PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), is made and entered
into as of September 30, 1997, by and between TIG Insurance Company, a
corporation organized under the laws of the State of California (the "Seller"),
and Nationwide Mutual Insurance Company, a mutual insurance company organized
under the laws of the State of Ohio ("Purchaser" and, together with Seller, the
"Parties"). Certain capitalized terms used herein are defined in Section 1
hereof.
WITNESSETH
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock of TIG Countrywide Insurance Company, a corporation organized under the
laws of the State of California ("Target");
WHEREAS, Seller, among other things, conducts a business which markets
personal automobile and homeowners' insurance through Independent Agents (the
"Business"); and
WHEREAS, on the terms and subject to the conditions contained in this
Agreement, Purchaser desires to purchase, and Seller desires to sell, all of the
issued and outstanding shares of capital stock of Target and the Business and
certain assets of the Seller and its Subsidiaries relating to the Business, and
the Purchaser desires to assume, and the Seller desires to transfer, the Assumed
Liabilities.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained in this Agreement, the parties, intending to
be legally bound, do hereby represent, warrant, covenant and agree as follows:
Section 1. Definitions.
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"Acquired Assets" means all right, title, and interest in and to the assets
of Seller listed in Exhibit A hereto, provided, however, that the Acquired
Assets shall not include (i) any of the rights of Seller or any of its
Affiliates under this Agreement (or under any collateral agreement between
Seller or any of its Affiliates on the one hand and Purchaser on the other hand
entered into on or after the date of this Agreement) or (ii) any rights in and
with respect to the assets associated with its Employee Benefit Plans or other
assets not specifically listed in Exhibit A or described herein.
"Adverse Consequences" means all claims, damages, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, losses, expenses, and fees,
including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504 (a) or any similar group defined under a similar provision of state
law.
"Assumed Liabilities" means all debts, obligations and other Liabilities of
Seller or its Affiliates under, or arising out of the agreements, contracts,
leases, licenses, and other arrangements referred to in the definitions of
Acquired Assets and Business through and including the time of Closing;
provided, however, that the Assumed Liabilities shall not include (i) any
Liability of Seller for the unpaid Taxes of any Person under Treas. Reg. Section
1.1502-6 (or any similar provision of state or local law), as a transferee or
successor, by contract, or otherwise, except to the extent required by law, (ii)
any liability of Seller for costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, (iii) any liability or
obligation of Seller under this Agreement (or under any collateral agreement
between Seller or any of its Affiliates on the one hand and Purchaser on the
other hand entered into on or after the date of this Agreement) or (iv) any
liabilities of Seller for payment of any accrued but not taken vacation and any
accrued salaries, wages and bonuses with respect to the Personal Lines Employees
as of the close of business on the Closing Date.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms the basis for any specified
consequence.
"Business" has the meaning set forth in the recitals of this Agreement.
"California Insurance Department" has the meaning set forth in Section 6(d)
below.
"Closing" has the meaning set forth in Section 3 below.
"Closing Balance Sheet" has the meaning set forth in Section 4(i) below.
"Closing Date" has the meaning set forth in Section 3 below.
"Closing Date Total Surplus" means the pro forma total surplus of Target as
of the Closing Date, calculated on a basis consistent with the Latest Balance
Sheet and giving effect to the transactions contemplated by the Target Quota
Share Reinsurance Agreement, the Seller Quota Share Reinsurance Agreement and
the Loss Portfolio Transfer Agreement.
"Closing Financial Data" has the meaning set forth in Section 4(i) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Section
1563 of the Code.
"Disclosure Schedule" has the meaning set forth in Section 6 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental Damages" means all claims, judgments, losses, penalties,
fines, liabilities, encumbrances, liens, costs and reasonable expenses of
investigation, defense or good faith settlement resulting from violations of
Environmental Laws, and including, without limitation: (i) damages for personal
injury and injury to property or natural resources; (ii) reasonable fees and
disbursements of attorneys, consultants, contractors, experts and laboratories;
and (iii) costs of any cleanup, removal, response, abatement, containment,
closure, restoration or monitoring work required by any Environmental Law.
"Environmental, Health and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, together with all other laws (including rules, regulations and
codes of federal, state and local governments, and all agencies thereof)
concerning pollution or protection of the environment, public health and safety,
or employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means an entity which, together with Target, would be
treated as a single employer under Section 414 of the Code.
"Extremely Hazardous Substance" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3 (21).
"Hazardous Materials" include substances (i) which are or become defined as
a "hazardous waste," "hazardous substance," or "pollutant or contaminant" under
any Environmental Laws; or (ii) which are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic or mutagenic; or (iii) which
contain petroleum hydrocarbons, polychlorinated biphenyls, asbestos, asbestos
containing materials or urea formaldehyde.
"Indemnified Party" has the meaning set forth in Section 16(b) below.
"Indemnifying Party" has the meaning set forth in Section 16(b) below.
"Independent Agent" means those persons, firms or corporations listed on
Exhibit B.
"Knowledge of Seller" or words of similar import, means the actual
knowledge of William Huff, Michael Casey, Louis Paglia, Harry Cotter, Richard
Gibson, Mark Jorgensen, David Rowlands, Jr., Ranelle Smith or Wilson Wheeler.
"Latest Balance Sheet" has the meaning set forth in Section 7(b) below.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due).
"Licenses" has the meaning set forth in Section 6(h) below.
"LossPortfolio Transfer Agreement" means the reinsurance agreement
described in Section 14(e) below.
"Material Adverse Effect" means any material adverse effect on the
business, financial condition, results of operations or properties of the Target
and the Business, considered as a whole.
"Material Agreement" has the meaning set forth in Section 7(k).
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Neutral Auditors" has the meaning set forth in Section 4(iv) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past practice and custom.
"Parties" has the meaning set forth in the preface of this Agreement.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Personal Lines Employees" means all of the employees of Seller who as of
the date of this Agreement performed services for the Business and who are named
in Exhibit C hereto (which Exhibit also sets forth the title, bonus paid (if
any), years of service and current rate of compensation for each such employee),
except any such employees who, prior to the Closing Date, become qualified for
long-term disability benefits under Seller's long-term disability plan, or any
such employees who are on short-term disability and who the Seller reasonably
determines, not later than December 1, 1997, are likely to become qualified for
long-term disability benefits.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Section 4975 of the Code.
"Purchase Price" has the meaning set forth in Section 2 below.
"Purchaser" has the meaning set forth in the recitals of this Agreement.
"Purchaser Disclosure Schedule" has the meaning set forth in Section 8
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Reserves" has the meaning set forth in Section 6(m) below.
"Resolution Period" has the meaning set forth in Section 4(iii) below.
"Restricted Business" has the meaning set forth in Section 12(b) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller Quota Share Reinsurance Agreement" means the reinsurance contract
between Target and Seller referred to in Section 13(e) below.
"Statements" has the meaning set forth in Section 6(d) below.
"Straddle Period" shall mean any taxable period that includes (but does not
end on) the Closing Date.
"Straddle Tax Return" shall mean any Tax Return required to be filed by
Target covering a taxable period commencing prior to the Closing Date and ending
after the Closing Date.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Target" has the meaning set forth in the preface above.
"Target Quota Share Reinsurance Agreement" means the reinsurance contract
between Target, Seller and certain Affiliates of Seller referred to in Section
12(d) below.
"Tax" means any federal, state, foreign or local income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TIG Holdings" means TIG Holdings, Inc., a Delaware corporation.
"Third Party Claim" has the meaning set forth in Section 16(b) below.
"Unresolved Changes" has the meaning set forth in Section 4(iv) of this
Agreement.
Section 2. Purchase and Sale. (a) Upon the terms and subject to the
conditions of this Agreement, at the Closing (as such term is defined below),
(i) Seller agrees to sell, transfer, assign, convey and deliver to Purchaser,
and Purchaser agrees to purchase, accept and acquire from Seller, 12,500 shares
of common stock, par value of $270 per share, of Target (the "Shares"), which
Shares shall constitute all of the issued and outstanding capital stock of
Target, and (ii) Purchaser shall pay to Seller $65 million plus Closing Date
Total Surplus (which may be negative) in cash by wire transfer in immediately
available funds (the "Purchase Price") in accordance with Section 5(b) below
(subject to adjustment as provided in Section 4 below), which price includes
consideration for certain transition and support services to be provided by
Seller to Purchaser as contemplated by Sections 11 and 14 hereof commencing
after the date hereof.
(b) No later than 10 days prior to the date that the Seller reasonably
believes will be the Closing Date, Seller shall deliver to Purchaser an
estimated pro forma balance sheet of Target as of the Closing (the "Estimated
Closing Balance Sheet") containing an estimate of Closing Date Total Surplus
("Estimated Closing Date Total Surplus"). The Estimated Closing Balance Sheet
shall be prepared on a basis consistent with the methods, principles, practices
and policies employed in the preparation and presentation of the Latest Balance
Sheet. The Purchase Price payable at Closing shall be adjusted by an amount
equal to Estimated Closing Date Surplus as set forth in such statement.
Section 3. The Closing. The closing of the sale and purchase of the
Shares and the Acquired Assets (the "Closing") shall take place at 10:00 a.m. on
the third business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the actions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) at the offices of Willkie Farr & Gallagher, One Citicorp
Center, 153 East 53rd Street, New York, NY 10022 or at the offices, or at such
other date, time or place as the parties may mutually agree (the "Closing
Date").
Section 4. Purchase Price Adjustment.
(i) As soon as practicable, but in no event later than 60 days
following the Closing Date, Seller shall prepare a pro forma balance sheet of
Target as of the Closing (the "Closing Balance Sheet") and a calculation of
Closing Date Total Surplus as of the Closing based on the Closing Balance Sheet
(collectively, the "Closing Financial Data"). The Closing Balance Sheet and the
calculation of Closing Date Total Surplus shall be prepared on a basis
consistent with the methods, principles, practices and policies employed in the
preparation and presentation of the Latest Balance Sheet.
(ii) During the preparation of the Closing Balance Sheet and the
calculation of Closing Date Total Surplus as of the Closing, and the period of
any review or dispute within the contemplation of this Section 4, Purchaser
shall (A) provide Seller and Seller's authorized representatives with full
access to all relevant books, records, workpapers and employees of Target and
the Business, and (B) cooperate fully with Seller and Seller's authorized
representatives, including the provision on a timely basis of all information
necessary or useful in the preparation of the Closing Balance Sheet.
(iii) Seller shall deliver a copy of the Closing Financial Data to
Purchaser promptly after it has been prepared. After receipt of the Closing
Financial Data, Purchaser shall have forty-five (45) days to review the Closing
Financial Data, together with the workpapers used in the preparation thereof.
