EXHIBIT 10.3
EXHIBIT H
TO
DISTRIBUTION AGREEMENT
INSURANCE AGREEMENT
This Insurance Agreement (the "AGREEMENT") is made and entered into as of
this day of , 1996, by and among Tenneco Inc., a Delaware
corporation ("TENNECO"), New Tenneco Inc., a Delaware corporation ("INDUSTRIAL
COMPANY") and Newport News Shipbuilding Inc., a Delaware corporation
("SHIPBUILDING COMPANY").
WHEREAS, Tenneco, Industrial Company and Shipbuilding Company have entered
into that certain Distribution Agreement, dated as of , 1996
(the "DISTRIBUTION AGREEMENT"), pursuant to which (i) Tenneco and its
Subsidiaries shall cause to be consummated the Corporate Restructuring
Transactions in order to restructure, divide and separate their existing
businesses and assets so that (a) the Industrial Assets and Industrial
Business shall be owned, controlled and operated, directly or indirectly, by
the Industrial Company, and (b) the Shipbuilding Assets and Shipbuilding
Business shall be owned, controlled and operated, directly or indirectly, by
the Shipbuilding Company, and (ii) Tenneco shall distribute on the
Distribution Date all of the outstanding capital stock of Industrial Company
and Shipbuilding Company as a dividend to the holders of shares of the common
stock, par value $5.00 per share, of Tenneco upon the terms and subject to the
conditions set forth in the Distribution Agreement;
WHEREAS, Tenneco, its Subsidiaries and their respective predecessors have
historically maintained various Policies for the benefit or protection of one
or more of the Energy Covered Persons, Industrial Covered Persons and
Shipbuilding Covered Persons;
WHEREAS, in connection with the transactions contemplated by the
Distribution Agreement, Tenneco, Industrial Company and Shipbuilding Company
have determined that it is necessary and desirable to provide for the
respective continuing rights and obligations in respect of said Policies from
and after the Distribution Date; and
WHEREAS, pursuant to the Distribution Agreement the parties hereto have
agreed to enter into this Agreement.
NOW THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. Unless otherwise defined herein or unless the context otherwise
requires, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined).
"AGREEMENT" shall mean this Insurance Agreement, dated as of , 1996,
by and among Tenneco, Industrial Company and Shipbuilding Company, including
any amendments hereto and each Schedule attached hereto.
"CLAIMS ADMINISTRATION" shall mean, with respect to any Policy, the
processing of claims made under such Policy, including, without limitation,
the reporting of losses or claims to insurance carriers and the management,
defense and settlement of claims.
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"CLAIMS DEPOSIT" shall mean the amount of funds, as of the Distribution
Date, maintained by Tenneco on deposit for the benefit of the insurance
carriers under the Retained Policies.
"CLAIMS-MADE" shall mean, with respect to any Policy, coverage provided by
such Policy for claims made during a period specified therein.
"CLAIMS-MADE POLICIES" shall mean those current and past Policies which are
Claims-Made in nature, including but not limited to those Policies identified
on SCHEDULE A hereto, which show Tenneco or any of its predecessors as the
named insured, but excluding (i) any directors' and officers' liability
insurance policies which are or were maintained by or on behalf of Tenneco,
(ii) the Exclusive Policies, and (iii) the Retained Policies.
"COMMON POLICIES" shall mean the Claims-Made Policies, Occurrence-Based
Policies, Eastern Policies and Retained Policies.
"CONSENT" shall have the meaning set forth in Section 2.3 hereof.
"CORPORATE RESTRUCTURING TRANSACTIONS" shall have the meaning set forth in
the Distribution Agreement.
"COVERED PERSONS" shall mean (i) with respect to Tenneco, the Energy Covered
Persons, (ii) with respect to Industrial Company, the Industrial Covered
Persons, and (iii) with respect to Shipbuilding Company, the Shipbuilding
Covered Persons.
"CURRENT CLAIMS-MADE POLICIES" shall mean the Claims-Made Policies in effect
as of the Distribution Date, which Policies are set forth on SCHEDULE A
hereto.
"CURRENT OCCURRENCE-BASED POLICIES" shall mean the Occurrence-Based Policies
in effect as of the Distribution Date, which Policies are set forth on
SCHEDULE B hereto.
"DISTRIBUTION AGREEMENT" shall mean that certain Distribution Agreement,
dated as of , 1996, by and among Tenneco, Industrial Company and
Shipbuilding Company, including any amendments, exhibits and schedules
thereto.
"DISTRIBUTION DATE" shall have the meaning set forth in the Distribution
Agreement.
"EASTERN POLICIES" shall mean the Policies identified on SCHEDULE C hereto,
which Policies show a member of the Energy Group as the named insured,
together with any predecessor policies thereto.
"ENERGY" shall mean, when unqualified, the Energy Assets, Energy Liabilities
and/or Energy Business.
"ENERGY BUSINESS" shall have the meaning set forth in the Distribution
Agreement.
"ENERGY COVERED PERSON" shall mean each member of the Energy Group and any
other Person, in each case to the extent any Policy addressed herein purports
to provide insurance coverage in respect of any claims, suits, actions,
proceedings, injuries, losses, liabilities, occurrences, damages or expenses
incurred by such Person arising out of, in connection with or otherwise
related to Energy.
"ENERGY GROUP" shall have the meaning set forth in the Distribution
Agreement.
"ENERGY LIABILITIES" shall have the meaning set forth in the Distribution
Agreement.
"EXCLUSIVE POLICIES" shall mean the Tenneco Exclusive Policies, Industrial
Exclusive Policies and Shipbuilding Exclusive Policies.
"GROUP" shall have the meaning set forth in the Distribution Agreement.
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"INDUSTRIAL" shall mean, when unqualified, the Industrial Assets, Industrial
Liabilities, Prior Industrial Businesses and/or Industrial Business.
"INDUSTRIAL ASSETS" shall have the meaning set forth in the Distribution
Agreement.
"INDUSTRIAL BUSINESS" shall have the meaning set forth in the Distribution
Agreement.
"INDUSTRIAL COVERED PERSON" shall mean each member of the Industrial Group
and any other Person, in each case to the extent any Policy addressed herein
purports to provide insurance coverage in respect of any claims, suits,
actions, proceedings, injuries, losses, liabilities, occurrences, damages or
expenses incurred by such Person arising out of, in connection with or
otherwise related to Industrial.
"INDUSTRIAL EXCLUSIVE POLICIES" shall mean all current and past Policies
which show Industrial Company, any other member of the Industrial Group or any
of their respective predecessors as the named insured and do not purport to
relate to Energy or Shipbuilding or to cover any Energy Covered Person or
Shipbuilding Covered Person, but excluding any Retained Policy.
"INDUSTRIAL GROUP" shall have the meaning set forth in the Distribution
Agreement.
"INDUSTRIAL LIABILITIES" shall have the meaning set forth in the
Distribution Agreement.
