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Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
Among
ING AMERICA INSURANCE HOLDINGS, INC.,
ANB ACQUISITION CORP.,
AETNA INC.
and, for limited purposes only, ING GROEP N.V.
Dated as of July 19, 2000
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TABLE OF CONTENTS
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ARTICLE I
The Transaction; Closing; Effective Time
1.1 The Spin-Off.................................................................................... 2
1.2 The Merger...................................................................................... 2
1.3 Closing......................................................................................... 2
1.4 Effective Time.................................................................................. 3
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1 The Certificate of Incorporation................................................................ 3
2.2 The By-Laws..................................................................................... 3
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1 Directors....................................................................................... 3
3.2 Officers........................................................................................ 3
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1 Effect on Capital Stock......................................................................... 4
4.2 Exchange of Cash for Shares..................................................................... 6
4.3 Dissenters' Rights.............................................................................. 8
ARTICLE V
Representations and Warranties
5.1 Representations and Warranties of the Company................................................... 9
(a) Organization, Good Standing and Qualification.......................................... 9
(b) Capital Structure...................................................................... 12
(c) Corporate Authority; Approval and Fairness............................................. 13
(d) Governmental Filings; No Violations.................................................... 14
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(e) Statutory Reports; Company Reports; Financial Statements............................... 15
(f) Absence of Certain Changes............................................................. 18
(g) Litigation and Liabilities............................................................. 20
(h) Employee Benefits...................................................................... 21
(i) Compliance with Laws; Permits.......................................................... 24
(j) Takeover Statutes...................................................................... 26
(k) Environmental Matters.................................................................. 26
(l) Taxes.................................................................................. 27
(m) Labor Matters.......................................................................... 29
(n) Insurance.............................................................................. 30
(o) Intellectual Property.................................................................. 30
(p) Rights Plan............................................................................ 31
(q) Brokers and Finders.................................................................... 31
(r) Insurance Business..................................................................... 31
(s) Liabilities and Reserves............................................................... 33
(t) Separate Accounts...................................................................... 33
(u) Material Contracts..................................................................... 34
(v) Investment Contracts, Fund Clients and Advisory Clients................................ 35
(w) Company Broker/Dealers................................................................. 37
(x) Bank Regulatory Matters................................................................ 38
(y) No Contracts, Etc...................................................................... 38
5.2 Representations and Warranties of ING, Parent and Merger Sub.................................... 39
ARTICLE VI
Covenants
6.1 Interim Operations; Operation of Businesses..................................................... 41
6.2 Acquisition Proposals........................................................................... 45
6.3 Accuracy of Proxy Statement and Form 10......................................................... 47
6.4 Shareholders Meeting............................................................................ 48
6.5 Filings; Other Actions; Notification............................................................ 48
6.6 Access.......................................................................................... 51
6.7 Stock Exchange.................................................................................. 51
6.8 Publicity....................................................................................... 51
6.9 Benefits; Company Options....................................................................... 52
6.10 ERISA Client Lists.............................................................................. 53
6.11 Expenses........................................................................................ 53
6.12 Indemnification; Directors' and Officers' Insurance............................................. 53
6.13 Compliance with 1940 Act Section 15............................................................. 55
6.14 Fund Client Contracts, Distribution Plans and Boards............................................ 56
6.15 Non-Fund Advisory Contracts..................................................................... 56
6.16 Qualification of the Fund Clients; Fund Client Boards........................................... 57
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6.17 Rights.......................................................................................... 57
6.18 Takeover Statute................................................................................ 57
6.19 Company Debt.................................................................................... 57
6.20 Voting of Shares................................................................................ 57
6.21 Other Agreements................................................................................ 57
6.22 Headquarters and Related Matters................................................................ 59
6.23 Asia............................................................................................ 59
6.24 Confidentiality................................................................................. 59
ARTICLE VII
Conditions
7.1 Conditions to Each Party's Obligation to Effect the Merger...................................... 60
7.2 Conditions to Obligations of Parent and Merger Sub.............................................. 61
7.3 Conditions to Obligation of the Company......................................................... 63
ARTICLE VIII
Termination
8.1 Termination by Mutual Consent................................................................... 64
8.2 Termination by Either Parent or the Company..................................................... 64
8.3 Termination by the Company...................................................................... 65
8.4 Termination by Parent........................................................................... 65
8.5 Effect of Termination and Abandonment........................................................... 65
ARTICLE IX
Miscellaneous and General
9.1 Survival........................................................................................ 67
9.2 Modification or Amendment....................................................................... 67
9.3 Waiver of Conditions............................................................................ 67
9.4 Counterparts.................................................................................... 68
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL................................................... 68
9.6 Notices......................................................................................... 69
9.7 Entire Agreement; No Other Representations...................................................... 71
9.8 No Third Party Beneficiaries.................................................................... 71
9.9 Obligations of Parent and of the Company........................................................ 71
9.10 Transfer Taxes.................................................................................. 72
9.11 Severability.................................................................................... 72
9.12 Interpretation.................................................................................. 72
9.13 Assignment...................................................................................... 72
9.14 Specific Performance............................................................................ 73
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INDEX OF DEFINED TERMS
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1940 Act ............................................................... 14
1999 10-K .............................................................. 9
Account Client ......................................................... 34
Acquisition Proposal ................................................... 45
Advisers Act ........................................................... 14
Advisory Client ........................................................ 35
Advisory Entities ...................................................... 35
Advisory Entity ........................................................ 35
Aetna China Name Rights ................................................ 58
Affiliate .............................................................. 10
Agent .................................................................. 32
Agreement .............................................................. 1
ALICA .................................................................. 15
Assumed Long-Term Debt Obligations ..................................... 4
Balance Sheet Date ..................................................... 18
Banking Authorities .................................................... 14
Bankruptcy and Equity Exception ........................................ 13
By-Laws ................................................................ 3
CBCA ................................................................... 2
Certificate ............................................................ 5
Certificate of Merger .................................................. 3
Charter ................................................................ 3
Chinese Mark ........................................................... 58
Chinese Mark Agreement ................................................. 58
CityPlace Accrual Amount ............................................... 5
Class B Voting Preferred Stock ......................................... 4
Client ................................................................. 35
Closing ................................................................ 2
Closing Date ........................................................... 2
Closing Date Interest Accrual .......................................... 6
Code ................................................................... 8
Common Stock ........................................................... 4
Company ................................................................ 1
Company Actuarial Analyses ............................................. 32
Company Broker/Dealers ................................................. 37
Company Disclosure Letter .............................................. 9
Company Intellectual Property Rights ................................... 30
Company Material Adverse Effect ........................................ 10
Company Option ......................................................... 12
Company Reports ........................................................ 16
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Company Requisite Vote ................................................. 13
Company SAP Statements ................................................. 15
Company Separate Accounts .............................................. 33
Compensation and Benefit Plans ......................................... 21
Confidentiality Agreement .............................................. 71
Constituent Corporations ............................................... 1
Contracts .............................................................. 15
Costs .................................................................. 54
Coverage Policies ...................................................... 59
Current Premium ........................................................ 55
D&O Insurance .......................................................... 55
Designated Person ...................................................... 19
Designated Persons ..................................................... 19
Dissenting Shareholders ................................................ 4
Dissenting Shares ...................................................... 4
Distribution Agreement ................................................. 1
Effective Time ......................................................... 3
Employee Benefits Agreement ............................................ 52
ERISA .................................................................. 21
ERISA Affiliate ........................................................ 22
ERISA Affiliate Plan ................................................... 22
ERISA Client ........................................................... 34
Excluded Capital Contribution .......................................... 5
Excluded Dividends ..................................................... 5
Excluded Employee ...................................................... 20
Excluded Share ......................................................... 4
Excluded Shares ........................................................ 4
Extended Date .......................................................... 64
First 2000 10-Q ........................................................ 9
Foreign Company Statements ............................................. 15
Form 10 ................................................................ 47
Fund Client ............................................................ 35
GAAP ................................................................... 17
Governmental Approvals ................................................. 48
Governmental Consents .................................................. 60
Governmental Entity .................................................... 14
HSR Act ................................................................ 14
Indemnified Parties .................................................... 53
ING .................................................................... 1
ING Companies .......................................................... 4
Insurance and Healthcare Authorities ................................... 14
Insurance Laws ......................................................... 24
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Intellectual Property .................................................. 30
International Entities ................................................. 20
International Retained Insurance ....................................... 10
Investment Contract .................................................... 35
IRS .................................................................... 22
Joint Venture .......................................................... 12
knowledge of the Company ............................................... 21
Laws ................................................................... 25
Long-Term Debt ......................................................... 5
MEC .................................................................... 28
Merger ................................................................. 1
Merger Consideration ................................................... 5
Merger Sub ............................................................. 1
NASD ................................................................... 14
Net Capital Contribution Amount ........................................ 5
Net Interest Accrual Amount ............................................ 5
Notice of Superior Proposal ............................................ 47
NYSE ................................................................... 51
of which the Company has knowledge ..................................... 21
open Taxable years ..................................................... 29
Order .................................................................. 61
Out-of-Pocket Expenses ................................................. 66
Parent ................................................................. 1
Parent Disclosure Letter ............................................... 39
Parent ERISA List ...................................................... 53
Parent Interest Portion ................................................ 5
Parent Material Adverse Effect ......................................... 39
Paying Agent ........................................................... 6
Payment Fund ........................................................... 6
PBGC ................................................................... 14
Pension Plan ........................................................... 22
Permitted Sales ........................................................ 5
Permitted Sales Proceeds ............................................... 5
Person ................................................................. 7
Preferred Stock ........................................................ 12
Proxy Statement ........................................................ 47
Qualified Plan ......................................................... 22
Representatives ........................................................ 51
Retained Insurance Companies ........................................... 10
Retained Insurance Contracts ........................................... 32
Right .................................................................. 4
Rights Agreement ....................................................... 4
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SEC .................................................................... 9
Section 6.21 Subsidiaries .............................................. 57
Securities Act ......................................................... 16
Share .................................................................. 4
Shareholders Meeting ................................................... 48
Shares ................................................................. 4
shares ................................................................. 36
Spin-Off ............................................................... 1
Spinco ................................................................. 1
Stock Plans ............................................................ 12
Subsidiary ............................................................. 10
Superior Proposal ...................................................... 46
Surviving Corporation .................................................. 2
Takeover Statute ....................................................... 26
Tax .................................................................... 27
Tax Allocation Agreement ............................................... 28
Tax Authority .......................................................... 28
Tax Return ............................................................. 28
Tax Sharing Agreement .................................................. 43
Taxable ................................................................ 27
Taxes .................................................................. 27
Termination Date ....................................................... 64
Termination Fee ........................................................ 66
the Company has no knowledge ........................................... 21
Total assets under management .......................................... 62
Transaction ............................................................ 1
Transaction Agreements ................................................. 2
Transaction Expenses ................................................... 53
U.S. Retained Insurance Companies ...................................... 10
Voting Debt ............................................................ 13
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AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
(hereinafter called this "Agreement"), dated as of July 19, 2000, among AETNA
INC., a Connecticut corporation (the "Company"), ING AMERICA INSURANCE HOLDINGS,
INC., a Delaware corporation ("Parent"), and ANB ACQUISITION CORP., a
Connecticut corporation and a newly formed, wholly owned subsidiary of Parent
("Merger Sub", the Company and Merger Sub sometimes being hereinafter
collectively referred to as the "Constituent Corporations") and, for the sole
purpose of Sections 4.2, 4.3, 5.2, 6.3, 6.5, 6.8, 6.12, 6.18, 6.19, 6.20 and
Article IX, ING GROEP N.V., a corporation organized under the laws of the
Netherlands ("ING").
RECITALS
WHEREAS, provided that all conditions precedent to the
Distribution (as defined below) have been satisfied, immediately prior to the
Effective Time (as defined below), the Company and Aetna U.S. Healthcare Inc., a
Pennsylvania corporation and a wholly owned subsidiary of the Company
("Spinco"), intend to enter into a distribution agreement in the form of Annex A
hereto, with such changes as may be approved by Parent in accordance with
Section 9.2(b) of this Agreement (the "Distribution Agreement"), and to effect
the various transactions contemplated thereby and, with the exception of this
Agreement, by the other Transaction Agreements (as defined below) (all such
transactions being referred to collectively as the "Spin-Off");
WHEREAS, the respective boards of directors of each of Parent,
Merger Sub and the Company have determined that it is in the best interests of
their respective entities and shareholders to enter into this Agreement and have
approved and adopted this Agreement and the merger of Merger Sub with and into
the Company (the "Merger", the Spin-Off, the Merger and the other transactions
contemplated by the Transaction Agreements sometimes being hereinafter
collectively referred to as the "Transaction") upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, in making the foregoing determinations, the board of
directors of the Company considered, among other things, the interests of the
Company's employees, customers, creditors and suppliers, as well as community
and societal considerations;
WHEREAS, the Company, ING, Parent and Merger Sub desire to
make certain representations, warranties, covenants and agreements in connection
with this Agreement and the Distribution Agreement (this Agreement, the
Distribution Agreement
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and the other agreements and term sheets attached hereto or thereto sometimes
being hereinafter collectively referred to as the "Transaction Agreements"); and
WHEREAS, for federal income Tax (as defined below) purposes,
it is intended that the Transaction will be treated at the shareholder level as
an integrated transaction in redemption and disposition of the Company's
outstanding capital stock.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Transaction; Closing; Effective Time
1.1 The Spin-Off. Provided that all conditions precedent to
the Spin-Off have been satisfied, prior to the Effective Time, the Company shall
enter into the Distribution Agreement with Spinco, each other Person that will
be a party to any Transaction Agreement (other than the Merger Agreement) shall
enter into each such Transaction Agreement, and, on the terms and subject to the
conditions of the Transaction Agreements, immediately prior to the Effective
Time, the Company shall effect, and cause Spinco to effect, the Spin-Off.
1.2 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time Merger Sub shall be merged
with and into the Company and the separate corporate existence of Merger Sub
shall thereupon cease. The Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and
the separate corporate existence of the Company with all its rights, privileges,
powers and franchises shall continue unaffected by the Merger, except as set
forth in Article II of this Agreement. The Merger shall have the effects
specified in the Connecticut Business Corporation Act, as amended (the "CBCA").
1.3 Closing. The closing of the Merger (the "Closing") shall
take place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York at 9:00 A.M. on the second business day on which the last to be
fulfilled or waived of the conditions set forth in Article VII (other than those
conditions that by their nature are to be fulfilled at the Closing, but subject
to the fulfillment or waiver of those conditions and subject to compliance with
the provisions of Section 4.2(b) of this Agreement) shall be fulfilled or waived
in accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "Closing
Date").
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1.4 Effective Time. As soon as practicable following the
Closing, the Company, Parent and Merger Sub will cause a Certificate of Merger
(the "Certificate of Merger") to be executed, acknowledged and delivered for
filing to the Secretary of State of Connecticut as provided in Section 33-819 of
the CBCA. The Merger shall become effective at the time when the Certificate of
Merger has been accepted for filing by the Secretary of State of Connecticut or
such other time as the parties hereto may agree to specify in the Certificate of
Merger (the "Effective Time").
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1 The Certificate of Incorporation. The certificate of
incorporation of Merger Sub as in effect immediately prior to the Effective Time
shall be the certificate of incorporation of the Surviving Corporation (the
"Charter"); provided, however, that the Charter shall be amended to change the
name of the Surviving Corporation to the name of: "Lion Connecticut Holdings
Inc.", and as so amended, shall be the certificate of incorporation of the
Surviving Corporation until duly amended as provided therein or by applicable
law.
2.2 The By-Laws. The by-laws of Merger Sub as in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"); provided, however, that the By-Laws shall be amended to change the
name of the Surviving Corporation to the name of: "Lion Connecticut Holdings
Inc.", and as so amended, shall be the by-laws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1 Directors. The directors of Merger Sub at the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
3.2 Officers. The officers of the Company at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their
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successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws. Prior to the Effective Time, the Company shall cause, by transfer or
otherwise, all officers of the Company and its Subsidiaries (as defined below)
and Affiliates (as defined below) who will be employees of Spinco or any of its
Subsidiaries after the Spin-Off (as contemplated by the Transaction Agreements)
to cease their employment with the Company and each of its Subsidiaries and
Affiliates, as the case may be, and no replacements shall be elected, appointed
or hired for such employees without the approval of Parent.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1 Effect on Capital Stock. At the Effective Time, as a
result of the Merger and without any action on the part of the holder of any
capital stock of the Company:
(a) Merger Consideration. Each share of Common Stock, par
value $0.01 per share, of the Company ("Common Stock"), including the associated
right to purchase one one-hundredth of a share of Class B Voting Preferred
Stock, par value $0.01 per share ("Class B Voting Preferred Stock"), of the
Company (each a "Right" and, together with Common Stock, a "Share" or,
collectively, the "Shares") issued pursuant to the Rights Agreement, dated as of
September 24, 1999, between the Company and First Chicago Trust Company of New
York, as Rights Agent (the "Rights Agreement"), issued and outstanding
immediately prior to the Effective Time (other than (i) Shares owned by or on
behalf of ING, Parent, Merger Sub or any other Subsidiary of ING (collectively,
the "ING Companies") or Shares that are owned by or on behalf of the Company or
any Subsidiary of the Company and in each case not held on behalf of third
parties or (ii) Shares ("Dissenting Shares") that are owned by shareholders
("Dissenting Shareholders") exercising dissenter's rights pursuant to Sections
33-855 through 33-872 of the CBCA (each such Share owned by or on behalf of the
ING Companies, the Company and any Subsidiary of the Company and each Dissenting
Share, an "Excluded Share" and collectively, the "Excluded Shares")) shall be
converted into the right to receive an amount in cash per Share equal to (x)
$7.70 billion (i) minus the greater of (A) $2.678 billion (which amount shall be
reduced by $300 million if the $300 million outstanding principal amount of the
6.75% Notes of Aetna Services, Inc. due 2001 due and payable on August 15, 2001
is repaid in full on such maturity date) and (B) the aggregate principal amount
of all Long-Term Debt (as defined below) outstanding as of the Effective Time to
any Person (other than obligations for indebtedness set forth in Section
4.1(a)(i) of the Company Disclosure Letter) (such amount being the "Assumed
Long-Term Debt
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Obligations"), (ii) plus the Net Capital Contribution Amount (positive or
negative), (iii) plus the Net Interest Accrual Amount (positive or negative) and
(iv) minus the CityPlace Accrual Amount divided by (y) the aggregate number of
outstanding Shares as of the Effective Time (the "Merger Consideration"). At the
Effective Time, all Shares issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall be canceled and retired
and shall cease to exist, and each certificate or other similar evidence of
ownership of uncertificated Shares (such certificate or similar evidence of
ownership of uncertificated Shares being referred to herein as a "Certificate")
formerly representing any of such Shares (other than Excluded Shares) shall
thereafter represent only the right to the Merger Consideration. "Net Capital
Contribution Amount" means an amount determined as of the Effective Time for the
period after March 31, 2000 until the Effective Time that is equal to the
aggregate cash capital contributions (other than Excluded Capital Contributions
(as defined below)) made (without duplication) after March 31, 2000 by the
Company or Aetna Services, Inc. to Aetna Retirement Services, Inc., Aetna
International, Inc. or any of their respective Subsidiaries from among the
permitted capital contributions included in Section 4.1(a) of the Company
Disclosure Letter minus the amount of any dividends or distributions (other than
Excluded Dividends) paid (without duplication) after March 31, 2000 from Aetna
Retirement Services, Inc., or Aetna International, Inc. or any of their
respective Subsidiaries (other than Subsidiaries that are not Subsidiaries of
the Company) to Aetna Services, Inc. (other than any such dividends and
distributions paid in respect of the proceeds (after Taxes and transaction
expenses incurred in connection therewith) (the "Permitted Sales Proceeds")
received from the sale or disposition of (i) Inversiones Mercantile-Aetna C.A.
and (ii) the Company's direct or indirect interest in Kwang Hua Securities
Investment & Trust Co. and Kwang Hua Securities Investment Consultant Co. Ltd.
(the items referred to in clauses (i) and (ii) collectively, the "Permitted
Sales")). The term "Long-Term Debt" means indebtedness for borrowed money, the
term of which, when incurred, had a maturity date of one year or more, of the
Company or any of its Subsidiaries. The term "Excluded Capital Contribution"
means any portion of any capital contribution made, directly or indirectly, to
Spinco or any of its Subsidiaries. The term "Excluded Dividends" means cash
dividends or other cash distributions, funds for which were originally provided
by Subsidiaries of Aetna Retirement Services, Inc. or Aetna International, Inc.
that are also Subsidiaries of Spinco, net of any Tax cost to any of the Company
or its Subsidiaries. The term "Net Interest Accrual Amount" means the amount
(positive or negative) equal to the Parent Interest Portion minus the Closing
Date Interest Accrual. The term "CityPlace Accrual Amount" means an amount equal
to the next aggregate semi-annual lease payment of the Company and its
Subsidiaries payable in respect of the the CityPlace building to be made after
the Effective Time multiplied by a fraction the numerator of which is the total
number of days elapsed since the immediately preceding October 31 or March 30
until the Effective Time and the denominator of which is 180. "Parent Interest
Portion" shall mean an amount equal to the amount of interest that would accrue
(in a manner consistent with accruals on the Assumed Long-Term Debt Obligations)
on $1 billion (one
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billion dollars) principal amount of indebtedness bearing an annual interest
rate of 7.1% from and including April 1, 2000 to the Effective Time. "Closing
Date Interest Accrual" shall mean the amount of interest accrued as of the
Effective Time in respect of the Assumed Long-Term Debt Obligations.
(b) The Merger and the Spin-Off shall be effected such that
the shares of Spinco to be distributed in the Spin-Off and the Merger
Consideration are distributed or paid, as the case may be, only to the same
holder of a share of Common Stock.
(c) Cancellation of Shares. Each Share issued and outstanding
immediately prior to the Effective Time and owned by or on behalf of any of the
ING Companies or owned by the Company or any Subsidiary of the Company (in each
case other than Shares that are held on behalf of third parties) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
no longer be outstanding and shall be canceled and retired without payment of
any consideration therefor and shall cease to exist.
(d) Merger Sub. At the Effective Time, each share of common
stock, par value $0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
4.2 Exchange of Cash for Shares.
(a) Paying Agent. At or prior to the Effective Time, ING shall
cause Parent or an Affiliate of Parent to deposit with First Chicago Trust
Company of New York (the "Paying Agent"), for the benefit of the holders of
Shares, cash sufficient to pay the aggregate Merger Consideration in exchange
for Shares outstanding immediately prior to the Effective Time (other than
Excluded Shares) upon due surrender of the Certificates (or affidavits of loss
in lieu thereof) pursuant to the provisions of this Article IV (such cash being
hereinafter referred to as the "Payment Fund").
The funds deposited with the Paying Agent shall be invested by
the Paying Agent as Parent shall reasonably direct, and any net profit resulting
from, or interest or income produced by, such investments will be payable to the
Surviving Corporation or Parent, as Parent directs.
(b) Payment Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to each holder of
record of Shares (other than holders of Excluded Shares) (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Paying Agent, such
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letter of transmittal to be in such form and have such other provisions as
Parent and the Company may reasonably agree, and (ii) instructions for use in
effecting the surrender of the Certificates (and affidavits of loss in lieu
thereof) in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation (or due submission of an affidavit of loss in lieu
thereof) to the Paying Agent together with such letter of transmittal, duly
executed, the holder of such Certificate (or submitter of such affidavit, as the
case may be) shall be entitled to receive in exchange therefor, a check in the
amount (after giving effect to any required Tax withholdings) of the number of
Shares represented by such Certificate (or affidavit of loss in lieu thereof)
multiplied by the Merger Consideration, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on any amount payable
upon due surrender (after giving effect to any required Tax withholding) of the
Certificates. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, a check for any cash to be
paid upon due surrender of the Certificate may be paid to such a transferee if
the Certificate formerly representing such Shares is presented to the Paying
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer Taxes have been paid
or are not applicable.
For the purposes of this Agreement, the term "Person" shall
mean any individual, corporation (including not-for-profit corporations),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, Governmental Entity (as defined below)
or other entity of any kind or nature.
(c) Transfers. After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Shares that were
outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to
the Surviving Corporation or Parent for transfer, they shall be canceled and,
provided the Merger Consideration provided thereon has not escheated to the
relevant Governmental Entity (as defined below), exchanged for a check (after
giving effect to any required Tax withholding) in the proper amount pursuant to
this Article IV.
(d) Termination of Payment Fund. Any portion of the Payment
Fund (including the profit, interest or income from any investments thereof)
that remains unclaimed by the holders of Shares (other than Excluded Shares) for
one year after the Effective Time shall be returned to Parent or as directed by
Parent. Any holders of Shares (other than Excluded Shares) who have not
theretofore complied with this Article IV shall thereafter look only to Parent
for payment of (after giving effect to any required Tax withholdings) the Merger
Consideration upon due surrender of their Certificates (or affidavits of loss in
lieu thereof), without any interest thereon. Notwithstanding the foregoing, none
of Parent, the Surviving Corporation, the Paying Agent or any other
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Person shall be liable to any former holder of Shares for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate a check in the amount (after giving
effect to any required Tax withholdings) of the number of Shares represented by
such lost, stolen or destroyed Certificate multiplied by the Merger
Consideration upon due surrender of, and deliverable in respect of the Shares
represented by, such Certificate pursuant to this Agreement.
(f) Withholding of Tax. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Shares such amounts as Parent (or any affiliate thereof) is
required to deduct and withhold with respect to the making of such payment under
the U.S. Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code") or any provision of state, local
or foreign Tax Law (as defined below). Such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the former holders of
Shares in respect of which such deduction and withholding was made.
4.3 Dissenters' Rights. Any Person who otherwise would be
deemed a Dissenting Shareholder shall not be entitled to receive the Merger
Consideration with respect to the Shares owned by such Person unless and until
such Person shall have failed to perfect or shall have effectively withdrawn or
lost such holder's right to dissent from the Merger under the CBCA. Each
Dissenting Shareholder shall be entitled to receive only the payment determined
pursuant to Sections 33-855 through 33-872 of the CBCA with respect to Shares
owned by such Dissenting Shareholder. The Company shall give Parent (i) prompt
notice of any written dissenters' demands, attempted withdrawals of such
demands, and any other instruments served pursuant to applicable Law received by
the Company relating to dissenters' rights and (ii) the opportunity to direct
all negotiations and proceedings with respect to dissenters' demands under the
CBCA. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any dissenters' demands for payment
for Shares, offer to settle or settle any such demands or approve any withdrawal
of any such demands. If, after the Effective Time, such Dissenting Shareholder
fails to perfect, withdraws or loses its right to demand the payment of fair
value for its Shares under the CBCA, such Shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger
Consideration and ING shall cause Parent to promptly thereafter deposit, or
cause to be
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deposited, with the Paying Agent, for the benefit of such Dissenting
Stockholder, cash sufficient to pay the aggregate Merger Consideration in
exchange for all such Shares.
ARTICLE V
Representations and Warranties
5.1 Representations and Warranties of the Company. Except as
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, filed with the Securities and Exchange Commission (the "SEC")
on February 29, 2000 (the "1999 10-K"), the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000, filed with the SEC on April 27, 2000
(the "First 2000 10-Q"), the Company's Annual Proxy Statement on Schedule 14A,
filed with the SEC on March 22, 2000, or as set forth in the corresponding
sections or subsections of the disclosure letter, dated the date hereof,
delivered to Parent by the Company on or prior to entering into this Agreement
(the "Company Disclosure Letter"), the Company hereby represents and warrants to
Parent and Merger Sub as set forth in this Section 5.1. All representations and
warranties contained in this Agreement which are made as to Joint Ventures (as
defined below) or any other joint ventures shall be made only as to the actual
knowledge of those people set forth on Section 5.1 of the Company Disclosure
Letter.
(a) Organization, Good Standing and Qualification. (i) Each of
the Company and its Subsidiaries (as defined below) and Joint Ventures and
Spinco is an entity duly organized, validly existing and in good standing (or
relevant state or foreign law equivalent) under the Laws of its respective
jurisdiction of organization and has all requisite corporate or similar power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business and is in good
standing in each jurisdiction where the ownership or operation of its assets or
properties or conduct of its business requires such qualification, except (A) to
the extent such qualifications to do business include the possession of
insurance, reinsurance or healthcare licenses, which are addressed in Section
5.1(a)(ii) below and (B) where the failure to be so organized, qualified or in
good standing (or relevant state or foreign law equivalent), or to have such
power or authority is not, individually or in the aggregate, reasonably likely
to have a Company Material Adverse Effect (as defined below). The Company has
made available to Parent complete and correct copies of the certificate of
incorporation and by-laws or other comparable governing instruments of the
Company and each of the Subsidiaries and Joint Ventures of the Company set forth
in Section 5.1(a)(i)(A) of the Company Disclosure Letter. Such certificates of
incorporation and by-laws or other comparable governing instruments of the
Company, Spinco, each of the Joint Ventures and each of the Subsidiaries listed
in Section 5.1(a)(i)(A) of the Company Disclosure Letter so delivered are in
full force and effect. Section 5.1(a)(i)(B) of the
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Company Disclosure Letter contains, as of the date of this Agreement, a correct
and complete list of (x) each Subsidiary and Joint Venture of the Company and
(y) each jurisdiction where the Company and each of such Subsidiaries and Joint
Ventures is organized.
As used in this Agreement, the term (x) "Subsidiary" means,
with respect to any Person, any entity, whether incorporated or unincorporated,
of which at least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions is directly or indirectly owned or
controlled by such Person or by one or more of its respective Subsidiaries or by
such Person and any one or more of its respective Subsidiaries; provided,
however, that except in the context of references in Section 5.1(e)(iii) to
consolidated financial statements of the Company and its Subsidiaries, (A) no
member of the Spinco Group (as defined in the Distribution Agreement) shall be
deemed to be a Subsidiary, Joint Venture or "Affiliate" (as defined in Rule
12b-2 under the Exchange Act) of the Company, (B) each member of the Spinco
Group (other than Spinco) shall be deemed to be a Subsidiary only of Spinco and
not a member of the Aetna Group (as defined in the Distribution Agreement), (C)
no member of the Aetna Group shall be deemed to be a Subsidiary, Joint Venture
or Affiliate of Spinco or member of the Spinco Group and (D) each member of the
Aetna Group (other than the Company) shall be deemed to be a Subsidiary only of
the Company and not a member of the Spinco Group, and (y) "Company Material
Adverse Effect" means a material adverse effect on the financial condition,
properties, business or annual results of operations of the Company and its
Subsidiaries and Joint Ventures taken as a whole, except to the extent that such
adverse effect results from (A) general economic conditions or changes therein
in any one or more countries, (B) financial market fluctuations or conditions in
any one or more countries, (C) adverse economic, currency or regulatory changes
or effects in or affecting the financial services industry, insurance industry
or asset management industry in any one or more countries or (D) the
announcement of the transactions contemplated herein. Notwithstanding the
foregoing, the parties hereto acknowledge and agree that in no event shall any
matter that is or would be a Spinco Group Liability (as such term is defined in
the Distribution Agreement) constitute or give rise to, in whole or in part, a
Company Material Adverse Effect.
(ii) The Company and its Subsidiaries (i) conducts its
domestic insurance and reinsurance operations exclusively through Aetna Life
Insurance and Annuity Company and Aetna Insurance Company of America (the "U.S.
