TAX MATTERS AGREEMENT by and among GENERAL REINSURANCE CORPORATION BERKSHIRE HATHAWAY INC. WHITE MOUNTAINS INSURANCE GROUP, LTD. and RAILSPLITTER HOLDINGS CORPORATION
Exhibit
2.2
by and
among
GENERAL
REINSURANCE CORPORATION
BERKSHIRE
HATHAWAY INC.
WHITE
MOUNTAINS INSURANCE GROUP, LTD.
and
RAILSPLITTER
HOLDINGS CORPORATION
As of
March 8, 2008
This
TAX MATTERS
AGREEMENT (this “Agreement”) is
entered into as of March 8, 2008 by and among WHITE MOUNTAINS INSURANCE
GROUP, LTD., a company existing under the laws of Bermuda (“White Mountains”),
RAILSPLITTER HOLDINGS CORPORATION, a Delaware corporation and wholly owned
subsidiary of White Mountains (the “Company”), BERKSHIRE HATHAWAY
INC., a Delaware corporation (“Berkshire Hathaway”),
and GENERAL
REINSURANCE CORPORATION, a Delaware corporation and wholly owned indirect
subsidiary of Berkshire Hathaway (“General
Reinsurance”).
W
I T N E S S E T H:
WHEREAS,
as of the date of this Agreement, White Mountains is the parent of a group of
companies, including the Company, International American Group, a Delaware
corporation (“IAG”), and Commercial
Casualty Insurance Company, a California insurance company (“CCIC”);
and
WHEREAS,
as of the date of this Agreement, IAG and its Subsidiaries are members of an
Affiliated Group the common parent of which is White Mountains Inc., a Delaware
corporation and wholly owned indirect subsidiary of White Mountains (the “WM Inc. Group”);
and
WHEREAS,
as of the date of this Agreement, CCIC is a member of an Affiliated Group the
common parent of which is White Mountains Re Holdings, Inc., a Delaware
corporation and wholly owned indirect subsidiary of White Mountains (the “WM Re Holdings
Group”); and
WHEREAS,
pursuant to the Reorganization White Mountains will cause the stock of IAG and
CCIC to be transferred to the Company; and
WHEREAS,
as of the date of this Agreement, General Reinsurance owns 1,724,200 shares of
common stock of White Mountains; and
WHEREAS,
White Mountains, the Company, Berkshire Hathaway and General Reinsurance have
entered into an agreement dated as of the date of this Agreement (the “Exchange Agreement”)
pursuant to which White Mountains will transfer all of the outstanding shares of
common stock of the Company to General Reinsurance in exchange for the shares of
common stock of White Mountains presently held by General Reinsurance, subject
to reduction under certain circumstances (as defined in Section 2.01(a) of the
Exchange Agreement, the “Exchange”);
and
WHEREAS,
the parties hereto intend the Exchange to qualify for nonrecognition of gain or
loss to General Reinsurance under Section 355(a) of the Code (the “Intended Tax-Free
Treatment”); and
WHEREAS,
as a result of the Exchange, the Company, IAG and its Subsidiaries and CCIC will
become members of the Affiliated Group of which Berkshire Hathaway is the common
parent and General Reinsurance is a member, effective after the Closing Date;
and
WHEREAS,
the parties to this Agreement (the “Parties”) desire to
provide for and agree upon the allocation of liability for Taxes arising prior
to, as a result of, and subsequent to the Transactions, and to provide for and
agree upon certain other matters relating to Taxes.
The
Parties hereby agree as follows:
ARTICLE
I
CERTAIN
DEFINITIONS AND OTHER MATTERS
SECTION
1.01. Certain
Definitions.
For
purposes of this Agreement (including the recitals hereof), the following terms
have the following meanings:
“Adjustment Request”
means any formal or informal claim or request filed with any Tax Authority or
court for the adjustment, refund, credit or offset of Taxes, including any
amended Tax Return claiming adjustment to the Taxes as reported on such Tax
Return or, if applicable, as previously adjusted.
“Affiliate” means,
with respect to any Person, any other Person directly or indirectly controlling,
controlled by or under common control with such Person. For purposes
of this definition, the term “control” (including its correlative meanings, the
terms “controlling”, “controlled by” and “under common control with”), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise. For the avoidance of doubt, the members of the Company
Group are Affiliates of White Mountains with respect to the period before the
Closing and Affiliates of Berkshire Hathaway with respect to the period after
the Closing.
“Affiliated Group”
means an affiliated group of corporations as defined in Section 1504(a) of
the Code.
“Balance Sheet” means
the most recent applicable IAG Balance Sheet or CCIC Balance Sheet, as such
terms are defined in Section 4.07 of the Exchange Agreement.
“Berkshire Run-off
Business” has the meaning assigned to such term in Section 9.01(c).
“Business Day” has the
meaning assigned to such term in Section 1.01 of the Exchange
Agreement.
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“Carryback” means any
net operating loss, net capital loss, excess tax credit, or other similar Tax
item that may or must be carried back from one taxable period to a prior taxable
period under applicable Tax Law.
“CCIC” has the meaning
assigned to such term in the recitals.
“CCIC Business” means
the Commercial Casualty Insurance Company Business as described in Exhibit C to
White Mountains’ Tax Representation Letter.
“Closing” has the
meaning assigned to such term in Section 2.02 of the Exchange
Agreement.
“Closing Date” has the
meaning assigned to such term in Section 2.02 of the Exchange
Agreement.
“Code” means the
United States Internal Revenue Code of 1986, as amended.
“Combined Tax” means
any Tax computed by reference to the assets and activities of more than one
company.
“Company Group” means
the Company, IAG and its Subsidiaries and CCIC.
“Company Subsidiary”
means IAG and its Subsidiaries and CCIC.
“Covered Opinion”
means an opinion complying with the requirements of United States Treasury
Department Circular 230, Title 31 Code of Federal Regulations Subtitle A, Part
10, Subpart B, Section 10.35, as amended.
“Cutoff Date” means
December 31, 2007.
“Exchange” has the
meaning assigned to such term in the recitals.
“Exchange Agreement”
has the meaning assigned to such term in the recitals.
“Federal Consolidated
Return” means any consolidated United States Federal Tax Return for an
Affiliated Group.
“Final Determination”
means, with respect to any Tax issue, (i) a decision, judgment, decree or other
order by any court of competent jurisdiction that has become final and not
subject to further appeal, (ii) a closing agreement (whether or not entered into
under Section 7121 of the Code) or any other binding settlement agreement
(whether or not with the IRS) entered into in connection with or in
contemplation of an administrative or judicial proceeding, or (iii) the
completion of the highest level of administrative proceedings if a judicial
contest is not (or is no longer) available.
“General Reinsurance
Transaction Tax” means any U.S. federal Tax (other than a Transfer Tax)
imposed on General Reinsurance or its Affiliates resulting from the failure of
the Exchange to qualify for the Intended Tax-Free Treatment.
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“Governmental
Authority” has the meaning assigned to such term in Section 1.01 of the
Exchange Agreement.
“Group” means the WM
Inc. Group, the WM Re Holdings Group or the Company Group, as the context
requires.
“IAG” has the meaning
assigned to such term in the recitals.
“IAG Business” means
the International American Group Business as described in Exhibit B to White
Mountains’ Tax Representation Letter.
“Indemnified Party”
means a Party that seeks
indemnification pursuant to this Agreement.