"INSURANCE ADMINISTRATION" shall mean, with respect to any Policy, the
accounting for premiums, defense costs, indemnity payments, deductibles and
retentions, as appropriate, under the terms and conditions of such Policy, and
the distribution of Insurance Proceeds.
"INSURANCE PROCEEDS" shall mean those monies, net of any applicable premium
adjustment, deductible, retention or similar cost paid or held by or for the
benefit of an insured party which are either (i) received by an insured from
an insurance carrier, or (ii) paid by an insurance carrier on behalf of an
insured.
"LETTERS OF CREDIT" shall have the meaning set forth in Section 7.1 hereof.
"MERGER AGREEMENT" shall have the meaning set forth in the Distribution
Agreement.
"OCCURRENCE-BASED" shall mean, with respect to any Policy, coverage provided
by such Policy for acts, omissions, damages or injuries which occur or are
alleged to have occurred during a period specified in such Policy.
"OCCURRENCE-BASED POLICIES" shall mean those current and past Policies which
are Occurrence-Based in nature, including but not limited to those policies
identified on SCHEDULE B hereto, which show Tenneco or any of its predecessors
as the named insured, but excluding (i) any directors' and officers' liability
policies which are or were maintained by or on behalf of Tenneco, (ii) the
Exclusive Policies, (iii) the Retained Policies, and (iv) the Eastern
Policies.
"OTHER CLAIMS-MADE POLICIES" shall mean the Claims-Made Policies other than
the Transferred Claims-Made Policies.
"OTHER OCCURRENCE-BASED POLICIES" shall mean the Occurrence-Based Policies
other than the Transferred Occurrence-Based Policies.
"PERSON" shall have the meaning set forth in the Distribution Agreement.
"POLICIES" means insurance policies and insurance contracts of any kind
(other than life and benefits policies or contracts), including, without
limitation, primary, excess and umbrella policies, commercial general
liability policies, fiduciary liability, automobile, aircraft, property and
casualty, workers' compensation and employee dishonesty insurance policies,
bond and self-insurance and captive insurance company arrangements, together
with the rights, benefits and privileges thereunder.
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"PRIOR INDUSTRIAL BUSINESSES" shall have the meaning set forth in the
Distribution Agreement.
"PRIOR SHIPBUILDING BUSINESSES" shall have the meaning set forth in the
Distribution Agreement.
"RETAINED POLICIES" shall mean the Policies identified on SCHEDULE D hereto,
together with all other current and past primary, workers' compensation,
automobile liability and general liability (including products liability)
Policies showing Tenneco, any other member of the Energy Group or any of their
respective predecessors as the insured party and which are cost plus,
fronting, high deductible or retrospective premium programs but excluding the
Eastern Policies.
"SHIPBUILDING" shall mean, when unqualified, the Shipbuilding Assets,
Shipbuilding Liabilities, Prior Shipbuilding Businesses and/or Shipbuilding
Business.
"SHIPBUILDING ASSETS" shall have the meaning set forth in the Distribution
Agreement.
"SHIPBUILDING BUSINESS" shall have the meaning set forth in the Distribution
Agreement.
"SHIPBUILDING COVERED PERSON" shall mean each member of the Shipbuilding
Group and any other Person, in each case to the extent any Policy addressed
herein purports to provide insurance coverage in respect of any claims, suits,
actions, proceedings, injuries, losses, liabilities, occurrences, damages or
expenses incurred by such Person arising out of, in connection with or
otherwise related to Shipbuilding.
"SHIPBUILDING EXCLUSIVE POLICIES" shall mean all current and past Policies
which show Shipbuilding Company, any other member of the Shipbuilding Group or
any of their respective predecessors as the named insured and do not purport
to relate to Energy or Industrial or to cover any Energy Covered Person or
Industrial Covered Person, but excluding any Retained Policy.
"SHIPBUILDING GROUP" shall have the meaning set forth in the Distribution
Agreement.
"SHIPBUILDING LIABILITIES" shall have the meaning set forth in the
Distribution Agreement.
"SUBSIDIARY" shall have the meaning set forth in the Distribution Agreement.
"TENNECO EXCLUSIVE POLICIES" shall mean all current and past Policies,
including but not limited to the current Policies set forth on SCHEDULE E
hereto, which show Tenneco, any other member of the Energy Group or any of
their respective predecessors as the named insured and do not purport to
relate to Shipbuilding or Industrial or to cover any Shipbuilding Covered
Person or Industrial Covered Person, excluding (i) any directors' and
officers' liability policies which are or were maintained by or on behalf of
Tenneco, and (ii) any Retained Policy.
"TERMINATION TIME" shall mean 11:59 p.m., Houston, Texas time, on the
Distribution Date.
"TRANSFERRED CLAIMS-MADE POLICIES" shall have the meaning set forth in
Section 2.2 hereof.
"TRANSFERRED OCCURRENCE-BASED POLICIES" shall have the meaning set forth in
Section 2.1 hereof.
"TRANSFERRED POLICIES" shall have the meaning set forth in Section 2.3
hereof.
1.2 References. References herein to a "Schedule" are, unless otherwise
specified, to one of the Schedules attached to this Agreement, and references
to an "Article" or a "Section" are, unless otherwise specified, to one of the
Articles or Sections, respectively, of this Agreement.
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ARTICLE II
SUBSTITUTION OF NAMED INSUREDS AND CANCELLATION OF POLICIES
2.1 Current Occurrence-Based Policies. On or prior to the Distribution Date,
Tenneco shall take or cause to be taken all necessary or appropriate action
(i) so that the Industrial Company is substituted as the named insured under
those Current Occurrence-Based Policies identified on SCHEDULE 2.1-A hereto
(the "TRANSFERRED OCCURRENCE-BASED POLICIES"), effective as of the Termination
Time, and (ii) to cause the Current Occurrence-Based Policies identified on
SCHEDULE 2.1-B hereto to be cancelled as of, and to afford no further coverage
to the insureds thereunder except as otherwise contemplated by this Agreement
from and after, the Termination Time. Industrial Company agrees to be
substituted as a named insured under the Transferred Occurrence-Based Policies
and to execute such further documents as Tenneco may reasonably request in
connection therewith.
2.2 Current Claims-Made Policies. On or prior to the Distribution Date,
Tenneco shall take or cause to be taken all necessary or appropriate action
(i) so that the Industrial Company is substituted as the named insured under
those Current Claims-Made Policies identified on SCHEDULE 2.2-A hereto (the
"TRANSFERRED CLAIMS-MADE POLICIES"), effective as of the Termination Time, and
(ii) to cause the Current Claims-Made Policies identified on SCHEDULE 2.2-B
hereto to be cancelled as of, and to afford no further coverage to the
insureds thereunder except as otherwise contemplated by this Agreement from
and after, the Termination Time. Industrial Company agrees to be substituted
as a named insured under the Transferred Claims-Made Policies and to execute
such further documents as Tenneco may reasonably request in connection
therewith.
