EXHIBIT 10.3
EMPLOYEE BENEFITS AGREEMENT
between
Aetna Inc.
and
Aetna U.S. Healthcare, Inc.
--------------------------
Dated as of [ ], 2000
EMPLOYEE BENEFITS AGREEMENT
EMPLOYEE BENEFITS AGREEMENT (the "Agreement") dated as of __________,
2000, among Aetna Inc., a Connecticut corporation (together with its successors,
"AI") and Aetna U.S. Healthcare, Inc., a Pennsylvania corporation (together with
its successors, "AUSHC") (AI and AUSHC, the "Aetna Companies").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, AI has decided to consolidate the assets and operations of
its health care businesses and certain other businesses worldwide into AUSHC and
its subsidiaries and affiliates and to distribute the Common Stock of AUSHC to
the holders of AI capital stock (the "Distribution"); and
WHEREAS, in furtherance of the foregoing, AI and AUSHC have entered
into a distribution agreement, dated as of the date of this agreement (the
"Distribution Agreement"), and certain other agreements that will govern certain
matters relating to the Distribution and the relationship of AI and AUSHC and
their respective Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Distribution Agreement, AI and AUSHC have
agreed to enter into this Agreement for the purpose of allocating assets,
liabilities, and responsibilities with respect to certain employee compensation
and benefit plans and programs between them;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Distribution Agreement, the Parties (as that term is defined
in the Distribution Agreement) agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions (a) The following terms, as used herein,
shall have the following meanings:
"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.
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"Affiliate" means Affiliate as such term is defined in the
Distribution Agreement.
"AI Business" means the Aetna Business as such term is defined in the
Distribution Agreement.
"AI Companies" means AI and the AI Subsidiaries.
"AI Employee Group" means all AI Employees and AI Non-U.S.
Employees.
"AI Employees" means each Person who (x), except with respect to up
to 4 Persons orally identified by AUSHC to AI and ING America Insurance
Holdings, Inc. to whom AUSHC may offer employment, which offer is accepted,
prior to the Distribution Date, is actively employed in the AI Business in the
United States who is listed on the payroll records of any of the AI Companies on
the Distribution Date, (y) is on short-term disability leave, authorized leave
of absence, military service or lay-off with recall rights, in each case in the
United States, as of the Distribution Date and who was last actively employed in
the AI Business by an AI Company (such inactive employees shall be offered
employment by an AI Company as of the date they return to active employment), or
(z) is listed on Schedule 1 hereto as an AI Employee and, in each case, their
respective beneficiaries. AI, AUSHC and ING America Insurance Holdings, Inc.
shall cooperate and mutually agree on the Persons to be listed on Schedule 1 and
those individuals who shall be considered AI Employees pursuant to clause (y)
above, the following sentence and Article 9 hereof. The foregoing
notwithstanding, AI Employees shall include any Person who was last actively
employed in the AI Business and who, on the Distribution Date, is receiving
salary continuation or severance benefits from any AI Company, the liability for
which such benefits is accrued on the books and records of any AI Company.
"AI Equity-Based Plans" means the Aetna Inc. 1998 Stock Incentive
Plan and the Aetna Inc., 1996 Stock Incentive Plan.
"AI ERISA Affiliate" means any entity that, together with AI and
after giving effect to the Restructuring, would be treated as a single employer
under Section 414 of the Code.
"AI Non-U.S. Employees" means each Person who, on the Distribution
Date, (x) is actively employed in the AI Business outside the United States by
any AI Company, (y) is on short-term disability leave, authorized leave of
absence, military service or lay-off with recall rights, in each case outside
the United States, as of the Distribution Date and who was last actively
employed in the AI
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Business by an AI Company (such inactive employees shall be offered employment
by an AI Company as of the date they return to active employment), or (z) is an
inactive or former employee and who was last actively employed in the AI
Business by an AI Company outside the United States including any Person who has
been on long-term disability leave or unauthorized leave of absence or who has
terminated his or her employment, retired or died on or before the Distribution
Date.
"AI Stock" means the Common Stock, without par value, of AI.
"AI Stock Value" means the closing per-share price of AI Stock as
listed on the NYSE on the last trading day before the Distribution Date.
"AI Subsidiaries" means the Subsidiaries of AI (determined after
giving effect to the Restructuring).
"AUSHC Business" means the Spinco Business as such term is defined in
the Distribution Agreement.
"AUSHC Companies" means AUSHC and the AUSHC Subsidiaries.
"AUSHC Employee Group" means all AUSHC Employees and AUSHC Retirees.
"AUSHC Employees" means any Person employed or formerly employed with
any of the Aetna Companies or any of their Subsidiaries, other than AUSHC
Retirees and Persons that are part of the AI Employee Group.
"AUSHC ERISA Affiliate" means any entity that, together with AUSHC
and after giving effect to the Restructuring, would be treated as a single
employer under Section 414 of the Code.
"AUSHC Retirees" means each Person who was employed by any of the
Aetna Companies or their Subsidiaries immediately prior to such Person's
retirement or other termination of employment from the Aetna Companies and their
Subsidiaries and who is not otherwise a member of the AI Employee Group, and
their respective beneficiaries.
"AUSHC Stock" means the common stock, par value $.005 per share, of
AUSHC.
"AUSHC Subsidiaries" means the Subsidiaries of AUSHC (determined
after giving effect to the Restructuring).
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"Close of the Distribution Date" means 11:59:59 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the Distribution Date.
"Closing Date" means the Closing Date as such term is defined in the
Merger Agreement.
"COBRA" means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code ss. 4980B and ERISA xx.xx. 601
through 608.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.
"Distribution" means Distribution as such term is defined in the
Distribution Agreement.
"Distribution Agreement" means the Distribution Agreement between AI
and AUSHC, to which this Agreement is Exhibit A.
"Distribution Date" means Distribution Date as such term is defined
in the Distribution Agreement.
"Distribution Documents" mean Distribution Documents as such term is
defined in the Distribution Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor federal labor or employment law. Reference to a
specific ERISA provision also includes any proposed, temporary, or final
regulation in force under that provision.
"FMLA" means the Family Leave and Medical Act of 1993, as amended.
"Governmental Entity" means Governmental Entity as such term is
defined in the Distribution Agreement.
"HMO" means a health maintenance organization that provides benefits
under the New AI Health and Welfare Plans or the AUSHC Health and Welfare Plans,
as the case may be.
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"Immediately after the Distribution Date" means 12:00 A.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the day after the Distribution Date.
"Liabilities" means any and all claims, debts, liabilities,
assessments, fines, penalties, damages, losses, disgorgements and obligations,
of any kind, character or description (whether absolute, fixed, contingent,
matured, not matured, liquidated, unliquidated, accrued, known, unknown, direct,
indirect, derivative or otherwise) whenever arising, all costs and expenses
relating thereto (including, but not limited to, all reasonable expenses of
investigation, all reasonable attorneys' fees and all reasonable out-of-pocket
expenses in connection with any Action or threatened Action).
"Merger Agreement" means the Agreement and Plan of Restructuring and
Merger dated as of , 2000, among AI, ING America Insurance Holdings, Inc.
and ANB Acquisition Corp.
"Pension Plan" means the Retirement Plan for Employees of Aetna
Services, Inc.
