"Merger Agreement"), a copy of which is set forth as Appendix A to the
attached Joint Proxy Statement/Prospectus. Pursuant to the Merger
Agreement, among other things, (i) Aetna Sub will be merged with and into
Aetna and U.S. Healthcare Sub will be merged with and into U.S. Healthcare,
with the result that each of Aetna and U.S. Healthcare will become a
wholly-owned subsidiary of Parent, (ii) each outstanding share of Aetna
Common Capital Stock (except for shares held by Aetna as treasury stock,
shares held by U.S. Healthcare or subsidiaries of U.S. Healthcare and
shares for which objecting shareholders' rights have been properly
exercised and perfected) will be converted into the right to receive one
share of Parent Common Stock, together with one right (a "Parent Right")
issued pursuant to a Rights Agreement effective as of the date of the
consummation of the mergers contemplated by the Merger Agreement and (iii)
each outstanding share of U.S. Healthcare Common Stock and U.S. Healthcare
Class B Stock (except for shares held by U.S. Healthcare as treasury stock,
certain shares held by Aetna or subsidiaries of Aetna and shares for which
dissenting shareholders' rights have been properly exercised and perfected)
will be converted into the right to receive (A) 0.2246 shares of Parent
Common Stock, together with 0.2246 Parent Rights, (B) 0.0749 shares of
Parent 6.25% Class C Voting Preferred Stock and (C) $34.20 in cash, all as
more fully set forth in the Merger Agreement and described in the attached
Joint Proxy Statement/Prospectus.

2. Contingent on the consummation of the mergers contemplated by the
Merger Agreement, the approval and adoption of the Aetna Inc. 1996 Stock
Incentive Plan.

3. Contingent on the consummation of the mergers contemplated by the
Merger Agreement, the approval and adoption of the Aetna Inc. Annual
Incentive Plan.

4. Contingent on the consummation of the mergers contemplated by the
Merger Agreement, the approval of the assumption by Parent of Aetna's
Non-Employee Director Deferred Stock and Deferred Compensation Plan.

5. The approval and adoption of a new Aetna Certificate of
Incorporation in connection with Aetna's reincorporation as a general
business corporation, the surrender of its license as an insurance company
in Connecticut and the related change of Aetna's name to Aetna Services,
Inc., as well as a change of the par value of Aetna's Common Capital Stock
to $.01. The proposed changes are intended generally to facilitate the
transactions contemplated by the Merger Agreement.

6. Such other business as may properly come before the Special Meeting
of Shareholders or any adjournment or postponement thereof.

Only shareholders of record at the close of business on May 20, 1996 are
entitled to receive notice of and to vote at the Special Meeting of Shareholders
or any adjournment or postponement thereof.
<PAGE> 9

The Special Meeting of Shareholders is open to all shareholders or their
authorized representatives. In order to attend the Special Meeting of
Shareholders, you must present an admission ticket. If you hold shares of Aetna
Common Capital Stock in your own name, please complete and return the enclosed
postage-paid reservation card directly to Aetna. An admission ticket will then
be mailed to you. If your shares of Aetna Common Capital Stock are held of
record by a broker or other nominee in street name or the name of another person
and you wish to attend the meeting, your broker or nominee must give written
notice to Aetna that you are its authorized representative for those shares. An
admission ticket will then be issued to you.

Whether or not you expect to attend the Special Meeting of Shareholders,
please fill in, date and sign the accompanying proxy card and mail it promptly
in the enclosed prepaid return envelope. If you attend the Special Meeting of
Shareholders, you may vote in person if you wish, even if you have previously
returned your proxy card.

By Order of the Board of Directors.

/s/ Lucille M. Nickerson
------------------------

LUCILLE M. NICKERSON
Vice President and
Corporate Secretary
Hartford, Connecticut

June 12, 1996

2
<PAGE> 10

LOGO

U.S. HEALTHCARE, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD JULY 18, 1996

TO THE SHAREHOLDERS OF U.S. HEALTHCARE, INC.:

The 1996 Annual Meeting of Shareholders of U.S. Healthcare, Inc. ("U.S.
Healthcare") will be held at U.S. Healthcare's Auditorium at the Customer
Service Center (Building 2), 1425 Union Meeting Road, Blue Bell, Pennsylvania on
Thursday, July 18, 1996, at 10:00 a.m., Eastern Daylight Time, for the purpose
of considering and voting upon the following:

1. The approval and adoption of an Agreement and Plan of Merger, dated
as of March 30, 1996, among Aetna Life and Casualty Company ("Aetna"), U.S.
Healthcare, Aetna Inc. ("Parent"), Antelope Sub, Inc., a wholly-owned
subsidiary of Parent ("Aetna Sub"), and New Merger Corporation, a
wholly-owned subsidiary of Parent ("U.S. Healthcare Sub"), as amended by
Amendment No. 1 thereto dated as of May 30, 1996 (as so amended, the
"Merger Agreement"), a copy of which is set forth as Appendix A to the
attached Joint Proxy Statement/Prospectus. Pursuant to the Merger
Agreement, among other things, (i) Aetna Sub will be merged with and into
Aetna and U.S. Healthcare Sub will be merged with and into U.S. Healthcare,
with the result that each of Aetna and U.S. Healthcare will become a
wholly-owned subsidiary of Parent, (ii) each outstanding share of U.S.
Healthcare Common Stock and U.S. Healthcare Class B Stock (except for
shares held by U.S. Healthcare as treasury stock, certain shares held by
Aetna or subsidiaries of Aetna and shares for which dissenting
shareholders' rights have been properly exercised and perfected) will be
converted into the right to receive (A) 0.2246 shares of Parent Common
Stock, together with 0.2246 rights (each a "Parent Right") issued pursuant
to a Rights Agreement effective as of the date of the consummation of the
mergers contemplated by the Merger Agreement, (B) 0.0749 shares of Parent
6.25% Class C Voting Preferred Stock and (C) $34.20 in cash, and (iii) each
outstanding share of Aetna Common Capital Stock (except for shares held by
Aetna as treasury stock, shares held by U.S. Healthcare or subsidiaries of
U.S. Healthcare and shares for which objecting shareholders' rights have
been properly exercised and perfected) will be converted into the right to
receive one share of Parent Common Stock, together with one Parent Right,
all as more fully set forth in the Merger Agreement and described in the
attached Joint Proxy Statement/Prospectus.

2. Contingent on the consummation of the mergers contemplated by the
Merger Agreement, the approval and adoption of the Aetna Inc. 1996 Stock
Incentive Plan.

3. Contingent on the consummation of the mergers contemplated by the
Merger Agreement, the approval and adoption of the Aetna Inc. Annual
Incentive Plan.

5. The election of two Class III directors to hold office until the
1999 Annual Meeting of Shareholders or until their respective successors
are duly elected and qualified. The Merger Agreement provides that after
the consummation of the mergers contemplated by the Merger Agreement the
Board of Directors of U.S. Healthcare (which will then be a wholly-owned
subsidiary of Parent) will be designated by Parent and will include the two
Co-Presidents of U.S. Healthcare.

6. Such other business as may properly come before the 1996 Annual
Meeting of Shareholders or any adjournment or postponement thereof.
<PAGE> 11

Only shareholders of record at the close of business on June 3, 1996 are
entitled to receive notice of and to vote at the 1996 Annual Meeting of
Shareholders or any adjournment or postponement thereof.

SHAREHOLDERS WILL BE ADMITTED TO THE 1996 ANNUAL MEETING OF SHAREHOLDERS
ONLY UPON PRESENTATION OF PROOF OF STOCK OWNERSHIP, WHICH MAY INCLUDE A CURRENT
BROKERAGE STATEMENT OR LETTER FROM THEIR BANK OR BROKER.

Whether or not you expect to attend the 1996 Annual Meeting of
Shareholders, please fill in, date and sign the accompanying proxy card and mail
it promptly in the enclosed prepaid return envelope. If you attend the 1996
Annual Meeting of Shareholders, you may vote in person if you wish, even if you
have previously returned your proxy card.

By Order of the Board of Directors.

/s/ Don H. Liu
----------------------------

DON H. LIU
Vice President and Secretary

Blue Bell, Pennsylvania

June 12, 1996

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AETNA LIFE AND CASUALTY COMPANY

AND

U.S. HEALTHCARE, INC.

JOINT PROXY STATEMENT

FOR SHAREHOLDERS MEETINGS TO BE HELD ON JULY 18, 1996

AETNA INC.

PROSPECTUS

This Joint Proxy Statement/Prospectus is being furnished to holders of
Common Capital Stock without par value ("Aetna Common Stock") of Aetna Life and
Casualty Company, a Connecticut insurance corporation ("Aetna"), in connection
with the solicitation of proxies by its Board of Directors, and holders of
Common Stock, par value $0.005 per share ("U.S. Healthcare Common Stock") of
U.S. Healthcare, Inc., a Pennsylvania corporation ("U.S. Healthcare"), and
holders of Class B Stock, par value $0.005 per share ("U.S. Healthcare Class B
Stock" and, together with U.S. Healthcare Common Stock, the "U.S. Healthcare
Stock"), of U.S. Healthcare, in connection with the solicitation of proxies by
its Board of Directors, for use at (i) Aetna's Special Meeting of Shareholders,
or any adjournment or postponement thereof (the "Aetna Special Meeting"), and
(ii) U.S. Healthcare's 1996 Annual Meeting of Shareholders, or any adjournment
or postponement thereof (the "U.S. Healthcare Annual Meeting" and, together with
the Aetna Special Meeting, the "Shareholder Meetings"). The Shareholder Meetings
are each being called to consider and vote upon, among other things, (i) a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of March
30, 1996 (the "Merger Agreement"), among Aetna, U.S. Healthcare, Aetna Inc., a
Connecticut corporation ("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"), as amended by Amendment No. 1 thereto dated as
of May 30, 1996 (as so amended, the "Amended Merger Agreement"), and (ii)
contingent upon the consummation of the mergers contemplated by the Merger
Agreement, proposals to approve and adopt the Aetna Inc. 1996 Stock Incentive
Plan and the Aetna Inc. Annual Incentive Plan and to approve the assumption by
Parent of Aetna's Non-Employee Director Deferred Stock and Deferred Compensation
Plan (together, the "Incentive Plans"). This Joint Proxy Statement/Prospectus is
also being furnished (i) to holders of Aetna Common Stock in connection with the
adoption of the new Certificate of Incorporation of Aetna and (ii) to holders of
U.S. Healthcare Stock in connection with the re-election of two Class III
directors to U.S. Healthcare's Board of Directors.

The Amended Merger Agreement provides for, among other things, the merger
of Aetna Sub with and into Aetna (the "Aetna Sub Merger") and the merger of U.S.
Healthcare Sub 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
each of Aetna and U.S. Healthcare will become a wholly-owned subsidiary of
Parent. Upon consummation of the Mergers, (i) each outstanding share of U.S.
Healthcare Stock (other than shares held by U.S. Healthcare as treasury stock or
certain shares held by Aetna or its subsidiaries (all of which will be canceled)
and shares for which dissenting shareholders' rights have been properly
exercised and perfected) will be converted into the right to receive (A) 0.2246
shares of Common Stock, par value $.01 per share, of Parent ("Parent Common
Stock"), together with 0.2246 rights (each, a "Parent Right") issued pursuant to
the Rights Agreement (the "Parent Rights Agreement") to be entered into by
Parent and First Chicago Trust Company of New York, as Rights Agent, effective
as of the date of the consummation of the Mergers, (B) 0.0749 shares of 6.25%
Class C Voting Preferred Stock, par value $.01 per share, of Parent ("Parent
Mandatorily Convertible Preferred Stock") and (C) $34.20 in cash, and (ii) each
outstanding share of Aetna Common Stock (other than shares held by Aetna as
treasury stock or shares held by U.S. Healthcare or its subsidiaries (all of
which will be canceled) and shares for which objecting shareholders' rights have
been properly exercised and perfected) will be converted into the right to
receive one share of Parent Common Stock, together with one Parent Right. The
consummation of the Mergers is subject to various conditions,

<PAGE> 13

including, among others, approval by the shareholders of each of Aetna and U.S.
Healthcare and the receipt of required regulatory approvals.

Leonard Abramson, Chairman of U.S. Healthcare, has agreed to vote his
shares of U.S. Healthcare Class B Stock -- representing approximately 83.7% of
the total voting power of U.S. Healthcare's outstanding capital stock -- in
favor of the Amended Merger Agreement. Accordingly, a vote in favor of the
approval and adoption of the Amended Merger Agreement at the U.S. Healthcare
Annual Meeting is assured without the vote of any other holder of shares of U.S.
Healthcare. See "The Amended Voting Agreement." Mr. Abramson has also indicated
that he intends to vote in favor of the adoption and assumption, as applicable,
of the Incentive Plans and in favor of the re-election of David B. Soll, M.D.,
which would assure such approval and re-election by U.S. Healthcare shareholders
without the vote of any other U.S. Healthcare shareholder.

Parent has filed a registration statement on Form S-4 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "1933 Act"), relating to (i) the
shares of Parent Common Stock, together with the Parent Rights, that are
proposed to be issued in connection with the Mergers to holders of outstanding
shares of U.S. Healthcare Common Stock, U.S. Healthcare Class B Stock and Aetna
Common Stock and (ii) the shares of Parent Mandatorily Convertible Preferred
Stock that are proposed to be issued in connection with the Mergers to holders
of outstanding shares of U.S. Healthcare Common Stock and U.S. Healthcare Class
B Stock. This Proxy Statement/Prospectus also constitutes the prospectus of
Parent with respect to up to 153,579,780 shares of Parent Common Stock, together
with Parent Rights, and 11,839,108 shares of Parent Mandatorily Convertible
Preferred Stock to be issued in connection with the Mergers. For a description
of the Parent Common Stock and the Parent Mandatorily Convertible Preferred
Stock, see "Description of Parent Capital Stock." For a description of the
Parent Rights, see "Description of Parent Rights".

Unless the context otherwise requires, all references in this Joint Proxy
Statement/Prospectus to Parent Common Stock shall include the corresponding
Parent Rights issued pursuant to the Parent Rights Agreement.

All information contained or incorporated by reference herein concerning
Aetna has been furnished by Aetna, and all information contained or incorporated
by reference herein concerning U.S. Healthcare has been furnished by U.S.
Healthcare.

This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to shareholders of each of Aetna and U.S. Healthcare on
or about June 12, 1996.

------------------------

THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGERS 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 JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------

The date of this Joint Proxy Statement/Prospectus is June 12, 1996.

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AVAILABLE INFORMATION

Each of Aetna and U.S. Healthcare is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). The
reports, proxy statements and other information filed by each of Aetna and U.S.
Healthcare with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and should be available at the Commission's
Regional Offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, material filed by Aetna may be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.

This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto
filed by Parent, certain portions of which have been omitted pursuant to the
rules and regulations of the Commission and to which portions reference is
hereby made for further information with respect to Parent, Aetna, U.S.
Healthcare, the Mergers, the securities offered hereby and related matters. The
Registration Statement and the exhibits thereto may be inspected without charge
at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained from the Commission at prescribed rates.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed with the Commission (Commission
file number 1-5704) by Aetna pursuant to the 1934 Act are incorporated by
reference in this Joint Proxy Statement/Prospectus:

1. Aetna's Annual Report on Form 10-K for the year ended December 31,
1995 (which incorporates by reference certain information from Aetna's
Proxy Statement relating to the 1996 Annual Meeting of Shareholders);

2. Aetna's Current Report on Form 8-K dated April 1, 1996;

3. Aetna's Current Report on Form 8-K dated April 15 1996; and

4. 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 pursuant to the 1934 Act are
incorporated by reference in this Joint Proxy Statement/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;

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 Aetna and U.S. Healthcare contained in this
Joint Proxy Statement/Prospectus does not purport to be comprehensive and should
be read together with the information in the documents incorporated by reference
herein.

All documents filed by Aetna and U.S. Healthcare pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Aetna Special Meeting and the
U.S. Healthcare Annual Meeting shall be deemed to be incorporated by reference
in this Joint Proxy Statement/Prospectus and to be a part hereof from the dates
of filing such documents or reports. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which is also incorporated or deemed to be
incorporated herein modifies or supersedes such statement. Any such statement

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so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
------------------------

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN CERTAIN EXHIBITS TO DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM A
COPY OF THIS JOINT PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED UPON WRITTEN OR
ORAL REQUEST, IN THE CASE OF AETNA DOCUMENTS, TO AETNA LIFE AND CASUALTY
COMPANY, 151 FARMINGTON AVENUE, HARTFORD, CT 06156, ATTENTION: CORPORATE
SECRETARY, TELEPHONE NUMBER (860) 273-0123, AND, IN THE CASE OF U.S. HEALTHCARE
DOCUMENTS, TO U.S. HEALTHCARE, INC., 980 JOLLY ROAD, P.O. BOX 1180, BLUE BELL,
PA 19422, ATTENTION: DAVID F. SIMON, TELEPHONE NUMBER (215) 628-4800. IN ORDER
TO ENSURE DELIVERY PRIOR TO THE SHAREHOLDER MEETINGS, REQUESTS SHOULD BE
RECEIVED BY JULY 9, 1996.

------------------------

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING AND THE SOLICITATIONS MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY AETNA OR U.S. HEALTHCARE. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY INFERENCE THAT THERE HAS NOT BEEN ANY CHANGE
IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF EITHER AETNA OR U.S.
HEALTHCARE SINCE THE DATE HEREOF.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 3
SUMMARY............................................................................... 8
MARKET PRICES......................................................................... 21
SELECTED HISTORICAL FINANCIAL DATA.................................................... 22
UNAUDITED SELECTED PRO FORMA FINANCIAL INFORMATION.................................... 24
UNAUDITED COMPARATIVE PER SHARE DATA.................................................. 25
RISK FACTORS.......................................................................... 26
INTRODUCTION.......................................................................... 27
THE COMPANIES......................................................................... 28
Aetna Life and Casualty Company..................................................... 28
U.S. Healthcare, Inc................................................................ 28
Aetna Inc........................................................................... 29
THE AETNA SPECIAL MEETING............................................................. 30
Purpose of the Aetna Special Meeting................................................ 30
Date, Place and Time................................................................ 30
Record Date......................................................................... 30
Required Vote....................................................................... 30
Voting and Revocation of Proxies.................................................... 30
Solicitation of Proxies............................................................. 31
THE U.S. HEALTHCARE ANNUAL MEETING.................................................... 32
Purpose of the U.S. Healthcare Annual Meeting....................................... 32
Date, Place and Time................................................................ 32
Record Date......................................................................... 32
Required Vote....................................................................... 32
Voting and Revocation of Proxies.................................................... 33
Solicitation of Proxies............................................................. 33
THE MERGERS........................................................................... 34
Background of the Mergers........................................................... 34
Recommendations of the Boards of Directors and Reasons for the Mergers.............. 37
Opinions of Financial Advisors...................................................... 42
Merger Consideration................................................................ 60
Financing of U.S. Healthcare Merger Consideration................................... 61
Merger Date......................................................................... 63
Conversion of Shares; Procedures for Exchange of Certificates; Dividends; No
Fractional Shares................................................................ 64
Stock Options; Restricted Stock..................................................... 65
Dividends........................................................................... 66
NYSE Listing........................................................................ 66
Expenses............................................................................ 66
Interests of Certain Persons in the Mergers......................................... 67
Accounting Treatment................................................................ 73
Certain Federal Income Tax Consequences............................................. 73
ERISA Considerations................................................................ 76
Appraisal Rights.................................................................... 77
THE AMENDED MERGER AGREEMENT.......................................................... 82
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
General............................................................................. 82
Consideration to be Received in the Mergers......................................... 82
Corporate Matters................................................................... 84
Conditions to the Mergers........................................................... 85
Representations and Warranties...................................................... 87
Certain Covenants................................................................... 87
Non-Solicitation.................................................................... 91
Stock Options and Benefit Plans..................................................... 93
Indemnification and Insurance....................................................... 94
Termination......................................................................... 95
Expenses and Termination Fees....................................................... 96
Survival of Representations and Warranties.......................................... 97
Rights Under the Amended Merger Agreement........................................... 97
Amendments; No Waivers.............................................................. 97
Governing Law....................................................................... 97
Jurisdiction........................................................................ 97
THE AMENDED VOTING AGREEMENT.......................................................... 98
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................................. 100
OTHER MATTERS......................................................................... 108
Regulatory Approvals................................................................ 108
Certain Projected Financial Information............................................. 108
Estimated Synergies................................................................. 110
Factors For Forward Looking Information............................................. 111
DESCRIPTION OF PARENT CAPITAL STOCK................................................... 113
Parent Common Stock................................................................. 113
Parent Mandatorily Convertible Preferred Stock...................................... 113
Class A and Class B Voting Preferred Stock and Class D Non-Voting Preferred Stock... 122
COMPARISON OF RIGHTS OF SHAREHOLDERS.................................................. 123
Comparison of Shareholder Rights with Respect to Parent and Aetna................... 123
Comparison of Shareholder Rights with Respect to Parent and U.S. Healthcare......... 123
DESCRIPTION OF PARENT RIGHTS.......................................................... 131
MANAGEMENT............................................................................ 134
Directors........................................................................... 134
Compensation of Directors........................................................... 138
Committees of the Board of Directors................................................ 139
Executive Officers.................................................................. 139
Compensation of Executive Officers.................................................. 139
OTHER INFORMATION FOR U.S. HEALTHCARE ANNUAL MEETING.................................. 140
Nominees for Election............................................................... 140
Principal Occupations and Directorships Held by the Nominees for Directors and
Directors of U.S. Healthcare..................................................... 141
Meetings and Committees of the Board of Directors................................... 141
Compensation of Directors........................................................... 142
Executive Compensation.............................................................. 143
Employment Contracts and Termination of Employment Arrangements..................... 146
Report of the Compensation Committee of the Board of Directors on Executive
Compensation for the Fiscal Year Ended December 31, 1995......................... 147
Stock Performance Graph............................................................. 150
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Certain Relationships and Transactions................................................ 151
OWNERSHIP OF AETNA, U.S. HEALTHCARE AND PARENT........................................ 152
Aetna............................................................................... 152
U.S. Healthcare..................................................................... 154
Parent.............................................................................. 156
AETNA INC. 1996 STOCK INCENTIVE PLAN.................................................. 157
Introduction........................................................................ 157
Principal Features of the Incentive Plan............................................ 157
Administration of Incentive Plan.................................................... 157
Shares Available for Issuance....................................................... 158
Adjustments......................................................................... 158
Grants Under the 1996 Incentive Plan................................................ 158
Effect on Awards on Termination of Employment....................................... 159
General............................................................................. 160
Effect on Other Compensation Programs............................................... 160
New Plan Benefits................................................................... 160
Certain Federal Income Tax Consequences............................................. 161
AETNA INC. ANNUAL INCENTIVE PLAN...................................................... 163
AETNA INC. NON-EMPLOYEE DIRECTOR DEFERRED STOCK AND DEFERRED COMPENSATION PLAN........ 165
Introduction........................................................................ 165
Principal Features of Director Plan................................................. 165
New Plan Benefits................................................................... 166
NEW AETNA CERTIFICATE OF INCORPORATION................................................ 167
EXPERTS............................................................................... 168
LEGAL MATTERS......................................................................... 168
FUTURE SHAREHOLDER PROPOSALS.......................................................... 169
INDEPENDENT AUDITORS' REPORT.......................................................... F-1
AETNA INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET.................................. F-2
AETNA INC. NOTES TO CONSOLIDATED BALANCE SHEET........................................ F-3
APPENDIX A -- AMENDED AGREEMENT AND PLAN OF MERGER
APPENDIX B -- AMENDED VOTING AGREEMENT
APPENDIX C -- FORM OF DESIGNATIONS, RIGHTS AND PREFERENCES OF 6.25% CLASS C VOTING
PREFERRED STOCK
APPENDIX D -- OPINION OF WASSERSTEIN PERELLA & CO., INC.
APPENDIX E -- OPINION OF J.P. MORGAN SECURITIES INC.
APPENDIX F -- OPINION OF GOLDMAN, SACHS & CO.
APPENDIX G -- OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
APPENDIX H -- AETNA INC. 1996 STOCK INCENTIVE PLAN
APPENDIX I -- AETNA INC. ANNUAL INCENTIVE PLAN
APPENDIX J -- AETNA INC. NON-EMPLOYEE DIRECTOR DEFERRED STOCK AND
DEFERRED COMPENSATION PLAN
APPENDIX K -- CONNECTICUT STATUTES GOVERNING APPRAISAL RIGHTS
APPENDIX L -- PENNSYLVANIA STATUTES GOVERNING APPRAISAL RIGHTS
APPENDIX M -- FORM OF NEW AETNA CERTIFICATE OF INCORPORATION
</TABLE>

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<PAGE> 19

SUMMARY

The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. This summary is not, and is not intended
to be, complete by itself. This summary is qualified in its entirety by
reference to the more detailed information contained elsewhere in this Joint
Proxy Statement/Prospectus, the appendices attached hereto and the documents
referred to or incorporated by reference herein. Shareholders of Aetna and U.S.
Healthcare are urged to review carefully all of the information contained in
this Joint Proxy Statement/Prospectus, the Merger Agreement, as amended,
attached as Appendix A and the other appendices attached hereto.

THE COMPANIES

Aetna.......................... Aetna Life and Casualty Company, a
Connecticut insurance corporation
("Aetna"), is one of the nation's largest
insurance and financial services
organizations, centered around three core
businesses: Aetna Health Plans; Aetna
Retirement Services; and Aetna
International. See "The
Companies -- Aetna Life and Casualty
Company."

U.S. Healthcare................ U.S. Healthcare, Inc., a Pennsylvania
corporation ("U.S. Healthcare"), is one
of the nation's largest managed care
companies providing comprehensive managed
health care services through health
maintenance organizations it owns and
operates. See "The Companies -- U.S.
Healthcare, Inc."

Aetna Inc...................... Aetna Inc. ("Parent") is a newly formed
Connecticut corporation that has not, to
date, conducted any activities other than
those incident to its formation, its
execution of the Agreement and Plan of
Merger, dated as of March 30, 1996, 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"), as amended by
Amendment No. 1 thereto dated as of May
30, 1996 (as so amended, the "Merger
Agreement"), and related agreements, and
its participation in the preparation of
this Joint Proxy Statement/Prospectus. As
a result of the Mergers (as defined
below), each of Aetna and U.S. Healthcare
will become a wholly-owned subsidiary of
Parent. Accordingly, the business of
Parent, through its wholly-owned
subsidiaries Aetna and U.S. Healthcare,
will be the businesses currently
conducted by Aetna and U.S. Healthcare.
See "The Companies -- Aetna Inc."

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THE AETNA SPECIAL MEETING

Time, Date and Place........... A special meeting (the "Aetna Special
Meeting") of shareholders of Aetna will
be held at Aetna's Corporate
Headquarters, 151 Farmington Avenue,
Hartford, Connecticut on Thursday, July
18, 1996 at 3:00 p.m., Eastern Daylight
Time.

Matters to be Considered at the
Aetna Special Meeting........ At the Aetna Special Meeting the
shareholders of Aetna will be asked to
consider and vote upon proposals (i) to
approve and adopt the Merger Agreement,
(ii) contingent on the consummation of
the Mergers contemplated by the Merger
Agreement, (a) to approve and adopt the
Aetna Inc. 1996 Stock Incentive Plan, (b)
to approve and adopt the Aetna Inc.
Annual Incentive Plan and (c) to approve
the assumption by Parent of Aetna's
Non-Employee Director Deferred Stock and
Deferred Compensation Plan and (iii) to
approve and adopt the new Aetna
Certificate of Incorporation. The Aetna
Inc. 1996 Stock Incentive Plan, the Aetna
Inc. Annual Incentive Plan and Aetna's
Non-Employee Director Deferred Stock and
Deferred Compensation Plan are herein
referred to collectively as the
"Incentive Plans".

Required Vote.................. The approval and adoption of the Merger
Agreement requires the affirmative vote
of 66 2/3% of the outstanding shares of
Aetna's Common Capital Stock without par
value ("Aetna Common Stock"). The
approval and adoption of the Aetna Inc.
1996 Stock Incentive Plan and the Aetna
Inc. Annual Incentive Plan, and the
approval of the assumption by Parent of
Aetna's Non-Employee Director Deferred
Stock and Deferred Compensation Plan,
require the affirmative vote of a
majority of the shares of Aetna Common
Stock present at the Aetna Special
Meeting in person or by proxy and
entitled to vote. The approval and
adoption of the new Aetna Certificate of
Incorporation requires the affirmative
vote of a majority of the outstanding
shares of Aetna Common Stock.

Recommendations of the Aetna
Board
of Directors................. The Board of Directors of Aetna believes
that the terms of the Merger Agreement
are in the best interests of Aetna,
including its shareholders, and will
create a strong new company. By a
unanimous vote of those Directors present
at a meeting on March 29, 1996, the Board
of Directors of Aetna approved the Merger
Agreement and recommends that
shareholders of Aetna vote FOR approval
and adoption of the Merger Agreement. The
merger of Aetna and U.S. Healthcare,
which follows the recently completed sale
of Aetna's property-casualty operations
to an affiliate of The Travelers
Insurance Group Inc., represents the
second step of Aetna's previously
announced strategic decision to focus its
resources on pursuing growth
opportunities in its health care business
and evaluating opportunities for growth
and development of its financial services
business and international operations.
See "The Merg-

9
<PAGE> 21

ers -- Recommendations of the Boards of
Directors and Reasons for the
Mergers -- Aetna."

By a unanimous vote of Directors at a
meeting on April 26, 1996, the Board of
Directors of Aetna approved the adoption
and assumption, as applicable, of each of
the Incentive Plans and recommends that
shareholders of Aetna vote FOR approval
of the adoption or assumption, as
applicable, of each of the Incentive
Plans by Parent. The Board of Directors
of Aetna believes that the ability of
Parent and its subsidiaries to attract,
motivate, retain and reward talented and
experienced individuals will be enhanced
through the Incentive Plans. See "Aetna
Inc. 1996 Stock Incentive Plan;" "Aetna
Inc. Annual Incentive Plan;" and "Aetna
Inc. Non-Employee Director Deferred Stock
and Deferred Compensation Plan."

By a unanimous consent dated May 30, 1996
the Board of Directors of Aetna adopted
the amended Aetna Certificate of
Incorporation and recommends that
shareholders of Aetna vote FOR adoption
of the new Aetna Certificate of
Incorporation. The Board of Directors of
Aetna believes that the approval and
adoption of the new Aetna Certificate of
Incorporation in connection with Aetna's
reincorporation as a general business
corporation, the surrender of its license
as an insurance company in Connecticut
and the related change of Aetna's name to
Aetna Services, Inc., as well as a change
of the par value of Aetna's Common Stock
to $.01, will facilitate the consummation
of the transactions contemplated by the
Merger Agreement. The delicensing of
Aetna as an insurance company in
Connecticut will not have any material
effect on Aetna's business or operations.
See "New Aetna Certificate of
Incorporation."

Opinions of Financial
Advisors......................... Wasserstein Perella & Co., Inc.
("Wasserstein Perella") has delivered its
written opinion to the Board of Directors
of Aetna to the effect that, as of the
date of this Joint Proxy
Statement/Prospectus and based on various
limitations and assumptions set forth
therein, the consideration to be paid to
the holders of U.S. Healthcare Stock (as
defined below) pursuant to the Amended
Merger Agreement is fair, from a
financial point of view, to Aetna.

J.P. Morgan Securities Inc. ("J.P. Morgan")
has delivered its written opinion to the
Board of Directors of Aetna to the effect
that, as of the date of this Joint Proxy
Statement/Prospectus and based on various
considerations and assumptions set forth
therein, the consideration to be paid to
the shareholders of U.S. Healthcare
pursuant to the Amended Merger Agreement
is fair, from a financial point of view,
to the shareholders of Aetna.

For information on the assumptions made,
matters considered and limitations on the
reviews undertaken by Wasserstein Perella
and J.P. Morgan, see "The Mergers --
Opinions of Financial Advisors -- Aetna."
Holders of Aetna Common Stock are urged
to read in their entirety the opinions of
Wasserstein Perella and J.P. Morgan dated
the date of this Joint Proxy
Statement/Prospectus, copies

10
<PAGE> 22

of which are attached as Appendices D and
E, respectively, to this Joint Proxy
Statement/Prospectus.

Record Date; Shares Outstanding
and
Entitled to Vote............. The record date (the "Aetna Record Date")
for the Aetna Special Meeting is May 20,
1996. As of the Aetna Record Date, there
were outstanding 115,427,152 shares of
Aetna Common Stock. Only holders of
record of Aetna Common Stock on the Aetna
Record Date are entitled to vote at the
Aetna Special Meeting.

Security Ownership of
Management....................... As of the Aetna Record Date, directors and
executive officers of Aetna and their
affiliates were owners of an aggregate of
338,292 shares of Aetna Common Stock
(less than one percent of the shares of
Aetna Common Stock then outstanding).

THE U.S. HEALTHCARE ANNUAL
MEETING

Time, Date and Place........... The 1996 Annual Meeting of Shareholders of
U.S. Healthcare (the "U.S. Healthcare
Annual Meeting" and, together with the
Aetna Special Meeting, the "Shareholder
Meetings") will be held at U.S.
Healthcare's Auditorium at the Customer
Service Center (Building 2), 1425 Union
Meeting Road, Blue Bell, Pennsylvania, on
Thursday, July 18, 1996 at 10:00 a.m.,
Eastern Daylight Time.

Matters to be Considered at the
U.S. Healthcare Annual
Meeting........................ At the U.S. Healthcare Annual Meeting, the
shareholders of U.S. Healthcare will be
asked to consider and vote upon proposals
(i) to approve and adopt the Merger
Agreement, (ii) contingent on the
consummation of the Mergers contemplated
by the Merger Agreement, (a) to approve
and adopt the Aetna Inc. 1996 Stock
Incentive Plan, (b) to approve and adopt
the Aetna Inc. Annual Incentive Plan and
(c) to approve the assumption by Parent
of Aetna's Non-Employee Director Deferred
Stock and Deferred Compensation Plan and
(iii) to re-elect two Class III directors
to hold office until the 1999 Annual
Meeting of Shareholders or until their
successors are duly elected and
qualified. The Merger Agreement provides
that immediately after the Merger Date
(as defined below), the Board of
Directors of U.S. Healthcare (which will
then be a wholly-owned subsidiary of
Parent) will be designated by Parent and
will include the two Co-Presidents of
U.S. Healthcare.

Required Vote.................. The approval and adoption of the Merger
Agreement requires the affirmative vote
of a majority of the voting power of the
outstanding shares of common stock, par
value $0.005 per share, of U.S.
Healthcare (the "U.S. Healthcare Common
Stock") and the outstanding shares of
Class B Stock, par value $0.005 per
share, of U.S. Healthcare (the "U.S.
Healthcare Class B Stock" and, together
with the U.S. Healthcare Common Stock,
the "U.S. Healthcare Stock"), voting
together as a single class. The approval
and adoption of the Aetna Inc. 1996 Stock
Incentive Plan and the Aetna Inc. Annual
Incentive Plan, and the approval of the
assumption by Parent of

11
<PAGE> 23

Aetna's Non-Employee Director Deferred
Stock and Deferred Compensation Plan,
require the affirmative vote of a
majority of the votes which the holders
of U.S. Healthcare Common Stock and U.S.
Healthcare Class B Stock present at the
U.S. Healthcare Annual Meeting in person
or by proxy are entitled to cast, voting
together as a single class. The
re-election of David B. Soll, M.D. as one
of the two Class III directors requires
the affirmative vote of a majority of the
votes which the holders of U.S.
Healthcare Common Stock and U.S.
Healthcare Class B Stock present at the
U.S. Healthcare Annual Meeting in person
or by proxy are entitled to cast, voting
together as a single class. The
re-election of Timothy T. Weglicki as the
other Class III director requires the
affirmative vote of a majority of the
votes which the holders of U.S.
Healthcare Common Stock present at the
U.S. Healthcare Annual Meeting in person
or by proxy are entitled to cast. Each
share of U.S. Healthcare Common Stock
will be entitled to one vote, and each
share of U.S. Healthcare Class B Stock
will be entitled to fifty votes, on each
matter on which the respective holders of
such shares are entitled to vote at the
U.S. Healthcare Annual Meeting.

Recommendations of the U.S.
Healthcare Board of
Directors...................... The Board of Directors of U.S. Healthcare
believes that the terms of the Merger
Agreement are fair to and in the best
interests of U.S. Healthcare and its
shareholders and has, by unanimous vote,
approved the Merger Agreement and
unanimously recommends that shareholders
of U.S. Healthcare vote FOR approval and
adoption of the Merger Agreement. U.S.
Healthcare believes that, among other
things, the Mergers will create a strong
new company as well as provide U.S.
Healthcare shareholders the opportunity
to receive cash in consideration for a
portion of their shares of U.S.
Healthcare. See "The
Mergers -- Recommendations of the Boards
of Directors and Reasons for the
Mergers -- U.S. Healthcare."

The Board of Directors of U.S. Healthcare
unanimously recommends that shareholders
of U.S. Healthcare vote FOR approval of
the adoption or assumption, as
applicable, by Parent of each of the
Incentive Plans. The Board of Directors
of U.S. Healthcare believes that the
ability of Parent and its subsidiaries to
attract, motivate, retain and reward
talented and experienced individuals will
be enhanced through the Incentive Plans.

The Board of Directors of U.S. Healthcare
has nominated David B. Soll, M.D. and
Timothy T. Weglicki to be re-elected as
the Class III directors and unanimously
recommends that the holders of U.S.
Healthcare Common Stock and U.S.
Healthcare Class B Stock vote FOR the re-
election of David B. Soll, M.D. and that
the holders of U.S. Healthcare Common
Stock vote for the re-election of Timothy
T. Weglicki.

Voting Agreement............... As of the U.S. Healthcare Record Date (as
defined below), Leonard Abramson,
Chairman of U.S. Healthcare, held
14,411,955 shares of Class B Stock,
representing approximately 83.7% of the
voting power of U.S. Healthcare's

12
<PAGE> 24

capital stock as of such date. Pursuant
to a Voting Agreement, as amended, with
affiliates of Aetna, Mr. Abramson has
agreed to vote for the approval and
adoption of the Merger Agreement at the
U.S. Healthcare Annual Meeting.
Accordingly, a vote in favor of the
approval and adoption of the Merger
Agreement at the U.S. Healthcare Annual
Meeting is assured without the vote of
any other holder of shares of U.S.
Healthcare Stock. See "The Amended Voting
Agreement." Mr. Abramson has also
indicated that he intends to vote for the
approval of the adoption and assumption,
as applicable, of each of the Incentive
Plans and for the re-election of David B.
Soll, M.D., which would assure such
approval by U.S. Healthcare shareholders
and such re-election without the vote of
any other shareholders of U.S.
Healthcare.

Opinions of Financial
Advisors......................... Goldman, Sachs & Co. ("Goldman Sachs") has
delivered its written opinion to the
Board of Directors of U.S. Healthcare to
the effect that, as of the date of this
Joint Proxy Statement/Prospectus, the
U.S. Healthcare Merger Consideration (as
defined below) to be received by the
holders of U.S. Healthcare Stock pursuant
to the Merger Agreement is fair to such
holders.

Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") has
delivered its written opinion to the
Board of Directors of U.S. Healthcare to
the effect that, as of the date of this
Joint Proxy Statement/Prospectus and
based upon the assumptions made, matters
considered and limits of review with
respect to such opinion, the
consideration to be received by the
holders of U.S. Healthcare Stock (other
than Aetna and its affiliates) in the
Mergers is fair to the shareholders of
U.S. Healthcare from a financial point of
view.

For information on the assumptions made,
matters considered and limitations on the
reviews undertaken by Goldman Sachs and
Merrill Lynch, see "The Mergers --
Opinions of Financial Advisors -- U.S.
Healthcare." Holders of U.S. Healthcare
Common Stock and U.S. Healthcare Class B
Stock are urged to read in their entirety
the opinions of Goldman Sachs and Merrill
Lynch dated the date of this Joint Proxy
Statement/Prospectus, copies of which are
attached as Appendices F and G,
respectively, to this Joint Proxy
Statement/Prospectus.

Record Date; Shares Outstanding
and
Entitled to Vote............. The record date (the "U.S. Healthcare
Record Date") for the U.S. Healthcare
Annual Meeting is June 3, 1996. As of the
U.S. Healthcare Record Date, there were
outstanding 139,842,375 shares of U.S.
Healthcare Common Stock and 14,429,426
shares of U.S. Healthcare Class B Stock.
U.S. Healthcare Common Stock is thus
entitled to cast a total of 139,842,375
votes and the U.S. Healthcare Class B
Stock is entitled to cast a total of
721,471,300 votes. Only holders of record
of U.S. Healthcare Common Stock and U.S.
Healthcare Class B Stock on the U.S.
Healthcare Record Date are entitled to
vote at the U.S. Healthcare Annual
Meeting. Furthermore, only holders of
U.S.

13
<PAGE> 25

Healthcare Common Stock on the U.S.
Healthcare Record Date are entitled to
vote on the re-election of Timothy T.
Weglicki.

Security Ownership of
Management....................... As of the U.S. Healthcare Record Date,
directors and executive officers of U.S.
Healthcare and their affiliates were
owners of an aggregate of 3,196,986
shares of U.S. Healthcare Common Stock
(approximately 2.3% of the shares of U.S.
Healthcare Common Stock then outstanding)
and 14,411,955 shares of U.S. Healthcare
Class B Stock (approximately 99.9% of the
shares of U.S. Healthcare Class B Stock
then outstanding).

As of the U.S. Healthcare Record Date,
Leonard Abramson, Chairman of U.S.
Healthcare, owned 2,268,755 shares of
U.S. Healthcare Common Stock
(approximately 1.6% of the shares of U.S.
Healthcare Common Stock then outstanding)
and 14,411,955 shares of U.S. Healthcare
Class B Stock (approximately 99.9% of the
shares of U.S. Healthcare Class B Stock
then outstanding). Mr. Abramson's
holdings of Class B Stock represent
approximately 83.7% of the voting power
of U.S. Healthcare's capital stock as of
such date.

See "Voting Agreement" above for
information concerning certain agreements
and indications made by Mr. Abramson
concerning the voting of his shares of
U.S. Healthcare Stock.

THE MERGERS

General........................ At the effective time of the Mergers
referred to below (the "Merger Date"),
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 each of Aetna and
U.S. Healthcare will become a wholly-
owned subsidiary of Parent.

Effect on U.S. Healthcare
Shareholders..................... On the Merger Date, each issued and
outstanding share of U.S. Healthcare
Common Stock and U.S. Healthcare Class B
Stock (other than shares of U.S.
Healthcare Common Stock and U.S.
Healthcare Class B Stock held by U.S.
Healthcare as treasury stock and certain
shares held by Aetna or its subsidiaries,
all of which will be canceled, and shares
for which dissenting shareholders' rights
have been properly exercised and
perfected) will be converted into the
right to receive (i) 0.2246 shares of
common stock, par value $.01 per share,
of Parent (the "Parent Common Stock"),
together with 0.2246 rights (each, a
"Parent Right") issued pursuant to a
Rights Agreement effective on the Merger
Date, (ii) 0.0749 shares of 6.25% Class C
Voting Preferred Stock, par value $.01
per share, of Parent (the "Parent
Mandatorily Convertible Preferred Stock")
and (iii) $34.20 in cash (the "Cash
Consideration") (the consideration
referred to in clauses (i), (ii) and
(iii) being collectively referred to as
the "U.S. Healthcare Merger
Consideration"). Prior to the

14
<PAGE> 26

Merger Date, there has been no public
market for the Parent Common Stock or the
Parent Mandatorily Convertible Preferred
Stock. For a description of Parent Common
Stock, see "Description of Parent Capital
Stock -- Common Stock," for a description
of the Parent Mandatorily Convertible
Preferred Stock, see "Description of
Parent Capital Stock -- Parent
Mandatorily Convertible Preferred Stock,"
and for a description of the Parent
Rights, see "Description of Parent
Rights."

Effect on U.S. Healthcare
Option Holders
and Holders of Restricted
Stock.......................... For a description of the effect of the
Mergers on holders of options on U.S.
Healthcare Stock and holders of
restricted stock of U.S. Healthcare, see
"The Mergers -- Stock Options; Restricted
Stock." Approval of the Merger Agreement
will constitute approval of the portion
of the Aetna Inc. 1996 Stock Incentive
Plan that allows for the conversion of
stock options pursuant to the Merger
Agreement.

Effect on Aetna Shareholders... On the Merger Date, each share of Aetna
Common Stock then issued and outstanding
(other than shares of Aetna Common Stock
held by Aetna as treasury stock and
shares held by U.S. Healthcare or its
subsidiaries, all of which will be
canceled, and shares for which objecting
shareholders' rights have been properly
exercised and perfected) will be
converted into the right to receive one
share of Parent Common Stock, together
with one Parent Right. Prior to the
Merger Date, there has been no public
market for Parent Common Stock. For a
description of Parent Common Stock, see
"Description of Parent Capital
Stock-Common Stock," for a description of
Parent Mandatorily Convertible Preferred
Stock, see "Description of Parent Capital
Stock-Parent Mandatorily Convertible
Preferred Stock, and for a description of
the Parent Rights see "Description of
Parent Rights."

Shares of Aetna Common Stock held pursuant
to Aetna's Dividend Reinvestment and
Stock Purchase Plan are expected to be
converted into shares of Parent Common
Stock on the Merger Date and to remain in
a substantially identical plan to be
adopted by Parent.

Effect on Aetna Option
Holders.......................... For a discussion of the effect of the
Mergers on holders of options on Aetna
Common Stock, see "The Mergers -- Stock
Options; Restricted Stock." Approval of
the Merger Agreement will constitute
approval of the portion of the Aetna Inc.
1996 Stock Incentive Plan that allows for
the conversion of stock options pursuant
to the Merger Agreement.

Parent Rights.................. The Parent Rights have certain
anti-takeover effects. The Parent 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 Parent Rights being
acquired. See "Description of Parent
Rights."

Regulatory Approvals; Merger
Date............................. Consummation of the Mergers requires the
approval of the Health and/or Insurance
Commissioners of various states.

15
<PAGE> 27

Applications for such approvals have been
filed, and Aetna and U.S. Healthcare
believe that such approvals should be
obtained during the third quarter of
1996. However, there can be no assurance
that such approvals will be obtained by
such time or that such approvals will be
granted. Assuming receipt of the approval
of the Aetna and U.S. Healthcare
shareholders, the Mergers will be
consummated promptly after receipt of the
required regulatory approvals and the
satisfaction or waiver of the other
conditions to the Mergers. The applicable
waiting period for the approval of the
Mergers under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as
amended, has expired. See "Other
Matters -- Regulatory Approvals."

Conditions to the Mergers;
Termination;
Termination Fees............. The obligations of Aetna and U.S.
Healthcare to consummate the Mergers are
subject to various conditions, including
obtaining the requisite shareholder and
regulatory approvals, the absence of any
order or other legal restraint or
prohibition preventing the consummation
of the Mergers, receipt of opinions of
counsel in respect of certain federal
income tax consequences of the Mergers
and the average of the closing prices per
share of Aetna Common Stock on the NYSE
Composite Tape for the 20 consecutive
trading days immediately prior to the
proposed Merger Date (the "Average
Closing Stock Price") being not less than
$60.90 (the "Average Closing Stock Price
Condition"). However, Aetna, in its sole
discretion, may satisfy the Average
Closing Stock Price Condition by
increasing the Cash Consideration by an
amount determined by a formula set forth
in the Merger Agreement. See "The Amended
Merger Agreement -- Conditions to the
Mergers." For example, if the Average
Closing Stock Price were $59.90 and Aetna
chose to satisfy the Average Closing
Stock Price Condition by increasing the
Cash Consideration, the Cash
Consideration would be increased by
$0.2995 per share of U.S. Healthcare
Stock. In the event that the Average
Closing Stock Price is less than $60.90
and Aetna determines not to increase the
Cash Consideration, U.S. Healthcare has
the right not to consummate the Mergers.
The Board of Directors of U.S. Healthcare
has not made any determination as to what
course of action it would take in such
event. The U.S. Healthcare Board of
Directors would make its decision based
on the facts and circumstances existing
at such time, after consulting with its
legal advisors and with Goldman Sachs and
Merrill Lynch, U.S. Healthcare's
financial advisors. Because the Mergers
may not be consummated for a period of
time after the Shareholder Meetings, the
Average Closing Stock Price may be higher
or lower than the price per share of
Aetna Common Stock at the time of the
Shareholder Meetings. In the event that
(i) the Average Closing Stock Price (as
defined in the Merger Agreement) drops to
less than $60.90, (ii) Aetna decides not
to increase the Cash Consideration
pursuant to the Merger Agreement and
(iii) U.S. Healthcare determines to waive
its right not to consummate the Mergers
in those circumstances, U.S.

16
<PAGE> 28

Healthcare will recirculate proxy
materials to its shareholders to obtain a
revote and will seek updated opinions
from its financial advisors.

The Merger Agreement may be terminated, and
the Mergers abandoned, at any time prior
to the Merger Date, whether or not
shareholder approvals have been obtained,
(i) by mutual consent of Aetna and U.S.
Healthcare or (ii) by either Aetna or
U.S. Healthcare, (a) if the Mergers are
not consummated on or before March 30,
1997 or (b) under certain other
circumstances. See "The Amended Merger
Agreement -- Termination."

Each of Aetna and U.S. Healthcare has
agreed that if the Merger Agreement is
terminated, under certain circumstances,
it will pay the other an amount equal to
$100 million plus all out-of-pocket
expenses, not to exceed $25 million,
incurred by such party in connection with
the Merger Agreement and related matters.
See "The Amended Merger
Agreement -- Expenses and Termination
Fees."

Board of Directors after the
Mergers.......................... Upon consummation of the Mergers, the Board
of Directors of Parent will consist of
the Board of Directors of Aetna
immediately prior to the Merger Date,
and, no later than sixty days following
the Merger Date, the Board of Directors
of Parent will be expanded to include Mr.
Abramson and two other persons designated
initially by U.S. Healthcare.

Interests of Certain Persons in
the
Mergers; Management after the
Mergers...................... Parent has entered into an agreement (the
"Agreement with Principal Shareholder")
with Leonard Abramson, Chairman of U.S.
Healthcare and the holder, as of the U.S.
Healthcare Record Date, of approximately
83.7% of the voting power of U.S.
Healthcare (the "Principal Shareholder").
Pursuant to the Agreement with the
Principal Shareholder, for a term of five
years commencing on the Merger Date,
Parent will pay the Principal Shareholder
a consulting fee of $2 million per year
and will provide other benefits in return
for advice to the chief executive officer
of Parent on certain business matters. In
addition, on the Merger Date, Parent will
transfer to the Principal Shareholder
ownership of a certain aircraft owned by
a subsidiary of U.S. Healthcare which had
a net book value of $19.6 million as of
March 31, 1996 and an approximate market
value of $25 million. In consideration of
the Principal Shareholder's agreement
generally not to compete with Parent,
Parent will make payments aggregating $25
million, half in cash and half in Parent
Common Stock, to the Principal
Shareholder upon commencement of, during
the term of, and at termination of the
Agreement with the Principal Shareholder.
The Agreement with Principal Shareholder
provides for a payment, if necessary,
intended to make the Principal
Shareholder whole for any excise tax
imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended
(the "Code") with respect to any payment
or benefits that he may receive under
such agreement or any other plan,
arrangement or agreement in

17
<PAGE> 29

effect on the date of the Merger
Agreement. In addition, on the Merger
Date the Principal Shareholder will
receive all amounts that are due under
the employment agreement between the
Principal Shareholder and U.S.
Healthcare.

Parent has agreed, pursuant to a
Registration Rights Agreement, to
register the shares of Parent Common
Stock and Parent Mandatorily Convertible
Preferred Stock to be received by the
Principal Shareholder in the Mergers.

U.S. Healthcare has entered into, and
Parent will assume, employment agreements
(each, an "Employment Agreement") with
six senior officers of U.S. Healthcare.
Each Employment Agreement provides for a
five year renewable term. Each such
executive will receive a cash sign-on
bonus equal to such executive's current
salary (including deferred compensation)
and 1995 or 1996 bonus, and a "stay"
bonus in the same amount payable in
shares of restricted Parent Common Stock.
Each Employment Agreement also restricts
the disposition of U.S. Healthcare Stock
and Parent Common Stock and provides for
reimbursement for income and employment
taxes incident to the vesting of U.S.
Healthcare restricted stock and the
partial cash-out of options and for any
imposition of excise tax pursuant to
Section 4999 of the Code, and all income
and employment taxes and excise taxes
thereon.

U.S. Healthcare has also entered into
employment agreements with twenty-seven
of its other executives on terms
substantially similar to those of the
Employment Agreements of the senior
officers referred to above, except that,
among other things, (i) no sign-on bonus
or "stay" bonus is provided; (ii) there
are no restrictions on the disposition of
U.S. Healthcare Common Stock or Parent
Common Stock; and (iii) there are no
provisions for reimbursement of income or
employment taxes.

From and after the Merger Date, all of the
business of U.S. Healthcare and all of
the domestic business of Aetna Health
Plans (the "Combined Health Operations")
will report to the two Co-Presidents (the
"Co-Presidents") of U.S. Healthcare who
will be Co-Presidents of the Combined
Health Operations and who will report
directly and exclusively to the chief
executive officer of Parent. The current
senior executives of U.S. Healthcare will
each assume similar positions with the
Combined Health Operations and report
directly and exclusively to the Co-
Presidents. No person employed by U.S.
Healthcare on March 30, 1996 may be
discharged or have his or her
compensation reduced or his or her
principal office location changed for a
period of 24 months after the Merger Date
without the prior consent and approval of
the Co-Presidents.

For additional information concerning the
arrangements referred to above, as well
as information concerning arrangements
with certain executive officers of Aetna,
see "The Mergers -- Interests of Certain
Persons in the Mergers."

18
<PAGE> 30

Dividends...................... Parent intends, upon consummation of the
Mergers, to set its quarterly dividend at
an annual payout rate of between 10% to
20% of operating earnings (which excludes
net realized capital gains or losses)
before amortization of goodwill and other
intangibles related to the Mergers.
Pursuant to the Merger Agreement, Aetna
has agreed that after the Merger Date,
subject to applicable law, the initial
annual dividend on Parent Common Stock
will not be less than $0.80 per share of
Parent Common Stock. Further, the initial
dividend on Parent Common Stock affects
the dividend rate paid on Parent
Mandatorily Convertible Preferred Stock.
The dividend rate on Parent 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
Parent Common Stock on the Merger Date is
more than $0.83 per share. Due to this
and other factors, Parent currently
expects that, subject to applicable law,
the initial dividend on Parent Common
Stock will be approximately $0.80 to
$0.83 per share (on an annualized basis).
The Board of Directors of Parent will
review the cash dividend each quarter
after interim operating earnings are
known.

Appraisal Rights............... Pursuant to the Pennsylvania Business
Corporation Law of 1988 (the
"Pennsylvania Law"), holders of shares of
U.S. Healthcare Stock may exercise
dissenters' rights in connection with the
Mergers, and pursuant to the Connecticut
Stock Corporation Act (the "Connecticut
Law"), holders of Aetna Common Stock may
demand payment for their shares of Aetna
Common Stock in connection with the
Mergers, in each case in accordance with
and subject to the provisions of the
Pennsylvania Law or the Connecticut Law,
as applicable. See "The
Mergers -- Appraisal Rights" and
Appendices K and L to this Joint Proxy
Statement/Prospectus.

NYSE Listing................... The Parent Common Stock and Parent
Mandatorily Convertible Preferred Stock
to be issued in the Mergers have been
approved for listing on the New York
Stock Exchange, subject to official
notice of issuance. Prior to the Merger
Date, there has been no public market for
the Parent Common Stock and the Parent
Mandatorily Convertible Preferred Stock.

Accounting Treatment........... The Mergers will be accounted for by Parent
under the "purchase" method of
accounting. The conversion of Aetna
Common Stock into Parent Common Stock
will be treated as a reorganization with
no change in the recorded amount of
Aetna's assets and liabilities. See "The
Mergers -- Accounting Treatment."

Tax Consequences............... In general, except with respect to any cash
received by the U.S. Healthcare
shareholders pursuant to the Mergers, the
Mergers have been structured to qualify
as tax-free transactions under the Code.
The respective obligations of Aetna and
U.S. Healthcare to consummate the Mergers
are conditioned on receipt by Aetna of an
opinion from Davis Polk & Wardwell,
counsel to Aetna, and by U.S. Healthcare
of an opinion from Skadden, Arps, Slate,

19
<PAGE> 31

Meagher & Flom, counsel to U.S.
Healthcare, in each case based on certain
facts, representations and assumptions
set forth in such opinions which are
consistent with the state of facts
existing on the Merger Date, that the
Mergers so qualify. See "The Amended
Merger Agreement -- Conditions to the
Mergers" and "The Mergers -- Certain
Federal Income Tax Consequences."

Parent Mandatorily Convertible
Preferred Stock.................. Pursuant to the Merger Agreement, as part
of the U.S. Healthcare Merger
Consideration, the holder of each share
of U.S. Healthcare Stock will be entitled
to receive, among other things, 0.0749
shares of Parent Mandatorily Convertible
Preferred Stock with an annual dividend
rate of $4.7578 per share. The dividend
rate with respect to such Parent
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 Parent Common Stock
on the Merger Date is more than $0.83 per
share.

Each share of Parent Mandatorily
Convertible Preferred Stock is
convertible at any time at the option of
the holder thereof into 0.8197 shares of
Parent Common Stock (subject to
adjustments). Parent may redeem shares of
Parent Mandatorily Convertible Preferred
Stock at any time after the third
anniversary of the Merger Date for shares
of Parent Common Stock based on specified
formulas. On the fourth anniversary of
the Merger Date, each outstanding share
of Parent Mandatorily Convertible
Preferred Stock will convert
automatically into one share of Parent
Common Stock (subject to adjustments).
See "Description of Parent Capital
Stock -- Parent Mandatorily Convertible
Preferred Stock" and Appendix C hereto.

20
<PAGE> 32

MARKET PRICES

Aetna Common Stock is listed on the New York and Pacific Stock Exchanges,
with unlisted trading privileges on other regional exchanges, and is also listed
on the Swiss Stock Exchanges at Basel, Geneva and Zurich. Call and put options
on Aetna Common Stock are traded on the American Stock Exchange. U.S. Healthcare
Common Stock is traded on the NASDAQ Stock Market ("NASDAQ"). Call and put
options on U.S. Healthcare Common Stock are traded on the American Stock
Exchange. The following table sets forth the high and low closing prices per
share of Aetna Common Stock as reported by the NYSE Composite Tape and the high
and low trading prices per share of U.S. Healthcare Common Stock as reported by
NASDAQ for the periods indicated.

<TABLE>
<CAPTION>
AETNA U.S. HEALTHCARE
COMMON STOCK COMMON STOCK
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1994
First Quarter.................................... $65.75 $53.13 $45.50 $36.63
Second Quarter................................... 57.88 50.00 47.50 35.00
Third Quarter.................................... 57.50 45.13 47.25 33.75
Fourth Quarter................................... 48.00 43.25 49.00 38.00
1995
First Quarter.................................... 57.00 46.88 47.50 39.50
Second Quarter................................... 64.25 54.50 44.50 26.50
Third Quarter.................................... 74.38 60.38 36.13 29.88
Fourth Quarter................................... 75.88 67.88 46.50 34.38
1996
First Quarter.................................... 78.50 67.13 50.75 39.75
Second Quarter (through June 3, 1996)............ 76.25 66.75 54.63 50.63
</TABLE>

On March 29, 1996, the last trading day before public announcement of the
execution of the Merger Agreement, the closing price of Aetna Common Stock as
reported by the NYSE Composite Tape and the closing price of U.S. Healthcare
Common Stock as reported by NASDAQ were $75.50 per share and $45.875 per share,
respectively.

On June 11, 1996, the last trading day before the date of this Joint Proxy
Statement/Prospectus, the closing price of Aetna Common Stock as reported by the
NYSE Composite Tape and the closing price of U.S. Healthcare Common Stock as
reported by NASDAQ were $73.00 per share and $54.50 per share, respectively.

AETNA AND U.S. HEALTHCARE SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE AETNA COMMON STOCK AND THE U.S. HEALTHCARE COMMON STOCK.

Parent intends, upon consummation of the Mergers, to set its quarterly
dividend at an annual payout rate of between 10% to 20% of operating earnings
(which excludes net realized capital gains or losses) before amortization of
goodwill and other intangibles related to the Mergers. Pursuant to the Merger
Agreement, Aetna has agreed that after the Merger Date, subject to applicable
law, the initial annual dividend on Parent Common Stock will not be less than
$0.80 per share of Parent Common Stock. Further, the initial dividend on Parent
Common Stock affects the dividend rate paid on Parent Mandatorily Convertible
Preferred Stock. The dividend rate on Parent 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 Parent Common Stock
on the Merger Date is more than $0.83 per share. Due to this and other factors,
Parent currently expects that, subject to applicable law, the initial dividend
on Parent Common Stock will be approximately $0.80 to $0.83 per share (on an
annualized basis). The Board of Directors of Parent will review the cash
dividend each quarter after interim operating earnings are known.

21
<PAGE> 33

SELECTED HISTORICAL FINANCIAL DATA

The following tables set forth selected historical financial data of Aetna
and U.S. Healthcare for the last five years and for the three months ended March
31, 1996 and 1995. The selected historical financial data of Aetna and U.S.
Healthcare have been derived from, and should be read in conjunction with, the
historical consolidated financial data of Aetna or U.S. Healthcare, as the case
may be, including the notes thereto, which are incorporated herein by reference.
See "Incorporation of Certain Documents by Reference" and "Available
Information."

SELECTED HISTORICAL FINANCIAL DATA
OF AETNA LIFE AND CASUALTY COMPANY

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue
Premiums.................... $ 1,843.9 $ 1,882.1 $ 7,431.4 $ 6,901.3 $ 5,921.7 $ 5,717.6 $ 5,434.2
Net investment income, fees
and other income, and net
realized capital gains and
losses.................... 1,466.5 1,310.2 5,546.6 5,317.7 5,418.0 5,367.3 5,279.9
-------- -------- -------- -------- -------- -------- --------
Total revenue from
continuing
operations(a)....... $ 3,310.4 $ 3,192.3 $12,978.0 $12,219.0 $11,339.7 $11,084.9 $10,714.1
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT
ADJUSTMENTS:
Income (loss) from continuing
operations before
extraordinary item and
cumulative effect
adjustments................. $ 165.5 $ 92.4 $ 473.9 $ 409.4 $ (602.3) $ 101.0 $ 140.4
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
discontinued
operations(b)............... 182.2 68.4 (222.2) 58.1 290.3 324.8 364.8
Extraordinary loss on
debenture redemption, net of
tax......................... -- -- -- -- (4.7) -- --
Cumulative effect adjustments
for continuing operations... -- -- -- -- (49.2) (369.8) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............. $ 347.7 $ 160.8 $ 251.7 $ 467.5 $ (365.9) $ 56.0 $ 505.2
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net realized capital gains
(losses), net of tax (from
continuing operations)
(included above)............ $ 41.4 $ (10.6) $ 29.5 $ (41.2) $ (42.0) $ (76.7) $ (200.6)
BALANCE SHEET DATA:
Total assets.................. $84,102.2 $84,323.7 $84,323.7 $75,486.7 $81,572.8 $77,022.0 $78,966.8
Total long-term debt.......... 985.5 989.1 989.1 1,079.2 1,112.2 900.9 976.0
Minority interest in preferred
securities
of subsidiary............... 275.0 275.0 275.0 275.0 -- -- --
Shareholders' equity.......... 7,028.0 7,272.8 7,272.8 5,503.0 7,043.1 7,238.3 7,384.5
PER COMMON SHARE DATA:
Income (loss) from
continuing operations
before extraordinary item
and cumulative effect
adjustments............... $ 1.43 $ .82 $ 4.16 $ 3.63 $ (5.42) $ .92 $ 1.28
Income (loss) from
discontinued operations... 1.57 .60 (1.95) .51 2.61 2.95 3.31
Cumulative effect
adjustments for continuing
operations................ -- -- -- -- (.44) (3.36) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 3.00 $ 1.42 $ 2.21 $ 4.14 $ (3.29) $ .51 $ 4.59
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Dividends declared.......... .69 .69 2.76 2.76 2.76 2.76 2.76
Shareholders' equity........ 61.01 63.39 63.39 48.85 62.77 65.64 67.09
Weighted average common shares
outstanding................. 115,765,475 112,949,522 113,897,633 112,848,653 111,062,954 110,101,861 110,056,005
</TABLE>

- ---------------
(a) Continuing operations includes results of operations of Aetna Health Plans,
Aetna Retirement Services, International and Large Case Pensions Segments.

(b) Discontinued operations includes Aetna's property-casualty operations, which
Aetna sold to an affiliate of The Travelers Insurance Group Inc. on April 2,
1996.

22
<PAGE> 34

SELECTED HISTORICAL FINANCIAL DATA

OF U.S. HEALTHCARE, INC.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
OPERATING REVENUE:
Commercial premiums.... $ 826,865 $ 711,972 $2,971,365 $2,635,621 $2,402,431 $2,010,963 $1,584,860
Government premiums.... 202,057 88,940 490,677 240,891 157,277 105,600 74,807
Other, principally
administrative
services fees........ 22,958 13,117 55,764 32,770 20,212 12,522 4,733
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,051,880 814,029 3,517,806 2,909,282 2,579,920 2,129,085 1,664,400
OPERATING EXPENSES:
Medical costs.......... 789,633 584,202 2,577,833 1,994,780 1,861,985 1,631,317 1,279,960
Administrative,
marketing and other
operating costs...... 120,607 94,626 412,878 322,372 279,586 227,770 182,723
---------- ---------- ---------- ---------- ---------- ---------- ----------
910,240 678,828 2,990,711 2,317,152 2,141,571 1,859,087 1,462,683
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations... 141,640 135,201 527,095 592,130 438,349 269,998 201,717
Investment income,
including net realized
gains and losses....... 21,840 19,801 91,873 65,214 65,315 60,139 44,101
Other income
(expense)(a)........... (22,990) -- -- -- -- -- 1,485
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 140,490 155,002 618,968 657,344 503,664 330,137 247,303
Provision for income
taxes.................. 58,852 60,450 238,303 266,225 203,989 130,091 96,203
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............... $ 81,638 $ 94,552 $ 380,665 $ 391,119 $ 299,675 $ 200,046 $ 151,100
========== ========== ========== ========== ========== ========== ==========
NET INCOME PER COMMON AND
COMMON EQUIVALENT
SHARE:(B)
Primary.............. $ .53 $ .59 $2.42 $2.42 $1.84 $1.23 $.93
Fully diluted........ $ .53 $ .59 $2.42 $2.42 $1.84 $1.23 $.92
Weighted average number
of common and common
equivalent shares
outstanding:(b)
Primary.............. 155,300 161,218 157,015 161,646 162,654 162,401 162,968
Fully diluted........ 155,321 161,304 157,436 161,704 162,798 162,614 163,397
Cash dividends paid per
common share(b)........ $ .275 $ .250 $1.0250 $.7233 $.3867 $.2733 $.1600
Cash dividends paid per
Class B share(b)....... $ .2475 $ .225 $.9225 $.6510 $.3480 $.2460 $.1440
Medical costs as a
percentage of
premiums............... 76.7% 72.9% 74.5% 69.3% 72.7% 77.1% 77.1%
BALANCE SHEET DATA:
Total assets(c)........ $1,759,777 $1,599,289 $1,667,144 $1,463,887 $1,343,653 $ 981,094 $ 758,218
Total liabilities(c)... 749,754 616,803 703,013 558,214 573,926 476,004 411,324
Shareholders'
equity(c)............ 1,010,023 982,486 964,131 905,673 769,727 505,090 346,894
</TABLE>

- ---------------
(a) Other expense in the three months ended March 31, 1996 consists of costs
incurred in connection with the Merger Agreement.

(b) After giving effect to 3 for 2 stock splits effected in the form of 50%
stock dividends paid in September 1992 and March 1994.

(c) U.S. Healthcare adopted Financial Accounting Standard Number 115 (FAS 115)
-- "Accounting for Certain Investments in Debt and Equity Securities" as of
December 31, 1993. The adoption of FAS 115 had no effect on net income but
increased marketable securities as of December 31, 1993 by $38.2 million,
representing net unrealized gains, and increased shareholders' equity by
$23.3 million (net unrealized gains less deferred income taxes of $14.9
million).

23
<PAGE> 35

UNAUDITED SELECTED PRO FORMA FINANCIAL INFORMATION

The following unaudited selected pro forma financial information for Parent
gives effect to (i) the sale by Aetna of its property-casualty operations and
(ii) the Mergers and related transactions, and is derived from the unaudited pro
forma financial information appearing elsewhere in this Joint Proxy
Statement/Prospectus. The applicable transactions are reflected in the unaudited
pro forma condensed consolidated balance sheet as if they occurred on March 31,
1996 and in the unaudited pro forma condensed consolidated statements of income
as if they occurred on January 1, 1996 (for the three months ended March 31,
1996) and January 1, 1995 (for the twelve months ended December 31, 1995). The
U.S. Healthcare Sub Merger will be accounted for under the purchase method of
accounting. The Aetna Sub Merger will be treated as a reorganization with no
change in the recorded amount of Aetna's assets and liabilities. See "The
Mergers -- Accounting Treatment". The unaudited pro forma financial statements
are prepared for illustrative purposes only and are not necessarily indicative
of the financial position or results of operations that might have occurred had
the applicable transactions actually taken place on the dates indicated, or of
future results of operations or financial position of the stand-alone or
combined entities. The unaudited pro forma financial information does not
reflect any nonrecurring/unusual restructuring charges resulting from the sale
by Aetna of its property-casualty operations or the integration of the Combined
Health Operations, or any synergies expected to be realized as a result of the
Mergers. See "Other Matters -- Estimated Synergies." The unaudited pro forma
financial statements are based on the historical consolidated financial
statements of Aetna and U.S. Healthcare and the unaudited selected pro forma
financial information should be read in conjunction with (i) such historical
financial statements and the notes thereto, which are incorporated by reference
in this Joint Proxy Statement/Prospectus, (ii) the unaudited pro forma financial
information and unaudited comparative per share data, including the notes
thereto, appearing elsewhere in this Joint Proxy Statement/Prospectus and (iii)
the selected historical financial data of Aetna and U.S. Healthcare appearing
elsewhere in this Joint Proxy Statement/Prospectus. See "Incorporation of
Certain Documents by Reference," "Available Information," "Unaudited Pro Forma
Financial Information" and "Selected Historical Financial Data."

<TABLE>
<CAPTION>
AT OR FOR THREE MONTHS FOR TWELVE MONTHS
ENDED MARCH 31, 1996 ENDED DECEMBER 31, 1995
----------------------- -----------------------
(IN MILLIONS)
<S> <C> <C>
Unaudited Pro Forma Consolidated
Income Statement Information:
Total Revenue..................... $ 4,384.1 $16,587.7
Income from continuing operations
before income taxes (benefits)
and preferred stock
dividends...................... 288.0 835.6
Income from continuing operations
attributable to common
ownership...................... 159.2 406.2
Unaudited Pro Forma Consolidated
Balance Sheet Information:
Total assets...................... 91,018.9
Total liabilities................. 80,146.1
Total minority interest in
preferred securities of
subsidiary..................... 275.0
Total shareholders' equity........ 10,597.8
</TABLE>

24
<PAGE> 36

UNAUDITED COMPARATIVE PER SHARE DATA

The following table sets forth for Aetna and U.S. Healthcare certain
historical and pro forma equivalent per share data at March 31, 1996 and for the
three months ended March 31, 1996 and for the twelve months ended December 31,
1995. The information presented herein should be read in conjunction with the
selected historical financial data and the unaudited pro forma financial
information appearing elsewhere in this Joint Proxy Statement/Prospectus. See
"Selected Historical Financial Data" and "Unaudited Selected Pro Forma Financial
Information."

For purposes of calculating equivalent share data, it has been assumed that
each share of U.S. Healthcare Stock is exchanged in the Mergers for $34.20 in
cash, 0.2246 shares of Parent Common Stock together with 0.2246 Parent Rights,
and 0.0749 shares of Parent Mandatorily Convertible Preferred Stock.

<TABLE>
<CAPTION>
AT OR FOR
THREE MONTHS TWELVE MONTHS
ENDED ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
AETNA LIFE AND CASUALTY COMPANY/AETNA INC. COMMON STOCK
Income from continuing operations per share:
Historical................................................. $ 1.43 $ 4.16
Combined pro forma......................................... 1.05 2.71
Book value per share:
Historical................................................. 61.01
Combined pro forma......................................... 64.37
Cash dividends per share:
Historical................................................. 0.69 2.76
Combined pro forma(a)...................................... 0.20 0.80
U.S. HEALTHCARE, INC. STOCK(B)
Income from continuing operations per share:
Historical................................................. $ 0.53 $ 2.42
Pro forma equivalent(c).................................... 0.24 0.61
Book value per share:
Historical................................................. 6.56
Pro forma equivalent(c).................................... 14.46
Cash dividends per share:
Historical................................................. 0.275 1.025
Pro forma equivalent(c).................................... 0.04 0.18
</TABLE>

- ---------------

(a) Parent intends, upon consummation of the Mergers, to set its quarterly
dividend at an annual payout rate of between 10% to 20% of operating
earnings (which excludes net realized capital gains or losses) before
amortization of goodwill and other intangibles related to the Mergers.
Parent currently expects that, subject to applicable law, the initial
dividend on Parent Common Stock will be approximately $0.80 to $0.83 per
share (on an annualized basis). For purposes of this Unaudited Comparative
Per Share Data, an annual dividend rate of $0.80 per share has been assumed.
The Board of Directors of Parent will review the cash dividend each quarter
after interim operating earnings are known.

(b) Historical per share amounts represent amounts per share of U.S. Healthcare
Common Stock and U.S. Healthcare Class B Stock, except for cash dividends
per share which represent dividends on shares of U.S. Healthcare Common
Stock only. Historical dividends on the U.S. Healthcare Class B Stock were
$.2475 for the three months ended March 31, 1996 and $.9225 for the twelve
months ended December 31, 1995.

(c) The pro forma equivalent is calculated by multiplying 0.2246, which is the
exchange ratio for the Parent Common Stock portion of the U.S. Healthcare
Merger Consideration, by Parent's pro forma income per share, book value per
share and cash dividends per share, which have been prepared using
adjustments consistent with those included in the Unaudited Pro Forma
Financial Information contained elsewhere in this Joint Proxy
Statement/Prospectus. The pro forma equivalent calculation does not give
effect to the portion of the U.S. Healthcare Merger Consideration consisting
of the Cash Consideration or Parent Mandatorily Convertible Preferred Stock.

25
<PAGE> 37

RISK FACTORS

In addition to the other information in this Joint Proxy
Statement/Prospectus, the following risk factors should be considered carefully
by Aetna and U.S. Healthcare shareholders in determining whether or not to vote
in favor of the approval and adoption of the Merger Agreement.

AETNA'S LONG-TERM STRATEGIC OBJECTIVES

In September 1995, Aetna's management and Board of Directors concluded that
Aetna's preferred strategic alternative was for Aetna to exit the
property-casualty business and focus on opportunities for growth of its health
care, financial services and international businesses. On April 2, 1996, the
sale of Aetna's property-casualty operations was consummated for sale proceeds
of approximately $4.1 billion. The Mergers represent the second step of this
strategic decision. Parent's ability to successfully implement this second step
is subject to the following uncertainties, among other things: (i) the ability
to integrate the U.S. Healthcare and Aetna management and information systems on
a timely basis, (ii) the ability to apply U.S. Healthcare's managed care
expertise to Aetna members and (iii) the ability to eliminate duplicative
administrative functions. See "The Mergers -- Background of the Mergers" and
"Other Matters -- Estimated Synergies" and "Other Matters -- Factors For Forward
Looking Information."

FACTORS AFFECTING THE HEALTH CARE INDUSTRY

As a result of the Mergers, Parent's health care operations will represent
its most substantial source of earnings. There are several important factors
which may subject health care operations to certain risks including, among other
things, (i) heightened competition, (ii) adverse changes in state and federal
legislation and regulation, (iii) increases in medical costs (including price
increases in pharmaceuticals and durable medical equipment), (iv) termination of
provider contracts or renegotiation thereof at more adverse terms, (v) inability
to increase premiums apace with increases in medical costs, (vi) adverse actions
of government payors, (vii) migration of employers and/or members to lower
margin lines of business and (viii) changes in health care practices and medical
technologies. Additional information regarding these factors is set forth under
"Other Matters -- Factors For Forward Looking Information," as well as in the
periodic reports of Aetna and U.S. Healthcare incorporated by reference herein.

INCREASED LEVEL OF DEBT

In connection with the Mergers, Aetna expects to increase its debt levels
by up to $1.4 billion through an issuance of commercial paper and/or borrowings
under a new Aetna credit facility. It is currently expected that any commercial
paper to be issued by Aetna will be unsecured and guaranteed by Parent. Aetna's
increased degree of leverage may pose risks to holders of Parent Common Stock
and Parent Mandatorily Convertible Preferred Stock. It is currently anticipated
that the indebtedness incurred by Aetna will be repaid from funds generated
internally by Parent and its subsidiaries and/or from other sources. Upon the
Mergers, Parent's ratio of debt to equity on a pro forma basis as of March 31,
1996 is anticipated to be approximately 26.7%. See "The Mergers -- Financing of
U.S. Healthcare Merger Consideration."

26
<PAGE> 38

INTRODUCTION

This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Aetna Life and Casualty Company, a Connecticut insurance corporation ("Aetna"),
in connection with the solicitation of proxies by Aetna for use at the Special
Meeting of Shareholders of Aetna (the "Aetna Special Meeting") to be held at
Aetna's Corporate Headquarters, 151 Farmington Avenue, Hartford, Connecticut on
Thursday, July 18, 1996 at 3:00 p.m. Eastern Daylight Time, and at any
adjournment or postponement thereof.

This Joint Proxy Statement/Prospectus is being furnished to the
shareholders of U.S. Healthcare, Inc., a Pennsylvania corporation ("U.S.
Healthcare"), in connection with the solicitation of proxies by U.S. Healthcare
for use at the 1996 Annual Meeting of Shareholders of U.S. Healthcare (the "U.S.
Healthcare Annual Meeting" and, together with the Aetna Special Meeting, the
"Shareholder Meetings") to be held at U.S. Healthcare's Auditorium at the
Customer Service Center (Building 2), 1425 Union Meeting Road, Blue Bell,
Pennsylvania on Thursday, July 18, 1996 at 10:00 a.m. Eastern Daylight Time, and
at any adjournment and postponement thereof.

At the Aetna Special Meeting and the U.S. Healthcare Annual Meeting, the
holders of Common Capital Stock without par value ("Aetna Common Stock") of
Aetna and the holders of Common Stock, par value $0.005 per share ("U.S.
Healthcare Common Stock") of U.S. Healthcare and Class B Stock, par value $0.005
per share ("U.S. Healthcare Class B Stock" and together with U.S. Healthcare
Common Stock, the "U.S. Healthcare Stock"), of U.S. Healthcare, respectively,
will be asked (i) to approve and adopt the Agreement and Plan of Merger dated as
of March 30, 1996 (the "Merger Agreement") among Aetna, U.S. Healthcare, Aetna
Inc., a Connecticut corporation ("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"), as amended by Amendment No. 1 thereto dated May
30, 1996 (the "Amended Merger Agreement"), pursuant to which 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 each of
Aetna and U.S. Healthcare will become a wholly-owned subsidiary of Parent, and
(ii) to approve, contingent on the consummation of the Mergers, the adoption of
each of the Aetna Inc. 1996 Stock Incentive Plan and the Aetna Inc. Annual
Incentive Plan, and the assumption by Parent of the Aetna Non-Employee Director
Deferred Stock and Deferred Compensation Plan (together, the "Incentive Plans").
At the Aetna Special Meeting, shareholders of Aetna will also be asked to
approve and adopt a new Aetna Certificate of Incorporation in connection with
Aetna's reincorporation as a general business corporation, the surrender of its
license as an insurance company in Connecticut and the related change of Aetna's
name to Aetna Services, Inc., as well as a change of the par value of Aetna's
Common Stock to $.01. The proposed changes are intended generally to facilitate
the transactions contemplated by the Amended Merger Agreement. At the U.S.
Healthcare Annual Meeting, shareholders of U.S. Healthcare will also be asked to
re-elect two Class III directors to hold office until the 1999 Annual Meeting of
Shareholders and until their respective successors are duly elected and
qualified.

This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Parent with respect to up to 153,534,550 shares of common stock, par value $.01
per share, of Parent (the "Parent Common Stock") together with rights (each, a
"Parent Right") issued pursuant to a Rights Agreement (the "Parent 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
(the "Merger Date") and 11,828,472 shares of 6.25% Class C Voting Preferred
Stock, par value $.01 per share, of Parent (the "Parent Mandatorily Convertible
Preferred Stock") to be issued pursuant to the Merger Agreement.

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This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to shareholders of Aetna and U.S. Healthcare on or about
June 12, 1996.

THE COMPANIES

AETNA LIFE AND CASUALTY COMPANY

Aetna was organized in 1967 as a Connecticut insurance company. Aetna is
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 cost 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: financial
services and 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.

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.

The principal executive offices of Aetna are located at 151 Farmington
Avenue, Hartford, CT 06156. Aetna's telephone number is (860) 273-0123.

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, Ohio and the District of

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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 HMOs.

The principal executive offices of U.S. Healthcare are located at 980 Jolly
Road, Blue Bell, PA 19422. U.S. Healthcare's telephone number is (215) 628-4800.

AETNA INC.

Parent, a newly formed Connecticut corporation, 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 its participation
in the preparation of this Joint Proxy Statement/Prospectus. Immediately
following the consummation of the Mergers, Parent will become a holding company
for Aetna and U.S. Healthcare and their respective subsidiaries. Accordingly,
the businesses of Parent through its wholly-owned subsidiaries Aetna and U.S.
Healthcare and their respective subsidiaries initially will be the businesses
currently conducted by Aetna and U.S. Healthcare and their respective
subsidiaries.

The principal executive offices of Parent are located at 151 Farmington
Avenue, Hartford, CT 06156. Parent's telephone number is (860) 273-0123.

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THE AETNA SPECIAL MEETING

PURPOSE OF THE AETNA SPECIAL MEETING

The purpose of the Aetna Special Meeting is to consider and vote upon the
following proposals, (i) the approval and adoption of the Amended Merger
Agreement, (ii) contingent on the consummation of the Mergers, the approval and
adoption of the Aetna Inc. 1996 Stock Incentive Plan and the Aetna Inc. Annual
Incentive Plan, and the approval of the assumption by Parent of Aetna's
Non-Employee Director Deferred Stock and Deferred Compensation Plan and (iii)
the approval and adoption of a new Aetna Certificate of Incorporation.

THE BOARD OF DIRECTORS OF AETNA HAS, BY UNANIMOUS VOTE OF THE TEN MEMBERS
(OF THE ELEVEN MEMBER BOARD) PRESENT AT A MEETING OF THE BOARD OF DIRECTORS ON
MARCH 29, 1996, APPROVED THE MERGER AGREEMENT AND HAS, BY UNANIMOUS VOTE OF THE
BOARD OF DIRECTORS ON APRIL 26, 1996 AND BY UNANIMOUS WRITTEN CONSENT DATED MAY
30, 1996, APPROVED THE INCENTIVE PLANS AND THE NEW AETNA CERTIFICATE OF
INCORPORATION. THE BOARD OF DIRECTORS RECOMMENDS THAT AETNA SHAREHOLDERS VOTE
FOR APPROVAL AND ADOPTION OF THE AMENDED MERGER AGREEMENT, FOR APPROVAL OF THE
ADOPTION OR ASSUMPTION, AS APPLICABLE, BY PARENT OF THE INCENTIVE PLANS AND FOR
APPROVAL AND ADOPTION OF THE NEW AETNA CERTIFICATE OF INCORPORATION.

DATE, PLACE AND TIME

The Aetna Special Meeting will be held at Aetna's Corporate Headquarters,
151 Farmington Avenue, Hartford, Connecticut on Thursday, July 18, 1996,
commencing at 3:00 p.m., Eastern Daylight Time.

RECORD DATE

The Board of Directors of Aetna has fixed the close of business on May 20,
1996 (the "Aetna Record Date") as the record date for the determination of
shareholders entitled to notice of and to vote at the Aetna Special Meeting. As
of the Aetna Record Date, there were issued and outstanding and entitled to vote
115,427,152 shares of Aetna Common Stock.

REQUIRED VOTE

The affirmative vote of 66 2/3% of the shares of Aetna Common Stock
outstanding on the Aetna Record Date is required to approve and adopt the
Amended Merger Agreement. The approval and adoption of the Aetna Inc. 1996 Stock
Incentive Plan and the Aetna Inc. Annual Incentive Plan and the approval of the
assumption by Parent of Aetna's Non-Employee Director Deferred Stock and
Deferred Compensation Plan requires the affirmative vote of a majority of the
shares of Aetna Common Stock present at the Aetna Special Meeting in person or
by proxy and entitled to vote. The approval and adoption of the new Aetna
Certificate of Incorporation requires the affirmative vote of a majority of the
outstanding shares of Aetna Common Stock. Each share of Aetna Common Stock is
entitled to one vote on each matter on which the respective holders of such
shares are entitled to vote as set forth above at the Aetna Special Meeting.

As of the Aetna Record Date, directors and executive officers of Aetna and
their affiliates were owners of an aggregate of 338,292 shares of Aetna Common
Stock (less than one percent of the shares then outstanding). The directors and
executive officers of Aetna have indicated that they intend to vote their shares
of Aetna Common Stock in favor of approval and adoption of the Amended Merger
Agreement.

VOTING AND REVOCATION OF PROXIES

Proxy cards for use at the Aetna Special Meeting accompany this Joint Proxy
Statement/Prospectus. A shareholder may use the proxy card if he or she is
unable to attend the meeting in person or wishes to have his or her shares voted
by proxy even if he or she does attend the meeting. A proxy may be revoked by
the person

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giving it at any time before it is exercised by providing written notice of such
revocation to the Secretary of Aetna, by submitting a proxy having a later date
or by appearing at the meeting and electing to vote in person. Any proxy validly
submitted and not revoked will be voted in the manner specified therein by the
shareholder. IF NO SPECIFICATION IS MADE, SHARES OF AETNA COMMON STOCK
REPRESENTED BY PROXY WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE AMENDED
MERGER AGREEMENT, FOR APPROVAL OF THE ADOPTION AND ASSUMPTION, AS APPLICABLE, OF
THE INCENTIVE PLANS AND FOR ADOPTION OF THE NEW AETNA CERTIFICATE OF
INCORPORATION. Abstentions and broker non-votes will have the effect of a vote
against approval of the Amended Merger Agreement, the adoption and assumption of
the Incentive Plans and the adoption of the new Aetna Certificate of
Incorporation. Aetna's Board of Directors knows of no other matter that will be
presented for action at the Aetna Special Meeting. If, however, any other matter
properly comes before the Aetna Special Meeting, the persons named in the proxy
or their substitutes will vote thereon in accordance with their best judgment.

Any full shares held by shareholders under Aetna's Dividend Reinvestment
and Stock Purchase Plan have been included in the shares shown on the enclosed
Proxy. Fractional interests in shares cannot be voted under Connecticut law.

SOLICITATION OF PROXIES

Aetna will bear the cost of the solicitation of proxies from its
shareholders, except that Aetna and U.S. Healthcare will share equally the cost
of printing and mailing this Joint Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of Aetna and its
subsidiaries may solicit proxies from Aetna shareholders by telephone or
telegram or in person. Such directors, officers and employees will not be
additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses in connection therewith. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of shares held of
record by such persons, and Aetna will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.

Kissel-Blake Inc., of New York, New York, will assist in the solicitation
of proxies by Aetna for a fee of $20,000 plus reasonable out-of-pocket expenses.
If you require additional copies of either this Joint Proxy Statement/Prospectus
or the Aetna proxy card, or you have questions, please contact Kissel-Blake Inc.
1-800-554-7733 (toll free).

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THE U.S. HEALTHCARE ANNUAL MEETING

PURPOSE OF THE U.S. HEALTHCARE ANNUAL MEETING

The purpose of the U.S. Healthcare Annual Meeting is to consider and vote
upon the following proposals: (i) the approval and adoption of the Amended
Merger Agreement, (ii) contingent on the consummation of the Mergers, the
approval and adoption of the Aetna Inc. 1996 Stock Incentive Plan and the Aetna
Inc. Annual Incentive Plan, and the approval of the assumption by Parent of
Aetna's Non-Employee Director Deferred Stock and Deferred Compensation Plan and
(iii) the election of two Class III directors to hold office until the 1999
Annual Meeting of Shareholders or until their respective successors are duly
elected and qualified.

THE BOARD OF DIRECTORS OF U.S. HEALTHCARE HAS, BY UNANIMOUS VOTE, APPROVED
THE AMENDED MERGER AGREEMENT AND THE INCENTIVE PLANS AND NOMINATED DAVID B.
SOLL, M.D. AND TIMOTHY T. WEGLICKI FOR RE-ELECTION AS CLASS III DIRECTORS AND
RECOMMENDS THAT ITS SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT, FOR APPROVAL OF THE ADOPTION AND ASSUMPTION, AS APPLICABLE, BY PARENT
OF THE INCENTIVE PLANS AND FOR RE-ELECTION OF DAVID B. SOLL, M.D. AND TIMOTHY T.
WEGLICKI.

DATE, PLACE AND TIME

The U.S. Healthcare Annual Meeting will be held at U.S. Healthcare's
Auditorium at the Customer Service Center (Building 2), 1425 Union Meeting Road,
Blue Bell, Pennsylvania on Thursday, July 18, 1996, commencing at 10:00 a.m.
Eastern Daylight Time.

RECORD DATE

The Board of Directors of U.S. Healthcare has fixed the close of business
on June 3, 1996 (the "U.S. Healthcare Record Date") as the record date for the
determination of shareholders entitled to notice of and to vote at the U.S.
Healthcare Annual Meeting. As of the U.S. Healthcare Record Date, there were
issued and outstanding and entitled to vote 139,842,375 shares of U.S.
Healthcare Common Stock and 14,429,426 shares of U.S. Healthcare Class B Stock.

REQUIRED VOTE

The affirmative vote of a majority of the voting power of the shares of
U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock outstanding on
the U.S. Healthcare Record Date, voting together as a single class, is required
to approve and adopt the Amended Merger Agreement.

The approval and adoption of the Aetna Inc. 1996 Stock Incentive Plan and
the Aetna Annual Incentive Plan, the approval of the assumption by Parent of
Aetna's Non-Employee Director Deferred Stock and Deferred Compensation Plan and
the re-election of David B. Soll, M.D. as one of the two Class III directors
require the affirmative vote of a majority of the votes which the holders of
U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock present at the
U.S. Healthcare Annual Meeting in person or by proxy are entitled to cast,
voting together as a single class. The re-election of Timothy T. Weglicki as the
other Class III director requires the affirmative vote of a majority of the
votes which holders of U.S. Healthcare Common Stock present at the U.S.
Healthcare Annual Meeting in person or by proxy are entitled to cast. Each share
of U.S. Healthcare Common Stock is entitled to one vote, and each share of U.S.
Healthcare Class B Stock is entitled to fifty votes, on each matter on which the
respective holders of such shares are entitled to vote as set forth above at the
U.S. Healthcare Annual Meeting.

With respect to the approval and adoption of the Amended Merger Agreement,
the approval of the adoption and assumption, as applicable, by Parent of each of
the Incentive Plans and the re-election of David B. Soll, M.D. to the U.S.
Healthcare Board of Directors as a Class III director, the presence at the U.S.
Healthcare Annual Meeting, in person or by proxy, of holders of U.S. Healthcare
Common Stock and U.S.

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Healthcare Class B Stock entitled to cast an aggregate of 430,656,838 votes will
be required for a quorum. With respect to the re-election of Timothy T. Weglicki
to the U.S. Healthcare Board of Directors as a Class III director, the presence
at the U.S. Healthcare Annual Meeting, in person or by proxy, of holders of U.S.
Healthcare Common Stock entitled to cast an aggregate of 69,921,189 votes will
be required for a quorum.

As of the U.S. Healthcare Record Date, directors and executive officers of
U.S. Healthcare and their affiliates were owners of an aggregate of 3,196,986
shares of U.S. Healthcare Common Stock (approximately 2.3% of the outstanding
shares of U.S. Healthcare Common Stock on the U.S. Healthcare Record Date) and
14,411,955 shares of U.S. Healthcare Class B Stock (approximately 99.9% of the
outstanding shares of U.S. Healthcare Class B Stock on the U.S. Healthcare
Record Date). The directors and executive officers of U.S. Healthcare have
indicated that they intend to vote their shares of U.S. Healthcare Common Stock
and U.S. Healthcare Class B Stock in favor of the approval and adoption of the
Amended Merger Agreement.

Leonard Abramson, Chairman of U.S. Healthcare (the "Principal
Shareholder"), has agreed to vote his shares of U.S. Healthcare Class B
stock -- representing approximately 83.7% of the total voting power of U.S.
Healthcare's outstanding capital stock -- for approval and adoption of the
Amended Merger Agreement at the U.S. Healthcare Annual Meeting. Accordingly, a
vote in favor of the approval and adoption of the Amended Merger Agreement at
the U.S. Healthcare Annual Meeting is assured without the vote of any other
holder of shares of U.S. Healthcare. See "The Mergers -- Interests of Certain
Persons in the Mergers" and "The Amended Voting Agreement." The Principal
Shareholder has also indicated that he intends to vote for the approval of the
adoption or assumption, as applicable, of the Incentive Plans and for the
re-election of David B. Soll, M.D., which would assure such approval by U.S.
Healthcare shareholders and such re-election without the vote of any other U.S.
Healthcare shareholders.

VOTING AND REVOCATION OF PROXIES

Proxy cards for use at the U.S. Healthcare Annual Meeting accompany this
Joint Proxy Statement/ Prospectus. A shareholder may use the proxy card if he or
she is unable to attend the meeting in person or wishes to have his or her
shares voted by proxy even if he or she does attend the meeting. A proxy may be
revoked by the person giving it at any time before it is exercised by providing
written notice of such revocation to the Secretary of U.S. Healthcare, by
submitting a proxy having a later date or by appearing at the meeting and
electing to vote in person. Any proxy validly submitted and not revoked will be
voted in the manner specified therein by the shareholder. IF NO SPECIFICATION IS
MADE, U.S. HEALTHCARE COMMON STOCK OR U.S. HEALTHCARE CLASS B STOCK, AS
APPLICABLE, REPRESENTED BY PROXY WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE
AMENDED MERGER AGREEMENT, FOR APPROVAL OF THE ADOPTION AND ASSUMPTION, AS
APPLICABLE, OF THE INCENTIVE PLANS AND FOR THE RE-ELECTION OF DAVID B. SOLL,
M.D. AND TIMOTHY T. WEGLICKI. Because approval of the Amended Merger Agreement
by U.S. Healthcare shareholders requires the affirmative vote of a majority of
the voting power of the shares of U.S. Healthcare Common Stock and U.S.
Healthcare Class B Stock outstanding on the U.S. Healthcare Record Date, voting
together as a single class, abstentions and broker non-votes will have the
effect of a vote against approval and adoption of the Amended Merger Agreement.
U.S. Healthcare's Board of Directors knows of no other matter that will be
presented for action at the U.S. Healthcare Annual Meeting. If, however, any
other matter properly comes before the U.S. Healthcare Annual Meeting, the
persons named in the proxy or their substitutes will vote thereon in accordance
with their best judgment.

SOLICITATION OF PROXIES

U.S. Healthcare will bear the cost of the solicitation of proxies from its
shareholders, except that Aetna and U.S. Healthcare will share equally the cost
of printing and mailing this Joint Proxy Statement/ Prospectus. In addition to
solicitation by mail, the directors, officers and employees of U.S. Healthcare
and its subsidiaries may solicit proxies from U.S. Healthcare shareholders by
telephone or telegram or in person. Such directors, officers and employees will
not be additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses in connection therewith. Arrangements will also be made
with

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brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of shares held of
record by such persons, and U.S. Healthcare will reimburse such custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
connection therewith.

THE MERGERS

BACKGROUND OF THE MERGERS

Having reviewed over the course of several years the ongoing prospects for
Aetna's businesses, in late 1994 Aetna instituted a comprehensive review of its
long-term strategic objectives and alternatives. In this regard, management and
Aetna's Board of Directors, with the assistance of Goldman, Sachs & Co.
("Goldman Sachs") (which was then serving as Aetna's financial advisor in
connection with its strategic review) and Aetna's legal advisors, undertook a
variety of analyses and met on numerous occasions to consider Aetna's long-term
strategic direction.

On the basis of these analyses and discussions, in September 1995 Aetna's
management and Board of Directors reached two key conclusions:

1. Aetna's ability concurrently to remain a preeminent competitor in
each of its four principal lines of business -- health care, asset
accumulation products, international insurance products and property-
casualty insurance -- was uncertain; and

2. The preferred strategic alternative was for Aetna to exit the
property-casualty business and focus on opportunities for growth of its
health care, financial services and international businesses.

In the spring of 1995, management of AHP retained Wasserstein Perella &
Co., Inc. ("Wasserstein Perella") in connection with Aetna's investigation of
potential transactions in the health care sector.

In the fall of 1995, Aetna conducted a controlled auction of its
property-casualty operations. On November 28, 1995, Aetna entered into an
agreement with the Travelers Insurance Group Inc. ("Travelers") for the sale of
such operations. That transaction was consummated on April 2, 1996, promptly
after receipt of required regulatory approvals, for sale proceeds of
approximately $4.1 billion in cash.

After the execution of the acquisition agreement with Travelers on November
28, 1995, Ronald E. Compton, Chairman of Aetna, announced publicly that the
proposed sale of Aetna's property-casualty operations was the first step in
Aetna's strategic decision to focus on growth opportunities in its health,
financial services and international businesses.

In Board of Directors meetings from the fall of 1995 through February 1996,
Aetna's management, together with Aetna's financial and legal advisors, reviewed
with Aetna's Board of Directors Aetna's health care strategy (including Aetna's
consideration of a number of possible acquisition candidates). During such time,
Aetna, together with its financial and legal advisors, explored a number of
possible health care transactions and was in contact, either directly or through
advisors, with a number of health care companies. Preliminary due diligence was
also conducted in connection with several potential transactions. In late
February 1996, based on analysis of the information obtained about U.S.
Healthcare and other potential transaction candidates, Aetna's management
indicated to the Board of Directors management's view that U.S. Healthcare was
the preferred candidate for a transaction by Aetna in the health care sector.
Aetna's management believed that U.S. Healthcare was the preferred candidate
because it believed that U.S. Healthcare best met, overall, Aetna's candidate
selection criteria, including leadership and management capability, managed care
capability, scalable information technology systems and business infrastructure,
and market presence in certain geographic areas. Aetna management's view was
also based on U.S. Healthcare's record of profitability relative to other
transaction candidates, its direct marketing capability and its position in the
commercial sector of the health care business, which was viewed as complementary
to Aetna's position.

Commencing in the second quarter of 1995, U.S. Healthcare's senior
management held discussions with a number of investment banking firms concerning
U.S. Healthcare's options for positioning itself for continued success in the
marketplace. Such discussions included, but were not limited to, consideration
of various long-

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term strategic alternatives and partnerships that might be accomplished through
either the merger with or acquisition of other business entities. From time to
time during the period from April through November 1995, management of U.S.
Healthcare met with representatives of Goldman Sachs regarding various options
and possibilities with respect to possible strategic business combinations.
Goldman Sachs disclosed to U.S. Healthcare that it was advising Aetna with
regard to business strategy issues when Aetna was discussed in the context of a
strategic business combination.

In December 1995, Goldman Sachs organized an initial meeting between Mr.
Compton and Leonard Abramson, Chairman of U.S. Healthcare. That meeting occurred
on December 8, 1995.

On February 12, 1996, Aetna retained J.P. Morgan Securities Inc. ("J.P.
Morgan") to serve as a financial advisor to assist Aetna in considering its
overall strategic alternatives for its health and non-health care operations, as
well as to provide additional financial advice in connection with Aetna's
consideration of health care transactions.

In February 1996, U.S. Healthcare retained Goldman Sachs to serve as its
financial advisor in connection with a possible strategic combination with
Aetna. In view of Goldman Sachs' relationship with Aetna, in March 1996, U.S.
Healthcare retained Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") to serve as an additional financial advisor to U.S. Healthcare.

In February 1996, Aetna and U.S. Healthcare engaged in preliminary
discussions relating to a possible combination of Aetna and U.S. Healthcare
which would, to the extent of the stock received, be tax-free to the
shareholders of U.S. Healthcare. Aetna advised U.S. Healthcare that, subject to
due diligence investigation, Aetna would consider making a proposal to acquire
U.S. Healthcare at a price of $56 per share which would include 15% Aetna Common
Stock, 25% mandatorily convertible preferred stock of Aetna and 60% cash. U.S.
Healthcare advised Aetna that it would not accept such a transaction unless the
price was increased. Subsequently, Aetna proposed a merger transaction in which
U.S. Healthcare would merge with a subsidiary of Aetna, and U.S. Healthcare
shareholders would receive approximately $57 in value per share, of which 60%
would be in cash, 20% would be in shares of Aetna Common Stock and 20% would be
in shares of mandatorily convertible preferred stock of Aetna. In addition,
Aetna stated that it would not be interested in executing a merger agreement
with U.S. Healthcare unless the Principal Shareholder entered into an agreement
in which he would agree to support the transaction for a significant period of
time.

Beginning in early March 1996, each of Aetna and U.S. Healthcare undertook
a due diligence investigation of the other and continued to explore the
potential terms of a merger transaction.

On March 5, 1996, the U.S. Healthcare Board of Directors met to consider
the status of the negotiations between U.S. Healthcare and Aetna and to receive
presentations from U.S. Healthcare's management, Merrill Lynch, Goldman Sachs
and U.S. Healthcare's legal advisors. At such meeting, the U.S. Healthcare Board
of Directors determined to authorize U.S. Healthcare's management to continue to
negotiate with Aetna in order to obtain more favorable terms. In particular, the
U.S. Healthcare Board of Directors directed U.S. Healthcare's management to seek
to improve the terms of the proposed preferred stock consideration and reduce
the portion of the total consideration represented thereby and to try to limit
the duration of the proposed voting agreement with the Principal Shareholder. On
March 5, 1996, Aetna agreed to raise the dividend rate on the preferred stock
portion of the merger consideration from 6.0% to 6.25%.

On March 6, 1996, U.S. Healthcare terminated discussions with Aetna due to
its dissatisfaction with various provisions of the proposed merger agreement,
including the percentage of the total consideration to be paid to U.S.
Healthcare shareholders in preferred stock, the amount of the termination fees
and whether they would be reciprocal, the structure of the merger, the duration
of the proposed voting agreement with the Principal Shareholder, the terms of
certain employment agreements to be entered into in connection with the proposed
merger agreement and the provisions of the proposed merger agreement governing
management of the combined health care business.

On or about March 18, 1996, following various discussions between senior
officers of Aetna and U.S. Healthcare, negotiations between Aetna and U.S.
Healthcare resumed. Pursuant to such negotiations, Aetna and U.S. Healthcare
agreed, among other things, (i) for purposes of the exchange ratios and the
preferred

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stock, to assume a value of Aetna Common Stock of $76 1/8, (ii) to reduce the
percentage of the total consideration to be paid to U.S. Healthcare shareholders
in preferred stock from approximately 20% to approximately 10% while increasing
the total consideration to be paid to U.S. Healthcare shareholders in common
stock from approximately 20% to approximately 30%, (iii) to reduce the
reciprocal termination fees from $250 million to $100 million, (iv) to change
the structure of the merger to provide for a new holding company (which was
intended to ensure, to the extent possible, that the transaction would be
tax-free under the federal tax laws for U.S. Healthcare shareholders), (v) to
reduce the duration of the Principal Shareholder's proposed voting agreement
from three years to eighteen months in the case of a competing offer and (vi) to
amend the terms of certain employment agreements to be entered into in
connection with the proposed merger agreement, the provisions of the proposed
merger agreement governing management of the combined health care business, and
other employee-related matters.

Such negotiations resulted in a definitive merger agreement and other
related documents, subject to approval by Aetna's Board of Directors and U.S.
Healthcare's Board of Directors. In addition, negotiations between Aetna and the
Principal Shareholder resulted in a voting agreement, a registration rights
agreement and an agreement concerning a variety of other matters, all subject to
obtaining the requisite approvals of the Aetna Board of Directors and the U.S.
Healthcare Board of Directors.

Leonard Abramson participated in the preliminary discussions with Aetna
with respect to the proposed merger transaction and continued to be involved in
discussions concerning key terms of the merger transaction. Michael J. Cardillo,
James H. Dickerson, Jr., Joseph T. Sebastianelli and David F. Simon were the
officers primarily responsible for negotiating the specific terms of the
proposed Merger Agreement on behalf of U.S. Healthcare. Leonard Abramson and his
counsel negotiated the terms of the proposed Agreement with Principal
Shareholder and the proposed Voting Agreement.

On March 29, 1996, the Aetna Board of Directors met and reviewed, with the
advice and assistance of Aetna's management and Aetna's financial and legal
advisors, the proposed Merger Agreement, the proposed Voting Agreement (the
"Voting Agreement") dated as of March 30, 1996 among the Principal Shareholder,
Aetna Life Insurance and Annuity Company and Aetna Life Insurance Company and
related agreements and transactions. At such meeting, Aetna's management and
financial and legal advisors made presentations to the Aetna Board of Directors
concerning the proposed transaction and Wasserstein Perella provided its oral
opinion to the effect that as of such date the U.S. Healthcare Merger
Consideration (as defined below) to be paid to the holders of U.S. Healthcare
Stock was fair to Aetna from a financial point of view, and J.P. Morgan
delivered its oral opinion to the effect that as of such date the U.S.
Healthcare Merger Consideration to be paid to the shareholders of U.S.
Healthcare was fair to the shareholders of Aetna from a financial point of view.
(See "The Mergers -- Opinions of Financial Advisors -- Aetna.") Because both
Wasserstein Perella and J.P. Morgan were involved in the process that resulted
in the signing of the Merger Agreement, Aetna's Board of Directors requested
fairness opinions from both financial advisors. By unanimous vote of the members
present, the Aetna Board of Directors approved the proposed Merger Agreement,
the proposed Voting Agreement and the related agreements and transactions.

On March 30, 1996, the U.S. Healthcare Board of Directors held a special
meeting to review, with the advice and assistance of U.S. Healthcare's
management and U.S. Healthcare's financial and legal advisors, the proposed
Merger Agreement and the transactions contemplated thereby. At such meeting,
U.S. Healthcare's management and U.S. Healthcare's financial and legal advisors
made presentations to the U.S. Healthcare Board of Directors concerning the
proposed transaction, and Goldman Sachs provided its oral opinion to the effect
that as of such date the U.S. Healthcare Merger Consideration to be received by
the holders of U.S. Healthcare Stock was fair to such holders, and Merrill Lynch
delivered its oral opinion to the effect that as of such date the consideration
to be received by the holders of U.S. Healthcare Stock in the Mergers was fair
to such shareholders from a financial point of view. (See "The
Mergers -- Opinions of Financial Advisors -- U.S. Healthcare.") Because both
Goldman Sachs and Merrill Lynch were involved in the process that resulted in
the signing of the Merger Agreement, U.S. Healthcare's Board of Directors
requested fairness opinions from both financial advisors. During the course of
such meeting, the U.S. Healthcare Board of Directors excused Mr. Abramson from
the meeting so that the directors who did not share his interests in the
transaction could independently consider the proposed transaction. See "The

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<PAGE> 48

Mergers -- Interests of Certain Persons in the Mergers." After such
deliberation, such directors invited Mr. Abramson to rejoin the meeting and
advised the U.S. Healthcare Board of Directors that they were in favor of the
proposed transaction, and recommended that the full U.S. Healthcare Board of
Directors approve the Merger Agreement. The U.S. Healthcare Board of Directors
then unanimously approved the proposed Merger Agreement and certain ancillary
agreements and the transactions contemplated thereby. (See "The
Mergers -- Recommendations of the Boards of Directors and Reasons for the
Mergers -- U.S. Healthcare.")

Promptly after the U.S. Healthcare Board of Directors meeting, Aetna and
U.S. Healthcare executed the Merger Agreement, Mr. Abramson and affiliates of
Aetna executed the Voting Agreement and the relevant parties executed various
related documents.

RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGERS

Aetna

At its regularly scheduled meeting held on March 29, 1996, the Aetna Board
of Directors, by unanimous vote of those directors present, (i) determined that
the terms of the Merger Agreement and the transactions contemplated thereby are
in the best interests of Aetna, including its shareholders and (ii) approved the
Merger Agreement and the transactions contemplated thereby. At such meeting, the
Aetna Board of Directors also recommended that Aetna shareholders approve and
adopt the Merger Agreement. In reaching the foregoing conclusions and
recommendations, the Aetna Board of Directors considered a number of factors,
including the following:

1. the presentations and views expressed by management of Aetna (at
the March 29, 1996 Aetna Board of Directors meeting as well as numerous
previously held meetings) regarding: (i) the results of Aetna's long-term
strategic review; (ii) the alternatives available to Aetna if it did not
pursue a transaction with U.S. Healthcare; (iii) the financial condition,
results of operations, business and prospects of each of Aetna, U.S.
Healthcare and the combined entity; and (iv) the recommendation of the
Mergers by the management of Aetna;

2. the strategic fit between Aetna and U.S. Healthcare which, in
Aetna's view, offers the opportunity for synergies (see "Other
Matters -- Estimated Synergies") through, among other things:

(a) the combination of Aetna's membership base and marketing
expertise with large employers with U.S. Healthcare's managed care
expertise;

(b) potential enhancement and strengthening of U.S. Healthcare's
customer services with Aetna's greater resources;

(c) complementing U.S. Healthcare's strength in direct sales to
small and medium-sized employer groups with Aetna's marketing strength
with large groups;

(d) potential cross-marketing opportunities of each party to sell
products currently sold only by the other party;

(e) the strength and expertise of the combined management of Aetna
and U.S. Healthcare; and

(f) opportunities for improving quality of care and other services,
lowering medical costs and streamlining administrative functions of all
of the business of U.S. Healthcare and all of the domestic business of
AHP (the "Combined Health Operations");

3. the fact that Aetna shareholders would continue to own more than
70% of the combined company;

4. the long-term and short-term interests of Aetna and its
shareholders, as well as the interests of Aetna's employees, customers,
creditors and suppliers and community and societal considerations including
those of any community in which any office or other facility of Aetna is
located;

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<PAGE> 49

5. the belief that the combined company would be better able to
respond to the needs of consumers and customers, the increased
competitiveness of the health care industry, and the opportunities that
changes in the health care industry might bring;

6. the presentations made by each of Wasserstein Perella and J.P.
Morgan at the March 29, 1996 Aetna Board of Directors meeting (see "The
Mergers -- Opinions of Financial Advisors -- Aetna"), the opinion of
Wasserstein Perella, expressed orally, to the effect that, as of March 29,
1996, the U.S. Healthcare Merger Consideration to be received by U.S.
Healthcare's shareholders was fair, from a financial point of view, to
Aetna and the opinion of J.P. Morgan, expressed orally, to the effect that,
as of March 29, 1996, the U.S. Healthcare Merger Consideration to be paid
to U.S. Healthcare's shareholders pursuant to the Mergers was fair, from a
financial point of view, to Aetna's shareholders. The full text of the
respective written opinions of Wasserstein Perella and J.P. Morgan, each
dated the date of this Joint Proxy Statement/Prospectus, which set forth
the procedures followed, the factors considered and the assumptions made by
Wasserstein Perella and J.P. Morgan, are attached as Appendix D and
Appendix E, respectively, to this Joint Proxy Statement/Prospectus and are
incorporated herein by reference. Shareholders of Aetna are urged to read
the opinions of Wasserstein Perella and J.P. Morgan carefully and in their
entirety. Such opinions will not be updated prior to the Merger Date. See
"The Mergers -- Opinions of Financial Advisors -- Aetna;"

7. the sources of capital available to Aetna to finance the
transaction with U.S. Healthcare, including the availability of
approximately $4.1 billion in proceeds from the then expected sale by Aetna
of its property-casualty operations to Travelers;

8. the terms and conditions of the Merger Agreement, the Parent
Mandatorily Convertible Preferred Stock, the arrangements with the
Principal Shareholder and the other agreements to be entered into in
connection with the Mergers;

9. the terms and conditions of the Voting Agreement, including the
fact that the Principal Shareholder, who is the owner of shares of U.S.
Healthcare capital stock representing in excess of 80% of the total voting
power of U.S. Healthcare, agreed, among other things, (i) to vote his
shares of U.S. Healthcare Class B Stock in favor of the Merger Agreement
and against any competing proposal for a merger or business combination
involving U.S. Healthcare; and (ii) except in limited circumstances, not to
sell or otherwise dispose of his shares of U.S. Healthcare Class B Stock
shares other than pursuant to the Merger Agreement;

10. the regulatory approvals required to consummate the Mergers,
including antitrust approvals and insurance and/or health regulatory
approvals, and the prospects of receiving such approvals;

11. the results of the due diligence review of U.S. Healthcare
conducted by Aetna's management and legal and financial advisors;

12. the potential impact of the Mergers on Aetna's other businesses;
and

13. the proposed Parent dividends.

The foregoing discussion of the information and factors considered by the
Aetna Board of Directors is not intended to be exhaustive but includes all
material factors considered by the Aetna Board of Directors. The Aetna Board of
Directors did not assign relative weights to the above factors or determine that
any factor was of particular importance. A determination of various weightings
would, in the view of the Aetna Board of Directors, be impractical. Rather, the
Aetna Board of Directors viewed its position and recommendations as being based
on the totality of the information presented to, and considered by, it. In
addition, individual members of the Aetna Board of Directors may have given
different weight to different factors.

It is expected that if the Mergers are not consummated, Aetna's management,
with oversight from the Aetna Board of Directors, will continue to manage Aetna
as an ongoing business.

FOR THE REASONS DESCRIBED ABOVE, THE AETNA BOARD OF DIRECTORS, BY A
UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT AT A MEETING ON MARCH 29, 1996,
APPROVED THE AMENDED MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
AND RECOMMENDS THAT AETNA SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
AMENDED MERGER AGREEMENT.

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U.S. Healthcare

At a special meeting held on March 30, 1996, the U.S. Healthcare Board of
Directors unanimously (i) determined that the terms of the Merger Agreement and
the transactions contemplated thereby are fair to, and in the best interests of,
U.S. Healthcare and its shareholders and (ii) approved the Merger Agreement and
the transactions contemplated thereby. At such meeting, the U.S. Healthcare
Board of Directors recommended that the U.S. Healthcare shareholders approve and
adopt the Merger Agreement. In reaching these determinations, the U.S.
Healthcare Board of Directors consulted with management of U.S. Healthcare, as
well as U.S. Healthcare's financial and legal advisors.

The U.S. Healthcare Board of Directors and U.S. Healthcare's senior
management have continually reviewed the current and future state of U.S.
Healthcare's strategic position and its short-term and long-term prospects. In
particular, in view of the continuing consolidation in the health care industry,
the U.S. Healthcare Board of Directors believed that it would likely be in the
best interests of U.S. Healthcare and its shareholders to enter into a strategic
business combination with another major health care company.

In light of, among other things, the review described in the immediately
preceding paragraph, the U.S. Healthcare Board of Directors determined that it
would be in the best interests of U.S. Healthcare and its shareholders to
approve the Merger Agreement and the transactions contemplated thereby. In
approving the Merger Agreement and the transactions contemplated thereby, the
U.S. Healthcare Board of Directors considered a number of factors, including,
but not limited to, the following:

1. the presentations and views expressed by management of U.S.
Healthcare (at U.S. Healthcare Board of Directors meetings on March 5, and
March 30, 1996 and at previous U.S. Healthcare Board of Directors meetings)
regarding, among other things: (i) the financial condition, results of
operations, business and prospects of U.S. Healthcare, including, the
prospects of U.S. Healthcare if it remains independent; (ii) the fact that
management of U.S. Healthcare believed that it was unlikely that any other
party would propose a strategic business combination that, taken as a
whole, would be more favorable to U.S. Healthcare and its shareholders; and
(iii) the recommendation of the Mergers by the management of U.S.
Healthcare;

2. the strategic fit between Aetna and U.S. Healthcare offers the
opportunity for substantial synergies (See "Other Matters -- Estimated
Synergies") and the transaction structure allows U.S. Healthcare
shareholders, to the extent they receive Parent Common Stock and (to a
certain extent) Parent Mandatorily Convertible Preferred Stock in the
Mergers, to participate in these synergies through continued ownership of
the combined company, including without limitation:

(a) application of U.S. Healthcare's managed care expertise
(including but not limited to provider network development, provider
contracting and rate negotiations, provider relations, medical
management, including utilization management, and quality assessment)
with respect to Aetna's membership;

(b) potential enhancement and strengthening of U.S. Healthcare's
customer services with Aetna's greater resources;

(c) complementing U.S. Healthcare's strength in direct sales to
small and medium-sized employer groups with Aetna's marketing strength
with large groups;

(d) potential cross-marketing opportunities of each party to sell
products currently sold only by the other party;

(e) the strength and expertise of the combined management of Aetna
and U.S. Healthcare; and

(f) opportunities for improving quality of care and other services,
lowering medical costs and streamlining administrative functions of the
Combined Health Operations.

3. the uncertainties of the health care industry in the United States,
the likelihood of continued consolidation in the managed health care sector
and the possibility that changes in the industry, depending on their
nature, could be disadvantageous to U.S. Healthcare;

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<PAGE> 51

4. the belief that the combined company would be better able to
respond to the needs of consumers and customers, the increased
competitiveness of the health care industry, and the opportunities that
changes in the health care industry might bring;

5. the presentations made by each of Goldman Sachs and Merrill Lynch
at the March 30, 1996 U.S. Healthcare Board of Directors meeting (see "The
Mergers -- Opinions of Financial Advisors -- U.S. Healthcare"), the opinion
of Goldman Sachs, expressed orally, to the effect that, as of March 30,
1996, the U.S. Healthcare Merger Consideration to be received by the
holders of U.S. Healthcare Stock was fair to such shareholders and the
opinion of Merrill Lynch, expressed orally, to the effect that, as of March
30, 1996, the U.S. Healthcare Merger Consideration to be received by U.S.
Healthcare's shareholders in the Mergers was fair to such shareholders from
a financial point of view. The full text of the respective opinions of
Goldman Sachs and Merrill Lynch, dated the date of this Joint Proxy
Statement/Prospectus, which set forth the matters considered and limits of
reviews with respect to such opinions are attached as Appendix F and
Appendix G, respectively, to this Joint Proxy Statement/Prospectus and are
incorporated herein by reference. Shareholders of U.S. Healthcare are urged
to read the opinions of Goldman Sachs and Merrill Lynch carefully and in
their entirety. Such opinions will not be updated prior to the Merger Date.
See "The Mergers -- Opinions of Financial Advisors -- U.S. Healthcare";

6. the historical trading prices of the shares of U.S. Healthcare
Common Stock and the fact that the U.S. Healthcare Merger Consideration
represented, as of the signing of the Merger Agreement, approximately
$57.00 per share of U.S. Healthcare Common Stock in value and a premium of
approximately 24% over $45 7/8, the closing price for the shares of U.S.
Healthcare Common Stock on the NASDAQ Stock Market on the last trading day
prior to the announcement of the execution of the Merger Agreement;

7. the fact that as of the date of the Merger Agreement approximately
60% of the U.S. Healthcare Merger Consideration is to be paid in cash;

8. the availability to Aetna of significant cash balances, including
approximately $4.1 billion in proceeds from the then expected sale by Aetna
of its property-casualty operations to Travelers (which sale was to be
completed shortly following the execution of the Merger Agreement);

9. the terms and conditions of the Merger Agreement, including the
amount and form of the U.S. Healthcare Merger Consideration, the parties'
representations, warranties, covenants and agreements, and the conditions
to their respective obligations set forth in the Merger Agreement;

10. the terms and conditions of the Parent Mandatorily Convertible
Preferred Stock, including, but not limited to, the dividend yield of 6.25%
(as compared to the anticipated dividend yield of Parent Common Stock);

11. the fact that U.S. Healthcare shareholders will be protected from
a significant decrease in the value of Aetna Common Stock due to market
fluctuation pursuant to a formula and mechanism which will provide U.S.
Healthcare the right not to consummate the Mergers in the event that the
average closing price of Aetna Common Stock for the 20 consecutive trading
days immediately prior to the Merger Date (the "Average Closing Price") is
less than $60.90, unless Aetna increases the cash component of the Merger
Consideration to compensate for a decline in the Average Closing Price
below $60.90;

12. the desire of the Principal Shareholder to effect the Mergers;

13. the terms and conditions of the Voting Agreement, including the
fact that the Principal Shareholder, who is the owner of shares of U.S.
Healthcare capital stock representing in excess of 80% of the total voting
power of U.S. Healthcare, agreed, among other things, (i) to vote his
shares of U.S. Healthcare Class B Stock in favor of the Merger Agreement
and against any competing proposal for a merger or business combination
involving U.S. Healthcare; and (ii) except in limited circumstances, not to
sell or otherwise dispose of his shares of U.S. Healthcare Class B Stock
other than pursuant to the Merger Agreement;

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<PAGE> 52

14. the terms and conditions of the Employment Agreements, including
the fact that the Co-Presidents and certain other senior officers of U.S.
Healthcare would, in large part, manage the combined health care operations
of Aetna and U.S. Healthcare following the Mergers;

15. the fact that the Principal Shareholder and two other U.S.
Healthcare Designees (as defined below) will become directors of Parent
following the Mergers;

16. the agreement that for a period of twenty-four months following
the Mergers, no employee of U.S. Healthcare would be discharged, have his
or her compensation reduced or his or her principal office location changed
without the prior consent and approval of the Co-Presidents of U.S.
Healthcare;

17. the opportunity for U.S. Healthcare shareholders to receive, as
part of the U.S. Healthcare Merger Consideration, shares of Parent Common
Stock and Parent Mandatorily Convertible Preferred Stock in an exchange
that is tax-free for federal income tax purposes (except to the extent of
any cash received in lieu of fractional shares) (see "The
Mergers -- Certain Federal Income Tax Consequences");

18. the agreement that U.S. Healthcare's name and apple logo with
respect to U.S. Healthcare products marketed as of March 30, 1996 could not
be changed without the prior consent and approval of the Co-Presidents of
U.S. Healthcare;

19. the regulatory approvals required to consummate the Mergers,
including, among other things, antitrust approvals and insurance regulatory
approvals, and the prospects of receiving such approvals;

20. the fact that pursuant to the Merger Agreement, the U.S.
Healthcare Board of Directors has the right to engage in negotiations with
or furnish information to third parties in response to an unsolicited
acquisition proposal if, after consultation with independent counsel, it
determines that it is necessary to do so in order to comply with its
fiduciary duties;

21. the fact that pursuant to the Merger Agreement, the U.S.
Healthcare Board of Directors has the right, upon payment to Aetna of a
termination fee (see "The Amended Merger Agreement -- Expenses and
Termination Fees"), to terminate the Merger Agreement if prior to the U.S.
Healthcare Annual Meeting the U.S. Healthcare Board of Directors has
withdrawn or modified in a manner adverse to Aetna its recommendation of
the Merger Agreement in order to permit U.S. Healthcare to execute a
definitive agreement in connection with an acquisition proposal which the
U.S. Healthcare Board of Directors determines is more favorable to U.S.
Healthcare's shareholders;

22. the fact that pursuant to the Merger Agreement, U.S. Healthcare
would be entitled to a termination fee under certain circumstances; and

23. the results of the due diligence review of Aetna conducted by U.S.
Healthcare's management and legal and financial advisors.

The foregoing discussion of the information and factors considered by the
U.S. Healthcare Board of Directors is not intended to be exhaustive but includes
all material factors considered by the U.S. Healthcare Board of Directors. The
U.S. Healthcare Board of Directors did not assign relative weights to the above
factors or determine that any factor was of particular importance. A
determination of various weightings would, in the view of the U.S. Healthcare
Board of Directors, be impractical. Rather, the U.S. Healthcare Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to, and considered by, it. In addition, individual
members of the U.S. Healthcare Board of Directors may have given different
weight to different factors.

The U.S. Healthcare Board of Directors recognized that, while there can be
no assurance as to the level of growth or profits to be attained by Parent in
the future and there can be no assurance that the requisite antitrust, insurance
or other regulatory approvals for the Mergers will be obtained, the Mergers and
the transactions contemplated thereby give U.S. Healthcare shareholders the
opportunity to receive Parent Common Stock and Parent Mandatorily Convertible
Preferred Stock pursuant to the Mergers and thereby participate in the synergies
expected to be created by the combination of Aetna and U.S. Healthcare and the
future growth and profits of the combined company. See "Other
Matters -- Estimated Synergies."

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It is expected that if the Mergers are not consummated, U.S. Healthcare's
current management, under the general direction of the U.S. Healthcare Board of
Directors, will continue to manage U.S. Healthcare as an ongoing business.

FOR THE REASONS DESCRIBED ABOVE, THE U.S. HEALTHCARE BOARD OF DIRECTORS, BY
THE UNANIMOUS VOTE OF ALL DIRECTORS, APPROVED THE AMENDED MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT U.S. HEALTHCARE
SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE AMENDED MERGER AGREEMENT.

OPINIONS OF FINANCIAL ADVISORS

Parent was established as a holding company to effect the Mergers. As an
economic matter the use of a holding company is immaterial to holders of Aetna
Common Stock. Consequently, opinions were not sought from financial advisors
concerning the exchange of Aetna Common Stock for Parent Common Stock or the
exchange of U.S. Healthcare Stock for Parent Common Stock and Parent Mandatorily
Convertible Preferred Stock. Instead, Aetna requested opinions from Wasserstein
Perella and J.P. Morgan regarding the fairness from a financial point of view of
the consideration to be paid by Parent to the holders of U.S. Healthcare Stock
in the U.S. Healthcare Sub Merger, and U.S. Healthcare requested opinions from
Goldman Sachs and Merrill Lynch regarding the fairness from a financial point of
view of the U.S. Healthcare Merger Consideration to be received by the holders
of U.S. Healthcare Stock. Aetna and U.S. Healthcare did not and did not request
their respective financial advisors to prepare a valuation of the Parent Common
Stock and Parent Mandatorily Convertible Preferred Stock. Aetna and U.S.
Healthcare believe that an evaluation of the fairness of the consideration paid,
in the case of Aetna, and the fairness of the consideration received, in the
case of U.S. Healthcare, in each case from a financial point of view,
represented an appropriate opinion for its shareholders. Accordingly, opinions
to that effect were obtained.

Aetna

Opinion of Wasserstein Perella & Co., Inc.

On March 29, 1996, Wasserstein Perella delivered its oral opinion to the
Aetna Board of Directors that, as of such date, the consideration to be paid by
Parent to the holders of U.S. Healthcare Stock in the U.S. Healthcare Sub Merger
was fair from a financial point of view to Aetna. Wasserstein Perella has
confirmed its March 29, 1996 oral opinion by delivering its written opinion to
the Aetna Board of Directors, dated the date of this Joint Proxy
Statement/Prospectus, that, as of such date, the consideration to be paid by
Parent to the holders of U.S. Healthcare Stock in the U.S. Healthcare Sub Merger
was fair, from a financial point of view, to Aetna.

The full text of the written opinion of Wasserstein Perella dated the date
of this Joint Proxy Statement/Prospectus, which sets forth the procedures
followed, the assumptions made, matters considered and limits on the review
undertaken, is attached as Appendix D to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference. Aetna shareholders are urged to read
the opinion carefully and in its entirety. Wasserstein Perella's written opinion
is addressed to the Aetna Board of Directors and does not constitute a
recommendation to any Aetna shareholder as to how such shareholder should vote
at the Aetna Special Meeting, and should not be relied upon by any shareholder
as such. The summary of the written opinion of Wasserstein Perella set forth in
this Joint Proxy Statement/Prospectus is qualified in its entirety by reference
to the full text of such opinion.

In arriving at its opinion, Wasserstein Perella, among other things: (i)
reviewed the Amended Merger Agreement; (ii) reviewed certain financial and other
information relating to Aetna and U.S. Healthcare that was publicly available or
furnished to Wasserstein Perella by Aetna and U.S. Healthcare, including
financial projections, certain internal financial analyses, reports and other
information prepared by their respective managements and representatives; (iii)
held discussions with various members of senior management of Aetna and U.S.
Healthcare concerning each company's historical and current operations, assets,
financial condition and future prospects; (iv) held discussions with the senior
managements of Aetna and U.S. Healthcare concerning an analysis of the strategic
and operating benefits anticipated from the Mergers

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which was prepared by Aetna's management and reviewed by U.S. Healthcare's
management; (v) reviewed the market price and trading histories for Aetna Common
Stock and U.S. Healthcare Common Stock and compared those prices and trading
histories with those of publicly traded companies that Wasserstein Perella
deemed to be relevant; (vi) compared the financial positions and operating
results of Aetna and U.S. Healthcare with those of publicly traded companies
that Wasserstein Perella deemed to be relevant; (vii) compared certain financial
terms of the U.S. Healthcare Sub Merger to certain financial terms of selected
other business combinations that Wasserstein Perella deemed to be relevant;
(viii) analyzed the estimated pro forma financial effects of the Mergers on
Parent; and (ix) conducted such other financial studies, analyses, inquiries and
investigations and reviewed such other factors as Wasserstein Perella deemed
appropriate for purposes of its opinion. No limitations were imposed by the
Aetna Board of Directors upon Wasserstein Perella with respect to the
investigations made or procedures followed by it in rendering its opinions.

In rendering its opinion, Wasserstein Perella relied on the accuracy and
completeness of all financial and other information reviewed by Wasserstein
Perella that was publicly available or furnished to it by Aetna and U.S.
Healthcare, and Wasserstein Perella did not assume any responsibility for
independent verification of any such information. Wasserstein Perella assumed,
with the consent of Aetna, that the financial forecasts and projections,
including certain strategic and operating benefits associated with the Mergers,
provided to it by Aetna and U.S. Healthcare were prepared in good faith and on
bases reflecting the best currently available judgments and estimates of each
respective company's management of future competitive, operating and regulatory
environments and related financial performance of Aetna and U.S. Healthcare.
Wasserstein Perella did not assume any responsibility for conducting a physical
inspection of the properties or facilities of Aetna or U.S. Healthcare or for
making or obtaining an independent valuation or appraisal of the assets or
liabilities (contingent or otherwise) of Aetna or U.S. Healthcare, and
Wasserstein Perella was not furnished with any such valuation or appraisal.
Wasserstein Perella noted that the Mergers are intended to qualify as exchanges
under Section 351 of the Code, and assumed with the consent of Aetna that the
Mergers will so qualify. Wasserstein Perella also assumed that the transactions
described in the Amended Merger Agreement would be consummated on the terms set
forth therein, without waiver of any such terms, and that any payments made
pursuant to Section 8.3(b) of the Amended Merger Agreement would not be material
to the analyses upon which its opinion was based.

Wasserstein Perella's opinion was necessarily based on economic, regulatory
and market conditions and other circumstances that existed and could be
evaluated by Wasserstein Perella on, and the information made available to it as
of, the date thereof. In addition, Wasserstein Perella did not express any
opinion as to the price or trading range at which the Parent Common Stock or the
Parent Mandatorily Convertible Preferred Stock will trade following the Mergers.

At the March 29, 1996 meeting of the Aetna Board of Directors, Wasserstein
Perella reviewed with the members of the Aetna Board of Directors certain
financial, industry and market information with respect to U.S. Healthcare and
Aetna, and the procedures used in arriving at, and the analyses underlying,
Wasserstein Perella's opinion. The summary set forth below does not purport to
be a complete description of Wasserstein Perella's opinion or Wasserstein
Perella's analyses relating thereto. In connection with rendering its written
opinion dated the date of this Joint Proxy Statement/Prospectus, Wasserstein
Perella confirmed the appropriateness of its reliance on the analyses used to
render its oral opinion on March 29, 1996 by performing procedures to update
certain of such analyses and by reviewing the assumptions on which such analyses
were based and the factors considered therewith. The preparation of a fairness
opinion is a complex process that is not purely mathematical and is not
necessarily susceptible to partial analyses or summary description. Shareholders
are encouraged to review Wasserstein Perella's written opinion in its entirety.

The following is a summary of the material analyses performed by
Wasserstein Perella in connection with its opinion.

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Operating Analysis of U.S. Healthcare and Aetna

U.S. Healthcare. Wasserstein Perella compared certain historical, current
and projected financial information relating to U.S. Healthcare with
corresponding publicly available information with respect to United HealthCare
Corporation ("United") and Humana Inc. ("Humana") (together, the "USHC
Comparative Companies"). Although neither of the USHC Comparative Companies is
identical to U.S. Healthcare, the USHC Comparative Companies were selected for
comparison after Wasserstein Perella's discussions with senior management of
Aetna as to companies that possess general business, operating and financial
characteristics representative of U.S. Healthcare and the industry in which U.S.
Healthcare operates.

In comparing U.S. Healthcare and the USHC Comparative Companies,
Wasserstein Perella noted that: (i) the compounded annual growth rate from 1992
to 1995 of at-risk enrollment for U.S. Healthcare was 13.8% compared to an
average of 32.2% for the USHC Comparative Companies during the same period
(Wasserstein Perella also noted that a material portion of the growth at the
USHC Comparative Companies was accomplished through acquisition); (ii) U.S.
Healthcare's at-risk enrollment growth during the latest four quarters ending
December 31, 1995 was 22.1% compared to an average of 68.2% for the USHC
Comparative Companies during the same period (Wasserstein Perella again noted
that a material portion of the growth at the USHC Comparative Companies, but not
at U.S. Healthcare, was accomplished through acquisition); (iii) U.S.
Healthcare's average ratio of medical costs to premiums (the "Medical Loss
Ratio") from 1992 to 1995 was 73.4% compared to an average of 81.6% for the USHC
Comparative Companies during the same period; (iv) U.S. Healthcare's Medical
Loss Ratio for the latest four quarters ending December 31, 1995 was 74.5%
compared to an average of 80.7% for the USHC Comparative Companies during the
same period; (v) U.S. Healthcare's average underwriting earnings before
interest, taxes, depreciation and amortization ("Underwriting EBITDA") as a
percentage of premiums and fees (the "Underwriting EBITDA Margin") from 1992 to
1995 was 17.1% compared to an average of 7.7% for the USHC Comparative Companies
during the same period; (vi) U.S. Healthcare's Underwriting EBITDA Margin for
the latest four quarters ending December 31, 1995 was 15.9% compared to an
average of 8.1% for the USHC Comparative Companies during the same period; (vii)
U.S. Healthcare's average underwriting earnings before interest and taxes as a
percentage of premiums and fees (the "Underwriting EBIT Margin") from 1992 to
1995 was 16.3% compared to an average of 6.0% for the USHC Comparative Companies
during the same period; (viii) U.S. Healthcare's Underwriting EBIT Margin for
the latest four quarters ending December 31, 1995 was 15.0% compared to an
average of 6.5% for the USHC Comparative Companies during the same period; (ix)
U.S. Healthcare's average net income as a percentage of total revenue (the "Net
Income Margin") for 1992 to 1995 was 11.0% compared to an average of 4.9% for
the USHC Comparative Companies during the same period; (x) U.S. Healthcare's Net
Income Margin for the latest four quarters ended December 31, 1995 was 10.5%
compared to an average of 5.3% for the USHC Comparative Companies during the
same period; (xi) the compounded annual growth rate from 1992 to 1995 of U.S.
Healthcare's earnings per share ("EPS") was 25.3% compared to an average of
41.8% for the USHC Comparative Companies during the same period (excluding 1992
in the case of Humana, due to depressed earnings); and (xii) based upon the
March 1996 median estimates prepared by Institutional Brokers Estimate Service
("IBES"), U.S. Healthcare's projected five-year EPS growth rate was 15.0%
compared to an average of 21.0% for the USHC Comparative Companies during the
same period.

Aetna. Wasserstein Perella performed two sets of comparative analyses with
respect to Aetna. The first set of analyses compared certain historical, current
and projected financial information relating to Aetna's ongoing operations
(without giving effect to the Mergers, but after giving effect to the
disposition of Aetna's property and casualty business (the "P&C Divestiture"))
with corresponding publicly available information with respect to American
General Corporation, CIGNA Corporation and Lincoln National Corporation (the
"Insurance Comparative Companies"). The second set of analyses compared certain
historical, current and projected financial information relating to Aetna's AHP
segment, composed of the Health, Specialty Health and Group Insurance divisions
(the "Aetna Health Segment"), with corresponding publicly available information
relating to U.S. Healthcare, United and Humana (the "HMO Comparative
Companies"). Although none of the Insurance Comparative Companies is identical
to Aetna and none of the HMO Comparative Companies is identical to the Aetna
Health Segment, the Insurance Comparative Companies

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and the HMO Comparative Companies were selected for comparison after Wasserstein
Perella's discussions with senior management of Aetna as to companies that
possess general business, operating and financial characteristics representative
of Aetna and the Aetna Health Segment and the industry in which Aetna and the
Aetna Health Segment operate.

In comparing Aetna and the Aetna Health Segment to the Insurance
Comparative Companies and the HMO Comparative Companies, respectively,
Wasserstein Perella noted that: (i) Aetna's average net income margin from
continuing operations before net realized investment gains and losses and
extraordinary charges (the "Consolidated Net Income Margin") from 1992 to 1995
was 3.1% compared to an average of 6.2% for the Insurance Comparative Companies
during the same period (excluding 1992 in the case of Lincoln National
Corporation, due to restatement of financial results); (ii) the Aetna Health
Segment's average net income as a percentage of total revenues (the "Health
Segment Net Income Margin") from 1992 to 1995 was 4.9% compared to an average of
6.9% for the HMO Comparative Companies during the same period; (iii) Aetna's
Consolidated Net Income Margin for the latest four quarters ending December 31,
1995 was 3.4% compared to an average of 5.9% for the Insurance Comparative
Companies during the same period; (iv) the Aetna Health Segment Net Income
Margin for the latest four quarters ending December 31, 1995 was 3.8% compared
to an average of 7.0% for the HMO Comparative Companies during the same period;
(v) Aetna's compounded annual EPS growth rate from 1992 to 1995 was 26.8%
compared to an average of 9.4% for the Insurance Comparative Companies during
the same period (excluding 1992 in the case of CIGNA Corporation, due to
depressed earnings); (vi) the compounded annual growth rate from 1992 to 1995 of
Aetna Health Segment's EPS was -3.3% compared to an average of 36.3% for the HMO
Comparative Companies during the same period (excluding 1992 in the case of
Humana, due to depressed earnings); (vii) Aetna's projected five-year EPS growth
rate was 10.0% compared to an average of 10.3% for the Insurance Comparative
Companies during the same period (in each case based on March 1996 median
estimates prepared by IBES); (viii) the Aetna Health Segment's projected
five-year EPS growth rate was 9.9% (based on the Aetna Financial Forecast,
defined below) compared to an average of 19.0% for the HMO Comparative Companies
during the same period (based on March 1996 median estimates prepared by IBES);
and (ix) Aetna's return on equity (including the property and casualty business,
but adjusted for asbestos and environmental charges related to property and
casualty operations), calculated by dividing operating income by average equity
for the latest four quarters ending December 31, 1995, was 12.5% compared to an
average of 11.1% for the Insurance Comparative Companies during the same period.
The Aetna Health Segment's return on equity for the latest four quarters ending
December 31, 1995 was not separately available, but the average return on equity
for the HMO Comparative Companies was 22.8% during such period.

Comparative Company Analysis. In order to analyze the relative public
market valuations of U.S. Healthcare and the USHC Comparative Companies,
Wasserstein Perella performed a market analysis of U.S. Healthcare and the USHC
Comparative Companies. Wasserstein Perella calculated the following market
trading multiples for each of the USHC Comparative Companies: (i) market
capitalization (total shares of common stock outstanding times the closing
market price per share on March 22, 1996 plus the total debt, capitalized
leases, preferred stock and minority interest minus cash and cash equivalents
reported as of December 31, 1995) (the "Market Capitalization") less certain
assumed values for each USHC Comparative Company's non-HMO businesses divided by
such USHC Comparative Company's number of enrolled HMO members ("Trading
Membership Value"); (ii) Market Capitalization divided by latest four quarters
Underwriting EBITDA at December 31, 1995 ("L4Q Underwriting EBITDA"); (iii)
market price per share of common stock on March 22, 1996 (the "Market Price") of
each USHC Comparative Company divided by such company's EPS for the latest four
quarters ending December 31, 1995 (the "1995 P/E Ratio"); (iv) the Market Price
divided by such company's estimated EPS for 1996 (the "1996 P/E Ratio"), based
on consensus First Call Corporation ("First Call") estimates; (v) the Market
Price divided by such company's EPS for 1997 (the "1997 P/E Ratio"), based on
consensus First Call estimates; and (vi) the 1996 P/E Ratio of each USHC
Comparative Company divided by the sum of such company's long-term growth rate
(based on March 1996 median estimates prepared by IBES) and such company's
current common stock dividend yield (the annualized per share dividend declared
divided by the common stock price as of March 22, 1996), multiplied by 100 (the
"1996 P/E to Growth"). Wasserstein Perella noted that its comparative company

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analysis did not give effect to any change-of-control premium that may arise in
connection with a transaction such as the Mergers.

Based on such calculations relating to the USHC Comparative Companies,
Wasserstein Perella noted that the relevant range of market multiples for the
USHC Comparative Companies were: (i) Trading Membership Values of $1,652 to
$2,090; (ii) L4Q Underwriting EBITDA of 9.5x to 12.4x; (iii) 1995 P/E Ratio of
21.6x to 25.4x; (iv) 1996 P/E Ratio of 17.8x to 19.7x; (v) 1997 P/E Ratio of
14.3x to 15.9x; and (vi) 1996 P/E to Growth of .89x to .98x.

Based on such analyses, Wasserstein Perella determined a range of implied
public market equity values for U.S. Healthcare of approximately $6.317 billion
to approximately $7.896 billion by applying the relevant range of multiples to
the appropriate financial and membership information of U.S. Healthcare, and
assuming receipt of proceeds from the exercise of stock options of approximately
$112.9 million (the "Option Proceeds"). The range of implied public equity
values of U.S. Healthcare was then divided by approximately 157.9 million fully
diluted shares of U.S. Healthcare Stock outstanding as of February 29, 1996
(representing approximately 153.9 million shares of U.S. Healthcare Stock
outstanding (including approximately 0.7 million restricted shares of U.S.
Healthcare Common Stock) and approximately 4.0 million shares of U.S. Healthcare
Common Stock issuable upon exercise of options) (the "Fully Diluted Shares
Outstanding") to yield a range of implied public market equity values of $40.00
to $50.00 per share of U.S. Healthcare Stock, without giving effect to any
change-of-control premium, an independent valuation of which was not prepared by
Wasserstein Perella.

Comparative Transaction Analysis. Wasserstein Perella calculated a range of
implied equity values per share of U.S. Healthcare Stock by reviewing certain
publicly available financial and other information relating to the following
health maintenance organization ("HMO") business combination transactions
pending or completed since January 1993 with equity values in excess of $200
million (the "Comparative HMO Transactions"): United/HealthWise of America,
Inc.; United/GenCare Health Systems, Inc.; Foundation Healthcare Corporation
("Foundation")/CareFlorida Health Systems, Inc.; Foundation/Intergroup
Healthcare Corporation; United/Ramsay-HMO, Inc.; FHP International
Corporation/TakeCare, Inc.; United/Complete Health Services, Inc.; QualMed,
Inc./HN Management Holdings, Inc.; and United/HMO America, Inc.

In conducting its transaction multiple analysis, Wasserstein Perella
calculated the following transaction multiples for each Comparative HMO
Transaction: (i) based on latest publicly available information, adjusted
purchase price (Offer Price (as defined below) multiplied by total shares of
common stock outstanding and stock options outstanding, plus total debt,
capitalized leases, preferred stock and minority interest minus cash, cash
equivalents and stock option proceeds) (the "Adjusted Purchase Price") divided
by the number of enrolled HMO members ("Transaction Membership Value"); (ii)
Adjusted Purchase Price divided by L4Q Underwriting EBITDA; (iii) offer price
per share of common stock for each acquired company in each Comparative HMO
Transaction (the "Offer Price") divided by such acquired company's EPS for the
latest four quarters preceding the closing date of the transaction (the "HMO L4Q
P/E Ratio"); (iv) Offer Price divided by such acquired company's estimated EPS
for the next four quarters following the announcement date of the transaction
(the "HMO N4Q P/E Ratio"), based on historical consensus First Call estimates;
(v) Offer Price divided by such acquired company's EPS for the next four
quarters beginning four quarters following the announcement date of the
transaction (the "HMO 8QF P/E Ratio"), based on historical consensus First Call
estimates; and (vi) Offer Price for such acquired company as a premium to such
company's unaffected stock price four weeks prior to the transaction's public
announcement, adjusted for earlier public dissemination of information, if
appropriate (the "Premium to Current Stock Price").

Based on such calculations relating to the Comparative HMO Transactions,
Wasserstein Perella noted that the relevant range of transaction multiples for
the Comparative HMO Transactions were: (i) Transaction Membership Values of
$2,328 to $2,589; (ii) L4Q Underwriting EBITDA of 10.6x to 16.1x; (iii) HMO L4Q
P/E Ratio of 24.8x to 32.1x; (iv) HMO N4Q P/E Ratio of 22.9x to 25.7x; (v) HMO
8QF P/E Ratio of 19.1x to 21.6x; and (vi) the Premium to Current Stock Price of
33.9% to 54.6%.

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Based on such analyses, Wasserstein Perella determined a range of implied
equity values of U.S. Healthcare of approximately $8.685 billion to
approximately $11.054 billion by applying the relevant range of multiples to the
appropriate financial and membership information of U.S. Healthcare, and
assuming receipt of the Option Proceeds. The range of implied equity values of
U.S. Healthcare was then divided by the Fully Diluted Shares Outstanding to
yield a range of implied equity values of $55.00 to $70.00 per share of U.S.
Healthcare Stock, which gives effect to valuations of change-of-control
transactions.

Discounted Cash Flow Analysis. A discounted cash flow analysis is a
traditional valuation methodology used to derive a valuation of a corporate
entity by capitalizing the estimated future earnings and calculating the
estimated future free cash flows of such corporate entity and discounting such
aggregated results back to the present. Wasserstein Perella performed a
discounted cash flow analysis of U.S. Healthcare through the year 2000 based
upon financial projections for the years 1996 through 1998 furnished to
Wasserstein Perella by senior management of U.S. Healthcare (which projections
did not give effect to any expense savings or revenue enhancement opportunities
contemplated by the Mergers). Earnings estimates for the year 2000 were
calculated by applying a five-year compounded annual growth rate of 15% (the
median long-term earnings growth rate prepared by IBES) to 1995 actual results,
and earnings estimates for 1999 represent an interpolation between 1998 and
2000. The resulting projections for 1996 through 2000 are defined as the "USHC
Financial Forecast." The stream of cash flows provided in such projections were
discounted to March 31, 1996. Wasserstein Perella's discounted cash flow
analysis did not give effect to any expense savings or revenue enhancement
opportunities contemplated by the Mergers, and an independent valuation of such
was not prepared.

In conducting the discounted cash flow analysis, Wasserstein Perella
assumed discount rates of 15% to 17% and terminal multiples of year 2000
unlevered net income of 15x to 18x. Based on this analysis, Wasserstein Perella
calculated a per share equity value of U.S. Healthcare Stock based on the Fully
Diluted Shares Outstanding of $45.25 to $55.50, without giving effect to any
expense savings or revenue enhancement opportunities contemplated by the
Mergers.

Historical Trading Performance

U.S. Healthcare. In addition to its other analyses, Wasserstein Perella
also: (i) reviewed the closing prices and monthly trading volumes of the U.S.
Healthcare Common Stock for the three-year period from March 1, 1993 to February
29, 1996; (ii) compared the indexed stock price performance of U.S. Healthcare,
the USHC Comparative Companies and the Standard & Poor's 500 for the three-year
period from March 1, 1993 to February 29, 1996 in order to provide perspective
on current and historical public market valuations and stock price performance
of U.S. Healthcare and the USHC Comparative Companies relative to the selected
market index; and (iii) reviewed the current and 52-week high and low trading
price of U.S. Healthcare Common Stock as of March 22, 1996, which indicated a
then current trading price of $47.75 per share, a high of $50.75 per share and a
low of $26.50 per share, to provide perspective on the recent market prices of
U.S. Healthcare Common Stock.

Aetna. With respect to Aetna, Wasserstein Perella also: (i) reviewed the
closing prices and trading volumes of Aetna Common Stock for the three-year
period from March 1, 1993 to February 29, 1996; (ii) compared the indexed stock
price performance of Aetna, the Insurance Comparative Companies and the Standard
& Poor's 500 for the three-year period from March 1, 1993 to February 29, 1996
in order to provide perspective on current and historical public market
valuations and stock price performance of Aetna and the Insurance Comparative
Companies relative to the selected market index; (iii) reviewed the current and
52-week high and low trading price of Aetna Common Stock as of March 22, 1996,
which indicated a current trading price of $76.125 per share, a high of $78.75
per share and a low of $54.00 per share, to provide perspective on the recent
market prices of Aetna Common Stock; and (v) based on the Aetna Financial
Forecast (as hereinafter defined) furnished to Wasserstein Perella by Aetna,
compared the Aetna estimated price-earnings ratio (calculated by dividing the
Market Price by the forecasted EPS (the "P/E Ratio")) of 13.2x and 10.1x for
1996 and 1997, respectively, with the average P/E Ratios of 10.4x and 9.4x,
respectively, for the Insurance Comparative Companies during the same period
(based on consensus First Call EPS estimates).

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Pro Forma Merger Analysis. Wasserstein Perella also analyzed certain pro
forma financial effects of the Mergers on Parent. This analysis was based upon
certain assumptions, including, without limitation, the following: (i) Aetna
management's projections for all business segments, recast to assume the
consummation of the P&C Divestiture, a repurchase of Aetna Common Stock, certain
investments and no change in Aetna's dividend policy (the "Aetna Financial
Forecast"); (ii) the USHC Financial Forecast; (iii) the operating synergies
between 1996 and 2000 as prepared by Aetna's management and reviewed by U.S.
Healthcare's management; and (iv) a revision of the pro forma Parent dividend
policy to reflect the higher growth nature of Parent. In addition, Wasserstein
Perella analyzed, and reviewed with the Board of Directors of Aetna, the terms
of the Parent Mandatorily Convertible Preferred Stock to be issued as part of
the U.S. Healthcare Merger Consideration.

Based on such assumptions and other information, Wasserstein Perella's pro
forma financial analysis of the financial effects of the Mergers indicated that:
(i) the Mergers would be dilutive as compared to Parent's EPS in the Aetna
Financial Forecast in fiscal years 1996, 1997 and 1998 and accretive as compared
to Parent's EPS in the Aetna Financial Forecast in fiscal years 1999 and 2000,
with such accretion increasing in each of such latter years; (ii) the ratio of
Parent's total debt to total capitalization would increase modestly as a result
of the Mergers; and (iii) the estimated Parent EPS compounded annual growth rate
for the years 1997 to 2000 would be significantly higher than the forecasted
Aetna EPS compounded annual growth rate during such period. Based on the
foregoing, Wasserstein Perella also noted that for the pro forma effect of the
Mergers to be neutral to the market price of Aetna Common Stock as of the date
of the Aetna Board Meeting, the Parent Common Stock would have to trade
approximately at a 13x multiple of estimated 1997 EPS.

The summary set forth above does not purport to be a complete description
of the analyses performed by Wasserstein Perella or Wasserstein Perella's
presentation to the Board of Directors of Aetna. Wasserstein Perella believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and the factors considered by it, without considering all factors
and analyses, could create a misleading view of the process underlying its
analyses set forth in its opinion. In performing its analyses, Wasserstein
Perella made numerous macroeconomic, operating and financial assumptions with
respect to industry performance, general business, regulatory and economic
conditions and other matters, many of which are beyond the control of Aetna and
U.S. Healthcare. Any estimates incorporated in the analyses performed by
Wasserstein Perella are not necessarily indicative of actual past or future
results or values, which may be significantly more or less favorable than such
estimates. Estimated values do not purport to be appraisals and do not
necessarily reflect the prices at which businesses or companies may be sold.
Because such estimates are inherently subject to uncertainty, neither
Wasserstein Perella, Aetna, nor any other person assumes responsibility for
their accuracy. No company utilized as a comparison is identical to Aetna or
U.S. Healthcare or the business segment for which a comparison is being made.
Accordingly, an analysis of comparative companies and comparative business
combinations resulting from the transactions is not mathematical. Rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparative companies and other
factors that could affect the value of the comparative companies or company to
which they are being compared.

The Board of Directors of Aetna selected Wasserstein Perella as its
financial advisor because Wasserstein Perella is an internationally recognized
investment banking firm and members of Wasserstein Perella have substantial
experience in transactions similar to the Mergers. Wasserstein Perella is an
investment banking firm engaged in, among other things, the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.

Pursuant to the terms of an engagement letter, dated March 28, 1996 and
effective April 12, 1995, Aetna paid Wasserstein Perella a fee of $4 million
(which includes a $250,000 retainer) upon the rendering of its written opinion,
and has agreed to pay Wasserstein Perella an additional fee of $16 million upon
consummation of the Mergers. Aetna has also agreed to reimburse Wasserstein
Perella, whether or not the Mergers are consummated, for its reasonable
out-of-pocket expenses, including all reasonable fees, disbursements and other
charges of counsel, and to indemnify Wasserstein Perella and certain related
persons against certain

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liabilities relating to or arising out of its engagement, including certain
liabilities under the Federal securities laws.

Wasserstein Perella has performed other investment banking and financial
advisory services for Aetna and its affiliates in the past for which Wasserstein
Perella has received customary compensation. In the ordinary course of its
business, Wasserstein Perella may actively trade the securities of Parent, Aetna
and U.S. Healthcare for the accounts of Wasserstein Perella and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities.

Opinion of J.P. Morgan Securities Inc.

At the meeting of the Board of Directors of Aetna on March 29, 1996, J.P.
Morgan rendered its oral opinion to the Aetna Board of Directors that, as of
such date, the consideration to be paid to the shareholders of U.S. Healthcare
in the U.S. Healthcare Sub Merger was fair from a financial point of view to
holders of Aetna Common Stock. J.P. Morgan has confirmed its March 29, 1996 oral
opinion by delivering its written opinion to the Aetna Board of Directors, dated
the date of this Joint Proxy Statement/Prospectus, that, as of such date, the
consideration to be paid to the shareholders of U.S. Healthcare in the U.S.
Healthcare Sub Merger was fair from a financial point of view to holders of
Aetna Common Stock. No limitations were imposed by the Aetna Board of Directors
upon J.P. Morgan with respect to the investigations made or procedures followed
by it in rendering its opinions.

The full text of the written opinion of J.P. Morgan dated the date of this
Joint Proxy Statement/Prospectus, which sets forth the procedures followed, the
assumptions made, matters considered and limits on the review undertaken, is
attached as Appendix E to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. Aetna shareholders are urged to read the
opinion carefully and in its entirety. J.P. Morgan's written opinion is
addressed to the Aetna Board of Directors, is directed only to the consideration
to be paid in the Mergers and does not constitute a recommendation to any Aetna
shareholder as to how such shareholder should vote at the Aetna Special Meeting,
and should not be relied upon by any shareholder as such. The summary of the
opinion of J.P. Morgan set forth in this Joint Proxy Statement/ Prospectus is
qualified in its entirety by reference to the full text of such opinion.

In arriving at its opinions, J.P. Morgan reviewed, among other things: in
the case of its March 29, 1996 opinion, a draft of the Merger Agreement and, in
the case of its opinion dated the date of this Joint Proxy Statement/Prospectus,
the Amended Merger Agreement and this Joint Proxy Statement/Prospectus; in the
case of its March 29, 1996 opinion, the audited financial statements of Aetna
and U.S. Healthcare for the fiscal year ended December 31, 1994, and the
unaudited financial statements of Aetna and U.S. Healthcare for the period ended
September 30, 1995 and, in the case of its opinion dated the date of this Joint
Proxy Statement/Prospectus, the audited financial statements of Aetna and U.S.
Healthcare for the fiscal year ended December 31, 1995; current and historical
market prices of Aetna Common Stock and U.S. Healthcare Common Stock; certain
publicly available information concerning the businesses of Aetna and U.S.
Healthcare and of certain other companies engaged in comparable businesses, and
the reported prices for certain other companies' securities deemed comparable;
publicly available terms of certain transactions involving companies comparable
to U.S. Healthcare and the consideration paid for such companies; the terms of
other relevant business combinations; certain internal financial analyses and
forecasts prepared by Aetna and U.S. Healthcare and their respective
managements; and certain agreements with respect to outstanding indebtedness or
obligations of Aetna and U.S. Healthcare. J.P. Morgan also held discussions with
certain members of the management of Aetna and U.S. Healthcare with respect to
certain aspects of the Mergers, and the past and current business operations,
financial condition and future prospects and operations of Aetna and U.S.
Healthcare, and certain other matters believed necessary or appropriate to J.P.
Morgan's inquiry. In addition, J.P. Morgan reviewed such other financial studies
and analyses and considered such other information as it deemed appropriate for
the purposes of its opinions.

J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by Aetna or U.S. Healthcare or otherwise reviewed by J.P.
Morgan, and J.P. Morgan has not assumed any responsibility or liability
therefor. J.P. Morgan has not conducted any valuation or appraisal of any assets
or liabilities, nor have any valuations or

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appraisals been provided to J.P. Morgan. In relying on financial analyses and
forecasts provided to J.P. Morgan, J.P. Morgan has assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management of Aetna or U.S. Healthcare, as
applicable, as to the expected future results of operations and financial
condition of Aetna and U.S. Healthcare, respectively. J.P. Morgan has also
assumed that the Mergers will have the tax consequences described in discussions
with, and materials furnished to J.P. Morgan by, representatives of Aetna, and
that the other transactions contemplated by the Amended Merger Agreement will be
consummated as described in the Amended Merger Agreement.

The projections furnished to J.P. Morgan for Aetna and U.S. Healthcare were
prepared by the respective managements of each company. Neither Aetna nor U.S.
Healthcare publicly discloses internal management projections of the type
provided to J.P. Morgan in connection with J.P. Morgan's analysis of the
Mergers, and such projections were not prepared with a view toward public
disclosure. These projections were based on numerous variables and assumptions
that are inherently uncertain and may be beyond the control of management,
including, without limitation, factors related to general economic and
competitive conditions and prevailing interest rates. Accordingly, actual
results could vary significantly from those set forth in such projections.

J.P. Morgan's opinions are based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may affect the written opinion
dated as of the date of this Joint Proxy Statement/Prospectus, and J.P. Morgan
does not have any obligation to update, revise, or reaffirm such opinion.

J.P. Morgan expressed no opinion as to the price at which Parent Common
Stock and Parent Mandatorily Convertible Preferred Stock will trade if and when
issued or at any future time. As a result, other factors after the date hereof
may affect the value of the businesses of Parent after consummation of the
Mergers, including but not limited to (i) the total or partial disposition of
Parent Common Stock or Parent Mandatorily Convertible Preferred Stock by
shareholders within a short period of time after the effective date of the
Mergers, (ii) changes in prevailing interest rates and other factors which
generally influence the price of securities, (iii) adverse changes in the
current capital markets, (iv) adverse changes in the financial condition,
business, assets, results of operations or prospects of Parent or of U.S.
Healthcare, and (v) any necessary actions by or restrictions of federal, state
or other governmental agencies or regulatory authorities.

In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinions. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its written opinion dated the date of this
Joint Proxy Statement/Prospectus. Although such analyses were utilized by J.P.
Morgan in connection with its opinion, J.P. Morgan did not present such analyses
to the Aetna Board.

Public Trading Multiples. Using publicly available information, J.P. Morgan
compared selected financial data of U.S. Healthcare with similar data for
selected publicly traded companies engaged in businesses which J.P. Morgan
judged to be analogous to the businesses of U.S. Healthcare. The companies
selected by J.P. Morgan were United Healthcare Corporation, Humana Health Plans,
Healthsource, Inc., Mid Atlantic Medical Services, Inc. and Oxford Health Plans.
These companies were selected, among other reasons, because of their large stock
market capitalization and concentration of members outside California. For each
comparable company, publicly available financial performance through the twelve
months ended December 31, 1995 was measured. J.P. Morgan selected the mean and
the median value for each multiple, specifically: earnings before interest,
taxes, depreciation and amortization ("EBITDA") (18.2x to 18.8x); projected 1996
net income (22.6x to 26.1x); and projected 1997 net income (18.2x to 20.2x).
These multiples were then applied to U.S. Healthcare's EBITDA, projected 1996
net income and projected 1997 net income, yielding implied trading values for
U.S. Healthcare Common Stock of approximately $56.00 to $70.00 per share.

Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined selected managed care transactions with respect to equity value,
aggregate value, aggregate value per member, equity value as a multiple of
trailing and next twelve months' earnings, aggregate value as a multiple of
trailing twelve

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months' premiums and fees, EBITDA and earnings before interest and taxes
("EBIT"), and the premium paid over the market price of the target one day and
one month prior to the announcement of the transaction. Specifically, J.P.
Morgan reviewed the following transactions: GenCare/United Healthcare;
TakeCare/FHP International; Ramsay-HMO/United Healthcare; Healthwise/United
Healthcare; HMO America/United Healthcare; and Intergroup/Foundation Health.
J.P. Morgan applied a range of multiples derived from such analysis to U.S.
Healthcare's trailing twelve months EBITDA (18.3x and 18.4x, respectively),
trailing twelve months net income (29.7x and 31.2x, respectively), and next
twelve months net income (23.9x and 24.0x, respectively), and arrived at an
estimated range of equity values for U.S. Healthcare Common Stock of between
$60.00 and $70.00 per share.

Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per share
for U.S. Healthcare Common Stock. J.P. Morgan calculated the unlevered free cash
flows that U.S. Healthcare is expected to generate during fiscal years 1996
through 2006 based upon financial projections prepared by the management of U.S.
Healthcare through the years ended December 31, 2000 and upon management
projections, adjusted by J.P. Morgan to reflect more moderate growth in revenues
and lower operating margins during the ten-year period. J.P. Morgan also
calculated a range of terminal asset values of U.S. Healthcare at the end of the
ten-year period ending December 31, 2006 by applying a perpetual growth rate
ranging from 3.5% to 4.5% of the unlevered free cash flow of U.S. Healthcare
during the final year of the ten-year period. The unlevered free cash flows and
the range of terminal asset values were then discounted to present values using
a range of discount rates from 11% to 13%, which were chosen by J.P. Morgan
based upon an analysis of the weighted average cost of capital of U.S.
Healthcare. The present value of the unlevered free cash flows and the range of
terminal asset values were then adjusted for U.S. Healthcare's estimated 1995
fiscal year-end excess cash, option exercise proceeds and total debt. Based on
the adjusted management projections and a discount rate of 11.5%, the discounted
cash flow analysis indicated a range of equity values of between $60.00 and
$65.00 per share of U.S. Healthcare Common Stock on a stand-alone basis (i.e.,
without synergies).

In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, J.P. Morgan reviewed the analyses used to render its March
29, 1996 oral opinion to the Board of Directors of Aetna by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the factors considered in connection
therewith.

The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set forth
above and its analyses must be considered as a whole and that selecting portions
thereof, without considering all of its analyses, could create an incomplete
view of the processes underlying its analyses and opinion. J.P. Morgan based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and industry-specific
factors. The other principal assumptions upon which J.P. Morgan based its
analyses are set forth above under the description of each such analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that might be achieved, which values may be higher or lower than
those indicated. Moreover, J.P. Morgan's analyses are not and do not purport to
be appraisals or otherwise reflective of the prices at which businesses actually
could be bought or sold.

As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to advise Aetna with
respect to the Mergers on the basis of such experience and its familiarity with
Aetna.

Pursuant to an Engagement Letter dated February 12, 1996, J.P. Morgan
rendered services in connection with the Mergers. Aetna will pay J.P. Morgan a
fee of $5 million. In addition, Aetna has agreed to reimburse J.P. Morgan for
its reasonable expenses incurred in connection with its services, including the
fees and

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disbursements of counsel, and will indemnify J.P. Morgan against certain
liabilities, including liabilities arising under the federal securities laws.

J.P. Morgan and its affiliates maintain banking and other business
relationships with Aetna and its affiliates, including acting as the agent bank
under Aetna's existing commercial bank facility, for which it receives customary
fees. J.P. Morgan and its affiliates are expected to act as the arranger and
administrative agent in connection with Aetna's $2.5 billion credit facility
anticipated to be available to fund a portion of the cash consideration payable
in connection with the Mergers. Affiliates of J.P. Morgan also engage in
securities trading and derivatives business with Aetna in the ordinary course of
business. In the ordinary course of their businesses, affiliates of J.P. Morgan
may actively trade the debt and equity securities of Aetna or U.S. Healthcare
for their own accounts or for the accounts of customers and, accordingly, they
may at any time hold long or short positions in such securities.

U.S. Healthcare

Opinion of Goldman, Sachs & Co.

On March 30, 1996, Goldman Sachs delivered its oral opinion to the U.S.
Healthcare Board of Directors that as of the date of such opinion, the U.S.
Healthcare Merger Consideration to be received by the holders of the U.S.
Healthcare Stock is fair to such holders. Goldman Sachs subsequently confirmed
its earlier opinion by delivery of its written opinion dated as of the date
hereof.

The full text of the written opinion of Goldman Sachs dated as of the date
hereof, which sets forth the procedures followed, the assumptions made, matters
considered and limitations on the review undertaken, is attached as Appendix F
to this Joint Proxy Statement/Prospectus and is incorporated herein by
reference. U.S. Healthcare shareholders are urged to read such opinion carefully
and in its entirety. Goldman Sachs' written opinion is addressed to the U.S.
Healthcare Board of Directors and does not constitute a recommendation to any
U.S. Healthcare shareholder as to how such shareholder should vote at the U.S.
Healthcare Annual Meeting, and should not be relied upon by any shareholder as
such. The summary of the written opinion of Goldman Sachs set forth in this
Joint Proxy Statement/Prospectus is qualified in its entirety by reference to
the full text of such opinion.

In connection with its opinion, Goldman Sachs reviewed, among other things:
(i) this Joint Proxy Statement/Prospectus; (ii) the Amended Merger Agreement;
(iii) the Amended Voting Agreement; (iv) the Form of Certificate of
Designations, Rights and Preferences relating to the Parent Mandatorily
Convertible Preferred Stock; (v) the Annual Reports to Shareholders and Annual
Reports on Form 10-K of U.S. Healthcare and Aetna for the five years ended
December 31, 1995; (vi) certain statutory annual statements of Aetna Life
Insurance Company, Aetna Life Insurance and Annuity Company and Aetna Life
Insurance Company of Illinois filed with various state insurance departments for
the year ended December 31, 1995; (vii) certain interim reports to shareholders
and Quarterly Reports on Form 10-Q of U.S. Healthcare and Aetna; (viii) certain
other communications from U.S. Healthcare and Aetna to their respective
shareholders; and (ix) certain internal financial analyses and forecasts for
U.S. Healthcare and Aetna prepared by their respective managements, including
analyses and forecasts of cost savings and operating synergies resulting from
the Mergers. Goldman Sachs also held discussions with members of the senior
managements of U.S. Healthcare and Aetna regarding the strategic rationale for,
and benefits of, the Mergers and their past and current business operations,
financial condition, and future prospects of their respective companies and for
Parent pursuant to the Mergers. In addition, Goldman Sachs reviewed the reported
price and trading activity for U.S. Healthcare Common Stock and Aetna Common
Stock, compared certain financial and stock market information for U.S.
Healthcare and Aetna with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the managed care industry and performed such
other studies and analyses as it considered appropriate.

Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. Goldman Sachs assumed, with the consent of U.S.
Healthcare, that the financial forecasts prepared by U.S. Healthcare and Aetna,
including without limitation, the projected synergies resulting from the Mergers
had been reasonably prepared on a basis

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reflecting the best currently available judgments and estimates of U.S.
Healthcare and Aetna and that such forecasts would be realized in the amounts
and the times contemplated thereby. Goldman Sachs indicated that it is not an
actuary and that its services did not include any actuarial determinations or
evaluation by it or an attempt to evaluate actuarial assumptions. Goldman Sachs
relied, with the consent of U.S. Healthcare, upon the actuarial opinions,
reports, and advice of actuarial advisors to U.S. Healthcare. In addition,
Goldman Sachs did not make an independent evaluation or appraisal of the assets
and liabilities of U.S. Healthcare or Aetna or any of their respective
subsidiaries and Goldman Sachs was not furnished with any such evaluation or
appraisal. Goldman Sachs was not asked to solicit, and accordingly did not
solicit, third parties with respect to potential alternative transactions. In
addition, in providing its opinion, Goldman Sachs did not express any view as to
the prices at which the Parent Mandatorily Convertible Preferred Stock may trade
if and when issued.

The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its oral opinion to U.S. Healthcare's
Board of Directors on March 30, 1996. Goldman Sachs utilized substantially the
same type of financial analyses in connection with providing the written opinion
attached hereto as Appendix F.

(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the U.S. Healthcare Common Stock.
In addition, Goldman Sachs analyzed the consideration to be received by
holders of U.S. Healthcare Stock pursuant to the Merger Agreement in
relation to the March 29, 1996 market price of the U.S. Healthcare Common
Stock and the ten-day, three-month and six-month average market prices of
the U.S. Healthcare Common Stock. Such analysis indicated that the price
per share of U.S. Healthcare Common Stock to be paid pursuant to the Merger
Agreement represented a premium of 24.3% based on the March 29, 1996 market
price of $45.88 per share of U.S. Healthcare Common Stock, 21.9% based on
the ten-day average market price of $46.75 per share of U.S. Healthcare
Common Stock, 22.3% based on the three-month average market price of $46.60
per share of U.S. Healthcare Common Stock and 30.2% based on the six-month
average market price of $43.78 per share of U.S. Healthcare Common Stock.
For purposes of its analysis, Goldman Sachs assumed that the Parent
Mandatorily Convertible Preferred Stock would trade at its stated value of
$76.13 and used a price for Aetna Common Stock of $76.13, which was the
price Aetna and U.S. Healthcare assumed for the value of Aetna Common Stock
for purposes of the exchange ratio. Goldman Sachs also noted that the
assumed price also was very close to the ten and twenty day (with March 29,
1996 as the terminal date) rolling average price for Aetna Common Stock of
$76.11 and $76.14, respectively.

(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to U.S. Healthcare to corresponding
financial information, ratios and public market multiples for 23 publicly
traded corporations: United Wisconsin Services Inc.; RightChoice Managed
Care, Inc.; Bankers Life; John Alden Financial Corp.; Aetna Life and
Casualty Company; Cigna Corp.; Physicians Health Services; Sierra Health
Services; Mid Atlantic Medical Services, Inc.; Physicians Corp. of America;
Wellcare Management Group; Healthwise of America; Maxicare; Coventry Corp.;
FHP International Corp.; Foundation Health Corp.; Health Systems
International, Inc.; PacifiCare Health Systems; WellPoint Health Networks
Inc.; Humana Inc.; United Healthcare Corp.; Oxford Health Plans, Inc.; and
Healthsource, Inc. (the "Selected Companies"). The Selected Companies were
chosen because they are publicly-traded companies that operate in the
health care industry. Goldman Sachs calculated and compared various
financial multiples and ratios. The multiples of U.S. Healthcare were
calculated using a price of $45.88 per share of U.S. Healthcare Common
Stock, the closing price of the shares of U.S. Healthcare Common Stock on
the Nasdaq Stock Market on March 29, 1996. The multiples and ratios for
U.S. Healthcare were based on information provided by U.S. Healthcare's
management and the multiples for each of the Selected Companies were based
on the most recent publicly available information. With respect to the
Selected Companies, Goldman Sachs considered estimated calendar year 1996
and 1997 price/earnings ("PE") ratios (based on information provided by the
Institutional Brokers Estimate System ("IBES")), which ranged from 7.3x to
38.2x for estimated calendar year 1996 with a median of 15.3x, compared to
16.9x for U.S. Healthcare, and which ranged from 10.1x to 28.3x for
estimated calendar year 1997, with a median of 12.3x compared to 14.6x for
U.S.

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Healthcare; estimated calendar year 1996 PE ratios as a multiple of the
five year estimated Earnings Per Share ("EPS") growth rate (provided by
IBES) which ranged from 0.4x to 2.7x with a median of 0.9x compared to 1.1x
for U.S. Healthcare; market value (as of March 29, 1996) as a multiple of
book value which ranged from 0.9x to 7.8x with a median 3.0x compared to
7.4x for U.S. Healthcare; and a five-year EPS growth rate (provided by
IBES) ranging from 6% to 40% with a median of 19% compared to 15% for U.S.
Healthcare.

(iii) Discounted Cash Flow Analysis. Goldman Sachs performed a
discounted cash flow analysis under the following scenario using U.S.
Healthcare's management's projections. Goldman Sachs calculated a net
present value of free cash flows for the years 1996 through 1998 using
discount rates ranging from 12% to 15%. Goldman Sachs calculated U.S.
Healthcare's terminal values in the year 1998 based on multiples ranging
from 15.5x net income to 18.5x net income. These terminal values were then
discounted to present value using discount rates ranging from 12% to 15%.
The various ranges for discount rates and terminal value multiples were
chosen to reflect theoretical analyses of cost of capital and a range of
trading values for comparable companies. Based on such analyses, the
implied per share values of U.S. Healthcare Common Stock ranged from $52.90
to $65.92.

(iv) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the healthcare industry
since 1990 (the "Selected Transactions"). Such analysis indicated that for
the Selected Transactions (i) levered consideration as a multiple of latest
twelve months ("LTM") sales ranged from 0.01x to 2.10x, compared to 2.31x
for the levered consideration (equity consideration less $550 million of
free cash projected as of March 31, 1996 by U.S. Healthcare's management)
to be received in the U.S. Healthcare Sub Merger, (ii) levered
consideration as a multiple of LTM Earnings Before Income Taxes ranged from
0.4x to 33.2x, compared to 15.3x for the levered consideration to be
received in the Mergers and (iii) levered consideration per member ranged
from negative $34.00 to $3,836.80, compared to levered consideration of
$2,894 per member to be received in the U.S. Healthcare Sub Merger (based
on membership estimates provided by the management of U.S. Healthcare, as
of February 1996).

(v) Pro Forma Combination Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the Mergers with and without synergies.
Using earnings estimates for U.S. Healthcare and Aetna prepared by their
respective managements for the years 1996 through 2000, Goldman Sachs
compared the EPS of the Aetna Common Stock, on a stand-alone basis, to the
EPS of the Parent Common Stock on a pro forma basis (assuming conversion of
Parent Mandatorily Convertible Preferred Stock) under the following two
scenarios (in each scenario, with synergies and without synergies):
assuming a conversion number for the Parent Mandatorily Convertible
Preferred Stock of 0.82 (the ".82 Case") and a conversion number for the
Parent Mandatorily Convertible Preferred Stock of 1.00 (the "1.00 Case").
With synergies, based on both the .82 Case and the 1.00 Case, the proposed
transaction would be accretive to the stockholders of Aetna on an EPS basis
in the years 1999 and 2000 and dilutive in the years 1996, 1997 and 1998.
Without synergies, based on both the .82 Case and the 1.00 Case, the
proposed transaction would be dilutive to the stockholders on an EPS basis
in the years 1996 through 2000. With synergies and based on
earnings-weighted average pro forma price/earnings ratios for the combined
company for 1997 through 2000, which ranged from 7.4x to 12.2x, Goldman
Sachs determined a weighted average implied pro forma stock price for the
combined companies' common stock (assuming conversion of the Parent
Mandatorily Convertible Preferred Stock at 0.82) which ranged from $71.85
to $86.73. Because Goldman Sachs presented the foregoing analysis it did
not perform the mathematical calculations in order to present an aggregate
range of values of the U.S. Healthcare Merger Consideration to the U.S.
Healthcare Board of Directors.

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to

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U.S. Healthcare or Aetna or the contemplated transaction. The analyses were
prepared solely for purposes of Goldman Sachs providing its opinion to the U.S.
Healthcare Board of Directors as to the fairness of the consideration to be
received by the holders of U.S. Healthcare Stock in the U.S. Healthcare Sub
Merger and do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of U.S. Healthcare, Aetna, Goldman Sachs or any
other person assumes responsibility if future results are materially different
from those forecast. As described above, Goldman Sachs' opinion to the Board of
Directors of U.S. Healthcare was one of many factors taken into consideration by
the U.S. Healthcare Board of Directors in making its determination to approve
the Merger Agreement. The foregoing summary does not purport to be a complete
description of the analyses performed by Goldman Sachs and is qualified by
reference to the written opinion of Goldman Sachs set forth in Appendix F
hereto.

Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. U.S. Healthcare
selected Goldman Sachs as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the Mergers.

Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of U.S. Healthcare and/or Aetna for its own account and for the
account of customers. As of the date hereof, Goldman Sachs has accumulated net
long positions of 14,200 shares of U.S. Healthcare Common Stock, 11,300 shares
of Aetna Common Stock and 3,500 Aetna Life and Casualty Company 6.375% Notes due
2003. In addition, Goldman Sachs has provided investment banking services to
Aetna from time to time, including acting as financial advisor in connection
with the sale of Aetna's property and casualty business.

Pursuant to a letter agreement dated February 27, 1996 (the "Engagement
Letter"), U.S. Healthcare engaged Goldman Sachs to act as its financial advisor
to assist U.S. Healthcare in its analysis and consideration of various possible
transactions with Aetna. Pursuant to the terms of the Engagement Letter, U.S.
Healthcare has agreed to pay Goldman Sachs upon consummation of the Mergers a
transaction fee based on 0.3% of the aggregate of the consideration paid for the
U.S. Healthcare Stock in the U.S. Healthcare Sub Merger plus the principal
amount of all indebtedness for borrowed money appearing on U.S. Healthcare's
most recent consolidated balance sheet prior to the consummation of the Mergers
(approximately $27 million based on an assumed value of the U.S. Healthcare
Merger Consideration of $57 per share of U.S. Healthcare Stock). U.S. Healthcare
has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses,
including attorney's fees, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.

Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated

On March 30, 1996, Merrill Lynch delivered its oral opinion to the U.S.
Healthcare Board of Directors, which was subsequently confirmed in a written
opinion dated the date of this Joint Proxy Statement/Prospectus, to the effect
that, as of such dates, and based upon the assumptions made, matters considered
and limits of review in connection with such opinions, the consideration to be
received by the holders of U.S. Healthcare Stock (other than Aetna and its
affiliates) pursuant to the Mergers is fair to such shareholders from a
financial point of view. References herein to the "Merrill Lynch Opinion" refer
to the written opinion of Merrill Lynch dated the date of this Joint Proxy
Statement/Prospectus.

A copy of the Merrill Lynch Opinion, which sets forth the assumptions made,
matters considered and certain limitations on the scope of review undertaken by
Merrill Lynch, is attached as Appendix G to this

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Joint Proxy Statement/Prospectus. U.S. Healthcare shareholders are urged to read
the Merrill Lynch Opinion in its entirety. The Merrill Lynch Opinion is
addressed to the U.S. Healthcare Board of Directors, is directed only to the
fairness from a financial point of view of the consideration to be received by
the holders of U.S. Healthcare Stock pursuant to the Mergers and does not
constitute a recommendation to any U.S. Healthcare shareholder as to how such
shareholder should vote at the U.S. Healthcare Annual Meeting. The summary of
the Merrill Lynch Opinion set forth in this Joint Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.

In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things: (i) reviewed U.S. Healthcare's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31, 1995 and
U.S. Healthcare's Form 10-Q and the related unaudited financial information for
the quarterly period ended March 31, 1996; (ii) reviewed Aetna's Annual Reports,
Forms 10-K and related financial information for the three fiscal years ended
December 31, 1995 and Aetna's Form 10-Q and the related unaudited financial
information for the quarterly period ended March 31, 1996; (iii) reviewed
certain information, including financial forecasts, relating to the business,
earnings, cash flow, assets and prospects of U.S. Healthcare and Aetna,
furnished to Merrill Lynch by U.S. Healthcare and Aetna, respectively; (iv)
conducted discussions with members of senior management of U.S. Healthcare and
Aetna concerning their respective businesses and prospects, including potential
synergies to be realized as a result of the Mergers; (v) reviewed the historical
market prices and trading activity for the U.S. Healthcare Common Stock and the
Aetna Common Stock and compared them with that of certain publicly traded
companies which Merrill Lynch deemed to be similar to U.S. Healthcare and Aetna,
respectively; (vi) compared the results of operations of U.S. Healthcare and
Aetna with those of certain companies which Merrill Lynch deemed to be
reasonably similar to U.S. Healthcare and Aetna, respectively; (vii) compared
the proposed financial terms of the Mergers with the financial terms of certain
other mergers and acquisitions which Merrill Lynch deemed to be relevant; (viii)
considered the pro forma effect of the Mergers on Aetna's cash flow, earnings
before income taxes, net income and dividends; (ix) reviewed the Amended Merger
Agreement; (x) reviewed the Amended Voting Agreement; (xi) reviewed the form of
certificate of designation, rights and preferences relating to the Parent
Mandatorily Convertible Preferred Stock Consideration; and (xii) reviewed such
other financial studies and analyses and performed such other investigations and
took into account such other matters as Merrill Lynch deemed necessary including
Merrill Lynch's assessment of general economic, market and monetary conditions.

In preparing the Merrill Lynch Opinion, Merrill Lynch relied upon the
accuracy and completeness of all information supplied or otherwise made
available to it by U.S. Healthcare and Aetna. Merrill Lynch did not
independently verify such information or undertake an independent appraisal,
evaluation or actuarial evaluation of the assets or liabilities of U.S.
Healthcare or Aetna. With respect to the financial forecasts and estimates of
operating efficiencies and potential synergies expected to result from the
Mergers furnished to Merrill Lynch by U.S. Healthcare and Aetna, Merrill Lynch
assumed that they were reasonably prepared and reflected the best currently
available estimates and judgments of the respective managements of U.S.
Healthcare and Aetna as to the expected future financial performance of their
respective companies. Merrill Lynch also assumed that the Mergers will be free
of Federal tax to U.S. Healthcare, Aetna, Parent and the holders of U.S.
Healthcare Stock (other than in respect of the cash consideration to be paid to
U.S. Healthcare shareholders and any cash paid in lieu of fractional shares).
Merrill Lynch further assumed that the Parent Common Stock will pay quarterly
dividends at a rate not greater than $0.83 per annum per share.

Merrill Lynch was not authorized by U.S. Healthcare to solicit, nor has it
solicited, third-party indications of interest for the acquisition of all or any
part of U.S. Healthcare. In addition, Merrill Lynch expressed no opinion as to
what the value of the Parent Mandatorily Convertible Preferred Stock will be
when issued to the holders of the U.S. Healthcare Stock upon consummation of the
Mergers.

The following is a summary of certain financial and comparative analyses
performed by Merrill Lynch in arriving at its oral opinion delivered to the U.S.
Healthcare Board of Directors on March 30, 1996.

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Historical Stock Trading Analysis -- U.S. Healthcare. Merrill Lynch
reviewed the historical trading prices and volumes for the U.S. Healthcare
Common Stock. In addition, Merrill Lynch analyzed the consideration to be
received by holders of U.S. Healthcare Stock pursuant to the Merger Agreement in
relation to the March 28, 1996 market price of the U.S. Healthcare Common Stock
and the range of market prices for the latest twelve months ("LTM"), last three
years, and last five years. Such analysis indicated that the price per share of
U.S. Healthcare Common Stock to be paid pursuant to the Merger Agreement
represented a premium of 21.7% based on (i) the March 28, 1996 closing price of
$46.875 per share of U.S. Healthcare Common Stock and (ii) the March 22, 1996
closing price of $76.125 per share of Aetna Common Stock (which is the price
Aetna and U.S. Healthcare used for the value of Aetna Common Stock for purposes
of negotiating the exchange ratios and the terms of the Parent Mandatorily
Convertible Preferred Stock) and an assumption for purposes of this analysis
that the Parent Mandatorily Convertible Preferred Stock would trade at its
stated value of $76.13.

Comparable Public Companies Analysis -- U.S. Healthcare. Using publicly
available information, Merrill Lynch compared certain financial and operating
information and ratios (described below) for U.S. Healthcare with corresponding
financial and operating information and ratios for a group of publicly traded
companies that Merrill Lynch deemed to be similar to U.S. Healthcare's business.
The companies included in the U.S. Healthcare comparable public companies
analysis were: FHP International Corporation ("FHP International"); Foundation,
Healthsource, Inc.; Health Systems International Incorporated ("HSI"); Humana;
Oxford Health Plans, Inc.; PacifiCare Health Systems, Inc.; and United
(collectively, the "U.S. Healthcare Comparables"). Merrill Lynch compared (i)
calendarized price/earnings ("P/E") ratios for 1996 and 1997, which ranged from
12.3x to 38.2x for estimated calendar year 1996 (with a median of 19.2x and a
mean of 22.4x), compared to the current trading value of 17.4x for U.S.
Healthcare, and which ranged from 10.1x to 27.5x for estimated calendar year
1997 (with a median of 16.0x and a mean of 17.7x), compared to the current
trading value of 14.9x for U.S. Healthcare; (ii) 5-year estimated growth rates,
which ranged from 15.0% to 40.0% (with a median of 20.0% and a mean of 22.6%)
compared to 18.3% (including dividend yield) for U.S. Healthcare; (iii) 1996
earnings per share ("EPS") multiples expressed as a percentage of estimated
growth (in each case based on information provided by IBES and First Call
Earnings Estimates), which ranged from 61.7% to 131.5% (with a median of 96.5%
and a mean of 99.3%) compared to the current trading value of 94.9% for U.S.
Healthcare; and (iv) market value per member based on total members as of
September 30, 1995, which ranged from $714.8 per member to $3,267.6 per member
(with a median of $1,144.8 per member and a mean of $1,361.3 per member)
compared to the current trading value of $2,526.1 per member for U.S.
Healthcare.

Discounted Cash Flow Analysis -- U.S. Healthcare. Merrill Lynch calculated
ranges of equity value for U.S. Healthcare based upon the value, discounted to
the present, of its fiscal year-end five-year stream of unlevered after-tax free
cash flow based upon U.S. Healthcare management projections of earnings and cash
flow through 1998 and extrapolations thereof for the remaining periods, and its
projected fiscal year 2000 terminal value based on multiples of net income
ranging from 15.0x to 19.0x. Merrill Lynch utilized discount rates of capital
ranging from 14% to 16%. The various ranges for discount rates and terminal
value multiples were chosen to reflect theoretical analyses of cost of capital
and a range of trading values for comparable companies. Based on such analyses,
the implied per share values of U.S. Healthcare Common Stock ranged from $47.16
to $59.83.

Comparable Acquisition Analysis. Merrill Lynch reviewed certain publicly
available information regarding 11 selected business combinations since July
1992 (the "Acquisition Comparables"). The Acquisition Comparables and the dates
the transactions were announced were as follows: United Healthcare's acquisition
of Healthwise of America, Inc. (February 1996); United's acquisition of PHP Inc.
(November 1995); Wellpoint Health Networks, Inc.'s proposed acquisition of HSI
(not consummated) (April 1995); Humana's acquisition of CareNetwork, Inc.
(October 1994); United's acquisition of GenCare Health Systems, Inc. (September
1994); Foundation Health's acquisition of Intergroup (July 1994); United's
acquisition of Ramsay-HMO, Inc. (February 1994); United's acquisition of
Complete Health (January 1994); FHP International's acquisition of TakeCare,
Inc. (January 1994); United's acquisition of HMO America, Inc. (May 1993); and
Foundation Health's acquisition of Century Medicorp (July 1992).

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Merrill Lynch compared the "offer value" (defined to be the offer price per
share multiplied by the sum of the number of shares outstanding and the number
of exercisable options outstanding (net of option proceeds)) of each such
transaction as a multiple of then publicly available LTM EPS, the next fiscal
years' estimated EPS at the date of announcement ("Forward EPS") and total
members. The ranges of the offer value as a multiple of LTM EPS, Forward EPS and
total members were as follows: (i) offer value to LTM EPS ranged from 22.5x to
66.7x (with a median of 31.7x and a mean of 35.1x compared to an implied 22.9x
to be received in the Mergers; (ii) offer value to Forward EPS ranged from 18.6x
to 36.1x (with a median of 22.6x and a mean of 24.0x) compared to an implied
21.1x to be received in the Mergers; and (iii) offer value to total members
ranged from $862.0 to $3,796.0 per member (with a median of $1,440.8 per member
and a mean of $1,729.6 per member) compared to $3,115.6 per member to be
received in the Mergers (based on membership estimates provided by the
management of U.S. Healthcare as of March 30, 1996).

With respect to four of the Acquisition Comparables, Wellpoint/HSI,
Foundation/Intergroup, United/ Ramsay-HMO and FHP International/Takecare,
Merrill Lynch also compared the offer value of each such transaction as a
multiple of then publicly available LTM EPS, Forward EPS and total members to
the Mergers (the "Selected Acquisition Comparables"). The ranges of the offer
value as a multiple of LTM EPS, Forward EPS and members for the Selected
Acquisition Comparables were as follows: (i) offer value to LTM EPS ranged from
22.5x to 36.6x (with a median of 32.4x and a mean of 31.0x); (ii) offer value to
Forward EPS ranged from 18.6x to 25.9x (with a median of 22.6x and a mean of
22.4x); and (iii) offer value to total members ranged from $1,328.4 to $3,796.0
(with a median of $1,441.4 and a mean of $2,001.8). As noted above, the offer
value with respect to the Mergers implied a 22.9x multiple of U.S. Healthcare's
LTM EPS, a 21.1x multiple of U.S. Healthcare's Forward EPS and $3,115.6 per
member.

Comparable Public Companies Analysis -- Aetna. Using publicly available
information, Merrill Lynch compared certain financial and operating information
and ratios (described below) for Aetna with corresponding financial and
operating information and ratios for a group of publicly traded companies that
Merrill Lynch deemed to be similar to Aetna's business. The companies included
in the Aetna comparable public company analysis were: American General
Corporation, Bankers Life Holding, Cigna Corporation, Protective Life
Corporation, ReliaStar Financial Corporation and USLIFE Corporation
(collectively, the "Aetna Comparables").

Using Aetna's management forecasts, Merrill Lynch compared (i) 1996 EPS
expressed as a percentage of equity, which ranged from 8.9% to 18.2% (with a
median of 12.9% and a mean of 13.2%) compared to 10.3% for Aetna; (ii) current
market price expressed as a multiple of book value, which ranged from 0.85x to
2.10x (with a median of 1.25x and a mean of 1.31x) compared to 2.10x for Aetna;
(iii) calendarized P/E ratios for 1996 and 1997, which ranged from 8.2x to 11.5x
for estimated calendar year 1996 (with a median and a mean of 9.8x) compared to
12.6x for Aetna and ranged from 3.4x to 9.1x for estimated calendar year 1997
(with a median of 8.8x and a mean of 7.6x) compared to 10.2x for Aetna; (iv)
total return to the same figures, which ranged from 11.8% to 16.2% (with a
median of 13.2% and a mean of 13.6%) compared to 14.6% for Aetna; and (v) 1996
EPS multiples expressed as a percentage of total return (in each case based on
IBES and First Call Earnings Estimates) which ranged from 61.0% to 81.7% (with a
median of 75.9% and a mean of 73.0%) compared to 86.3% for Aetna.

Discounted Cash Flow Analysis -- Aetna. Merrill Lynch calculated ranges of
equity value for Aetna based upon the value, discounted to the present, of its
fiscal year end five-year stream of unlevered after-tax free cash flow and its
projected fiscal year 2000 terminal value based upon projections from Aetna
management estimates for net income based on multiples of net income ranging
from 12.0x to 14.0x. Merrill Lynch utilized discount rates ranging from 12.0% to
14.0%. The various ranges for discount rates and terminal value multiples were
chosen to reflect theoretical analyses of cost of capital and range of trading
values for comparable companies. Based on such analyses, the implied per share
values of Aetna Common Stock ranged from $72.31 to $85.92.

Historical Exchange Ratio Analysis. Merrill Lynch reviewed the implied
historical exchange ratio between Aetna and U.S. Healthcare over the past two
years and compared such ratios to the exchange ratio set pursuant to the Merger
Agreement.

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Relative Contribution Analysis. Merrill Lynch compared the relative
ownership of the holders of U.S. Healthcare Stock and the holders of Aetna
Common Stock with respect to the combined company (assuming conversion of the
U.S. Healthcare Preferred Stock) of approximately 28% and 72%, respectively, to
the relative contributions of each of U.S. Healthcare and Aetna to the combined
company's revenues, earnings before interest and taxes ("EBIT"), and net income
based on U.S. Healthcare and Aetna managements' forecasts, before synergies and
transaction adjustments. This analysis indicated that for 1996, U.S. Healthcare
would contribute 25.5% of the revenues of the combined entity, 40.1% of the EBIT
of the combined entity, and 41.1% of the net income of the combined entity.

Implied Exchange Ratio. Merrill Lynch reviewed the implied exchange ratios
derived from the discounted cash flow and comparable companies analyses, both
described herein. By comparing the highest implied values of U.S. Healthcare to
the implied lowest values of Aetna, and vice-versa, the indicated results were
as follows: (i) U.S. Healthcare stand-alone DCF to Aetna stand-alone DCF yielded
an implied exchange ratio of 0.1640 to 0.2500; (ii) U.S. Healthcare stand-alone
DCF to Aetna stand-alone DCF with synergies reflecting Aetna's shareholders
approximate 72% pro forma ownership, yielded an implied exchange ratio of 0.1185
to 0.1818; and (iii) comparable public companies analysis yielded an implied
exchange ratio of 0.1571 to 0.2326. The fixed common exchange ratio under the
proposed transaction terms is 0.2246, derived by assuming a $57.00 per share
offer value for U.S. Healthcare Common Stock and $76.125 per share value for
Aetna Common Stock and multiplying the result by the proposed percentage of
common stock consideration (30.0%).

Pro Forma Analysis. In addition, Merrill Lynch analyzed certain pro forma
effects resulting from the Mergers, including the potential impact of the
Mergers on projected EPS for Aetna on a stand-alone basis based on management
and publicly available EPS forecasts, as well as pro forma for the Mergers using
a "base case" scenario, which assumes 100% of management's estimated synergies,
and a "downside case," which assumes the combined company attains only
seventy-five percent (75%) of the synergies anticipated to be realized as a
result of the Mergers. In the "base case" scenario, the Mergers would be
accretive to the holders of Aetna Common Stock on a management EPS and publicly
available EPS basis in the years 1999 and 2000 and dilutive in the years 1996,
1997 and 1998. In the "downside case" scenario, the Mergers would be accretive
to the holders of Aetna Common Stock on a management EPS basis in the year 2000
and dilutive in the years 1996, 1997, 1998 and 1999, and on a publicly available
EPS basis, the Mergers would be accretive to the holders of Aetna Common Stock
in 1999 and 2000 and dilutive in the years 1996, 1997 and 1998.

Necessary Break-Even Analysis. The necessary break-even analyses prepared
by Merrill Lynch indicated that the P/E ratio of Aetna needed to break even
after the Mergers (i.e., in order to yield the same current value to holders of
Aetna Common Stock) would be 13.2x in 1997 under the "base case" scenario.
Additionally, based on the projected compounded annual growth rates of earnings
for Aetna after the Mergers, the break-even P/E, expressed as a percentage of
expected growth, was 49.7%, as compared to the mean of HMOs of 99.3% and
insurance companies of 73.0%.

The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch. Arriving at a fairness opinion is a
complex process not necessarily susceptible to partial or summary description.
Merrill Lynch believes that its analysis must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all such factors and analyses, could create a misleading view of the
process underlying its analyses set forth in the Merrill Lynch Opinion. The
matters considered by Merrill Lynch in its analyses are based on numerous
macroeconomics, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond U.S. Healthcare's or Aetna's control and involve the
application of complex methodologies and educated judgment. Any estimates
incorporated in the analyses performed by Merrill Lynch are not necessarily
indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty. No public company utilized as a comparison is
identical to U.S. Healthcare or Aetna, and none of the Acquisition Comparables
or other business combinations utilized as a comparison is identical to the
proposed Mergers. Accordingly, an analysis of publicly traded comparable
companies and comparable business combinations is not mathematical; rather it
involves complex considera-

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tions and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which they
are being compared.

The U.S. Healthcare Board of Directors selected Merrill Lynch to act as its
financial advisor on the basis of Merrill Lynch's reputation as an
internationally recognized investment banking firm with substantial expertise in
transactions similar to the Merger and because it is familiar with U.S.
Healthcare and its business. As part of its investment banking business, Merrill
Lynch is continually engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions.

Merrill Lynch Fees. With respect to Merrill Lynch's services as financial
advisor in connection with the Mergers, pursuant to a letter agreement dated
March 4, 1996, U.S. Healthcare has agreed to pay Merrill Lynch (i) a retainer of
$100,000, (ii) a fee of $2,000,000 payable upon execution of the Merger
Agreement and (iii) an additional fee of $4,000,000 payable upon consummation of
the Mergers, against which the fees earned from clauses (i) and (ii) above will
be credited. In addition, U.S. Healthcare also has agreed to reimburse Merrill
Lynch for its reasonable out-of-pocket expenses (including reasonable fees and
expenses of its legal counsel) and to indemnify Merrill Lynch and certain
related persons against certain liabilities, including liabilities under the
federal securities laws, arising out of its engagement.

Merrill Lynch has, in the past, provided financial advisory and financing
services to U.S. Healthcare and has received fees for rendering such services.
Merrill Lynch has, in the past, also provided financial advisory and financing
services, and may continue to provide financing services to, Aetna, and has
received fees for rendering such services. Such continuing financing services
may include, without limitation, financing in connection with the Mergers.

THE FOREGOING DESCRIPTIONS OF THE OPINIONS AND PRESENTATIONS OF WASSERSTEIN
PERELLA, J.P. MORGAN, GOLDMAN SACHS AND MERRILL LYNCH CONTAIN FORWARD LOOKING
INFORMATION. SEE "OTHER MATTERS -- FACTORS FOR FORWARD LOOKING INFORMATION" FOR
INFORMATION WITH RESPECT TO THE FACTORS THAT MAY AFFECT SUCH INFORMATION.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE PROJECTIONS AND FORECASTS
FURNISHED TO THE FINANCIAL ADVISORS RENDERING THE OPINIONS DESCRIBED ABOVE WERE
PREPARED BY THE RESPECTIVE MANAGEMENTS OF AETNA OR U.S. HEALTHCARE. NEITHER
AETNA NOR U.S. HEALTHCARE PUBLICLY DISCLOSES INTERNAL MANAGEMENT PROJECTIONS OF
THE TYPE PROVIDED TO SUCH FINANCIAL ADVISORS IN CONNECTION WITH SUCH INVESTMENT
BANKS' ANALYSIS OF THE MERGERS, AND SUCH PROJECTIONS WERE NOT PREPARED WITH A
VIEW TOWARD PUBLIC DISCLOSURE. THESE PROJECTIONS WERE BASED ON NUMEROUS
VARIABLES AND ASSUMPTIONS THAT ARE INHERENTLY UNCERTAIN AND MAY BE BEYOND THE
CONTROL OF MANAGEMENT, INCLUDING, WITHOUT LIMITATION, FACTORS RELATED TO GENERAL
ECONOMIC AND COMPETITIVE CONDITIONS AND PREVAILING INTEREST RATES. ACCORDINGLY,
ACTUAL RESULTS COULD VARY SIGNIFICANTLY FROM THOSE SET FORTH IN SUCH
PROJECTIONS.

MERGER CONSIDERATION

U.S. Healthcare. Upon consummation of the U.S. Healthcare Sub Merger, each
share of U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock
outstanding immediately prior to the Merger Date (except for shares held by U.S.
Healthcare as treasury stock, certain shares held by Aetna or subsidiaries of
Aetna and shares for which dissenters' rights have been properly exercised and
perfected) shall be converted into:

(a) the right to receive 0.2246 shares of Parent Common Stock,
together with 0.2246 Parent Rights;

(b) the right to receive 0.0749 shares of Parent Mandatorily
Convertible Preferred Stock; and

(c) the right to receive $34.20 in cash without interest (the "Cash
Consideration", and together with the Parent Common Stock, Parent Rights
and Parent Mandatorily Convertible Preferred Stock referred to above, the
"U.S. Healthcare Merger Consideration"). See "The Amended Merger
Agreement -- Conditions to the Mergers" for information with respect to
circumstances in which the cash

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portion of the U.S. Healthcare Merger Consideration might be increased. For
a description of the Parent Common Stock, see "Description of Parent
Capital Stock -- Parent Common Stock" for a description of the Parent
Mandatorily Convertible Preferred Stock, see "Description of Parent Capital
Stock -- Parent Mandatorily Convertible Preferred Stock" and for a
description of the Parent Rights, see "Description of the Parent Rights."

Prior to the Merger Date there has been no public market for the Parent
Common Stock or Parent Mandatorily Convertible Preferred Stock.

Notwithstanding the foregoing, holders of U.S. Healthcare Stock otherwise
entitled to fractional shares of Parent Common Stock or Parent Mandatorily
Convertible Preferred Stock, as applicable, will be entitled to receive, from
First Chicago Trust Company of New York, as exchange agent (the "Exchange
Agent"), in accordance with the Merger Agreement, a cash payment in lieu of such
fractional shares, representing such holder's proportionate interest, if any, in
the net proceeds from the sale by the Exchange Agent in one or more transactions
(which sale transactions shall be made at such times, in such manner and on such
terms as the Exchange Agent shall determine in its reasonable discretion) on
behalf of all such holders of the aggregate of the fractional shares of Parent
Common Stock or Parent Mandatorily Convertible Preferred Stock, as applicable,
which would otherwise have been issued.

Each share of U.S. Healthcare Stock held by U.S. Healthcare as treasury
stock or owned by Aetna or any subsidiary of Aetna immediately prior to the
Merger Date shall be canceled and no payment shall be made with respect thereto;
provided that any shares of U.S. Healthcare Stock (i) held by Aetna or any
subsidiary of Aetna for the account of another person or entity, (ii) as to
which Aetna or any subsidiary or affiliate of Aetna is or may be required to act
as a fiduciary or in a similar capacity or (iii) the cancellation of which would
violate any legal duties or obligations of Aetna or any subsidiary or affiliate
of Aetna shall not be canceled.

Aetna. Upon consummation of the Aetna Sub Merger, pursuant to the Merger
Agreement, each share of Aetna Common Stock outstanding immediately prior to the
Merger Date (except for shares held by Aetna as treasury stock, shares held by
U.S. Healthcare or subsidiaries of U.S. Healthcare and shares for which
objecting shareholders' rights have been properly exercised and perfected) shall
be converted into one share of Parent Common Stock, together with one Parent
Right (the "Aetna Merger Consideration" and, together with the U.S. Healthcare
Merger Consideration, the "Merger Consideration"). Prior to the Merger Date,
there has been no public market for the Parent Common Stock or Parent
Mandatorily Convertible Preferred Stock. Each share of Aetna Common Stock held
by Aetna as treasury stock or owned by U.S. Healthcare or any subsidiary of U.S.
Healthcare immediately prior to the Merger Date shall be canceled and no payment
shall be made with respect thereto.

Stock Options and Benefit Plans. For a description of the treatment of the
U.S. Healthcare and Aetna stock options and employee benefit plans, see "The
Amended Merger Agreement -- Stock Options and Benefit Plans."

Appraisal Rights. Holders of Aetna Common Stock and U.S. Healthcare Common
Stock are entitled to exercise dissenting or objecting, as applicable,
shareholders' rights in connection with the Mergers. See "The
Mergers -- Appraisal Rights."

Parent Rights. The Parent Rights have certain anti-takeover effects. The
Parent 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 Parent Rights being
acquired. See "Description of Parent Rights."

FINANCING OF THE U.S. HEALTHCARE MERGER CONSIDERATION

Of the approximately $5.3 billion required to pay the Cash Consideration
pursuant to the U.S. Healthcare Sub Merger and fees and expenses related to the
Mergers, it is currently anticipated that (i) approximately $3.9 billion will be
funded out of the proceeds of the sale of Aetna's property-casualty operations
and (ii) approximately $1.4 billion will be funded out of a combination of the
net proceeds of the proposed issuance by Aetna of commercial paper and
borrowings under a new Aetna credit facility.

It is currently expected that any commercial paper to be issued by Aetna
will be unsecured and guaranteed by Parent.

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In connection with the Mergers, Aetna has received a commitment letter
dated May 14, 1996 (the "Commitment Letter") and term sheet (the "Term Sheet")
executed by Morgan Guaranty Trust Company of New York ("Morgan"), J.P. Morgan
Securities Inc. ("JPMSI"), Deutsche Bank AG, New York and/or Cayman Island
Branch ("Deutsche"), Deutsche Morgan Grenfell/C.J. Lawrence Inc. ("DMG"), The
Chase Manhattan Bank, N.A. ("Chase"), Chase Securities Inc. ("Chase
Securities"), Citibank, N.A. ("Citibank") and Citicorp Securities Inc.
("Citicorp Securities") pursuant to which JPMSI has agreed, on the terms and
subject to the conditions set forth in the Commitment Letter and Term Sheet, to
arrange a credit facility (the "Credit Facility") in the amount of $2.5 billion
for Aetna. On the terms and subject to the conditions set forth in the
Commitment Letter and Term Sheet, Morgan has committed to lend $500 million,
Deutsche has committed to lend $400 million and each of Chase and Citibank has
committed to lend $300 million. The foregoing commitments of Morgan, Deutsche,
Chase and Citibank are subject, among other things, to the arrangement of
commitments from other banks for the remaining $1 billion. Aetna's obligation to
consummate the U.S. Healthcare Sub Merger is not subject to obtaining the
required financing. As used herein, the term "Banks" means Morgan, Deutsche,
Chase, Citibank and the other banks which commit to lend under the proposed
credit facility (all of which must be acceptable to Aetna, JPMSI and DMG).

The following summary of the Commitment Letter and the Term Sheet does not
purport to be complete and is qualified in its entirety by reference to the
Commitment Letter and the Term Sheet, copies of which have been filed as
exhibits to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part and are incorporated by reference herein.

The Commitment Letter and Term Sheet provide for a five-year revolving
credit facility in an aggregate amount of $2.5 billion. Until the Merger Date,
the aggregate principal amount of loans outstanding may not exceed $1 billion.
Aetna may borrow up to $1.4 billion under the Credit Facility to fund a portion
of the Cash Consideration and to pay a portion of the fees and expenses incurred
in connection with the Mergers. Thereafter, the Credit Facility will remain
available for general corporate purposes, including, without limitation, to
backstop any commercial paper to be issued from time to time by Parent, whether
in connection with the Mergers or otherwise.

Pursuant to the Term Sheet, borrowings under the Credit Facility may be
used for general corporate purposes, including payment of the Cash Consideration
and fees and expenses incurred in connection with the Mergers.

Interest on borrowings under the Credit Facility will be determined based
on the type of borrowing selected by Aetna from time to time. The four borrowing
options are: LIBOR, Adjusted CD, Base Rate and Money Market. Interest on LIBOR
borrowings will be the rate at which Eurodollar deposits for one, two, three or
six months are offered by certain reference banks to prime banks in the London
interbank market in amounts comparable to such reference banks' respective
shares of the relevant borrowing, plus the applicable spread. Interest on
Adjusted CD borrowings will be the reference banks' certificate of deposit rate
for 30, 60, 90 or 180 day deposits in amounts comparable to such reference
banks' respective shares of the relevant borrowing, plus the applicable spread.
Interest on Base Rate borrowings will be the higher of (i) Morgan's prime rate
or (ii) the federal funds rate plus 0.50%. Pursuant to the Money Market option,
Aetna may request Morgan, as Administrative Agent, to solicit competitive bids
from the Banks. Each Bank will bid at its own discretion for amounts up to the
total amount of the unused commitments and Aetna will be under no obligation to
accept any of the bids. The calculation of the applicable spread will be based
upon the ratings from Moody's Investors Service, Inc., Standard & Poor's Ratings
Group, and Duff and Phelps Inc. given to Aetna's senior unsecured long-term
debt. After the Merger Date, such debt may include any such indebtedness that is
guaranteed by Parent, as guarantor under the proposed credit agreement.

A facility fee will be payable to each Bank based on such Bank's
commitment, regardless of whether the Credit Facility is drawn or undrawn,
except fees in respect of commitments in excess of $1 billion will not commence
to accrue until the earlier of the Merger Date and one month after execution of
the definitive documentation for the Credit Facility.

The Term Sheet specifies that the Banks' obligation to effect the closing
of the proposed Credit Facility is subject to conditions customary for
financings of this type, including without limitation: (i) negotiation and
execution of satisfactory documentation; (ii) accuracy of representations and
warranties; (iii) termination of

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Aetna's existing credit agreement; and (iv) receipt of customary closing
certificates, opinions and evidence of authority.

The proposed credit agreement will include conditions to borrowing
customary for financings of this type, including without limitation: (i) timely
receipt of a borrowing notice; (ii) absence of defaults; and (iii) accuracy of
specified representations and warranties. If the Merger Date occurs more than
120 days after execution of the proposed credit agreement, availability of the
$1.5 billion incremental portion of the facility is conditional upon there being
no material adverse change in the business, financial position or results of
operations of Parent and its consolidated subsidiaries, including U.S.
Healthcare, taken as a whole, since March 31, 1996.

The proposed credit agreement will contain representations and warranties
relating to Aetna and, on and after the Merger Date, Parent, as guarantor under
the proposed credit agreement, and specified subsidiaries which are customary
for financings of this type, including without limitation: (i) corporate
existence; (ii) corporate and government authorization, no contravention and
binding effect; (iii) financial information; (iv) no material adverse change;
(v) no material litigation; (vi) compliance with ERISA (as defined below); (vii)
status of principal subsidiaries; and (viii) compliance with applicable laws
(excluding environmental laws).

The proposed credit agreement will also contain covenants applicable to
Aetna, Parent and specified subsidiaries which are customary for financings of
this type, including without limitation: (i) provision of financial and other
information; (ii) conduct of business; (iii) equal and ratable lien protection
(applicable to common stock of specified subsidiaries of Aetna and, on and after
the Merger Date, of Parent); (iv) limitations on consolidations, mergers and
sales of assets; (v) use of proceeds; (vi) "most favored lender" treatment of
cross defaults (applicable to Aetna and Parent); (vii) compliance with laws,
including ERISA but excluding environmental laws; and (viii) prior to the Merger
Date, adjusted consolidated net worth (adjusted to exclude net unrealized
capital gains and losses) of Aetna not less than $5 billion and, on and after
the Merger Date 75% of projected adjusted consolidated net worth (adjusted as
set forth above) of Parent on the Merger Date.

The proposed credit agreement will contain events of default which are
customary for financings of this type, including without limitation: (i)
nonpayment of principal, interest or fees; (ii) violation of covenants; (iii)
material breach of representations or warranties; (iv) cross acceleration to
other indebtedness of Aetna, Parent or specified subsidiaries; (v) bankruptcy or
insolvency of Aetna, Parent or specified subsidiaries; and (vi) change of
ownership or control of more than 35% of Aetna (prior to the Merger Date) or
Parent (on and after the Merger Date). On and after the Merger Date, the due and
punctual payment of the principal and interest of the loans made under this
facility will be unconditionally guaranteed by Parent, as guarantor under the
proposed credit agreement.

It is anticipated that the indebtedness incurred by Aetna through
borrowings under the proposed credit facility, the issuance of commercial paper
or any alternative financing arrangements will be repaid from funds generated
internally by Parent and its subsidiaries and/or from other sources which may
include the proceeds of the private or public sale of securities. No final
decisions have been made concerning the method Parent will employ to repay such
indebtedness.

MERGER DATE

The Mergers will become effective upon the filing of Articles of Merger for
the U.S. Healthcare Sub Merger with the Department of State of the Commonwealth
of Pennsylvania and a Certificate of Merger for the Aetna Sub Merger with the
Secretary of the State of the State of Connecticut. Such filings are anticipated
to take place as soon as practicable after receipt of shareholder approval, all
required regulatory approvals and the satisfaction or waiver of the other
conditions to the Mergers. It is currently anticipated that the Merger Date will
occur during the third quarter of 1996. There can be no assurance, however, that
the required regulatory approvals will be obtained, or that the other conditions
to the Mergers will be satisfied, by such date. See "The Amended Merger
Agreement -- Conditions to the Mergers" and " Other Matters -- Regulatory
Approvals."

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CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; DIVIDENDS; NO
FRACTIONAL SHARES

U.S. Healthcare. Promptly after the Merger Date, transmittal forms will be
mailed to each holder of record of U.S. Healthcare Stock to be used in
forwarding certificates evidencing such shares for surrender and exchange for
certificates evidencing the shares of Parent Common Stock and Parent Mandatorily
Convertible Preferred Stock, together with the cash, to which such holder has
become entitled. After receipt of such transmittal form each holder of
certificates formerly representing shares of U.S. Healthcare Stock should
surrender such certificates, together with a properly completed and duly
executed transmittal form, to the Exchange Agent, and each holder will receive
in exchange therefor certificates evidencing the whole number of shares of
Parent Common Stock (and related Parent Rights) and Parent Mandatorily
Convertible Preferred Stock together with the cash to which such holder is
entitled. Such transmittal forms will be accompanied by instructions specifying
other details of the exchange. No fractional shares of Parent Common Stock or
Parent Mandatorily Convertible Preferred Stock will be issued to holders of U.S.
Healthcare Stock. See "--Merger Consideration -- U.S. Healthcare" above for
information concerning cash payments in lieu of fractional shares.

Until a holder of U.S. Healthcare Stock so surrenders his or her
certificates representing shares of U.S. Healthcare Stock, such certificates
will, after the Merger Date, represent for all purposes only the right to
receive the U.S. Healthcare Merger Consideration and the other amounts, if any,
specified in the Amended Merger Agreement, subject to any dissenters' rights
available. No dividends or other distributions with respect to the Parent Common
Stock or Parent Mandatorily Convertible Preferred Stock, as applicable,
constituting a portion of the U.S. Healthcare Merger Consideration will be paid
to the holder of any unsurrendered certificate representing shares of U.S.
Healthcare Stock until such certificate is surrendered in accordance with the
Amended Merger Agreement. Subject to the effect of applicable laws, following
such surrender, there will be paid, without interest, to the record holder of
the certificates representing the Parent Common Stock or Parent Mandatorily
Convertible Preferred Stock, as applicable, (i) at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Merger Date payable prior to or on the date of such surrender with respect to
such whole shares of Parent Common Stock or Parent Mandatorily Convertible
Preferred Stock, as applicable, and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Merger Date but prior to the date of surrender and a payment date subsequent to
the date of surrender payable with respect to such whole shares of Parent Common
Stock or Parent Mandatorily Convertible Preferred Stock, as applicable, less the
amount of any withholding taxes which may be required thereon.

U.S. HEALTHCARE SHAREHOLDERS SHOULD NOT SURRENDER THEIR SHARE CERTIFICATES
FOR EXCHANGE UNTIL THEY RECEIVE A TRANSMITTAL FORM.

Aetna. On the Merger Date, all outstanding shares of Aetna Common Stock
will be canceled and each certificate theretofore representing any such shares,
without any action on the part of the holder thereof, shall be deemed to
represent an equivalent number of shares of Parent Common Stock (and related
Parent Rights).

Shares of Aetna Common Stock held pursuant to Aetna's Dividend Reinvestment
and Stock Purchase Plan are expected to be converted into shares of Parent
Common Stock on the Merger Date and to remain in a substantially identical plan
to be adopted by Parent.

AETNA SHAREHOLDERS ARE NOT REQUIRED TO SURRENDER THEIR SHARE CERTIFICATES
FOR EXCHANGE.

From and after the Merger Date, all shares of U.S. Healthcare Stock
converted into the U.S. Healthcare Merger Consideration and all shares of Aetna
Common Stock converted into the Aetna Merger Consideration will no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of such shares shall cease to have any rights with
respect thereto, except the rights to receive the U.S. Healthcare Merger
Consideration or Aetna Merger Consideration, as applicable, the right to
exercise dissenters' rights or objecting shareholders' rights in accordance with
and subject to the provisions of the

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Pennsylvania Law (as defined below) or the Connecticut Law (as defined below),
as applicable, and other rights specified in the Amended Merger Agreement.

STOCK OPTIONS; RESTRICTED STOCK

U.S. Healthcare. As of June 3, 1996, there were unexercised options
outstanding to purchase approximately 3,661,000 shares of U.S. Healthcare Common
Stock at prices ranging from $4.74 to $48.04 per share. As of that date, all
such options were exercisable.

