Conduct of the Business From the date hereof until the Closing or the termination of this Agreement in accordance with Section 7.1, Seller shall cause the Transferred Companies to: (x) conduct the Business in all material respects in the ordinary course consistent with past practice; and (y) use their reasonable best efforts to preserve intact the Business and the current relationships and goodwill of the Transferred Companies with customers, suppliers, contractors, licensors, employees, agents, producers, distributors, insureds, Insurance Regulators and others having business dealings with them. Without limiting the generality of the foregoing, from the date hereof until the Closing or the termination of this Agreement in accordance with Section 7.1, except as otherwise expressly permitted or required by this Agreement or as set forth in Section 4.1 of the Seller Disclosure Letter, without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), Seller shall cause the Transferred Companies not to:
(a) (i) split, combine or reclassify any of its outstanding capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its outstanding capital stock or (ii) purchase, redeem or otherwise acquire any shares of outstanding capital stock of the Transferred Companies or any rights, warrants or options to acquire any such shares, other than, in each case, any such transaction solely involving Transferred Companies following which each Transferred Company remains a direct or indirect wholly owned Subsidiary of Seller;
(b) issue, sell, grant, pledge or otherwise encumber any shares of capital stock of any of the Transferred Companies, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than, in each case, any such transaction solely involving Transferred Companies following which each Transferred Company remains a direct or indirect wholly owned Subsidiary of Seller;
(c) amend its Organizational Documents in a manner that would be adverse to Buyer’s interests;
(d) sell, lease, license or otherwise dispose of (including by way of reinsurance) any of the material assets (other than Investment Assets, which are the subject of clause (y) of this Section 4.1) of any of the Transferred Companies, except in the ordinary course of business consistent with past practice;
(e) enter into any Contract with respect to any merger, consolidation, liquidation, dissolution or business combination (including any acquisition of assets or liabilities comprising a business or a segment, division or line of business) involving any of the Transferred Companies;
(f) purchase, sell, lease, pledge, exchange, encumber or otherwise dispose or acquire any property or assets (other than transactions occurring in the ordinary course of business consistent with past practice and other than Investment Assets, which are the subject of clause (y) of this Section 4.1) for which the aggregate consideration paid or payable in any individual transaction is in excess of $2,000,000 or in the aggregate in excess of $7,500,000;
(g) (i) amend, extend, renew or otherwise modify in any material respect any of the Leases, (ii) assign or sublease any material portion of any of the Leased Real Property or (iii) enter into any new lease, terminate any lease or buy any real property;
(i) modify or amend in any material respect or terminate any material Contract, (ii) waive, release or assign any material rights or claims under any material Contract or (iii) enter into any material Contract, in each case other than in the ordinary course of business consistent with past practice; or (x) modify, amend or terminate any OB Contract or (y) waive, release or assign any rights or claims under any OB Contract;
(i) incur any financial Indebtedness for borrowed money from third party lending sources (other than current trade accounts payable incurred in respect of property or services purchased in the ordinary course of business consistent with past practice) or assume, grant, guarantee or endorse, pledge or otherwise secure any assets or property or otherwise as an accommodation become responsible for (whether primary or secondary) the obligations of any Person (other than a Transferred Company), or make any third party loans or advances (other than, in each case, in the ordinary course of business consistent with past practice), for individual amounts in excess of $1,000,000 or in the aggregate in excess of $2,000,000;
(j) default under any Indebtedness, or fail to pay or satisfy when due any Liability, of any of the Transferred Companies in excess of $500,000 (other than any such Liability that is being contested in good faith);
(k) forgive, cancel or compromise any material debt or claim or waive or release any right, in each case other than in the ordinary course of business consistent with past practice or pursuant to an Insurance Contract;
(l) enter into any new line of business;
(m) make any capital expenditures in excess of $2,000,000 individually or $5,000,000 in the aggregate (not including those made in the ordinary course of business);
(n) voluntarily abandon any material Permit, except to the extent required in order to comply with applicable Law, or voluntarily terminate, fail to renew or permit to lapse any material Permit;