Retained Insurance Companies") and (ii) conducts its international insurance,
reinsurance and health care operations through those Subsidiaries, Joint
Ventures and joint ventures set forth in Section 5.1(a)(ii)(A) of the Company
Disclosure Letter (the "International Retained Insurance Companies" and,
together with the U.S. Retained Insurance Companies, the "Retained Insurance
Companies"). Section 5.1(a)(ii)(B) of the Company
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<PAGE> 19
Disclosure Letter sets forth the jurisdictions where the Retained Insurance
Companies are domiciled or "commercially domiciled" and licensed to do an
insurance or reinsurance or healthcare business for insurance regulatory
purposes. Each of the Retained Insurance Companies is (A) duly licensed or
authorized to engage in the business conducted by it (including, without
limitation, as a healthcare company, an insurance company or, where applicable,
a reinsurer) in its jurisdiction of organization, (B) duly licensed or
authorized as a healthcare company, an insurance company or, where applicable, a
reinsurer in each other jurisdiction where it is required to be so licensed or
authorized, and (C) duly authorized in its jurisdiction of organization and each
other applicable jurisdiction to engage in or write each line of business
reported as being written in the Company SAP Statements (as defined below) (in
the case of U.S. Retained Insurance Companies) or (in the case of International
Retained Insurance Companies) comparable report, except, in the case of each of
clauses (A) through (C), where the failure to be so licensed or authorized is
not reasonably likely to have a Company Material Adverse Effect. The Company and
each of the Retained Insurance Companies have made all required filings under
applicable Insurance Laws (as defined below) except where the failure to file is
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect.
(iii) Joint Ventures. Section 5.1(a)(iii)(A) of the Company
Disclosure Letter sets forth a list of each of the Company's and its
Subsidiaries' Joint Ventures. With respect to each of those Joint Ventures so
indicated in Section 5.1(a)(iii) of the Company Disclosure Letter, the Company
has made available to Parent correct and complete copies of all agreements among
Joint Venture parties with respect to the Joint Venture and all governing
instruments and amendments thereto with respect to each Joint Venture. With
respect to each of the Joint Ventures, the Company has made available to Parent
correct and complete copies of all agreements to which the Company or any of its
Subsidiaries or Joint Ventures is a party which (i) have affected or are
reasonably likely to affect the ability, if any, of Parent to direct and control
such entity's business operations after consummation of the Merger and the other
transactions contemplated in the Transaction Agreements or (ii) evidence any
commitment (whether or not contingent) for future investment of capital or
otherwise to be directly or indirectly made by ING, the Company or any of their
respective Subsidiaries therein, or any other future material liabilities or
obligations in respect thereof of ING, the Company or any of their respective
Subsidiaries. With respect to the joint ventures of the Company and its
Subsidiaries that are not Joint Ventures: (A) neither the Company nor any of its
Subsidiaries or Joint Ventures is liable for any material obligations or
material liabilities of any such joint ventures, (B) neither the Company nor any
of its Subsidiaries or Joint Ventures is obligated to make any loans or capital
contributions to, or to undertake any guarantees or obligations with respect to,
such joint ventures, (C) none of such joint ventures own any assets that are
material to the continued conduct of the business of the Company and its
Subsidiaries and Joint Ventures, taken as a whole, substantially as it is
presently conducted, (D) neither the Company nor any of its Subsidiaries or
Joint Ventures is subject to any limitation on its right to compete
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or any material limitation on its right to otherwise conduct its business by
reason of any agreement relating to such joint venture and (E) each joint
venture is in material compliance with all Laws of all Governmental Entities. As
used herein, "Joint Venture" shall mean those direct or indirect joint ventures
of the Company or any of its Subsidiaries (i) that are not otherwise direct or
indirect Subsidiaries of the Company and (ii) in which the Company or any of its
Subsidiaries as of the date of this Agreement have invested, or made commitments
to invest, $25 million or more, but "Joint Venture" and "joint venture" shall
not include any entities whose securities are held solely for passive investment
purposes by the Company or any of its Subsidiaries. Section 5.1(a)(iii)(B) of
the Company Disclosure Letter contains, as of the date of this Agreement, a
correct and complete list of each joint venture of the Company and its
Subsidiaries that is not a Joint Venture.
(b) Capital Structure. The authorized capital stock of the
Company consists of 500,000,000 shares of Common Stock, of which 141,149,275
shares of Common Stock were outstanding as of the close of business on June 30,
2000, 15,000,000 shares of Class A Voting Preferred Stock, par value $0.01 per
share, of which no shares are outstanding, 15,000,000 shares of Class B Voting
Preferred Stock, of which no shares are outstanding, 15,000,000 shares of Class
C Voting Preferred Stock, par value $0.01 per share, of which no shares are
outstanding, and 15,000,000 shares of Class D Non-Voting Preferred Stock, par
value $0.01 per share, of which no shares are outstanding (the Class A Voting
Preferred Stock, the Class B Voting Preferred Stock, the Class C Voting
Preferred Stock and the Class D Non-Voting Preferred Stock sometimes being
referred to herein as the "Preferred Stock"). Since June 30, 2000 to the date
hereof, no Shares have been issued except in the ordinary course of business,
including, without limitation, pursuant to stock option exercises. All of the
outstanding shares of Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. The Company has no shares of Common Stock
or Preferred Shares reserved for or otherwise subject to issuance, except that,
as of the date hereof, there were (i) 22,179,682 shares of Common Stock reserved
for issuance pursuant to those plans identified as Stock Plans in Section 5.1(b)
of the Company Disclosure Letter (collectively, the "Stock Plans"), (ii)
1,673,145 shares of Class B Voting Preferred Stock reserved for issuance
pursuant to the Rights Agreement, (iii) 3,200,000 shares of Common Stock
reserved for issuance pursuant to the Share Exchange and Registration Rights
Agreement dated as of December 17, 1999, between the Company and Citibank, N.A.
and (iv) 1,000,000 shares of Common Stock reserved for issuance pursuant to the
Certificate dated August 6, 1999 representing Stock Appreciation Rights to
purchase shares of Common Stock of the Company, issued to The Prudential
Insurance Company of America. The Company has provided to Parent a correct and
complete list of the aggregate outstanding options, as of the date of this
Agreement, to purchase Shares under the Stock Plans (each a "Company Option"),
including the date of grant, exercise price and number of Shares subject
thereto. Each of the outstanding shares of capital stock or other securities of
each of the Company's Subsidiaries is duly
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authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly owned subsidiary of the Company, free and
clear of any lien, pledge, security interest, claim or other encumbrance. Except
as set forth above, there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements, calls, commitments or
rights of any kind that obligate the Company or any of its Subsidiaries to issue
or sell any shares of capital stock or other securities of the Company or any of
its Subsidiaries or any securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. The Company does not have outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or convertible
into or exercisable for securities having the right to vote) with the
shareholders of the Company on any matter ("Voting Debt").
(c) Corporate Authority; Approval and Fairness. (i) The
Company has, and Spinco will have prior to the Effective Time, all requisite
corporate power and authority and the Company has, and Spinco will have prior to
the Effective Time, taken all corporate action necessary in order to execute,
deliver and perform its obligations under the Transaction Agreements to which it
is or will be a party and to consummate, on the terms and subject to the
conditions of the Transaction Agreements, the transactions contemplated hereby
and thereby, subject only to approval of this Agreement and the transactions
contemplated hereby by the holders of at least two-thirds of the outstanding
shares of Common Stock (the "Company Requisite Vote"). Each Transaction
Agreement to which the Company or Spinco is or will be a party, when executed by
such party, will be a valid and binding agreement of such party enforceable
against such party in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to the
rights of creditors of insurance companies generally and to general equity
principles (the "Bankruptcy and Equity Exception").
(ii) The board of directors of the Company (A) has, and, in
the case of Spinco, the Board of Directors of Spinco will have prior to the
Effective Time, unanimously approved the Transaction Agreements and the
transactions contemplated hereby and (B) has declared that this Agreement and
the transactions contemplated hereby, taken as a whole, are fair to, advisable
and in the best interests of the holders of shares of Common Stock. In taking
such action, the Board of Directors of the Company considered, among other
things, the interests of the Company's employees, customers, creditors and
suppliers as well as community and societal considerations. The board of
directors of the Company has also has received the opinions of its financial
advisors, Donaldson Lufkin & Jenrette Securities Corporation and Goldman, Sachs
& Co., to the effect that the
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consideration to be received by the holders of shares of Common Stock in the
Merger is fair from a financial point of view to the holders of shares of Common
Stock.
(d) Governmental Filings; No Violations. (i) Other than the
reports, filings, registrations, consents, approvals, permits, authorizations,
applications, expiry of waiting periods and/or notices (A) pursuant to Section
1.4, (B) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (C) under any foreign competition laws, (D) under the
Exchange Act, the Securities Act (in each case as defined below) and other
securities laws, (E) under the Investment Company Act of 1940, as amended (the
"1940 Act"), (F) under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), (G) with the NYSE (as defined below), (H) with the National
Association of Securities Dealers, Inc. (the "NASD"), (I) with applicable
foreign, federal and state regulatory authorities governing insurance and
healthcare (including, but not limited to, the Commissioners or Superintendents,
as the case may be, of Insurance of Connecticut and Florida) (the "Insurance and
Healthcare Authorities"), (J) in respect of certain undertakings made by the
Company to the Insurance and Healthcare Authorities of the States of Florida and
California, (K) with federal and state regulatory authorities governing banking
(including, but not limited to, the Office of Thrift Supervision, the Federal
Deposit Insurance Corporation, the Connecticut Banking Department, and the
Office of the Comptroller of the Currency), insurance premium finance,
commercial collections, leasing, consumer finance, financial services,
investment services, commercial finance and mortgage lending or servicing (the
"Banking Authorities"), (L) with the Department of Labor, (M) with applicable
foreign and federal regulatory authorities governing foreign investments, (N)
with applicable foreign regulatory authorities governing the management of
pension plans, (O) with applicable state regulatory authorities governing
investments advisors, (P) with the Pension Benefit Guaranty Corporation (the
"PBGC") (Q) required to be obtained from any Governmental Entity (as defined
below) in its capacity as a customer of the Company, Spinco or any of their
Subsidiaries or any Joint Ventures and (R) with the IRS in connection with
certain transfers contemplated by the Employee Benefits Agreement (as defined
below), no notices, reports or other filings are required to be made by the
Company, Spinco or any of their Subsidiaries or any Joint Ventures with, nor are
any consents, registrations, approvals, permits, applications, expiry of waiting
periods or authorizations required to be obtained by the Company, Spinco or any
of their Subsidiaries or any Joint Ventures from, any U.S. or non-U.S.
governmental or regulatory authority, agency, commission, tribunal, body or
other governmental, quasi-governmental or self-regulatory entity (each, a
"Governmental Entity"), in connection with the execution and delivery of the
Transaction Agreements by the Company and Spinco and the consummation by the
Company and Spinco of the Merger, the Spin-Off and the other transactions
contemplated hereby and thereby, except those that the failure to make or obtain
are not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent,
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materially delay or materially impair the ability of the Company or Spinco to
consummate the Merger and the other transactions contemplated by the Transaction
Agreements.
(ii) The execution, delivery and performance of each
Transaction Agreement by the Company (and in the case of the Distribution
Agreement, Spinco) does not, and the consummation by the Company (and in the
case of the Distribution Agreement, Spinco) of the Merger and the other
transactions contemplated hereby and thereby will not, constitute or result in
(A) a breach or violation of, or a default under, the certificate or by-laws of
Spinco or the Company or the comparable governing instruments of any of the
Company's or Spinco's Subsidiaries or any Joint Ventures, (B) a breach or
violation of, or a default under, the acceleration of any rights or obligations
or the creation of a lien, pledge, security interest, claim or other encumbrance
on the assets of Spinco, the Company or any of the Company's or Spinco's
Subsidiaries or any Joint Ventures (with or without notice, lapse of time or
both) pursuant to, any agreement, lease, non-governmental license, contract,
treaty, note, mortgage, indenture, non-governmental franchise, non-governmental
permit, concession, arrangement or other non-governmental obligation
("Contracts") binding upon Spinco, the Company or any of the Company's or
Spinco's Subsidiaries or any Joint Ventures or, assuming compliance with the
matters referred to in Section 5.1(d)(i), any Law (as defined below), or any
governmental or non-governmental permit, franchise or license to which Spinco,
the Company or any of the Company's or Spinco's Subsidiaries or any Joint
Ventures is subject or (C) any change in the rights or obligations of any party
under any of the Contracts, except, in the case of clause (B) or (C) above, for
any breach, violation, default, acceleration, creation or change that is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent, materially delay or materially impair the ability of
the Company or Spinco to consummate the transactions contemplated by the
Transaction Agreements. The payment of the Merger Consideration in the Merger
and distribution of the shares of Spinco to be distributed in the Spin-Off only
to the same holder of a share of Common Stock (as described in Section 4.1(b) of
this Agreement) is capable of being effected in accordance with Law.
(e) Statutory Reports; Company Reports; Financial Statements.
(i) Since January 1, 1997, each of the Retained Insurance Companies has filed
all annual or quarterly statements, together with all exhibits, interrogatories,
notes, actuarial opinions, affirmations, certifications, schedules or other
supporting documents in connection therewith, required to be filed with or
submitted to the appropriate regulatory authorities of the jurisdiction in which
it is, or was for the period of time covered by the filing, domiciled or
"commercially domiciled" on forms prescribed or permitted by such authority (in
the case of U.S. Retained Insurance Companies and Aetna Life Insurance Company
of America ("ALICA"), collectively, the "Company SAP Statements", and in the
case of International Retained Insurance Companies, other than immaterial
International Retained Insurance Companies, collectively the "Foreign Company
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<PAGE> 24
Statements"). The Company has delivered or made available to Parent all Company
SAP Statements and all Foreign Company Statements, in each case for the year
ended December 31, 1999 each in the form (including exhibits, annexes and any
amendments thereto) filed with the applicable insurance regulatory agency. Since
January 1, 1997, the financial statements included in the Company SAP Statements
and Foreign Company Statements for the periods from and after January 1, 1997,
including the notes thereto, have been prepared in accordance with statutory or
other applicable accounting practices prescribed or permitted by applicable
regulatory authorities in effect as of the date of the respective statements,
and such accounting practices have been applied on a substantially consistent
basis throughout the periods involved, except as expressly set forth in the
notes or schedules thereto. Such financial statements present fairly in all
material respects the respective statutory financial positions and results of
operations of each of the Retained Insurance Companies as of their respective
dates and for the respective periods presented therein. The Company SAP
Statements and Foreign Company Statements complied in all material respects with
all applicable Laws when filed, and no material deficiency has been asserted
with respect to any Company SAP Statements or Foreign Company Statements by the
applicable insurance regulatory body or other Governmental Entity. Except as
indicated therein, all assets that are reflected as admitted assets on the
Company SAP Statements and Foreign Company Statements , to the extent
applicable, comply in all material respects with all applicable Insurance Laws
(as defined below) with respect to admitted assets and are in an amount at least
equal to the minimum amounts required by applicable Insurance Laws. The
statutory balance sheets and statements of income, changes in financial position
and cash flow included in the Company SAP Statements for 1999 have been audited
by KPMG LLP and the Company has delivered or made available to Parent true and
complete copies of all audit opinions related thereto. To the extent the balance
sheets and statements of income, changes in financial position and cash flow
included in the Foreign Company Statements for 1999 have been audited, the
Company has delivered or made available to Parent true and complete copies of
all audit opinions related thereto. The Company has delivered to Parent true and
complete copies of all examinations and market conduct reports or other
comparable examinations or reports of insurance departments and any insurance
regulatory agencies since January 1, 1998 relating to the Retained Insurance
Companies.
(ii) The Company has filed with the SEC each registration
statement, report, proxy statement or information statement required to be filed
by it since January 1, 1997, including the 1999 10-K and the First 2000 10-Q,
each in the form, when filed (or if amended, as of the date of such amendment)
(including exhibits, annexes and any amendments thereto), promulgated by the SEC
under the Securities Act of 1933, as amended (the "Securities Act") or the
Exchange Act (collectively, with any other filings made with the SEC since
January 1, 1997, and including any such registration statements, reports, proxy
statements and information statements filed subsequent to the date hereof and as
amended, the "Company Reports"). As of their respective dates (or, if amended,
as
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of the date of such amendment), the Company Reports did not, and any Company
Reports filed with the SEC subsequent to the date hereof will not, 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 made therein, in the light
of the circumstances in which they were made, not misleading.
(iii) Each of the consolidated balance sheets included in the
Company Reports (including the related notes and schedules) fairly presents in
all material respects, or will fairly present in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of income, shareholders' equity and
cash flows included in the Company Reports (including any related notes and
schedules) fairly presents in all material respects, or will fairly present in
all material respects, the results of operations, retained earnings and cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that will not be material in amount or
effect), in each case in accordance with U.S. generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein.
(iv) Section 5.1(e)(iv) of the Company Disclosure Letter
contains the unaudited pro forma consolidated balance sheet of Spinco and its
Subsidiaries as of March 31, 2000, together with the related unaudited
consolidated statement of income for the three-month period then ended, and the
unaudited pro forma consolidated statement of income of Spinco and its
Subsidiaries for the year ended December 31, 1999. Such statements present
information as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) as of the Balance Sheet Date
or, with respect to the income statements, as if the Spin-Off had occurred (on
the terms and subject to the conditions set forth in the Transaction Agreements)
as of the beginning of the period presented. Such statements are based on, and
should be read in conjunction with, the historical consolidated financial
statements included in the Company Reports. Such balance sheet fairly presents
in all material respects the consolidated financial position of Spinco and its
Subsidiaries as of its date, as if the Spin-Off had occurred (on the terms and
subject to the conditions set forth in the Transaction Agreements) on such date,
and each such consolidated statement of income, fairly presents in all material
respects the results of operations of Spinco and its Subsidiaries for the
periods set forth therein, as if the Spin-Off had occurred (on the terms and
subject to the conditions set forth in the Transaction Agreements) as of the
beginning of such period (subject to notes and normal year-end audit adjustments
that will not be material in amount or effect). The accounts reflected in the
unaudited pro forma consolidated financial statements referred to in this
subsection have been prepared in accordance with GAAP on a basis consistent with
the historical audited consolidated financial statements of the Company and its
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Subsidiaries (including Spinco and its Subsidiaries) and were prepared in
accordance with the requirements of SEC Regulation S-X as it relates to pro
forma financial statements.
(v) Section 5.1(e)(v) of the Company Disclosure Letter
contains the unaudited pro forma consolidated balance sheet of the Company and
its Subsidiaries as of March 31, 2000, together with the related unaudited
consolidated statement of income, for the three-month period then ended, and the
unaudited pro forma consolidated statement of income of the Company and its
Subsidiaries for the year ended December 31, 1999. Such statements present
information as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) as of the Balance Sheet Date
or, with respect to the income statements, as if the Spin-Off had occurred (on
the terms and subject to the conditions set forth in the Transaction Agreements)
as of the beginning of the period presented. Such statements are based on, and
should be read in conjunction with, the historical consolidated financial
statements included in the Company Reports. Such balance sheet fairly presents
in all material respects the consolidated financial position of the Company and
its Subsidiaries as of its date, as if the Spin-Off had occurred (on the terms
and subject to the conditions set forth in the Transaction Agreements) on such
date, and each such consolidated statement of income fairly presents in all
material respects the results of operations of the Company and its Subsidiaries
for the periods set forth therein, as if the Spin-Off had occurred (on the terms
and subject to the conditions set forth in the Transaction Agreements) as of the
beginning of such period (subject to notes and normal year-end audit adjustments
that will not be material in amount or effect). The accounts reflected in the
unaudited pro forma financial statements referred to in this subsection have
been prepared in accordance with GAAP on a basis consistent with the historical
audited consolidated financial statements of the Company and its Subsidiaries
(including Spinco and its Subsidiaries) and were prepared in accordance with the
requirements of SEC Regulation S-X as it relates to pro forma financial
statements.
(f) Absence of Certain Changes. Except as disclosed in the
Company Reports filed prior to the date hereof or as expressly contemplated by
the Transaction Agreements or Section 6.1 hereof, since March 31, 2000 (the
"Balance Sheet Date"), the Company and its Subsidiaries and Joint Ventures have
conducted their respective businesses only in, and have not engaged in any
material transaction other than according to, the ordinary course of such
businesses consistent with prior practice and since the Balance Sheet Date there
has not been (i) any Company Material Adverse Effect or any development or
combination of developments of which the Company has knowledge (as such phrase
is defined below) that has had or is reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect; (ii) any damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company or any of its
Subsidiaries or Joint Ventures, whether or not covered by insurance, which is
reasonably likely to have a Company Material Adverse Effect; (iii) any change by
the Company or any of its Subsidiaries in accounting principles,
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<PAGE> 27
practices or methods, except as may be appropriate to conform to changes in
statutory or regulatory accounting rules or generally accepted accounting
principles or regulatory requirements with respect thereto; (iv) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or Aetna Retirement Services, Inc.
or Aetna International, Inc., except for dividends or other distributions on the
capital stock of the Company publicly announced prior to the date hereof and
except for regularly scheduled quarterly cash dividends on the Company's capital
stock; (v) any material addition, or any development involving a prospective
material addition, to the Company and its Subsidiaries' consolidated reserves
for future insurance policy benefits or other insurance policy claims and
benefits other than as a result of new business produced in the ordinary course
of business since the Balance Sheet Date and except to the extent relating
solely to any member of the Spinco Group; (vi) any material change in the
actuarial, investment, reserving, underwriting or claims administration
policies, practices or principles of any Retained Insurance Company, except as
may be appropriate to conform to changes in statutory or regulatory accounting
or actuarial rules or generally accepted accounting or actuarial principles or
regulatory requirements with respect thereto; (vii) any amendment of any of the
Compensation and Benefit Plans (as defined below) other than amendments in the
ordinary course of business consistent with prior practice; (viii) any granting
by the Company or any of its Subsidiaries to any of the 20 highest paid
employees (by base salary) of the Company (each a "Designated Person" and
collectively, the "Designated Persons") of any increase in compensation, except
(A) for increases in the ordinary course of business consistent with prior
practice, (B) as was required under employment agreements in effect as of the
Balance Sheet Date or (C) in connection with a promotion; (ix) any granting by
the Company or any of its Subsidiaries to any Designated Person of any increase
in severance or termination pay, except (A) for obligations which have been
satisfied prior to the date hereof, (B) for increases in the ordinary course of
business consistent with prior practice in any one case not in excess of
$100,000, (C) as was required under any employment, severance or termination
agreement in effect as of the Balance Sheet Date or (D) in connection with a
promotion; (x) any entry by the Company or any of its Subsidiaries into any new
severance or termination agreement with any Designated Person, except (A) for
obligations which have been satisfied prior to the date hereof, (B) new
severance or termination obligations in the ordinary course of business
consistent with prior practice in any one case not in excess of $100,000, (C) in
connection with a promotion or (D) any new severance or termination agreement
entered into at Parent's request or with Parent's consent; (xi) except in the
ordinary course of business consistent with past practices, any material Tax
election made by the Company or any of its Subsidiaries or any material changes
of the Company or any of its Subsidiaries' methods of accounting for federal
income Tax purposes or (xii) any transfer or transaction that would have been
prohibited by Section 6.1(l) had it been in effect since March 31, 2000;
provided, however, that the limitations of clauses (vii) through (x) of this
Section 5.1(f) shall not apply to any actions taken in respect of any individual
who, after giving effect to the Spin-Off, will be an
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<PAGE> 28
executive officer, director or employee of Spinco or any of its Subsidiaries (an
"Excluded Employee") if such actions do not adversely affect the Company and its
Subsidiaries and such limitations shall not apply to any actions taken in
respect of any other individual so long as any liabilities resulting from such
actions are the responsibility of Spinco or any of its Subsidiaries (after
giving effect to the Transaction Agreements). For purposes of the proviso to
this Section 5.1(f), an action will not be considered to adversely affect the
Company and its Subsidiaries if (i) the action is taken with respect to an
Excluded Employee whose employment arrangements expressly provide that, upon
consummation of the Spin-Off, any and all claims of such Excluded Employee with
respect to employment shall be brought only against Spinco or any of its
Subsidiaries and shall not be brought against the Company or any of its
Subsidiaries or (ii) if the aggregate liability for the action (other than an
action described in the foregoing clause (i)), together with the aggregate
liability for all actions other than those described in the foregoing clause
(i), determined in each case without regard to the Transaction Agreements, is
less than $10 million.
(g) Litigation and Liabilities. (i) Except as disclosed in the
Company Reports filed prior to the date hereof, there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the Company, threatened against Spinco, the
Company, their respective Subsidiaries, any of the Joint Ventures or any of
their respective properties or assets except for those that are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent, materially delay or materially impair the ability of
the Company or Spinco to consummate the transactions contemplated by the
Transaction Agreements.
(ii) Set forth in Section 5.1(g)(ii) of the Company Disclosure
Letter is a complete list, as of the date hereof, of all civil, criminal or
administrative actions, suits, claims (other than individual customer complaints
which are received in the ordinary course of business, consistent with past
practices, and as to which no suit, action or arbitration has been commenced),
hearings, investigations or proceedings pending, or, to the actual knowledge of
the people set forth in Section 5.1(g)(ii) of the Company Disclosure Letter,
threatened, against the Company and its Subsidiaries (other than Aetna
International, Inc. and its Subsidiaries, the "International Entities"), any
Joint Ventures and any joint ventures of the Company or their properties or
assets.
(iii) Set forth in Section 5.1(g)(iii) of the Company
Disclosure Letter is a complete list, as of the date hereof, of each civil,
criminal or administrative actions, suits, claims (other than individual
customer complaints which are received in the ordinary course of business,
consistent with past practices, and as to which no suit, action or arbitration
has been commenced), hearings, investigations or proceedings pending, or, to the
actual knowledge of the people set forth in Section 5.1(g)(iii) of the Company
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<PAGE> 29
Disclosure Letter, threatened, against the International Entities and the Joint
Ventures or their properties or assets, as to which, in each case, it is
reasonably likely to expect potential damages resulting therefrom to exceed
$500,000, net of applicable insurance and reserves.
(iv) As of the date hereof, there is no litigation against any
member of the Spinco Group which, net of applicable insurance and reserves with
respect thereto, is reasonably likely to result in liability for amounts which
would be material to the financial condition of Spinco.
(v) Except for those obligations and liabilities that are
fully reflected or reserved against on the consolidated balance sheet of the
Company included in the 1999 10-K or the First 2000 10-Q and for obligations and
liabilities incurred in the ordinary course of business consistent with prior
practice since March 31, 2000, neither the Company nor any of its Subsidiaries
has incurred any obligations or liabilities of any nature whatsoever, whether
absolute, accrued, contingent, known, unknown or otherwise and none of the Joint
Ventures has incurred any obligation or liabilities of any nature whatsoever,
whether absolute, accrued, contingent or otherwise and, in each case, whether or
not required to be disclosed on a balance sheet prepared in accordance with GAAP
or statutory or other applicable accounting principles, including those relating
to matters involving any Environmental Law (as defined below), or any other
facts or circumstances of which the Company has knowledge that could result in
any claims against, or obligations or liabilities of, the Company or any of its
Affiliates or Joint Ventures, except for those that are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Company or
Spinco to consummate the transactions contemplated by the Transaction
Agreements. As used in the Agreement, each of the phrases (i) "of which the
Company has knowledge", (ii) "knowledge of the Company" and (iii) "the Company
has no knowledge" means the actual knowledge of those people set forth on
Section 5.1(g)(v) of the Company Disclosure Letter.
(h) Employee Benefits. (i) A true and complete copy of each
material employment benefit and compensation plan, Contract, policy or
arrangement, including each "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), bonus, incentive, deferred compensation, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, stock appreciation
rights, stock based, termination and severance plan, Contract, policy or
arrangement that covers employees, directors, agents, consultants, former
employees or former directors of the Company and its Subsidiaries (the
"Compensation and Benefit Plans") and any trust agreement or insurance contract
forming a part of such Compensation and Benefit Plans has been made available to
Parent prior to the date hereof. The Compensation and Benefit Plans are listed
in Section 5.1(h) of the
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<PAGE> 30
Company Disclosure Letter and any "change of control" or similar provisions
therein are specifically identified in Section 5.1(h) of the Company Disclosure
Letter. Except as provided in the Transaction Agreements, neither the Company
nor any of its Subsidiaries has any commitment, oral or written, to create any
additional material Compensation and Benefit Plan or to modify or change any
existing Compensation and Benefit Plan in a material respect.
(ii) All Compensation and Benefit Plans are in substantial
compliance with all applicable Law, including the Code and ERISA, and all
required filings and disclosures with respect to any Compensation and Benefit
Plan have been timely made. More specifically, the Company and the Compensation
and Benefit Plans have at all times complied with Section 407 of ERISA with
respect to the holding and acquiring of "employer securities" and "qualifying
employer securities" as defined under ERISA. Each Compensation and Benefit Plan
that is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") and that is intended to be qualified under Section
401(a) of the Code (each, a "Qualified Plan"), has received a favorable
determination letter (including a determination that the related trust under
such Compensation and Benefit Plan is exempt from Tax under Section 501(a) of
the Code) from the Internal Revenue Service (the "IRS") with respect to "TRA"
(as defined in Section 1 of Revenue Procedure 93-39), and the Company is not
aware of any circumstances reasonably likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
knowledge of the Company, threatened legal action, suit, claim or governmental
investigation relating to any of the Compensation and Benefit Plans, other than
routine claims for benefits. Neither the Company nor any of its Subsidiaries nor
Spinco nor any of its Subsidiaries has engaged in a transaction, or omitted to
take any action, with respect to any Compensation and Benefit Plan that,
assuming the Taxable period of such transaction expired as of the date hereof,
could subject the Company or any of its Subsidiaries to a material Tax or
penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) There is no material liability under Subtitle C or D of
Title IV of ERISA that has been incurred which has not been satisfied and no
such material liability is expected to be incurred by the Company or any
Subsidiary with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (such entity an "ERISA Affiliate" and such plan an "ERISA
Affiliate Plan"). The Company and its Subsidiaries have not incurred any
material withdrawal liability that has not been satisfied and the Company does
not expect that they will incur any such material withdrawal liability with
respect to any multiemployer plan under Subtitle E to Title IV of ERISA. Neither
the Company, its Subsidiaries nor any ERISA Affiliate has contributed, or been
obligated to contribute, to a
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<PAGE> 31
"multiemployer plan" within the meaning of Section 3(37) of ERISA within the
last six calendar years. No notice of a "reportable event", within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any Pension Plan or any ERISA
Affiliate Plan within the 12-month period ending on the date hereof or, except
in respect of the transactions contemplated by the Transactions Agreements,
will be required to be filed in connection with the transactions contemplated
by the Transaction Agreements. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan, and, to the knowledge of
the Company, no condition exists that presents a material risk that such
proceedings will be instituted.
(iv) All material contributions required to be made under the
terms of any Compensation and Benefit Plan or ERISA Affiliate Plan as of the
date hereof have been timely made in accordance with such terms and applicable
Law and/or have been reflected on the most recent consolidated balance sheet
filed or incorporated by reference in the Company Reports prior to the date
hereof. Neither any Pension Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA, and no ERISA Affiliate has an
outstanding funding waiver. Neither the Company nor its Subsidiaries or ERISA
Affiliates nor Spinco nor its Subsidiaries or ERISA Affiliates (x) has provided,
or is required to provide, security to any Pension Plan or to any ERISA
Affiliate Plan pursuant to Section 401(a)(29) of the Code or (y) has taken any
action, or omitted to take any action, that has resulted, or is reasonably
likely to result, in the imposition of a lien under Section 412(a) of the Code
or pursuant to ERISA.
(v) Under each Pension Plan which is a single-employer plan
and ERISA Affiliate Plan, as of the last day of the most recent plan year ended
prior to the date hereof, the actuarially determined present value of all
"benefit liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the Pension
Plan's most recent actuarial valuation), did not exceed the then current value
of the assets of such Plan, and as of the date hereof, there has been no
material adverse change in the financial condition of such Plan nor any
amendment or other change to such Plan that would materially increase the amount
of benefits thereunder which reasonably could be expected to change such result.