Unless Purchaser delivers written notice to Seller on or prior to the 45th day
after Purchaser's receipt of the Closing Financial Data stating that Purchaser
has objections to the Closing Financial Data, or methods, principles, practices
or policies employed in the preparation thereof, Purchaser shall be deemed to
have accepted and agreed to the Closing Financial Data. If Purchaser so notifies
Seller of its objections to the Closing Financial Data, the Parties shall,
within twenty (20) days (or such longer period as the Parties may agree)
following such notice (the "Resolution Period"), attempt to resolve their
differences arising from such objections and any resolution by them as to any
disputed amounts or methods, principles, practices or policies employed in the
preparation thereof shall be final, binding and conclusive. Purchaser
acknowledges and agrees that it shall not, under any circumstances, have the
ability to raise objections relating to the adequacy of the amounts recorded for
Loss Reserves, ALAE Reserves or ULAE (the "Reserve Accounts") on the Latest
Balance Sheet, Closing Date Balance Sheet, the methods, principles, practices or
policies employed in the preparation thereof, or the impact thereof on Closing
Date Total Surplus; provided, however, that with respect to any development in
the Reserve Accounts between the date of the Latest Balance Sheet and the
Closing Date, Purchaser may raise objections to the method used in preparing the
amounts recorded in the Reserve Accounts solely on the basis that such method
was inconsistent with the past practice of the Seller.
(iv) Any amounts or methods, principles, practices or policies employed
in the preparation thereof, remaining in dispute at the conclusion of the
Resolution Period ("Unresolved Changes") shall be submitted to such firm of
United States independent certified public accountants as Seller and Purchaser
may agree, such firm to be a "Big 6 Firm". If they cannot so agree within five
(5) days after the end of the Resolution Period, they shall each select one such
firm within ten (10) days after the end of the Resolution Period and the two (2)
firms so chosen shall select a third firm of United States independent certified
public accountants, such firm to be a "Big 6 Firm" to which such dispute shall
be submitted (the firm ultimately selected pursuant to this Section being the
"Neutral Auditors").
All Unresolved Changes shall be submitted to the Neutral Auditors no
later than ten (10) days after the same is designated. Each Party agrees to
execute, if requested by the Neutral Auditors, a reasonable engagement letter.
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditors shall be borne pro rata by Seller and Purchaser in proportion
to the allocation of the dollar amount of the Unresolved Changes between Seller
and Purchaser made by the Neutral Auditors such that the prevailing party pays a
lesser proportion of the fees and expenses. The Neutral Auditors shall act as an
arbitrator to determine, based on the provisions of this Section 4, only the
Unresolved Changes. The Neutral Auditors' determination of the Unresolved
Changes shall be made within forty-five (45) days of the submission of the
Unresolved Changes thereto, shall be set forth in a written statement delivered
to Seller and Purchaser and shall be final, binding and conclusive.
The term "Adjusted Closing Balance Sheet," as used in this Agreement,
shall mean the definitive Closing Balance Sheet agreed to by Seller and
Purchaser under Section 4(iii) or, if submitted to the Neutral Auditors, this
Section 4(iv) (in such case giving effect to those items theretofore agreed to
by Seller and Purchaser). It is understood by the Parties that to the extent
Purchaser's objections to the Closing Financial Data are correct, adjustments
will be made in such items of the Latest Balance Sheet so that such items are so
provided for or reflected therein in a manner consistent with the methods,
principles, practices or policies employed in the preparation of the Closing
Financial Data. Similar adjustments shall be made, if applicable, in Adjusted
Total Shareholders Equity.
(v) The purchase price paid by Purchaser at the Closing shall be (A)
increased dollar for dollar by the amount and to the extent Closing Date Total
Surplus as of the Closing based upon the Closing Balance Sheet or the Adjusted
Closing Balance Sheet, as the case may be, exceeds Estimated Closing Date Total
Surplus, or (B) decreased dollar for dollar by the amount and to the extent
Closing Date Total Surplus as of the Closing based upon the Closing Balance
Sheet or the Adjusted Closing Balance Sheet, as the case may be, is less than
Estimated Closing Date Total Surplus. Any adjustments to the purchase price made
pursuant to this Section 4(a)(v) shall be paid by wire transfer of immediately
available funds to the account specified by the Party to which such payment is
owed. In the event that the amount of Closing Date Total Surplus as of the
Closing is agreed to by Purchaser and Seller during (or before) the Resolution
Period, such payment shall be made within five (5) business days after the date
such agreement is reached. In the event that there are Unresolved Changes at the
end of the Resolution Period, then (A) if the Purchaser and Seller agree that a
purchase price adjustment is owed to one Party regardless of the ultimate
resolution of any Unresolved Changes, then the minimum amount which the
Purchaser and the Seller agree is owed to such Party shall be paid within five
(5) business days after the end of the Resolution Period and any additional
amounts owing to such Party with respect to the Unresolved Changes shall be paid
within five (5) business days after resolution thereof by the Neutral Auditors
or (B) in all other cases, any and all payments shall be made within five (5)
business days after resolution of the Unresolved Changes by the Neutral
Auditors.
(vi) Purchaser and Seller shall make good faith efforts to comply with
the timing and response requirements set forth in this Section 4, but in the
absence of bad faith, neither Party shall be deemed to have waived its rights
under the purchase price adjustment provisions as contemplated herein on the
basis of technical violations of timing and response requirements.
Section 5. Actions at Closing; Further Assurances.
(a) Actions by Seller. At the Closing, Seller shall deliver to
Purchaser:
(i) stock certificates representing the Shares, duly
endorsed in blank;
(ii) the various certificates, instruments and documents
referred to in Section 14 hereof;
(iii) an opinion, dated the Closing Date, of Peter Acton,
General Counsel of TIG Holdings, in the form of Exhibit D
hereto; and
(iv) resignations, dated as of the Closing Date, of the
directors and officers of Target. (b) Actions by Purchaser.
At the Closing, Purchaser shall:
(i) wire transfer the Purchase Price in immediately
available funds to an account of Seller, as designated in
writing by Seller prior to the Closing Date;
(ii) deliver to Seller the various certificates, instruments
and documents referred to in Section 13 hereof; and
(iii) deliver to Seller an opinion, dated the Closing Date,
of W. Sidney Druen, Senior Vice President and General
Counsel and Assistant Secretary, in the form of Exhibit E
hereto.
Section 6. Representations and Warranties of Seller With Respect to
Target. Except as set forth in the disclosure schedule of the Seller
accompanying this Agreement (the "Disclosure Schedule"), Seller hereby
represents and warrants to the Purchaser as follows:
(a) Organization and Standing. Target is an insurance
corporation duly organized, validly existing, and in good
standing under the laws of the State of California, is duly
authorized under California law to carry on its business as a
property and casualty insurance company, has all requisite
corporate power and authority to own, lease, and operate its
assets, properties and business and to carry on its business as
now being and heretofore conducted. Target is duly qualified to
do business in each other state or jurisdiction in which such
qualification is required, except where the failure to be so
qualified would not have a Material Adverse Effect.
(b) Capital Structure. The authorized capital stock of
Target consists of 30,000 shares of common stock, par value of
$270 per share. As of the date hereof, 12,500 Shares are
outstanding and issued to Seller, all of which are free and
clear of any Security Interest. All of such presently
outstanding Shares are duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. Upon
delivery to Purchaser on the Closing Date of the stock
certificates provided for in Section 5(a)(i) hereof, Purchaser
will acquire good title to all of the Shares, free and clear of
any Security Interest, other than those created by or through
Purchaser, or as a result of Purchaser's application for
acquisition of control of Target.
(c) Subsidiaries. Target does not have any
Subsidiaries.
(d) Financial Statements. Seller has made available to
Purchaser for inspection complete copies of (i) the Annual
Statements of Target as filed with the Insurance Department of
the State of California (the "California Insurance Department")
for the years ended December 31, 1994, 1995 and 1996 and (ii)
the Quarterly Statement of Target as filed with the California
Insurance Department for the quarter ended June 30, 1997 (the
"Statements"). The Statements have been prepared in a manner
permitted under statutory authority of the California Insurance
Department, on a consistent basis, during the periods covered by
each such Statement, except as disclosed in the auditor's report
and notes to such Statements. All Statements fairly present the
financial position and results of operations of Target as of the
dates and for the periods covered by such statements.
(e) Options or Other Rights. There is no outstanding
right, subscription, warrant, call, unsatisfied preemptive
right, option or other agreement of any kind to purchase or
otherwise to receive from Target, any of the outstanding,
authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of Target and there is no
outstanding security of any kind convertible for or exchangeable
into any such capital stock. Except for powers of attorney with
respect to the consolidated federal income Tax Returns that
include the Target for periods ending on or before the Closing
Date,Target has no powers of attorney outstanding.
(f) Certificate of Incorporation, By-laws, Etc. The
copies of the Certificate of Incorporation and Bylaws and the
stock books of Target made available to Purchaser for inspection
are true and complete as in effect on the date hereof. The
minute books of Target have been made available to the Purchaser
for its inspection and the originals thereof will be delivered
to Purchaser at Closing. The minute books of Target contain true
and complete recordings of all meetings and consents in lieu of
meetings of the board of directors or any committee thereof of
Target since April 23, 1993, except where the absence of any
such recordings of meetings or consents in lieu of meetings
would not have a Material Adverse Effect or the consummation of
the transactions contemplated by this Agreement.
(g) Compliance with Laws. To the Knowledge of Seller,
Target is not in violation of any federal, state or local law,
ordinance, statute, rule, regulation, order, judgment,
injunction, award, decree or requirement of any governmental or
regulatory body, court or arbitrator applicable to Target, which
violation individually or in the aggregate would have a Material
Adverse Effect and Target has not received any written notice
that any such violation is being or may be alleged.
(h) Licenses. Target has such licenses, permits, orders
or approvals of, and have made all required registrations with,
any federal or state governmental or regulatory body that are
necessary to the conduct of the business of Target as of the
date hereof (collectively, "Licenses") and all such Licenses are
in full force and effect, subject to such exceptions as would
not have a Material Adverse Effect. Seller has not received any
written notice of any violation in respect of any such License
and no proceeding is pending or, to the Knowledge of Seller,
threatened to suspend, revoke or limit any such License which
would have a Material Adverse Effect.