"Person" means Person as defined in the Distribution Agreement.
"Restructuring" means Restructuring as such term is defined in the
Distribution Agreement.
"Savings Plan" means the Aetna Services, Inc. Incentive Savings Plan
"Specified Participant" means any AI Employee who was a "Transition
Participant" in the Pension Plan and who on December 31, 2000 (x) will have at
least 9 years of service (calculated as 8 years and 22 weeks of service) and is
less than 50 years of age or (y) will have at least 5 years of service
(calculated as 4 years and 22 weeks of service) and is at least 50 years old and
less than 62 years old.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by such Person.
"Supplemental Plans" means the Aetna Services, Inc. Supplemental
Incentive Savings Plan and the Aetna Services, Inc. Supplemental Pension Benefit
Plan (amended and restated as of January 1, 1999).
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"Transition Period" means, the period during which AUSHC provides to
AI transition services pursuant to the Distribution Agreement or any Exhibits
thereto.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERMS SECTION
Adjusted Transfer Amount 3.03
Aeltus Arrangements 4.11
Agent 6.01
AI Aeltus Liabilities 4.11
AI Assumed Liabilities 6.01
AI Bonus Liabilities 2.04
AI DC Plan Liabilities 3.01
AI Deferred Compensation Liabilities 3.02
XX Xxxxx-Up Liabilities 4.10
AI Health and Welfare Liabilities 4.01
AI International Liabilities 5.02
AI Phantom Liabilities 4.11
AI Retiree Health and Life Liabilities 4.02
AI Supplemental Liabilities 3.02
AI WCP Liabilities 4.06
AUSHC Aeltus Liabilities 4.11
AUSHC Assumed Plans 2.02
AUSHC Bonus Liabilities 2.04
AUSHC DCSAP 4.13
AUSHC Deferred Compensation Liabilities 3.02
AUSHC Foreign Phantom Liabilities 4.11
AUSHC Gross-Up Liabilities 4.10
AUSHC HCSAP 4.13
AUSHC Health and Welfare Liabilities 4.01
AUSHC Health and Welfare Plans 4.01
AUSHC International Liabilities 5.02
AUSHC Phantom Liabilities 4.11
AUSHC Retained Liabilities 6.01
AUSHC WCP Liabilities 4.06
AUSHC's Actuary 3.03
DB Plan 3.03
DC Plan 3.01
Direct Rollover 3.01
Director Liabilities Art. 5
Gross-Up Payments 4.10
Initial Transfer Amount 3.03
New AI Plans 2.03
New AI Health and Welfare Plans 4.01
PBGC 3.03
Plan Rate 3.03
Phantom Arrangements 4.11
PTO 4.16
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Retained Retiree Health and Life Liabilities 4.02
Retained Pension Liabilities 3.03
Retained Savings Plan Liabilities 3.01
Retained Supplemental Liabilities 3.02
Scheduled Bonus Plans 2.04
Supplemental Retirement Plan 3.02
Supplemental Savings Plan 3.02
Transfer Amount 3.03
Transferred Benefits 3.03
True-Up Amount 3.03
True-Up Date 3.03
ARTICLE 2
EMPLOYEES; ASSUMPTION AND/OR ADOPTION OF PLANS; OPTION ADJUSTMENTS
SECTION 2.01. Employees Except as provided in Section 6.22 of the
Merger Agreement, no provision of this Agreement shall require AI or AUSHC or
any of their respective Subsidiaries to continue the employment of any of their
respective employees following the Distribution Date.
SECTION 2.02. Assumption by AUSHC of Certain Plans
(a) Effective as of the Close of the Distribution Date, AI and AUSHC
shall take such actions as may be required to cause AUSHC, or an AUSHC
Subsidiary, to assume responsibility for and become the sponsor of, and AI or
the relevant AI Subsidiary to cease, except as otherwise provided herein, to be
responsible for, or be the sponsor of, and to cease to be a "participating
employer" in or otherwise have any Liability in respect of, all of the Aetna
Companies and their Subsidiaries employee benefit plans and arrangements set
forth on Schedule 3 hereto (it is anticipated that the plans listed on Schedule
3 shall include all plans listed on Section 5.01(h)(i) of the Company Disclosure
Letter to the Merger Agreement, except to the extent such plans only cover
members of the AI Employee Group) ("AUSHC Assumed Plans").
(b) Effective as of the Close of the Distribution Date, AI and AUSHC
shall take such actions as may be required to cause AUSHC, or an AUSHC
Subsidiary, to be substituted for Aetna Services, Inc. as a party to the trust
agreement established under, and forming a part of, the Savings Plan.
(c) Effective as of the Close of the Distribution Date, AI and AUSHC
shall take such actions as may be required to cause AUSHC, or an AUSHC
Subsidiary, to be substituted for Aetna Services, Inc. (or other relevant party)
as a party to the trust agreement established under, and forming a part of, the
Pension Plan or any other AUSHC Assumed Plan.
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SECTION 2.03. Adoption of Comparable Plans
(a) Effective Immediately after the Distribution Date, AI shall
adopt, or cause to be adopted, employee benefit plans, arrangements and policies
for AI Employees, that provide benefits with respect to periods after the
Distribution Date that in the aggregate are comparable to the employee benefit
plans, arrangements and policies (listed in the March 12, 2000 amendments to the
Severance and Salary Continuation, Benefits Plan, and also including PTO) made
available to such Employees immediately prior to the Distribution Date, provided
that nothing shall prevent AI from terminating or amending such plans except as
otherwise provided in Sections 3.03 and 7.01 hereof.
(b) Effective Immediately after the Distribution Date, subject to
ss. 2.03(a) AI may adopt, or cause to be adopted, any other employee benefit
plans and arrangements for AI Employees, or may elect to participate in the
plans and programs of any purchaser of the AI Stock.
(c) The employee benefit plans and arrangements adopted in
accordance with the immediately preceding two paragraphs shall be collectively
known as the "New AI Plans". AI shall identify to AUSHC the names of the New AI
Plans as soon as practicable after the Distribution Date. The New AI Plans shall
be, with respect to AI Employees, in all respects the successors in interest to,
and shall not provide benefits that are duplicative of benefits provided by, any
corresponding AUSHC Assumed Plans. AI and AUSHC shall agree on methods and
procedures, including amending the respective plan documents, to prevent AI
Employees from receiving duplicate benefits from the New AI Plans and the AUSHC
Assumed Plans. With respect to AI Employees, each New AI Plan specified in (a)
above and any other benefit plan, arrangement or policy applicable after the
Distribution Date to AI Employees shall provide that all service, compensation,
and other benefit-affecting determinations, as of the Close of the Distribution
Date, that were otherwise recognized under the corresponding AUSHC Assumed Plan
(for periods immediately before the Close on the Distribution Date) shall, as of
Immediately after the Distribution Date, receive full recognition and credit to
the extent the recognition or credit can validly be taken into account under the
New AI Plan to the same extent as if those items occurred under the New AI Plans
specified in (a) above and any other benefit plan, arrangement or policy
applicable after the Distribution Date to AI Employees, except to the extent
that duplication of benefits would result. AUSHC shall provide appropriate data
to AI about such past service.