“Indemnifying Party”
means a Party against which
indemnification is sought under this Agreement.
“Intended Tax-Free
Treatment” has the meaning assigned to such term in the
recitals.
“IRS” means the United
States Internal Revenue Service.
“IRS Ruling” has the
meaning assigned to such term in Section 8.01(c) of the Exchange
Agreement.
“Material Increase in Tax
Risk” has the meaning assigned to such term in Section 1.01 of the
Exchange Agreement.
“Non-Qualification
Event” has the meaning assigned to such term in Section 1.01 of the
Exchange Agreement.
“Parties” has the
meaning assigned to such term in the recitals.
“Permitted Loan” means
any loan of cash, evidenced by a written instrument, made by the Company or any
Company Subsidiary on market terms and conditions that: (i) requires
the payment, in cash, of (A) interest on the principal amount thereof (on not
less than a semiannual basis) and (B) principal at maturity; (ii) is not
convertible into any equity interest in any entity or exchangeable into any
other property (provided, however, that this
clause shall not be interpreted to preclude any lender from taking a security
interest in, or from foreclosing upon, any assets or property of the borrower);
(iii) has a maturity of not longer than seven years; and (iv) is (A) made to, or
guaranteed by, Berkshire Hathaway or (B) made to a borrower that is reasonably
expected, at the time such loan is made, to repay all interest and principal of
such loan, in accordance with its terms.
“Person” means an
individual, partnership, corporation, limited liability company, joint stock
company, unincorporated organization or association, trust, joint venture, firm,
branch, registered office, governmental authority or any other
entity.
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“Post-Closing Period”
means any taxable period (or portion thereof) beginning after the Closing
Date.
“Post-Cutoff Period”
means any taxable period (or portion thereof) beginning after the Cutoff
Date.
“Pre-Closing Period”
means any taxable period (or portion thereof) ending on or before the Closing
Date.
“Pre-Cutoff Period”
means taxable period (or portion thereof) ending on or before the Cutoff
Date.
“Prime Rate” means the
base rate on corporate loans charged by Citibank, N.A., New York, New York from
time to time, compounded daily on the basis of a year of 365 or 366 (as
applicable) days and actual days elapsed.
“Reorganization” has
the meaning assigned to such term in Section 3.01 of the Exchange
Agreement.
“Requesting Party” has
the meaning assigned to such term in Section
3.04.
“Responsible Party”
means, with respect to any Tax Return, the Party having responsibility for
preparing and filing such Tax Return under this Agreement.
“Subsidiary” of any
Person means, at any date, any corporation, partnership, joint venture or other
entity of which the applicable Person owns, directly or indirectly, more than
50% of the outstanding voting securities or equity interests.
“Tax” means all forms
of taxation or duties imposed by a governmental entity (or political subdivision
thereof), together with any related interest, penalties or other additions to
tax.
“Tax Authority” means,
with respect to any Tax, the governmental entity (or political subdivision
thereof) that imposes such Tax, and the agency (if any) charged with the
collection of such Tax for such entity or subdivision.
“Tax Benefit” means
any Tax refund, credit or offset or the Tax effect of any item of loss,
deduction or credit or any other item (including increases in Tax basis) that
decreases Taxes paid or required to be paid, including any interest with respect
thereto or interest that would have been payable but for such
item. For the avoidance of doubt, Tax Benefit refers only to such
benefits as have been actually realized.
“Tax Claim” has the
meaning assigned to such term in Section
6.01(a).
“Tax Law” means any
law of any governmental entity (or political subdivision thereof) relating to
any Tax.
5
“Tax Records” means
Tax Returns, Tax Return workpapers, documentation relating to any Tax Claims,
and any other books of account or records required to be maintained under
applicable Tax Laws or under any record retention agreement with any Tax
Authority.
“Tax Representation
Letters” means the letters of representations dated as of the date of
this Agreement and provided by White Mountains and by Berkshire Hathaway to each
of Cravath, Swaine & ▇▇▇▇▇ LLP and ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
LLP.
“Tax Return” means any
report of Taxes due, any claims for a refund, credit or offset of Taxes paid,
any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under applicable Tax
Law, including any attachments, exhibits, or other materials submitted with any
of the foregoing, and any amendments or supplements to any of the
foregoing.
“Transaction
Agreements” has the meaning assigned to such term in Section 1.01 of the
Exchange Agreement.
“Transactions” means
the transactions contemplated by this Agreement and the other Transaction
Agreements, including the Reorganization and the Exchange.
“Transfer Taxes” has
the meaning assigned to such term in Section
2.07(a).
“Treasury Regulations”
means the Treasury regulations promulgated under the Code.
“White Mountains Disclosure
Schedule” has the meaning assigned to such term in Article IV of the
Exchange Agreement.
“White Mountains Transaction
Taxes” means any U.S federal Tax (other than a Transfer Tax) imposed on
White Mountains or its Affiliates attributable to the Reorganization or
resulting from the failure of the Exchange to qualify for the Intended Tax-Free
Treatment.
“WM Inc. Group” has
the meaning assigned to such term in the recitals.
“WM Re Holdings Group”
has the meaning assigned to such term in the recitals.
SECTION
1.02. Interpretation. When
a reference is made in this Agreement to Exhibits, Schedules, Articles or
Sections, such reference shall be to an Exhibit, Schedule, Article or Section to
this Agreement unless otherwise indicated. The words “include,”
“includes,” “included,” and “including,” when used herein shall be deemed in
each case to be followed by the words “without limitation.” The words
“close of business” shall be deemed to mean 5:00 P.M., New York City time, on
the date specified. The words “hereof,” “herein,” “hereby,” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The term “or” is not exclusive and means “and/or” unless
the context in which such phrase is used shall dictate otherwise. The
word “extent” in the phrase “to the extent” shall mean the degree to which a
subject or other such thing extends, and such phrase shall not mean simply “if”
unless the context in which such phrase is used shall dictate
otherwise. The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such term. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. Any reference in this Agreement to a
Person shall be deemed to be a reference to such Person and any successor (by
merger, consolidation, transfer or otherwise) to all or substantially all its
assets.
6
ARTICLE
II
ALLOCATION
OF TAX LIABILITIES AND BENEFITS
SECTION
2.01. Indemnity by White
Mountains. Following the Closing, White Mountains shall
indemnify and hold Berkshire Hathaway, General Reinsurance, the Company and
their Affiliates harmless from:
(i) all Taxes of (x) the Company Group for all Pre-Cutoff Periods
(including Taxes allocated to any Pre-Cutoff Period under Section 2.06), (y)
any member of an affiliated, consolidated, combined or unitary group (other than
another member of the Company Group) of which any member of the Company Group
(or a predecessor thereof) was a member on or prior to the Closing Date,
including pursuant to Treasury Regulation § 1.1502-6 (or analogous or
similar provisions of state, local, or foreign Tax Law), or (z) any other Person
(other than another member of the Company Group) as successor or transferee, by
contract or otherwise;
(ii) all Taxes of the Company Group that result primarily from the
breach of any covenant in Section 6.01 of the Exchange Agreement or in Section 8.02 of this
Agreement;
(iii) all General Reinsurance Transaction Taxes allocated to White
Mountains under Section
2.03;
(iv) all White Mountains Transaction Taxes allocated to White
Mountains under Section
2.04;
(v) all Transfer Taxes allocated to White Mountains under Section 2.07;
and
(vi) all
reasonable out-of-pocket expenses, including professional fees, incurred with
respect to any Taxes described in this Section
2.01.