(i) No Breach. Assuming compliance with the
requirements referred to in Section 7(g) below, neither the
execution and the delivery of this Agreement by Seller, nor the
consummation of the transactions contemplated hereby, will (i)
violate any statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Target is
subject or any provision of the charter or bylaws of Target or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any Material Agreement or License to which
Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or creation
of Security Interest would not have a Material Adverse Effect or
materially impair the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(j) Finders Fees. TIG Holdings has retained Goldman,
Sachs & Co. as its financial advisor in connection with this
Agreement. TIG Holdings (excluding Target) is solely liable for
the payment of any and all fees or commission in connection
therewith and Seller will indemnify Purchaser for any
misrepresentation contained in this Section 6(j).
(k) Authority. Seller has all requisite corporate power
and authority to execute and deliver this Agreement and to carry
out its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller and this Agreement has
been duly executed and delivered by Seller and constitutes the
valid and legally binding obligation of Seller, enforceable
against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, rehabilitation, or
similar laws affecting the enforcement of creditors' rights
generally.
(l) No Improper Payments. To the Knowledge of Seller,
during the ownership of Target by TIG Holdings, neither Target
nor any of its officers and directors have at any time: (i) made
any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public
or quasi-public duties, other than payments required or allowed
by applicable law; or (ii) made any payment outside the Ordinary
Course of Business to any purchasing or selling agent, or person
charged with similar duties, of any entity to which Target sells
or has sold, or from which Target buys or has bought, products
or services, for the purpose of illegally influencing such agent
or person to buy products or services from, or sell products or
services to, Target, where either (i) or (ii) would have a
Material Adverse Effect.
(m) No Representation With Respect to Reserves.
Notwithstanding any other provision of this Agreement, Seller
makes no representation or warranty that the reserves of Target
or the Business for unpaid claims and claims expenses, whether
reported or incurred but not reported (the "Reserves"), or the
amounts recorded in the Reserve Accounts, are adequate or
sufficient. Purchaser agrees that it shall not affect a claim
against Seller under any provision of this Agreement, the Target
Quota Share Reinsurance Agreement, the Seller Quota Share
Reinsurance Agreement or the Loss Portfolio Transfer Agreement
or for Adverse Consequences suffered by it or any of its
Affiliates arising out of the inadequacy or insufficiency of the
Reserves or the amounts recorded in the Reserve Accounts.
Section 7. Representations and Warranties of the Seller With Respect to
the Business and the Acquired Assets. Except as set forth in the Disclosure
Schedule, Seller hereby represents and warrants to the Purchaser as follows:
(a) Acquired Assets. Upon consummation of the
transactions contemplated by this Agreement and the Purchaser
obtaining the consents referred to in the Disclosure Schedule,
the Seller will have assigned, transferred and conveyed to the
Target, directly or indirectly, all of the Acquired Assets free
and clear of all Security Interests except for such as would not
have a Material Adverse Effect. Each tangible asset has been
maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and
tear) and is suitable for the purposes for which it is presently
used in the Business except for such that would not have a
Material Adverse Effect.
(b) Financial Information. Seller has furnished to
Purchaser the pro forma consolidated balance sheet of the
Business as of August 31, 1997 (the "Latest Balance Sheet"). The
Latest Balance Sheet presents fairly the financial condition of
the Business as of August 31, 1997 on the pro forma basis
described in the notes thereto.
(c) Events Subsequent to the Date of the Latest Balance
Sheet. Except as contemplated by this Agreement, since the date
of the Latest Balance Sheet, there has not been any material
adverse change in the business, financial condition, results of
operations, or properties of the Business and Target taken as a
whole. Without limiting the generality of the foregoing, since
that date:
(i) neither Seller nor Target has entered into
any Material Agreement outside the Ordinary Course of
Business that is an Assumed Liability and that relates
to any of the Acquired Assets;
(ii) no party (including Seller) has
accelerated, terminated, modified, or canceled any
Material Agreement relating to any of the Acquired
Assets outside the Ordinary Course of Business;
(iii) Seller has not imposed any Security
Interest upon any of the Acquired Assets, the
imposition of which, individually or in the aggregate,
would have a Material Adverse Effect;
(iv) Seller has not issued any note, bond, or
other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or
capitalized lease obligation that is an Assumed
Liability;
(v) Seller has not entered into any employment
or collective bargaining agreement or modified the
terms of any existing such agreement with respect to
the Personal Lines Employees;
(vi) Seller has not granted any increase in the
base compensation of any of the Personal Lines
Employees outside the Ordinary Course of Business;
(vii) Seller has not adopted, amended, modified
or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for
the benefit of any of the Personal Lines Employees (or
taken any such action with respect to any other
Employee Benefit Plan) that is an Assumed Liability
outside the Ordinary Course of Business; and
(viii) Seller has not entered into any
amendment, modification, termination, alteration,
sublease agreements or assignments regarding or
affecting any lease dealing with real estate which are
Assumed Liabilities and relate to Acquired Assets.
Nothing in this Section 7(c) or elsewhere in this
Agreement shall prohibit Seller from causing Target to assume
the Assumed Liabilities prior to the Closing.
(d) Litigation. Section 7(d) of the Disclosure Schedule
sets forth each instance, with respect to the Personal Lines
Employees, the Acquired Assets and the Business, in which Seller
or Target (i) is subject to any outstanding injunction,
judgment, order, decree or ruling, or (ii) is a party to any
material action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative
agency of any federal, state or local jurisdiction or before any
arbitrator. Except as set forth in Section 7(d) of the
Disclosure Schedule: (i) to the Knowledge of the Seller, there
are no actions, suits, hearings, arbitrations, proceedings
(public or private) or governmental investigations that have
been brought by or against any governmental authority or any
other Person (collectively, "Proceedings") pending or threatened
in writing against or affecting the Seller, the Business or any
of the Acquired Assets as to which there is a substantial
likelihood of a determination or resolution adverse to the
Business and which, if so adversely determined or resolved,
would have a Material Adverse Effect; and (ii) there are no
existing or threatened in writing orders, judgments or decrees
(other than those of general application) of any governmental
authority affecting any of the Acquired Assets or the Business
which would have a Material Adverse Effect.
(e) Forms of Policy. Except for such forms which are
not material to the Business, each form of insurance policy,
policy endorsement or amendment, reinsurance treaties and
contracts, certificate of insurance, application form, and sales
material used by Seller in connection with the Business in any
jurisdiction has, where required, been approved by the
appropriate insurance or other regulatory authorities of such
jurisdiction, except where the failure to obtain such approval
would not have a Material Adverse Effect, and has been furnished
to Purchaser.
(f) No Breach. Assuming compliance with the
requirements referred to in Section 7(g) below, neither the
execution and the delivery of this Agreement nor the
consummation of the transactions contemplated thereby, will (i)
violate any statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Seller is
subject or any provision of the charter or bylaws of Seller or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any Material Agreement or License to which any
of the Acquired Assets or the Business are subject (or result in
the imposition of any Security Interest upon any of the Acquired
Assets or the Business), except where the violation, conflict,
breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or creation of Security
Interest would not have a Material Adverse Effect or materially
impair the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(g) Consents and Approvals. The execution and delivery
by the Seller of this Agreement, the performance by the Seller
of its obligations hereunder, and the consummation by the Seller
of the transactions contemplated hereby do not require the
Seller or Target to obtain any consent, approval or action of,
or make any filing with or give any notice to, any governmental
or regulatory body, except for (i) any filings, notices and/or
approvals under the insurance laws of the states identified in
Section 7(g) of the Disclosure Schedule, (ii) the expiration or
early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("the H-S-R
Act") or (iii) other notices, filings, authorizations, consents
and approvals which if not obtained or made would not have a
Material Adverse Effect or materially impair the ability of the
Parties to consummate the transactions contemplated by this
Agreement.
(h) Employees.
(i) To the Knowledge of Seller, as of the date
hereof, there is no Personal Lines Employee at the
level of Assistant Vice President or above who plans to
terminate employment with Seller, nor are there any
other Personal Lines Employees who plan to so terminate
which would result in a Material Adverse Effect. Seller
is not a party to or bound by any collective bargaining
agreement with respect to Personal Lines Employees, nor
has it experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining
disputes with respect to Personal Lines Employees.
Neither Seller nor any of the directors and officers
(and employees with responsibility for employment
matters) of Seller has any Knowledge of any
organizational effort presently being made or
threatened by or on behalf of any labor union with
respect to the Personal Lines Employees.
(ii) Seller has not, except to the extent any
of the following would not have a Material Adverse
Effect:
(A) made any commitments, oral or in
writing or otherwise, to any Personal Lines
Employee regarding lifetime employment or
employment for any specified time period or
retention as a consultant;
(B) been advised by or have any
Knowledge that any Personal Lines Employee is,
will be, or is likely to be, asserting a claim
relating to such person's employment or
termination from employment with Seller for
breach of contract, breach of implied covenant
of good faith and fair dealing, wrongful
termination, violation of public policy,
negligent termination or other claim based in
tort or contract;
(C) been advised or have Knowledge
that, with respect to any Personal Lines
Employee, Seller has been charged with, or
deemed to be in violation of, or is likely to
be charged with or deemed to be in violation
of, any federal, state, or local law that
prohibits discrimination on the basis of sex,
race, color, religion, national origin, status
as a handicapped individual, disability,
marital status, status as a Vietnam era veteran
or a disabled veteran, or sexual preference; or
(D) taken any action to create
enhanced rights or benefits for all or some of
the Personal Lines Employees based in whole or
in part on a change of control or change of
ownership of Target or the other transactions
contemplated by this Agreement, which action
would result in liability to Purchaser or
Target.
(i) Employee Benefit Plans.
(i) There are no Employee Benefit Plans which
are sponsored by Target or with respect to which Target
has any liability to contribute.
(ii) There are no Employee Benefit Plans in
which any ERISA Affiliate participates which are
subject to Title IV of ERISA. No ERISA Affiliate has
any material liability with respect to any
Multiemployer Plan.
(iii) Each Employee Pension Benefit Plan
maintained by Seller which is intended to satisfy the
requirements of Section 401(a) of the Code is qualified
in form and operation under that section and the trust
of each such plan is exempt from tax under Section
501(a) of the Code. Seller has provided to Purchaser a
copy of the most recent determination letter issued by
the Internal Revenue Service with respect to each such
plan. None of such plans has been amended since the
date of such determination letters in a manner which
would cause such plans to fail to so qualify.
