Aetna 2015 Annual Report Download - page 54

Annual Report- Page 48
While we believe these provisions are reasonable and not preclusive of other offers, these restrictions might
discourage a third party that has an interest in acquiring all or a significant part of Aetna from considering or
proposing that acquisition. Furthermore, the termination fees described in the immediately following paragraph
below may result in a potential competing acquirer proposing to pay a lower per-share price to acquire Aetna than it
might otherwise have proposed to pay because of the added expense of the termination fee that may become
payable by Aetna in certain circumstances.
Lawsuits have been filed and other lawsuits may be filed against Humana, Aetna and their respective boards of
directors challenging the Proposed Acquisition. An adverse ruling in any such lawsuit may prevent the Proposed
Acquisition from being completed.
Beginning on July 9, 2015, three putative state court class action complaints have been filed by purported Humana
stockholders (collectively, the “Humana Complaints”) challenging the Proposed Acquisition, two in Kentucky and
one in Delaware (collectively, the “Humana Merger Litigation”). The Humana Complaints generally allege, among
other things, that the individual members of Humana’s board of directors breached their fiduciary duties owed to
Humana’s stockholders by entering into the Merger Agreement, approving the Proposed Acquisition, and failing to
take steps to maximize the value of Humana to its stockholders, and that Aetna and certain of its subsidiaries and, in
the case of the Delaware complaint, Humana aided and abetted such breaches of fiduciary duties. Among other
remedies, the Humana Complaints seek equitable relief rescinding the Merger Agreement and enjoining the
defendants from completing the Proposed Acquisition as well as costs and attorneys’ fees.
On October 9, 2015, Humana and the other defendants named in the Humana Complaints signed a memorandum of
understanding (the “MOU”) to settle the Humana Merger Litigation. Subject to court approval and further definitive
documentation in a stipulation of settlement that will be subject to customary conditions, the MOU resolved the
claims brought in the Humana Merger Litigation. There can be no assurance that the parties to the Humana Merger
Litigation ultimately will enter into a stipulation of settlement or that a court will approve such settlement even if
the parties were to enter into such stipulation. In such event, the proposed settlement contemplated by the MOU
may be terminated. Following the signing of the MOU, the plaintiffs withdrew the Delaware state court complaint.
On September 3, 2015, a purported Aetna shareholder filed a putative class action and derivative complaint
challenging the Proposed Acquisition in Pennsylvania state court (the “Aetna Complaint”). The Aetna Complaint
generally alleged, among other things, that Aetna’s board of directors (the “Aetna Board”) breached its fiduciary
duties by negotiating and entering into the Merger Agreement because the Proposed Acquisition overvalued
Humana, the negotiation process leading to the Proposed Acquisition was flawed, the Proposed Acquisition
represented an effort by the Aetna Board to avoid being acquired by another company, Aetna senior management
preferred a transaction with Humana to a transaction with that other company given concerns over their post-
transaction continued employment, and Aetna's registration statement in connection with the Proposed Acquisition
omitted certain material information. The Aetna Complaint generally sought, among other things, declaratory and
injunctive relief, preliminary injunctive relief prohibiting or delaying the defendants from consummating the
Proposed Acquisition, other forms of equitable relief and unspecified amounts of damages. In addition, the Aetna
Board has received demands from two purported Aetna shareholders (including the named plaintiff in the Aetna
Complaint) to investigate and remedy potential or alleged breaches of fiduciary duties in connection with the
Proposed Acquisition.
In response to these demands, and the subsequently filed Aetna Complaint, the Aetna Board, in accordance with
Pennsylvania law and procedure, appointed a special litigation committee (the “SLC”), consisting of Edward J.
Ludwig (Chairperson), Roger N. Farah, Ellen M. Hancock and Richard J. Harrington, to, among other things,
investigate and evaluate such demands and the Aetna Complaint. The SLC retained independent counsel to assist
and advise it in connection with its investigation and evaluation. On October 4, 2015, the SLC and its counsel
issued a 120-page report that reflected, among other things, the SLC’s determination that pursuing the allegations in
the shareholder demands and in the Aetna Complaint was not in the best interests of Aetna or its shareholders and a
recommendation that Aetna pursue dismissal of the Aetna Complaint and not pursue any of the claims in the
demands. The recommendation of the SLC was adopted unanimously by the non-management members of the