As of the date of the Merger Agreement, each then-outstanding option
granted to (i) a U.S. Healthcare employee to acquire U.S. Healthcare Common
Stock (a "U.S. Healthcare Employee Stock Option") and (ii) each outstanding
option granted to a non-employee to acquire U.S. Healthcare Stock (a "U.S.
Healthcare Non-Employee Stock Option" and together with the U.S. Healthcare
Employee Stock Options, the "U.S. Healthcare Stock Options"), in each case,
under any incentive plan of U.S. Healthcare, became fully vested and
exercisable. On the Merger Date, each U.S. Healthcare Stock Option then
outstanding will be canceled and treated as follows:

(i) with respect to all U.S. Healthcare Non-Employee Stock Options and
the number of shares subject to U.S. Healthcare Employee Stock Options held
by each holder which, if all such holder's canceled U.S. Healthcare
Employee Stock Options were exercised immediately prior to the Merger Date,
would give rise to 40% of the income which would be recognized by such
holder upon such exercise (assuming, for these purposes, that all such
options were nonqualified options) (the "Initial Number of U.S. Healthcare
Option Shares"), Parent will issue in substitution therefor options to
purchase Parent Common Stock on the terms and conditions described below
(each such substitute option, a "U.S. Healthcare Substitute Option"). U.S.
Healthcare Substitute Options will be issued under the Aetna Inc. 1996
Stock Incentive Plan which complies in all respects with the applicable
requirements of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"1934 Act"). The number of shares of Parent Common Stock subject to each
such U.S. Healthcare Substitute Option and the exercise price thereunder
will be computed in compliance with the requirements of Section 424(a) of
the Code, and each such U.S. Healthcare Substitute Option will otherwise be
subject to the other applicable terms and conditions of the U.S. Healthcare
Stock Option for which it is substituted. Without limiting the generality
of the foregoing, (A) the exercise price of each U.S. Healthcare Substitute
Option will equal the exercise price of the U.S. Healthcare Stock Option
for which such U.S. Healthcare Substitute Option was substituted,
multiplied by a fraction, the numerator of which is the average closing
price of Parent Common Stock for the five trading days following the Merger
Date ("X") and the denominator of which is the closing price of U.S.
Healthcare Stock on the last trading day preceding the Merger Date ("Y")
and (B) the number of shares subject to such U.S. Healthcare Substitute
Option will equal the Initial Number of U.S. Healthcare Option Shares,
multiplied by a fraction, the numerator of which is Y and the denominator
of which is X. The U.S. Healthcare Stock Options for which U.S. Healthcare
Substitute Options will be issued with respect to each holder shall be
selected in the following order:

(1) first, incentive stock options, and

(2) second, nonqualified options,

in each case giving priority to those with the highest exercise price.

(ii) with respect to each remaining canceled U.S. Healthcare Employee
Stock Option, the holder will receive in cash, as promptly as possible but
in no event more than 10 business days following the Merger Date, an amount
equal to the excess of (A) the closing price of U.S. Healthcare Stock on
the last trading day preceding the Merger Date, over (B) the exercise price
of such U.S. Healthcare Stock Option, multiplied by the number of shares of
U.S. Healthcare Stock subject to such remaining U.S. Healthcare Employee
Stock Option.

As of the date of the Merger Agreement, each then-outstanding share of
restricted stock of U.S. Healthcare issued to U.S. Healthcare employees (the
"U.S. Healthcare Restricted Stock") became fully

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vested. Each outstanding share of restricted stock of U.S. Healthcare issued to
any Person who is not an employee of U.S. Healthcare will become fully vested
and entitled to receive the U.S. Healthcare Merger Consideration on the Merger
Date. As of June 3, 1996, there were outstanding 509,548 shares of U.S.
Healthcare restricted stock.

Aetna. As of May 20, 1996, there were 5,511,962 unexercised options
outstanding under various employee stock option plans of Aetna to purchase
shares of Aetna Common Stock at prices ranging from $41.50 to $75.50 per share.
As of that date, 2,585,580 options to purchase shares of Aetna Common Stock were
exercisable and 2,926,482 options were not exercisable.

Pursuant to the Amended Merger Agreement, on the Merger Date, each
outstanding option to purchase shares of Aetna Common Stock (an "Aetna Stock
Option") under any of Aetna's incentive plans, whether vested or unvested, will
be canceled and Parent will issue in substitution therefor an option to purchase
Parent Common Stock on the terms and conditions described below (each such
replacement option an "Aetna Substitute Option"). Aetna Substitute Options will
be issued under the Aetna Inc. 1996 Stock Incentive Plan which complies in all
respects with the applicable requirements of Rule 16b-3 promulgated under the
1934 Act. The number of shares of Parent Common Stock subject to each such Aetna
Substitute Option and the exercise price thereunder shall be equal to the number
of shares of Aetna Common Stock subject to the Aetna Stock Option and the
exercise price thereunder that such Aetna Substitute Option replaces and in
compliance with the requirements of Section 424(a) of the Code, each such Aetna
Substitute Option shall be subject to substantially all of the other terms and
conditions (including vesting schedule) of the Aetna Stock Option it replaces.

Approval of the Amended Merger Agreement will constitute approval of the
portion of the Aetna Inc. 1996 Stock Incentive Plan that allows for the
conversion of stock options pursuant to the Amended Merger Agreement. See "Aetna
Inc. 1996 Stock Incentive Plan".

DIVIDENDS

Parent intends, upon consummation of the Mergers, to set its quarterly
dividend at an annual payout rate of between 10% to 20% of operating earnings
(which excludes net realized capital gains or losses) before amortization of
goodwill and other intangibles related to the Mergers. Pursuant to the Amended
Merger Agreement, Aetna has agreed that after the Merger Date, subject to
applicable law, the initial annual dividend on Parent Common Stock will not be
less than $0.80 per share of Parent Common Stock. Further, the initial dividend
on Parent Common Stock affects the dividend rate paid on Parent Mandatorily
Convertible Preferred Stock. The dividend rate on Parent 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 Parent Common
Stock on the Merger Date is more than $0.83 per share. Due to this and other
factors, Parent currently expects that, subject to applicable law, the initial
dividend on Parent Common Stock will be approximately $0.80 to $0.83 per share
(on an annualized basis). The Board of Directors of Parent will review the cash
dividend each quarter after interim operating earnings are known. See
"Description of Parent Capital Stock -- Parent Mandatorily Convertible Preferred
Stock -- Dividends" for a description of the determination of the dividend rate
of the Parent Mandatorily Convertible Preferred Stock.

NYSE LISTING

The Parent Common Stock and Parent Mandatorily Convertible Preferred Stock
have been approved for listing on the New York Stock Exchange, subject to
official notice of issuance. Prior to the Merger Date, there has been no public
market for Parent Common Stock or Parent Mandatorily Convertible Preferred
Stock.

EXPENSES

Except under some circumstances in the case of termination of the Amended
Merger Agreement and except for the costs of this Joint Proxy
Statement/Prospectus (which will be shared equally by Aetna and U.S.
Healthcare), all costs and expenses incurred in connection with the Amended
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such costs or expenses.

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INTERESTS OF CERTAIN PERSONS IN THE MERGERS

Board of Directors and Executive Officers of Parent Generally

From and after the Merger Date, until successors are duly elected or
appointed and qualified in accordance with applicable law, the Board of
Directors of Parent will consist of the Board of Directors of Aetna immediately
prior to the Merger Date, and, no later than sixty days following the Merger
Date, the Board of Directors of Parent will be expanded to include Leonard
Abramson, Chairman of U.S. Healthcare (the "Principal Shareholder"), and two
other persons initially designated by U.S. Healthcare prior to the Merger Date
(the Principal Shareholder and such Persons, the "U.S. Healthcare Designees").
Thereafter, if any of the U.S. Healthcare Designees (with the exception of the
Principal Shareholder) 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 Principal Shareholder. See "Management." Mr.
Ronald E. Compton, Chairman and chief executive officer of Aetna, will serve as
Chairman and chief executive officer of Parent. A number of officers and key
employees of U.S. Healthcare have entered into employment agreements pursuant to
which they will serve as officers or key employees of the Combined Health
Operations. See "--U.S. Healthcare -- Officers and Directors" below. In
addition, the individuals referred to under "Management -- Executive Officers"
will be executive officers of Parent.

U.S. Healthcare

Officers and Directors

Certain members of U.S. Healthcare's management and U.S. Healthcare's Board
of Directors may be deemed to have certain interests in the Merger that are in
addition to their interests as shareholders of U.S. Healthcare generally. The
U.S. Healthcare Board of Directors was aware of these interests and considered
them, among other matters, in approving the Amended Merger Agreement and the
transactions contemplated thereby.

Described below are material employment agreements that are currently in
effect or will take effect upon the Merger, other arrangements with the
Principal Shareholder and the terms of the Amended Merger Agreement that relate
to the treatment of equity-based awards and other employee matters. The
following description of various agreements is qualified in its entirety by
reference to the complete text of the relevant agreements, copies of certain of
which are filed as exhibits to the Registration Statement on Form S-4 of which
this Joint Proxy Statement/Prospectus is a part and which are incorporated by
reference herein.

Agreement With Principal Shareholder. In connection with the proposed
Mergers, Parent has entered into an Amended and Restated Agreement (the
"Agreement with Principal Shareholder") with Leonard Abramson, Chairman of U.S.
Healthcare, dated as of May 30, 1996, which will take effect upon the Merger
Date. The term of the Agreement with Principal Shareholder is five years
commencing on the Merger Date and ending on the fifth anniversary thereof,
subject to annual one-year extensions beginning on the fourth anniversary of the
Merger Date unless either party gives notice of nonextension at least 180 days
prior to such anniversary.

The Agreement with Principal Shareholder provides that, in consideration of
the Principal Shareholder's agreement to make himself reasonably available to
the chief executive officer of Parent to provide advice on the strategic
business activities, marketing strategies and public relations efforts of U.S.
Healthcare and Parent during normal business hours, Parent will pay the
Principal Shareholder a consulting fee of two million dollars per year, and will
provide the Principal Shareholder with life, disability, accident, and health
insurance benefits substantially similar to those which he receives or to which
he is currently entitled from U.S. Healthcare.

Pursuant to the terms of the Agreement with Principal Shareholder, the
Principal Shareholder is prohibited, during the initial and any extended term of
such agreement and for a five-year period thereafter (regardless of the reason
for the termination of the Principal Shareholder's services), from: (i) engaging
after the Merger Date (whether in the United States or, generally, in any other
country in which Parent or any of its affiliates is engaged, in any health care
operations) in a business that is, at that time, in competition with any

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of the health care operations conducted directly or indirectly by Parent or any
of its affiliates; (ii) soliciting or accepting the business of any supplier,
customer or client of Parent or any of its affiliates or any person or entity
whose business has been solicited by the Principal Shareholder during the
twelve-month period prior to the termination of the Principal Shareholder's
services; (iii) subject to certain limited exceptions, hiring or attempting to
hire any employee or consultant of Parent or any of its affiliates, or inducing
or attempting to induce any employee or consultant of Parent or any of its
affiliates to terminate employment with Parent or any of its affiliates or to
enter a business relationship with any other person or entity; or (iv) engaging
in any activity to interfere with, disrupt or damage the business of Parent or
any of its affiliates. In consideration for the Principal Shareholder's
agreement to abide by such covenants, Parent will pay the Principal Shareholder:
(x) on the Merger Date, ten million dollars; (y) during the five-year period
commencing on the Merger Date, one million dollars per year; and (z) a final
lump sum payment of ten million dollars, payable upon the later of the first
business day that is seven months after the last day on which the Principal
Shareholder served as a director of Parent and the termination or expiration of
the consulting period, in the case of (x) to be paid three-fourths in cash and
one-fourth in shares of Parent Common Stock, in the case of (y) to be paid in
cash and in the case of (z) to be paid in shares of Parent Common Stock.

In addition, the Agreement with Principal Shareholder provides that, on the
Merger Date, Parent will transfer to the Principal Shareholder ownership of a
certain aircraft (currently owned by a subsidiary of U.S. Healthcare), which had
a net book value of $19.6 million as of March 31, 1996 and an approximate market
value of $25 million. In addition, during the term of the Agreement with
Principal Shareholder, Parent will pay the operating costs of such aircraft, on
an after-tax basis, up to a maximum amount of two million dollars.

The Agreement with Principal Shareholder provides that, in the event of the
termination of the Principal Shareholder's services by reason of death,
"disability" (as defined in the Agreement with Principal Shareholder) or by
Parent without "cause" (as defined in the Agreement with Principal Shareholder),
Parent will (i) pay the Principal Shareholder (or his estate or legal
representative) the consulting fees to which he would have been entitled had he
continued working through the remainder of the term of the Agreement with
Principal Shareholder, payable in a lump sum; (ii) continue to make any
remaining payments to be made in consideration of the noncompetition covenants
described above; and (iii) continue all disability, accident or health insurance
coverage through the remainder of the term of the Agreement with Principal
Shareholder. In the event of the resignation of the Principal Shareholder, he
will continue to receive any remaining payments to be made in consideration of
the noncompetition covenants described above. The Agreement with Principal
Shareholder provides for a payment, if necessary, intended to make Mr. Abramson
whole for any excise tax imposed under Section 4999 of the Code with respect to
any payment or benefits that he may receive under such agreement or any other
plan, arrangement or agreement in effect on the date of the Merger Agreement.
See "Management -- Compensation of Directors."

Pursuant to the terms of the employment agreement dated as of January 1,
1993, between Mr. Abramson and U.S. Healthcare, upon the termination of Mr.
Abramson's employment on the Merger Date, he will be entitled to a severance
payment in an amount equal to his then current Base Salary (as defined in such
employment agreement) for the balance of the five-year employment term which
expires on December 31, 1997, the pro rata portion of other cash compensation
including performance bonus and deferred compensation for the period up to and
including the date of termination and all other employee benefits to which the
Principal Shareholder is entitled or the cash equivalent thereof.

In connection with approving the Merger Agreement, the U.S. Healthcare
Board of Directors authorized and directed that all compensation earned but
deferred by Mr. Abramson (including, without limitation, the portion of the 1995
bonus deferred by Mr. Abramson in the amount of $910,488) will be paid to Mr.
Abramson on the Merger Date. In addition, pursuant to the Merger Agreement and
the U.S. Healthcare, Inc. Incentive Plan (the "U.S. Healthcare Incentive Plan"),
each outstanding option held by Mr. Abramson became fully vested as of March 30,
1996 and is no longer subject to any conditions relating to exercisability other
than as agreed to under the Amended Voting Agreement. See "Other Information for
U.S. Healthcare Annual Meeting -- Report of the Compensation Committee of the
Board of Directors on Executive Compensation for the Fiscal Year Ended December
31, 1995."

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Employment Agreements. Consistent with the goal of both companies to retain
the skills and expertise of the senior management of U.S. Healthcare, in
connection with the execution of the Merger Agreement, U.S. Healthcare has
entered into employment agreements (each, an "Employment Agreement"), effective
as of March 30, 1996 (the "Effective Date"), with each of the following of its
senior officers: Michael J. Cardillo, Co-President; James H. Dickerson, Jr.,
Chief Financial Officer; Arthur N. Leibowitz, M.D., Chief Medical Officer;
Timothy E. Nolan, Senior Sales Officer; Joseph T. Sebastianelli, Co-President;
and David F. Simon, Chief Legal Officer. Certain of these employment agreements
are filed as exhibits to the Registration Statement of Aetna Inc. on Form S-4 of
which this Joint Proxy Statement/Prospectus is a part and are incorporated
herein by reference. Each Employment Agreement will be assumed by Parent at the
Merger Date (each of U.S. Healthcare and Parent is sometimes hereinafter
referred to as the "Employer") and each of the above-named executives will
assume similar positions with respect to the health operations of the combined
business at such time. Each Employment Agreement has an initial term of five
years with automatic one-year extensions commencing on the fifth anniversary of
the Merger Date (or, if the Mergers are not consummated, on the fifth
anniversary of the Effective Date) unless notice of nonextension is given at
least 180 days prior to such anniversary. Each Employment Agreement provides
for: (i) a base salary at least equal to the executive's annual salary rate
(including deferred compensation) for 1996; (ii) an annual target bonus equal to
80% of such executive's base salary upon the attainment of reasonable corporate
performance goals, provided that (A) the bonus payment in respect of 1997 must
at least equal the target bonus for such fiscal year, and (B) if the Merger Date
occurs prior to December 31, 1996, the bonus payment in respect of 1996 can be
no less than that which the executive would have received (as determined by U.S.
Healthcare) had the Merger Date occurred subsequent to such date; (iii) grants
of options, shares of restricted stock and other equity-based awards on terms no
less favorable than such grants are made to similarly situated executives of the
Employer and its subsidiaries; and (iv) benefits (including retirement, group
life, medical, dental and disability benefits) on a basis reasonably comparable
in the aggregate to those provided to the executive immediately prior to the
Merger Date, or if more favorable to the executive, to those provided to other
senior officers of Parent and its subsidiaries.

Each Employment Agreement provides for the payment, at the Merger Date, of
(i) a sign-on bonus (the "Cash Bonus") equal to the sum of the executive's
then-current annual salary (including deferred compensation) plus the amount of
such executive's 1995 bonus (or 1996 bonus, if the Merger Date follows December
31, 1996 and such 1996 bonus is larger); and (ii) a "stay" bonus in the form of
a grant, as of the Merger Date, of that number of shares of restricted Parent
Common Stock equal to the Cash Bonus amount divided by the average closing price
per share (the "Price Per Share") of Parent Common Stock over the ten trading
days following the consummation of the Merger (such grant of restricted Parent
Common Stock hereinafter referred to as the "Restricted Stock Bonus").
Restrictions with respect to the Restricted Stock Bonus will lapse upon the
second anniversary of the date of grant, or, if earlier, (i) upon a change in
control of Parent or (ii) upon termination of the executive's employment (a) by
reason of death or "disability," (b) by the Employer other than for "cause" or
(c) by the executive for "good reason" (each such term, as defined in the
Employment Agreements). As of the Merger Date (assuming the Mergers occur in
1996), each of U.S. Healthcare's executives would receive a Cash Bonus and a
Restricted Stock Bonus, assuming a Price Per Share of $76 1/8 for Parent Common
Stock, in the following approximate amounts: Mr. Cardillo, $1,354,380 and 17,792
shares; Mr. Dickerson, $865,991 and 11,376 shares; Dr. Leibowitz, $565,886 and
7,434 shares; Mr. Nolan, $865,991 and 11,376 shares; Mr. Sebastianelli,
$1,354,380 and 17,792 shares; and Mr. Simon, $847,007 and 11,127 shares.

Each Employment Agreement provides that the executive may not sell or
otherwise dispose (with specified exceptions) of (i) during the period
commencing with the Effective Date and ending on the Merger Date, any shares of
U.S. Healthcare Common Stock, including shares subject to option, except for the
partial cash-out of such shares and options in connection with the Mergers (see
"-- Stock Options; Restricted Stock") and (ii) during the one-year period
following the Merger Date, any shares of Parent Common Stock. Each Employment
Agreement also provides that, in consideration of the executive's agreement to
such restrictions, each executive will be reimbursed for all income and
employment taxes (and all income and employment taxes on the reimbursement
amount) payable by the executive as the result of the acceleration of the
vesting of U.S. Healthcare Restricted Stock on March 30, 1996 or as the result
of the partial cash-out of

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shares of such stock still subject to options as of the Merger Date. Assuming a
price per share of $57 for U.S. Healthcare Common Stock, the approximate amounts
of such income and employment tax reimbursements would be as follows: Mr.
Cardillo, $1,800,000; Mr. Dickerson, $1,600,000; Dr. Leibowitz, $500,000; Mr.
Nolan, $1,600,000; Mr. Sebastianelli, $1,800,000; and Mr. Simon, $1,100,000.

Each Employment Agreement provides that, if the executive's employment
under the Employment Agreement is terminated by the Employer other than for
"cause" or "disability" or by the executive for "good reason," the executive
will be entitled to receive the following payments and benefits: (i) a payment
in cash equal to three times the sum of (A) the higher of the executive's base
salary as in effect immediately prior to the event or circumstance upon which
termination of employment is based and the executive's annual base salary
(including amounts deferred for the applicable year and any interest accrued
thereon) in effect immediately prior to the Merger Date, and (B) the
then-current annual target bonus, 50% of such payment to be paid in a lump sum
on the date of termination and, subject to compliance with the noncompetition
provisions of the Employment Agreement, the remaining 50% to be paid in a lump
sum on the first anniversary of the date of termination of employment); (ii) a
pro rata portion, to the date of termination, of the higher of the actual or
target value of any contingent annual bonus award made to the executive for any
then uncompleted fiscal year under any bonus plan (other than the fiscal year
commencing in 1996); (iii) for thirty-six months immediately following the date
of such termination, the continuation of substantially the same welfare and
pension benefits as the executive is receiving immediately prior to termination
of employment, subject to offset by any such benefits received without cost
during such thirty-six month period; and (iv) if the executive would have become
entitled to benefits under the Employer's postretirement health care or life
insurance plans during the thirty-six month period following the date of
termination of employment, the provision of such postretirement benefits
beginning on the later of (A) the date the executive would have become eligible
for such benefits and (B) the date on which the welfare benefits described in
the immediately preceding clause will terminate. Each Employment Agreement also
provides that, in the event of such a termination, all outstanding equity-based
awards granted following the Merger Date under Parent incentive plans will
continue to vest for one year following the date of termination of the
executive's employment and will remain exercisable through the 90-day period
following such one-year period. In the event that the executive's employment
under the Employment Agreement is terminated by reason of death or "disability,"
each of the Employment Agreements provides that the executive (or his estate or
legal representative) will continue to receive his base salary and annual bonus
for the one-year period following such termination. Notwithstanding the
foregoing, the termination of Messrs. Cardillo's and Sebastianelli's employment
during the first two years of the employment term requires a vote of two-thirds
of the Board of Directors of Parent, which two-thirds must include one of the
U.S. Healthcare Designees.

Each Employment Agreement also provides for a payment, if necessary,
intended to reimburse the executive for any excise tax imposed under section
4999 of the Code with respect to any payment or benefits that the executive may
receive under his Employment Agreement or any other plan, arrangement or
agreement, and all income, employment and excise taxes thereon.

U.S. Healthcare has also entered into employment agreements with
twenty-seven of its executives on terms substantially similar to those of the
Employment Agreements, except that: (i) annual target bonuses under these
agreements will be as determined by U.S. Healthcare prior to the Merger Date,
not to exceed 50% of base salary; (ii) no Cash Bonuses or Restricted Stock
Bonuses are provided under these agreements; (iii) there are no restrictions on
the sale of U.S. Healthcare Common Stock or Parent Common Stock, and no
reimbursement of any income or employment taxes imposed upon the vesting of
restricted shares, or the acceleration of exercisability of options for the
purchase, of U.S. Healthcare Common Stock are provided under these agreements;
(iv) the lump sum severance benefit under these agreements is based upon a
multiplier of two, rather than three; and (v) the continuation of retirement and
welfare benefits is for a twenty-four, rather than a thirty-six, month period
following termination of employment. Each such employment agreement will be
assumed by Parent on the Merger Date. The executives with whom U.S. Healthcare
has entered into such employment agreements are as follows: Howard Arkans,
Ronald Brooks, Joseph Carver, Arnold Cohen, Angelo DeVita, Edward Dulik, Raymond
Fabius, Nicholas Hanchak, Eliot Heher, Joel Kahn, Jay Krakovitz, William Kramer,
Don Liu, Thomas Masci, Jr., Scott Murphy,

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J. Edward Neugebauer, Jay Rosan, Neil Schlackman, Marcy Shoemaker, Mel Stein,
Jeffrey Sulitzer, Jeffery Weiner, Sandra Harmon-Weiss, Gerald Young, Robyn
Walsh, Nancy Wolfson, and Richard Wolfson. Nancy Wolfson and Marcy Shoemaker are
daughters of Mr. Abramson and Mr. Richard Wolfson is a son-in-law of Mr.
Abramson. In addition, all existing employment agreements with other U.S.
Healthcare employees will continue to be in effect after the Merger Date.

Registration Rights Agreement. Pursuant to the Registration Rights
Agreement (the "Registration Rights Agreement"), dated as of March 30, 1996,
between Parent and the Principal Shareholder as amended by Amendment No. 1
thereto dated May 30, 1996, Parent has agreed to provide the Principal
Shareholder with a shelf registration statement and unlimited "piggy-back"
registration rights in respect of the shares of Parent Common Stock and Parent
Mandatorily Convertible Preferred Stock ("Registrable Securities") to be
received by the Principal Shareholder in the Mergers. Parent has agreed pursuant
to the Registration Rights Agreement to use its best efforts to cause the shelf
registration statement to be declared effective by the Commission no later than
the Merger Date. The Principal Shareholder must notify Parent at least 10 days
prior to making any offer or sale of Registrable Securities pursuant to the
shelf registration statement, and Parent may, within 5 days of receiving such
notice, postpone or suspend such offering for up to 75 days if such offering
would interfere with a pending or contemplated financing, merger,
recapitalization or other corporate action or policies of Parent. The exercise
of piggyback registration rights is subject to the approval of the managing
underwriter of the offering being registered by Parent; if the managing
underwriter believes that inclusion of the Principal Shareholder's shares would
have a material adverse effect on the offering, the managing underwriter may
reduce the number of shares to be registered in accordance with the priorities
set forth in the Registration Rights Agreement. All expenses associated with the
registration of Registrable Securities pursuant to the shelf registration
statement or the exercise of piggy-back registration rights will be borne by
Parent, with the exception of underwriting discounts and commissions and any
out-of-pocket expenses of the Principal Shareholder in connection with such
registration. The Registration Rights Agreement also provides for, under certain
circumstances, indemnification by Parent in favor of the Principal Shareholder
and by the Principal Shareholder in favor of Parent with respect to certain
information contained in a registration statement pursuant to such registration
rights.

Criterion Agreements

Pursuant to the Amended Merger Agreement, Parent has agreed to cause U.S.
Healthcare to perform its obligations under U.S. Healthcare's agreements with
Criterion Communications, Inc. ("Criterion") and not to terminate such
agreements until 2004, absent a breach by any other party thereto. U.S.
Healthcare owns 51%, and Ms. Marcy Shoemaker (a daughter of Mr. Leonard
Abramson) owns 49%, of the outstanding voting securities of Criterion. See
"Other Information for U.S. Healthcare Annual Meeting -- Certain Relationships
and Transactions" for additional information relating to the agreements with
Criterion.

Equity Awards

As of March 30, 1996, (i) each outstanding share of U.S. Healthcare
Restricted Stock granted to U.S. Healthcare employees became fully vested and
entitled to receive the U.S. Healthcare Merger Consideration on the Merger Date,
and (ii) each outstanding U.S. Healthcare Stock Option became fully vested and
exercisable. See "The Amended Merger Agreement -- Stock Options and Benefit
Plans" for information concerning the treatment of U.S. Healthcare restricted
stock and U.S. Healthcare Stock Options upon consummation of the Mergers. In
accordance with the Amended Merger Agreement, assuming a price per share of $57
for U.S. Healthcare Common Stock, U.S. Healthcare's executives will be eligible
to receive cash in the following approximate amounts as a result of the
cancellation and partial cash-out of their U.S. Healthcare Stock Options: Mr.
Abramson, $7,180,790; Mr. Cardillo, $1,552,613; Mr. Dickerson, $874,911; Dr.
Leibowitz, $415,169; Mr. Nolan, $1,105,444; Mr. Sebastianelli, $1,054,928; and
Mr. Simon, $901,770. In addition, the number of shares of restricted stock of
U.S. Healthcare owned by U.S. Healthcare executives that became fully vested as
of March 30, 1996 and that are eligible to receive the U.S. Healthcare Merger
Consideration are as follows: Mr. Abramson, 0; Mr. Cardillo, 10,752; Mr.
Dickerson, 19,772; Dr. Leibowitz, 3,344; Mr. Nolan, 10,772; Mr. Sebastianelli,
19,752; and Mr. Simon, 6,272.

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Employee Matters

The Amended Merger Agreement provides as follows with respect to employee
matters in general. During the two-year period commencing with the Merger Date,
no person who was an employee of U.S. Healthcare on March 30, 1996 can be
discharged or have his or her compensation reduced or his or her principal
office location changed without the prior consent and approval of the
Co-Presidents. Through December 31, 1998, Parent will maintain employee plans
and benefit arrangements for the benefit of U.S. Healthcare employees that are
reasonably comparable in the aggregate to the employee plans and arrangements of
U.S. Healthcare in effect as of the signing of the Amended Merger Agreement. Any
changes in the benefits to be provided under such plans will be deemed
reasonably comparable in the aggregate unless unanimously rejected by the
Co-Presidents in their reasonable good faith discretion.

Additional information relating to executive compensation and various
benefit arrangements of U.S. Healthcare is included elsewhere in this Joint
Proxy Statement/Prospectus.

Aetna

Officers and Directors

Certain members of Aetna's management and the Aetna Board of Directors may
be deemed to have certain interests in the Mergers that are in addition to their
interests as shareholders of Aetna generally. The Aetna Board of Directors was
aware of these interests and considered them, among other matters, in approving
the Amended Merger Agreement and the transactions contemplated thereby.

In contemplation of a potential strategic reorganization, Aetna entered
into employment agreements with key executives, the terms of some of which are
set forth in, and incorporated herein by reference to, Aetna's 1996 Proxy
Statement, the relevant portions of which are incorporated into Aetna's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 (the "Aetna Form
10-K"). See "Available Information" and "Incorporation of Certain Documents By
Reference." Certain of these employment agreements are filed as exhibits to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a part
and are incorporated herein by reference. Rights under certain of these
agreements (including two executive officers' agreements) have vested as a
result of the Amended Merger Agreement.

Under the terms of Zoe Baird's employment agreement with Aetna, the
execution of the Merger Agreement vested Ms. Baird's right to receive payments
when she leaves Aetna aggregating an estimated $2,449,000 and vested 6,000
performance stock options with an exercise price of $57 per share. In addition,
under the terms of a new employment agreement with Aetna, dated April 16, 1996,
subject to Ms. Baird's continuing employment, Aetna will pay Ms. Baird $900,000
upon consummation of the Mergers, $500,000 of which will be paid on October 1,
1996 whether or not the Mergers shall have been consummated. Ms. Baird will
continue her employment as Senior Vice President and General Counsel of Aetna
and after the Mergers, of Parent.

James W. McLane's employment by Aetna will terminate prior to the Mergers.
Under the terms of Mr. McLane's employment agreement with Aetna, Mr. McLane will
receive payments aggregating an estimated $2,475,000 and has vested rights in
75,000 performance stock options with an exercise price of $57 per share.

Equity Awards

See "The Amended Merger Agreement -- Stock Options and Benefit Plans" for
information concerning the treatment of options to purchase shares of Aetna
Common Stock upon consummation of the Mergers.

Additional information relating to executive compensation and various
benefit arrangements of Aetna is set forth in, and incorporated herein by
reference to, Aetna's 1996 Proxy Statement (the relevant portions of which are
incorporated into the Aetna Form 10-K). See "Available Information" and
"Incorporation of Certain Documents by Reference."

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ACCOUNTING TREATMENT

The Mergers will be accounted for by Parent under the "purchase" method of
accounting in accordance with generally accepted accounting principles. Under
the purchase method of accounting, the purchase price of U.S. Healthcare Stock,
including indirect costs of the Mergers, will be allocated to the assets
acquired and liabilities assumed based upon their estimated fair value, with the
excess purchase consideration allocated to goodwill. The conversion of Aetna
Common Stock into Parent Common Stock will be treated as a reorganization with
no change in the recorded amount of Aetna's assets and liabilities.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax
consequences of (i) the Mergers to Aetna, U.S. Healthcare, the Aetna
shareholders and the U.S. Healthcare shareholders and (ii) an investment in
Parent Common Stock and Parent Mandatorily Convertible Preferred Stock. The
summary is based upon the Code, administrative pronouncements, judicial
decisions and Treasury regulations, subsequent changes to any of which may
affect the tax consequences described herein. The summary does not purport to be
a comprehensive description of all of the tax consequences applicable to a
particular taxpayer. In particular, the summary does not address the tax
treatment to holders subject to special tax rules, such as banks, insurance
companies, dealers in securities or shareholders who acquired their stock
pursuant to the exercise of employee stock options or otherwise as compensation.
In addition, the summary only applies to a holder (a) who is a U.S. citizen or
resident, a U.S. corporation, partnership or other entity created or organized
under the laws of the United States, or an estate or trust the income of which
is subject to U.S. federal income taxation regardless of its source and (b) who
holds shares of Aetna Common Stock or U.S. Healthcare Stock as capital assets.
Shareholders are urged to consult their tax advisors as to the particular United
States federal income tax consequences to them of the Mergers and an investment
in Parent Common Stock and Parent Mandatorily Convertible Preferred Stock and as
to the foreign, state, local and other tax consequences thereof.

Except with respect to any cash received by the U.S. Healthcare
shareholders pursuant to the Mergers, the Mergers have been structured to
qualify as tax-free transactions under the Code. The obligations of Aetna and
U.S. Healthcare to consummate the Mergers are conditioned on receipt by Aetna of
an opinion from Davis Polk & Wardwell, counsel to Aetna, and by U.S. Healthcare
of an opinion from Skadden, Arps, Slate, Meagher & Flom, counsel to U.S.
Healthcare, that the Mergers so qualify. See "Amended Merger Agreement
- -- Conditions to the Mergers." Such opinions shall be based upon certain facts,
assumptions and representations contained in certificates of officers of Parent,
U.S. Healthcare, Aetna and their respective subsidiaries dated as of the date of
the consummation of the Mergers. Opinions of counsel are not binding on the
Internal Revenue Service ("IRS") or the courts, and the parties do not intend to
request a ruling from the IRS with respect to the Mergers. Accordingly, there
can be no assurance that the IRS will not challenge such conclusion or that a
court will not sustain such challenge.

Davis Polk & Wardwell has provided an opinion to Aetna to the effect that
neither Aetna nor any of its shareholders will recognize gain or loss for U.S.
federal income tax purposes as a result of the Aetna Sub Merger. Skadden, Arps,
Slate, Meagher & Flom has provided an opinion to U.S. Healthcare to the effect
that, under current law, the transfer of U.S. Healthcare Stock by the
shareholders of U.S. Healthcare to Parent pursuant to the U.S. Healthcare Sub
Merger in exchange for the U.S. Healthcare Merger Consideration will constitute
a transfer described in Section 351 of the Code, and accordingly, that the U.S.
Healthcare Sub Merger will have the tax consequences set forth below. Each of
such opinions referred to above is subject to the conditions, qualifications and
assumptions set forth therein and has been filed as an exhibit to the
Registration Statement.

Tax Consequences of the Mergers

Tax Consequences to Aetna Shareholders. Aetna shareholders (other than
shareholders who exercise and perfect objecting shareholders' rights) will not
recognize income, gain or loss upon the receipt of shares of Parent Common Stock
in exchange for their shares of Aetna Common Stock. The tax basis of the shares
of Parent Common Stock received by Aetna shareholders will be the same as the
tax basis of the shares of Aetna Common Stock exchanged therefor. The holding
period of the shares of Parent Common Stock received by Aetna shareholders will
include the holding period of the shares of Aetna Common Stock surrendered
therefor.

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Tax Consequences to U.S. Healthcare Shareholders. Subject to the discussion
below concerning fractional shares, U.S. Healthcare shareholders (other than
shareholders who exercise and perfect dissenters' rights) will recognize gain
(but not loss) measured by the lesser of (i) the excess, if any, of (x) the sum
of the fair market value (on the Merger Date) of the Parent Common Stock and
Parent Mandatorily Convertible Preferred Stock and the Cash Consideration over
(y) the tax basis of their shares of U.S. Healthcare Stock and (ii) the Cash
Consideration. Such gain, if any, will be long-term capital gain if such U.S.
Healthcare Stock was held for more than one year at the time of the consummation
of the Mergers. A U.S. Healthcare shareholder who holds more than one block of
U.S. Healthcare Stock (i.e. shares acquired at different times or prices) will
determine the amount of gain recognized and loss not recognized pursuant to the
U.S. Healthcare Sub Merger separately with respect to each such block of U.S.
Healthcare Stock. For this purpose, all of the Cash Consideration, Parent Common
Stock and Parent Mandatorily Convertible Preferred Stock received by a holder of
U.S. Healthcare Stock will be allocated proportionately among the blocks of U.S.
Healthcare Stock surrendered by such holder.

The aggregate tax basis of the shares of Parent Common Stock and Parent
Mandatorily Convertible Preferred Stock received by U.S. Healthcare
shareholders, including the fractional shares deemed to be received, will be the
same as the aggregate tax basis of the shares of U.S. Healthcare Stock exchanged
therefor (i) increased by the gain recognized (as calculated above) and (ii)
decreased by the Cash Consideration received. The aggregate tax basis will be
allocated among a shareholder's Parent Common Stock and Parent Mandatorily
Convertible Preferred Stock received in the U.S. Healthcare Sub Merger,
including fractional shares deemed to be received, in proportion to their fair
market values (on the Merger Date). The holding period of the shares of Parent
Common Stock and shares of Parent Mandatorily Convertible Preferred Stock
received by U.S. Healthcare shareholders will include the holding period of the
shares of U.S. Healthcare Stock surrendered therefor.

U.S. Healthcare shareholders who receive cash with respect to fractional
shares will be treated as having received such fractional shares pursuant to the
U.S. Healthcare Sub Merger and then as having sold those fractional shares in
the market for cash. Such U.S. Healthcare shareholders will recognize gain or
loss with respect to such fractional shares in an amount equal to the difference
between the tax basis allocated to such fractional shares (as calculated above),
and the cash received in respect thereof. Any such gain or loss will be capital
gain or loss and will constitute long-term capital gain or loss if the holding
period of such fractional shares (as determined above) exceeds one year.

Backup Withholding. Certain noncorporate holders may be subject to backup
withholding at a rate of 31% on payments of Cash Consideration and cash with
respect to fractional shares. Backup withholding will not apply, however, to a
shareholder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification or who
otherwise is exempt from backup withholding. Generally, a U.S. Healthcare
shareholder will provide such certification on Form W-9 (Request for Taxpayer
Identification Number and Certification) or on Form W-8 (Certificate of Foreign
Status).

Reporting Requirements. Each U.S. Healthcare shareholder and each Aetna
shareholder (other than shareholders who exercise and perfect dissenters' rights
or rights of objecting shareholders, as applicable) will be required to retain
records and file with such holder's U.S. federal income tax return a statement
setting forth certain facts relating to the Mergers. It is also expected that
such shareholders will be asked to indicate in the letter of transmittal their
tax basis in the shares surrendered by them pursuant to the Mergers.

Tax Consequences to Aetna and U.S. Healthcare. No income, gain or loss will
be recognized by Aetna or U.S. Healthcare pursuant to the Mergers.

Tax Consequences to Aetna and U.S. Healthcare Shareholders upon Exercise of
Objecting or Dissenting Shareholders' Rights. A holder of Aetna Common Stock or
U.S. Healthcare Stock who exercises and perfects dissenters' rights or rights of
objecting shareholders, as applicable, with respect to all stock owned actually
or constructively will generally recognize capital gain or loss equal to the
difference between the amount of cash received (other than in respect of
interest awarded by a court) and such shareholder's tax basis in his or her
shares of stock. Such capital gain or loss will be long-term capital gain or
loss if such shares have a holding period exceeding one year at the time of the
consummation of the Mergers. Interest, if any,

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awarded by a court to an objecting or dissenting shareholder will be includible
in such shareholder's income as ordinary income for U.S. federal income tax
purposes.

Tax Consequences of an Investment in Parent Common Stock
and Parent Mandatorily Convertible Preferred Stock

Cash Dividends. Any cash dividends that are paid in respect of the Parent
Mandatorily Convertible Preferred Stock and Parent Common Stock, to the extent
paid out of Parent's current or accumulated earnings and profits, will be
taxable as ordinary income. Corporate shareholders of Parent generally will
qualify for the intercorporate dividends-received deduction with respect to such
dividends, subject to a minimum holding period and other applicable
requirements. To the extent that Parent does not have sufficient current or
accumulated earnings and profits, all or a portion of any distribution made with
respect to Parent Common Stock or Parent Mandatorily Convertible Preferred Stock
in any particular year will not qualify as dividends for United States federal
income tax purposes and, as a result, will not be eligible for the dividends
received deduction. A distribution in respect of the Parent Common Stock and
Parent Mandatorily Convertible Preferred Stock that does not constitute a
dividend for United States federal income tax purposes will represent a
non-taxable distribution to the extent of the shareholder's basis in Parent
Common Stock or Parent Mandatorily Convertible Preferred Stock, as the case may
be (correspondingly reducing such shareholder's basis in such shares of stock)
and, to the extent such distributions exceed the shareholder's basis in such
stock, as capital gain.

Under certain circumstances, a corporate shareholder that receives
"extraordinary dividends", as defined in Section 1059(c) of the Code, is
required to reduce its tax basis in the stock on which such dividends are paid
by the non-taxed portion of such dividends. For this purpose, under Section
1059(f) of the Code, any dividend with respect to "disqualified preferred stock"
is treated as an "extraordinary dividend." Generally, quarterly dividends not in
arrears paid to an original holder of Parent Common Stock and Parent Mandatorily
Convertible Preferred Stock will not constitute extraordinary dividends under
Section 1059(c) of the Code. In addition, although the issue is not free from
doubt, the Parent Mandatorily Convertible Preferred Stock will not constitute
"disqualified preferred stock" under Section 1059(f) of the Code.

Redemption or Mandatory or Optional Conversion of Parent Mandatorily
Convertible Preferred Stock into Parent Common Stock. Except as provided below,
gain or loss will not be recognized by a shareholder upon the redemption of its
Parent Mandatorily Convertible Preferred Stock for shares of Parent Common Stock
or the conversion of its Parent Mandatorily Convertible Preferred Stock into
shares of Parent Common Stock. Dividend income may be recognized at such time,
however, to the extent cash or Parent Common Stock is received in payment of
accrued and unpaid dividends, provided that Parent has sufficient current or
accumulated earnings and profits.

A shareholder who receives cash in lieu of a fractional share of Parent
Common Stock upon redemption or conversion of its Parent Mandatorily Convertible
Preferred Stock will be treated as having first received such fractional share
and as having then exchanged such fractional share for cash in a taxable
transaction. Subject to Section 302 of the Code and related provisions, any gain
or loss recognized by the shareholder on the deemed receipt and subsequent
exchange of a fractional share will be capital gain or loss.

Generally, a shareholder's basis in the Parent Common Stock received upon
the redemption or conversion of Parent Mandatorily Convertible Preferred Stock
(other than Parent Common Stock, if any, taxed as a dividend upon receipt) will
equal the shareholder's adjusted basis on its redeemed or converted shares of
Parent Mandatorily Convertible Preferred Stock. The holding period of such
Parent Common Stock will include the holding period of the redeemed or converted
shares of Parent Mandatorily Convertible Preferred Stock.

Adjustments of the Rates. Certain possible future adjustments of the rates
to reflect Parent's issuance of certain rights, warrants or evidence of
indebtedness, or distributions of securities or other assets to holders of
Parent Common Stock may result in constructive distributions taxable as
dividends to the holders of Parent Mandatorily Convertible Preferred Stock (to
the extent that Parent has current or accumulated earnings and

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profits) which may constitute (and cause other dividends to constitute)
"extraordinary dividends" to corporate shareholders as described above.

Backup Withholding. As set forth above, certain noncorporate shareholders
may be subject to backup withholding at a rate of 31% on dividends received on
Parent Common Stock and Parent Mandatorily Convertible Preferred Stock and
certain consideration received upon the redemption or conversion of Parent
Mandatorily Convertible Preferred Stock.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in Section 4975(e)(1) of
the Code, including individual retirement accounts and Keogh plans, (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in such entity (each of (a), (b) and (c) hereinafter referred to as a
"Plan"), and (d) persons who have certain specified relationships to such Plans
("Parties in Interest" under ERISA and "Disqualified Persons" under the Code).
ERISA also imposes certain duties on persons who are fiduciaries of Plans
subject to ERISA, and ERISA and the Code prohibit certain transactions between
Plans and persons who are Parties in Interest or Disqualified Persons with
respect to such Plans ("Prohibited Transactions").

Because of the activities of Aetna or U.S. Healthcare or one or more of
their respective subsidiaries or affiliates (including, without limitation, the
asset management services performed by any Aetna affiliate), Aetna or U.S.
Healthcare, as the case may be, could be deemed to be a Party in Interest or
Disqualified Person with respect to certain Plans. If the Merger Consideration
is acquired by a Plan with respect to which Aetna or U.S. Healthcare is a Party
in Interest or Disqualified Person, such acquisition could be deemed to be a
direct or indirect Prohibited Transaction. Such transactions may, however, be
exempt from the penalties otherwise applicable to such transactions by reason of
the existence of one or more statutory or administrative exemptions such as
those described below. If the conditions of one or more of these exemptions (or
some other applicable exemption) are met, then the receipt of the Merger
Consideration by or on behalf of a Plan with respect to which Aetna or U.S.
Healthcare is a Party in Interest or Disqualified Person should be exempt from
the penalties applicable to Prohibited Transactions under ERISA and the Code.
FOR THIS REASON, NO PLAN WITH RESPECT TO WHICH AETNA OR U.S. HEALTHCARE IS A
PARTY IN INTEREST OR DISQUALIFIED PERSON MAY, AND EACH SUCH PLAN INVESTOR WILL
BE DEEMED TO HAVE REPRESENTED AND AGREED THAT IT WILL NOT, ACQUIRE THE MERGER
CONSIDERATION IN CONNECTION WITH THE MERGERS, UNLESS THE ACQUISITION IS EXEMPT
UNDER ONE OF THE ADMINISTRATIVE EXEMPTIONS DESCRIBED BELOW OR ANOTHER APPLICABLE
EXEMPTION.

The United States Department of Labor has issued a number of administrative
exemptions that may exempt a Plan's receipt of the Merger Consideration. One of
these exemptions, Prohibited Transaction Exemption 84-14, will generally apply
to the receipt of the Merger Consideration if such receipt is effected at the
sole discretion of a "qualified professional asset manager," as defined in such
exemption ("QPAM"). Two other class exemptions, Prohibited Transaction
Exemptions 90-1 and 91-38, apply with respect to investments made by certain
pooled investment funds maintained by an insurance company or a bank. Under
either of these exemptions, the receipt of the Merger Consideration by such a
collective investment fund will generally be exempt if the Plan's investment in
such fund (treating all plans of the same sponsor as a single plan) does not
exceed 10% of the fund's total assets or, if the Plan's interests in the fund
exceeds such level, Aetna or U.S. Healthcare is a Party in Interest and
Disqualified Person solely by reason of a service provider relationship to the
Plan. The availability of each of these exemptions is subject to a number of
important conditions which the Plan's fiduciary must consider in determining
whether such exemptions apply. The administrative exemptions will not apply if
the QPAM, insurance company or bank directing the investment is Aetna or U.S.
Healthcare or one of their respective affiliates.

Prior to receiving the Merger Consideration, Plan shareholders of Aetna and
U.S. Healthcare should consult with their legal advisors concerning the impact
of ERISA and the Code and the potential

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consequences of such receipt with respect to their specific circumstances. Each
Plan fiduciary must determine that the receipt of the Merger Consideration is
consistent with the fiduciary duties under ERISA and does not result in the
occurrence of a non-exempt Prohibited Transaction under ERISA or the Code.
Fiduciaries of governmental plans (as defined in Section 3(32) of ERISA and
Section 414 of the Code) are not subject to the fiduciary responsibility
provisions of ERISA or the Prohibited Transaction provisions of ERISA or the
Code, but may be subject to other restrictions under applicable local law.

APPRAISAL RIGHTS

Aetna. Aetna shareholders have the right, under Section 33-373 of the
Connecticut Stock Corporation Act (the "Connecticut Law"), to elect to object to
the Aetna Sub Merger and demand payment for their Aetna Common Stock and an
appraisal thereof in accordance with the provisions of Section 33-374 of the
Connecticut Law, which Section sets forth the rights and obligations of
objecting shareholders of Aetna and the procedures to be followed.

Shareholders of Aetna who object to the Aetna Sub Merger will be entitled,
if the Aetna Sub Merger is consummated, to receive a cash payment equal to the
"fair value" of their shares. Fair value is to be determined as of the day prior
to the date on which this Joint Proxy Statement/Prospectus was mailed to
shareholders, exclusive of any element of value arising from the expectation or
accomplishment of the Aetna Sub Merger. A Connecticut appellate court has held
that in order to determine fair value, any legally recognized measure of value,
such as market value, may be used and that no single method of valuation will
control in all cases.

The following is a summary of the procedures to be followed under Sections
33-373 and 33-374 of the Connecticut Law, the text of which is attached to this
Joint Proxy Statement/Prospectus as Appendix K and which is incorporated herein
by reference. The summary does not purport to be a complete statement of the
provisions of Sections 33-373 and 33-374 of the Connecticut Law and is qualified
in its entirety by reference to Sections 33-373 and 33-374.

To be entitled to the cash payment, an Aetna shareholder must satisfy all
of the following conditions:

(i) The shareholder must file with Aetna a written notice objecting to
the approval and adoption of the Merger Agreement at or prior to the Aetna
Special Meeting but prior to the vote by Aetna shareholders on the approval
of the Amended Merger Agreement;

(ii) The shareholder must not vote his or her shares in favor of the
Merger Agreement; and

(iii) The shareholder must deliver to Aetna, within 10 days after the
date on which the vote on the Amended Merger Agreement is taken, a written
demand that Aetna purchase all of his or her shares at fair value.

The demand must state the number of shares of Aetna Common Stock held by
the shareholder making the demand. No demand may be withdrawn by the shareholder
unless Aetna consents thereto. Within 20 days after demanding the purchase of
his or her shares, each demanding shareholder must submit the certificate or
certificates representing his or her shares of Aetna Common Stock for notation
thereon that such demand has been made. If the certificates are not submitted
for notation as provided above, Aetna may, at its option, terminate the
shareholder's appraisal rights unless a court of competent jurisdiction, for
good and sufficient cause shown, otherwise directs. Generally, any Aetna
shareholder making such demand shall thereafter be entitled only to the payment
provided in Section 33-374 of the Connecticut Law and shall not be entitled to
vote, to receive dividends or to exercise any other rights of a shareholder in
respect to his or her shares.

No later than 10 days after the later of (i) Aetna's receipt of a
shareholder's demand or (ii) the Merger Date, Aetna is required to make a
written offer to each objecting shareholder to pay for the shares of such
shareholder a specified price which Aetna considers to be such shares' fair
value. Aetna has not determined the amount of any such offer, nor when it would
be made; however, it is unlikely that it would be made prior to the Merger Date.
Such value may be higher or lower than the value of the consideration received
by Aetna shareholders in the Aetna Sub Merger. If Aetna and an objecting
shareholder agree in writing as to the value

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of such shares, Aetna must pay such agreed upon value to the shareholder
concurrently with the shareholder's surrender of his or her certificate or
certificates duly endorsed for transfer. At any time within 60 days after the
date on which Aetna is obliged to make an offer for the objecting shareholder's
shares, Aetna or any shareholder who has made a demand and has not accepted the
offer of Aetna may file a petition in the Superior Court for Hartford County,
Connecticut (the "Court"), seeking a determination of the fair value of the
shares. All objecting shareholders who have not accepted the offer made by Aetna
will be made parties to the proceeding, whether residents of Connecticut or not.
The Court may, if it so elects, appoint one or more persons as appraisers to
receive evidence and recommend a decision on the question of the fair value of
the shares, and the Court shall determine the question of fair value of the
shares and direct payment of that value, together with such interest, if any, as
the Court allows, to the shareholders entitled thereto. Fair value, as
determined by the Court, may be higher or lower than the value of the
consideration to be received by Aetna shareholders in the Aetna Sub Merger. The
costs and expenses of any proceeding will be determined by the Court and will be
assessed against Aetna, except that if the Court finds that the failure of any
or all of the shareholders to accept an offer was arbitrary, vexatious or not in
good faith, the Court may apportion and assess against such shareholders all or
any part of the costs and expenses as the Court may deem equitable. For this
purpose, expenses include reasonable compensation for the appraisers, but
exclude fees and expenses of counsel for or experts employed by any parties
unless either the fair value of the shares as determined by the Court materially
exceeds the amount of an offer, or no offer was made by Aetna, in which cases
the Court in its discretion may also award to shareholders reasonable
compensation for experts employed by the shareholders.

An Aetna shareholder's failure to vote on the Amended Merger Agreement will
not constitute a waiver of his or her appraisal rights under Section 33-374 of
the Connecticut Law. However, a vote in favor of the Merger Agreement will
constitute a waiver of this right, and a vote against the Amended Merger
Agreement by itself will not satisfy the requirements with respect to written
objection and written demand or the other requirements of Section 33-374 of the
Connecticut Law, summarized above, necessary to perfect appraisal rights.

Section 33-373 of the Connecticut Law provides that the right to object and
be paid the value of shares as described above is the exclusive remedy of an
objecting shareholder with respect to the Aetna Sub Merger. Failure by an Aetna
shareholder to follow the steps required by the Connecticut Law for perfecting
appraisal rights will result in the loss of those rights. An objecting
shareholder who does not perfect his or her right to appraisal through
compliance with the Connecticut Law will have the rights specified in the Merger
Agreement.

All written communications from Aetna shareholders with respect to the
exercise of appraisal rights should be mailed to Aetna Life and Casualty
Company, 151 Farmington Avenue, Hartford, Connecticut 06156; Attention:
Corporate Secretary.

IN VIEW OF THE COMPLEXITIES OF THE FOREGOING PROVISIONS OF THE CONNECTICUT
LAW, AETNA SHAREHOLDERS WHO ARE CONSIDERING PURSUING RIGHTS AS AN OBJECTING
SHAREHOLDER MAY WISH TO CONSULT LEGAL COUNSEL.

U.S. Healthcare. U.S. Healthcare shareholders have the right under Sections
1930(a) and 1571-80 (Subchapter D of Chapter 15) of the Pennsylvania Business
Corporation Law of 1988 (the "Pennsylvania Law") to elect to object to the
Mergers and, in lieu of receiving the U.S. Healthcare Merger Consideration in
exchange for each share of U.S. Healthcare Stock, to demand, in writing, payment
in cash of the fair value of such shareholder's U.S. Healthcare Stock.

The following is a summary of the procedures to be followed under Sections
1571 through 1580 of the Pennsylvania Law, the text of which is attached to this
Joint Proxy Statement/Prospectus as Appendix L. The summary does not purport to
be a complete statement of the provisions of Sections 1571 through 1580 of the
Pennsylvania Law and is qualified in its entirety by reference to Sections 1571
through 1580.

Before a shareholder vote is taken with respect to the Mergers, any
dissenting shareholder, in order to perfect dissenting shareholders' rights,
must deliver to U.S. Healthcare a written notice of intention to demand that he
or she be paid the fair value of his or her U.S. Healthcare Stock if the Mergers
are effected. Neither

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the return of a proxy by the dissenting shareholder with instructions to vote
the U.S. Healthcare Stock subject thereto against the Mergers, nor a vote
against the Mergers, is sufficient to satisfy the requirement of delivering
written notice to U.S. Healthcare. In addition, the shareholder must not effect
any change in the beneficial ownership of his or her U.S. Healthcare Stock from
the date of filing the notice with U.S. Healthcare through the Merger Date, and
the U.S. Healthcare Stock for which payment of fair value is sought must not be
voted in favor of the approval and adoption of the Amended Merger Agreement. The
submission of a signed blank proxy will serve to waive appraisal rights if not
revoked, but a failure to vote will not waive such rights. Proper revocation
either of a signed blank proxy or a signed proxy instructing a vote for approval
and adoption of the Amended Merger Agreement will also preserve dissenters'
rights under the Pennsylvania Law. A signed blank proxy or a signed proxy
instructing a vote for approval and adoption of the Amended Merger Agreement may
be properly revoked for purposes of preserving dissenters' rights by giving
written notice of revocation to the Secretary of U.S. Healthcare, by attendance
of and voting by the shareholder at the U.S. Healthcare Annual Meeting against
the approval and adoption of the Amended Merger Agreement or by execution and
delivery to U.S. Healthcare of a proxy instructing a vote against approval and
adoption of the Merger Agreement which is dated subsequent to the previously
signed proxy. Failure by a dissenting shareholder to comply with any of the
foregoing will result in the forfeiture of any right to payment of fair value
for his U.S. Healthcare Stock.

A record holder of U.S. Healthcare Stock may assert dissenters' rights as
to fewer than all of the U.S. Healthcare Stock registered in his or her name
only if he or she dissents with respect to all the U.S. Healthcare Stock of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he or she dissents. A
beneficial owner of U.S. Healthcare Stock who is not the record holder may
assert dissenters' rights with respect to U.S. Healthcare Stock held on his or
her behalf if he or she submits to U.S. Healthcare the written consent of the
record holder not later than the time of assertion of dissenters' rights. A
beneficial owner may not dissent with respect to less than all of the U.S.
Healthcare Stock owned by such shareholder of the same class or series, whether
or not such U.S. Healthcare Stock is registered in his or her name.

If the Amended Merger Agreement is approved and adopted by the requisite
number of holders of U.S. Healthcare Stock at the U.S. Healthcare Annual
Meeting, U.S. Healthcare will mail to all dissenters who gave due notice of
their intention to demand payment of fair value and who refrained from voting in
favor of the Mergers, a notice stating where and when a demand for payment must
be sent and certificates for U.S. Healthcare Stock must be deposited in order to
obtain payment. The notice shall be accompanied by a copy of Sections 1571
through 1580 (Subchapter D of Chapter 15) of the Pennsylvania Law and a form for
demanding payment, which form shall include a request for certification of the
date that beneficial ownership of the dissenting U.S. Healthcare Stock was
acquired by the shareholder or the person on whose behalf the shareholder
dissents. The time set for the receipt of demands and the deposit of
certificates shall not be less than 30 days from the mailing of the notice.
Failure by a shareholder to timely demand payment or timely deposit certificates
pursuant to such notice will cause such shareholder to lose all right to receive
payment of the fair value of his or her U.S. Healthcare Stock. If the Mergers
have not been effected within 60 days after the date set for demanding payment
and depositing certificates, U.S. Healthcare shall return any certificates that
have been deposited. U.S. Healthcare, however, may at any later time send a new
notice regarding demand for payment and deposit of certificates with like
effect.

Promptly after the Merger Date, or upon the timely receipt of demand for
payment, if the Mergers have already been effected, U.S. Healthcare shall either
remit to dissenters who have made demand and deposited their certificates the
amount U.S. Healthcare estimates to be the fair value of their U.S. Healthcare
Stock or give written notice that no remittance will be made under Section 1577
of the Pennsylvania Law. Such remittance or notice shall be accompanied by (i)
the closing balance sheet and statement of income of U.S. Healthcare for a
fiscal year ending not more than 16 months prior to the date of such remittance
or notice, together with the latest available interim financial statements, (ii)
a statement of U.S. Healthcare's estimate of the fair value of the U.S.
Healthcare Common Stock which may be more or less than the value of the
consideration to be paid to holders of U.S. Healthcare Stock in the Mergers, and
(iii) a notice of the right of the dissenting shareholder to demand payment or
supplemental payment, as the case may be, accompanied by a copy of Sections 1571
through 1580 (Subchapter D of Chapter 15) of the Pennsylvania Law. If

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U.S. Healthcare does not remit the amount of its estimate of the fair value of
the U.S. Healthcare Stock, it shall return all certificates that have been
deposited and may make a notation thereon that a demand for payment has been
made.

If a dissenting shareholder believes that the amount estimated or paid by
U.S. Healthcare for his or her U.S. Healthcare Stock is less than the fair
value, the shareholder may send to U.S. Healthcare his or her own estimate of
the fair value which shall be deemed a demand for payment of the amount of the
deficiency. If the dissenting shareholder does not file his or her own estimate
of fair value within 30 days after the mailing by the corporation of its
remittance or notice, such dissenter shall be entitled to no more than the
amount stated in the notice or remitted to him by U.S. Healthcare.

Within 60 days after the latest of (i) the Merger Date, (ii) timely receipt
of any demands for payment and (iii) timely receipt of any shareholder estimates
of fair value, if any demands for payment remain unsettled, U.S. Healthcare may
file in court (the "Court") an application for relief requesting that the fair
value of the U.S. Healthcare Stock be determined by the Court. Each dissenting
shareholder whose demands have not been settled shall be made a party to the
proceeding and shall be entitled to recover the amount determined by the Court
by which the fair value of his U.S. Healthcare Stock is found to exceed the
amount, if any, previously remitted by U.S. Healthcare. The fair value of such
U.S. Healthcare Stock could be determined by the court to be higher or lower
than the U.S. Healthcare Merger Consideration. Such dissenting shareholder shall
also be entitled to interest on such amount from the Merger Date until the date
of payment as is fair and equitable under the circumstances, taking into account
all relevant factors including the average rate currently paid by U.S.
Healthcare on its principal bank loans. If U.S. Healthcare fails to file an
application within the 60-day period, any dissenting shareholder who has not
settled his claim may do so in the name of the corporation within 30 days after
the expiration of the 60-day period. If no dissenting shareholder files an
application within such 30-day period, each dissenting shareholder who has not
settled his claim shall be paid no more than U.S. Healthcare's estimate of the
fair value of his or her U.S. Healthcare Stock and may bring an action to
recover any amount not previously remitted.

The costs and expenses of any valuation proceedings, including the
reasonable compensation and expenses of any appraiser appointed by the Court,
shall be determined by the Court and assessed against U.S. Healthcare except
that any part of such costs and expenses may be assessed as the Court deems
appropriate against all or some of the dissenters whose action in demanding
supplemental payment is found by the court to be dilatory, obdurate, arbitrary,
vexatious or in bad faith. The Court may also assess the fees and expenses of
counsel and experts for any or all of the dissenters against U.S. Healthcare if
U.S. Healthcare fails to comply substantially with Sections 1571 through 1580
(Subchapter D of Chapter 15) of the Pennsylvania Law or acts in bad faith or in
a dilatory, obdurate, arbitrary or vexatious manner. The Court may also assess
any such fees or expenses incurred by U.S. Healthcare against a dissenting
shareholder if such dissenting shareholder is found to have acted in bad faith
or in a dilatory, obdurate, arbitrary or vexatious manner. If the Court finds
that the services of counsel for any dissenter were of substantial benefit to
the other dissenting shareholders and should not be assessed against U.S.
Healthcare, it may award to such counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.

In accordance with the provisions of Section 1105 of the Pennsylvania Law,
a shareholder of U.S. Healthcare will not have any right to obtain, in the
absence of fraud or fundamental unfairness, an injunction against the Mergers,
or any right to valuation and payment of the fair value of his or her U.S.
Healthcare Stock because of the Mergers, other than the right to dissent and
claim such payment as is described in the foregoing provisions. Absent fraud or
fundamental unfairness, Section 1105 of the Pennsylvania Law provides that the
foregoing dissenters' rights and remedies are exclusive. However, the United
States Court of Appeals for the Third Circuit has interpreted provisions of a
predecessor statute to the Pennsylvania Law that are substantially analogous to
Section 1105 and concluded that dissenters' appraisal rights co-exist with
common law causes of action, such as rescission or money damages.

Any shareholder contemplating making demand for fair value is urged to
review carefully the provisions of Sections 1571 through 1580 of the
Pennsylvania Law, particularly the procedural steps required to perfect his or
her dissenters' rights thereunder. Dissenters' rights will be lost if the
procedural requirements of Sections 1571 through 1580 of the Pennsylvania Law
are not fully and precisely satisfied.

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All written communications from U.S. Healthcare shareholders with respect
to the exercise of dissenting shareholders' rights should be mailed to U.S.
Healthcare, Inc., 980 Jolly Road, Blue Bell, PA 19422, Attention: Secretary.

IN VIEW OF THE COMPLEXITIES OF THE FOREGOING PROVISIONS OF THE PENNSYLVANIA
LAW, U.S. HEALTHCARE SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE
MERGERS MAY WISH TO CONSULT LEGAL COUNSEL.

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THE AMENDED MERGER AGREEMENT

GENERAL

The following description of the Amended Merger Agreement is qualified in
its entirety by reference to the complete text of the Amended Merger Agreement,
which is incorporated by reference herein and a copy of which is annexed to this
Joint Proxy Statement/Prospectus as Appendix A. Capitalized terms not defined
herein shall have the meanings set forth in the Amended Merger Agreement.

The Amended Merger Agreement provides for the merger of U.S. Healthcare Sub
with and into U.S. Healthcare (the "U.S. Healthcare Surviving Corporation") and
the merger of Aetna Sub with and into Aetna (the "Aetna Surviving Corporation").
As a result of the Mergers, each of Aetna and U.S. Healthcare will become
wholly-owned subsidiaries of Parent. In the Mergers, shareholders of Aetna and
U.S. Healthcare will receive the consideration described below. The Mergers will
become effective upon the filing of Articles of Merger for the U.S. Healthcare
Sub Merger with the Department of State of the Commonwealth of Pennsylvania and
a Certificate of Merger for the Aetna Sub Merger with the Secretary of the State
of the State of Connecticut. Such filings are anticipated to take place as soon
as practicable after receipt of all required regulatory approvals and the
satisfaction or waiver of the other conditions to the Mergers. It is currently
anticipated that the Merger Date will occur during the third quarter of 1996.
There can be no assurance, however, that the required regulatory approvals will
be obtained, or that the other conditions to the Mergers will be satisfied, by
such date. See "-- Conditions to the Mergers" and "Other Matters -- Regulatory
Approvals."

CONSIDERATION TO BE RECEIVED IN THE MERGERS

U.S. Healthcare Sub Merger. Upon consummation of the U.S. Healthcare Sub
Merger, each share of U.S. Healthcare Common Stock and each share of U.S.
Healthcare Class B Stock, outstanding immediately prior to the Merger Date
(except for shares held by U.S. Healthcare as treasury stock, certain shares
held by Aetna or subsidiaries of Aetna and shares for which dissenters' rights
have been properly exercised and perfected) shall be converted into:

(a) the right to receive 0.2246 shares of Parent Common Stock,
together with 0.2246 Parent Rights;

(b) the right to receive 0.0749 shares of Parent Mandatorily
Convertible Preferred Stock; and

Notwithstanding the foregoing, holders of U.S. Healthcare Stock otherwise
entitled to fractional shares of Parent Common Stock or Parent Mandatorily
Convertible Preferred Stock, as applicable, will be entitled to receive,
from the Exchange Agent in accordance with the Amended Merger Agreement, a
cash payment in lieu of such fractional shares, representing such holders'
proportionate interests, if any, in the net proceeds from the sale by the
Exchange Agent in one or more transactions (which sale transactions shall
be made at such times in such manner and on such terms as the Exchange
Agent shall determine in its reasonable discretion) on behalf of all such
holders of the aggregate of the fractional shares of Parent Common Stock or
Parent Mandatorily Convertible Preferred Stock, as applicable, which would
otherwise have been issued.

Each share of U.S. Healthcare Stock held by U.S. Healthcare as treasury
stock or owned by Aetna or any subsidiary of Aetna immediately prior to the
Merger Date will be canceled and no payment shall be made with respect thereto;
provided that any shares of U.S. Healthcare Stock (i) held by Aetna or any
subsidiary of Aetna for the account of another person or entity, (ii) as to
which Aetna or any subsidiary or affiliate of Aetna is or may be required to act
as a fiduciary or in a similar capacity or (iii) the cancellation of which would
violate any legal duties or obligations of Aetna or any subsidiary or affiliate
of Aetna will not be canceled.

Aetna Sub Merger. Upon consummation of the Aetna Sub Merger, pursuant to
the Amended Merger Agreement, each share of Aetna Common Stock outstanding
immediately prior to the Merger Date (except for shares held by Aetna as
treasury stock, certain shares held by U.S. Healthcare or subsidiaries of

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U.S. Healthcare and shares for which objecting shareholders' rights have been
properly exercised and perfected) shall be converted into one share of Parent
Common Stock, together with one Parent Right. Each share of Aetna Common Stock
held by Aetna as treasury stock or owned by U.S. Healthcare or any subsidiary of
U.S. Healthcare immediately prior to the Merger Date shall be canceled and no
payment shall be made with respect thereto.

If at any time during the period between the date of the Merger Agreement
and the Merger Date, any change in the outstanding shares of U.S. Healthcare
Stock or Aetna Common Stock shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration will be appropriately adjusted.

Stock Options and Benefit Plans. For a description of the treatment of the
U.S. Healthcare and Aetna stock options and employee benefit plans see "-- Stock
Options and Benefit Plans."

Exchange of Shares. After the Merger Date, all outstanding shares of Aetna
Common Stock will be canceled and each certificate theretofore representing any
such shares, without any action on the part of the holder thereof, shall be
deemed to represent an equivalent number of shares of Parent Common Stock.

AETNA SHAREHOLDERS ARE NOT REQUIRED TO SURRENDER THEIR SHARE CERTIFICATES
FOR EXCHANGE.

Promptly after the Merger Date, transmittal forms will be mailed to each
holder of record of U.S. Healthcare Stock to be used in forwarding certificates
evidencing such shares for surrender and exchange for certificates evidencing
the shares of Parent Common Stock and Parent Mandatorily Convertible Preferred
Stock, together with the cash, to which such holder has become entitled. After
receipt of such transmittal form each holder of certificates formerly
representing shares of U.S. Healthcare Stock should surrender such certificates,
together with a properly completed and duly executed transmittal form, to the
Exchange Agent, and each holder will receive in exchange therefor certificates
evidencing the whole number of shares of Parent Common Stock and Parent
Mandatorily Convertible Preferred Stock, together with the cash, to which such
holder is entitled, as applicable. Such transmittal forms will be accompanied by
instructions specifying other details of the exchange.

No fractional shares of Parent Common Stock or Parent Mandatorily
Convertible Preferred Stock will be issued to holders of U.S. Healthcare Stock.
See "-- Merger Consideration -- U.S. Healthcare" above for information
concerning cash payments in lieu of fractional shares.

U.S. HEALTHCARE SHAREHOLDERS SHOULD NOT SURRENDER THEIR SHARE CERTIFICATES
FOR EXCHANGE UNTIL THEY RECEIVE A TRANSMITTAL FORM.

Until a holder of U.S. Healthcare Stock so surrenders his or her
certificates representing U.S. Healthcare Stock, such certificates will, after
the Merger Date, represent for all purposes only the right to receive the U.S.
Healthcare Merger Consideration and the other amounts if any, specified in the
Merger Agreement. No dividends or other distributions with respect to the Parent
Common Stock or Parent Mandatorily Convertible Preferred Stock, as applicable,
constituting a portion of the Merger Consideration will be paid to the holder of
any unsurrendered certificate representing U.S. Healthcare Stock until such
certificate is surrendered in accordance with the Amended Merger Agreement.
Subject to the effect of applicable laws, following such surrender, there will
be paid, without interest, to the record holder of the certificates representing
the Parent Common Stock or Parent Mandatorily Convertible Preferred Stock, as
applicable, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Merger Date payable prior to or on
the date of such surrender with respect to such whole shares of Parent Common
Stock or Parent Mandatorily Convertible Preferred Stock, as applicable, and not
paid, less the amount of any withholding taxes which may be required thereon,
and (ii) at the appropriate payment date, the amount of dividends or

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other distributions with a record date after the Merger Date but prior to the
date of surrender and a payment date subsequent to the date of surrender payable
with respect to such whole shares of Parent Common Stock or Parent Mandatorily
Convertible Preferred Stock, as applicable, less the amount of any withholding
taxes which may be required thereon.

At the Merger Date, each share of common stock, without par value, of U.S.
Healthcare Sub ("U.S. Healthcare Sub Common Stock") and each share of common
stock, par value $1.00 per share, of Aetna Sub ("Aetna Sub Common Stock")
outstanding immediately prior to the Merger Date shall be converted into an
equal number of shares of Common Stock, par value $.01 per share, of the U.S.
Healthcare Surviving Corporation ("U.S. Healthcare Surviving Corporation Common
Stock") and Common Stock, par value $.01 per share, of the Aetna Surviving
Corporation ("Aetna Surviving Corporation Common Stock"), respectively. From and
after the Merger Date, all certificates representing U.S. Healthcare Sub Common
Stock and Aetna Sub Common Stock will be deemed for all purposes to represent
the number of shares of U.S. Healthcare Surviving Corporation Common Stock and
Aetna Surviving Corporation Common Stock into which they were converted.

All outstanding shares of the capital stock of Parent immediately prior to
the Merger Date will be canceled immediately upon consummation of the Aetna Sub
Merger.

CORPORATE MATTERS

Aetna and U.S. Healthcare have agreed to cause Parent to take all necessary
corporate action to amend the certificate of incorporation and bylaws of Parent
prior to the Merger Date (x) to be in substantially the form of the certificate
of incorporation and bylaws of Aetna in effect on the date of the Merger
Agreement (modified (i) as may be appropriate to effect the transactions
contemplated by the Amended Merger Agreement, (ii) as may be appropriate to
reflect the fact that Parent is not an "insurance corporation", (iii) to change
the par value of the Parent Common Stock from $1.00 to $.01, (iv) to change the
name of Parent to Aetna Inc., (v) to increase the authorized capital stock of
the Parent and (vi) as may be agreed by U.S. Healthcare and Aetna), and (y) to
fix the designation, rights and preferences of the Parent Mandatorily
Convertible Preferred Stock.

Pursuant to the Amended Merger Agreement, from and after the Merger Date,
until successors are duly elected or appointed and qualified in accordance with
applicable law, the Board of Directors of Parent will consist of the Board of
Directors of Aetna immediately prior to the Merger Date, and, no later than 60
days following the Merger Date, the Board of Directors of Parent will be
expanded to include the Principal Shareholder and two other Persons initially
designated by U.S. Healthcare prior to the Merger Date (the Principal
Shareholder and such persons, the "U.S. Healthcare Designees"), provided that
such other Persons may elect to become members of the Board of Directors of
Parent at any time during such 60 day period. Thereafter, if any of the U.S.
Healthcare Designees (with the exception of the Principal Shareholder) 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 to such U.S.
Healthcare Designees shall be selected by the Principal Shareholder. U.S.
Healthcare Designees (including, if applicable, any successor or successors
selected by the Principal Shareholder) will be nominated by the Parent Board of
Directors for election to such Board of Directors for a period of no less than
two consecutive years immediately following the Merger Date. The Parent Board of
Directors will appoint the Principal Shareholder to any committee of the Parent
Board of

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Directors that is constituted for the purpose of identifying and recommending a
candidate to become chief executive officer of Parent at such time as the
current chief executive officer of Parent retires.

From and after the Merger Date, all of the lines of business and operations
of U.S. Healthcare (including but not limited to all HMO, POS, indemnity health
insurance and other lines of business and operations) and all of the domestic
(U.S.) lines of business and operations of Aetna Health Plans (including but not
limited to all Health, Specialty Health and Group Insurance lines of business
and operations) (hereinafter referred to collectively as the "Combined Health
Operations") will report to the two Co-Presidents of U.S. Healthcare as of March
30, 1996, who will then assume the positions of Co-Presidents of the Combined
Health Operations (hereinafter referred to as the "Co-Presidents"). The
Co-Presidents will have their principal offices in Blue Bell, Pennsylvania or
such other location as they shall determine, and shall report directly and
exclusively to the chief executive officer of Aetna. Reporting directly and
exclusively to the Co-Presidents will be the individuals who serve as the Chief
Financial Officer, Chief Medical Officer, Senior Sales Officer and Chief Legal
Officer of U.S. Healthcare as of the date of the Merger Agreement, who will each
assume similar positions and responsibilities for the Combined Health Operations
as of the Merger Date except as may otherwise be mutually agreed between the
Co-Presidents and any of the specific officers. The Co-Presidents will also
select and appoint those other senior officers who will be reporting directly to
the Co-Presidents and responsible for other areas of responsibility for the
Combined Health Operations (including but not limited to Group Insurance,
Information Technology, Operations, Sales, National Accounts, Behavioral Health,
Dental, Pharmacy, Health Education, and Human Resources), provided, however,
that such appointments shall be made only in consultation with and with the
approval of the chief executive officer of Aetna. The Co-Presidents will also
serve as Co-Chairs of a transition group consisting of U.S. Healthcare and Aetna
executives who will plan for and oversee the integration activities of the
Combined Health Operations to occur on and after the Merger Date. For a period
of 24 months from the Merger Date, no person employed by U.S. Healthcare as of
the date of the Merger Agreement will be discharged with or without cause or
have his or her compensation reduced or his or her principal office location
changed absent the prior consent and approval of the Co-Presidents. Any change
or termination in the use of the U.S. Healthcare name or apple logo with respect
to U.S. Healthcare products marketed as of the date of the Merger Agreement will
be as mutually agreed by the Chairman of Aetna and the Co-Presidents. The
provisions described in this paragraph will be subject to the terms of any
employment agreements entered into by U.S. Healthcare with any of its employees
as of the date of the Merger Agreement or with the Specified U.S. Healthcare
Officers as contemplated by the Amended Merger Agreement.

CONDITIONS TO THE MERGERS

The obligations of Aetna to effect the Aetna Sub Merger and the obligations
of U.S. Healthcare to effect the U.S. Healthcare Sub Merger are each subject to
the effectuation by the other of the Merger to which the other is a party and to
all the following additional conditions: (a) the Amended Merger Agreement and
the transactions contemplated thereby shall have been approved and adopted by
the shareholders of Aetna in accordance with the laws of the State of
Connecticut and by the shareholders of U.S. Healthcare in accordance with the
laws of the Commonwealth of Pennsylvania; (b) any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
relating to the transactions contemplated by the Amended Merger Agreement shall
have expired; (c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree of a court of competent jurisdiction shall
prohibit the consummation of either of the Mergers; (d) the Form S-4
Registration Statement relating to the Parent Common Stock and Parent
Mandatorily Convertible Preferred Stock shall have been declared effective under
the 1933 Act and no stop order suspending the effectiveness of such Form S-4
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the Commission; (e) (i) U.S. Healthcare
shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom in form
and substance reasonably satisfactory to U.S. Healthcare, and (ii) Aetna shall
have received an opinion of Davis Polk & Wardwell in form and substance
satisfactory to Aetna, in each case on the basis of certain facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing on the Merger Date, to the effect that neither
it nor any of its shareholders shall recognize gain or loss for U.S. Federal
income tax purposes as a result of the Mergers to which it is a party (other
than in respect of (x) the

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Cash Consideration or (y) any cash paid in lieu of fractional shares); (f) the
shares of Parent Common Stock and Parent Mandatorily Convertible Preferred Stock
issuable in the Mergers shall have been approved for listing on the NYSE upon
official notice of issuance or such other stock exchanges as shall be agreed;
and (g) all actions by or in respect of or filings with any governmental body,
agency, official or authority required to permit the consummation of the U.S.
Healthcare Sub Merger and the Aetna Sub Merger including, without limitation,
any approvals or filings required under federal or state laws, rules and
regulations governing insurance and insurance companies, health maintenance
organizations, health care services plans, third party administrators or other
managed health care organizations, or any actions or filings pursuant to the New
Jersey Industrial Site Recovery Act shall have been made or obtained.

The obligations of Aetna to effect the Aetna Sub Merger are further subject
to all of the following conditions: (a) (i) U.S. Healthcare shall have performed
in all material respects all of its obligations under the Amended Merger
Agreement required to be performed by it at or prior to the Merger Date, (ii)
the representations and warranties of U.S. Healthcare contained in the Amended
Merger Agreement shall be true at and as of the Merger Date, as if made at and
as of the Merger Date (without giving effect to any materiality or Material
Adverse Effect (as defined in the Amended Merger Agreement) qualifications or
materiality exceptions contained therein); provided that the condition set forth
in clause (ii) will be deemed satisfied if any inaccuracies in any such
representations and warranties at and as of the Merger Date (without giving
effect to any materiality or Material Adverse Effect qualifications or
materiality exceptions contained therein) would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect on
U.S. Healthcare; and (b) at least twelve of the U.S. Healthcare Specified
Officers shall have entered into employment agreements with U.S. Healthcare
substantially in the form attached to the Merger Agreement.

The obligations of U.S. Healthcare to effect the U.S. Healthcare Sub Merger
are further subject to all of the following conditions: (a) (i) Aetna shall have
performed in all material respects all of its obligations under the Amended
Merger Agreement required to be performed by it at or prior to the Merger Date,
(ii) the representations and warranties of Aetna contained in the Amended Merger
Agreement shall be true at and as of the Merger Date, as if made at and as of
the Merger Date (without giving effect to any materiality or Material Adverse
Effect qualifications or materiality exceptions contained therein); provided
that the condition set forth in clause (ii) will be deemed satisfied if any
inaccuracies in any such representations and warranties at and as of the Merger
Date (without giving effect to any materiality or Material Adverse Effect
qualifications or materiality exceptions contained therein) would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect on Aetna; and (b) the average of the closing prices per
share of the Aetna Common Stock on the NYSE Composite Tape for the 20
consecutive trading days immediately prior to the proposed Merger Date (the
"Average Closing Stock Price") is not less than $60.90, provided that this
condition will be deemed to be satisfied notwithstanding the fact that the
Average Closing Stock Price is less than $60.90 if Aetna, in its sole
discretion, agrees to increase that portion of the Merger Consideration payable
in respect of each share of U.S. Healthcare Stock by an amount in cash equal to
(A) the difference between (I) a fraction, the numerator of which is $60.90 and
the denominator of which is the Average Closing Stock Price and (II) 1, and
multiplying such difference by (B) the product of (y) 0.2995 and (z) the Average
Closing Stock Price. In the event that the Average Closing Stock Price is less
than $60.90 and Aetna determines not to increase the Cash Consideration, U.S.
Healthcare has the right not to consummate the Mergers. The Board of Directors
of U.S. Healthcare has not made any determination as to what course of action it
would take in such event. The U.S. Healthcare Board of Directors would make its
decision based on the facts and circumstances existing at such time, after
consulting with its legal advisors and with Goldman Sachs and Merrill Lynch,
U.S. Healthcare's financial advisors. Because the Mergers may not be consummated
for a period of time after the Shareholder Meetings, the Average Closing Stock
Price may be higher or lower than the price per share of Aetna Common Stock at
the time of the Shareholder Meetings. In the event that (i) the Average Closing
Stock Price (as defined in the Amended Merger Agreement) drops to less than
$60.90, (ii) Aetna decides not to increase the Cash Consideration pursuant to
the Amended Merger Agreement and (iii) U.S. Healthcare determines to waive its
right not to consummate the Mergers in those circumstances, U.S. Healthcare will
recirculate proxy materials to its shareholders to obtain a revote and will seek
updated opinions from its financial advisors.

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All the conditions to the Mergers must either be satisfied or waived prior
to the consummation of the Mergers.

REPRESENTATIONS AND WARRANTIES

The Amended Merger Agreement contains certain representations and
warranties including without limitations representations and warranties by each
of Aetna and U.S. Healthcare as to (i) corporate existence and power, (ii)
corporate authorization, (iii) governmental authorization, (iv)
non-contravention, (v) capitalization, (vi) subsidiaries, (vii) filings with the
Commission, (viii) financial statements, (ix) disclosure documents, (x)
information supplied, (xi) absence of certain changes, (xii) no undisclosed
material liabilities, (xiii) litigation and investigations, (xiv) taxes, (xv)
matters relating to ERISA, (xvi) permits and compliance with laws, (xvii)
intellectual property rights and (xviii) fairness opinions.

CERTAIN COVENANTS

The Amended Merger Agreement requires that until the Merger Date, U.S.
Healthcare and its Subsidiaries shall conduct their business in the ordinary
course consistent with past practice and shall use their best efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Specifically, pursuant to the Merger Agreement, except as
contemplated by the Amended Merger Agreement, without the prior written consent
of Aetna:

(a) U.S. Healthcare will not adopt or propose any change in its
articles of incorporation or bylaws;

(b) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, (i) merge or consolidate with any other Person (other
than a merger of consolidation of a Subsidiary of U.S. Healthcare with a
wholly-owned Subsidiary of U.S. Healthcare) or (ii) acquire, whether by
means of merger, consolidation or otherwise, any business or assets, other
than acquisitions of products or services used in the ordinary course
operations of the business of U.S. Healthcare and its Subsidiaries in a
manner consistent with past practice and other acquisitions in an aggregate
amount not exceeding $75,000,000;

(c) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, sell, lease, license or otherwise dispose of any
material assets or property except in the ordinary course of business
pursuant to contracts or commitments existing on the date of the Merger
Agreement;

(d) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, declare, set aside or pay any dividend (other than the
payment of U.S. Healthcare regular quarterly dividend on U.S. Healthcare
Common Stock in an amount not exceeding $0.275 per share and on U.S.
Healthcare Class B Stock in an amount not exceeding $0.248 per share) or
make any other distribution with respect to any shares of U.S. Healthcare
Stock;

(e) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, create or assume any Lien on any material asset other
than in the ordinary course consistent with past practices;

(f) except pursuant to contracts or commitments existing on the date
of the Merger Agreement and other than the issuance of an aggregate of
150,000 options to acquire U.S. Healthcare Stock and/or shares of U.S.
Healthcare Restricted Stock to Persons other than the Specified U.S.
Healthcare Officers, U.S. Healthcare will not, and will not permit any
Subsidiary of U.S. Healthcare to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any U.S. Healthcare Securities,
any U.S. Healthcare Subsidiary Securities or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire,
any U.S. Healthcare Securities or U.S. Healthcare Subsidiary Securities;

(g) except as provided for in the Merger Agreement, (i) U.S.
Healthcare will not split, combine or reclassify, or take any other similar
action with respect to, any U.S. Healthcare Stock, and (ii) U.S. Healthcare
will not, and will not permit any Subsidiary of U.S. Healthcare to,
repurchase, redeem or otherwise acquire an amount of shares of capital
stock of, or other ownership interests in,

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U.S. Healthcare or any Subsidiary of U.S. Healthcare, which repurchase,
redemption or other acquisition, individually or in the aggregate, is
material to U.S. Healthcare and its Subsidiaries, taken as a whole;

(h) except for borrowings or guarantees in the ordinary course of
business consistent with past practice, U.S. Healthcare will not, and will
not permit any Subsidiary of U.S. Healthcare to, incur or assume any
indebtedness from any third party for borrowed money or guarantee any such
indebtedness;

(i) except for (i) loans, advances or capital contributions to or
investments in Subsidiaries of U.S. Healthcare, (ii) investments in
securities consistent with past practices or (iii) other loans, advances,
capital contributions or investments in an aggregate amount not exceeding
$25,000,000, U.S. Healthcare will not, and will not permit any Subsidiary
of U.S. Healthcare to make any material loans, advances or capital
contributions to, or investments in, any other Person;

(j) except for employment agreements with the Specified U.S.
Healthcare Officers in the form attached to the Merger Agreement, U.S.
Healthcare will not, and will not permit any of its Subsidiaries to: (i)
(A) grant any severance or termination pay to, or enter into any
employment, termination or severance arrangement with, any Specified U.S.
Healthcare Officer or, (B) except in the ordinary course of business
consistent in magnitude and character with past practice and with the terms
of severance or termination arrangements in effect or pending on the date
of the Merger Agreement with respect to individuals with comparable
positions or responsibilities, grant any severance or termination pay to,
or enter into any employment, termination or severance arrangement with,
any other employees; (ii) (A) amend in any material respect any employment,
termination or severance arrangement with any Specified U.S. Healthcare
Officer or (B) except in the ordinary course, amend in any material respect
any employment, termination or severance arrangement with any other
directors, officers or employees; (iii) (x) establish, adopt, enter into,
or (y) except (I) amendments to the U.S. Healthcare Stock Options or the
restricted stock of U.S. Healthcare to accelerate the vesting thereof upon
execution of the Merger Agreement and (II) the acceleration of vesting of
U.S. Healthcare Non-Employee Stock Options and U.S. Healthcare Restricted
Stock issued to Persons who are not employees of U.S. Healthcare, amend or
take action to accelerate or enhance any rights or benefits under, (A) any
plan providing for options, stock, performance awards or other forms of
incentive or deferred compensation or (B) any collective bargaining, bonus,
profit sharing, thrift, compensation, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any of its directors, officers or employees; (iv) grant, confer or award
any options, stock, performance awards or other awards to acquire any
shares of its capital stock (other than an aggregate of 150,000 options to
acquire U.S. Healthcare Stock and/or shares of restricted stock of U.S.
Healthcare pursuant to the terms existing on the date of the Merger
Agreement of U.S. Healthcare's plans) to Persons other than the Specified
U.S. Healthcare Officers; (v) increase the contribution percentages under
U.S. Healthcare's defined contribution plans; or (vi) (A) other than an
annual adjustment with respect to the 1997 calendar year if the Merger Date
occurs after December 31, 1996, which adjustment shall be of a magnitude
and character consistent with past practice, increase the compensation or
benefits of any Specified U.S. Healthcare Officer or pay any benefit not
required by any plan or arrangement as in effect as of the date of the
Merger Agreement or (B) except in the ordinary course of business
consistent in magnitude and character with past practice and in no event
greater than 6% in the aggregate on a per annum basis for all such
individuals as a group, increase the compensation or benefits of any other
employees or pay any benefit not required by any plan or arrangement as in
effect as of the date of the Merger Agreement; provided that Aetna has
agreed that it will not unreasonably withhold its consent, if requested by
U.S. Healthcare, to transactions described in this paragraph (j);

(k) U.S. Healthcare will not, and will not permit any of its
Subsidiaries to, authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of U.S.
Healthcare or any Subsidiary of U.S. Healthcare, or any plan of division or
share exchange involving U.S. Healthcare or any of its Subsidiaries;

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of U.S. Healthcare, except for any such change required by reason of a
concurrent change in generally accepted accounting principles or statutory
accounting principles;

(m) except as previously disclosed to Aetna and except for such
contracts as would not be material to U.S. Healthcare and its Subsidiaries
taken as a whole or material to their operation in any Standard
Metropolitan Statistical Area, U.S. Healthcare will not and will not permit
any Subsidiary of U.S. Healthcare to enter into any contract limiting the
right of U.S. Healthcare or any of its Subsidiaries at any time on or after
the date of the Merger Agreement or Aetna or any of its Subsidiaries or
Affiliates at or after the Merger Date, to engage in, or to compete with
any Person in, any business, including, without limitation, any contract
which includes exclusivity provisions restricting the geographical area in
which, or the method by which, any such business may be conducted by U.S.
Healthcare or any of its Subsidiaries or Affiliates, or by Aetna or any of
its Subsidiaries or Affiliates after the Merger Date;

(n) subject (in the case of an acquisition) to paragraph (b) above,
U.S. Healthcare will not and will not permit any of its Subsidiaries to
enter into any acquisition, joint venture, national vendor or franchising
agreement or arrangement which is material to U.S. Healthcare and its
Subsidiaries, taken as a whole;

(o) U.S. Healthcare will not, and will not permit any of its
Subsidiaries to, enter into any agreement or arrangement with a third party
on an exclusive basis to offer or market any of the following services of
such third party: group life, disability, managed workers' compensation,
long term care, dental, behavioral or pharmacy benefits; and

(p) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, agree, commit or adopt any plan or proposal to do any
of the foregoing.

The Amended Merger Agreement further provides that prior to the Merger
Date, except as contemplated by or described in the Amended Merger Agreement,
unless U.S. Healthcare has consented in writing thereto:

(a) Aetna will not adopt or propose any change in its certificate of
incorporation or bylaws;

(b) (i) Aetna will not, and will not permit any Subsidiary of Aetna
to, merge or consolidate with any other Person (other than a merger or
consolidation of a Subsidiary of Aetna with a wholly-owned Subsidiary of
Aetna) and (ii) Aetna shall cause Aetna's domestic (U.S.) health care
operations (the "Aetna Health Operations") not to acquire, whether by means
of merger, consolidation or otherwise, any business or assets, other than
acquisitions of products or services used in the ordinary course operations
of the business of Aetna and its Subsidiaries in a manner consistent with
past practice and other acquisitions in an aggregate amount not exceeding
$75,000,000;

(c) Aetna will not permit any Aetna Health Operations to, sell, lease,
license or otherwise dispose of any material assets or property except in
the ordinary course of business pursuant to contracts or commitments
existing on the date of the Merger Agreement;

(d) Aetna will not, and will not permit any Subsidiary of Aetna to,
declare, set aside or pay any dividend (other than the payment of a regular
quarterly dividend on Aetna Common Stock in an amount not exceeding $0.69
per share), or make any other distribution, with respect to any shares of
Aetna's capital stock;

(e) Aetna will not, and will not permit the Aetna Health Operations
to, create or assume any Lien on any material asset other than in the
ordinary course consistent with past practices;

(f) Aetna will not, and will not permit any Subsidiary of Aetna to,
issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any capital stock of Aetna or Aetna Subsidiary Securities or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such securities of Aetna or any Aetna Subsidiary
Securities except (i) pursuant to contracts and commitments existing on the
date hereof, (ii) the issuance of Aetna securities pursuant to existing
Aetna stock plans or in connection with the exercise of Aetna Stock
Options, and (iii) any such securities issued in one or a

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series of transactions at fair market value which would not require the
approval of the shareholders of Aetna under the applicable NYSE rules;

(g) except as described in the Amended Merger Agreement, (i) Aetna
will not split, combine or reclassify, or take any other similar action
with respect to, any capital stock of Aetna, and (ii) Aetna will not, and
will not permit any Subsidiary of Aetna to, repurchase, redeem or otherwise
acquire an amount of shares of capital stock of, or other ownership
interests in, Aetna or any Aetna Subsidiary Securities which repurchase,
redemption or other acquisition, individually or in the aggregate, is
material to Aetna and its Subsidiaries taken as a whole;

(h) except for borrowings or guarantees in the ordinary course of
business consistent with past practice, Aetna will not permit any Aetna
Health Operation to incur or assume any indebtedness from any third party
for borrowed money or guarantee any such indebtedness;

(i) except for (i) loans, advances or capital contributions to or
investments in Subsidiaries of Aetna, (ii) investments in securities
consistent with past practice or (iii) other loans, advances, capital
contributions or investments in an aggregate amount not exceeding
$25,000,000, Aetna will not permit any Aetna Health Operation to make any
material loans, advances or capital contributions to, or investments in,
any other Person;

(j) Aetna will not, and will not permit any of its Subsidiaries to,
authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of Aetna or any Subsidiary
of Aetna, or any plan of division or share exchange involving Aetna or any
of its Subsidiaries;

(k) Aetna will not, and will not permit any Subsidiary of Aetna to,
change any method of accounting or any accounting principle or practice
used by Aetna or any Subsidiary of Aetna, except for any such change
required by reason of a concurrent change in generally accepted accounting
principles or statutory accounting principles;

(l) except as previously disclosed to U.S. Healthcare and except for
such contracts as would not be material to Aetna or the applicable Aetna
Health Operations or material to their operation in any Standard
Metropolitan Statistical Area, Aetna will not permit any Aetna Health
Operation to enter into any contract limiting the right of any Aetna Health
Operation at any time on or after the date of the Merger Agreement or U.S.
Healthcare or any of its Subsidiaries or Affiliates at or after the Merger
Date, to engage in, or to compete with any Person in, any business,
including, without limitation, any contract which includes exclusivity
provisions restricting the geographical area in which, or the method by
which, any such business may be conducted by Aetna or any of its
Subsidiaries or Affiliates, or by U.S. Healthcare or any of its
Subsidiaries or Affiliates after the Merger Date;

(m) Aetna will not permit any Aetna Health Operation to enter into any
acquisition, joint venture, national vendor or franchising agreement or
arrangement which is material to Aetna and its Subsidiaries, taken as a
whole;

(n) subject (in the case of an acquisition) to paragraph (b) above,
Aetna will not permit any Aetna Health Operation to enter into any
agreement or arrangement with a third party on an exclusive basis to offer
or market any of the following services of such third party: group life,
disability, managed workers' compensation, long term care, dental,
behavioral or pharmacy benefits; and

(o) Aetna will not, and will not permit any Subsidiary of Aetna to,
agree, commit or adopt any plan or proposal to do any of the foregoing.

Until the Merger Date, Aetna and U.S. Healthcare have agreed to cause
Parent (x) not to take any action inconsistent with the provisions of the
Amended Merger Agreement and (y) not to conduct business or activity other than
in connection with the Amended Merger Agreement.

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Agreement, initially after the Merger Date, subject to applicable law, the
annual dividend on the Parent Common Stock will not be less than $0.80 per share
of Parent Common Stock. The Board of Directors of Parent will review the cash
dividend each quarter after interim operating earnings are known.

Pursuant to the Amended Merger Agreement, Parent will cause the U.S.
Healthcare Surviving Corporation to perform its obligations under (a) the
agreements with Criterion (see "The Mergers -- Interests of Certain Persons in
the Mergers") and (b) the employment agreements with the Specified U.S.
Healthcare Officers. In addition, Parent will not permit the U.S. Healthcare
Surviving Corporation to terminate the agreements with Criterion until 2004
absent a breach by any other party thereto. See "Other Information for U.S.
Healthcare Annual Meeting -- Certain Relationships and Transactions."

The Amended Merger Agreement contains certain other covenants including
covenants relating to (i) preparation and filing of proxy statements, (ii)
access to information, (iii) notices of certain events, (iv) coordination and
cooperation with respect to shareholders' meetings, preparation and filing of
disclosure documents, actions and filings with governmental bodies, agencies,
officials or authorities and other third parties, (v) public announcements, (vi)
letters from persons deemed "affiliates" for purposes of Rule 145 under the 1933
Act, (vii) filing of a Form S-4 registration statement, (viii) government
authorizations, (ix) filing of disclosure documents and (x) the listing of the
Parent Common Stock and Parent Mandatorily Convertible Preferred Stock.

Pursuant to the Amended Merger Agreement, U.S. Healthcare and Aetna have
also agreed to cause a meeting of their shareholders to be duly called and held
as soon as reasonably practicable for the purpose of voting on the approval and
adoption of the Amended Merger Agreement and, to the extent submitted to such
shareholders for approval, of the transactions contemplated by the Amended
Merger Agreement, and the Boards of Directors of U.S. Healthcare and Aetna have
agreed to recommend approval and adoption of the Amended Merger Agreement by
such shareholders, provided that such meetings need not be called and held and,
prior to such meetings such recommendations may be withdrawn, modified or
amended to the extent that, as a result of the commencement or receipt of an
Acquisition Proposal (as defined below) with respect to U.S. Healthcare or an
Aetna Acquisition Proposal (as defined below), as applicable, the Board of
Directors of the entity subject to such Acquisition Proposal determines in good
faith that it is necessary to so act in order to comply with the fiduciary
duties under applicable law after consultation with independent counsel.

Aetna has also agreed to vote or cause to be voted all shares of U.S.
Healthcare Stock owned by it or any of its Subsidiaries in favor of the approval
and adoption of the Amended Merger Agreement, provided that no obligation shall
be imposed in respect of shares of U.S. Healthcare Stock (i) held by Aetna or
any Subsidiary of Aetna for the account of another Person (ii) as to which Aetna
or any Subsidiary or Affiliate of Aetna is or may be required to act as
fiduciary or in a similar capacity or (iii) the voting of which pursuant to the
above would violate any legal duties or obligations of Aetna or any Subsidiary
or Affiliate of Aetna.

Aetna and U.S. Healthcare have further agreed, subject to the terms and
conditions of the Amended Merger Agreement, that each party will use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the Mergers and the other transactions
contemplated by the Amended Merger Agreement.

NON-SOLICITATION

Pursuant to and until the termination of the Amended Merger Agreement, U.S.
Healthcare will not, and will cause its Subsidiaries and the directors,
officers, employees, financial advisors and other agents or representatives of
U.S. Healthcare or any of its Subsidiaries not to, directly or indirectly, take
any action to solicit, initiate or encourage any Acquisition Proposal with
respect to U.S. Healthcare or engage in negotiations with, or disclose any
nonpublic information relating to U.S. Healthcare or any Subsidiary of U.S.
Healthcare or afford access to the properties, books or records of U.S.
Healthcare or any Subsidiary of U.S. Healthcare to, any Person that may be
considering making, or has made, an Acquisition Proposal with respect to U.S.
Healthcare. However, U.S. Healthcare is not prevented from furnishing non-public
information to, or entering into discussions or negotiations with, any Person in
connection with an unsolicited bona fide Acquisition Proposal with respect to
U.S. Healthcare, if and only to the extent that (1) the Board of Directors

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of U.S. Healthcare determines in good faith after consultation with independent
counsel that such action is necessary in order to comply with its fiduciary
duties under applicable law and (2) prior to furnishing non-public information
to, or entering into discussions or negotiations with, such Person, U.S.
Healthcare receives from such Person an executed confidentiality agreement with
terms no less favorable to U.S. Healthcare than those contained in the
Confidentiality Agreement dated as of January 16, 1996 between U.S. Healthcare
and Aetna (the "Confidentiality Agreement"). U.S. Healthcare will promptly (and
in no event later than 24 hours after receipt of the relevant Acquisition
Proposal with respect to U.S. Healthcare), notify (which notice shall be
provided orally and in writing and shall identify the Person making the relevant
Acquisition Proposal with respect to U.S. Healthcare and set forth the material
terms thereof) Aetna after receipt of any Acquisition Proposal with respect to
U.S. Healthcare or any request for nonpublic information relating to U.S.
Healthcare or any Subsidiary of U.S. Healthcare or for access to any properties,
books or records of U.S. Healthcare or any Subsidiary of U.S. Healthcare by any
Person that may be considering making, or has made, an Acquisition Proposal with
respect to U.S. Healthcare and will keep Aetna fully informed of the status and
details of any such Acquisition Proposal with respect to U.S. Healthcare. U.S.
Healthcare shall give Aetna at least one day's advance notice of any information
to be supplied to, and at least three days' advance notice of any agreement to
be entered into with, any Person making such Acquisition Proposal with respect
to U.S. Healthcare. U.S. Healthcare shall, and shall cause its Subsidiaries and
the directors, officers, employees, financial advisors and other agents or
representatives of U.S. Healthcare or any of its Subsidiaries to, cease
immediately and cause to be terminated all activities, discussions or
negotiations, if any, with any Persons conducted prior to the date of the Merger
Agreement with respect to any Acquisition Proposal with respect to U.S.
Healthcare. An "Acquisition Proposal" with respect to any Person, pursuant to
the Amended Merger Agreement, means any offer or proposal for, or any indication
of interest in, (i) a merger or other business combination involving such Person
or any Subsidiary of such Person or (ii) the acquisition in any manner of any
significant equity interest in, or a substantial portion of the assets of, such
Person or any Subsidiary of such Person, in each case other than the
transactions contemplated by the Amended Merger Agreement.

Pursuant to the Amended Merger Agreement, until the termination of the
Amended Merger Agreement, Aetna will not, and will cause its Subsidiaries and
the directors, officers, employees, financial advisors and other agents or
representatives of Aetna or any of its Subsidiaries not to, directly or
indirectly, take any action to solicit, initiate or encourage any Aetna
Acquisition Proposal or engage in negotiations with, or disclose any nonpublic
information relating to Aetna or any Subsidiary of Aetna or afford access to the
properties, books or records of Aetna or any Subsidiary of Aetna to, any Person
that may be considering making, or has made, an Aetna Acquisition Proposal.
However, Aetna is not prevented from furnishing non-public information to, or
entering into discussions or negotiations with, any Person in connection with an
unsolicited bona fide Aetna Acquisition Proposal, with respect to Aetna if and
only to the extent that (1) the Board of Directors of Aetna determines in good
faith after consultation with independent counsel that such action is necessary
in order to comply with its fiduciary duties under applicable law and (2) prior
to furnishing non-public information to, or entering into discussions or
negotiations with, such Person, Aetna receives from such Person an executed
confidentiality agreement with terms no less favorable to Aetna than those
contained in the Confidentiality Agreement. Aetna will promptly (and in no event
later than 24 hours after receipt of the relevant Aetna Acquisition Proposal)
notify (which notice shall be provided orally and in writing and shall identify
the Person making the relevant Aetna Acquisition Proposal and set forth the
material terms thereof) U.S. Healthcare after receipt of any Aetna Acquisition
Proposal or any request for nonpublic information relating to Aetna or any
Subsidiary of Aetna or for access to any properties, books or records of Aetna
or any Subsidiary of Aetna by any Person that may be considering making, or has
made, an Aetna Acquisition Proposal and will keep U.S. Healthcare fully informed
of the status and details of any such Aetna Acquisition Proposal. Aetna shall
give U.S. Healthcare at least one day's advance notice of any information to be
supplied to, and at least three days' advance notice of any agreement to be
entered into with, any Person making such Aetna Acquisition Proposal. Aetna
shall, and shall cause its Subsidiaries and the directors, officers, employees,
financial advisors and other agents or representatives of Aetna or any of its
Subsidiaries to, cease immediately and cause to be terminated all activities,
discussions or negotiations, if any, with any Persons conducted prior to the
date of the Merger Agreement with respect to any Aetna Acquisition Proposal. An
"Aetna Acquisition Proposal" pursuant to the Merger Agreement means any offer or
proposal for, or any indication of interest in, (i) a

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merger or other business combination involving Aetna or any of the Aetna Health
Operations or (ii) the acquisition in any manner of any significant equity
interest in, or a substantial portion of the assets of, the Aetna Health
Operations, in each case other than the transactions contemplated by the Merger
Agreement.

STOCK OPTIONS AND BENEFIT PLANS

U.S. Healthcare Options. Pursuant to the Amended Merger Agreement, as of
the date of the Merger Agreement, each then-outstanding (i) U.S. Healthcare
Employee Stock Option became and (ii) U.S. Healthcare Non-Employee Stock Option,
in each case, under any incentive plan of U.S. Healthcare, will become fully
vested and exercisable. At the Merger Date, each U.S. Healthcare Stock Option
then outstanding will be canceled and treated as follows:

(i) with respect to all U.S. Healthcare Non-Employee Stock Options and
the Initial Number of U.S. Healthcare Option Shares, Parent will issue in
substitution therefor U.S. Healthcare Substitute Options. U.S. Healthcare
Substitute Options will be issued under a Parent stock option plan to be
adopted prior to the Merger Date and which shall comply in all respects
with the applicable requirements of Rule 16b-3 promulgated under the 1934
Act. The number of shares of Parent Common Stock subject to each such U.S.
Healthcare Substitute Option and the exercise price thereunder will be
computed in compliance with the requirements of Section 424(a) of the Code,
and each such U.S. Healthcare Substitute Option will otherwise be subject
to the other applicable terms and conditions of the U.S. Healthcare Stock
Option for which it is substituted. Without limiting the generality of the
foregoing, (A) the exercise price of each U.S. Healthcare Substitute Option
will equal the exercise price of the U.S. Healthcare Stock Option for which
such U.S. Healthcare Substitute Option was substituted, multiplied by a
fraction, the numerator of which is the average closing price of Parent
Common Stock for the five trading days following the Merger Date ("X") and
the denominator of which is the closing price of U.S. Healthcare Stock on
the last trading day preceding the Merger Date ("Y") and (B) the number of
shares subject to such U.S. Healthcare Substitute Option will equal the
Initial Number of U.S. Healthcare Option Shares, multiplied by a fraction,
the numerator of which is Y and the denominator of which is X. The U.S.
Healthcare Stock Options for which U.S. Healthcare Substitute Options will
be issued with respect to each holder shall be selected in the following
order:

(1) first, incentive stock options, and

(2) second, nonqualified options,

in each case giving priority to those with the highest exercise price.

(ii) with respect to each remaining canceled U.S. Healthcare Employee
Stock Option, the holder will receive in cash, within as promptly as
possible, but in no event more than 10 business days following the Merger
Date, an amount equal to the excess of (A) the closing price of U.S.
Healthcare Stock on the last trading day preceding the Merger Date, over
(B) the exercise price of such U.S. Healthcare Stock Option, multiplied by
the number of shares of U.S. Healthcare Stock subject to such remaining
U.S. Healthcare Employee Stock Option.

As of the date of the Merger Agreement, each then outstanding share of U.S.
Healthcare Restricted Stock became fully vested. Each outstanding share of
restricted stock of U.S. Healthcare issued to any Person who is not an employee
of U.S. Healthcare will become fully vested and entitled to receive the U.S.
Healthcare Merger Consideration on the Merger Date.

Aetna Options. Pursuant to the Amended Merger Agreement, at the Merger
Date, each outstanding Aetna Stock Option under any of Aetna's incentive plans,
whether vested or unvested, will be canceled and Parent shall issue in
substitution therefor an Aetna Substitute Option. Aetna Substitute Options will
be issued under a Parent stock option plan to be adopted prior to the Merger
Date which will comply in all respects with the applicable requirements of Rule
16b-3 promulgated under the 1934 Act. The number of shares of Parent Common
Stock subject to each such Aetna Substitute Option and the exercise price
thereunder will equal the number of shares of Aetna Common Stock subject to the
Aetna Stock Option and the exercise price thereunder that such Aetna Substitute
Option replaces and, in compliance with the requirements of

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Section 424(a) of the Code, each such Substitute Option shall be subject to
substantially all of the other terms and conditions (including vesting schedule)
of the Aetna Stock Option it replaces.

Benefit Plans. Pursuant to the Merger Agreement, through December 31, 1998,
Parent will maintain employee plans and benefit arrangements for the benefit of
U.S. Healthcare employees that are reasonably comparable in the aggregate to the
U.S. Healthcare Employee Plans and U.S. Healthcare Benefit Arrangements. Any
changes will be deemed reasonably comparable in the aggregate unless unanimously
rejected by the two Co-Presidents of U.S. Healthcare in their reasonable good
faith discretion.

Upon the consummation of the Aetna Sub Merger any existing rights attached
to Aetna Common Stock under the Rights Agreement, as amended, dated as of
October 27, 1989 between Aetna and First Chicago Trust Company of New York will
be extinguished.

U.S. Healthcare has agreed that it will and will direct the appropriate
fiduciaries to, exercise all appropriate fiduciary responsibilities with respect
to shares of U.S. Healthcare Stock held in any U.S. Healthcare employee plans.