2.3 Consent. Tenneco and Industrial Company shall each use its best efforts
to obtain prior to the Distribution Date the consent of each insurance carrier
under the Transferred Occurrence-Based Policies and the Transferred Claims-
Made Policies (collectively, the "TRANSFERRED POLICIES") that is required to
consummate the transactions contemplated by Sections 2.1 and 2.2 hereof (each,
a "CONSENT"), it being understood that if Consent to such transactions is not
received as contemplated by this Section 2.3 with respect to any Policy, such
Policy shall nonetheless be considered and treated as a Transferred Claims-
Made Policy or Transferred Occurrence-Based Policy, as the case may be, for
purposes of this Agreement.
2.4 No Transfer of Certain Policies. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement to
substitute Industrial Company as the named insured under any Transferred
Policy without Consent thereto if such substitution or attempt to substitute
without such Consent would constitute a breach of such Transferred Policy. If
Consent to such substitution is not obtained prior to the Distribution Date,
Tenneco and Industrial Company agree to negotiate in good faith an arrangement
which shall place the Industrial Company, insofar as reasonably possible, in
the same position as would have existed had such Consent to substitution been
obtained prior to the Distribution Date.
ARTICLE III
COVERAGE
3.1 Maintenance of Coverage Through Distribution Date. From the date hereof
up to the Termination Time, the parties hereto agree to maintain (and to cause
each member of their respective Groups over which they have legal or effective
direct or indirect control to maintain) in full force and effect the
Occurrence-Based Policies, Claims-Made Policies, Eastern Policies and Retained
Policies for the benefit of any Energy Covered Person, Industrial Covered
Person and Shipbuilding Covered Person to which such Policies by their terms
relate.
3.2 Coverage Under Occurrence-Based Policies.
(a) Termination of Coverage Under Transferred Occurrence-Based Policies. The
parties hereto agree to take or cause to be taken all necessary or appropriate
action so that, notwithstanding anything to the contrary contained in any
Transferred Occurrence-Based Policy, effective as of the Termination Time
coverage under the Transferred Occurrence-Based Policies shall be terminated
(it being understood that such Transferred
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Occurrence-Based Policies shall nonetheless remain in full force and effect)
so that none of the Transferred Occurrence-Based Policies shall afford any
further coverage to any Energy Covered Person or Shipbuilding Covered Person
for occurrences which take place or are alleged to have taken place after the
Termination Time. From and after the Termination Time, coverage under any
Transferred Occurrence-Based Policy may, at the option of Industrial Company,
continue for any Industrial Covered Person upon the terms and conditions of
such Transferred Occurrence-Based Policy.
(b) Termination of Coverage Under Other Occurrence-Based Policies. The
parties hereto agree to take or cause to be taken all necessary or appropriate
action so that, notwithstanding anything to the contrary contained in any
Other Occurrence-Based Policy, effective as of the Termination Time coverage
under the Other Occurrence-Based Policies shall be terminated so that none of
the Other Occurrence-Based Policies shall afford any further coverage to any
Energy Covered Person, Industrial Covered Person or Shipbuilding Covered
Person for occurrences which take place or are alleged to have taken place
after the Termination Time.
(c) Access to Policies Following Termination Time. Notwithstanding the
provisions of Sections 3.2(a) and 3.2(b) hereof, from and after the
Termination Time each Energy Covered Person, Industrial Covered Person and
Shipbuilding Covered Person shall have the right to coverage and to make or
pursue a claim for coverage under any Occurrence-Based Policy with respect to
all claims, suits, actions, proceedings, injuries, losses, liabilities,
occurrences, damages and expenses incurred or claimed to have been incurred
prior to the Termination Time by such Covered Person in or in connection with
the operation of, or otherwise related to, (i) Energy, with respect to any
Energy Covered Person, (ii) Industrial, with respect to any Industrial Covered
Person, or (iii) Shipbuilding, with respect to any Shipbuilding Covered
Person, in each case subject to the terms, conditions and limitations of such
Occurrence-Based Policy, provided, however, that nothing in this Section
3.2(c) shall be deemed to constitute or reflect an assignment of any such
Occurrence-Based Policy.
(d) Policy Limits. Any Energy Covered Person, Industrial Covered Person or
Shipbuilding Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under an Occurrence-Based Policy may claim for such
insurance as and to the extent that such insurance is available up to the full
extent of the applicable limits of liability under such Occurrence-Based
Policy. Notwithstanding the foregoing, each of Tenneco, Industrial Company and
Shipbuilding Company shall, to the extent any of its respective Covered
Persons shall have exhausted all or any portion of the limits of liability, if
any, under any Occurrence-Based Policy, use its best efforts to either (i)
obtain and comply in full with the conditions required to effect the
reinstatement of the full limits of liability under such Occurrence-Based
Policy for all claims which would be covered thereby absent such exhaustion
(including any pending or known claims) and be responsible for and pay all
costs and expenses, including the amount of any resultant increase in the
premium charged in respect of such Occurrence-Based Policy or any renewal
thereof, in connection therewith, or (ii) obtain and maintain in full force
and effect a Policy in replacement of the limits of liability exhausted under
such Occurrence-Based Policy for all claims which would be covered thereby
absent such exhaustion (including any pending or known claims), and be
responsible for and pay all costs and expenses in connection therewith, which
Policy shall provide at least the same coverage, and contain terms and
provisions which are no less favorable to the insured parties, as existed
under the Occurrence-Based Policy in respect of which such replacement is
obtained, provided, however, that no party hereto shall be required to expend
more than an amount equal to 350% of the original premium paid with respect to
the portion of the limits of liability under such Occurrence-Based Policy
(determined on a pro rata basis) exhausted by such party's respective Covered
Persons to obtain reinstatement or a replacement Policy as contemplated
hereby, it being understood that each party hereto shall nonetheless be
required to obtain the maximum amount of reinstatement or replacement coverage
available for such 350% premium amount in accordance with the terms and
provisions of clauses (i) or (ii) hereof, as applicable. If at any time a
party (an "Impairing Party") hereto becomes aware (such party being deemed to
be aware whenever any of the directors or executive officers of such party or
any other member of its respective Group become aware) of a claim or potential
claim against any of such Impairing Party's respective Covered Persons which
claim is reasonably likely to exhaust (but has not yet exhausted) all or any
portion of the aggregate limits of liability, if any, under any Occurrence-
Based Policy (a "Potential Impairment"), such Impairing Party shall promptly
provide notice of
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such Potential Impairment to the other parties hereto. Such Impairing Party
shall have five business days after providing such notice to elect to, at that
time, either secure reinstatement of the limits of liability under such
Occurrence-Based Policy (to the extent provided for therein) or purchase a
Policy in replacement of such limits of liability (in each case in accordance
with the terms and provisions of the second preceding sentence) in respect of
such Potential Impairment (but shall not be required to so elect at such
time). If such Impairing Party does not timely elect to secure reinstatement
or replacement coverage, then either or both of the other parties hereto may
elect to reinstate the limits of liability under such Occurrence-Based Policy
(to the extent provided for therein) and pay all expenses incurred in
connection therewith, provided, however, that if such Potential Impairment
actually occurs, the Impairing Party shall reimburse the other parties for any
fees and expenses incurred by such parties in connection with such
reinstatement.