SECTION 2.04. AI Equity-Based Plan Assumption; Option Adjustments;
Bonus Payments
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(a) In connection with the Restructuring and Distribution and
effective as of the Distribution Date, AI and AUSHC shall cause the AI
Equity-Based Plans to be assumed by AUSHC and amended to reflect the
Distribution and Restructuring; provided, however, that AI shall be responsible
for any Liabilities to AI Employees for (x) "Incentive Units" under the AI
Equity-Based Plans and (y) the Aetna Performance Excellence Unit Plan, in each
case to the extent accrued on the books and records of AI and any assets
allocated to such Liabilities shall be transferred to AI.
(b) (i) In connection with the Restructuring and Distribution and
effective as of the Distribution Date, AI and AUSHC shall cause each
employee stock option to purchase AI Stock outstanding under the AI
Equity-Based Plans and held by each member of the AI Employee Group,
whether or not vested or exercisable, to be equitably adjusted to
reflect the Distribution and to be converted into the right to
receive cash from AUSHC. At or as soon as practicable following the
Distribution Date, AI and AUSHC shall cause each such option to be
cancelled. It is understood that each such holder shall receive,
subject to applicable withholding, a benefit at least equal to the
amount, if any, by which the AI Stock Value exceeds the option
exercise price.
(ii) In connection with the Restructuring and Distribution and
effective as of the Distribution Date, AI and AUSHC shall cause each
option to acquire AI Stock held by members of the AUSHC Employee
Group under the AI Equity-Based Plans and all other options to
acquire AI Stock not subject to ss. 2.04(b)(i) to (x) be equitably
adjusted to reflect thE Distribution, (y) converted into an option to
purchase AUSHC Stock or receive cash and (z) cease to relate to AI
Stock. Each such AUSHC Option may continue to have and be subject to
the same terms and conditions set forth in the AI Equity-Based Plans
and as provided in the respective option agreements governing such AI
options as of the Distribution Date. Neither AI nor any Affiliate
shall have any Liability with respect to such options or, except as
provided in Section 2.04(a), under the AI Equity-Based Plans or the
Aetna Performance Excellence Unit Plan.
(c) AI shall assume Liability for all annual bonus payments to AI
Employees under the "Scheduled Bonus Plans" (designated as such on Schedule 3)
to the extent accrued on the books and records of any AI Company (such
Liabilities, the "AI Bonus Liabilities") and any assets allocated to such
Liabilities shall be transferred to AI. AUSHC shall assume Liability for all
bonus payments in excess of the AI Bonus Liabilities (including amounts in
excess of amounts so accrued on the books and records of any AI Company relating
to transaction bonus program payments referred to in ss. 5.1(f) of the Company
Disclosure Letter
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provided in connection with the Merger Agreement), notwithstanding the
foregoing, AUSHC shall have no Liabilities for any bonus payments to AI
Employees in excess of the target bonus amount so accrued for such AI Employees
(such Liabilities, the "AUSHC Bonus Liabilities").
ARTICLE 3
SAVINGS, SUPPLEMENTAL AND PENSION PLANS
SECTION 3.01. The Savings Plan
(a) (i) AUSHC shall retain all Liabilities and obligations in
respect of benefits accrued by each member of the AI Employee Group under the
Savings Plan until, in the case of AI Employees, such Liabilities are
transferred to and assumed by the DC Plan as described below. Prior to such
transfer, AUSHC and AI shall work together to develop a process whereby AI
Employees who have loans outstanding under the Savings Plan will be permitted to
continue to make periodic repayments on such outstanding loans through a
reduction of salary paid by AI and AI remitting such payments to the Savings
Plan on a timely basis (including AI charging such AI employees a reasonable
administrative fee, if any, for such services).
(ii) Prior to the Distribution Date, AI or an AI ERISA Affiliate
shall adopt (in consultation with ING America Insurance Holdings,
Inc.) a savings plan for the benefit of AI Employees that is
substantially similar to the Savings Plan and is intended to qualify
under Section 401(a) of the Code (the "DC Plan"). For at least twelve
months after the Distribution Date the DC Plan shall permit deferrals
and require matching contributions at least equal to those provided
under the Savings Plan immediately prior to the Distribution Date to
the extent permissible under applicable law and without altering any
benefit under any other plan maintained by AI or any AI ERISA
Affiliate. As soon as practicable after the Distribution Date
(provided that (A) AI has received a favorable determination letter
from the Internal Revenue Service to the effect that the DC Plan
meets the requirements for qualification under Section 401(a) of the
Code (or a certification by AI, reasonably satisfactory to AUSHC, to
such effect), (B) AUSHC has received a favorable determination letter
from the Internal Revenue Service to the effect that the Savings Plan
meets the requirements for qualification under Section 401(a) of the
Code (or a certification by AUSHC, reasonably satisfactory to AI, to
such effect), and (C) the applicable regulatory filing requirements
have been met) (1) AUSHC shall cause the Savings Plan accounts of AI
Employees then employed by AI or
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any AI ERISA Affiliate which are held by the Saving Plan's related
trust to be transferred to the DC Plan and its related trust, and AI
shall cause those transferred accounts to be accepted by the DC Plan
and its related trust and (2) the DC Plan shall assume and be solely
responsible for Liabilities only with respect to transferred accounts
of such AI Employees (all such assumed liabilities "AI DC Plan
Liabilities");. Such transfer shall be in-kind to the maximum extent
practicable and shall not favor participants who are AUSHC Employees
over participants who are AI Employees; provided, however, that AUSHC
shall use its reasonable efforts to effect an equitable partition of
the Stable Value Fund. Any DC Plan fund relating to AUSHC Stock shall
be administered so as to permit transfers out of, but not additions
to, such fund.
(b) After the Distribution Date, AUSHC shall retain all assets and
Liabilities under the Savings Plan except as otherwise provided in Section
3.01(a) ("Retained Savings Plan Liabilities").
SECTION 3.02. Supplemental Plans and Deferred Compensation Plans
(a) (i) Effective Immediately after the Distribution Date, all
Liabilities accrued on the books and records of any AI Company with respect to
the Supplemental Plans to the extent applicable to any AI Employee and any
assets allocable to such Liabilities shall be transferred to and assumed by AI
effective as of Immediately after the Distribution Date ("AI Supplemental
Liabilities") under the New AI Plans that correspond to the Supplemental Plans.
(ii) All other Liabilities under the Supplemental Plans shall be
transferred to and assumed or otherwise retained by AUSHC ("Retained
Supplemental Liabilities").
(b) (i) AI shall assume and be responsible for all deferred
compensation plan Liabilities accrued on the books and records of any AI Company
with respect to any member of the AI Employee Group ("AI Deferred Compensation
Liabilities") and any assets allocated to such Liabilities shall be transferred
to AI.
(ii) AUSHC shall assume and be responsible, for all other deferred
compensation plan Liabilities whenever incurred, accrued in respect of any
member of the AI Employee Group (except as provided in (i)) and in respect of
each AUSHC Employee Group member ("AUSHC Deferred Compensation Liabilities").
(iii) AUSHC and AI shall cooperate to ensure that no deferred
compensation amount is distributed prematurely in respect of any AI Employee.
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SECTION 3.03. Pension Plan
(a) Subject to completion of the asset transfer specified in ss.