INDEMNIFICATION AND INSURANCE

Pursuant to the Merger Agreement, from and after the Merger Date, Parent
shall, and shall cause the U.S. Healthcare Surviving Corporation to, indemnify,
defend and hold harmless any person who is on the date of the Amended Merger
Agreement, or has been at any time prior to the date of the Merger Agreement, or
who becomes prior to the Merger Date, an officer, director, or employee or
agent, and the Principal Shareholder (the "Indemnified Party") of U.S.
Healthcare or any of its Subsidiaries against all losses, claims, damages,
liabilities, costs and expenses (including attorney's fees and expenses),
judgments, fines, losses, and amounts paid in settlement in connection with any
actual or threatened action, suit, claim, proceeding or investigation (each a
"Claim") to the extent that any such Claim is based on, or arises out of, (i)
the fact that such person is or was a director, officer, employee or agent or
the Principal Shareholder of U.S. Healthcare or any of its Subsidiaries at any
time prior to the Merger Date or is or was serving at the request of U.S.
Healthcare or any of its Subsidiaries as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise at
any time prior to the Merger Date, or (ii) the Amended Merger Agreement, the
Voting Agreement, as amended by Amendment No. 1 thereto dated May 30, 1996, or
any of the transactions contemplated thereby, or (iii) Claims relating to the
facts specified in the consolidated lawsuit captioned J.H. Realty et. al. v.
U.S. Healthcare (C.A. 95-CV-4176 and 95-CV-7180 (E.D. Pa.)) in each case to the
extent that any such Claim pertains to any matter or fact arising, existing, or
occurring prior to or at the Merger Date, regardless of whether such Claim is
asserted or claimed prior to, at or after the Merger Date (the matters described
in clauses (i), (ii) and (iii) the "Pre-Merger Matters"), to the fullest extent
indemnified under U.S. Healthcare's articles of incorporation, bylaws in effect
as of the date of the Amended Merger Agreement or indemnification agreements in
effect at the date of the Amended Merger Agreement, including provisions
relating to advancement of expenses incurred in the defense of any action or
suit; provided that, for purposes of the foregoing, the Principal Shareholder,
in his capacity as such, shall be deemed to be a beneficiary of such
indemnification provisions; and, provided further that such indemnification
shall be subject to any limitation imposed from time to time under applicable
laws.

Parent and the U.S. Healthcare have agreed that all rights to
indemnification and all limitations or exculpation of liabilities existing in
favor of the Indemnified Party as provided in U.S. Healthcare's articles of
incorporation and bylaws as in effect as of the date of the Merger Agreement
shall continue in full force and effect with respect to Pre-Merger Matters,
without any amendment thereto, for a period of six years from the Merger Date to
the extent such rights are consistent with Pennsylvania Law; provided that, in
the event any Claim or Claims with respect to any such Pre-Merger Matters are
asserted or made within such six year period, all rights to indemnification in
respect of any such Claim or Claims shall continue until disposition of any and
all such Claims; provided further, that any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the Pennsylvania Law, U.S. Healthcare's articles of
incorporation or bylaws or such agreements, as the case may be, shall be made by
independent legal counsel selected by the Indemnified Party and reasonably
acceptable to Parent. However,

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the provisions described in this section shall not impair any rights or
obligations of any present or former directors or officers of U.S. Healthcare.

Pursuant to the Amended Merger Agreement, in the event Parent or the U.S.
Healthcare Surviving Corporation or any of their successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary to
effectuate the purposes of provisions described in this section, proper
provision shall be made so that the successors and assigns of Parent and U.S.
Healthcare assume the obligations described in this section and none of the
actions described in clause (i) or (ii) shall be taken until such provision is
made.

Parent or the U.S. Healthcare Surviving Corporation have agreed to maintain
U.S. Healthcare's officers' and directors' liability insurance policy as of the
Merger Date ("D&O Insurance") with respect to Pre-Merger Matters for a period of
not less than six years after the Merger Date, provided, that Parent or the U.S.
Healthcare Surviving Corporation may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers; provided, further, if the existing D&O
Insurance with respect to Pre-Merger Matters expires or is canceled during such
period, Parent or the U.S. Healthcare Surviving Corporation have agreed to use
their best efforts to obtain substantially similar D&O Insurance; and provided
further that in satisfying its obligations described in this Section, Parent
shall not be obligated to pay premiums in excess of 150% of the premium for D&O
Insurance paid by U.S. Healthcare as of the date of the Merger Agreement, which
amount has previously been disclosed to Aetna.

The terms described in the four immediately preceding paragraphs will
similarly apply to Aetna, and Parent shall have obligations with respect to
Aetna corresponding to those of Parent with respect to U.S. Healthcare described
in this section.

Pursuant to the Amended Merger Agreement, notwithstanding anything to the
contrary described in the first paragraph of this Section, the obligations of
Parent to indemnify the Principal Shareholder as described in the first
paragraph of this Section in his capacity as such and not as a director or
officer shall (i) take effect as of the date of the Merger Agreement, (ii) prior
to the Merger Date, be the obligations of Aetna and (iii) be limited to Claims
based on, or arising out of, the Amended Merger Agreement, the Voting Agreement
or any of the transactions contemplated thereby involving the Principal
Shareholder in his capacity as such. Expenses that are subject to
indemnification as described in this Section shall be advanced by Parent or
Aetna, as applicable, and indemnification shall be paid in accordance with the
procedures set forth in U.S. Healthcare's bylaws in effect as of the date of the
Merger Agreement as the same have been modified as described in the second
paragraph of this section.

TERMINATION

The Amended Merger Agreement may be terminated and abandoned at any time
prior to the Merger Date, whether before or after the approval by the respective
shareholders of Aetna and U.S. Healthcare:

(a) by mutual written consent of U.S. Healthcare and Aetna;

(b) by either U.S. Healthcare or Aetna, if the Merger has not been
consummated by the date twelve months following the date of the Merger
Agreement;

(c) by either U.S. Healthcare or Aetna, if there shall be any law or
regulation that makes consummation of either of the Mergers illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Aetna or U.S. Healthcare from consummating their respective
Mergers is entered and such judgment, injunction, order or decree shall
become final and nonappealable;

(d) by Aetna, in the event of any breach by the Principal Shareholder
of any obligations under the Amended Voting Agreement;

(e) (i) by U.S. Healthcare, if the approvals of the shareholders of
Aetna contemplated by the Amended Merger Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a duly
held meeting of shareholders or any adjournment thereof or (ii) by Aetna,
if the approvals of the shareholders of U.S. Healthcare contemplated by the
Amended Merger Agreement shall not have

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been obtained by reason of the failure to obtain the required vote at a
duly held meeting of shareholders or any adjournment thereof;

(f) by Aetna, if, (i) the Board of Directors of U.S. Healthcare
determines not to call or hold the U.S. Healthcare Annual Meeting or (ii)
prior to the U.S. Healthcare Annual Meeting, the Board of Directors of U.S.
Healthcare shall have withdrawn, modified or changed in a manner adverse to
Aetna its approval or recommendation of the Amended Merger Agreement or the
U.S. Healthcare Sub Merger;

(g) by U.S. Healthcare, if, (i) the Board of Directors of Aetna
determines not to call or hold the Aetna Special Meeting or (ii) prior to
the Aetna Special Meeting, the Board of Directors of Aetna shall have
withdrawn, modified or changed in a manner adverse to U.S. Healthcare its
approval or recommendation of the Amended Merger Agreement or the Aetna Sub
Merger;

(h) by Aetna, upon a breach of any representation, warranty, covenant
or agreement of U.S. Healthcare, or if any representation or warranty of
U.S. Healthcare shall become untrue, in either case such that the
conditions described in (a) in the second paragraph under "Conditions to
the Mergers" would be incapable of being satisfied by the first anniversary
of the date of the Merger Agreement (or as otherwise extended);

(i) by U.S. Healthcare, upon a breach of any representation, warranty,
covenant or agreement of Aetna, or if any representation or warranty of
Aetna shall become untrue, in either case such that the conditions
described in clause (a) in the third paragraph under "Conditions to the
Mergers" would be incapable of being satisfied by the first anniversary of
the date of the Merger Agreement (or as otherwise extended); and

(j) by U.S. Healthcare, upon payment to Aetna of the amounts referred
to in the second paragraph under "Expenses and Termination Fee", if prior
to the U.S. Healthcare Shareholder Meeting, the Board of Directors of U.S.
Healthcare shall have withdrawn or modified in a manner adverse to Aetna
its approval or recommendation of the Merger Agreement or the U.S.
Healthcare Sub Merger in order to permit U.S. Healthcare to execute a
definitive agreement in connection with an Acquisition Proposal with
respect to U.S. Healthcare which the Board of Directors of U.S. Healthcare
determines in good faith (based on the presentation of an investment
banking firm of national reputation) to be more favorable to U.S.
Healthcare's shareholders than the U.S. Healthcare Sub Merger.

EXPENSES AND TERMINATION FEES

The Amended Merger Agreement provides that, except as otherwise described
therein or agreed in writing, all costs and expenses incurred in connection with
the Amended Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such cost or expense. Aetna and U.S. Healthcare have
agreed to share the costs of the Joint Proxy Statement/Prospectus equally.

U.S. Healthcare has agreed that if the Amended Merger Agreement is
terminated pursuant to the provisions described in paragraphs (e)(ii), (f) or
(j) under "Termination", it will pay Aetna an amount equal to $100,000,000 plus
all out-of-pocket expenses, not to exceed $25,000,000, incurred by Aetna in
connection with the Merger Agreement, the Mergers and all related transactions;
provided that no such payment will be required if the Merger Agreement is
terminated pursuant to the provisions described in paragraph (e)(ii) under
"Termination" unless, after the date of the Merger Agreement, U.S. Healthcare
shall have received, or there shall have been commenced, an Acquisition Proposal
with respect to U.S. Healthcare.

U.S. Healthcare has also agreed that if the Amended Merger Agreement is
terminated pursuant to the provisions described in paragraph (e)(ii) under
"Termination" and no payment is required pursuant to the provisions described in
the immediately preceding paragraph of this section, it will reimburse Aetna for
all out-of-pocket expenses (not to exceed $25,000,000) incurred by Aetna in
connection with the Amended Merger Agreement, the Merger and all related
transactions.

Aetna has agreed that if the Amended Merger Agreement is terminated (i)
pursuant to the provisions described in paragraphs (e)(i), (g) or (k) under
"Termination", it will pay U.S. Healthcare an amount equal to $100,000,000 plus
all out-of-pocket expenses, not to exceed $25,000,000, incurred by U.S.
Healthcare in connection with the Amended Merger Agreement, the Mergers and all
related transactions; provided that no such payment will be required if the
Amended Merger Agreement is terminated pursuant to the provisions

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described in (e)(i) under the heading "Termination" unless, after the date of
the Merger Agreement, Aetna shall have received, or there shall have been
commenced, an Aetna Acquisition Proposal.

Aetna has also agreed that if the Amended Merger Agreement is terminated
pursuant to the provisions described in paragraph (e)(i) under "Termination" and
no payment is required pursuant to the provisions described in the immediately
preceding paragraph of this Section, it will reimburse U.S. Healthcare for all
out-of-pocket expenses (not to exceed $25,000,000) incurred by U.S. Healthcare
in connection with the Amended Merger Agreement, the Mergers and all related
transactions.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

The representations and warranties contained in the Amended Merger
Agreement will not survive the Merger Date.

RIGHTS UNDER THE AMENDED MERGER AGREEMENT

None of the Amended Merger Agreement, the Confidentiality Agreement or any
other agreement contemplated thereby is intended to confer on any Person other
than the parties thereto any rights or remedies except that the provisions
described under "Indemnification and Insurance" and the provisions described
under the fifth paragraph under "Certain Covenants" are intended to confer
rights and remedies on the Persons specified therein, the provisions described
in the first paragraph under "Stock Options and Benefit Plans -- Benefit Plans"
and in the third paragraph under "Corporate Matters" are intended to confer
rights and remedies on the Co-Presidents and the provisions described under the
second paragraph under "Corporate Matters" are intended to confer rights and
remedies on the Principal Shareholder.

AMENDMENTS; NO WAIVERS

Any provision of the Amended Merger Agreement may be amended or waived
prior to the Merger Date if such amendment or waiver is in writing and signed,
in the case of an amendment, by U.S. Healthcare, Aetna and Parent or, in the
case of a waiver, by the party against whom the waiver is to be effective;
provided that after the adoption of the Amended Merger Agreement by the
shareholders of (i) U.S. Healthcare, no such amendment or waiver may, without
the further approval of such shareholders, alter or change (A) the amount or
kind of consideration to be received in exchange for any shares of capital stock
of U.S. Healthcare, or (B) any of the terms or conditions of the Amended Merger
Agreement if such alteration or change would adversely affect the holders of any
shares of capital stock of U.S. Healthcare and (ii) Aetna, no such amendment or
waiver may, without the further approval of such shareholders, alter or change
(A) the amount or kind of consideration to be received in exchange for any
shares of capital stock of Aetna or (B) any of the terms or conditions of the
Amended Merger Agreement if such alteration or change would adversely affect the
holders of any shares of capital stock of Aetna.

GOVERNING LAW

The Amended Merger Agreement will be construed in accordance with and
governed by the law of the State of New York (without regard to principles of
conflict of laws).

JURISDICTION

Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, the Amended Merger
Agreement or the transactions contemplated by the Amended Merger Agreement may
be brought against any of the parties in the United States District Court for
the Southern District of New York or any state court sitting in the City of New
York, Borough of Manhattan, and each of the parties to the Amended Merger
Agreement have consented to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts) in any such suit, action or proceeding and has
waived any objection to venue laid therein. Process in any such suit, action or
proceeding pursuant to the Amended Merger Agreement may be served on any party
anywhere in the world, whether within or without the State of New York.

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THE AMENDED VOTING AGREEMENT

The following description of the Voting Agreement, dated as of March 30,
1996, among Leonard Abramson, Aetna Life Insurance Company and Aetna Life
Insurance and Annuity Company, as amended by Amendment No. 1 thereto dated as of
May 30, 1996 (as so amended the "Amended Voting Agreement) is qualified in its
entirety by reference to the complete text of the Amended Voting Agreement,
which is incorporated by reference herein and a copy of which is annexed to this
Joint Proxy Statement/Prospectus as Appendix B. Capitalized terms not defined
herein shall have the meaning set forth in the Amended Voting Agreement.

Simultaneously with the execution of the Merger Agreement, Aetna Life
Insurance Company, a Connecticut insurance corporation and an affiliate of Aetna
("ALIC"), Aetna Life Insurance and Annuity Company, a Connecticut insurance
company and an affiliate of Aetna ("ALIAC" and, together with ALIC, the "Other
Parties") and the Principal Shareholder entered into a Voting Agreement, which
was amended by Amendment No. 1 thereto dated May 30, 1996, pursuant to which the
Principal Shareholder agreed to vote or cause to be voted 14,411,955 shares of
U.S. Healthcare Class B Stock owned by him, as of the date of such Agreement
(the "Class B Shares"), representing approximately 83.7% of the total voting
power of U.S. Healthcare's capital stock as of March 30, 1996, at the U.S.
Healthcare Annual Meeting and at any other annual or special meeting of
shareholders of U.S. Healthcare where such matters arise (a) in favor of the
approval and adoption of the Amended Merger Agreement and the transactions
contemplated thereby and (b) against (i) approval of any proposal made in
opposition to or in competition with the Mergers or any of the other
transactions contemplated by the Amended Merger Agreement, (ii) any merger,
consolidation, sale of assets, business combination, share exchange,
reorganization or recapitalization of U.S. Healthcare or any of its
subsidiaries, with or involving any party other than Aetna, the Other Parties or
one of their respective subsidiaries, (iii) any liquidation or winding up of
U.S. Healthcare, (iv) any extraordinary dividend by U.S. Healthcare, (v) any
change in the capital structure of U.S. Healthcare (other than pursuant to the
Amended Merger Agreement) and (vi) any other action that may reasonably be
expected to impede, interfere with, delay, postpone or attempt to discourage the
Mergers or the other transactions contemplated by the Amended Merger Agreement
or result in a breach of any of the covenants, representations, warranties or
other obligations or agreements of U.S. Healthcare under the Amended Merger
Agreement which would materially and adversely affect U.S. Healthcare or its
ability to consummate the transactions contemplated by the Amended Merger
Agreement.

If, in lieu of the U.S. Healthcare Annual Meeting, shareholder action in
respect of the Amended Merger Agreement or any of the transactions contemplated
thereby is taken by written consent, the Principal Shareholder has agreed that
the provisions of the Amended Voting Agreement imposing obligations in respect
of or in connection with the U.S. Healthcare Annual Meeting will similarly apply
to such action by written consent.

From and after the date of the Voting Agreement, the Principal Shareholder
has also agreed (a) not to commit any act that could restrict or otherwise
affect his full legal power, authority and right to vote the Class B Shares in
favor of the approval and adoption of the Amended Merger Agreement and the
transactions contemplated thereby, and (b) without limiting the generality of
the foregoing, not to enter into any voting agreement with any person or entity
with respect to any of the Class B Shares, grant any person or entity any proxy
(revocable or irrevocable) or power of attorney with respect to any of the Class
B Shares, deposit any of the Class B Shares in a voting trust or otherwise enter
into any agreement or arrangement limiting or affecting the Principal
Shareholder's legal power, authority or right to vote the Class B Shares in
favor of the approval and adoption of the Amended Merger Agreement and the
transactions contemplated thereby.

The Principal Shareholder has further agreed that (other than pursuant to
the Amended Merger Agreement) he will not, and will not agree to, (i) sell,
assign, dispose of, encumber, mortgage, hypothecate or otherwise transfer (each
such action, a "Transfer") any Class B Shares or any options, warrants or other
rights to acquire U.S. Healthcare Class B Stock to any person or entity or (ii)
convert (or allow the conversion of) any Class B Shares into shares of U.S.
Healthcare Common Stock; provided that, notwithstanding the provisions described
in (i) above, the Principal Shareholder is permitted to effect a Transfer of all
or a portion

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of the Class B Shares to any "Permitted Transferee" (as defined in U.S.
Healthcare's Articles of Incorporation) if prior to and as a condition of such
Transfer such Permitted Transferee enters into a written agreement with the
Other Shareholders (in form and substance satisfactory to the Other
Shareholders) agreeing to be bound by the terms of the Voting Agreement binding
on the Principal Shareholder.

If, after the date of the Voting Agreement, the Principal Shareholder
acquires beneficial ownership of any shares of U.S. Healthcare Class B Stock
(any such shares, "Additional Shares"), including, without limitation, upon
exercise of any option, warrant or right to acquire U.S. Healthcare Class B
Stock or through any stock dividend or stock split, the Principal Shareholder
has agreed that the provisions regarding the Class B Shares described above
shall also apply to such Additional Shares.

The provisions of the Amended Voting Agreement will terminate on the
earliest to occur of (i) the consummation of the Mergers, (ii) the date which is
18 months after the date of the Voting Agreement or (iii) the termination of the
Amended Merger Agreement if, but only if, the Amended Merger Agreement is
terminated solely for reasons that are not directly or indirectly related to the
commencement of, or any Person's direct or indirect indication of interest in
making, an Acquisition Proposal with respect to U.S. Healthcare.

The Amended Voting Agreement is governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania without giving effect to the
principles of conflicts of laws thereof.

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<PAGE> 111

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated statements of
income of Parent for the three months ended March 31, 1996 and the twelve months
ended December 31, 1995 present results for Parent as if each of the following
had occurred as of January 1, 1996 and January 1, 1995, respectively: (i) the
consummation of the sale by Aetna of its property-casualty operations to an
affiliate of Travelers (the "Property-Casualty Sale") and (ii) the consummation
of the Mergers (including associated borrowings and related transactions). The
accompanying unaudited pro forma condensed consolidated balance sheet for Parent
as of March 31, 1996 gives effect to the Property-Casualty Sale and the Mergers
(including associated borrowings and related transactions) as if they had
occurred as of March 31, 1996.

The U.S. Healthcare Sub Merger will be accounted for under the purchase
method of accounting. Accordingly, the amount of the consideration to be paid in
the U.S. Healthcare Sub Merger will be allocated to assets acquired and
liabilities assumed based on their estimated fair values. The excess of such
consideration over the estimated fair value of such assets and liabilities has
been preliminarily allocated to certain identifiable intangible assets and
goodwill. The purchase price allocation may be adjusted upon completion of the
final valuations of U.S. Healthcare's assets and liabilities and the effect of
any such adjustment could be significant. The Aetna Sub Merger will be treated
as a reorganization with no change in the recorded amount of Aetna's assets and
liabilities. See "The Mergers -- Accounting Treatment." The pro forma condensed
consolidated financial statements do not give effect to any synergies which may
be realized as a result of the Mergers. See "Other Matters -- Estimated
Synergies." Additionally, except as indicated in the notes thereto, the pro
forma condensed consolidated financial statements do not reflect any
nonrecurring/unusual restructuring charges that may be incurred as a result of
the integration of the Combined Health Operations. The amount of such charges
related to the integration of the Combined Health Operations cannot be
reasonably determined at this time.

The unaudited pro forma condensed consolidated financial statements are
provided for informational purposes only and do not purport to represent what
Parent's financial position or results of operations actually would have been
had the Property-Casualty Sale and the Mergers in fact occurred on the dates
indicated, or to project Parent's financial position or results of operations
for any future date or period.

The unaudited pro forma condensed consolidated financial statements are
based on the historical consolidated financial statements of Aetna and U.S.
Healthcare and should be read in conjunction with (i) such historical financial
statements, and the notes thereto, which are incorporated by reference in this
Joint Proxy Statement/Prospectus, (ii) the selected historical financial data
appearing elsewhere in this Joint Proxy Statement/Prospectus and (iii) the
unaudited selected pro forma financial information and unaudited comparative per
share data, including the notes thereto, appearing elsewhere in this Joint Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference,"
"Available Information," "Selected Historical Financial Data," and "Unaudited
Selected Pro Forma Financial Information."

100
<PAGE> 112

AETNA INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
AETNA LIFE AETNA LIFE PRO FORMA
AND PRO FORMA AND U.S.
CASUALTY PROPERTY- CASUALTY U.S. HEALTHCARE AETNA
COMPANY CASUALTY SALE COMPANY HEALTHCARE MERGER INC.(M)
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL ADJUSTMENTS(E) AS ADJUSTED
------------ ------------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Premiums.......................... $ 1,843.9 $ -- $ 1,843.9 $ 1,028.9 $ -- $ 2,872.8
Net investment income, including
net realized capital gains...... 948.3 --(a) 948.3 21.8 --(f) 970.1
Fees and other income............. 518.2 -- 518.2 23.0 -- 541.2
------------ ------ ------------ -------- ------- ------------
Total revenue............. 3,310.4 -- 3,310.4 1,073.7 -- 4,384.1
------------ ------ ------------ -------- ------- ------------
Benefits and Expenses:
Current and future benefits....... 2,236.9 -- 2,236.9 789.6 -- 3,026.5
Operating expenses................ 790.2 -- 790.2 143.6 3.5(g) 943.3
29.0(h)
(23.0)(m)
Amortization of deferred policy
acquisition costs............... 37.0 -- 37.0 -- -- 37.0
Amortization of identifiable
intangible assets and
goodwill........................ -- -- -- -- 89.3(j) 89.3
Restructuring costs............... -- --(c) -- -- --(k) --
------------ ------ ------------ -------- ------- ------------
Total benefits and
expenses................ 3,064.1 -- 3,064.1 933.2 98.8 4,096.1
------------ ------ ------------ -------- ------- ------------
Income from continuing operations
before income taxes (benefits)
and preferred stock dividends... 246.3 -- 246.3 140.5 (98.8) 288.0
Income taxes (benefits)........... 80.8 --(a) 80.8 58.9 (1.3)(g) 114.7
(10.2)(h)
2.5(m)
(16.0)(j)
------------ ------ ------------ -------- ------- ------------
Income from continuing
operations...................... 165.5 -- 165.5 81.6 (73.8) 173.3
Dividends on mandatorily
convertible preferred stock..... -- -- -- -- (14.1)(i) (14.1)
------------ ------ ------------ -------- ------- ------------
Income from continuing operations
attributable to common
ownership....................... $ 165.5 $ -- $ 165.5 $ 81.6 $ (87.9) $ 159.2
============ ====== ============ ======== ======= ============
Results Per Common Share:
Primary:
Income from continuing
operations...................... $ 1.43 $ 1.43 $ 1.05
============ ============ ============
Weighted average common shares
outstanding................... 115,765,475 115,765,475 151,233,455*
------------ ------------ ------------
</TABLE>

* Pro forma weighted average common shares outstanding reflects Aetna's first
quarter 1996 weighted average common shares outstanding and the issuance by
Parent of 35,467,980 shares of Parent Common Stock in connection with the U.S.
Healthcare Sub Merger, as though all such shares were issued and outstanding
on January 1, 1996. No conversion of the Parent Mandatorily Convertible
Preferred Stock is assumed.

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

101
<PAGE> 113

AETNA INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
AETNA LIFE AETNA LIFE PRO FORMA
AND PRO FORMA AND U.S.
CASUALTY PROPERTY- CASUALTY U.S. HEALTHCARE AETNA
COMPANY CASUALTY SALE COMPANY HEALTHCARE MERGER INC.(M)
HISTORICAL ADJUSTMENT(D) AS ADJUSTED HISTORICAL ADJUSTMENTS(E) AS ADJUSTED
------------ ------------- ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Premiums......................... $ 7,431.4 $ -- $ 7,431.4 $ 3,462.0 $ -- $ 10,893.4
Net investment income, including
net realized capital gains..... 3,622.3 --(a) 3,622.3 91.9 --(f) 3,714.2
Fees and other income............ 1,924.3 -- 1,924.3 55.8 -- 1,980.1
------------ ------ ------------ -------- ------- ------------
Total revenue............ 12,978.0 -- 12,978.0 3,609.7 -- 16,587.7
------------ ------ ------------ -------- ------- ------------
Benefits and Expenses:
Current and future benefits...... 9,027.2 -- 9,027.2 2,577.8 -- 11,605.0
Operating expenses............... 3,087.5 17.0(b) 3,104.5 412.9 18.2(g) 3,651.6
116.0(h)
Amortization of deferred policy
acquisition costs.............. 137.1 -- 137.1 -- -- 137.1
Amortization of identifiable
intangible assets and
goodwill....................... -- -- -- -- 358.4(j) 358.4
Restructuring costs.............. -- --(c) -- -- --(k) --
------------ ------ ------------ -------- ------- ------------
Total benefits and
expenses............... 12,251.8 17.0 12,268.8 2,990.7 492.6 15,752.1
------------ ------ ------------ -------- ------- ------------
Income from continuing operations
before income taxes (benefits)
and preferred stock
dividends...................... 736.2 (17.0) 709.2 619.0 (492.6) 835.6
Income taxes (benefits).......... 252.3 (5.9)(b) 246.4 238.3 (7.0)(g) 373.2
(40.6)(h)
(63.9)(j)
------------ ------ ------------ -------- ------- ------------
Income from continuing
operations..................... 473.9 (11.1) 462.8 380.7 (381.1) 462.4
Dividends on mandatorily
convertible preferred stock.... -- -- -- -- (56.2)(i) (56.2)
------------ ------ ------------ -------- ------- ------------
Income from continuing operations
attributable to common
ownership...................... $ 473.9 $ (11.1) $ 462.8 $ 380.7 $ (437.3) $ 406.2
============ ====== ============ ======== ======= ============
Results Per Common Share:
Primary:
Income from continuing
operations..................... $ 4.16 $ 4.06 $ 2.71
============ ============ ============
Weighted average common shares
outstanding.................. 113,897,633 113,897,633 149,365,613*
------------ ------------ ------------
</TABLE>

* Pro forma weighted average common shares outstanding reflects Aetna's 1995
weighted average common shares outstanding and the issuance by Parent of
35,467,980 common shares in connection with the U.S. Healthcare Sub Merger, as
though all such shares were issued and outstanding on January 1, 1995. No
conversion of the Parent Mandatorily Convertible Preferred Stock is assumed.

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

102
<PAGE> 114

AETNA INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(IN MILLIONS)

<TABLE>
<CAPTION>
AETNA LIFE AND PRO FORMA AETNA LIFE AND PRO FORMA
CASUALTY PROPERTY- CASUALTY U.S. U.S. HEALTHCARE AETNA
COMPANY CASUALTY SALE COMPANY HEALTHCARE MERGER INC.(M)
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL ADJUSTMENTS AS ADJUSTED
-------------- ------------- -------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Marketable securities...... $ 31,911.5 $ -- $ 31,911.5 $1,002.8 $ -- $32,914.3
Other investments.......... 10,578.3 -- 10,578.3 -- -- 10,578.3
--------- ---------- --------- --------- --------- ---------
Total investments.... 42,489.8 -- 42,489.8 1,002.8 -- 43,492.6
--------- ---------- --------- --------- --------- ---------
Cash and cash equivalents.... 1,558.5 4,134.0(n) 5,692.5 353.7 (3,900.0)(r) 2,146.2
Goodwill..................... -- -- -- -- 6,992.2(t) 6,992.2
Identifiable intangible
assets..................... -- -- -- -- 1,525.0(t) 1,525.0
Deferred federal and foreign
income taxes............... 402.2 64.0(o) 592.8 -- 26.1(s) 624.2
126.6(p) -- 5.3(q)
Separate accounts assets..... 31,128.9 -- 31,128.9 -- -- 31,128.9
Net assets of discontinued
operations................. 3,746.7 (3,746.7)(n) -- -- -- --
Other assets................. 4,776.1 -- 4,776.1 403.2 (69.5)(s) 5,109.8
--------- ---------- --------- --------- --------- ---------
Total assets......... $ 84,102.2 $ 577.9 $ 84,680.1 $1,759.7 $ 4,579.1 $91,018.9
========= ========== ========= ========= ========= =========
LIABILITIES:
Future policy benefits..... $ 18,459.6 $ -- $ 18,459.6 $ -- $ -- $18,459.6
Other policy liabilities... 1,637.8 -- 1,637.8 582.7 -- 2,220.5
Policyholders' funds left
with the company......... 21,702.6 -- 21,702.6 -- -- 21,702.6
--------- ---------- --------- --------- --------- ---------
Total insurance
liabilities........ 41,800.0 -- 41,800.0 582.7 -- 42,382.7
Debt....................... 1,373.9 -- 1,373.9 -- 1,450.0(r) 2,823.9
Accounts payable and other
liabilities.............. 2,558.5 211.8(o) 3,131.9 167.0 533.8(t) 3,872.7
361.6(p) 40.0(q)
Separate Accounts
liabilities.............. 31,066.8 -- 31,066.8 -- -- 31,066.8
--------- ---------- --------- --------- --------- ---------
Total liabilities.... 76,799.2 573.4 77,372.6 749.7 2,023.8 80,146.1
--------- ---------- --------- --------- --------- ---------
MINORITY INTEREST IN
PREFERRED SECURITIES OF
SUBSIDIARY................. 275.0 -- 275.0 -- -- 275.0
--------- ---------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
Common Capital Stock....... 1,473.5 -- 1,473.5 0.7 2,700.0(r) 4,161.4
(0.7)(t)
(12.1)(l)
Class B Stock.............. -- -- -- 0.1 (0.1)(t) --
Mandatorily convertible
preferred stock.......... -- -- -- -- 900.0(r) 900.0
Additional paid-in
capital.................. -- -- -- 188.2 (188.2)(t) --
Net unrealized capital
gains.................... 103.2 (24.8)(n) 78.4 (10.7) 10.7(t) 78.4
Retained earnings.......... 5,463.4 387.3(n) 5,492.7 1,161.3 (1,161.3)(t) 5,458.0
24.8(n) (34.7)(q)
(147.8)(o)
(235.0)(p)
Treasury stock, at cost.... (12.1) -- (12.1) (311.8) 311.8(t) --
12.1(l)
Unearned portion of
restricted common
stock.................... -- -- -- (17.8) 17.8(t) --
--------- ---------- --------- --------- --------- ---------
Total shareholders'
equity............. 7,028.0 4.5 7,032.5 1,010.0 2,555.3 10,597.8
--------- ---------- --------- --------- --------- ---------
Total liabilities,
minority interest
and shareholders'
equity............. $ 84,102.2 $ 577.9 $ 84,680.1 $1,759.7 $ 4,579.1 $91,018.9
========= ========== ========= ========= ========= =========
</TABLE>

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

103
<PAGE> 115

AETNA INC.

NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PRO FORMA ADJUSTMENTS RELATED TO THE PROPERTY-CASUALTY SALE:

a. No adjustment has been made to reflect three months of interest income at
4.93% in 1996 and a full year of interest income at 5.49% in 1995 (average
3 month Treasury bill rates for the periods) on net proceeds from the
Property-Casualty Sale (after giving effect to the payment of transaction
costs and liabilities associated with the sale) of approximately $3.9
billion. The amount of such adjustments (after-tax) would approximate $31.3
million for the three months ended March 31, 1996 and $139.2 million for
the twelve months ended December 31, 1995.

b. Pro forma adjustment to reflect a full year of interest expense (an
additional 11.2 months) at 6.01% in 1995 (average commercial paper rates
for the periods), and related income tax benefits, on the capital
contribution by Aetna of $303 million to the property-casualty operations.
Such capital contribution was actually made on December 6, 1995.

c. No adjustment has been made to give effect to the restructuring charges
related to the Property-Casualty Sale, including CityPlace and other
facility and severance charges (see adjustment p). Such charges will be
recorded by Aetna in the second quarter of 1996.

d. No adjustment has been made to reflect the historical results of Aetna's
discontinued property-casualty operations. Such results were $182.2 million
(or $1.57 per Common Share) of net income for the three months ended March
31, 1996 and $222.2 million of a net loss (or $1.95 per Common Share) for
the twelve months ended December 31, 1995.

PRO FORMA ADJUSTMENTS RELATED TO THE MERGERS:

e. No adjustment has been made to give effect to any synergies which may be
realized as a result of the Mergers. See "Other Matters -- Estimated
Synergies".

f. No adjustment has been made to reflect a reduction in interest income on
that portion of the Cash Consideration to be paid at closing of the U.S.
Healthcare Sub Merger generated from the Property-Casualty Sale since such
interest income is not reflected in the pro forma financial statements (see
adjustment a).

g. Pro forma adjustment to conform the U.S. Healthcare accounting policies
with those of Aetna related to expensing rather than capitalizing costs
primarily relating to purchased and internally developed software, printed
and other promotional items, and deferred startup costs, and the related
income tax effect (see adjustment s).

h. Pro forma adjustment to reflect assumed interest expense of 8.0% on $1.45
billion of assumed bank debt or commercial paper anticipated to be borrowed
to fund a portion of the Cash Consideration (see adjustment r), and the
related income tax effect.

i. Pro forma adjustment to reflect the dividends on the $900 million of 6.25%
Class C Voting Preferred Stock of Parent to be issued in connection with
the Mergers (see adjustment r). In determining pro forma earnings per
share, Parent Mandatorily Convertible Preferred Stock is not considered a
common stock equivalent and is antidilutive. Pursuant to the terms of the
Parent Mandatorily Convertible Preferred Stock, the dividend rate on the
Parent Mandatorily Convertible Preferred Stock is subject to a one-time
increase if the dividend rate on the Parent Common Stock initially after
the Merger Date is greater than $0.83 per share. No such increase has been
reflected in this pro forma adjustment because the common stock dividend
assumed is $.80 per share.

104
<PAGE> 116

AETNA INC.

NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

j. Pro forma adjustment to reflect the amortization of the approximately $8.0
billion excess of the purchase price over the estimated fair value of the
net assets acquired using a range of estimated useful lives for
identifiable intangible assets of 5 to 25 years and a 40 year useful life
for goodwill (37 year weighted average life), and the related income tax
effect on intangibles other than goodwill.

k. No adjustment has been made to give effect to any nonrecurring/unusual
restructuring charges that may be incurred as a result of the integration
of the Combined Health Operations. The amount of such charges cannot be
reasonably determined at this time. Also, no adjustment has been made to
give effect to any nonrecurring charges that may be incurred as a result of
the Agreement with Principal Shareholder and the Employment Agreements (see
adjustment q).

l. Reflects the conversion of Aetna Common Stock into Parent Common Stock
(including the cancellation of shares held in treasury) and the payment of
the U.S. Healthcare Merger Consideration pursuant to the U.S. Healthcare
Sub Merger.

m. Pro forma adjustment to remove the effect of merger related costs incurred
by U.S. Healthcare in the first quarter of 1996 and the related income tax
effect.

PRO FORMA ADJUSTMENTS RELATED TO THE PROPERTY-CASUALTY SALE:

n. Pro forma adjustments to reflect the Property-Casualty Sale, including (i)
the resulting excess of proceeds over the net assets of the
property-casualty operations and (ii) the realization of the net unrealized
capital gain (included within the net assets of the property-casualty
operations) upon such Sale. Assumes the Property-Casualty Sale had occurred
on March 31, 1996 (based on the actual selling price).

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Proceeds from the Property-Casualty Sale......................... $ 4,134.0
Net assets of the property-casualty operations................... (3,746.7)
-------------
Excess of proceeds over net assets of the property-casualty
operations..................................................... $ 387.3
=========
Realization of net unrealized capital gain....................... $ 24.8
=========
</TABLE>

o. Pro forma adjustment to reflect transaction costs, and certain employee
benefit and similar liabilities, and the related deferred tax asset, of the
property-casualty operations which are being retained by Aetna. Assumes the
Property-Casualty Sale had occurred on March 31, 1996.

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Establishment of certain liabilities............................. $ 211.8
Less: related tax benefits....................................... (64.0)
-------------
$ 147.8
=========
</TABLE>

p. Pro forma adjustment to reflect the restructuring charge taken in
connection with the Property-Casualty Sale, and the related deferred tax
asset, that related to the CityPlace office facility ($292 million,
pre-tax, representing the present value of the difference between the rent
required to be paid by Aetna under the lease and future rentals expected to
be received by Aetna) which was leased to Travelers, and certain other
facility and severance charges. Assumes the Property-Casualty Sale had
occurred on March 31, 1996.

105
<PAGE> 117

AETNA INC.

NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Establishment of restructuring charge............................ $ 361.6
Less: related tax benefits....................................... (126.6)
-------------
$ 235.0
=========
</TABLE>

Aetna anticipates taking certain other restructuring charges in connection
with its strategic and financial reviews of its continuing operations in
order to make such operations more competitive. A second quarter charge for
AHP staff reductions has been announced ($30 million, pre-tax), however,
other restructuring charges cannot be estimated at this time pursuant to
Statement of Financial Accounting Standards No. 5. No adjustment has been
made to give effect to such charges (including the AHP charge) as they are
not related to the Merger.

PRO FORMA ADJUSTMENTS RELATED TO THE MERGERS:

q. Pro forma adjustment to reflect estimated liabilities assumed by Aetna, and
the related tax effects, as a result of the Agreement with Principal
Shareholder and Employment Agreements.

<TABLE>
<CAPTION>
(IN
MILLIONS)
----------
<S> <C>
Establishment of principal shareholder and employment agreement
liabilities.................................................... $ 40.0
Less: related tax benefits....................................... (5.3)
----------
$ 34.7
==========
</TABLE>

r. Pro forma adjustment to reflect payment and financing of the U.S.
Healthcare Merger Consideration and transaction costs to be paid at closing
(based on an assumed price of Aetna Common Stock of 76 1/8 and transaction
costs of $50 million).

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Cash............................................................. $ 3,900.0
Borrowings from banks or commercial paper........................ 1,450.0
Issuance of Parent Common Stock.................................. 2,700.0
Issuance of Parent Mandatorily Convertible Preferred Stock....... 900.0
-------------
$ 8,950.0
=========
</TABLE>

s. Pro forma adjustment to conform the U.S. Healthcare accounting policies
with those of Aetna related to expensing rather than capitalizing certain
assets, to reflect an airplane being transferred to the Principal
Shareholder, to write-off certain assets, and to reflect the related
deferred tax effect. Adjustment reflects a change in accounting principle
which would be appropriate for U.S. Healthcare as a separate company and
does not reflect a change in the estimated future benefits of the assets.
Such assets, and the related deferred taxes, consisted of the following:

106
<PAGE> 118

AETNA INC.

NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
(IN
MILLIONS)
----------
<S> <C>
Conforming Accounting Policies:
Computer software.......................................... $ 27.6
Printed and other promotional items........................ 8.7
Deferred startup costs..................................... 3.8
Airplane........................................................ 19.6
Write-off of Assets:
Organization costs and goodwill............................ 6.9
Licenses................................................... 1.6
Other...................................................... 1.3
----------
69.5
Less: related tax effect........................................ (26.1)
----------
$ 43.4
==========
</TABLE>

t. Pro forma adjustment to reflect the excess of the purchase price over net
assets acquired resulting from the U.S. Healthcare Sub Merger, and the
related deferred tax effect. The purchase price allocation is based on
current available information and may be adjusted upon the completion of
the final valuations of U.S. Healthcare's assets and liabilities. Although
such adjustment could be material, based on current information it is not
expected to be material.

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Purchase price................................................... $ 8,950.0
Less: U.S. Healthcare's shareholders' equity as follows:
Common stock................................................... .7
Class B stock.................................................. .1
Additional paid-in capital..................................... 188.2
Net unrealized capital losses.................................. (10.7)
Retained earnings.............................................. 1,161.3
Treasury stock, at cost........................................ (311.8)
Unearned portion of restricted common stock.................... (17.8)
-------------
7,940.0
Plus: the effect of adjustment s above........................... 43.4
-------------
Purchase price in excess of the estimated fair value of net
assets acquired................................................ $ 7,983.4*
=========
* Allocated as follows:
Identifiable Intangibles:
Customer lists.............................................. $ 800.0
Provider networks........................................... 600.0
Software/Workforce.......................................... 100.0
Covenant not to compete..................................... 25.0
-------------
1,525.0
Less: related tax effect.................................... (533.8)
-------------
991.2
Goodwill....................................................... 6,992.2
-------------
$ 7,983.4
=========
</TABLE>

107
<PAGE> 119

OTHER MATTERS

REGULATORY APPROVALS

State Regulatory Approval

State health and/or insurance regulatory laws intended primarily for the
protection of policyholders contain provisions that require advance approval by
state agencies of any change in control of HMOs or insurance companies that are
domiciled (or, in some cases, that have such substantial business that such
companies or organizations are deemed to be commercially domiciled) in that
state. U.S. Healthcare is the holding company for HMOs, dental plans and/or
insurance companies domiciled in Connecticut, Delaware, Georgia, Massachusetts,
Minnesota, New Hampshire, New Jersey, New York, North Carolina, Ohio,
Pennsylvania and Virginia. The approval of the Health and/or Insurance
Commissioners under the change in control laws in such states must be obtained
in order to consummate the Mergers. Although requirements vary by state, in
general such Health and/or Insurance Commissioners are required to approve the
Mergers unless such Commissioners find that it is not in the interest of the
public and policyholders after consideration of, among other factors: (a)
requirements for licensure of HMOs or insurance company; (b) effects on
competition; (c) the financial condition of the HMO or insurance company after
the Mergers; (d) plans or proposals for changes in business, corporate structure
and management; (e) competence, experience and integrity of those persons
controlling the HMO's or insurance company's operations; and (f) whether the
Mergers would be hazardous or prejudicial to those buying insurance.

Aetna has filed applications with the Health and/or Insurance Commissioners
of all applicable states seeking orders granting such approval. In addition,
Aetna has filed applications for exemption from change of control laws in
certain states where its insurance companies or HMOs are domiciled due to the
creation of Parent as a holding company for Aetna. Exemptions need to be
obtained in Arizona, Florida, Georgia, North Carolina, Ohio and Pennsylvania in
order to consummate the Mergers. Aetna and U.S. Healthcare expect that approvals
will be granted by all states by or during the third quarter of 1996, although
there can be no assurance that all relevant Health and Insurance Commissioners
will issue final orders by such time. Affected persons, as determined by a
Commissioner, may generally seek to participate in health or insurance
commission proceedings on the Mergers. While procedures vary by state, orders of
Health and/or Insurance Commissioners may be appealed by certain persons and the
effectiveness of an order could be stayed by the Commissioner or a court while
such an appeal is pending. If approval is stayed, consummation of the Mergers
would be delayed pending such proceedings.

Other Regulatory Approvals

The consummation of the Mergers is also subject to Aetna's relinquishment
of its license as an insurance company in Connecticut, Pennsylvania and the
District of Columbia.

Certain aspects of the Mergers will require notification to, and filings
with, various securities and other authorities in certain states. The Mergers
may also require notification to certain state and federal government agencies
that contract with U.S. Healthcare's HMOs, and notification to certain states
where U.S. Healthcare conducts insurance operations.

The applicable waiting period for the approval of the Mergers under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired.

CERTAIN PROJECTED FINANCIAL INFORMATION

In the course of its discussions with Aetna in March 1996, U.S. Healthcare
provided Aetna and its financial advisors with certain business and financial
information which Aetna and U.S. Healthcare believe was not publicly available.
Such information included, among other things, certain financial projections for
fiscal 1996 through fiscal 1998 prepared by management of U.S. Healthcare as a
long-range plan (the "Projections"). The Projections do not take into account
any of the potential effects of the transactions contemplated by the Amended
Merger Agreement.

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Set forth below is a summary of the Projections.

U.S. HEALTHCARE PROJECTIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Total Revenues....................................... $4,697 $5,953 $7,122
Pre-Tax Income....................................... 692 795 928
Net Income........................................... 425 489 571
Earnings per share................................... $ 2.75 $ 3.14 $ 3.65
</TABLE>

The following material assumptions were used by U.S. Healthcare in
preparing the Projections:

1. Total annual insured membership growth rate declines ratably from 25% in
1996 to 20% in 1998.

2. Self-insured membership growth rate for 1996 is assumed to be 65%. Annual
growth rate for subsequent periods is calculated at 15%.

3. Medicare membership annual growth rate assumed to be 100% in 1996, 75% in
1997, and 50% in 1998.

4. Overall premium and medical costs per member per month increase in equal
amounts in 1996 over 1995.

5. Overall premium per member per month increases 5% per year in 1997 and 1998
as a result of product mix change.

6. Overall medical costs per member per month increase in 1997 and 1998
proportionately with premiums.

7. Total selling, general and administrative expenses are calculated at 11.3%
of operating revenues in 1996, declining ratably to 10.7% in 1998.

8. Per member per month fees and per member per month costs associated with
self-insured members remain constant throughout the period.

9. Investment income growth is calculated based on increased cash balances but
reflects no change in earnings rate over the period.

THE PROJECTIONS SET FORTH ABOVE WERE NOT PREPARED WITH A VIEW TO PUBLIC
DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SECURITIES AND
EXCHANGE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS ARE INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO AETNA AND ITS
FINANCIAL ADVISORS. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE
PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS (CERTAIN OF WHICH ARE SET
FORTH ABOVE) RELATING TO THE BUSINESS OF U.S. HEALTHCARE, ALL OF WHICH ARE
SUBJECT TO MATERIAL RISKS AND UNCERTAINTIES. ALTHOUGH SUCH PROJECTIONS AND
ASSUMPTIONS WERE CONSIDERED REASONABLE BY U.S. HEALTHCARE AT THE TIME THEY WERE
PREPARED, THE PROJECTIONS ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF U.S. HEALTHCARE.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE REALIZED,
AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF SUCH
PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT U.S. HEALTHCARE,
AETNA, U.S. HEALTHCARE SUB, AETNA SUB, PARENT OR ANY OTHER PERSON WHO RECEIVED
ANY SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS. NONE
OF U.S. HEALTHCARE, AETNA, U.S. HEALTHCARE SUB, AETNA SUB, PARENT OR ANY OTHER
PARTY INTENDS PUBLICLY TO UPDATE OR OTHERWISE PUBLICLY REVISE THE PROJECTIONS
SET FORTH ABOVE EVEN IF EXPERIENCE OR FUTURE CHANGES MAKE IT CLEAR THAT SUCH
PROJECTIONS WILL NOT BE REALIZED.

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THE INDEPENDENT ACCOUNTANTS FOR AETNA AND U.S. HEALTHCARE HAVE NOT EXAMINED
OR COMPILED THESE PROJECTIONS AND ACCORDINGLY DO NOT EXPRESS AN OPINION OR ANY
OTHER FORM OF ASSURANCE ON THEM.

THE PROJECTED FINANCIAL INFORMATION SET FORTH ABOVE IS FORWARD LOOKING
INFORMATION. FOR A DISCUSSION OF FACTORS REGARDING SUCH FORWARD LOOKING
INFORMATION, SEE "-- FACTORS FOR FORWARD LOOKING INFORMATION."

ESTIMATED SYNERGIES

Aetna and U.S. Healthcare have announced publicly that they anticipate that
the Mergers will yield increased operating income from the Combined Health
Operations resulting from a combination of expense savings and increased
revenues. The annual increase in operating income is expected to be
approximately $300 million (after tax) per year, and to be achieved within 18
months of the Merger Date. It is further expected that the anticipated increase
in operating income referred to in the preceding sentence will be sufficient to
offset the amortization of goodwill and other intangibles related to the Mergers
within 18 months of the Merger Date.

Approximately two-thirds (or approximately $200 million) of the anticipated
increase in operating income is expected to be attributable to reduced operating
expenses and medical cost improvements. Operating expense reductions are
currently anticipated to be approximately $140 million and medical cost
improvements are currently anticipated to be approximately $60 million. Expense
reductions are expected to result from lowering medical costs and streamlining
duplicative administrative functions. Reductions in administrative expenses are
based on projected needs for overlapping functions such as information systems,
provider contracting systems and medical credentialing, finance, accounting and
other administrative functions, particularly in overlapping markets and the
application of existing Aetna resources in serving U.S. Healthcare customers.
Expected reductions in medical costs are based on assumptions that the combined
companies will improve provider contracting and medical management strategies,
in part through utilization of U.S. Healthcare's medical management expertise in
serving Aetna's members.

Approximately one-third (approximately $100 million) of the anticipated
increase in operating income is expected to be attributable to increased
revenues; of these revenue-related synergies, approximately $80 million is
expected from increased revenues to be achieved through HMO membership growth
through both new customers and accelerated conversion of non-insured customers
to insured plans. Increased revenue is also
expected to be achieved through other cross selling opportunities. The expected
revenue enhancements are based on assumptions that (i) increased HMO membership
will be achieved by cross selling of U.S. Healthcare HMO products to existing
Aetna Fortune 1000 customers and to Aetna specialty health plan members, (ii)
increases in insured Medicare membership will be achieved through joint
marketing of the companies' brand name products, and (iii) additional
enhancements will be achieved by cross selling of Aetna health services,
specialty health and group life products and providing certain other existing
Aetna customer service resources to existing U.S. Healthcare customers.

Expected income synergies do not include any normal business and other
revenue growth, any Aetna corporate expense reductions associated with
divestiture of its property-casualty operations, any potential synergies between
the combined health operations and Aetna's retirement services and other
operations, and the effect of future general economic conditions.

THE ESTIMATES OF SYNERGIES SET FORTH ABOVE WERE NOT PREPARED WITH A VIEW TO
PUBLIC DISCLOSURE. THE ESTIMATES ARE BASED UPON A VARIETY OF ASSUMPTIONS
RELATING TO THE BUSINESS OF U.S. HEALTHCARE AND AETNA WHICH MAY NOT BE REALIZED
AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
SUBJECT TO MATERIAL RISKS AND UNCERTAINTIES AND MANY OF WHICH ARE BEYOND THE
CONTROL OF AETNA AND U.S. HEALTHCARE. ACCORDINGLY, THERE CAN BE NO ASSURANCE
THAT THE ESTIMATED SYNERGIES WILL BE REALIZED, AND ACTUAL SYNERGIES, IF ANY, MAY
VARY MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF SUCH ESTIMATES HEREIN SHOULD
NOT BE REGARDED AS

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AN INDICATION THAT U.S. HEALTHCARE, AETNA, U.S. HEALTHCARE SUB, AETNA SUB,
PARENT OR ANY OTHER PERSON CONSIDERS THEM AN ACCURATE PREDICTION OF FUTURE
EVENTS. NONE OF U.S. HEALTHCARE, AETNA, U.S. HEALTHCARE SUB, AETNA SUB, PARENT
OR ANY OTHER PERSON INTENDS PUBLICLY TO UPDATE OR OTHERWISE PUBLICLY REVISE THE
ESTIMATED SYNERGIES SET FORTH ABOVE EVEN IF EXPERIENCE OR FUTURE CHANGES MAKE IT
CLEAR THAT SUCH SYNERGIES WILL NOT BE REALIZED.

THE INDEPENDENT ACCOUNTANTS FOR AETNA AND U.S. HEALTHCARE HAVE NOT EXAMINED
OR COMPILED THESE ESTIMATES AND ACCORDINGLY DO NOT EXPRESS AN OPINION OR ANY
OTHER FORM OF ASSURANCE ON THEM.

THE ESTIMATED SYNERGIES SET FORTH ABOVE CONSTITUTE FORWARD LOOKING
INFORMATION. FOR A DISCUSSION OF FACTORS REGARDING SUCH FORWARD LOOKING
INFORMATION SEE "-- FACTORS FOR FORWARD LOOKING INFORMATION."

FACTORS FOR FORWARD LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a new "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves without fear of litigation so long as
those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the statement.
Accordingly, Aetna and U.S. Healthcare hereby identify the following important
factors which could cause Aetna's and U.S. Healthcare's actual results to differ
materially from any such results which might be projected, forecast, estimated
or budgeted by Aetna or U.S. Healthcare in forward-looking statements, including
the Projections and the estimated synergies:

(a) Heightened competition, including specifically the intensification of
price competition, the entry of new competitors and the formation of new
products by new and existing competitors;

(b) Adverse state and federal legislation and regulation, including
limitations on premium levels, increases in minimum capital and reserves and
other financial viability requirements, prohibition or limitation of capitated
arrangements or provider financial incentives, benefit mandates (including
mandatory length of stay and emergency room coverage), limitations on the
ability to manage care and utilization and any willing provider or pharmacy
laws;

(c) Increases in medical costs, including increases in utilization and
costs of medical services and the effects of actions by competitors or groups of
providers;

(d) Termination of provider contracts or renegotiation thereof at less
cost-effective rates or terms of payment;

(e) Price increases in pharmaceuticals, durable medical equipment and other
covered items;

(f) Adverse actions of governmental payors, including unilateral reduction
of Medicare and Medicaid premiums payable to Aetna or U.S. Healthcare and
discontinuance of or limitations on governmentally-funded programs;

(g) Inability to increase premiums or prospective or retroactive reductions
to premium rates for federal employees apace with increases in medical costs due
to competition, government regulation, or other factors;

(h) Failure to obtain new customers, retain existing customers or
reductions in force by existing customers;

(i) Governmental financial assessments or taxes to subsidize uncompensated
care, other insurance carriers, or academic medical institutions;

(j) Adverse publicity and news coverage;

(k) Inability to carry out marketing and sales plans;

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(l) Loss or retirement of key executives;

(m) Denial of accreditation by independent quality accrediting agencies
such as NCQA;

(n) The selection by employers and individuals of higher
copayment/deductible/coinsurance plans with relatively lower premiums;

(o) The migration of employers from insured to self-funded coverage
resulting in reduced margins to U.S. Healthcare;

(p) The impact upon Aetna's or U.S. Healthcare's medical loss ratio of
greater net enrollment in higher medical loss ratio lines of business such as
Medicare and Medicaid;

(q) Adverse results in significant litigation matters;

(r) Adverse regulatory determinations resulting in loss or limitations of
licensure, certification or contracts with governmental payors;

(s) Higher service, administrative or general expenses occasioned by the
need for additional advertising, marketing, administrative, or management
information systems expenditures;

(t) Changes in interest rates causing a reduction of investment income or
in the market value of interest rate sensitive investments; and

(u) Increases by regulatory authorities of minimum capital, reserve and
other financial viability requirements.

In addition to the foregoing, the ability of Parent to realize the
increases in operating income referred to in "-- Estimated Synergies" is also
subject to the following additional uncertainties, among others:

(a) The ability to integrate the U.S. Healthcare and Aetna management and
information systems on a timely basis;

(b) The ability to apply U.S. Healthcare's managed care expertise to Aetna
members;

(d) The fact that Parent will be subject to greater indebtedness than are
Aetna and U.S. Healthcare as of the date of this Joint Proxy
Statement/Prospectus.

Many of the foregoing factors discussed have been discussed in Aetna's or
U.S. Healthcare's prior filings with the Commission. The foregoing review of
factors pursuant to the Private Litigation Securities Reform Act of 1995 should
not be construed as exhaustive.

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DESCRIPTION OF PARENT CAPITAL STOCK

The authorized capital stock of Parent consists of 500,000,000 shares of
Parent Common Stock, 15,000,000 shares of Parent 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 Law and Parent's Certificate of
Incorporation (including the Form of Designations, Rights and Preferences of the
6.25% Class C Voting Preferred Stock attached to this Joint Proxy
Statement/Prospectus as Appendix C). See "Description of Parent Rights" for a
description of Parent Rights to be issued to holders of Parent Common Stock.

PARENT COMMON STOCK

The shares of Parent Common Stock to be issued in the Mergers, when issued
pursuant to the Merger Agreement, will be fully paid and nonassessable. Each
holder of Parent 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 Parent 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 Parent Common Stock will have an equal and
ratable right to receive dividends as may be declared by the Board of Directors
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 Parent Common Stock has any preemptive right to
subscribe for any securities of Parent.

PARENT MANDATORILY CONVERTIBLE PREFERRED STOCK

Dividends. The holders of outstanding shares of Parent 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 Parent 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 Parent 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 Parent 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 Parent 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 Parent
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 Parent 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 Parent 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 Parent Mandatorily Convertible
Preferred Stock

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on the Mandatory Conversion Date (as defined below) or on the date of their
earlier conversion or redemption.

So long as any shares of Parent 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) Parent Common Stock or any other class or series of
Parent's capital stock ranking junior to Parent Mandatorily Convertible
Preferred Stock with respect to dividends or liquidation preferences (such
capital stock, including the Parent Common Stock, collectively "Junior
Securities") or (b) Parity Preferred Stock (as defined below) until cumulative
dividends on Parent 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 Parent 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 Parent Mandatorily Convertible Preferred Stock and any
Parity Preferred Stock, all dividends declared with respect to shares of Parent
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 Parent 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 Parent Mandatorily
Convertible Preferred Stock and such Parity Preferred Stock bear to each other.
Holders of the shares of Parent 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 Parent Mandatorily Convertible Preferred Stock will not be entitled to share
therein.

Any dividend payment made on shares of Parent Mandatorily Convertible
Preferred Stock will first be credited against the earliest accrued but unpaid
dividend due with respect to shares of Parent Mandatorily Convertible Preferred
Stock. All dividends paid with respect to shares of Parent 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 Parent 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 Parent 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 Parent Mandatorily Convertible Preferred Stock will
convert automatically (the "Mandatory Conversion") into (i) shares of Parent
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 Parent 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

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Parent Common Stock for each share of Parent Mandatorily Convertible Preferred
Stock and is subject to adjustment as described below (the "Common Equivalent
Rate").

Optional Redemption by Parent. Shares of Parent 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 Parent Mandatorily
Convertible Preferred Stock. Upon any such redemption, Parent will deliver to
the holders of shares of Parent Mandatorily Convertible Preferred Stock in
exchange for each share so redeemed, the greater of (i) a number of shares of
Parent Common Stock equal to the Call Price in effect on the redemption date,
divided by the Current Market Price (as defined below) of the Parent Common
Stock determined as of the second trading day immediately preceding the Notice
Date (as defined below) or (ii) .8197 of a share of Parent 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 Parent
Mandatorily Convertible Preferred Stock as described below. If fewer than all
the outstanding shares of Parent Mandatorily Convertible Preferred Stock are to
be redeemed, shares of Parent Mandatorily Convertible Preferred Stock to be
redeemed will be selected by Parent from outstanding shares of Parent
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 Parent 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 Parent Mandatorily Convertible Preferred
Stock.

Parent will provide notice of any redemption of the shares of Parent
Mandatorily Convertible Preferred Stock pursuant to the provisions described
under "Optional Redemption by Parent" to holders of record of Parent 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 Parent 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 Parent 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 Parent
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 Parent 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 Parent Common Stock and
to receive any funds payable pursuant to the provisions described under
"Mandatory Conversions" 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 Parent 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 Parent Common Stock at a rate of .8197 of a
share of Parent Common Stock for each share of Parent Mandatorily Convertible
Preferred Stock (the "Optional Conversion Rate"), subject to adjustment as set
forth below. The right to convert shares of Parent 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 Parent 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

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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 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 Parent 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 Parent 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 Parent
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 Parent Mandatorily Convertible
Preferred Stock, Parent will make no payment or allowance for unpaid dividends,
whether or not in arrears, on converted shares of or for previously declared
dividends or distributions on the shares of Parent Common Stock issued upon such
conversion.

Certain Definitions. For purposes of the Parent 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 Parent 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 Parent Common Stock is
listed or admitted to trading (as reported on the NYSE Composite Tape or a
similar reporting system) or, if the Parent Common Stock is not listed or
admitted to trading on a national securities exchange, on the Nasdaq National
Market System, or, if the Parent 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 Parent 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 Parent Common Stock as determined by any New York Stock Exchange
member firm selected from time to time by the Board of Directors for such
purpose;

The term "Current Market Price" per share of Parent 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 Parent 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

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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 Parent Common
Stock. Dividends will accrue on the shares of Parent Mandatorily Convertible
Preferred Stock at a higher rate than the rate at which dividends are
anticipated to be paid to the holders of Parent Common Stock immediately after
the Merger Date. The opportunity for equity appreciation afforded by an
investment in shares of Parent Mandatorily Convertible Preferred Stock is less
than that afforded by an investment in the Parent Common Stock because the Call
Price may be lower than the Current Market Price of the Parent Common Stock on
the redemption date and Parent may, at its option, redeem the shares of Parent
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 Parent Common Stock after the third anniversary of the Merger Date
exceeds the Call Price for a share of Parent Mandatorily Convertible Preferred
Stock. In such event, a holder of a share of Parent Mandatorily Convertible
Preferred Stock will receive less than one share of Parent Common Stock per
share of Parent Mandatorily Convertible Preferred Stock, but not less than .8197
of a share of Parent Common Stock, subject to adjustment as described herein. A
holder may also surrender for conversion any shares of Parent 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 Parent Common Stock, subject to adjustment as described herein. The per share
value of Parent Common Stock received by holders of shares of Parent Mandatorily
Convertible Preferred Stock may be more or less than the $76 1/8 assumed nominal
value of each share of Parent Mandatorily Convertible Preferred Stock to be
issued pursuant to the U.S. Healthcare Sub Merger, due to market fluctuations in
the price of the Parent Common Stock.

As a result of these provisions, holders of shares of Parent Mandatorily
Convertible Preferred Stock would be expected to realize no equity appreciation
if the Current Market Price of the Parent 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 Parent
Mandatorily Convertible Preferred Stock generally will realize the entire
decline in equity value if the market price of the Parent Common Stock is less
than the $76 1/8 assumed nominal value of a share of Parent 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 Parent Common Stock in shares of Parent Common
Stock, (ii) subdivides or splits outstanding Parent Common Stock into a greater
number of shares, (iii) combines outstanding shares of Parent Common Stock into
a smaller number of shares, or (iv) issues by reclassification of shares of
Parent 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 Parent 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
Parent Common Stock which such holder would have owned or been entitled to
receive immediately following any event described above had such shares of
Parent 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 stockholders 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 Parent Common Stock (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)
entitling them to subscribe for or purchase shares of Parent 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

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issued to holders of shares of Parent Mandatorily Convertible Preferred Stock on
a pro rata basis with the shares of Parent 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 Parent 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 Parent Common Stock offered for subscription
or purchase pursuant to such rights or warrants, and of which the denominator
will be the number of shares of Parent 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 Parent Common Stock which the aggregate
offering price of the total number of shares of Parent 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 stockholders entitled to receive such rights or
warrants. To the extent that shares of Parent 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 Parent 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 Parent 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 Parent
Mandatorily Convertible Preferred Stock on a pro rata basis with the shares of
Parent 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 Parent Common Stock on the record date for the determination of
stockholders entitled to receive such dividend or distribution, and of which the
denominator will be such Current Market Price per share of Parent 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 Parent 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 stockholders
entitled to receive such dividend or distribution. Such adjustment will be made
successively.

Any shares of Parent 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 Parent 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 stockholders after the Merger Date will not be taxable.

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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 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 Parent
Mandatorily Convertible Preferred Stock the additional shares of Parent Common
Stock issuable upon such conversion or redemption over the shares of Parent
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 Parent 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 Parent 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 Parent 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 Parent 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 Parent Common Stock into which such share of
Parent 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 Parent Common Stock into which such shares of Parent
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 Parent 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 Parent Common Stock that would have been issuable at the Redemption
Rate in effect on such redemption date upon a redemption of such share
immediately prior to consummation of such transaction, assuming in each case
that such holder of Parent 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 Parent 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, Option 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 Parent 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

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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 Parent Common Stock will be issued upon the redemption or conversion
of any shares of Parent Mandatorily Convertible Preferred Stock. In lieu of any
fractional share otherwise issuable in respect of the aggregate number of shares
of Parent 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 Price as of the second Trading Date immediately
preceding the Notice Date, in the case of redemption, or (ii) Closing Price of
the Parent 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 Parent Common Stock issuable upon
conversion thereof will be computed on the basis of the aggregate number of
shares of Parent 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 Parent 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 Parent 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
stockholders an amount per share of Parent 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 Parent Mandatorily
Convertible Preferred Stock entitled thereto. In the event the assets of Parent
available for distribution to the holders of the shares of Parent 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 Parent Mandatorily Convertible Preferred
Stock and of all other series of Parity Securities, the holders of shares of
Parent 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 Parent 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 Parent
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 Parent Mandatorily Convertible
Preferred Stock shall have the right with the holders of Parent Common Stock to
vote in the election of directors and upon each other matter coming before any
meeting of the stockholders on the basis of 4/5 of a vote for each share held.
The holders of shares of Parent Mandatorily Convertible Preferred Stock and the
holders of Parent 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 Parent Mandatorily Convertible Preferred Stock
are outstanding, if at any time dividends payable on the shares of Parent
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

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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 Parent Common Stock, to elect any directors of
Parent ("Preferred Stock Directors"), the holders of the shares of Parent
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 of Parent 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 Parent Mandatorily Convertible Preferred Stock to elect two
Preferred Stock Directors will, when vested, continue until all dividends in
arrears on the shares of Parent Mandatorily Convertible Preferred Stock and such
other series of Preferred Stock will have been paid in full and the right of any
other series of Preferred Stock to exercise voting rights, separate from the
Parent 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 Parent 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 Parent 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 stockholders at which a successor will have
been elected and qualified or (ii) the termination of the right of the holders
of shares of Parent Mandatorily Convertible Preferred Stock and such other
series of Preferred Stock to vote for Directors pursuant to the immediately
preceding paragraph. Vacancies on the Parent 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 Parent 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 Parent Mandatorily Convertible Preferred Stock then outstanding or reduce the
minimum time required for any notice to which holders of shares of Parent
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 Parent 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 Parent Mandatorily Convertible Preferred Stock; and provided further
that the provisions described in 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 Parent 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 Parent 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 Parent
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 Parent Mandatorily
Convertible Preferred Stock so held or (B) convert into shares of Parent 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 Parent Mandatorily Convertible
Preferred Stock.

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Notwithstanding the provisions summarized in the preceding two paragraphs,
however, no such approval described therein of the holders of the shares of
Parent 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 Parent Mandatorily Convertible
Preferred Stock at the time outstanding.

Preemptive Rights. The holders of shares of Parent 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.

CLASS A AND CLASS B VOTING PREFERRED STOCK AND CLASS D NON-VOTING PREFERRED
STOCK

Parent Board 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 Law. 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 Parent 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 Parent Rights Plan. See "Comparison of Rights of
Shareholders -- Comparison of Shareholder Rights with Respect to Parent and
Aetna" and "Description of Parent Rights."

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COMPARISON OF RIGHTS OF SHAREHOLDERS

COMPARISON OF SHAREHOLDER RIGHTS WITH RESPECT TO PARENT AND AETNA

Upon the consummation of the Aetna Sub Merger, the shareholders of Aetna
will become shareholders of Parent, and their rights will be governed by the
Certificate of Incorporation of Parent (the "Parent Certificate") and bylaws of
Parent (the "Parent Bylaws") in the forms that will be effective at the Merger
Date.

The following discussion is not intended to be complete and is qualified in
its entirety by reference to the Connecticut Law, the Parent Certificate and
Parent Bylaws, the Certificate of Incorporation of Aetna (the "Aetna
Certificate") and the bylaws of Aetna (the "Aetna Bylaws"). Forms of the Aetna
Certificate and Aetna Bylaws have been filed as exhibits to the Registration
Statement of which this Joint Proxy Statement/Prospectus is part and are
incorporated herein by this reference.

Since both Parent and Aetna are organized under the laws of the State of
Connecticut, any differences in the rights of shareholders of Parent and Aetna
will arise solely from differences in their respective certificates of
incorporation and bylaws. The Parent Certificate and Parent Bylaws are
substantially similar to the Aetna Certificate and Aetna Bylaws, respectively,
except the Parent Certificate was modified (i) to effect the transactions
contemplated by the Merger Agreement, (ii) to reflect the fact that Parent is
not an "insurance corporation", (iii) to set the par value of the Parent Common
Stock at $.01, (iv) to change the name of Parent to Aetna Inc., (v) to increase
the authorized capital stock of Parent, (vi) to fix the designation, rights and
preferences of the Parent Mandatorily Convertible Preferred Stock, and (vii) to
authorize 15,000,000 shares of Class D Preferred Stock.

In addition, the Board of Directors of Aetna has adopted a rights plan.
Pursuant to Aetna's amended Share Purchase Rights Plan, a dividend of one share
purchase right (a "Right") was made payable for each share of Aetna Common Stock
outstanding on November 7, 1989, and one Right will attach to each share of
Aetna Common Stock subsequently issued, prior to the time at which the Rights
become exercisable, expire or are redeemed. The Mergers will not give rise to
any rights or benefits under the amended Share Purchase Rights Plan, and
existing rights attached to Aetna Common Capital Stock will be extinguished in
the Aetna Sub Merger. The Board of Directors of Parent has adopted the Parent
Rights Agreement which is substantially similar to Aetna's amended Share
Purchase Rights Plan. See "Description of Parent Rights."

COMPARISON OF SHAREHOLDER RIGHTS WITH RESPECT TO PARENT AND U.S. HEALTHCARE

Upon the consummation of the U.S. Healthcare Sub Merger, the shareholders
of U.S. Healthcare will become shareholders of Parent, and their rights will be
governed by the Connecticut Law and the Parent Certificate and the Parent Bylaws
in the forms that will become effective at the Merger Date. On January 1, 1997,
the Connecticut Business Corporation Act (the "CBCA") will replace the
Connecticut Law. The rights of shareholders under the CBCA will differ in
certain respects from their rights under the Connecticut Law. The material
differences under the CBCA are discussed below following the descriptions of
certain provisions of the Connecticut Law.

The following is a discussion of certain differences between rights of
shareholders of U.S. Healthcare and Parent. The discussion is not intended to be
complete and is qualified in its entirety by reference to the Connecticut Law,
the CBCA, the Pennsylvania Law, the Parent Certificate and Parent Bylaws and the
articles of incorporation of U.S. Healthcare (the "U.S. Healthcare Articles")
and the bylaws of U.S. Healthcare (the "U.S. Healthcare Bylaws"). The U.S.
Healthcare Articles and U.S. Healthcare Bylaws have been filed as exhibits to
U.S. Healthcare's Annual Report on Form 10-K for the year ended December 31,
1995 and are incorporated herein by this reference.

Bylaws. Under the Pennsylvania Law, the power to adopt, amend or repeal
bylaws may be vested by the bylaws in the directors, with statutory exceptions
for certain actions committed to the shareholders (absent a contrary provision
in the articles) and subject to the power of shareholders to change such
actions. The Pennsylvania law provides that unless the articles of incorporation
otherwise provide, shareholders may change

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the bylaws without the consent of the directors. The U.S. Healthcare Bylaws
provide the shareholders of U.S. Healthcare with the power to alter, amend or
repeal the U.S. Healthcare Bylaws by the majority vote of shareholders at any
annual meeting or special meeting duly convened after notice to the shareholders
of such purpose at which a quorum is present except that a vote of 80% and 75%,
respectively of the votes which shareholders are entitled to cast shall be
necessary to alter, amend or repeal any provisions inconsistent with Section 3.1
of the U.S. Healthcare Bylaws (dealing with the number, term and election of
directors) or Sections 7.1 or 7.2 of the U.S. Healthcare Bylaws (dealing with
limitation of directors' liability and indemnification). The Board of Directors
of U.S. Healthcare may also alter, amend or repeal the U.S. Healthcare Bylaws
subject to the power of the shareholders to change such action.

Under the Connecticut Law, a corporation's shareholders and, to the extent
permitted by the bylaws, the board of directors may adopt, amend or repeal
bylaws. The Parent Bylaws provide that they may be rescinded or amended by the
affirmative vote of the holders of a majority of the voting power of shares
entitled to vote thereon or by an affirmative vote of Parent directors holding a
majority of the number of directorships.

Distributions to Shareholders. Under the Pennsylvania Law, a corporation
has the power, subject to restrictions in its bylaws, to make distributions to
its shareholders unless after giving effect thereto (i) the corporation would
not be able to pay its debts as they become due in the usual course of business,
or (ii) the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed upon the dissolution of the
corporation to satisfy the preferential rights, if any, of shareholders having
superior preferential rights to those shareholders receiving the distribution.
Total assets and liabilities for this purpose are to be determined by the board
of directors, which may base its determination on one or more of the following:
book value, or current value, of the corporation's assets and liabilities,
unrealized appreciation and depreciation of the corporation's assets and
liabilities and any other method that is reasonable in the circumstances. The
U.S. Healthcare Bylaws do not contain any limitations on such powers.

Under the Connecticut Law, a corporation's board of directors may from time
to time declare, and the corporation may pay, dividends on the corporation's
outstanding shares in cash, property or its own shares, except when the
corporation is insolvent or when such payment would render the corporation
insolvent. A corporation is insolvent under the Connecticut Law if the
corporation (i) is unable to pay its debts as they become due in the usual
course of business or (ii) has liabilities in excess of assets. Dividends may be
paid out of earned surplus and, under certain circumstances, out of capital
surplus. For payments out of capital surplus, the liquidation preferences of
preferred shares in excess of their par value are treated as a liability for
purposes of determining the corporation's solvency. The Connecticut Law permits
a corporation to redeem or repurchase its shares out of earned surplus and,
under certain circumstances, out of capital surplus.

Under the CBCA, a corporation may not make a distribution to shareholders
if, after giving effect thereto, the corporation would not be able to pay its
debts as they become due in the usual course of business or the corporation's
total assets would be less than the sum of its total liabilities plus, unless
the articles of incorporation permit otherwise, the amount that would be needed,
if any, to satisfy the preferential rights upon dissolution of shareholders
whose preferential rights are superior of those receiving the distribution. The
board of directors may determine that a distribution is not prohibited either on
the basis of financial statements prepared on the basis of accounting practices
and principles that are reasonable in the circumstances or on a fair valuation
or other reasonable method.

Classes of Directors. Under the Pennsylvania Law, directors may be elected
in two or more classes whose terms expire at different times provided that each
class shall be as nearly equal in number as possible, the term of office of at
least one class shall expire in each year and no single term shall exceed four
years. The U.S. Healthcare Bylaws provide for the classification of directors
into three classes, each class serving for staggered three-year terms.

Under the Connecticut Law, a corporation's certificate of incorporation may
provide for the classification of directors, either as to their term of office,
or as to their election by one or more classes of shareholders exclusively, or
both, provided that (i) a director may not be elected for a shorter term than
one year or for a longer term than five years and (ii) in the case of
classification by term of office, the classification must be such that the term
of one or more classes expires each succeeding year. The Parent Bylaws currently
provide

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that the Board of Directors shall consist of not less than three nor more than
twenty-one directors, the exact number to be fixed by vote of the Board of
Directors or shareholders. The Parent Certificate does not provide for a
classified board of directors.

Under the CBCA, a corporation's certificate of incorporation may provide
for the classification of directors, either as to their election by one or more
classes of shareholders exclusively or as to their term of office. Under
staggered term provisions, the total number of directors may be divided into up
to five groups, each containing approximately the same percentage of the total,
with the term of one group expiring each year.

Removal of Directors. Under the Pennsylvania Law, unless the articles of
incorporation or bylaws provide otherwise, directors may be removed by the
shareholders of a corporation for or without cause, and by the board of
directors for any proper cause specified in the bylaws. Notwithstanding the
foregoing, unless otherwise provided in the articles of incorporation, directors
of a corporation having a classified board may be removed by the shareholders
only for cause, if such classification has been effected by a bylaw or adopted
by the shareholders. The U.S. Healthcare Articles provide for removal of
directors without cause by the affirmative vote of holders of at least 80% of
the outstanding shares entitled to vote thereon.

Under the Connecticut Law, a director may be removed from office in
accordance with bylaws adopted by the shareholders, or upon any other lawful
removal from office. The Parent Bylaws do not currently provide for removal of
directors.

Under the CBCA, shareholders may remove directors with or without cause
unless the Parent Certificate provides that directors may be removed only for
cause. If a director is elected by a voting group of shareholders only the
shareholders of that voting group may participate in the vote to remove him. A
director may be removed only if the number of votes cast to remove him exceeds
the number of votes cast not to remove him. The Superior Court for the Judicial
District where the corporation's principal office is located may remove a
director in a proceeding commenced either by the corporation or by shareholders
holding at least 10% of the outstanding shares of any class, if such court finds
that the director engaged in fraudulent or dishonest conduct or gross abuse of
authority or discretion with respect to the corporation, and that removal is in
the best interest of the corporation. If so removed, the court may bar the
director from re-election for a period prescribed by the court.

Meetings of Shareholders. Under the Pennsylvania Law applicable to
corporations whose shares are registered under the 1934 Act, a shareholder is
not entitled to call a special meeting of shareholders unless such shareholder
is an "interested shareholder" (as defined in Section 2553 of the Pennsylvania
Law) calling a special meeting for the purpose of approving a "business
combination" (as defined in Section 2554 of the Pennsylvania Law) with such
"interested shareholder." As so defined, an "interested shareholder" is a person
who, together with its affiliates and associates, owns (or within the preceding
five-year period did own) 20% or more of a "registered" corporation's shares
entitled to vote generally in the election of directors ("Voting Shares"), and a
"business combination" includes mergers, consolidations, asset sales, share
exchanges, divisions of a "registered" corporation or any subsidiary thereof and
other transactions resulting in a disproportionate financial benefit to an
"interested shareholder." In addition, a qualified shareholder (generally, since
January 1, 1980, a holder of 20% or more of the outstanding shares of a
corporation) is entitled to call a special meeting of U.S. Healthcare's
shareholders. Under the U.S. Healthcare Bylaws, special meetings of the
shareholders of U.S. Healthcare may be called by U.S. Healthcare's president or
a majority of its board of directors.

Under the Connecticut Law, special meetings of shareholders may be called
by the board of directors, officers or persons as may be provided in the
certificate of incorporation or bylaws. The Connecticut Law also requires the
president to call a special meeting upon the written request of the holders of
not less than one-tenth of the voting power of all shares entitled to vote at
the meeting, except that if the corporation has a class of voting stock
registered pursuant to Section 12 of the 1934 Act (such as Parent), and no
person held ten percent or more of the voting power of all shares of the
corporation on February 1, 1988, the president need not call such meeting except
upon the written request of the holders of not less than 35% of such voting
power. If the president shall not, within 15 days after the receipt of such
request, call such special meeting, such

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shareholders may call such special meeting. The Parent Bylaws permit the Board
of Directors, the Chairman of the Board and the President to call a special
meeting of shareholders.

Action By Shareholders Without Meeting. Under the Pennsylvania Law, unless
restricted in the bylaws, any action which may be taken at a meeting of the
shareholders may be taken without a meeting if consents of all shareholders who
would be entitled to vote at a meeting for such purpose shall be filed with the
secretary of the corporation. In addition, the bylaws may provide that any
action which may be taken at a meeting of the shareholders may be taken without
a meeting if there is written consent of shareholders who would have been
entitled to cast the minimum number of votes that would be necessary to
authorize the action at a meeting at which all the shareholders were present and
voting. The U.S. Healthcare Bylaws permit any action which may be taken at a
meeting of shareholders or a class of shareholders to be taken by unanimous
consent.

Under the Connecticut Law, shareholders may take any action by unanimous
written consent without a meeting, provided that, if the certificate of
incorporation so provides, actions (other than the election of directors) may be
taken by written consent of less than all of the shareholders (but not less than
a majority of the voting power). Notice must be given to shareholders entitled
to vote not less than 20 days or more than 50 days before the date any consents
are to become effective, and persons holding at least 10% of the voting power of
the corporation can block the proposed action up to 5 days before such consents
are to become effective if action is proposed to be taken by the written consent
of less than all of the corporation's shareholders. Neither the Parent
Certificate nor the Parent Bylaws provides for its shareholders taking action by
less than unanimous written consent.

Dissenters' Rights. Under the Pennsylvania Law, shareholders of a
corporation have a right of appraisal (i.e., the right to dissent from a
proposed corporate action and to obtain payment of the judicially-determined
"fair value" of their shares) with respect to specified corporate actions,
including: (i) a plan of merger, consolidation, division (within the meaning of
Section 1951 of the Pennsylvania Law), share exchange or conversion (within the
meaning of Section 1961 of the Pennsylvania Law); (ii) certain other plans or
amendments to its articles of incorporation in which disparate treatment is
accorded to the holders of shares of the same class or series; and (iii) a sale
or transfer of all or substantially all of such corporation's assets. However,
appraisal rights are not provided to the holders of shares of any class that is
either listed on a national securities exchange or held of record by more than
2,000 shareholders unless (i) such shares are not converted solely into shares
of the acquiring, surviving, new or other corporation and cash in lieu of
fractional shares; (ii) if such shares constitute a preferred or special class
of stock, the articles of incorporation, the corporate action under
consideration or the express terms of the transaction encompassed in such
corporate action do not entitle all holders of the shares of such class to vote
thereon and require for the adoption thereof the affirmative vote of a majority
of the votes cast by all shareholders of such class; or (iii) if such shares
constitute a group of a class or series which are to receive the same special
treatment in the corporate action under consideration, the holders of such group
are not entitled to vote as a special class in respect of such corporate action.

Under the Connecticut Law, shareholders may perfect rights of objecting
shareholders to obtain the judicially-determined "fair value" of their shares
with regard to corporate actions involving certain (i) amendments to the
corporation's certificate of incorporation; (ii) offers by the corporation to
holders of its shares of any class having accrued and unpaid dividends or other
arrearages to exchange such shares; (iii) mergers; (iv) sales of all or
substantially all of the assets of the corporation; or (v) distributions to
shareholders, by dividend, liquidating distributions or otherwise, by transfer
of assets in kind to shareholders collectively as co-owners.

Under the CBCA, shareholders may perfect dissenters' rights with regard to
corporate actions involving: (i) consummation of a plan of merger to which the
corporation is a party if shareholder approval is required for the merger, or if
the corporation is a subsidiary that is merged with its parent; (ii)
consummation of a plan of share exchange to which the corporation is a party as
the corporation whose shares will be acquired if the shareholder is entitled to
vote on the plan; (iii) consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled to vote on the
transaction; (iv) an amendment to the articles of incorporation that materially
and

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adversely affects rights in respect of a dissenter's shares; or (v) any
corporate action taken pursuant to a shareholder vote to the extent the articles
of incorporation, bylaws or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares. Neither the Parent Certificate nor the Parent Bylaws provide such
special dissenters' rights.

Certain Statutory and Charter Provisions. Under both the Pennsylvania Law
and the Connecticut Law, the articles of incorporation or certificate of
incorporation, as the case may be, may provide for a higher shareholder vote
requirement than that required by law in order to approve certain proposed
actions or transactions of the corporation. The U.S. Healthcare Bylaws require
the vote of 80% of the votes which shareholders are entitled to cast to alter,
amend or repeal Section 3.1 of the U.S. Healthcare Bylaws (relating to number,
term and election of directors). The U.S. Healthcare Articles require the vote
of 80% of the votes which shareholders are entitled to cast for removal of
directors without cause. The Parent Certificate includes no such provision.

Anti-takeover Provisions. The Parent Certificate and Parent Bylaws contain
a number of provisions relating to corporate governance and to the rights of
shareholders. Certain of these provisions may be deemed to have a potential
anti-takeover effect in that such provisions may delay or prevent a change of
control of Parent. These provisions include the authority of the Board of
Directors to issue one or more series of preferred stock with such provisions as
the Board of Directors may determine.

Interested Shareholder Transactions. Under the Pennsylvania Law, no
business combination (defined to include certain mergers, sales of assets, sales
of 5% or more of outstanding stock, loans, recapitalizations or liquidations or
dissolutions) involving a Pennsylvania corporation and an interested shareholder
(defined to be any holder of 20% or more of the corporation's voting stock) may
be entered into unless (i) approved by the board of directors of the corporation
prior to the interested shareholder's share acquisition date, (ii) (a) five
years have expired since the acquisition of shares of the corporation by the
interested shareholder, and (b) either (1) a majority of shareholders of the
corporation (excluding the interested shareholder) approves the business
combination, or (2) the business combination is approved by an affirmative vote
of all of the holders of all of the outstanding common shares and satisfies
certain minimum statutory requirements, or (iii) approved (a) by a majority of
votes that all shareholders would be entitled to cast in an election of
directors, not including shares beneficially held by the interested shareholder
provided that (1) the meeting is called no earlier than three months after the
interested shareholder became, and if at the time of the meeting the interested
shareholder is, the beneficial owner of shares entitling the interested
shareholder to cast at least 80% of the votes that all shareholders would be
entitled to cast in an election of directors and (2) the business combination
satisfies certain other minimum statutory conditions, or (b) by the affirmative
vote of all of the holders of all of the outstanding common shares. However,
such law does not restrict any offer to purchase all of a corporation's shares.

The U.S. Healthcare Articles require the affirmative vote of holders of at
least 80% of the voting power of shares entitled to vote generally for the
election of directors to approve a plan of merger or consolidation or transfer
of all or substantially all of the assets of U.S. Healthcare. The requirement of
receiving the affirmative vote of holders of at least 80% of the votes which
shareholders are entitled to cast shall not be applicable if a transaction
described above in this paragraph shall have been approved by the affirmative
vote of 80% of the directors of U.S. Healthcare.

Under the Connecticut Law, certain transactions between a Connecticut
corporation and an interested shareholder (which is defined as a beneficial
owner of 10% or more of the voting power of the then outstanding shares of
voting stock of the corporation, or an affiliate of the corporation which at any
time during the two-year period prior to the transaction was the beneficial
owner of 10% or more of the voting power of the then outstanding shares of
voting stock of the corporation) are prohibited. The provision prohibits
business combinations (which include mergers, consolidations, sales of assets
having an aggregate book value of 10% or more of the total market value of the
outstanding shares of the corporation or its net worth, the issuance or transfer
of equity securities having an aggregate market value of 5% or more of the total
market value of the outstanding shares of the corporation, the adoption of a
resolution calling for the liquidation or dissolution of the corporation
proposed by or on behalf of the interested shareholder or a reclassification of
securities or

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merger having the effect of increasing by 5% or more the proportionate amount of
securities owned by an interested shareholder) with or for the benefit of an
interested shareholder or its affiliates or associates unless such business
combination is approved by the board of directors and receives the affirmative
vote of 80% of the voting power of all of the outstanding shares of voting stock
and two-thirds of the voting power of the outstanding shares of voting stock
exclusive of the stock held by the interested shareholder and its affiliates and
associates. The provision is inapplicable where, among other things, the
consideration to be received by shareholders for their shares in the business
combination meets certain pricing criteria. Connecticut corporations are
permitted to exclude certain business combinations from the voting requirements
of this provision by board resolution.

A similar provision of the Connecticut Law prohibits business combinations
(defined for purposes of such provision to include a merger or consolidation of
the corporation or any subsidiary of the corporation, a sale or other
disposition of assets having a market value equal to 10% or more of the
aggregate market value of all the outstanding stock of the corporation or
representing 10% or more of the earning power or net income of the corporation,
the issuance or transfer by the corporation or a subsidiary of the corporation
of stock of such corporation or subsidiary having an aggregate market value
equal to 5% or more of the aggregate market value of all outstanding stock of
the corporation (other than through a pro rata stock dividend or the exercise of
warrants or other rights or the conversion of convertible securities), the
adoption of a plan or proposal for the complete or partial liquidation of the
corporation or a subsidiary or payment of certain dividends if proposed by an
interested shareholder or an affiliate or associate which has the effect of
increasing the proportionate share of any class or series of voting stock (or
securities convertible into voting stock) owned by the interested shareholder
and the receipt by the interested shareholder or an affiliate or associate of
any financial benefit other than proportionately as a shareholder of the
corporation) with interested shareholders (which is defined as a beneficial
owner of 10% or more of the voting power of the outstanding shares of voting
stock of the corporation or an affiliate or associate of the corporation which
at any time during the five-year period prior to the transaction was the
beneficial owner of 10% or more of the voting power of the then outstanding
shares of voting stock of the corporation) within a five-year period after such
shareholder became an interested shareholder unless such business combination is
approved by the board of directors and a majority of the non-employee directors
of which there must be at least two.

Pursuant to its Bylaws, U.S. Healthcare has opted out of certain comparable
provisions of the Pennsylvania Law.

Fiduciary Duty and Limitations of Liability. Under the Pennsylvania Law, a
director may, in considering the best interests of a corporation, consider (i)
the effects of any action on shareholders, employees, suppliers, customers and
creditors of the corporation, and upon communities in which offices or other
facilities of the corporation are located, (ii) the short-term and long-term
interests of the corporation, including the possibility that the best interests
of the corporation may be served by the continued independence of the
corporation, (iii) the resources, intent and conduct of any person seeking to
take control of the corporation and (iv) all other pertinent factors.

As permitted under the Pennsylvania Law, the U.S. Healthcare Bylaws limit
the personal liability of directors of U.S. Healthcare for monetary damages for
any action taken or failure to take any action unless the director has breached
or failed to perform the duties of his office and the breach or failure
constitutes self-dealing, willful misconduct or recklessness. The above
provision does not eliminate the personal liability of directors for violations
of a criminal statute or the liability of a director for the payment of taxes
pursuant to federal, state or local law.

Under the Connecticut Law, a director shall perform his duties in good
faith, in a manner he reasonably believes to be in the best interests of the
corporation and with such care as an ordinarily prudent person in a like
position would use under similar circumstances. A director who so performs these
duties shall be presumed to have no liability by reason of being a director or
having been a director of the corporation. In approving a merger, consolidation
or sale of all or substantially all of the assets of a corporation, a director,
in determining what he reasonably believes to be in the best interests of the
corporation, shall consider (i) the long-term as well as the short-term
interests of the corporation, (ii) the interests of the shareholders, long-

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term as well as short-term, including the possibility that those interests may
be best served by the continued independence of the corporation, (iii) the
interests of the corporation's employees, customers, creditors and suppliers,
and (iv) community and societal considerations including those of any community
in which any office or other facility of the corporation is located. A director
may also consider any other factors he considers appropriate in making such
determination.

As permitted under the Connecticut Law, the Parent Certificate limits in
certain circumstances the monetary liability of directors to Parent and its
shareholders for a breach of their fiduciary duty as directors to the amount of
their compensation for serving Parent 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) enables the director or an associate (as defined in the Connecticut Law) to
receive an improper personal gain, (iii) shows a lack of good faith and a
conscious disregard for the duty of the director to Parent under circumstances
in which the director was aware that his or her conduct or omission created an
unjustifiable risk of serious injury to Parent, (iv) constitutes a sustained and
unexcused pattern of inattention that amounts to an abdication of the director's
duty to Parent or (v) creates liability under Section 33-321 of the Connecticut
Law (relating to the distribution of assets of Parent, whether by dividend,
purchase or redemption of shares or otherwise, in violation of the Connecticut
Law).

In addition, these provisions do not eliminate the liability of a director
for violations of federal securities laws, nor do they limit the rights of
Parent or its shareholders, in appropriate circumstances, to seek equitable
remedies such as injunctive or other forms of non-monetary relief. Such remedies
may not be effective in all cases.

Derivative Actions. Under the Pennsylvania Law, a shareholder may maintain
a derivative action, even if such shareholder was not a shareholder at the time
of the alleged wrongdoing if there is a strong prima facie case in favor of the
claim asserted and if the court determines in its discretion that serious
injustice will result without such action.

Under the Connecticut Law, a shareholder may bring a derivative action only
if he or she was a shareholder at the time of the alleged wrongdoing.

Under the CBCA, a shareholder may bring a derivative action if he or she
(i) was a shareholder of the corporation at the time of the act or omission
complained of or became a shareholder through transfer by operation of the law
from one who was a shareholder at that time and (ii) fairly and adequately
represent the interests of the corporation in enforcing the right of the
corporation.

Indemnification. Under the Pennsylvania Law, a business corporation has the
power to indemnify its directors, officers, shareholders, employees and agents
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such individuals in connection
with a third-party action or proceeding if such individual acted in good faith
and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal proceeding, had
no reason to believe his conduct was unlawful. A business corporation has the
power to indemnify its directors, officers, shareholders, employees and agents
against expenses (including attorneys' fees) actually and reasonably incurred in
connection with a threatened, pending or completed action by or in the right of
the corporation if such individual acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation. Indemnification shall not be made in respect of any claim, issue or
matter as to which the person has been adjudged to be liable to the corporation
and unless and only to the extent that a Court of Common Pleas or other court
deems proper. To the extent that a representative of a corporation has been
successful on the merits or otherwise in the defense of a third party or
derivative action, indemnification for expenses incurred is mandatory. The
Pennsylvania Law provides that provisions thereof on indemnification shall not
be deemed exclusive of any other rights to which a person may be entitled under
any bylaw, agreement or otherwise, provided that indemnification shall not be
made in the case of willful misconduct or recklessness. The U.S. Healthcare
Bylaws grant such indemnification rights to the directors, officers,
shareholders, employees and agents of U.S. Healthcare.

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The Connecticut Law also provides for indemnification of directors,
officers, shareholders, employees, agents of a corporation and certain eligible
outside parties. The Connecticut Law requires, in general, that the person
requesting indemnification must have successfully defended an action against
such person or have acted in good faith in what he or she reasonably believed
were the best interests of the corporation in order to receive indemnification.
The Connecticut Law does not permit, however, a corporation, through its
certificate of incorporation, its bylaws, a resolution of the board of directors
or the shareholders or an agreement, to provide any greater or lesser
indemnification rights than those specifically required by the Connecticut Law.
Parent intends, however, as specifically authorized under the Connecticut Law,
to procure insurance providing greater indemnification rights for its directors
and officers than those set forth in the statute. Unlike the statute, such
insurance does not 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 policy, and such insurance covers
directors and officers for any acts not specifically excluded for which the
director or officer is not eligible for indemnification under the statute to the
extent such coverage does not violate public policy.

The CBCA gives a corporation the power to indemnify its directors against
liability (including judgments, settlements, penalties and fines) if such
individual acted in good faith, reasonably believed that his or her conduct was
in the corporation's best interests (or, where he or she was not acting as a
director, was not opposed to its best interests) and, in the case of criminal
proceedings, had no reasonable cause to believe his or her conduct was unlawful.
In a proceeding by or in the right of the corporation, the corporation may
indemnify a director only for reasonable expenses and may not indemnify a
director who was adjudged liable to the corporation. Indemnification of
reasonable expenses incurred by a director is mandatory when he or she is wholly
successful in the defense of any proceeding. A director may also apply to any
court of competent jurisdiction, which may order indemnification if it concludes
that the director is fairly and reasonably entitled to it under all the
circumstances, whether or not such director meets the statutory standard of
conduct outlined above. Such court may also order indemnification for reasonable
expenses even if the director was adjudged liable in a proceeding by or in the
right of the corporation. The CBCA does not permit a corporation through its
certificate of incorporation, bylaws, a resolution of the board of directors or
shareholders or an agreement to provide any indemnification to a director which
is inconsistent with the CBCA. A corporation may indemnify an officer, employee
or agent who is not a director to the same extent as a director. An officer is
entitled to mandatory indemnification for expenses when he or she is wholly
successful in the defense of any proceeding and may, like a director, apply to a
court for an indemnification order. In addition, a corporation may indemnify an
officer, employee or agent who is not a director to the extent, consistent with
public policy, that its certificate of incorporation, bylaws, general or
specific action of its board of directors or contract may provide. The CBCA also
authorizes a corporation to obtain insurance providing indemnification rights
for directors, officers, employees and agents which are greater than those
authorized by the statute. Because Parent was formed before the CBCA takes
effect, Parent will be required to provide directors, officers, employees and
other persons covered by the above-described provisions with indemnifications to
the fullest extent permitted under the CBCA.

Rights Plan. U.S. Healthcare does not have a rights plan. The Parent Board
of Directors adopted a rights plan substantially identical to Aetna's amended
Share Purchase Rights Plan to be effective as of the Merger Date. See
"Description of Parent Rights."

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DESCRIPTION OF PARENT RIGHTS

The following description of the Parent Rights is qualified in its entirety
by reference to the Parent Rights Agreement, which is incorporated by reference
herein and a form of which is an exhibit to Aetna Inc.'s Registration Statement
on Form S-4 which this Joint Proxy Statement/Prospectus is a part of.

It is intended that each share of Parent Common Stock outstanding
immediately after the Merger Date will have attached thereto a Parent Right
issued pursuant to the Parent Rights Agreement. Each Parent Right entitles the
registered holder to purchase from Parent one 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 Parent 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 Parent 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 Parent 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 Parent 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 Parent Common Stock;

the Parent Rights will be evidenced, with respect to any of the Parent Common
Stock certificates outstanding as of the Merger Date, by such Parent Common
Stock certificates.

The Parent Rights Agreement provides that, until the Distribution Date, the
Parent Rights will be transferred with and only with shares of Parent Common
Stock. Until the Distribution Date (or earlier redemption or expiration of the
Parent Rights), new Parent Common Stock certificates issued after the Merger
Date upon transfer or new issuance of shares of Parent Common Stock will contain
a notation incorporating the Parent Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Parent Rights),
the surrender for transfer of any certificates for shares of Parent Common Stock
outstanding as of the Merger Date will also constitute the transfer of the
Parent Rights associated with the shares of Parent Common Stock represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Parent Rights (the "Right Certificates")
will be mailed to holders of record of shares of Parent Common Stock as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Parent Rights.

No Parent Right is exercisable at any time prior to the Distribution Date.
The Parent Rights will expire on November 7, 1999 (the "Final Expiration Date"),
unless earlier redeemed by Parent as described below. Until a Parent 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 Parent Rights, and
the number of Parent Rights outstanding, are subject to customary antidilution
provisions.

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<PAGE> 143

Shares of Series A Preferred Stock purchased upon exercise of the Parent
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 Parent
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 Parent Common Stock. Each share of Series A Preferred Stock
will have 100 votes, voting together with Parent Common Stock. Finally, in the
event of any merger, consolidation or other transaction in which Parent Common
Stock is exchanged, each share of Series A Preferred Stock will be entitled to
receive 100 times the amount received per share of Parent 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 Parent Right should approximate the value of
one share of Parent Common Stock.

In the event that (i) any person or group of affiliated or associated
persons (other than the Parent or a related person) becomes the beneficial owner
of 15% or more of the outstanding shares of Parent 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 Parent Rights Agreement, proper
provision shall be made so that each holder of a Parent Right, other than Parent
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 Parent 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 Parent 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 Parent Rights
Agreement) per share of Parent Common Stock were $100.00, each Parent 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 Parent 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 Parent Right as
described above, such Parent Right would entitle its holder to receive from
Parent, upon the surrender of such Parent 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 Parent 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 Parent Common
Stock are changed or exchanged, or (iii) 50% or more of Parent's 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 Parent
Right (other than Parent 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 Parent 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 Parent Rights Agreement)
per share of common stock of such other person were $25.00, each Parent 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, Parent 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 Parent
Rights will be reduced as provided in the

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<PAGE> 144

Parent 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 Parent Rights in whole, but not in part, at a price
of $0.01 per Parent 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 Parent Rights by adopting a resolution to that effect.

Immediately upon any redemption of the Parent Rights, the right to exercise
the Parent Rights will terminate and the only right of the holders of Parent
Rights will be to receive the Redemption Price. Parent will give notice of such
redemption to the holders of the then-outstanding Parent 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 Parent Rights Agreement or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Parent Common Stock.

The Parent 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 Parent 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 Parent Rights Agreement may be made which will
decrease the stated Redemption Price.

The Parent Rights have certain anti-takeover effects. The Parent 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 Parent Rights being acquired.
The Parent 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 Parent Rights may be redeemed by Parent at the
Redemption Price prior to the time that the Parent Rights would otherwise become
exercisable or, if later, the time that a person or group becomes an Acquiring
Person.

The Parent Rights are substantially similar to Aetna's existing rights
issued pursuant to Aetna's amended Share Purchase Rights Plan.

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<PAGE> 145

MANAGEMENT

DIRECTORS

Upon consummation of the Mergers, the Board of Directors of Parent will
consist of the members of the Board of Directors of Aetna immediately prior to
the Merger Date. The individuals listed under "Aetna Designees" in the table
below are the members of the Board of Directors of Aetna who are expected to
become the members of the Board of Directors of Parent on the Merger Date. No
later than sixty days following the Merger Date, the Board of Directors of
Parent will be expanded to include the U.S. Healthcare Designees. The
individuals listed under "U.S. Healthcare Designees" in the table below are the
individuals expected to become members of the Board of Directors of Parent
within such sixty days.

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<PAGE> 146

<TABLE>
<CAPTION>
NAME AND YEAR FIRST BECAME
A DIRECTOR OF AETNA OR
U.S. HEALTHCARE, AS AGE AS OF BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
APPLICABLE 5/20/96 AND OTHER INFORMATION
- ---------------------------- --------- -------------------------------------------------------
<S> <C> <C>
Barbara Hackman Franklin 56 Miss Franklin is President and Chief Executive Officer
(Aetna Director from 1979 to of
1992, and since 1993) Barbara Franklin Enterprises (private investment and
international trade consulting firm). From 1992 to
1993, she served as the 29th U.S. Secretary of
Commerce. Before her appointment, Miss Franklin was
President and Chief Executive Officer of Franklin
Associates (management consulting firm), which she
founded in 1984. Miss Franklin also served: four terms
on the Advisory Committee for Trade Policy and
Negotiations; as Alternate Representative to the 44th
Session of the United Nations General Assembly; as a
public member of the Board of the American Institute of
Certified Public Accountants and the Auditing Standards
Board Planning Committee; and as an advisor to the
Comptroller General of the United States. Miss Frank-
lin has also been a Senior Fellow of The Wharton School
of the University of Pennsylvania and an original
Commissioner of the U.S. Consumer Product Safety
Commission. Miss Franklin chairs the American Trader
Initiative Advisory Council for the Heritage
Foundation, is active in numerous international organi-
zations, and is also a director of AMP Incorporated
(electrical and electronic connection devices), The Dow
Chemical Company (chemicals and chemical products) and
MedImmune, Inc. (biotechnology company).
Earl G. Graves 61 Mr. Graves is Chairman and Chief Executive Officer of
(Aetna Director since 1994) Earl G. Graves, Ltd. (a multi-faceted communications
company) and is the Publisher of Black Enterprise
magazine which he founded in 1970. Additionally, since
1990, Mr. Graves has served as Chairman and Chief
Executive Officer of Pepsi-Cola of Washington, D.C.,
L.P. (a PepsiCo bottling franchise). Further, Mr.
Graves is a general partner of Egoli Partners, L.P.
(general partner of New Age Beverages, the PepsiCo
franchise in South Africa). Mr. Graves also is a
director of AMR Corporation and its subsidiary,
American Airlines, Inc., Chrysler Corporation (auto-
motive manufacturer), Federated Department Stores Inc.
(retailer) and Rohm and Haas Company (specialty
chemicals and plastics). In addition, he serves as a
volunteer on the Boards of the New American Schools
Development Corporation and the American Museum of
Natural History and Planetarium. Mr. Graves is a
Trustee of Howard University, a member of the Executive
Committee of the Council on Competitiveness, and is on
the Executive Board of the National Office of the Boy
Scouts of America serving as Vice President of
Relationships and Marketing.
</TABLE>

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<PAGE> 147

<TABLE>
<CAPTION>
NAME AND YEAR FIRST BECAME
A DIRECTOR OF AETNA OR
U.S. HEALTHCARE, AS AGE AS OF BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
APPLICABLE 5/20/96 AND OTHER INFORMATION
- ---------------------------- --------- -------------------------------------------------------
<S> <C> <C>
Gerald Greenwald 60 Mr. Greenwald is Chairman and Chief Executive Officer
(Aetna Director since 1993) of UAL Corporation, the parent company of United
Airlines ("UAL"), a position he assumed in July 1994.
From 1979 to 1990, Mr. Greenwald held various executive
positions with Chrysler Corporation (automotive
manufacturer), serving as Vice Chairman of the Board
from 1989 to May 1990 and as Chairman of Chrysler
Motors from 1985 to 1988. In 1990, Mr. Greenwald was
selected to serve as Chief Executive Officer of United
Employee Acquisition Corporation in connection with the
proposed 1990 employee acquisition of UAL. From 1991 to
1992, he was a Managing Director of Dillon Read & Co.,
Inc. (investment banking) and, from 1992 to 1993, he
was President and Deputy Chief Executive Officer of
Olympia & York Developments Ltd. (Canadian real estate
company). Mr. Greenwald then served as Chairman and
Managing Director of Tatra Truck Company (producer of
trucks in the Czech Republic) from 1993 to 1994. Mr.
Greenwald is a Trustee of Princeton University and the
Aspen Institute.
Ellen M. Hancock 53 Mrs. Hancock served as an Executive Vice President and
(Aetna Director since 1995) Chief Operating Officer of National Semiconductor
Corporation (leading manufacturer of semiconductors)
from September 1995 to May 1996. Prior to that, Mrs.
Hancock served in various staff, managerial and
executive positions at International Business Machines
Corporation ("IBM") (information-handling systems,
equipment and services) from 1966 to 1995. She became a
Vice President of IBM in 1985 and served as President,
Communication Products Division from 1986 to 1988 when
she was named General Manager, Networking Systems. Mrs.
Hancock was elected an IBM Senior Vice President in
November 1992 and, in 1993, was appointed Senior Vice
President and Group Executive, which position she held
until February 1995. Mrs. Hancock is a director of
Colgate-Palmolive Company (consumer products) and
Siemens ROLM Communications (telecommunications).
Michael H. Jordan 59 Mr. Jordan is Chairman and Chief Executive Officer of
(Aetna Director since 1992) Westinghouse Electric Corporation (diversified global
technology-based corporation). From 1992 to 1993, he
was a principal in Clayton, Dubilier & Rice, Inc.
(private investing firm). Mr. Jordan retired in July
1992 as Chairman and Chief Executive Officer of the
PepsiCo International Foods and Beverages Division of
PepsiCo, Inc. (beverages, snack foods and restaurants),
having held various positions with PepsiCo since 1974.
Mr. Jordan also is a director of Dell Computer
Corporation (personal computers and related services),
Melville Corporation (specialty retailer) and
Rhone-Poulenc Rorer Inc. (pharmaceuticals) and is also
a member of the Advisory Board of Grupo CIMA
(healthcare services and hospital investments).
</TABLE>

136
<PAGE> 148

<TABLE>
<CAPTION>
NAME AND YEAR FIRST BECAME
A DIRECTOR OF AETNA OR
U.S. HEALTHCARE, AS AGE AS OF BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
APPLICABLE 5/20/96 AND OTHER INFORMATION
- ---------------------------- --------- -------------------------------------------------------
<S> <C> <C>
Jack D. Kuehler 63 Mr. Kuehler retired in August 1993 as Vice Chairman and
(Aetna Director since 1990) a director of IBM, having held various positions with
IBM since joining that company in 1958. Prior to his
appointment as Vice Chairman of IBM in January 1993,
Mr. Kuehler served as President from 1989 to 1993, as
Vice Chairman from 1988 to 1989 and as Executive Vice
President from 1987 to 1988. Mr. Kuehler also is a
director of In Focus Systems, Inc. (projection products
and services), Olin Corporation (chemical, metal and
defense-related products), The Parsons Corporation
(heavy construction and engineering services), and is a
member of the National Academy of Engineering, a Fellow
of the Institute of Electrical and Electronics
Engineers, Inc. and a Fellow of the American Academy of
Arts and Sciences.
Frank R. O'Keefe, Jr. 66 Mr. O'Keefe retired in 1988 as Chairman, President and
(Aetna Director since 1989) Chief Executive Officer of Armtek Corporation (producer
of automotive materials, components and systems),
having assumed that position in 1986. Prior to that, he
served as President and Chief Operating Officer of
Armstrong Rubber Company from 1980 to 1986. Following
his retirement from Armtek, Mr. O'Keefe served as
President of Long Wharf Capital Partners, Inc.
(business investments) from 1988 to 1990. He was an
independent business consultant from 1990 to 1995. Mr.
O'Keefe also is a director of Southern New England
Telecommunications Corporation and The United
Illuminating Company.
Judith Rodin 51 Dr. Rodin became President of the University of
(Aetna Director since 1995) Pennsylvania in July 1994. Prior to assuming her
current position, Dr. Rodin had served as Provost of
Yale University since 1992. Dr. Rodin joined the Yale
faculty in 1972, and held teaching and research
positions of increasing responsibility in the
Department of Psychology. She became a Professor of
Medicine and Psychology in 1985 and served as Chair of
the Department of Psychology from 1989 to 1991 and Dean
of the Graduate School of Arts and Sciences from 1991
to 1992 when she became Provost. Dr. Rodin is a
director of Air Products and Chemicals, Inc.
(industrial gases and chemicals), Electronic Data
Systems Corporation (computer services) and of the
Brookings Institution.
U.S. Healthcare Designees
Leonard Abramson 63 Mr. Abramson has been the principal executive officer
(U.S. Healthcare Director and a director of U.S. Healthcare since 1982. Mr.
since 1982) Abramson is expected to be appointed to the Board of
Directors of Parent within sixty days of the Merger
Date.
</TABLE>

137
<PAGE> 149

COMPENSATION OF DIRECTORS

Compensation for non-employee Directors will be reviewed annually by a
Nominating and Corporate Governance Committee of the Parent Board of Directors.
The Committee's goal of attracting and retaining qualified Directors is
supported through a competitive compensation program that provides remuneration
for Directors' contributions while offering stock-based compensation
alternatives, which strengthen the mutuality of interests with other
shareholders.