3.3 Coverage Under Claims-Made Policies.
(a) Termination of Coverage Under Transferred Claims-Made Policies. The
parties hereto agree to take or cause to be taken all necessary or appropriate
action so that, notwithstanding anything to the contrary contained in any
Transferred Claims-Made Policy, effective as of the Termination Time coverage
under the Transferred Claims-Made Policies shall be terminated (it being
understood that such Transferred Claims-Made Policies shall nonetheless remain
in full force and effect) so that none of the Transferred Claims-Made Policies
shall afford any further coverage to any Energy Covered Person or Shipbuilding
Covered Person for claims which have not been reported or made as provided by
the terms of such Transferred Claims-Made Policy prior to the Termination
Time. From and after the Termination Time, coverage under any Transferred
Claims-Made Policy may, at the option of Industrial Company, continue for any
Industrial Covered Person upon the terms and conditions of such Transferred
Claims-Made Policy.
(b) Termination of Coverage Under Other Claims-Made Policies. The parties
hereto agree to take or cause to be taken all necessary or appropriate action
so that, notwithstanding anything to the contrary contained in any Other
Claims-Made Policy, effective as of the Termination Time coverage under the
Other Claims-Made Policies shall be terminated so that no Other Claims-Made
Policy shall afford any further coverage to any Energy Covered Person,
Industrial Covered Person or Shipbuilding Covered Person for claims which have
not been reported or made as provided by the terms of such Other Claims-Made
Policy prior to the Termination Time.
(c) Access to Policies Following Termination Time. Notwithstanding the
provisions of Sections 3.3(a) and 3.3(b) hereof, from and after the
Termination Time each Energy Covered Person, Industrial Covered Person and
Shipbuilding Covered Person shall have the right to coverage and to make or
pursue a claim for coverage under any Claims-Made Policy with respect to all
claims, suits, actions, proceedings, injuries, losses, liabilities,
occurrences, damages and expenses which are reported in accordance with the
terms of such Claims-Made Policy prior to the Termination Time and which are
incurred or claimed to be incurred by such Covered Person in or in connection
with the operation of, or otherwise related to, (i) Energy, with respect to
any Energy Covered Person, (ii) Industrial, with respect to any Industrial
Covered Person, or (iii) Shipbuilding, with respect to any Shipbuilding
Covered Person, in each case subject to the terms, conditions and limitations
of such Claims-Made Policy, provided, however, that nothing in this Section
3.3(c) shall be deemed to constitute or reflect an assignment of any such
Claims-Made Policy.
(d) Policy Limits. Any Energy Covered Person, Industrial Covered Person or
Shipbuilding Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under a Claims-Made Policy may claim for such insurance as
and to the extent that such insurance is available up to the full extent of
the applicable limits of liability under such Claims-Made Policy.
Notwithstanding the foregoing, each of Tenneco, Industrial Company and
Shipbuilding Company shall, to the extent any of its respective Covered
Persons shall have exhausted all or any portion of the limits of liability, if
any, under any Claims-Made Policy, use its best efforts to either (i) obtain
and comply in full with the conditions required to effect the reinstatement of
the full limits of liability under such Claims-Made Policy for all claims
which would be covered thereby absent such exhaustion (including any pending
or known claims) and be responsible for and pay all costs and expenses,
including the amount of any resultant increase in the premium charged in
respect of such Claims-Made Policy or any renewal
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thereof, in connection therewith, or (ii) obtain and maintain in full force
and effect at its own cost a Policy in replacement of the limits of liability
exhausted under such Claims-Made Policy for all claims which would be covered
thereby absent such exhaustion (including any pending or known claims), and be
responsible for and pay all costs and expenses in connection therewith, which
Policy shall provide at least the same coverage, and contain terms and
provisions which are no less favorable to the insured parties, as existed
under the Claims-Made Policy in respect of which such replacement is obtained,
provided, however, that no party hereto shall be required to expend more than
an amount equal to 350% of the original premium paid with respect to the
portion of the limits of liability under such Claims-Made Policy (determined
on a pro rata basis) exhausted by such party's respective Covered Persons to
obtain reinstatement or a replacement Policy as contemplated hereby, it being
understood that each party hereto shall nonetheless be required to obtain the
maximum amount of reinstatement or replacement coverage available for such
350% premium amount in accordance with the terms and provisions of clauses (i)
or (ii) hereof, as applicable. If at any time an Impairing Party becomes aware
(such party being deemed to be aware whenever any of the directors or
executive officers of such party or any other member of its respective Group
become aware) of a claim or potential claim against any of such Impairing
Party's respective Covered Persons which claim is reasonably likely to exhaust
(but has not yet exhausted) all or any portion of the aggregate limits of
liability, if any, under any Claims-Made Policy (a "Potential Impairment"),
such Impairing Party shall promptly provide notice of such Potential
Impairment to the other parties hereto. Such Impairing Party shall have five
business days after providing such notice to elect to, at that time, either
secure reinstatement of the limits of liability under such Claims-Made Policy
(to the extent provided for therein) or purchase a Policy in replacement of
such limits of liability (in each case in accordance with the terms and
provisions of the second preceding sentence) in respect of such Potential
Impairment (but shall not be required to so elect at such time). If such
Impairing Party does not timely elect to secure reinstatement or replacement
coverage, then either or both of the other parties hereto may elect to
reinstate the limits of liability under such Claims-Made Policy (to the extent
provided for therein) and pay all expenses incurred in connection therewith,
provided, however, that if such Potential Impairment actually occurs, the
Impairing Party shall reimburse the other parties for any fees and expenses
incurred by such parties in connection with such reinstatement.
3.4 Coverage Under Retained Policies.
(a) Termination of Coverage at Termination Time. The parties hereto agree to
take or cause to be taken all necessary or appropriate action so that, except
as otherwise contemplated by the terms of this Agreement and notwithstanding
anything to the contrary contained in any Retained Policy, effective as of the
Termination Time any and all coverage of any Industrial Covered Person or
Shipbuilding Covered Person under the Retained Policies shall be terminated
(it being understood that such Retained Policies shall nonetheless remain in
full force and effect). From and after the Termination Time, coverage under
any of the Retained Policies may, at the option of Tenneco, continue for any
Energy Covered Person upon the terms and conditions of such Retained Policies.