3.03(b), effective as of Immediately after the Distribution Date, AI shall adopt
or become a participating employer in a defined benefit plan intended to qualify
under Section 401(a) of the Code (the "DB Plan"), and AI shall designate
effective as of the Distribution Date such plan as a plan for the benefit of AI
Employees who immediately prior to the Distribution Date participated in the
Pension Plan and shall cause the DB Plan to provide benefits and entitlements as
of the Distribution Date and, except as provided below, for the twelve month
period beginning on the Distribution Date, to such AI Employees which are at
least substantially equivalent to the benefits and entitlements provided to such
AI Employee under the Pension Plan immediately prior to the Distribution Date
and under which (x) each such AI Employee is given credit under the DB Plan for
service to the extent recognized immediately prior to the Distribution Date by
the Pension Plan, for all purposes, including eligibility, vesting, benefit
accrual, eligibility for early retirement, subsidized early retirement and death
benefits, (y) each such AI Employee is given credit under the DB Plan for
service with AI after the Distribution Date for purposes of vesting and early
retirement eligibility in respect of the Transferred Benefits, and (z) each AI
Employee who was a "Transition Participant" (as defined in the Pension Plan) in
the Pension Plan on the Distribution Date will have his or her pay with AI (or
an AI ERISA Affiliate) after the Distribution Date recognized through December
31, 2006 using the Pension Plan's "transition final average pay" formula in
calculating his or her minimum DB Plan benefit. In calculating a Transition
Participant's otherwise applicable DB Plan benefit, the transition final average
pay benefit shall apply as a minimum benefit. If AI does not recognize service
through December 31, 2006 in the DB Plan in calculating the "transition final
average pay" formula minimum benefit for Specified Participants, then AI will
use reasonable efforts to provide, in the aggregate, the economic equivalent
impact of such benefits under the DC Plan (only taking into account the
incremental employer contributions), the DB Plan and/or such other retirement
benefit plans or arrangements as AI may establish.
(b) As soon as practicable after the Distribution Date, AUSHC shall
cause to be transferred from the Pension Plan an amount to the DB Plan an amount
in cash or other assets acceptable to AI and the trustee of the DB Plan at least
equal to all accrued benefits and other liabilities of the Pension Plan relating
to AI Employees (the "Transferred Benefits"), calculated as of the Distribution
Date, in the form and manner described below. Following the completion of the
transfer of assets and liabilities from the Pension Plan to the DB Plan as
provided herein, AUSHC and its Affiliates shall have no further liability
whatsoever (either under this Agreement or otherwise) with respect to such
benefits of the AI
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Employees under the Pension Plan. As of the Distribution Date, AUSHC shall cause
AI Employees to cease further accrual of benefits under the Pension Plan.
(i) AUSHC shall cause Xxxxxx Associates LLC ("AUSHC's Actuary")
to determine the value of the Transferred Benefits under ss. 414(l) of
the Code as if the Pension Plan were terminated on the Distribution
Date using the safe harbor assumptions that would be used by the PBGC
upon plan termination (assuming no ancillary benefits have been
amended out of the Pension Plan prior to such calculation) except that
the Pension Plan's actuarial valuation turnover assumptions (as used
in the Xxxxxx Associates report dated June 7, 2000) shall be used (the
"Transfer Amount"), but in no event shall such Transfer Amount be less
than (i) the minimum amount needed to satisfy the requirements of ss.
414(l) of the Code or (ii) if greater, the projected benefit
obligation for the AI Employees (as determined under SFAS 87 using the
same actuarial assumptions and methods used in AI's 2000 financial
statements), to the extent permitted by Section 414(l) of the Code.
(ii) The actuarial calculation of the liabilities as well as
assumptions and methodologies used to calculate such liability
underlying the Transfer Amount determined by AUSHC's Actuary shall be
subject to review and challenge by an actuarial firm designated by AI.
In the event those two actuaries cannot agree, the matter will be sent
to a third independent actuary for the final determination. Promptly
after the Closing Date, (provided that (A) AUSHC has received a
certification by AI, reasonably satisfactory to AUSHC, to the effect
that the DB Plan meets the requirements for qualification under
Section 401(a) of the Code, (B) AI has received a certification by
AUSHC, reasonably satisfactory to AI, to the effect that the Pension
Plan meets the requirements for qualification under Section 401(a) of
the Code, and (C) the applicable regulatory filing requirements have
been met), AUSHC shall cause to be transferred from the trust for the
Pension Plan to the trust established for the DB Plan, an amount equal
to 85% of the amount reasonably estimated by AUSHC's Actuary in good
faith to be equal to the Transfer Amount (the "Initial Transfer
Amount"). As soon as practicable after the final determination of the
Transfer Amount (the "True-Up Date"), AUSHC shall cause a second
transfer to be made to the DB Plan, in cash, of the "True-Up Amount".
The True-Up Amount shall be a positive amount equal to the Transfer
Amount minus the sum of (i) the Initial Transfer Amount and (ii)
distributions, if any, from, and reasonable expenses of administration
(consistent with past practice) under, the Pension Plan for benefits
or other purposes made with respect to AI Employees from the Closing
Date through the True-Up Date plus interest on the True-Up
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Amount at the rate of the 5%, compounded annually (the "Plan Rate")
from and including the Closing Date through but excluding the True-Up
Date or, in the case of distributions and reasonable administrative
expenses, from and including the Closing Date through the date such
distribution is made or such expense is paid.
(iii) If for any reason the Initial Transfer Amount exceeds the
Transfer Amount, then on the True-Up Date or as soon thereafter as
practicable, AI shall cause the DB Plan to transfer to the Pension
Plan an amount, in cash, equal to the amount by which the Initial
Transfer Amount exceeds the Transfer Amount, plus interest thereon
from and including the Closing Date through but excluding the True-Up
Date (or, if later, the date on which such amount is transferred to
the Pension Plan) at the Plan Rate, plus an amount equal to
distributions, if any, from, and reasonable expenses of
administration (consistent with past practice) under, the Pension
Plan for benefits or other purposes made with respect to AI Employees
from the Distribution Date through the date of such transfer adjusted
for interest at the Plan Rate, consistent with the approach set forth
in (ii) above.
(c) AUSHC and AI shall cooperate after the Distribution Date so as
to ensure the proper administration of the Pension Plan and the DB Plan.
(d) Notwithstanding any provision of this Agreement to the contrary,
if at any time before the Distribution Date, the PBGC asserts any issue with
respect to the Pension Plan, AUSHC may, in its sole discretion (i) enter into
negotiations with the PBGC to resolve any such issues and, upon satisfactorily
resolving such issues, AUSHC shall fully comply with the terms of this Article;
(ii) reach such other agreement as may be satisfactory to AI and AUSHC or (iii)
take such actions in lieu of the transfer of assets and liabilities contemplated
above as AUSHC may deem appropriate; provided, however, that any such actions
under this sub-section (iii) shall not have an adverse financial impact on ING
America Insurance Holdings, Inc. or AI.