(o) settle or compromise or agree to the dismissal of any Litigation or threatened Litigation (in each case, except for claims under any insurance policies within applicable policy limits that do not allege bad faith), other than any settlement or compromise that involves solely cash payments of less than $5,000,000 in any individual case or of less than $10,000,000 in the aggregate (provided that Seller shall provide prior written notice to Buyer of any such settlement or compromise that involves solely cash payments in excess of $2,000,000 in any individual case);
(p) other than in the ordinary course of business consistent with past practice, dispose of, permit to lapse, abandon, dedicate to the public domain, waive, release or assign any rights, or settle any claims, or permit the creation of any material Lien with respect to any Intellectual Property material to the Business;
(q) (i) establish, adopt, amend or terminate any Company Benefit Plan or any arrangement which upon its establishment or adoption would constitute a material Company Benefit Plan or (ii) materially amend or terminate any related material insurance policy or related material vendor contract, in either case except (A) in the ordinary course of business consistent with past practice or (B) as may be required by applicable Laws or pursuant to the terms of any Company Benefit Plan as in effect on the date hereof;
(r) make or promise to make any material bonus, profit-sharing or similar payment, or fund, increase or accelerate the vesting, payment or amount of wages, salary, commissions, fringe benefits, severance benefits, deferred compensation or other compensation or benefits (including equity-based compensation, whether payable in cash or otherwise) or remuneration payable to, or for the benefit of, any Employee, in each case except (i) as required by applicable Law or the terms of any Company Benefit Plan as in effect on the date hereof and (ii) with respect to Employees other than the LTIP Employees, to the extent such action is (x) not material or (y) made in the ordinary course of business consistent with past practice (including in connection with promotions and employee review cycles consistent with past practice);
(i) terminate the employment of any Key Employee (other than for cause) or hire any new employee who would be, upon hiring, a Key Employee or (ii) enter into a collective bargaining agreement or similar labor agreement with respect to any Employees or renew, extend or renegotiate any existing collective bargaining agreement or similar labor agreement with respect to any Employees, except, in the case of this clause (ii), as may be required by applicable Law;
(i) settle or compromise any Tax Audit or forgo the right to any refund of Taxes; (ii) change any of the Transferred Companies’ methods, policies or practices of Tax accounting or methods of reporting income or deductions for Tax purposes from those employed in the preparation of its most recently filed Tax Return; (iii) amend any Tax Return of or with respect to any of the Transferred Companies; (iv) enter into any agreement with a Tax Authority with respect to any Transferred Company, or terminate any agreement entered into with a Tax Authority with respect to any Transferred Company that is in effect as of the date hereof; (v) alter or make any Tax election; (vi) request a ruling relating to Taxes; (vii) grant any power of attorney relating to Tax matters; or (viii) prepare any Tax Return in a manner that is not consistent with past practices;
(u) terminate, cancel or amend, or cause the termination, cancellation or amendment of, any material insurance coverage (and any surety bonds, letters of credit, cash collateral or other deposits related thereto required to be maintained with respect to such coverage) maintained by the Transferred Companies that is not replaced by comparable insurance coverage;
(v) change in any material respect the terms for, or policies with respect to, the payment of commissions to any of its insurance agents, brokers or producers;
(w) enter into any reinsurance commutations (other than as contemplated by Section 4.16 and the Commutation Agreement), or enter into, amend, modify or otherwise revise any reinsurance agreement or treaty that results in a material change in risk or coverage;
(x) make any material change in its underwriting, reinsurance, claims administration, selling, reserving, Tax or financial accounting policies, guidelines, practices or principles (other than any change required by a change in applicable Laws, GAAP or SAP or, in respect of underwriting or claims administration policies, guidelines, practices or principles, in the ordinary course of business consistent with past practice);
(y) other than as set forth in Schedule 4.1(y), amend or otherwise change the Investment Guidelines or make any investment or manage its Investment Assets other than in compliance with the Investment Guidelines;
(z) during the period from the date hereof to the Closing Date, spend less than 90% (without the consent of Buyer) or more than 100% (without the consent of Seller), in the aggregate, of the advertising spending called for during such period by the advertising plan set forth on Schedule 4.1(z) (for purposes of calculating such aggregate percentage, the spending called for in any period by such advertising plan that is not fully completed between the date hereof and the Closing Date shall be determined on a pro rata basis based on the number of days of such partial period that actually elapsed between the date hereof and the Closing Date), with the actual amount of such spending within such limits being determined by the management of the Transferred Companies in its sole discretion; or
(aa) agree or commit to do any of the foregoing.