SECTION
2.02. Indemnity by Berkshire
Hathaway, General Reinsurance or the Company. Following the
Closing, Berkshire Hathaway, General Reinsurance and the Company Group shall,
jointly and severally, indemnify and hold White Mountains and its Affiliates
harmless from:
(i) all Taxes of the Company Group for all Post-Cutoff Periods
(including Taxes allocated to any Post-Cutoff Period under Section 2.06) other
than any Taxes described in Section
2.01(ii);
7
(ii) all General Reinsurance Transaction Taxes
allocated to General Reinsurance under Section
2.03;
(iii) all White Mountains Transaction Taxes allocated to
General Reinsurance under Section 2.04, but
only up to a maximum aggregate amount of U.S. $10,000,000;
(iv) all Transfer Taxes allocated to General Reinsurance under Section 2.07;
and
(v) all reasonable out-of-pocket expenses, including professional
fees, incurred with respect to any Taxes described in this Section
2.02.
SECTION
2.03. Allocation of General
Reinsurance Transaction Taxes. (a) Except as
provided in Sections
2.03(b) and (c) below, all General Reinsurance Transaction Taxes shall be
allocated 50% to White Mountains and 50% to General Reinsurance.
(b) White
Mountains shall be allocated 100% of General Reinsurance Transaction Taxes that
result primarily from, individually or in the aggregate:
(i) the
failure to be true and correct of any representation provided by White Mountains
in its Tax Representation Letter or in the request for the IRS Ruling;
or
(ii) the breach by White Mountains or any of its Affiliates of Section 9.02, 9.03, 9.04 or
9.05.
(c) General
Reinsurance shall be allocated 100% of General Reinsurance Transaction Taxes
that result primarily from, individually or in the aggregate:
(i) the failure to be true and correct of any representation provided
by Berkshire Hathaway in its Tax Representation Letter or in the request for the
IRS Ruling; or
(ii) the
breach by Berkshire Hathaway, General Reinsurance or any of their respective
Affiliates of Section
9.01, 9.03, 9.04 or 9.05.
(d) For
purposes of determining whether a representation “fails to be true and correct”
under Section 2.03 or
2.04, the representation shall be treated (i) if made expressly as of a
specified date, then as of such specified date and, (ii) otherwise, as if made
as of the Closing Date.
SECTION
2.04. Allocation of White
Mountains Transaction Taxes. (a) Except as provided
in Section 2.04(b) or
(c), 100% of White Mountains Transaction Taxes shall be allocated to
White Mountains.
(b) General
Reinsurance shall be allocated 100% of White Mountains Transaction Taxes that
result primarily from, individually or in the aggregate:
(i) the
failure to be true and correct of any representation provided by Berkshire
Hathaway in its Tax Representation Letter or in the request for the IRS Ruling;
or
8
(ii) the
breach by Berkshire Hathaway, General Reinsurance or any of their respective
Affiliates of Section
9.01, 9.03, 9.04 or 9.05.
(c) If
Berkshire Hathaway has exercised its right pursuant to Section 9.02 of the
Exchange Agreement to require the consummation of the Transactions, then General
Reinsurance shall be allocated 100% of the White Mountains Transaction Taxes, if
any, that are imposed solely as a result of the Parties reporting the Exchange
as taxable in accordance with Section
9.05(d).
SECTION
2.05. Limitation on
Indemnification if a Party Exercises its Option to Require
Consummation. Notwithstanding anything in the Transaction
Agreements to the contrary:
(a) if
White Mountains has exercised its right pursuant to Section 9.02 of the Exchange
Agreement to require the consummation of the Transactions, then (i) Section 2.01(iii)
(relating to White Mountains’ indemnity obligation for certain General
Reinsurance Transaction Taxes) and Sections 2.03(a) and
(b) (allocating certain General Reinsurance Transaction Taxes to White
Mountains) shall not apply, and (ii) Section 2.02(iii)
(relating to Berkshire Hathaway’s, General Reinsurance’s or the Company’s
indemnity obligation for certain White Mountains Transaction Taxes) and Section 2.04(b)
(allocating certain White Mountains Transaction Taxes to General Reinsurance)
shall not apply; and
(b) if
Berkshire Hathaway has exercised its right pursuant to Section 9.02 of the
Exchange Agreement to require the consummation of the Transactions, then Section 2.01(iii)
(relating to White Mountains’ indemnity obligation for certain General
Reinsurance Transaction Taxes) and Sections 2.03(a) and
(b) (allocating certain General Reinsurance Transaction Taxes to White
Mountains) shall not apply.
SECTION
2.06. Allocation of Taxes Between
Periods. (a) Tax items for any taxable period (or
portion thereof) that includes the Cutoff Date shall be allocated between the
Pre-Cutoff Period and the Post-Cutoff Period (i) in the case of any Taxes
imposed on a periodic basis, such as real, personal and intangible property
Taxes, on a daily pro-rata basis and (ii) in the case of any other Taxes, in
accordance with the principles of Treasury Regulation § 1.1502-76(b)
(relating to the “closing of the books” method) as reasonably interpreted and
applied by the Parties.
(b) With
respect to any taxable period (or portion thereof) beginning after the Cutoff
Date and ending on or before the Closing Date, the amount of Tax of each member
of the Company Group shall be determined as if IAG and its Subsidiaries ceased
to be members of the WM Inc. Group and commenced to be members of a separate
Affiliated Group, and CCIC ceased to be a member of the WM Re Holdings Group, as
of the day after the Cutoff Date.
SECTION
2.07. Transfer
Taxes. (a) All sales, use, gross receipts, stamp
duty or other transfer Taxes (“Transfer Taxes”)
imposed on the transfers occurring as part of the Reorganization shall be
allocated to White Mountains.
(b) Transfer
Taxes imposed on the Exchange, if any, shall be allocated 50% to White Mountains
and 50% to General Reinsurance.
9
SECTION
2.08. Tax
Benefits. (a) White Mountains shall be entitled to
any Tax Benefits that relate to Taxes described in Section 2.01, other
than any Taxes with respect to which Section 2.05 prevents
allocation to White Mountains.
(b) General
Reinsurance shall be entitled to any Tax Benefits that relate to Taxes described
in Section
2.02, other than any Taxes with respect to which Section 2.05 prevents
allocation to General Reinsurance.
SECTION
2.09. No Duplicative
Payment. Notwithstanding anything to the contrary in this
Agreement, it is intended that the provisions of this Agreement will not result
in a duplicative payment of any amount required to be paid under any Transaction
Agreement, and this Agreement shall be construed accordingly.
ARTICLE
III
PREPARATION
AND FILING OF TAX RETURNS
SECTION
3.01. White Mountains
Responsibility. White Mountains shall prepare and file, or
cause to be prepared and filed:
(i) Federal Consolidated Returns for the WM Inc. Group and Federal
Consolidated Tax Returns for the WM Re Holdings Group, in each case for all
taxable periods; and
(ii) all
other Tax Returns required to be filed by or with respect to the members of the
Company Group on or before the Closing Date.
SECTION
3.02. Company
Responsibility. The Company or General Reinsurance, as
applicable, shall prepare and file, or cause to be prepared and filed, all other
Tax Returns required to be filed by or with respect to the members of the
Company Group.