ARTICLE 4
HEALTH AND WELFARE PLANS
SECTION 4.01. Assumption of Health and Welfare Plan Liabilities;
General Provisions
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(a) Effective as of Immediately after the Distribution Date and
except as provided in Section 4.02(a), all Liabilities to or relating to claims
incurred after the Distribution Date by each AI Employee under the "AUSHC Health
and Welfare Plans" (designated as such on Schedule 3 hereto) shall cease to be
Liabilities of the AUSHC Health and Welfare Plans and shall be transferred to
and assumed by AI as of Immediately after the Distribution Date ("AI Health and
Welfare Liabilities") under the New AI Plans that correspond to the AUSHC Health
and Welfare Plans (the "New AI Health and Welfare Plans" (designated as such on
Schedule 5 hereto)). AUSHC shall retain all other Liabilities, including claims
relating to AI Employees incurred but unreported prior to the Distribution Date
under the AUSHC Health and Welfare Plans ("AUSHC Health and Welfare
Liabilities").
(b) Notwithstanding Section 4.01, all treatments which have been
precertified for or are being provided to an AI Employee as of the Distribution
Date, to the extent not provided in a New AI Health and Welfare Plan, shall be
provided without interruption under the appropriate AUSHC Health and Welfare
Plan until such treatment is concluded or discontinued pursuant to applicable
plan rules and limitations (but not beyond December 31, 2001), but AI shall
continue to be responsible for all Liabilities relating to, arising out of or
resulting from such on-going treatments as of the Distribution Date.
(c) AI shall cause the New AI Health and Welfare Plans to recognize
and maintain all coverage and contribution elections made by AI Employees under
the AUSHC Health and Welfare Plans as of the Distribution Date and apply such
elections under the New AI Health and Welfare Plans for the remainder of the
period or periods for which such elections are by their terms applicable. The
transfer or other movement of employment from AUSHC to AI at any time before the
Close of the Distribution Date shall neither constitute nor be treated as a
"status change" under the AUSHC Health and Welfare Plans or the New AI Health
and Welfare Plans.
(d) AI shall cause the New AI Health and Welfare Plans to recognize
and give credit for all amounts applied to deductibles, out-of-pocket maximums,
and other applicable benefit coverage limits with respect to which such expenses
have been incurred by AI Employees under the AUSHC Health and Welfare Plans for
the remainder of the year in which the Distribution Date occurs to the extent
recognized under the comparable AUSHC Health and Welfare Plans.
(e) AI shall provide coverage to AI Employees under the New AI
Health and Welfare Plans without the need to undergo a physical examination or
otherwise provide evidence of insurability to the extent recognized under the
comparable AUSHC Health and Welfare Plans.
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(f) AI shall cause the New AI Health and Welfare Plans to recognize
and credit all service of each AI Employee recognized by the corresponding AUSHC
Health and Welfare Plan before the Close of the Distribution Date for all
purposes, including, but not limited to, severance, disability and PTO.
SECTION 4.02. Post-retirement Health and Life Insurance Benefits
(a) AUSHC shall be responsible for providing to AI Employees who are
eligible to receive post-retirement medical or dental or life insurance
coverages under the AUSHC Health and Welfare Plans were they to retire
immediately before the Close of the Distribution Date and all members of the
AUSHC Employee Group such coverage under the AUSHC Health and Welfare Plans
("Retained Retiree Health and Life Liabilities"). Nothing shall prevent AUSHC
from amending or terminating such plans.
(b) AI shall provide to AI Employees not eligible for coverage
pursuant to sub-section (a) above, post-retirement medical, dental or life
insurance coverages under the New AI Health and Welfare Plans equivalent to
coverage provided to similarly situated employees of ING America Insurance
Holdings, Inc. ("AI Retiree Health and Life Liabilities") and, except as
provided in ss. 6.01(b)(v), shall have no obligations or Liabilities in respect
of such medical, dental or life insurance coverages whether or not assumed by
AUSHC.
SECTION 4.03. Effect of Change in Rates AUSHC and AI shall use their
reasonable efforts to cause each of the insurance companies, HMOs, point-of-
service vendors and third-party administrators providing services and benefits
under the AUSHC Health and Welfare Plans and the New AI Health and Welfare Plans
to maintain the premium and/or administrative rates based on the aggregate
number of participants in both the AUSHC Health and Welfare Plans and the New AI
Health and Welfare Plans through the expiration of the financial fee or rate
guarantees in effect as of the Close of the Distribution Date under the
respective contracts, policies, and agreements separately rated or adjusted for
the demographics, experience or other relevant factors related to the covered
participants of AUSHC and AI, respectively. To the extent they are not
successful in such efforts, AUSHC and AI shall each bear the revised premium or
administrative rates attributable to the individuals covered by their respective
health and welfare plans.
SECTION 4.04. COBRA and HIPPA
(a) AUSHC shall be responsible for administering compliance with the
health care continuation coverage requirements of COBRA and the AUSHC
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Health and Welfare Plans with respect to all members of the AUSHC Employee
Group.
(b) Effective as of Immediately after the Distribution Date, AI
shall solely be responsible for administering compliance with the health care
continuation coverage requirements of COBRA and the New AI Health and Welfare
plans with respect to AI Employees who have a qualifying event within the
meaning of COBRA at any time beginning Immediately after the Distribution Date.
(c) For periods before the Distribution Date, AUSHC shall be
responsible for administering compliance with the portability requirements under
the Health Insurance Portability and Accountability Act of 1996 with respect to
AI Employees and other employees and former employees of the AI and
beneficiaries and dependents thereof and AI shall be responsible for filing all
necessary employee change notices with respect to AI Employees in accordance
with applicable AUSHC policies and procedures. Effective immediately after the
Distribution Date, AI shall be solely responsible for administering compliance
with such health care continuation coverage and portability requirements with
respect to AI Employees, and AUSHC shall be solely responsible for administering
compliance with such requirements with respect to members of the AUSHC Employee
Group.
SECTION 4.05. Leave of Absence Programs and FMLA
(a) AUSHC shall be responsible for administering compliance with the
AUSHC leave of absence programs and FMLA with respect to each member of the
AUSHC Employee Group.
(b) Effective as of Immediately after the Distribution Date: (i) AI
shall adopt, and shall cause each AI Company to adopt, leave of absence
programs; (ii) AI shall honor, and shall cause each AI Company to honor, all
terms and conditions of leaves of absence which have been granted to any AI
Employee under an AUSHC leave of absence program or FMLA before the Distribution
Date by AI, including such leaves that are to commence after the Distribution
Date; (iii) AI and each AI Company shall be solely responsible for administering
leaves of absence and compliance with FMLA with respect to their employees; and
(iv) AI and each AI Company shall recognize all periods of service of each AI
Employee with the Aetna Companies or any of their Subsidiaries, as applicable,
to the extent such service is recognized by AUSHC for the purpose of eligibility
for leave entitlement under the AUSHC leave of absence programs and FMLA.
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(c) As soon as administratively possible and not later than the
Distribution Date, AUSHC shall provide to AI copies of all records pertaining to
the AUSHC leave of absence programs and FMLA with respect to all AI Employees to
the extent such records have not been provided previously to AI or an AI
Company.
SECTION 4.06. AUSHC Workers' Compensation Program
(a) AI shall assume and be responsible for all workers' compensation
Liabilities relating to AI Employees to the extent accrued on the books and
records of any AI Company (the "AI WCP Liabilities") and any assets allocated to
such Liabilities shall be transferred to AI.