Conduct of Third Party Claims If the matter or circumstance that may give rise to a Claim other than a Tax Claim is a result of or in connection with a claim by a third party (a “Third Party Claim”) then:
11.4.1 the Purchaser shall, to the extent reasonably practicable and subject to Applicable Law, consult with the Seller in relation to the conduct of the Third Party Claim and shall take reasonable account of the views of the Seller before taking any action in relation to the Third Party Claim;
11.4.2 no admissions in relation to the Third Party Claim shall be made by or on behalf of the Purchaser or any member of the Purchaser’s Group and the Third Party Claim shall not be compromised, disposed of or settled without the written consent of the Seller, such consent not to be unreasonably withheld or delayed;
11.4.3 subject to the Seller indemnifying the Purchaser or member of the Purchaser’s Group concerned against all reasonable costs and expenses (including legal and professional costs and expenses) that may be incurred thereby, the Purchaser shall, or the Purchaser shall procure that the members of the Purchaser’s Group shall, take such action as the Seller may reasonably request to avoid, dispute, deny, defend, resist, appeal, compromise or contest the Third Party Claim;
11.4.4 the Seller shall, subject in each case to being paid all reasonable out-of-pocket costs and expenses:
(i) make available to the Purchaser and the relevant Group Company such persons and all such information as the Purchaser may reasonably request for assessing, contesting, disputing, defending, compromising or appealing the Third Party Claim; and
(ii) shall give the Purchaser and the relevant Group Company reasonable access to its premises and to its books and records for such purpose during normal business hours on any Business Day following reasonable notice being given to the Seller;
11.4.5 subject to 11.4.3, the Seller shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser, to assume conduct of any Third Party Claim and to have the conduct of any related proceedings, negotiations or appeals;
11.4.6 if the Seller sends a notice to the Purchaser pursuant to Clause 11.4.5 and until such time as any final compromise, agreement, expert determination or non-appealable decision of a court or tribunal of competent jurisdiction is made in respect of that Third Party Claim or that Third Party Claim is otherwise finally disposed of:
(i) the Purchaser shall, and the Purchaser shall procure that any member of the Purchaser’s Group shall:
(a) give, subject to being paid all reasonable costs and expenses, all such information and assistance including access to premises and personnel, and the right to examine and copy or photograph any assets, accounts, documents and records (excluding, in each case, information or documents which are protected by legal professional privilege but including, in each case, information or documents that are subject to common interest privilege), as the Seller may reasonably request, including instructing such professional or legal advisers as the Seller may nominate to act on behalf of the Purchaser or other member of the Purchaser’s Group concerned but in accordance with the Seller’s instructions, provided that the appointment of such adviser or advisers shall have been approved in writing by the Purchaser (such approval not to be unreasonably withheld, conditioned or delayed); and
(b) not make any admission of liability, agreement or compromise in relation to that Third Party Claim without the prior written approval of the Seller (such approval not to be unreasonably withheld, conditioned or delayed);
(ii) the Seller shall:
(a) consult with the Purchaser and take reasonable account of the views of the Purchaser before taking any action in relation to the Third Party Claim;
(b) without prejudice to its ability to defend the Third Party Claim, conduct the Third Party Claim with a view to minimising any material harm to the goodwill and reputation of the Wider Group or the Purchaser’s Group;
(c) keep the Purchaser informed of all relevant matters relating to the Third Party Claim and shall promptly forward or procure to be forwarded to the Purchaser copies of all correspondence and other written communications with such other information, including non-written records (except information or documents which are protected by legal professional privilege), relating to the Third Party Claim;
(d) not make any admission of liability, settlement or compromise of the Third Party Claim without the written consent of the Purchaser, such consent not to be unreasonably withheld, conditioned or delayed. If the Purchaser or member of the Purchaser’s Group fails to consent to a settlement or compromise, the maximum liability of the Seller shall (without prejudice to Clause 10) not exceed the full amount of the proposed settlement or compromise and the Purchaser or member of the Purchaser’s Group shall be liable for any damages awarded in excess of the proposed settlement or compromise and costs incurred from (and including) the date the Seller notified the Purchaser of the settlement or compromise; and
(e) indemnify, save as set out in Clause 11.4.6(ii)(d), the Purchaser or other member of the Purchaser’s Group concerned against all reasonable costs and expenses (including legal and professional costs and expenses) that may be incurred as a result of the Seller assuming conduct of the Third Party Claim.
11.4.7 The covenants in this Clause 11.4 may be enforced:
(i) by any Group Company against the Seller; and
(ii) by any member of the Seller’s Group against the Purchaser or a Group Company, under the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇.
11.4.8 The provisions of this Clause 11.4 may be varied or terminated by agreement between the Seller and the Purchaser (and the Purchaser may also release or compromise in whole or in part any liability in respect of rights or claims contemplated by this Clause 11.4) without the consent of any Group Company.