(vi) Except as required by applicable Law, by the Transaction
Agreements or pursuant to individual agreements, neither the Company nor any of
its Subsidiaries or ERISA Affiliates have any obligations for retiree health and
life benefits under any Compensation and Benefit Plan. No action taken by the
Company or its Subsidiaries or Spinco or its Subsidiaries alters the Company's
or its Subsidiaries' ability to amend or terminate any retiree health or life
plan in accordance with the written terms of such plan.
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<PAGE> 32
(vii) The consummation of the Merger and the other
transactions contemplated by the Transaction Agreements will not, without any
other action (w) entitle any employee, consultant or director of the Company or
any of its Subsidiaries to any payment (including severance pay or similar
compensation) or any increase in compensation, (x) accelerate the time of
payment or vesting or trigger any payment of compensation or benefits or the
funding of any trust under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Compensation and Benefit Plans or
(y) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans.
(viii) With respect to each Compensation and Benefit Plan, if
applicable, the Company has provided or made available to Parent true and
complete copies of (i) the most recent Form 5500 filed with the IRS; (ii) the
most recent actuarial report and financial statement; (iii) the most recent
summary plan description; (iv) the forms filed with the PBGC (other than for
premium payments) since January 1, 1998; (v) the most recent determination
letter issued by the IRS; (vi) any Form 5310 or Form 5330 filed with the IRS;
and (vii) the most recent nondiscrimination tests performed under ERISA and the
Code (including 401(k) and 401(m) tests).
(ix) From March 31, 2000 through the date hereof, no (i)
Designated Persons or (ii) other employees of Aetna Retirement Services, Inc. or
Aetna International, Inc. or any of their Subsidiaries (that are also
Subsidiaries of the Company), Joint Ventures or joint ventures have been
transferred to or from the Company, Spinco, any of their respective Subsidiaries
or joint ventures or Aetna Services, Inc., other than transfers of such other
employees identified in clause (ii) in the ordinary course of business
consistent with past practices.
(i) Compliance with Laws; Permits. (i) The business and
operations of the Company and its Subsidiaries and Joint Ventures have been
conducted in compliance with all applicable foreign, federal, state and local
Laws regulating the business and products of insurance, reinsurance and
healthcare and all applicable orders and directives of Insurance and Healthcare
Authorities (including federal authorities with respect to health maintenance
organization and other health and workmen's compensation products and variable
insurance and annuity products) and market conduct recommendations resulting
from market conduct examinations conducted by or on behalf of Insurance and
Healthcare Authorities (including federal authorities with respect to health
maintenance organization and other health and workmen's compensation products
and variable insurance and annuity products) (collectively, "Insurance Laws"),
except where the failure to so conduct such business and operations is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. Without limiting the generality of the preceding sentence,
except where the failure to do so is not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse
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<PAGE> 33
Effect, each of the Company and its Subsidiaries and Joint Ventures and, to the
knowledge of the Company as of the date hereof, its Agents (as defined below),
have marketed, administered, sold and issued insurance, reinsurance, healthcare
and annuity products and guaranteed investment contracts in compliance with all
applicable Insurance Laws, including (A) all applicable prohibitions against
withdrawal of business lines and "redlining", (B) all applicable requirements
relating to the disclosure of the nature of insurance and/or annuity products
as policies of insurance or annuities, as the case may be, (C) all applicable
requirements relating to insurance and/or annuity product projections and
illustrations and (D) all applicable requirements relating to the advertising,
sales and marketing of insurance and annuity products, healthcare products and
guaranteed investment contracts. In addition, (X) there is no pending or, to
the knowledge of the Company, threatened charge by any Insurance and Healthcare
Authority that the Company or any of its Subsidiaries or Joint Ventures has
violated, nor any pending or, to the knowledge of the Company, threatened
investigation by any Insurance and Healthcare Authority with respect to
possible violations of any applicable Insurance Laws where such violations are,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect; (Y) none of the Company or any of its Subsidiaries or Joint
Ventures is subject to any order or decree of any Insurance and Healthcare
Authority relating specifically to such Person (as opposed to insurance
companies generally) which is, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect; and (Z) the Company and its
Subsidiaries and Joint Ventures have filed all reports required to be filed
with any Insurance and Healthcare Authority as to which the failure to file
such reports is, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect.
(ii) In addition to Insurance Laws, except as set forth in the
Company Reports filed prior to the date hereof, the businesses of each of
Spinco, the Company and the Company's Subsidiaries and Joint Ventures have not
been, and are not being, conducted in violation of any applicable federal,
state, local or foreign law, statute, ordinance, directive, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively, "Laws"), except for
violations or possible violations that are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Company or
Spinco to consummate the Merger and the other transactions contemplated by the
Transaction Agreements. No investigation or review by any Governmental Entity
with respect to the Company or any of its Subsidiaries or Joint Ventures which
would be reasonably likely to have a Company Material Adverse Effect is pending
or, to the knowledge of the Company, threatened, nor has any Governmental Entity
indicated an intention to conduct the same. To the knowledge of the Company, no
change is required in the Company's or any of its Subsidiaries' or Joint
Ventures' processes, properties or procedures in connection with any such Laws,
and the Company has not received any notice or communication of any
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<PAGE> 34
noncompliance with any such Laws that has not been cured as of the date hereof
other than any such failure to make changes or non-compliance which is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. Spinco, the Company and the Company's Subsidiaries and Joint
Ventures each has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct its business as presently conducted except those the absence of
which are not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect or prevent, materially delay or materially
impair the ability of the Company or Spinco to consummate the Merger and the
other transactions contemplated by the Transaction Agreements. None of the
Company's Subsidiaries which is a registered broker-dealer has entered into or
is subject to a restrictions letter agreement or similar agreement or decree
with the NASD as of the date hereof.
(j) Takeover Statutes. No restrictive provision of any "fair
price," "moratorium", "control share acquisition", "interested shareholder" or
other similar anti-takeover statute or regulation (each a "Takeover Statute") or
any restrictive provision of any anti-takeover provision in the Company's
certificate of incorporation and by-laws is, or at or following the Effective
Time will be, applicable to the Company, the Shares, the Merger or the other
transactions contemplated by the Transaction Agreements.
(k) Environmental Matters. Except as would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect:
(i) the Company and its Subsidiaries and Joint Ventures have
at all times been in compliance with all Orders (as defined below) of any
Governmental Entity and all Laws, in each case related to any Environmental Law
(as defined in the Distribution Agreement);
(ii) there are not any past or present conditions or
circumstances at, or arising out of, any current or former business, assets or
properties of the Company or any of its Subsidiaries or Joint Ventures,
including but not limited to the on-site or off-site disposal, presence or
release of or exposure to any chemical substance, product or waste or any other
condition or circumstance which has resulted in or could reasonably be expected
to give rise to: (a) liabilities, fines, penalties, costs, capital expenditures
or obligations for any violation, noncompliance, cleanup, remediation, disposal
or corrective action under any Environmental Law or (b) claims arising for
personal injury, property damage, or damage to natural resources; and
(iii) neither the Company nor any of its Subsidiaries or Joint
Ventures has (a) received any notice of noncompliance with, violation of, or
liability or potential liability relating to any Environmental Law or (b)
entered into any consent decree, agreement or order or is subject to any order
of any court or governmental authority or
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<PAGE> 35
tribunal or any indemnity with any third party relating to any Environmental
Law or relating to the cleanup of any hazardous materials contamination.
(l) Taxes. (i) Except as would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect, the
Company and each of its Subsidiaries (A) have duly and timely filed (taking into
account any extension of time (to the extent validly received) within which to
file) all Tax Returns (as defined below) required to be filed by any of them and
all such filed Tax Returns are complete and accurate; (B) all Taxes (as defined
below) owed (whether or not shown on any Tax Return) have been paid when due,
including any Taxes that the Company or any of its Subsidiaries are obligated to
withhold from amounts owing to any employee, creditor or third party, except
with respect to matters contested in good faith; and (C) have not waived any
statute of limitations with respect to Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency, which waiver or extension has
covered a Tax period that has not yet expired. Except as are not reasonably
likely to have a Company Material Adverse Effect, (A) there are not any pending
or threatened audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters, (B) there are not any unresolved questions or
claims concerning the Company's or any of its Subsidiaries' Tax liability and
(C) there are no Tax liens against the Company or any of its Subsidiaries except
for liens for Taxes not yet due or Taxes being contested in good faith. The
Company has made available to Parent true and correct copies of the United
States federal income Tax Returns filed by the Company and its Subsidiaries for
each of the fiscal years ended December 31, 1995, 1996, 1997 and 1998. Neither
the Company nor any of its Subsidiaries is a party to any Tax Allocation
Agreement that is material to the determination of a Tax of the (i) Company and
its Subsidiaries, or (ii) Spinco and its Subsidiaries.
As used in this Agreement, (y) "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") means (i) all federal,
state, local and foreign income, profits, franchise, premium, gross receipts,
environmental, customs duty, capital stock, severances, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions, (ii) any liability for the payment of any amount of the type
described in clause (i) as a result of being or having been before the Closing
Date a member of an affiliated, consolidated, combined or unitary group, or a
party to any agreement or arrangement, as a result of which liability of the
Company and each of its subsidiaries to a Tax Authority is determined or taken
into account with reference to the liability of any other Person (including,
e.g., liability under Treasury Regulation 1.1502-6 or similar liability under
any other Law), and (iii) any liability for the payment of any amount as a
result of being party to any Tax Allocation Agreement or with respect to the
payment of
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<PAGE> 36
any amount of the type described in (i) or (ii) as a result of any existing
express or implied obligation (including, but not limited to, an
indemnification obligation). "Tax Return" means all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax Authority relating to
Taxes.
"Tax Allocation Agreement" means all existing agreements or
arrangements (whether or not written) binding the Company or any of its
Subsidiaries that provide for the allocation, apportionment, sharing or
assignment of any Tax liability or benefit, or the transfer or assignment of
income, revenues, receipts, or gains for the principal purpose of determining
any Person's Tax liability.
"Tax Authority" means the Internal Revenue Service and any
other domestic or foreign Governmental Entity or Person responsible for the
administration of any Tax Laws.
(ii) Except for situations which would not, individually or in
the aggregate, be reasonably likely to have a Company Material Adverse Effect,
(A) the Tax treatment under the Code of all Retained Insurance Contracts (as
defined below) is and at all times has been in all material respects the same or
more favorable to the purchaser, policyholder or intended beneficiaries thereof
as the Tax treatment under the Code for which such Retained Insurance Contracts
qualified or purported to qualify at the time of their issuance or purchase,
except for changes resulting from changes to the Code which do not affect such
Retained Insurance Contracts due to the effective date thereof, (B) each
hardware, software and firmware product used by the Retained Insurance Companies
to maintain such Retained Insurance Contracts' qualification for the Tax
treatment under the Code for which such Retained Insurance Contracts qualified
or purported to qualify at the time of their issuance or purchase is and at all
relevant times has been properly designed and implemented to maintain such
qualification, (C) each annuity contract issued by the Retained Insurance
Companies qualifies as an annuity contract under Section 72 of the Code, (D)
each life insurance policy which is a Retained Insurance Contract qualifies as a
life insurance contract for federal income Tax purposes and any such policy
which is a modified endowment contract under Section 7702A of the Code (each, a
"MEC") has been marketed as such at all relevant times or the policyholder
otherwise has consented to such MEC status and (E) each of the Retained
Insurance Companies is and at all times has been the owner for federal income
Tax purposes of the assets in any segregated asset account underlying or
supporting each variable annuity contract and each variable insurance policy
issued by it; provided, however, that for purposes of this sentence and Section
5.1(l)(iv), (A) the term Retained Insurance Companies shall include only Aetna
Life Insurance & Annuity Company and Aetna Insurance Company of America and (B)
the term Retained Insurance Contracts shall not include any contracts issued by
any Person other than the Retained Insurance Companies, as modified by clause
(A) of this proviso.
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(iii) Except for situations which would not, individually or
in the aggregate, be reasonably likely to have a Company Material Adverse
Effect, each Fund Client (as defined below) has elected to qualify and, for all
Taxable years that an Advisory Entity (as defined below) served as investment
adviser and with respect to which the applicable statute of limitations
(including any extensions) has not expired ("open Taxable years"), has
continuously qualified to be treated as a "regulated investment company" under
Subchapter M of Chapter 1 of Subtitle A of the Code and has continuously been
eligible to compute, and has for each such Taxable year computed, its federal
income Tax under Section 852 of the Code and has no earnings and profits
accumulated in any Taxable year. Except as would not be, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect, each
Fund Client that is intended to be a Tax-exempt municipal bond fund has
satisfied the requirements of Section 852(b)(5) of the Code and is qualified to
pay exempt interest dividends as defined therein. At the Closing Date, all Tax
Returns with respect to any Taxable period for which the applicable statute of
limitations (including any extensions) has not expired and during which an
Advisory Entity has served as investment adviser that were or are required to
be filed on or before such date by or on behalf of a Fund Client were or shall
have been filed and were or shall be complete and correct and all federal and
other Taxes, shown or required to be shown as due on such returns, shall have
been paid or provided for. No such Tax Return or other filing is currently
under audit, no assessment has been asserted with respect to such Tax Returns
or other filings, and no requests for waivers of the time to make any such
assessment are pending. None of the Fund Clients is delinquent in the payment
of any material Tax assessment or governmental charge.
(iv) In providing recordkeeping and administrative services in
the ordinary course of business consistent with prior practice with respect to
customers' insurance products, whether individual or group retirement or
deferred compensation plans or arrangements, and with respect to any Retained
Insurance Contracts issued, assumed, modified, exchanged or sold by a Retained
Insurance Company as of the Closing Date, each Retained Insurance Company is in
compliance with the applicable administrative requirements of the Code and the
rules and regulations thereunder, and, to the extent applicable, the
requirements of Parts 2, 3 and 4 of Title I of ERISA, except in each case for
those failures to comply that are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
(m) Labor Matters. Neither the Company nor any of its
Subsidiaries or Joint Ventures is a party to or otherwise bound by any
collective bargaining agreement, Contract or other agreement or understanding
with a labor union or labor organization, nor is the Company or any of its
Subsidiaries or Joint Ventures the subject of any material proceeding asserting
that the Company or any of its Subsidiaries or Joint Ventures has committed an
unfair labor practice or seeking to compel it to bargain with any labor union or
labor organization nor is there pending or, to the knowledge of the Company,
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threatened, nor has there been for the past five years, any labor strike,
dispute, walk-out, work stoppage, slow-down or lockout involving the Company or
any of its Subsidiaries or Joint Ventures. The parties acknowledge and agree
that this representation and warranty is made only with respect to employees of
the Company and its Subsidiaries and Joint Ventures who are not Excluded
Employees.
(n) Insurance. All material fire and casualty, general
liability, directors' and officers', errors and omissions and product liability
insurance policies maintained by or on behalf of the Company or any of its
Subsidiaries or Joint Ventures are with reputable insurance carriers and provide
insurance coverage reasonably customary or adequate for the operation of their
respective businesses, except for any such failures to maintain insurance
policies that are not, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect. The Company and its Subsidiaries and
Joint Ventures have given notice to insurance carriers of all material claims
that may be covered, and, with respect to claims in excess of $1,000,000, the
Company and its Subsidiaries and Joint Ventures have not received any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights or any notice of cancellation or any other indication that any insurance
policy is no longer in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its obligations
thereunder.
(o) Intellectual Property. (i) After giving effect to the
Spin-Off and the related transactions, the Company and each of its Subsidiaries
and Joint Ventures will own, or will be licensed or will otherwise possess
legally enforceable rights to use, all material patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how, trade secrets, computer software programs or applications, and
tangible or intangible proprietary information or materials ("Intellectual
Property") that is used in the business of the Company and its Subsidiaries and
Joint Ventures as currently conducted ("Company Intellectual Property Rights"),
except for any such failures to own, be licensed or possess that are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, and to the knowledge of the Company all material patents,
trademarks, trade names, service marks and copyrights held by the Company and
its Subsidiaries and Joint Ventures are valid and subsisting.
(ii) Except as is not reasonably likely to have a Company
Material Adverse Effect:
(A) neither the Company nor Spinco nor their respective
Subsidiaries is, nor will any of them be as a result of the execution and
delivery of the Transaction Agreements or the performance of its obligations
hereunder and thereunder, in violation of any licenses, sublicenses and other
agreements as to which it is a party and pursuant to
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which the Company and its Subsidiaries and Joint Ventures is authorized to use
any third-party Intellectual Property;
(B) the Company and its Subsidiaries have not received any
notice of any bona fide claims (I) to the effect that the Company or any of its
Subsidiaries or Joint Ventures is infringing on any copyright, patent,
trademark, trade name, service mark or trade secret, (II) against the use by the
Company or any of its Subsidiaries or Joint Ventures of any Intellectual
Property used in the business of the Company or any of its Subsidiaries or Joint
Ventures as currently conducted or as proposed to be conducted or (III)
challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights or other trade secret material to the Company; and
(C) to the knowledge of the Company, the Company Intellectual
Property does not infringe the intellectual property rights of any third party
and there is no infringement of any of the Company Intellectual Property Rights
by any third party, including any employee or former employee of the Company or
any of its Subsidiaries or Joint Ventures.
(p) Rights Plan. (i) The board of directors of the Company and
the Company have taken all necessary action to render the Rights Agreement
inapplicable to the Merger, the Spin-Off and the other transactions contemplated
by the Transaction Agreements.
(ii) The Company has, or prior to the Effective Time will
have, taken all necessary action with respect to all of the outstanding Rights
so that, as of immediately prior to the Effective Time, (A) neither the Company
nor Parent will have any obligations under the Rights or the Rights Agreement
and (B) the holders of the Rights will have no rights under the Rights or the
Rights Agreement.
(q) Brokers and Finders. Neither the Company, nor any of its
Subsidiaries, officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the Merger, the Spin-Off or the other transactions
contemplated by the Transaction Agreements, except that the Company has employed
Donaldson Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. as
its financial advisors. The fees and expenses of Goldman, Sachs & Co. and
Donaldson Lufkin & Jenrette Securities Corporation shall be paid by Spinco and
after the Spin-Off, the Company will have no liability or obligation to such
firms arising out of their engagement with the Company.
(r) Insurance Business. (i) Except as otherwise is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, all policies, binders, slips, certificates, guaranteed
investment contracts, annuity contracts and
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participation agreements and other agreements of insurance and reinsurance and
healthcare products, whether individual or group, in effect as of the date
hereof (including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the Retained
Insurance Companies (the "Retained Insurance Contracts") and any and all
marketing materials, are, to the extent required under applicable Law, on forms
approved by applicable insurance regulatory authorities or which have been
filed and not objected to by such authorities within the period provided for
objection, and such forms comply in all material respects with the Insurance
Laws applicable thereto. Premium rates established by the Retained Insurance
Companies that are required to be filed with or approved by insurance
regulatory authorities have been so filed or approved, the premiums charged
conform thereto in all material respects, and such premiums comply in all
material respects with the Insurance Laws applicable thereto, except where the
failure to be so filed or approved, or to so conform or comply, is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
(ii) To the knowledge of the Company as of the date hereof,
each insurance agent, third party administrator, manager, marketer, underwriter,
broker, reinsurance intermediary and distributor (each an "Agent"), at the time
such Agent wrote, sold, produced or managed business for any Retained Insurance
Company was duly licensed (for the type of business written, sold, produced or
managed) and no such Agent violated (or with or without notice or lapse of time
or both, would have violated) any term or provision of any Law applicable to the
writing, sale, production or management of business for any Retained Insurance
Company, except for such failures to be licensed or such violations which have
been cured, which have been resolved or settled through agreements with
applicable Governmental Entities or which are barred by an applicable statute of
limitations, or that have not had or are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
(iii) Prior to the date hereof, the Company has made available
to Parent a true and correct copy of each material Contract between any Retained
Insurance Company and any reinsurance intermediary and of each material pooling
agreement to which a Retained Insurance Company is a party.
(iv) Prior to the date hereof, the Company has made available
to Parent a true and complete copy of any actuarial reports prepared by
independent actuaries with respect to reserve adequacy of any Retained Insurance
Company or any of its Subsidiaries since December 31, 1997, and all attachments,
addenda, supplements and modifications thereto (the "Company Actuarial
Analyses"). To the knowledge of the Company, the information and data furnished
by the Company or any Retained Insurance Company to its independent actuaries in
connection with the preparation of the Company Actuarial Analyses were accurate
in all material respects.
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(v) To the knowledge of the Company as of the date hereof, all
material amounts recoverable under reinsurance, coinsurance or other similar
Contracts to which any Retained Insurance Company is a party (including, but
not limited to, amounts based on paid and unpaid losses) are fully collectible.
(s) Liabilities and Reserves. (i) The reserves carried on the
Company SAP Statements or Foreign Company Statements, as the case may be, of
each Retained Insurance Company for the year ended December 31, 1999 for future
annuity contracts, insurance and healthcare policy benefits, losses, claims,
reinsurance and similar purposes are in compliance in all material respects with
the applicable requirements for reserves, if any, established by the insurance
departments or applicable Governmental Entity of the jurisdiction of domicile of
such Retained Insurance Company, were determined in all material respects in
accordance with generally accepted actuarial standards consistently applied and
are fairly stated in all material respects in accordance with sound actuarial
principles utilizing actuarial assumptions in accordance with or more
conservative than called for in relevant policy and Contract provisions. The
Company has delivered to Parent true, correct and complete copies of the
actuarial valuation reports delivered to the insurance department of the
domiciliary jurisdiction of each U.S. Retained Insurance Company for the years
ended December 31, 1999 and 1998.
(ii) Except for regular periodic assessments in the ordinary
course of business consistent with prior practice or assessments based on
developments which are publicly known within the insurance industry, to the
knowledge of the Company, no claim or assessment is pending or threatened
against any U.S. Retained Insurance Company which is peculiar or unique to such
Retained Insurance Company by any state insurance guaranty association in
connection with such association's fund relating to insolvent insurers which if
determined adversely, is, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect.
(t) Separate Accounts. (i) Except as otherwise is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, each separate account maintained by a Retained Insurance Company
(collectively, the "Company Separate Accounts") is duly and validly established
and maintained under the laws of its jurisdiction of formation and, to the
extent subject to the 1940 Act, is either excluded from the definition of an
investment company pursuant to Sections 3(c)(1), 3(c)(7) or 3(c)(11) of the 1940
Act or is duly registered as an investment company under the 1940 Act. Except as
otherwise is not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect, each such Company Separate Account, if
registered under the 1940 Act, is operated in compliance with the 1940 Act, has
filed all reports and amendments of its registration statement required to be
filed, and has been granted all exemptive relief necessary for its operations as
presently conducted, and is in compliance with all conditions to any such
relief. Except as otherwise is not, individually
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or in the aggregate, reasonably likely to have a Company Material Adverse
Effect, the Retained Insurance Contracts under which the Company Separate
Accounts assets are held are duly and validly issued and are binding
obligations of the issuing Retained Insurance Company and are either exempt
from registration under the Securities Act or were sold pursuant to an
effective registration statement under the Securities Act, and any such
registration statement is currently in effect to the extent necessary to allow
the appropriate Retained Insurance Company to receive contributions under such
Retained Insurance Contracts.
(ii) The assets of each Company Separate Account that are
subject to the Code are adequately diversified within the meaning of, and to the
extent required by, Section 817(h) of the Code.
(iii) Each of the Retained Insurance Companies that is subject
to the Code is treated for federal Tax purposes as the owner of the assets
underlying the respective life insurance policies and annuity contracts issued,
entered into or sold by it.
(iv) Each account through which the Company or any of its
Subsidiaries provides services to any client (an "Account Client") that is (A)
an employee benefit plan, as defined in Section 3(3) of ERISA, that is subject
to Title I of ERISA; (B) a person acting on behalf of such a plan; or (C) an
entity whose assets include the assets of such a plan, within the meaning of
ERISA and applicable regulations (hereinafter referred to as an "ERISA Client"),
in each case have been managed by the Company and its Subsidiaries such that
each of the Company and its Subsidiaries in the exercise of such management is
in compliance in all respects with the applicable requirements of ERISA, except
to the extent the failure to comply is not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
(u) Material Contracts. All of the material Contracts of the
Company and its Subsidiaries and Joint Ventures that are required to be
described in the Company Reports or listed or filed as Exhibits to the 1999
10-K, the First 2000 10-Q or any Company Reports filed subsequent to the date
hereof thereto are described in such Company Reports or listed or filed as
exhibits thereto, respectively, and are in full force and effect. True and
complete copies of all such material Contracts have been delivered or made
available by the Company to Parent. Neither the Company nor any of its
Subsidiaries or Joint Ventures nor, to the knowledge of the Company, any other
party is in breach of or in default under any such Contract except for such
breaches and defaults as are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect. Neither the Company nor any of
its Subsidiaries or Joint Ventures is party to any Contract containing any
provision or covenant limiting in any material respect the ability of the
Company or any of its Subsidiaries or Joint Ventures or, assuming the
consummation of the transactions contemplated by the Transaction Agreements, ING
or
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any of its subsidiaries or joint ventures, to (i) sell any products or services
of or to any other Person, (ii) engage in any line of business or (iii) compete
with or to obtain products or services from any Person or limiting the ability
of any Person to provide products or services to the Company or any of its
Affiliates or Joint Ventures or, assuming the consummation of the transactions
contemplated by the Transaction Agreements, ING or any of its subsidiaries or
joint ventures.
(v) Investment Contracts, Fund Clients and Advisory Clients.
(i) Certain of the Company's Subsidiaries provide investment advisory,
sub-advisory, administration, distribution or certain other services (each
Contract for such services being referred to as an "Investment Contract", each
other party thereto being referred to as a "Client", and each Client which is
registered as an investment company under the 1940 Act being referred to as a
"Fund Client") to the Clients. A complete list of Fund Clients is set forth in
Section 5.1(v) of the Company Disclosure Letter. Each of the Fund Clients (or
the company or trust of which it is a series) is duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
organization, except as would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect. The Boards of
Trustees or Directors of the Fund Clients operate in all material respects in
conformity with the applicable requirements and restrictions of Sections 9, 10
and 16 of the 1940 Act.
(ii) Except as would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect, each of the Fund
Clients is in compliance with all applicable Laws of the SEC, the NASD, the IRS
and any other governmental agency or self-regulatory body having jurisdiction
over such Fund Client or its distributor or investment adviser and of any
jurisdiction in which such Fund Client is registered, qualified or sold and with
its prospectus and statement of additional information.
(iii) Each of the Company's Subsidiaries that provides
investment advisory or sub-advisory services (each an "Advisory Entity" and,
collectively "Advisory Entities"), a complete list of which has previously been
made available by the Company to Parent, to any Fund Client or any other Person
(each such other Person, an "Advisory Client") is duly registered with the SEC
as an investment adviser or is not required to do so because it does not engage
in business in the United States and does not provide investment advisory or
sub-advisory services to an investment company registered under the 1940 Act. No
Advisory Entity is required to register as an investment advisor with any state.
Any Advisory Entity doing business outside the United States is duly licensed to
provide investment advisory services in the jurisdictions in which it does
business. The Company is not an Advisory Entity. Each pooled Advisory Client is
either registered as an investment company under the 1940 Act or relies upon an
appropriate exemption from the definition of an investment company under the
1940 Act.
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(iv) Each Fund Client and Advisory Entity has operated and is
currently operating in compliance with all Laws, and with the investment
objectives, policies and restrictions, that are applicable to it or its business
except for such noncompliance as would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect. Each Advisory
Entity has been and is in compliance with each Investment Contract to which it
is a party, except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect.
(v) The accounts of each Advisory Client subject to ERISA have
been managed by the applicable Company Subsidiary in compliance in all material
respects with the applicable requirements of ERISA.
(vi) All issued and outstanding shares of common stock and
shares or units of beneficial interest of each Fund Client (collectively,
"shares") are, and at the Effective Time will be, and all of the authorized but
unissued shares of each Fund Client when issued for the consideration described
in the current registration statement relating to that Fund Client will be duly
and legally issued and outstanding, fully paid, and non-assessable by the Fund
Client. No Fund Client has outstanding any options, warrants, or other rights to
subscribe for or purchase any of its shares, nor is there outstanding any
security convertible into shares of any Fund Client.
(vii) The current prospectus and related registration
statement, including the current statement of additional information, for each
of the Fund Clients (copies of which have been made available to Parent) conform
in all material respects to the applicable requirements of the Securities Act,
the 1940 Act, and the rules and regulations of the SEC thereunder, as well as
the applicable requirements of the various state securities Laws, and do 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,
in light of the circumstances under which they were made, not misleading.
(viii) Each Fund Client has filed with the SEC all material
Contracts, including all agreements and arrangements for the distribution of
shares, to which a Fund Client is a party or by which a Fund Client or its
property is bound, other than Contracts for the purchase or sale of portfolio
securities entered into in the ordinary course of business consistent with prior
practice, that are required to be filed with the SEC. Each Contract subject to
Section 12(b) or 15 of the 1940 Act has been duly approved at all times in
compliance in all material respects with Section 12(b) or 15 of the 1940 Act and
all other applicable Laws. Each such Contract is currently in full force and
effect and has been performed by the relevant entity in accordance with the 1940
Act and all other applicable Laws. No material default or condition or event
that, after notice or lapse of time or both, would constitute a material default
on the part of the Company or any of its
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Subsidiaries or, to the knowledge of the Company, on the part of the other
parties to such advisory and sub-advisory agreements, exists under any of those
material Contracts.
(ix) All proxy statements to be prepared for use by the Fund
Clients in connection with the transactions contemplated by the Transaction
Agreements will, with respect to information provided by the Company, any of its
Subsidiaries, or a Fund Client, not contain any untrue statement of a material
fact, or omit to state any material fact required to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(w) Company Broker/Dealers. (i) The Company and its
Subsidiaries operate its broker/dealer operations exclusively through Aetna Life
Insurance and Annuity Company, Aeltus Capital, Inc., Aetna Investment Services,
Inc., Systematized Benefits Administrators, Inc., Financial Network Investment
Corporation and Aetna Financial Services, Inc. (collectively, the "Company
Broker/Dealers"). Each Company Broker/Dealer that is required to be registered
as a broker-dealer with the SEC or under applicable state Laws is so registered
and is registered with each other Governmental Entity with which it is required
to register in order to conduct its business as now conducted, and is and has
been since January 1, 1997 in full compliance with all applicable Laws
thereunder, except for any failures to register or comply which are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. Each Company Broker/Dealer is a member organization in good
standing of the NASD and such other organizations in which its membership is
required in order to conduct its business as now conducted, except such failures
to be in good standing or such memberships the failure to have or maintain which
are not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect.
(ii) Except as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect, no Company
Broker/Dealer is, nor is any "associated person" of it, subject to a "statutory
disqualification" (as such terms are defined in the Exchange Act) or subject to
a disqualification that would be a basis for censure, limitations on the
activities, functions or operations of, or suspension or revocation of the
registration of any of the Company Broker/Dealers as broker-dealer, municipal
securities dealer, government securities broker or government securities dealer
under Section 15, Section 15B or Section 15C of the Exchange Act and, to the
knowledge of the Company, there are no proceedings or investigations pending by
any Governmental Entity or self-regulatory organization that is reasonably
likely to result in any such censure, limitations, suspension or revocation.
(iii) Except as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect, since its
inception, each Company Broker/Dealer has had net capital (as such term is
defined in Rule 15c3-1 under the
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Exchange Act) that satisfies the minimum net capital requirements of the
Exchange Act and of the laws of any jurisdiction in which such company conducts
business.
(x) Bank Regulatory Matters. (i) Neither the Company nor any
of its Subsidiaries or Joint Ventures or their respective properties is a party
to or is subject to any order, decree, agreement, memorandum of understanding or
similar agreement with, or extraordinary supervisory letter from, any Banking
Authority.
(ii) Neither the Company nor any of its Subsidiaries or Joint
Ventures has been advised by any Banking Authority that such Banking Authority
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, supervisory letter or similar submission.