(j) Real Property. Section 7(j) of the Disclosure
Schedule lists real property leased or subleased to Seller that
is an Acquired Asset. Seller has made available to Purchaser
correct and complete copies of the leases and subleases listed
in Section 7(j) of the Disclosure Schedule together with any
amendments thereto through the date of this Agreement. With
respect to each lease and sublease listed in Section 7(j) of the
Disclosure Schedule:
(i) the lease or sublease is legal, valid,
binding, and in full force and effect;
(ii) Neither Seller nor any Affiliate, and to
the Knowledge of Seller, no other party to the lease or
sublease is in material breach or material default, and
no event has occurred which, with notice or lapse of
time, would constitute a material breach or material
default or permit termination, modification, or
acceleration thereunder which would have a Material
Adverse Effect;
(iii) Seller has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(iv) all facilities leased or subleased
thereunder have received all approvals of governmental
authorities required in connection with the operation
thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations
and are supplied with utilities and other services
necessary for the operation of said facilities as
operated which if not received or operated and
maintained or supplied would have a Material Adverse
Effect or materially impair the ability of the Parties
to consummate the transactions contemplated by this
Agreement;
(v) Except as would not have a Material
Adverse Effect, Seller and its Affiliates have (A)
complied with all Environmental, Health, and Safety
Laws; (B) not caused or permitted any Hazardous
Materials to be treated, stored, disposed of,
generated, or used in any leased premises which are the
subject of this Agreement, except that Seller may have
stored, used or disposed of products customarily found
in office buildings and used in connection with
operation and maintenance of property but such use was
in compliance with all Environmental, Health, and
Safety Laws; and (C) have not received any notice
concerning any past or present, actual or potential
violation of Environmental Laws or liability for
Environmental Damages; and
(vi) Seller shall deliver to Purchaser as
promptly as practicable, with respect to the 12-month
period preceding the date hereof, true and complete
copies of all accounting information for transactions
valued at greater than $10,000 dollars in Seller's
possession regarding operating expenses, real estate
taxes, and common area charges for the leases and
subleases listed on Schedule 7(j).
(k) Material Agreements. Section 7(k) of the Disclosure
Schedule sets forth a true and complete list of each of the
following contracts that are currently in effect and to which
Target is a party, or by which any of the Acquired Assets is
bound:
(i) each agency or consultation contract that
is not terminable without penalty or other liability
(other than liabilities previously accrued thereunder)
upon 90 days or less notice, except for such as are not
material to the Business;
(ii) each contract which restricts or contains
limitations on the ability of Target to conduct the
Business that are Assumed Liabilities, which contract
would have a Material Adverse Effect;
(iii) each contract under which Target has
incurred, assumed or guaranteed indebtedness for
borrowed money in excess of $250,000;
(iv) each lease or sublease of real property
used in the Business, and each lease, sublease or
rental or use contract for which Target is liable, in
each case, that (i) is not terminable by Target without
penalty or other liability (other than liabilities
previously accrued thereunder or on the Latest Balance
Sheet) upon 90 days or less notice and (ii) requires
annual payments by Target of more than $250,000;
(v) each assumption reinsurance (as the ceding
or assuming company), reinsurance, coinsurance or other
similar contract providing for the transfer or sharing
of liabilities with respect to the Business that are
material thereto, and each trust agreement or other
security agreement related thereto that are material to
the Business;
(vi) each contract or arrangement pursuant to
which any person guarantees an obligation of Target in
excess of $250,000, or, except for insurance policies
and similar contracts issued by Target and other
contracts entered into in the Ordinary Course of
Business, pursuant to which Target guarantees any
obligation of or agrees to indemnify another person
which could reasonably be expected to result in
aggregate future payments by Target of $250,000 or
more;
(vii) each contract not disclosed pursuant to
the foregoing clauses (i) through (vi) that are
expected to involve the payment, pursuant to the terms
of such contract, by or to Target of more than
$250,000, or that is otherwise material to the Business
and Target considered as a whole, other than insurance
policies, reinsurance arrangements, annuity and other
contracts entered into in the Ordinary Course of
Business;
(viii) any agreement (or group of related
agreements) under which Seller or Target has created,
incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation,
and under which Seller or Target has imposed a Security
Interest on any of the Acquired Assets;
(ix) any agreement involving Target and one or
more of its Affiliates concerning the Business or the
Acquired Assets, the Independent Agents or the Personal
Lines Employees; and
(x) any employment or collective bargaining
agreement with respect to the Personal Lines Employees.
Seller has delivered, or will deliver within two weeks
of the date hereof, to Purchaser a correct and complete copy of
each agreement listed in Section 7(k) of the Disclosure Schedule
and neither Target nor the Acquired Assets is bound by any oral
agreement which if written would be required to be disclosed
under this Section 7(k). Except (i) as to matters which on a
cumulative basis cannot reasonably be expected to have a
Material Adverse Effect or (ii) as contemplated by this
Agreement, with respect to each agreement referred to in clauses
(i) through (x) above (the "Material Agreements"): (A) the
Material Agreement is legal, valid, binding, enforceable against
the Affiliates of TIG Holdings party thereto, and, to the
Seller's Knowledge, each other party thereto; and (B) to the
Knowledge of Seller, no party is in material breach or material
default, and no event has occurred which with notice or lapse of
time would constitute a material breach or material default, or
permit termination, modification, or acceleration, under the
Agreement.
Section 8. Representations and Warranties of Purchaser. Except as set
forth in the disclosure schedule of the Purchaser accompanying this Agreement
(the "Purchaser Disclosure Schedule"), Purchaser hereby represents and warrants
to the Seller as follows:
(a) Organization. Purchaser is duly organized and
validly existing as a mutual insurance company and in good
standing under the laws of Ohio.
(b) Authority. Purchaser has all requisite corporate
power and authority to execute and deliver this Agreement and to
carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser and this Agreement has
been duly executed and delivered by Purchaser and constitutes
the valid and legally binding obligation of Purchaser,
enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, rehabilitation, or
similar laws affecting the enforcement of creditors' rights
generally.
(c) Finders Fees. Purchaser has no liability or
obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement for which the Seller or any of its Affiliates could
become liable or obligated.
(d) No Breach. Assuming compliance with the
requirements referred to in Section 8(e) below, neither the
execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated thereby, will (i)
violate any statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Purchaser is
subject or any provision of the charter or bylaws of Purchaser
or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or
require any notice under any material agreement, contract,
lease, License or instrument to which Purchaser or any of its
material properties or assets are subject (or result in the
imposition of any Security Interest upon any of its assets),
except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure
to give notice or creation of a Security Interest would not
materially impair the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(e) Consents and Approvals. The execution and delivery
by the Purchaser of this Agreement, the performance by the
Purchaser of its obligations hereunder, and the consummation by
the Purchaser of the transactions contemplated hereby do not
require the Purchaser to obtain any consent, approval or action
of, or make any filing with or give any notice to, any person or
any governmental or regulatory body, except for (i) any filings,
notices and/or approvals under the insurance laws of the states
identified in Section 8(e) of the Purchaser Disclosure Schedule,
(ii) the expiration or early termination of the applicable
waiting period under the H-S-R Act or (iii) other notices,
filings, authorizations, consents and approvals which if not
obtained or made would not materially impair the ability of the
Parties to consummate the transactions contemplated by this
Agreement.
Section 9. Tax Matters.
(a) Prior Period Tax Returns. For the calendar years ended
December 31, 1996, 1995, and 1994, Seller shall deliver to Purchaser
prior to Closing complete copies of the separate company federal and
state income Tax Returns of Target included in the preparation of
consolidated or combined federal or state income Tax Returns that include
Target prepared by, or on behalf of, Target, and Seller shall deliver to
Purchaser, prior to Closing, complete copies of all other Tax Returns
filed in any jurisdiction by Target as reasonably requested by Purchaser.
Seller shall provide to Purchaser at Closing (i) a list of all Tax
Returns of Target required to be filed after the Closing Date for periods
ending on or prior to the Closing Date (including the due dates of such
returns) and (ii) a breakdown of the amounts accrued for federal and all
other Taxes on the Statements of Target on the Closing Date.
(b) Audits; Post-Closing Tax Returns. Except as disclosed in
Schedule 9(b), (i) Target (or Seller or its affiliates on behalf of
Target) has timely filed all Tax Returns that have become due and has
paid all Taxes shown as due thereon; (ii) Target has accrued all Taxes on
its financial statements, whether or not due and payable, imposed on or
with respect to the operations or assets of Target for all periods (or
portions thereof) ending on or before the date hereof in accordance with
GAAP; and (iii) there are no audits or investigations relating to, and no
claims, demands or assessments of, Taxes, pending or threatened against
Target. Purchaser shall cause Target to timely file all Tax Returns for
which Target bears primary filing responsibility that Target is required
to file after the Closing Date for periods ending on or prior to the
Closing Date and to pay Taxes relating to such Tax Returns to the extent
accrued on the Closing Balance Sheet. The preparation and filing of
federal income Tax Returns or any other Tax Return of Target for any
period beginning after the Closing Date and the payment of and liability
for Taxes relating thereto shall be the sole obligation of Purchaser.
(c) Seller's Consolidated Federal Income Tax Return. On the
Closing Date, Purchaser shall pay Seller an amount equal to the Seller's
estimate of the amount due but unpaid under that certain tax sharing
agreement dated January 28, 1993 (the "Tax Sharing Agreement") but in no
event more than the amount accrued for such purpose on the Closing
Balance Sheet. The obligations of Target under the Tax Sharing Agreement
shall be terminated on the Closing Date, and Target shall have no further
liability under such Tax Sharing Agreement after the payment provided for
in the preceding sentence. With respect to Seller's consolidated federal
income tax return for the calendar year ending during the taxable period
that includes the Closing Date, Seller shall include therein the income
and expense of Target for such period through the Closing Date
(determined consistent with prior practice). In connection with filing
its federal income and other Tax Returns, Seller and Purchaser agree to
report (and cause their respective affiliates to report) the acquisition
of Target in such returns in a manner consistent with the structure of
the transactions contemplated hereby.
(d) Straddle Tax Returns. Purchaser shall prepare and file, or
cause to be prepared and filed, all Straddle Tax Returns required to be
filed by Target and shall cause Target to pay the Taxes shown to be due
thereon. Seller will furnish to Purchaser all information and records
reasonably requested by Purchaser for use in preparation of any Straddle
Tax Returns. Within a reasonable period of time prior to the due date
thereof, Purchaser shall allow Seller to review, comment upon and
reasonably approve any Straddle Tax Return prior to the filing of such
return with the relevant tax authority. Purchaser and Seller agree to
cause Target to file all Tax Returns for any Straddle Period in a manner
consistent with the filing of such Tax Returns for prior taxable periods
and on the basis that the relevant taxable period ended as of the close
of business on the Closing Date, unless the relevant Tax authority will
not accept a Tax Return filed on that basis.