(b) Access to Policies and Policy Limits. Notwithstanding the provisions of
Section 3.4(a) hereof, from and after the Termination Time each Industrial
Covered Person and Shipbuilding Covered Person shall have the right to
coverage and to make or pursue a claim for coverage under any Retained Policy
with respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, damages and expenses incurred or claimed to have
been incurred prior to the Termination Time by such Covered Person in or in
connection with the operation of, or otherwise related to, (i) Industrial,
with respect to any Industrial Covered Person, or (ii) Shipbuilding, with
respect to any Shipbuilding Covered Person, in each case subject to the terms,
conditions and limitations of such Retained Policy, provided, however, that
nothing in this Section 3.4(b) shall be deemed to constitute or reflect an
assignment of any such Retained Policy. Any Industrial Covered Person or
Shipbuilding Covered Person may claim insurance coverage under a Retained
Policy as and to the extent that such insurance is available up to the full
extent of the applicable limits of liability under such Retained Policy.
3.5 Coverage Under Eastern Policies.
(a) Termination of Coverage Under Eastern Policies. The parties hereto agree
to take or cause to be taken all necessary or appropriate action so that,
notwithstanding anything to the contrary contained in any Eastern
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Policies, effective as of the Termination Time coverage under the Eastern
Policies shall be terminated (it being understood that such Eastern Policies
in full force and effect as of the Termination Time shall nonetheless remain
in full force and effect) so that the Eastern Policies do not afford any
further coverage to any Industrial Covered Person or Shipbuilding Covered
Person for occurrences which take place or are alleged to have taken place
after the Termination Time. From and after the Termination Time, coverage
under the Eastern Policies may, at the option of Tenneco, continue for any
Energy Covered Person upon the terms and conditions of the Eastern Policies.
(b) Access to Eastern Policies Following Termination Time. Notwithstanding
the provisions of Sections 3.5(a) hereof, from and after the Termination Time
each Energy Covered Person, Industrial Covered Person (to the extent (but only
to that extent and subject to the last sentence of this Section 3.5(b) and
Section 3.5(d)) payment under any Eastern Policy is a condition precedent to
the provision of coverage by any insurer providing coverage in the same layer
as, or a layer excess to that of, such Eastern Policy) and Shipbuilding
Covered Person (to the extent (but only to the extent and subject to the last
sentence of this Section 3.5(b)) necessary to access reinsurance policies)
shall have the right to coverage and to make or pursue a claim for coverage
under any Eastern Policy with respect to all claims, suits, actions,
proceedings, injuries, losses, liabilities, occurrences, damages and expenses
incurred or claimed to have been incurred prior to the Termination Time by
such Covered Person in or in connection with the operation of, or otherwise
related to, (i) Energy, with respect to any Energy Covered Person, (ii)
Industrial, with respect to any Industrial Covered Person, or (iii)
Shipbuilding, with respect to any Shipbuilding Covered Person, in each case,
subject to the terms, conditions and limitations of such Eastern Policy,
provided, however, that nothing in this Section 3.5(b) shall be deemed to
constitute or reflect an assignment of the Eastern Policies. The parties
hereto agree to take or cause to be taken all necessary or appropriate actions
so that, from and after the Termination Time, no Industrial Covered Person or
Shipbuilding Covered Person shall be entitled to coverage or to make or pursue
a claim for coverage under the Eastern Policies except to the extent expressly
provided for herein and in no event shall the Eastern Insurance Provider (as
defined below) or any of its subsidiaries have any obligation or liability to
any Shipbuilding Covered Person or Industrial Covered Person under any Eastern
Policy which is not either as a conduit with respect to third party
reinsurance or subject to reimbursement by Industrial Company pursuant to
Section 3.5(d).
(c) Policy Limits. Any Energy Covered Person, Industrial Covered Person or
Shipbuilding Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under the Eastern Policies may claim for such insurance as
and to the extent that such insurance is available up to the full extent of
the applicable limits of liability under the Eastern Policies, subject to the
provisions of Section 3.5(b).
(d) Reimbursement Obligation of Industrial Company. Industrial Company
agrees to reimburse to the insurer under each Eastern Policy (the "EASTERN
INSURANCE PROVIDER") the full amount of any claim for insurance coverage for
an Industrial Covered Person under such Eastern Policy made pursuant to the
terms of Section 3.5(b) hereof which is actually paid by said Eastern
Insurance Provider after the Termination Time.
3.6 Coverage Under Exclusive Policies. From and after the Termination Time,
coverage under any Exclusive Policy may continue with respect to any claims,
suits, actions, proceedings, injuries, losses, liabilities, occurrences,
damages or expenses incurred or claimed to have been incurred prior to, on or
after the Distribution Date, subject to the terms, conditions and limitations
of such Exclusive Policy, provided, however, that (i) no member of the Energy
Group shall have any liability or obligation with respect to any of the
Industrial Exclusive Policies or Shipbuilding Exclusive Policies, (ii) no
member of the Industrial Group shall have any liability or obligation with
respect to any of the Tenneco Exclusive Policies or Shipbuilding Exclusive
Policies, and (iii) no member of the Shipbuilding Group shall have any
liability or obligation with respect to any of the Tenneco Exclusive Policies
or Industrial Exclusive Policies.
3.7 Assistance in Obtaining Additional Coverage. Each of the parties hereto
agrees to use its reasonable best efforts to assist the other parties in the
transition to separate insurance coverage for the Energy Group, Industrial
Group and Shipbuilding Group from and after the Distribution Date which
assistance shall include, but shall not be limited to, the identification of
potential insurance carriers.
9
3.8 Discovery Periods. Except with respect to any Industrial Covered Person
and except as the parties hereto may otherwise agree, the parties hereto
acknowledge and agree that when this Agreement calls for the termination of
insurance coverage under a Claims-Made Policy such insurance coverage shall be
terminated as of the time specified and that no discovery period of coverage
in respect of such Policy shall be provided thereunder, notwithstanding
anything to the contrary contained herein or in any such Policy.
Notwithstanding the foregoing, if requested to do so by Tenneco, Industrial
Company shall use its reasonable efforts to procure that the relevant insurers
under the Claims-Made Policies offer to Tenneco a discovery period of coverage
under said Claims-Made Policies for Energy Covered Persons with an aggregate
limitation of liability separate from the limitation of liability under said
Claims-Made Policies for coverage afforded Industrial Covered Persons. All
premiums, costs and other charges with respect to any discovery period of
coverage provided under any Claims-Made Policy shall be the sole
responsibility of (i) Tenneco, with respect to coverage for Energy Covered
Persons, and (ii) Industrial Company, with respect to coverage for Industrial
Covered Persons. Each party hereto shall not (and shall not permit any of its
respective Covered Persons over which it has legal or effective direct or
indirect control to) take any action contrary to the provisions of this
Section 3.8.