(b) In
the case of any Tax Return that is required to be prepared and filed by one
Party under this Agreement and that is required by law to be signed by another
Party (or by its authorized representative), the latter Party shall not be
required to sign such Tax Return under this Agreement if there is no substantial
authority for the Tax treatment of any material Tax items reported on the Tax
Return.
10
SECTION
3.04. Right to Review Tax
Returns. The Responsible Party with respect to any Tax Return
shall make such Tax Return (or the relevant portions thereof) and related
workpapers available for review by the other Parties, if requested by any Party
(the “Requesting
Party”), but only to the extent such Tax Return (or portions thereof)
relates to Taxes for which the Requesting Party or any of its Subsidiaries may
be liable or may have a claim for Tax Benefits under this Agreement. The
Responsible Party shall use its reasonable best efforts to make such Tax Returns
(or portions thereof) available for review sufficiently in advance of the due
date for filing such Tax Returns so as to provide the Requesting Party with a
meaningful opportunity to analyze and comment on such Tax Returns (or portions
thereof) and have such Tax Returns modified before filing. The
Parties shall cooperate in good faith to resolve any issues arising out of the
review of such Tax Returns (or portions thereof).
SECTION
3.05. Adjustment Requests
(Including Amended Tax Returns). Unless each of the other
Parties consents (which consent shall not be unreasonably withheld or delayed),
(i) no Adjustment Request with respect to any Combined Tax for a Pre-Closing
Period shall be filed (unless such Adjustment Request will not increase the Tax
liability of the Company Group for a Post-Cutoff Period), and (ii) any available
elections to waive the right to claim in any Pre-Closing Period with respect to
any Combined Tax of the WM Inc. Group or the WM Re Holdings Group any Carryback
of any member of the Company Group arising in a Post-Closing Period shall be
made, and no affirmative election shall be made to claim any such
Carryback. Any Adjustment Request that the Parties consent to make
under this Section
3.05 shall be prepared and filed by the Responsible Party under Sections 3.01 and
3.02 for the Tax Return to be adjusted. The Party requesting the
Adjustment Request shall provide to the Responsible Party all information
required for the preparation and filing of such Adjustment Request in such form
and detail as reasonably requested by the Responsible Party.
ARTICLE
IV
TIMING
OF PAYMENTS
SECTION
4.01. Tax
Payments. Each Party shall timely pay to the relevant Tax
Authority all Taxes that are legally imposed on it, including any Taxes for
which such Party may seek indemnity under this Agreement.
SECTION
4.02. Indemnity
Payments. (a) Each Indemnified Party shall (i)
timely compute any amounts to which it may be entitled under this Agreement; and
(ii) promptly (but in no event later than within 15 Business Days from the date
such Taxes are paid) provide the Indemnifying Party with a written notice of any
amounts due from such Indemnifying Party accompanied by evidence of payment and
a statement detailing the Taxes paid and describing in reasonable detail the
calculation of such amounts; provided, however, that failure
to give such notice shall not affect the indemnification provided under this
Agreement except to the extent that the Indemnifying Party shall have been
actually prejudiced as a result of such failure.
(b) Any
indemnity payment under this Agreement shall become due upon the receipt of the
written notice described in Section
4.02(a). Within 15 Business Days following the receipt by the
Indemnifying Party of that notice, the Indemnifying Party shall pay to the
Indemnified Party the amount shown thereon as due, together with interest
computed at the Prime Rate based on the number of days from the later of (i) the
date of Tax payment or (ii) the date the notice is received to the date the
Indemnifying Party makes its indemnity payment.
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(c) For
the avoidance of doubt, and without limiting the foregoing provisions of this
Section 4.02,
following the occurrence of a Non-Qualification Event, the payment of estimated
Taxes calculated with respect to the Exchange, as well as any payment of Taxes
made with respect to the Exchange required to be made on the original due date
of an Indemnified Party’s Tax Return for the year that includes the Closing Date
despite the fact that such Tax Return is not filed on such original due date,
shall be treated as the payment of Taxes for purposes of this Section
4.02.
SECTION
4.03. Tax
Benefits. (a) In the event that any Tax Benefit to
which White Mountains is entitled under Section 2.08 is
received by Berkshire Hathaway, General Reinsurance or any of their respective
Subsidiaries (including any member of the Company Group if such Tax Benefit is
received after Closing), the recipient shall pay White Mountains, within 15
Business Days following receipt, the amount of such Tax Benefit (including any
Tax Benefit realized as a result of the payment), net of any out-of-pocket
expenses, including professional fees, and Taxes attributable to such Tax
Benefit.
(b) In
the event that any Tax Benefit to which General Reinsurance is entitled under
Section 2.08 is
received by White Mountains or any of its Subsidiaries (including any member of
the Company Group if such Tax Benefit is received before Closing and is not
retained by the Company Group), the recipient shall pay General Reinsurance,
within 15 Business Days following receipt, the amount of such Tax Benefit
(including any Tax Benefit realized as a result of the payment), net of any
out-of-pocket expenses, including professional fees, and Taxes attributable to
such Tax Benefit.
(c) Any
Tax Benefit payment shall include interest computed at the Prime Rate based on
the number of days from the date of receipt of the Tax Benefit to the date of
payment of such amount under this Section
4.03.
(d) In
the event that any Tax Benefit for which a payment has been made pursuant to
this Section 4.03 is
subsequently reduced or disallowed, the Person that received such payment shall
indemnify and hold harmless the Person that made such payment for any Tax
liability, including related interest and penalties, assessed against such
Person by reason of the reduction or disallowance.
ARTICLE
V
COOPERATION;
TAX RECORDS; CONFIDENTIALITY
SECTION
5.01. Cooperation. (a) The
Parties shall cooperate (and cause their respective Subsidiaries to cooperate)
with each other and with each other’s agents (including accounting firms and
legal counsel) in connection with Tax matters relating to the Parties and their
Subsidiaries, including (i) preparation and filing of Tax Returns, (ii)
determining the liability for and amount of any Taxes due (including estimated
Taxes) or the right to and amount of any Tax Benefit, (iii) examinations of Tax
Returns, and (iv) any administrative or judicial proceeding in respect of Taxes
assessed or proposed to be assessed.
12
(b) The
Parties shall make available to each other, as reasonably requested and
available, personnel (including officers, directors, employees and agents of the
Parties or their respective Subsidiaries) responsible for preparing,
maintaining, and interpreting information and documents relevant to Taxes, and
personnel reasonably required as witnesses or for purposes of providing
information or documents in connection with any administrative or judicial
proceedings relating to Taxes; provided that the
requesting Party shall reimburse the other Party for its reasonable
out-of-pocket expenses, including professional fees and excluding compensation
of the Party’s officers, directors and employees.
(c) The
Parties and their respective Subsidiaries shall make available to each other for
inspection and copying during normal business hours upon reasonable notice all
Tax Records in their possession to the extent reasonably required by the other
Party in connection with the preparation of Tax Returns, audits, litigation, or
the resolution of items under this Agreement.
SECTION
5.02. Retention of Tax
Records. The Parties shall preserve and keep (or cause to be
preserved and kept) all Tax Records exclusively relating to the assets and
activities of the Company Group for Pre-Closing Periods, and White Mountains
shall preserve and keep all other Tax Records relating to Combined Taxes of the
WM Inc. Group, the WM Re Holdings Group and the Company Group for Pre-Closing
Periods, for so long as the contents thereof may become material in the
administration of any matter under applicable Tax Law, but in any event until
the later of (i) the expiration of any applicable statutes of limitation, and
(ii) seven years after the Closing Date. If, prior to the expiration
of such period, a Party reasonably determines that any Tax Records that it is
required to preserve and keep under this Article V are no
longer material in the administration of any matter under applicable Tax Law,
such Party may dispose of such records upon 90 days’ written notice to the other
Party. Such notice shall include a list of the records to be disposed of
describing in reasonable detail each file, book, or other record accumulation
being disposed. The notified Party shall have the opportunity, at its cost and
expense, to copy or remove, within such 90-day period, all or any part of such
Tax Records.