Parent will pay its non-employee Directors a retainer fee of $25,000 per
year for membership on the Board of Directors, a retainer fee of $4,000 a year
for membership on a Committee of the Board of Directors ($7,000 in the case of
the chairperson of the Committee) and a $1,000 fee for attendance at each Board
of Directors or Committee meeting.

Pursuant to the Aetna Non-Employee Director Deferred Stock and Deferred
Compensation Plan (the "Director Plan"), which, subject to the approval of the
respective shareholders of Aetna and U.S. Healthcare, will be assumed by Parent,
non-employee Directors upon their initial election to the Board of Directors
will receive a one-time grant of units convertible upon retirement from Board of
Directors service into 1,500 shares of Parent Common Stock ("Initial Units").
Additionally, on the date of each Annual Meeting of the Shareholders of Parent,
each outside Director will receive units convertible upon retirement from Board
of Directors service into 350 shares of Parent Common Stock ("Annual Units" and
together with the Initial Units, "Units"). Generally, to become fully vested in
the Units a Director must complete, in the case of the Initial Units, three
years of service and, in the case of the Annual Units, one year of service as a
Director following the grant of the Units. If, however, service is sooner
terminated by reason of death, disability, retirement or acceptance of a
position in government service, a Director is entitled to receive the full grant
provided the Director has completed a minimum of six consecutive months of
service as a Director since such grant. A non-employee Director's rights with
respect to any unvested Units will also vest upon a Change-in-Control (as
defined in the Director Plan) of Parent. Otherwise, if a Director ceases to be a
Director before completion of such one or three years(s) of service, as
applicable, from the grant date of any Units, he or she

138
<PAGE> 150

will receive only a pro-rata portion of the related shares, provided that the
Director has completed a minimum of six consecutive months of service as a
Director since such grant. Although Directors receive dividend equivalents, they
have no voting rights with respect to the shares that are subject to the grant.
The Units granted are not transferable.

COMMITTEES OF THE BOARD OF DIRECTORS

Following the Mergers, the Board of Directors of Parent will establish such
committees and designate members of such committees as it deems appropriate. The
Principal Shareholder will serve on any committee of the Parent Board of
Directors that is constituted for the purpose of identifying and recommending a
candidate to become chief executive officer of Parent at such time as Mr.
Compton retires.

EXECUTIVE OFFICERS

Set forth below are the names and titles of the persons who are expected to
serve as executive officers of Parent initially following the Mergers.

<TABLE>
<CAPTION>
NAME AGE* POSITION
- ------------------------------ ---- ----------------------------------------------------
<S> <C> <C>
Ronald E. Compton 63 Chairman, President and chief executive officer
Richard L. Huber 59 Vice Chairman for Strategy and Finance
Zoe Baird 43 Senior Vice President and General Counsel
Michael J. Cardillo 53 Co-President of the Combined Health Operations
Mary Ann Champlin 48 Senior Vice President, Aetna Human Resources
Fredrick C. Copeland, Jr. 54 President and chief executive officer,
Aetna International, Inc.
Daniel P. Kearney 57 Executive Vice President, Investments/Financial
Services
Joseph T. Sebastianelli 49 Co-President of the Combined Health Operations
</TABLE>

- ---------------

* As of May 20, 1996

COMPENSATION OF EXECUTIVE OFFICERS

Parent has not yet paid any compensation to its chief executive officer or
any of its other executive officers. Except in the case of certain executive
officers subject to employment agreements described under "The
Mergers -- Interests of Certain Persons in the Mergers -- U.S.
Healthcare -- Employment Agreements" the compensation of such executive officers
has not yet been determined. The Board of Directors of Parent may rely on a
Compensation Committee composed of non-employee members of the Parent Board of
Directors to recommend the form and amount of compensation to be paid to the
executive officers of Parent.

It is anticipated that when the Compensation Committee meets to determine
such compensation, which meeting is not expected to occur until after the Merger
Date, the Compensation Committee will generally adhere to compensation policies
which reflect the belief that (i) Parent must attract and retain individuals of
outstanding ability and motivate and reward such individuals for sustained
performance, (ii) a substantial portion of an executive's compensation should be
at risk based upon the executive's performance and that of Parent, and (iii)
within these parameters, levels of compensation should generally be in line with
that offered by comparable corporations. On an ongoing basis, subject to any
existing employment agreement, the type and amount of compensation to be paid by
Parent to its officers will be entirely discretionary and within the subjective
judgment of the Compensation Committee.

For information concerning the compensation paid to the chief executive
officer and the other four most highly compensated executive officers of Aetna
for the 1995 fiscal year, see the 1996 Proxy Statement for Aetna, the relevant
portions of which are incorporated by reference into the Aetna Form 10-K. See
"Incorporation of Certain Documents by Reference."

For information concerning the compensation paid to the executive officers
of U.S. Healthcare for the 1995 fiscal year, see "Other Information for U.S.
Healthcare Annual Meeting."

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<PAGE> 151

OTHER INFORMATION FOR U.S. HEALTHCARE ANNUAL MEETING

NOMINEES FOR ELECTION

At the U.S. Healthcare Annual Meeting, the shareholders of U.S. Healthcare
will elect two Class III directors to hold office until the 1999 Annual Meeting
of Shareholders of U.S. Healthcare and until their successors are duly elected
and qualified. U.S. Healthcare's Board of Directors is divided into three
classes serving staggered three-year terms; the term of one class of directors
expires each year. The term of the Class III directors expires at the U.S.
Healthcare Annual Meeting. The nominees of the U.S. Healthcare Board of
Directors for election as Class III directors are David B. Soll, M.D. and
Timothy T. Weglicki, who are currently Class III directors. In accordance with
U.S. Healthcare's Articles of Incorporation, one of the Class III directors is
to be elected by the holders of U.S. Healthcare Common Stock and U.S. Healthcare
Class B Stock, voting together as a single class, and the other Class III
director is to be elected solely by the holders of U.S. Healthcare Common Stock.
Dr. Soll has been nominated by the Board of Directors as the Class III director
to be elected by the holders of U.S. Healthcare Common Stock and U.S. Healthcare
Class B Stock, and his election will require the affirmative vote of a majority
of the votes which the holders of U.S. Healthcare Common Stock and U.S.
Healthcare Class B Stock present at the U.S. Healthcare Annual Meeting in person
or by proxy are entitled to cast, voting together as a single class. Mr.
Weglicki has been nominated by the U.S. Healthcare Board of Directors as the
Class III director to be elected solely by the holders of U.S. Healthcare Common
Stock, and his election will require the affirmative vote of a majority of the
votes which the holders of U.S. Healthcare Common Stock present at the U.S.
Healthcare Annual Meeting in person or by proxy are entitled to cast. Unless
contrary instructions are given, the shares represented by the enclosed proxy
will be voted "FOR" the election of Dr. Soll and Mr. Weglicki. The U.S.
Healthcare Board of Directors believes that the nominees are willing to serve as
directors. If any nominee at the time of election is unable or unwilling to
serve or is otherwise unavailable for election and, as a result, another person
is nominated, the persons named in the enclosed proxy or their substitutes will
have discretion and authority to vote for or to refrain from voting for the
other nominee in accordance with their best judgment.

The nominees for election as directors and the directors whose terms of
office continue after the U.S. Healthcare Annual Meeting, together with certain
information about them, are as follows:

<TABLE>
<CAPTION>
DIRECTOR TERM EXPIRES POSITION(S) WITH U.S.
NAME AGE SINCE (CLASS) HEALTHCARE
- -------------------------------------- --- -------- ------------ -------------------------
<S> <C> <C> <C> <C>
Leonard Abramson(1)(2) 63 1982 1998 (I) Principal executive
officer and Director
Betsy Z. Cohen(4) 54 1994 1997 (II) Director
Jerome S. Goodman(3) 61 1988 1998 (I) Director
Allen Misher, Ph.D.(1)(2)(3)(4) 63 1985 1997 (II) Director
David B. Soll, M.D. 65 1982 1996 (III) Director
Timothy T. Weglicki(3) 44 1990 1996 (III) Director
</TABLE>

- ---------------

(1) Member of U.S. Healthcare's Stock Option Committee.

(2) Member of U.S. Healthcare's Executive Committee.

(3) Member of U.S. Healthcare's Audit Committee.

(4) Member of U.S. Healthcare's Compensation Committee and Incentive Plan
Committee. Effective April 15, 1996, Ms. Cohen and Dr. Misher were appointed
to U.S. Healthcare's Compensation Committee and Incentive Plan Committee.
Prior to April 15, 1996, Mr. Goodman and Dr. Misher were members of U.S.
Healthcare's Compensation Committee and Incentive Plan Committee.

The Merger Agreement provides that immediately after the Merger Date, the
Board of Directors of U.S. Healthcare will be designated by Parent and will
include the Co-Presidents. It is not expected that the above directors will
continue to be directors of U.S. Healthcare after the Merger Date.

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<PAGE> 152

PRINCIPAL OCCUPATIONS AND DIRECTORSHIPS HELD BY THE NOMINEES FOR DIRECTORS
AND DIRECTORS OF U.S. HEALTHCARE

Mr. Abramson has been the principal executive officer and a Director of
U.S. Healthcare since 1982.

Ms. Cohen has been Chairman, Chief Executive Officer and a Director of
JeffBanks, Inc. (a bank holding company) since 1981. From 1985 until 1993, Ms.
Cohen was a Director of First Union Corp. of Virginia (a bank holding company)
and its predecessor, Dominion Bankshares, Inc. (a bank holding company). Ms.
Cohen has also been a Director of Life Technologies since 1992.

Mr. Goodman has been Chairman of Cherry Hill Travel, Inc. d/b/a Travel One
(a commercial travel agent) since 1971 and was the sole stockholder of Travel
One from 1971 to 1994. He has been a Director of GBC Technologies, Inc. since
1992. From 1987 until 1992, Mr. Goodman was also Chairman, President and Chief
Executive Officer of First Peoples Financial Corporation (a bank holding
company).

Dr. Misher has been President Emeritus of the Philadelphia College of
Pharmacy and Science since February 1995 and was President of the Philadelphia
College of Pharmacy and Science from 1984 to 1994. He has been a Director of
U.S. Bioscience, Inc. since 1988, a Director of Marsam Pharmaceuticals, Inc.
(pharmaceutical company) since 1991, a Director of Cortech, Inc. since 1994 and
a Director of Oravax, Inc. since 1996.

Dr. Soll is a practicing ophthalmologist and has been Director of the
Division of Ophthalmology, Cooper Hospital/University Medical Center and
Clinical Professor of Surgery (Ophthalmology), University of Medicine and
Dentistry of New Jersey/Robert Wood Johnson Medical School at Camden, New Jersey
since 1988. Dr. Soll has been Director of the Ophthalmology Service at Frankford
Hospital since 1965 and a consultant at the Philadelphia Geriatric Center since
1965, and from 1968 to the present, he has been Director of the Ophthalmology
Service at Medical College Hospitals, Elkins Park Campus.

Mr. Weglicki has been a general partner of ABS Capital Partners, L.P., a
merchant banking fund affiliated with Alex. Brown & Sons Incorporated, an
investment banking and brokerage firm, since January 1994, and was a Managing
Director of Alex. Brown & Sons Incorporated from 1984 to 1995.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

U.S. Healthcare's Board of Directors has an Audit Committee, a Compensation
Committee, an Incentive Plan Committee, a Stock Option Committee and an
Executive Committee, but does not have a Nominating Committee.

The Audit Committee, which held two meetings in 1995, consists of Dr.
Misher and Messrs. Goodman and Weglicki. The functions of the Audit Committee
generally include the following: recommending the engagement of U.S.
Healthcare's independent auditors; reviewing with U.S. Healthcare's independent
auditors the scope and results of their engagement; reviewing the scope and
results of U.S. Healthcare's internal audit function; and reviewing the adequacy
of U.S. Healthcare's systems of internal accounting controls.

The Compensation Committee, which held two meetings in 1995, currently
consists of Ms. Cohen and Dr. Misher. The function of the Compensation Committee
is to review and approve the compensation of U.S. Healthcare's executive
officers.

The Incentive Plan Committee, which held two meetings in 1995, currently
consists of Ms. Cohen and Dr. Misher. The functions of the Incentive Plan
Committee are to grant stock options and restricted stock awards pursuant to
U.S. Healthcare's Incentive Plan and to serve as the administrative committee of
U.S. Healthcare's Incentive Plan.

The Stock Option Committee, which held no meetings in 1995, consists of
Messrs. Abramson and Dickerson and Dr. Misher. The function of the Stock Option
Committee is to grant stock options pursuant to U.S. Healthcare's stock option
plans pursuant to which stock options may be granted to employees and
participating physicians under contract with U.S. Healthcare's HMOs.

The Executive Committee is empowered to exercise all of the powers of the
Board of Directors between meetings of the Board, except for certain powers
reserved by law or the U.S. Healthcare Bylaws to the Board

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<PAGE> 153

of Directors or the shareholders. The members of the Executive Committee are Mr.
Abramson and Dr. Misher. The Executive Committee did not hold any meetings in
1995.

The Board of Directors held four meetings in 1995. Each Director attended
at least 75% of the aggregate number of meetings of the Board of Directors and
committees on which the Director served.

COMPENSATION OF DIRECTORS

For 1995, U.S. Healthcare paid an annual fee of $10,000 to each
non-employee director and $1,000 for each Board of Directors or committee
meeting attended. For 1995, Ms. Cohen received $14,000, Mr. Goodman received
$18,000, Dr. Misher received $20,000, Dr. Soll received $14,000 and Mr. Weglicki
received $16,000.

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<PAGE> 154

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table summarizes the compensation
paid by U.S. Healthcare to U.S. Healthcare's executive officers for each of the
last three fiscal years.

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------------------ PAYOUTS
OTHER RESTRICTED ------------
ANNUAL STOCK SECURITIES ALL OTHER
FISCAL COMPENSATION AWARDS UNDERLYING COMPENSATION
NAME AND POSITION YEAR SALARY(1) BONUS(2) ($)(3) ($)(4) OPTIONS PAYOUTS (5)(6)
- --------------------- ------ ---------- ---------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Abramson 1995 $1,791,764(7) $ 700,000(8) $121,139 None None None $369,724
Principal executive
officer 1994 1,739,577 1,635,000 77,830 None None None 421,581
1993 1,676,700 1,459,395(9) 75,114 None 150,000 None 310,836
Michael J. Cardillo 1995 575,100 221,460 15,839 $499,968 55,595 None 20,062
Co-President and 1994 475,200 300,000 9,588 None None None 20,096
Principal marketing
officer 1993 432,000 225,000 8,629 None 40,500 None 29,270
Joseph T.
Sebastianelli(10) 1995 513,000 221,460 1,688 499,968 68,095(12) None 20,062
Co-President and
Principal medical 1994 313,906 255,000 None 635,000(11) None(12) None 3,000
administrative
officer
James H. Dickerson,
Jr.(10) 1995 378,000 129,146 1,525 291,648 56,475(12) None 20,062
Principal financial
officer 1994 283,500 150,000 None 986,133(11) None(12) None None
Timothy E. Nolan 1995 378,000 129,146 9,978 291,648 38,300 None 20,062
Senior sales officer 1994 286,200 270,000 6,091 None None None 20,096
1993 243,000 270,000 5,624 None 37,500 None 29,270
David F. Simon 1995 378,000 129,146 8,004 291,648 30,885 None 20,062
Principal legal and
regulatory 1994 361,800 150,000 4,373 None None None 20,096
affairs officer 1993 329,400 125,000 3,337 None 15,000 None 29,270
</TABLE>

- ---------------

(1) Includes deferred compensation that accrues annually at a designated
percentage of each executive officer's annual base salary, which is payable
upon termination of employment. The designated percentage of deferred
compensation for Mr. Abramson for 1993, 1994, and 1995 was 11.78%, and the
designated percentage of deferred compensation for the other executive
officers for 1993, 1994, and 1995 was 8%.

The amount reported in this column also includes the portion of salary that
each executive officer contributed to the U.S. Healthcare Savings Plan (the
"Savings Plan"). Participants in the Savings Plan may contribute a
percentage of their cash compensation, subject to certain limitations set
forth in the Savings Plan.

(2) Under the 1995 Stock-Based Performance Bonus Program for Senior Employees
(the "1995 Bonus Program"), each executive officer other than Leonard
Abramson received his 1995 bonus in a combination of cash and restricted
shares of U.S. Healthcare's Common Stock. The restricted shares granted
under the 1995 Bonus Program vest in five annual installments commencing on
January 4, 1996. The 1995 bonus amount for each executive officer in this
column (other than Leonard Abramson) includes the market value of the first
installment of restricted shares granted under the 1995 Bonus Program which
vested on January 4, 1996. The number of shares and the market value (which
is determined by multiplying the number of vested shares by the closing
price of U.S. Healthcare Common Stock on the NASDAQ Stock Market on the
vesting date) of the first installment that vested on January 4, 1996 were
as follows: Mr. Cardillo, 2,688 shares ($120,960); Mr. Sebastianelli, 2,688
shares ($120,960); Mr. Dickerson, 1,049 shares ($47,205); Mr. Nolan, 996
shares ($44,820) and Mr. Simon, 1,049 shares ($47,205). Pursuant to the
Merger Agreement and the U.S. Healthcare Incentive Plan, all restricted
shares vested as of March 30, 1996.

(3) The deferred compensation amount, which accrues each year as described
above in Note 1, is increased each year by an amount corresponding to
interest, based upon U.S. Healthcare's average yield on its investments, on
the prior year's accumulated balance. This column includes interest earned
by each executive officer on his deferred compensation.

(4) The restricted stock awards shown in this column for 1995 reflect the
market value (as of the grant date) of the four remaining installments of
restricted shares granted to each executive officer other than Leonard
Abramson under the 1995 Bonus Program (described above in Note 2) which had
not vested as of January 4, 1996. The market value of these restricted
shares was determined by multiplying the number of unvested shares by the
closing price of Common Stock on the NASDAQ Stock Market as of the grant
date. As of January 1, 1996, the officers listed in this table held the
following number of shares of restricted stock, with the following values:
Mr. Abramson, 0 shares ($0), Mr. Cardillo, 10,752 shares ($499,968); Mr.
Sebastianelli, 10,752 shares ($499,968); Mr. Dickerson, 6,272 shares
($291,648); Mr. Nolan, 6,272 shares ($291,648); Mr. Simon, 6,272 shares
($291,648). Pursuant to the Merger Agreement and the U.S. Healthcare
Incentive Plan, all restricted shares vested as of March 30, 1996.

(5) Includes contributions made by U.S. Healthcare to the Pension Plan for
Employees of U.S. Healthcare (the "Pension Plan") and to the Savings Plan.
Under the Pension Plan, U.S. Healthcare contributes for each eligible
employee an amount equal to 8% of the employee's compensation plus 5.7% of
the employee's compensation in

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<PAGE> 155

excess of the social security taxable wage base, subject to a maximum
limitation on U.S. Healthcare contribution per employee as specified in the
Pension Plan. The Pension Plan provides for payment of an employee's
account balance either in a lump sum or under an annuity option specified
in the Pension Plan, as selected by the employee.

The amount reported in this column also includes U.S. Healthcare's
contributions under the Savings Plan in an amount equal to one-third of the
participating employee's contribution, up to 2% of the employee's annual
compensation.

(6) Pursuant to agreements between U.S. Healthcare and two trusts created by
Leonard Abramson, the trusts have purchased three split-dollar life
insurance policies on Mr. Abramson's life and one split-dollar life
insurance policy on the joint lives of Mr. Abramson and his wife, Madlyn K.
Abramson. Under these agreements, U.S. Healthcare pays the premium on each
policy, minus a sum equal to the lesser of the applicable one-year term
premium cost computed under Internal Revenue Service Revenue Ruling 55-747
or the cost of comparable one-year term life insurance in the amount of
each policy. The trusts are the beneficiaries of the insurance policies.
However, U.S. Healthcare has been granted a security interest in the death
benefits of each policy equal to the sum of all premium payments made by
U.S. Healthcare. These arrangements are designed so that if the assumptions
made as to mortality experience, policy dividends and other factors are
realized, U.S. Healthcare, upon Mr. Abramson's death or the surrender of
the policies, will recover all of its insurance premium payments (which do
not include certain amounts paid annually to Mr. Abramson, as described
below). The premiums paid by U.S. Healthcare in 1993, 1994, and 1995
pursuant to these arrangements were $405,267, $405,177, and $401,670,
respectively. The amounts in this column do not include such premium
payments. However, the amounts in this column include the present value of
the imputed interest on such premium payments, such interest calculated
based upon Mr. Abramson's remaining life expectancy, and totaled $256,760,
$282,346, and $256,016 in 1993, 1994, and 1995, respectively.

Pursuant to the split-dollar arrangement described above, Mr. Abramson
receives each year an amount equal to the portion of the annual premiums
due and payable on the life insurance policies which are not paid by U.S.
Healthcare pursuant to the above-described formula, but paid by Mr.
Abramson. The amounts reported in this column include such amounts, which
totaled $25,049, $25,139, and $28,646 in 1993, 1994, and 1995,
respectively.

The amounts in this column also include the following payments by U.S.
Healthcare to Mr. Abramson: (i) for 1995, $50,000 for travel and $18,000
for 1994 tax return preparation fees and (ii) for 1994, $50,000 for travel
expenses and $47,000 for 1992 and 1993 tax return preparation fees.

(7) Does not include a $48,088 cost of living increase in base salary to which
Mr. Abramson was entitled but declined to receive.

(8) Does not include $910,488 of cash bonus Mr. Abramson earned for 1995, but
did not receive. Mr. Abramson has an employment agreement pursuant to which
he was entitled to receive a cash bonus for 1995 in the amount of
$1,610,488. However, Mr. Abramson declined to receive the full amount of
such cash bonus he was entitled for 1995 and requested that the portion of
his bonus in excess of $700,000 be deferred until such time as U.S.
Healthcare's earnings per share for any four consecutive quarters in the
aggregate have exceeded $2.70 per share. The Board of Directors of U.S.
Healthcare accepted Mr. Abramson's request. Accordingly, payment of
$910,488 of Mr. Abramson's 1995 total bonus amount of $1,610,488 was
initially deferred until such time as U.S. Healthcare's earnings reach the
level described above. In connection with the execution of the Merger
Agreement, the U.S. Healthcare Board of Directors authorized the payment of
such portion of Mr. Abramson's bonus on the Merger Date.

(9) The bonus amount for 1993 also includes a contract renewal bonus of $64,395
payable pursuant to the employment agreement which terminated on December
31, 1992.

(10) No information is reported for 1993 because Messrs. Sebastianelli and
Dickerson were not employees of U.S. Healthcare prior to 1994.

(11) The value of the restricted stock grant reflected in this column is
determined by multiplying the total number of shares awarded by the closing
price of U.S. Healthcare Common Stock on the Nasdaq Stock Market on the
date of grant. Messrs. Sebastianelli and Dickerson were awarded 15,000 and
22,500 shares of U.S. Healthcare Common Stock, respectively.

(12) Under the program described in the Report of the Compensation Committee of
the Board of Directors under the heading "Repricing of Stock Options",
options to purchase 15,000 and 30,000 shares of U.S. Healthcare Common
Stock which were granted in 1994 to Messrs. Sebastianelli and Dickerson,
respectively, were canceled and were reissued in 1995 with a new exercise
price and a new vesting schedule. These canceled stock options are not
reflected in this column; only the stock options reissued in 1995 are
included in this column.

U.S. Healthcare did not grant any stock appreciation rights ("SARs") to any
executive officer during the three fiscal years covered by the Summary
Compensation Table.

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<PAGE> 156

Option/SAR Grants in Fiscal Year 1995. The following table summarizes the
stock options granted by U.S. Healthcare to U.S. Healthcare's executive officers
during the last fiscal year. No SARs were granted during the last fiscal year.

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN OR BASE GRANT DATE
NAME GRANTED(#)(1) LAST FISCAL YEAR PRICE($/SH) EXPIRATION DATE PRESENT VALUE(2)
- -------------------------- ------------- ---------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Michael J. Cardillo....... 55,595 2.7% $ 31.18 August 7, 2005 $ 865,058
Joseph T. Sebastianelli... 68,095(3) 3.3% $ 31.18 August 7, 2005 1,059,558
James H. Dickerson, Jr.... 56,475(3) 2.8% $ 31.18 August 7, 2005 878,751
Timothy E. Nolan.......... 38,300 1.9% $ 31.18 August 7, 2005 595,948
David F. Simon............ 30,885 1.5% $ 31.18 August 7, 2005 480,571
</TABLE>

- ---------------

(1) When granted, the options reflected in the table were to become exercisable
in five equal annual installments commencing on August 7, 1996. The exercise
price of the options is 100% of the fair market value of U.S. Healthcare
Common Stock as of the date of grant. In addition, pursuant to the Merger
Agreement and the U.S. Healthcare Incentive Plan, each outstanding option
became fully vested as of March 30, 1996 and is no longer subject to any
conditions relating to exercisability other than as agreed to under the
Employment Agreement with the executive officer.

(2) The dollar amount set forth under this heading is the result of calculations
based on requirements promulgated by the Securities and Exchange Commission
and is not intended to reflect U.S. Healthcare's estimate or projection of
possible future stock prices. The dollar amount was calculated for all
options using the binomial option pricing model with the following
assumptions: (a) 41.56% volatility, (b) 6.67% risk-free rate of return, (c)
2.2% annual dividend yield and (d) all options exercised at the end of their
term.

(3) In August 1995, Messrs. Sebastianelli and Dickerson received stock option
grants for 15,000 shares and 30,000 shares, respectively, at the then fair
market value of common stock in exchange for cancellation of a like number
of stock options.

Aggregated Option/SAR Exercises in Fiscal Year 1995 and Fiscal Year-End
Option Values. The following table summarizes the stock options exercised by
U.S. Healthcare's executive officers during the last fiscal year and the fiscal
year-end number and value of unexercised stock options held by such executive
officers. No SARs had been granted as of the end of the last fiscal year.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END(#) FISCAL YEAR END($)(2)
ACQUIRED VALUE (EXERCISABLE(E)/ EXERCISABLE(E)
NAME ON EXERCISE REALIZED($)(1) (UNEXERCISABLE(U)) UNEXERCISABLE(U)
- ------------------------------- ----------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Leonard Abramson............... 0 0 60,000(E) $1,058,793(E)
90,000(U) 1,588,190(U)
Michael J. Cardillo............ 0 0 16,200(E) 290,790(E)
79,895(U) 1,287,900(U)
Joseph T. Sebastianelli........ 0 0 68,095(U) 1,043,215(U)
James H. Dickerson, Jr. ....... 0 0 56,475(U) 865,197(U)
Timothy E. Nolan............... 0 0 7,500(E) 134,625(E)
60,800(U) 990,631(U)
David F. Simon................. 10,126 236,293 11,063(E) 309,207(E)
48,323(U) 910,209(U)
</TABLE>

- ---------------

(1) Based on the difference between the closing price of U.S. Healthcare Common
Stock on The NASDAQ Stock Market on the date of exercise and the exercise
price of the options. In addition, pursuant to the Merger Agreement and the
U.S. Healthcare Incentive Plan, each outstanding option became fully vested

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<PAGE> 157

as of March 30, 1996 and is no longer subject to any conditions relating to
exercisability other than as agreed to under the Employment Agreement with
each executive officer.

(2) Based on the difference between the closing price of U.S. Healthcare Common
Stock on the NASDAQ Stock Market at year end 1995 and the exercise price of
the options.

Ten-Year Option Repricing. Under the program described in the Report of the
Compensation Committee of the Board of Directors under the heading "Repricing of
Stock Options", certain stock options were canceled and reissued in 1995 with a
new exercise price and a new vesting schedule. In addition, pursuant to the
Merger Agreement and the U.S. Healthcare Incentive Plan, each outstanding option
became fully vested as of March 30, 1996 and is no longer subject to any
conditions relating to exercisability other than as agreed to under the
Employment Agreement with each executive officer. The following table provides
information regarding repricing of stock options affecting the executive
officers identified in the Summary Compensation Table under that program or any
other program within the past ten fiscal years. Messrs. Sebastianelli and
Dickerson are the only executive officers who participated in the 1995 program.

<TABLE>
<CAPTION>
NUMBER OF ORIGINAL LENGTH OF ORIGINAL
SECURITIES EXERCISE OPTION-TERM
UNDERLYING MARKET PRICE OF PRICE OF REMAINING AT
REPRICING OPTIONS STOCK AT TIME OF STOCK AT TIME OF NEW EXERCISE DATE OF
DATE REPRICED REPRICING REPRICING PRICE REPRICING(1)
--------- ----------- ---------------- ---------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Abramson...... 11/3/87 337,502 $ 1.67 $ 3.30 $ 1.67 4.25
Michael J. Cardillo... 11/3/87 50,625 1.67 3.00 1.67 4.25
Joseph T.
Sebastianelli....... 8/7/95 15,000 31.18 41.04 31.18 8.58
James H. Dickerson, Jr. . ... 8/7/95 30,000 31.18 42.50 31.18 8.67
Timothy E. Nolan...... 11/3/87 50,625 1.67 3.00 1.67 4.25
</TABLE>

- ---------------
(1) Length of time remaining is set forth in years.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS

A discussion of the employment arrangements entered into with each of the
executive officers of U.S. Healthcare (other than Mr. Abramson) is set forth
under "The Mergers -- Interests of Certain Persons in the Mergers -- U.S.
Healthcare". Pursuant to their Employment Agreements, Messrs. Cardillo,
Sebastianelli, Dickerson, Nolan, and Simon are entitled to receive in 1996 (i)
annual base salaries of $600,000, $600,000, $420,000, $420,000, and $402,500,
respectively, (ii) an annual target bonus equal to 80% of such executive's base
salary upon the attainment of reasonable corporate performance goals, provided
that (A) the bonus payment in respect of 1997 must at least equal the target
bonus for such fiscal year and (B) if the Merger Date occurs prior to December
31, 1996, the bonus payment in respect of 1996 can be no less than that which
the executive would have received (as determined by U.S. Healthcare) had the
Merger Date occurred subsequent to such date; (iii) grants of options, shares of
restricted stock and other equity-based awards on terms no less favorable than
such grants are made to similarly situated executives of the Employer and its
subsidiaries; and (iv) benefits (including retirement, group life, medical,
dental and disability benefits) on a basis reasonably comparable in the
aggregate to those provided to the executive immediately prior to the Merger
Date, or if more favorable to the executive, to those provided to other senior
officers of Parent and its subsidiaries.

Mr. Abramson is a party to an employment agreement pursuant to which he is
entitled to receive the following compensation for his services in 1996: (i) an
annual base salary of $1,602,938, (ii) an annual bonus based upon U.S.
Healthcare's performance, and (iii) non-cash compensation and fringe benefits
(including insurance against accidental injury or death of Mr. Abramson or his
spouse). Mr. Abramson's employment agreement, the current term of which is for a
period of 5 years from January 1, 1993, provides for a severance payment if he
is terminated by U.S. Healthcare without cause, provided that he complies with
certain confidentiality and non-competition obligations. In such event, he is
entitled to receive his then-current base salary for the balance of his
employment term (but not less than one year's base salary). Under his employment
agreement, Mr. Abramson is also entitled to receive the pro rata portion of
other cash

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<PAGE> 158

compensation (based upon the other cash compensation he would have received had
the agreement not been terminated). Effective as of the Merger Date, the
employment agreement will be superceded by the Agreement with Principal
Shareholder described under "The Mergers -- Interests of Certain Persons in the
Mergers -- U.S. Healthcare."

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

Membership of the Committee. The compensation of U.S. Healthcare's
executive officers is determined by the Compensation Committee of the Board of
Directors (the "Compensation Committee"), which is comprised of the undersigned
non-employee, independent directors of U.S. Healthcare. The members of the
Compensation Committee also serve as the members of the Incentive Plan Committee
of the Board of Directors.

Objectives of the Compensation Committee. The Compensation Committee bases
its determinations upon U.S. Healthcare's financial performance as well as the
personal contribution, leadership, experience and performance of each
individual. The Compensation Committee also considers performance measures such
as market share, efficiency gains, corporate reputation, quality improvements
and U.S. Healthcare's relationships with customers, providers and employees.
Each executive officer's contribution to the enhancement of U.S. Healthcare's
corporate culture and values is also evaluated. The Compensation Committee also
seeks to set compensation at levels believed to be sufficient to retain the
services of U.S. Healthcare's executive officers.

A fundamental goal of the Compensation Committee is to link the financial
interests of U.S. Healthcare's executive officers with those of U.S.
Healthcare's shareholders. In addition to being reflected in other compensation
determinations, stock options are granted to provide incentives that focus
attention on the enhancement of shareholder value and to align the interests of
executive officers with those of U.S. Healthcare's shareholders. In reviewing
individual performance and determining the salary and bonuses of executive
officers other than Mr. Abramson, U.S. Healthcare's principal executive officer
("CEO"), the Compensation Committee relies upon the recommendations of Mr.
Abramson. In addition to base salary, bonus, restricted stock and stock options,
executive officers receive certain employee benefits including deferred
compensation, paid insurance coverages and pension plan contributions.

The Compensation Committee also considers the impact of the deduction
limitation under Section 162(m) of the Code and, in the case of outstanding
performance, may set compensation levels that exceed the deduction limitation.
The Compensation Committee takes into account in its compensation determinations
any stock options granted under U.S. Healthcare's Incentive Plan that it
believes currently meet the requirement of being performance-based under the
provisions of Section 162(m) of the Code.

Chief Executive Officer Compensation. Over the last five years, U.S.
Healthcare has achieved significant increases in revenue, net income, enrollment
and total shareholder value under the leadership of its current CEO. These
increases were considered in the Compensation Committee's compensation
determinations.

Effective January 1, 1993, U.S. Healthcare and its CEO, Mr. Abramson,
entered into a performance-based employment agreement for a term of five years.
This agreement will renew for a second five-year term unless either party gives
prior notice of non-renewal. Under this agreement, Mr. Abramson received a base
salary for 1993 of $1,500,000, which was increased to $1,556,250 in 1994 and to
$1,602,938 in 1995 to reflect cost of living increases. Mr. Abramson's base
salary for 1996 is $1,602,938. Mr. Abramson was entitled to receive but declined
to receive a cost of living adjustment increase in his base salary for 1996 in
the amount of $48,088. In addition, the agreement provides for an annual
performance-based incentive bonus determined by the sum of two components. The
first component is equal to 0.5% of the amount by which the net income of U.S.
Healthcare exceeds the amount equal to 10% of U.S. Healthcare's shareholders'
equity at the beginning of the year for which the performance bonus is being
determined. The second component is equal to the lower of (a) $10,000 for each
percentage point in excess of five by which U.S. Healthcare's revenues from
continuing operations increased over the prior year and (b) the first component.
Under this formula, Mr. Abramson was entitled to an incentive bonus of
$1,610,488 for 1995. However, Mr. Abramson declined to receive the full amount
of such bonus and requested that the portion of his bonus in excess of $700,000
be

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<PAGE> 159

deferred until such time the earnings per share of U.S. Healthcare Common Stock
for any four consecutive quarters in the aggregate have exceeded $2.70 per
share. This Compensation Committee accepted Mr. Abramson's request on behalf of
the Board of Directors of U.S. Healthcare. Accordingly, payment of $910,488 of
Mr. Abramson's 1995 bonus was deferred until such time as the contingency is
satisfied. [In connection with the execution of the Merger Agreement, the U.S.
Healthcare Board of Directors authorized the payment of such portion of Mr.
Abramson's bonus on the Merger Date.

As discussed above, it is the goal of the Compensation Committee to provide
U.S. Healthcare's employees with incentives that focus attention on the
enhancement of shareholder value and to align the interests of U.S. Healthcare's
employees with those of U.S. Healthcare's shareholders by granting stock options
to U.S. Healthcare's employees. In accordance with such goal, on August 7, 1995,
pursuant to the U.S. Healthcare Incentive Plan the Compensation Committee
authorized the grant of stock options to its employees, including Mr. Abramson.
The Compensation Committee authorized a grant to Mr. Abramson of a stock option
to purchase 300,000 shares of U.S. Healthcare Common Stock at an exercise price
of $31.18 per share, the fair market value of U.S. Healthcare Common Stock at
that time. In determining the number and the exercise price of stock options
then granted, the Compensation Committee considered, among other things, the
number and the date of the stock options already granted to Mr. Abramson (the
last of such options having been granted in 1993), the exercise prices of the
stock options already granted to him and the then-current fair market value of
U.S. Healthcare Common Stock. However, Mr. Abramson at that time requested that
the Compensation Committee defer to a later date the granting of such stock
option, which request this Compensation Committee accepted. On January 1, 1996,
the stock option described above with the same exercise price of $31.18, in the
form of a non-qualified stock option exercisable in five equal annual
installments beginning on January 1, 1997, was granted to Mr. Abramson pursuant
to the authorization of this Compensation Committee, except that, pursuant to
the request of Mr. Abramson, this stock option is not exercisable until such
time as the earnings per share of U.S. Healthcare Common Stock for any four
consecutive quarters in the aggregate exceed $2.70 per share. This stock option
is subject to all other applicable terms and conditions under the Plan and the
stock option agreement between U.S. Healthcare and Mr. Abramson. In addition,
pursuant to the Merger Agreement and the U.S. Healthcare Incentive Plan, each
outstanding option became fully vested as of March 30, 1996 and is no longer
subject to any conditions relating to exercisability other than as agreed to
under the Employment Agreements with the executive officers.

The Compensation Committee believes Mr. Abramson's performance-based
compensation arrangements are beneficial to U.S. Healthcare for numerous
reasons. Under his effective leadership, U.S. Healthcare has achieved
outstanding corporate financial performance (including increases in enrollment,
revenue and net income) as well as total shareholder return (increased market
value and dividends). Mr. Abramson has also established an exceptional record in
customer service, technology use and innovation, quality of care, government
relations, management efficiency and development of a strong management team. In
particular, the Compensation Committee recognized that U.S. Healthcare
experienced tremendous membership growth during 1995; U.S. Healthcare continued
to receive outstanding results in quality evaluations conducted by the National
Committee for Quality Assurance; and U.S. Healthcare became a member of both the
S&P 500 and the Fortune 500. The Compensation Committee also recognized that
U.S. Healthcare responded promptly to the unexpected medical cost increase
encountered during the first quarter of 1995 by aggressively implementing
expanded efforts to stabilize medical costs. The arrangements also recognize Mr.
Abramson's exemplary service to U.S. Healthcare since its inception and Mr.
Abramson's stature in both the community and the health care industry while
offering incentives for his continued leadership, vision and performance.

Compensation of Executive Officers other than the CEO. The 1995 base
salaries of U.S. Healthcare's executive officers other than Mr. Abramson ranged
from $350,000 to $532,500, which, in the judgment of the CEO and the
Compensation Committee, reflect each person's performance, experience and
responsibilities within U.S. Healthcare. The 1995 year-end incentive bonuses for
such executive officers as recommended by the CEO and endorsed by the
Compensation Committee ranged from $81,941 to $100,500 in cash bonus and from
$328,434 to $603,000 in restricted stock (vesting over 5 annual installments)
based on the fair market value of such stock at the time of the grant. Each
executive officer participated in an executive bonus pool,

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<PAGE> 160

pursuant to which each executive officer received as his 1995 incentive bonus an
amount equal to a percentage of his base salary based on the respective
responsibilities of such officer and such officer's individual performance. The
analysis of an executive officer's performance is in part subjective and does
not lend itself to formulas. Consistent with the Compensation Committee's
objective to link the financial interests of U.S. Healthcare's executive
officers with those of U.S. Healthcare's shareholders, the Compensation
Committee authorized the 1995 Stock-Based Performance Bonus Program for certain
senior employees of U.S. Healthcare, including the executive officers of U.S.
Healthcare other than the CEO. Pursuant to the 1995 Stock-Based Performance
Bonus Program, each executive officer other than the CEO received approximately
14% to 19% of his total 1995 bonus in cash and approximately 81% to 86% of the
bonus in restricted stock, as described above. Pursuant to the Merger Agreement
and the U.S. Healthcare Incentive Plan, each share of the restricted stock
became fully vested as of March 30, 1996.

On August 7, 1995, the Compensation Committee authorized grants to each of
the executive officers of options to purchase between 26,475 and 55,595 shares
of U.S. Healthcare Common Stock (exclusive of any repriced options described
below). These grants, which are exercisable in five equal annual installments at
100% of the fair market value on the date of grant, were made to provide an
incentive for these officers to increase total shareholder return and to further
the objective of retaining their services for U.S. Healthcare. Pursuant to the
Merger Agreement and the U.S. Healthcare Incentive Plan, each outstanding option
became fully vested as of March 30, 1996 and is no longer subject to any
conditions relating to exercisability other than as agreed to under the
Employment Agreements with the executive officers.

Repricing of Stock Options. On August 7, 1995, the Compensation Committee
adopted a program for the cancellation of the options to purchase 426,395 shares
of U.S. Healthcare Common Stock originally granted to certain employees of U.S.
Healthcare under U.S. Healthcare's Incentive Plan between December 6, 1993 and
August 6, 1995 and the reissuance of new stock options for the same number of
shares of U.S. Healthcare Common Stock with an exercise price equal to $31.18,
the fair market value (as defined in the U.S. Healthcare Incentive Plan) of U.S.
Healthcare Common Stock as of the date of reissuance. All other terms of the
reissued stock options were identical to those of the canceled stock options,
except that the reissued stock options became subject to a new and longer
vesting schedule and that any vested but unexercised stock options became
unexercisable except in accordance with the new vesting schedule. Pursuant to
the Merger Agreement and the U.S. Healthcare Incentive Plan, each outstanding
option became fully vested as of March 30, 1996 and is no longer subject to any
conditions relating to exercisability other than as agreed to under the
Employment Agreements with the executive officers.

The Compensation Committee believes that stock options represent an
important component of employee compensation. As the exercise prices of all of
the canceled stock options were higher, and in many cases substantially higher,
than the then-current market price of U.S. Healthcare Common Stock as a result
of a substantial decline in the market price of U.S. Healthcare Common Stock in
1995, the Compensation Committee believed that canceled stock options no longer
served the intended purposes of those stock options, which were to induce
employees to remain in the service of U.S. Healthcare, foster increased
ownership of U.S. Healthcare Common Stock by its employees, and align the
interests of employees with those of the shareholders. Indeed, the original
exercise prices of the canceled stock options could have acted as a disincentive
to many of the employees who held those options. The Compensation Committee
determined that it was in the best interest of U.S. Healthcare and its
shareholders to replace the canceled stock options with the reissued stock
options at the same time as, and with the same exercise price as, the stock
options which were granted for the rest of U.S. Healthcare's employees on August
7, 1995.

The canceled and reissued stock options were held only by employees below
the level of executive officers other than two executive officers who did not
otherwise hold a significant equity interest in U.S. Healthcare. The reissued
options included an option on 30,000 shares and an option on 15,000 shares with
an exercise price of $31.18 held by Mr. Dickerson and Mr. Sebastianelli,
respectively. None of the stock options held by the other executive officers
were canceled and reissued under this program.

Summary. As described above, the Compensation Committee's policies and
actions link CEO and other executive officer compensation to corporate financial
performance, total shareholder return, individual

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<PAGE> 161

achievement and other relevant considerations. In 1995, almost half of the
compensation of U.S. Healthcare's executive officers consisted of restricted
stock and other performance-based variable components. The Compensation
Committee intends to continue its policy of linking a substantial portion of
executive officer compensation to corporate financial performance, total return
to shareholders (including growth of share price and dividends over time) and
the other criteria described in this report.

Signed and respectfully submitted
this 10th day of April 1996

JEROME S. GOODMAN
ALLEN MISHER, PH.D.

The Report of the Compensation Committee above is not deemed to be
"soliciting material" or to be "filed" with the Commission or subject to
Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act.

STOCK PERFORMANCE GRAPH

The following stock performance graph, prepared by Value Line, Inc. from
its own data, compares the performance of U.S. Healthcare Common Stock to the
S&P Composite 500 Stock Index and a peer group selected by Value Line, Inc. for
the past five fiscal years. The graph assumes an investment of $100 in each of
U.S. Healthcare Common Stock, the S&P Composite 500 Stock Index and the peer
group at the close of trading on the last trading day preceding the first day of
the fifth preceding fiscal year and reinvestment of all dividends.

[CHART]

The peer group selected by Value Line, Inc. and used for the above graph is
the Value Line Medical Services Industry Group, which consists of U.S.
Healthcare, Inc., Beverly Enterprises, Inc., Columbia/HCA Healthcare
Corporation, Community Psychiatric Centers, Inc., FHP International Corporation,
Manor Care, Inc., NovaCare, Inc., Omnicare, Inc., PacifiCare Health Systems,
Inc. (Class A Stock), Rotech Medical Corporation, Shared Medical Systems
Corporation, Tenet Healthcare Corporation and United HealthCare Corporation.
National Health Laboratories Incorporated and Surgical Care Affiliates, Inc.,
which were

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<PAGE> 162

included in the peer group used in U.S. Healthcare's proxy statement dated April
27, 1995, were deleted in the peer group utilized for the above graph because
they were deleted by Value Line, Inc. from its Medical Services Industry Group.

The Stock Performance Graph above is not deemed to be "soliciting material"
or to be "filed" with the Commission or subject to Regulation 14A or 14C or to
the liabilities of Section 18 of the Exchange Act.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

During 1995, the medical practice of Dr. Soll, a Director of U.S.
Healthcare, received $670,878 from U.S. Healthcare or its subsidiaries for
medical services rendered to members of U.S. Healthcare's HMOs.

During 1995, U.S. Healthcare paid $3,862,837 to vendors of travel and
lodging services for business related travel by employees arranged through
Cherry Hill Travel, Inc. d/b/a Travel One, a travel agency. Mr. Goodman, a
Director of U.S. Healthcare, is the Chairman of Cherry Hill Travel, Inc.

U.S. Healthcare paid $248,715 in salary and cash bonus and 2,608 shares of
restricted U.S. Healthcare Common Stock (which vest in five equal annual
installments) for services rendered in 1995 by Ms. Nancy Wolfson, an employee of
U.S. Healthcare and a daughter of Mr. Abramson (who is a Director, principal
executive officer and beneficial holder of more than ten percent of the voting
securities of U.S. Healthcare). U.S. Healthcare paid $287,010 in salary and cash
bonus and 3,012 shares of restricted U.S. Healthcare Common Stock (which vest in
five equal annual installments) for services rendered in 1995 by Mr. Richard
Wolfson, an employee of U.S. Healthcare and a son-in-law of Mr. Abramson.
Pursuant to the Merger Agreement as of March 30, 1996 each then-outstanding
share of U.S. Healthcare restricted stock became fully vested. U.S. Healthcare
owns 51% and Ms. Marcy Shoemaker (a daughter of Mr. Abramson) owns 49% of the
outstanding voting securities of Criterion. U.S. Healthcare has made available
to Criterion a line of credit for up to $10,000,000. In 1995, Criterion borrowed
$184,707 under the line of credit. U.S. Healthcare has also entered into a
service agreement with Criterion pursuant to which Criterion is obligated to pay
for certain administrative services and facilities provided by U.S. Healthcare
for Criterion. Criterion paid U.S. Healthcare $89,630 for services and
facilities provided in 1995. In addition, U.S. Healthcare is the guarantor of
Criterion's obligations under a lease agreement for Criterion's office space.
Criterion has also entered into a service agreement with U.S. Healthcare
pursuant to which U.S. Healthcare is obligated to pay for certain services
provided or arranged by Criterion for U.S. Healthcare. U.S. Healthcare paid
Criterion $5,186,240 for such services provided in 1995. Ms. Shoemaker was paid
$225,000 in salary and no bonus as an officer of Criterion. See "The Mergers --
Interests of Certain Persons in the Mergers -- Criterion Agreements".

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<PAGE> 163

OWNERSHIP OF AETNA, U.S. HEALTHCARE AND PARENT
AETNA

Directors and Executive Officers. The following table sets forth the number
of shares of Aetna Common Stock beneficially owned, as of May 20, 1996 unless
otherwise indicated, and the equivalent number of shares of Parent Common Stock
assuming consummation of the Mergers, by each current director, the chief
executive officer and the three other most highly compensated executive officers
of Aetna and for all current directors and executive officers of Aetna as a
group. The number of shares shown for each director and each of the named
executive officers represents less than one percent of the shares of Aetna
Common Stock outstanding and Parent Common Stock expected to be outstanding upon
consummation of the Mergers. Unless otherwise indicated in the footnotes, the
individuals named below have sole voting and investment power with respect to
the shares indicated below.

<TABLE>
<CAPTION>
AETNA COMMON STOCK OWNED
--------------------------------------------
OTHER EQUIVALENT
INTERESTS PERCENT SHARES OF
NAME OF BENEFICIAL OWNER AND NUMBER OF IN OF PARENT
ADDRESS OF SHAREHOLDER SHARES(1) SHARES(2) CLASS COMMON STOCK
- ---------------------------------------- ----------------------- --------- ------- ------------
<S> <C> <C> <C> <C>
Ronald E. Compton 75,662 shares(3) -- * 75,662
(Director and named executive)
William H. Donaldson 750 shares 2,250 * 3,000
(Director)
Barbara Hackman Franklin 567 shares(4) 2,250 * 2,817
(Director)
Earl G. Graves 500 shares 2,250 * 2,750
(Director)
Gerald Greenwald 3,000 shares(5) 2,250 * 5,250
(Director)
Ellen M. Hancock 400 shares(6) 2,050 * 2,450
(Director)
Michael H. Jordan 3,000 shares 2,250 * 5,250
(Director)
Jack D. Kuehler 440 shares 2,250 * 2,690
(Director)
Frank R. O'Keefe, Jr. 850 shares(7) 2,250 * 3,100
(Director)
Judith Rodin 100 shares 2,050 * 2,150
(Director)
Richard L. Huber 53,509 shares(8) -- * 53,509
(named executive)
Daniel P. Kearney 52,499 shares -- * 52,499
(named executive)
James W. McLane 41,721 shares(9) -- * 41,721
(named executive)
Directors and executive officers as a 338,292 shares(10) -- * 338,292
group
(19 persons)
</TABLE>

- ---------------

* Less than 1%.

(1) Represents shares beneficially owned and shares which the beneficial owner
named above has the right to acquire within 60 days of May 20, 1996, upon
exercise of outstanding stock options.

(2) Each outside Director has been granted units convertible (according to the
terms of the 1990 Non-Employee Director Deferred Stock Plan and the 1994
Non-Employee Director Deferred Stock and Deferred Compensation Plan) into
shares of Aetna Common Stock upon retirement from Board service, subject to
certain conditions.

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<PAGE> 164

(3) Includes 44,300 shares held jointly with his spouse, as to which Mr.
Compton shares voting and investment powers. Also includes options to
purchase 22,114 shares of Aetna Common Stock currently exercisable.

(4) Excludes 2,757 shares held by her spouse, as to which Miss Franklin
disclaims beneficial ownership.

(5) Represents shares held by his spouse.

(6) Held jointly with her spouse, as to which Mrs. Hancock shares voting and
investment powers.

(7) Includes 750 shares held by Revocable Living Trust of which Mr. O'Keefe is
Trustee and beneficiary. Excludes 150 shares held by Revocable Living Trust
of which Mrs. O'Keefe is Trustee and beneficiary, and as to which Mr.
O'Keefe disclaims beneficial ownership.

(8) Includes 5,000 shares held by a revocable living trust of which Mr. Huber
is Trustee and beneficiary and 5,000 shares held by Huber Associates
Limited Partnership, a family limited partnership of which Mr. Huber and
his spouse are the sole general partners. Also includes options to purchase
42,501 shares of Aetna Common Stock currently exercisable and held by Huber
Associates Limited Partnership.

(9) Includes 6,498 share held jointly with his spouse as to which Mr. McLane
shares voting and investment powers. Also includes options to purchase
30,912 shares of Aetna Common Stock currently exercisable.

(10) Directors and executive officers as a group have sole voting and investment
powers over 35,542 shares of Aetna Common Stock and share voting and
investment powers with respect to 66,846 shares of Aetna Common Stock.
Included in the number of shares shown in the table are 5,135 shares of
Aetna Common Stock held under Aetna's Incentive Savings Plan and
beneficially owned by executive officers. As a group, the executive
officers hold options to purchase 230,769 shares of Aetna Common Stock
currently exercisable.

No individual listed above has beneficial ownership of more than 1% of the
outstanding shares of Aetna Common Stock.

Unless otherwise noted in the footnotes, each person currently has sole
voting and investment powers over the shares set forth above.

Five Percent Shareholders. The following table sets forth information with
respect to the shares of Aetna Common Stock which are held by persons known to
Aetna to be the beneficial owners of more than 5% of such stock. All information
set forth in the following table is as of December 31, 1995, except as otherwise
indicated.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------------------------------------- --------------------- ----------------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc. 5,893,055 shares(1) 5.1%
767 Fifth Avenue
New York, New York 10153
Mellon Bank Corporation 6,565,075 shares(2) 5.7%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
FMR Corp. 7,938,933 shares(3) 6.9%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>

- ---------------

(1) Of the reported shares, Sanford C. Bernstein & Co., Inc. reports that it has
no voting power with respect to 2,362,311 shares.

(2) Of the reported shares, 5,015,075 (4.4%) are held by Mellon Bank, N.A., as
Trustee for Aetna Incentive Savings Plan ("ISP"). Mellon Bank, N.A., has
agreed to vote the shares held as Trustee in accordance with the
instructions received from ISP participants. Generally, shares as to which
no directions are received are voted by the Trustee in the same percentage
as the shares as to which directions have been received. Mellon Bank
Corporation disclaims beneficial ownership of all ISP shares that have been
allocated to individual ISP participant accounts for which voting directions
have been received.

153
<PAGE> 165

(3) Of the reported shares, 7,393,843 shares were beneficially owned by Fidelity
Management & Research Company as a result of its serving as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940 and as investment adviser to certain other
funds which are generally offered to limited groups of investors, and
545,090 shares beneficially owned by Fidelity Management Trust Company as a
result of its serving as trustee or managing agent for various private
investment accounts, primarily employee benefit plans, and as investment
adviser to certain other funds which are generally offered to limited groups
of investors. FMR Corp. has sole voting power with respect to 332,290 shares
and sole dispositive power with respect to 7,938,933 shares.

U.S. HEALTHCARE

Directors and Executive Officers. The following table sets forth the number
of shares of U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock
beneficially owned as of June 3, 1996 by each current director and executive
officer (including the chief executive officer) of U.S. Healthcare as a group
and the equivalent number of shares of Parent Common Stock and Parent
Mandatorily Convertible Preferred Stock assuming consummation of the Mergers.
The number of shares shown for all executive officers and directors as a group
represented approximately 2.3% of the U.S. Healthcare Common Stock and 99.9% of
the U.S. Healthcare Class B Stock outstanding. Individuals have sole voting and
investment power over the stock unless otherwise indicated in the footnotes.

<TABLE>
<CAPTION>
SHARES OF U.S. HEALTHCARE
EQUIVALENT SHARES OF
COMMON AND CLASS B STOCK, PARENT MANDATORILY
AS APPLICABLE, EQUIVALENT SHARES OF CONVERTIBLE PREFERRED
BENEFICIALLY OWNED(1) PARENT COMMON STOCK STOCK
------------------------- ------------------------ ------------------------
CLASS OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME SHARES SHARES CLASS SHARES CLASS SHARES CLASS
- -------------------------------- -------------- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard Abramson Common Stock 2,268,755 (2) 1.6% 3,746,487 2.5% 1,249,385 10.8%
Class B Stock 14,411,955 99.9% -- -- -- --
Betsy Z. Cohen Common Stock 2,000 * 449 * 150 *
Jerome S. Goodman Common Stock 83,095 * 18,663 * 6,224 *
Allen Misher, Ph.D. Common Stock 5,250 * 1,179 * 393 *
David B. Soll, M.D. Common Stock 217,147 * 48,771 * 16,264 *
Timothy T. Weglicki Common Stock 37,500 (3) * 8,423 * 2,809 *
Michael J. Cardillo Common Stock 153,831 (4) * 34,550 * 11,522 *
Joseph T. Sebastianelli Common Stock 95,741 (5) * 21,503 * 7,171 *
James H. Dickerson, Jr. Common Stock 81,952 (6) * 18,406 * 6,138 *
Timothy E. Nolan Common Stock 171,262 (7) * 38,465 * 12,828 *
David F. Simon Common Stock 80,453 (8) * 18,070 * 6,026 *
All directors and executive
officers as a group Common Stock 3,196,986 (9) 2.3% 3,954,966 2.6% 1,318,910 11.4%
Class B Stock 14,411,955 99.9% -- -- -- --
</TABLE>

- ---------------

* Less than 1%.

(1) Based on information furnished by the beneficial owners listed.

(2) Includes 35,260 shares of U.S. Healthcare Common Stock held by Mr. Abramson
and two other individuals, as trustees of a trust for the benefit of Mr.
Abramson's grandchildren, 1,691,543 shares of U.S. Healthcare Common Stock
held by Madlyn K. Abramson, Mr. Abramson's wife, as trustee for three trusts
for the benefit of their children, and 80,000 shares of U.S. Healthcare
Common Stock held in a trust for the benefit of Mr. Abramson's grandchildren
for which Mrs. Abramson is co-trustee; Mr. Abramson disclaims beneficial
ownership of these shares. Also includes options to purchase 450,000 shares
of U.S. Healthcare Common Stock that are currently exercisable. If all of
the shares of U.S. Healthcare Class B Stock beneficially owned by Mr.
Abramson were converted into U.S. Healthcare Common Stock, Mr. Abramson
would become a beneficial owner of 10.8% of all outstanding U.S. Healthcare
Common Stock.

(3) Includes options to purchase 37,500 shares of U.S. Healthcare Common Stock
that are currently exercisable. Mr. Weglicki has been a partner of ABS
Capital Partners, L.P., a merchant banking fund

154
<PAGE> 166

affiliated with Alex. Brown & Sons Incorporated, an investment banking and
brokerage firm, since January 1994, and was a Managing Director of Alex.
Brown & Sons Incorporated from 1984 to 1995. Alex. Brown & Sons Incorporated
is a market maker in U.S. Healthcare Common Stock, and in the ordinary
course of business buys and sells U.S. Healthcare Common Stock. Mr. Weglicki
disclaims beneficial ownership of any shares of U.S. Healthcare Common Stock
held by Alex. Brown & Sons Incorporated.

(4) Includes 296 shares of U.S. Healthcare Common Stock held under the U.S.
Healthcare, Inc. Savings Plan. Also includes options to purchase 96,095
shares of U.S. Healthcare Common Stock that are currently exercisable.

(5) Includes 206 shares of U.S. Healthcare Common Stock held under the Savings
Plan. Also includes options to purchase 68,095 shares of U.S. Healthcare
Common Stock that are currently exercisable.

(6) Includes 156 shares of U.S. Healthcare Common Stock held under the U.S.
Healthcare Savings Plan. Also includes options to purchase 56,475 shares of
U.S. Healthcare Common Stock that are currently exercisable.

(7) Includes 15,458 shares of U.S. Healthcare Common Stock held under the U.S.
Healthcare Savings Plan. Also includes options to purchase 68,300 shares of
U.S. Healthcare Common Stock that are currently exercisable, 60 shares of
U.S. Healthcare Common Stock held in a custodial account for the benefit of
Mr. Nolan's niece, 55 shares of U.S. Healthcare Common Stock held in a
custodial account for the benefit of Mr. Nolan's godchild, 30 shares of U.S.
Healthcare Common Stock held in a custodial account for the benefit of Mr.
Nolan's nephew, and 20 shares of U.S. Healthcare Common Stock held in a
custodial account for the benefit of Mr. Nolan's niece. This also includes
4,539 shares of U.S. Healthcare Common Stock held in a joint account by Mr.
Nolan and Kathleen Nolan, his wife.

(8) Includes 933 shares of U.S. Healthcare Common Stock held under the U.S.
Healthcare Savings Plan. Also includes options to purchase 51,323 shares of
U.S. Healthcare Common Stock that are currently exercisable.

(9) Includes options to purchase 827,788 shares of U.S. Healthcare Common Stock
that are currently exercisable. Also includes 17,049 shares of U.S.
Healthcare Common Stock held under the U.S. Healthcare Savings Plan.
Pursuant to the Merger Agreement and the U.S. Healthcare Incentive Plan, all
unexercisable options held by each director and executive officer as of
March 30, 1996 became fully vested on March 30, 1996 and are no longer
subject to any conditions relating to exercisability other than as agreed to
under the Employment Agreements and the Agreement with Principal
Shareholder, as applicable. If all of the shares of U.S. Healthcare Class B
Stock beneficially owned by Mr. Abramson were converted into U.S. Healthcare
Common Stock, all directors and executive officers as a group would become
beneficial owners of 11.4% of all outstanding U.S. Healthcare Common Stock.

155
<PAGE> 167

Five Percent Stockholders. The following table sets forth information
concerning the only persons known to U.S. Healthcare as of June 3, 1996 to own
beneficially more than 5% of the outstanding shares of U.S. Healthcare Stock.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF INDICATED CLASS
---------------------------
NAME AND ADDRESS CLASS OF NUMBER OF PERCENT OF
OF SHAREHOLDER STOCK SHARES CLASS
- ---------------------------------------------------- ------------- ----------- ----------
<S> <C> <C> <C>
Leonard Abramson.................................... Common Stock 2,268,755(1) 1.6%
Class B Stock 14,411,955 99.9%
</TABLE>

- ---------------

(1) Includes 35,260 shares of U.S. Healthcare Common Stock held by Mr. Abramson
and two other individuals, as trustees of a trust for the benefit of Mr.
Abramson's grandchildren, 1,691,543 shares of U.S. Healthcare Common Stock
held by Madlyn K. Abramson, Mr. Abramson's wife, as trustee for three trusts
for the benefit of their children, and 80,000 shares of Common Stock held in
a trust for the benefit of Mr. Abramson's grandchildren for which Mrs.
Abramson is co-trustee; Mr. Abramson disclaims beneficial ownership of these
shares. Also includes options to purchase 450,000 shares of Common Stock
that are currently exercisable. If all of the shares of Class B Stock
beneficially owned by Mr. Abramson were converted into Common Stock, Mr.
Abramson would become a beneficial owner of 10.8% of all outstanding Common
Stock.

PARENT

There are currently outstanding 1,000 shares of Parent Common Stock, of
which 500 are owned by each of Aetna and U.S. Healthcare, which shares will be
canceled on consummation of the Mergers. It is anticipated that, after giving
effect to the Mergers, approximately 153,547,884 shares of Parent Common Stock
(assuming that options to acquire an additional 132,500 shares of U.S.
Healthcare Stock and/or U.S. Healthcare Restricted Stock are issued as permitted
by the Amended Merger Agreement, that all vested options are exercised prior to
the Merger Date, that the shares subject to outstanding stock grants that may
vest prior to the Merger Date are issued, and that the Merger Date occurs prior
to July 17, 1996) and 11,839,108 shares of Parent Mandatorily Convertible
Preferred Stock will be outstanding and approximately 11,839,108 additional
shares of Parent Common Stock will be reserved for issuance upon conversion of
the Parent Mandatorily Convertible Preferred Stock. In addition, Parent shall be
authorized to issue (A) under the Aetna Inc. 1996 Stock Incentive Plan (i) up to
7,350,000 shares of Parent Common Stock, (ii) such number of shares of Parent
Common Stock as shall be required in respect of the Merger Options (estimated to
be 6,736,000 shares of Parent Common Stock assuming no additional options are
granted or exercised between the Aetna Record Date and the Merger Date) and
(iii) such number of shares of Parent Common Stock as shall be required to
satisfy outstanding incentive awards under the Aetna Life and Casualty Company
1994 Stock Incentive Plan (estimated to be 685,000 if maximum performance
targets are met) and (B) such number of shares of Parent Common Stock (estimated
to be 110,100) under the Aetna Inc. Non-Employee Director Deferred Stock and
Deferred Compensation Plan and Aetna's 1990 Non-Employee Director Deferred Stock
Plan (which shares may be issued from authorized but unissued shares of Parent
Common Stock or from treasury shares).

The directors and executive officers as a group are expected to
beneficially own approximately 10.7% of the outstanding shares of Parent Common
Stock and 2.7% of the outstanding shares of Parent Mandatorily Convertible
Preferred Stock after giving effect to the Mergers. See "-- Aetna" and "-- U.S.
Healthcare" for the number of shares of Parent Common Stock expected to be
beneficially owned by each director, the chief executive officer of Parent and
the other executive officers of Parent.

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<PAGE> 168

AETNA INC. 1996 STOCK INCENTIVE PLAN

INTRODUCTION

At the Aetna Special Meeting and the U.S. Healthcare Annual Meeting, the
shareholders of Aetna and U.S. Healthcare, respectively, will be asked to
approve the adoption of the Aetna Inc. 1996 Stock Incentive Plan (the "1996
Incentive Plan"), which has been approved by the respective Boards of Directors
of Aetna, U.S. Healthcare and Parent; provided that approval of the Mergers will
constitute approval of that portion of the Incentive Plan relating to the stock
options to be issued in replacement of outstanding Aetna and U.S. Healthcare
stock options pursuant to the Merger Agreement (the "Merger Options"). Approval
of the 1996 Incentive Plan is contingent on the consummation of the Mergers.

The following summary of the 1996 Incentive Plan is qualified in its
entirety by reference to the complete text of the 1996 Incentive Plan, which is
attached to this Joint Proxy Statement/Prospectus as Appendix H. Capitalized
terms not separately defined in this description have the meanings set forth in
the 1996 Incentive Plan.

The purposes of the 1996 Incentive Plan are to promote the interests of
Parent and its shareholders, and to further align the interests of employees of
Parent and its Subsidiaries and Affiliates and persons eligible to receive the
Merger Options (collectively, "Eligible Employees") with shareholders. In
conjunction with the adoption of the 1996 Incentive Plan, Parent will continue
to implement the stock ownership guidelines for senior executives established by
Aetna. These guidelines will encourage and ensure that senior executives acquire
and maintain significant levels of stock ownership. Such stock ownership aligns
changes in shareholder value with meaningful changes in a senior executive's
financial situation.

The 1996 Incentive Plan is closely modeled on Aetna's 1994 Stock Incentive
Plan (the "Existing Plan"). The Existing Plan was approved by Aetna amended in
1994. The material differences between the 1996 Incentive Plan and the Existing
Plan are aimed at combining features from existing U.S. Healthcare plans with
the Existing Plan. They include;

(i) the addition of certain means of replenishing the shares available
for issuance;

(ii) the extension of the term;

(iii) the expansion of the universe of eligible employees;

(iv) the addition of the Merger Options and restricted stock awards;

(v) small variations in the annual/performance period limits on grants to
individual participants; and

(vi) the granting to the committee administering the 1996 Incentive Plan of
increased discretion in setting certain terms of awards.

PRINCIPAL FEATURES OF THE INCENTIVE PLAN

Awards which may be granted under the 1996 Incentive Plan include Options,
Stock Appreciation Rights ("SARs"), Incentive Stock and Incentive Units and
Other Stock-Based Awards (collectively, "Awards"). In addition, Awards under the
1996 Incentive Plan may be granted as payment in lieu of other compensation
payable by Parent to an Eligible Employee.

ADMINISTRATION OF INCENTIVE PLAN

A committee (the "Parent Compensation Committee") consisting of at least
two directors of Parent chosen by the Parent Board of Directors, each of whom is
a "disinterested person" within the meaning of Rule 16b-3 under the 1934 Act and
an "outside director" within the meaning of Section 162(m) of the Code will,
among other things, administer the 1996 Incentive Plan, and will determine which
Eligible Employees will receive Awards and the terms and conditions of such
Awards. Directors who are not employees of Parent are not eligible to receive
Awards under the 1996 Incentive Plan. The number of Eligible Employees who may
receive Awards under the 1996 Incentive Plan will likely vary from year to year.

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<PAGE> 169

SHARES AVAILABLE FOR ISSUANCE

Except as otherwise described in this paragraph and under "Adjustments"
below, the maximum number of shares of Parent Common Stock that may be delivered
under the 1996 Incentive Plan is 7,350,000 plus (i) the number of shares of
Parent Common Stock to be delivered upon exercise of the Merger Options and (ii)
the number of shares required to satisfy any outstanding incentive unit awards
under the Aetna 1994 Stock Incentive Plan ("Prior Plan"). Based on assumed
respective fair market values of $76 1/8 and $57 for Aetna Common Stock and U.S.
Healthcare Common Stock immediately preceding the Merger Date, an assumed
average fair market value of $76 1/8 for the Parent Common Stock during the
five-day period immediately following the Merger Date, and assuming no
additional options are granted or exercised between the Aetna Record Rate and
the Merger Date, approximately 6,736,000 shares of Parent Common Stock will
become subject to the Merger Options. In addition, the number of shares of
Parent Common Stock delivered under the 1996 Incentive Plan with respect to (i)
Incentive Stock Options ("ISOs") shall not exceed 5,000,000 shares or (ii)
Incentive Stock or Incentive Units shall not exceed 2,235,000 shares. While it
is expected that, when available, treasury shares will be used, the shares
delivered under the 1996 Incentive Plan may be unissued shares or treasury
shares. Shares of Parent Common Stock subject to Awards that are forfeited,
terminated, canceled or settled without the delivery of Parent Common Stock
under the 1996 Incentive Plan or the Prior Plan will again be available for
Awards under the 1996 Incentive Plan. Also, (x) shares tendered to Parent in
satisfaction or partial satisfaction of the exercise price of any Award under
either the 1996 Incentive Plan or the Prior Plan and (y) remittances from option
exercises used to repurchase shares of Parent Common Stock on the open market
will increase the number of shares available for delivery pursuant to Awards
granted under the Incentive Plan to the extent permitted by Rule 16b-3 under the
1934 Act. In addition, any shares of Parent Common Stock underlying Awards
granted in assumption of, or in substitution for, outstanding awards previously
granted by a company acquired by Parent, or with which Parent combines
("Substitute Awards") shall not, except in the case of shares with respect to
which Substitute Awards are granted to Section 16 insiders as defined by Section
16 of the 1934 Act, be counted against the shares available for delivery under
the 1996 Incentive Plan.

ADJUSTMENTS

If a Fundamental Corporate Event occurs, the Parent Compensation Committee
may, as it deems appropriate, adjust the number and kind of shares that may be
delivered under the 1996 Incentive Plan in the future and the number and kind of
shares and the grant, exercise or conversion price, if applicable, under all
outstanding Awards to preserve, or to prevent the enlargement of, the benefits
made available under the 1996 Incentive Plan.

GRANTS UNDER THE 1996 INCENTIVE PLAN

Stock Options. The Parent Compensation Committee may grant Nonstatutory
Stock Options ("NSOs") and ISOs. These Options may contain any terms that the
Parent Compensation Committee determines, except that no Eligible Employee may
be granted Options for more than 500,000 shares of Parent Common Stock in
respect of any year in which the 1996 Incentive Plan is in effect (subject to
adjustment as described above). Except in the case of Substitute Options or
Options granted in lieu of payment for compensation earned by an Eligible
Employee of Parent outside of the 1996 Incentive Plan or the Prior Plan, the
exercise price shall not be less than 100% of the Fair Market Value on the date
of grant. The Parent Compensation Committee shall have the discretion to
determine the terms and conditions upon which Options shall be exercisable.

SARs. SARs may be granted to Eligible Employees in addition to, or in
tandem with, an Option or unrelated to an Option. A SAR permits an Eligible
Employee to receive cash, shares or a combination of cash and shares, generally
based on the excess of the Fair Market Value at the time of exercise over the
exercise price, which exercise price shall equal the Fair Market Value on the
date the SAR was granted, provided that if an SAR is granted retroactively in
tandem with or in substitution for an Option, the exercise price may be the
exercise price of such Option. The term of each SAR will be fixed by the Parent
Compensation Committee but may not exceed ten years from the date of the grant.
The Parent Compensation Committee

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<PAGE> 170

shall have the discretion to determine all other terms and conditions applicable
to SARs, including when SARs shall be exercisable.

Incentive Units and Incentive Stock. The Parent Compensation Committee may
grant an Eligible Employee Incentive Units which provide a contractual right to
receive shares of Parent Common Stock or cash based on the Fair Market Value of
the related shares at the end of a restricted period determined by the
Compensation Committee, which period, except in the case of grants made in
connection with the Merger as required by employment agreements or otherwise, is
generally expected to be three years or more (the "Restricted Period"). The
Parent Compensation Committee also may grant shares of Incentive Stock that are
nontransferable and subject to substantial risk of forfeiture during the
applicable Restricted Period. The Parent Compensation Committee shall have the
discretion to provide that Awards of Incentive Stock and Incentive Units will
vest, if at all, upon the (i) employee's continued employment during the
relevant Restricted Period as determined by the Parent Compensation Committee
and/or (ii) attainment or partial attainment of performance objectives
determined by the Parent Compensation Committee. In general, an employee who has
been granted Incentive Stock, the vesting restrictions of which relate solely to
the passage of time and continued employment, will from the date of grant have
the benefits of ownership in respect of such shares, including the right to
receive dividends and other distributions thereon, subject to the restrictions
set forth in the 1996 Incentive Plan and in the instrument evidencing such
Award. With respect to any performance period, no Executive Officer (as of the
Merger Date, eight people) may be granted Awards of Incentive Stock or Incentive
Units which vest upon the achievement of performance objectives in respect of
more than 300,000 shares of Parent Common Stock or, if such Awards are settled
in cash, the Fair Market Value thereof determined at the time of payment (each
subject to adjustment as described above).

With respect to any award of Incentive Stock or Incentive Units made to an
Executive Officer of Parent that the Parent Compensation Committee determines
will vest based on the achievement of performance objectives, such performance
objectives shall relate to at least one of the following criteria, which may be
determined solely by reference to the performance of Parent, a Subsidiary or an
Affiliate (or any business unit thereof) or based on comparative performance
relative to other companies: (i) net income; (ii) earnings before income taxes;
(iii) earnings per share; (iv) return on shareholders' equity; (v) expense
management; (vi) profitability of an identifiable business unit or product;
(vii) ratio of claims to revenues; (viii) revenue growth; (ix) earnings growth;
(x) total shareholder return; (xi) cash flow; (xii) return on assets; (xiii)
pretax operating income; or (xiv) any combination of the foregoing.

Merger Options. As of the Merger Date, each holder of an option to purchase
shares of U.S. Healthcare Common Stock shall be granted an option to purchase
Parent Common Stock in accordance with the provisions of Section 1.7 of the
Amended Merger Agreement and each holder of an option to purchase shares of
Aetna Common Stock shall be granted an option to purchase Parent Common Stock in
accordance with the provisions of Section 1.8 of the Amended Merger Agreement.
Except as modified by the Amended Merger Agreement, such options shall be
governed by the terms of the incentive plans and award agreements under which
they were originally granted, which terms are incorporated in the 1996 Incentive
Plan by reference.

Other Stock-Based Awards. The 1996 Incentive Plan also authorizes the
Parent Compensation Committee to grant Other Stock-Based Awards to Eligible
Employees and to grant Executive Officers Parent Common Stock in lieu of cash
payable as salary or under any other bonus or incentive compensation plan of
Parent.

Dividends and Dividend Equivalents. The Parent Compensation Committee may
provide that any Award shall include dividends or dividend equivalents, payable
in cash, Parent Common Stock, securities or other property on a current or
deferred basis.

EFFECT ON AWARDS ON TERMINATION OF EMPLOYMENT

The Parent Compensation Committee has broad discretion as to the specific
terms and conditions of each Award and any rules applicable thereto, including
but not limited to the effect thereon of the death, retirement or other
termination of employment of the Eligible Employee or the effect, if any, of a
change in control of Parent.

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<PAGE> 171

GENERAL

Award Agreement. The terms of each Award are to be evidenced by a written
instrument delivered to the Eligible Employee.

Withholding. The Awards are subject to applicable tax withholding by Parent
which may, to the extent permitted by the Parent Compensation Committee, be
satisfied by the withholding of shares deliverable under the Incentive Plan.

Transferability. Unless the Parent Compensation Committee expressly permits
transfers for the benefit of members of the Eligible Employee's immediate family
or trust or similar vehicle for their benefit, Awards under the 1996 Incentive
Plan may not be assigned or transferred except by will, the laws of descent and
distribution or a qualified domestic relations order.

Deferral. The Parent Compensation Committee shall have the discretion to
determine whether, to what extent, and under what circumstances cash, Parent
Common Stock, other securities, other Awards, other property, and other amounts
payable with respect to an Award shall be deferred either automatically or at
the election of the holder thereof or of the Parent Compensation Committee.

Amendment or Termination. The Parent Board of Directors or the Parent
Compensation Committee may terminate or suspend the 1996 Incentive Plan at any
time, but the termination or suspension will not adversely affect any vested
Awards then outstanding under the 1996 Incentive Plan. Unless terminated by
action of the Board or the Parent Compensation Committee, no Award may be
granted under the 1996 Incentive Plan after April 30, 2006. The 1996 Incentive
Plan may be amended or terminated at any time by the Parent Board of Directors,
except that no amendment may be made without shareholder approval if the Parent
Compensation Committee determines that such approval is necessary to comply with
any tax or regulatory requirement, including any approval requirement which is a
prerequisite for exemptive relief from Section 16 of the 1934 Act, for which or
with which the Compensation Committee determines that it is desirable to qualify
or comply. The 1996 Incentive Plan Committee may amend the term of any Award or
Option granted, retroactively or prospectively, but no amendment may adversely
affect any vested Award or Option without the holder's consent.

EFFECT ON OTHER COMPENSATION PROGRAMS

Nothing contained in the 1996 Incentive Plan shall prevent Parent from
adopting or continuing in effect other compensation arrangements, which may, but
need not, provide for the grant of options, incentive stock, and other types of
Awards provided for hereunder. If the 1996 Incentive Plan is approved by
shareholders, following the Merger Date no awards will be granted under the
current Aetna and U.S. Healthcare incentive plans. All awards with respect to
award cycles currently in progress under plans currently in effect at Aetna or
U.S. Healthcare will be satisfied with cash or Parent Common Stock issued under
the 1996 Incentive Plan, as the case may be, in accordance with the provisions
of such plans.

NEW PLAN BENEFITS

Set forth below, with respect to persons expected to be executive officers
or employees of Parent following the Mergers, is a summary of the Merger Options
and the initial Awards of Incentive Stock to be granted to the executive
officers of Parent pursuant to the terms of their employment agreements.
Additional Awards to be granted under the 1996 Incentive Plan have not yet been
determined.

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<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION NUMBER OF SHARES OF
(AETNA INC.) MERGER OPTIONS(1) DOLLAR VALUE($)(2) INCENTIVE STOCK(3) DOLLAR VALUE($)
- -------------------------------- ----------------- ------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
Ronald E. Compton
Chairman, President and chief
executive officer 201,780 0 --
Richard L. Huber
Vice Chairman for Strategy and
Finance 159,500 0 --
Daniel P. Kearney
Executive Vice President,
Investments/Financial Services 149,736 0 --
Michael J. Cardillo
Co-President of the Combined
Health Operations 28,681 17,792 1,354,416
Joseph T. Sebastianelli
Co-President of the Combined
Health Operations 20,393 17,792 1,354,426
All executive officers of Parent
as a group 721,690 35,584 2,696,832
All employees as a group,
including all current officers
and employees of Aetna and
U.S. Healthcare who are not
executive officers(4) 6,736,316 76,895 5,853,632
</TABLE>

- ---------------

(1) Numbers based on the number of U.S. Healthcare or Aetna (as the case may
be), options outstanding as of June 3, 1996 or May 20, 1996, respectively,
assuming a fair market value of $57 for the U.S. Healthcare Common Stock
immediately preceding the Merger Date and an average fair market value of
$76 1/8 for Parent Common Stock during the five day period immediately
following the Merger Date.

(2) Not applicable.

(3) Such Awards will vest on the second anniversary of the Merger Date, subject
to acceleration upon the occurrence of certain events or certain types of
terminations of employment.

(4) No current Director or nominee for election as a Director who is not also an
employee of Parent is eligible to participate in the 1996 Incentive Plan.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Options described above are intended to comply with the requirements of
the Code regarding the deductibility of certain performance based compensation.

Under currently applicable federal income tax law, an Eligible Employee
will receive no taxable income upon the grant of an NSO or an ISO. When an
Eligible Employee exercises an NSO, the excess of the Fair Market Value of the
shares on the date of exercise over the exercise price paid will be ordinary
income to the Eligible Employee and his or her employer will be allowed a
federal income tax deduction in the same amount. When an Eligible Employee
exercises an ISO while employed or within three months after termination of
employment (one year for disability), no income will be recognized upon exercise
of the ISO. If the Eligible Employee holds shares acquired for at least one year
after exercise and two years after the grant of the ISO, the excess of the
amount realized upon disposition of the shares over the exercise price paid is
treated as long-term capital gain for the Eligible Employee and the Eligible
Employee's employer is not allowed a federal income tax deduction. A sale or
other exchange of the underlying stock before the end of either of the required
holding periods will be a "disqualifying disposition" which will generally
result in the Eligible Employee being taxed on the gain derived from an ISO as
though it were an NSO and the Eligible Employee's employer will be allowed a
federal income tax deduction in the same amount. Special rules apply if the
exercise price is paid in shares.

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<PAGE> 173

holders of U.S. Healthcare Common Stock and U.S. Healthcare Class B Stock
present at the U.S. Healthcare Annual Meeting in person or by proxy are entitled
to cast, voting as a single class, are required for approval of the Incentive
Plan.

APPROVAL AND ADOPTION OF THE AMENDED MERGER AGREEMENT CONSTITUTES APPROVAL
OF THE MERGER OPTION PORTION OF THE 1996 INCENTIVE PLAN THAT ALLOWS FOR THE
CONVERSION OF STOCK OPTIONS PURSUANT TO THE AMENDED MERGER AGREEMENT.

EACH OF THE BOARD OF DIRECTORS OF AETNA AND OF U.S. HEALTHCARE RECOMMENDS A
VOTE FOR APPROVAL OF THE ADOPTION OF THE 1996 INCENTIVE PLAN.

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AETNA INC.
ANNUAL INCENTIVE PLAN

At the Aetna Special Meeting and the U.S. Healthcare Annual Meeting, the
shareholders of Aetna and U.S. Healthcare, respectively, will be asked to adopt
the Aetna Inc. Annual Incentive Plan (the "Annual Plan") to be effective as of
January 1, 1997, which has been approved by the respective Boards of Directors
of Aetna, U.S. Healthcare and Parent. Approval of the Annual Plan is contingent
on consummation of the Mergers.

The following summary of the Annual Plan is qualified in its entirety by
reference to the complete text of the Annual Plan, which is attached to this
Joint Proxy Statement/Prospectus as Appendix I. Capitalized terms not separately
defined in this description have the meanings set forth in the Annual Plan.

Shareholder approval is required under Section 162(m) of the Code so that
compensation payable pursuant to the Annual Plan, together with other
compensation paid to the same "covered employee," exceeding $1 million is
considered "performance based" and, therefore, tax deductible by Parent. Under
Section 162(m) a covered employee is an executive officer named in Parent's
Summary Compensation Table who is acting in such capacity on the last day of the
applicable tax year.

Summarized below are certain terms of the Annual Plan which is submitted
for shareholder approval.

Eligible Employees. All executive officers as described in Rule 3b-7 of the
1934 Act, (as of the Merger Date), are eligible to be named by the Parent Board
of Directors as participants for any fiscal year. The Parent Board of Directors
shall select the executive officers (eight people expected as of the Merger
Date) who shall participate in the Annual Plan with respect to any fiscal year.

Performance Criteria. On or before March 31 of each fiscal year, the Parent
Compensation Committee shall establish the performance objectives that must be
attained in order for the Parent to pay bonuses under the Annual Plan. Unless
the Parent Compensation Committee determines at the time of grant not to qualify
the award as performance-based compensation under Section 162(m), the
performance objectives for awards made under the Annual Plan will be based upon
one or more of the following criteria, which may be determined solely by
reference to the performance of Parent, a Subsidiary or an Affiliate (or any
business unit thereof) or based on comparative performance relative to other
companies: (i) net income; (ii) earnings before income taxes; (iii) earnings per
share; (iv) return of shareholders equity; (v) expense management; (vi)
profitability of an identifiable business unit or product; (vii) ratio of claims
to revenues; (viii) revenue growth; (ix) earnings growth; (x) total shareholder
return; (xi) cash flow; (xii) return on assets; (xiii) pretax operating income,
or (xiv) any combination of the foregoing.

Individual Limit. The maximum amount that can be paid to any participant
under the Annual Plan with respect to any fiscal year is $2,000,000. The Parent
Compensation Committee has the discretion to pay amounts which are less than
this maximum amount based on individual performance or such other criteria as
the Compensation Committee shall deem relevant.

Administration. The Parent Compensation Committee, to the extent necessary
to comply with Section 162(m) and Section 16 of the 1934 Act, shall at all times
be comprised of at least two Directors, each of whom is an "outside director"
for purposes of Section 162(m) and a "disinterested person" for purposes of
Section 16, shall administer and interpret the Annual Plan. Prior to making any
payment under the Annual Plan, the Parent Compensation Committee shall certify
in writing that the performance objectives have been attained.

Amendment and Termination. The Parent Compensation Committee may at any
time amend, terminate or suspend the Annual Plan. No adverse changes will be
made retroactively, but may apply to subsequent performance periods. The Annual
Plan will not be effective with respect to the calendar years ending after
December 31, 2001 (except as to awards earned prior to such date which are
subsequently paid), unless otherwise extended by action of the Parent
Compensation Committee.

Effect on Other Compensation Programs. Nothing contained in the Annual Plan
shall prevent Parent from adopting or continuing in effect other compensation
arrangements.

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<PAGE> 175

New Plan Award Table. Because the Annual Plan will not be effective until
January 1, 1997, awards under the Annual Plan have not yet been determined.

The affirmative vote of a majority of the shares of Aetna Common Stock
present at the Aetna Special Meeting in person or by proxy and entitled to vote
and the affirmative vote of a majority of the votes which the holders of U.S.
Healthcare Common Stock and U.S. Healthcare Class B Stock present at the U.S.
Healthcare Annual Meeting in person or by proxy are entitled to cast, voting as
a single class, are required for approval of the Annual Plan.

EACH OF THE BOARD OF DIRECTORS OF AETNA AND THE BOARD OF DIRECTORS OF U.S.
HEALTHCARE RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF THE ANNUAL
PLAN.

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<PAGE> 176

AETNA INC. NON-EMPLOYEE DIRECTOR
DEFERRED STOCK AND DEFERRED COMPENSATION PLAN

INTRODUCTION

At the Aetna Special Meeting and the U.S. Healthcare Annual Meeting, the
shareholders of Aetna and U.S. Healthcare, respectively, will be asked to
approve the assumption by Parent of the Aetna Non-Employee Director Deferred
Stock and Deferred Compensation Plan (the "Director Plan"), which was approved
by the shareholders of Aetna at the 1996 Annual Meeting. Such assumption was
approved by the respective Boards of Directors of Aetna, U.S. Healthcare and
Parent. Approval of the assumption of the Director Plan is contingent on the
consummation of the Mergers.

The Director Plan will assist Parent in attracting and retaining qualified
Non-Employee Directors. The Director Plan also will further enhance the
long-term mutuality of interest among Parent's Non-Employee Directors and
shareholders by increasing these Directors' ownership interest in Parent.

The following summary of the Director Plan is qualified in its entirety by
reference to the complete text of the Director Plan, which is attached to this
Joint Proxy Statement/Prospectus as Appendix J. Capitalized terms not separately
defined in this section have the meanings set forth in the Director Plan.

The Director Plan is substantially identical to the Aetna Non-Employee
Director Deferred Stock Plan (approved by Aetna shareholders at Aetna's 1996
Annual Meeting).

PRINCIPAL FEATURES OF DIRECTOR PLAN

Shares Available. A maximum of 99,600 shares of Parent Common Stock may be
issued under the Director Plan, subject to appropriate adjustments in the event
of certain corporate transactions, including stock dividends and splits, to
preserve, or to prevent the enlargement of, the benefits made available under
the Director Plan.

Grants under the Director Plan. Under the Director Plan, each Non-Employee
Director will, upon his or her initial appointment as Director, receive
contractual rights (" Director Plan Units") to receive 1,500 shares of Parent's
Common Stock (the "Initial Grants"). All non-employee Directors currently
serving on the Board of Directors of Aetna have previously received such grants
and are not eligible for further Initial Grants. Additionally, on the date of
each Annual Meeting occurring during the term of the Director Plan, each Non-
Employee Director will receive Units representing the right to receive 350
shares of Parent Common Stock (the "Annual Grants").

Vesting. To become fully vested in the Director Plan Units a Non-Employee
Director must complete, in the case of the Initial Grants, three Years of
Service and, in the case of the Annual Grants, one Year of Service as a Director
following the grant of the Director Plan Units. If a Non-Employee Director
ceases to be a Director due to death, Disability, Retirement or acceptance of a
position in Government Service prior to such one or three Year(s) of Service
from the date any Director Plan Units are granted, a Non-Employee Director's
rights with respect to the related Director Plan Units will become fully vested
provided that the Non-Employer Director has completed at least six consecutive
months of service from such grant date. A Non-Employee Director's rights with
respect to any unvested Director Plan Units will also vest upon a
Change-in-Control of Parent regardless of the period served by the Non-Employee
Director. Otherwise, if a Director ceases to be a Director before completing
such one or three Year(s) of Service from the grant date of any Director Plan
Units, he or she will receive only a pro-rata portion of the related shares,
provided that the Director has completed a minimum of six consecutive months of
service as a Director from such grant date.

Delivery of Shares. Shares of Parent Common Stock will generally be
delivered in respect of Director Plan Units following a non-employee Director's
cessation of service as a Director. However, following a Change-in-Control of
Parent, a non-employee Director will receive cash in lieu of Parent Common Stock
based upon the Fair Market Value of the Parent Common Stock on the date of the
Change-in-Control.

Deferral. Non-employee Directors will also be permitted to defer receipt of
all or a portion of Director compensation otherwise payable in cash (including
dividend equivalents) and to have such amounts credited

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<PAGE> 177

to a Stock Unit Account (which tracks the value of the Parent Common Stock) or
an Interest Account (which credits interest based on the rate of interest paid
from time to time under the Parent's Incentive Savings Plan for employees,
currently yielding 6.75%).

Administration and Amendment. The Director Plan will be administered by a
Nominating Committee of the Board of Directors of Parent. The Board of Directors
of Parent may amend the Director Plan, but, without shareholder approval, no
amendment may (i) increase the number of shares of Parent Common Stock that may
be issued under the Director Plan; (ii) modify the vesting requirements; or
(iii) otherwise change the times at which, or period within which, shares may be
delivered. Other than to conform with changes in the Code or ERISA no amendment
to the formula provisions of the Director Plan may be adopted within six months
of any prior amendment.

Dividend Equivalents. The grant of Director Plan Units will not confer on a
Director any rights as a shareholder of Parent (such as the right to vote and
the right to receive dividends); however, on each dividend payment date
non-employee Directors will be paid an amount in cash equal to the dividend per
share for the applicable dividend payment times the number of shares that are
subject to Director Plan Units held by such non-employee Director.

Termination. Unless sooner terminated by action of the Parent Board of
Directors, the Director Plan will continue in effect through April 30, 2001, but
grants under the Director Plan on or prior to the termination date will continue
in effect until they expire in accordance with their terms.

Other Information. As of the Merger Date, there will be nine non-employee
Directors of Parent.

NEW PLAN BENEFITS

Set forth below are the Director Plan Unit grants that will be outstanding
on the Merger Date, assuming that all Aetna Directors are elected to the Parent
Board.

AETNA INC. NON-EMPLOYEE DIRECTOR DEFERRED STOCK AND
DEFERRED COMPENSATION PLAN

<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) UNITS(2)(3)
- ------------------------------------------------- ------------ -----------------
<S> <C> <C>
All Non-Employee Directors as a group............ $1,511,081 19,850
</TABLE>

- ---------------

(1) Based on an assumed closing price of Parent Common Stock on the Merger Date
of $76 1/8.

(2) The number of Director Plan Units reported does not include Units that may
be credited to a Director upon an election to defer all or a portion of the
Director's compensation in the Stock Unit Account.

(3) The Principal Shareholder and the other U.S. Healthcare Designees will each
receive 1,500 shares of Parent Common Stock upon joining the Board of
Directors of Parent.

EACH OF THE BOARD OF DIRECTORS OF AETNA AND THE BOARD OF DIRECTORS OF U.S.
HEALTHCARE RECOMMENDS A VOTE FOR THE APPROVAL OF THE ASSUMPTION BY PARENT OF THE
DIRECTOR PLAN.

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<PAGE> 178

THE NEW AETNA CERTIFICATE OF INCORPORATION

The following description of the new Aetna Certificate of Incorporation is
qualified in its entirety by reference to the complete text of the new Aetna
Certificate of Incorporation, which is incorporated by reference herein and a
copy of which is annexed to this Joint Proxy Statement/Prospectus as Appendix M.

In connection with Aetna's delicensing as an insurance company in order to
facilitate the transactions contemplated by the Amended Merger Agreement, Aetna
plans to surrender its charter as a specially chartered corporation and
reincorporate as a general business corporation under the Connecticut Law. In
order to effect reincorporation, the Aetna shareholders must adopt an
authorizing resolution approving the new Aetna Certificate of Incorporation, the
text of which is attached to this Joint Proxy Statement/Prospectus as Appendix
M, by the affirmative vote of a majority of the outstanding shares of Aetna
Common Capital Stock. Reincorporation will take effect when a certificate
setting forth such resolution and the new Aetna Certificate of Incorporation is
filed with the Secretary of the State of the State of Connecticut. Upon such
effectiveness, Aetna will cease to be a specially chartered corporation and
shall continue its corporate existence under, and shall be subject to and have
the benefits of, the Connecticut Law.

The new Aetna Certificate of Incorporation is essentially the same as the
existing Aetna Certificate, except that it (i) omits reference to the special
act of the Connecticut legislature under which Aetna was originally chartered
and to provisions authorizing Aetna to conduct insurance businesses (ii) changes
Aetna's name to Aetna Services, Inc. and (iii) changes the par value of common
stock to $.01.

The adoption of the new Aetna Certificate of Incorporation will not have a
material impact on the business or operations of Aetna.

The affirmative vote of a majority of the outstanding shares of Aetna
Common Stock present at the Aetna Special Meeting in person or by proxy and
entitled to vote is required to approve the new Aetna Certificate of
Incorporation.

THE BOARD OF DIRECTORS OF AETNA RECOMMENDS A VOTE FOR ADOPTION OF THE NEW
AETNA CERTIFICATE OF INCORPORATION.

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<PAGE> 179

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 is
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 Joint Proxy
Statement/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. The report of KPMG Peat Marwick LLP covering
the December 31, 1995 consolidated financial statements of Aetna Life and
Casualty Company and Subsidiaries refers to Aetna's change 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 has been
included in this Joint Proxy Statement/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 consolidated financial information of
Aetna Life and Casualty Company and Subsidiaries incorporated by reference in
this Joint Proxy Statement/Prospectus and to be incorporated by reference in
this Joint Proxy Statement/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 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
1933 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
1933 Act.

The consolidated financial statements of U.S. Healthcare, Inc. at December
31, 1995 and 1994, and for each of the three years in the period ended December
31, 1995, incorporated by reference in U.S. Healthcare, Inc.'s Annual Report on
Form 10-K, as amended (the "U.S. Healthcare Form 10-K"), for the year ended
December 31, 1995 and incorporated by reference in this Joint Proxy
Statement/Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference in the
U.S. Healthcare Form 10-K 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.

Representatives of Ernst & Young LLP are expected to be present at the U.S.
Healthcare Annual Meeting and representatives of KPMG Peat Marwick LLP are
expected to be present at the Aetna Special Meeting, where they will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.

LEGAL MATTERS

The validity of the Parent Common Stock (including related Parent Rights)
and Parent Mandatorily Convertible Preferred Stock offered hereby will be passed
upon by Day, Berry & Howard. In addition, Davis Polk & Wardwell and Skadden,
Arps, Slate, Meagher & Flom have delivered opinions to Aetna and U.S.
Healthcare, respectively, as to certain tax matters.

168
<PAGE> 180

FUTURE SHAREHOLDER PROPOSALS

If the Mergers are consummated, the first annual meeting of the
shareholders of Parent is expected to be held in 1997. If the Mergers are not
consummated, the 1997 Annual Meeting of Shareholders of U.S. Healthcare is
expected to be held on or about May 22, 1997 and the 1997 Annual Meeting of
Shareholders of Aetna is expected to be held on or about April 25, 1997.

Subject to the foregoing, if any Parent shareholder intends to present a
proposal at the 1997 Parent annual meeting and wishes to have such proposal
considered for inclusion in the proxy materials for such meeting, such holder
must submit the proposal to the Secretary of Parent in writing so as to be
received at the executive offices of Parent by November 21, 1996 (which is 120
days prior to the anticipated mailing date of proxy materials for such meeting).
The Parent Bylaws require that notice of nominations of persons for election to
the Parent Board of Directors, other than those made by or at the direction of
the Parent Board of Directors, must be received no later than 90 days before an
Annual Meeting. The notice must present certain information concerning the
nominee and the shareholder making the nomination. The notice also must include
the nominee's written consent to being a nominee and to serving if elected.
Notices should be sent to the Corporate Secretary, Aetna Inc., 151 Farmington
Avenue, Hartford, Connecticut 06156. Such proposals must also meet the other
requirements of the rules of the Commission relating to shareholders' proposals.
In the event the Mergers are not consummated, the only shareholder proposals
eligible to be considered for inclusion in the proxy materials for the 1997
Annual Meeting of U.S. Healthcare or Aetna, as the case may be, will be those
which were duly submitted to the Corporate Secretary of U.S. Healthcare by
December 23, 1996 (which is 120 days prior to the anticipated mailing date of
proxy materials for such meeting) or the Corporate Secretary of Aetna by
November 21, 1996 (which is 120 days prior to the anticipated mailing date of
proxy materials for such meeting), as the case may be.

169
<PAGE> 181

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of
Aetna Inc.

We have audited the accompanying consolidated balance sheet of Aetna Inc.
and Subsidiaries as of April 22, 1996. This consolidated balance sheet is the
responsibility of the Aetna Inc.'s management. Our responsibility is to express
an opinion on this consolidated balance sheet based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the consolidated
balance sheet provides a reasonable basis for our opinion.

In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Aetna Inc. and
Subsidiaries as of April 22, 1996 in conformity with generally accepted
accounting principles.

Hartford, Connecticut
April 23, 1996
/s/KPMG Peat Marwick LLP

F-1
<PAGE> 182

AETNA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
APRIL 22, 1996

<TABLE>
<S> <C>
Assets:
Cash........................................................................... $ 2,000
-------
Total assets................................................................ $ 2,000
=======
Stockholders' equity:
Common stock, (par value $1.00 per share; 20,000 shares authorized; 2,000
shares issued and 1,000 shares outstanding)................................. $ 2,000
Additional paid-in capital..................................................... 1,000
Treasury stock, at cost (1,000 shares)......................................... (1,000)
-------
Total stockholders' equity.................................................. $ 2,000
=======
</TABLE>

The accompanying notes are an integral part of the consolidated balance sheet.

F-2
<PAGE> 183

AETNA INC.
NOTES TO CONSOLIDATED BALANCE SHEET

1. BACKGROUND OF ORGANIZATION:

Aetna Inc. was incorporated under the Stock Corporation Act of the state of
Connecticut on March 25, 1996 for the purpose of effectuating the combination of
Aetna Life and Casualty Company ("Aetna") and U.S. Healthcare, Inc. ("U.S.
Healthcare") in accordance with the terms of the Agreement and Plan of Merger
dated as of March 30, 1996 (the "Merger Agreement"). Aetna Inc. is equally owned
by Aetna and U.S. Healthcare. Since its formation, Aetna Inc. has organized two
wholly-owned subsidiaries in accordance with the Merger Agreement and has not
conducted business or activity other than in connection with the Merger
Agreement (related expenses are the responsibility of Aetna and U.S.
Healthcare). Aetna Inc. has no contingent liabilities.

2. STOCKHOLDERS' EQUITY:

The initial authorized capital stock of Aetna Inc. consists of 20,000
shares of Common Stock, par value $1.00 per share. Two thousand shares have been
issued, 1,000 shares are held in treasury and 1,000 shares are outstanding.

3. MERGER AGREEMENT:

Aetna and U.S. Healthcare entered into the Merger Agreement pursuant to
which they agreed to merge in a transaction, valued at that time, at
approximately $8.9 billion. The Merger Agreement, which has been approved by the
board of directors of each company, calls for the formation of a new holding
company, Aetna Inc. U.S. Healthcare shareholders will receive $34.20 in cash,
0.2246 shares of Aetna Inc. common stock together with Aetna Inc. rights and
0.0749 shares of Aetna Inc. mandatorily convertible preferred stock for each
share of U.S. Healthcare common stock and each share of U.S. Healthcare Class B
Stock outstanding. Each outstanding share of Aetna common stock will be
converted into a share of common stock of Aetna Inc. All issued shares of the
capital stock of Aetna Inc. immediately prior to the merger date will be
cancelled upon completion of the mergers. The authorized number of shares will
be increased to effect the transaction. Immediately after the transaction, Aetna
and U.S. Healthcare will each be wholly-owned subsidiaries of Aetna Inc., and
Aetna Inc. will be owned approximately 78% by Aetna shareholders and
approximately 22% by U.S. Healthcare shareholders (approximately 72% and
approximately 28%, respectively, on a fully diluted basis).

Aetna expects to finance the transaction with a combination of $5.3 billion
in cash ($3.9 million from the net proceeds received from the sale of its
property-casualty operations and $1.45 billion of additional bank debt, which
may initially be financed with commercial paper) and the issuance of $2.7
billion of new Aetna Inc. common stock and $0.9 billion of Aetna Inc.
mandatorily convertible preferred stock. The agreement is subject to approval by
the shareholders of both companies, receipt of required insurance, healthcare
and other regulatory approvals, and other customary conditions. The transaction
is expected to close in the third quarter of 1996.