(b) AUSHC shall assume and be responsible for all workers
compensation Liabilities in respect of members of the AUSHC Employee Group and
worker's compensation Liabilities in respect of AI Employees that are not AI WCP
Liabilities, ("AUSHC WCP Liabilities")
(c) AI and AUSHC shall cooperate with respect to the issuance of
new, or transfer of, existing workers' compensation policies and licenses.
SECTION 4.07. Flexible Benefit Plans
(a) To the extent any AI Employee contributed to an account under
the AUSHC Health Care Spending Account Plan ("AUSHC HCSAP") during the calendar
year that includes the Distribution Date, effective as of Immediately after the
Distribution Date, AUSHC shall transfer to the corresponding New AI Health and
Welfare Plan the account balances of AI Employees for such calendar year under
the AUSHC HCSAP, regardless of whether the account balance is positive or
negative.
(b) To the extent any AI Employee contributed to the AUSHC Dependant
Care Spending Account Plan ("AUSHC DCSAP") during the calendar year that
includes the Distribution Date, effective as of Immediately after the
Distribution Date, AUSHC shall transfer to the corresponding New AI Health and
Welfare Plan the account balances of AI Employees for such calendar year in the
AUSHC DCSAP Plan.
SECTION 4.08. PTO Policy During the calendar year in which the
Distribution Date occurs, each AI Employee shall be permitted under the relevant
New AI Plan to accrue paid time off ("PTO") days calculated under the relevant
AUSHC Health and Welfare Plan's PTO policy immediately before the Close of the
Distribution Date, and to use such PTO days during such calendar year as if
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the Distribution Date had not occurred, or to carry over to the following
calendar year five such PTO days.
SECTION 4.09. Application of Article 4 to the AI Companies Any
reference in this Article 4 to "AI" shall include a reference to the AI
Companies when and to the extent AI has caused an AI Company to (a) become a
party to a vendor contract, group insurance contract, or HMO letter agreement
associated with a New AI Health and Welfare Plan, (b) become a self-insured
entity for the purposes of one or more New AI Health and Welfare Plans, (c)
assume all or a portion of the liabilities or administrative responsibilities
for benefits which arose before the Distribution Date under an AUSHC Health and
Welfare Plan and which were expressly assumed by AI pursuant to the terms of
this Agreement, or (d) take any other action, extend any coverage, assume any
other liability or fulfill any other responsibility that AI would otherwise be
required to take under the terms of this Article 4, unless it is clear from the
context that the particular reference is not intended to include an AI Company.
In all such instances in which a reference in this Article 4 to "AI" includes a
reference to an AI Company, AI shall be responsible to AUSHC for ensuring that
the AI Company complies with the applicable terms of this Agreement.
SECTION 4.10. Gross-Up Liabilities
(a) AUSHC shall assume and be responsible for Liabilities for any
gross-up or tax reimbursement payments in respect in Section 4999 of the Code
("Gross-Up Payments") that become payable (x) with respect to any member of the
AI Employee Group solely as a result of the consummation of the transactions
contemplated by the Merger Agreement or (y) at any time with respect to any
member of the AUSHC Employee Group ("AUSHC Gross-Up Liabilities").
(b) AI shall assume and be responsible for Liabilities for Gross-up
Payments that become payable with respect to any member of the AI Employee Group
as a result of any actual or constructive termination of employment upon or
following consummation of the transactions contemplated by the Merger Agreement
("XX Xxxxx-Up Liabilities").
(c) AI shall cause an accounting or actuarial firm to initially
determine the amount of any Gross-Up Payments and the amount of XX Xxxxx-Up
Liabilities, if any. AUSHC shall, designate an accounting or actuarial firm to
review such determinations. In the event these two accounting or actuarial firms
cannot agree, the matter will be referred to a third independent accounting or
actuarial firm for their final determination.
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SECTION 4.11. Certain Phantom Equity Payments
(a) (i) AI shall assume and be responsible for Liabilities relating
to phantom equity payments in respect of all Chile and Taiwan phantom equity
plans, agreements or arrangements (the "Phantom Arrangements") in an amount
equal to the sum of (x) and (y), where (x) equals $5,000,000 and (y) equals the
amount accrued on the books and records of any AI Company in respect of the
Phantom Arrangements (such sum, the "AI Foreign Phantom Liabilities") and any
assets allocated to such Liabilities shall be transferred to AI.
(ii) AI shall assume and be responsible for Liabilities relating
to Aeltus Investment Management phantom equity plans, agreements or
arrangements (the "Aeltus Arrangements") to the extent accrued on the
books and records of any AI Company ( the "AI Aeltus Liabilities") and
any assets allocated to such Liabilities shall be transferred to AI.
(b) AUSHC shall assume and be responsible for all Liabilities
relating to (x) the Phantom Arrangements in excess of the AI Phantom Liabilities
(such excess, the "AUSHC Foreign Phantom Liabilities") and (y) all Liabilities
relating to the Aeltus Arrangements that are not AI Aeltus Liabilities (the
"AUSHC Aeltus Liabilities") (the AUSHC Foreign Phantom Liabilities and AUSHC
Aeltus Liabilities, the "AUSHC Phantom Liabilities")
ARTICLE 5
NON-EMPLOYEE DIRECTOR BENEFITS AND INTERNATIONAL BENEFITS
SECTION 5.01. Effective as of the Close of the Distribution Date, AI
and AUSHC shall take such action as may be required to cause AUSHC to assume
responsibility for and become the sponsor of, and AI to cease to be responsible
for Liabilities under or related to, or be the sponsor of, the AI Director
Deferred Stock and Deferred Compensation Plan, AI Director Charitable Award
Program, AI Director Health Insurance Arrangements, AI Director Life Insurance
Arrangements and Director Long-Term Care Arrangements ("Director Liabilities").
SECTION 5.02. AI shall assume and be responsible for all employee
benefit Liabilities relating to Aetna International, Inc. and its Subsidiaries
to the extent funded (provided such funds are transferred to an AI Company) or
accrued on the books and records of any AI Company (the "AI International
Liabilities") and any assets allocated to such liabilities shall be transferred
to AI. AUSHC shall assume and be responsible for all employee benefit
Liabilities relating to
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Aetna International, Inc. and its Subsidiaries, other than AI International
Liabilities (the "AUSHC International Liabilities").