3.9 Further Assurances. Each of Tenneco, Industrial Company and Shipbuilding
Company agree to take (and to cause each of its respective Covered Persons
over which it has direct or indirect legal or effective control to take) all
such actions as are necessary or appropriate, including the provision of
notice to all relevant insurance carriers and cooperation with respect to the
obtaining of any reinstatement of limitations on liability as contemplated
hereby, to effectuate the purposes of this Article III.
ARTICLE IV
PREMIUMS, DEDUCTIBLES AND RELATED MATTERS
4.1 Occurrence-Based and Claims-Made Policies.
(a) Premiums in Respect of Occurrence-Based and Claims-Made Policies. From
and after the Termination Time, all premiums, costs and other charges with
respect to any Occurrence-Based Policy or Claims-Made Policy shall be paid by
Industrial Company, provided, however, that (i) Tenneco shall promptly
reimburse Industrial Company in full for any such premiums, costs or other
charges in respect of the cover afforded under any such Occurrence-Based
Policy or Claims-Made Policy to any Energy Covered Person, and (ii)
Shipbuilding Company shall promptly reimburse Industrial Company in full for
any such premiums, costs or other charges in respect of the cover afforded
under any such Occurrence-Based Policy or Claims-Made Policy to any
Shipbuilding Covered Person, in each case determined in accordance with
Tenneco's historical practices with respect to the allocation of such
premiums, costs and charges prior to the date hereof. All amounts refunded
from and after the Termination Time by insurance carriers in respect of
premiums previously paid under any Occurrence-Based Policy or Claims-Made
Policy shall be the sole property of Industrial Company, provided, however,
that Industrial Company shall promptly pay to Tenneco or the Shipbuilding
Company, as applicable, upon receipt thereof from an insurance carrier, the
Energy Group's or the Shipbuilding Group's respective share of any such
amounts refunded (such respective share to be determined in accordance with
Tenneco's historical practices with respect to the allocation of insurance
premiums among its Subsidiaries and divisions prior to the date hereof). Each
of Tenneco and Shipbuilding Company shall (and shall cause each member of its
respective Group over which it has direct or indirect legal or effective
control to) promptly pay to Industrial Company any such refunded amounts
actually received by it to which Industrial Company is entitled pursuant
hereto.
(b) Deductibles, Retentions and Self-Insured Amounts. From and after the
Termination Time, all deductibles, retentions and self-insured amounts with
respect to coverage or a claim for coverage under any Occurrence-Based Policy
or Claims-Made Policy shall be the sole responsibility of (i) Tenneco, with
respect to any coverage or claim for coverage in respect of any Energy Covered
Person, (ii) Industrial Company, with respect to any coverage or claim for
coverage in respect of any Industrial Covered Person, and (iii) Shipbuilding
Company, with respect to any coverage or claim for coverage in respect of any
Shipbuilding Covered Person.
10
4.2 Retained Policies.
(a) Premiums, Costs and Other Charges. From and after the Termination Time,
all premiums, costs and other charges with respect to any Retained Policy,
including claim payments and associated expenses under cost plus or fronting
policies, shall be the sole responsibility of and be paid by Tenneco,
provided, however, that (i) Industrial Company shall promptly reimburse
Tenneco for all such premiums, costs and other charges paid by Tenneco
(including amounts paid by Tenneco as reimbursement in respect of amounts
drawn under letters of credit maintained by Tenneco pursuant to Section 7.1
hereof) in respect of coverage provided for any Industrial Covered Person to
the extent such premiums, costs and other charges exceed the amount of the
Claims Deposit, and (ii) Shipbuilding Company shall promptly reimburse Tenneco
for all such premiums, costs and other charges paid by Tenneco (including
amounts paid by Tenneco as reimbursement in respect of amounts drawn under
letters of credit maintained by Tenneco pursuant to Section 7.1 hereof) in
respect of coverage provided for any Shipbuilding Covered Person. All amounts
refunded from and after the Termination Time by insurance carriers in respect
of premiums previously paid under any Retained Policy shall be the sole
property of Tenneco, provided, however, that Tenneco shall promptly pay to (i)
Industrial Company, all such refunded amounts in respect of coverage provided
for any Industrial Covered Person under such Retained Policy, and (ii)
Shipbuilding Company, all such refunded amounts in respect of coverage
provided for any Shipbuilding Covered Person under such Retained Policy.
(b) Deductibles, Retentions and Self-Insured Amounts. From and after the
Termination Time, all deductibles, retentions and self-insured amounts with
respect to coverage or a claim for coverage under any Retained Policy shall be
the sole responsibility of (i) Tenneco, with respect to any coverage or claim
for coverage in respect of any Energy Covered Person, (ii) Industrial Company,
with respect to any coverage or claim for coverage in respect of any
Industrial Covered Person, and (iii) Shipbuilding Company, with respect to any
coverage or claim for coverage in respect of any Shipbuilding Covered Person.
4.3 Eastern Policies.
(a) Premiums in Respect of Eastern Policies. All amounts refunded from and
after the Termination Time by insurance carriers in respect of premiums
previously paid under any Eastern Policy shall be the sole property of
Tenneco, provided, however, that Tenneco shall promptly pay to (i) Industrial
Company, upon receipt thereof from an insurance carrier, the Industrial
Group's respective share of any such amounts refunded, and (ii) Shipbuilding
Company, upon receipt thereof from an insurance carrier, the Shipbuilding
Group's respective share of any such amounts refunded, in each case determined
in accordance with Tenneco's historical practices with respect to the
allocation of insurance premiums among its Subsidiaries and divisions prior to
the date hereof. Each party shall (and shall cause each member of its
respective Group over which it has direct or indirect legal or effective
control to) promptly pay to any other party any such amounts actually received
by it to which such other party is entitled pursuant to this Section 4.3(a).
(b) Deductibles, Retentions and Self-Insured Amounts. From and after the
Termination Time, all deductibles, retentions and self-insured amounts with
respect to coverage or a claim for coverage under any Eastern Policy shall be
the sole responsibility of (i) Tenneco, with respect to any coverage or claim
for coverage in respect of any Energy Covered Person, (ii) Industrial Company,
with respect to any coverage or claim for coverage in respect of any
Industrial Covered Person, and (iii) Shipbuilding Company, with respect to any
coverage or claim for coverage in respect of any Shipbuilding Covered Person.
(c) Amounts to be Refunded. Tenneco shall direct and instruct the Eastern
Insurance Provider to pay to Industrial Company in cash promptly after the
Termination Time, to the extent permitted by law, and to record a
corresponding dollar-for-dollar reduction in all associated liabilities on its
books and records for, (i) all amounts which appear as reserves on the books
and records of the Eastern Insurance Provider as of the Termination Time in
respect of claims relating to any Industrial Covered Person which have been
reported prior to the Termination Time, (ii) the full amount of any "incurred
but not reported" reserve and any portfolio loss transfer reserve appearing on
the books and records of the Eastern Insurance Provider as of the Termination
Time under the contingent liability programs of the Eastern Policies, and
(iii) 50% of the amount of any "incurred but not reported" reserve appearing
on the books and records of the Eastern Insurance Provider as of the
Termination Time under the excess liability programs of the Eastern Policies
with respect to Industrial and Energy.