F-3
<PAGE> 184

APPENDIX A -- AMENDED AGREEMENT AND PLAN OF MERGER
<PAGE> 185

COMPOSITE CONFORMED COPY

[GIVING EFFECT TO AMENDMENT NO. 1]

AGREEMENT AND PLAN OF MERGER

DATED AS OF
MARCH 30, 1996
AMONG

AETNA LIFE AND CASUALTY COMPANY
U.S. HEALTHCARE, INC.
AETNA INC.,
ANTELOPE SUB, INC.
AND

NEW MERGER CORPORATION

AS AMENDED BY

AMENDMENT NO. 1

THERETO DATED AS OF

MAY 30, 1996

<PAGE> 186

TABLE OF CONTENTS(1)

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
THE MERGERS
SECTION 1.1. U.S. Healthcare Sub Merger.......................................... A-1
SECTION 1.2. Aetna Sub Merger.................................................... A-2
SECTION 1.3. Surrender and Payment............................................... A-3
SECTION 1.4. Cancellation of Parent Stock........................................ A-4
SECTION 1.5. The Merger Date..................................................... A-4
SECTION 1.6. Dissenting Shares................................................... A-4
SECTION 1.7. Stock Options of U.S. Healthcare; Restricted Stock.................. A-5
SECTION 1.8. Stock Options of Aetna.............................................. A-6
SECTION 1.9. Adjustments......................................................... A-6
SECTION 1.10. Fractional Shares................................................... A-6
SECTION 1.11. Parent Rights....................................................... A-7
ARTICLE 2
THE SURVIVING CORPORATIONS
SECTION 2.1. Articles and Certificate of Incorporation; Bylaws................... A-7
SECTION 2.2. Directors and Officers.............................................. A-7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF U.S. HEALTHCARE
SECTION 3.1. Corporate Existence and Power....................................... A-8
SECTION 3.2. Corporate Authorization............................................. A-8
SECTION 3.3. Governmental Authorization.......................................... A-8
SECTION 3.4. Non-Contravention................................................... A-8
SECTION 3.5. Capitalization...................................................... A-9
SECTION 3.6. Subsidiaries........................................................ A-9
SECTION 3.7. SEC Filings......................................................... A-10
SECTION 3.8. Financial Statements................................................ A-10
SECTION 3.9. Disclosure Documents................................................ A-10
SECTION 3.10. Information Supplied................................................ A-10
SECTION 3.11. Absence of Certain Changes.......................................... A-11
SECTION 3.12. No Undisclosed Material Liabilities................................. A-13
SECTION 3.13. Litigation; Investigations.......................................... A-13
SECTION 3.14. Taxes............................................................... A-13
SECTION 3.15. ERISA............................................................... A-14
SECTION 3.16. Permits; Compliance with Laws....................................... A-16
SECTION 3.17. Finders' Fees....................................................... A-16
SECTION 3.18. Intellectual Property Rights........................................ A-16
SECTION 3.19. Takeover Statutes................................................... A-17
SECTION 3.20. Fairness Opinion.................................................... A-17
</TABLE>

- ---------------

(1) The Table of Contents is not a part of this Agreement.

i
<PAGE> 187

<S> <C> <C>
PAGE
----
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AETNA
SECTION 4.1. Corporate Existence and Power....................................... A-17
SECTION 4.2. Corporate Authorization............................................. A-17
SECTION 4.3. Governmental Authorization.......................................... A-18
SECTION 4.4. Non-Contravention................................................... A-18
SECTION 4.5. Capitalization...................................................... A-18
SECTION 4.6. SEC Filings......................................................... A-18
SECTION 4.7. Financial Statements................................................ A-19
SECTION 4.8. Disclosure Documents................................................ A-19
SECTION 4.9. Information Supplied................................................ A-19
SECTION 4.10. Absence of Certain Changes.......................................... A-19
SECTION 4.11. No Undisclosed Material Liabilities................................. A-21
SECTION 4.12. Litigation; Investigations.......................................... A-21
SECTION 4.13. Subsidiaries........................................................ A-21
SECTION 4.14. Taxes............................................................... A-21
SECTION 4.15. ERISA............................................................... A-22
SECTION 4.16. Permits; Compliance with Laws....................................... A-23
SECTION 4.17. Intellectual Property Rights........................................ A-23
SECTION 4.18. Fairness Opinions................................................... A-24
ARTICLE 5
COVENANTS OF U.S. HEALTHCARE
SECTION 5.1. Conduct of U.S. Healthcare.......................................... A-24
SECTION 5.2. Shareholder Meeting; Proxy Material................................. A-26
SECTION 5.3. Access to Information............................................... A-26
SECTION 5.4. Other Offers Relating to U.S. Healthcare............................ A-27
SECTION 5.5. Notices of Certain Events........................................... A-27
SECTION 5.6. Fiduciary Matters................................................... A-28
ARTICLE 6
COVENANTS OF AETNA
SECTION 6.1. Voting of U.S. Healthcare Stock..................................... A-28
SECTION 6.2. Shareholder Meeting; Proxy Materials................................ A-28
SECTION 6.3. Access to Information............................................... A-28
SECTION 6.4. Notices of Certain Events........................................... A-28
SECTION 6.5. Certain Corporate Actions........................................... A-29
SECTION 6.6. Other Offers Relating to Aetna...................................... A-30
SECTION 6.7. Amendment of the Stock Purchase Agreement........................... A-30
SECTION 6.8. Dividends........................................................... A-31
ARTICLE 7
COVENANTS OF AETNA,
U.S. HEALTHCARE AND PARENT
SECTION 7.1. Best Efforts........................................................ A-31
SECTION 7.2. Cooperation......................................................... A-31
SECTION 7.3. Public Announcements................................................ A-31
SECTION 7.4. Further Assurances.................................................. A-31
SECTION 7.5. Rule 145 Affiliates................................................. A-31
</TABLE>

ii
<PAGE> 188

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 7.6. Director and Officer Liability...................................... A-32
SECTION 7.7. Subsidiary Agreements............................................... A-33
SECTION 7.8. Plans Following the Closing......................................... A-33
SECTION 7.9. Voting of Shares.................................................... A-33
SECTION 7.10. Form S-4............................................................ A-33
SECTION 7.11. Certain Corporate Matters with Respect to Parent.................... A-33
SECTION 7.12. Governmental Authorization.......................................... A-34
SECTION 7.13. Disclosure Documents................................................ A-35
SECTION 7.14. Listing of Stock.................................................... A-35
ARTICLE 8
CONDITIONS TO THE MERGERS
SECTION 8.1. Conditions to the Obligations of Each Party......................... A-35
SECTION 8.2. Conditions to the Obligations of Aetna.............................. A-36
SECTION 8.3. Conditions to the Obligations of U.S. Healthcare.................... A-36
ARTICLE 9
TERMINATION
SECTION 9.1. Termination......................................................... A-37
SECTION 9.2. Effect of Termination............................................... A-38
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices............................................................. A-38
SECTION 10.2. Entire Agreement; Survival of Representations and Warranties........ A-39
SECTION 10.3. Amendments; No Waivers.............................................. A-39
SECTION 10.4. Expenses............................................................ A-39
SECTION 10.5. Successors and Assigns.............................................. A-40
SECTION 10.6. Governing Law....................................................... A-40
SECTION 10.7. Jurisdiction........................................................ A-40
SECTION 10.8. Counterparts; Effectiveness......................................... A-40
Exhibit A Form of Designations, Rights and Preferences of Parent Preferred
Stock
Exhibit B Forms of Affiliate Letters
</TABLE>

iii
<PAGE> 189

TABLE OF DEFINITIONS

<TABLE>
<CAPTION>
TERM SECTION
- ---------------------------------------------------------------------------------- ---------
<S> <C>
1933 Act.......................................................................... 1.7(d)
1933 Act Affiliates............................................................... 7.5
1934 Act.......................................................................... 1.7(a)
Acquisition Proposal.............................................................. 5.4
Aetna............................................................................. preamble
Aetna Acquisition Proposal........................................................ 6.6
Aetna Balance Sheet............................................................... 4.7
Aetna Balance Sheet Date.......................................................... 4.7
Aetna Benefit Arrangements........................................................ 4.15(c)
Aetna Certificate of Merger....................................................... 1.5
Aetna Class A Stock............................................................... 4.5
Aetna Class B Stock............................................................... 4.5
Aetna Class C Stock............................................................... 4.5
Aetna Disclosure Documents........................................................ 4.8(a)
Aetna Employee Plan............................................................... 4.15(a)
Aetna Health Operations........................................................... 4.10(d)
Aetna Merger Consideration........................................................ 1.2(b)
Aetna Permits..................................................................... 4.16(a)
Aetna Proxy Statement............................................................. 4.8(a)
Aetna Rights Agreement............................................................ 1.2(c)
Aetna Shareholder Meeting......................................................... 6.2(a)
Aetna Software.................................................................... 4.17(b)
Aetna Stock....................................................................... 1.2(b)
Aetna Stock Option................................................................ 1.8(a)
Aetna Sub......................................................................... preamble
Aetna Sub Common Stock............................................................ 1.2(b)
Aetna Sub Merger.................................................................. 1.2(a)
Aetna Subsidiary Securities....................................................... 4.13(b)
Aetna Substitute Option........................................................... 1.8(a)
Aetna Surviving Corporation....................................................... 1.2(a)
Aetna Surviving Corporation Common Stock.......................................... 1.2(b)
Aetna 10-K........................................................................ 4.6(a)
Affiliate......................................................................... 1.1(b)
Average Closing Stock Price....................................................... 8.3(b)
Cash Consideration................................................................ 1.1(b)
Claim............................................................................. 7.6(a)
Class B Stock..................................................................... 1.1(b)
Code.............................................................................. preamble
Common Stock...................................................................... 1.1(b)
Confidentiality Agreement......................................................... 5.4
Connecticut Law................................................................... 1.2(b)
The Consolidated Health Operations................................................ 7.11(c)
Co-Presidents..................................................................... 7.11(c)
D&O Insurance..................................................................... 7.6(d)
Employee Benefit Plan............................................................. 3.15(a)
ERISA............................................................................. 3.15(a)
ERISA Affiliate................................................................... 3.15(a)
Excess Shares..................................................................... 1.10
Exchange Agent.................................................................... 1.3(a)
Form S-4.......................................................................... 7.10
HSR Act........................................................................... 3.3
Indemnified Party................................................................. 7.6(a)
Initial Number of U.S. Healthcare Option Shares................................... 1.7(a)(i)
Lien.............................................................................. 3.4
</TABLE>

iv
<PAGE> 190

<TABLE>
<CAPTION>
TERM SECTION
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Material Adverse Effect........................................................... 3.1
Mergers........................................................................... 1.4
Merger Date....................................................................... 1.5
Merger Consideration.............................................................. 1.2(b)
Multiemployer Plan................................................................ 3.15(b)
New Annual Dividend............................................................... 6.8
NYSE.............................................................................. 1.10
Parent............................................................................ preamble
Parent Common Stock............................................................... 1.1(b)
Parent Disclosure Documents....................................................... 7.13
Parent Preferred Stock............................................................ 1.1(b)
Parent Rights..................................................................... 1.11
Parent Rights Agreement........................................................... 1.11
Pennsylvania Law.................................................................. 1.1(b)
Pension Plans..................................................................... 3.15(a)
Person............................................................................ 1.3(c)
Pre-Merger Matters................................................................ 7.6(a)
Principal Shareholder............................................................. 7.11(b)
SEC............................................................................... 1.7(d)
Scheduled Contracts............................................................... 7.7
Specified U.S. Healthcare Officer................................................. 3.11(j)
Stock Purchase Agreement.......................................................... 8.1(i)
Subject Company................................................................... 7.5
Subsidiary........................................................................ 1.1(b)
Taxes............................................................................. 3.14(k)
Taxing Authorities................................................................ 3.14(k)
Tax Return........................................................................ 3.14(k)
U.S. Healthcare................................................................... preamble
U.S. Healthcare Articles of Merger................................................ 1.5
U.S. Healthcare Balance Sheet..................................................... 3.8
U.S. Healthcare Balance Sheet Date................................................ 3.8
U.S. Healthcare Benefit Arrangements.............................................. 3.15(e)
U.S. Healthcare Designees......................................................... 7.11(b)
U.S. Healthcare Disclosure Documents.............................................. 3.9(a)
U.S. Healthcare Employee Plans.................................................... 3.15(a)
U.S. Healthcare Employee Stock Option............................................. 1.7(a)
U.S. Healthcare Merger Consideration.............................................. 1.1(b)
U.S. Healthcare Non-Employee Stock Option......................................... 1.7(a)
U.S. Healthcare Permits........................................................... 3.16(a)
U.S. Healthcare Proxy Statement................................................... 3.9(a)
U.S. Healthcare Restricted Stock.................................................. 1.7(b)
U.S. Healthcare Securities........................................................ 3.5
U.S. Healthcare Shareholder Meeting............................................... 5.2(a)
U.S. Healthcare Software.......................................................... 3.18(b)
U.S. Healthcare Stock............................................................. 1.1(b)
U.S. Healthcare Stock Option...................................................... 1.7(a)
U.S. Healthcare Sub............................................................... preamble
U.S. Healthcare Sub Common Stock.................................................. 1.1(b)
U.S. Healthcare Sub Merger........................................................ 1.1(a)
U.S. Healthcare Subsidiary Securities............................................. 3.6(b)
U.S. Healthcare Substitute Option................................................. 1.7(a)(i)
U.S. Healthcare Surviving Corporation............................................. 1.1(a)
U.S. Healthcare Surviving Corporation Common Stock................................ 1.1(b)
U.S. Healthcare 10-K.............................................................. 3.6(a)
Voting Agreement.................................................................. 9.1(d)
</TABLE>

v
<PAGE> 191

AMENDED AGREEMENT AND PLAN OF MERGER

AMENDED AGREEMENT AND PLAN OF MERGER dated as of March 30, 1996 among Aetna
Life and Casualty Company, a Connecticut insurance corporation ("Aetna"), U.S.
Healthcare, Inc., a Pennsylvania corporation ("U.S. Healthcare"), Aetna Inc., a
Connecticut corporation ("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") as amended by Amendment No. 1 thereto dated May
30, 1996.

WHEREAS, the respective Boards of Directors of Aetna and U.S. Healthcare
have determined that it is in the best interests of their respective
shareholders to combine their health businesses and to enter into this
Agreement;

WHEREAS, the respective Boards of Directors of Aetna and U.S. Healthcare
have approved this Agreement and the mergers contemplated hereby; and

WHEREAS, for United States federal income tax purposes, it is intended that
the transactions contemplated by this Agreement qualify as transfers subject to
Section 351(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code") and that the shareholders of
U.S. Healthcare be treated as if they transferred their U.S. Healthcare Stock to
Parent in exchange for the U.S. Healthcare Merger Consideration and that the
shareholders of Aetna be treated as if they transferred their Aetna Stock to
Parent in exchange for the Aetna Merger Consideration;

NOW, THEREFORE, in consideration of the promises and the representations,
warranties, covenants, and agreements set forth herein, intending to be legally
bound hereby, the parties hereto agree as follows:

ARTICLE 1

THE MERGERS

SECTION 1.1. U.S. Healthcare Sub Merger. (a) Upon the terms and subject
to the conditions set forth herein, on the Merger Date, U.S. Healthcare Sub
shall merge into U.S. Healthcare (the "U.S. Healthcare Sub Merger") and the
separate existence of U.S. Healthcare Sub shall cease. U.S. Healthcare shall be
the surviving corporation in the U.S. Healthcare Sub Merger (hereinafter
sometimes referred to as the "U.S. Healthcare Surviving Corporation") and its
separate corporate existence, with all its purposes, objects, rights,
privileges, powers and franchises, shall continue unaffected and unimpaired by
the U.S. Healthcare Sub Merger.

(b) Pursuant to the U.S. Healthcare Sub Merger:

(i) Each share of Common Stock, par value $0.005 per share, of U.S.
Healthcare (the "Common Stock"), and each share of Class B Stock, par value
$0.005 per share, of U.S. Healthcare (the "Class B Stock", and together
with the Common Stock, the "U.S. Healthcare Stock") held by U.S. Healthcare
as treasury stock or owned by Aetna or any Subsidiary of Aetna immediately
prior to the Merger Date shall be canceled and no payment shall be made
with respect thereto; provided that any shares of U.S. Healthcare Stock (i)
held by Aetna or any Subsidiary of Aetna for the account of another Person,
(ii) as to which Aetna or any Subsidiary or Affiliate of Aetna is or may be
required to act as a fiduciary or in a similar capacity or (iii) the
cancellation of which would violate any legal duties or obligations of
Aetna or any Subsidiary or Affiliate of Aetna shall not be canceled but,
instead, shall be treated as set forth in Section 1.1(b)(ii) or 1.6. For
purposes of this Agreement, the term "Subsidiary", when used with respect
to any Person, means any corporation or other organization, whether
incorporated or unincorporated, (A) of which (i) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or (ii) such
Person or any other Subsidiary of such Person is a general partner or (B)
which is controlled, directly or indirectly, by such Person (through
ownership of securities, by contract or otherwise) but shall not include
investment companies managed by subsidiaries of Aetna. For purposes of

A-1
<PAGE> 192

this Agreement, the term "Affiliate", when used with respect to any Person,
means any other Person directly or indirectly controlling, controlled by,
or under common control with such Person; and

(ii) Each share of U.S. Healthcare Stock outstanding immediately prior
to the Merger Date shall, except as otherwise provided in Section 1.1(b)(i)
or as provided in Section 1.6 with respect to shares of U.S. Healthcare
Stock as to which dissenters' rights have been exercised (which shares
shall be treated in accordance with Section 1930 of the Pennsylvania
Business Corporation Law of 1988, as amended (the "Pennsylvania Law")), be
converted into the following (the consideration referred to in the
following clauses (A), (B) and (C) is referred to collectively as the "U.S.
Healthcare Merger Consideration"):

(A) the right to receive 0.2246 shares of Common Stock, par value
$.01 per share, of Parent ("Parent Common Stock"), together with 0.2246
Parent Rights;

(B) the right to receive 0.0749 shares of 6.25% Class C Voting
Preferred Stock, par value $.01 per share, of Parent (the terms of which
are set forth in Exhibit A hereto) (the "Parent Preferred Stock"); and

(C) subject to any adjustment as contemplated by Section 8.3(b)
hereof, the right to receive in cash without interest an amount equal to
$34.20 (the "Cash Consideration").

(iii) At the Merger Date, each share of common stock, without par
value, of U.S. Healthcare Sub ("U.S. Healthcare Sub Common Stock")
outstanding immediately prior to the Merger Date shall be converted into an
equal number of shares of Common Stock, par value $.01 per share, of the
U.S. Healthcare Surviving Corporation ("U.S. Healthcare Surviving
Corporation Common Stock").

From and after the Merger Date, all shares of U.S. Healthcare Stock converted in
accordance with Section 1.1(b)(ii) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of such shares shall cease to have any rights with respect thereto, except the
right to receive the U.S. Healthcare Merger Consideration, the right to exercise
dissenters' rights in accordance with and subject to the provisions of the
Pennsylvania Law and the other rights specified in this Agreement. From and
after the Merger Date, all certificates representing U.S. Healthcare Sub Common
Stock shall be deemed for all purposes to represent the number of shares of U.S.
Healthcare Surviving Corporation Common Stock into which they were converted in
accordance with Section 1.1(b)(iii).

SECTION 1.2. Aetna Sub Merger. (a) Upon the terms and subject to the
conditions set forth herein, on the Merger Date, Aetna Sub shall merge into
Aetna (the "Aetna Sub Merger") and the separate existence of Aetna Sub shall
cease. Aetna shall be the surviving corporation in the Aetna Sub Merger
(hereinafter sometimes referred to as the "Aetna Surviving Corporation") and its
separate corporate existence, with all its purposes, objects, rights,
privileges, powers and franchises, shall continue unaffected and unimpaired by
the Aetna Sub Merger.

(b) Pursuant to the Aetna Sub Merger:

(i) Each share of common capital stock without par value of Aetna (the
"Aetna Stock") held by Aetna as treasury stock or owned by U.S. Healthcare
or any Subsidiary of U.S. Healthcare immediately prior to the Merger Date
shall be canceled and no payment shall be made with respect thereto;

(ii) Each share of Aetna Stock outstanding immediately prior to the
Merger Date shall, except as otherwise provided in Section 1.2(b)(i) or as
provided in Section 1.6 with respect to shares of Aetna Stock as to which
rights of objecting shareholders have been exercised (which shares shall be
treated in accordance with Sections 33-373 and 33-374 of the Connecticut
Stock Corporation Act (the "Connecticut Law")), be converted into the right
to receive one share of Parent Common Stock, together with one Parent Right
(the "Aetna Merger Consideration" and, together with the U.S. Healthcare
Merger Consideration, the "Merger Consideration").

(iii) At the Merger Date, each share of common stock, par value $1.00
per share, of Aetna Sub ("Aetna Sub Common Stock"), outstanding immediately
prior to the Merger Date shall be converted

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into an equal number of shares of Common Stock, par value $.01 per share,
of the Aetna Surviving Corporation ("Aetna Surviving Corporation Common
Stock").

From and after the Merger Date, all shares of Aetna Stock converted in
accordance with Section 1.2(b)(ii) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of such shares shall cease to have any rights with respect thereto, except the
right to receive the Aetna Merger Consideration, the right to exercise
dissenters' rights in accordance with and subject to the provisions of the
Connecticut Law and the other rights specified in this Agreement. From and after
the Merger Date, all certificates representing Aetna Sub Common Stock shall be
deemed for all purposes to represent the number of shares of the Aetna Surviving
Corporation Common Stock into which they were converted in accordance with
Section 1.2(b)(iii).

(c) Prior to the consummation of the Aetna Sub Merger, Aetna shall cause
the Rights Agreement (the "Aetna Rights Agreement") dated as of October 27, 1989
between Aetna and First Chicago Trust Company of New York to be amended to
specify that the transactions contemplated by this Agreement do not give rise to
any rights or benefits under the Aetna Rights Agreement.

SECTION 1.3. Surrender and Payment. (a) Prior to the Merger Date, Aetna
and U.S. Healthcare shall cause Parent to appoint an agent (the "Exchange
Agent") for the purpose of exchanging certificates representing shares of U.S.
Healthcare Stock for the U.S. Healthcare Merger Consideration. Parent will make
available to the Exchange Agent, as needed, certificates representing the Parent
Common Stock and the Parent Preferred Stock in respect of the U.S. Healthcare
Merger Consideration and the Cash Consideration to be paid in respect of shares
of U.S. Healthcare Stock, in accordance with the terms of Section 1.1(b).
Promptly after the Merger Date, Parent shall send, or shall cause the Exchange
Agent to send, to each holder of shares of U.S. Healthcare Stock at the Merger
Date a letter of transmittal for use in such exchange (which shall specify that
delivery of the U.S. Healthcare Merger Consideration shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the certificates
representing shares of U.S. Healthcare Stock, to the Exchange Agent). Upon the
conversion of Aetna Stock into Parent Common Stock in accordance with Section
1.2(b), all shares of Aetna Stock so converted shall be cancelled and cease to
exist, and each certificate theretofore representing any such shares shall,
without any action on the part of the holder thereof, be deemed to represent an
equivalent number of shares of Parent Common Stock.

(b) Each holder of shares of U.S. Healthcare Stock that have been converted
into a right to receive the U.S. Healthcare Merger Consideration upon surrender
to the Exchange Agent of a certificate or certificates representing such shares
of U.S. Healthcare Stock together with a properly completed letter of
transmittal covering such shares of U.S. Healthcare Stock will be entitled to
receive the U.S. Healthcare Merger Consideration payable in respect of such
shares of U.S. Healthcare Stock and the other amounts, if any, specified in this
Agreement. Until so surrendered, each such certificate shall, after the Merger
Date, represent for all purposes only the right to receive the U.S. Healthcare
Merger Consideration and the other amounts, if any, specified in this Agreement.

(c) If any portion of the U.S. Healthcare Merger Consideration is to be
paid to a Person other than the registered holder of the shares of U.S.
Healthcare Stock represented by the certificate or certificates surrendered in
exchange therefor, it shall be a condition to such payment that the certificate
or certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required as a result of such
payment to a Person other than the registered holder of such shares of U.S.
Healthcare Stock or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable. For purposes of this Agreement,
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including, without limitation, a government or political subdivision or any
agency or instrumentality thereof.

(d) After the Merger Date, there shall be no further registration of
transfers of shares of U.S. Healthcare Stock. If, after the Merger Date,
certificates representing shares of U.S. Healthcare Stock or Aetna Stock are
presented to the respective surviving corporations in the Mergers, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article 1.

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(e) Any portion of the U.S. Healthcare Merger Consideration made available
to the Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the
holders of shares of U.S. Healthcare Stock six months after the Merger Date
shall be returned to Parent, upon demand, and any such holder who has not
exchanged his shares of U.S. Healthcare Stock for the U.S. Healthcare Merger
Consideration in accordance with this Section 1.3 prior to that time shall
thereafter look only to Parent for his claim for Parent Common Stock, Parent
Preferred Stock, any cash in lieu of fractional shares of Parent Common Stock or
, as applicable, and any dividends or distributions with respect to Parent
Common Stock or Parent Preferred Stock, as applicable, and the Cash
Consideration. Notwithstanding the foregoing, Parent shall not be liable to any
holder of shares of U.S. Healthcare Stock for any amount paid to a public
official pursuant to applicable abandoned property laws. Any amounts remaining
unclaimed by holders of shares of U.S. Healthcare Stock immediately prior to
such time as such amounts would otherwise escheat to or become property of any
governmental entity shall, to the extent permitted by applicable law, become the
property of Parent free and clear of any claim or interest of any Person
previously entitled thereto.

(f) Any portion of the U.S. Healthcare Merger Consideration made available
to the Exchange Agent pursuant to Section 1.3(a) to pay for shares of U.S.
Healthcare Stock in respect of which dissenters' rights have been perfected
shall be returned to Parent, upon demand.

(g) No dividends or other distributions with respect to the Parent Common
Stock or Parent Preferred Stock, as applicable, constituting all or a portion of
the U.S. Healthcare Merger Consideration shall be paid to the holder of any
unsurrendered certificate representing U.S. Healthcare Stock until such
certificates are surrendered as provided in this Section 1.3. Subject to the
effect of applicable laws, following such surrender, there shall be paid,
without interest, to the record holder of the certificates representing the
Parent Common Stock or Parent Preferred Stock, as applicable, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Merger Date payable prior to or on the date of such surrender
with respect to such whole shares of Parent Common Stock or Parent Preferred
Stock, as applicable, and not paid, less the amount of any withholding taxes
which may be required thereon, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the Merger
Date but prior to the date of surrender and a payment date subsequent to the
date of surrender payable with respect to such whole shares of Parent Common
Stock or Parent Preferred Stock, as applicable, less the amount of any
withholding taxes which may be required thereon.

SECTION 1.4. Cancellation of Parent Stock. All outstanding shares of the
capital stock of Parent immediately prior to the Merger Date shall be canceled
immediately upon consummation of the Aetna Sub Merger. The U.S. Healthcare Sub
Merger and the Aetna Sub Merger are sometimes together referred to as the
"Mergers".

SECTION 1.5. The Merger Date. As soon as practicable (but in no event
more than two business days) after the satisfaction or, to the extent permitted
hereunder or under applicable law, waiver of all conditions to each of the
Mergers, (a) U.S. Healthcare and U.S. Healthcare Sub shall file the articles of
merger required to effect the U.S. Healthcare Sub Merger (the "U.S. Healthcare
Articles of Merger") with the Department of State of the Commonwealth of
Pennsylvania and make all other filings or recordings required by the
Pennsylvania Law in connection with the U.S. Healthcare Sub Merger, and (b)
Aetna and Aetna Sub shall file a certificate of merger (the "Aetna Certificate
of Merger") with the Secretary of the State of the State of Connecticut and make
all other filings or recordings required by the Connecticut Law in connection
with the Aetna Sub Merger, and (c) the Mergers shall become effective, it being
understood that the U.S. Healthcare Sub Merger shall become effective
immediately prior to the Aetna Sub Merger in accordance with the terms of such
U.S. Healthcare Articles of Merger and Aetna Certificate of Merger (such time
and date are referred to as the "Merger Date").

SECTION 1.6. Dissenting Shares. Notwithstanding Section 1.1 or Section
1.2, as applicable, shares of U.S. Healthcare Stock or Aetna Stock outstanding
immediately prior to the Merger Date and held by a holder who has not voted in
favor of the U.S. Healthcare Sub Merger or the Aetna Sub Merger, as applicable,
and who has exercised dissenters' rights in respect of such shares of U.S.
Healthcare Stock in accordance with the Pennsylvania Law, or rights of objecting
shareholders in respect of such shares of Aetna Stock in

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accordance with the Connecticut Law, shall not be converted into a right to
receive the U.S. Healthcare Merger Consideration or the Aetna Merger
Consideration, as applicable, unless such holder fails to perfect or withdraws
or otherwise loses his dissenters' or objecting shareholders' rights. Shares of
U.S. Healthcare Stock in respect of which dissenters' rights have been exercised
shall be treated in accordance with Section 1930 of the Pennsylvania Law. Shares
of Aetna Stock in respect of which objecting shareholders' rights have been
exercised shall be treated in accordance with Sections 33-373 and 33-374 of the
Connecticut Law. If after the Merger Date such holder fails to perfect or
withdraws or otherwise loses his right to demand the payment of fair value for
shares of U.S. Healthcare Stock under Pennsylvania Law, or shares of Aetna Stock
under Connecticut Law, as applicable, such shares of U.S. Healthcare Stock or
Aetna Stock shall be treated as if they had been converted as of the Merger Date
into a right to receive the U.S. Healthcare Merger Consideration or the Aetna
Merger Consideration, as applicable. U.S. Healthcare shall give Aetna prompt
notice of any demands received by U.S. Healthcare for the exercise of
dissenters' rights with respect to shares of U.S. Healthcare Stock and Aetna
shall have the right to participate in all negotiations and proceedings with
respect to such demands. U.S. Healthcare shall not, except with the prior
written consent of Aetna, make any payment with respect to, or settle or offer
to settle, any such demands.

SECTION 1.7. Stock Options of U.S. Healthcare; Restricted Stock. (a) As
of the date of this Agreement, each outstanding option granted to (i) a U.S.
Healthcare employee to acquire U.S. Healthcare Stock (a "U.S. Healthcare
Employee Stock Option") and (ii) each outstanding option granted to a non-
employee to acquire U.S. Healthcare Stock (a "U.S. Healthcare Non-Employee Stock
Option" and together with the U.S. Healthcare Employee Stock Options, the "U.S.
Healthcare Stock Options"), in each case, under any incentive plan of U.S.
Healthcare, shall become fully vested and exercisable. At the Merger Date, each
U.S. Healthcare Stock Option then outstanding shall be canceled and treated as
follows:

(i) with respect to all U.S. Healthcare Non-Employee Stock Options and
the number of shares subject to U.S. Healthcare Employee Stock Options held
by each holder which, if all such holder's canceled U.S. Healthcare
Employee Stock Options were exercised immediately prior to the Merger Date,
would give rise to 40% of the income which would be recognized by such
holder upon such exercise (assuming, for these purposes, that all such
options were nonqualified options) (the "Initial Number of U.S. Healthcare
Option Shares"), Parent shall issue in substitution therefor options to
purchase Parent Common Stock on the terms and conditions described herein
(each such substitute option, a "U.S. Healthcare Substitute Option"). U.S.
Healthcare Substitute Options shall be issued under a Parent stock option
plan to be adopted prior to the Merger Date and which shall comply in all
respects with the applicable requirements of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "1934 Act"). The number of shares
of Parent Common Stock subject to each such U.S. Healthcare Substitute
Option and the exercise price thereunder shall be computed in compliance
with the requirements of Section 424(a) of the Code, and each such U.S.
Healthcare Substitute Option shall otherwise be subject to the other
applicable terms and conditions of the U.S. Healthcare Stock Option for
which it is substituted. Without limiting the generality of the foregoing,
(A) the exercise price of each U.S. Healthcare Substitute Option shall
equal the exercise price of the U.S. Healthcare Stock Option for which such
U.S. Healthcare Substitute Option was substituted, multiplied by a
fraction, the numerator of which is the average closing price of Parent
Common Stock for the five trading days following the Merger Date ("X") and
the denominator of which is the closing price of U.S. Healthcare Stock on
the last trading day preceding the Merger Date ("Y") and (B) the number of
shares subject to such U.S. Healthcare Substitute Option shall equal the
Initial Number of U.S. Healthcare Option Shares, multiplied by a fraction,
the numerator of which is Y and the denominator of which is X. The U.S.
Healthcare Stock Options for which U.S. Healthcare Substitute Options shall
be issued with respect to each holder shall be selected in the following
order:

(1) first, incentive stock options, and

(2) second, nonqualified options,

in each case giving priority to those with the highest exercise price.

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(ii) with respect to each remaining canceled U.S. Healthcare Employee
Stock Option, the holder shall receive in cash, as promptly as possible but
in no event more than ten business days following the Merger Date, an
amount equal to the excess of (A) the closing price of U.S. Healthcare
Stock on the last trading day preceding the Merger Date, over (B) the
exercise price of such U.S. Healthcare Stock Option, multiplied by the
number of shares of U.S. Healthcare Stock subject to such remaining U.S.
Healthcare Employee Stock Option.

(b) As of the date of this Agreement, each outstanding share of restricted
stock of U.S. Healthcare issued to U.S. Healthcare employees (the "U.S.
Healthcare Restricted Stock") shall become fully vested and entitled to receive
the U.S. Healthcare Merger Consideration. Each outstanding share of restricted
stock of U.S. Healthcare issued to any Person who is not an employee of U.S.
Healthcare shall become fully vested and entitled to receive the U.S. Healthcare
Merger Consideration on the Merger Date.

(c) Prior to the Merger Date, U.S. Healthcare (i) shall use its best
efforts to obtain any consents from holders of any U.S. Healthcare Stock Options
or U.S. Healthcare Restricted Stock and (ii) shall make any amendments to the
terms of any of their respective incentive plans or arrangements, in each case
that are necessary to give effect to the transactions contemplated by this
Section 1.7.

(d) As soon as practicable after the Merger Date, Parent shall file with
the Securities and Exchange Commission ("SEC") a registration statement on Form
S-8 with respect to the shares of Parent Common Stock underlying the U.S.
Healthcare Substitute Options and use its reasonable best efforts to have such
registration statement declared effective under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "1933 Act").

SECTION 1.8. Stock Options of Aetna. (a) At the Merger Date, each
outstanding option to purchase shares of Aetna Stock (an "Aetna Stock Option")
under any of Aetna's incentive plans, whether vested or unvested, shall be
canceled and Parent shall issue in substitution therefor an option to purchase
Parent Common Stock on the terms and conditions described herein (each such
replacement option an "Aetna Substitute Option"). Aetna Substitute Options shall
be issued under a Parent stock option plan to be adopted prior to the Merger
Date and which shall comply in all respects with the applicable requirements of
Rule 16b-3 promulgated under the 1934 Act. The number of shares of Parent Common
Stock subject to each such Aetna Substitute Option and the exercise price
thereunder shall be equal to the number of shares of Aetna Stock subject to the
Aetna Stock Option and the exercise price thereunder that such Aetna Substitute
Option replaces and, in compliance with the requirements of Section 424(a) of
the Code, each such Aetna Substitute Option shall be subject to substantially
all of the other terms and conditions (including vesting schedule) of the Aetna
Stock Option it replaces.

(b) Prior to the Merger Date, Aetna shall (i) use its best efforts to
obtain any consents from holders of any Aetna Stock Options and (ii) make any
amendments to the terms of any of its incentive plans or arrangements, in each
case, that are necessary to give effect to the transactions contemplated by this
Section 1.8.

(c) As soon as practicable after the Merger Date, Parent shall file with
the SEC a registration statement on Form S-8 with respect to the shares of
Parent Common Stock underlying the Aetna Substitute Options and use its
reasonable best efforts to have such registration statement declared effective
under the 1933 Act.

SECTION 1.9. Adjustments. If at any time during the period between the
date of this Agreement and the Merger Date, any change in the outstanding shares
of Aetna Stock or U.S. Healthcare Stock shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration shall be appropriately adjusted.

SECTION 1.10. Fractional Shares. No fractional shares of Parent Common
Stock or Parent Preferred Stock shall be issued in the U.S. Healthcare Sub
Merger, but in lieu thereof each holder of U.S. Healthcare Stock otherwise
entitled to a fractional share of Parent Common Stock or , as applicable, will
be entitled to receive, from the Exchange Agent in accordance with the
provisions of this Section 1.10, a cash payment in lieu of such fractional
shares of Parent Common Stock or Parent Preferred Stock, as applicable,

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representing such holder's proportionate interest, if any, in the net proceeds
from the sale by the Exchange Agent in one or more transactions (which sale
transactions shall be made at such times, in such manner and on such terms as
the Exchange Agent shall determine in its reasonable discretion) on behalf of
all such holders of the aggregate of the fractional shares of Parent Common
Stock or Parent Preferred Stock, as applicable, which would otherwise have been
issued (the "Excess Shares"). The sale of the Excess Shares by the Exchange
Agent shall be executed on the New York Stock Exchange, Inc. (the "NYSE")
through one or more member firms of the NYSE and shall be executed in round lots
to the extent practicable. Until the net proceeds of such sale or sales have
been distributed to the holders of shares of U.S. Healthcare Stock, the Exchange
Agent will hold such proceeds in trust for the holders of U.S. Healthcare Stock.
Parent shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including, without limitation, the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of the Excess
Shares. As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of U.S. Healthcare Stock in lieu of any fractional
shares of Parent Common Stock or Parent Preferred Stock, as applicable, the
Exchange Agent shall make available such amounts to such holders of shares of
U.S. Healthcare Stock without interest.

SECTION 1.11. Parent Rights. Aetna and U.S Healthcare shall cause Parent
to enter into, effective as of the Merger Date, a rights agreement with terms
substantially identical to the Aetna Rights Agreement (the "Parent Rights
Agreement"). The rights to be issued pursuant to the Parent Rights Agreement are
referred to herein as the "Parent Rights." No fractional Parent Rights shall be
issued in the U.S. Healthcare Sub Merger. Instead, only whole Parent Rights will
be issued in respect of whole shares of Parent Common Stock. Unless the context
otherwise requires, all references herein to Parent Common Stock shall include
the corresponding Parent Rights issued therewith pursuant to the Parent Rights
Agreement.

ARTICLE 2

THE SURVIVING CORPORATIONS

SECTION 2.1. Articles and Certificate of Incorporation; Bylaws. (a) The
articles of incorporation and bylaws of U.S. Healthcare in effect at the Merger
Date shall be the articles of incorporation and bylaws, respectively, of the
U.S. Healthcare Surviving Corporation until amended in accordance with
applicable law. The U.S. Healthcare Surviving Corporation shall have the same
name as U.S. Healthcare. The U.S. Healthcare Surviving Corporation shall succeed
to all of the rights, privileges, powers and franchises, of a public as well as
of a private nature, of U.S. Healthcare and U.S. Healthcare Sub, all of the
properties and assets and all of the debts of U.S. Healthcare and U.S.
Healthcare Sub, choses in action and other interests due or belonging to U.S.
Healthcare and U.S. Healthcare Sub and shall be subject to, and responsible for,
all of the debts, liabilities and duties of U.S. Healthcare and U.S. Healthcare
Sub with the effect set forth in the Pennsylvania Law.

(b) The certificate of incorporation and bylaws of Aetna in effect at the
Merger Date shall be the certificate of incorporation and bylaws, respectively,
of the Aetna Surviving Corporation until amended in accordance with applicable
law. The Aetna Surviving Corporation shall have the same name as Aetna. The
Aetna Surviving Corporation shall succeed to all of the rights, privileges,
powers and franchises, of a public as well as of a private nature, of Aetna and
Aetna Sub, all of the properties and assets of and all of the debts of Aetna and
Aetna Sub, choses in action and other interests due or belonging to Aetna and
Aetna Sub and shall be subject to, and responsible for, all of the debts,
liabilities and duties of Aetna and Aetna Sub with the effect set forth in the
Connecticut Law.

SECTION 2.2. Directors and Officers. From and after the Merger Date,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (a) the directors of the U.S. Healthcare Surviving Corporation
immediately after the Merger Date shall be designated by Parent and shall
include, without limitation, the two Co-Presidents, (b) the directors of Parent
immediately after the Merger Date shall be the directors of the Aetna Surviving
Corporation, (c) the officers of U.S. Healthcare immediately prior to the Merger
Date (other than the Principal Shareholder) shall be the officers of the U.S.
Healthcare Surviving Corporation and (d) the officers of Aetna immediately prior
to the Merger Date shall be the officers of the Aetna Surviving Corporation.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES
OF U.S. HEALTHCARE

U.S. Healthcare represents and warrants to Aetna that:

SECTION 3.1. Corporate Existence and Power. U.S. Healthcare is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. U.S. Healthcare is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on U.S. Healthcare. For purposes of
this Agreement, a "Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the condition (financial or otherwise), business,
assets, or results of operations of such Person and its Subsidiaries taken as a
whole or on the ability of such Person to perform its obligations hereunder.
U.S. Healthcare has heretofore delivered to Aetna true and complete copies of
U.S. Healthcare's articles of incorporation and bylaws as currently in effect.

SECTION 3.2. Corporate Authorization. The execution, delivery and,
subject to receipt of the approvals referred to in Section 3.3, the performance
by U.S. Healthcare of this Agreement and the consummation by U.S. Healthcare of
the transactions contemplated by this Agreement are within U.S. Healthcare's
corporate powers and, except as set forth in the third sentence of this Section
3.2, have been duly authorized by all necessary corporate action. Without
limiting the generality of the foregoing, the Board of Directors of U.S.
Healthcare has unanimously adopted a resolution adopting and approving this
Agreement. The affirmative vote of a majority of the total voting power
represented by the outstanding shares of U.S. Healthcare Stock entitled to vote
thereon, voting as a single class, is the only vote of any class or series of
U.S. Healthcare's capital stock necessary to approve and adopt this Agreement
and the transactions contemplated by this Agreement. This Agreement has been
duly executed and delivered by U.S. Healthcare and constitutes a valid and
binding agreement of U.S. Healthcare, enforceable against U.S. Healthcare in
accordance with its terms, subject to (a) bankruptcy, insolvency, moratorium and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (b) general principles of equity (regardless of
whether considered in a proceeding at law or in equity).

SECTION 3.3. Governmental Authorization. The execution, delivery and
performance by U.S. Healthcare of this Agreement, and the consummation by U.S.
Healthcare of the transactions contemplated by this Agreement require no action,
by or in respect of, or filing with, any governmental body, agency, official or
authority other than (a) the filing of the U.S. Healthcare Articles of Merger in
accordance with the Pennsylvania Law; (b) compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); (c) compliance with any applicable requirements of the
1934 Act; (d) compliance with any applicable requirements of the 1933 Act; (e)
compliance with any applicable foreign or state securities or Blue Sky laws; (f)
approvals or filings required under laws, rules and regulations governing
insurance and insurance companies, health maintenance organizations, health care
service plans, third party administrators or other managed health care
organizations; and (g) filings and notices not required to be made or given
until after the Merger Date.

SECTION 3.4. Non-Contravention. Except as disclosed on Schedule 3.4, the
execution, delivery and performance by U.S. Healthcare of this Agreement and the
consummation by U.S. Healthcare of the transactions contemplated by this
Agreement do not and will not (a) assuming receipt of the approvals referred to
in Sections 3.2, contravene or conflict with the articles of incorporation or
bylaws of U.S. Healthcare, (b) assuming compliance with the matters referred to
in Section 3.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to U.S. Healthcare or any Subsidiary of U.S. Healthcare, (c)
constitute a default (or an event which with notice, the lapse of time or both
would become a default) under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of U.S. Healthcare or
any Subsidiary of

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U.S. Healthcare or to a loss of any benefit to which U.S. Healthcare or any
Subsidiary of U.S. Healthcare is entitled under any provision of any agreement,
contract or other instrument binding upon U.S. Healthcare or any Subsidiary of
U.S. Healthcare or any license, franchise, permit or other similar authorization
held by U.S. Healthcare or any Subsidiary of U.S. Healthcare, or (d) result in
the creation or imposition of any Lien on any asset of U.S. Healthcare or any
Subsidiary of U.S. Healthcare, except for such contraventions, conflicts or
violations referred to in clause (b) or defaults, rights of termination,
cancellation or acceleration, losses or Liens referred to in clause (c) or (d)
that would not, individually or in the aggregate, have a Material Adverse Effect
on U.S. Healthcare. For purposes of this Agreement, "Lien" means, with respect
to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.

SECTION 3.5. Capitalization. As of February 29, 1996, the authorized
capital stock of U.S. Healthcare consists of 275,000,000 shares of Common Stock,
50,000,000 shares of Class B Stock and 50,000,000 shares of preferred stock. As
of February 29, 1996, there were (i) 139,481,136 shares of Common Stock
outstanding, including 748,481 shares of employee and non-employee unvested
restricted common stock, (ii) 14,429,867 shares of Class B Stock outstanding and
(iii) no shares of preferred stock outstanding. As of February 29, 1996, there
were employee and non-employee stock options to purchase an aggregate of
4,004,857 shares of Common Stock outstanding (of which options to purchase an
aggregate of 802,346 shares of Common Stock were exercisable). All outstanding
shares of capital stock of U.S. Healthcare have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in this Section
3.5 and except for changes since February 29, 1996 resulting from the exercise
of stock options outstanding on such date, there are outstanding (a) no shares
of capital stock or other voting securities of U.S. Healthcare, (b) no
securities of U.S. Healthcare convertible into or exchangeable for shares of
capital stock or voting securities of U.S. Healthcare, and (c) no options or
other rights to acquire from U.S. Healthcare, and no obligation of U.S.
Healthcare to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of U.S.
Healthcare (the items in clauses (a), (b) and (c) being referred to collectively
as the "U.S. Healthcare Securities"). There are no outstanding obligations of
U.S. Healthcare or any Subsidiary of U.S. Healthcare to repurchase, redeem or
otherwise acquire any U.S. Healthcare Securities other than put rights with
respect to not more than 100,000 shares of Common Stock held by providers of
medical services.

SECTION 3.6. Subsidiaries. (a) Each Subsidiary of U.S. Healthcare is duly
incorporated, validly existing (as an insurance corporation, corporation
organized as a health maintenance organization or otherwise) and in good
standing under the laws of its jurisdiction of incorporation, has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and is duly qualified to do
business as a foreign corporation or is duly licensed to do business as an
insurer, a health maintenance organization or otherwise and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect on U.S.
Healthcare. All Subsidiaries and their respective jurisdictions of incorporation
are identified in U.S. Healthcare's annual report on Form 10-K for the fiscal
year ended December 31, 1995 (the "U.S. Healthcare 10-K").

(b) Except as disclosed on Schedule 3.6, all of the outstanding capital
stock of, or other ownership interests in, each Subsidiary of U.S. Healthcare,
is owned by U.S. Healthcare, directly or indirectly, free and clear of any Lien
and free of any other limitation or restriction (including, without limitation,
any restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). Except as disclosed on Schedule 3.6, there
are no outstanding (i) securities of U.S. Healthcare or any Subsidiary of U.S.
Healthcare convertible into or exchangeable for shares of capital stock or other
voting securities or ownership interests in any Subsidiary of U.S. Healthcare,
and (ii) options or other rights to acquire from U.S. Healthcare or any
Subsidiary of U.S. Healthcare, and no other obligation of U.S. Healthcare or any
Subsidiary of U.S. Healthcare to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for, any capital stock, voting securities or ownership interests in, any
Subsidiary of U.S. Healthcare (the items in clauses (i) and (ii) being referred
to collectively as the "U.S. Healthcare Subsidiary Securities"). Except as
disclosed on Schedule 3.6, there are no outstanding

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obligations of U.S. Healthcare or any Subsidiary of U.S. Healthcare to
repurchase, redeem or otherwise acquire any outstanding U.S. Healthcare
Subsidiary Securities.

SECTION 3.7. SEC Filings. (a) U.S. Healthcare has delivered to Aetna (i)
U.S. Healthcare's annual reports on Form 10-K for its fiscal years ended
December 31, 1995, 1994 and 1993, (ii) its proxy or information statements
relating to meetings of, or actions taken without a meeting by, the shareholders
of U.S. Healthcare held since January 1, 1993, and (iii) all of its other
reports, statements, schedules and registration statements filed with the SEC
since January 1, 1993.

(b) As of its filing date, each such report, statement, schedule or
registration statement filed pursuant to the 1934 Act did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

(c) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the 1933 Act as of the date such registration
statement or amendment became effective did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.

SECTION 3.8. Financial Statements. The audited consolidated financial
statements of U.S. Healthcare included in its annual reports on Form 10-K
referred to in Section 3.7 fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of U.S. Healthcare
and its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended. For purposes of
this Agreement, "U.S. Healthcare Balance Sheet" means the consolidated balance
sheet of U.S. Healthcare as of December 31, 1995 set forth in the U.S.
Healthcare 10-K and "U.S. Healthcare Balance Sheet Date" means December 31,
1995.

SECTION 3.9. Disclosure Documents. (a) Each document required to be filed
by U.S. Healthcare with the SEC in connection with the transactions contemplated
by this Agreement (the "U.S. Healthcare Disclosure Documents"), including,
without limitation, the proxy or information statement of U.S. Healthcare (the
"U.S. Healthcare Proxy Statement"), if any, to be filed with the SEC in
connection with this Agreement and the U.S. Healthcare Sub Merger, and any
amendments or supplements thereto, will, when filed, comply as to form in all
material respects with the applicable requirements of the 1934 Act.

(b) At the time the U.S. Healthcare Proxy Statement or any amendment or
supplement thereto is first mailed to shareholders of U.S. Healthcare and at the
time such shareholders vote on the adoption and approval of this Agreement, the
U.S. Healthcare Proxy Statement, as supplemented or amended, if applicable, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. At the
time of the filing of any U.S. Healthcare Disclosure Document other than the
U.S. Healthcare Proxy Statement and at the time of any distribution thereof,
such U.S. Healthcare Disclosure Document will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties contained in this
Section 3.9(b) will not apply to statements included in or omissions from the
U.S. Healthcare Disclosure Documents based upon information furnished to U.S.
Healthcare in writing by Aetna or Parent specifically for use therein.

SECTION 3.10. Information Supplied. The information supplied or to be
supplied by U.S. Healthcare for inclusion or incorporation by reference in (i)
the Aetna Proxy Statement or any amendment or supplement thereto will not, at
the time the Aetna Proxy Statement is first mailed to shareholders of Aetna and
at the time such shareholders vote on the proposals relating to the Aetna Sub
Merger set forth therein, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made is not
misleading, (ii) the Form S-4 or any amendment or supplement thereto will not,
at the time the Form S-4 becomes effective under the 1933 Act and at the Merger
Date, contain any untrue statement of a material fact or omit

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to state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Aetna Disclosure Document or
Parent Disclosure Document (other than the Aetna Proxy Statement, the Form S-4
and any amendments or supplements to either) will not, at the time of
effectiveness of such Aetna Disclosure Document or Parent Disclosure Document
and at the time of any distribution thereof, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

SECTION 3.11. Absence of Certain Changes. Except as disclosed in the U.S.
Healthcare 10-K, as set forth on Schedule 3.11, or as specifically permitted by
Section 5.1, since the U.S. Healthcare Balance Sheet Date U.S. Healthcare and
its Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:

(a) any event, occurrence or facts which has had or is reasonably
expected to have a Material Adverse Effect on U.S. Healthcare;

(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of U.S. Healthcare
(other than payment of U.S. Healthcare's regular quarterly dividend on U.S.
Healthcare Common Stock in an amount not exceeding $0.275 per share and on
Class B Stock in an amount not exceeding $0.248 per share), or any
repurchase, redemption or other acquisition by U.S. Healthcare or any
Subsidiary of U.S. Healthcare of any amount of outstanding shares of
capital stock or other securities of, or other ownership interests in, U.S.
Healthcare, which repurchase, redemption or other acquisition, individually
or in the aggregate, is material to U.S. Healthcare and its Subsidiaries,
taken as a whole;

(c) any amendment of any term of any outstanding security of U.S.
Healthcare or any Subsidiary of U.S. Healthcare (other than amendments to
the U.S. Healthcare Stock Options or the restricted stock of U.S.
Healthcare to accelerate the vesting thereof upon execution of this
Agreement);

(d) any incurrence, assumption or guarantee by U.S. Healthcare or any
Subsidiary of U.S. Healthcare of any indebtedness from any third party for
borrowed money other than in the ordinary course of business and in amounts
and on terms consistent with past practices;

(e) any creation or assumption by U.S. Healthcare or any Subsidiary of
U.S. Healthcare of any Lien on any material asset other than in the
ordinary course of business consistent with past practices;

(f) any making of any loan, advance or capital contribution to or
investment in any Person other than (i) loans, advances or capital
contributions to or investments in Subsidiaries of U.S. Healthcare, (ii)
investments in securities consistent with past practice or (iii) other
loans, advances, capital contributions or investments in an aggregate
amount not exceeding $25,000,000;

(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of U.S. Healthcare
or any Subsidiary of U.S. Healthcare which, individually or in the
aggregate, is or may reasonably be expected to be material to U.S.
Healthcare and its Subsidiaries, taken as a whole;

(h) any transaction or commitment made, or any contract or agreement
entered into, by U.S. Healthcare or any Subsidiary of U.S. Healthcare
relating to its assets or business (including, without limitation, the
acquisition or disposition of any assets) or any relinquishment by U.S.
Healthcare or any Subsidiary of U.S. Healthcare of any contract, license or
other right which, in any such case, individually or in the aggregate,
would have a Material Adverse Effect on U.S. Healthcare, other than
transactions, commitments, contracts or agreements contemplated by this
Agreement;

(i) any change in any method of accounting or accounting principle or
practice by U.S. Healthcare or any Subsidiary of U.S. Healthcare, except
for any such change required by reason of a concurrent change in generally
accepted accounting principles or statutory accounting principles;

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(j) (A) except for new employment agreements with the Persons listed
on Schedule 3.11(j) (each, a "Specified U.S. Healthcare Officer"), entered
into as of the date hereof, or in the case of those Specified U.S.
Healthcare Officers listed on Schedule 8.2(b), in the form of Schedule
3.11(j)(A) hereto (i) any grant by U.S. Healthcare or any of its
Subsidiaries of any severance or termination pay to, or entry into any
employment, termination or severance arrangement with, any Specified U.S.
Healthcare Officer or, (ii) except in the ordinary course of business
consistent in magnitude and character with past practice and with the terms
of severance or termination arrangements in effect or pending on the U.S.
Healthcare Balance Sheet Date with respect to individuals with comparable
positions or responsibilities, any grant of any severance or termination
pay to, or entry into any employment, termination or severance arrangement
with, any other employees; (B)(i) any amendment in any material respect of
any employment, termination or severance arrangement with any Specified
U.S. Healthcare Officer or (ii) except in the ordinary course, any
amendment in any material respect of any employment termination or
severance arrangement with any other directors, officers or employees (it
being understood that for the purposes of clauses (i) and (ii), any
increase or acceleration of benefits under any such agreement or
arrangement shall be deemed material); (C) any (x) establishment, adoption,
entry into, or (y) except (I) the matters described in the parenthetical
clause of Section 3.11(c) hereof and (II) the acceleration of vesting of
U.S. Healthcare Non-Employee Stock Options and restricted stock of U.S.
Healthcare issued to Persons who are not employees of U.S. Healthcare,
amendment or action to accelerate or enhance any rights or benefits under,
(i) any plan providing for options, stock, performance awards or other
forms of incentive or deferred compensation or (ii) any collective
bargaining, bonus, profit sharing, thrift, compensation, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any of its directors, officers or employees; (D) any grant,
conferment or award of any options, stock, performance awards or other
awards to acquire any shares of capital stock of U.S. Healthcare (other
than an aggregate of 150,000 options to acquire U.S. Healthcare Stock
and/or shares of restricted stock of U.S. Healthcare pursuant to the terms
existing on the date hereof of U.S. Healthcare's plans to persons other
than the Specified U.S. Healthcare Officers); (E) any increase in the
contribution percentages under U.S. Healthcare's defined contribution
plans; or (F) (i) other than an annual adjustment with respect to the 1997
calendar year if the Merger Date occurs after December 31, 1996, which
adjustment shall be of a magnitude and character consistent with past
practice, any increase in the compensation or benefits of Specified U.S.
Healthcare Officers or any payment of any benefit not required by any plan
or arrangement in effect as of the date hereof or (ii) except in the
ordinary course of business consistent in magnitude and character with past
practice and in no event greater than 6% in the aggregate on a per annum
basis for all other individuals as a group, any increase in the
compensation or benefits of any other employees or payment of any benefit
not required by any plan or arrangement as in effect on the U.S. Healthcare
Balance Sheet Date;

(k) except such contracts as would not be material to U.S. Healthcare
and its Subsidiaries as a whole or material to their operations in any
Standard Metropolitan Statistical Area, any entry by U.S. Healthcare or any
of its Subsidiaries into any contract limiting the right of U.S. Healthcare
or any of its Subsidiaries at any time on or after the date of this
Agreement or Aetna or any of its Subsidiaries or Affiliates at or after the
Merger Date, to engage in, or to compete with any Person in, any business,
including, without limitation, any contract which includes exclusivity
provisions restricting the geographical area in which, or the method by
which, any such business may be conducted by U.S. Healthcare or any of its
Subsidiaries or Affiliates, or by Aetna or any of its Subsidiaries or
Affiliates after the Merger Date;

(l) any entry by U.S. Healthcare or any of its Subsidiaries into any
acquisition, joint venture, or franchising agreement or arrangement which
is material to U.S. Healthcare and its Subsidiaries, taken as a whole; or

(m) any entry by U.S. Healthcare or any of its Subsidiaries into any
agreement or arrangement with a third party on an exclusive basis to offer
or market any of the following services of such third party:

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group life, disability, managed workers' compensation, long term care,
dental, behavioral or pharmacy benefits.

SECTION 3.12. No Undisclosed Material Liabilities. There are no
liabilities, commitments or obligations (whether pursuant to contracts or
otherwise) of U.S. Healthcare or any Subsidiary of U.S. Healthcare of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, including, without limitation, any fines, disciplinary actions or
other adverse actions that may be taken or reported concerning the conduct of
U.S. Healthcare or any of its Subsidiaries, other than:

(a) liabilities, commitments or obligations disclosed or provided for
in the U.S. Healthcare Balance Sheet or in the U.S. Healthcare 10-K;

(b) liabilities, commitments or obligations incurred in the ordinary
course of business since the U.S. Healthcare Balance Sheet Date;

(d) liabilities, commitments or obligations which, individually or in
the aggregate, have not had, and are not reasonably likely to have, a
Material Adverse Effect on U.S. Healthcare.

SECTION 3.13. Litigation; Investigations. Except as disclosed or referred
to in the U.S. Healthcare 10-K or in Schedule 3.13, there is no action, claim,
suit, investigation, proceeding or examination, including, without limitation,
any insurance or health related investigations, proceedings or examinations
pending against or affecting, or to the knowledge of U.S. Healthcare threatened
against or affecting, U.S. Healthcare or any Subsidiary of U.S. Healthcare or
any of their respective properties before any court or arbitrator or any
governmental body, agency, authority or official which, net of reserves
established therefor reflected in the U.S. Healthcare 10-K and giving effect to
reinsurance probable of recovery, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on U.S. Healthcare.

SECTION 3.14. Taxes. (a) All Tax Returns required to be filed (taking
into account all extensions heretofore granted) on or before the date hereof or
the Merger Date by or on behalf of U.S. Healthcare or any of its Subsidiaries
have been filed within the time and in the manner prescribed by law, other than
those Tax Returns the failure of which to file would not have a Material Adverse
Effect on U.S. Healthcare.

(b) As of the time of filing, all such Tax Returns correctly reflected
in all material respects all facts regarding the income, business, assets,
operations, activities and status of U.S. Healthcare and its Subsidiaries
and any other information required to be shown therein.

(c) All Taxes shown to be due and payable by U.S. Healthcare and any
of its Subsidiaries on all such Tax Returns have been timely paid, or
withheld and remitted to the appropriate Taxing Authorities.

(d) Except as set forth on Schedule 3.14, all applicable statutes of
limitations for the assessment of material Taxes against U.S. Healthcare
and any of its Subsidiaries have expired. No deficiency payment of any
Taxes for any period has been asserted by any Taxing Authority which
remains unsettled at the date hereof except for deficiencies which would
not have a Material Adverse Effect on U.S. Healthcare.

(e) Except for Tax Returns required to be filed with respect to the
1995 taxable year, neither U.S. Healthcare nor any of its Subsidiaries has
requested any extension of time within which to file any Tax Return which
has not yet been filed.

(f) There are no material Liens upon any property or assets of U.S.
Healthcare or any of its Subsidiaries for Taxes, except for Tax liens in
respect of Taxes not yet due or which are being contested in good faith and
by appropriate proceedings (and for the payment of which adequate reserves
have been provided) and reflected in the U.S. Healthcare 10-K.

(g) Except as set forth on Schedule 3.14, there is no claim, audit,
action, suit, proceeding, or investigation now pending or threatened
against or with respect to U.S. Healthcare or any of its Subsidiaries in
respect of any Taxes.

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(h) Neither U.S. Healthcare nor any of its Subsidiaries has any
contractual obligations under any tax sharing agreement or similar
agreement or tax indemnity agreement with any corporation which is not a
member of the affiliated group of corporations of which U.S. Healthcare is
the common parent.

(i) There are no requests for rulings or determinations in respect of
any Tax pending between U.S. Healthcare or any of its Subsidiaries and any
Taxing Authorities.

(j) Neither U.S. Healthcare nor any of its Subsidiaries owns any
interest in real property in the State of New York or in any other
jurisdiction in which a Tax is imposed on the transfer of a controlling
interest in an entity that owns any interest in real property.

(k) For purposes of this Agreement, "Taxes" means all United States
Federal, state, local and foreign taxes, levies and other assessments,
including, without limitation, all income, sales, use, goods and services,
value added, capital, capital gains, net worth, transfer, profits,
withholding, payroll, employer health, unemployment insurance payments,
excise, real property and personal property taxes, and any other taxes,
assessments or similar charges in the nature of a tax, including, without
limitation, interest, additions to tax, fines and penalties, imposed by a
governmental or public body, agency, official or authority (the "Taxing
Authorities"). For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return or other document (including any related
or supporting information) required to be filed with any Taxing Authority
in connection with the determination, assessment, collection,
administration or imposition of any Taxes.

SECTION 3.15. ERISA. (a) Schedule 3.15 contains a list identifying each
"employee benefit plan", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), which (i) is subject to any provision of
ERISA and (ii) is maintained, administered or contributed to by U.S. Healthcare
or any Subsidiary of U.S. Healthcare and covers any employee or former employee
of U.S. Healthcare or any Subsidiary of U.S. Healthcare or under which U.S.
Healthcare or any Subsidiary of U.S. Healthcare has any liability. Copies of
such plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof have been furnished to Aetna
together with (A) the three most recent annual reports (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any such plan and
(B) the most recent actuarial valuation report prepared in connection with any
such plan. Such plans are referred to collectively herein as the "U.S.
Healthcare Employee Plans". For purposes of this Section, "ERISA Affiliate" of
any Person means any other Person which, together with such Person, would be
treated as a single employer under Section 414 of the Code. The only U.S.
Healthcare Employee Plans which individually or collectively would constitute an
"employee pension benefit plan" as defined in Section 3(2) of ERISA (the
"Pension Plans") are identified as such in the list referred to above. U.S.
Healthcare has provided Aetna with complete age, salary, service and related
data as of a recent date for employees and former employees of U.S. Healthcare
and any Subsidiary of U.S. Healthcare covered under the Pension Plans.

(b) Except as set forth in Schedule 3.15, no U.S. Healthcare Employee Plan
(i) constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA (a
"Multiemployer Plan"), (ii) is maintained in connection with any trust described
in Section 501(c)(9) of the Code or (iii) is subject to Title IV of ERISA.
Neither U.S. Healthcare nor any ERISA Affiliate of U.S. Healthcare has (i)
engaged in, or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii)
incurred, or reasonably expects to incur prior to the Merger Date, (A) any
liability under Title IV of ERISA arising in connection with the termination of,
or a complete or partial withdrawal from, any plan covered or previously covered
by Title IV of ERISA or (B) any liability under Section 4971 of the Code that in
either case could become a liability of Parent or any of its Affiliates after
the Merger Date. Nothing done or omitted to be done and no transaction or
holding of any asset under or in connection with any U.S. Healthcare Employee
Plan has or will make U.S. Healthcare or any Subsidiary of U.S. Healthcare, or
any officer or director of U.S. Healthcare or any Subsidiary of U.S. Healthcare,
subject to any liability under Title I of ERISA or liable for any tax pursuant
to Section 4975 of the Code that could have a Material Adverse Effect on U.S.
Healthcare.

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(c) With respect to each U.S. Healthcare Employee Plan which is intended to
be qualified under Section 401(a) of the Code, U.S. Healthcare has received a
favorable determination letter that the plan is so qualified and that each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of the Code
and, to the knowledge of U.S. Healthcare, no event has occurred since the date
of such determination that would adversely affect such qualification and
exception. U.S. Healthcare has furnished to Aetna copies of the most recent
Internal Revenue Service determination letters with respect to each such Plan.
Each U.S. Healthcare Employee Plan has been maintained in all material respects
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Plan.

(d) Except as set forth in Schedule 3.15, or in connection with the
transactions contemplated by this Agreement, there is no contract, agreement,
plan or arrangement covering any employee or former employee of U.S. Healthcare
or any Subsidiary of U.S. Healthcare that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Sections 162(a)(1), 162(m) or 280G of the Code.

(e) U.S. Healthcare has provided Aetna with a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an U.S. Healthcare Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
U.S. Healthcare or any of its Subsidiaries and (iii) covers any employee or
former employee of U.S. Healthcare or any of its Subsidiaries. Such contracts,
plans and arrangements as are described above, copies or descriptions of all of
which have been furnished or made available previously to Aetna, are referred to
collectively herein as the "U.S. Healthcare Benefit Arrangements". Each U.S.
Healthcare Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations that are applicable to such U.S. Healthcare
Benefit Arrangement.

(f) Except for the Retiree Health Benefit Plan, neither U.S. Healthcare nor
any Subsidiary of U.S. Healthcare has any current or projected liability in
respect of post-employment or post-retirement health or medical or life
insurance benefits for retired, former or current employees of U.S. Healthcare
or any Subsidiary of U.S. Healthcare, except as required to avoid excise tax
under Section 4980B of the Code. No condition exists that would prevent U.S.
Healthcare or any Subsidiary of U.S. Healthcare from amending or terminating any
U.S. Healthcare Employee Plan or U.S. Healthcare Benefit Arrangement providing
health or medical benefits in respect of any active employee of U.S. Healthcare
or any Subsidiary other than limitations imposed under the terms of a collective
bargaining agreement.

(g) Except as disclosed in writing to Aetna prior to the date hereof, there
has been no amendment to, written interpretation or announcement (whether or not
written) by U.S. Healthcare or any of its Subsidiaries relating to, or change in
employee participation or coverage under, any U.S. Healthcare Employee Plan or
U.S. Healthcare Benefit Arrangement which would increase materially the expense
of maintaining such U.S. Healthcare Employee Plan or U.S. Healthcare Benefit
Arrangement above the level of the expense incurred in respect thereof for the
fiscal year ended on the U.S. Healthcare Balance Sheet Date.

(h) Except as set forth in Schedule 3.15, neither U.S. Healthcare nor any
Subsidiary of U.S. Healthcare is a party to or subject to any union contract or
any employment contract or arrangement providing for annual future cash
compensation of $250,000 or more with any officer, director or employee.

(i) U.S. Healthcare has provided or made available a list of (a) the names,
titles, annual salaries and other compensation of all officers of U.S.
Healthcare or its Subsidiaries and all other employees of U.S. Healthcare or its
Subsidiaries whose annual base salary exceeds $250,000 and (b) the wage rates
for non-salaried employees of U.S. Healthcare and its Subsidiaries (by
classification). None of the employees referred to in clause (a) and no other
key employee of U.S. Healthcare or its Subsidiaries has disclosed to U.S.
Healthcare and its Subsidiaries that he or she intends to resign or retire as a
result of the transactions

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contemplated by this Agreement, or otherwise for any other reason within one
year after the date of this Agreement (other than the Principal Shareholder).

(j) U.S. Healthcare and its Subsidiaries are in compliance with all
currently applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not engaged in any
unfair labor practice, failure to comply with which or engagement in which, as
the case may be, would reasonably be expected to have a Material Adverse Effect
on U.S. Healthcare. There is no unfair labor practice complaint pending or, to
the knowledge of U.S. Healthcare, threatened against U.S. Healthcare or any
Subsidiary of U.S. Healthcare before the National Labor Relations Board which
would reasonably be expected to have a Material Adverse Effect on U.S.
Healthcare; and

(k) None of the assets of U.S. Healthcare constitute the assets of any
employee benefit plan subject to Title I of ERISA or Section 4975 of the Code.

SECTION 3.16. Permits; Compliance with Laws. (a) U.S. Healthcare and its
Subsidiaries hold all governmental licenses, authorizations, consents and
approvals required to carry on their respective businesses as now conducted (the
"U.S. Healthcare Permits") and are in compliance in all respects with the terms
of the U.S. Healthcare Permits, except for any noncompliance which, individually
or in the aggregate, has not had and is not reasonably likely to have a Material
Adverse Effect on U.S. Healthcare or as disclosed in the U.S. Healthcare 10-K.
Except as disclosed in the U.S. Healthcare 10-K, neither U.S. Healthcare nor any
Subsidiary of U.S. Healthcare is in violation of, or has violated, any
applicable provisions of any laws, rules, ordinances or regulations, in any such
case, in a manner that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on U.S. Healthcare. U.S.
Healthcare has advised Aetna of the facts underlying currently pending formal
proceedings with respect to any potentially material violations of any of the
foregoing.

(b) U.S. Healthcare and its Subsidiaries have complied in all respects with
all laws, rules, ordinances and regulations governing all Medicare, Medicaid and
any other contracts with any government entity and have filed all returns, cost
reports and other filings in the manner prescribed by applicable laws, rules,
ordinances or regulations, except for any such non-compliance or failure to make
any such filing or filings, which individually or in the aggregate, has not had
and is not reasonably expected to have a Material Adverse Effect on U.S.
Healthcare. All returns, cost reports and other financial filings made by U.S.
Healthcare or any of its Subsidiaries to Medicare, Medicaid or any other
governmental health or welfare related entity or third party payor were true,
correct and complete in all material respects as of their date of filing.
Neither U.S. Healthcare nor any of its Subsidiaries has been subject to any
written finding of fraudulent procedures or practices arising out of the
provision of health care services relating to Medicare, Medicaid or any other
government entity with which U.S. Healthcare or any Subsidiary of U.S.
Healthcare has a contract to provide health care services or benefits, and
except as disclosed in Schedule 3.16, neither U.S. Healthcare nor any of its
Subsidiaries is currently subject to any pending or threatened audit relating to
such fraudulent procedures or practices.

SECTION 3.17. Finders' Fees. Except for Goldman, Sachs & Co. and Merrill
Lynch & Co., Inc., copies of whose engagement agreements have been or will be
promptly provided to Aetna, there is no investment banker, broker, finder or
other intermediary which has been retained by, or is authorized to act on behalf
of, U.S. Healthcare or any Subsidiary of U.S. Healthcare who might be entitled
to any fee or commission from U.S. Healthcare, Aetna or any Subsidiary or
Affiliate of either upon consummation of the transactions contemplated by this
Agreement.

SECTION 3.18. Intellectual Property Rights. (a) U.S. Healthcare and its
Subsidiaries own or have rights to use, free and clear of all Liens, and have
not assigned, hypothecated or otherwise encumbered, the name "U.S. Healthcare"
and any of U.S. Healthcare's related trademarks, tradenames, service marks or
logos. Except as set forth on Schedule 3.18, U.S. Healthcare has no knowledge of
any current pending or threatened infringement or challenge by any Person with
respect to the name "U.S. Healthcare" and the U.S. Healthcare logo.

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(b) Except as set forth on Schedule 3.18, each of U.S. Healthcare and its
Subsidiaries owns outright or holds valid and enforceable licenses to all copies
of the operating and applications computer software programs and databases
material to the conduct by U.S. Healthcare and its Subsidiaries of their
respective businesses (other than programs and databases that are generally
commercially available) as of the date hereof (collectively, the "U.S.
Healthcare Software"). None of the U.S. Healthcare Software used by U.S.
Healthcare and its Subsidiaries, and no use thereof, infringes upon or violates
any patent, copyright, trade secret or other proprietary right of any other
Person and, to the best knowledge of U.S. Healthcare, no claim with respect to
any such infringement or violation is pending or threatened, except for any such
infringement which, individually or in the aggregate, has not had and is not
reasonably expected to have a Material Adverse Effect on U.S. Healthcare. Upon
consummation of the transactions contemplated by this Agreement, except for U.S.
Healthcare Software sold or otherwise disposed of in the ordinary course of
business after the date hereof, each of U.S. Healthcare and its Subsidiaries (i)
will continue to own all the U.S. Healthcare Software owned by it, free and
clear of all claims, Liens, encumbrances, obligations and liabilities and (ii)
with respect to all agreements for the lease or license of U.S. Healthcare
Software which require consents or other actions as a result of the consummation
of the transactions contemplated by this Agreement in order for U.S. Healthcare
and its Subsidiaries to continue to use and operate such U.S. Healthcare
Software after the consummation of the transactions contemplated by this
Agreement, shall have obtained such consents or taken such other actions so
required prior to the Merger Date, except for such consents or actions that if
not obtained or taken, individually or in the aggregate, would not be reasonably
expected to have a Material Adverse Effect on U.S. Healthcare.

SECTION 3.19. Takeover Statutes. The provisions of Subchapters G, H, I
and J of Chapter 25 of the Pennsylvania Law are not applicable to U.S.
Healthcare.

SECTION 3.20. Fairness Opinion. U.S. Healthcare has received the opinion
of Merrill Lynch & Co., Inc. to the effect that, as of the date hereof, the U.S.
Healthcare Merger Consideration to be received by the holders of U.S. Healthcare
Stock (other than Aetna and its Affiliates) in the U.S. Healthcare Sub Merger is
fair to such holders from a financial point of view and the opinion of Goldman,
Sachs & Co. that the U.S. Healthcare Merger Consideration to be received by the
holders of U.S. Healthcare Stock pursuant to this Agreement is, as of the date
of this Agreement, fair to such holders. It is agreed and understood that such
opinions are for the sole benefit of the Board of Directors of U.S. Healthcare
and may not be relied upon by Parent, Aetna or any third party.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES
OF AETNA

Aetna represents and warrants to U.S. Healthcare that:

SECTION 4.1. Corporate Existence and Power. Aetna is duly incorporated
and validly existing as an insurance corporation in good standing under the laws
of its jurisdiction of incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Aetna is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on Aetna. Aetna has heretofore delivered to U.S.
Healthcare true and complete copies of Aetna's certificate of incorporation and
bylaws as currently in effect.

SECTION 4.2. Corporate Authorization. The execution, delivery and,
subject to receipt of the approvals referred to in Section 4.3, the performance
by Aetna of this Agreement and the consummation by Aetna of the transactions
contemplated by this Agreement are within the corporate powers of Aetna and have
been duly authorized by all necessary corporate action, except for any required
approval by Aetna's shareholders of this Agreement and the transactions
contemplated hereby. This Agreement has been duly

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executed and delivered by Aetna and constitutes a valid and binding agreement of
Aetna enforceable against Aetna in accordance with its terms, subject to (a)
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and, in the case of Aetna, the rights of creditors
of insurance companies generally and (b) general principles of equity
(regardless of whether considered in a proceeding at law or in equity).

SECTION 4.3. Governmental Authorization. The execution, delivery and
performance by Aetna of this Agreement and the consummation by Aetna of the
transactions contemplated by this Agreement require no action by or in respect
of, or filing with, any governmental body, agency, official or authority other
than (a) the filing of an Aetna Certificate of Merger in accordance with the
Connecticut Law; (b) compliance with any applicable requirements of the HSR Act;
(c) compliance with any applicable requirements of the 1934 Act; (d) compliance
with any applicable requirements of the 1933 Act; (e) compliance with any
applicable foreign or state securities or Blue Sky laws; (f) approvals or
filings required under laws, rules and regulations governing insurance and
insurance companies, health maintenance organizations, health care services
plans, third party administrators or other managed health care organizations;
(g) the filing with the Secretary of the State and, if required, the Insurance
Commissioner of the State of Connecticut of an amendment to Parent's certificate
of incorporation to reflect the changes contemplated by Section 7.11 hereof; and
(h) filings and notices not required to be made or given until after the Merger
Date.

SECTION 4.4. Non-Contravention. Except as disclosed on Schedule 4.4, the
execution, delivery and performance by Aetna of this Agreement and the
consummation by Aetna of the transactions contemplated by this Agreement do not
and will not (a) assuming receipt of the approvals referred to in Section 4.2,
contravene or conflict with the certificate of incorporation or bylaws of Aetna,
(b) assuming compliance with the matters referred to in Section 4.3, contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
Aetna or any Subsidiary of Aetna, (c) constitute a default (or an event which
with notice, the lapse of time or both would become a default) under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of Aetna or any Subsidiary of Aetna or to a loss of any benefit to
which Aetna or any Subsidiary of Aetna is entitled under any provision of any
agreement, contract or other instrument binding upon Aetna or any Subsidiary of
Aetna or any license, franchise, permit or other similar authorization held by
Aetna or any Subsidiary of Aetna, or (d) result in the creation or imposition of
any Lien on any asset of Aetna or any Subsidiary of Aetna, except for such
contraventions, conflicts or violations referred to in clause (b) or defaults,
rights of termination, cancellation or acceleration, losses or Liens referred to
in clause (c) or (d) that would not, individually or in the aggregate, have a
Material Adverse Effect on Aetna.

SECTION 4.5. Capitalization. As of February 29, 1996, the authorized
capital stock of Aetna consisted of 10,000,000 shares of Class A Voting
Preferred Stock without par value ("Aetna Class A Stock"), 15,000,000 shares of
Class B Voting Preferred Stock without par value ("Aetna Class B Stock"),
15,000,000 shares of Class C Non-Voting Preferred Stock without par value
("Aetna Class C Stock") and 250,000,000 shares of Aetna Stock without par value
("Aetna Stock"). As of February 29, 1996, there were (i) no shares of Aetna
Class A Stock outstanding, (ii) no shares of Aetna Class B Stock outstanding,
(iii) no shares of Aetna Class C Stock outstanding and (iv) 114,990,477 shares
of Aetna Stock outstanding. As of February 29, 1996, an aggregate of 15,208,090
shares of Aetna Stock were reserved for issuance or issuable under employee
benefit or other compensation plans or programs or dividend reinvestment plans
of Aetna. All outstanding shares of capital stock of Aetna have been duly
authorized and validly issued and are fully paid and nonassessable.

SECTION 4.6. SEC Filings. (a) Aetna has delivered to U.S. Healthcare (i)
Aetna's annual reports on Form 10-K for its fiscal years ended December 31, 1995
(the "Aetna 10-K"), 1994 and 1993, (ii) its proxy or information statements
relating to meetings of or actions taken without a meeting by Aetna's
shareholders held since January 1, 1993, and (iii) all of its other reports,
statements, schedules and registration statements filed with the SEC since
January 1, 1993.

(b) As of its filing date, each such report or statement, schedule or
registration filed pursuant to the 1934 Act did not contain any untrue statement
of a material fact or omit to state any material fact necessary in

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order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

SECTION 4.7. Financial Statements. The audited consolidated financial
statements of Aetna included in its annual reports on Form 10-K referred to in
Section 4.6 fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of Aetna and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended. For purposes of this
Agreement, "Aetna Balance Sheet" means the consolidated balance sheet of Aetna
as of December 31, 1995 set forth in the Aetna 10-K and the "Aetna Balance Sheet
Date" means December 31, 1995.

SECTION 4.8. Disclosure Documents. (a) Each document required to be filed
by Aetna with the SEC in connection with the transactions contemplated by this
Agreement (the "Aetna Disclosure Documents"), including, without limitation, the
proxy or information statement of Aetna (the "Aetna Proxy Statement"), if any,
to be filed with the SEC in connection with this Agreement and the Aetna Sub
Merger, and any amendments or supplements thereto, will, when filed, comply as
to form in all material respects with the applicable requirements of the 1934
Act.

(b) At the time the Aetna Proxy Statement or any amendment or supplement
thereto is first mailed to shareholders of Aetna and at the time such
shareholders vote on the proposals relating to this Agreement and the Aetna Sub
Merger set forth therein, the Aetna Proxy Statement, as supplemented or amended,
if applicable, will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. At the time of the filing of any Aetna Disclosure Document other
than the Aetna Proxy Statement and at the time of any distribution thereof, such
Aetna Disclosure Document will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 4.8
will not apply to statements included in or omissions from the Aetna Disclosure
Documents based upon information furnished to Aetna in writing by U.S.
Healthcare or Parent specifically for use therein.

SECTION 4.9. Information Supplied. The information supplied or to be
supplied by Aetna for inclusion or incorporation by reference in (i) the U.S.
Healthcare Proxy Statement or any amendment or supplement thereto will not, at
the time the U.S. Healthcare Proxy Statement is first mailed to shareholders of
U.S. Healthcare and at the time such shareholders vote on the approval and
adoption of this Agreement, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, (ii) the Form S-4 or any amendment or supplement thereto will not,
at the time the Form S-4 or any amendment or supplement thereto become effective
under the 1933 Act and on the Merger Date, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any U.S.
Healthcare Disclosure Document or Parent Disclosure Document (other than the
U.S. Healthcare Proxy Statement and the Form S-4) will not, at the time of
effectiveness of such U.S. Healthcare Disclosure Document and at the time of any
distribution thereof contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.

SECTION 4.10. Absence of Certain Changes. Except as disclosed on Schedule
4.10 or as specifically permitted by Section 6.5 and except as disclosed in the
Aetna 10-K and except for the proposed sale of Aetna's property-casualty
business and transactions related thereto, since the Aetna Balance Sheet Date,

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Aetna has conducted the Aetna Health Operations in the ordinary course
consistent with past practice and there has not been:

(a) any event, occurrence or facts which has had or is reasonably
expected to have a Material Adverse Effect on Aetna;

(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Aetna (other
than payment of Aetna's regular quarterly dividend on Aetna Stock in an
amount not exceeding $0.69 per share), or any repurchase, redemption or
other acquisition by Aetna or any Subsidiary of Aetna of any amount of
outstanding shares of capital stock or other securities of, or other
ownership interests in, Aetna which repurchase, redemption or other
acquisition, individually or in the aggregate, is material to Aetna and its
Subsidiaries taken as a whole;

(d) any incurrence, assumption or guarantee by any of Aetna's domestic
(U.S.) health care operations ("Aetna Health Operations") of any
indebtedness from any third party for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with
past practices;

(e) any creation or assumption by Aetna Health Operations of any Lien
on any material asset other than in the ordinary course of business
consistent with past practices;

(f) any making of any loan, advance or capital contribution by any
Aetna Health Operations to or investment in any Person other than (i)
loans, advances or capital contributions to or investments in Subsidiaries
of Aetna, (ii) investments in securities consistent with past practice or
(iii) other loans, advances, capital contributions or investments in an
aggregate amount not exceeding $25,000,000;

(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Aetna or any
Subsidiary of Aetna which, individually or in the aggregate, is or may
reasonably be expected to be material to Aetna and its Subsidiaries, taken
as a whole;

(h) any transaction or commitment made, or any contract or agreement
entered into, by any Aetna Health Operations relating to its assets or
business (including, without limitation, the acquisition or disposition of
any assets) or any relinquishment by any Aetna Health Operations of any
contract, license or other right, which in any such case, individually or
in the aggregate, would have a Material Adverse Effect on Aetna, other than
transactions, commitments, contracts or agreements contemplated by this
Agreement;

(i) any change in any method of accounting or accounting principle or
practice by Aetna or any Subsidiary of Aetna, except for any such change
required by reason of a concurrent change in generally accepted accounting
principles or statutory accounting principles;

(j) except for such contracts as would not be material to Aetna and
its Subsidiaries taken as a whole or material to their operation in any
Standard Metropolitan Statistical Area, any entry by any Aetna Health
Operations into any contract limiting the right of any Aetna Health
Operations at any time on or after the date of this Agreement or U.S.
Healthcare or any of its Subsidiaries or Affiliates at or after the Merger
Date, to engage in, or to compete with any Person in, any business
conducted by U.S. Healthcare, including, without limitation, any contract
which includes exclusivity provisions restricting the geographical area in
which, or the method by which, any such business may be conducted by Aetna
or any of its Subsidiaries or Affiliates, or by U.S. Healthcare or any of
its Subsidiaries or Affiliates after the Merger Date;

(k) any entry by any Aetna Health Operations into any acquisition,
joint venture or franchising agreement or arrangement which is material to
Aetna and its Subsidiaries taken as a whole; or

(m) any entry by any Aetna Health Operations or any of its
Subsidiaries into any agreement or arrangement with a third party on an
exclusive basis to offer or market any of the following services of such
third party: group life, disability, managed workers' compensation, long
term care, dental, behavioral or pharmacy benefits.

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SECTION 4.11. No Undisclosed Material Liabilities. There are no
liabilities, commitments or obligations (whether pursuant to contracts or
otherwise) of Aetna or any Subsidiary of Aetna of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, commitment or obligation,
including, without limitation, any fines, disciplinary actions or other adverse
actions that may be taken or reported concerning the conduct of Aetna or any of
its Subsidiaries, other than:

(a) liabilities, commitments or obligations disclosed or provided for
in the Aetna Balance Sheet or in the Aetna 10-K;

(b) liabilities, commitments or obligations incurred in the ordinary
course of business since the Aetna Balance Sheet Date;

(d) liabilities, commitments or obligations which, individually or in
the aggregate, have not had, and are not reasonably likely to have, a
Material Adverse Effect on Aetna.

SECTION 4.12. Litigation; Investigations. Except as disclosed or referred
to in the Aetna 10-K or on Schedule 4.12, there is no action, claim, suit,
investigation, proceeding or examination, including, without limitation, any
insurance or health related investigations, proceedings or examinations pending
against or affecting, or to the knowledge of Aetna threatened against or
affecting, Aetna or any Subsidiary of Aetna or any of their respective
properties before any court or arbitrator or any governmental body, agency,
authority or official which, net of reserves established therefor reflected in
the Aetna 10-K and giving effect to reinsurance probable of recovery,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Aetna.

SECTION 4.13. Subsidiaries. (a) Each Subsidiary of Aetna is duly
incorporated, validly existing (as an insurance corporation, corporation
organized as a health maintenance organization or otherwise) and in good
standing under the laws of its jurisdiction of incorporation, has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and is duly qualified to do
business as a foreign corporation or is duly licensed to do business as an
insurer, a health maintenance organization or otherwise and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect on Aetna. All
material Subsidiaries and their respective jurisdictions of incorporation are
identified in the Aetna 10-K.

(b) Except as disclosed on Schedule 4.13, all of the outstanding capital
stock of, or other ownership interests in, each Subsidiary of Aetna, is owned by
Aetna, directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including, without limitation, any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). Except as disclosed on Schedule 4.13, there are no
outstanding (i) securities of Aetna or any Subsidiary of Aetna convertible into
or exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of Aetna, and (ii) options or other rights
to acquire from Aetna or any Subsidiary of Aetna, and no other obligation of
Aetna or any Subsidiary of Aetna to issue, any capital stock, voting securities
or other ownership interests in, or any securities convertible into or
exchangeable for, any capital stock, voting securities or ownership interests
in, any Subsidiary of Aetna (the items in clauses (i) and (ii) being referred to
collectively as the "Aetna Subsidiary Securities"). Except as disclosed in
Schedule 4.13, there are no outstanding obligations of Aetna or any Subsidiary
of Aetna to repurchase, redeem or otherwise acquire any outstanding Aetna
Subsidiary Securities.

SECTION 4.14. Taxes. (a) All Tax Returns required to be filed (taking
into account all extensions heretofore granted) on or before the date hereof or
the Merger Date by or on behalf of Aetna or any of its Subsidiaries have been
filed within the time and in the manner prescribed by law, other than those Tax
Returns the failure of which to file would not have a Material Adverse Effect on
Aetna.

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(b) As of the time of filing, all such Tax Returns correctly reflected in
all material respects all facts regarding the income, business, assets,
operations, activities and status of Aetna and its Subsidiaries and any other
information required to be shown therein.

(c) All Taxes shown to be due and payable by Aetna and any of its
Subsidiaries on all such Tax Returns have been timely paid, or withheld and
remitted to the appropriate Taxing Authorities.

(d) Except as set forth on Schedule 4.14(d), all applicable statutes of
limitations for the assessment of material Taxes against Aetna and any of its
Subsidiaries have expired. No deficiency payment of any Taxes for any period has
been asserted by any Taxing Authority which remains unsettled at the date hereof
except for deficiencies which would not have a Material Adverse Effect on Aetna.

(e) Except for Tax Returns required to be filed with respect to the 1995
taxable year, neither Aetna nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Return which has not yet been
filed.

(f) There are no material Liens upon any property or assets of Aetna or any
of its Subsidiaries for Taxes, except for Tax liens in respect of Taxes not yet
due or which are being contested in good faith and by appropriate proceedings
(and for the payment of which adequate reserves have been provided) and
reflected in the Aetna 10-K.

(g) Except as set forth on Schedule 4.14(g), there is no claim, audit,
action, suit, proceeding, or investigation now pending or threatened against or
with respect to Aetna or any of its Subsidiaries in respect of any Taxes.

(h) Except as set forth in Schedule 4.14(h), neither Aetna nor any of its
Subsidiaries has any contractual obligations under any tax sharing agreement or
similar agreement or tax indemnity agreement with any corporation which is not a
member of the affiliated group of corporations of which Aetna is the common
parent.

(i) Except as set forth on Schedule 4.14(i), there are no requests for
rulings or determinations in respect of any Tax pending between Aetna or any of
its Subsidiaries and any Taxing Authorities.

SECTION 4.15. ERISA. (a) Neither Aetna nor any ERISA Affiliate of Aetna
has (i) engaged in, or is a successor or parent corporation to an entity that
has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or
(ii) incurred, or reasonably expects to incur prior to the Merger Date, (A) any
liability under Title IV of ERISA arising in connection with the termination of,
or a complete or, except as may be incurred by reason of the transactions
contemplated by the Stock Purchase Agreement, partial withdrawal from, any plan
covered or previously covered by Title IV of ERISA or (B) any liability under
Section 4971 of the Code that in either case could become a liability of Parent
or any of its Affiliates after the Merger Date. Nothing done or omitted to be
done, and no transaction or holding of any asset under or in connection with any
"employee benefit plan" as defined in Section 3(3) of ERISA which (i) is subject
to any provision of ERISA and (ii) is maintained, administered or contributed to
by Aetna or any Subsidiary of Aetna and covers any employees or former employees
of Aetna or any Subsidiary of Aetna under which Aetna or any Subsidiary of Aetna
has any liability (each an "Aetna Employee Plan") has or will make Aetna or any
Subsidiary of Aetna, or any officer or director of Aetna or any Subsidiary of
Aetna, subject to any liability under Title I of ERISA or liable for any tax
pursuant to Section 4975 of the Code that could have a Material Adverse Effect
on Aetna.

(b) With respect to each Aetna Employee Plan which is intended to be
qualified under Section 401(a) of the Code, Aetna has received a favorable
determination letter that the plan is so qualified and that each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code. Each
Aetna Employee Plan has been maintained in all material respects in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code,
which are applicable to such Plan.

(c) Each employment, severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements),

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workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
which (i) is not an Aetna Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by Aetna or any of its Subsidiaries and
(iii) covers any employee or former employee of Aetna or any of its Subsidiaries
(the "Aetna Benefit Arrangements") has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations that are applicable to such Aetna Benefit
Arrangement.

(d) Aetna and its Subsidiaries are in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect on Aetna.
There is no unfair labor practice complaint pending or, to the knowledge of
Aetna, threatened against Aetna or any Subsidiary of Aetna before the National
Labor Relations Board which would reasonably be expected to have a Material
Adverse Effect on Aetna.

(e) None of the assets of Aetna constitute the assets of any employee
benefit plan subject to Title I of ERISA or Section 4975 of the Code.

SECTION 4.16. Permits; Compliance with Laws. (a) Aetna and its
Subsidiaries hold all governmental licenses, authorizations, consents and
approvals required to carry on their respective businesses as now conducted (the
"Aetna Permits") and are in compliance in all respects with the terms of the
Aetna Permits, except for any noncompliance which, individually or in the
aggregate, has not had and is not reasonably likely to have a Material Adverse
Effect on Aetna or as disclosed in the Aetna 10-K. Except as disclosed in the
Aetna 10-K, neither Aetna nor any Subsidiary of Aetna is in violation of, or has
violated, any applicable provisions of any laws, rules, ordinances or
regulations, in any such case, in a manner that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
Aetna. Aetna has advised U.S. Healthcare of the facts underlying currently
pending formal proceedings with respect to any potentially material violations
of any of the foregoing.

(b) Neither Aetna nor any of its Subsidiaries has been subject to any
written finding of fraudulent procedures or practices arising out of the
provision of health care services relating to Medicare, Medicaid or any other
government entity with which Aetna or any Subsidiary of Aetna has a contract to
provide health care services or benefits, and except as disclosed in Schedule
4.16, neither Aetna nor any of its Subsidiaries is currently subject to any
pending or threatened audit relating to such fraudulent procedures or practices.

SECTION 4.17. Intellectual Property Rights. (a) Aetna and its
Subsidiaries own or have rights to use, free and clear of all Liens, and have
not assigned, hypothecated or otherwise encumbered, the name "Aetna" and any of
Aetna's related trademarks, tradenames, service marks or logos. Aetna has no
knowledge of any current pending or threatened infringement or challenge by any
Person with respect to the name "Aetna" and the Aetna logo.

(b) Except as set forth on Schedule 4.17, each of Aetna and its
Subsidiaries owns outright or holds valid and enforceable licenses to all copies
of the operating and applications computer software programs and databases
material to the conduct by Aetna and its Subsidiaries of their respective
businesses (other than programs and databases that are generally commercially
available) as of the date hereof (collectively, the "Aetna Software"). None of
the Aetna Software used by Aetna and its Subsidiaries, and no use thereof,
infringes upon or violates any patent, copyright, trade secret or other
proprietary right of any other Person and, to the best knowledge of Aetna, no
claim with respect to any such infringement or violation is pending or
threatened, except for any such infringement which, individually or in the
aggregate, has not had and is not reasonably expected to have a Material Adverse
Effect on Aetna. Upon consummation of the transactions contemplated by this
Agreement, except for Aetna Software sold or otherwise disposed of in the
ordinary course of business after the date hereof, each of Aetna and its
Subsidiaries (i) will continue to own all the Aetna Software owned by it, free
and clear of all claims, Liens, encumbrances, obligations and liabilities and
(ii) with respect to all agreements for the lease or license of Aetna Software
which require consents or other

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actions as a result of the consummation of the transactions contemplated by this
Agreement in order for Aetna and its Subsidiaries to continue to use and operate
such Aetna Software after the consummation of the transactions contemplated by
this Agreement, shall have obtained such consents or taken such other actions so
required prior to the Merger Date, except for such consents or actions that if
not obtained or taken, individually or in the aggregate, would not be reasonably
expected to have a Material Adverse Effect on Aetna.

SECTION 4.18. Fairness Opinions. Aetna has received opinions of
Wasserstein Perella & Co., Inc. and J.P. Morgan & Co. to the effect that, as of
the date hereof, the consideration to be paid to the holders of U.S. Healthcare
Stock in the U.S. Healthcare Sub Merger is fair, from a financial point of view,
to Aetna. It is agreed and understood that such opinions are for the sole
benefit of the Board of Directors of Aetna and may not be relied upon by Parent,
U.S. Healthcare or any third party.

ARTICLE 5

COVENANTS OF U.S. HEALTHCARE

U.S. Healthcare agrees that:

SECTION 5.1. Conduct of U.S. Healthcare. From the date hereof until the
Merger Date, U.S. Healthcare and its Subsidiaries shall conduct their business
in the ordinary course consistent with past practice and shall use their best
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Merger Date, except as contemplated by this Agreement, without
the prior written consent of Aetna:

(a) U.S. Healthcare will not adopt or propose any change in its
articles of incorporation or bylaws;

(d) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, declare, set aside or pay any dividend (other than the
payment of U.S. Healthcare regular quarterly dividend on U.S. Healthcare
Common Stock in an amount not exceeding $0.275 per share and on Class B
Stock in an amount not exceeding $0.248 per share) or make any other
distribution with respect to any shares of U.S. Healthcare capital stock;

(f) except pursuant to contracts or commitments existing on the date
hereof and other than the issuance of an aggregate of 150,000 options to
acquire U.S. Healthcare Stock and/or shares of restricted stock of U.S.
Healthcare to Persons other than the Specified U.S. Healthcare Officers,
U.S. Healthcare will not, and will not permit any Subsidiary of U.S.
Healthcare to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any U.S. Healthcare Securities, any U.S.
Healthcare Subsidiary Securities or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any U.S.
Healthcare Securities or U.S. Healthcare Subsidiary Securities;

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(g) Except as disclosed on Schedule 5.1(g), (i) U.S. Healthcare will
not split, combine or reclassify, or take any other similar action with
respect to, any capital stock of U.S. Healthcare, and (ii) U.S. Healthcare
will not, and will not permit any Subsidiary of U.S. Healthcare to,
repurchase, redeem or otherwise acquire an amount of shares of capital
stock of, or other ownership interests in, U.S. Healthcare or any
Subsidiary of U.S. Healthcare, which repurchase, redemption or other
acquisition, individually or in the aggregate, is material to U.S.
Healthcare and its Subsidiaries, taken as a whole;

(h) Except for borrowings or guarantees in the ordinary course of
business consistent with past practice, U.S. Healthcare will not, and will
not permit any Subsidiary of U.S. Healthcare to, incur or assume any
indebtedness from any third party for borrowed money or guarantee any such
indebtedness;

(i) Except for (i) loans, advances or capital contributions to or
investments in Subsidiaries of U.S. Healthcare, (ii) investments in
securities consistent with past practices or (iii) other loans, advances,
capital contributions or investments in an aggregate amount not exceeding
$25,000,000, U.S. Healthcare will not, and will not permit any Subsidiary
of U.S. Healthcare to, make any material loans, advances or capital
contributions to, or investments in, any other Person;

(j) except for new employment agreements with those Specified U.S.
Healthcare Officers listed on Schedule 8.2(b) in the form attached hereto
as Schedule 3.11(j)(A), U.S. Healthcare will not, and will not permit any
of its Subsidiaries to: (i) (A) grant any severance or termination pay to,
or enter into any employment, termination or severance arrangement with,
any Specified U.S. Healthcare Officer or, (B) except in the ordinary course
of business consistent in magnitude and character with past practice and
with the terms of severance or termination arrangements in effect or
pending on the date hereof with respect to individuals with comparable
positions or responsibilities, grant any severance or termination pay to,
or enter into any employment, termination or severance arrangement with,
any other employees; (ii) (A) amend in any material respect any employment,
termination or severance arrangement with any Specified U.S. Healthcare
Officer or (B) except in the ordinary course, amend in any material respect
any employment, termination or severance arrangement with any other
directors, officers or employees (it being understood that for purposes of
clauses (A) and (B) any increase or acceleration of benefits under any such
agreement shall be deemed material); (iii) (x) establish, adopt, enter
into, or (y) except (I) the matters described in the parenthetical clause
of Section 3.11(c) hereof and (II) the acceleration of vesting of U.S.
Healthcare Non-Employee Stock Options and restricted stock of U.S.
Healthcare issued to Persons who are not employees of U.S. Healthcare,
amend or take action to accelerate or enhance any rights or benefits under,
(A) any plan providing for options, stock, performance awards or other
forms of incentive or deferred compensation or (B) any collective
bargaining, bonus, profit sharing, thrift, compensation, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any of its directors, officers or employees; (iv) grant,
confer or award any options, stock, performance awards or other awards to
acquire any shares of its capital stock (other than an aggregate of 150,000
options to acquire U.S. Healthcare Stock and/or shares of restricted stock
of U.S. Healthcare pursuant to the terms existing on the date hereof of
U.S. Healthcare's plans to Persons other than the Specified U.S. Healthcare
Officers; (v) increase the contribution percentages under U.S. Healthcare's
defined contribution plans; or (vi) (A) other than an annual adjustment
with respect to the 1997 calendar year if the Merger Date occurs after
December 31, 1996, which adjustment shall be of a magnitude and character
consistent with past practice, increase the compensation or benefits of any
Specified U.S. Healthcare Officer or pay any benefit not required by any
plan or arrangement as in effect as of the date hereof or (B) except in the
ordinary course of business consistent in magnitude and character with past
practice and in no event greater than 6% in the aggregate on a per annum
basis for all such individuals as a group, increase the compensation or
benefits of any other employees or pay any benefit not required by any plan
or arrangement as in effect as of the date hereof; provided that Aetna
agrees it will not unreasonably withhold its consent, if requested by U.S.
Healthcare, to transactions proposed under this paragraph (j);

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Healthcare or any Subsidiary of U.S. Healthcare, or any plan of division or
share exchange involving U.S. Healthcare or any of its Subsidiaries;

(l) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, change any method of accounting or any accounting
principle or practice used by U.S. Healthcare or any Subsidiary of U.S.
Healthcare, except for any such change required by reason of a concurrent
change in generally accepted accounting principles or statutory accounting
principles;

(m) except as previously disclosed to Aetna and except for such
contracts as would not be material to U.S. Healthcare and its Subsidiaries
taken as a whole or material to their operation in any Standard
Metropolitan Statistical Area, U.S. Healthcare will not and will not permit
any Subsidiary of U.S. Healthcare to enter into any contract limiting the
right of U.S. Healthcare or any of its Subsidiaries at any time on or after
the date of this Agreement or Aetna or any of its Subsidiaries or
Affiliates at or after the Merger Date, to engage in, or to compete with
any Person in, any business, including, without limitation, any contract
which includes exclusivity provisions restricting the geographical area in
which, or the method by which, any such business may be conducted by U.S.
Healthcare or any of its Subsidiaries or Affiliates, or by Aetna or any of
its Subsidiaries or Affiliates after the Merger Date;

(n) subject (in the case of an acquisition) to Section 5.1(b), U.S.
Healthcare will not and will not permit any of its Subsidiaries to enter
into any acquisition, joint venture, national vendor or franchising
agreement or arrangement which is material to U.S. Healthcare and its
Subsidiaries, taken as a whole;

(p) U.S. Healthcare will not, and will not permit any Subsidiary of
U.S. Healthcare to, agree, commit or adopt any plan or proposal to do any
of the foregoing.

SECTION 5.2. Shareholder Meeting; Proxy Material. (a) U.S. Healthcare
shall cause a meeting of its shareholders (the "U.S. Healthcare Shareholder
Meeting") to be duly called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of this Agreement and, to the
extent submitted to U.S. Healthcare's shareholders for approval, the
transactions contemplated by this Agreement, and the Board of Directors of U.S.
Healthcare shall recommend approval and adoption of this Agreement and the U.S.
Healthcare Sub Merger by U.S. Healthcare's shareholders; provided that such
meeting need not be called and held and, prior to the U.S. Healthcare
Shareholder Meeting, such recommendation may be withdrawn, modified or amended
to the extent that, as a result of the commencement or receipt of an Acquisition
Proposal with respect to U.S. Healthcare, the Board of Directors of U.S.
Healthcare determines in good faith that it is necessary to so act in order to
comply with its fiduciary duties under applicable law after consultation with
independent counsel.

(b) In connection with the U.S. Healthcare Shareholder Meeting, and subject
to the proviso to Section 5.2(a), U.S. Healthcare (i) will promptly prepare and
file with the SEC, will use its best efforts to have cleared by the SEC and will
thereafter mail to its shareholders as promptly as practicable the U.S.
Healthcare Proxy Statement and all other proxy materials for such meeting, (ii)
will use its best efforts to obtain the shareholder approvals referred to in
Section 5.2(a) and (iii) will otherwise comply with all legal requirements
applicable to such meeting.

SECTION 5.3. Access to Information. To the extent permitted by applicable
law, from the date hereof until the Merger Date, U.S. Healthcare will give (or
cause to be given) Aetna, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of U.S. Healthcare and its Subsidiaries, will furnish (or cause to be
furnished) to Aetna, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct the
employees, counsel and financial advisors of U.S. Healthcare and its
Subsidiaries to cooperate with Aetna in its investigation of the business of
U.S. Healthcare

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and its Subsidiaries; provided that no investigation pursuant to this Section
shall affect any representation or warranty given by U.S. Healthcare to Aetna
hereunder.

SECTION 5.4. Other Offers Relating to U.S. Healthcare. From the date
hereof until the termination of this Agreement, U.S. Healthcare will not, and
will cause its Subsidiaries and the directors, officers, employees, financial
advisors and other agents or representatives of U.S. Healthcare or any of its
Subsidiaries not to, directly or indirectly, take any action to solicit,
initiate or encourage any Acquisition Proposal with respect to U.S. Healthcare
or engage in negotiations with, or disclose any nonpublic information relating
to U.S. Healthcare or any Subsidiary of U.S. Healthcare or afford access to the
properties, books or records of U.S. Healthcare or any Subsidiary of U.S.
Healthcare to, any Person that may be considering making, or has made, an
Acquisition Proposal with respect to U.S. Healthcare; provided that nothing
contained in this Section 5.4 shall prevent U.S. Healthcare from furnishing
non-public information to, or entering into discussions or negotiations with,
any Person in connection with an unsolicited bona fide Acquisition Proposal with
respect to U.S. Healthcare, if and only to the extent that (1) the Board of
Directors of U.S. Healthcare determines in good faith after consultation with
independent counsel that such action is necessary in order to comply with its
fiduciary duties under applicable law and (2) prior to furnishing non-public
information to, or entering into discussions or negotiations with, such Person,
U.S. Healthcare receives from such Person an executed confidentiality agreement
with terms no less favorable to U.S. Healthcare than those contained in the
Confidentiality Agreement dated as of January 16, 1996 between U.S. Healthcare
and Aetna (the "Confidentiality Agreement"). U.S. Healthcare will promptly (and
in no event later than 24 hours after receipt of the relevant Acquisition
Proposal with respect to U.S. Healthcare), notify (which notice shall be
provided orally and in writing and shall identify the Person making the relevant
Acquisition Proposal with respect to U.S. Healthcare and set forth the material
terms thereof) Aetna after receipt of any Acquisition Proposal with respect to
U.S. Healthcare or any request for nonpublic information relating to U.S.
Healthcare or any Subsidiary of U.S. Healthcare or for access to any properties,
books or records of U.S. Healthcare or any Subsidiary of U.S. Healthcare by any
Person that may be considering making, or has made, an Acquisition Proposal with
respect to U.S. Healthcare and will keep Aetna fully informed of the status and
details of any such Acquisition Proposal with respect to U.S. Healthcare. U.S.
Healthcare shall give Aetna at least one days' advance notice of any information
to be supplied to, and at least three days' advance notice of any agreement to
be entered into with, any Person making such Acquisition Proposal with respect
to U.S. Healthcare. U.S. Healthcare shall, and shall cause its Subsidiaries and
the directors, officers, employees, financial advisors and other agents or
representatives of U.S. Healthcare or any of its Subsidiaries to, cease
immediately and cause to be terminated all activities, discussions or
negotiations, if any, with any Persons conducted heretofore with respect to any
Acquisition Proposal with respect to U.S. Healthcare. For purposes of this
Agreement, with respect to any Person, "Acquisition Proposal" means any offer or
proposal for, or any indication of interest in, (i) a merger or other business
combination involving such Person or any Subsidiary of such Person or (ii) the
acquisition in any manner of any significant equity interest in, or a
substantial portion of the assets of, such Person or any Subsidiary of such
Person, in each case other than the transactions contemplated by this Agreement.

SECTION 5.5. Notices of Certain Events. U.S. Healthcare shall promptly
notify Aetna of:

(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;

(b) any notice or other communication from any governmental body,
agency, official or authority in connection with the transactions
contemplated by this Agreement; and

(c) any actions, suits, claims, investigations, proceedings or health
or insurance related proceedings or market conduct examinations or audits
commenced or, to the best of U.S. Healthcare's knowledge threatened
against, relating to or involving or otherwise affecting U.S. Healthcare or
any Subsidiary of U.S. Healthcare which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 3.13 or which relate to the consummation of the transactions
contemplated by this Agreement.

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SECTION 5.6. Fiduciary Matters. U.S. Healthcare shall, and shall direct
the appropriate fiduciaries to, exercise all appropriate fiduciary
responsibilities with respect to shares of U.S. Healthcare Stock held in any of
its U.S. Healthcare Employee Plans.

ARTICLE 6

COVENANTS OF AETNA

Aetna agrees that:

SECTION 6.1. Voting of U.S. Healthcare Stock. Aetna agrees to vote or
cause to be voted all shares of U.S. Healthcare Stock owned by it or any of its
Subsidiaries in favor of the approval and adoption of this Agreement at the U.S.
Healthcare Shareholder Meeting; provided that this Section 6.1 shall not impose
any obligations in respect of shares of U.S. Healthcare Stock (i) held by Aetna
or any Subsidiary of Aetna for the account of another Person, (ii) as to which
Aetna or any Subsidiary or Affiliate of Aetna is or may be required to act as
fiduciary or in a similar capacity or (iii) the voting of which pursuant to the
provisions of this Section 6.1 would violate any legal duties or obligations of
Aetna or any Subsidiary or Affiliate of Aetna.

SECTION 6.2. Shareholder Meeting; Proxy Materials. (a) Aetna shall cause
a special meeting of its shareholders (the "Aetna Shareholder Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval and adoption of this Agreement, and, to the extent submitted to
Aetna's shareholders for approval, the transactions contemplated by this
Agreement, and the Board of Directors of Aetna shall recommend approval and
adoption of this Agreement by Aetna's shareholders; provided that such special
meeting need not be called and held and, prior to the Aetna Shareholder Meeting,
such recommendation may be withdrawn, modified or amended, to the extent that,
as a result of the commencement or receipt of an Aetna Acquisition Proposal, the
Board of Directors of Aetna determines in good faith that it is necessary to so
act in order to comply with its fiduciary duties under applicable law after
consultation with independent counsel.

(b) In connection with the Aetna Shareholder Meeting, and subject to the
proviso to Section 6.2(a), Aetna (i) will promptly prepare and file with the
SEC, will use its best efforts to have cleared by the SEC and will thereafter
mail to its shareholders as promptly as practicable the Aetna Proxy Statement
and all other proxy materials for such meeting, (ii) will use its best efforts
to obtain the shareholder approvals referred to in Section 6.2(a), and (iii)
will otherwise comply with all legal requirements applicable to such meeting.

SECTION 6.3. Access to Information. To the extent permitted by applicable
law, from the date hereof until the Merger Date, Aetna will give (or cause to be
given) U.S. Healthcare, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of Aetna and its Subsidiaries, will furnish (or cause to be furnished)
to U.S. Healthcare, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct the
employees, counsel and financial advisors of Aetna and its Subsidiaries to
cooperate with U.S. Healthcare in its investigation of the business of Aetna and
its Subsidiaries; provided that no investigation pursuant to this Section shall
affect any representation or warranty given by Aetna to U.S. Healthcare
hereunder.

SECTION 6.4. Notices of Certain Events. Aetna shall promptly notify U.S.
Healthcare of:

(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;

(b) any notice or other communication from any governmental body,
agency, official or authority in connection with the transactions
contemplated by this Agreement; and

(c) any actions, suits, claims, investigations, proceedings or health
or insurance related proceedings or market conduct examinations commenced
or, to the best of Aetna's knowledge threatened against, relating to or
involving or otherwise affecting Aetna or any Subsidiary of Aetna which
relate to the consummation of the transactions contemplated by this
Agreement.

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SECTION 6.5. Certain Corporate Actions. Prior to the Merger Date, except
as contemplated by this Agreement or in Schedule 6.5, unless U.S. Healthcare has
consented in writing thereto:

(a) Aetna will not adopt or propose any change in its certificate of
incorporation or bylaws;

(b) (i) Aetna will not, and will not permit any Subsidiary of Aetna
to, merge or consolidate with any other Person (other than a merger or
consolidation of a Subsidiary of Aetna with a wholly-owned Subsidiary of
Aetna) and (ii) Aetna shall cause the Aetna Health Operations not to
acquire, whether by means of merger, consolidation or otherwise, any
business or assets, other than acquisitions of products or services used in
the ordinary course operations of the business of Aetna and its
Subsidiaries in a manner consistent with past practice and other
acquisitions in an aggregate amount not exceeding $75,000,000;

(d) Aetna will not, and will not permit any Subsidiary of Aetna to,
declare, set aside or pay any dividend (other than the payment of a regular
quarterly dividend on Aetna Stock in an amount not exceeding $0.69 per
share), or make any other distribution, with respect to any shares of
Aetna's capital stock;

(e) Aetna will not, and will not permit the Aetna Health Operations
to, create or assume any Lien on any material asset other than in the
ordinary course consistent with past practices;

(g) except as disclosed in Schedule 6.5(g), (i) Aetna will not split,
combine or reclassify, or take any other similar action with respect to,
any capital stock of Aetna, and (ii) Aetna will not, and will not permit
any Subsidiary of Aetna to, repurchase, redeem or otherwise acquire an
amount of shares of capital stock of, or other ownership interests in,
Aetna or any Aetna Subsidiary Securities which repurchase, redemption or
other acquisition, individually or in the aggregate, is material to Aetna
and its Subsidiaries taken as a whole;

(i) except for (i) loans, advances or capital contributions to or
investments in Subsidiaries of Aetna, (ii) investments in securities
consistent with past practice or (iii) other loans, advances, capital
contributions or investments in an aggregate amount not exceeding
$25,000,000, Aetna will not permit any Aetna Health Operation to, make any
material loans, advances or capital contributions to, or investments in,
any other Person;

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(l) except as previously disclosed to U.S. Healthcare and except for
such contracts as would not be material to Aetna or the Aetna Health
Operation or material to their operation in any Standard Metropolitan
Statistical Area, Aetna will not permit any Aetna Health Operation to enter
into any contract limiting the right of any Aetna Health Operation at any
time on or after the date of this Agreement or U.S. Healthcare or any of
its Subsidiaries or Affiliates at or after the Merger Date, to engage in,
or to compete with any Person in, any business, including, without
limitation, any contract which includes exclusivity provisions restricting
the geographical area in which, or the method by which, any such business
may be conducted by Aetna or any of its Subsidiaries or Affiliates, or by
U.S. Healthcare or any of its Subsidiaries or Affiliates after the Merger
Date;

(n) subject (in the case of an acquisition) to Section 6.5(b), Aetna
will not permit any Aetna Health Operation to enter into any agreement or
arrangement with a third party on an exclusive basis to offer or market any
of the following services of such third party: group life, disability,
managed workers' compensation, long term care, dental, behavioral or
pharmacy benefits; and

(o) Aetna will not, and will not permit any Subsidiary of Aetna to,
agree, commit or adopt any plan or proposal to do any of the foregoing.