(y) No Contracts, Etc. Except for assets or properties to be
transferred to Spinco or its Subsidiaries pursuant to the Transaction
Agreements, none of Spinco or any of its Subsidiaries presently uses in the
conduct of its business any material assets or properties, whether tangible,
intangible or mixed, which are also utilized in the conduct of the business of
the Company and its Subsidiaries and Joint Ventures, and, other than ordinary
course commercial arrangements on arms length terms, none of Spinco or any of
its Subsidiaries is presently directly or indirectly a party to any Contract,
arrangement or understanding with the Company or any of its Subsidiaries or
Joint Ventures (other than the Transaction Agreements). After giving effect to
the Spin-Off and to all supplies and services to be provided pursuant to the
Transaction Agreements, the Company and its Subsidiaries and Joint Ventures,
will include all the Company's direct or indirect right, title and interest
(including minority interests) in and to all of (i) the assets and services that
are necessary to permit the operation of the Company and its Subsidiaries and
Joint Ventures in substantially the same manner as such operations have been
conducted prior to the date hereof and (ii) all assets reflected on the
unaudited pro forma consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 2000 referred to in Section 5.1(e)(iv) of this
Agreement, except those assets disposed of in the ordinary course of business
since such date. The termination of all Contracts, arrangements and
understandings between the Company and its Subsidiaries and Joint Ventures on
the one hand and Spinco and its Subsidiaries on the other hand, to the extent
contemplated by the Distribution Agreement, is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect. The
unaudited pro forma consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 2000 referred to in Section 5.1(e)(v) of this
Agreement reflects all assets of the Company and its Subsidiaries and Joint
Ventures principally used in the business or operations of the Company and its
Subsidiaries and Joint Ventures as of March 31, 2000, other than assets or
properties of the Company or Aetna Services, Inc. or any of their Subsidiaries
that will be transferred to
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Spinco or its Subsidiaries and made available as necessary to provide services
to the Company and its Subsidiaries pursuant to the Transaction Agreements.
5.2 Representations and Warranties of ING, Parent and Merger
Sub. Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated the date hereof, delivered to the Company by Parent on
or prior to entering into this Agreement (the "Parent Disclosure Letter"), ING,
Parent and Merger Sub each hereby represent and warrant to the Company that:
(a) Capitalization of Merger Sub. The authorized capital stock
of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per
share, all of which are validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective Time will be,
owned by Parent, and there are (i) no other shares of capital stock or voting
securities of Merger Sub, (ii) no securities of Merger Sub convertible into or
exchangeable for shares of capital stock or voting securities of Merger Sub and
(iii) no options or other rights to acquire from Merger Sub, and no obligations
of Merger Sub to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Merger Sub. Merger Sub has not conducted any business prior to the date hereof
and has no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to the Transaction Agreements and the transactions contemplated
thereunder.
(b) Organization, Good Standing and Qualification. Each of
ING, Parent and Merger Sub is a corporation duly organized, validly existing and
in good standing under the Laws of its respective jurisdiction of organization
and has all requisite corporate or similar power and authority to own and
operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing in each
jurisdiction where the ownership or operation of its assets or properties or
conduct of its business requires such qualification, except where the failure to
be so organized, qualified or in such good standing, or to have such power or
authority, is not reasonably likely to have a Parent Material Adverse Effect. As
used herein, the term "Parent Material Adverse Effect" means a material adverse
effect on the financial condition, properties, business or annual results of
operations of Parent and its Subsidiaries and joint ventures taken as a whole,
except to the extent that such adverse effect results from (i) general economic
conditions or changes in any one or more countries, (ii) financial market
fluctuations or conditions in any one or more countries, (iii) adverse economic,
currency or regulatory changes or effects in or affecting the financial services
industry, insurance industry, banking industry, or asset management industry
generally in any one or more countries, (iv) the announcement of the
transactions contemplated herein, or any effect which would prevent, materially
delay or materially impair the ability of Parent to consummate the transactions
contemplated hereby.
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(c) Corporate Authority. (i) Each of ING, Parent and Merger
Sub has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby on the
terms and subject to the conditions of this Agreement. This Agreement is a valid
and binding agreement of ING, Parent and Merger Sub, enforceable against each of
ING, Parent and Merger Sub in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(ii) No approval by the shareholders of either of ING or
Parent is required in order for ING and Parent to execute, deliver and perform
its respective obligations under this Agreement and to consummate the
transactions contemplated hereby on the terms and subject to the conditions of
this Agreement.
(d) Governmental Filings; No Violations. (i) Other than the
reports, filings, registrations, consents, approvals, permits, authorizations,
applications and/or notices (A) pursuant to Section 1.4, (B) under the HSR Act,
(C) under any foreign competition laws, (D) under the Exchange Act, the
Securities Act and other securities laws, (E) under the 1940 Act, (F) under the
Advisers Act, (G) with the NYSE, (H) with the NASD, (I) with the applicable
Insurance and Healthcare Authorities, (J) with the Banking Authorities, (K) with
the PBGC, (L) with the Department of Labor, (M) with applicable foreign and
federal regulatory authorities governing foreign investments, (N) with
applicable foreign regulatory authorities governing the management of pension
plans, (O) with the IRS in connection with certain transfers contemplated by the
Employee Benefits Agreement, and (P) with applicable Dutch regulatory
authorities (notice filings), no notices, reports or other filings are required
to be made by ING, Parent or Merger Sub with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
ING, Parent or Merger Sub from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by ING, Parent and Merger Sub and the
consummation by ING, Parent and Merger Sub of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect.
(ii) The execution, delivery and performance of this Agreement
by ING, Parent and Merger Sub do not, and the consummation by ING, Parent and
Merger Sub of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default under,
the governing instruments of ING, Parent and Merger Sub, (B) a breach or
violation of, or a default under, the acceleration of any rights or obligations
or the creation of a lien, pledge, security interest, claim or other encumbrance
on the assets of ING or any of its Subsidiaries (with or without notice, lapse
of time or both) pursuant to, any Contracts binding upon ING or any of its
Subsidiaries or any Law or governmental or non-governmental franchise, permit,
license or obligation to which ING or any of its Subsidiaries is subject or (C)
any change in the rights or
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obligations of any party under any of the Contracts, except, in the case of
clause (B) or (C) above, for breach, violation, default, acceleration, creation
or change that, individually or in the aggregate, is not reasonably likely to
have a Parent Material Adverse Effect.
(iii) Neither the Company nor any of its Subsidiaries is a
party to any Contracts requiring consents or approvals, the failure to obtain
which, individually or in the aggregate, would cause a failure of the condition
set forth in Section 7.2(c) to be satisfied. The representation set forth in the
immediately preceding sentence shall be limited to the actual knowledge as of
the date hereof of any of the people set forth on Section 5.2(d)(iii) of the
Parent Disclosure Letter.
(e) Adequate Funds. Parent has and will have at the Effective
Time sufficient funds for the payment of the aggregate Merger Consideration and
to perform its obligations under this Agreement.
(f) Brokers and Finders. Neither ING, nor Parent, Merger Sub
or any of their respective Subsidiaries, officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the Merger or the other
transactions contemplated hereby, except that the Parent has employed Merrill,
Lynch & Co. as its financial advisors. The fees and expenses of Merrill, Lynch &
Co. shall be paid by Parent and the Company will have no liability or obligation
with respect thereto.
ARTICLE VI
Covenants
6.1 Interim Operations; Operation of Businesses. The Company
covenants and agrees as to itself and its Subsidiaries and, subject to the
provisions of Section 9.9, its Joint Ventures, that after the date hereof and
prior to the Effective Time (unless Parent shall otherwise approve in writing,
which approval shall not be unreasonably withheld or delayed, and except as set
forth in Section 6.1 of the Company Disclosure Letter or as otherwise expressly
contemplated to occur prior to the Effective Time by any of the Transaction
Agreements and except as would otherwise be permitted by Section 5.1(f) of this
Agreement):
(a) its and its Subsidiaries' and Joint Ventures' businesses
shall be conducted in the ordinary course of business consistent with prior
practice and, to the extent consistent therewith, each shall use all reasonable
efforts to (i) preserve its business organization intact and maintain its
existing relations and goodwill with customers, suppliers, distributors, agents,
regulators, creditors, lessors, employees and business
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associates, (ii) maintain and keep material properties and assets in good repair
and condition, ordinary wear and tear excepted and (iii) maintain in effect all
existing governmental permits that are required for the continued operation of
the business of the Company and its Subsidiaries and Joint Ventures in all
material respects as they are currently conducted;
(b) it and its Subsidiaries and Joint Ventures shall not (i)
issue, sell, pledge, dispose of or encumber any capital stock owned by it in any
of its Subsidiaries or Joint Ventures; (ii) amend its certificate of
incorporation or by-laws or comparable governing instruments; (iii) split,
combine or reclassify its outstanding shares of capital stock; (iv) declare, set
aside or pay any dividend, other than dividends of the Permitted Sales Proceeds,
payable in cash, stock or property in respect of any capital stock other than
dividends from direct or indirect wholly-owned Subsidiaries of Aetna Retirement
Services, Inc. and Aetna International, Inc. that are also Subsidiaries of the
Company and other than regular quarterly cash dividends by the Company not in
excess of $0.20 per share of Common Stock; or (v) repurchase, redeem or
otherwise acquire, except in connection with the Stock Plans, or permit any of
its Subsidiaries or Joint Ventures to purchase or otherwise acquire, any shares
of any of its or its Subsidiaries or Joint Ventures' capital stock or any
securities convertible into or exchangeable or exercisable for any such shares
of capital stock;
(c) neither it nor its Subsidiaries or Joint Ventures shall
(i) issue, sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments, rights or any agreements of any kind to acquire, any shares
of its capital stock of any class or any Voting Debt (other than (A) options or
(B) shares of Common Stock issuable pursuant to options, in either case under
the Stock Plans); (ii) other than in the ordinary course of business consistent
with prior practice or pursuant to existing Contracts described in Section
6.1(c) of the Company Disclosure Letter or as would otherwise be permitted by
Section 6.21 of this Agreement and other than the Permitted Sales, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any
other property or assets (including capital stock of or ownership interests in
any of its Subsidiaries or Joint Ventures) or modify any material indebtedness;
(iii) incur any indebtedness with a maturity of one year or more; (iv) make or
authorize or commit for any capital expenditures (x) in the case of Subsidiaries
of the Company and Joint Ventures, taken together, in excess of five million
dollars ($5,000,000) in the aggregate in excess of those set forth in or
expressly contemplated by the applicable financial plans furnished to Parent
prior to the date hereof and (y) in the case of the Company and Aetna Services,
Inc., taken together, in excess of twenty-five million dollars ($25,000,000) in
the aggregate; or (v) by any means, make any acquisition of, or investment in,
assets or stock of or other interest in, any other Person or entity other than
portfolio investments made in the ordinary course of business consistent with
past practice;
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(d) neither it nor its Subsidiaries or Joint Ventures shall
terminate, establish, adopt, enter into, make any new, or accelerate the vesting
or payment of any existing, grants or awards under, amend or otherwise modify,
any Compensation and Benefit Plans, except as may be required by law or
contractual obligations in effect as of the date of this Agreement, or increase
the salary, wage, bonus or other compensation of any employees except increases
occurring in the ordinary course of business consistent with prior practice
(which shall include normal periodic performance reviews and related
compensation and benefit increases); provided, however, that up to $3,000,000
may be allocated to retention payments to be made to employees conditioned on
their remaining with the Company or any of its Subsidiaries after the Merger and
such additional amounts as may be agreed to by Parent;
(e) except for any Tax Claims as to which Spinco and its
Subsidiaries would be required, under the Tax Sharing Agreement that is appended
as Exhibit C to the Distribution Agreement (the "Tax Sharing Agreement")
(assuming its effectiveness), to indemnify the Company and its Subsidiaries and
Joint Ventures, neither it nor its Subsidiaries or Joint Ventures shall (i) (x)
settle or compromise the litigation specified in Section 6.1(e) of the Company
Disclosure Letter or (y) settle or compromise any other claims or litigation for
an amount in excess of two million dollars ($2,000,000) individually with
respect to each such other claim or litigation, (ii) pay, discharge, settle or
satisfy any material liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of liabilities and obligations in the ordinary course of business
consistent with prior practice and within the amounts reflected or reserved on
the most recent consolidated financial statements contained in the Company
Reports prior to the date hereof or (iii) except in the ordinary course of
business consistent with prior practice, enter into, modify, amend or terminate
any of its material Contracts (other than any Contracts providing for any
Permitted Sale) or waive, release or assign any material rights or claims (it
being agreed that the provisions of clause (iii) shall not apply to any matter
referred to therein to the extent relating to Spinco or any of its
Subsidiaries);
(f) neither it nor any of its Subsidiaries or Joint Ventures
shall make any material Tax election or permit any insurance policy naming it as
a beneficiary or loss-payable payee to be cancelled or terminated, except in
each case in the ordinary course of business consistent with prior practice and
except for elections under Section 338 of the Code;
(g) neither it nor any of its Subsidiaries or Joint Ventures
shall enter into any agreement containing any provision or covenant limiting in
any material respect the ability of the Company or any Affiliate or Joint
Venture or, assuming the consummation of the transactions contemplated by the
Transaction Agreements, ING or any of its subsidiaries or joint ventures, to (i)
sell any products or services of or to any
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other Person, (ii) engage in any line of business or (iii) compete with or to
obtain products or services from any Person or limiting the ability of any
Person to provide products or services to the Company or any of its Affiliates
or Joint Ventures or, assuming the consummation of the transactions contemplated
by the Transaction Agreements, ING or any of its Subsidiaries or Joint Ventures;
(h) neither it nor its Subsidiaries or Joint Ventures shall
make any significant change in any accounting methods or systems of internal
accounting controls, except as may be appropriate to conform to changes in
statutory or regulatory accounting rules or generally accepted accounting
principles or regulatory requirements with respect thereto;
(i) neither it nor its Subsidiaries or Joint Ventures shall,
other than as would not be inconsistent with the Company's or its Subsidiaries'
or Joint Ventures' respective investment guidelines as in effect in the first
quarter of 2000 (or, following consultation with Parent, consistent with
industry standards), intentionally and materially alter the mix of investment
assets of the Company, Subsidiary or Joint Venture or the duration or credit
quality of such assets;
(j) neither it nor its Subsidiaries or Joint Ventures shall,
other than consistent with past practices (or following consultation with
Parent, consistent with industry standards), intentionally and materially alter
the profile of the insurance liabilities of the Retained Insurance Companies or
materially alter the pricing practices or policies of the Retained Insurance
Companies;
(k) neither it nor any of its Subsidiaries or Joint Ventures
shall take any action that would cause or omit to take any action for the
purpose of causing any of the Company's representations and warranties herein to
become untrue in any material respect;
(l) neither it nor any of its Subsidiaries and Joint Ventures
will engage in or allow any transfer of assets or liabilities or other
transactions between (A) the Company and its Subsidiaries and Joint Ventures or
joint ventures, on the one hand, and Spinco and any of its Subsidiaries and
joint ventures, on the other hand, or (B) the Company or Aetna Services, Inc.,
on the one hand, and any Subsidiary of Aetna Services, Inc. that is also a
Subsidiary of the Company, on the other hand, except, in either case, (i)
payments in return for services rendered in the ordinary course of its business
consistent with past practice, (ii) as expressly contemplated by the Transaction
Agreements to occur prior to the Effective Time or (iii) transfers of Permitted
Sales Proceeds; and
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(m) neither it nor any of its Subsidiaries nor Joint Ventures
shall authorize or enter into an agreement to do any of the foregoing.
The parties agree that the provisions of Section 6.1, other
than Section 6.1(l) and as contemplated by Section 6.1(e), shall be inapplicable
to Spinco and its Subsidiaries and the Company may permit Spinco and its
Subsidiaries to conduct their businesses in their discretion; provided, however,
that the Company agrees that no action will be taken or permitted in furtherance
of the interests of Spinco and its Subsidiaries, or the Transaction, by the
Company or any of its Subsidiaries or Joint Ventures or Spinco or its
Subsidiaries that would (i) reasonably be expected to interfere with the timely
consummation of the Merger or (ii) have any of the effects set forth in Section
6.1(l). Notwithstanding the limitations in this Section 6.1, other than Section
6.1(l), which shall apply, the Company and Aetna Services, Inc. shall be free to
take any of the actions set forth in Section 6.1 of the Company Disclosure
Letter. No such actions shall result in any loss or liability to any Subsidiary
of Aetna Services, Inc. that is also a Subsidiary of the Company except to the
extent expressly contemplated by the Transaction Agreements to occur prior to
the Effective Time or expressly contemplated by Section 6.1 of the Company
Disclosure Letter. Except as expressly permitted by this Agreement, the Company
agrees to use its best efforts to operate the business of Spinco and its
Subsidiaries independently of the Company and Aetna Services, Inc. in a manner
that minimizes the liabilities incurred within the Company and Aetna Services,
Inc.
6.2 Acquisition Proposals. (a) The Company agrees that neither
it nor any of its Subsidiaries, nor Spinco nor any of its Subsidiaries nor any
of the officers and directors of any of them shall, and that it shall direct and
use its best efforts to cause Spinco's, its and their Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by them or any of their Subsidiaries) not to, directly or
indirectly, initiate, solicit or encourage any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction, or any purchase of all or 10% or more of
the assets or any equity securities of the Company or any of its Subsidiaries or
Spinco or any of its Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), it being understood that any such
activities engaged in prior to the date of this Agreement do not violate this
Section 6.2. The Company further agrees that from and after the date hereof
neither it nor any of its Subsidiaries nor Spinco nor any of its Subsidiaries
nor any of the officers and directors of any of them shall, and that it shall
direct and use its best efforts to cause Spinco's, its and their Subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by them or any of their Subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however,
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that nothing contained in this Agreement shall prevent the Company or its board
of directors from (A) complying with Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal; (B) providing
information in response to a request therefor by a Person who has made a bona
fide written Acquisition Proposal that was not solicited in violation of this
Section 6.2(a) if the board of directors receives from the Person so requesting
such information an executed confidentiality agreement on terms substantially
similar to those contained in the Confidentiality Agreement (as defined below);
(C) engaging in any negotiations or discussions with any Person who has made an
unsolicited bona fide written Acquisition Proposal that was not solicited in
violation of this Section 6.2(a); or (D) recommending such an Acquisition
Proposal to the shareholders of the Company, if and only to the extent that,
(i) in each such case referred to in clause (B), (C) or (D) above, the board of
directors of the Company determines in good faith after consultation with
outside legal counsel that such action is necessary in order for its directors
to comply with their respective fiduciary duties under applicable law and (ii)
in each case referred to in clause (C) or (D) above, the board of directors of
the Company determines in good faith (after consultation with its financial
advisor) that such Acquisition Proposal, if accepted, is reasonably likely to
be consummated, taking into account all legal, financial and regulatory aspects
of the proposal and the Person making the proposal and would, if consummated,
result in a transaction or a combination of transactions more favorable to the
Company's shareholders from a financial point of view than the transactions
contemplated by this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as a "Superior Proposal"). The Company
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. The Company agrees that it will take
the necessary steps to promptly inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 6.2.
The Company agrees that it will notify Parent immediately if any such
inquiries, proposals or offers relating to an Acquisition Proposal are received
by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers and
thereafter shall keep Parent informed, on a current basis, on the status and
terms of any such proposals or offers and the status of any such discussions or
negotiations. The Company also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring it or any of its Subsidiaries or Spinco or any of
its Subsidiaries to return or destroy all confidential information heretofore
furnished to such Person by or on behalf of it or any of its Subsidiaries or
Spinco or any of its Subsidiaries. Notwithstanding the foregoing, the parties
hereto acknowledge and agree that the provisions of this Section 6.2(a) shall
not restrict in any respect the right of the Company, Spinco, Spinco's
Subsidiaries or any of the officers, directors, employees, agents and
representatives of any of them to, directly or
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indirectly, initiate, solicit, encourage or take any other action with respect
to (including without limitation entering into an agreement for) any
transaction relating to any assets or equity securities of Spinco or any of its
Subsidiaries, so long as such transaction would not reasonably be expected to
interfere with the timely consummation of the Merger, the Spin-Off or the other
transactions contemplated by the Transaction Agreements.
(b) Notwithstanding anything in this Section 6.2 to the
contrary, if, at any time prior to obtaining the Company Requisite Vote, the
Company's board of directors determines in good faith, on the basis of the
advice of its financial advisors and outside counsel, in response to an
Acquisition Proposal that did not result from a breach of Section 6.2(a), that
such proposal is a Superior Proposal, the Company or its board of directors may
terminate this Agreement if, and only if, the Company shall substantially
concurrently with such termination enter into a definitive agreement containing
the terms of a Superior Proposal; provided, however, that the Company shall not
terminate this Agreement pursuant to this sentence, and any purported
termination pursuant to this sentence shall be void and of no force or effect,
unless the Company shall have complied with (i) all the provisions of this
Section 6.2, including the notification provisions in this Section 6.2, (ii) the
following proviso, and (iii) all applicable requirements of Section 8.3,
including the payment of the termination fee described in Section 8.5(b) prior
to or concurrently with such termination; and provided further, however, that
the Company shall not exercise its right to terminate this Agreement pursuant to
this Section 6.2 until after five business days following Parent's receipt of
written notice (a "Notice of Superior Proposal") advising Parent that the
Company's board of directors has received such a Superior Proposal and that such
board of directors will, subject to any action taken by Parent pursuant to this
sentence, cause the Company to accept such Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal (it being understood and agreed that any
amendment to the price or any other material term of such a Superior Proposal
shall require an additional Notice of Superior Proposal and a new five business
day period).
6.3 Accuracy of Proxy Statement and Form 10. Each of the
Company, ING and Parent agrees that none of the information supplied or to be
supplied by it or its Affiliates, Subsidiaries or Joint Ventures (and in the
case of the Company, including Spinco and its Affiliates) for inclusion or
incorporation by reference in the proxy statement of the Company seeking
approval of the Merger (the "Proxy Statement") and the registration statement on
Form 10 relating to the Spin-Off (the "Form 10") and any amendment or supplement
thereto will, in the case of the Proxy Statement, at the date of mailing to
holders of Shares and at the time of the meeting of holders of Shares of the
Company to be held in connection with the Transaction and, in the case of the
Form 10, at the effective date of the Form 10 and at the date of mailing of the
Form 10 to holders of record of the Shares, in any such case, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make
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the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees that the Proxy Statement and the Form
10 and any amendment or supplement thereto will comply in all material respects
with the applicable provisions of the Exchange Act and the rules and
regulations thereunder.
6.4 Shareholders Meeting. The Company will take, in accordance
with applicable law and its certificate of incorporation and by-laws, all action
necessary to convene a meeting of holders of shares of Common Stock (the
"Shareholders Meeting") as promptly as reasonably practicable after the
execution of this Agreement to consider and vote upon the approval of this
Agreement and the transactions contemplated hereby. Subject to fiduciary
obligations and the requirements of applicable Law, the Company's board of
directors shall recommend such approval and shall take all lawful action to
solicit such approval.
6.5 Filings; Other Actions; Notification. (a) ING, Parent and
the Company shall use their respective best efforts to prepare and file with the
SEC the Proxy Statement and the Form 10 as promptly as is practicable after the
date hereof. The Company shall use its reasonable best efforts to (i) have the
Proxy Statement and the Form 10 approved by the SEC as promptly as practicable
after each such filing and (ii) promptly after each such approval thereafter
mail the Proxy Statement and the Form 10 to the holders of Shares of the
Company. The Company shall promptly notify Parent and ING of any request by the
SEC for any amendment or supplement to the Proxy Statement or the Form 10 and
shall provide Parent and ING copies of all correspondence between the Company
and/or any of its representatives and the SEC with respect to the Proxy
Statement.
(b) The Company, ING and Parent shall cooperate with each
other and use (and shall cause their respective Subsidiaries, Joint Ventures and
joint ventures, including Spinco and its Subsidiaries, to use) their respective
best reasonable efforts to take or cause to be taken all actions, and do or
cause to be done all things necessary, proper or advisable on its part under the
Transaction Agreements and applicable Laws to consummate and make effective the
Merger, the Spin-Off and the other transactions contemplated by the Transaction
Agreements as soon as practicable, including preparing and filing as promptly as
practicable all documentation to effect all necessary notices, applications,
petitions, reports and other filings and to obtain as promptly as practicable
all consents, registrations, approvals, waivers, licenses, permits,
qualifications, orders, ratings and authorizations necessary or advisable to be
obtained from any Governmental Entity ("Governmental Approvals") and/or any
third party and make all transfers or assignments contemplated by the
Transaction Agreements, in each case in order to consummate the Merger, the
Spin-Off or any of the other transactions contemplated by the Transaction
Agreements, in each case on the terms and subject to the conditions set forth in
the Transaction Agreements; provided, however, that nothing in this Section 6.5
shall require,
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or be construed to require, ING or Parent, in connection with the receipt of
any regulatory approval, to proffer to, or agree to (i) sell or hold separate
and agree to sell, divest or to discontinue to or limit, before or after the
Effective Time, any assets, businesses, or interest in any assets or businesses
of ING, Parent, the Company or any of their respective Affiliates or Joint
Ventures (or to consent to any sale, or agreement to sell, or discontinuance or
limitation by ING or Parent or the Company, as the case may be, of any of its
assets or businesses) or (ii) agree to any conditions relating to, or changes
or restriction in, the operations of any such asset or businesses which, in the
case of clause (i) or clause (ii), is reasonably likely, individually or in the
aggregate, to have a material adverse effect on the financial condition,
properties, business or annual results of operations of the Company and its
Subsidiaries, taken as a whole, or a material adverse effect on the financial
condition, properties, business or annual results of operations of ING and its
Subsidiaries, taken as a whole. Subject to applicable Laws relating to the
exchange of information (including any obligations pursuant to any listing
agreement with or rules of any securities exchange), each of ING, Parent and
the Company shall have the right to review and approve (such approval not to be
unreasonably withheld or delayed) in advance, and to the extent practicable
each will consult the other on, all the information relating to it, and any of
its Affiliates and Joint Ventures, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
(including any securities exchange) in connection with the Merger and the other
transactions contemplated by the Transaction Agreements.
(c) The Company, ING and Parent each shall, upon request by
the other, furnish the other with all true and accurate information concerning
itself, its Subsidiaries, Joint Ventures and joint ventures (including in the
case of the Company, Spinco and its Subsidiaries), directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement or the Form 10 or any other statement,
filing, notice or application made by or on behalf of ING, Parent or the Company
or any of their respective Subsidiaries, Joint Ventures or joint ventures to any
third party and/or any Governmental Entity in connection with the Merger and the
transactions contemplated by the Transaction Agreements.
(d) The Company, ING and Parent each shall promptly provide
the other party with copies of all filings made by either the Company, Spinco,
ING or Parent with any Governmental Entity in connection with the Transaction
Agreements and the transactions contemplated hereby and thereby. The Company,
ING and Parent each shall keep the other apprised of the status of matters
relating to completion of the transactions contemplated hereby and thereby,
including promptly furnishing the other with copies of any notices or other
communications received by Spinco, ING, Parent or the Company, as the case may
be, or any of its Subsidiaries, Joint Ventures or joint ventures, from any third
party and/or any Governmental Entity with respect to the Merger and the other
transactions contemplated by the Transaction Agreements. Notwithstanding
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the foregoing, Spinco shall only be required with respect to the Spin-Off to
provide ING and Parent copies of material filings, notices and communications
relating to the Spin-Off. The Company shall keep Parent informed on a prompt
basis concerning the status of rating agency communications regarding Spinco
and provide Parent with copies of all presentations to and correspondence with
rating agencies relating to the Spinco rating. The Company shall give prompt
notice to Parent of any change that is reasonably likely to result in a Company
Material Adverse Effect.
(e) In the event any claim, action, suit, investigation or
other proceeding by any Governmental Entity or other Person or other legal or
administrative proceeding is commenced that questions the validity or legality
of any of the Transaction Agreements, the Merger, the Spin-Off or the other
transactions contemplated by the Transaction Agreements or claims damages in
connection therewith, the Company, ING and Parent each agree to cooperate and
use their best reasonable efforts to defend against and respond thereto.
(f) The Company shall use its reasonable efforts to assist
Parent in obtaining all required consents, including the consent of the People's
Republic of China, prior to the Effective Time, to either (i) the transfer of
the joint venture interest held by Aetna Life Insurance Company in Pacific-Aetna
Life Insurance Company Limited to a Subsidiary of the Company or (ii) if consent
to such transfer cannot be obtained on terms and conditions reasonably
acceptable to Parent on an alternative structure agreed upon with Parent whereby
the benefits (as well as the liabilities) associated with the joint venture
interest held by Aetna Life Insurance Company in Pacific-Aetna Life Insurance
Company Limited are transferred to a Subsidiary of the Company; provided,
however, that the foregoing shall not require the Company, its Subsidiaries,
Joint Ventures or joint ventures to (x) take or fail to take any action that
could reasonably be expected to adversely affect in any respect any of Spinco or
any of its Subsidiaries or prevent or materially delay or impair the
consummation of the transactions contemplated hereby or (y) pay any money, other
than reasonable advisors' fees and expenses, to any third party in connection
with carrying out its obligations under this sentence. Notwithstanding the
references to Governmental Consents of the Peoples Republic of China and Hong
Kong in Section 7.1(b) of this Agreement, the parties hereto acknowledge and
agree that the transfer of the joint venture interest held by Aetna Life
Insurance Company in Pacific-Aetna Life Insurance Company Limited or the
license held by Pacific-Aetna Life Insurance Company Limited are not to be a
condition to either party's obligation to effect the Merger.
(g) The Company shall use its best efforts to satisfy the
conditions to the Spin-Off set forth in Section 3.02 of the Distribution
Agreement and shall effect the Spin-Off if such conditions have been satisfied.
Notwithstanding anything in this Section 6.5 to the contrary, the parties
acknowledge and agree that this Section 6.5 shall not
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require the Company or Spinco, in connection with the receipt of any
Governmental Approval in connection with the consummation of the Spin-Off, to
proffer or agree to conditions relating to, or changes or restrictions in, the
operations or assets of Spinco and its Subsidiaries that are reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
financial condition, properties, business or annual results of operations of
Spinco and its Subsidiaries, taken as a whole, or waive any condition to the
Spin-Off set forth in Section 3.02 of the Distribution Agreement. At or prior
to the Spin-Off, the Company shall take those actions required by Section 7.01
of the Distribution Agreement to be taken at or prior to the Spin-Off.
(h) The Company and its Subsidiaries shall use their
reasonable best efforts to keep Parent informed concerning material
developments, including with respect to matters addressed in Section 6.1 of this
Agreement, in the businesses of the Company and its Subsidiaries and to consult
periodically with representatives of Parent concerning such developments.
6.6 Access. Upon reasonable notice, and subject to applicable
law, the Company shall (and shall cause its Subsidiaries and Joint Ventures to
and use reasonable efforts to cause its Fund Clients to) afford Parent's
officers, employees, counsel, accountants and other authorized representatives
("Representatives") reasonable access, during normal business hours throughout
the period prior to the Effective Time, to its officers, employees, properties,
books, Contracts and records and, during such period, shall (and shall cause its
Subsidiaries and Joint Ventures and Spinco and its Subsidiaries to) furnish
promptly to the other all information concerning its business, properties and
personnel as may reasonably be requested; provided, however, that no
investigation pursuant to this Section shall affect or be deemed to modify any
representation or warranty made by the Company; and provided further, however,
that the foregoing shall not require the Company to permit any inspection, or to
disclose any information, that in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any of
its obligations with respect to confidentiality if the Company shall have used
best reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or such Person
as may be designated by its officers, as the case may be.
6.7 Stock Exchange. The Surviving Corporation shall use its
best efforts to cause the Shares to be de-listed from the New York Stock
Exchange (the "NYSE") and de-registered under the Exchange Act as soon as
practicable following the Effective Time.