SECTION
5.03. Certain Tax
Information. White Mountains shall provide to General
Reinsurance as soon as practicable (but not later than 30 days after the Closing
Date) a schedule detailing any carryover item that may be partially or
totally attributed and carried over by the Company Group, including with respect
to the tangible and intangible properties of the Company Group (i) their
adjusted bases, (ii) the methods of depreciation or amortization used by the WM
Inc. Group and the WM Re Holdings Group, and (iii) the remaining recovery
periods, in each case, as of the Closing Date, for Federal, state and foreign
Tax purposes. White Mountains shall promptly notify General Reinsurance of any
subsequent adjustments that may affect the amount of such carryover items and
associated Tax attributes.
SECTION
5.04. Confidentiality. Any
Tax information or Tax-related documents provided under this Agreement shall be
kept confidential by the Party receiving such information or documents, except
as may otherwise be necessary in connection with the filing of Tax Returns or in
connection with any administrative or judicial proceedings relating to
Taxes.
13
ARTICLE
VI
TAX
CLAIM PROCEDURES
SECTION
6.01. Tax Claim
Notice. (a) Each Indemnified Party shall promptly
notify the Indemnifying Party of the commencement of any demand, audit,
examination, action, investigation, suit, proceeding or other proposed change or
adjustment by any Tax Authority concerning any Tax, or any other adjustment or
claim, (i) that could reasonably give rise to an indemnity liability of the
Indemnifying Party pursuant to this Agreement (each a “Tax Claim”) or (ii)
that could reasonably be expected to affect the Tax consequences of the
Transactions to either Party.
(b) Each
Tax Claim notice shall contain factual information (to the extent known)
describing any asserted Tax liability in reasonable detail and shall be
accompanied by copies of any notice and other documents received from any Tax
Authority in respect of any such matters.
(c) In
the event that such notice of any Tax Claim is not given to the Indemnifying
Party within a sufficient period of time or in reasonable detail to apprise the
Indemnifying Party of the nature of such claim (in each instance taking into
account the facts and circumstances with respect to such claim), the
Indemnifying Party shall not be liable to the Indemnified Party under this
Agreement for such claim, but only to the extent that the rights of the
Indemnifying Party with respect to such claim are actually and materially
prejudiced.
(d) After
the delivery of the notice required by Section 6.01(a), the
Indemnified Party shall deliver to the Indemnifying Party such additional
information with respect to such Tax Claim in its possession that the
Indemnifying Party may reasonably request.
SECTION
6.02. Control of Tax
Claims. (a) In
General. Subject to Section 6.02(b), the
Indemnified Party shall be entitled to exercise full control of the defense,
compromise or settlement of any Tax Claim unless the Indemnifying Party (within
a reasonable time after the receipt of notice of such Tax Claim in accordance
with Section
6.01(a)):
(i) delivers a written confirmation to such Indemnified Party that
the indemnity provisions of this Agreement are applicable to such Tax Claim and
that the Indemnifying Party will indemnify such Indemnified Party in respect of
such Tax Claim pursuant to this Agreement,
(ii) notifies
such Indemnified Party in writing of the Indemnifying Party’s intention to
assume the defense thereof, and
(iii) retains
legal counsel reasonably satisfactory to such Indemnified Party to conduct the
defense of such Tax Claim,
in which
case the Indemnifying Party shall be entitled to exercise full control of the
defense, compromise or settlement of such Tax Claim.
(b) Transaction
Taxes. In the case of any Tax Claim with respect to General
Reinsurance Transaction Taxes or White Mountains Transaction Taxes, White
Mountains and General Reinsurance shall have the right to control jointly the
defense, compromise or settlement of such Tax Claim (and neither Party shall
settle or compromise or consent to entry of any judgment with respect to any
such Tax Claim without the prior written consent of the other Party) except (i)
in the case of General Reinsurance Transaction Taxes, to the extent General
Reinsurance waives all related indemnities and allocations of such Taxes under
Sections 2.01(iii),
2.03(a) and 2.03(b) (or such provisions shall have ceased to apply under
Section 2.05),
in which case General Reinsurance shall have the sole right to control the
defense, compromise or settlement of such Tax Claim, or (ii) in the case of
White Mountains Transaction Taxes, to the extent White Mountains waives all
related indemnities and allocations of such Taxes under Sections 2.02(iii) and
2.04(b) (or such provisions shall have ceased to apply under Section 2.05), in
which case White Mountains shall have the sole right to control the defense,
compromise or settlement of such Tax Claim. In the case of any Tax Claim over
which General Reinsurance and White Mountains exercise joint control, the
parties shall use their reasonable best efforts to resolve any disputes that
arise with respect to the defense, compromise or settlement of such Tax Claim.
If the Parties are unable to agree, they shall promptly elevate the matter to
the level of their respective Chief Executive Officers.
14
(c) Combined
Taxes. In the case of any Tax Claim with respect to any
Combined Tax:
(i) White Mountains shall control the defense of the portion of the
Tax Claim directly and exclusively related to any proposed adjustment by a Tax
Authority that would create or increase a Tax liability for which White
Mountains and/or any of its Affiliates would be exclusively liable under this
Agreement; and
(ii) the Company shall control the defense of the portion of the Tax
Claim directly and exclusively related to any proposed adjustment by a Tax
Authority that would create or increase a Tax liability for which General
Reinsurance, the Company and/or any of their respective Affiliates would be
exclusively liable under this Agreement.
(d) Participation of
Non-Controlling Party. Unless the Parties exercise joint
control, the Party controlling the defense, compromise or settlement of any Tax
Claim under this Section 6.02
shall:
(i) notify the non-controlling Party of significant developments with
respect to such Tax Claim;
(ii) keep the non-controlling Party reasonably informed;
(iii) consult
with the non-controlling Party with respect to any issue that reasonably could
be expected to have an adverse effect on the non-controlling Party or any of its
Affiliates (including by giving rise to an indemnity obligation of the
non-Controlling Party or any of its Affiliates); and
(iv) provide
the non-controlling Party with an opportunity to attend, at the non-controlling
Party’s own expense, as an observer, settlement discussions and other
conferences or meetings with respect to such Tax Claim.
15
ARTICLE
VII
TAX
REPRESENTATIONS AND WARRANTIES OF WHITE MOUNTAINS
White
Mountains represents and warrants to Berkshire Hathaway and General Reinsurance,
except as otherwise specifically disclosed to Berkshire Hathaway and General
Reinsurance in the White Mountains Disclosure Schedule, as of the date of this
Agreement, as follows:
SECTION
7.01. Taxes and Tax
Returns. Each member of the Company Group has filed (or
otherwise been included in) all Federal income Tax Returns and all other
material Tax Returns required to be filed with respect to it. All
such Tax Returns are true, complete and correct in all material respects, and
all Taxes shown thereon as owing have been paid.
SECTION
7.02. Withholding
Taxes. Each member of the Company Group has in all material
respects withheld and paid over to the proper Tax Authority all Taxes required
to be withheld and paid over.