ARTICLE 6
GENERAL ALLOCATION OF LIABILITIES
SECTION 6.01. Allocation of Liabilities Generally
(a) Subject to the terms and conditions of this Agreement, effective
as of the Close of the Distribution Date, AUSHC shall assume and agree to pay
when due, honor and discharge, the following Liabilities, whether incurred
before, on or after the Distribution Date ("AUSHC Retained Liabilities"):
(i) all Liabilities arising under any employment, separation or
retirement agreement or arrangement to the extent applicable to any
member of the AUSHC Employee Group, who is not otherwise a member of
the AI Employee Group;
(ii) the AUSHC Assumed Plans, AI Equity-Based Plans, Retained
Retiree Health and Life Liabilities, Retained Savings Plan
Liabilities, Retained Supplemental Liabilities, AUSHC Phantom
Liabilities, AUSHC Bonus Liabilities, AUSHC Gross-Up Liabilities,
AUSHC Deferred Compensation Liabilities, AUSHC WCP Liabilities,
Director Liabilities, AUSHC International Liabilities and AUSHC Health
and Welfare Liabilities;
(iii) all Liabilities arising under any other employee benefit
plan or arrangement maintained at any time after the Distribution Date
by any of the AUSHC Companies to the extent applicable to any member
of the AUSHC Employee Group;
(iv) all Liabilities arising under any federal, state, local or
foreign law, order or regulation (including, without limitation, ERISA
and the Code) to the extent they relate to participation by any member
of the AUSHC Employee Group in any AUSHC Assumed Plan, whether
relating to events occurring on, prior to or after the Close of the
Distribution Date or arising by reason of the transactions
contemplated by this Agreement or otherwise;
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(v) all statutory Liabilities to any member of the AUSHC Employee
Group, which arise, directly or indirectly, by reason of the
transactions contemplated by this Agreement;
(vi) all Liabilities to agents in respect of non-qualified
pension benefits except to the extent assumed by AI except pursuant to
Section 6.01(b)(v); and
(vii) All Liabilities attributable to actions specified to be
taken by AUSHC under this Agreement.
(b) Subject to the terms and conditions of this Agreement, effective
as of Immediately after the Distribution Date, AI shall assume and agree to pay
when due, honor and discharge, the following Liabilities, whether incurred
before, on or after the Distribution Date ("AI Assumed Liabilities"):
(i) all Liabilities arising under any employment, separation or
retirement agreement or arrangement to the extent applicable to any
member of the AI Employee Group or to any other Person not a member of
the AUSHC Employee Group which has been established or entered into by
any AI Company other than the Retained Savings Plan Liabilities;
(ii) the New AI Plans, the DB Plan, AI Supplemental Liabilities,
AI Bonus Liabilities, AI DC Plan Liabilities, AI Retiree Health and
Life Liabilities, Transferred Benefits, AI Deferred Compensation
Liabilities, AI WCP Liabilities, XX Xxxxx-Up Liabilities, AI Phantom
Liabilities, AI International Liabilities and AI Health and Welfare
Liabilities;
(iii) all Liabilities arising under any other employee benefit
plan or arrangement maintained at any time after the Distribution Date
by any of the AI Companies to the extent applicable to any member of
the AI Employee Group;
(iv) all Liabilities arising under any federal, state, local or
foreign law, order or regulation (including, without limitation, ERISA
and the Code) to the extent they relate to participation by any member
of the AI Employee Group in any New AI Plan, relating to events
occurring on or after the time Immediately after the Distribution
Date;
(v) all Liabilities accrued on the books and records of any AI
Company to, directly or indirectly, current or former independent
contractors or statutory employees who at any time performed services
as insurance agents for an AI Company in connection with the AI
Business
23
("Agents") (it being understood that prior to the Distribution Date
AUSHC shall cause to be transferred to AI assets previously intended
to support Liabilities relating to certain Agents under a
non-qualified defined benefit plan, which such amount of assets
equaled approximately $42 million as of December 31, 1999, which
actual amount of such assets shall be deemed accrued);
(vi) all statutory Liabilities to any member of the AI Employee
Group which arises, directly or indirectly, by reason of the
transactions contemplated by this Agreement;
(vii) all Liabilities accrued on the books and records of any AI
Company under benefit plans maintained outside the United States to
the extent they relate to members of the AUSHC Employee Group for
services performed outside the United States; and
(viii) all Liabilities attributable to actions specified to be taken
by AI under this Agreement;
SECTION 6.02. Method of Settlement Notwithstanding anything herein to
the contrary, to the extent possible any transfer or assumption of Liabilities
pursuant to this Article 6 shall be effected, prior to the Distribution Date,
through a corresponding adjustment in the relevant intercompany account balances
of the parties hereto.
SECTION 6.03. Further Assurances
(a) On and after the date hereof, AUSHC will, at the reasonable
request of AI, execute, acknowledge and deliver all such endorsements,
assurances, consents, assignments, transfers, conveyances, powers of attorney
and other instruments and documents, and take such other actions necessary (i)
to assign, transfer, convey and deliver to AI, acting in its fiduciary capacity,
all the assets to be transferred to AI pursuant to this Agreement and (ii) to
assist AI in obtaining the consent and approval of all Governmental Entities and
other Persons required to be obtained by AI to effect the transfer thereof and
the assumption of the AI Assumed Liabilities by AI or otherwise appropriate to
carry out the transactions contemplated hereby.
(b) On and after the date hereof, AI will, at the reasonable request
of AUSHC, execute, acknowledge and deliver all such endorsements, assurances,
consents, assignments, transfers, conveyances, powers of attorney and other
instruments and documents, and take such other actions necessary (i) to assign,
transfer, convey and deliver to AUSHC, acting in its fiduciary capacity, all the
24
assets to be transferred to AUSHC pursuant to this Agreement, and (ii) to assist
AUSHC in obtaining the consent and approval of all Governmental Entities and
other Persons required to be obtained by AUSHC to effect the transfer thereof
and the assumption of the AUSHC Retained Liabilities by AUSHC or otherwise
appropriate to carry out the transactions contemplated hereby.
ARTICLE 7
COVENANTS
SECTION 7.01. Certain Covenants (a) AI shall (x) employ or cause the
AI Employees to be employed in the AI Business at positions and with
responsibilities substantially consistent with their respective positions and
responsibilities immediately prior to the Distribution Date after giving effect
to the Distribution (but disregarding any decrease in responsibilities as a
result of AI no longer being a publicly traded entity), and (y) from the
Distribution Date until the end of the twelve month period following the
Distribution Date, maintain or cause to be maintained employee compensation and
benefit plans and arrangements, including bonus opportunities, for the benefit
of the AI Employee Group that, except as provided below, provide benefits with
respect to periods after the Distribution Date that in the aggregate are
comparable to the compensation and benefit plans and arrangements referred to in
Section 2.03(a). Following such twelve month period, members of the AI Employee
Group shall be entitled to the same treatment as is accorded similarly situated
other employees of AI or any acquiror of AI stock and its Subsidiaries.
(b) Without limiting the provisions of Section 7.01 above, from the
Distribution Date until the end of the twenty-four month period following the
Distribution Date, AI shall (x) not, without the consent of the affected AI
Employee, materially reduce any AI Employee's base salary or (y) provide or
cause to be provided to each member of the AI Employee Group severance and
related benefits at least equal to the severance and related benefits available
to such member immediately prior to the Distribution Date.
(c) Without limiting the provisions of Section 7.01(a) above, from
the Distribution Date until the end of the twelve month following the
Distribution Date AI shall provide or cause to be provided each AI Employee
either (x) tax qualified and non-tax qualified defined contribution and defined
benefit plan benefits equivalent to such benefits made available to each such AI
Employee immediately prior to the Distribution Date, or (y) the cash equivalent
thereof.
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(d) Members of the AI Employee Group shall participate after the
Distribution Date in equity-based programs sponsored by AI or any acquiror of AI
Stock to the same extent as similarly situated other employees of AI or such
acquiror and its Subsidiaries, giving consideration to other benefits provided
to such employees.
ARTICLE 8
INDEMNIFICATION
With respect to indemnification, the parties hereto agree as set
forth in the Distribution Agreement.