6.8 Publicity. The initial press release with respect to the
Merger and the other transactions contemplated by this Agreement shall be a
joint press release.
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Thereafter, neither the Company, Spinco, ING nor Parent shall (i) issue any
press release or otherwise make any public announcements with respect to the
Merger and the other transactions contemplated by this Agreement (other than
the Spin-Off) or (ii) make any material filings with any third party and/or any
Governmental Entity (including any securities exchange) for the purpose of
furthering consummation of the Transactions, in each case without consulting
with, and obtaining the prior consent of, the other party (which consent shall
not be unreasonably withheld or delayed). The Company shall use its best
reasonable efforts to consult in advance with Parent concerning any public
announcement concerning the Spin-Off. Notwithstanding the foregoing two
sentences, a party may, without consulting with or obtaining the consent of the
other party, issue a press release or otherwise make a public announcement as
may be required by Law or under the applicable rules of any securities exchange
if it has used its best reasonable efforts to consult with the other party and
to obtain such party's consent but has been unable to do so in a timely manner.
6.9 Benefits; Company Options; Company Employees.
(a) Exhibit A (the "Employee Benefits Agreement") to the
Distribution Agreement, which sets forth the covenants of the Company relating
to employee benefits matters, shall have the same force and effect, and shall be
subject to the provisions hereof until the Effective Time, as if set forth
herein.
(b) The Company and Spinco agree to, and to cause each of
their Subsidiaries to, (x) consult with Parent in advance of (and in a manner
which provides Parent reasonable time to comment) issuing or making any
communications to the employees of the Company and its Subsidiaries regarding
the Transaction or any other employee benefit matter and (y) develop with Parent
a communications program relating to the post Spin-Off period, which shall be
implemented prior to the Spin-Off (it being understood such implementation will
be made in a timely manner so as to effectuate enrollment in the new benefit
plans the Company will offer after the Spin-Off).
(c) Except as expressly contemplated by the Employee Benefits
Agreement, the Company agrees not to and to cause its Subsidiaries not to (x)
transfer employees from any of Aetna Retirement Services, Inc. or Aetna
International, Inc. or any of their Subsidiaries (that are also Subsidiaries of
the Company) or Joint Ventures to the Company, Aetna Services, Inc., Spinco or
any of its Subsidiaries or Joint Ventures without Parent's consent (which
consent shall not be unreasonably withheld) or (y) transfer employees to Aetna
Retirement Services, Inc. or Aetna International, Inc. or any of their
Subsidiaries (that are also Subsidiaries of the Company) or Joint Ventures from
the Company, Aetna Services, Inc., Spinco or any of its Subsidiaries without
Parent's consent (which consent shall not be unreasonably withheld).
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(d) The Company, Spinco and Parent agree to cooperate in the
preparation of, and mutually agree with Parent on the final versions of the
schedules to the Employee Benefits Agreement. Without limiting the generality
of the foregoing, in this regard the Company and Spinco agree to provide to
Parent all relevant information available to them in respect of the Company and
its Subsidiaries' employees and the Compensation and Benefit Plans for the
purposes of creating such schedules.
6.10 ERISA Client Lists. Within 30 days following the date
hereof, Parent shall deliver to the Company a written list of the entities that
are affiliated with or related to Parent (the "Parent ERISA List"). As soon as
practicable after the date the Parent ERISA List is delivered to the Company,
but in no event later than 30 days before the Closing Date, the Company shall
deliver to Parent a written statement which identifies each Account Client that
is an ERISA Client and lists each contract or agreement, if any, and all
amendments thereto, in effect on the date hereof, entered into by the Company or
any of its Subsidiaries with respect to or on behalf of any such ERISA Client,
pursuant to which any of the entities identified in the Parent ERISA List has
agreed to (i) execute securities transactions, (ii) provide any other goods or
services or (iii) purchase, sell, exchange or swap securities or any other
economic interests therein or derivative thereof, including but not limited to
rights to receive or obligations to pay interest or principal denominated in a
particular currency.
6.11 Expenses. Except as otherwise provided in Section 8.5(b),
Section 9.10 or any Transaction Agreement, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Transaction
Agreements and the Merger and the other transactions contemplated by the
Transaction Agreements shall be paid by the party incurring such expense, except
that (a) expenses incurred in connection with the filing fee and printing and
mailing the Proxy Statement shall be shared equally by Parent and the Company
and (b) all Transaction Expenses (as defined below), unless otherwise
specifically provided for in any Transaction Agreement, shall be paid by Spinco.
"Transaction Expenses" shall mean all fees, costs and expenses incurred by (i)
the Company, its Subsidiaries and Joint Ventures, in each case at or prior to
the Effective Time, and (ii) Spinco and its Subsidiaries, in the case of each of
clause (i) and (ii), in connection with the Merger, the Spin-Off or any of the
other transactions contemplated by the Transaction Agreements, including the
fees and expenses of the Company's and Spinco's legal and financial advisors and
the other fees and expenses set forth on Section 6.11 of the Company Disclosure
Letter.
6.12 Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, ING agrees that it will cause the Company to
indemnify and hold harmless each present and former director, officer and
employee of the Company (when acting in such capacity), determined as of
immediately prior to the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees),
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judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted or required under Connecticut
law and its certificate of incorporation or by-laws or pursuant to other
agreements in effect on the date hereof to indemnify such Person (and ING shall
also cause the Company to advance expenses as incurred to the fullest extent
permitted under applicable law; provided, however, that the Person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Person is not entitled to indemnification); and
provided further, however, that any determination required to be made with
respect to whether an officer's or director's conduct complies with the
standards set forth under Connecticut law and the Company's certificate of
incorporation and by-laws shall be made by independent counsel selected by the
Surviving Corporation.
(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 6.12, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify the Surviving
Corporation and ING thereof. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) ING or the Surviving Corporation shall have the right to assume the
defense thereof and ING or the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if ING or the Surviving Corporation elects not
to assume such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between ING or the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and ING or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that the
Surviving Corporation or ING shall be obligated pursuant to this paragraph (b)
to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, (ii) the Indemnified Parties will cooperate in the defense of any
such matter and (iii) ING or the Surviving Corporation shall not be liable for
any settlement effected without its prior written consent; and provided further
that neither ING nor the Surviving Corporation shall have any obligation
hereunder to any Indemnified Party if and when a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final, that
the indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law.
(c) ING shall cause the Surviving Corporation to either (i)
maintain the Company's existing officers' and directors' liability insurance for
a period of six years
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after the Effective Time or (ii) maintain a run-off or tail policy or
endorsement with respect to covering claims asserted within six years after the
Effective Time arising from facts or events that occurred at or before the
Effective Time (either, "D&O Insurance"), in each case so long as the annual
premium therefor is not in excess of 175% of the last annual premium paid prior
to the date hereof (the "Current Premium"); provided, however, that if the
existing D&O Insurance expires, is terminated or cancelled during such six-year
period, the Surviving Corporation will use its reasonable efforts to obtain as
much D&O Insurance as can be obtained for the remainder of such period for a
premium not in excess (on an annualized basis) of 175% of the Current Premium.
(d) If the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then, and
in each such case, proper provisions shall be made so that the successors and
assigns of the Surviving Corporation shall assume all of the obligations set
forth in this Section.
(e) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
(f) Notwithstanding any provision of this Section 6.12 to the
contrary, to the extent a Cost is also a Spinco Group Liability (as defined in
the Distribution Agreement) such matter shall be addressed as a Spinco Group
Liability pursuant to the Distribution Agreement rather than this Section 6.12.
6.13 Compliance with 1940 Act Section 15. (a) Prior to the
Closing, the Company shall use reasonable best efforts to ensure compliance with
Section 15(f) of the 1940 Act, so that the transactions contemplated by the
Transaction Agreements will be in compliance immediately after the Closing with
Section 15(f) of the 1940 Act, including assuring that at the time of the
Closing at least 75% of the Board of Directors or Trustees of each Fund Client
are not "interested persons" (as such term is defined in the 1940 Act) of the
Surviving Corporation or the Company.
(b) Parent will use reasonable best efforts to assure
compliance with the conditions of Section 15(f) of the 1940 Act as it applies to
the transactions contemplated by the Agreement. From and after the Closing,
Parent shall conduct the business of the Surviving Corporation so as to assure
that, insofar as within the control of Parent: (i) for a period of three (3)
years after the Closing Date, at least 75% of the members of the Board of
Directors or Trustees of each Fund Client which enters into a replacement
Investment Contract with an Advisory Entity that constitutes an investment
advisory
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agreement are not (A) "interested persons" of the Surviving Corporation or (B)
"interested persons" of the Company; and (ii) there is not imposed on any Fund
Client an "unfair burden" (within the meaning of Section 15(f) of the 1940 Act)
as a result of the transactions contemplated by the Transaction Agreements, or
any express or implied terms, conditions or understandings applicable thereto.
(c) For a period of three years (3) after the Closing, none of
Parent, Surviving Corporation, nor any of their respective Affiliates will
voluntarily engage in any transaction which would constitute an assignment of
any investment advisory contract with any Fund Client that is registered under
the 1940 Act and is currently managed by the Company or its Affiliates to which
Parent, Surviving Corporation or any of their respective Affiliates or the
Company or any of its Affiliates is a party without first obtaining a covenant
in all material respects the same as that contained in this Section 6.13.
6.14 Fund Client Contracts, Distribution Plans and Boards. The
Company shall use its reasonable best efforts to cause (a) the consideration and
due approval by the Board of Directors of each Fund Client and (b) to the extent
required by the 1940 Act, the consideration and due approval by such Fund
Client's securityholders, of (X) a new Investment Contract (or, where permitted,
approval of continuation of the existing Investment Contract) with the same
Advisory Entity to become effective upon the Closing, in each case, on the same
material terms as in effect on the date hereof under such Investment Contract
for the performance by the relevant Advisory Entity of investment management,
investment advisory, investment subadvisory or distribution services and (Y) an
amended Rule 12b-1 distribution plan, in each case, on the same material terms
as in effect on the date hereof. In addition, the Company shall use its
reasonable best efforts to encourage the Board of Directors of each Fund Client
(or, to the extent required by the 1940 Act, the independent Directors thereof)
(X) to select and nominate, so as to constitute a majority of the independent
Directors of such Board, individuals who are currently serving as independent
directors of investment companies that are advised by an Affiliate of Parent and
(Y) to nominate one director (who shall not be an independent director) that is
selected by Parent in each case so long as the Company does not reasonably
conclude, after consultation with Parent, such encouragement would adversely
affect the ability of the Company to obtain any consent required pursuant to
Section 7.2(d).
6.15 Non-Fund Advisory Contracts. The Company or relevant
Advisory Entity shall notify each Advisory Client of the transactions
contemplated by the Transaction Agreements and use its reasonable best efforts
to obtain, prior to the Closing, any necessary consent of each Advisory Client
to the "assignment" (as such term is used in the Advisers Act) of its Investment
Contract involving investment advisory services as a result of the transactions
contemplated by the Transaction Agreements in a form
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reasonably satisfactory to Parent. The Company and Advisory Entity shall
consult with Parent regarding all written communications with Advisory Clients
concerning the obtaining of such assignments.
6.16 Qualification of the Fund Clients; Fund Client Boards.
Subject to applicable fiduciary duties to the Fund Clients, the Company will use
its reasonable best efforts to cause the Fund Clients to take no action (i) that
would prevent any Fund Client from qualifying as a "regulated investment
company" under Subchapter M of Chapter 1 of Subtitle A of the Code, (ii) that
would prevent any Fund Client that is intended to be a Tax-exempt municipal bond
fund from satisfying the requirements of Section 852(b)(5) of the Code or from
qualifying to pay exempt interest dividends as defined therein or (iii) that
would be inconsistent with any Fund Client's prospectus and other offering,
advertising and marketing materials.
6.17 Rights. Prior to the Effective Time, the board of
directors of the Company shall take all necessary action to amend the definition
of Final Expiration Date (as defined in the Rights Agreement) to be the
Distribution Time (as defined in the Distribution Agreement).
6.18 Takeover Statute. If any Takeover Statute is or may
become applicable to the Merger or the other transactions contemplated by the
Transaction Agreements, ING, Parent and their respective boards of directors and
the Company and its board of directors shall each grant such approvals and take
such actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by the Transaction Agreements
and otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions.
6.19 Company Debt. Effective as of the Closing and, in each
case (to the extent necessary), pursuant to supplemental indentures (reasonably
satisfactory in form and substance to the Company), ING shall guarantee the
performance of the obligations of Aetna Services, Inc. and the Company with
respect to the Long-Term Debt, each such guarantee to take substantially the
same form as the Company's current guarantees of the obligations of Aetna
Services, Inc. under the Long-Term Debt.
6.20 Voting of Shares. Each of ING and Parent agrees to vote,
or cause to be voted, all Shares beneficially owned by it or any of its
Affiliates in favor of adoption of this Agreement and the transactions
contemplated hereby at the Shareholders Meeting.
6.21 Other Agreements. (a) The Company agrees that it shall
use its reasonable best efforts promptly to enter into agreements for the sale
of those Persons set forth on Section 6.21 of the Company Disclosure Letter (the
"Section 6.21 Subsidiaries") on terms and conditions as favorable to the Company
and its Subsidiaries as can be
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obtained and in accordance with the procedures agreed between the parties. The
Company shall permit representatives of Parent to be fully involved in every
aspect of such sales process and the Company shall retain such financial and
legal advisors to effect such sales as Parent shall reasonably request. Except
as may otherwise be agreed, the terms and conditions of all agreements for sale
or other agreements in connection with the sales process shall be subject to
Parent's prior approval, which will not be unreasonably withheld or delayed.
The Company and its Subsidiaries shall not be required in connection with
effecting these sales to take any action that would adversely affect Spinco and
its Subsidiaries. Transaction expenses incurred in connection with such sales
shall not be deemed to be "Transaction Expenses" for purposes of this Agreement
and shall not be required to be paid by Spinco pursuant to Section 7.03 of the
Distribution Agreement. Parent and the Company each agree that it shall use its
reasonable best efforts to obtain waivers of regulatory requirements in the
jurisdictions of the Section 6.21 Subsidiaries that otherwise could delay or
prevent satisfaction of the conditions set forth in Section 7.1(b).
(b) The Company agrees that in carrying out the transactions
contemplated by the Distribution Agreement it shall use its reasonable best
efforts (consistent with and subject to the terms and conditions of the
Transaction Agreements) to minimize the creation of liabilities of the Company
and its Subsidiaries. The Company shall keep Parent informed on a regular basis
concerning the developments in the transactions contemplated by the Transaction
Agreements and the means by which such transactions are effected and, subject to
any existing agreements as to the means of effecting the transactions that are
reflected in the Distribution Agreement, the Company shall give reasonable
consideration to Parent's views on the means by which such transactions are
effected.
(c) In connection with the Spin-Off, the Company and Spinco
shall enter into a trademark licensing agreement (the "Chinese Mark Agreement")
pursuant to which the Company shall grant to Spinco a perpetual, exclusive, and
royalty-free license to use the Chinese name and/or characters associated with
the name "Aetna" or related logo, identified on Schedules D or I of the
Distribution Agreement (including, to the extent held by the Company or any of
its Subsidiaries or Spinco or any of its Subsidiaries, all forms and
transliterations thereof, the "Chinese Mark") in connection with the Spinco
Business (as that term is defined in the Distribution Agreement) in the United
States. The Company acknowledges that the rights, title to and interest in the
Chinese Mark and the associated Intellectual Property Rights (as defined in the
Distribution Agreement) (the "Aetna China Name Rights") shall be owned by a
member of the Aetna Group following the Spin-Off. The Chinese Mark Agreement
shall contain such other terms and conditions as the parties may agree, which
terms and conditions shall be no less favorable to Spinco than the terms and
conditions of the Trademark Licensing Agreement are to the Company (taking into
account those issues which may arise by virtue of the fact that the Chinese
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Mark is a translation of an Intellectual Property Right which will, following
the Spin-Off, be owned by Spinco).
(d) On or prior to the Effective Time, Parent or its
Affiliates shall use its reasonable best efforts to procure insurance coverage
having the terms and conditions set forth in Section 6.21 of the Parent
Disclosure Letter or insurance policies procured by Parent or its Affiliates to
cover similar risks (the "Coverage Policies"). The Company agrees that, in
connection with any such Coverage Policies, the Company shall contribute or
cause to be contributed as a capital contribution to Aetna Retirement Services,
Inc., cash in an amount equal to Parent's actual cost of obtaining such
Coverage Policies, or a portion of such cost not to exceed $30 million, or in
the event Parent notifies the Company that such Coverage Policies are
unavailable on commercially reasonable terms and conditions, $30 million, and
the amount of any such contribution shall not increase the Net Capital
Contribution Amount.
(e) Prior to the Effective Time, the Company shall contribute,
or cause to be contributed, to the capital of Aetna Retirement Services, Inc. an
amount equal to $3.97 million.
6.22 Headquarters and Related Matters. Parent agrees to cause
the Surviving Corporation to maintain the principal corporate offices of the
Company's qualified plan operations in the city of Hartford, in the State of
Connecticut for at least three (3) years following the Effective Time and Parent
intends to cause the Company and its Subsidiaries to maintain employment levels
in and around the city of Hartford at substantially current levels, less normal
attrition.
6.23 Asia. Parent agrees that for one year from the Effective
Time, unless there is a material change in circumstances at ING and its
Subsidiaries, Parent shall not permit the Company and its Subsidiaries to sell
the interests of Aetna International, Inc. in Taiwan, Hong Kong and Malaysia;
provided that the foregoing shall not limit the right of Parent to sell minority
interests in such Subsidiaries.
6.24 Confidentiality. The parties hereby acknowledge and agree
that the provisions of the Confidentiality Agreement (as defined below) shall
apply with respect to all information provided hereunder to Parent or any of its
Affiliates or Representatives (as such term is defined in the Confidentiality
Agreement).
ARTICLE VII
Conditions
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7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved by holders of shares of Common
Stock constituting the Company Requisite Vote in accordance with applicable law
and the certificate and by-laws of the Company.
(b) Regulatory Consents. (i) The waiting period applicable to
the consummation of the Merger under the HSR Act and applicable Insurance Laws
shall have expired or been terminated and (ii) other than the filing provided
for in Section 1.4 and filings, if any, required under the environmental
transfer acts of the states of New Jersey and Connecticut, all notices, reports
and other filings required to be made prior to the Effective Time by Spinco, the
Company or Parent or any of their respective Subsidiaries or Joint Ventures
with, and all consents, registrations, approvals, permits and authorizations
required to be obtained prior to the Effective Time by Spinco, the Company or
Parent or any of their respective Subsidiaries or Joint Ventures from, any
Governmental Entity in connection with the execution and delivery of the
Transaction Agreements and the consummation of the Merger and the other
transactions contemplated hereby and thereby by Spinco, the Company, Parent and
Merger Sub shall have been made or obtained (as the case may be), other than (in
the case of jurisdictions other than the United States, the Netherlands, the
People's Republic of China, Hong Kong, Mexico, Poland, Malaysia and Taiwan)
those the failure of which to make or obtain are not, individually or in the
aggregate, reasonably likely (as compared to the situation in which they are
made or obtained and taking into account all possible consequences to Parent and
its Subsidiaries, Spinco and its Subsidiaries and the Company and its
Subsidiaries and Joint Ventures of consummating the transactions contemplated by
the Transaction Agreements without making or obtaining them) (A) to be material
to the Company and its Subsidiaries and Joint Ventures, taken as a whole, (B) to
be material to Parent and its Subsidiaries, taken as a whole, (C) to materially
and adversely impact the reasonably anticipated economic and business benefits
to Parent and its Subsidiaries of the transactions contemplated hereby, (D) to
result in criminal liability or a more than de minimis civil fine or other
penalty against Parent or any of its Affiliates, joint ventures or employees or
against the Company or any of its Affiliates, Joint Ventures or employees or (E)
to result in Parent and its Subsidiaries and joint ventures being prohibited
from conducting, or materially limited in their ability to conduct, business in
any jurisdiction (collectively, "Governmental Consents").
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(c) Litigation. (i) No court or Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law (including any Insurance Law) (whether temporary, preliminary or
permanent) (collectively, an "Order") that is in effect and restrains, enjoins
or otherwise prohibits consummation of the Spin-Off or the Merger.
(ii) No Governmental Entity shall have instituted or
threatened to institute any proceeding that seeks such an Order.
(d) Spin-Off. The Spin-Off shall have been consummated in
accordance with the terms and subject to the conditions set forth in Section
3.02 of the Distribution Agreement.
7.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. (i) The representations
and warranties of the Company set forth in this Agreement which are qualified by
"Company Material Adverse Effect" shall each be true and correct as so qualified
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date), (ii) the representations and
warranties of the Company set forth in Sections 5.1(a)(i) or (ii), 5.1(b),
5.1(c), 5.1(j), 5.1(p) and 5.1(q) of this Agreement which are not qualified by
"Company Material Adverse Effect" shall each be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent any such representation
or warranty expressly speaks as of an earlier date) and (iii) the
representations and warranties of the Company set forth in this Agreement other
than those contemplated by clauses (i) and (ii) hereof (without giving effect to
any qualifications as to "materiality" or other similar qualifications) shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date), except where
the failure of such representations and warranties to be true and correct
(without giving effect to any qualifications as to "materiality" or other
similar qualifications) would not be, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Parent shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to the foregoing effect.
(b) Performance of Obligations of the Company. Each of Spinco
and the Company shall have performed in all material respects all obligations
required to be
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performed by it under the Transaction Agreements at or prior to the Closing
Date, and Parent shall have received a certificate signed on behalf of the
Company by an executive officer of the Company to such effect.
(c) Consents Under Agreements. The Company shall have
obtained the consent or approval of each Person whose consent or approval shall
be required in order to consummate the transactions contemplated by the
Transaction Agreements under any Contract to which Spinco or any of its
Subsidiaries or the Company or any of its Subsidiaries, Joint Ventures or joint
ventures is a party and conduct the businesses of the Company and its
Subsidiaries, Joint Ventures and joint ventures substantially as presently
conducted, except those for which the failure to obtain such consent or
approval is not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect or is not reasonably likely to prevent,
materially delay or materially impair the ability of Spinco or the Company to
consummate the transactions contemplated by the Transaction Agreements and no
such consent or approval, and, except as otherwise agreed in writing pursuant
to this Agreement, no Governmental Consent shall require ING to (i) sell or
hold separate and agree to sell, divest or to discontinue to or limit, before
or after the Effective Time, any assets, businesses, or interest in any assets
or businesses of Parent, the Company or any of their respective Affiliates,
Joint Ventures or joint ventures (or to consent to any sale, or agreement to
sell, or discontinuance or limitation by Parent or the Company, as the case may
be, of any of its assets or businesses) or (ii) agree to any conditions
relating to, or changes or restriction in, the operations of any such asset or
businesses which, in either the case of clause (i) or (ii), is reasonably
likely to have a material adverse effect on the financial condition,
properties, business or annual results of operations of the Company and its
Subsidiaries, Joint Ventures and joint ventures, taken as a whole, or a
material adverse effect on the financial condition, properties, business or
annual results of operations of ING and its Subsidiaries, taken as a whole.
Notwithstanding the foregoing, Parent and Merger Sub agree that the failure to
obtain any required consents or approvals as to which the Parent has actual
knowledge (as determined at the time and as set forth in Section 5.2(d)(iii))
shall not give rise to a failure of the condition set forth in this Section
7.2(c) to be satisfied.
(d) Client Approvals. The approvals contemplated in Section
6.14 shall have been obtained for Fund Clients representing at least 85% of the
total assets under management of Fund Clients as of the date hereof. "Total
assets under management" means the aggregate of the net assets of the open-end
and closed-end Fund Clients, as adjusted to eliminate increases or decreases
attributable exclusively to positive or negative changes in the market value of
portfolio assets as of the date hereof.
(e) Legal Opinions. Parent shall have received an opinion or
opinions of counsel to the Company dated the Closing Date, addressing the legal
matters set forth in Section 7.2(e) of the Company Disclosure Letter.
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(f) Solvency Opinions. The Parent and the Company shall have
received, each as an addressee thereof, copies of the "solvency opinions"
delivered in connection with the Spin-Off.
(g) Spinco Debt Ratings. (i) At the Effective Time, Spinco
shall have a post-Spin-Off investment grade debt rating of at least BBB from
Standard & Poor's Corporation or Baa2 from Moody's Investors Services, Inc. as
to long-term senior unsecured debt (or the equivalent for issuers which do not
have long-term senior unsecured debt outstanding) and (ii) the Company shall
have delivered written evidence, dated as of the Closing Date, from such rating
agency evidencing such rating. For the avoidance of doubt, the parties hereto
acknowledge and agree that possession of one such rating shall satisfy this
condition.
7.3 Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) The representations
and warranties of ING, Parent and Merger Sub set forth in this Agreement which
are qualified by "Parent Material Adverse Effect" shall each be true and correct
as so qualified as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date), (ii) the
representations and warranties of ING, Parent and Merger Sub set forth in
Section 5.2(a), 5.2(b), 5.2(c) and 5.2(f) of this Agreement which are not
qualified by "Parent Material Adverse Effect" shall each be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date), and (iii)
the representations and warranties of ING, Parent and Merger Sub set forth in
this Agreement other than those contemplated by clauses (i) and (ii) hereof
(without giving effect to any qualifications as to "materiality" or other
similar qualifications) shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent any such representation or warranty expressly speaks
as of an earlier date), except where the failure of such representations and
warranties to be true and correct (without giving effect to any qualifications
as to "materiality" or other similar qualifications) would not be, individually
or in the aggregate, reasonably likely to have a Parent Material Adverse Effect.
(b) Performance of Obligations of ING, Parent and Merger Sub.
Each of ING, Parent and Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing
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Date, and the Company shall have received a certificate signed on
behalf of ING, Parent and Merger Sub by authorized officers of ING and Parent to
such effect.
(c) Consents Under Agreements. ING shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate the transactions contemplated by this Agreement under
any Contract to which ING or any of its Subsidiaries is a party, except those
for which failure to obtain such consents and approvals, individually or in the
aggregate, is not reasonably likely to have a Parent Material Adverse Effect
and no Governmental Approvals required to be obtained from any Governmental
Entity by the Company or Spinco or any of Spinco's Subsidiaries in connection
with the consummation of the Spin-Off shall be subject to terms or conditions
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the financial condition, properties, business or annual results of
operations of Spinco and its Subsidiaries, taken as a whole.
(d) Guarantee of Company Debt. ING shall have entered into the
supplemental indentures required by Section 6.19 of this Agreement.
ARTICLE VIII
Termination
8.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval by holders of shares of Common Stock
of the Company referred to in Section 7.1(a), by mutual written consent of the
Company and Parent by action of their respective boards of directors.
8.2 Termination by Either Parent or the Company. This
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time by action of the board of directors of either the Company or
Parent (and written notice to the other party) if (a) the Merger shall not have
been consummated by August 31, 2001 whether such date is before or after the
date of approval by the holders of Shares of the Company (the "Termination
Date"); provided, however, that the Termination Date shall be automatically
extended for two (2) months (the "Extended Date"), if, on August 31, 2001: (i)
any of the Governmental Consents described in 7.1(b) have not been obtained or
waived, (ii) each of the other conditions to the consummation of the Merger set
forth in Article VII has been satisfied or waived or remains capable of
satisfaction, and (iii) any Governmental Consent that has not yet been obtained
is being pursued diligently and in good faith; (b) the approval of the holders
of shares of Common Stock required by Section 7.1(a) shall not have been
obtained at a meeting duly convened therefor or at any
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adjournment or postponement thereof; (c) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall become
final and non-appealable (whether before or after the approval by the
shareholders of the Company); or (d) any Law is in effect or is adopted or
issued which has the effect of prohibiting the Spin-Off or the Merger; provided
further, however, that the right to terminate this Agreement pursuant to clause
(a) above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the occurrence of the failure of the Merger to be
consummated.
8.3 Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time if: (a) whether before or after the approval of the holders of shares of
Common Stock referred to in Section 7.1(a), by action of the board of directors
of the Company and written notice to Parent, there has been a material breach by
Parent or Merger Sub of any representation, warranty, covenant or agreement
contained in this Agreement that is not curable and such breach would give rise
to a failure of the condition set forth in Section 7.3(a) or Section 7.3(b); or
(b) in accordance with, and subject to the terms and conditions of, Section
6.2(b).
8.4 Termination by Parent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time by
action of the board of directors of Parent and written notice to the Company if:
(a) the board of directors of the Company shall have withdrawn or adversely
modified its adoption or recommendation of this Agreement or the transactions
contemplated hereby or shall have approved or recommended an Acquisition
Proposal; or (b) there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement that
is not curable and such breach would give rise to a failure of the condition set
forth in Section 7.2(a) or Section 7.2(b); or (c) Shares or other securities or
assets are issued or delivered pursuant to the terms of the Rights Agreement
upon or following the occurrence of a Section 13 Event (as defined in the Rights
Agreement) or an Acquiring Person (as defined in the Rights Agreement) becoming
such.
8.5 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal and financial
advisors or other representatives); provided, however, that no such termination
shall relieve any party hereto of any liability or damages resulting from any
deliberate breach of this Agreement occurring prior to such termination. The
parties further agree that if the Company is or becomes obligated to pay a
termination fee pursuant to Section 8.5(b), the right of Parent to receive such
termination fee shall be the sole remedy for damages of Parent with respect to
the facts
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and circumstances giving rise to such payment obligation except for
any deliberate breach of this Agreement. No party may assert a claim for damages
for any inaccuracy of any representation or warranty contained in this Agreement
(whether by direct claim or counterclaim) except in connection with the
termination of this Agreement.
(b) In the event that (i) this Agreement is terminated by
Parent pursuant to Section 8.4(a), or (ii) this Agreement is terminated by the
Company pursuant to Section 8.3(b), then the Company shall, promptly, but in no
event later than one business day after the date of such termination, pay Parent
a termination fee of one hundred sixty-five million dollars ($165,000,000) (the
"Termination Fee") and shall promptly, but in no event later than one business
day after being notified of the amount of all documented out-of-pocket charges
and expenses incurred by Parent or Merger Sub in connection with this Agreement
and the transactions contemplated by this Agreement up to a maximum of ten
million dollars ($10,000,000) ("Out-of-Pocket Expenses"), pay to Parent an
amount equal to the Out-of-Pocket Expenses, in each case payable by wire
transfer of same day funds. In the event that (i) this Agreement is terminated
by Parent or the Company pursuant to Section 8.2(b) or (ii) this Agreement is
terminated by Parent pursuant to Section 8.4(b), then (A) the Company shall
promptly, but in no event later than one business day after being notified of
the Out-of-Pocket Expenses by Parent, pay to Parent an amount equal to the
Out-of-Pocket Expenses, payable by wire transfer of same day funds and (B) if,
in the case of clause (i), a bona fide Acquisition Proposal shall have become
public or any Person shall have publicly announced an intention (whether or not
conditional) to make a proposal or offer relating to an Acquisition Proposal
prior to the date of the Shareholders Meeting or if, in the case of clause (ii),
this Agreement is terminated by Parent pursuant to Section 8.4(b) as a result of
a deliberate breach by the Company and a bona fide Acquisition Proposal shall
have been made to the Company or become public or any Person shall have
announced to the Company or publicly announced an intention (whether or not
conditional) to make a proposal or offer relating to an Acquisition Proposal
prior to the date of termination, and in the case of each of clause (i) and
clause (ii), within fifteen (15) months from the date of termination, the
Company executes and delivers a definitive agreement with respect to any
Acquisition Proposal or an Acquisition Proposal is consummated (it being
understood that in the event the board of directors of the Company recommends
the acceptance by the shareholders of the Company of a third-party tender offer
or exchange offer for at least a majority of the outstanding Shares, such
recommendation shall be treated as though an agreement with respect to an
Acquisition Proposal had been executed), the Company shall promptly, but in no
event later than one business day after the date of such execution and delivery,
or consummation, as the case may be, pay Parent the Termination Fee. The Company
acknowledges that the agreements contained in this Section 8.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to
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obtain such payment, Parent or Merger Sub commences a suit which results in a
judgment against the Company for the fee set forth in this paragraph (b), the
Company shall pay to Parent or Merger Sub its costs and expenses (including
attorneys' fees) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank N.A. in effect on the date such
payment was required to be made.