(e) Responsibility for Taxes. Except to the extent accrued on
the Closing Balance Sheet or as otherwise provided under Section 9(i)
hereof, Seller shall pay and be responsible for any and all Taxes imposed
on or with respect to the operations or assets of Target for all periods
(or portions thereof) ending on or prior to the Closing Date (including
any and all Taxes attributable to or resulting from Target having been
affiliated with Seller and a portion of any Taxes reflected on Straddle
Tax Returns computed as if the taxable period with respect to such
Straddle Tax Return ended as of the close of business on the Closing
Date). Seller shall hold Purchaser harmless from loss in respect of any
liability for the aforementioned Taxes incurred by Target, Purchaser and
its affiliates in connection therewith (determined without regard to any
deduction, credit or exclusion of Purchaser and its affiliates other than
such items of Target which accrued prior to the Closing Date and as to
which Target has received a benefit). Notwithstanding anything else
contained in this Section 9(e), Seller shall be entitled to receive and
retain any refunds of Taxes attributable to operations of Target for
periods ending on or prior to the Closing Date, except for any such
refunds accrued on the Closing Balance Sheet or arising from the
carryback of any deduction or credit attributable to operations after the
Closing Date. Purchaser shall cause Target to pay any refunds to which
Seller is entitled to Seller within fifteen (15) days of its receipt of
any refund. Seller shall pay to Target any refunds it receives and to
which Target is entitled within fifteen (15) days of its receipt of any
such refund.
(f) Books and Records. Purchaser and Seller shall furnish or
cause to be furnished to the other Party upon request as promptly as
practicable such information (including access to personnel) and books
and records pertaining to the Target and assistance relating to the
Target as is reasonably necessary for the preparation, review, audit and
filing of any Tax Return required to be filed under this Agreement, the
preparation for any Tax audit or the defense of any assessment or other
similar claim. Each Party shall reimburse the other Party for the outside
nonemployee costs of providing such information. Neither Party shall
dispose of any books and records of Target until six months after the
expiration of the applicable statute of limitations (including any
extension thereof); provided, however, that in the event a proceeding has
been instituted for which the books and records may be required prior to
the expiration of the applicable statute of limitations, the information
shall be retained until six months after there is a final determination
with respect to such proceeding and each Party shall provide notice to
the other Party of its intention to dispose of such books and records at
least one month prior to disposing of such books and records.
(g) Procedures Relating to Tax Claims. If a claim is made or
asserted, either orally or in writing, by any Tax authority which, if
successful, may result in an indemnity payment to Purchaser or any of its
affiliates pursuant to this Section 9, Purchaser shall notify Seller of
such claim (a "Tax Claim"), stating the nature and basis of such claim
and the amount thereof, to the extent known. Seller will have the right,
at its option, upon timely notice to Purchaser, to assume control of any
defense of any Tax Claim (other than a Tax Claim relating solely to Taxes
of Target for a Straddle Period) with its own counsel. Costs of such Tax
Claims are to be borne by Seller unless the Tax Claim relates to taxable
periods ending after the Closing Date, in which event such costs will be
fairly apportioned. Purchaser and Target shall cooperate with Seller in
contesting any Tax Claim, which cooperation shall include the retention
and, upon Seller's request, the provision of records and information
which are reasonably relevant to such Tax Claim and making employees
available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder. In the
case of any Tax Claim relating to Taxes of Target for a Straddle Period,
the Party which is responsible under this Agreement for the larger
portion of the total Tax Claim shall have the right to control any
proceedings related thereto. Purchaser shall take all actions necessary
to authorize Seller and its affiliates to act on behalf of Target with
respect to any Tax Claim for which Seller has the right of control under
this Section 9, including, without limitation, the execution of
appropriate powers of attorney or other required agreements.
(h) Tax Withholding. Seller has withheld and paid all material
Taxes required to have been withheld and paid in connection with amounts
paid or owing to the Personal Lines Employees and Independent Agents.
(i) Section 338(h)(10) Elections.
(i) Seller and Purchaser shall make a joint
election under Section 338(h)(10) of the Code and under any
comparable provision of applicable state or local law with
respect to Purchaser's acquisition of Shares pursuant to this
Agreement (collectively, the "Section 338(h)(10) Elections").
Notwithstanding any other provision of this Agreement, if either
Purchaser or Seller fails to properly effect the election under
this Section 9(i)(i), then Purchaser or Seller shall indemnify
Seller or Purchaser, as the case may be, for any Adverse
Consequences of such failure. Any claim based upon this Section
9(i)(i) shall survive until expiration of the applicable statute
of limitations for the taxable period that includes the Closing
Date.
(ii) The following provisions shall apply:
(A) Subject to Section 9(i)(ii)(B) below, as soon
as practicable after the Closing, the Parties shall
mutually prepare a Form 8023-A (with all attachments)
and any corresponding forms under comparable
provisions of applicable state or local law (the
Section "338(h)(10) Forms"), the Parties shall execute
such Section 338(h)(10) Forms, and Purchaser shall
promptly and timely file such executed Section
338(h)(10) Forms and provide written evidence of such
filing to Seller. The Parties shall report the
purchase of the Shares pursuant to this Agreement
consistent with the Section 338(h)(10) Elections, and
no Party shall take any position to the contrary
thereto in any Tax Return, any proceeding before any
taxing authority or otherwise, unless required to do
so by applicable law pursuant to a determination as
defined in Section 1313(a) of the Code.
(B) Seller and Purchaser shall determine, as
promptly as reasonably practicable following the
Closing, the Modified Aggregate Deemed Sales Price (as
defined under applicable Treasury Regulations) and the
allocation of such Modified Aggregate Deemed Sales
Price among the assets of the Target. Such allocation
of the Modified Aggregate Deemed Sales Price shall be
made in accordance with Section 338(b) of the Code and
any applicable Treasury Regulations. The Parties (i)
shall be bound by such allocation for purposes of
determining any Taxes, (ii) shall prepare and file all
Tax Returns (including, but not limited to, the
Section 338(h)(10) Forms) to be filed with any taxing
authority in a manner consistent with such allocation,
and (iii) shall take no position inconsistent with
such allocation in any Tax Return, any proceeding
before any taxing authority or otherwise, unless
required to do so by applicable law pursuant to a
determination as defined in Section 1313(a) of the
Code. In the event that such allocation is disputed by
any taxing authority, the Party receiving notice of
such dispute shall promptly notify and consult with
the other Party concerning resolution of such dispute.
To the extent that the Purchase Price is adjusted by
reason of any payment under this Agreement, (i) the
Modified Aggregate Deemed Sales Price shall be
adjusted to reflect such change, (ii) the provisions
of this Section 9(i)(ii)(B) shall be followed in
redetermining the allocation of the Modified Aggregate
Deemed Sales Price, and (iii) the Parties will, to the
extent required by applicable law, file amended Tax
Returns consistent with such revised allocation.
(j) Limitation on Tax Indemnity. Notwithstanding the foregoing,
Seller shall have no obligation to indemnify Purchaser under this Section
9 for any loss to which Purchaser would not have been entitled to
indemnification had such obligation been treated as arising from a breach
described in Section 16(b) of this Agreement.
Section 10. Representations and Covenants of Parties With Respect to
Personal Lines Employees. Each of the Parties hereby covenants as to itself, the
following:
(a) Hiring of Personal Lines Employees. Prior to the Closing
Date, Purchaser shall offer to employ all of the Personal Lines
Employees, such offer to be effective as of 12:01 a.m. on the day
immediately following the Closing Date, on terms fair to Purchaser and
the employees, including salaries equal to 100% of the salaries paid by
Seller as of the Closing Date, and with employee benefits (including
medical, disability, severance pay, and life insurance and retirement
benefits) that are substantially the same as those provided to
similarly situated employees of Purchaser and its subsidiaries who are
engaged in its insurance operations; provided that, with respect to any
person who is on short-term disability at such time, such employment
shall not commence until such short-term disability period terminates.
Seller shall remove from Seller's payroll system all Personal
Lines Employees effective as of the end of the business day on the
Closing Date. Seller makes no representations as to whether any
employee will accept employment with Purchaser. The Personal Lines
Employees who accept employment with Purchaser shall be referred to as
the "Transferred Employees." Nothing in this Agreement shall be
construed as limiting in any way the right of Purchaser after the
Closing Date to terminate the employment of any Transferred Employee at
any time, to change his or her salary or wages or to modify benefits or
other terms and conditions of employment of Transferred Employees as
long as any changes to salary or wages made are done in accordance with
Purchaser's normal compensation practices and as long as any
modification to benefits or other terms and conditions of employment of
any Transferred Employee apply generally to employees of Purchaser's
business, provided, however, that without limiting the right of the
Purchaser or Target to terminate the employment of any Transferred
Employee after the Closing Date, Purchaser shall not reduce the salary
or wages of any Transferred Employee for at least twenty four (24)
months following the Closing Date.
(b) Seller's and Purchaser's Obligations With Respect to
Personal Lines Employees. With respect to each Personal Lines Employee:
(i) Seller shall be responsible for, and shall
indemnify and hold harmless Purchaser against, any actions,
claims or proceedings brought by or on behalf of any Personal
Lines Employee at any time, including but not limited to,
wrongful termination, breach of fiduciary duty, discrimination,
sexual harassment, workers compensation or other
employment-related matter ("Employee Claims"), to the extent
such claims are based solely upon actions, events or
circumstances which occurred before the Closing Date. Purchaser
shall be responsible for, and shall indemnify and hold Seller
harmless against, any Employee Claims, to the extent such claims
are based solely upon actions, events or circumstances which
occur after the Closing Date.
(ii) Seller shall be responsible for all benefits
provided pursuant to all of Seller's Employee Benefit Plans,
including but not limited to deferred compensation,
non-qualified and incentive plans or policies with respect to
services rendered on or before the Closing Date.
(iii) Seller's welfare benefit plans shall be
responsible for welfare benefit claims relating to the Personal
Lines Employees incurred on or prior to the Closing Date (in
accordance with the terms of such plans) or during any period
for which a Transferred Employee shall elect continuation
coverage of the type described in Section 10(b)(iv)(C) of this
Agreement with respect to a "qualifying event" occurring on or
before the Closing Date, and Purchaser's welfare plans shall
assume responsibility for all welfare benefit claims relating to
Personal Lines Employees incurred after the Closing Date to the
extent such claim is covered by such plans and the Transferred
Employee was enrolled for such coverage. For this purpose, a
claim is deemed incurred when the medical or other service
giving rise to the claim is performed, except that in the case
of death, a claim is incurred on the date of death.