ARTICLE 9
CERTAIN EMPLOYEES
SECTION 9.01. Certain Dedicated IT Persons Schedule 6 sets forth the
names of up to 85 Persons in the information technology area whose activities
have primarily supported the AI Business that AI agrees to employ as soon as
practicable after the date hereof and in any event prior to the Distribution
Date. In the event that any such Person ceases to be employed by AI on or
Immediately before the Distribution Date for any reason, AUSHC shall have the
right to designate such Person's replacement on such Schedule. Persons who,
after the Distribution Date are on such Schedule, shall be considered AI
employees for all purposes hereunder.
SECTION 9.02. Certain Supporting IT Persons Prior to the end of the
Transition Period, AUSHC shall provide to AI a list of up to 35 Persons who,
during the Transition Period, provided significant information technology
services in respect of the AI Business for AI and its Subsidiaries and who, if
not hired by AI prior to the end of such Period, shall be entitled to severance
benefits from AI at least equal to the severance benefits available to
similarly-situated AI Employees, taking into account each such Person's service
and compensation with the AUSHC Companies. If hired by AI, any such Person shall
be considered an AI employee for all purposes hereunder.
SECTION 9.03. Certain Business Resources Prior to the end of the
Transition Period, AUSHC shall provide to AI a list of up to 80 Persons who,
during the Transition Period, performed significant headquarters-related
management services in respect of the AI Business for AI and its Subsidiaries
and
26
who, if not hired by AI prior to the end of such Period, shall be entitled to
severance benefits from AI at least equal to the severance benefits available to
similarly-situated AI Employees, taking into account each such Person's service
and compensation with the AUSHC Companies. If hired by AI, any such Person shall
be considered an AI employee for all purposes hereunder.
SECTION 9.04. Certain Tax, Audit and Financial Controls Persons Prior
to the Closing Date, ING America Insurance Holdings, Inc., AI and AUSHC shall
identify at least 26 and not more than 35 Persons employed by AUSHC in the tax,
audit and financial controls areas who performed significant services for the AI
Business, if not hired by AI immediately prior to the Closing Date, shall be
entitled to severance benefits from AI at least equal to the severance benefits
available to similarly-situated AI Employees, taking into account each such
Person's service and compensation with the AUSHC Companies. If hired by AI, any
such Person shall be considered an AI employee for all purposes hereunder.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.01. 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 AI, to:
Aetna Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 000-000-0000
Attention: General Counsel
Head of Human Resources
Corporate Secretary
27
With a copy to:
If to AUSHC, to:
Aetna U.S. Healthcare, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 000-000-0000
Attention: General Counsel
Head of Human Resources
Corporate Secretary
With a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
If to ING America Insurance Corp., to:
ING North America Insurance Corp.
0000 Xxxxxx Xxxxx Xxxx, XX
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx
Executive Vice President &
Chief Financial Officer
Fax: 000-000-0000
B. Xxxxx Xxxxxx
Senior Vice President &
Chief Counsel
Fax: 000-000-0000
With copies to:
ING Groep N.V.
Strawinskylaan 2631, 1077 ZZ Amsterdam,
X.X. Xxx 000,
0000 Xx. Xxxxxxxxx, xxx Xxxxxxxxxxx
Attention: Xxxx Xxxxxxx
28
Executive Board Member
Fax: x00-00-000-0000
Diederik van Wassenaer
General Counsel
Fax: x00-00-000-0000
and
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxxxxxxx, Esq.
Fax: 000-000-0000
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.
SECTION 10.02. 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 AI and AUSHC, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.03. 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 consent of the other parties hereto.
SECTION 10.04. Governing Law This Agreement shall be construed in
accordance with and governed by the law of the State of New York, without regard
to the conflict of laws rules thereof.
SECTION 10.05. 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.
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This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
SECTION 10.06. Entire Agreement This Agreement and the other
Distribution Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersedes 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 other Distribution Documents has been made or relied
upon by any party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
SECTION 10.07. Jurisdiction Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
the United States District Court for the Southern District of New York or any
other New York State court sitting in New York County, and each of the parties
hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding 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 suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding 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 10.08. No Third Party Beneficiaries 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, any benefit, right
or remedies under or by reason of this Agreement.
SECTION 10.09. Headings The Section and other headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
SECTION 10.10. Severability The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such
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provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
SECTION 10.11. Schedules AI, ING America Insurance Holdings, Inc. and
AUSHC shall cooperate and mutually agree on each of the Schedules to this
Agreement. Subject to Ivy America's consent, which consent shall not
unreasonably be withheld, AI and AUSHC shall have the right to amend or
supplement the information set forth in any Schedule hereto from time to time
until two business days prior to the Distribution Date.
SECTION 10.12. Cooperation and Coordination The parties agree to
share, and furnish each other with, such information concerning employees and
employee benefit plans, and to take all such other action, as is necessary and
appropriate to effect the transactions contemplated hereby, and to coordinate,
in advance, the time, form and content of communications to current and former
employees of the parties relating to such transactions.
SECTION 10.13. Withholdings The party that is responsible for making
a payment hereunder shall be responsible for making the appropriate
withholdings, if any, attributable to such payments.
SECTION 10.14. Accruals (a) Where the extent of AI's Liabilities are
limited to the extent funded (provided such funds are transferred to AI) or the
amounts accrued, such Liabilities shall be equal to such funding or (x) the
amount accrued and allocated to the AI Business on the March 31, 2000 Balance
Sheet specified in the Merger Agreement (as set forth and separately identified
on Schedule 7) plus or minus (y) except with respect to an accrual of
approximately $13.3 million in the aggregate of AI Supplemental Liabilities and
AI Deferred Compensation Liabilities (provided that AUSHC transfers
approximately $3.9 million of cash to AI to support the international portion of
such Liabilities), the amount properly accrued or paid after March 31, 2000 to
the extent that such amount relates solely to services performed during the
period between March 31, 2000 and the Distribution Date and without regard to
any modifications to the terms of such plans, agreements or arrangements after
March 31, 2000 (except as otherwise agreed to by ING America Insurance Holdings,
Inc.) (such amounts to be set forth and separately identified on Schedule 7).
(b) Where AUSHC's Liabilities are limited to the amounts in excess
of the accruals referenced in (a) above, such Liabilities shall relate solely to
that period of time ending on the Distribution Date.
SECTION 10.15. Assets Allocated to Assumed Liabilities. Transfers of
assets that are allocated to Liabilities that are assumed by AI shall not be
treated
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as part of the Net Capital Contribution Amount under Section 4.1 of the Merger
Agreement (such transfers to be separately identified and set forth on Schedule
7).
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
AETNA U.S. HEALTHCARE, INC.
By:
-------------------------------
Name:
Title:
[Address/Fax]
AETNA INC.
By:
-------------------------------
Name:
Title:
[Address/Fax]
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SCHEDULES TO EMPLOYEE BENEFIT
ASSUMPTION AND SERVICES AGREEMENT
Schedule 1 Scheduled AI Employees
Schedule 2 [RESERVED]
Schedule 3 AUSHC Assumed Plans
Schedule 4 Scheduled AUSHC Employees
Schedule 5 New AI Plans
Schedule 6 Certain Dedicated IT Persons
Schedule 7 Accrued AI Liabilities
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