ARTICLE IX
Miscellaneous and General
9.1 Survival. This Article IX and the agreements of the
Company, ING, Parent and Merger Sub contained in Article IV, Sections 6.7 (Stock
Exchange), 6.11 (Expenses), 6.12 (Indemnification; Directors' and Officers'
Insurance), 6.13(b) and (c) (Compliance with 1940 Act Section 15), 6.19 (Company
Debt), 6.22 (Headquarters and Related Matters), 6.23 (Asia) and 6.24
(Confidentiality) shall survive the consummation of the Merger. This Article IX,
the agreements of the Company, Parent and Merger Sub contained in Section 6.11
(Expenses) and Section 8.5 (Effect of Termination and Abandonment) shall survive
the termination of this Agreement. All other representations, warranties,
covenants and agreements in this Agreement shall not survive the consummation of
the Merger or the termination of this Agreement (it being understood that this
sentence shall not limit the rights of any party hereto under Section 8.5 of
this Agreement).
9.2 Modification or Amendment. (a) Subject to the provisions
of the applicable law, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
(b) Each of the parties hereto acknowledges and agrees that,
except as otherwise contemplated by the relevant agreement, the Company may
amend or modify any Transaction Agreement (other than this Agreement) only with
the written consent of Parent. Parent agrees that it will not withhold any such
consent if such proposed amendment or modification would not reasonably be
expected to adversely affect in any respect any of ING, Parent, the Company and
its Subsidiaries and their respective Affiliates, or prevent or materially delay
or impair the consummation of the transactions hereby.
9.3 Waiver of Conditions. The conditions to each of the
parties' obligations to consummate the Merger are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law. No failure or delay by any party in exercising any
right, power or privilege hereunder shall
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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.
9.4 Counterparts. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK, EXCEPT WITH RESPECT TO PROVISIONS RELATING TO THE
IMPLEMENTATION OF THE MERGER THAT ARE REQUIRED BY CONNECTICUT LAW TO BE GOVERNED
BY THE LAW OF THE STATE OF CONNECTICUT, WHICH PROVISIONS SHALL BE GOVERNED BY
CONNECTICUT LAW, IN EACH CASE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the jurisdiction of the United
States District Court for the Southern District of New York or any other New
York State court sitting in New York City, Borough of Manhattan, solely in
respect of the interpretation and enforcement of the provisions of the
Transaction Agreements and of any documents referred to in the Transaction
Agreements, and in respect of the transactions contemplated hereby and thereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that any Transaction Agreement or any such document may
not be enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard and
determined in such court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.6 or in such other
manner as may be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
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TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6 Notices. Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, or by facsimile:
if to ING, Parent or Merger Sub
ING America Insurance Holdings, Inc.
in c/o ING North America Insurance Corp.
5780 Powers Ferry Road, NW
Atlanta, Georgia 30327-4390
Attention: Michael W. Cunningham
Executive Vice President &
Chief Financial Officer
Fax: 770-980-3303
B. Scott Burton
Senior Vice President &
Chief Counsel
Fax: 770-850-7660
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with copies to:
ING Groep N.V.
Strawinskylaan 2631, 1077 ZZ Amsterdam,
P.O. Box 810,
1000 Av. Amsterdam, the Netherlands
Attention: Fred Hubbell
Executive Board Member
Fax: +31-20-541-5402
Diederik van Wassenaer
General Counsel
Fax: +31-20-541-8723
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Joseph B. Frumkin, Esq.,
William D. Torchiana, Esq.
Fax: 212-558-3588
if to the Company
Aetna Inc.
151 Farmington Avenue
Hartford, CT 06156-7505
Attention: L. Edward Shaw, Jr.
General Counsel
William J. Casazza
Corporate Secretary
Fax: 860-273-8340
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with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Lewis B. Kaden, Esq.
David L. Caplan, Esq.
Fax: 212-450-4800
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7 Entire Agreement; No Other Representations. This Agreement
(including, any annexes, exhibits or schedules hereto or thereto and other
documents executed in connection herewith), the Company Disclosure Letter and
the Confidentiality Agreement, dated May 25, 2000 (the "Confidentiality
Agreement"), between Parent and the Company constitute the entire agreement, and
supersede all other prior agreements, understandings, representations and
warranties, both written and oral, among the parties, with respect to the
subject matter hereof and thereof.
9.8 No Third Party Beneficiaries. Except as provided in
Section 6.12 (Indemnification; Directors' and Officers' Insurance), this
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
9.9 Obligations of Parent and of the Company. Whenever this
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of
the Company or Spinco to take any action, such requirement shall be deemed to
include an undertaking on the part of the Company to cause Spinco or such
Subsidiary to take such action and, after the Effective Time, on the part of the
Surviving Corporation to cause such Subsidiary to take such action. Parent
acknowledges that neither the Company nor any of its Subsidiaries possesses the
power to control the Joint Ventures. Accordingly, whenever this Agreement
requires, or limits or restricts the ability of, the Company or any of its
Subsidiaries to take any action with respect to a Joint Venture or joint
venture, the Company and its Subsidiaries shall be deemed to have fully
satisfied all of such obligations under this Agreement with respect to such
Joint Venture or joint venture if it has used its reasonable best efforts to
cause the Joint Venture or joint venture, as the case may be, to comply with
such obligations under this Agreement; provided, however, that the foregoing
shall not require the Company, its Subsidiaries, Joint Ventures or joint
ventures to (i) take or fail to take any action that would reasonably be
expected to adversely affect in any respect any of Spinco or any of its
Subsidiaries or prevent or materially delay or impair the consummation of the
Transactions or (ii) pay any money to any third party in connection with
carrying out its obligations under this sentence.
9.10 Transfer Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including penalties and
interest) incurred in connection with the Merger and the Spin-Off shall be paid
in accordance with the Distribution Agreement.
9.11 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
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9.12 Interpretation. The table of contents and headings herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a Section or Annex, such
reference shall be to a Section of or Annex to this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". Unless the context otherwise requires, the use of the singular
shall include the plural, the use of the masculine shall include the feminine,
and vice versa. As used in this Agreement, the antecedent of any personal
pronoun shall be deemed to be only the next preceding proper noun or nouns, as
appropriate for such pronoun. As used in this Agreement, any reference to any
law, rule or regulation shall be deemed to include a reference to any
amendments, revisions or successor provisions to such law, rule or regulation.
Except as otherwise explicitly provided herein, all references in this
Agreement to (i) the "Company," "ING" or "Parent" shall be deemed to be a
reference only to such company and not to any direct or indirect subsidiaries
of such company or (ii) to documents or other materials having been "made
available" to Parent shall be deemed to be a reference to a document or other
materials made available to Parent in the Company's data room in Hartford,
Connecticut before June 9, 2000 or was actually delivered to an employee or
Representative of Parent.
9.13 Assignment. This Agreement shall not be assignable by
operation of law or otherwise; provided, however, that Parent may designate, by
written notice to the Company, another wholly owned direct or indirect
subsidiary to be a Constituent
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Corporation in lieu of Merger Sub, in which event all references herein to
Merger Sub shall be deemed references to such other subsidiary, except that all
representations and warranties made herein with respect to Merger Sub as of the
date of this Agreement shall be deemed representations and warranties made with
respect to such other subsidiary as of the date of such designation.
9.14 Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof in
any federal court located in the State of New York, in addition to any other
remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
AETNA INC.
By: /s/ ALFRED P. QUIRK, JR.
-------------------------
Name: Alfred P. Quirk, Jr.
Title: Vice President-Finance and Treasurer
ING AMERICA INSURANCE HOLDINGS, INC.
By: /s/ MICHAEL W. CUNNINGHAM
-------------------------
Name: Michael W. Cunningham
Title: Executive Vice President and
Chief Financial Officer
ANB ACQUISITION CORP.
By: /s/ MICHAEL W. CUNNINGHAM
---------------------------
Name: Michael W. Cunningham
Title: President
ING GROEP N.V.
(solely for the purpose of Sections 4.2,
4.3, 5.2, 6.3, 6.5, 6.8, 6.12, 6.18,
6.19, 6.20 and Article IX)
By: /s/ MICHAEL W. CUNNINGHAM
---------------------------
Name: Michael W. Cunningham
Title: Attorney-in-Fact
-73-
<PAGE> 82
ANNEX A
FORM OF
DISTRIBUTION AGREEMENT
between
Aetna Inc.
and
Aetna U.S. Healthcare Inc.
---------------------
DATED AS OF [ ], 2000
<PAGE> 83
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions......................................................2
ARTICLE 2
CONTRIBUTIONS AND ASSUMPTION OF LIABILITIES
SECTION 2.01. Contribution of Contributed Subsidiaries.........................15
SECTION 2.02. Transfers of Certain Assets to Spinco Group......................15
SECTION 2.03. Transfers of Certain Assets to Aetna Group.......................15
SECTION 2.04. Assumption of Certain Liabilities................................16
SECTION 2.05. Agreement Relating to Consents Necessary to Transfer Assets......16
ARTICLE 3
THE DISTRIBUTION
SECTION 3.01. Cooperation Prior to the Distribution............................17
SECTION 3.02. Aetna Board Action; Conditions Precedent to the Distribution.....18
SECTION 3.03. The Distribution.................................................19
SECTION 3.04. Stock Dividend...................................................19
SECTION 3.05. Fractional Shares................................................19
ARTICLE 4
INDEMNIFICATION AND OTHER MATTERS
SECTION 4.01. Spinco Indemnification of Aetna Group............................20
SECTION 4.02. Aetna Indemnification of Spinco Group............................20
SECTION 4.03. Insurance and Third Party Obligations; Limitation on Liability...21
SECTION 4.04. Notice and Payment of Claims.....................................22
SECTION 4.05. Notice and Defense of Third-Party Claims.........................22
SECTION 4.06. Non-Exclusivity of Remedies......................................25
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ARTICLE 5
EMPLOYEE MATTERS AND TRANSITION SERVICES
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SECTION 5.01. Employee Matters Generally..........................................25
SECTION 5.02. Transition Services Matters Generally...............................25
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Provision of Corporate Records......................................25
SECTION 6.02. Access to Information...............................................26
SECTION 6.03. Litigation Cooperation..............................................26
SECTION 6.04. Reimbursement.......................................................27
SECTION 6.05. Retention of Records................................................27
SECTION 6.06. Confidentiality.....................................................27
SECTION 6.07. Preservation of Privilege...........................................28
SECTION 6.08. Inapplicability of Article 6 to Tax Matters.........................29
ARTICLE 7
CERTAIN OTHER AGREEMENTS
SECTION 7.01. Intercompany Accounts...............................................29
SECTION 7.02. Trademarks; Trade Names.............................................30
SECTION 7.03. Further Assurances and Consents.....................................31
SECTION 7.04. Noncompetition and Non-Solicitation.................................31
SECTION 7.05. Third Party Beneficiaries...........................................32
SECTION 7.06. Intellectual Property Rights and Licenses...........................32
SECTION 7.07. Insurance...........................................................32
SECTION 7.08. Prohibition on Certain Sales........................................34
SECTION 7.09. Brazilian Certificate of Foreign Capital Registration...............34
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices.............................................................34
SECTION 8.02. Amendments; No Waivers..............................................36
SECTION 8.03. Expenses............................................................36
SECTION 8.04. Successors and Assigns..............................................37
SECTION 8.05. Governing Law.......................................................37
SECTION 8.06. Counterparts; Effectiveness.........................................37
SECTION 8.07. Entire Agreement....................................................37
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SECTION 8.08. Tax Sharing Agreement; Set-Off; Payment of After-Tax Amounts
Certain Transfer Taxes..............................................37
SECTION 8.09. Jurisdiction........................................................38
SECTION 8.10. Pre-Litigation Dispute Resolution...................................39
SECTION 8.11. Severability........................................................39
SECTION 8.12. Survival............................................................39
SECTION 8.13. Captions............................................................39
SECTION 8.14. Specific Performance................................................39
Schedule A -- Spinco Assets - Contracts
Schedule B -- Spinco Assets - Other Assets, Properties and Business
Schedule C -- Spinco Group Liabilities
Schedule D -- Spinco Intellectual Property Rights
Schedule E -- Spinco Litigation
Schedule F -- Aetna Assets - Contracts
Schedule G -- Aetna Assets - Other Assets, Properties and Business
Schedule H -- Aetna Group Liabilities
Schedule I -- Aetna Intellectual Property Rights
Schedule 2.01 -- Contribution of Contributed Subsidiaries
Schedule 7.01 -- Existing Arrangements
Schedule 7.04(a) -- Noncompetition
Schedule 7.07 -- Group Policies
Exhibit A -- Employee Benefits Agreement
Exhibit B -- Term Sheet for Software Licensing Agreement
Exhibit C -- Tax Sharing Agreement
Exhibit D -- Term Sheet for Trademark Assignment Agreement
Exhibit E -- Term Sheet for Trademark Licensing Agreement
Exhibit F -- Term Sheet for Transition Services Agreement
Exhibit G -- Term Sheet for Lease Agreement
Exhibit H -- Term Sheet for CityPlace Agreement
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<PAGE> 86
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Schedule A -- Spinco Assets - Contracts
Schedule B -- Spinco Assets - Other Assets, Properties and Business
Schedule C -- Spinco Group Liabilities
Schedule D -- Spinco Intellectual Property Rights
Schedule E -- Spinco Litigation
Schedule F -- Aetna Assets - Contracts
Schedule G -- Aetna Assets - Other Assets, Properties and Business
Schedule H -- Aetna Group Liabilities
Schedule I -- Aetna Intellectual Property Rights
Schedule 2.01 -- Contribution of Contributed Subsidiaries
Schedule 7.01 -- Existing Arrangements
Schedule 7.04(a) -- Noncompetition
Schedule 7.07 -- Group Policies
Exhibit A -- Employee Benefits Agreement
Exhibit B -- Term Sheet for Software Licensing Agreement
Exhibit C -- Tax Sharing Agreement
Exhibit D -- Term Sheet for Trademark Assignment Agreement
Exhibit E -- Term Sheet for Trademark Licensing Agreement
Exhibit F -- Term Sheet for Transition Services Agreement
Exhibit G -- Term Sheet for Lease Agreement
Exhibit H -- Term Sheet for CityPlace Agreement
</TABLE>
iv
<PAGE> 87
FORM OF DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT dated as of [ ], 2000 (this "AGREEMENT")
between Aetna Inc., a Connecticut corporation ("AETNA"), and Aetna U.S.
Healthcare Inc., a Pennsylvania corporation ("SPINCO").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Spinco is presently a wholly-owned subsidiary of Aetna;
WHEREAS, the Board of Directors of Aetna has determined that it is in
the best interests of Aetna, its shareholders and Spinco that all outstanding
shares of Spinco Common Stock (as defined below) be distributed pro rata to
Aetna's shareholders (provided that all conditions precedent to the
Distribution have been satisfied) and that, pursuant to an agreement and plan
of restructuring and merger dated as of July 19, 2000 ("MERGER AGREEMENT")
among Aetna, ING Groep N.V., a corporation organized under the laws of the
Netherlands ("ACQUIROR"), ING America Insurance Holdings, Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of Acquiror ("PARENT"), and
ANB Acquisition Corp., a Connecticut corporation and a wholly-owned subsidiary
of Parent ("MERGER SUBSIDIARY"), Merger Subsidiary be merged with and into
Aetna, as a result of which Aetna will become a wholly-owned subsidiary of
Parent (the "MERGER");
WHEREAS, for United States federal income Tax (as defined below)
purposes, it is intended that the holders of common stock of Aetna be treated
as having received cash consideration from Parent and the Spinco Common Stock
in redemption and disposition of the outstanding Aetna Common Stock (as defined
below);
WHEREAS, Aetna is concurrently herewith entering into, or proposes to
enter into prior to or on the Distribution Date (as defined below), the
Ancillary Agreements (as defined below); and
WHEREAS, the parties hereto desire to set forth herein the principal
corporate transactions to be effected in connection with the Distribution and
certain other matters relating to the relationship and the respective rights
and obligations of the parties following the Distribution.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE> 88
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"ACQUIROR" has the meaning set forth in the recitals.
"ACTION" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding of any nature (whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise) by or
before any arbitrator or Governmental Entity or similar Person or body.
"AELTUS NAME RIGHTS" means all of Aetna's right, title and interest in
and use of the "Aeltus" name and any derivative thereof including, without
limitation, all trademarks, service marks, trade dress, logos, domain names,
trade names and corporate names (whether or not registered) in the United
States and all other nations throughout the world, including all variations,
derivations, combinations, registrations and applications for registration of
the foregoing and all goodwill associated therewith.
"AETNA" has the meaning set forth in the recitals.
"AETNA ASSETS" means all assets as reflected in the unaudited pro
forma consolidated balance sheet as of March 31, 2000 of Aetna and its
Subsidiaries set forth in Section 5.1(e)(iv) of the Company Disclosure Schedule
accompanying the Merger Agreement (except for those assets disposed of in
accordance with or expressly permitted by the Merger Agreement) together with
all other assets, leases, properties and businesses, of every kind and
description, wherever located, real, personal or mixed, tangible or intangible,
owned, held or used by (i) Aetna, Aetna Services or any member of the Spinco
Group that relate primarily to the Aetna Business or (ii) any Aetna Subsidiary.
Without limitation and for the avoidance of doubt, the following items are, and
shall be, "AETNA ASSETS" (and are not, and shall not be, Spinco Assets):
(a) all rights of the Aetna Group (but excluding any and all rights
of the Spinco Group) under the Merger Agreement, the Confidentiality Agreement
and the Distribution Documents;
(b) all Aetna Intellectual Property Rights;
(c) all rights under the Contracts listed on Schedule F hereto;
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<PAGE> 89
(d) the other assets, properties and business listed on Schedule G
hereto; and
(e) all goodwill associated with the Aetna Business or the Aetna
Assets, together with the right to represent to third parties that Aetna Group
is the successor to the Aetna Business.
"AETNA BENEFITS LIABILITIES" means the AI Assumed Liabilities as
defined in the Employee Benefits Agreement.
"AETNA BUSINESS" means the businesses and operations of the Aetna
Subsidiaries as conducted as of the date hereof.
"AETNA CHINA NAME RIGHTS" shall have the meaning assigned to such term
in the Merger Agreement.
"AETNA COMMON STOCK" means the common stock, par value $.01 per share,
of Aetna.
"AETNA ENVIRONMENTAL LIABILITIES" means any and all Liabilities of or
relating to (i) Aetna, Aetna Services or any member of the Spinco Group to the
extent arising from the conduct of, in connection with or relating to, the
Aetna Business (as currently or previously conducted), or the ownership or use
of assets or property in connection therewith (including, without limitation,
offsite disposal), or (ii) any Aetna Subsidiary; which, in either case, arise
under or relate to Environmental Laws, but shall exclude any such Liabilities
to the extent arising from the conduct of, in connection with or relating to
the Spinco Assets or the Spinco Business.
"AETNA GROUP" means Aetna, Aetna Services, the Aetna Subsidiaries and
all successors to each of those Persons.
"AETNA GROUP LIABILITIES" means, except as otherwise specifically
provided in the Merger Agreement or any Distribution Document, all of the
following Liabilities (including Liabilities arising out of any litigation),
whether arising before, at or after the Distribution Time: (i) all Liabilities
of or relating to Aetna, Aetna Services or any member of the Spinco Group to
the extent arising from the conduct of, in connection with or relating to, the
Aetna Business, or the ownership or use of assets or property in connection
therewith, (ii) all Liabilities of or relating to any Aetna Subsidiary except
to the extent arising from the conduct of, in connection with or relating to
the Spinco Assets or the Spinco Business or ownership or use thereof, (iii) the
Liabilities set forth on Schedule H hereto, (iv) the Company Debt, and (v) the
Aetna Benefits Liabilities. Without
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limiting the generality of the foregoing, and except as specified in the next
sentence, "AETNA GROUP LIABILITIES" shall include, without limitation, the
following Liabilities whether arising before, at or after the Distribution
Time: (a) any Liabilities arising in connection with the Aetna Assets, (b) the
Aetna Environmental Liabilities, (c) all Liabilities arising under Contracts
entered into by any of the Aetna Subsidiaries, including, without limitation,
any such Contract relating to the acquisition or disposition of assets,
securities or businesses (other than any such Contracts relating to the
Domestic P&C Business) and (d) all other Liabilities of the Aetna Group under
the Merger Agreement or any Ancillary Agreement. However, notwithstanding the
foregoing, "AETNA GROUP LIABILITIES" shall exclude any and all: (1) Liabilities
for Taxes (since such Liabilities shall be governed by the Tax Sharing
Agreement), and (2) other Liabilities to the extent specifically retained or
assumed by the Spinco Group.
"AETNA INDEMNITEE" has the meaning set forth in Section 4.01(a).
"AETNA INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights (i) owned by a member of the Aetna Group or the Spinco Group or (ii)
owned by a third party and licensed or sublicensed to a member of the Aetna
Group or the Spinco Group, in either case held for use or used primarily in the
conduct of the Aetna Business including, without limitation, the Aetna China
Name Rights, the Aeltus Name Rights and the Intellectual Property Rights listed
on Schedule I hereto, but excluding the Aetna Name Rights.
"AETNA NAME RIGHTS" has the meaning set forth in this Section 1.01 in
the definition of "SPINCO INTELLECTUAL PROPERTY RIGHTS".
"AETNA SERVICES" means Aetna Services, Inc., a Connecticut
corporation.
"AETNA SHAREHOLDERS" means the holders of the Aetna Common Stock.
"AETNA SUBSIDIARIES" means (i) the direct and indirect Subsidiaries of
Aetna Services other than the Contributed Subsidiaries (and, subject to
obtaining all required approvals, shall include Pacific Aetna Life Insurance
Ltd., if and from such time as the joint venture interest in such company held
by Aetna Life Insurance Company is transferred to another Aetna Subsidiary),
(ii) the respective direct and indirect Subsidiaries of the Persons referred to
in clause (i) and (iii) the respective minority ownership interests of the
Persons referred to in clauses (i) and (ii).
"AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the Exchange Act (as defined herein) as of the date hereof, provided
however, that except when referred to as an "EXISTING AFFILIATE," for purposes
of this
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Agreement, no member of one Group shall be treated as an Affiliate of any
member of the other Group.
"AGREEMENT" has the meaning set forth in the recitals.
"ANCILLARY AGREEMENTS" means each of the Chinese Mark Agreement,
Employee Benefits Agreement, the Lease Agreement, the CityPlace Agreement, the
Software Licensing Agreement, the Tax Sharing Agreement, the Trademark
Assignment Agreement, the Trademark Licensing Agreement and the Transition
Services Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or one on
which banks are authorized or required by law to close in New York, New York or
Hartford, Connecticut.
"CHINESE MARK AGREEMENT" shall have the meaning assigned to such term
in the Merger Agreement.
"CITYPLACE AGREEMENT" means the agreement to be entered into on or
before the Distribution Date between Aetna (or Aetna Services) and Spinco (or
one of its Affiliates, in which case Spinco shall guarantee the obligations of
such Affiliate) in respect of the CityPlace property, reflecting the terms set
forth on Exhibit H hereto.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY DEBT" shall have the meaning assigned to the term "Long Term
Debt" in the Merger Agreement.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
as of May 25, 2000 between Parent and Aetna.
"CONTRACTS" means any agreements, lease, license, contract, treaty,
note, mortgage, indenture, franchise, permit, concession, arrangement or other
obligation.
"CONTRIBUTED SUBSIDIARIES" means (i) Aetna Life Insurance Company, a
Connecticut corporation, Aetna Health and Life Insurance Company, a Connecticut
corporation, Aetna Risk Indemnity Company Limited, a Bermuda corporation, Aetna
Realty Investments I, Inc., a Connecticut corporation, AE Housing Corp, a
Connecticut corporation, Aetna Business Resources, Inc., a Connecticut
corporation, AE Fifteen, Incorporated, a Connecticut corporation, Luettgens
Limited, a Connecticut corporation, AUSHC Holdings, Inc., a
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Connecticut corporation, ASI Wings, L.L.C., a Delaware limited liability
company, Aetna Life & Casualty Bermuda Limited, a Bermuda corporation, Aetna
Foundation, Inc., a Connecticut non-stock corporation, Aelan Inc., a
Connecticut corporation, (ii) any subsidiaries formed for the purpose of
effecting the Restructuring, (iii) the respective direct and indirect
Subsidiaries of the Persons referred to in clauses (i) and (ii) and (iv) the
respective minority ownership interests of the Persons referred to in clauses
(i), (ii) and (iii).
"CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing;
"DAMAGES" means, with respect to any Person, any and all damages
(including punitive and consequential damages), losses, Liabilities and
expenses incurred or suffered by such Person (including, but not limited to,
all expenses of investigation, all attorneys' and expert witnesses' fees and
all other out-of-pocket expenses incurred in connection with any Action or
threatened Action).
"DISTRIBUTION" means the distribution by Aetna, pursuant to the terms
and subject to the conditions hereof, of all of the outstanding shares of
Spinco Common Stock to the Aetna Shareholders of record as of the Record Date.
"DISTRIBUTION AGENT" means First Chicago Trust Company of New York.
"DISTRIBUTION DATE" means the Business Day on which the Distribution
is effected.
"DISTRIBUTION DOCUMENTS" means this Agreement and the Ancillary
Agreements and any other agreements or documents entered into to effect the
transactions contemplated hereby or by the Ancillary Agreements (but excluding
the Confidentiality Agreement and the Merger Agreement).
"DISTRIBUTION TIME" means the time immediately before the Merger
Effective Time (as defined below).
"DOMESTIC P&C BUSINESS" means the property and casualty insurance
business and operations formerly conducted by Aetna or any of its Former or
Existing Affiliates in the United States.
"EMPLOYEE BENEFITS AGREEMENT" means the Employee Benefits Agreement
substantially in the form attached as Exhibit A hereto to be entered into on or
before the Distribution Date between Aetna and Spinco.
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"ENVIRONMENTAL LAW" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any Governmental Entity or
other third party, relating to human health and safety, the environment or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXISTING AFFILIATE" means any Affiliate of Aetna as of the date
hereof and not giving effect to this Agreement, the Restructuring or the
Merger.
"FINALLY DETERMINED" means, with respect to any Action, threatened
Action or other matter, that the outcome or resolution of that Action,
threatened Action or other matter either (i) has been decided through binding
arbitration or by a Governmental Entity of competent jurisdiction by judgment,
order, award, or other ruling or (ii) has been settled or voluntarily dismissed
by the parties pursuant to the dispute resolution procedure set forth in
Section 8.10 or otherwise and, in the case of each of clauses (i) and (ii), the
claimants' rights to maintain that Action, threatened Action or other matter
have been finally adjudicated, waived, discharged or extinguished, and that
judgment, order, ruling, award, settlement or dismissal (whether mandatory or
voluntary, but if voluntary that dismissal must be final, binding and with
prejudice as to all claims specifically pleaded in that Action) is subject to
no further appeal, vacatur proceeding or discretionary review.
"FORM 10" means the registration statement on Form 10 to be filed by
Spinco with the Commission to effect the registration of Spinco Common Stock
(as defined below) pursuant to the Exchange Act in connection with the
Distribution, as such registration statement may be amended from time to time.
"FORMER AFFILIATE" means any Person (as defined below) that, at any
time prior to the date hereof and without giving effect to this Agreement was,
but has ceased to be, an Affiliate of Aetna and/or Aetna Services.
"GOVERNMENTAL ENTITY" means any U.S. or non-U.S. governmental or
regulatory authority, agency, commission, tribunal, body or other governmental,
quasi-governmental or self-regulatory entity.
"GROUP" means, as the context requires, the Spinco Group (as defined
below) or the Aetna Group (as defined below).
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"GROUP POLICIES" means all Policies, current or past, which prior to
the Distribution Time are or at any time were maintained by or on behalf of or
for the benefit or protection of Aetna, any Existing Affiliate or any Former
Affiliate (or any of their predecessors) and/or one or more of the current or
past directors, officers, employees or agents of any of the foregoing
including, without limitation, the Policies identified on Schedule 7.07 hereto
but excluding any Policies under which any Aetna Subsidiary is the named
insured.
"INCENTIVE AMOUNT" shall have the meaning assigned to such term in
writing by Parent and Aetna.
"INDEMNIFIED PARTY" has the meaning set forth in Section 4.04.
"INDEMNIFYING PARTY" has the meaning set forth in Section 4.04.
"INFORMATION STATEMENT" means the information statement to be sent to
each Aetna Shareholder of record as of the Record Date in connection with the
Distribution.
"INSURANCE PROCEEDS" shall mean those monies (i) received by an
insured from an insurance carrier or (ii) paid by an insurance carrier on
behalf of an insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid
or held by or for the benefit of such insured.
"INSURED CLAIMS" shall mean those Liabilities that, individually or in
the aggregate, are covered within the terms and conditions of any of the Group
Policies, whether or not subject to premium adjustments, deductibles,
retentions, co-insurance, cost of reserve paid or held by or for the benefit of
the applicable insured(s), uncollectability or retrospectively-rated premiums,
but only to the extent that such Liabilities are within applicable Group Policy
limits, including aggregates.
"INTELLECTUAL PROPERTY RIGHTS" means (i) inventions, whether or not
patentable, reduced to practice or made the subject of one or more pending
patent applications, (ii) national and multinational statutory invention
registrations, patents and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof) registered or applied for in the United States and all other nations
throughout the world, and all improvements to the inventions disclosed in each
such registration, patent or patent application, (iii) trademarks, service
marks, trade dress, logos, domain names, trade names and corporate names
(whether or not registered) in the United States and all other nations
throughout the world, including all variations,
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derivations, combinations, registrations and applications for registration of
the foregoing and all goodwill associated therewith, (iv) copyrights (whether
or not registered) and registrations and applications for registration thereof
in the United States and all other nations throughout the world, including all
derivative works, moral rights, renewals, extensions, reversions or
restorations associated with such copyrights, now or hereafter provided by law,
regardless of the medium of fixation or means of expression, (v) computer
software (including source code, object code, firmware, operating systems and
specifications), (vi) trade secrets and, whether or not confidential, business
information (including pricing and cost information, business and marketing
plans and customer and supplier lists) and know-how (including manufacturing
and production processes and techniques and research and development
information), (vii) industrial designs (whether or not registered), (viii)
databases and data collections, (ix) copies and tangible embodiments of any of
the foregoing, in whatever form or medium, (x) all rights to obtain and rights
to apply for patents, and to register trademarks and copyrights, (xi) all
rights in all of the foregoing provided by treaties, conventions and common law
and (xii) all rights to sue or recover and retain damages and costs and
attorneys' fees for past, present and future infringement or misappropriation
of any of the foregoing.
"LAW" means any applicable federal, state, local or foreign law,
statute, ordinance, directive, rule, regulation, judgment, order, injunction,
decree, arbitration award, agency requirement, license or permit of any
Governmental Entity.
"LEASE AGREEMENT" means the Lease Agreement to be entered into prior
to or as of the Distribution Date between Aetna (or an Affiliate of Aetna, in
which case the obligations of such Affiliate shall be guaranteed by Aetna) and
Aetna Life Insurance Company in respect of the property (the "TOWER") situated
at 151 Farmington Avenue, Hartford, Connecticut 06156 reflecting the terms set
forth on Exhibit G hereto.