(iv) Purchaser shall cause all Transferred Employees to
be covered by Purchaser's severance pay plan and each such
Transferred Employee shall be credited with such employee's
service with Seller for purposes of determining benefits under
such plan, based on the years of service shown for such employee
on Exhibit C hereto, provided that the crediting of such service
for Transferred Employees who have incurred breaks in service
shall, to the extent such crediting would not be permitted under
Purchaser's severance pay plan, be subject to the approval of an
amendment to such plan by Purchaser's board of directors
permitting such crediting, and Purchaser shall use its best
efforts to obtain such approval prior to the Closing Date.
(v) With respect to each Transferred Employee:
(A) Purchaser shall waive pre-existing condition
exclusions, evidence of insurability provisions,
waiting period requirements or any similar provisions
under any employee benefit plan or compensation
arrangements maintained or sponsored by or contributed
to by Purchaser for such Transferred Employee on or
after the Closing Date; provided such conditions,
waiting periods, exclusions or similar provisions did
not preclude coverage for such Transferred Employee as
of the Closing Date under the comparable plans of
Seller and, to the extent any such waiver is not
permitted under any of Purchaser's employee benefit
plans or compensation arrangements, such waiver will be
subject to approval of amendment under such plans or
arrangements by the Purchaser's board of directors
permitting such waiver and Purchaser will use its best
efforts to obtain such approval prior to the Closing
Date.
(B) Purchaser shall recognize the service of each
Transferred Employee with Seller prior to the Closing
Date for all purposes other than pension benefit
accrual under each of Purchaser's employee benefit
plans, programs and policies (including but not limited
to vacation and severance) other than the Nationwide
Insurance Enterprise Retirement Plan. Vesting service
for purposes of the Nationwide Insurance Enterprise
Savings Plan shall only be considered when applying
those vesting provisions which are based on service,
and not those based on participation in that plan.
(C) Seller shall be responsible for satisfying
obligations under Section 601 et. seq. of ERISA and
Section 4980B of the Code ("COBRA"), to provide
continuation coverage to or with respect to any
Transferred Employee in accordance with law with
respect to any "qualifying event" occurring on or
before the Closing Date. Purchaser shall be responsible
for satisfying obligations under COBRA to provide
continuation coverage to or with respect to any
Transferred Employee in accordance with law with
respect to any "qualifying event" which occurs after
the Closing Date.
(D) Purchaser shall be responsible for, and shall
indemnify and hold Seller harmless against, all workers
compensation benefits paid or payable to the
Transferred Employees after the Closing Date with
respect to claims made by Transferred Employees after
the Closing Date.
(vi) Purchaser represents that it does not currently contemplate
a plant closing involving, or mass lay-off of, Transferred Employees,
or any terminations that in the aggregate would constitute a mass
lay-off of Transferred Employees, within twelve (12) months following
the Closing Date. Purchaser shall indemnify and hold Seller harmless
against any Liability which may be incurred or suffered by Seller under
the Worker Adjustment and Retraining Notification Act or any similar
state law arising out of, or relating to, any actions taken by
Purchaser with respect to the Transferred Employees on or after the
Closing Date.
Section 11. Covenants Pending the Closing. The Parties agree as follows
with respect to the period between the execution of this Agreement and the
Closing:
(a) General. Each of the Parties shall use all reasonable
efforts to take all actions and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement.
(b) Regulatory Approvals. Each of the Parties shall use all
reasonable efforts, and shall reasonably cooperate with each other in
such efforts, to obtain the approvals of all regulatory authorities
required to be obtained by Seller or Purchaser or by any Affiliate of
Seller or Purchaser in order to consummate the transactions
contemplated by this Agreement. Seller and Purchaser shall make and
cause their respective Subsidiaries to make all necessary filings as
soon as practicable, including, without limitation, those required by
the H-S-R Act and applicable insurance laws in order to facilitate
prompt consummation of the transactions contemplated by the Agreement.
In addition, Seller and Purchaser shall each use all reasonable
efforts, and shall cooperate fully with each other, to comply as soon
as practicable with all governmental requirements applicable to, or
necessary for the consummation of, the transactions contemplated
hereby. Seller and Purchaser shall use all reasonable efforts to
provide such information and communications to governmental entities as
such governmental entities may reasonably request. Each of the Parties
shall provide to the other Party copies of all applications filed or
submitted with governmental entities in connection with this Agreement
and shall keep the other Party apprised of the status of matters
relating to completion of the transactions contemplated hereby.
(c) Access to Information. Seller and Target shall give to
Purchaser and to Purchaser's accountants, actuaries, counsel, and other
representatives (hereinafter "Purchaser's Representatives") access at
all reasonable times in a manner so as not to interfere with the normal
business operations of Target or the Business, throughout the period
prior to the Closing, to all of Target's properties, books, contracts,
commitments and records. During such period, Seller shall furnish to
Purchaser all such information concerning the affairs of Target as
Purchaser may reasonably request. Pending the Closing hereunder,
Purchaser and Purchaser's Representatives will comply with the
provisions of the Confidentiality Agreement between Purchaser and TIG
Holdings, dated June 18, 1997.
(d) Conduct of Business; Appointment of Independent Agents.
Except as otherwise contemplated by this Agreement, Seller will not
engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business with respect to Target, the
Acquired Assets, the Personal Lines Employees or the Business. Seller
shall use commercially reasonable efforts to cause the appointment of
all Independent Agents with Target prior to the Closing Date.
Notwithstanding the immediately preceding sentence, Seller makes no
express or implied representation that any Independent Agent appointed
with Target prior to the Closing Date will continue to write the
Business with Target prior to, at or after the Closing.
(e) Insurance. Seller will use its reasonable efforts to
maintain in effect insurance coverage against loss of or damage to the
Acquired Assets and against the liabilities and risks of the Business
in amounts and kinds not less favorable in any material respect than
those currently in effect and use its reasonable efforts to maintain
the same through the Closing Date.
(f) Books of Account. Seller will, and Seller will cause Target
to, maintain and continue to keep its books, accounts and records with
respect to the Business in the Ordinary Course of Business.
(g) Exclusivity. So long as this Agreement is in effect, Seller
will not (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities of Target, or any substantial
portion of the Acquired Assets, the Business or Target (including any
acquisition structured as a merger, consolidation, or share exchange)
or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to
do or seek any of the foregoing. Seller will promptly notify Purchaser
if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(h) Notice of Developments. Each Party will give prompt written
notice to the other of any material matter causing a breach of any of
its own representations and warranties in Sections 6, 7 and 8 above, as
applicable .
(i) Inter-Company Balances. Seller shall cause all intercompany
balances between Seller and Target to be settled prior to the Closing
Date.
(j) Financial Statements. As promptly as practicable after an
Annual Statement or Quarterly Statement is filed by Target with the
California Insurance Department after the date hereof and prior to the
Closing Date, Seller shall deliver to Purchaser a copy of such Annual
Statement or Quarterly Statement.
(k) Termination of Agreements. Except for the agreements
contemplated by this Agreement, Seller shall cause Target to terminate
or modify, on terms mutually agreeable and which do not have a Material
Adverse Effect on the Acquired Assets or the Business, as of or prior
to the Closing Date all agreements between Target and the TIG Holdings
as of the Closing Date.
(l) Certain Actions by Purchaser. Purchaser shall use all
reasonable efforts to obtain (i) its own IVANS account and (ii)
licenses to use any software loaded on any Acquired Assets, in each
case prior to Closing.
(m) Actions With Respect to Leases. The Seller shall use
reasonable efforts to obtain consents to the assignment of the real
property leases to Target set forth in Section 11(m) of the Disclosure
Schedule to the extent that Purchaser and Seller mutually agree that
such leases shall be assigned to Target. The assignment of one or all
of such leases shall not be a condition of the obligation of the
Purchaser or the Seller hereunder.
Section 12. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure
to act, or transaction on or prior to the Closing Date involving Seller
or Purchaser, each of the other Parties will cooperate with the
contesting or defending Party and his or its counsel in the contest or
defense, make available his or its personnel, and provide such
testimony and access to his or its books and records as shall be
reasonably necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification
therefor under Section 16(b) below) and all at reasonable times and in
a manner so as not to interfere with the other Party's business;
provided, however, that the Party being requested to provide
information and access shall not be required to provide such
information and access unless the Party requesting such information
agrees to abide by any reasonable requests on the part of the providing
party with respect to the confidentiality of such information.
(b) Covenant Not to Compete. At a time agreeable to Purchaser,
Purchaser and Target shall take appropriate action to change the name
of Target as promptly as possible to a name not likely to be confused
with Seller. For a period of two (2) years after the Closing Date, no
Subsidiary of TIG Holdings will directly write Independent Agent
produced auto or homeowners business (the "Restricted Business"),
except as permitted in the Target Quota Share Reinsurance Agreement,
the Seller Quota Share Reinsurance Agreement or the Loss Portfolio
Transfer Agreement; provided, however, TIG Holdings and its
Subsidiaries shall be entitled to (i) continue to write non-standard
auto business, (ii) continue to conduct Restricted Business to the
extent required by law, (iii) write umbrella and excess business, and
(iv) acquire and continue to operate any business or company from a
third party, unless in the case this clause (iv), 25% or more of the
net premium written by the business or company to be acquired in its
most recently completed fiscal year was derived from Restricted
Business, and such percentage represents at least $50 million of net
premium written in which case after the consummation of such an
acquisition, Seller shall notify Purchaser of the transaction and
Purchaser shall have the right to offer to purchase that portion of the
business or company so acquired that is derived from Restricted
Business exercisable within thirty (30) days after receipt of such
notice, which shall be accompanied by such due diligence material as
would allow Purchaser to meaningfully evaluate the business or company
within such thirty (30) day period. To the extent Purchaser does not
make such an offer or the parties cannot agree on mutually acceptable
terms for such a transaction, Seller shall use commercially reasonable
efforts to sell the portion of the business or company derived from
Restricted Business to a third party within one year of the acquisition
thereof; provided that Seller shall not be deemed in breach of this
Section after the expiry of such 1-year period if, in good faith, it
has been unable to divest such business as of such expiration date and
it continues in good faith to attempt to divest such business. This
Section 12(b) shall terminate immediately following the acquisition of
TIG Holdings, whether by merger, sale of stock or substantially all of
the assets of TIG Holdings, by a third party or the merger of TIG
Holding with or into a third party, including a "merger of equals"
however accomplished. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 12(b)
is invalid or unenforceable, the Parties agree that the court making
the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time
within which the judgment may be appealed.