SECTION
7.03. Claims and
Disputes. There is no material dispute or claim concerning any
Tax liability of any member of the Company Group either claimed or raised by any
Tax Authority in writing.
ARTICLE
VIII
PRE-CLOSING
COVENANTS
SECTION
8.01. Termination of Prior Tax
Sharing Agreements. Prior to the Closing, White Mountains must
terminate all prior Tax sharing agreements. Upon termination, all rights and
obligations under such agreements shall cease.
SECTION
8.02. No Material Tax-Related
Changes. From the date of this Agreement until the Closing,
White Mountains will not, and will not permit its Subsidiaries to:
(i) make, change or revoke any material Tax election relating
primarily to (or that would materially and negatively affect) any member of the
Company Group,
(ii) change materially any method of Tax accounting relating
primarily to (or that would materially and negatively affect) any member of the
Company Group,
(iii) consent
to any extension or waiver of the limitations period applicable to any material
Tax claim or assessment relating primarily to (or that would materially and
negatively affect) any member of the Company Group,
(iv) settle
or compromise any material Tax liability relating primarily to (or that would
materially and negatively affect) any member of the Company Group,
16
(v) enter into any material agreement relating primarily to (or that
would materially and negatively affect) Taxes of a member of the Company Group
with any Tax Authority, or
(vi) make
any material change in any Tax practice or policy relating primarily to (or that
would materially and negatively affect) any member of the Company
Group;
except,
in each case, (A) as consented to or approved in advance by Berkshire Hathaway
(which consent shall not be unreasonably withheld or delayed), (B) as otherwise
required because of a change in law or a Final Determination or (C) to the
extent such actions would not affect Taxes of or with respect to any member of
the Company Group due for any Post-Cutoff Period.
SECTION
8.03. IRS
Ruling. Without limiting the generality of Section 6.03 of the
Exchange Agreement, as soon as reasonably practicable after the date of this
Agreement, White Mountains shall prepare and file, or cause to be prepared or
filed, the joint request of White Mountains and Berkshire Hathaway for the IRS
Ruling, and White Mountains and Berkshire Hathaway shall proceed in good faith
and exercise their reasonable best efforts to cause the IRS Ruling to be timely
issued, including by making such reasonable representations (that are true and
correct) as are requested by the IRS. In addition, White Mountains
shall be responsible for preparing and submitting (i) the documentation, if any,
for any IRS pre-submission conference, (ii) the written responses to subsequent
IRS information requests, if any, and (iii) the draft of the private letter
ruling; provided, however, that White
Mountains shall not submit any such materials to the IRS (or any other materials
relating to the IRS Ruling process) without Berkshire Hathaway’s consent (which
consent shall not be unreasonably withheld or delayed). Without limiting the
generality of Section
5.01, the Parties shall cooperate with each other in respect of the
preparation of such documents and shall furnish all information to each other
that is reasonably necessary or advisable with respect thereto. White
Mountains shall share working drafts of such documents with Berkshire Hathaway
and General Reinsurance, permit Berkshire Hathaway and General Reinsurance to
review and comment on such documents, consider in good faith all comments of
Berkshire Hathaway or General Reinsurance with respect to such documents, and
otherwise consult with and keep Berkshire Hathaway and General Reinsurance
reasonably informed regarding any issues, communications or significant
developments relating to the IRS Ruling process. White Mountains shall also
notify Berkshire Hathaway and General Reinsurance of, and permit Berkshire
Hathaway and General Reinsurance to participate in, any meetings or discussions
with the IRS relating to the IRS Ruling process including any IRS pre-submission
conference. For the avoidance of doubt, nothing in this Section 8.03 shall
require Berkshire Hathaway, General Reinsurance or their Affiliates to make any
representations to the IRS other than representations that (x) reasonably relate
to the activities of Berkshire Hathaway, General Reinsurance or their Affiliates
with respect to White Mountains or the Company Group or to their intended
operation of the Company, the IAG Business or the CCIC Business and (y) do not
impose restrictions or requirements on the operation of Berkshire Hathaway,
General Reinsurance or their Affiliates (including the Company Group) that are
materially in excess of the restrictions or requirements set forth in Section
9.01.
17
ARTICLE
IX
TAX-FREE
STATUS OF EXCHANGE
SECTION
9.01. Berkshire Hathaway and
General Reinsurance Covenants. (a) Subject to Section 9.01(b),
during the period that begins on the Closing and ends on the second anniversary
of the Closing Date, Berkshire Hathaway, General Reinsurance and their
Affiliates shall not, in any transaction or series of transactions:
(i) liquidate the Company or cause the Company to liquidate any
Company Subsidiary, in each case including by way of merger, consolidation or
conversion;
(ii) dispose, directly or indirectly, of the shares of the Company or
cause the Company to dispose, directly or indirectly, of the shares of any
Company Subsidiary;
(iii) cause
or permit the Company or any Company Subsidiary, directly or indirectly, to
distribute or transfer to Berkshire Hathaway, General Reinsurance or any of
their Affiliates (other than the Company or any Company Subsidiary) any cash or
property, other than (A) distributions or transfers of any amounts of operating
cash flow of the Company or the Company Subsidiaries, as applicable, after the
Exchange, (B) transfers of cash pursuant to any Permitted Loans, (C) transfers
of cash or property pursuant to any contracts in existence prior to the Closing
between the Company or any Company Subsidiary on the one hand, and Berkshire
Hathaway, General Reinsurance or any of their Affiliates on the other hand, or
(D) any other transfers of cash to pay Taxes, operational expenses, benefit plan
expenses or any other expenses, in each case properly allocable to any member of
the Company Group;
(iv) cause
or permit the Company or any Company Subsidiary, directly or indirectly, to
redeem or otherwise purchase any of its outstanding stock;
(v) cause
or permit the Company or any Company Subsidiary to sell or otherwise dispose of
all or substantially all of its assets, except in the ordinary course of
business;
(vi) cause
or permit IAG to cease to operate the IAG Business, or CCIC to cease to operate
the CCIC Business, in each case in a manner substantially consistent with the
operation of the IAG Business and the CCIC Business immediately before the
Closing;
(vii) cause or permit the Company to sell or otherwise dispose of any
equity interest in any Company Subsidiary that would cause the Company and such
Company Subsidiary to fail to be members of the same Affiliated
Group;
(viii) cause or permit the Company or any Company Subsidiary to
change the terms of any Permitted Loan in a manner that would cause such loan to
fail to continue to qualify as a Permitted Loan; or
(ix) cause
or permit the Company or any Company Subsidiary to reinsure all (or
substantially all) of the risks associated with the IAG Business or the CCIC
Business.
18
(b) Berkshire
Hathaway, General Reinsurance and their Affiliates may take any of the actions
described in Section
9.01(a) if, prior to taking such action, Berkshire Hathaway or
General Reinsurance obtains:
(i) a ruling from the IRS confirming that the proposed action will
not affect the Tax treatment of the Transactions;
(ii) an opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP (or other
nationally-recognized tax counsel satisfactory to White Mountains in its
reasonable discretion), to the effect that the proposed action will not affect
the Tax treatment of the Transactions; or
(iii) the
prior written consent of White Mountains, which consent may be provided or
withheld by White Mountains in its reasonable discretion,
provided that (A) in
the case of (i) and (ii) such ruling or opinion, as applicable, is satisfactory
to White Mountains in its reasonable discretion and (B) in each case, such
ruling, opinion or consent, as applicable, is based on facts and representations
provided by Berkshire Hathaway or General Reinsurance that are true, complete
and correct in all material respects. For each such opinion, ruling
or consent described in this Section 9.01(b),
Berkshire Hathaway or General Reinsurance shall certify to White Mountains that
the facts and representations on which any such opinion, ruling or consent is
based are true, complete and correct in all material respects.