"LIABILITY" or "LIABILITIES" means any and all claims, debts,
liabilities, assessments, costs (including, with respect to matters under
Environmental Laws, removal costs, remediation costs, closure costs and
expenses of investigation and ongoing monitoring), deficiencies, charges,
demands, fines, penalties, damages, losses, disgorgements and obligations, of
any kind, character or description (whether absolute, contingent, matured, not
matured, liquidated, unliquidated, accrued, known, unknown, direct, indirect,
derivative or otherwise) whenever arising, including, but not limited to, all
costs, interest and expenses relating thereto (including, but not limited to,
all expenses of investigation, all attorneys' and expert witnesses' fees and
all other out-of-pocket expenses in connection with
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any Action or threatened Action) and expressly including those relating to an
Indemnified Party's own negligence or other misconduct.
"LICENSED MARKS AND NAMES" has the meaning set forth in Section 7.02.
"MERGER" has the meaning set forth in the recitals.
"MERGER AGREEMENT" has the meaning set forth in the recitals.
"MERGER EFFECTIVE TIME" shall have the meaning assigned to the term
Effective Time in the Merger Agreement.
"MERGER SUBSIDIARY" has the meaning set forth in the recitals.
"NYSE" has the meaning set forth in Section 3.01(d).
"PARENT" has the meaning set forth in the recitals.
"PERMITTED TRADEMARK PERIOD" means the three year period commencing on
the Distribution Date, subject to any limitations set forth in the Trademark
Licensing Agreement.
"PERMITTED SALES PROCEEDS" and "PERMITTED SALES" shall have the
meanings assigned to such terms in the Merger Agreement.
"PERSON" means any individual, corporation (including not-for-profit
corporations), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, Governmental Entity or other
entity of any kind or nature.
"POLICIES" means insurance policies and insurance contracts of any
kind, including, without limitation, primary, excess and umbrella policies,
directors and officers', errors and omissions, commercial general liability
policies, life and benefits policies and contracts, fiduciary liability,
automobile, aircraft, property and casualty, workers' compensation and employee
dishonesty insurance policies, bonds and self-insurance and captive insurance
company arrangements, together with the rights, benefits and privileges
thereunder.
"PROXY STATEMENT" means the proxy statement of Aetna to be filed with
the Commission pursuant to the Exchange Act in connection with the Merger.
"RECORD DATE" means the date determined by Aetna's Board of Directors
(or by a committee of that board or any other Person acting under authority
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duly delegated to that committee or Person by Aetna's Board of Directors or a
committee of that Board) as the record date for determining the Aetna
Shareholders of record entitled to receive the Distribution.
"REPRESENTATIVES" has the meaning set forth in Section 6.06.
"RESTATED SPINCO CHARTER" means the restated certificate of
incorporation of Spinco, which shall be in such form as the Board of Directors
of Spinco reasonably determines.
"RESTRUCTURING" means the contributions pursuant to Section 2.01
hereof, the settlement of intercompany accounts and repayment of Short Term
Debt (as defined below) in accordance with Section 7.01 hereof, the
Distribution and the other transactions contemplated by this Agreement and the
Ancillary Agreements.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHORT TERM DEBT" means any indebtedness for borrowed money with a
maturity of less than one year at the time of issuance.
"SOFTWARE LICENSING AGREEMENT" means the Software Licensing Agreement
to be entered into prior to or as of the Distribution Date between Aetna and
Spinco, reflecting the terms set forth on Exhibit B hereto.
"SPINCO" has the meaning set forth in the recitals.
"SPINCO ASSETS" means all assets, leases, properties and businesses,
of every kind and description, wherever located, real, personal or mixed,
tangible or intangible, owned, held or used by Aetna, Aetna Services or any
member of the Spinco Group, excluding the Aetna Assets. Without limitation and
for the avoidance of doubt, the following items are, and shall be, "SPINCO
ASSETS" (and are not, and shall not be, Aetna Assets):
(a) all right, title and interest in the real property situated
at 151 Farmington Avenue, Hartford, Connecticut 06156 (subject to the
rights of the Aetna Group under the Lease Agreement), together with
all buildings, fixtures, and improvements erected thereon;
(b) all rights of the Spinco Group (but excluding any and all
rights of the Aetna Group) under the Distribution Documents;
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(c) to the extent relating to the business, assets or employees
of any member of the Spinco Group, all rights of Aetna under the
Confidentiality Agreement and the confidentiality agreements entered
into by Aetna with potential purchasers of Aetna or certain of Aetna's
businesses during June and July 2000;
(d) all cash and cash equivalents, including all bank account
balances and petty cash, of Aetna and Aetna Services (provided,
however, that the cash positions of Aetna and Aetna Services cannot be
increased or decreased in a manner that violates the Merger
Agreement);
(e) all Spinco Intellectual Property Rights;
(f) all rights under the Contracts listed on Schedule A hereto;
(g) the other assets, properties and business listed on Schedule
B hereto;
(h) the Permitted Sales Proceeds from the Permitted Sales and the
Incentive Amount; and
(i) all goodwill associated with the Spinco Group, the Aetna
Group or the Spinco Assets prior to the Distribution Time (excluding
goodwill associated with the Aetna Business or the Aetna Assets),
together with the right to represent to third parties that the Spinco
Group is the successor to all businesses and operations of the Spinco
Group or the Aetna Group other than the Aetna Business (it being
agreed and understood between the parties that this will preclude the
Spinco Group from representing to third parties that it is the
successor to Aetna Group's financial services and international
businesses).
"SPINCO BENEFITS LIABILITIES" means the AUSHC Retained Liabilities as
defined in the Employee Benefits Agreement.
"SPINCO BUSINESS" means the businesses and operations of Spinco, its
Subsidiaries and the Contributed Subsidiaries, as conducted on the date hereof,
but taking into account the Restructuring.
"SPINCO COMMON STOCK" means the common stock, par value $.005 per
share, of Spinco.
"SPINCO ENVIRONMENTAL LIABILITIES" means any and all Liabilities of or
relating to (i) Aetna, Aetna Services or any member of the Spinco Group or (ii)
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the Spinco Business or the Spinco Assets (including, without limitation, offsite
disposal), which, in either case, arise under or relate to Environmental Laws,
excluding the Aetna Environmental Liabilities.
"SPINCO GROUP" means Spinco, its direct and indirect Subsidiaries and
the Contributed Subsidiaries (including all successors to each of those
Persons).
"SPINCO GROUP LIABILITIES" means, except as otherwise specifically
provided in the Merger Agreement or any Distribution Document, all Liabilities
(including Liabilities arising out of any litigation), whether arising before,
at or after the Distribution Time, of or relating to (a) Aetna, Aetna Services
or any member of the Spinco Group, (b) any member of Aetna Group to the extent
arising from the conduct of, in connection with or relating to the Spinco
Assets or the Spinco Business or the ownership or use thereof, (c) or arising
out of the Domestic P&C Business or (d) the Contracts (x) filed as Exhibits
4.22 and 10.6 to the Aetna Annual Report on Form 10-K for the year ended
December 31, 1999 or (y) identified on Schedule F to which Aetna Life Insurance
and Annuity Company and one or more Affiliates of Lincoln National Corporation
are parties; in each case excluding the Aetna Group Liabilities. Without
limiting the generality of the foregoing, and except as specified in the next
sentence, "SPINCO GROUP LIABILITIES" shall include, without limitation, the
following Liabilities whether arising before, at or after the Distribution
Time: (i) any Liabilities arising in connection with the Spinco Assets or the
Spinco Business, (ii) the Spinco Environmental Liabilities, (iii) the
Liabilities set forth on Schedule C hereto, (iv) the Spinco Litigation
Liabilities, (v) the Spinco Benefits Liabilities, (vi) all other Liabilities of
the Spinco Group under any Distribution Document, and (vii) except to the
extent otherwise provided in this Agreement, the Merger Agreement or in any of
the Ancillary Agreements, all Liabilities of the Spinco Group or the Aetna
Group arising (prior to the Merger Effective Time) out of the Distribution and
any of the other transactions contemplated by this Agreement or any of the
Ancillary Agreements. Notwithstanding the foregoing, "SPINCO GROUP LIABILITIES"
shall exclude any and all: (1) Liabilities for Taxes (which Liabilities shall
be governed by the Tax Sharing Agreement) and (2) other Liabilities to the
extent specifically retained or assumed by the Aetna Group.
"SPINCO INDEMNITEE" has the meaning set forth in Section 4.02(a).
"SPINCO INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights (i) owned by a member of the Spinco Group or the Aetna Group or (ii)
owned by a third party and licensed or sublicensed to a member of the Spinco
Group or the Aetna Group, in each case excluding the Aetna Intellectual
Property Rights but including without limitation:
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(a) all right, title and interest in and use of the "Aetna" name and
any derivative thereof including, without limitation, all trademarks, service
marks, trade dress, logos, domain names, trade names and corporate names
(whether or not registered) in the United States and all other nations
throughout the world, including all variations, derivations, combinations,
registrations and applications for registration of the foregoing and all
goodwill associated therewith, but excluding the Aetna China Name Rights and
the Aeltus Name Rights (collectively, the "AETNA NAME Rights"); and
(b) the Intellectual Property Rights listed on Schedule D hereto.
"SPINCO LITIGATION" means (i) the litigation pending as of the date
hereof in which Aetna or Aetna Services or one or more of their respective
officers, directors or employees is named a defendant (x) relating to,
involving or arising out of the Spinco Business and any new such cases which
may be commenced after the date hereof, (y) alleging violations of federal or
state securities laws by Aetna or (z) alleging breaches of fiduciary duties of
the Aetna directors under state law (in the case of clauses (y) and (z), the
cases set forth on Schedule E) but excluding, in each case, any such litigation
which relates primarily to the Aetna Business; and (ii) any litigation in which
Aetna or Aetna Services (or one or more of their respective officers, directors
or employees) is named a defendant on or after the date hereof alleging
violations of federal or state securities laws or breaches of fiduciary duties
of the Aetna directors at the Merger Effective Time under state law, in each
case (x) relating to or arising out of the Merger or the Restructuring and (y)
arising out of matters occurring before the Merger Effective Time. For the
avoidance of doubt, "SPINCO LITIGATION" shall not include any Actions relating
to or in connection with Taxes, as such litigation is governed by the Tax
Sharing Agreement.
"SPINCO LITIGATION LIABILITIES" means all Liabilities arising before,
at or after the Distribution Time, in connection with, relating to, or
resulting from the Spinco Litigation.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interests having by their terms ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person or by one or
more of its respective Subsidiaries or by such Person and any one or more of
its respective Subsidiaries.
"TAX" means Tax as such term is defined in the Tax Sharing Agreement.
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"TAX SHARING AGREEMENT" means the Tax Sharing Agreement substantially
in the form attached as Exhibit C hereto to be entered into as of the
Distribution Date among Aetna, Parent and Spinco.
"THIRD-PARTY CLAIM" has the meaning set forth in Section 4.05.
"TRADEMARK ASSIGNMENT AGREEMENT" means the Trademark Assignment
Agreement to be entered into as of the Distribution Date between Aetna and
Spinco, reflecting the terms set forth on Exhibit D hereto.
"TRADEMARK LICENSING AGREEMENT" means the Trademark Licensing
Agreement to be entered into as of the Distribution Date between Aetna and
Spinco, reflecting the terms set forth on Exhibit E hereto.
"TRANSFER" has the meaning set forth in Section 2.02.
"TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement to be entered into as of the Distribution Date between Aetna and
Spinco, reflecting the terms set forth on Exhibit F hereto.
ARTICLE 2
CONTRIBUTIONS AND ASSUMPTION OF LIABILITIES
SECTION 2.01. Contribution of Contributed Subsidiaries. Upon the terms
and subject to the conditions set forth in the Merger Agreement and the
Distribution Documents, effective prior to the Distribution Time, Aetna shall
contribute to Spinco all of the outstanding shares of capital stock of, or
other ownership interests in, each of the Subsidiaries in clause (i) and clause
(ii) of the definition of Contributed Subsidiaries in the manner described on
Schedule 2.01, subject to receipt of any necessary consents or approvals of
third parties or of Governmental Entities and subject to Section 7.03.
SECTION 2.02. Transfers of Certain Assets to Spinco Group. Upon the
terms and subject to the conditions set forth in the Merger Agreement or any
Distribution Document, except as otherwise expressly set forth therein,
effective prior to or as of the Distribution Time or as soon as practicable
after the Distribution Time, subject to receipt of any necessary consents or
approvals of third parties or of Governmental Entities and subject to Section
7.03, Aetna shall, or, if requested, shall cause the relevant member of Aetna
Group to, assign, contribute, convey, transfer and deliver ("TRANSFER") to
Spinco or to one or more of Spinco's wholly-owned Subsidiaries all of the
right, title and interest of Aetna
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or such member of the Aetna Group in and to all Spinco Assets that are not
owned, held or used by a Contributed Subsidiary, if any, as the same shall
exist on the Distribution Date or on such later date as a particular Transfer
may occur.
SECTION 2.03. Transfers of Certain Assets to Aetna Group. Upon the
terms and subject to the conditions set forth in the Merger Agreement or any
Distribution Document, except as otherwise expressly set forth therein,
effective prior to or as of the Distribution Time or as soon as practicable
after the Distribution Time, subject to receipt of any necessary consents or
approvals of third parties or of Governmental Entities and subject to Section
7.03, prior to the Distribution Time Aetna, and following the Distribution Time
Spinco, shall, or if requested, shall cause the relevant member of the Spinco
Group to, Transfer to Aetna or to one or more members of Aetna Group all of the
right, title and interest of Spinco or such member of the Spinco Group in and
to all Aetna Assets, if any, as the same shall exist on the Distribution Date
or on such later date as a particular Transfer may occur.
SECTION 2.04. Assumption of Certain Liabilities. (a) Upon the terms and
subject to the conditions set forth in the Merger Agreement or any Distribution
Document, except as otherwise expressly set forth therein, effective as of the
Distribution Time (or of the time of Transfer, if earlier, of the assets to
which such Liabilities are attributable), in partial consideration for the
Transfers pursuant to Section 2.02, Spinco hereby unconditionally (i) assumes
all Spinco Group Liabilities (it being understood that the Spinco Benefits
Liabilities are allocated and assumed pursuant to the Employee Benefits
Agreement) to the extent not then an existing obligation of the Spinco Group
and (ii) undertakes to pay, satisfy and discharge when due in accordance with
their terms all Spinco Group Liabilities.
(b) Upon the terms and subject to the conditions set forth in the
Merger Agreement or any Distribution Document, except as otherwise expressly
set forth therein, effective as of the Distribution Time (or of the time of
Transfer, if earlier, of the assets to which such Liabilities are
attributable), in partial consideration for the Transfers pursuant to Section
2.03, Aetna hereby unconditionally (i) assumes all Aetna Group Liabilities (it
being understood that the Aetna Benefits Liabilities are allocated and assumed
pursuant to the Employee Benefits Agreement) to the extent not then an existing
obligation of the Aetna Group and (ii) undertakes to pay, satisfy and discharge
when due in accordance with their terms all Aetna Group Liabilities.
SECTION 2.05. Agreement Relating to Consents Necessary to Transfer
Assets. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to transfer or assign any asset or
any claim or right or any benefit arising thereunder or resulting therefrom if
an
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attempted assignment thereof, without the necessary consent of a third
party, would constitute a breach or other contravention thereof or in any way
adversely affect the rights of Spinco, or any member of the Spinco Group, or
Aetna, or any member of the Aetna Group, thereunder. Spinco and Aetna shall
cooperate with each other, keep each other informed and will, subject to
Section 7.03, use their reasonable best efforts to obtain the consent of any
third party or any Governmental Entity, if any, required in connection with the
transfer or assignment pursuant to Sections 2.02 or 2.03 of any such asset or
any claim or right or any benefit arising thereunder. Until such required
consent is obtained, or if such consent cannot be obtained or an attempted
assignment thereof would be ineffective or would adversely affect the rights of
the transferor thereunder so that the intended transferee would not in fact
receive substantially all such rights, Spinco and Aetna will cooperate in a
mutually agreeable arrangement under which the intended transferee would obtain
the benefits and assume the obligations thereunder in accordance with this
Agreement, including (but not limited to) sub-contracting, sub-licensing or
sub-leasing to such transferee, or under which the transferor would enforce for
the benefit of the transferee and (except as otherwise provided herein or in
any Ancillary Agreement) at the transferee's expense any and all rights of the
transferor against, with the transferee assuming the transferor's obligations
to, each third party thereto. In the case of any Transfer involving a third
party consent, the transferor shall not agree to any terms of transfer (without
the prior written consent of the transferee) which have the effect of
materially altering the rights or benefits arising under any of the particular
Spinco Assets or the Aetna Assets, as the case may be subject to the Transfer.
ARTICLE 3
THE DISTRIBUTION
SECTION 3.01. Cooperation Prior to the Distribution. (a) As promptly as
practicable after the date of this Agreement, Aetna and Spinco shall prepare,
and Spinco shall file with the Commission, the Form 10, which shall include or
incorporate by reference the Information Statement. Aetna and Spinco shall use
their reasonable best efforts to cause the Form 10 to become effective under
the Exchange Act as soon as practicable. After the Form 10 has become
effective, Aetna shall mail the Information Statement as promptly as
practicable to the Aetna Shareholders of record as of the Record Date.
(b) Aetna and Spinco shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
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amendments to any employee benefit and other plans contemplated by the
Ancillary Agreements.
(c) Aetna and Spinco shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States and shall take reasonable best efforts to
comply with all applicable foreign securities laws in connection with the
transactions contemplated hereby or by the Ancillary Agreements.
(d) Spinco shall prepare, file and pursue an application to permit the
listing of the Spinco Common Stock on the New York Stock Exchange ("NYSE").
SECTION 3.02. Aetna Board Action; Conditions Precedent to the
Distribution. Aetna's Board of Directors shall establish (or delegate authority
to establish) the Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution. In no event shall the
Distribution occur unless the following conditions shall have been satisfied:
(a the Form 10 shall have become effective under the Exchange Act;
(b the Spinco Common Stock to be delivered in the Distribution shall
have been approved for listing on the NYSE, subject to official notice of
issuance;
(c the Restated Spinco Charter shall be in effect;
(d each of the Aetna Board of Directors and the Spinco Board of
Directors (i) shall have received an opinion, addressed and reasonably
satisfactory to each of them from an independent solvency firm selected by
those boards of directors, and (ii) shall otherwise be reasonably satisfied,
(A) that after giving effect to the Restructuring (x) neither Aetna nor Spinco
will be insolvent or will have unreasonably small capital or assets with which
to engage in their respective businesses, (y) each of Aetna and Spinco will be
able to pay its respective debts as they become due in the usual course of
business and (z) neither Aetna's nor Spinco's total assets will be less than
the sum of its respective total liabilities and (B) that the Distribution, when
effected in accordance with the terms of this Agreement and the Ancillary
Agreements, shall have been effected in accordance with the provisions of the
Connecticut Business Corporation Act relating to distributions and applicable
fraudulent transfer and fraudulent conveyance laws;
(e the contributions referred to in Section 2.01, the transfers
referred to in Sections 2.02 and 2.03, and the assumptions of Liabilities
referred to in Section 2.04 of this Agreement shall have been effected;
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(f each of the Ancillary Agreements shall have been duly executed
and delivered by the parties thereto; and
(g each condition to the Merger set forth in Sections 7.1(a), (b)
and (c), 7.2 and 7.3 of the Merger Agreement shall have been satisfied or
waived.
SECTION 3.03. The Distribution. Subject to the terms and conditions set
forth in this Agreement, (i) immediately prior to the Distribution Time, Aetna
shall deliver to the Distribution Agent, for the benefit of the Aetna
Shareholders of record on the Record Date, a stock certificate or certificates,
endorsed by Aetna in blank, representing all of the then-outstanding shares of
Spinco Common Stock owned by Aetna, (ii) the Distribution shall be effective as
of the Distribution Time and (iii) Aetna shall instruct the Distribution Agent
to distribute, on or as soon as practicable after the Distribution Date, to
each Aetna Shareholder of record as of the Record Date one share of Spinco
Common Stock (together with the associated preferred share purchase rights) for
every one share of Aetna Common Stock so held. Spinco agrees to provide all
certificates for shares of Spinco Common Stock that Aetna shall require (after
giving effect to Sections 3.04 and 3.05) in order to effect the Distribution.
The Merger and Distribution shall be effected such that the Merger
Consideration (as defined in the Merger Agreement) and the shares of Spinco
Common Stock to be distributed in the Distribution are payable and
distributable, as applicable, only to the same Aetna Shareholders.
SECTION 3.04. Stock Dividend. On or before the Distribution Date,
Spinco shall issue to Aetna as a stock dividend the number of shares of Spinco
Common Stock (together with the associated preferred share purchase rights)
that are required to effect the Distribution, as certified by the Distribution
Agent. In connection with the Distribution, Aetna shall deliver to Spinco for
cancellation all of the share certificates currently held by it representing
Spinco Common Stock.
SECTION 3.05. Fractional Shares. No certificates representing
fractional shares of Spinco Common Stock will be distributed in the
Distribution. The Distribution Agent will be directed to determine the number
of whole shares and fractional shares of Spinco Common Stock allocable to each
Aetna Shareholder of record as of the Record Date. Upon the determination by
the Distribution Agent of such number of fractional shares, as soon as
practicable after the Distribution Date, the Distribution Agent, acting on
behalf of the holders thereof, shall sell such fractional shares for cash on
the open market in each case at the then prevailing market prices and shall
disburse to each holder entitled thereto, in lieu of any fractional share,
without interest, that holder's ratable share of the proceeds of that sale,
after making appropriate deductions of the amount required, if any, to be
withheld for United States federal income Tax purposes.
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ARTICLE 4
INDEMNIFICATION AND OTHER MATTERS
SECTION 4.01. Spinco Indemnification of Aetna Group. (a Subject to
Section 4.03, from and after the Distribution Date, Spinco shall indemnify,
defend and hold harmless each member of the Aetna Group, their Affiliates
(including, for the avoidance of doubt, Parent) and their respective officers,
directors and employees (each, a "AETNA INDEMNITEE") from and against any and
all Damages incurred or suffered by any Aetna Indemnitee arising out of (i) any
and all Spinco Group Liabilities and (ii) the breach by any member of the
Spinco Group of any obligation under any Distribution Document (subject to any
limitation set forth therein), other than the Tax Sharing Agreement (all
indemnities thereunder being governed by the specific terms of the Tax Sharing
Agreement).
(b Subject to Section 4.03, from and after the Distribution Date,
Spinco shall indemnify, defend and hold harmless each Aetna Indemnitee and each
Person, if any, who controls any Aetna Indemnitee within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all Damages caused by any untrue statement or alleged untrue
statement of a material fact contained in the Form 10 or any amendment thereof
or the Information Statement or Proxy Statement (in each case as amended or
supplemented if Spinco shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
that those Damages are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information that is furnished
to Spinco by Parent or any of its Affiliates (other than any member of the
Aetna Group) specifically for use therein.
SECTION 4.02. Aetna Indemnification of Spinco Group. (a Subject to
Section 4.03, from and after the Distribution Date, Aetna shall indemnify,
defend and hold harmless each member of the Spinco Group, their Affiliates and
their respective officers, directors and employees (each, a "SPINCO
INDEMNITEE") from and against any and all Damages incurred or suffered by any
Spinco Indemnitee arising out of (i) any and all Aetna Group Liabilities and
(ii) the breach by any member of the Aetna Group of any obligation under any
Distribution Document (subject to any limitation set forth therein), other than
the Tax Sharing Agreement (all indemnities thereunder being governed by the
specific terms of the Tax Sharing Agreement).
(b Subject to Section 4.03, from and after the Distribution Date,
Aetna shall indemnify, defend and hold harmless each Spinco Indemnitee and each
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Person, if any, who controls any Spinco Indemnitee within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all Damages caused by any untrue statement or alleged untrue
statement of a material fact contained in the Form 10 or any amendment thereof
or the Information Statement or Proxy Statement (in each case as amended or
supplemented if Spinco shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that those Damages are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information that is furnished to Spinco by Parent or any of its Affiliates
(other than any member of the Aetna Group) specifically for use therein.
SECTION 4.03. Insurance and Third Party Obligations; Limitation on
Liability. (a Upon indemnification of the Indemnified Party (as defined below),
the Indemnifying Party shall be subrogated to the rights of the Indemnified
Party against the insurer or other third party with respect to such indemnified
amount. It is expressly agreed that no insurer or any other third party shall
be (i) entitled to a benefit it would not be entitled to receive in the absence
of the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any Insured Claims or any other claims to which it is
obligated or (iii) entitled to any subrogation rights with respect to any
obligation hereunder.
(b Each party shall use its reasonable best efforts to mitigate its
Damages and not to cause or worsen any Liability which would be a Liability of
the other party. If an Indemnified Party shall receive any amount of Insurance
Proceeds or any other amount from a third party in connection with a specific
Liability giving rise to indemnification hereunder (i) at any time subsequent
to the actual receipt of a payment in full indemnification of such Liability
hereunder, then such Indemnified Party shall reimburse the Indemnifying Party
for any such indemnification payment made up to the amount of such Insurance
Proceeds or other amounts actually received or (ii) at any time prior to the
receipt of any indemnification payment in respect of such Liability hereunder,
then the indemnification to be paid under Section 4.01 or 4.02 shall be paid
net of the amount of any such Insurance Proceeds or other amounts actually
received. Notwithstanding this Section 4.03, (x) in no event shall any
Indemnified Party be required (i) to take any action, or forebear from
exercising any right, under the Merger Agreement or any Distribution Document
or (ii) to take any action with respect to, make any demand under or claim any
coverage in connection with, any Policy, and (y) nothing herein shall permit
any Indemnifying Party to delay or refrain from making any payment to any
Indemnified Party because of the availability or alleged availability of any
Policy or Insurance Proceeds (provided
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that the foregoing shall not limit the subrogation rights of an Indemnifying
Party under Section 4.03(a)).
SECTION 4.04. Notice and Payment of Claims. If any Aetna Indemnitee or
Spinco Indemnitee (the "INDEMNIFIED PARTY") determines that it is or may be
entitled to indemnification by any party (the "INDEMNIFYING PARTY") under this
Article 4 (other than in connection with any Action subject to Section 4.05),
the Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. Within 30 calendar days after
receipt of such notice, the Indemnifying Party shall pay the Indemnified Party
such amount in cash or other immediately available funds unless the
Indemnifying Party objects in writing to the claim for indemnification or the
amount thereof. In the event of such an objection or failure to pay by the
Indemnifying Party, the amount, if any, that is Finally Determined to be
required to be paid by the Indemnifying Party in respect of such indemnity
claim shall be paid by the Indemnifying Party to the Indemnified Party in cash
within 15 calendar days after such indemnity claim has been so Finally
Determined, with interest thereon at the prime rate of Citibank N.A. in effect
from time to time for the period commencing on the 30th day following receipt
of the initial notice of the claim from the Indemnified Party until the date of
actual payment (inclusive).
SECTION 4.05. Notice and Defense of Third-Party Claims. (a Promptly
(and in any event within 10 Business Days) following the earlier of (i) receipt
of notice, whether by service of process or otherwise, of the commencement by a
third party of any Action against or otherwise involving any Indemnified Party
or (ii) receipt of information from a third party alleging the existence of a
claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "THIRD-PARTY
CLAIM"), the Indemnified Party shall give the Indemnifying Party written notice
thereof. The failure of the Indemnified Party to give notice as provided in
this Section 4.05 shall not relieve the Indemnifying Party of its obligations
under this Agreement, except to the extent that the Indemnifying Party is
actually and materially prejudiced by such failure to give notice.
(b Within 30 calendar days after receipt of notice from the
Indemnified Party pursuant to Section 4.05(a), the Indemnifying Party may (by
giving written notice thereof to the Indemnified Party) elect at its option to,
and shall at the request of the Indemnified Party, assume the defense of such
Third-Party Claim at the Indemnifying Party's sole cost and expense unless the
Indemnifying Party objects in writing to such indemnification claim (in which
case the Indemnified Party may not require the Indemnifying Party to assume the
defense and the
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Indemnifying Party shall only assume the defense with the consent of the
Indemnified Party). During such 30-calendar day period, unless and until the
Indemnifying Party assumes the defense of a Third-Party Claim or objects in
writing, the Indemnified Party shall take such action as it deems appropriate,
acting in good faith, in connection with the Third-Party Claim; provided,
however, that the Indemnified Party shall not settle or compromise, or make any
offer to settle or compromise, the Third-Party Claim without the prior written
consent of the Indemnifying Party (which shall not be unreasonably withheld).
(c If the Indemnifying Party assumes the defense of a Third-Party
Claim, (w) it shall keep the Indemnified Party timely informed of all
significant developments in connection therewith, (x) the defense shall be
conducted by counsel retained by the Indemnifying Party, provided that the
Indemnified Party shall have the right to participate in such proceedings and
to be represented by counsel of its own choosing at the Indemnified Party's
sole cost and expense; and (y) the Indemnifying Party may settle or compromise
the Third-Party Claim without the prior written consent of the Indemnified
Party so long as such settlement or compromise includes an unconditional
release of the Indemnified Party from all claims that are the subject of such
Third-Party Claim, provided that the Indemnifying Party may not agree to any
such settlement or compromise pursuant to which there is any finding or
admission of any violation of Law or pursuant to which any remedy or relief
(including but not limited to the imposition of a consent order, injunction or
decree which would restrict the future activity or conduct of the Indemnified
Party or any Subsidiary or Affiliate thereof), other than monetary damages for
which the Indemnifying Party shall be responsible hereunder, shall be applied
to or against the Indemnified Party, without the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld).
(d If the Indemnifying Party has not objected in writing to such
indemnification claim, and, if at the end of the 30-calendar day period
referred to in Section 4.05(b) the Indemnifying Party has not assumed the
defense of such claim, or, if earlier, beginning at such time as the
Indemnifying Party has declined in writing to assume the defense of a
Third-Party Claim, (x) the Indemnified Party will take such steps as it deems
appropriate to defend that Third-Party Claim and the defense shall be conducted
by counsel retained by the Indemnified Party, provided that the Indemnifying
Party shall have the right to participate in such proceedings and to be
represented by counsel of its own choosing at the Indemnifying Party's sole
cost and expense; and (y) the Indemnifying Party shall reimburse the
Indemnified Party on a current basis (and in any event within 30-calendar days
after the submission of invoices and bills by an Indemnified Party) for its
expenses of investigation, attorneys' and expert witnesses' fees and other
out-of-pocket expenses incurred in defending against such Third-Party Claim and
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the Indemnifying Party shall be bound by the result obtained with respect
thereto by the Indemnified Party; provided further, that the Indemnified Party
shall not settle or compromise, or make any offer to settle or compromise, the
Third-Party Claim without the prior written consent of the Indemnifying Party
(which shall not be unreasonably withheld).
(e The Indemnifying Party shall pay to (or at the direction of) the
Indemnified Party in cash the amount, if any, for which the Indemnified Party
is entitled to be indemnified hereunder within 15 calendar days after such
Third Party Claim has been Finally Determined, in the case of an indemnity
claim as to which the Indemnifying Party has acknowledged liability or, in the
case of any indemnity claim as to which the Indemnifying Party has not
acknowledged liability, within 15 calendar days after such Indemnifying Party's
liability, if any, hereunder has been Finally Determined.
(f Notwithstanding any other provision of this Agreement, Aetna
acknowledges and agrees that Spinco shall (solely at its own cost and expense)
assume and continue the defense of all the Spinco Litigation and that, as long
as such settlement or compromise includes an unconditional release of all Aetna
Indemnitees, Spinco shall be permitted to settle or compromise such Actions
without the consent of Aetna or any of its Affiliates provided that Spinco may
not agree to any such settlement or compromise pursuant to which there is any
finding or admission of any violation of Law or pursuant to which any remedy or
relief (including but not limited to the imposition of a consent order,
injunction or decree which would restrict the future activity or conduct of the
Aetna Indemnitees), other than monetary damages for which the Spinco shall be
responsible hereunder, shall be applied to or against the such Aetna
Indemnitee, without the prior written consent of such Aetna Indemnitee (which
shall not be unreasonably withheld); provided, further, that Spinco shall use
its reasonable best efforts to defend any Aetna Indemnitee and to cause any
Aetna Indemnitee to be dismissed with prejudice as a party to any pending or
future Spinco Litigation and, to the extent any Aetna Indemnitee believes, in
its reasonable judgment, that Spinco has failed to diligently pursue such
defense or dismissal, the Aetna Indemnitee shall be entitled (at its own cost
and expense) to independently move for or otherwise pursue such defense or
dismissal and to take such related actions as it may deem necessary or
appropriate in connection therewith. Spinco shall keep Aetna timely informed of
all significant developments with respect to the Spinco Litigation to which any
Aetna Indemnitee is a party.