(c) Non-Solicitation. The Parties hereby covenant and agree that
for a period of twenty four (24) months following the Closing Date
neither they nor any of their respective Affiliates shall, without the
prior written consent of the other Parties, directly or indirectly,
induce, encourage or solicit for employment or agency relationship any
Transferred Employee on the part of Seller or any employee of Seller on
the part of Purchaser or employ or enter into an agency relationship
with any Transferred Employee or any employee of Seller as of the
Closing Date; provided that the provisions of this Section 12(c) shall
not apply to any Transferred Employee if Purchaser terminates such
Transferred Employee, subjects such Transferred Employee to an
indefinite lay-off, or such Transferred Employee or employee of Seller
contacts the other Party on his or her own initiative without any
direct or indirect solicitation by or encouragement by such Party
(other than general solicitation in industry journals, national
newspapers or other such publications).
(d) Target Quota Share Reinsurance Agreement; Surplus.
Immediately following the Closing, Purchaser shall cause Target to
enter into the Target Quota Share Reinsurance Agreement in
substantially the form of Exhibit G hereto and Seller shall cause the
Subsidiaries of Seller party to such Agreement to execute and deliver
such Agreement. Purchaser shall cause the statutory surplus of Target,
calculated in accordance with statutory accounting principles
prescribed or permitted by the California Insurance Department and
after giving effect to the transactions contemplated hereby to exceed
the minimum capital and surplus required by the California Insurance
Department.
Section 13. Conditions to Obligations of Seller. The obligation of
Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser in Section 8 hereof
shall be true and correct in all material respects at and as of the
Closing Date, except for representations and warranties made as of a
specified date, which shall be true and correct in all material
respects as of such date.
(b) Performance by Purchaser. All of the obligations under this
Agreement to be complied with and performed by Purchaser on or before
the Closing Date shall have been complied with and performed in all
material respects, including, without limitation, the delivery of each
of the items to be delivered under Section 5(b) hereof provided that
the covenant contained in Section 5(b)(i) shall have been complied with
in all respects. At the Closing, Seller shall have received a
certificate, dated the Closing Date and duly executed by an executive
officer of the Purchaser (without personal liability to such officer)
to the effect that the conditions set forth in Section 13(a) and (b)
have been satisfied.
(c) Legal Challenge. No suit, action or other proceeding shall
be pending before any court or governmental agency, and no claim shall
have been asserted, in which it is or will be sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated which,
in the opinion of Seller's counsel, if successful would materially
impair the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(d) Approvals. The Parties shall have obtained all necessary
approvals or assurances thereof from the Insurance Commissioners of the
States of California and Michigan for the transfer of control of
Target, and the transactions contemplated hereby, and the applicable
waiting period under the H-S-R Act and rules and regulations
promulgated thereunder shall have expired or early termination of the
waiting period shall have been approved by the appropriate regulatory
authority. Purchaser shall have obtained an IVANS account with respect
to the Business and the software licenses referred to in Section 11(m).
(e) Seller Quota Share Reinsurance Agreement; Loss Portfolio
Transfer Agreement. The parties to the Seller Quota Share Reinsurance
Agreement shall have entered into such Agreement in substantially the
form of Exhibit H hereto and such Agreement shall be in full force and
effect. The Loss Portfolio Agreement substantially in the form of
Exhibit I hereto shall have been executed and delivered by the parties
thereto and such agreement shall be in full force and effect.
(f) Certificates. Purchaser will have furnished Seller with such
certificates of its officers and others as Seller may reasonably
request to evidence satisfaction of the conditions set forth in this
Section 13, such certificates to be made without personal liability of
such officer or other person signing such certificate.
Seller may waive any condition specified in this Section 13 if
it executes a writing so stating at or prior to the Closing.
Section 14. Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Seller in Sections 6 and 7 hereof
shall be true and correct in all material respects at and as of the
Closing Date, except for representations and warranties made as of a
specified date, which shall be true and correct in all material
respects as of such date.
(b) Performance by Seller. All of the obligations under this
Agreement to be complied with and performed by Seller on or before the
Closing Date shall have been complied with and performed in all
material respects, including, without limitation, the delivery of each
of the items to be delivered under Section 5(a) hereof provided that
the covenant contained in Section 5(a)(i) shall have been complied with
in all respects. At the Closing, Purchaser shall have received a
certificate, dated the Closing Date and duly executed by an executive
officer of the Seller (without personal liability to such officer) to
the effect that the conditions set forth in Section 14(a) and (b) have
been satisfied.
(c) Approvals. The Parties shall have obtained all necessary
approvals and assurances thereof from the Insurance Commissioners of
the States of California and Michigan for the transfer of control of
Target, and the transactions contemplated hereby, and the applicable
waiting period under the H-S-R Act and rules and regulations
promulgated thereunder shall have expired or early termination of the
waiting period shall have been approved by the appropriate regulatory
authority.
(d) Legal Challenge. No suit, action or other proceeding shall
be pending before any court or governmental agency, and no claim shall
have been asserted, in which it is or will be sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby
which, in the opinion of Purchaser's counsel, if successful would have
a Material Adverse Effect on the Business, or would materially impair
the ability of the Parties to consummate the transactions contemplated
by this Agreement.
(e) Transition Service Agreement; Loss Portfolio Agreement. The
Transition Service Agreement in the form of Exhibit J hereto shall have
been executed and delivered by the Seller and Target. The Loss
Portfolio Agreement substantially in the form of Exhibit I hereto shall
have been executed and delivered by the parties thereto and such
agreement shall be in full force and effect.
(f) Seller Quota Share Reinsurance Agreement. The parties to the
Seller Quota Share Reinsurance Agreement shall have entered into such
Agreement in substantially the form of Exhibit H hereto and such
Agreement shall be in full force and effect.
(g) Certificates. Seller will have furnished Purchaser with such
certificates of its officers and others as Purchaser may reasonably
request to evidence satisfaction of the conditions set forth in this
Section 14, such certificates to be made without personal liability of
such officer or other person signing such certificate.
(h) Transfer of Acquired Assets. Subject to the Purchaser
obtaining the consents referred to in Section 14(h) of the Disclosure
Schedule, Seller shall have transferred to Target the Acquired Assets
which are material to the Business.
Purchaser may waive any condition specified in this Section 14
if it executes a writing so stating at or prior to the Closing.
Section 15. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) Purchaser and Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing.
(ii) Purchaser may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing (A) in
the event Seller has breached any material representation,
warranty, or covenant contained in this Agreement in any
material respect, Purchaser has notified Seller of the breach,
and the breach has continued without cure for a period of thirty
(30) days after the notice of breach or (B) if the Closing shall
not have occurred on or before March 31, 1998, by reason of the
failure of any condition precedent under Section 14 hereof
(unless the failure results primarily from Purchaser itself
breaching any representation, warranty, or covenant contained in
this Agreement).
(iii) Seller may terminate this Agreement by giving
written notice to Purchaser at any time prior to the Closing (A)
in the event Purchaser has breached any material representation,
warranty, or covenant contained in this Agreement in any
material respect, Seller has notified Purchaser of the breach,
and the breach has continued without cure for a period of thirty
(30) days after the notice of breach or (B) if the Closing shall
not have occurred on or before March 31, 1998, by reason of the
failure of any condition precedent under Section 13 hereof
(unless the failure results primarily from Seller breaching any
representation, warranty, or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 15 above, all rights and obligations of
the Parties hereunder shall terminate without any liability of any
Party to any other Party (other than as a result of a willful breach of
any covenant or agreement contained in this Agreement); provided,
however that the confidentiality provisions contained in Section 11(c)
above shall survive termination.
Section 16. Survival; Indemnification.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Seller contained in Sections 6, 7
and 10 of this Agreement, and all of the representations and warranties
of the Purchaser contained in Sections 8 and 10 of this Agreement,
shall survive the Closing hereunder (unless the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at
the time of Closing) and continue in full force and effect for two (2)
years thereafter. Notwithstanding any otherwise applicable statute of
limitations, no claim, lawsuit, or other proceeding arising out of or
related to the breach of any representation or warranty of the Parties
contained herein may be made more than two (2) years after the Closing
Date.
(b) Remedies for Breaches of This Agreement.
(i) Except in the case of any claim related to Taxes,
for which the obligation of Seller to indemnify shall be
governed solely by Section 9 hereof, in the event Seller
breaches (x) any of its representations and warranties
contained in Sections 6, 7 and 10 of this Agreement or (y) any
of its covenants contained in this Agreement, and, if there is
an applicable survival period pursuant to Section 16(a) above,
provided that Purchaser makes a written claim for
indemnification against Seller within such survival period,
then Seller agrees to indemnify Purchaser from and against any
Adverse Consequences Purchaser may suffer which are caused
proximately by the breach; provided, however, that Seller
shall not have any obligation to indemnify Purchaser from and
against any Adverse Consequences caused by the breach of any
representation or warranty of Seller contained in Sections 6 ,
7 or 10 above and any loss otherwise indemnifiable under
Section 9 of this Agreement (A) until Purchaser has suffered
Adverse Consequences by reason of all such breaches in excess
of a $1 million aggregate deductible (after which point Seller
will be obligated only to indemnify Purchaser from and against
further such Adverse Consequences) or thereafter (B) to the
extent the Adverse Consequences Purchaser has suffered by
reason of all such breaches exceeds the Purchase Price (after
which point Seller will have no obligation to indemnify
Purchaser from and against further such Adverse Consequences).
Notwithstanding anything to the contrary in this Agreement,
Seller will have no liability or obligation to Purchaser
pursuant to this Section 16(b) or otherwise for any Adverse
Consequences arising out of any breach of any representation
or warranty made in this Agreement if disclosed in writing at
or prior to the Closing.
(ii) In the event Purchaser breaches (x) any of its
representations and warranties contained in Sections 8 or 10
of this Agreement or (y) any of its covenants contained in
this Agreement, and, if there is an applicable survival period
pursuant to Section 16(a) above, provided that Seller makes a
written claim for indemnification against Purchaser within
such survival period, then Purchaser agrees to indemnify
Seller from and against any Adverse Consequences Seller may
suffer which are caused proximately by the breach; provided,
however, that Purchaser shall not have any obligation to
indemnify Seller from and against any Adverse Consequences
caused by the breach of any representation or warranty of
Purchaser contained in Sections 8 or 10 above (A) until Seller
has suffered Adverse Consequences by reason of all such
breaches in excess of a $1 million aggregate deductible (after
which point Purchaser will be obligated only to indemnify
Seller from and against further such Adverse Consequences) or
thereafter (B) to the extent the Adverse Consequences Seller
has suffered by reason of all such breaches exceeds the
Purchase Price (after which point Purchaser will have no
obligation to indemnify Seller from and against further such
Adverse Consequences). Notwithstanding anything to the
contrary in this Agreement, Purchaser will have no liability
or obligation to Seller pursuant to Section 16(b) or otherwise
for any Adverse Consequences arising out of any breach by
Purchaser of any representation or warranty made in this
Agreement if disclosed in writing at or prior to the Closing.