(c) Berkshire
Hathaway’s Affiliates currently conduct certain insurance activities involving
the management of property and casualty insurance or reinsurance companies in
run-off, as well as the management of books of insurance or reinsurance
contracts in run-off assumed from property and casualty insurance or reinsurance
companies. Such activities are substantially similar to the
activities of the IAG Business and the CCIC Business (the “Berkshire Run-off
Business”). During the period that begins on the Closing and
ends on the second anniversary of the Closing Date, (i) the same managers that
manage the Berkshire Run-off Business will also manage the CCIC Business and the
IAG Business, (ii) the Berkshire Run-off Business, the CCIC Business and the IAG
Business will be managed together as one business activity, and (iii) Berkshire
Hathaway and its Affiliates will continue to seek on an opportunistic basis (x)
to acquire additional property and casualty insurance or reinsurance companies
in run-off and (y) to assume additional property and casualty insurance or
reinsurance contracts in run-off to add to the Berkshire Run-off Business, which
additions, if made, will be managed together with the Berkshire Run-off
Business, the CCIC Business and the IAG Business as one business
activity.
SECTION
9.02. White Mountains
Covenant. Immediately after the Exchange, White Mountains will
be engaged in the active conduct of a trade or business (within the meaning of
Section 355(b) of the Code), and White Mountains will continue to be engaged, in
a manner both consistent with the operation of such active trade or business at
the time of the Exchange and compliant with Section 355(b) of the Code, in such
active trade or business during the period that begins on the Closing and ends
on the second anniversary of the Closing Date.
SECTION
9.03. Mutual
Covenant. From the date of this Agreement until the Closing,
the Parties will not take any action or fail to take any required action (and
will not permit their Affiliates to take any action or fail to take any required
action) with respect to White Mountains, its Affiliates, the Company Group or
the operation of the Berkshire Run-off Business which action or failure to take
a required action could reasonably be expected to result in a Material Increase
in Tax Risk. For the avoidance of doubt, except as otherwise
expressly provided in this Agreement (including Sections 8.03, 9.01 or
9.03), nothing in this Agreement shall require Berkshire Hathaway,
General Reinsurance or any of their Affiliates to, or require any such party to
agree to (i) sell, divest, hold separate, transfer to the Company or any of its
Subsidiaries or otherwise dispose of their assets or businesses in a specified
manner or (ii) conduct their businesses in a specified manner, in each case
whether as a condition to obtaining approval from a Governmental Authority or
any other Person or for any other reason.
19
SECTION
9.04. Other IRS Ruling
Requests. Except as provided in Section 9.01(b), each
Party covenants and agrees that subsequent to the Closing Date it will not file,
and it will cause its Subsidiaries to refrain from filing, any ruling request
with the IRS (i) in respect of any part of the Transactions, or (ii) that
may reasonably be expected to have any effect on the Tax treatment of the
Transactions, in each case without the consent of the other Parties (which
consent shall not be unreasonably withheld or delayed).
SECTION
9.05. Tax Reporting of the
Exchange. (a) Except as otherwise provided in this
Section 9.05,
the Tax treatment reported on any Tax Return of Tax items relating to the
Exchange shall be consistent with the treatment of such Tax items in the IRS
Ruling.
(b) Notwithstanding
Section
9.05(a), if at least 45 days prior to the due date (taking into account
any extensions) for Berkshire Hathaway’s Tax Return for the year that includes
the Closing Date, Berkshire Hathaway shall have delivered to White Mountains a
notice stating that a Material Increase in Tax Risk has occurred, then the
Parties will report the Exchange as taxable unless Berkshire Hathaway shall have
received, as soon as reasonably practicable (but not later than five days prior
to such due date), an opinion from Cravath, Swaine and ▇▇▇▇▇ LLP (which opinion
shall, at Berkshire Hathaway’s election after consultation with White Mountains,
be a Covered Opinion) to the effect that it is more likely than not that the
Intended Tax-Free Treatment will be sustained.
(c) Notwithstanding
Section
9.05(a), if White Mountains shall have exercised its right pursuant to
Section 9.02(b) of the Exchange Agreement to require the consummation of the
Transactions, then the Parties will report the Exchange as taxable.
(d) Notwithstanding
Section
9.05(a), if Berkshire Hathaway shall have exercised its right pursuant to
Section 9.02(a) of the Exchange Agreement to require the consummation of the
Transactions, then the Parties will report the Exchange as qualifying for the
Intended Tax-Free Treatment unless, at least 10 days prior to the due date
(taking into account any extensions) for Berkshire Hathaway’s Tax Return for the
year that includes the Closing Date, Berkshire Hathaway notifies White Mountains
of its intention to report the Exchange as taxable.
(e) Notwithstanding
anything in the Transaction Agreements to the contrary, including without
limitation this Section 9.05, no
Person shall be required under the Transaction Agreements to take a Tax
reporting position with respect to the Transactions unless there is a reasonable
basis for such position.
20
(f) Each
Party shall timely comply with any information reporting requirements imposed by
any Tax Authority with respect to the Exchange.
SECTION
9.06. Limitation on Covenants if a
Party Exercises its Option to Require
Consummation. Notwithstanding anything in the Transaction
Agreements to the contrary, upon the occurrence of a Non-Qualification Event,
the Parties shall be released from future compliance with the covenants
contained in Sections
9.01, 9.02, 9.03 and 9.04.
ARTICLE
X
TREATMENT
OF PAYMENTS; TAX GROSS UP
SECTION
10.01. Treatment of Certain
Payments. (a) Any payments made by White Mountains
or its Affiliates to Berkshire Hathaway, General Reinsurance or their Affiliates
under the Transaction Agreements shall be reported for Tax purposes by the
Indemnifying Party and the Indemnified Party as capital contributions from White
Mountains to the Company occurring immediately prior to the
Exchange.
(b) Any
payments made by Berkshire Hathaway, General Reinsurance or their Affiliates to
White Mountains or its Affiliates under the Transaction Agreements shall be
reported for Tax purposes by the Indemnifying Party and the Indemnified Party as
distributions by the Company to White Mountains occurring immediately prior to
the Exchange.
SECTION
10.02. Payments of
Interest. Notwithstanding anything to the contrary herein, to
the extent the Indemnifying Party makes a payment of interest to the Indemnified
Party as provided in Article IV, the
interest payment shall be treated as interest expense to the Indemnifying Party
(deductible to the extent provided by applicable Tax Law) and as interest income by the Indemnified Party (includible in
income to the extent provided by applicable Tax Law).
SECTION
10.03. Tax Gross
Up. If, notwithstanding Section 10.01, there
is an adjustment to the Tax liability of a Party as a result of its receipt of
an indemnity payment under Article II or a
payment of interest under Section 10.02, such
payment shall be appropriately adjusted so that the amount of such payment,
reduced by the amount of all Taxes payable (including withholding Taxes with
respect to payments of interest under Section 10.02) with
respect to the receipt thereof (but taking into account all correlative Tax
Benefits resulting from the payment of such Taxes), shall equal the amount of
the payment that the Party receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.