11
4.4 Exclusive Policies. From and after the Termination Time, all
deductibles, retentions, self-insured amounts, premiums and other costs with
respect to any Exclusive Policy or claim for coverage thereunder shall be the
sole responsibility of, and all refunded premiums with respect to any
Exclusive Policy shall be the sole property of, (i) Tenneco, with respect to
any Tenneco Exclusive Policy, (ii) Industrial Company, with respect to any
Industrial Exclusive Policy, and (iii) Shipbuilding Company, with respect to
any Shipbuilding Exclusive Policy.
4.5 Excess Costs and Settlements. Each Covered Person shall be responsible
for any excess costs and expenses relating to its respective claims permitted
hereunder (or those of any member of its respective Group) under the Common
Policies, including defense costs to the extent such defense costs are not
covered under such Common Policies, and shall be responsible for obtaining or
reviewing the appropriateness of releases upon settlement of such claims.
4.6 Effect on Other Agreements. Notwithstanding anything to the contrary
contained herein, nothing in this Article IV shall be construed to alter or in
any way limit any rights to indemnity provided in the Distribution Agreement
or in any other Ancillary Agreement (as such term is defined in the
Distribution Agreement).
ARTICLE V
ADMINISTRATION
5.1 Occurrence-Based and Claims-Made Policies.
(a) Administration. From and after the Distribution Date, Claims
Administration and Insurance Administration with respect to the Occurrence-
Based Policies and Claims-Made Policies shall be the responsibility of (i)
Tenneco, with respect to any coverage or claim for coverage of any Energy
Covered Person, (ii) Industrial Company, with respect to any coverage or claim
for coverage of any Industrial Covered Person, and (iii) Shipbuilding Company,
with respect to any coverage or claim for coverage of any Shipbuilding Covered
Person. Each of Shipbuilding Company and Tenneco shall (and shall cause each
of its respective Covered Persons over which it has direct or indirect legal
or effective control to) provide prompt notice to Industrial Company of all
actions taken by it with respect to the Claims Administration and Insurance
Administration for the Occurrence-Based Policies and Claims-Made Policies as
contemplated by this Section 5.1. Each party hereto shall (and shall cause
each other member of its Group over which it has direct or indirect legal or
effective control to) take all necessary or appropriate action, if any, to
delegate Claims Administration and Insurance Administration with respect to
the Occurrence-Based Policies and Claims-Made Policies to any other party who
is to assume such responsibilities pursuant hereto and, to the extent such
delegation is not permitted by the terms of any such policy, shall engage in
Claims Administration or Insurance Administration for any such policy only
upon the express authorization and direction of such other party. Each party
hereto shall be responsible for its own disbursements and out-of-pocket
expenses and the direct and indirect costs of its employees or agents relating
to Claims Administration and Insurance Administration contemplated by this
Section 5.1. Notwithstanding anything to the contrary contained herein,
Industrial Company shall have the right, at its option, to undertake at its
own cost and expense Claims Administration and/or Insurance Administration
with respect to any coverage or claim for coverage of any Energy Covered
Person or Shipbuilding Covered Person.
(b) Effect of Administrative Responsibilities. Each of Tenneco, Industrial
Company and Shipbuilding Company acknowledges and agrees that each other
party's responsibilities under this Section 5.1 for Claims Administration and
Insurance Administration shall not relieve any party submitting an insured
claim under any Occurrence-Based Policy or Claims-Made Policy of (a) the
primary responsibility for reporting such insured claim accurately, completely
and in a timely manner, or (b) any other right or responsibility which such
party may have pursuant to the terms of any Occurrence-Based Policy or Claims-
Made Policy.
5.2 Eastern and Retained Policies. From and after the Termination Time,
Tenneco shall be solely responsible for Claims Administration and Insurance
Administration with respect to the Retained Policies and Eastern Policies
including, without limitation, the administration of all xxxxxxxx associated
with the Retained
12
Policies by the insurance carriers thereunder. Notwithstanding the foregoing,
each of Industrial Company and Shipbuilding Company shall retain the right to,
at its option, direct the management, defense, reporting and settlement of
claims involving its respective Covered Persons under the Retained Policies
and Eastern Policies.
ARTICLE VI
PROCEEDS
6.1 Occurrence-Based and Claims-Made Policies. From and after the
Distribution Date, Insurance Proceeds received with respect to claims, costs
and expenses under the Occurrence-Based Policies and Claims-Made Policies
shall be paid to the Covered Person to which such Insurance Proceeds are due
pursuant to the terms of such Policies.
6.2 Eastern and Retained Policies. From and after the Distribution Date,
Insurance Proceeds received with respect to claims, costs and expenses under
the Retained Policies and Eastern Policies shall be paid, as appropriate, to
the Covered Person to which such Insurance Proceeds are due pursuant to the
terms of such Policies.
6.3 Return of Proceeds. Each of Tenneco, Industrial Company and Shipbuilding
Company shall (and shall cause each of its respective Covered Persons over
which it has direct or indirect legal or effective control to) to promptly pay
to each other party any Insurance Proceeds actually received by it to which
any of such other party's Covered Persons are entitled pursuant hereto, which
other party shall then distribute such Insurance Proceeds to the Covered
Person to which they are due pursuant hereto.
ARTICLE VII
LETTERS OF CREDIT AND SURETY BONDS
7.1 Maintenance. (a) Letters of Credit. From and after the Distribution
Date, to secure obligations under the Retained Policies relating to periods
preceding the Termination Time, Tenneco shall, for such time as may be
required by law or the terms of any Retained Policy, maintain in full force
and effect the letters of credit identified on SCHEDULE 7.1-A hereto or, as
necessary or appropriate, substitute therefor and maintain in full force and
effect letters of credit acceptable to the insurance carriers and/or surety
under the Retained Policies issued by comparably rated lenders containing
substantially identical terms and conditions (collectively, the "LETTERS OF
CREDIT"). The parties hereto shall use reasonable commercial efforts to obtain
the necessary consents and approvals, and shall thereafter negotiate in good
faith an agreement, to allocate the Letters of Credit among the parties hereto
such that each party becomes responsible for the maintenance of letters of
credit for such time as may be required by law or the terms of any Retained
Policy to secure obligations under the Retained Policies relating to periods
prior to the Termination Time in respect of coverage afforded thereunder to
such party's respective Covered Persons, provided, however, that neither
Industrial Company nor Shipbuilding Company shall be required to use such
reasonable commercial efforts or negotiate any such agreement if such party
determines that the allocation contemplated hereby cannot be accomplished
without commercially unreasonable expense.