SECTION 6.6. Other Offers Relating to Aetna. From the date hereof until
the termination hereof, Aetna will not, and will cause its Subsidiaries and the
directors, officers, employees, financial advisors and other agents or
representatives of Aetna or any of its Subsidiaries not to, directly or
indirectly, take any action to solicit, initiate or encourage any Aetna
Acquisition Proposal or engage in negotiations with, or disclose any nonpublic
information relating to Aetna or any Subsidiary of Aetna or afford access to the
properties, books or records of Aetna or any Subsidiary of Aetna to, any Person
that may be considering making, or has made, an Aetna Acquisition Proposal;
provided that nothing contained in this Section 6.6 shall prevent Aetna from
furnishing non-public information to, or entering into discussions or
negotiations with, any Person in connection with an unsolicited bona fide Aetna
Acquisition Proposal, with respect to if and only to the extent that (1) the
Board of Directors of Aetna determines in good faith after consultation with
independent counsel that such action is necessary in order to comply with its
fiduciary duties under applicable law and (2) prior to furnishing non-public
information to, or entering into discussions or negotiations with, such Person,
Aetna receives from such Person an executed confidentiality agreement with terms
no less favorable to Aetna than those contained in the Confidentiality
Agreement. Aetna will promptly (and in no event later than 24 hours after
receipt of the relevant Aetna Acquisition Proposal) notify (which notice shall
be provided orally and in writing and shall identify the Person making the
relevant Aetna Acquisition Proposal and set forth the material terms thereof)
U.S. Healthcare after receipt of any Aetna Acquisition Proposal or any request
for nonpublic information relating to Aetna or any Subsidiary of Aetna or for
access to any properties, books or records of Aetna or any Subsidiary of Aetna
by any Person that may be considering making, or has made, an Aetna Acquisition
Proposal and will keep U.S. Healthcare fully informed of the status and details
of any such Aetna Acquisition Proposal. Aetna shall give U.S. Healthcare at
least one days' advance notice of any information to be supplied to, and at
least three days' advance notice of any agreement to be entered into with, any
Person making such Aetna Acquisition Proposal. Aetna shall, and shall cause its
Subsidiaries and the directors, officers, employees, financial advisors and
other agents or representatives of Aetna or any of its Subsidiaries to, cease
immediately and cause to be terminated all activities, discussions or
negotiations, if any, with any Persons conducted heretofore with respect to any
Aetna Acquisition Proposal. For purposes of this Agreement, "Aetna Acquisition
Proposal" means any offer or proposal for, or any indication of interest in, (i)
a merger or other business combination involving Aetna or any of the Aetna
Health Operations or (ii) the acquisition in any manner of any significant
equity interest in, or a substantial portion of the assets of, the Aetna Health
Operations, in each case other than the transactions contemplated by this
Agreement.

SECTION 6.7. Amendment of the Stock Purchase Agreement. Aetna agrees that
it will not agree to any amendment, modification or waiver of the Stock Purchase
Agreement which would have a Material

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Adverse Effect on Aetna or which would materially impair or adversely affect in
a material respect the ability of Aetna to satisfy its obligations under this
Agreement.

SECTION 6.8. Dividends. It is understood by U.S. Healthcare that the
annual dividend to be paid in respect of Parent Common Stock (the "New Annual
Dividend") will be an amount below the dividend currently paid in respect of
Aetna Stock. Initially after the Merger Date, subject to applicable law, the New
Annual Dividend will not be less than $0.80 per share of Parent Common Stock.

ARTICLE 7

COVENANTS OF AETNA,
U.S. HEALTHCARE AND PARENT

The parties hereto agree that:

SECTION 7.1. Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate the
Mergers and the other transactions contemplated by this Agreement.

SECTION 7.2. Cooperation. Without limiting the generality of Section 7.1,
Aetna and U.S. Healthcare shall together, or pursuant to an allocation of
responsibility to be agreed between them, coordinate and cooperate (i) with
respect to the timing of the Aetna Shareholder Meeting and U.S. Healthcare
Shareholder Meeting and shall use their reasonable best efforts to hold such
meetings on the same day, (ii) in connection with the preparation of U.S.
Healthcare Disclosure Documents, the Aetna Disclosure Documents and the Parent
Disclosure Documents, (iii) in determining whether any action by or in respect
of, or filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the Mergers or the other transactions contemplated by this
Agreement, (iv) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection therewith
or with the U.S. Healthcare Disclosure Documents, the Aetna Disclosure Documents
and the Parent Disclosure Documents, and timely seeking to obtain any such
actions, consents, approvals or waivers and (v) in diligently opposing any
objections to, appeals from or other similar actions with respect to any such
actions, consents, approvals or waivers. Subject to the terms and conditions of
this Agreement, Parent, Aetna and U.S. Healthcare will each use its reasonable
best efforts to have the Form S-4 declared effective under the 1933 Act as
promptly as practicable after the Form S-4 is filed.

SECTION 7.3. Public Announcements. Aetna and U.S. Healthcare will (i)
mutually agree on the text of any press release and (ii) consult with each other
before making any other public statement with respect to this Agreement and the
transactions contemplated by this Agreement, except, in each such case, as may
be required by applicable law or any listing or similar agreement with any
national securities exchange or the National Association of Securities Dealers
Automated Quotation System.

SECTION 7.4. Further Assurances. At and after the Merger Date, the
directors and officers of each of the surviving corporations in the Mergers will
be authorized to execute and deliver, in the name and on behalf of (x) U.S.
Healthcare or U.S. Healthcare Sub, and (y) Aetna or Aetna Sub, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of (x) U.S. Healthcare or U.S. Healthcare Sub, and (y) Aetna or Aetna Sub, any
other actions and things to vest, perfect or confirm of record or otherwise in
such surviving corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of U.S. Healthcare or Aetna, as
applicable, acquired or to be acquired by such surviving corporation as a result
of, or in connection with, the Mergers.

SECTION 7.5. Rule 145 Affiliates. At least 40 days prior to the Merger
Date, each of U.S. Healthcare and Aetna (each of which is referred to for
purposes of this Section 7.5 as a "Subject Company") shall cause to be delivered
to Parent a letter identifying all Persons who are at the time of the Subject
Company's Shareholder Meeting described in Section 5.2 or 6.2, as applicable,
deemed to be "affiliates" of the

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Subject Company for purposes of Rule 145 under the 1933 Act (the "1933 Act
Affiliates"). Each Subject Company shall use its best efforts to cause each
person who is identified as a 1933 Act Affiliate to deliver to Parent at least
30 days prior to the Merger Date an agreement substantially in the form of
Exhibit B-1 or B-2, as applicable, to this Agreement.

SECTION 7.6. Director and Officer Liability. (a) From and after the
Merger Date, Parent shall, and shall cause the U.S. Healthcare Surviving
Corporation to, indemnify, defend and hold harmless any person who is on the
date hereof, or has been at any time prior to the date hereof, or who becomes
prior to the Merger Date, an officer, director, or employee or agent, and the
Principal Shareholder (the "Indemnified Party") of U.S. Healthcare or any of its
Subsidiaries against all losses, claims, damages, liabilities, costs and
expenses (including attorney's fees and expenses), judgments, fines, losses, and
amounts paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "Claim") to the extent that any
such Claim is based on, or arises out of, (i) the fact that such person is or
was a director, officer, employee or agent or the Principal Shareholder of U.S.
Healthcare or any of its Subsidiaries at any time prior to the Merger Date or is
or was serving at the request of U.S. Healthcare or any of its Subsidiaries as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise at any time prior to the Merger Date, or (ii)
this Agreement, the Voting Agreement or any of the transactions contemplated
hereby or thereby, or (iii) Claims relating to the facts specified in the
consolidated lawsuit captioned J.H. Realty et. al. v. U.S. Healthcare (C.A.
95-CV-4176 and 95-CV-7180 (E.D. Pa.)) in each case to the extent that any such
Claim pertains to any matter or fact arising, existing, or occurring prior to or
at the Merger Date, regardless of whether such Claim is asserted or claimed
prior to, at or after the Merger Date (the matters described in clauses (i),
(ii) and (iii) the "Pre-Merger Matters"), to the fullest extent indemnified
under U.S. Healthcare's articles of incorporation, bylaws in effect as of the
date hereof or indemnification agreements in effect at the date hereof,
including provisions relating to advancement of expenses incurred in the defense
of any action or suit; provided that, for purposes of the foregoing, the
Principal Shareholder, in his capacity as such, shall be deemed to be a
beneficiary of such indemnification provisions; and, provided further that such
indemnification shall be subject to any limitation imposed from time to time
under applicable laws.

(b) Parent and the U.S. Healthcare Surviving Corporation agree that all
rights to indemnification and all limitations or exculpation of liabilities
existing in favor of the Indemnified Party as provided in U.S. Healthcare's
articles of incorporation and bylaws as in effect as of the date hereof shall
continue in full force and effect with respect to Pre-Merger Matters, without
any amendment thereto, for a period of six years from the Merger Date to the
extent such rights are consistent with Pennsylvania Law; provided that, in the
event any Claim or Claims with respect to any such Pre-Merger Matters are
asserted or made within such six year period, all rights to indemnification in
respect of any such Claim or Claims shall continue until disposition of any and
all such Claims; provided further, that any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under Pennsylvania Law, U.S. Healthcare's articles of
incorporation or bylaws or such agreements, as the case may be, shall be made by
independent legal counsel selected by the Indemnified Party and reasonably
acceptable to Parent; and provided further, that nothing in this Section 7.6
shall impair any rights or obligations of any present or former directors or
officers of U.S. Healthcare.

(c) In the event Parent or the U.S. Healthcare Surviving Corporation or any
of their successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case, to
the extent necessary to effectuate the purposes of this Section 7.6, proper
provision shall be made so that the successors and assigns of Parent and U.S.
Healthcare assume the obligations set forth in this Section 7.6 and none of the
actions described in clause (i) or (ii) shall be taken until such provision is
made.

(d) Parent or the U.S. Healthcare Surviving Corporation shall maintain U.S.
Healthcare's officers' and directors' liability insurance policy as of the
Merger Date ("D&O Insurance") with respect to Pre-Merger Matters for a period of
not less than six years after the Merger Date, provided, that Parent or the U.S.
Healthcare Surviving Corporation may substitute therefor policies of
substantially similar coverage and

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amounts containing terms no less advantageous to such former directors or
officers; provided, further, if the existing D&O Insurance with respect to
Pre-Merger Matters expires or is canceled during such period, Parent or the U.S.
Healthcare Surviving Corporation will use their best efforts to obtain
substantially similar D&O Insurance; and provided further that in satisfying its
obligations under this Section, Parent shall not be obligated to pay premiums in
excess of 150% of the premium for D&O Insurance paid by U.S. Healthcare as of
the date hereof, which amount has previously been disclosed to Aetna.

(e) The terms of Section 7.6(a) - 7.6(d) shall also apply, mutatis
mutandis, to Aetna, and Parent shall have obligations with respect to Aetna
corresponding to those of Parent with respect to U.S. Healthcare set forth in
Section 7.6.

(f) Notwithstanding anything to the contrary in Section 7.6(a), the
obligations of Parent to indemnify the Principal Shareholder set forth in
Section 7.6(a) in his capacity as such and not as a director or officer shall
(i) take effect as of the date hereof, (ii) prior to the Merger Date, be the
obligations of Aetna and (iii) be limited to Claims based on, or arising out of,
this Agreement, the Voting Agreement or any of the transactions contemplated
hereby or thereby involving the Principal Shareholder in his capacity as such.
Expenses that are subject to indemnification under this Section 7.6 shall be
advanced by Parent or Aetna, as applicable, and indemnification shall be paid in
accordance with the procedures set forth in U.S. Healthcare's bylaws in effect
as of the date hereof as the same have been modified pursuant to Section 7.6(b).

SECTION 7.7. Subsidiary Agreements. Parent shall cause the U.S.
Healthcare Surviving Corporation to perform its obligations under the agreements
described in Schedule 7.7 (the "Scheduled Contracts") and the employment
agreements with the Specified U.S. Healthcare Officers. In addition, Parent
shall not permit the U.S. Healthcare Surviving Corporation to terminate the
Scheduled Contracts until 2004 absent a breach by any other party thereto.

SECTION 7.8. Plans Following the Closing. Through December 31, 1998,
Parent will maintain employee plans and benefit arrangements for the benefit of
U.S. Healthcare employees that are reasonably comparable in the aggregate to the
U.S. Healthcare Employee Plans and U.S. Healthcare Benefit Arrangements. Any
changes shall be deemed reasonably comparable in the aggregate unless
unanimously rejected by the two Co-Presidents of U.S. Healthcare in their
reasonable good faith discretion.

SECTION 7.9. Voting of Shares. Aetna and U.S. Healthcare shall cause
Parent to vote, whether by means of written consent or otherwise, all shares of
capital stock of U.S. Healthcare Sub and Aetna Sub owned by Parent or any of its
Subsidiaries in favor of the approval and adoption of this Agreement.

SECTION 7.10. Form S-4. Subject to Sections 5.2 and 6.2, Aetna and U.S.
Healthcare shall cause Parent to promptly prepare and file with the SEC a
registration statement on Form S-4 with respect to the Parent Common Stock, the
corresponding Parent Rights issued with the Parent Common Stock pursuant to the
Parent Rights Agreement and Parent Preferred Stock issuable in connection with
the Mergers (the "Form S-4") and to take any action required to be taken under
applicable Blue Sky law in connection with such issuance of Parent Common Stock,
the corresponding Parent Rights issued with the Parent Common Stock pursuant to
the Parent Rights Agreement and Parent Preferred Stock.

SECTION 7.11. Certain Corporate Matters with Respect to Parent. (a) Aetna
and U.S. Healthcare shall cause Parent to take all necessary corporate action to
amend the certificate of incorporation and bylaws of Parent prior to the Merger
Date (x) to be in substantially the form of the certificate of incorporation and
bylaws of Aetna in effect on the date hereof (modified (i) as may be appropriate
to effect the transactions contemplated by this Agreement, (ii) as may be
appropriate to reflect the fact that Parent is not an "insurance corporation",
(iii) to change the par value of the Parent Common Stock from $1.00 to $.01,
(iv) to change the name of Parent to Aetna Inc., (v) to increase the authorized
capital stock of the Parent and (vi) as may be agreed by U.S. Healthcare and
Aetna), and (y) to fix the designation, rights and preferences of the
substantially in the form of Exhibit A hereto.

(b) From and after the Merger Date, until successors are duly elected or
appointed and qualified in accordance with applicable law, the Board of
Directors of Parent shall consist of the Board of Directors of Aetna immediately
prior to the Merger Date, and, no later than sixty days following the Merger
Date, the

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Board of Directors of Parent shall be expanded to include Leonard Abramson,
Chairman of U.S. Healthcare (the "Principal Shareholder"), and two other Persons
initially designated by U.S. Healthcare prior to the Merger Date (the Principal
Shareholder and such Persons, the "U.S. Healthcare Designees"), provided that
such other Persons may elect to become members of the Board of Directors of
Parent at any time during such sixty day period. Thereafter, if any of the U.S.
Healthcare Designees (with the exception of the Principal Shareholder) 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 to such U.S.
Healthcare Designees shall be selected by the Principal Shareholder. U.S.
Healthcare Designees (including, if applicable, any successor or successors
selected by the Principal Shareholder) will be nominated by the Parent Board of
Directors for election to such Board of Directors for a period of no less than
two consecutive years immediately following the Merger Date. The Parent Board of
Directors shall appoint the Principal Shareholder to any committee of the Parent
Board of Directors that is constituted for the purpose of identifying and
recommending a candidate to become Chief Executive Officer of Parent at such
time as the current Chief Executive Officer of Parent retires.

(c) From and after the Merger Date, all of the lines of business and
operations of U.S. Healthcare (including but not limited to all HMO, POS,
indemnity health insurance and other lines of business and operations) and all
of the domestic (U.S.) lines of business and operations of Aetna Health Plans
(including but not limited to all Health, Specialty Health and Group Insurance
lines of business and operations) (hereinafter referred to collectively as "The
Consolidated Health Operations") shall report to the two Co-Presidents of U.S.
Healthcare as of the date hereof, who will then assume the positions of
Co-Presidents of the Consolidated Health Operations (hereinafter referred to as
the "Co-Presidents"). The Co-Presidents shall have their principal offices in
Blue Bell, PA or such other location as they shall determine, and shall report
directly and exclusively to the Chief Executive Officer of Aetna. Reporting
directly and exclusively to the Co-Presidents shall be the individuals who serve
as the Chief Financial Officer, Chief Medical Officer, Senior Sales Officer and
Chief Legal Officer of U.S. Healthcare as of the date hereof, who will each
assume similar positions and responsibilities for the Consolidated Health
Operations as of the Merger Date except as may otherwise be mutually agreed
between the Co-Presidents and any of the specific officers. The Co-Presidents
will also select and appoint those other senior officers who will be reporting
directly to the Co-Presidents and responsible for other areas of responsibility
for the Consolidated Health Operations (including but not limited to Group
Insurance, Information Technology, Operations, Sales, National Accounts,
Behavioral Health, Dental, Pharmacy, Health Education, and Human Resources),
provided, however, that such appointments shall be made only in consultation
with and with the approval of the Chief Executive Officer of Aetna. The
Co-Presidents will also serve as Co-Chairs of a transition group consisting of
U.S. Healthcare and Aetna executives who will plan for and oversee the
integration activities of the Consolidated Health Operations to occur on and
after the Merger Date. For a period of twenty-four (24) months from the Merger
Date, no person employed by U.S. Healthcare as of the date hereof will be
discharged with or without cause or have his or her compensation reduced or his
or her principal office location changed absent the prior consent and approval
of the Co-Presidents. Any change or termination in the use of the U.S.
Healthcare name or apple logo with respect to U.S. Healthcare products marketed
as of the date hereof shall be as mutually agreed by the Chairman of Aetna and
the Co-Presidents. The provisions of this paragraph shall be subject to the
terms of any employment agreements entered into by U.S. Healthcare with any of
its employees as of the date hereof or with the Specified U.S. Healthcare
Officers as contemplated by this Agreement.

(d) Each of U.S. Healthcare and Aetna shall cause Parent to take all
necessary corporate action for the establishment of the Parent stock option plan
contemplated by Sections 1.7 and 1.8 hereof and agrees to vote the shares of
capital stock of Parent owned by it in favor of the adoption of such plan as
required under the laws of the State of Connecticut.

(e) From the date hereof until the Merger Date, Aetna and U.S. Healthcare
shall cause Parent (x) not to take any action inconsistent with the provisions
of this Agreement and (y) not to conduct business or activity other than in
connection with this Agreement.

SECTION 7.12. Governmental Authorization. Aetna and U.S. Healthcare shall
cause Parent to take all actions by or in respect of, or filing with, any
governmental body, agency, official or authority required for the execution,
delivery and performance by Parent of this Agreement and the consummation by
Parent of the

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transactions contemplated by this Agreement, including (a) compliance with any
applicable requirements of the HSR Act; (b) compliance with any applicable
requirements of the 1934 Act; (c) compliance with any applicable requirements of
the 1933 Act; (d) compliance with any applicable foreign or state securities or
Blue Sky laws; (e) approvals or filings required under laws, rules and
regulations governing insurance and insurance companies, health maintenance
organizations, health care services plans, third party administrators or other
managed health care organizations; and (f) the filing with the Secretary of the
State and, if required, the Insurance Commissioner of the State of Connecticut
of an amendment to the Parent's certificate of incorporation to reflect the
matters contemplated by Section 7.11.

SECTION 7.13. Disclosure Documents. Aetna and U.S. Healthcare shall cause
each document required to be filed by Parent with the SEC in connection with the
transactions contemplated by this Agreement (the "Parent Disclosure Documents"),
including, without limitation, the Form S-4, if any, to be filed with the SEC in
connection with the Mergers, and any amendments or supplements thereto, to, when
filed, comply as to form in all material respects with the applicable
requirements of the 1934 Act.

SECTION 7.14. Listing of Stock. Each of Aetna and U.S. Healthcare shall,
subject to the terms of this Agreement, use its reasonable best efforts to make
application to the NYSE or such other stock exchanges as shall be agreed for the
listing of the Parent Common Stock and Parent Preferred Stock and to list such
stock on the NYSE or such other exchanges.

ARTICLE 8

CONDITIONS TO THE MERGERS

SECTION 8.1. Conditions to the Obligations of Each Party. The obligations
of U.S. Healthcare to consummate the U.S. Healthcare Sub Merger and of Aetna to
consummate the Aetna Sub Merger are subject to the satisfaction (or waiver by
the party for whose benefit such conditions exist) of the following conditions:

(a) this Agreement and the transactions contemplated by this Agreement
shall have been approved and adopted by the shareholders of U.S. Healthcare
in accordance with the laws of the Commonwealth of Pennsylvania;

(b) this Agreement and the transactions contemplated by this Agreement
shall have been approved and adopted by the shareholders of Aetna in
accordance with the laws of the State of Connecticut;

(c) any applicable waiting period under the HSR Act relating to the
transactions contemplated by this Agreement shall have expired;

(d) no provision of any applicable law or regulation and no judgment,
injunction, order or decree of a court of competent jurisdiction shall
prohibit the consummation of either of the Mergers;

(e) the Form S-4 shall have been declared effective under the 1933 Act
and no stop order suspending the effectiveness of the Form S-4 shall be in
effect and no proceedings for such purpose shall be pending before or
threatened by the SEC;

(f) (i) U.S. Healthcare shall have received an opinion of Skadden,
Arps, Slate, Meagher & Flom in form and substance reasonably satisfactory
to U.S. Healthcare, and (ii) Aetna shall have received an opinion of Davis
Polk & Wardwell in form and substance satisfactory to Aetna, in each case
on the basis of certain facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing on the
Merger Date, to the effect that neither it nor any of its shareholders
shall recognize gain or loss for U.S. Federal income tax purposes as a
result of the Merger to which it is a party (other than in respect of (x)
the Cash Consideration or (y) any cash paid in lieu of fractional shares).
In rendering the opinions described in the preceding sentence, such counsel
may require and rely upon representations contained in certificates of
officers of Parent, U.S. Healthcare, Aetna and their respective
Subsidiaries;

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(g) the shares of Parent Common Stock and Parent Preferred Stock
issuable in the Mergers shall have been approved for listing on the NYSE
upon official notice of issuance or such other stock exchanges as shall be
agreed;

(h) all actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of
the U.S. Healthcare Sub Merger and the Aetna Sub Merger including, without
limitation, any approvals or filings required under federal or state laws,
rules and regulations governing insurance and insurance companies, health
maintenance organizations, health care services plans, third party
administrators or other managed health care organizations, or any actions
or filings pursuant to the New Jersey Industrial Site Recovery Act shall
have been made or obtained; and

(i) the transaction contemplated by the Stock Purchase Agreement dated
as of November 28, 1995 between The Travelers Insurance Group Inc. and
Aetna (the "Stock Purchase Agreement") relating to the purchase and sale of
100% of the Common Stock of The Aetna Casualty and Surety Company and The
Standard Fire Insurance Company shall have been consummated.

SECTION 8.2. Conditions to the Obligations of Aetna. The obligations of
Aetna to consummate the Aetna Sub Merger are subject to the satisfaction (or
waiver by Aetna) of the following further conditions:

(a) (i) U.S. Healthcare shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior
to the Merger Date, (ii) the representations and warranties of U.S.
Healthcare contained in this Agreement shall be true at and as of the
Merger Date, as if made at and as of the Merger Date (without giving effect
to any materiality or Material Adverse Effect qualifications or materiality
exceptions contained therein); provided that the condition set forth in
clause (ii) shall be deemed satisfied if any inaccuracies in any such
representations and warranties at and as of the Merger Date (without giving
effect to any materiality or Material Adverse Effect qualifications or
materiality exceptions contained therein) would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect
on U.S. Healthcare; and Aetna shall have received a certificate signed by
an executive officer of U.S. Healthcare to the effect set forth in clauses
(i) and (ii) (after giving effect to the proviso therein); and

(b) At least twelve of the Persons listed on Schedule 8.2(b) shall
have entered into employment agreements with U.S. Healthcare substantially
in the form of Schedule 3.11(j)(A) hereto.

SECTION 8.3. Conditions to the Obligations of U.S. Healthcare. The
obligations of U.S. Healthcare to consummate the U.S. Healthcare Sub Merger are
subject to the satisfaction (or waiver by U.S. Healthcare) of the following
further conditions:

(a) (i) Aetna shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Merger Date, (ii) the representations and warranties of Aetna contained in
this Agreement shall be true at and as of the Merger Date, as if made at
and as of the Merger Date (without giving effect to any materiality or
Material Adverse Effect qualifications or materiality exceptions contained
therein); provided that the condition set forth in clause (ii) shall be
deemed satisfied if any inaccuracies in any such representations and
warranties at and as of the Merger Date (without giving effect to any
materiality or Material Adverse Effect qualifications or materiality
exceptions contained therein) would not, individually or in the aggregate,
have or reasonably be expected to have a Material Adverse Effect on Aetna;
and U.S. Healthcare shall have received a certificate signed by an
executive officer of Aetna to the effect set forth in clauses (i) and (ii)
hereof (after giving effect to the proviso therein); and

(b) the average of the closing prices per share of the Aetna Common
Stock on the NYSE Composite Tape for the 20 consecutive trading days
immediately prior to the proposed Merger Date (the "Average Closing Stock
Price") is not less than $60.90, provided that this condition shall be
deemed to be satisfied notwithstanding the fact that the Average Closing
Stock Price is less than $60.90 if Aetna, in its sole discretion, agrees to
increase that portion of the Merger Consideration payable in respect of
each share of U.S. Healthcare Stock by an amount in cash equal to (A) the
difference between (I) a fraction, the numerator of which is $60.90 and the
denominator of which is the Average Closing Stock Price and (II) 1, and
multiplying such difference by (B) the product of (y) 0.2995 and (z) the
Average Closing Stock Price.

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ARTICLE 9

TERMINATION

SECTION 9.1. Termination. This Agreement may be terminated and the
Mergers may be abandoned at any time prior to the Merger Date (notwithstanding
any approval of this Agreement by the shareholders of U.S. Healthcare or Aetna):

(a) by mutual written consent of U.S. Healthcare and Aetna;

(b) by either U.S. Healthcare or Aetna, if the Merger has not been
consummated by the date twelve months following the date of this Agreement;

(d) by Aetna, in the event of any breach by the Principal Shareholder
of any obligations under the Voting Agreement dated as of the date hereof
(the "VOTING AGREEMENT") among the Principal Shareholder, Aetna Life
Insurance and Annuity Company and Aetna Life Insurance Company as amended
by Amendment No. 1 thereto dated May 30, 1996;

(e) (i) by U.S. Healthcare, if the approvals of the shareholders of
Aetna contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of
shareholders or any adjournment thereof or (ii) by Aetna, if the approvals
of the shareholders of U.S. Healthcare contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote
at a duly held meeting of shareholders or any adjournment thereof;

(f) by Aetna, if, (i) the Board of Directors of U.S. Healthcare
determines not to call or hold the U.S. Healthcare Shareholder Meeting or
(ii) prior to the U.S. Healthcare Shareholder Meeting, the Board of
Directors of U.S. Healthcare shall have withdrawn, modified or changed in a
manner adverse to Aetna its approval or recommendation of this Agreement or
the U.S. Healthcare Sub Merger;

(g) by U.S. Healthcare, if, (i) the Board of Directors of Aetna
determines not to call or hold the Aetna Shareholder Meeting or (ii) prior
to the Aetna Shareholder Meeting, the Board of Directors of Aetna shall
have withdrawn, modified or changed in a manner adverse to U.S. Healthcare
its approval or recommendation of this Agreement or the Aetna Sub Merger;

(h) by Aetna, upon a breach of any representation, warranty, covenant
or agreement of U.S. Healthcare, or if any representation or warranty of
U.S. Healthcare shall become untrue, in either case such that the
conditions set forth in Section 8.2(a) would be incapable of being
satisfied by the first anniversary of the date hereof (or as otherwise
extended);

(i) by U.S. Healthcare, upon a breach of any representation, warranty,
covenant or agreement of Aetna, or if any representation or warranty of
Aetna shall become untrue, in either case such that the conditions set
forth in Section 8.3(a) would be incapable of being satisfied by the first
anniversary of the date hereof (or as otherwise extended);

(j) by U.S. Healthcare, upon payment to Aetna of the amounts referred
to in Section 10.4(b), if prior to the U.S. Healthcare Shareholder Meeting,
the Board of Directors of U.S. Healthcare shall have withdrawn or modified
in a manner adverse to Aetna its approval or recommendation of this
Agreement or the U.S. Healthcare Sub Merger in order to permit U.S.
Healthcare to execute a definitive agreement in connection with an
Acquisition Proposal with respect to U.S. Healthcare which the Board of
Directors of U.S. Healthcare determines in good faith (based on the
presentation of an investment banking firm of national reputation) to be
more favorable to U.S. Healthcare's shareholders than the U.S. Healthcare
Sub Merger; and

(k) by U.S. Healthcare, if the Stock Purchase Agreement is terminated
in accordance with its terms.

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<PAGE> 228

The party desiring to terminate this Agreement pursuant to this Section 9.1
shall give written notice of such termination to the other party in accordance
with Section 10.1.

SECTION 9.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (a) the agreements
contained in this Section 9.2 and in Section 10.4 shall survive the termination
hereof and (b) no such termination shall relieve any party of any liability or
damages resulting from any breach by that party of this Agreement.

ARTICLE 10

MISCELLANEOUS

SECTION 10.1. Notices. Except as provided in Section 5.4, all notices,
requests and other communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given,

if to Aetna, to:

Aetna Life and Casualty Company
151 Farmington Avenue
Hartford, CT 06156-7505
Fax: 860-549-6755
Attention: Richard L. Huber
Vice Chairman

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Lewis B. Kaden

if to U.S. Healthcare, to:

U.S. Healthcare, Inc.
780 Jolly Road
P.O. Box 1109
Blue Bell, PA 19422
Fax: 215-283-6401
Attention: David Simon

with a copy to:

Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2000
Attention: Stephen M. Banker

if to Parent, to:

each of the addresses set forth above

or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.

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<PAGE> 229

SECTION 10.2. Entire Agreement; Survival of Representations and
Warranties. (a) This Agreement (including the Exhibits hereto), the other
agreements referred to in this Agreement and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to such
subject matter. None of this Agreement, the Confidentiality Agreement or any
other agreement contemplated hereby or thereby (or any provision hereof or
thereof) is intended to confer on any Person other than the parties hereto or
thereto any rights or remedies (except that Sections 7.6 and 7.7 are intended to
confer rights and remedies on the Persons specified therein, Sections 7.8 and
7.11(c) are intended to confer rights and remedies on the Co-Presidents and
Section 7.11(b) is intended to confer rights and remedies on the Principal
Shareholder).

(b) The representations and warranties contained herein shall not survive
the Merger Date.

SECTION 10.3. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Merger Date if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
U.S. Healthcare, Aetna and Parent or, in the case of a waiver, by the party
against whom the waiver is to be effective; provided that after the adoption of
this Agreement by the shareholders of (i) U.S. Healthcare, no such amendment or
waiver shall, without the further approval of such shareholders, alter or change
(A) the amount or kind of consideration to be received in exchange for any
shares of capital stock of U.S. Healthcare, or (B) any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
the holders of any shares of capital stock of U.S. Healthcare and (ii) Aetna, no
such amendment or waiver shall, without the further approval of such
shareholders, alter or change (A) the amount or kind of consideration to be
received in exchange for any shares of capital stock of Aetna or (B) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of Aetna.

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

SECTION 10.4. Expenses. (a) Except as otherwise specified in this Section
10.4 or agreed in writing by the parties, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such cost or expense.

(b) U.S. Healthcare agrees that if this Agreement shall be terminated
pursuant to Section 9.1(e)(ii), (f), or (j), it will pay Aetna an amount equal
to $100,000,000 plus all out-of-pocket expenses, not to exceed $25,000,000,
incurred by Aetna in connection with this Agreement, the Mergers and all related
transactions by wire transfer of immediately available funds promptly, but in no
event later than two business days, after such termination; provided that no
payment will be required pursuant to this Section 10.4(b) if this Agreement is
terminated pursuant to Section 9.1(e)(ii) unless, after the date hereof, U.S.
Healthcare shall have received, or there shall have been commenced, an
Acquisition Proposal with respect to U.S. Healthcare.

(c) U.S. Healthcare agrees that if this Agreement shall be terminated
pursuant to Section 9.1(e)(ii) and no payment is required by it pursuant to
Section 10.4(b), it will reimburse Aetna for all out-of-pocket expenses (not to
exceed $25,000,000) incurred by Aetna in connection with this Agreement, the
Merger and all related transactions. Such payment shall be made by wire transfer
of immediately available funds promptly, but in no event later than two business
days, after such termination.

(d) Aetna agrees that if this Agreement shall be terminated (i) pursuant to
Section 9.1(e)(i), (g) or (k), or (ii) pursuant to Section 9.1(b) and (A) the
condition set forth in Section 8.1(i) has not been satisfied or waived by Aetna
and (B) all other conditions set forth in Section 8.1 and 8.2 have theretofore
been, or are then capable of being satisfied, it will pay U.S. Healthcare an
amount equal to $100,000,000 plus all out-of-pocket expenses, not to exceed
$25,000,000, incurred by U.S. Healthcare in connection with this Agreement, the
Mergers and all related transactions by wire transfer of immediately available
funds promptly, but in no event later than two business days, after such
termination; provided that no payment will be required

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<PAGE> 230

pursuant to this Section 10.4(d) if this Agreement is terminated pursuant to
Section 9.1(e)(i) unless, after the date hereof, Aetna shall have received, or
there shall have been commenced, an Aetna Acquisition Proposal.

(e) Aetna agrees that if this Agreement shall be terminated pursuant to
Section 9.1(e)(i) and no payment is required by it pursuant to Section 10.4(d),
it will reimburse U.S. Healthcare for all out-of-pocket expenses (not to exceed
$25,000,000) incurred by U.S. Healthcare in connection with this Agreement, the
Mergers and all related transactions. Such payment shall be made by wire
transfer of immediately available funds promptly, but in no event later than two
business days, after receipt by Aetna of a written notice given by U.S.
Healthcare setting forth the amount of such expenses.

SECTION 10.5. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto; provided further that Aetna may
assign its rights, but not its obligations, under this Agreement to a
wholly-owned subsidiary of Aetna.

SECTION 10.6. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York (without regard
to principles of conflict of laws).

SECTION 10.7. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated by this Agreement may be
brought against any of the parties in the United States District Court for the
Southern District of New York or any state court sitting in the City of New
York, Borough of Manhattan, and each of the parties hereto hereby consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts) in any such suit, action or proceeding and waives any objection to venue
laid therein. Process in any such suit, action or proceeding may be served on
any party anywhere in the world, whether within or without the State of New
York. Without limiting the generality of the foregoing, each party hereto agrees
that service of process upon such party at the address referred to in Section
10.1, together with written notice of such service to such party, shall be
deemed effective service of process upon such party.

SECTION 10.8. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.

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<PAGE> 231

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

AETNA LIFE AND CASUALTY COMPANY

By /s/ RONALD COMPTON

------------------------------------
Name: Ronald Compton
Title: Chairman and Chief Executive
Officer

U.S. HEALTHCARE, INC.

By /s/ JOSEPH T. SEBASTIANELLI

------------------------------------
Name: Joseph T. Sebastianelli
Title: Co-President

AETNA INC.

By /s/ RICHARD HUBER

------------------------------------
Name: Richard Huber
Title: Vice President

ANTELOPE SUB, INC.

By /s/ RICHARD HUBER

------------------------------------
Name: Richard Huber
Title: Vice President

NEW MERGER CORPORATION

By /s/ JAMES DICKERSON

------------------------------------
Name: James Dickerson
Title: President

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<PAGE> 232

APPENDIX B -- AMENDED VOTING AGREEMENT
<PAGE> 233

COMPOSITE CONFORMED COPY

[GIVING EFFECT TO AMENDMENT NO. 1]

VOTING AGREEMENT AS AMENDED BY AMENDMENT NO. 1

Agreement dated as of March 30, 1996 among Leonard Abramson (the "PRINCIPAL
SHAREHOLDER"), Aetna Life Insurance Company, a Connecticut insurance
corporation, Aetna Life Insurance and Annuity Company, a Connecticut insurance
corporation (collectively, the "OTHER SHAREHOLDERS"). Capitalized terms used but
not defined herein shall have the meanings ascribed to such terms in the Merger
Agreement (as defined below) as amended by Amendment No. 1 thereto dated May 30,
1996.

In consideration of the execution by Aetna Life and Casualty Company, a
Connecticut insurance corporation ("AETNA"), of the Agreement and Plan of Merger
dated as of March 30, 1996 (the "MERGER AGREEMENT") among Aetna, U.S.
Healthcare, Inc., a Pennsylvania corporation ("U.S. HEALTHCARE"), Aetna Inc.
("PARENT"), a Connecticut corporation, New Merger Corporation, a Pennsylvania
corporation, and Antelope Merger Sub, Inc., a Connecticut corporation, a copy of
which is attached as Exhibit A hereto, and other good and valuable
consideration, receipt of which is hereby acknowledged, the Principal
Shareholder and the Other Shareholders hereby agree as follows:

1. Representations and Warranties of Principal Shareholder. The Principal
Shareholder hereby represents and warrants to the Other Shareholders as follows:

(a) Title. As of the date hereof, the Principal Shareholder beneficially
owns 1,818,755 shares (including 1,806,803 shares held in various trusts for the
benefit of his children and grandchildren, but not including any stock options
owned by him) of Common Stock ("COMMON STOCK"), par value $0.005 per share, of
U.S. Healthcare and 14,411,955 shares of Class B Stock ("CLASS B STOCK"), par
value $0.005 per share, of U.S. Healthcare (the shares of Class B Stock so owned
by Principal Shareholder, the "CLASS B SHARES"). As of the date hereof, the
Principal Shareholder holds options to purchase 450,000 shares of Common Stock,
all of which will become exercisable upon execution and delivery of the Merger
Agreement. The Principal Shareholder holds no options to purchase Class B Stock
and, except as set forth in this Section 1(a), as of the date hereof the
Principal Shareholder does not (i) beneficially own any shares of any class or
series of capital stock of U.S. Healthcare or any securities convertible into or
exercisable for shares of any class or series of U.S. Healthcare's capital stock
or (ii) have any rights to acquire any shares of any class or series of capital
stock of U.S. Healthcare or any securities convertible into or exercisable for
shares of any class of U.S. Healthcare's capital stock. The Principal
Shareholder owns the Class B Shares free and clear of all liens, claims,
options, charges or other encumbrances. The Class B Shares represent
approximately 83.7% of the total voting power of U.S. Healthcare's capital stock
as of the date hereof.

(b) Right to Vote. The Principal Shareholder has full legal power,
authority and right to vote all Class B Shares in favor of approval and adoption
of the Merger Agreement and the transactions contemplated by the Merger
Agreement without the consent or approval of, or any other action on the part
of, any other person or entity. Without limiting the generality of the
foregoing, except for this Agreement, the Principal Shareholder has not entered
into any voting agreement with any person or entity with respect to any of the
Class B Shares, granted any person or entity any proxy (revocable or
irrevocable) or power of attorney with respect to any of the Class B Shares,
deposited any of the Class B Shares in a voting trust or entered into any
arrangement or agreement with any person or entity limiting or affecting the
Principal Shareholder's legal power, authority or right to vote the Class B
Shares in favor of the approval and adoption of the Merger Agreement or any of
the transactions contemplated by the Merger Agreement. As of the date of the
U.S. Healthcare shareholders meeting to vote on approval and adoption of the
Merger Agreement and, to the extent submitted to shareholders for approval, the
transactions contemplated by the Merger Agreement, including any adjournment or
postponement thereof (the "U.S. HEALTHCARE SHAREHOLDERS MEETING"), except for
this Agreement, the Principal Shareholder will have full legal power, authority
and right to vote all Class B Shares in favor of the approval and adoption of
the Merger Agreement and the transactions contemplated by the Merger Agreement
without the consent or approval of, or any other action on the part of, any
other person or entity. From and after the date hereof, the Principal
Shareholder will not commit any act that could restrict or otherwise affect such
legal power, authority and right to vote all Class B Shares in favor of the
approval and

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<PAGE> 234

adoption of the Merger Agreement and the transactions contemplated by the Merger
Agreement. Without limiting the generality of the foregoing, from and after the
date hereof the Principal Shareholder will not enter into any voting agreement
with any person or entity with respect to any of the Class B Shares, grant any
person or entity any proxy (revocable or irrevocable) or power of attorney with
respect to any of the Class B Shares, deposit any of the Class B Shares in a
voting trust or otherwise enter into any agreement or arrangement limiting or
affecting the Principal Shareholder's legal power, authority or right to vote
the Class B Shares in favor of the approval and adoption of the Merger Agreement
and the transactions contemplated by the Merger Agreement (other than this
Agreement).

(c) Authority. The Principal Shareholder has full legal power, authority
and right to execute and deliver, and to perform his obligations under, this
Agreement. This Agreement has been duly executed and delivered by the Principal
Shareholder and constitutes a valid and binding agreement of the Principal
Shareholder enforceable against the Principal Shareholder in accordance with its
terms, subject to (i) bankruptcy, insolvency, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether considered in a
proceeding at law or in equity).

(d) Conflicting Instruments; No Transfer. Neither the execution and
delivery of this Agreement nor the performance by the Principal Shareholder of
his agreements and obligations hereunder will result in any breach or violation
of or be in conflict with or constitute a default under any term of (i) any
agreement, judgment, injunction, order, decree, law, regulation or arrangement
to which the Principal Shareholder is a party or by which the Principal
Shareholder (or any of his assets) is bound, except for any such breach,
violation, conflict or default which, individually or in the aggregate, would
not impair or affect the Principal Shareholder's ability to cast all votes
necessary to approve and adopt the Merger Agreement and the transactions
contemplated by the Merger Agreement or (ii) the Articles of Incorporation of
U.S. Healthcare.

2. Representations and Warranties of Other Shareholders. Each Other
Shareholder hereby represents and warrants to the Principal Shareholder that
this Agreement has been duly authorized by all necessary corporate action on its
part, has been duly executed and delivered by such Other Shareholder and is a
valid and binding agreement of such Other Shareholder enforceable against such
Other Shareholder in accordance with its terms, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and the rights of creditors of insurance companies generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity).

3. Restriction on Transfer. The Principal Shareholder agrees that (other
than pursuant to the Merger Agreement) he will not, and will not agree to, (i)
sell, assign, dispose of, encumber, mortgage, hypothecate or otherwise transfer
(collectively, "TRANSFER") any Class B Shares or any options, warrants or other
rights to acquire Class B Stock to any person or entity or (ii) convert (or
allow the conversion of) any Class B Shares into shares of Common Stock of U.S.
Healthcare; provided that, notwithstanding clause (i), the Principal Shareholder
shall be permitted to Transfer Class B Shares to any "Permitted Transferee" (as
defined in U.S. Healthcare's Articles of Incorporation) if prior to and as a
condition of such Transfer such Permitted Transferee enters into a written
agreement with the Other Shareholders (in form and substance satisfactory to the
Other Shareholders) agreeing to be bound by the terms of this Agreement binding
on the Principal Shareholder.

4. Agreement to Vote of Principal Shareholder. The Principal Shareholder
hereby irrevocably and unconditionally agrees to vote or to cause to be voted
all Class B Shares at the U.S. Healthcare Shareholders Meeting and at any other
annual or special meeting of shareholders of U.S. Healthcare where such matters
arise (a) in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated by the Merger Agreement and (b) against (i) approval
of any proposal made in opposition to or in competition with the Mergers or any
of the other transactions contemplated by the Merger Agreement, (ii) any merger,
consolidation, sale of assets, business combination, share exchange,
reorganization or recapitalization of U.S. Healthcare or any of its
subsidiaries, with or involving any party other than Aetna, the Other
Shareholders or one of their respective subsidiaries, (iii) any liquidation or
winding up of U.S. Healthcare, (iv) any

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extraordinary dividend by U.S. Healthcare, (v) any change in the capital
structure of U.S. Healthcare (other than pursuant to the Merger Agreement) and
(vi) any other action that may reasonably be expected to impede, interfere with,
delay, postpone or attempt to discourage the Mergers or the other transactions
contemplated by the Merger Agreement or result in a breach of any of the
covenants, representations, warranties or other obligations or agreements of
U.S. Healthcare under the Merger Agreement which would materially and adversely
affect U.S. Healthcare or its ability to consummate the transactions
contemplated by the Merger Agreement.

5. Action in Principal Shareholder Capacity Only. The Principal
Shareholder makes no agreement or understanding herein as director or officer of
U.S. Healthcare. The Principal Stockholder signs solely in his capacity as a
recordholder and beneficial owner of the Class B Shares, and nothing herein
shall limit or affect any actions taken in his capacity as an officer or
director of U.S. Healthcare.

6. Invalid Provisions. If any provision of this Agreement shall be invalid
or unenforceable under applicable law, such provision shall be ineffective to
the extent of such invalidity or unenforceability only, without it affecting the
remaining provisions of this Agreement.

7. Executed in Counterparts. This Agreement may be executed in
counterparts each of which shall be an original with the same effect as if the
signatures hereto and thereto were upon the same instrument.

8. Specific Performance. The parties hereto agree that if for any reason
the Principal Shareholder fails to perform any of his agreements or obligations
under this Agreement irreparable harm or injury to the Other Shareholders and
Aetna would be caused for which money damages would not be an adequate remedy.
Accordingly, the Principal Shareholder agrees that, in seeking to enforce this
Agreement against the Principal Shareholder, the Other Shareholders and Aetna
shall be entitled to specific performance and injunctive and other equitable
relief. The provisions of this Section 8 constitute the Other Shareholders' and
Aetna's sole remedy in the event of a breach by the Principal Shareholder of any
of his representations or warranties under this Agreement; provided that, with
respect to the Principal Shareholder's agreements and obligations under this
Agreement, the provisions of this Section 8 are without prejudice to any other
rights or remedies, whether at law or in equity, that the Other Shareholders or
Aetna may have against the Principal Shareholder for any failure to perform any
of his agreements or obligations under this Agreement.

9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to the principles of conflicts of laws thereof.

10. Amendments; Termination. (a) This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.

(b) The provisions of this Agreement shall terminate upon the earliest to
occur of (i) the consummation of the Mergers, (ii) the date which is 18 months
after the date hereof or (iii) the termination of the Merger Agreement if, but
only if, the Merger Agreement is terminated solely for reasons that are not
directly or indirectly related to the commencement of, or any Person's direct or
indirect indication of interest in making, an Acquisition Proposal with respect
to U.S. Healthcare.

(c) For purposes of this Agreement, the term "MERGER AGREEMENT" includes
the Merger Agreement, as the same may be modified or amended from time to time;
provided that no such amendment or modification amends or modifies the Merger
Agreement in a manner such that the Merger Agreement, as so amended or modified,
is less favorable to the Principal Shareholder in any material respect than is
the Merger Agreement in effect on the date hereof.

11. Additional Shares. If, after the date hereof, the Principal
Shareholder acquires beneficial ownership of any shares of Class B Stock (any
such shares, "ADDITIONAL SHARES"), including, without limitation, upon exercise
of any option, warrant or right to acquire Class B Stock or through any stock
dividend or stock split, the provisions of this Agreement (other than those set
forth in Section 1) applicable to Class B Shares shall be applicable to such
Additional Shares as if such Additional Shares had been Class B Shares as of the
date hereof. The provisions of the immediately preceding sentence shall be
effective with respect to Additional

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Shares without action by any person or entity immediately upon the acquisition
by the Principal Shareholder of beneficial ownership of such Additional Shares.

12. Action by Written Consent. If, in lieu of the U.S. Healthcare
Shareholders Meeting, shareholder action in respect of the Merger Agreement or
any of the transactions contemplated by the Merger Agreement is taken by written
consent, the provisions of this Agreement imposing obligations in respect of or
in connection with the U.S. Healthcare Shareholders Meeting shall apply mutatis
mutandis to such action by written consent.

13. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal successors (including, in the case of the Principal Shareholder or any
other individual, any executors, administrators, estates, legal representatives
and heirs of the Principal Shareholder or such individual) and permitted
assigns; provided that no party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the consent of the
Other Shareholders (in the case of the Principal Shareholder or any of his
permitted assigns) or the Principal Shareholder (in the case of the Other
Shareholders or any of their permitted assigns), except that the Other
Shareholders' rights under this Agreement may be transferred to Aetna or any
wholly-owned subsidiary of Aetna. Without limiting the scope or effect of the
restrictions on Transfer set forth in Section 3 hereof, Principal Shareholder
agrees that this Agreement and the obligations hereunder shall attach to the
Class B Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Class B Shares shall pass, whether by operation of
law or otherwise.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this 30th day of March, 1996.

By: /s/ LEONARD ABRAMSON

------------------------------------
LEONARD ABRAMSON

AETNA LIFE INSURANCE COMPANY

By: /s/ RICHARD HUBER

------------------------------------
Name: Richard Huber
Title: Vice Chairman

AETNA LIFE INSURANCE AND
ANNUITY COMPANY

By: /s/ SUSAN SCHECHTER

------------------------------------
Name: Susan Schechter
Title: Secretary

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<PAGE> 237

APPENDIX C -- FORM OF DESIGNATIONS, RIGHTS AND PREFERENCES OF 6.25%
CLASS C VOTING PREFERRED STOCK
<PAGE> 238

FORM OF

DESIGNATIONS, RIGHTS AND PREFERENCES OF
6.25% CLASS C VOTING PREFERRED STOCK

The terms, limitations and relating rights and preferences of shares of the
Corporation's Class C Voting Preferred Stock, par value $.01 per share, to be
designated as 6.25% PACS, Class C Voting Preferred Stock are hereby fixed as
follows:

SECTION 1. DESIGNATION AND AMOUNT.

The designation of the series of Class C Voting Preferred Stock created by
this Article shall be "6.25% Class C Voting Preferred Stock" (the "PACS").
The authorized number of shares constituting the PACS shall be shares.

SECTION 2. DIVIDENDS.

(a) The holders of outstanding shares of PACS shall be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
funds legally available therefor, cumulative preferential dividends from
[closing date], 1996, at the rate per share of $4.7578 per annum*, in cash
payable quarterly in equal amounts (other than with respect to the initial
dividend period) on , , , and of each
year (each such date being hereinafter referred to as a "Dividend Payment
Date"), or, if any Dividend Payment Date is not a business day, then the
Dividend Payment Date shall be the next succeeding business day; provided,
however, that with respect to any dividend period during which a redemption
occurs, the Corporation may, at its option, declare accrued dividends to, and
pay such dividends on, the redemption date, in which case such dividends would
be payable on the redemption date in cash to the holders of the shares of PACS
as of the record date for such dividend payment and such accrued dividends would
not be included in the calculation of the related Call Price (as hereinafter
defined). Each dividend on the shares of PACS shall be payable to holders of
record as they appear on the stock register of the Corporation on such record
date, not less than 10 nor more than 70 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors of the Corporation. The
first dividend payment shall be for the period from [closing date], 1996 to
, 1996 and the first dividend will be payable on , 1996.
Dividends (or amounts equal to accrued and unpaid dividends) payable on shares
of PACS for any period less than a full quarterly dividend period will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in any period less than one month.

Dividends on the shares of PACS will accrue on a daily basis beginning on
the date immediately following a Dividend Payment Date (except that, with
respect to the initial Dividend Payment Date, dividends on the shares of PACS
will accrue beginning on [closing date], 1996) whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared. Accumulated unpaid dividends shall not bear interest.
Dividends will cease to accrue in respect of shares of PACS on the Mandatory
Conversion Date (as hereinafter defined) or on the date of their earlier
conversion or redemption.

(b) So long as any shares of PACS are outstanding, no dividends or other
distributions (other than dividends payable in Junior Securities (as defined
below) or warrants, rights or options exercisable for or convertible into Junior
Securities, together with cash in lieu of fractional shares of Junior Securities
or fractional interests in any such warrants, rights or options), and no
redemption, purchase or other acquisition for value (other than redemptions,
purchases or acquisitions payable in Junior Securities or warrants, rights or
options exercisable for or convertible into Junior Securities, together with
cash in lieu of fractional shares of Junior Securities or fractional interests
in any such warrants, rights or options), shall be paid or made, as the case may
be, with respect to, nor may any funds be set aside or made available for any
sinking fund for the

- ---------------

*If the annual dividend for the Aetna Common Stock at the Merger Date is
set at a level above $0.83 per share, the annual PACS dividend will be
determined as follows: $4.7578 + [(annual dividend per share on Aetna Common
Stock - $0.83) X 0.8197]

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purchase or redemption of, (a) the Common Stock, par value $.01 per share, of
the Corporation ("Common Stock") or any other class or series of the
Corporation's capital stock ranking junior to the PACS 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 the PACS and Parity Preferred Stock in the
full amounts owing for all dividend periods ending, and all amounts payable upon
redemption or conversion of PACS and Parity Preferred Stock, on or prior to the
date on which the proposed dividend or distribution is paid, or the proposed
redemption, purchase or other acquisition is effected, have been, in the case of
dividends, declared and, in all cases, paid or set apart for payment.

(c) If any dividends are not paid or set apart in full, as aforesaid, with
respect to shares of PACS and any Parity Preferred Stock, all dividends declared
with respect to shares of PACS and any Parity Preferred Stock shall be declared
pro rata based on the number of shares so that the amount of dividends declared
per share on shares of PACS and such Parity Preferred Stock shall in all cases
bear to each other the same ratio that accrued dividends per share on shares of
PACS and such Parity Preferred Stock bear to each other. Holders of the shares
of PACS shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends as provided in Section
(2)(a).

(d) Subject to the foregoing provisions of this Section (2), the Board of
Directors may declare and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Junior Securities and Parity
Preferred Stock and may redeem, purchase or otherwise acquire any Junior
Securities and Parity Preferred Stock, in either case from time to time, and the
holders of the shares of PACS shall not be entitled to share therein.

(e) Any dividend payment made on shares of PACS shall first be credited
against the earliest accrued but unpaid dividend due with respect to shares of
PACS.

(f) All dividends paid with respect to shares of PACS pursuant to this
Section (2) shall be paid pro rata to the holders entitled thereto.

SECTION 3. REDEMPTION AND CONVERSION.

(a) Mandatory Conversion. On [anniversary date of closing date], 2000 (the
"Mandatory Conversion Date"), subject to (x) the right of the Corporation to
redeem the shares of PACS on or after [anniversary date of closing date], 1999
(the "Initial Redemption Date") and prior to the Mandatory Conversion Date, as
described below, and (y) the conversion of the shares of PACS at the option of
the holder at any time prior to the Mandatory Conversion Date, as described
below, each outstanding share of PACS shall convert automatically (the
"Mandatory Conversion") into

(i) shares of Common Stock at the Common Equivalent Rate (as
hereinafter defined) in effect on the Mandatory Conversion Date; and

(ii) the right to receive an amount in cash equal to all accrued and
unpaid dividends on such share of PACS (the "Accrued Dividend Amount")
(other than previously declared dividends payable to a different holder of
record on a prior date) to the Mandatory Conversion Date, whether or not
declared, out of funds legally available for the payment of dividends. The
Common Equivalent Rate is initially one share of Common Stock for each
share of PACS and is subject to adjustment as set forth below (the "Common
Equivalent Rate").

(b) Redemption by the Corporation.

(i) Right to Redeem. Shares of PACS are not redeemable by the
Corporation prior to the Initial Redemption Date. At any time and from time
to time on or after the Initial Redemption Date and prior to the Mandatory
Conversion Date, the Corporation shall have the right to redeem, in whole
or in part, the outstanding shares of PACS. Upon any such redemption, the
Corporation shall deliver to the holders of shares of PACS in exchange for
each share so redeemed, the greater of (A) a number of shares of Common
Stock equal to the Call Price (as hereinafter defined) in effect on the
redemption date, divided by the Current Market Price of the Common Stock
determined as of the second trading day immediately

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preceding the Notice Date (as hereinafter defined) or (B) .8197 of a share
of Common Stock (each a "Redemption Rate")(subject to adjustment as set
forth below). The public announcement of any call for redemption shall be
made prior to, or at the time of, the mailing of the notice of such call to
holders of shares of PACS as described below. If fewer than all the
outstanding shares of PACS are to be redeemed, shares of PACS to be
redeemed shall be selected by the Corporation from outstanding shares of
PACS not previously redeemed by lot or pro rata (as nearly as may be
practicable). As used in this subparagraph (b), the term "Notice Date" with
respect to any notice given by the Corporation in connection with a
redemption of shares of PACS means the date on which first occurs either
the public announcement of such redemption or the commencement of mailing
of such notice to the holders of shares of PACS.

(ii) Notice of Redemption. The Corporation shall provide notice of
any redemption of the shares of PACS pursuant to this subparagraph (b) to
holders of record of PACS to be called for redemption not less than 15 days
nor more than 60 days prior to the date fixed for such redemption. The
earliest Notice Date for any call for redemption of shares of PACS is not
earlier than [60 days prior to anniversary date of closing], 1999. Such
notice shall be provided by mailing notice of such redemption, first class
postage prepaid, to each holder of record of shares of PACS to be redeemed,
at such holder's address as it appears on the stock register of the
Corporation; provided that neither failure to give such notice nor any
defect therein shall affect the validity of the proceeding for the
redemption of any shares of PACS to be redeemed except as to the holders to
whom the Corporation has failed to give said notice or whose notice was
defective.

Each such notice shall state, as appropriate, the following and may contain
such other information as the Corporation deems advisable:

(A) the redemption date;

(B) that all outstanding shares of PACS are to redeemed or, in the
case of a call for redemption of fewer than all outstanding shares of
PACS, the number of such shares held by such holder to be redeemed;

(C) the number of shares of Common Stock deliverable upon
redemption of each share of PACS to be redeemed and, if applicable, the
Redemption Rate and the Current Market Price used to calculate such
number of shares of Common Stock;

(D) the place or places where certificates for such shares are to
be surrendered for redemption; and

(E) that dividends on the shares of PACS to be redeemed shall cease
to accrue on such redemption date (except as otherwise provided herein).

(i) Deposit of Shares and Funds. The Corporation's obligation to
deliver shares of Common Stock and provide funds upon redemption in
accordance with Sections 3(a) and 3(b) shall be deemed fulfilled if, on or
before the Mandatory Conversion Date or a redemption date, as applicable,
the Corporation shall irrevocably deposit, with a bank or trust company, or
an affiliate of a bank or trust company, having an office or agency in New
York City, or shall set aside or make other reasonable provision for the
issuance of such number of shares of Common Stock as are required to be
delivered by the Corporation pursuant to Section 3(a) or 3(b), as the case
may be, upon the occurrence of the Mandatory Conversion or the related
redemption (and for the payment of cash in lieu of the issuance of
fractional share amounts and accrued and unpaid dividends payable in cash
on the shares to be redeemed as and to the extent provided by Section 3(a)
or 3(b), as the case may be). Any interest accrued on such funds shall be
paid to the Corporation from time to time. Subject to applicable laws, any
shares of Common Stock or funds so deposited and unclaimed at the end of
two years from such redemption date shall be repaid and released to the
Corporation, after which time the holder or holders of such shares of PACS
so converted or called for redemption shall look only to the Corporation
for delivery of such shares of Common Stock or funds.

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(ii) Surrender of Certificates; Status. Each holder of shares of PACS
to be converted or redeemed pursuant to Section 3(a) or 3(b), as the case
may be, shall surrender the certificates evidencing such shares (properly
endorsed or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state) to the Corporation at the place
designated by the Corporation and shall thereupon be entitled to receive
certificates evidencing shares of Common Stock and to receive any funds
payable pursuant to Sections 3(a) or 3(b), as the case may be, following
such surrender and following the date of such conversion or redemption. In
case fewer than all the shares represented by any such surrendered
certificate are called for redemption, a new certificate shall be issued at
the expense of the Corporation representing the unredeemed shares. If, on
the Mandatory Conversion Date, or, in the event of a redemption, on the
date fixed for redemption, as the case may be, shares of Common Stock and
funds necessary for such Mandatory Conversion or redemption, as applicable,
shall have been irrevocably either set aside by the Corporation separate
and apart from its other funds or assets in trust for the account of the
holders of the shares to be converted or to be redeemed (and so as to be
and continue to be available therefor) or deposited with a bank or trust
company or an affiliate thereof or the Corporation shall have made other
reasonable provision therefor, then, notwithstanding that the certificates
evidencing any shares of PACS so converted or called for redemption shall
not have been surrendered, the shares of PACS represented thereby so
converted or called for redemption shall be deemed no longer outstanding,
dividends with respect to the shares so converted or called for redemption
shall cease to accrue on the Mandatory Conversion Date or the date fixed
for redemption, as applicable, (except that holders of shares of PACS at
the close of business on a record date for any payment of dividends shall
be entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the redemption of such
shares following such record date and prior to such Dividend Payment Date)
and all rights with respect to the shares so converted or called for
redemption shall forthwith after such date cease and terminate, except for
the rights of the holders to receive the shares of Common Stock and funds,
if any, payable pursuant to Sections 3(a) or 3(b) without interest upon
surrender of their certificates therefor (unless the Corporation defaults
on the delivery of such shares or the payment of such funds). Holders of
shares of PACS that are converted or redeemed shall not be entitled to
receive dividends declared and paid on such shares of Common Stock, and
such shares of Common Stock shall not be entitled to vote, until such
shares of Common Stock are issued upon the surrender of the certificates
representing such shares of PACS and upon such surrender such holders shall
be entitled to receive such dividends declared and paid on such shares of
Common Stock subsequent to such redemption date or Mandatory Conversion
Date with interest thereon. Amounts payable in cash in respect of shares of
PACS or shares of Common Stock shall not bear interest.

(d) Conversion at Option of Holder. Shares of PACS are convertible, in
whole or in part, at the option of the holder thereof, at any time prior to the
Mandatory Conversion Date, unless previously redeemed, into shares of Common
Stock at a rate of .8197 of a share of Common Stock for each share of PACS (the
"Optional Conversion Rate"), subject to adjustment as set forth below. The right
to convert shares of PACS called for redemption shall terminate immediately
prior to the close of business on the redemption date with respect to such
shares.

Conversion of shares of PACS at the option of the holder may be effected by
delivering certificates evidencing such shares, together with written notice of
conversion and a proper assignment of such certificates to the Corporation or in
blank, to the office or agency to be maintained by the Corporation for that
purpose (and, if applicable, cash payment of an amount equal to the dividend
payable on such shares), and otherwise in accordance with conversion procedures
established by the Corporation. Each optional conversion shall be deemed to have
been effected immediately prior to the close of business on the date on which
the foregoing requirements shall have been satisfied. The conversion shall be at
the Optional Conversion Rate in effect at such time and on such date.

Holders of shares of PACS at the close of business on a record date for any
payment of declared dividends shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following such record date and prior to the
corresponding Dividend Payment Date. However, shares of PACS surrendered for
conversion after the close

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of business on a record date for any payment of dividends and before the opening
of business on the next succeeding Dividend Payment Date must be accompanied by
payment to the Corporation 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 PACS called for redemption on
[anniversary date of closing date], 1999 or any other Dividend Payment Date
thereafter will receive the dividend on such shares payable on that date without
paying an amount equal to such dividend to the Corporation upon conversion.
Except as provided above, upon any optional conversion of shares of PACS, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares of PACS or for previously declared dividends
or distributions on the shares of Common Stock issued upon such conversion.

(e) Adjustments of the Common Equivalent Rate, Optional Conversion Rate and
Redemption Rate. The Common Equivalent Rate, the Optional Conversion Rate and
the Redemption Rates (collectively, the "Rates") shall be each subject to
adjustment from time to time as provided below in this section (e).

(i) If the Corporation shall, after [closing date], 1996:

(A) pay a stock dividend or make a distribution with respect to its
Common Stock in shares of such Common Stock,

(B) subdivide or split its outstanding Common Stock into a greater
number of shares,

(D) issue by reclassification of its shares of Common Stock any
shares of common stock of the Corporation;

then, in any such event, the Rates in effect immediately prior to such
event shall each be adjusted so that the holder of any shares of PACS
shall thereafter be entitled to receive, upon Mandatory Conversion or
upon conversion at the option of the holder or redemption, the number of
shares of Common Stock of the Corporation which such holder would have
owned or been entitled to receive immediately following any event
described above had such shares of PACS been converted immediately prior
to such event or any record date with respect thereto. Such adjustment
shall become effective at the opening of business on the business day
next following the record date for determination of stockholders
entitled to receive such dividend or distribution, in the case of a
dividend or distribution, and shall become effective immediately after
the effective date, in the case of a subdivision, split, combination or
reclassification. Such adjustments shall be made successively.

(ii) If the Corporation shall, after [closing date], 1996, issue
rights or warrants to all holders of its Common Stock (other than Rights
issued pursuant to any Rights Plan of the Corporation) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the Current Market Price at the time of such issue, then, in any such
event unless such rights or warrants are issued to holders of shares of
PACS on a pro rata basis with the shares of Common Stock based on the
Common Equivalent Rate on the date immediately preceding such issuance,
each Rate shall be adjusted by multiplying such Rate, in effect immediately
prior to the date of issuance of such rights or warrants, by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of Common
Stock offered for subscription or purchase pursuant to such rights or
warrants, and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or
warrants, immediately prior to such issuance, plus the number of additional
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at such Current Market
Price (determined by multiplying such total number of shares by the
exercise price of such rights or warrants and dividing the product so
obtained by such Current Market Price). Such adjustment shall become
effective at the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, each Rate

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shall be readjusted to the applicable Rate which would then be in effect
had the adjustments been made upon the issuance of such rights or warrants
upon the basis of delivery of only the number of shares of Common Stock
actually delivered. Such adjustment shall be made successively.

(iii) If the Corporation shall after [closing date], 1996, pay a
dividend or make a distribution to all holders of its Common Stock of
evidences of its indebtedness, cash or other assets (including capital
stock of the Corporation or any subsidiary of the Corporation, but
excluding (x) the Corporation's regular quarterly cash dividend and (y)
dividends referred to in subparagraph (i) above) or shall issue to all
holders of its Common Stock rights or warrants to subscribe for or purchase
any of its securities (other than Rights issued pursuant to any Rights Plan
of the Corporation and those referred to in subparagraph (ii) above), then
unless such dividend is paid or distribution is made to each holder of
shares of PACS on a pro rata basis with the shares of Common Stock based on
the Common Equivalent Rate on the date immediately preceding such payment
or distribution, in any such event, each Rate shall be adjusted by
multiplying such Rate in effect on the record date mentioned below, by a
fraction of which the numerator shall be the Current Market Price per share
of the Common Stock on the record date for the determination of
stockholders entitled to receive such dividend or distribution, and of
which the denominator shall be such Current Market Price per share of
Common Stock less the fair market value (as determined in good faith by the
Board of Directors, whose good faith determination shall be conclusive, and
described in a resolution adopted with respect thereto) as of such record
date of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights or warrants applicable to one
share of Common Stock. Such adjustment shall become effective on the
opening of business on the business day next following the record date for
the determination of stockholders entitled to receive such dividend or
distribution. Such adjustment shall be made successively.

(iv) Any shares of Common Stock issuable in payment of a dividend or
other distribution shall be deemed to have been issued immediately prior to
the close of business on the record date for such dividend or other
distribution for purposes of calculating the number of outstanding shares
of Common Stock under subsection (ii) above.

(v) The Corporation shall also be entitled to make upward adjustments
in the Common Equivalent Rate, the Optional Conversion Rate, the Redemption
Rate and the Call Price, as it in its sole discretion shall determine to be
advisable, in order that any stock dividends, subdivisions of shares,
distribution of rights to purchase stock or securities, or distribution of
securities convertible into or exchangeable for stock (or any transaction
which could be treated as any of the foregoing transactions pursuant to
Section 305 of the Internal Revenue Code of 1986, as amended) made by the
Corporation to its stockholders after [closing date], 1996 shall not be
taxable.

(vi) In any case in which subsection 4(e) 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 subsection 3(a) or redemption pursuant to
subsection 3(b) or 3(d) occurs after such record date, but before the
occurrence of such event, the Corporation may, in its sole discretion,
elect to defer the following until after the occurrence of such event: (A)
issuing to the holder of any converted or redeemed shares of PACS the
additional shares of Common Stock issuable upon such conversion or
redemption over the shares of Common Stock issuable before giving effect to
such adjustments and (B) paying to such holder any amount in cash in lieu
of a fractional share of Common Stock pursuant to subsection 3(j).

(vii) All adjustments to the Rates shall be calculated to the nearest
1/100th of a share of Common Stock. No adjustment in the Rates shall be
required unless such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustment which by
reason of this subsection (vii) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment.

(f) Adjustment for Consolidation or Merger. In case of any consolidation
or merger to which the Corporation is a party (other than a merger or
consolidation in which the Corporation is the surviving or continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or

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consolidation remains unchanged), or in the case of any sale or transfer to
another corporation of the property of the Corporation as an entirety or
substantially as an entirety, proper provisions shall be made so that each share
of PACS shall, after consummation of such transaction, be subject to (i)
conversion at the option of the holder into the kind and amount of securities,
cash or other property receivable upon consummation of such transaction by a
holder of the number of shares of Common Stock into which such share of PACS
might have been converted immediately prior to consummation of such transaction,
(ii) conversion on the Mandatory Conversion Date into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which such
shares of PACS would have converted if the conversion on the Mandatory
Conversion Date had occurred immediately prior to the date of consummation of
such transaction, plus the right to receive cash in an amount equal to all
accrued and unpaid dividends on such shares of PACS (other than previously
declared dividends payable to a holder of record as of a prior date), and (iii)
redemption on any redemption date in exchange for the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock that would have
been issuable at the Redemption Rate in effect on such redemption date upon a
redemption of such share immediately prior to consummation of such transaction,
assuming in each case that such holder of Common Stock failed to exercise rights
of election, if any, as to the kind or amount of securities, cash or other
property receivable upon consummation of such transaction (provided that if the
kind or amount of securities, cash or other property receivable upon
consummation of such transaction is not the same for each non-electing share,
then the kind and amount of securities, cash or other property receivable upon
consummation of such transaction for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). The kind and amount of securities into or for which the
shares of PACS shall be convertible or redeemable after consummation of such
transaction shall be subject to adjustment as described in Section 3(e)
following the date of consummation of such transaction. The Corporation may not
become a party to any such transaction unless (A) the terms thereof are
consistent with the foregoing or (B) the holders of shares of PACS shall have
approved other terms in accordance with the provisions of Section 5(c).

For purposes of the immediately preceding paragraph, any sale or transfer
to another corporation of property of the Corporation which did not account for
at least 50% of the consolidated net income of the Corporation for its most
recent fiscal year ending prior to the consummation of such transaction shall
not in any event be deemed to be a sale or transfer of the property of the
Corporation as an entirety or substantially as an entirety.

(g) Notices of Adjustments. (i) Whenever the Rates are adjusted as herein
provided, the Corporation shall:

(A) forthwith compute the adjusted Rates in accordance herewith and
prepare a certificate signed by an officer of the Corporation setting forth
the adjusted Rates, the method of calculation thereof in reasonable detail
and the facts requiring such adjustment and upon which such adjustment is
based, which certificate shall be conclusive, final and binding evidence of
the correctness of the adjustment, and file such certificate forthwith with
the transfer agent for the shares of PACS and the Common Stock; and

(B) make a prompt public announcement and mail a notice to the holders
of the outstanding shares of PACS stating that the Rates have been
adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Rates, such notice to be
mailed at or prior to the time the Corporation mails an interim statement
to its stockholders covering the fiscal quarter during which the facts
requiring such adjustment occurred, but in any event within 45 days of the
end of such fiscal quarter.

(ii) In case, at any time while any of the shares of PACS are outstanding,

(A) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock, excluding any cash dividends; or

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(B) the Corporation shall authorize the issuance to all holders of its
Common Stock of rights or warrants to subscribe for or purchase shares of
its Common Stock or of any other subscription rights or warrants; or

(C) the Corporation shall authorize any reclassification, subdivision
or split of its Common Stock (other than a subdivision or combination
thereof) or any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is required
(except for a merger of the Corporation into one of its subsidiaries solely
for the purpose of changing the corporate domicile of the Corporation to
another state of the United States and in connection with which there is no
substantive change in the rights or privileges of any securities of the
Corporation other than changes resulting from differences in the corporate
statutes of the then existing and the new state of domicile), or the sale
or transfer to another corporation of the property of the Corporation as an
entirety or substantially as an entirety; or

(D) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;

then the Corporation shall cause to be filed at each office or agency maintained
for the purpose of conversion of the shares of PACS, and shall cause to be
mailed to the holders of shares of PACS at their last addresses as they shall
appear on the stock register, at least 10 days before the date hereinafter
specified (or the earlier of the dates hereinafter specified, in the event that
more than one date is specified), a notice stating (A) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (B) the date on which any such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property (including cash),
if any, deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. The failure to give or receive
the notice required by this subsection (g)(ii) or any defect therein shall not
affect the legality or validity of such dividend, distribution, right or warrant
or other action.

(h) Effect of Conversions and Redemptions. The person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon any conversion or redemption shall be deemed to have become on
the date of any such conversion or redemption the holder or holders of record of
the shares represented thereby; provided, however, that any such surrender on
any date when the stock transfer books of the Corporation shall be closed shall
constitute the person or persons in whose name or names the certificate or
certificates for such shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open.

(i) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon the redemption or
conversion of any shares of PACS. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of shares of PACS of any holder
which are redeemed or converted on any redemption date or upon Mandatory
Conversion or any optional conversion, such holder shall be entitled to receive
an amount in cash (computed to the nearest cent) equal to the value of such
fractional shares based on the (i) Current Market Price as of the second Trading
Date immediately preceding the Notice Date, in the case of redemption, or (ii)
Closing Price of the Common Stock determined (A) as of the fifth Trading Date
immediately preceding the Mandatory Conversion Date, in the case of Mandatory
Conversion, or (B) as of the second Trading Date immediately preceding the
effective date of conversion, in the case of an optional conversion by a holder.
If more than one share shall be surrendered for conversion or redemption at one
time by or for the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of PACS so surrendered or redeemed.

(j) Reissuance. Shares of PACS that have been issued and reacquired in any
manner, including shares purchased, exchanged, redeemed or converted, shall not
be reissued as part of PACS and shall (upon

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compliance with any applicable provisions of the laws of the State of
Connecticut) have the status of authorized and unissued shares of preferred
stock of the Corporation ("Preferred Stock") undesignated as to series and may
be redesignated and reissued as part of any series of Preferred Stock.

(k) Definitions. As used in this Article:

(i) the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York or
the State of Connecticut are authorized or obligated by law or executive
order to close or are closed because of a banking moratorium or otherwise;

(ii) the term "Call Price" of each share of PACS shall be the sum of
(x) $76 1/8 and (y) all accrued and unpaid dividends thereon to but not
including the redemption date (other than previously declared dividends
payable to a holder of record as of a prior date);

(iii) the term "Closing Price" on any day shall mean the last reported
sales price on such day or, in case no such sale takes place on such day,
the average of the reported closing high and low quotations, in either case
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading (as reported on the NYSE Composite Tape or a
similar reporting system) or, if the Common Stock is not listed or admitted
to trading on a national securities exchange, on the Nasdaq National Market
System, or, if the Common Stock is not listed or admitted to trading on a
national securities exchange or the Nasdaq National Market System, the
average of the high bid and low-asked quotations of the Common Stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted reporting
service, or, if no such quotations are available, the fair market value of
the Common Stock as determined by any New York Stock Exchange member firm
selected from time to time by the Board of Directors for such purpose;

(iv) the term "Current Market Price" per share of Common Stock at any
date shall be deemed to be the lesser of (x) the average of the daily
Closing Prices for the twenty consecutive Trading Dates ending on and
including the date in question or (y) the Closing Price of the Common Stock
for such date of determination; provided, that, if any event that results
in an adjustment of the Common Equivalent Rate occurs during such twenty
day period, the Current Market Price as determined pursuant to the
foregoing shall be appropriately adjusted to reflect the occurrence of such
event;

(v) the term "Parity Preferred Stock" means the Corporation's Class A
Voting Preferred Stock, $.01 par value per share, Class B 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 the Corporation's
Preferred Stock that by its terms ranks on a parity as to both the payment
of dividends and distribution of assets upon a liquidation of the
Corporation; and

(vi) the term "Trading Date" shall mean a date on which the New York
Stock Exchange (or any successor thereto) is open for the transaction of
business.

(l) Payment of Taxes. The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the redemption or conversion of shares of
PACS pursuant to this Section 3; provided, however, that the Corporation shall
not be required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the registered holder of shares of PACS
redeemed or converted or to be redeemed or converted, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.

(m) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock and/or its issued Common Stock held in
its treasury, for the purpose of effecting any Mandatory Conversion of the
shares of PACS or any conversion of the shares of PACS at the option of the
holder, the full number of shares of Common Stock then deliverable upon any such
conversion of all outstanding shares of PACS.

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SECTION 4. LIQUIDATION RIGHTS.

(a) In the event of the liquidation, dissolution, or winding up of the
business of the Corporation, whether voluntary or involuntary, the holders of
shares of PACS then outstanding, after payment or provision for payment of the
debts and other liabilities of the Corporation and the payment or provision for
payment of any distribution on any shares of the Corporation having a preference
and a priority over the shares of PACS on liquidation, and before any
distribution to the holders of Junior Securities, shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders an amount per share of PACS in cash equal to the sum of (i) $76 1/8
plus (ii) all accrued and unpaid dividends thereon. All amounts paid in respect
of such liquidation, dissolution or winding up shall be paid pro rata to the
holders of PACS entitled thereto. In the event the assets of the Corporation
available for distribution to the holders of the shares of PACS upon any
dissolution, liquidation or winding up of the Corporation shall be insufficient
to pay in full the liquidation payments payable to the holders of outstanding
shares of PACS and of all other series of Parity Securities, the holders of
shares of PACS and of all series of Parity Securities shall share ratably in
such distribution of assets in proportion to the amount which would be payable
on such distribution if the amounts to which the holders of outstanding shares
of PACS and the holders of outstanding shares of such Parity Preferred Stock
were paid in full. Except as provided in this Section 4, holders of PACS shall
not be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.

(b) For the purposes of this Section 4, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:

(i) the sale, transfer, lease or exchange of the assets of the
Corporation as an entirety or substantially as an entirety; or

(ii) the consolidation or merger of the Corporation with one or more
other corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger).

SECTION 5. VOTING RIGHTS.

(a) The holders of shares of PACS shall have the right with the holders of
Common Stock to vote in the election of directors and upon each other matter
coming before any meeting of the shareholders on the basis of 4/5 of a vote for
each share held. The holders of shares of PACS and the holders of Common Stock
shall vote together as one class except as otherwise set forth herein or as
otherwise provided by law or elsewhere in the Certificate of Incorporation.

(b) For so long as any shares of PACS are outstanding, if at any time
dividends payable on the shares of PACS or any other series of Preferred Stock
are in arrears and unpaid in an aggregate amount equal to or exceeding the
aggregate amount of dividends payable thereon for six quarterly dividend
periods, or if any other series of Preferred Stock shall be entitled for any
other reason to exercise voting rights, separate from the Common Stock, to elect
any Directors of the Corporation ("Preferred Stock Directors"), the holders of
the shares of PACS, voting separately as a class with the holders of all other
series of Preferred Stock upon which like voting rights have been conferred and
are exercisable, with each share of PACS entitled to vote on this and other
matters upon which holders of Preferred Stock vote as a group, shall have the
right to vote for the election of two Preferred Stock Directors of the
Corporation, such Directors to be in addition to the number of Directors
constituting the Board of Directors immediately prior to the accrual of such
right. Such right of the holders of shares of PACS to elect two Preferred Stock
Directors shall, when vested, continue until all dividends in arrears on the
shares of PACS and such other series of Preferred Stock shall have been paid in
full and the right of any other series of Preferred Stock to exercise voting
rights, separate from the Common Stock, to elect Preferred Stock Directors shall
terminate or have terminated and, when so paid, and any such termination occurs
or has occurred, such right of the holders of shares of PACS to elect two
Preferred Stock Directors separately as a class shall cease, subject always to
the same provisions for the vesting of such right of the holders of the shares
of PACS to elect two Preferred Stock Directors in the case of future dividend
defaults.

C-10
<PAGE> 248

The term of office of each Director elected pursuant to the preceding
paragraph shall terminate on the earlier of (i) the next annual meeting of
stockholders at which a successor shall have been elected and qualified or (ii)
the termination of the right of the holders of shares of PACS and such other
series of Preferred Stock to vote for Directors pursuant to the preceding
paragraph. Vacancies on the Board of Directors resulting from the death,
resignation or other cause of any such Director shall be filled exclusively by
no less than two-thirds of the remaining Directors and the Director so elected
shall hold office until a successor is elected and qualified.

(c) For as long as any shares of PACS remain outstanding, the affirmative
consent of the holders of at least two-thirds thereof actually voting (voting
separately as a class) given in person or by proxy, at any annual meeting or
special meeting of the shareholders called for such purpose, shall be necessary
to (i) amend, alter or repeal any of the provisions of the Certificate of
Incorporation of the Corporation which would adversely affect the powers,
preferences or rights of the holders of the shares of PACS then outstanding or
reduce the minimum time required for any notice to which holders of shares of
PACS then outstanding may be entitled; provided, however, that any such
amendment, alteration or repeal that would authorize, create or increase the
authorized amount of any additional shares of Junior Securities or any other
shares of stock (whether or not already authorized) ranking on a parity with the
shares of PACS shall be deemed not to adversely affect such powers, preferences
or rights and shall not be subject to approval by the holders of shares of PACS;
and provided further that clause (i) shall not be applicable to the amendment,
alteration or repeal of any provisions of the Certificate of Incorporation of
the Corporation approved at a meeting of the shareholders the record date of
which is prior to the issuance of any shares of PACS; (ii) authorize or create,
or increase the authorized amount of, any capital stock, or any security
convertible into capital stock, of any class ranking senior to PACS as to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation; or (iii) merge or consolidate with or into any
other corporation, unless each holder of the shares of PACS immediately
preceding such merger or consolidation shall have the right either to (A)
receive or continue to hold in the resulting corporation the same number of
shares, with substantially the same rights and preferences, as correspond to the
shares of PACS so held or (B) convert into shares of Common Stock at the Common
Equivalent Rate in effect on the date immediately preceding the announcement of
any such merger or consolidation.

There is no limitation on the issuance by the Corporation of Parity
Preferred Stock or of any class ranking junior to the shares of PACS.

Notwithstanding the provisions summarized in the preceding two paragraphs,
however, no such approval described therein of the holders of the shares of PACS
shall be required to authorize an increase in the number of authorized shares of
Preferred Stock or if, at or prior to the time when such amendment, alteration,
or repeal is to take effect or when the authorization, creation or increase of
any such senior stock or security is to be made, or when such consolidation or
merger, liquidation, dissolution or winding up is to take effect, as the case
may be, provision is made for the redemption of all shares of PACS at the time
outstanding.

SECTION 6. PREEMPTIVE RIGHTS.

The holders of shares of PACS shall have no preemptive rights, including
rights with respect to any shares of capital stock or other securities of the
Corporation convertible into or carrying rights or options to purchase any such
shares.

SECTION 7. LIMITATIONS.

Except as may otherwise be required by law, the shares of PACS shall not
have any terms, limitations, and relating rights and preferences other than
those specifically set forth in this resolution (as such resolution may be
amended from time to time) or otherwise in the Certificate of Incorporation of
the Corporation.

C-11
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APPENDIX D -- OPINION OF WASSERSTEIN PERELLA & CO., INC.
<PAGE> 250

[Letterhead of Wasserstein Perella & Co., Inc.]

June 12, 1996

Board of Directors

Aetna Life and Casualty Company

151 Farmington Avenue

Hartford, CT 06156

Members of the Board:

You have asked us to advise you with respect to the fairness from a financial
point of view to Aetna Life and Casualty Company, a Connecticut insurance
corporation (the "Company"), of the USHC Merger Consideration (as defined below)
to be paid by Aetna Inc., a Connecticut corporation formerly named Butterfly,
Inc. ("Parent"), pursuant to the terms of the Agreement and Plan of Merger,
dated as of March 30, 1996 (as amended by Amendment No. 1 thereto dated May 30,
1996, the "Merger Agreement"), among the Company, U.S. Healthcare, Inc., a
Pennsylvania corporation ("USHC"), Antelope Sub, Inc., a Connecticut corporation
("Aetna Sub"), New Merger Corporation, a Pennsylvania corporation ("USHC Sub"),
and Parent.

Pursuant to the Merger Agreement, (i) USHC Sub shall merge with and into USHC
(the "USHC Merger"), with USHC as the surviving corporation in the USHC Merger
and (ii) Aetna Sub shall merge with and into the Company (the "Aetna Merger"
and, together with the USHC Merger, the "Mergers"), with the Company as the
surviving corporation in the Aetna Merger. As a result of the Mergers, each of
the Company and USHC will become a wholly owned subsidiary of Parent. In
addition, the Merger Agreement provides that, among other things, at the
effective time of the Mergers, (i) each issued and outstanding share of Common
Stock, par value $0.005 per share, of USHC (the "USHC Common Stock") and each
issued and outstanding share of Class B Stock, par value $0.005 per share, of
USHC (together with the USHC Common Stock, the "USHC Stock") (in each case,
other than shares of USHC Stock that are canceled or with respect to which
appraisal rights are exercised in accordance with the Merger Agreement) will be
converted into the right to receive (x) 0.2246 shares, par value $0.01 per
share, of Common Stock of Parent (the "Parent Common Stock"), together with
0.2246 rights (each, a "Parent Right") to be issued pursuant to a Rights
Agreement to be entered into by Parent on the date of the consummation of the
Mergers, (y) 0.0749 shares, par value $0.01 per share, of 6.25% Class C Voting
Preferred Stock of Parent (the "Parent Preferred Stock") and (z) $34.20 in cash,
without interest (collectively, the "USHC Merger Consideration"), and (ii) each
issued and outstanding share of common capital stock, no par value per share, of
the Company (the "Aetna Stock") (other than shares of Aetna Stock that are
canceled or with respect to which appraisal rights are exercised in accordance
with the Merger Agreement) will be converted into the right to receive one share
of Parent Common Stock, together with one Parent Right. The terms and conditions
of the Mergers are set forth in more detail in the Merger Agreement.

In connection with our opinion, we have, among other things, (i) reviewed the
Merger Agreement; (ii) reviewed the joint proxy statement/prospectus relating to
the issuance of Parent Common Stock and Parent Preferred Stock in the Mergers
(the "Joint Proxy Statement/Prospectus"); (iii) reviewed certain financial and
other information relating to the Company and USHC that was publicly available
or furnished to us by the Company and USHC, including financial projections,
certain internal financial analyses, reports and other information prepared by
their respective managements and representatives; (iv) held discussions with
various members of senior management of the Company and USHC concerning each
company's historical and current operations, assets, financial condition and
future prospects; (v) held discussions with the senior managements of the
Company and USHC concerning an analysis of the strategic and operating benefits
anticipated from the Mergers which was prepared by the Company's management and
reviewed by USHC's management; (vi) reviewed the market price and trading
histories of the common stocks of the Company and USHC and compared those prices
and trading histories with those of publicly traded companies we deemed
relevant; (vii) compared the financial positions and operating results of the
Company and USHC with those of publicly traded companies we deemed relevant;
(viii) compared certain financial terms of the USHC

<PAGE> 251

Board of Directors

June 12, 1996

Page Two

Merger to certain financial terms of selected other business combinations we
deemed relevant; (ix) analyzed the estimated pro froma financial effects of the
Mergers on Parent; and (x) conducted such other financial studies, analyses,
inquiries and investigations and reviewed such other factors as we deemed
appropriate for purposes of this opinion.

In rendering this opinion, we have relied on the accuracy and completeness of
all financial and other information reviewed by us that was publicly available
or furnished to us by the Company and USHC, and we have not assumed any
responsibility for independent verification of any of such information. We have
assumed, with your consent, that the financial forecasts and projections,
including certain strategic and operating benefits associated with the Mergers,
provided to us by the Company and USHC were prepared in good faith and on bases
reflecting the best currently available judgments and estimates of each
respective company's management of future competitive, operating and regulatory
environments and related financial performance of the Company and USHC. We have
not assumed any responsibility for conducting a physical inspection of the
properties or facilities of the Company or USHC or for making or obtaining an
independent valuation or appraisal of the assets or liabilities (contingent or
otherwise) of the Company or USHC, nor have we been furnished with any such
valuation or appraisal. We also note that the Mergers are intended to qualify as
exchanges within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended, and we have assumed, with your consent, that the Mergers will
so qualify. We have also assumed that the transactions described in the Merger
Agreement will be consummated on the terms set forth therein, without waiver of
any such terms, and that any payments made pursuant to Section 8.3(b) of the
Merger Agreement would not be material to the analyses upon which our opinion is
based.

Our opinion is necessarily based on economic, regulatory and market conditions
and other circumstances as they exist and can be evaluated by us on, and the
information made available to us as of, the date hereof. Furthermore, we express
no opinion as to the price or trading range at which the Parent Common Stock or
the Parent Preferred Stock will trade following the Mergers.

Wasserstein Perella & Co., Inc. has acted as financial advisor to the Company in
connection with the proposed Mergers and will receive a fee for its services. In
addition, we have performed other investment banking and financial advisory
services for the Company and its affiliates in the past for which we have
received customary compensation. In the ordinary course of our business, we may
actively trade the securities of Parent, the Company and USHC for our own
accounts and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.

It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Merger Agreement and may
not be used for any other purpose or reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose without our prior
written consent, provided, however, that this letter may be reproduced in full
in the Joint Proxy Statement/Prospectus. This letter does not constitute a
recommendation to any shareholder as to how such holder should vote with respect
to the Mergers, and should not be relied upon by any shareholder as such.

Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that as of the date hereof the
USHC Merger Consideration to be paid by Parent in the USHC Merger is fair from a
financial point of view to the Company.

Sincerely,

/s/ WASSERSTEIN PERELLA & CO., INC.

--------------------------------------

Wasserstein Perella & Co., Inc.

<PAGE> 252

APPENDIX E -- OPINION OF J.P. MORGAN SECURITIES INC.
<PAGE> 253

APPENDIX E

[LETTERHEAD OF J.P. MORGAN]

June 12, 1996

The Board of Directors

Aetna Life and Casualty Company

151 Farmington Avenue

Hartford, Connecticut 06156-7505

Attention: Mr. Ronald E. Compton

Chairman and President

Ladies and Gentlemen

You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Aetna Life and Casualty Company (the "Company") of
the consideration to be paid to the shareholders of U.S. Healthcare, Inc. ("U.S.
Healthcare") in connection with the merger of New Merger Corporation, a
subsidiary of Parent (as defined below)("U.S. Healthcare Sub"), into U.S.
Healthcare (the "Transaction"). The merger will take place pursuant to an
Agreement and Plan of Merger dated as of March 30, 1996 as amended by Amendment
No. 1 thereto dated May 30, 1996 (the "Agreement") among the Company. U.S.
Healthcare, Butterfly, Inc., a newly-formed holding company ("Parent"), Antelope
Sub, Inc., a subsidiary of parent that will merge into the Company, and U.S.
Healthcare Sub. The Agreement provides that each share of Common Stock, par
value $0.005 per share, of U.S. Healthcare, and each share of Class B Stock, par
value $0.005 per share, of U.S. Healthcare will be converted into the right to
receive (1) 0.2246 shares of Common Stock, par value $0.01 per share, of Parent,
together with 0.2246 Parent Rights (as defined in the Agreement), (ii) 0.0749
shares of 6.25% Class C Voting Preferred Stock, par value $0.01 per share, of
Parent and (iii) $34.20 in cash, subject to adjustment as provided in Section
8.3 (b) of the Agreement.

Please be advised that while certain provisions of the Transaction are
summarized above, the terms of the Transaction are more fully described in the
Agreement. As a result, the description of the Transaction and certain other
information contained herein is qualified in its entirety by reference to the
more detailed information appearing or incorporated by reference in the
Agreement.

In arriving at our opinion, we have reviewed: (i) the Agreement; (ii) the
joint proxy statement-prospectus of the Company and the U.S. Healthcare (the
"Proxy Statement"), (iii) certain publicly available information concerning the
businesses of the Company and U.S. Healthcare and of certain other companies
engaged in comparable businesses, and the reported market prices for certain
other companies' securities deemed comparable to U.S. Healthcare and the
consideration paid for such companies; (v) current and historical market prices
of the common We are expressing no opinion herein as to the price at which
Parent's stock will trade if and when issued or at any future time. As a result,
other factors after the date hereof may affect the value of the businesses of
Parent after consummation of the Transaction, including but not limited to (i)
the total or partial disposition of the common stock of Parent by shareholders
of Parent within a short period of time after the effective date of the
Transaction, (ii) changes in prevailing interest rates and other factors which
generally influence the price of securities, (iii) adverse changes in the
current capital markets, (iv) the occurrence of adverse changes in the financial
condition, business, assets, results of operations or prospects of Parent, or of
U.S. Healthcare, (v) any actions or restrictions imposed by federal, state or
other

<PAGE> 254

governmental agencies or regulatory authorities, and (vi) delays in the
execution of all agreements necessary to complete the Transaction on terms and
conditions that are acceptable to all parties in interest.

We have acted as financial-advisor to the Company with respect to the
proposed Transaction and will receive a fee from the Company for our services.
Affiliates of J.P. Morgan also engage in securities trading and derivatives
business with the Company in the ordinary course of business. Morgan Guaranty
Trust Company of New York also has acted and continues to act as a lender to the
Company. In the ordinary course of their businesses, affiliates of J.P. Morgan
may actively trade the debt and equity securities of the Company or U.S.
Healthcare for their own accounts or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities.

On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid to the shareholders of U.S.
Healthcare in the proposed Transaction is fair, from a financial point of view,
to the shareholders of the Company.

This letter is provided for the benefit of the Board of Directors of the
Company in connection with and for the purposes of its evaluation of the
Transaction. This opinion does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote with respect
to the Transaction. This opinion may not be disclosed, referred to, or
communicated by you (in whole or in part) to any third party for any purpose
whatsoever except with our prior written consent in each instance. This opinion
may be reproduced in full in any proxy or information statement mailed to
shareholders of the Company but may not otherwise be disclosed publicly in any
manner without our prior written approval and must be treated as confidential.

Very truly yours,

J.P. MORGAN SECURITIES INC.

By /s/ EDWARD J. KELLY III

------------------------------------

Edward J. Kelly III

Managing Director

<PAGE> 255

APPENDIX F -- OPINION OF GOLDMAN, SACHS & CO.
<PAGE> 256

GOLDMAN, SACHS & CO./85 BROAD STREET/NEW YORK, NEW YORK 10004

TEL: 212-902-1000

PERSONAL AND CONFIDENTIAL GOLDMAN SACHS

June 12, 1996

Board of Directors

U.S. Healthcare, Inc.

980 Jolly Road

Blue Bell, PA 19422

Gentlemen and Madame:

You have requested our opinion as to the fairness to the holders, other
than Aetna Life and Casualty Company ("Aetna") and its subsidiaries, of the
outstanding shares of Common Stock, par value $0.005 per share (the "U.S.
Healthcare Common Stock"), and Class B Stock, par value $0.005 per share
(together with the U.S. Healthcare Common Stock, the "U.S. Healthcare Stock"),
of U.S. Healthcare, Inc. ("U.S. Healthcare") of the U.S. Healthcare Merger
Consideration (as defined below) to be received for the U.S. Healthcare Stock
pursuant to the Agreement and Plan of Merger dated as of March 30, 1996, among
Aetna, U.S. Healthcare, Aetna, Inc., a company owned 50% by U.S. Healthcare and
50% by Aetna ("Parent"), New Merger Corporation, a wholly-owned subsidiary of
Parent ("U.S. Healthcare Sub"), and Antelope Sub, Inc., a wholly-owned
subsidiary of Parent ("Aetna Sub") as amended by Amendment No. 1 thereto dated
May 30, 1998 (as so amended, the "Merger Agreement"), in connection with the
mergers of U.S. Healthcare Sub and Aetna Sub (the "Mergers") into, respectively,
U.S. Healthcare and Aetna. The Merger Agreement provides that as a result of the
Mergers each share of Aetna Common Capital Stock, without par value ("Aetna
Common Stock"), will be converted into one share of Common Stock, par value
$1.00 per share, of Parent ("Parent Common Stock") and each share of U.S.
Healthcare Stock will be converted into (i) $34.20 in cash, (ii) 0.0749 shares
of 6.25% Class C Voting Preferred Stock, par value $0.01 per share of Parent
(the "Parent Mandatorily Convertible Preferred Stock") and (iii) 0.2246 shares
of Parent Common Stock (the consideration referred to in clauses (i), (ii) and
(iii) above being collectively referred to herein as the "U.S. Healthcare Merger
Consideration").

Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with U.S. Healthcare having acted as its financial advisor in
connection with, and having participated in certain negotiations leading to, the
Merger Agreement. We also have provided certain investment banking services to
Aetna from time to time, including acting as financial advisor in connection
with the divestiture of Aetna's property and casualty operations on April 2,
1996. Goldman, Sachs & Co. is a full service securities firm and in the course
of our normal trading activities we have accumulated a net long position, as of
the date hereof, of 14,200 shares of U.S. Healthcare Common Stock and a net long
position of 11,300 shares of Aetna Common Stock as well as a net long position
of 3,500 Aetna Life and Casualty Company 6.375% Notes due 2003.

In connection with this opinion, we have reviewed, among other things,
Parent's Registration Statement on Form S-4, including the Joint Proxy
Statement/Prospectus relating to the Special Meeting of Shareholders of Aetna
and the Annual Meeting of Shareholders of U.S. Healthcare to be held in
connection with the Merger Agreement; the Merger Agreement; the Voting Agreement
between Aetna and the principal shareholder of U.S. Healthcare; the Form of
Certificate of Designations, Rights and Preferences relating to the Parent
Mandatorily Convertible Preferred Stock; Annual Reports to Shareholders and
Annual Reports on

<PAGE> 257

<PAGE> 258

U.S. HEALTHCARE, INC.

JUNE 12, 1996

PAGE TWO

Form 10-K of U.S. Healthcare and Aetna for the five years ended December 31,
1995; certain statutory annual statements of Aetna Life Insurance Company, Aetna
Life Insurance and Annuity Company and Aetna Life Insurance Company of Illinois
filed with various State Insurance Departments for the year ended December 31
1995; certain interim reports to shareholders and Quarterly Reports on Form 10-Q
of U.S. Healthcare and Aetna; certain other communications from U.S. Healthcare
and Aetna to their shareholders; and certain internal financial analyses and
forecasts for U.S. Healthcare and Aetna prepared by their respective
managements, including analyses and forecasts of cost savings and operating
synergies ("synergies") resulting from the Mergers. We also have held
discussions with members of the senior managements of U.S. Healthcare and Aetna
regarding the strategic rationale for, and benefits of, the Mergers and the past
and current business operations, financial condition and future prospects of the
respective companies and for Parent pursuant to the Mergers. In addition, we
have reviewed the reported price and trading activity for the U.S. Healthcare
Common Stock and Aetna Common Stock, compared certain financial and stock market
information for U.S. Healthcare and Aetna with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the managed care
industry and performed such other studies and analyses as we considered
appropriate.

We have relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts prepared by U.S. Healthcare and Aetna including,
without limitation, the projected synergies resulting from the Mergers have been
reasonably prepared on a basis reflecting the best currently available judgments
and estimates of U.S. Healthcare and Aetna and that such forecasts will be
realized in the amounts and the times contemplated thereby. We are not actuaries
and our services did not include any actuarial determinations or evaluations by
us or an attempt to evaluate actuarial assumptions. We have relied, with your
consent, upon the actuarial opinions, reports, and advice of actuarial advisors
to U.S. Healthcare. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of U.S. Healthcare and Aetna or any of
their subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have not been asked to solicit, and accordingly we have not
solicited, third parties with respect to potential alternative transactions. In
addition, in providing our opinion, we are not expressing any view as to the
prices at which the Parent Mandatorily Convertible Preferred Stock may trade if
and when issued.

Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the U.S.
Healthcare Merger Consideration to be received by the holders of U.S. Healthcare
Stock pursuant to the Merger Agreement is fair to such holders.

Very truly yours,

/s/ Goldman, Sachs & Co.

GOLDMAN, SACHS & CO.

<PAGE> 259

APPENDIX G -- OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE> 260

[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]

June 12, 1996

Board of Directors

U.S. Healthcare, Inc.

980 Jolly Road

Blue Bell, Pennsylvania 19422

Dear Members of the Board of Directors:

U.S. Healthcare, Inc. (the "Company"), Aetna Life and Casualty Company (the
"Merger Partner") and Butterfly, Inc., a company owned 50% by the Company and
50% by the Merger Partner ("Parent"), have entered into an agreement and plan of
merger dated as of March 30, 1996, as amended by Amendment No. 1 dated as of May
30, 1996 (the "Merger Agreement") pursuant to which (i) newly formed
subsidiaries of Parent will be merged with and into each of the Company and the
Merger Partner (collectively, the "Mergers"), (ii) each share of the common
capital stock, without par value, of the Merger Partner (the "Merger Partner
Common Stock") will be converted into one share of common capital stock, par
value $1.00 per share, of Parent (the "Parent Common Stock"), and (iii) each
outstanding share of (x) the Company's common stock, par value $0.005 per share
(the "Company Common Stock") and (y) the Company's Class B Stock, par value
$0.005 per share (the "Class B Stock" and, together with the Company Common
Stock, the "Company Stock"), will be converted into the right to receive (a)
0.2246 shares of Parent Common Stock (the "Parent Common Stock Consideration"),
(b) 0.0749 shares of 6.25% Class C Non-Voting Preferred Stock, par value $0.01
per share, of Parent (the "Parent Preferred Stock Consideration"), and (c)
$34.20 in cash, subject to adjustment as provided in the Merger Agreement (the
"Cash Consideration" and, together with the Parent Common Stock Consideration
and the Parent Preferred Stock Consideration, the "Consideration").

You have asked us whether, in our opinion, the proposed Consideration to be
received by the holders of the Company Stock (other than the Merger Partner and
its affiliates) in the Mergers is fair to such shareholders from a financial
point of view.

In arriving at the opinion set forth below, we have, among other things:

1. Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31,
1995 and the Company's Form 10-Q and the related unaudited financial
information for the quarterly period ended March 31, 1996;

2. Reviewed the Merger Partner's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31,
1995 and the Merger Partner's Form 10-Q and the related unaudited
financial information for the quarterly period ended March 31, 1996;

<PAGE> 261

3. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Merger Partner, furnished to us by the Company and the
Merger Partner, respectively;

4. Conducted discussions with members of senior management of the Company
and the Merger Partner concerning their respective businesses and
prospects, including potential synergies to be realized as a result of
the Mergers;

5. Reviewed the historical market prices and trading activity for the
Company Common Stock and the Merger Partner Common Stock and compared
them with that of certain publicly traded companies which we deemed to
be similar to the Company and the Merger Partner, respectively;

6. Compared the results of operations of the Company and the Merger
Partner with that of certain companies which we deemed to be reasonably
similar to the Company and the Merger Partner, respectively;

7. Compared the proposed financial terms of the Mergers with the financial
terms of certain other mergers and acquisitions which we deemed to be
relevant;

8. Considered the pro forma effect of the Mergers on the Merger Partner's
cash flow, earnings before income taxes, net income and dividends;

9. Reviewed the Merger Agreement;

10. Reviewed the Amended Voting Agreement dated as of March 30, 1996,
between the Merger Partner and the principal shareholder of the
Company;

11. Reviewed the Form of Certificate of Designations, Rights and
Preferences relating to the Parent Preferred Stock Consideration; and

12. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary including our assessment of general economic, market
and monetary conditions.

In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
the Merger Partner, and we have not independently verified such information or
undertaken an independent appraisal, evaluation or actuarial evaluation of the
assets or liabilities of the Company or the Merger Partner. With respect to the
financial forecasts and estimates of operating efficiencies and potential
synergies expected to result from the Mergers furnished to us by the Company and
the Merger Partner, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's or
the Merger Partner's management as to the expected future financial performance
of the Company or the Merger Partner, as the case may be. We have also assumed
that the Mergers will be free of Federal tax to the Company, the Merger Partner,
Parent and the holders of Company Stock (other than in respect of the Cash
Consideration and any cash paid in lieu of fractional shares). We have further
assumed that the Parent Common Stock will pay quarterly dividends at a rate not
greater than $0.83 per annum per share. Our opinion is based upon general
economic, market, monetary and other conditions as they exist and can be
evaluated, and the information made available to us, as of the date hereof. We
express no opinion as to what the value of the Parent Preferred Stock actually
will be when issued to the holders of the Common Stock upon consummation of the
Mergers.

In connection with the preparation of this opinion, we have not been
authorized by the Company to solicit, nor have we solicited, third-party
indications of interest for the acquisition of all or any part of the Company.

This opinion is addressed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholders as to how such shareholders
should vote on the proposed Mergers.

We have acted as financial advisor to the Company in connection with the
Mergers and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Mergers. We have, in

<PAGE> 262

the past, provided financial advisory and financing services to the Company and
have received fees for rendering such services. We have, in the past, also
provided financial advisory and financing services, and may continue to provide
financing services to, the Merger Partner, and have received fees for rendering
such services. Such continuing financing services may include, without
limitation, financing in connection with the Mergers. In addition, in the
ordinary course of our securities business, we may actively trade the Company
Common Stock and the Merger Partner Common Stock for our own account and the
accounts of our customers, and we therefore may from time to time hold a long or
short position in such securities.

On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Consideration to be received by the holders of the Company Stock
(other than the Merger Partner and its affiliates) in the Mergers is fair to
such shareholders from a financial point of view.

Very truly yours,

MERRILL LYNCH, PIERCE, FENNER & SMITH

INCORPORATED

<PAGE> 263

APPENDIX H -- AETNA INC. 1996 STOCK INCENTIVE PLAN
<PAGE> 264

APPENDIX H

AETNA, INC.
1996 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE.

The purposes of this Plan are to promote the interests of the Company and
its shareholders, and further align the interests of shareholders and
Participants by:

(i) motivating Participants through Awards tied to total return to
shareholders (i.e., stock price appreciation and dividends);

(ii) attracting and retaining outstanding individuals as Participants;

(iii) enabling Participants to acquire additional equity interests in
the Company;

(iv) providing compensation opportunities dependent upon the Company's
performance relative to its competitors and changes in its own performance
over time; and

(v) providing for the grant of substitute options as contemplated
under Sections 1.7 and 1.8 of the Merger Agreement.

SECTION 2. DEFINITIONS.

"AFFILIATE" shall mean any corporation or other entity (other than the
Company or one of its Subsidiaries) in which the Company directly or indirectly
owns at least twenty percent (20%) of the combined voting power of all classes
of stock of such entity or at least twenty percent (20%) of the ownership
interests in such entity.

"AWARD" shall mean a Merger Option and any other grant or award under the
Plan, as evidenced in a written document delivered to a Participant as provided
in Section 13(b).

"BOARD" shall mean the Board of Directors of the Company.

"CAUSE" shall mean (i) the willful failure by the Participant to perform
substantially the Participant's duties as an employee of the Company (other than
due to physical or mental illness) after reasonable notice to the Participant,
(ii) the Participant's engaging in serious misconduct that is injurious to the
Company, any Subsidiary or any Affiliate, (iii) the Participant's having been
convicted of, or entered a plea of nolo contendere to, a crime that constitutes
a felony, (iv) the breach by the Participant of any written covenant or
agreement not to compete with the Company, any Subsidiary or any Affiliate or
(v) the breach by the Participant of his or her duty of loyalty to the Company
which shall include, without limitation, (A) the disclosure by the Participant
of any confidential information pertaining to the Company, any Subsidiary or any
Affiliate, (B) the harmful interference by the Participant in the business or
operations of the Company, any Subsidiary or any Affiliate, (C) any attempt by
the Participant directly or indirectly to induce any employee, insurance agent,
insurance broker or broker-dealer of the Company, any Subsidiary or any
Affiliate to be employed or perform services elsewhere, (D) any attempt by the
Participant directly or indirectly to solicit the trade of any customer or
supplier, or prospective customer or supplier, of the Company or (E) any breach
or violation of the Company's Code of Conduct.