ARTICLE
XI
GENERAL
PROVISIONS
SECTION
11.01. Notices. All
notices, requests and other communications to any party hereunder shall be in
writing (including facsimile transmission) and shall be given:
21
If to
Berkshire Hathaway or General Reinsurance, to:
Berkshire
Hathaway Inc.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
and with
a copy to:
▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
If to
White Mountains or the Company, to:
White
Mountains Insurance Group, Ltd.
▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
and with
a copy to:
Cravath,
Swaine & ▇▇▇▇▇ LLP
Worldwide
Plaza
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
or to
such other address or facsimile number as such party may hereafter specify for
the purpose by notice to the other parties hereto. All notices and
other communications given to a party in accordance with the provisions of this
Agreement shall be deemed to have been given (i) when delivered by hand or
transmitted by telecopy (answer back received), if received prior to 5 P.M. on a
Business Day, otherwise on the next Business Day, or (ii) one Business Day
after the same are sent by a reliable overnight courier service, with
acknowledgment of receipt requested.
SECTION
11.02. No Third-Party
Beneficiaries. Other than as provided in Section 11.06,
this Agreement is not intended to confer any rights or remedies upon any Person
other than the Parties.
SECTION
11.03. Amendments;
Waivers. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each Party, or in the case of a waiver,
by the Party against whom the waiver is to be effective. For the
avoidance of doubt, any provision of any Exhibit to this Agreement may be
amended if, but only if, such amendment is in writing and is signed by each
Party.
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(b) No
failure or delay by any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. Except as otherwise provided
herein, the rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by applicable Law.
(c) Any
consent provided under this Agreement must be in writing, signed by the Party
against whom enforcement of such consent is sought.
SECTION
11.04. Expenses. Regardless
of whether the Transactions are consummated, except as otherwise expressly
provided in the Transaction Agreements, each of the Parties shall pay its own
expenses incident to this Agreement, the other Transaction Agreements and the
consummation of the Transactions (including legal fees and filing
fees).
SECTION
11.05. Late
Payments. Any amount owed by one Party to another Party under
this Agreement that is not paid when due shall bear interest at the Prime Rate
plus 2%, compounded semiannually, from the due date of the payment to the date
paid.
SECTION
11.06. Successors and
Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns. None of the Parties shall be permitted to assign
its rights or obligations under this Agreement to any Person without the prior
written consent of the other Parties.
SECTION
11.07. Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State.
SECTION
11.08. Jurisdiction. Any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the Transactions
will be brought exclusively in the state courts of the State of New York located
in New York, New York, or in the Federal courts located in the State of New
York. Each of the Parties hereby consents to personal jurisdiction in
any such action, suit or proceeding brought in any such court (and of the
appropriate appellate courts therefrom) and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any Party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the
foregoing, each Party agrees that service of process on such Party as provided
in Section
11.01 shall be deemed effective service of process on such
Party.
SECTION
11.09. WAIVER OF JURY
TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS.
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SECTION
11.10. Counterparts;
Effectiveness. This Agreement may be executed in two or more
counterparts, all of which shall be considered the same
agreement. Signature pages from separate identical counterparts may
be combined with the same effect as if the parties signing such signature page
had signed the same counterpart. This Agreement shall become
effective when each Party shall have received counterparts hereof signed by all
of the other Parties.
SECTION
11.11. Captions. The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof.
SECTION
11.12. Integration. This
Agreement constitutes the agreement among the Parties pertaining to the subject
matter of this Agreement and supersedes all prior agreements and understandings
pertaining thereto. In the event of any inconsistency between this Agreement and
the Exchange Agreement or any other agreements relating to the Transactions, the
provisions of this Agreement shall control.
SECTION
11.13. Entire
Agreement. This Agreement (including the Schedules and
Exhibits attached hereto or delivered in connection herewith) and the other
Transaction Agreements constitute the entire agreement among the Parties with
respect to the matters covered hereby and thereby, and all written or oral
agreements, representations, warranties or covenants previously existing between
the Parties with respect to such subject matter are cancelled and are not part
of this Agreement or the other Transaction Agreements.
SECTION
11.14. Publicity; Public
Announcements. White Mountains and General Reinsurance will
reasonably cooperate with each other in connection with the issuance of mutually
acceptable press releases to be issued on or promptly after the date of
execution hereof announcing the execution of this Agreement. Each of
White Mountains and General Reinsurance agrees not to, and to cause each of
their respective Affiliates not to, issue, or cause or permit to be issued, any
press release or other public statement regarding this Agreement or the
Transactions without the prior written consent of the other, except, if, in the
reasonable judgment of the Party seeking to disclose, such release or statement
is required by applicable law (including the rules and regulations of the United
States Securities and Exchange Commission) or by any securities exchange or
association on which such Person’s securities are listed or traded (including
pursuant to any listing agreement), in which case the Party required to make the
release or announcement shall allow the other Party reasonable time (taking into
account any time requirements for regulatory filings) to comment on such release
or announcement (so as to confirm the accuracy of any statements therein
regarding such other Party, among other things) and thereafter the Party
required to make the release or announcement is permitted to make such release
or announcement.
SECTION
11.15. Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any Party. Upon such determination, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner in order that the
Transactions be consummated as originally contemplated to the fullest extent
possible.
24
SECTION
11.16. Further
Assurances. The Parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the
purposes of this Agreement, including the execution and delivery to the other
Parties and their Subsidiaries and representatives of such powers of attorney or
other authorizing documentation as is reasonably necessary or appropriate in
connection with Tax Claims (or portions thereof) under the control of such other
Parties in accordance with Article VI.
SECTION
11.17. No Strict
Construction. Each Party acknowledges that this Agreement has
been prepared jointly by the Parties and shall not be strictly construed against
any Party.
SECTION
11.18. Termination. This
Agreement shall be automatically terminated in the event that (i) no Closing
occurs or (ii) the Exchange Agreement is terminated; provided that this
Agreement, in circumstances described in Section 9.02 of the Exchange Agreement,
shall be deemed to no longer be terminated. In the event of the
termination of this Agreement pursuant to this Section 11.18,
this Agreement, except for the provisions of this Section 11.18,
shall become void and have no effect, without any liability on the part of any
Party or its directors, officers or stockholders.
SECTION
11.19. Enforcement. The
parties hereto agree that prior to the Closing, money damages or other remedies
at law would not be a sufficient or adequate remedy for any breach or violation
of, or default under, this Agreement by them and that in addition to all other
remedies available to them prior to the Closing, each of them shall, prior to
the Closing, be entitled to the fullest extent permitted by law to an injunction
restraining such breach, violation or default and to other equitable relief,
including specific performance, without bond or other security being
required.
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IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as
of the 8th day of March, 2008.
|
WHITE
MOUNTAINS INSURANCE GROUP, LTD.,
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Title: Chairman and Chief Executive Officer | |||
|
BERKSHIRE
HATHAWAY INC.,
|
|||
|
|
By:
|
/s/ ▇▇▇▇ ▇. Hamburg | |
| Name: ▇▇▇▇ ▇. Hamburg | |||
| Title: Chief Financial Officer | |||
| GENERAL REINSURANCE CORPORATION, | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. | |||
| Title: Chief Financial Officer | |||
| RAILSPLITTER HOLDINGS CORPORATION, | |||
|
|
By:
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ | |||
| Title: Authorized Signatory | |||
26