(iii) Except in the case of any Tax Claim which shall
be governed by Section 9(g) of this Agreement, if any third
party shall notify any Party (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 16(b), then the
Indemnified Party shall promptly (and in any event within five
(5) business days after receiving notice of the Third Party
Claim) notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is materially prejudiced by such delay.
(iv) The Indemnifying Party shall have the right,
exercisable by giving notice to the Indemnified Party not
later than thirty (30) days after receipt of the notice
described in (iii) above, to assume the control of the
defense, compromise or settlement of the Third Party Claim.
(v) Upon the assumption of control by the
Indemnifying Party as aforesaid, the Indemnifying Party shall,
at its expense, diligently proceed with the defense,
compromise or settlement of the Third Party Claim at the
Indemnifying Party's sole expense, including employment of
counsel, and in connection therewith, the Indemnified Party
shall cooperate fully, but at the expense of the Indemnifying
Party, to make available to the Indemnifying Party all
pertinent information and witnesses under Indemnified Party's
control and to make such assignments and take such other steps
as in the opinion of counsel for the Indemnifying Party are
necessary to enable the Indemnifying Party to conduct such
defense, provided always that the Indemnified Party shall be
entitled to reasonable security from the Indemnifying Party
for any expense, costs or other liabilities to which it may be
or may become exposed by reason of such cooperation.
(vi) The final determination of any such Third Party
Claim, including all related costs and expenses, will be
binding and conclusive upon the parties hereto as to the
validity or invalidity, as the case may be, of such Third
Party Claim against the Indemnifying Party hereunder.
(vii) Should the Indemnifying Party fail to give
notice to the Indemnified Party as provided in clause (iv)
hereof or in the event the Indemnifying Party declines to
undertake the defense of any Third Party Claim, action or
proceeding when first notified thereof, the Indemnified Party
shall keep the Indemnifying Party advised as to the current
status and progress thereof. The Indemnified Party agrees not
to make any offer of settlement without first having provided
five (5) days advance written notice thereof to the
Indemnifying Party. In no event will the Indemnified Party
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be
unreasonably withheld).
(viii) In the event the Indemnifying Party undertakes
the defense of any such claim, action or proceeding, the
Indemnified Party shall nevertheless be entitled to
participate in (but not direct) the defense thereof with
counsel of its own choice and at its own expense, and the
parties agree to cooperate fully with one another in
connection with the defense and/or settlement thereof;
provided, however, that any decision to settle any such claim,
action or proceeding shall be at the Indemnifying Party's sole
discretion. From and after delivery of the notice referred to
in clause (iii) above, the Indemnifying Party shall be
relieved of the obligation to reimburse the Indemnified Party
for any other legal, accounting or other out-of-pocket costs
and expenses thereafter incurred by the Indemnified Party with
respect to the defense of such claim, action or proceeding
notwithstanding any participation by the Indemnified Party
therein.
(ix) If the Indemnified Party subsequently recovers
all or part of the Third Party Claim from any other person
legally obligated to pay the claim, the Indemnified Party
shall forthwith repay to the Indemnifying Party the amounts
recovered up to an amount not exceeding the payment made by
the Indemnifying Party to the Indemnified Party by way of
indemnity.
(c) Mitigation. In the event that any Party suffers damage or
loss in respect of which it has or makes a valid claim against another
Party for indemnification, it must take reasonable steps to mitigate
its loss or damage.
(d) Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for tax benefits and insurance coverage in
determining Adverse Consequences for purposes of this Section 16. All
indemnification payments under Section 9 hereof or under this Section
16 shall be deemed adjustments to the Purchase Price.
(e) Exclusive Remedy. Each Party, on behalf of itself and its
Affiliates (and its partners, officers, directors and employees),
hereby acknowledges and agrees that the sole and exclusive remedy with
respect to any and all claims against the other Party and its
Affiliates relating to the acquisition of Target and the Business or
any other issue relating to the subject matter of this Agreement or the
transactions contemplated hereby shall be pursuant to the
indemnification provisions contained in Section 9 hereof and this
Section 16. Purchaser, on behalf of itself and its Affiliates (and its
partners, officers, directors and employees), hereby (i) waives and
releases the Seller and its Affiliates (and their shareholders,
officers, directors and employees) from any statutory or other rights
of contribution or indemnity (except as set forth in this Section 16)
with respect to the transactions contemplated hereby and the ownership
of the Business and Target and (ii) waives and releases all rights of
subrogation with respect to claims relating thereto. Notwithstanding
the foregoing, each party shall have the right to pursue remedies
against the other Party outside of this Section 16 to enforce covenants
of such other party contained in the Transition Services Agreement, the
Target Quota Share Reinsurance Agreement, the Seller Quota Share
Reinsurance Agreement and the Loss Portfolio Transfer Agreement.
Section 17. Press Releases. Each of the Parties to this Agreement
hereby agrees with each other Party that no press release or similar public
announcement or communication will be made or caused to be made prior to the
Closing concerning the execution or performance of this Agreement or the
transactions contemplated hereunder unless specifically approved in advance by
the other Party. It is understood and agreed that no Party hereto shall disclose
any facts or information with respect to this Agreement and the transactions
contemplated herein prior to the Closing, except disclosures to insurance
regulatory authorities, other governmental authorities, Seller's or Purchaser's
representatives (in which case the disclosing Party shall use its reasonable
best efforts to consult with the other Party before making the disclosure and to
allow the other Party to review the text of the disclosure before it is made).
Section 18. Expenses. Each of the Parties shall pay its own expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby. Purchaser shall be responsible for paying all
filing fees in connection with any H-S-R Act filing required to consummate this
transaction. Seller shall be required to pay and shall indemnify Purchaser and
Target against all transfer taxes payable in connection with the transfer of the
Acquired Assets and the Shares hereunder
Section 19. Cooperation Clause. Each Party agrees to execute and
deliver, or cause to be executed and delivered, at or after the Closing, such
additional or further transfers, assignments, resolutions, endorsements, power
of attorney, and other instruments or documents as may reasonably be requested
by the other for the purpose of carrying out the intentions of the Parties
hereto. Any reasonable out-of-pocket expense associated with preparing or
obtaining the requested material shall be borne by the requesting Party. Each
Party agrees to cooperate with the other in effecting the transactions
contemplated hereunder.
Section 20. Waiver of Covenants and Conditions. At any time prior to
the Closing Date or at the Closing, any Party hereto may waive compliance by a
written instrument in any particular instance with any covenant or condition by,
or breach of any representation or warranty by, any other Party hereto. No
waiver of any term, provision or condition of this Agreement, whether by conduct
or otherwise, in any one or more instances shall be deemed or construed as a
further or continuing waiver of any such term, provision or condition.
Section 21. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the time hand delivered, mailed, certified mail-return receipt
requested, or telefaxed, with hard copy mailed first class, postage prepaid, to
the parties at the following addresses:
(a) if to Seller, to:
TIG Holdings, Inc.
65 East 55th Street, 28th Floor
New York, New York 10022
Attention: Peter M. Acton
Telephone: (212) 446-2705
Facsimile: (212) 371-8574
In the case of any notices, requests, demands, claims and other
communications relating to any Tax matters covered described in Section
9 hereof,
an additional copy to:
Cynthia D. Crandall
Vice President and Director of Tax
TIG Insurance Company
5205 North O'Connor Blvd.
Irving, TX 75039
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Michael G. Marks
Telephone: (212) 821-8000
Facsimile: (212) 821-8111
(b) if to Purchaser, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond
Vice President-Enterprise Controller
Telephone: 614-249-4462
Facsimile: 614-249-3003
and:
Office of General Counsel
Mark B. Koogler
Vice President and
Associate General Counsel
Telephone: 614-249-4649
Facsimile: 614-249-2418
or to any such other address as designated in writing by the appropriate party.
Section 22. Assignment. None of the rights or obligations of any party hereto
may be assigned or delegated in whole or in part without the consent in writing
of the other party hereto.
Section 23. Entire Agreement; Construction. This Agreement and the Exhibits,
Disclosure Schedule and Purchaser Disclosure Schedule attached hereto embody the
entire agreement and understanding between Seller and Purchaser with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation.
This Agreement may be amended only by a writing signed by all parties
hereto.
Section 24. Representations and Warranties; Disclosure Schedule.
Neither the specification of any dollar amount in the representations and
warranties set forth in Sections 6, 7, 8 and 10 nor the indemnification
provisions of Section 16 nor the inclusion of any items in the Disclosure
Schedule or the Purchaser Disclosure Schedule to this Agreement will be deemed
to constitute an admission by Seller or Purchaser, or otherwise imply, that any
such amounts or the items so included are material for the purposes of this
Agreement. All documents or information disclosed in any section of the
Disclosure Schedule or the Purchaser Disclosure Schedule to this Agreement are
intended to be disclosed for all purposes under this Agreement and will also be
deemed to be incorporated by reference in each of the other sections of the
Disclosure Schedule or the Purchaser Disclosure Schedule to this Agreement to
which they may be relevant. For purposes of this Agreement, the determination as
to whether any item, event, circumstance or amount is "material" shall be made
with reference to the Business and Target, taken as a whole. Purchaser
acknowledges and agrees that the failure of the Independent Agents to continue
to write Business prior to, at or after Closing shall not constitute a Material
Adverse Effect, material adverse change or a material event for any purpose
under this Agreement.
Section 25. No Agreement until signed by all Parties. Nothing in this
document will constitute an offer capable of acceptance or an agreement of any
kind until this document is executed and delivered by each of the Parties.
Section 26. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflict of law principles and shall be binding upon and shall inure to the
benefit of the parties hereto and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly entered into as of the date first above written.
PURCHASER:
NATIONWIDE MUTUAL INSURANCE COMPANY
By: /s/ Mark B. Koogler
Name: Mark B Koogler
Title: Vice President and
Associate General Counsel
SELLER:
TIG INSURANCE COMPANY
By: /s/ William H. Huff
Name: William H. Huff, III
Title: Senior Vice President and
General Counsel