"CODE" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.

"COMMITTEE" shall mean a committee of the Board as may be designated by the
Board to administer the Plan, which, to the extent necessary to comply with
Section 16 of the Exchange Act and Section 162(m) of the Code, shall consist of
at least two directors of the Company chosen by the Board each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act
and an "outside director" within the meaning of Section 162(m).

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"COMMON STOCK" shall mean the common stock, $.01 par value, of the Company.

"COMPANY" shall mean Aetna Inc.

"ELIGIBLE EMPLOYEE" shall mean each employee of the Company, its
Subsidiaries or its Affiliates, but shall not include directors who are not
employees of such entities; provided that, in the case of the Merger Options,
the term Eligible Employee shall mean each person who is eligible to receive a
Merger Option.

"EMPLOYMENT" shall mean, for purposes of determining whether a termination
of employment has occurred under the Plan, continuous and regular salaried
employment with the Company, a Subsidiary or an Affiliate, which shall include
(unless the Committee shall otherwise determine) any period of vacation, any
approved leave of absence or any salary continuation or severance pay period
and, at the discretion of the Committee, may include service with any former
Subsidiary or Affiliate of the Company. For this purpose, regular salaried
employment means scheduled employment of at least 20 hours per week.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.

"EXECUTIVE OFFICER" shall mean those persons who are officers of the
Company within the meaning of Rule 16a-1(f) of the Exchange Act.

"FAIR MARKET VALUE" shall mean on any date, with respect to a share of
Common Stock, the closing price of a share of Common Stock as reported by the
Consolidated Tape of New York Stock Exchange Listed Shares on such date, or, if
no shares were traded on such Exchange on such date, on the next date on which
the Common Stock is traded.

"FUNDAMENTAL CORPORATE EVENT" shall mean any stock dividend, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares, offering to purchase Common
Stock at a price substantially below fair market value, or other similar event.

"INCENTIVE STOCK" shall mean an Award of Common Stock granted under Section
7 which may become vested and nonforfeitable upon the passage of time and/or the
attainment, in whole or in part, of performance objectives determined by the
Committee.

"INCENTIVE STOCK OPTION" shall mean an Option which is intended to meet the
requirements of Section 422 of the Code.

"INCENTIVE UNIT" shall mean an Award of a contractual right granted under
Section 7 to receive Common Stock (or, at the discretion of the Committee, cash
based on the Fair Market Value of the Common Stock) which may become vested and
nonforfeitable upon either the passage of time and/or the attainment, in whole
or in part, of performance objectives determined by the Committee.

"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger, dated as of
March 30, 1996, among Aetna Life and Casualty Company, U.S. Healthcare, Inc.,
the Company, Antelope Sub, Inc. and New Merger Corporation, as amended by
Amendment No. 1 thereto dated as of May , 1996.

"MERGER DATE" shall mean the date of the closing of the transactions
contemplated by the Merger Agreement.

"MERGER OPTION" shall mean an Option which is granted under Section 10 in
substitution for an outstanding option previously granted by Aetna Life and
Casualty Company or U.S. Healthcare, Inc., as the case may be.

"NONSTATUTORY STOCK OPTION" shall mean an Option which is not intended to
be an Incentive Stock Option.

"OPTION" shall mean the right granted under Section 5 to purchase the
number of shares of Common Stock specified by the Committee, at a price and for
the term fixed by the Committee in accordance with the Plan and subject to any
other limitations and restrictions as this Plan and the Committee shall impose,
and shall include both Incentive Stock Options and Nonstatutory Stock Options.

"OTHER STOCK-BASED AWARD" shall mean any right granted under Section 8.

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"PARTICIPANT" shall mean an Eligible Employee who is selected by the
Committee to receive an Award under the Plan and any recipient of a (i) Merger
Option granted under Section 10 or (ii) Substitute Award as contemplated under
Section 4(c).

"PLAN" shall mean the Aetna Inc. 1996 Stock Incentive Plan, described
herein, and as may be amended from time to time.

"PRIOR PLAN" shall mean the Aetna Life and Casualty Company 1994 Stock
Incentive Plan.

"RESTRICTED PERIOD" shall mean the period during which a grant of Incentive
Stock or Incentive Units is subject to forfeiture.

"STOCK APPRECIATION RIGHT" shall mean a right granted under Section 6.

"SUBSIDIARY" shall mean any entity of which the Company possesses directly
or indirectly fifty percent (50%) or more of the total combined voting power of
all classes of stock of such entity.

"SUBSTITUTE AWARDS" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired by
the Company or with which the Company combines.

SECTION 3. ADMINISTRATION.

The Plan shall be administered by the Committee. The Committee shall have
the responsibility of construing and interpreting the Plan and of establishing
and amending such rules and regulations as it deems necessary or desirable for
the proper administration of the Plan. Any decision or action taken or to be
taken by the Committee, arising out of or in connection with the construction,
administration, interpretation and effect of the Plan and of its rules and
regulations, shall, to the maximum extent permitted by applicable law, be within
its absolute discretion (except as otherwise specifically provided herein) and
shall be conclusive and binding upon all Participants and any person claiming
under or through any Participant.

Subject to the terms of the Plan and applicable law, and in addition to
other express powers and authorizations conferred on the Committee by the Plan,
the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards, if any, to be granted
to an Eligible Employee; (iii) determine the number of shares of Common Stock to
be covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Common Stock, other
securities, other Awards or other property, or canceled, forfeited, or suspended
and the method or methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended; (vi) determine whether, to what extent, and under what
circumstances, cash, Common Stock, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan.

SECTION 4. SHARES AVAILABLE FOR AWARDS.

(a) Shares Available for Issuance. The maximum number of shares of Common
Stock in respect of which Awards may be made under the Plan shall be a total of
7,350,000 shares of Common Stock plus (i) the number of shares of Common Stock
to be delivered upon exercise of the Merger Options and (ii) the number of
shares required to satisfy any outstanding incentive unit awards under the Prior
Plan. Notwithstanding the foregoing, but subject to the provisions of Section
4(b), in no event shall the number of shares of Common Stock issued under the
Plan with respect to (x) Incentive Stock Options exceed 5,000,000 or (y)
Incentive Stock or Incentive Units exceed 2,235,000. Shares of Common Stock may
be made available from the authorized but unissued shares of the Company or from
shares held in the Company's treasury and not reserved for some other purpose.
In the event that any Award is paid solely in cash, no shares shall be deducted
from the number of shares available for issuance by reason of such Award. Shares
of Common Stock subject to Awards that are forfeited, terminated, canceled or
settled without the delivery of Common Stock

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under the Plan or the Prior Plan will again be available for Awards under the
Plan, as will (A) shares of Common Stock tendered (either actually or by
attestation) to the Company in satisfaction or partial satisfaction of the
exercise price of any Award under either the Plan or the Prior Plan and (B)
shares of Common Stock repurchased on the open market with remittances from the
exercise of Options granted under the Plan or the Prior Plan to the extent
permitted by Rule 16b-3 under the Exchange Act.

(b) Adjustment for Corporate Transactions. In the event that the Committee
shall determine that any Fundamental Corporate Event affects the Common Stock
such that an adjustment is required to preserve, or to prevent enlargement of,
the benefits or potential benefits made available under this Plan, then the
Committee may, in such manner as the Committee may deem equitable, adjust any or
all of (i) the number and kind of shares which thereafter may be awarded or
optioned and sold or made the subject of Awards under the Plan, (ii) the number
and kinds of shares subject to outstanding Awards and (iii) the grant, exercise
or conversion price with respect to any of the foregoing. Additionally, the
Committee may make provisions for a cash payment to a Participant or a person
who has an outstanding Award. However, the number of shares subject to any Award
shall always be a whole number.

(c) Substitute Awards. Any shares of Common Stock underlying Substitute
Awards shall not, except in the case of shares with respect to which Substitute
Awards are granted to Participants who are officers or directors of the Company
for purposes of Section 16 of the Exchange Act or any successor section thereto,
be counted against the Shares available for Awards under the Plan.

SECTION 5. STOCK OPTIONS.

(a) Grant. Subject to the provisions of the Plan, the Committee shall have
the authority to grant Options to an Eligible Employee and to determine (i) the
number of shares to be covered by each Option, (ii) subject to Section 5(b), the
exercise price of the Option and (iii) the conditions and limitations applicable
to the exercise of the Option. Notwithstanding the foregoing, in no event shall
the Committee grant any Participant Options (i) for more than 500,000 shares of
Common Stock in respect of any year in which the Plan is in effect, as such
number may be adjusted pursuant to Section 4(b). In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and comply
with Section 422 of the Code and the regulations thereunder.

(b) Exercise Price. Except in the case of Substitute Awards or Options
granted in lieu of payment for compensation earned by an Eligible Employee of
the Company, the exercise price of an Option shall not be less than 100% of the
Fair Market Value on the date of grant.

(c) Exercise. Each Option shall be exercised at such times and subject to
such terms and conditions as the Committee may specify at the time of the
applicable Award or thereafter. No shares shall be delivered pursuant to any
exercise of an Option unless arrangements satisfactory to the Committee have
been made to assure full payment of the exercise price therefor. Without
limiting the generality of the foregoing, payment of the exercise price may be
made in cash or its equivalent or, if and to the extent permitted by the
Committee, by exchanging shares of Common Stock owned by the optionee (which are
not the subject of any pledge or other security interest or which, in the case
of Incentive Stock, are fully vested) either actually or by attestation, or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Common Stock so tendered
to the Company, valued as of the date of such tender, is at least equal to such
exercise price.

SECTION 6. STOCK APPRECIATION RIGHTS.

(a) Grant of Stock Appreciation Rights. The Committee shall have the
authority to grant Stock Appreciation Rights in tandem with an Option, in
addition to an Option, or freestanding and unrelated to an Option.
Notwithstanding the foregoing, in no event shall the Committee grant any
Participant Stock Appreciation Rights (i) for more than 500,000 shares of Common
Stock in respect of any year in which the Plan is in effect, as such number may
be adjusted pursuant to Section 4(b). Stock Appreciation Rights granted in
tandem with an Option may be granted either at the same time as the Option or at
a later time.

(b) Exercise Price. The exercise price of an SAR shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the SAR was
granted; provided that if an SAR is granted retroactively

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in tandem with or in substitution for an Option, the exercise price may be the
exercise price of the Option to which it is related.

(c) Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall
entitle the Participant to receive from the Company an amount equal to the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the Stock Appreciation Right over the base price thereof. The
Committee shall determine the time or times at which or the event or events
(including, without limitation, a change of control) upon which a Stock
Appreciation Right may be exercised in whole or in part, the method of exercise
and whether such Stock Appreciation Right shall be settled in cash, shares of
Common Stock or a combination of cash and shares of Common Stock; provided,
however, that unless otherwise specified by the Committee at or after grant, a
Stock Appreciation Right granted in tandem with an Option shall be exercisable
at the same time or times as the related Option is exercisable.

SECTION 7. INCENTIVE AWARDS.

(a) Incentive Stock and Incentive Units. Subject to the provisions of the
Plan, the Committee shall have the authority to grant time vesting and/or
performance vesting Incentive Stock or Incentive Units to any Eligible Employee
and to determine (i) the number of shares of Incentive Stock and the number of
Incentive Units to be granted to each Participant and (ii) the other terms and
conditions of such Awards; provided that, to the extent necessary to comply with
applicable law, Incentive Stock shall only be awarded to an Eligible Employee
who has been employed for such minimum period of time as shall be determined by
the Committee. The Restricted Period related to Incentive Stock or Incentive
Units shall lapse upon the passage of time and/or the determination by the
Committee that the performance objectives established by the Committee have been
attained, in whole or in part. The maximum number of shares of Common Stock that
may be subject to any performance-based Awards of Incentive Stock and Incentive
Units (whether payable in cash or shares) granted to an Executive Officer with
respect to a Restricted Period shall not exceed 300,000 shares, as such number
may be adjusted pursuant to Section 4(b). The performance objectives with
respect to an Award made to an Executive Officer shall be related to at least
one of the following criteria, which may be determined solely by reference to
the performance of the Company, a Subsidiary or an Affiliate (or any business
unit thereof) or based on comparative performance relative to other companies:
(i) net income, (ii) earnings before income taxes, (iii) earnings per share,
(iv) return on shareholders equity, (v) expense management, (vi) profitability
of an identifiable business unit or product, (vii) ratio of claims to revenues,
(viii) revenue growth, (ix) earnings growth, (x) total shareholder return, (xi)
cash flow, (xii) return on assets, (xiii) pretax operating income, and any
combination of the foregoing.

(b) Certificates. Any certificates issued in respect of Incentive Stock
shall be registered in the name of the Participant and deposited by such
Participant, together with a stock power endorsed in blank, with the Company. At
the expiration of the Restricted Period with respect to any award of Incentive
Stock, unless otherwise forfeited, the Company shall deliver such certificates
to the Participant or to the Participant's legal representative. Payment for
Incentive Stock Units shall be made by the Company in shares of Common Stock,
cash or in any combination thereof, as determined by the Committee.

SECTION 8. OTHER STOCK-BASED AWARDS.

The Committee shall have authority to grant to eligible Employees an "Other
Stock-Based Award", which shall consist of any right which is (i) not an Award
described in Sections 5 through 7 above and (ii) an Award of Common Stock or an
Award denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Common Stock (including, without limitation,
securities convertible into Common Stock), as deemed by the Committee to be
consistent with the purposes of the Plan; provided that any such rights must
comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and
applicable law. Subject to the terms of the Plan and any applicable award
agreement, the Committee shall determine the terms and conditions of any such
Other Stock-Based Award.

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SECTION 9. DIVIDENDS AND DIVIDEND EQUIVALENTS.

The Committee may provide that any Award shall include dividends or
dividend equivalents, payable in cash, Common Stock, securities or other
property on a current or deferred basis, including payment contingencies.

SECTION 10. MERGER OPTIONS.

Effective as of the Merger Date, each holder of an option to purchase
shares of common stock of U.S. Healthcare shall be granted an option to purchase
Common Stock in accordance with the provisions of Section 1.7 of the Merger
Agreement and each holder of an option to purchase shares of common stock of
Aetna Life and Casualty Company shall be granted an option to purchase Common
Stock in accordance with the provisions of Section 1.8. of the Merger Agreement.
Except as modified by the Merger Agreement, such options shall be governed by
the terms of the incentive plans and award agreements under which they were
originally granted, which terms are incorporated herein by reference.

SECTION 11. STOCK IN LIEU OF CASH.

The Committee may grant Awards in lieu of all or a portion of compensation
or an Award otherwise payable in cash to an Executive Officer pursuant to any
bonus or incentive compensation plan of the Company.

If shares are issued in lieu of cash, the number of shares of Common Stock
to be issued shall be the greatest number of whole shares which has an aggregate
Fair Market Value on the date the cash would otherwise have been payable
pursuant to the terms of such other plan equal to or less than the amount of
such cash.

SECTION 12. DEFERRAL.

The Committee shall have the discretion to determine whether, to what
extent, and under what circumstances cash, shares of Common Stock, other
securities, other Awards, other property, and other amounts payable with respect
to an Award shall be deferred either automatically or at the election of the
holder thereof or of the Committee.

SECTION 13. GENERAL PROVISIONS.

(a) Withholding. The Company shall have the right to deduct from all
amounts paid to a Participant in cash (whether under this Plan or otherwise) any
taxes required by law to be withheld in respect of Awards under this Plan. In
the case of any Award satisfied in the form of Common Stock, no shares shall be
issued unless and until arrangements satisfactory to the Company shall have been
made to satisfy any withholding tax obligations applicable with respect to such
Award. Without limiting the generality of the foregoing and subject to such
terms and conditions as the Committee may impose, the Company shall have the
right to retain, or the Committee may, subject to such terms and conditions as
it may establish from time to time, permit Participants to elect to use shares
of Common Stock (including Common Stock issuable in respect of an Award) to
satisfy, in whole or in part, the amount required to be withheld.

(b) Award Agreement. Each Award hereunder shall be evidenced in writing.
The written agreement shall be delivered to the Participant and shall
incorporate the terms of the Plan by reference and specify the terms and
conditions thereof and any rules applicable thereto.

(c) Nontransferability. Unless the Committee shall permit (on such terms
and conditions as it shall establish) an Award to be transferred to a member of
the Participant's immediate family or to a trust or similar vehicle for the
benefit of such immediate family members (collectively, the "Permitted
Transferees"), no Award shall be assignable or transferable except by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order, and except to the extent required by law, no right or interest
of any Participant shall be subject to any lien, obligation or liability of the
Participant. All rights with respect to Awards granted to a Participant under
the Plan shall be exercisable during the Participant's lifetime only by such
Participant or, if applicable, the Permitted Transferees or the Participant's
legal representative.

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(d) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company, any
Subsidiary or any Affiliate. Further, the Company and each Subsidiary and
Affiliate expressly reserves the right at any time to dismiss a Participant free
from any liability, or any claim under the Plan, except as provided herein or in
any agreement entered into with respect to an Award.

(e) No Rights to Awards, No Shareholder Rights. No Participant or Eligible
Employee shall have any claim to be granted any Award under the Plan, and there
is no obligation of uniformity of treatment of Participants and Eligible
Employees. Subject to the provisions of the Plan and the applicable Award, no
person shall have any rights as a shareholder with respect to any shares of
Common Stock to be issued under the Plan prior to the issuance thereof.

(f) Construction of the Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of the State of Connecticut.

(g) Effective Date. Subject to the approval of the Company's shareholders
and the shareholders of Aetna Life and Casualty Company and U.S. Healthcare
Inc., the Plan shall be effective on the Merger Date.

(h) Amendment or Termination of Plan. The Board or the Committee may
terminate or suspend the Plan at any time, but the termination or suspension
will not adversely affect any vested Awards then outstanding under the Plan. No
Award may be granted under the Plan after April 30, 2006 or such earlier date as
the Plan is terminated by action of the Board or the Committee, The Plan may be
amended or terminated at any time by the Board, except that no amendment may be
made without shareholder approval if the Committee determines that such approval
is necessary to comply with any tax or regulatory requirement, including any
approval requirement which is a prerequisite for exemptive relief from Section
16 of the 1934 Act, for which or with which the Committee determines that it is
desirable to qualify or comply. The Committee may amend the term of any Award or
Option granted, retroactively or prospectively, but no amendment may adversely
affect any vested Award or Option without the holder's consent.

(i) Compliance with Legal and Exchange Requirements. The Plan, the granting
and exercising of Awards thereunder, and the other obligations of the Company
under the Plan, shall be subject to all applicable federal and state laws,
rules, and regulations, and to such approvals by any regulatory or governmental
agency as may be required. The Company, in its discretion, may postpone the
granting and exercising of Awards, the issuance or delivery of Common Stock
under any Award or any other action permitted under the Plan to permit the
Company, with reasonable diligence, to complete such stock exchange listing or
registration or qualification of such Common Stock or other required action
under any federal or state law, rule, or regulation and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Common Stock
in compliance with applicable laws, rules, and regulations. The Company shall
not be obligated by virtue of any provision of the Plan to recognize the
exercise of any Award or to otherwise sell or issue Common Stock in violation of
any such laws, rules, or regulations; and any postponement of the exercise or
settlement of any Award under this provision shall not extend the term of such
Awards, and neither the Company nor its directors or officers shall have any
obligations or liability to the Participant with respect to any Award (or stock
issuable thereunder) that shall lapse because of such postponement.

(j) Severability of Provisions. If any provision of this Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and this Plan shall be construed and enforced as if
such provision had not been included.

(k) Incapacity. Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge any liability or obligation of the Committee, the Board,
the Company and all other parties with respect thereto.

(l) Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed in the construction of this Plan.

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APPENDIX I -- AETNA INC. ANNUAL INCENTIVE PLAN
<PAGE> 272

APPENDIX I

AETNA INC.
ANNUAL INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 1, 1997)

1. PURPOSE.

The purpose of this Plan is to provide a general incentive for designated
key executive employees of the Companies in order to improve operating results
of the Companies and to reward such employees for the accomplishment of
financial and strategic objectives of the Companies.

2. DEFINITIONS.

Unless the context requires otherwise, the following words as used in the
Plan shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably and that each
comprehends the others.

(a) "Aetna" means Aetna Inc.

(b) "Board" means the Board of Directors of Aetna.

(i) When any "person" as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Sections 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act but excluding Aetna and any
subsidiary thereof and any employee benefit plan sponsored or
maintained by Aetna or any subsidiary (including any trustee of such
plan acting as trustee), directly or indirectly, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of Aetna representing
20 percent or more of the combined voting power of Aetna's then
outstanding securities;

(ii) When, during any period of 24 consecutive months, the individuals
who, at the beginning of such period, constitute the Board (the
"Incumbent Directors") cease for any reason other than death to
constitute at least a majority thereof, provided that a director
who was not a director at the beginning of such 24-month period
shall be deemed to have satisfied such 24-month requirement (and be
an Incumbent Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either
actually (because they were directors at the beginning of such
24-month period) or by prior operation of this paragraph (ii); or

(iii) The occurrence of a transaction requiring stockholder approval for
the acquisition of Aetna by an entity other than Aetna or a
Subsidiary through purchase of assets, or by merger, or otherwise.

(d) "Committee" means the Committee on Compensation and Organization of the
Board (or such other committee of the Board that the Board shall designate from
time to time) or any subcommittee thereof consisting of two or more directors
each of whom is an "outside director" within the meaning of Section 162(m) and a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.

(e) "Common Stock" means the common stock, $.01 par value, of Aetna.

(f) "Companies" means one or more of Aetna, any of Aetna's affiliated
companies, and any other entity as to which (i) Aetna or any of Aetna's
affiliated companies holds or is seeking to acquire an ownership interest, and
(ii) has been included in the Plan by the Committee.

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(g) "Covered Employee" shall have the meaning set forth in Section 162(m).

(h) "Deferral Period" means the period of time during which payment of any
amount otherwise payable under the Plan is deferred (i) at the direction of the
Committee pursuant to Section 6(b) or (ii) at the election of a Participant
pursuant to Section 6(c), but in either case subject to the right of the
Committee to terminate the Deferral Period as provided in Section 6(g).

(i) "Disability" means the occurrence of an event that would entitle a
Participant to the payment of disability income under a specific long-term
disability income plan approved by the Companies and under which the Participant
is enrolled, as such plan may be amended from time to time, or if such
Participant is not enrolled in a specific plan, as defined in a plan covering
similarly situated executive officers of Aetna.

(j) "Fair Market Value" means on any date, with respect to a share of
Common Stock, the closing price of a share of Common Stock as reported by the
Consolidated Tape of New York Stock Exchange Listed Shares on such date, or, if
no shares were traded on such Exchange on such date, on the next date on which
the Common Stock is traded.

(k) "Participant" means (i) each Covered Employee and (ii) each other
executive officer of Aetna as defined in Rule 3b-7 of the Securities Exchange
Act of 1934 whom Aetna designates as a participant under the Plan.

(l) "Performance Period" means the calendar year or such other period as
may be designated by the Committee.

(m) "Plan" means the Aetna Inc. Annual Incentive Plan, as set forth herein
and as may be amended from time to time.

(n) "Retirement" means the retirement of a Participant from active service
with the Companies at or after the age at which full pension benefits are
provided under a specific retirement plan maintained or contributed to by any of
the Companies and under which the Participant has an accrued benefit, as such
plan may be amended from time to time, or if such Participant does not have an
accrued benefit under any such plan, the age at which full pension benefits are
provided under a retirement plan covering similarly situated executive officers
of Aetna.

(o) "Section 162(m)" means Section 162(m) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder.

(p) "Share" means a share of Common Stock.

(q) "Stock Unit" means a unit representing the contractual right to receive
the value of one Share.

(r) "Stock Unit Account" means, with respect to any Participant who has
elected to have deferred amounts deemed invested in Stock Units, a bookkeeping
account established to record such Participant's interest under the Plan related
to such Stock Units.

(s) "Subsidiary" means any entity of which the Company possesses directly
or indirectly fifty percent (50%) or more of the total combined voting power of
all classes of stock of such entity.

3. ADMINISTRATION.

The Plan shall be administered by the Committee. The Committee shall have
the responsibility of construing and interpreting the Plan, provided that, in no
event, shall the Plan be interpreted in a manner which would cause any award to
a Covered Employee to fail to qualify as performance-based compensation under
Section 162(m). The Committee shall establish the performance objectives for any
Performance Period in accordance with Section 4 and certify whether such
performance objectives have been obtained. Any determination made or decision or
action taken or to be taken by the Committee, arising out of or in connection
with the construction, administration, interpretation and effect of the Plan and
of its rules and regulations, shall, to the fullest extent permitted by law (but
subject to the limitations on the discretion of the Committee applicable to
awards intended to be qualified as performance-based compensation under Section

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162(m)), be within the Committee's absolute discretion and shall be conclusive
and binding on any and all Participants, any person claiming under or through a
Participant and each of the Companies. The Committee may employ such legal
counsel, consultants and agents (including counsel or agents who are employees
of any Company) as it may deem desirable for the administration of the Plan and
may rely upon any opinion received from any such counsel or consultant or agent
and any computation received from such consultant or agent. All expenses
incurred in the administration of the Plan, including, without limitation, for
the engagement of any counsel, consultant or agent, shall be paid by the
Companies. No member or former member of the Board or the Committee shall be
liable for any act, omission, interpretation, construction or determination made
in connection with the Plan other than as a result of such individual's willful
misconduct.

4. DETERMINATION OF PARTICIPANTS.

In addition to the Covered Employees, the Committee may designate as a
Participant in the Plan any executive officer of Aetna as defined in Rule 3b-7
of the Securities Exchange Act of 1934. Members of the Board who are not
employees of any of the Companies shall not be eligible to participate in the
Plan.

5. BONUSES.

(a) Performance Criteria. On or before the end of the first three months of
each Performance Period (or such other date as may be required or permitted
under Section 162(m)), the Committee shall establish the performance objective
or objectives that must be satisfied in order for a Participant to receive a
bonus for such Performance Period. Any such performance objectives will be based
upon the relative or comparative achievement of one or more of the following
criteria, as determined by the Committee: (i) net income, (ii) earnings before
income taxes, (iii) earnings per share, (iv) return on shareholders equity, (v)
expense management, (vi) profitability of an identifiable business unit or
product, (vii) ratio of claims to revenues, (viii) revenue growth, (ix) earnings
growth, (x) total shareholder return, (xi) cash flow, (xii) return on assets,
(xiii) pretax operating income and any combination of the foregoing.

(b) Maximum Amount Payable. If the Committee certifies in writing that any
one of the performance objectives established for the relevant Performance
Period under Section 5(a) has been satisfied, each Participant who is employed
by the Companies on the last day of the Performance Period for which the bonus
is payable shall be entitled to receive a bonus in an amount not to exceed
$2,000,000.

(c) Negative Discretion. Notwithstanding anything else contained in Section
5(b) to the contrary, the Committee shall have the right, in its discretion, (i)
to reduce or eliminate the amount otherwise payable to any Participant under
Section 5(b) and (ii) to establish rules or procedures that have the effect of
limiting the amount payable to each Participant to an amount that is less than
the maximum amount otherwise authorized under Section 5(b).

(d) Affirmative Discretion. Notwithstanding any other provision in the Plan
to the contrary, (i) the Committee shall have the right, in its discretion, to
pay to any Participant who is not a Covered Employee a bonus for a Performance
Period in an amount up to the maximum bonus payable under Section 5(b), based on
individual performance or any other criteria that the Committee, in its
discretion, deems to warrant the payment of such a bonus, and (ii) in connection
with the hiring of any person who is or becomes a Covered Employee, the
Committee may provide for a minimum bonus amount for such Covered Employee with
respect to the Performance Period in which such Covered Employee is hired and/or
for the next following Performance Period, which would be payable to such
Covered Employee regardless of whether the relevant performance objectives are
attained with respect to the relevant Performance Period.

(e) Methodology for Determinations. In making any determination under
Section 5(c) or 5(d), the Committee shall give consideration to such factors as
it deems appropriate, including, without limitation, the degree to which the
established performance objectives have been obtained and whether the
Participant has materially contributed to the overall results of the Companies.
To assist it in making its determination under such Sections, the Chairman of
Aetna will furnish the Committee with specific recommendations (except with
respect to the Chairman's own award) and the Committee may request such other
advice and recommendations as it deems appropriate.

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6. PAYMENT OF AWARDS.

(a) General Rule. Except as otherwise expressly provided hereunder, payment
of any bonus amount determined under Section 4 shall be made to each Participant
as soon as practicable after the Committee certifies that one or more of the
applicable performance objectives have been attained (or, in the case of any
bonus payable under the provisions of Section 5(d), after the Committee
determines the amount of any such bonus). Any such payments shall be made in
cash or, at the discretion of the Committee in awards under the Aetna Inc. 1996
Stock Incentive Plan.

(b) Mandatory Deferral. Notwithstanding Section 6(a), the Committee may
specify that a percentage of the bonus payable with respect to any Participant,
all Participants or any class of Participants for any Performance Period be
mandatorily deferred for a Deferral Period specified by the Committee. The
percentage to be so deferred shall be determined by the Committee in its
discretion. Unless otherwise determined by the Committee at or after the date of
such deferral, any amount payable in respect of an amount mandatorily deferred
pursuant to this Section 6(b) shall be forfeited by the Participant if

(i) the Participant's employment with each of the Companies is
terminated for cause (as determined in the discretion of the
Committee under the generally applicable practices and policies of
whichever of the Companies employs the Participant);

(ii) the Participant voluntarily terminates employment, other than by
reason of death, Disability or Retirement, prior to the end of the
Deferral Period specified by the Committee with respect to such
mandatorily deferred amount; or

(iii) the Participant engages in any activity or conduct which, in the
reasonable opinion of the Committee, is inimical to the best
interest of the Companies.

(c) Voluntary Deferral. Notwithstanding Section 6(a), the Committee may
permit a Participant to defer payment of any portion of an award that is not
mandatorily deferred pursuant to Section 6(b) or to defer payment of an amount
mandatorily deferred to a date or event later than that specified by the
Committee. Any such election shall be made at such time or times, and subject to
such terms and conditions, as the Committee shall determine.

(d) Accounting for Deferrals. Any amount deferred under this Section 6
shall be credited to one or more bookkeeping accounts for the benefit of such
Participant on the books and records of whichever of the Companies employees the
Participant. Unless a Participant otherwise elects to have such amounts deemed
invested in Stock Units in accordance with Section 6(e), such amounts shall be
deemed held in cash and shall be credited with such rate of interest or such
deemed rate of earnings as the Committee shall specify from time to time;
provided that, unless the Committee otherwise determines, no interest or
earnings shall be credited during the Deferral Period specified by the Committee
in respect of amounts mandatorily deferred.

(e) Stock Units. The Committee may permit any Participant, all Participants
or any class of Participants to elect that any or all amounts deferred under the
Plan (including amounts mandatorily deferred pursuant to Section 6(b)) be deemed
invested, in whole or in part, in a number of whole or fractional Stock Units.
Any such Stock Units shall be credited to a Stock Unit Account for the benefit
of such Participant. The number of whole and fractional Stock Units credited to
a Stock Unit Account in respect of any amount deferred under this Section 6
shall be equal to the quotient of (i) the amount deferred divided by (ii) the
Fair Market Value of a Share on the date such amount would have been paid under
the Plan but for such deferral. Whenever a dividend other than a dividend
payable in the form of Shares is declared with respect to the Shares, the number
of Stock Units in the Participant's Stock Unit Account shall be increased by the
number of Stock Units determined by dividing (i) the product of (A) the number
of Stock Units in the Participant's Stock Unit Account on the related dividend
record date and (B) the amount of any cash dividend declared by the Company on a
Share (or, in the case of any dividend distributable in property other than
Shares, the per share value of such dividend, as determined by the Company for
purposes of income tax reporting) by (ii) the Fair Market Value on the related
dividend payment date. In the case of any dividend declared on Shares which is
payable in Shares, each Participant's Stock Unit Account shall be increased by
the number of Stock Units equal to the product of (i) the number of Units
credited to the Participant's Stock Unit Account on the

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related dividend record date and (ii) the number of Shares (including any
fraction thereof) distributable as a dividend on a Share. In the event of any
stock split, recapitalization, reorganization or other corporate transaction
affecting the capital structure of Aetna, the Committee shall make such
adjustments to the number of Stock Units credited to each Participant's Stock
Unit Account as the Committee shall deem necessary or appropriate to prevent the
dilution or enlargement of such Participant's rights.

(f) Payment of Deferred Amounts. Amounts attributable to any amount
deferred under the Plan, regardless of whether deferred pursuant to Section 6(b)
or 6(c), shall be paid or commence to be paid, at the election of the
Participant, at the end of the applicable Deferral Period or as of the first
business day of the calendar year next following the end of the Deferral Period.
Payment of such amounts shall be made, at the Participant's election, in a lump
sum or in five, ten or such other number of annual installments as shall be
permitted by the Committee. If a Participant does not timely elect the time at
which or the form in which such amounts shall be paid, such amounts shall be
paid immediately following the end of the Deferral Period and in a lump sum,
unless the Committee shall specify a different time or method of payment. The
Committee may, in its discretion, accelerate the payment of all or any portion
of any Participant's deferred amounts (regardless of whether the applicable
Deferral Period or period have terminated) in order to alleviate a financial
hardship incurred by the Participant due to an unforeseeable emergency beyond
the Participant's control.

Any payment to be made in respect of deferred amounts shall be made in
cash. For purposes of any cash distribution in respect of a Participant's Stock
Units, the cash payable shall equal the product of (i) the number of whole and
fractional Stock Units being distributed and (ii) the Fair Market Value of a
Share on the date as of which the distribution is to be made.

(g) Termination of Deferral Period. Notwithstanding anything else contained
in the Plan to the contrary, the Committee may, in its discretion, terminate any
Deferral Period in respect of any Participant. Such elective termination will be
deemed to be the end of the Deferral Period for purposes of determining when
payment of the Participant's interest is to commence under Section 6(f).

(h) Change in Control. Upon the occurrence of a Change in Control, all
performance objectives for the then current Performance Period shall be deemed
to have been achieved at target levels of performance and the Committee shall
cause each Participant to be paid an amount in cash based on such assumed
performance for the entire Performance Period as soon as practicable but in no
event later than 10 business days following the occurrence of such Change in
Control.

7. AMENDMENT AND TERMINATION.

Notwithstanding Section 8(a), the Board or the Committee may at any time
amend, suspend, discontinue or terminate the Plan; provided, however, that no
such action shall be effective without approval by the shareholders of Aetna to
the extent necessary to continue to qualify the amounts payable to Covered
Employees as performance-based compensation under Section 162(m).
Notwithstanding the foregoing, no amendment, suspension, discontinuance or
termination of the Plan shall adversely affect the rights of any Participant or
beneficiary in respect of any award that the Committee has determined to be
payable to a Participant in accordance with the terms hereof or as to any
amounts awarded, but payment of which has been deferred, in accordance with
Section 6.

8. GENERAL PROVISIONS.

(a) Effectiveness of the Plan.Subject to the approval of Aetna's
shareholders and the shareholders of Aetna Life and Casualty Company and U.S.
Healthcare Inc., the Plan shall be effective with respect to calendar years
beginning on or after January 1, 1997 and ending on or before December 31, 2001,
unless the term hereof is extended by action of the Board or the Committee.

(b) Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the

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consent of any such beneficiary. Any such designation, change or cancellation
must be made in a form approved by the Committee and shall not be effective
until received by the Committee. If no beneficiary has been named, or the
designated beneficiary or beneficiaries shall have predeceased the Participant,
the beneficiary shall be the Participant's spouse or, if no spouse survives the
Participant, the Participant's estate. If a Participant designates more than one
beneficiary, the rights of such beneficiaries shall be payable in equal shares,
unless the Participant has designated otherwise.

(c) No Right of Continued Employment. Nothing contained in this Plan shall
create any rights of employment in any Participant or in any way affect the
right and power of any of the Companies to discharge any Participant or
otherwise terminate the Participant's employment at any time with or without
cause or to change the terms of employment in any way.

(d) No Limitation on Corporate Actions. Nothing contained in the Plan shall
be construed to prevent any of the Companies from taking any corporate action
(including, without limitation, making provision for the payment of other
incentive compensation, whether payable in cash or otherwise, or whether
pursuant to a plan or otherwise) which is deemed by it to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
any awards made under the Plan. No employee, beneficiary or other person shall
have any claim against any of the Companies as a result of any such action.

(e) No Right to Specific Assets. Nothing contained in the Plan (including,
without limitation, the provisions of Section 6 hereof) shall be construed to
create in any Participant or beneficiary any claim against, right to or lien on
any particular assets of any of the Companies or to require any of the Companies
to segregate or otherwise set aside any assets or create any fund to meet any of
its obligations hereunder.

(f) No Contractual Right to Bonus. Nothing in this Plan shall be construed
to give any Participant any right, whether contractual or otherwise, to receive
any bonus with respect to any Performance Period unless and until the Committee
shall have expressly determined that such a Participant is entitled to receive
such an award pursuant to the terms of the Plan.

(g) Nonalienation of Benefits. Except as expressly provided herein, no
Participant or beneficiary shall have the power or right to transfer,
anticipate, or otherwise encumber the Participant's interest under the Plan.

(h) Withholding. Any amount payable to a Participant or a beneficiary under
this Plan shall be subject to any applicable Federal, state and local income and
employment taxes and any other amounts that any of the Companies is required at
law to deduct and withhold from such payment.

(i) Severability. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.

(j) Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Connecticut, without reference to the
principles of conflict of laws.

(k) Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in a construction of the provisions of the
Plan.

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APPENDIX J -- AETNA INC. NON-EMPLOYEE DIRECTOR DEFERRED STOCK AND
DEFERRED COMPENSATION PLAN
<PAGE> 279

APPENDIX J

AETNA INC.
NON-EMPLOYEE DIRECTOR DEFERRED STOCK
AND DEFERRED COMPENSATION PLAN

SECTION 1. ESTABLISHMENT OF PLAN; PURPOSE.

The Plan is hereby established to permit Eligible Directors of the Company,
in recognition of their contributions to the Company, to receive Shares in the
manner described below. The Plan is intended to enable the Company to attract,
retain and motivate qualified directors and to enhance the long-term mutuality
of interest between Directors and stockholders of the Company.

SECTION 2. DEFINITIONS.

When used in this Plan, the following terms shall have the definitions set
forth in this Section:

"Accounts" shall mean an Eligible Director's Stock Unit Account and
Interest Account, as described in Section 8.

"Affiliate" shall mean an entity at least a majority of the total voting
power of the then-outstanding voting securities of which is held, directly or
indirectly, by the Company and/or one or more other Affiliates.

"Board of Directors" shall mean the Board of Directors of the Company.

"Committee" shall mean the Nominating and Corporate Governance Committee of
the Board of Directors or such other committee of the Board as the Board shall
designate from time to time.

"Company" shall mean Aetna Inc.

"Compensation" shall mean the annual retainer fees earned by an Eligible
Director for service as a Director; the annual retainer fee, if any, earned by
an Eligible Director for service as a member of a committee of the Board of
Directors; and any fees earned by an Eligible Director for attendance at
meetings of the Board of Directors and any of its committees.

"Director" shall mean any member of the Board of Directors, whether or not
such member is an Eligible Director.

"Disability" shall mean an illness or injury that lasts at least six
months, is expected to be permanent and renders a Director unable to carry out
his/her duties.

"Effective Date" shall mean the date, if any, on which the Plan is approved
by the shareholders of Aetna Life and Casualty Company and U.S. Healthcare, Inc.
and the transactions contemplated by the Merger Agreement are consummated.

"Eligible Director" shall mean a member of the Board of Directors who is
not an employee of the Company.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Fair Market Value" shall mean on any date, with respect to a Share of
Common Stock, the closing price of a Share of Common Stock as reported by the
Consolidated Tape of New York Stock Exchange Listed Shares on the next preceding
date on which there was such a trade.

"Government Service" shall mean the appointment or election of the Eligible
Director to a position with the federal, state or local government or any
political subdivision, agency or instrumentality thereof.

"Grant" shall mean a grant of Units under Section 5.

"Interest Account" shall mean the bookkeeping account established to record
the interests of an Eligible Director with respect to deferred Compensation that
is not deemed invested in Units.

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"Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of
March 30, 1996, among Aetna Life and Casualty Company, U.S. Healthcare, Inc.,
the Company, Antelope Sub, Inc. and New Merger Corporation, as amended by
Amendment No. 1 thereto dated as of May 30, 1996.

"Prior Plan" shall mean the Aetna Life and Casualty Company Non-Employee
Director Deferred Stock and Deferred Compensation Plan.

"Retirement" shall mean termination of service as a Director on account of
the Company's mandatory Director retirement policy as may be in effect on the
date of such termination of service.

"Shares" shall mean shares of Stock.

"Stock" shall mean the Common Stock, $.01 par value, of the Company.

"Stock Unit Account" shall mean, with respect to an Eligible Director who
has elected to have deferred amounts deemed invested in Units, a bookkeeping
account established to record such Eligible Director's interest under the Plan
related to such Units.

"Subsidiary" shall mean any entity of which the Company possesses directly
or indirectly fifty percent (50%) or more of the total combined voting power of
all classes of stock of such entity.

"Unit" shall mean a contractual obligation of the Company to deliver a
Share or pay cash based on the Fair Market Value of a Share to an Eligible
Director or the beneficiary or estate of such Eligible Director as provided
herein.

"Year of Service as a Director" shall mean a period of 12 months of service
as a Director, measured from the effective date of a Grant.

SECTION 3. ADMINISTRATION.

The Plan shall be administered by the Committee; provided, however, that
the Plan shall be administered such that any Director participating in the Plan
shall continue to be deemed to be a "disinterested person" under Rule 16b-3 of
the Securities and Exchange Commission under the Exchange Act ("Rule 16b-3"), as
such Rule is in effect on the Effective Date of the Plan and as it may be
subsequently amended, for purposes of such Director's ability to serve on any
committee charged with administering any of the Company's stock-based incentive
plans for executive officers intended to qualify for the exemptive relief
available under Rule 16b-3.

SECTION 4. SHARES AUTHORIZED FOR ISSUANCE.

4.1. MAXIMUM NUMBER OF SHARES. The aggregate number of Shares with respect
to which Grants may be made to Eligible Directors under the Plan shall not
exceed 99,600 Shares, subject to adjustment as provided in Section 4.2 below. If
any Unit is settled in cash or is forfeited without a distribution of Shares,
the Shares otherwise subject to such Unit shall again be available for Grants
hereunder.

4.2. ADJUSTMENT FOR CORPORATE TRANSACTIONS. In the event that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Stock at a price substantially below Fair Market
Value, or other similar event affects the Stock such that an adjustment is
required to preserve, or to prevent enlargement of, the benefits or potential
benefits made available under the Plan, then the Board of Directors shall adjust
the number and kind of shares which thereafter may be awarded under the Plan and
the number of Units that have been, or may be, granted under the Plan.

SECTION 5. UNIT GRANTS.

5.1. UNIT AWARDS. Each Eligible Director (other than any Eligible Director
who has received an award under the Prior Plan) who is first elected or
appointed to the Board of Directors on or after the Effective Date of the Plan
shall be awarded 1,500 Units on such date. In addition, on the date of each
Annual Meeting of

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Shareholders of the Company occurring after 1996 and during the term of this
Plan, each Eligible Director serving as a Director on such date shall be awarded
350 Units.

5.2. DELIVERY OF SHARES. Subject to satisfaction of the applicable vesting
requirements set forth in Section 6 and except as otherwise provided in Section
7, all Shares that are subject to any Units shall be delivered to an Eligible
Director and transferred on the books of the Company on the date which is the
first business day of the month immediately following the termination of such
Eligible Director's service as a Director. Notwithstanding the foregoing, an
Eligible Director may elect that all or a portion of his or her Units shall be
payable in cash as soon as practicable following the first business day of the
month immediately following the termination of such Eligible Director's service
as a Director. Any fractional Shares to be delivered in respect of Units shall
be settled in cash based upon the Fair Market Value on the date any whole Shares
are transferred on the books of the Company to the Eligible Director or the
Eligible Director's beneficiary. The amount of any cash payment shall be
determined by multiplying the number of Units and the number of Units subject to
a cash payment election by the Fair Market Value on the first business day of
such month. Upon the delivery of a Share (or cash with respect to a whole or
fractional Share) pursuant to the Plan, the corresponding Unit (or fraction
thereof) shall be canceled and be of no further force or effect.

5.3. NONTRANSFERABILITY. Units may not be assigned or transferred, in
whole or in part, either directly or by operation of law (except in the event of
an Eligible Director's death by will or applicable laws of descent and
distribution), including, but not by way of limitation, by execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner, and no such
right or interest of any Eligible Director in the Plan shall be subject to any
obligation or liability of such Eligible Director.

5.4. DIVIDEND EQUIVALENTS. An Eligible Director shall have no rights as a
shareholder of the Company with respect to any Units until Shares are delivered
to the Director pursuant to this Section 5 hereof; provided that, each Eligible
Director shall have the right to receive an amount equal to the dividend per
Share for the applicable dividend payment date (which, in the case of any
dividend distributable in property other than Shares, shall be the per Share
value of such dividend, as determined by the Company for purposes of income tax
reporting) times the number of Units held by such Eligible Director on the
record date for the payment of such dividend (a "Dividend Equivalent"). Each
Eligible Director may elect, prior to any calendar year, whether the Dividend
Equivalent is (i) payable in cash, on or as soon as practicable after each date
on which dividends are paid to shareholders with respect to Shares; (ii) treated
as reinvested in an additional number of Units determined by dividing (A) the
cash amount of any such dividend by (B) the Fair Market Value on the related
dividend payment date; or (iii) deferred and credited to the Eligible Director's
Interest Account pursuant to Section 8.4.

SECTION 6. VESTING.

6.1. SERVICE REQUIREMENTS. Except as otherwise provided in this Section 6
or Section 7, an Eligible Director shall vest in his or her Units as provided in
this Section 6.1. If an Eligible Director terminates service prior to the
completion of three Years of Service as a Director, the number of Shares to be
delivered to such Eligible Director in respect of Units granted upon his or her
election to the Board shall equal the amount obtained by multiplying 1,500 by a
fraction, the numerator of which is the number of full months of service
completed by such Director from the applicable date of Grant and the denominator
of which is 36. If an Eligible Director terminates service prior to the
completion of three Years of Service as a Director, the number of Shares to be
delivered to such Eligible Director in respect of any annual Grant of Units made
prior to 1996 shall equal the amount obtained by multiplying 200 by a fraction,
the numerator of which is the number of full months of service completed by such
Director from the applicable date of Grant and the denominator of which is 36.
If an Eligible Director terminates service prior to the completion of one Year
of Service as a Director from the date of Grant with respect to any annual grant
of Units made after 1995, the number of shares to be delivered to such Eligible
Director in respect of such Grant shall equal the amount obtained by multiplying
350 by a fraction, the numerator of which is the number of full months of
service completed by such Director from the applicable date of Grant and the
denominator of which is 12. Notwithstanding the foregoing, and except as
provided in Section 6.2, if the Eligible Director terminates service by reason
of his/her death, Disability, Retirement, or acceptance of a position in
Government Service

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prior to the completion of the period of service required to be performed to
fully vest in any Grant, all Shares that are the subject of such Grant (or, if
elected by the Eligible Director, the value thereof in cash) shall be delivered
to such Eligible Director (or the Eligible Director's beneficiary or estate).

6.2. SIX MONTHS' MINIMUM SERVICE. If an Eligible Director has completed
less than six consecutive months of service as a Director, all Units held by
such Eligible Director shall be immediately forfeited. If an Eligible Director
has completed less than six consecutive months of service from any date on which
any annual Grant of Units is made, all Units held by such Eligible Director that
relate to such annual Grant shall be immediately forfeited; provided, however,
that this sentence shall not apply to any annual Grant of Units made prior to
1996.

6.3. DISTRIBUTION ON DEATH. Except as provided in Section 6.2, in the
event of the death of an Eligible Director, the Shares corresponding to such
Units or, at the election of the Eligible Director's beneficiary or estate, the
value thereof in cash shall be delivered to the beneficiary designated by the
Eligible Director on a form provided by the Company, or, in the absence of such
designation, to the Eligible Director's estate.

SECTION 7. CHANGE IN CONTROL.

7.1. IMMEDIATE VESTING. Upon the occurrence of a Change in Control, each
Eligible Director's right and interest in Units which have not previously vested
under Section 6 shall become vested and nonforfeitable regardless of the period
of the Eligible Director's service since the date such Units were granted.

7.2. CASH SETTLEMENT. Upon the occurrence of a Change in Control, in lieu
of delivering Shares with respect to the Units then held by an Eligible
Director, the Company shall pay such Eligible Director, not later than 60 days
after the Change in Control occurs, cash in an aggregate amount equal to the
product of (i) the number of Shares that are subject to all Units credited to
such Eligible Director at the time of the Change in Control multiplied by (ii)
the Fair Market Value on the date of the Change in Control. Notwithstanding the
foregoing, no payment with respect to Units shall be made under this Section 7.2
(and such Eligible Director shall have no right to receive such payment) earlier
than six months and one day after the applicable date of Grant.

7.3. DEFINITION. "Change in Control" shall mean the occurrence of any of
the following events:

(i) When any "person" as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Sections 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act but excluding the Company and any
Subsidiary thereof and any employee benefit plan sponsored or
maintained by the Company or any Subsidiary (including any trustee of
such plan acting as trustee), directly or indirectly, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as
amended from time to time), of securities of the Company representing
20 percent or more of the combined voting power of the Company's then
outstanding securities;

(ii) When, during any period of 24 consecutive months the individuals who,
at the beginning of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to constitute at
least a majority thereof, provided that a Director who was not a
Director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent
Director) if such Director was elected by, or on the recommendation of
or with the approval of, at least two-thirds of the Directors who then
qualified as Incumbent Directors either actually (because they were
directors at the beginning of such 24-month period) or by prior
operation of this Paragraph (ii); or

(iii) The occurrence of a transaction requiring stockholder approval for
the acquisition of the Company by an entity other than the Company or
a Subsidiary through purchase of assets, or by merger, or otherwise.

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SECTION 8. DEFERRED COMPENSATION PROGRAM.

8.1. ELECTION TO DEFER. On or before December 31 of any calendar year, an
Eligible Director may elect to defer receipt of all or any part of any
Compensation payable in respect of the calendar year following the year in which
such election is made, and to have such amounts credited, in whole or in part,
to a Stock Unit Account or an Interest Account. Any person who shall become an
Eligible Director during any calendar year may elect, not later than the 30th
day after his or her term as a Director begins, to defer payment of all or any
part of his or her Compensation payable for the portion of such calendar year
following such election.

8.2. METHOD OF ELECTION. A deferral election shall be made by written
notice filed with the Corporate Secretary of the Company. Such election shall
continue in effect (including with respect to Compensation payable for
subsequent calendar years) unless and until the Eligible Director revokes or
modifies such election by written notice filed with the Corporate Secretary of
the Company. Any such revocation or modification of a deferral election shall
become effective as of the end of the calendar year in which such notice is
given and only with respect to Compensation payable for services rendered
thereafter; provided that if the effect of such revocation or modification of a
deferral election is to change the amount of deferred compensation that would
otherwise have been credited to the Stock Unit Account it shall in no event
become effective earlier than six months after it is received by the Corporate
Secretary. Amounts credited to the Eligible Director's Stock Unit Account prior
to the effective date of any such revocation or modification of a deferral
election shall not be affected by such revocation or modification and shall be
distributed only in accordance with the otherwise applicable terms of the Plan.
An Eligible Director who has revoked an election to participate in the Plan may
file a new election to defer Compensation payable for services to be rendered in
the calendar year following the year in which such election is filed.

8.3. INVESTMENT ELECTION. At the time an Eligible Director elects to defer
receipt of Compensation pursuant to Section 8.1, the Eligible Director shall
designate in writing the portion of such Compensation, stated as a whole
percentage, to be credited to the Interest Account (or such other account as may
be established from time to time by the Committee) and the portion to be
credited to the Stock Unit Account. If an Eligible Director fails to notify the
Corporate Secretary as to how to allocate any Compensation between the Accounts,
100% of such Compensation shall be credited to the Interest Account. By written
notice to the Corporate Secretary of the Company, an Eligible Director may
change the manner in which Compensation payable with respect to services to be
rendered after the end of such calendar year are allocated among the Accounts,
provided that any such election shall only be effective with respect to
Compensation payable six months after such election is received by the Corporate
Secretary.

8.4. DIVIDEND EQUIVALENTS. In addition to the deferral of Compensation
permitted under Section 8.1, an Eligible Director may elect, in the manner and
at the time described in Section 5.4, to have Dividend Equivalents payable in
respect of his or her Units credited to his or her Interest Account in the
manner and at the time described in such Section 5.4.

8.5. INTEREST ACCOUNT. Any Compensation allocated to the Interest Account
shall be credited to the Interest Account as of the date such Fees would have
been paid to the Eligible Director. Any amounts credited to the Interest Account
shall be credited with interest at the same rate and in the manner in which
interest is credited under the Fixed Investment Fund (or, if such fund no longer
exists, the fund with the investment criteria most clearly comparable to that of
such Fund) under the Aetna Inc. Incentive Savings Plan (or any successor
thereto).

8.6. STOCK UNIT ACCOUNT. Any Compensation allocated to the Stock Unit
Account shall be deemed to be invested in a number of Units equal to the
quotient of (i) such Compensation divided by (ii) the Fair Market Value on the
date the Fees then being allocated to the Stock Unit Account would otherwise
have been paid. Fractional Units shall be credited, but shall be rounded to the
nearest hundredth percentile, with amounts equal to or greater than .005 rounded
up and amounts less than .005 rounded down. Whenever a dividend other than a
dividend payable in the form of Shares is declared with respect to the Shares,
the number of Units in the Eligible Director's Stock Unit Account shall be
increased by the number of Units determined by dividing (i) the product of (A)
the number of Units in the Eligible Director's Stock Unit Account on the related
dividend record date, and (B) the amount of any cash dividend declared by the

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Company on a Share (or, in the case of any dividend distributable in property
other than Shares, the per share value of such dividend, as determined by the
Company for purposes of income tax reporting), by (ii) the Fair Market Value on
the related dividend payment date. In the case of any dividend declared on
Shares which is payable in Shares, the Eligible Director's Stock Unit Account
shall be increased by the number of Units equal to the product of (i) the number
of Units credited to the Eligible Director's Stock Unit Account on the related
dividend record date, and (ii) the number of Shares (including any fraction
thereof) distributable as a dividend on a Share. In the event of any stock
split, stock dividend, recapitalization, reorganization or other corporate
transaction affecting the capital structure of the Company, the Committee shall
make such adjustments to the number of Units credited to each Eligible
Director's Stock Unit Account as the Committee shall deem necessary or
appropriate to prevent the dilution or enlargement of such Eligible Director's
rights.

8.7. DISTRIBUTION ELECTION. At the time an Eligible Director makes a
deferral election pursuant to Section 8.1, the Eligible Director shall also file
with the Corporate Secretary of the Company a written election (a "Distribution
Election") with respect to whether

(i) the aggregate amount, if any, credited to the Interest Account at any
time and the value of any Units credited to the Stock Unit Account
shall be distributed in cash, in Shares or in a combination thereof,
provided that any election to receive a distribution of all or any
portion of the value of a Participant's Interest Account in Shares must
be made on an irrevocable basis at least six months in advance of such
distribution;

(ii) such distribution shall commence as soon as practicable following the
first business day of the calendar month following the date the
Eligible Director ceases to be a Director or on the first business day
of any calendar year following the calendar year in which the Eligible
Director ceases to be a Director, and

(iii) such distribution shall be in one lump sum payment or in such number
of annual installments (not to exceed ten) as the Eligible Director
may designate.

The amount of any installment payment shall be determined by multiplying
the amount credited to the Accounts of an Eligible Director immediately prior to
the distribution by a fraction, the numerator of which is one and the
denominator of which is the number of installments (including the current
installment) remaining to be paid. An Eligible Director may at any time, and
from time to time, change any Distribution Election applicable to his or her
Accounts, provided that no election to change the timing of any final
distribution shall be effective unless it is made in writing and received by the
Corporate Secretary of the Company at least one full calendar year prior to the
time at which the Eligible Director ceases to be a director.

8.8. FINANCIAL HARDSHIP WITHDRAWAL. Any Eligible Director may, after
submission of a written request to the Corporate Secretary of the Company and
such written evidence of the Eligible Director's financial condition as the
Committee may reasonably request, withdraw from his Interest Account (but not
from his Stock Unit Account) up to such amount as the Committee shall determine
to be necessary to alleviate the Eligible Director's financial hardship.

8.9. TIMING AND FORM OF DISTRIBUTIONS. Any distribution to be made
hereunder, whether in the form of a lump sum payment or installments, following
the termination of an Eligible Director's service as a Director shall commence
in accordance with the Distribution Election made by the Eligible Director
pursuant to Section 8.7. If an Eligible Director fails to specify a form of
payment for a distribution in accordance with Section 8.7, the distribution from
the Interest Account shall be made in cash and the distribution from the Stock
Unit Account shall be made in Shares. If an Eligible Director fails to specify
in accordance with Section 8.7 a commencement date for a distribution or whether
such distribution shall be made in a lump-sum payment or a number of
installments, such distribution shall be made in a lump sum payment and commence
on the first business day of the month immediately following the date on which
the Eligible Director ceases to be a Director. In the case of any distribution
being made in annual installments, each installment after the first installment
shall be paid on the first business day of each subsequent calendar year, or as
soon as practical thereafter, until the entire amount subject to such
Distribution Election shall have been paid.

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8.10. EFFECT ON PRIOR PLAN. Subject to the approval of the Company's
shareholders and the shareholders of Aetna Life and Casualty Company and U.S.
Healthcare Inc., upon the consummation of the transactions contemplated by the
Merger Agreement, the amounts standing to the credit of each Eligible Director
under the Prior Plan shall be transferred to the Plan and credited to the
Eligible Director's Interest and/or Stock Unit Accounts, as applicable. Any
elections in effect under such Prior Plan shall be deemed to be an election made
pursuant to and in accordance with the terms of this Section 8 unless and until
the Eligible Director elects to change such elections in accordance with the
provisions of this Section 8.

SECTION 9. UNFUNDED STATUS.

The Company shall be under no obligation to establish a fund or reserve in
order to pay the benefits under the Plan. A Unit represents a contractual
obligation of the Company to deliver Shares or pay cash to a Director as
provided herein. The Company has not segregated or earmarked any Shares or any
of the Company's assets for the benefit of a Director or his/her beneficiary or
estate, and the Plan does not, and shall not be construed to, require the
Company to do so. The Director and his/her beneficiary or estate shall have only
an unsecured, contractual right against the Company with respect to any Units
granted or amounts credited to a Director's Accounts hereunder, and such right
shall not be deemed superior to the right of any other creditor. Units shall not
be deemed to constitute options or rights to purchase Stock.

SECTION 10. AMENDMENT AND TERMINATION.

The Plan may be amended at any time by the Board of Directors, provided
that, except as provided in Section 4.2, the Board of Directors may not, without
approval of the shareholders of the Company: (i) modify the number of Shares
with respect to which Units may be awarded under the Plan; (ii) modify the
vesting requirements established under Section 6 or Section 7; or (iii)
otherwise change the times at which, or the period within which, Shares may be
delivered under the Plan. Any modification of any of the formula provisions of
the Plan shall not be made more than once every six months, other than to
comport with changes in the Internal Revenue Code, ERISA or the rules
thereunder. The Plan shall terminate on April 30, 2001, except with respect to
previously awarded Grants and amounts credited to the Accounts of Directors.
Notwithstanding the foregoing, no termination of the Plan shall materially and
adversely affect any rights of any Director under any Grant made pursuant to the
Plan. Unless the Board otherwise specifies at the time of such termination, a
termination of the Plan will not result in the distribution of the amounts
credited to an Eligible Director's Accounts.

SECTION 11. GENERAL PROVISIONS.

11.1. NO RIGHT TO SERVE AS A DIRECTOR. This Plan shall not impose any
obligations on the Company to retain any Eligible Director as a Director nor
shall it impose any obligation on the part of any Eligible Director to remain as
a Director of the Company.

11.2. CONSTRUCTION OF THE PLAN. The validity, construction,
interpretation, administration and effect of the Plan, and the rights relating
to the Plan, shall be determined solely in accordance with the laws of the State
of Connecticut.

11.3. NO RIGHT TO PARTICULAR ASSETS. Nothing contained in this Plan and no
action taken pursuant to this Plan shall create or be construed to create a
trust of any kind or any fiduciary relationship between the Company and any
Eligible Director, the executor, administrator or other personal representative
or designated beneficiary of such Eligible Director, or any other persons. Any
reserves that may be established by the Company in connection with Units granted
under this Plan shall continue to be treated as the assets of the Company for
federal income tax purposes and remain subject to the claims of the Company's
creditors. To the extent that any Eligible Director or the executor,
administrator, or other personal representative of such Eligible Director,
acquires a right to receive any payment from the Company pursuant to this Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company.

11.4. LISTING OF SHARES AND RELATED MATTERS. If at any time the Board of
Directors shall determine in its discretion that the listing, registration or
qualification of the Shares covered by this Plan upon any national

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securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the delivery of Shares under this Plan, no
Shares will be delivered unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Board of
Directors.

11.5. SEVERABILITY OF PROVISIONS. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.

11.6. INCAPACITY. Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge any liability or obligation of the Board of Directors, the
Company and all other parties with respect thereto.

11.7. HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed in the construction of this Plan.

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APPENDIX K -- CONNECTICUT STATUTES GOVERNING APPRAISAL RIGHTS
<PAGE> 288

CONNECTICUT STATUTES GOVERNING
APPRAISAL RIGHTS

SECTIONS 33-373 AND 33-374 OF THE
CONNECTICUT STOCK CORPORATION ACT

SEC. 33-373. RIGHTS OF OBJECTING SHAREHOLDERS. (a) Any objecting holder of
preferred shares shall have the right to be paid the value of all shares of such
class owned by him in accordance with the provisions of section 33-374 if an
amendment to the certificate of incorporation is effected which would: (1)
Cancel or otherwise affect the right to accrued dividends or other arrearages in
respect of such class of shares; (2) reduce the dividend preference thereof; (3)
make noncumulative, in whole or in part, dividends thereof, which had
theretofore been cumulative; (4) reduce the redemption price thereof or make
such shares subject to redemption when not otherwise redeemable; (5) reduce any
preferential amount payable thereon upon voluntary or involuntary liquidation.

(b) If an offer is made by the corporation to holders of its shares of any
class having accrued dividends or other arrearages to exchange such shares for
other securities of the corporation which would be entitled to preference in the
receipt of any periodical payment or dividend over such shares, and if the offer
is accepted by, and such exchange is effected with, any holder of such shares,
then any other holder of such shares who objects to the terms of the offer shall
have the right to be paid the value of all shares of such class owned by him in
accordance with the provisions of section 33-374.

(c) Any shareholder of a merging or consolidating domestic corporation who
objects to the merger or consolidation shall have the right to be paid the value
of all shares of such corporation owned by him in accordance with the provisions
of section 33-374, except that a shareholder of a merging domestic corporation
which is to be the surviving corporation shall have such right only: (1) If and
to the extent that the plan of merger will effect an amendment to the
certificate of incorporation of the surviving corporation which would entitle
the shareholder to such right pursuant to the provisions of subsection (a) of
this section, or (2) if the plan of merger provides for the distribution to
shareholders of the surviving corporation of cash, securities or other property
in lieu of or in exchange for or upon the conversion of outstanding shares of
the surviving corporation.

(d) If a corporation sells all or substantially all its assets primarily in
consideration for securities of another corporation, domestic or foreign, and
such transaction is part of a general plan of liquidation and distribution
substantially equivalent to a merger, any shareholder of such corporation
objecting to such sale shall have the right to be paid the value of all shares
of such corporation owned by him in accordance with the provisions of section
33-374.

(e) If a distribution to shareholders, by dividend, liquidating
distribution or otherwise, is effected by transfer of assets in kind to
shareholders collectively as co-owners, any objecting shareholder who would
otherwise receive such distribution shall have the right to be paid the value of
all shares of such corporation owned by him in accordance with the provisions of
section 33-374.

(f) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in section 33-374.

SEC. 33-374. PROCEDURE FOR OBJECTING SHAREHOLDER. (a) As used in this
section, the term (1) "corporation" includes, if the context so indicates, the
successor, surviving or new corporation which acquires the property of a
predecessor corporation upon a sale of assets for securities, merger or
consolidation; (2) "the date on which the exchange was effective" means the date
on which the corporation first actually consummated an exchange of shares or, if
it reserved the right to postpone the operation or effectiveness of all
acceptances of its offer of exchange, the date on which it declared the
acceptance operative or effective; (3) "sale of assets for securities" means a
sale of assets entitling objecting shareholders to be paid the value of shares
pursuant to subsection (d) of section 33-373; (4) "shares" of a shareholder
means those shares owned by him as to which he is entitled to be paid the value
pursuant to the provisions of section 33-373.

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(b) Any shareholder designated in section 33-373 as having the right to be
paid the value of shares as provided in this section may elect to exercise such
right by giving notice to the corporation, in writing, objecting to the proposed
corporate transaction giving rise to such right. (1) In the case of a
shareholder so designated in subsections (a), (c) and (d) of section 33-373 such
notice shall be delivered to the corporation prior to the meeting of
shareholders called for the purpose of voting on such transactions, or at such
meeting prior to voting on such transaction, or prior to the time action taken
by consents as provided in section 33-330 shall become effective. If such
transaction is approved, any such shareholder so notifying the corporation,
provided none of his shares shall have been voted in favor thereof, may require
the corporation to purchase shares at fair value by delivering to the
corporation a demand to that effect in writing, within ten days after the date
on which the vote was taken or action taken by consents as provided in section
33-330 became effective. (2) In the case of a shareholder so designated in
subsection (b) of section 33-373, such notice shall be delivered to the
corporation within fifteen days after the date of mailing the offer. If an
exchange is effected with any shareholder, any such shareholder so notifying the
corporation, provided none of his shares shall have been so exchanged, may
require the corporation to purchase his shares at fair value by delivering to
the corporation a demand to that effect in writing, within ten days after the
date on which the exchange was effective if the corporation shall give notice of
such date to such shareholder or within sixty days after delivering the written
notice to the corporation, whichever is the earlier. (3) A shareholder so
designated in subsection (e) of section 33-373 may require the corporation to
purchase his shares at fair value by delivering such notice to the corporation
within fifteen days after the date of mailing the distribution or any notice
thereof from the corporation, whichever is earlier, accompanied by a demand to
that effect in writing, provided such shareholder shall not have accepted such
distribution. (4) In the case of a shareholder so designated in subsection (c)
of section 33-373, where a merger has been effected as provided in section
33-370, such notice shall be delivered to the corporation within fifteen days
after the date of mailing the plan of merger, and be accompanied by a demand in
writing that the corporation purchase his shares at fair value.

(c) Any demand to purchase shares under subsection (b) of this section
shall state the number and classes of shares of the shareholder making the
demand. Except as provided in subsection (i) of this section, any shareholder
making such demand shall thereafter be entitled only to payment as in this
section provided and shall not be entitled to vote, to receive dividends or to
exercise any other rights of a shareholder in respect of such shares. No such
demand may be withdrawn unless the corporation consents thereto. Any shareholder
failing to make demand as provided in subsection (b) of this section shall be
bound by the corporate transaction involved in accordance with its terms.

(d) At any time after the receipt of a notice by a shareholder objecting to
the proposed corporate transaction giving rise to rights under this section, but
not later than ten days after receipt of a demand to purchase shares or ten days
after the corporate transaction is effective, whichever is later, the
corporation shall make a written offer, to each shareholder who makes demand as
provided in this section, to pay for his shares at a specified price deemed by
such corporation to be the fair value thereof as of the day prior to the date on
which notice of the proposed corporate transaction was mailed, exclusive of any
element of value arising from the expectation or accomplishment of such
corporate transaction.

(e) Within twenty days after demanding the purchase of his shares, each
shareholder so demanding shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such and
demand has been made. His failure to do so shall, at the option of the
corporation, terminate his rights under this section unless a court of competent
jurisdiction, for good and sufficient cause shown, otherwise directs. If shares
represented by a certificate on which notation has been so made are transferred,
each new certificate issued therefor shall bear similar notation, together with
the name of the shareholder of such shares who made such demand, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which such shareholder had after making such
demand.

(f) If the corporation and any shareholder making a demand to purchase
shares under subsection (b) of this section agree in writing as to the value of
the shares, the corporation shall pay such shareholder such value upon and
concurrently with the surrender to the corporation of the certificate or
certificates representing such shares duly endorsed for transfer. If the
corporation defaults in or refuses to make such payment, such shareholder may
file a petition in the superior court for the judicial district where the
principal office of the

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corporation is located, praying that judgment be entered for such amount, and
such shareholder shall be entitled to judgment for such amount. If any such
shareholder should be a party to a proceeding under subsection (g) of this
section, the court in such proceeding shall upon motion of either the
corporation or such shareholder dismiss the proceeding with respect to such
shareholder.

(g) At any time during the period of sixty days after the date the
corporation is obliged to make an offer under subsection (d) of this section,
the corporation, or any shareholder who has made a demand to purchase shares
under subsection (b) of this section and who has not accepted the offer made by
the corporation and acting in the name of the corporation, may file a petition
in the superior court for the judicial district where its principal office is
located, or before any judge thereof, praying that the value of the shares of
such shareholders be found and determined. All shareholders making demand under
subsection (b) of this section who have not accepted the offer made by the
corporation, wherever residing, shall be made parties to the proceeding as an
action against their shares quasi in rem. A copy of the petition shall be served
on each such shareholder who is a resident of this state and shall be served by
registered or certified mail on each such shareholder who is a nonresident.
Service on nonresidents shall also be made by publication as provided by law.
The jurisdiction of the court shall be plenary and exclusive. All shareholders
who are parties to the proceeding shall be entitled to judgment against the
corporation for the amount of the fair value of their shares as of the day prior
to the date on which notice of the proposed corporate transaction was mailed,
exclusive of any element of value arising from the expectation or accomplishment
of such corporate transaction. The court may, if it so elects, appoint one or
more persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers shall have such power and authority as
shall be specified in the order of their appointment or an amendment thereof.
The court shall by its judgment determine the fair value of the shares of the
shareholders entitled to payment therefor and shall direct the payment of such
value, together with interest, if any, as hereinafter provided, to the
shareholders entitled thereto. The judgment may include an allowance for
interest at such rate as the court may find to be fair and equitable in all the
circumstances, from the date notice of the proposed corporate transaction was
mailed to the date of payment. The costs and expenses of any such proceeding
shall be determined by the court and shall be assessed against the corporation,
but all or any part of such costs and expenses may be apportioned and assessed
as the court may deem equitable against any or all shareholders who are parties
to the proceeding to whom the corporation has made an offer to pay for the
shares if the court finds that the action of such shareholders in failing to
accept such offer was arbitrary or vexatious or not in good faith. Such expenses
shall include reasonable compensation for and reasonable expenses of the
appraisers, but shall exclude the fees and expenses of counsel for and experts
employed by any party, but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor, or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the shareholder in
the proceeding.

(h) Any judgment entered under subsection (f) or (g) of this section shall
be enforceable as other decrees of the superior court may be enforced and shall
be payable only upon and currently with the surrender to the corporation of the
certificate or certificates representing the shares for which payment is due,
duly endorsed for transfer. Upon payment of any such judgment, the shareholder
shall cease to have any interest in such shares. The liability to pay for shares
or to pay damages imposed by this section on a corporation extends to the
successor corporation which acquires the assets of the predecessor, whether by
merger, consolidation or sale of assets for securities. Shares acquired by a
corporation pursuant to payment of the agreed value therefor or to payment of
the judgment entered therefor, as in this section provided, may be held and
disposed of by such corporation as in the case of other treasury shares, unless
in the case of a merger or consolidation the plan of merger or consolidation
otherwise provides.

(i) If a demand to purchase shares under subsection (b) of this section is
withdrawn upon consent, or if the proposed corporate action is abandoned or
rescinded or the shareholders revoke the authority to effect such action, or if
no demand or petition for the determination of fair value by a court has been
made or filed within the time provided in this section, or if a court of
competent jurisdiction determines that such shareholder is not entitled to the
relief provided by this section, then the right of such shareholder to be paid
the fair value of his shares shall cease and his status as a shareholder shall
thereupon be restored.

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APPENDIX L -- PENNSYLVANIA STATUTES GOVERNING APPRAISAL RIGHTS
<PAGE> 292

PENNSYLVANIA STATUTES GOVERNING APPRAISAL RIGHTS

SECTIONS 1930(A) AND 1571-80 (SUBCHAPTER D
OF CHAPTER 15) OF THE PENNSYLVANIA
BUSINESS CORPORATION LAW OF 1988

SECTION 1930. DISSENTERS RIGHTS.

(a) General rule. If any shareholder of a domestic business corporation
that becomes a party to a plan of merger or consolidation objects to the plan of
merger or consolidation and complies with the provisions of Subchapter D of
Chapter 15 (relating to dissenters' rights), the shareholder shall be entitled
to the rights and remedies of dissenting shareholders therein provided, if any.
See also section 1906(c) (relating to dissenters' rights upon special
treatment).

CHAPTER 15

SUBCHAPTER D -- DISSENTERS' RIGHTS

SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER.

(b) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters' rights upon special treatment)
Section 1930 (relating to dissenters' rights)
Section 1931(d) (relating to dissenters' rights in share exchanges)
Section 1932(c) (relating to dissenters' rights in asset transfers)
Section 1952(d) (relating to dissenters' rights in division)
Section 1962(c) (relating to dissenters' rights in conversion)
Section 2104(b) (relating to procedure)
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid)
Section 2325(b) (relating to minimum vote requirement)
Section 2704(c) (relating to dissenters' rights upon election)
Section 2705(d) (relating to dissenters' rights upon renewal of election)
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions)
Section 7104(b)(3) (relating to procedure)

(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of, and to vote at, the
meeting at which a plan specified in any of section 1930, 1931(d), 1932(c)
or 1952(d) is to be voted on, are either:

(i) listed on a national securities exchange; or

(ii) held or record by more than 2,000 shareholders;

shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.

(2) Paragraph (1) shall not apply to and dissenters' rights shall be
available without regard to the exception provided in that paragraph in the
case of:

(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other corporation
or solely into such shares and money in lieu of fractional shares.

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(ii) Shares of any preferred or special class, unless the articles,
the plan or the terms of the transaction entitle all shareholders of the
class to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of
the votes cast by all shareholders of the class.

(iii) Shares entitled to dissenters' rights under section 1906(c)
(relating to dissenters' rights upon special treatment).

(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority of more of
the directors of the corporation.

(d) Grant of optional dissenters' rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters' rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholder to dissenters' rights.

(e) Notice of dissenters' rights. Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters' rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:

(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and

(2) A copy of this subchapter.

(f) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters'
rights.

(g) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.

(h) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters' rights procedure).

SECTION 1572. DEFINITIONS.

The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:

"Corporation." -- The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.

"Dissenter." -- A shareholder or beneficial owner who is entitled to and
does assert dissenters' rights under this subchapter and who has performed every
act required up to the time involved for the assertion of those rights.

"Fair Value." -- The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects taking into
account all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.

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"Interest." -- Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.

SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS.

(i) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters' rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.

(j) Beneficial owners of shares. A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters' rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters' rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.

SECTION 1574. NOTICE OF INTENTION TO DISSENT.

If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.

SECTION 1575. NOTICE TO DEMAND PAYMENT.

(k) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporation action
is to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporation action.
In either case, the notice shall:

(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.

(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.

(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.

(4) Be accompanied by a copy of this subchapter.

(l) Time for receipt of demand for payment. The time set for receipt of the
demand and deposit of certificated shares shall not be less than 30 days from
the mailing of the notice.

SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.

(m) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.

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(n) Restriction on uncertificated shares. If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).

(o) Rights retained by shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.

SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.

(p) Failure to effectuate corporation action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.

(q) Renewal of notice to demand payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may, at any later time, send a new notice conforming
to the requirements of section 1575 (relating to notice to demand payment), with
like effect.

(r) Payment of fair value of shares. Promptly after effectuation of the
proposed corporation action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:

(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.

(2) A statement of the corporation's estimate of the fair value of the
shares.

(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.

(s) Failure to make payment. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.

SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.

(t) General rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenters' shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.

(u) Effect of failure to file estimate. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.

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SECTION 1579. VALUATION PROCEEDINGS GENERALLY.

(v) General rule. Within 60 days after the latest of:

(1) Effectuation of the proposed corporate action;

(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or

(3) Timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares).

If any demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value of the
shares by determined by the court.

(w) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).

(x) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.

(y) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.

(z) Effect of corporation's failure to file application. If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the corporation
may do so in the name of the corporation at any time within 30 days after the
expiration of the 60-day period. If a dissenter does not file an application
within the 30-day period, each dissenter entitled to file an application shall
be paid the corporation's estimate of the fair value of the shares and no more,
and may bring an action to recover any amount not previously remitted.

SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS.

(aa) General rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.

(bb) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.

(cc) Award of fees for benefits to other dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who are benefited.

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APPENDIX M -- FORM OF NEW AETNA CERTIFICATE OF INCORPORATION

<PAGE> 298

APPENDIX M

RESOLUTION TO ADOPT CERTIFICATE

OF INCORPORATION

RESOLVED. That, for the purpose of surrendering its Charter and
reincorporating under the Stock Corporation Act of the State of Connecticut,
this Company adopts as its certificate of incorporation the Certificate of
Incorporation in the form presented with this resolution.

CERTIFICATE OF

INCORPORATION OF AETNA SERVICES, INC.

Section 1. The name of the Company is Aetna Services, Inc.

Section 2. The nature of the business to be transacted, and the purposes
to be promoted or carried out by the Company, are to engage in any lawful act or
activity for which corporations may be formed under the Stock Corporation Act of
the State of Connecticut or any successor statute thereto.

The Company shall have all powers granted by law and all powers granted in
the Stock Corporation Act of the State of Connecticut or any successor statute
thereto.

Section 3. The minimum stated capital with which the Company shall
commence business shall be an amount not less than $1,000. The authorized number
of shares of capital stock shall be 250,000,000 shares of Common Capital Stock
par value $.01 per share, 10,000,000 shares of Class A Voting Preferred Stock
par value $.01 per share, 15,000,000 shares of Class B Voting Preferred Stock
par value $.01 per share, and 15,000,000 shares of Class C Non-Voting Preferred
Stock par value $.01 per share. The Class A Voting Preferred Stock, Class B
Voting Preferred Stock and Class C Non-Voting Preferred Stock shall be equal in
rank among themselves and senior to the Common Capital Stock as to payments of
dividends or payments upon liquidation. The Board of Directors is authorized to
fix and determine the terms, limitations and relative rights and preferences of
any of the classes of the preferred stock including, without limitation, any
voting rights thereof, to divide and issue any of the classes of the preferred
stock in series, and to fix and determine the variations among series to the
extent permitted by law.

No holder of any Common Capital Stock of the Company shall have any
preemptive right to purchase or subscribe to any shares of any class of its
capital stock now or hereafter authorized or to any securities convertible into
shares of any class of its capital stock. No holder of any class of the
preferred stock of the Company shall have any preemptive right to purchase or
subscribe to any shares of any class of its capital stock now or hereafter
authorized or to any securities convertible into shares of any class of its
capital stock.

Provisions Applicable to the

15,000,000 Authorized Shares of

Class B Voting Preferred Stock

The 15,000,000 shares of authorized Class B Voting Preferred Stock of the
Company shall constitute a single class with the following terms, limitations
and relative rights and preferences:

1. Dividends. The holders of any series of the Class B Voting Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, preferential dividends as such rates and payable on such dividends
payment dates in each year as shall be established for such series, such
dividends to be payable to holders of the Class B Voting Preferred Stock of
record on such dates as may be fixed by said Board, but not more than 70 days
before each dividend payment date; provided, however, that dividends shall not
be declared or paid on any Class B Voting Preferred Stock for any dividend
period unless dividends have been or are contemporaneously declared or paid to
the same pro rata extent on the outstanding preferred stock of all series

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of all classes ranking on a parity with the Class B Voting Preferred Stock as to
payment of dividends for all dividend periods terminating on the same or an
earlier date.

Dividends on each share of any series of the Class B Voting Preferred Stock
shall accrue and be cumulative, if so provided for in such series, from the date
of issue thereof or from such other date as may be provided for in such series.

Whenever dividends payable on the Class B Voting Preferred Stock as
provided herein are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Class B
Voting Preferred Stock outstanding shall have been paid in full, the Company
shall not:

(a) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Class B Voting Preferred Stock;

(b) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Class B Voting Preferred
Stock except dividends paid ratably on the Class B Voting Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled; or

(c) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Class B Voting Preferred Stock provided
that the Company may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of the
Company ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Class B Voting Preferred Stock.

2. Liquidation. The holders of shares of any series of the Class B Voting
Preferred Stock shall receive upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company the respective amounts established for
such series. If the net assets of the Company shall be insufficient to pay said
amounts in full together with the aggregate liquidation preference for the
outstanding shares of preferred stock of all other classes ranking on a parity
with the Class B Voting Preferred Stock as to payments upon liquidation, then
the entire net assets of the Company shall be distributed among the holders of
preferred stock of all such classes, who shall receive a common percentage of
the full respective preferential amounts. Neither the consolidation nor the
merger of the Company with or into another corporation or corporations, nor the
sale or transfer by the Company or all or any part of its assets, shall be
deemed a liquidation, dissolution or winding up of the Company.

3. Redemption and Purchase. Subject to any restriction contained in the
terms of any particular series of the Class B Voting Preferred Stock, all or any
part of any series of the Class B Voting Preferred Stock at any time outstanding
may be called for redemption at any time at the applicable redemption price
provided for in such series and in the manner herein below provided. All or any
part of any series of the Class B Voting Preferred Stock may be called for
redemption in accordance with the terms of such series without calling any part
or all of any other series of the Class B Voting Preferred Stock. If less then
all of any such series of the Class B Voting Preferred Stock is so called, the
shares of such series of the Class B Voting Preferred Stock to be called shall
be selected by lot or pro rata or by any other means the Board of Directors
deems equitable, all as determined by the Board of Directors.

Except for a mandatory redemption provided for in any series of the Class B
Voting Preferred Stock, (i) no call for redemption of less than all of the Class
B Voting Preferred Stock outstanding shall be made without paying or setting
aside for payment an amount equal to the cumulative dividends accrued and unpaid
to the last preceding dividend date on all of the Class B Voting Preferred Stock
then outstanding and not called and (ii) no redemption of less than all of the
Class B Voting Preferred Stock outstanding shall be made without paying or
setting aside for payment an amount equal to the cumulative dividends accrued
and unpaid to the dividend date that coincides with or last precedes such
redemption date on all the Class B Voting Preferred Stock then outstanding and
not called.

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Except as otherwise provided in any series of the Class B Voting Preferred
Stock, notice of each such call, specifying the shares called for redemption,
the redemption date and the place where the redemption price of the stock so
called is payable, and, if any series of such stock is convertible, the date
upon which the conversion rights of the shares of such series being redeemed
will expire, shall be mailed by or on behalf of the Company not less than 30
days before the redemption date or the date upon which conversion rights of such
shares will expire when called for redemption, whichever is earlier, to each
holder of stock so called at such holder's address as it appears upon the books
of the Company.

If notice of such call shall have been duly given as aforesaid and if, on
or before the redemption date designated in such notice, the funds necessary for
the redemption shall have been set aside so as to be and continue to be
available therefor, then notwithstanding that any certificate of the Class B
Voting Preferred Stock so called for redemption shall not have been surrendered
for cancellation, the dividends thereon shall cease to accrue from and after the
date of redemption so designated, and all rights with respect to the shares of
the Class B Voting Preferred Stock so called for redemption shall forthwith
after such redemption date cease and terminate, except only the right of the
holders thereof to receive the redemption price of such shares without interest.

The Company may, however, at any time prior to the redemption date
specified in the notice of redemption deposit in trust, for the account of the
holders of the shares of the Class B Voting Preferred Stock to be redeemed, with
a bank or trust company in good standing named in the notice of redemption, all
funds necessary for the redemption, and deliver in writing irrevocable
instructions and authority directing such bank or trust company on behalf of and
at the expense of the Company to cause notice of such redemption to be duly
mailed as provided above promptly after receipt of such irrevocable instructions
and authority and to pay the redemption price to the holders of the shares of
the Class B Voting Preferred Stock to be redeemed, and thereupon,
notwithstanding that any certificate for the shares of the Class B Voting
Preferred Stock so called for redemption shall not have been surrendered for
cancellation, all shares of the Class B Voting Preferred Stock with respect to
which the deposit shall have been made shall no longer be deemed outstanding and
all rights with respect to such shares shall cease and terminate, except only
the right of the holders thereof to receive from such bank or trust company the
redemption price of such shares without interest, and with respect to any series
of such stock entitled to conversion rights, to exercise such conversion rights.
Any moneys so deposited for the redemption of shares of the Class B Voting
Preferred Stock which shall be converted prior to the redemption date shall be
repaid to the Company immediately following such conversion. Any amount earned
on funds so deposited shall be paid to the Company from time to time.

Any funds so set aside or deposited, as the case may be, and unclaimed at
the end of six years from such redemption date shall be released and repaid to
the Company upon it request after which the holders of the shares so called for
redemption shall look only to the Company for the payment thereof without
interest.

4. Conversion. Shares of any series of the Class B Voting Preferred Stock
may be convertible into or exchangeable for Common Capital Stock or other
securities or assets of the Company or any other issuer to the extent, but only
to the extent, if any, as may be provided for in such series.

5. Voting Rights. Subject to the provision for adjustment hereinafter set
forth, each shares of Class B Voting Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareholders of
the Company. In the event the Company shall at any time after November 7, 1989
(a) declare a dividend on the outstanding shares of Common Capital Stock payable
in shares of Common Capital Stock, (b) split up or divide the outstanding shares
of Common Capital Stock, (c) combine the outstanding shares of Common Capital
Stock into a smaller number of shares, or (d) issue any shares of its capital
stock in a reclassification of the outstanding shares of Common Capital Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), then,
in each such case, and regardless of whether any shares of Class Voting
Preferred Stock are then issued or outstanding, the number of votes per share to
which each holder of shares of Class B Voting Preferred Stock would be entitled
immediately prior to such event shall be adjust by multiplying such number by a
fraction, the numerator of which is the number of shares of Common Capital Stock
outstanding immediately

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after such event and the denominator if which is the number of shares of Common
Capital Stock that were outstanding immediately prior to such event.

Except as otherwise provided herein or by law, the holders of shares of
Class B Voting Preferred Stock and the holders of shares of Common Capital Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Company.

Except as set forth herein, or as required by law, holders of Class B
Voting Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Capital Stock as set forth herein) for taking any corporate
action.

The Certificate of Incorporation shall not be amended in any manner which
would materially after or change the powers, preferences or special rights of
the Class B Voting Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least a majority of the outstanding shares
of Class B Voting Preferred Stock, voting separately as a class.

6. Consolidation, Merger, Etc. (a) In case the Company shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Capital Stock are exchanged for or changed into other stock or
securities, case and/or any other property, then in any such case each share of
Class B Voting Preferred Stock shall at the same time be similarly exchanged for
or changed into an amount per share, subject to the provision for adjustment set
forth in subsection (b) of this Section 6, equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Capital Stock
is changed or exchanged.

(b) In the event the Company shall at any time after November 7, 1989 (i)
declare a dividend on the outstanding shares of Common Capital Stock payable in
shares of Common Capital Stock, (ii) split up or divide the outstanding shares
of Common Capital Stock, (iii) combine the outstanding shares of Common Capital
Stock into a smaller number of shares, or (iv) issue any shares of its capital
stock in a reclassification of the outstanding shares of Common Capital Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), then,
in each such case, and regardless of whether any shares of Class B Voting
Preferred Stock are the issued or outstanding, the amount per share to which
each holder of shares of Class B Voting Preferred Stock would be entitled
immediately prior to such event under subsection (a) of this Section 6 shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Capital Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Capital
Stock that were outstanding immediately prior to such event.

7. Transfer Agent. The Company shall always have at least one transfer
agent for the Class B Voting Preferred Stock, which may be the Company or a bank
or trust company in good standing.

Provisions Applicable to the

Class B Voting Preferred Stock, Series A

There is hereby established a series of the Company's Class B Voting
Preferred Stock, without par value, designated and hereinafter referred to as
"Class B Voting Preferred Stock, Series A" the authorized number of shares of
which series shall be 2,500,000 and the terms of which series shall be as
follows:

1. Dividends. (a)The holders of shares of Class B Voting Preferred Stock,
Series A shall be entitled to receive cumulative quarterly dividends payable in
cash (or in kind to the extent provided below) on the fifteenth day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share of Class B
Voting Preferred Stock, Series A (the "First Quarterly Dividend Payment Date"),
in an amount per share (rounded to nearest cent), subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions, other than a
dividend (payable in shares of Common Capital Stock or a subdivision of the
outstanding shares of Common

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Capital Stock (by reclassification or otherwise), declared on the Common Capital
Stock on or since the immediately preceding Quarterly Dividend Declaration Date,
as defined below, or, with respect to the first Quarterly Dividend Declaration
Date, since the first issuance of any share of Class B Voting Preferred Stock,
Series A. In the event no dividend or distribution shall have been declared on
the Common Capital Stock during the period between any Quarterly Dividend
Declaration Date and the next subsequent Quarterly Dividend Declaration Date,
the holders of shares of Class B Voting Preferred Stock, Series A shall be
entitled to receive a dividend of $0.01 per share on the next subsequent
Quarterly Dividend Payment Date. The Company shall declare a dividend on the
Class B Voting Preferred Stock, Series A on the fifth day of March, June,
September and December of each year (each such date being referred to herein as
a "Quarterly Dividend Declaration Date"), commencing on the first Quarterly
Dividend Declaration Date after the first issuance of a share of Class B Voting
Preferred Stock, Series A. In the event the Company shall at any time after
November 7, 1989 (i) declare a dividend on the outstanding shares of Common
Capital Stock payable in shares of Common Capital Stock, (ii) split up or divide
the outstanding shares of Common Capital Stock, (iii) combine the outstanding
shares of Common Capital Stock into a smaller number of shares, or (iv) issue
any shares of its capital stock in a reclassification of the outstanding shares
of Common Capital Stock (including any such reclassification in connection with
a consolidation or merger on which the company is the continuing or surviving
corporation), then, in each such case, and regardless of whether any shares of
Class B Voting Preferred Stock, Series A are then issued or outstanding the
amount per share to which each holder of shares of Class B Voting Preferred
Stock, Series A would be entitled immediately prior to such event under the
first sentence of this Section 1(a) shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Capital
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Capital Stock that were outstanding immediately
prior to such event.

(b) Dividends shall begin to accrue and be cumulative on outstanding shares
of Class B Voting Preferred Stock, Series A from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares: (i) unless the date of
issue of such shares is prior to the record date for the First Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of the first issuance of a share of Class B Voting
Preferred Stock, Series A; or (ii) unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Class B Voting Preferred Stock, Series A entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Class B Voting Preferred
Stock, Series A in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Class B Voting Preferred Stock, Series A entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than 70 calendar days prior to the date fixed for the payment therefore.

2. Redemption. The shares of Class B Voting Preferred Stock, Series A
shall not be redeemable.

3. Liquidation. Upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, no distribution or payment shall be made (a) to
the holders of Common Capital Stock or any other shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock, Series A, unless, prior thereto, the holders of
shares of Class B Voting Preferred Stock, Series A shall have received an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of Common Capital Stock, plus an amount equal to all accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, or (b) to the holders of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Class B
Voting Preferred Stock, Series A, except distributions made ratably on the Class
B Voting Preferred Stock, Series A and all other such parity stock in proportion
to the total amounts to which the holders of all such shares are entitled upon
such liquidation, dissolution or winding up. In the event the Company shall at
any time after

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November 7, 1989 (a) declare a dividend on the outstanding shares of Common
Capital Stock payable in shares of Common Stock Capital Stock, (b) split up or
divide the outstanding shares of Common Capital Stock, (c) combine the
outstanding shares of Common Capital Stock into a smaller number of shares, or
(d) issue any shares of its capital stock in a reclassification of the
outstanding shares of Common Capital Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock, Series A and then issued
or outstanding, the aggregate amount pre share to which each holder of shares of
Class B Voting Preferred Stock, Series A would be entitled immediately prior to
such event under the proviso in clause (a) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Capital Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Capital
Stock that were outstanding immediately prior to such event.

4. No Conversion Rights. Holders of shares of Class B Voting Preferred
Stock, Series A shall have no right to convert such shares into or exchange them
for shares of Common Capital Stock, or other securities or assets of the Company
or any other issue.

5. Reacquired Shares. Any shares of Class B Voting Preferred Stock, Series
A purchased or otherwise acquired by the Company in any manner whatsoever shall
not be canceled but shall be held as treasury shares until retired, canceled or
reissued by action of the Board of Directors.

Section 4. (A) No person who is or was a director of the Company shall be
personally liable to the Company or its shareholders for monetary damages for
breach of duty as a director in an amount that exceeds the compensation received
by the director for serving the Company during the year of the violation if such
breach did not (a) involve a knowing and culpable violation of law by the
director, (b) enable the director or an associate, as defined in subdivision (3)
of Section 33-374d of the Stock Corporation Act of the State of Connecticut as
in effect on the effective date hereof, or as defined in any successor statute
thereto, as such may be amended from time to time, to receive an improper
personal economic gain, (c) show a lack of good faith and a conscious disregard
for the duty of the director to the Company under circumstances in which the
director was aware that his conduct or omission created an unjustifiable risk of
serious injury to the Company, (d) constitute a sustained and unexcused pattern
of inattention that amounted to an abdication of the director's duty to the
Company, or (e) create liability under Section 33-321 of the Stock Corporation
Act of the State of Connecticut as in effect on the effective date hereof, or
any successor statute thereto, as such may be amended from time to time. This
Section 4 shall not limit or preclude the liability of a person who is or was a
director for any act or omission occurring prior to the effective date hereof.
Any lawful repeal or modification of this Section 4 or the adoption of any
provision inconsistent herewith by the Board of Directors and the shareholders
of the Company shall not, with respect to a person who is or was a director,
adversely affect any limitation of liability, right or protection of such person
existing hereunder with respect to any breach of duty occurring prior to the
effective date of such repeal, modification or adoption of a provision
inconsistent herewith.

(B) The limitation of liability of any person who is or was a director
provided for in this Section shall not be exclusive of any other limitation or
elimination of liability contained in, or which may be provided to any such
person under, Connecticut law as in effect on the effective date hereof and as
thereafter amended.

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PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. 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.

Consistent with the statute, the Registrant intends to procure 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 will not require an after-the-fact
determination of good faith in order for the insured director or officer to
receive the benefits provided under the policies nor will 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 will 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

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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 21. EXHIBITS.

The following is a list of exhibits to the Registration Statement:

<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger, dated as of March 30, 1996, among Aetna Life and
Casualty Company, U.S. Healthcare, Inc., Butterfly, Inc., Antelope Sub, Inc.
and New Merger Corporation (U.S. Healthcare, Inc. Form 8-K, filed April 2,
1996 Exhibit 99.1)*
2.2 Amendment No. 1, dated as of May 30, 1996, to the Agreement and Plan of Merger,
dated as of March 30, 1996, among Aetna Life and Casualty Company, U.S.
Healthcare, Inc., Aetna Inc., (formerly known as Butterfly, Inc.), Antelope
Sub. Inc. and New Merger Corporation***
3.1 Aetna Inc. Amended and Restated Certificate of Incorporation***
3.2 Aetna Inc. Bylaws***
4.1 Form of Designations, Rights and Preferences of 6.25% Class C Voting Preferred
Stock**
4.2 Form of Aetna Inc. Rights Agreement***
5.1 Opinion of Day, Berry & Howard as to legality of Common Shares and Preferred
Shares***
7.1 Opinion of Day, Berry & Howard re: liquidation preference***
8.1 Opinion of Davis Polk & Wardwell re: tax matters***
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom re: tax matters***
9.1 Voting Agreement, dated as of March 30, 1996, among Leonard Abramson, Aetna
Life Insurance Company and Aetna Life Insurance and Annuity Company (U.S.
Healthcare, Inc. Form 8-K, filed April 2, 1996 Exhibit 99.2)*
9.2 Amendment No. 1, dated as of May 30, 1996, to the Voting Agreement, dated as of
March 30, 1996, among Leonard Abramson, Aetna Life Insurance Company and
Aetna Life Insurance and Annuity Company***
10.1 Aetna Life and Casualty Company $2.5 billion Credit Facility Commitment
Letter***
10.2 Registration Rights Agreement, dated as of March 30, 1996, between Butterfly,
Inc. and Leonard Abramson (U.S. Healthcare, Inc. Form 8-K, filed April 2,
1996 Exhibit 99.3)*
10.3 Amendment No. 1, dated as of May 30, 1996, to the Registration Rights
Agreement, dated as March 30, 1990 between Aetna Inc. (formerly known as
Butterfly, Inc.) and Leonard Abramson***
10.4 Amended and Restated Agreement dated as of May 30, 1996 between Aetna Inc.
(formerly Butterfly, Inc.) and Leonard Abramson***
10.5 The Aetna Inc. 1996 Stock Incentive Plan**
10.6 The Aetna Inc. Annual Incentive Plan**
10.7 The Aetna Inc. Non-Employee Director Deferred Stock and Deferred Compensation
Plan**
10.8 Form of Employment Agreement, dated as of March 30, 1996, by and between U.S.
Healthcare, Inc. and Joseph Sebastianelli. (U.S. Healthcare, Inc. Form 8-K,
filed April 2, 1996 Exhibit 99.5)*
10.9 Form of Employment Agreement, dated as of March 30, 1996, by and between U.S.
Healthcare, Inc. and Michael Cardillo. (U.S. Healthcare, Inc. Form 8-K, filed
April 2, 1996 Exhibit 99.6)*
</TABLE>

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<TABLE>
<S> <C>
10.10 Stock Purchase Agreement, dated as of November 28, 1995, between The Travelers
Insurance Group Inc. and Aetna Life and Casualty Company relating to the
purchase and sale of 100% of the Common Stock of the Aetna Casualty and
Surety Company and The Standard Fire Insurance Company (Aetna Life and
Casualty Company 1995 Form 10-K, filed February 1996 Exhibit 10.1)*
10.11 Letter Agreement, dated as of January 19, 1995, between Aetna Life and Casualty
Company and Richard L. Huber (Aetna Life and Casualty Company 1995 Form 10-K,
filed February 1996 Exhibit 10.2)*
10.12 Amendment No. 1 dated March 1, 1996 to Letter Agreement dated January 19, 1995
between Aetna Life and Casualty Company and Richard L. Huber.***
10.13 Employment Agreement, dated as of January 29, 1996, between Aetna Life and
Casualty Company and Ronald E. Compton (Aetna Life and Casualty Company 1995
Form 10-K, filed February 1996 Exhibit 10.4)*
10.14 Employment Agreement, dated as of December 19, 1995, between Aetna Life and
Casualty Company and Daniel P. Kearney (Aetna Life and Casualty Company 1995
Form 10-K, filed February 1996 Exhibit 10.5)*
10.15 Letter Agreement, dated as of January 31, 1996, between Aetna Life and Casualty
Company and The Travelers Insurance Group Inc. (Aetna Life and Casualty
Company Form 10-Q, filed April 26, 1996 Exhibit 10.5)*
10.16 Amendment, dated as of April 2, 1996, to Stock Purchase Agreement, dated as of
November 28, 1995, between Aetna Life and Casualty Company and The Travelers
Insurance Group Inc. (Aetna Life and Casualty Company Form 10-Q, filed April
26, 1996 Exhibit 10.6)*
10.17 Amended and Restated U.S. Healthcare, Inc. Savings Plan (U.S. Healthcare, Inc.
1995 Form 10-K, filed March 1996 Exhibit 10.16)*
10.18 Amended and Restated Pension Plan for Employees of U.S. Healthcare, Inc. (U.S.
Healthcare, Inc. 1995 Form 10-K, filed March 1966 Exhibit 10.17)*
10.19 Split Dollar Insurance Agreement, dated as of February 1, 1990, among Madlyn K.
Abramson, Marcy A. Shoemaker (formerly Marcy Abramson), Nancy Wolfson, Judith
Abramson and David B. Soll, and U.S. Healthcare, Inc., and the related
Collateral Assignment Agreement, dated as of February 1, 1990, among Madlyn
K. Abramson, Marcy A. Shoemaker (formerly Marcy Abramson), Nancy Wolfson,
Judith Abramson and David B. Soll and U.S. Healthcare, Inc. (U.S. Healthcare,
Inc. 1995 Form 10-K, filed March 1996 Exhibit 10.24)*
10.20 Split Dollar Insurance Agreement, dated as of January 21, 1991, among Marcy A.
Shoemaker (formerly Marcy Abramson), Nancy Wolfson, Judith Abramson, David B.
Soll, Jerome Goodman and Edward M. Glickman, and U.S. Healthcare, Inc., and
the related Collateral Assignment Agreement, dated as of January 21, 1991,
among Marcy A. Shoemaker (formerly Marcy Abramson), Nancy Wolfson, Judith
Abramson, David B. Soll, Jerome Goodman and Edward M. Glickman, and U.S.
Healthcare, Inc. (U.S. Healthcare, Inc. 1995 Form 10-K, filed March 1996
Exhibit 10.25)*
10.21 Description of Deferred Compensation Plan (U.S. Healthcare, Inc. 1995 Form
10-K, filed March 1996 Exhibit 10.26)*
11.1 Statement re Computation of Per Share Earnings (Aetna Life and Casualty Company
1995 Form 10-K, filed February 1996 and U.S. Healthcare, Inc. 1995 Form 10-K,
filed March 1996)*
15.1 Letter of KPMG Peat Marwick LLP re: Unaudited Interim Financial Information***
21.1 Subsidiaries of the Registrant***
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***
23.4 Consent of Wasserstein Perella & Co., Inc.***
23.5 Consent of J.P. Morgan Securities Inc.
23.6 Consent of Goldman, Sachs & Co.***
</TABLE>

II-3
<PAGE> 307

<TABLE>
<S> <C>
23.7 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated***
23.8 Consent of Day, Berry & Howard (included in Item 5.1)
23.9 Consent of Leonard Abramson***
23.10 Consent of Betsy Z. Cohen***
23.11 Consent of Ronald E. Compton, William H. Donaldson, Barbara Hackman Franklin,
Earl G. Graves, Gerald Greenwald, Ellen M. Hancock, Michael H. Jordan, Jack
D. Kuehler, Frank R. O'Keefe, Jr. and Judith Rodin***
23.12 Consent of Jerome S. Goodman***
23.13 Consent of Davis Polk & Wardwell (included in Exhibit 8.1)
23.14 Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit 8.2)
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)*
99.1 Form of Proxy Card for Aetna Special Meeting***
99.2 Form of Proxy Card for U.S. Healthcare Annual Meeting***
</TABLE>

- ---------------
* Exhibit is being incorporated by reference as indicated.

** Exhibit included as Appendix to the Joint Proxy Statement/Prospectus that
forms part of this Registration Statement.

*** Previously filed.

ITEM 22. UNDERTAKINGS.

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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, 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.

The undersigned Registrant hereby undertakes as follows:

(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party which is deemed to be an underwriter
within the meaning of Rule 145(c), such reoffering prospectus will contain
the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.

(2) Every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, as amended, 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.

II-4
<PAGE> 308

The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

The undersigned Registrant hereby further undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of or included
in the registration statement when it became effective.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or ales 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 and 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
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;"

(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.

II-5
<PAGE> 309

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS POST-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 JUNE 12, 1996.

AETNA INC.

By /s/ RONALD E. COMPTON

------------------------------------
Name: Ronald E. Compton
Title: President
<PAGE> 310

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON JUNE 12, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------
<C> <S>
/s/ Ronald E. Compton President and Director
- --------------------------------------------- (Principal executive officer)
Ronald E. Compton
/s/ Richard L. Huber Vice President and Director
- --------------------------------------------- (Principal financial and
Richard L. Huber accounting officer)
/s/ James H. Dickerson, Jr. Director
- ---------------------------------------------
James H. Dickerson, Jr.
/s/ David F. Simon Director
- ---------------------------------------------
David F. Simon
</TABLE>
<PAGE> 311

INDEX TO EXHIBITS

The following is included as an exhibit to this Pre-Effective Amendment :

23.5 Consent of J.P. Morgan Securities, Inc.

<PAGE> 312

EXHIBIT INDEX

The following is a list of exhibits to the Registration Statement:

<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger, dated as of March 30, 1996, among Aetna Life and
Casualty Company, U.S. Healthcare, Inc., Butterfly, Inc., Antelope Sub, Inc.
and New Merger Corporation (U.S. Healthcare, Inc. Form 8-K, filed April 2,
1996 Exhibit 99.1)*
2.2 Amendment No. 1, dated as of May 30, 1996, to the Agreement and Plan of Merger,
dated as of March 30, 1996, among Aetna Life and Casualty Company, U.S.
Healthcare, Inc., Aetna Inc., (formerly known as Butterfly, Inc.), Antelope
Sub. Inc. and New Merger Corporation***
3.1 Aetna Inc. Amended and Restated Certificate of Incorporation***
3.2 Aetna Inc. Bylaws***
4.1 Form of Designations, Rights and Preferences of 6.25% Class C Voting Preferred
Stock**
4.2 Form of Aetna Inc. Rights Agreement***
5.1 Opinion of Day, Berry & Howard as to legality of Common Shares and Preferred
Shares***
7.1 Opinion of Day, Berry & Howard re: liquidation preference***
8.1 Opinion of Davis Polk & Wardwell re: tax matters***
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom re: tax matters***
9.1 Voting Agreement, dated as of March 30, 1996, among Leonard Abramson, Aetna
Life Insurance Company and Aetna Life Insurance and Annuity Company (U.S.
Healthcare, Inc. Form 8-K, filed April 2, 1996 Exhibit 99.2)*
9.2 Amendment No. 1, dated as of May 30, 1996, to the Voting Agreement, dated as of
March 30, 1996, among Leonard Abramson, Aetna Life Insurance Company and
Aetna Life Insurance and Annuity Company***
10.1 Aetna Life and Casualty Company $2.5 billion Credit Facility Commitment Letter***
10.2 Registration Rights Agreement, dated as of March 30, 1996, between Butterfly,
Inc. and Leonard Abramson (U.S. Healthcare, Inc. Form 8-K, filed April 2,
1996 Exhibit 99.3)*
10.3 Amendment No. 1, dated as of May 30, 1996, to the Registration Rights
Agreement, dated as March 30, 1990 between Aetna Inc. (formerly known as
Butterfly, Inc.) and Leonard Abramson***
10.4 Amended and Restated Agreement dated as of May 30, 1996 between Aetna Inc.
(formerly Butterfly, Inc.) and Leonard Abramson***
10.5 The Aetna Inc. 1996 Stock Incentive Plan**
10.6 The Aetna Inc. Annual Incentive Plan**
10.7 The Aetna Inc. Non-Employee Director Deferred Stock and Deferred Compensation
Plan**
10.8 Form of Employment Agreement, dated as of March 30, 1996, by and between U.S.
Healthcare, Inc. and Joseph Sebastianelli. (U.S. Healthcare, Inc. Form 8-K,
filed April 2, 1996 Exhibit 99.5)*
10.9 Form of Employment Agreement, dated as of March 30, 1996, by and between U.S.
Healthcare, Inc. and Michael Cardillo. (U.S. Healthcare, Inc. Form 8-K, filed
April 2, 1996 Exhibit 99.6)*
</TABLE>

<PAGE> 313

<PAGE> 314

- ---------------

* Exhibit is being incorporated by reference as indicated.

** Exhibit included as Appendix to the Joint Proxy Statement/Prospectus that
forms part of this Registration Statement.

*** Previously filed.

<PAGE> 1
JPMorgan

Exhibit 23.5

CONSENT OF J.P.MORGAN SECURITIES INC.

We hereby consent to (i) the use of our opinion letter dated
June 12, 1996 to the Board of Directors of Aetna Life and Casualty Company (the
"Company") included in Appendix E to the Joint Proxy Statement/Prospectus
relating to the proposed mergers involving the Company, U.S. Healthcare, Inc.
and certain of their affiliates described in such Proxy Statement/Prospectus
and (ii) the references to such opinion in such Proxy Statement/Prospectus. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we hereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.

J.P.MORGAN SECURITIES INC.

By: /s/ Edward J. Kelly III
---------------------------------------
Name: Edward J. Kelly III
Title: Managing Director

June 12, 1996