(g Subject to Article 6, each party shall cooperate, and cause their
respective Representatives to cooperate, in the defense or prosecution of any
Third-Party Claim and shall furnish or cause to be furnished such records,
information and testimony, and attend such conferences, discovery proceedings,
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hearings, trials or appeals, as may be reasonably requested in connection
therewith.
SECTION 4.06. Non-Exclusivity of Remedies. The remedies provided for in
this Article 4 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Indemnified Party at law or in equity.
If the indemnification provided for in this Article 4 is unavailable to any
Indemnified Party (x) that is a member of the Aetna Group on the grounds that
such Indemnified Party was a former Affiliate of Spinco or (y) on other public
policy grounds, then the Indemnifying Party shall pay to the Indemnified
Party's parent such amount that represents the diminution in value to such
parent as a result of the Indemnifying Party's inability to so indemnify such
Indemnified Party (provided that such amount shall not exceed the amount that
would otherwise have been payable by the Indemnifying Party to such Indemnified
Party in respect of such claim pursuant to this Article 4).
ARTICLE 5
EMPLOYEE MATTERS AND TRANSITION SERVICES
SECTION 5.01. Employee Matters Generally. With respect to employee
matters and employee benefits arrangements, the parties hereto agree as set
forth herein and in the Employee Benefits Agreement and in the Tax Sharing
Agreement.
SECTION 5.02. Transition Services Matters Generally. With respect to
the provision of certain transition services by either Group to the other Group
after the Distribution Time, the parties hereto agree as set forth herein and
in the Transition Services Agreement, the Lease Agreement and the Software
Licensing Agreement.
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Provision of Corporate Records. Except as otherwise
specifically set forth in this Agreement or any Ancillary Agreement,
immediately prior to or as soon as practicable following the Distribution Date,
each Group shall provide to the other Group all documents, Contracts, books,
records and data (including but not limited to minute books, stock registers,
stock certificates and documents of title) in its possession relating primarily
to the other Group or its
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business, assets and affairs (after giving effect to the transactions
contemplated hereby); provided that if any such documents, Contracts, books,
records or data relate to both Groups or the business and operations of both
Groups, each such Group shall provide to the other Group true and complete
copies of such documents, Contracts, books, records or data. Data stored in
electronic form shall be provided in the format in which it existed at the
Distribution Date, except as otherwise specifically set forth in this Agreement
or any Ancillary Agreement.
SECTION 6.02. Access to Information. From and after the Distribution
Date, each Group shall, for a reasonable period of time, afford promptly to the
other Group and its accountants, counsel and other designated Representatives
reasonable access during normal business hours to all documents, Contracts,
books, records, computer data and other data in such Group's possession
relating to such other Group or the business and affairs of such other Group
(after giving effect to the transactions contemplated hereby) (other than data
and information subject to (i) an attorney/client or other privilege that is
not specifically subject to the provisions of this Article 6 or (ii) in the
case of access provisions in any joint defense arrangements between a member or
members of one Group and a member or members of the other Group, the terms of
the relevant joint defense agreement), insofar as such access is reasonably
required by such other Group, including, without limitation, for audit,
accounting, litigation, regulatory compliance and disclosure and reporting
purposes.
SECTION 6.03. Litigation Cooperation. From and after the Distribution
Date: (a) Each Group shall use all reasonable best efforts to make available to
the other Group and its accountants, counsel, and other designated
representatives, upon written request, its current and former directors,
officers, employees and representatives as witnesses, and shall otherwise
cooperate with the other Group, to the extent reasonably required in connection
with any Action or threatened Action arising out of either Group's business and
operations in which the requesting party may from time to time be involved.
(b Each party hereto shall promptly notify the other party hereto,
upon its receipt or the receipt by any of its Affiliates, of a request or
requirement (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands or other similar processes)
which relates to the business and operations of the other party (a "REQUEST")
reasonably regarded as calling for the inspection or production of any
documents or other information in its possession, custody or control, as
received from any Person that is a party in any Action, or in the event the
Person delivering the Request is not a party to such Action, as received from
such Person. In addition to complying with the applicable provisions of Section
6.06, each party shall assert and maintain, or cause its Affiliates to assert
and maintain, any applicable claim to privilege,
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immunity, confidentiality or protection in order to protect such documents and
other information from disclosure, and shall seek to condition any disclosure
which may be required on such protective terms as may be appropriate. No party
may waive, undermine or fail to take any action necessary to preserve an
applicable privilege without the prior written consent of the affected party
hereto (or any affected Affiliate or Affiliates of any such party) except, in
the opinion of such party's counsel, as required by law.
(c Aetna, on its own behalf and on behalf of all of its Affiliates,
hereby waives any conflict which might preclude counsel currently representing
Aetna, Spinco or any of their respective Affiliates from representing Spinco
and/or any of its Affiliates following the Distribution Date in connection with
the Spinco Litigation existing at the Merger Effective Time.
(d Aetna and Spinco shall enter into such joint defense agreements,
in customary form, as Aetna and Spinco shall determine are advisable.
SECTION 6.04. Reimbursement. Except to the extent that any member of
one Group is obligated to indemnify any member of the other Group under Article
4 for that cost or expense, each Group providing information or witnesses to
the other Group, or otherwise incurring any expense in connection with
cooperating, under Sections 6.01, 6.02 or 6.03 shall be entitled to receive
from the recipient thereof, upon the presentation of invoices therefor, payment
for all out-of-pocket costs and expenses that may be incurred in providing such
information, witnesses or cooperation.
SECTION 6.05. Retention of Records. From and after the Distribution
Date, except as otherwise required by law or agreed to in writing, each party
shall, and shall cause the members of its respective Group to, retain all
information relating to the other Group's business and operations in accordance
with the then general practice of such party with respect to information
relating to its own business and operations. Notwithstanding the foregoing, any
party may destroy or otherwise dispose of any such information at any time,
provided that, prior to such destruction or disposal, (i) such party shall
provide not less than 90 calendar days' prior written notice to the other
party, specifying the information proposed to be destroyed or disposed of and
the scheduled date for such destruction or disposal, and (ii) if the recipient
of such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the information proposed to be destroyed or
disposed of be delivered to such requesting party, the party proposing the
destruction or disposal shall promptly arrange for the delivery of such of the
information as was requested at the expense of the requesting party.
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SECTION 6.06. Confidentiality. From and after the Distribution Date,
each party shall hold and shall cause its Affiliates and their respective
directors, officers, employees, counsel, accountants, agents, consultants,
advisors and other authorized representatives ("REPRESENTATIVES") to hold in
strict confidence all documents and other information (other than any such
documents and other information relating solely to the business or affairs of
such party) concerning the other party and/or its Affiliates ("CONFIDENTIAL
INFORMATION") unless such party is compelled to disclose such documents and/or
other information by judicial or administrative process or, in the opinion of
its counsel, by other requirements of law or the rules of any applicable stock
exchange. Confidential Information shall not include such documents and/or
other information which can be shown to have been (A) in the public domain
through no fault of such party, (B) lawfully acquired after the Distribution
Date on a non-confidential basis from other sources or (C) acquired or
developed independently by such party without violating this Section 6.06 or
the Confidentiality Agreement. Notwithstanding the foregoing, such party may
disclose such Confidential Information to its Representatives so long as such
Persons are informed by such party of the confidential nature of such
Confidential Information and are directed by such party to treat such documents
and/or other information confidentially. In the event that such party or any of
its Representatives is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or other similar processes) to disclose any of the
Confidential Information, such party will promptly notify the other party so
that the other party may seek a protective order or other remedy or waive such
party's compliance with this Section 6.06. Such party shall exercise reasonable
best efforts to preserve the confidentiality of the Confidential Information,
including, but not limited to, by cooperating with the other party to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. If, in the absence of
a protective order or other remedy or the absence of receipt of a waiver of the
other party, such party or any of its Representatives is nonetheless legally
compelled to disclose any of the Confidential Information, such party or such
Representative may disclose only that portion of the Confidential Information
which is legally required to be disclosed. Such party agrees to be responsible
for any breach of this Section 6.06 by it and/or its Representatives.
SECTION 6.07. Preservation of Privilege. The parties hereto recognize
that as a consequence of the transactions contemplated by this Agreement or the
Merger Agreement or the Ancillary Agreements, the parties may have common
interests in the defense of certain pending or threatened litigation which may
necessitate the exchange between the parties or their counsel of documents or
other information that is subject to the attorney-client privilege, the work
product doctrine or other legally recognized privileges, protections or
immunities from
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discovery. Each party agrees to take in addition to, and not in limitation of,
its obligations under Section 6.03(b) all reasonable best and necessary efforts
to protect and maintain, and to cause its Affiliates to protect and maintain,
any applicable claim to privilege, immunity, protection or confidentiality in
order to protect such documents and other information from improper disclosure
or use. In addition to, and not in limitation of, its obligations under Section
6.03(b) and without limiting the generality of the foregoing, and to the
maximum extent permitted by law, none of the parties or their respective
Affiliates may waive or undermine, or fail to defend in a commercially
reasonable manner, any privilege or protection or take or fail to take any
other commercially reasonable action (a) that could result in the disclosure of
any common-interest or joint-defense materials to any Person that is neither a
party to this Agreement nor an Affiliate of any such party or (b) that would
have the effect of waiving or undermining such privilege or protection, in
either case, without the prior written consent of the affected party and any
affected Affiliate of such affected party.
SECTION 6.08. Inapplicability of Article 6 to Tax Matters.
Notwithstanding anything to the contrary in this Article 6, this Article 6
shall not apply with respect to documents, other information and/or other
matters relating to Taxes, all of which shall be governed by the Tax Sharing
Agreement.
ARTICLE 7
CERTAIN OTHER AGREEMENTS
SECTION 7.01. Intercompany Accounts. (a Except as otherwise
specifically set forth herein or in any of the Ancillary Agreements or in the
Merger Agreement, (i) all intercompany loan balances in existence as of the
Distribution Time between any member of the Aetna Group and any member of the
Spinco Group will be settled or paid in cash or other immediately available
funds prior to or as of the Distribution Time and (ii) all intercompany
accounts receivable and accounts payable between any member of one Group and
any member of another Group in existence at the Distribution Time shall be paid
in full, in cash or other immediately available funds, by the party or parties
owing such obligations as soon as practicable (but in no event more than 30
calendar days after the Distribution Time). It is understood and agreed that
all or a portion of the intercompany loan balances owed by Spinco to Aetna
Services will be paid in cash by Spinco.
(b At or prior to the Distribution Time, Aetna shall repay or cause
to be repaid all Short Term Debt of any member of the Aetna Group, other than
(i) not more than $17.4 million aggregate principal amount (together with
accrued and
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unpaid interest thereon) of Short Term Debt issued by Cruz Blanca S.A., AFP
Santa Maria S.A., Aetna Credito Hipotecario S.A., and Aetna Life Insurance
Company of America, Taiwan Branch, and (ii) any Short Term Debt of any Person
that is not a Subsidiary of Aetna.
(c) Except as otherwise contemplated hereby or as set forth on
Schedule 7.01 or in any of the other Ancillary Agreements or in the Merger
Agreement, all prior agreements and arrangements, including those relating to
goods, rights or services provided or licensed, between any member of the
Spinco Group and any member of the Aetna Group shall be terminated effective as
of the Distribution Time, if not previously terminated. No such agreements or
arrangements shall be in effect after the Distribution Time unless embodied in
this Agreement, the Ancillary Agreements or set forth on Schedule 7.01.
SECTION 7.02. Trademarks; Trade Names. (a) Prior to the Distribution
Time, Aetna and Spinco will enter into the Trademark Assignment Agreement, the
Chinese Mark Agreement and the Trademark Licensing Agreement.
(b) From and after the Distribution Date, (i) Aetna will not, and will
not permit any of its Affiliates to, use any of (A) the Licensed Marks and
Names, except as specifically permitted by the Trademark License Agreement, and
(B) the Spinco Group's logos, marks or names (other than the Licensed Marks and
Names), and (ii) Spinco will not, and will not permit any of its Affiliates to,
use the Aetna China Name Rights except as specifically permitted by the Chinese
Mark Agreement.
(c) From and after the Distribution Date, Spinco will not, and will
not permit any of its Affiliates to, infringe upon the Aeltus Name Rights.
(d) As promptly as practicable following the Distribution Time, Aetna
will, and will cause Aetna Services to, file with the applicable Governmental
Entity amendments to their articles or certificate of incorporation or
otherwise take all action necessary to delete from their names the word "Aetna"
or any marks and names derived therefrom and shall do or cause to be done all
other acts, including the payment of any fees required in connection therewith,
to cause such amendments or other actions to become effective. Aetna will cause
all other members of the Aetna Group to take the foregoing actions with respect
to the names of the Aetna Subsidiaries as promptly as practicable prior to the
end of the Permitted Trademark Period.
(e) From and after the Distribution Date, each party agrees to
cooperate with the other party in connection with any regulatory matters
relating to the
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Trademark Licensing Agreement, the Chinese Mark Agreement and the Trademark
Assignment Agreement.
(f) Aetna acknowledges that from and after the Distribution Date,
notwithstanding the use of the marks and names (the "LICENSED MARKS AND NAMES")
licensed by Spinco as licensor pursuant to the Trademark Licensing Agreement,
the Aetna Name Rights will remain an asset of the Spinco Group and shall
include any goodwill associated with the use of the "Aetna" name, and any
derivative thereof, in combination with one or more of the Acquiror's existing
names or marks as permitted by the Trademark Licensing Agreement.
SECTION 7.03. Further Assurances and Consents. In addition to the
actions specifically provided for elsewhere in this Agreement, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable laws, regulations and
agreements or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable best efforts to obtain any consents and approvals and to make any
filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement; provided that no party hereto
shall be obligated to pay any consideration therefor (except for filing fees
and other similar charges) to any third party from whom such consents or
approvals are requested or to take any action or omit to take any action if the
taking of or the omission to take such action would be unreasonably burdensome
to the party, its Group or its Group's business. The parties agree to enter
into and execute such additional Distribution Documents as may be reasonably
necessary, proper or advisable to effect the transactions contemplated by this
Agreement or the Ancillary Agreements, provided, however that such additional
Distribution Documents shall not diminish any of the rights granted or increase
any of the Liabilities assumed under this Agreement or the Ancillary
Agreements.
SECTION 7.04. Noncompetition and Non-Solicitation. (a)(i) For a period
of three (3) years following the Merger Effective Time, neither Spinco nor any
of its Affiliates (after giving effect to the Distribution), will engage in the
following businesses conducted by the Aetna Group immediately prior to the
Merger Effective Time: (A) in the United States, underwriting and/or issuance
of defined contribution group annuities for pension plans maintained by
employer or similar groups pursuant to Section 401(k), 403(b) or 457 of the
U.S. Internal Revenue Code of 1986, as amended (or any successor law),
underwriting and/or issuance of individual annuities, providing investment
advisory or broker-dealer services, or the management of mutual funds, and (B)
in those jurisdictions outside of the United States listed in Schedule
7.04(a)(I), those businesses specified with respect
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to each such jurisdiction ((A) and (B) collectively, the "Prohibited
Businesses"), and (ii) for an additional period of 12 months, to the extent
that Spinco or any of its Affiliates (after giving effect to the Distribution)
engages directly or indirectly in any Prohibited Business, it will do so using
a brand other than "Aetna" (except and only to such extent as may be required
by Law); provided that the foregoing shall not prohibit Spinco or any of its
Affiliates from (x) conducting any of the activities set forth in Schedule 7.04
(a)(II), (y) engaging in any Prohibited Business in any jurisdiction specified
in Schedule 7.04(a) if the Aetna Group ceases to engage in such business in such
jurisdiction, or (z) owning, acquiring or investing in any Person, provided
that if such Person derives in excess of 10% of its consolidated gross revenue
in the most recently completed four fiscal quarters from business activities
which would be restricted hereunder, Spinco will, or will cause such Affiliate
to, divest a portion of such business representing such excess within 12 months
of the acquisition date (unless, in the case of the restriction specified in
(i) above, such 12-month period would terminate subsequent to the termination
of the 3-year restriction period). It is understood that the restrictions set
forth in the immediately preceding sentence will not apply to any Person that
acquires (by acquisition, merger or otherwise) an interest in Spinco or any of
its Affiliates so long as such Person was not an Affiliate of Spinco that was
subject to such restrictions prior to the aforementioned acquisition, merger or
other acquisitive transaction (it being further understood that, following the
aforementioned acquisition, merger or other acquisitive transaction, such
restrictions will continue to apply to Spinco and its Affiliates that were
subject to such restrictions prior to such acquisition, merger or other
transaction).
(b) Except as otherwise permitted by any Ancillary Agreement, for a
period of two years from the Merger Effective Date, neither Group nor any of
its Affiliates shall, directly or indirectly, solicit or attempt to employ or
employ any employee of the other Group. Notwithstanding the foregoing, the
restriction set forth in the immediately preceding sentence shall not apply to
(i) with respect to all employees other than officers and other senior
management of any member of a Group, any Person who contacts such Group or any
of its Affiliates in response to general advertisements or searches or other
broad-based hiring methods or (ii) individuals who choose to leave for Good
Reason the employment of, or are terminated by, a Group without the other Group
having taken any action otherwise prohibited by this Section 7.04(b) . "GOOD
REASON" for the purposes of this Section 7.04(b) shall mean a significant or
long-term reduction in compensation, a relocation of more than 50 miles from
the employee's current place of employment or a material diminution of the
employee's duties and responsibilities.
(c) If any provision contained in this Section 7.04 shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or
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unenforceability shall not affect any other provisions of this Section, but this
Section shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. It is the intention of the parties
that if any of the restrictions or covenants contained herein is held to cover
a geographic area or to be for a length of time which is not permitted by
applicable law, or in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
In addition to and not in limitation of the parties' obligations under Section
8.14, each of the parties hereto acknowledges that the other party would be
irreparably harmed by any breach of this Section and that there would be no
adequate remedy at law or in damages to compensate such party for any such
breach. Each of the parties hereto agrees that the other party shall be
entitled to injunctive relief requiring specific performance by such party of
this Section, and consents to the entry thereof.
SECTION 7.05. Third Party Beneficiaries. Acquiror and Parent shall be
third party beneficiaries of this Agreement. Except as contemplated in the
preceding sentence, nothing contained in this Agreement is intended to confer
upon any Person or entity other than the parties hereto and their respective
successors and permitted assigns and Acquiror and Parent, any benefit, right or
remedies under or by reason of this Agreement, except that the provisions of
Article 4 shall inure to the benefit of the Spinco Indemnitees and the Aetna
Indemnitees.
SECTION 7.06. Intellectual Property Rights and Licenses. Except as
otherwise specifically set forth in this Agreement or in any of the other
Ancillary Agreements, neither Group shall have any right or license in or to
any technology, software, Intellectual Property Right or other proprietary
right owned, licensed or held for use by the other Group.
SECTION 7.07. Insurance. (a) The Spinco Assets shall include any and
all rights of an insured party under each of the Group Policies, subject to the
terms of such Group Policies and any limitations or obligations of Spinco
contemplated by this Section 7.07 or Schedule 7.07, specifically including
rights of indemnity and the right to be defended by or at the expense of the
insurer, with respect to all Actions and Liabilities incurred or claimed to
have been incurred prior to the Distribution Date by any party in or in
connection with the conduct of any of the Spinco Group or the Aetna Group or
their respective businesses and operations, and which Actions and Liabilities
may arise out of an insured or insurable
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occurrence under one or more of such Group Policies. With respect to all of the
applicable Group Policies, Spinco shall use its reasonable best efforts, at its
option, either (x) to cause Aetna and its Affiliates to be named or maintained
as additional insured parties thereunder to the extent of, or (y) to obtain a
run-off or tail coverage policy with respect to, in each case, their respective
insurable interests in respect of the Aetna Group Liabilities incurred or
claimed to have been incurred prior to the Distribution Date and insured
thereunder, and the Aetna Assets shall include such rights, to the extent they
relate to the Aetna Group Liabilities, of an additional insured party under
each such Group Policy or under such run-off or tail policy, as applicable,
subject to the terms of such Policy.
(b) Spinco shall administer all Group Policies. Where Aetna Group
Liabilities are covered under the Group Policies for periods prior to the
Distribution Date, or under any Group Policy covering claims made after the
Distribution Date with respect to an action, error, omission or occurrence
prior to the Distribution Date, then from and after the Distribution Date, upon
request from Aetna, Spinco shall claim coverage for Insured Claims under such
Group Policy as and to the extent that such insurance is available (subject to
Section 7.07(c)) up to the full extent of the applicable limits of liability of
such Group Policy.
(c) Spinco shall use its reasonable best efforts to cause Insurance
Proceeds received with respect to claims, costs and expenses under the Group
Policies (i) relating to Aetna Group Liabilities, to be paid directly to Aetna
(or the applicable member of the Aetna Group) and (ii) relating to the Spinco
Group Liabilities to be paid directly to Spinco (or the applicable member of
the Spinco Group). In the event Spinco has been unable to cause Insurance
Proceeds to be paid directly to a Aetna Group member in accordance with the
preceding sentence, or to cause Aetna and its Affiliates to be named or
maintained as additional insureds or to obtain run-off or tail policies in
accordance with the last sentence of Section 7.07(a), Spinco shall inform Aetna
of the reasons therefor and Aetna shall be entitled, at its own cost and
expense, to take such actions as may be necessary to achieve such payment or
such additional insured status or to obtain such run-off or tail policy (so
long as such actions are not materially adverse to Spinco). Payment of the
allocable portions of indemnity costs out of Insurance Proceeds resulting from
such Group Policies will be made by Spinco to the appropriate party upon
receipt from the insurance carrier (to the extent not paid directly to a Aetna
Group member pursuant to the first sentence of this Section 7.01(c)). In the
event that the aggregate limits on any Group Policies are exceeded by the
aggregate of outstanding Insured Claims by the parties hereto, the parties
shall agree on an equitable allocation of Insurance Proceeds based upon their
respective bona fide claims. Each party agrees to use reasonable best efforts
to maximize available coverage under those Group Policies applicable to such
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party, and to take all reasonable steps to recover from all other responsible
parties in respect of an Insured Claim to the extent coverage limits under a
Group Policy have been exceeded or would be exceeded as a result of such Insured
Claim. Notwithstanding any other provision of this Agreement, Spinco shall not
be required to renew, extend or expand the coverage available under any of the
Group Policies provided, that prior to any termination (or failure to
reinstate) such Group Policies with respect to coverage of any Aetna Group
Liabilities insured thereunder, Spinco shall afford Aetna the opportunity of
taking such commercially reasonable steps as may be necessary to maintain such
coverage in place.
SECTION 7.08. Prohibition on Certain Sales. Aetna agrees that for one
year from the Merger Effective Time, unless there is a material change at
Acquiror and its Subsidiaries, Aetna will not sell or permit to be sold the
interests of Aetna International, Inc. in Taiwan, Hong Kong and Malaysia;
provided, that the foregoing shall not limit the right of Aetna to sell
minority interests in such Subsidiaries.
SECTION 7.09. Brazilian Certificate of Foreign Capital Registration .
Prior to the Distribution Date, Aetna shall use its reasonable best efforts to
provide to Parent a copy of the Certificate of Foreign Capital Registration for
Sul America Aetna Seguros e Previdencia S.A., and if not prior to the
Distribution Date, Spinco shall provide such certificate to Parent within one
year from the Distribution Date.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices. All notices and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be deemed given when received addressed as follows:
If to Aetna to:
Aetna Inc.
[ ]
[ ]
Telecopy: [ ]
Attention: [ ]
With copies to:
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Parent
in c/o IVY North American Insurance Corp.
5780 Powers Ferry Road, NW
Atlanta, Georgia 30327-4390
Attention: Michael W. Cunningham,
Executive Vice President &
Chief Financial Officer
Fax: 770-980-3303
B. Scott Burton
Senior Vice President &
Chief Counsel
Fax: 770-850-7660
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Joseph B. Frumkin, Esq.
William D. Torchiana, Esq.
Fax: 212-558-3588
If to Spinco, to:
Spinco
[ ]
[ ]
Telecopy: [ ]
Attention: [ ]
With a copy to:
[counsel to come]
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: Lewis B. Kaden
Any party may, by written notice so delivered to the other parties,
change the address to which delivery of any notice shall thereafter be made.
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SECTION 8.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Aetna and Spinco, or in
the case of a waiver, by the party against whom the waiver is to be effective.
In addition, unless the Merger Agreement shall have been terminated in
accordance with its terms, any such amendment or waiver that is adverse in
interest to any member of the Aetna Group shall be subject to the written
consent of Parent.
(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 8.03. Expenses. (a) All costs and expenses incurred by Aetna or
Spinco in connection with the preparation, execution and delivery of the
Ancillary Agreements and the consummation of the Distribution and the other
transactions contemplated hereby and therein (including the fees and expenses
of all counsel, accountants and financial and other advisors of both Groups in
connection therewith, and all expenses in connection with preparation, filing
and printing of the Form 10, the Information Statement and the Proxy Statement)
shall be paid by Spinco; provided that the Parent and its Affiliates shall pay
their own expenses, if any, incurred in connection with the Distribution and
Spinco shall pay all Transaction Expenses (as defined in the Merger Agreement),
in each case except as specifically provided otherwise herein, in the Merger
Agreement or any Ancillary Agreement.
(b) Each reference in this Agreement to expenses, fees and
out-of-pocket costs shall mean such expenses, fees and out-of-pocket costs as
the party incurring such expenses, fees or out-of-pocket costs would reasonably
incur in connection with its own business under circumstances where such
expenses, fees and out-of-pocket costs are not subject to reimbursement.
SECTION 8.04. 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 neither party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of Parent and the other party
hereto. If any party or any of its successors or assigns (i) shall consolidate
with or merge into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provisions shall be
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made so that the successors and assigns of such party shall assume all of the
obligations of such party under the Distribution Documents.
SECTION 8.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without
regard to the conflict of laws rules thereof.
SECTION 8.06. 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 a counterpart hereof signed by the other party hereto.
SECTION 8.07. Entire Agreement. This Agreement, the Merger Agreement,
the Confidentiality Agreement and the other Distribution Documents constitute
the entire understanding of 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 the
subject matter hereof and thereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein or in the
Confidentiality Agreement, the Merger Agreement or the other Distribution
Documents has been made or relied upon by any party hereto. To the extent that
the provisions of this Agreement are inconsistent with the provisions of any
other Ancillary Agreement, the provisions of such other Ancillary Agreement
shall prevail.
SECTION 8.08. Tax Sharing Agreement; Set-Off; Payment of After-Tax
Amounts; Certain Transfer Taxes. (a) Except as otherwise specifically provided
herein and not inconsistent with the Tax Sharing Agreement, this Agreement
shall not govern any Tax, and any and all claims, losses, damages, demands,
costs, expenses or liabilities relating to Taxes shall be exclusively governed
by the Tax Sharing Agreement.
(b) If, at the time Spinco is required to make any payment to Aetna or
any of its Affiliates under this Agreement, Aetna or any of its Affiliates owes
Spinco or any of its Affiliates any amount under this Agreement or any
Ancillary Agreement, then such amounts shall be offset and the excess shall be
paid by the party liable for such excess. Similarly, if at the time Aetna is
required to make any payment to Spinco or any of its Affiliates under this
Agreement, and Spinco or any of its Affiliates owes Aetna or any of its
Affiliates any amount under this Agreement or any Ancillary Agreement, then
such amounts shall be offset and the excess shall be paid by the party liable
for such excess.
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(c) If Aetna, Spinco or any of their respective post-Distribution
Affiliates makes a payment pursuant to Section 4.01 or 4.02 of this Agreement,
then such Person shall also pay the recipient of such payment the related
After-Tax Amount (as defined in the Tax Sharing Agreement). This Section
8.08(c) shall be interpreted in accordance with the principles set forth in the
Tax Sharing Agreement and shall be subject to the dispute resolution provisions
contained in Section 10.09 of the Tax Sharing Agreement.
(d) Except as otherwise provided in the Ancillary Agreements, all
transfer, documentary, sales, use, stamp and registration taxes and fees
(including any penalties and interest) incurred in connection with any of the
transactions described in Article 2 of this Agreement shall be borne and paid
equally by Spinco and Aetna. The party that is required by applicable law to
file any Return (as defined in the Tax Sharing Agreement) or make any payment
with respect to any of those taxes shall do so, and the other party shall
cooperate with respect to that filing or payment as necessary. The non-paying
party shall reimburse the paying party in accordance with this Section 8.08, as
appropriate, within 5 Business Days after it receives notice of the payment of
those taxes. This Section 8.08(d) shall be interpreted in accordance with the
principles set forth in the Tax Sharing Agreement and shall be subject to the
dispute resolution provisions contained in Section 10.09 of the Tax Sharing
Agreement.
SECTION 8.09. Jurisdiction. Except as otherwise expressly provided in
this Agreement, any Action seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in the United States District Court for the
District of Delaware, and each of the parties hereby consents to the
jurisdiction of such court (and of the appropriate appellate courts therefrom)
in any such Action and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such Action in any such court or that any such Action which is
brought in any such court has been brought in an inconvenient forum. Process in
any such Action may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 8.01 shall be deemed effective service of process on such party.
SECTION 8.10. Pre-Litigation Dispute Resolution. Prior to the bringing
of any Action against the other, senior officers of Aetna and Spinco shall
confer, consult and in good faith attempt for a period of 30 calendar days to
resolve any dispute between such parties relating to this Agreement or any of
the Ancillary Agreements (other than the Tax Sharing Agreement) without resort
to legal remedies.
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SECTION 8.11. Severability. If any one or more of the provisions
contained in this Agreement should be declared invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained in this Agreement shall not in any way be
affected or impaired thereby so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such a declaration, the parties shall modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the transactions contemplated hereby
are consummated as originally contemplated to the fullest extent possible.
SECTION 8.12. Survival. All covenants and agreements of the parties
contained in this Agreement and the Confidentiality Agreement shall survive the
Distribution Date indefinitely, unless a specific survival or other applicable
period is expressly set forth therein.
SECTION 8.13. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 8.14. Specific Performance. Each party to this Agreement
acknowledges and agrees that damages for a breach or threatened breach of any
of the provisions of this Agreement would be inadequate and irreparable harm
would occur. In recognition of this fact, each party agrees that, if there is a
breach or threatened breach, in addition to any damages, the other nonbreaching
party to this Agreement, without posting any bond, shall be entitled to seek
and obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction, attachment, or any other
equitable remedy which may then be available to obligate the breaching party
(i) to perform its obligations under this Agreement or (ii) if the breaching
party is unable, for whatever reason, to perform those obligations, to take any
other actions as are necessary, advisable or appropriate to give the other
party to this Agreement the economic effect which comes as close as possible to
the performance of those obligations (including, but not limited to,
transferring, or granting liens on, the assets of the breaching party to secure
the performance by the breaching party of those obligations).
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IN WITNESS WHEREOF the parties hereto have caused this Distribution
Agreement to be duly executed by their respective authorized officers as of the
date first above written.
AETNA INC.
By:
------------------------------
Name: [ ]
Title: [ ]
AETNA U.S. HEALTHCARE INC.
By:
------------------------------
Name: [ ]
Title: [ ]