(b) Surety Bonds. The parties hereto acknowledge that Tenneco is obligated
to indemnify the sureties under certain performance bonds and other surety
instruments that secure obligations of the Energy Business, Energy Group,
Industrial Business, Prior Industrial Businesses, Industrial Group,
Shipbuilding Business, Prior Shipbuilding Businesses and/or Shipbuilding Group
including, but not limited to, the surety instruments identified on SCHEDULE
7.1-B hereto (the "TENNECO-PROVIDED BONDS"). From and after the Termination
Time, Tenneco shall maintain such Tenneco-Provided Bonds in place for such
time as may be required by law. To the extent possible on commercially
reasonable terms, each of Industrial Company and Shipbuilding Company shall
use reasonable commercial efforts to obtain a replacement for each Tenneco-
Provided Bond that secures obligations of the Industrial Business, Prior
Industrial Businesses or Industrial Group (in the case of Industrial Company)
or the Shipbuilding Business, Prior Shipbuilding Businesses or Shipbuilding
Group (in the case of Shipbuilding Company) and to thereafter arrange for the
release of Tenneco from the Tenneco-Provided Bond
13
which has been so replaced. If the surety under any Tenneco-Provided Bond is
required to and does in fact perform according to the terms of said Tenneco-
Provided Bond and Tenneco is required to and does in fact indemnify such
surety in respect thereof, (i) Industrial Company shall reimburse Tenneco for
all amounts actually paid by Tenneco to such surety to the extent such amounts
constitute Industrial Liabilities, and (ii) Shipbuilding Company shall
reimburse Tenneco for all amounts actually paid by Tenneco to such surety to
the extent such amounts constitute Shipbuilding Liabilities.
7.2 Reimbursement for Maintenance Fees. Each of Industrial Company and
Shipbuilding Company hereby agrees to reimburse Tenneco annually commencing on
, 1997 (to be a date as of the end of the thirteenth month
following execution hereof) (such date and each anniversary thereof being
referred to herein as a "DUE DATE") for the actual and reasonable
administrative fees and expenses paid by Tenneco (the "LC MAINTENANCE FEES")
in respect of the issuance and maintenance of the Letters of Credit during the
twelve-month period ended 30 days prior to such year's Due Date (each, a
"YEARLY PERIOD"), to the extent such Letters of Credit secure obligations
relating to any Industrial Covered Person or Shipbuilding Covered Person,
respectively, under the Retained Policies. The amount of the LC Maintenance
Fees for each Yearly Period which shall be the responsibility of Industrial
Company and Shipbuilding Company hereunder shall be based on the total
outstanding reserves showing on the books and records of CIGNA, as of February
28 during such Yearly Period, for claims by all Industrial Covered Persons,
Energy Covered Persons and Shipbuilding Covered Persons under the Retained
Policies relating to periods prior to the Termination Time (the "YEARLY TOTAL
RESERVES"). Industrial Company shall reimburse Tenneco hereunder for an amount
equal to the LC Maintenance Fees for each Yearly Period multiplied by a
fraction, (i) the numerator of which is equal to the outstanding reserves
showing on the books and records of CIGNA, as of February 28 during such
Yearly Period, for claims by all Industrial Covered Persons under the Retained
Policies relating to periods prior to the Termination Time, and (ii) the
denominator of which is equal to the Yearly Total Reserves for such Yearly
Period. Shipbuilding Company shall reimburse Tenneco hereunder for an amount
equal to the LC Maintenance Fees for each Yearly Period multiplied by a
fraction, (i) the numerator of which is equal to the outstanding reserves
showing on the books and records of CIGNA, as of February 28 during such
Yearly Period, for claims by all Shipbuilding Covered Persons under the
Retained Policies relating to periods prior to the Termination Time, and (ii)
the denominator of which is equal to the Yearly Total Reserves for such Yearly
Period.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. This Agreement may not be terminated except upon the
written agreement of each of the parties hereto.
8.2 Further Assurances. If at any time after the Distribution Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of Tenneco, Industrial Company and Shipbuilding Company shall,
on the written request of any of them, take (or cause the appropriate member
of its Group over which it has direct or indirect legal or effective control
to take) all such reasonably necessary or desirable action. If subsequent to
the Distribution Date any Policy showing any member of the Energy Group,
Industrial Group or Shipbuilding Group, or any of their respective
predecessors, as named insured is discovered which was in effect for periods
prior to the Termination Time and has not been addressed by the provisions of
this Agreement or the Merger Agreement, the parties hereto agree to negotiate
in good faith an arrangement with respect to such Policy which shall give, to
the fullest extent possible, effect to the purposes of this Agreement and the
transactions contemplated by the Distribution Agreement.
8.3 Cooperation. The parties hereto agree to use their reasonable best
efforts to cooperate with respect to the various insurance matters
contemplated by this Agreement. Each party hereto shall not (and shall not
permit any of its respective Covered Persons over which it has legal or
effective direct or indirect control to) take any action or permit any
inaction that could reasonably be expected to jeopardize or otherwise
interfere with the rights of any other party (or any of such other party's
respective Covered Persons) hereunder or the ability of
14
any other party (or any of such other party's respective Covered Persons) to
collect any proceeds which might be available under any of the Policies
addressed herein in accordance with the terms of this Agreement.
8.4 No Representations and Warranties. The parties hereto understand and
agree that no representation or warranty as to the existence, applicability or
extent of insurance coverage for Energy, Industrial or Shipbuilding under any
Policy is herein being made.
8.5 Limitation on Liability. Except as may be otherwise expressly provided
for herein, no party hereto shall be liable hereunder to another party or any
of such other party's Covered Persons for claims not reimbursed by insurers
for any reason not within the control of such party including, without
limitation, coinsurance provisions, deductibles, quota share deductibles,
exhaustion of aggregates, self-insured retentions, bankruptcy or insolvency of
an insurance carrier, Policy limitations or restrictions, any coverage
disputes, any failure to timely claim or any defect in such claim or its
processing.
8.6 Successors and Assigns. Except as otherwise expressly provided herein,
no party hereto may assign or delegate, whether by operation of law or
otherwise, any of such party's rights or obligations under or in connection
with this Agreement without the written consent of each other party hereto. No
assignment will, however, release the assignor of any of its obligations under
this Agreement or waive or release any right or remedy the other parties may
have against such assignor hereunder. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will be binding upon and enforceable
against the respective successors and assigns of such party and will be
enforceable by and will inure to the benefit of the respective successors and
permitted assigns of such party.
8.7 Modification; Waiver; Severability. This Agreement may not be amended or
modified except in a writing executed by each of the parties hereto. The
failure by any party to exercise or a delay in exercising any right provided
for herein shall not be deemed a waiver of any right hereunder. Whenever
possible, each provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one and the same Agreement.
8.9 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
8.10 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
five business days after mailing by certified or registered mail, return
receipt requested and postage prepaid, to the recipient at such recipient's
address as indicated below:
TENNECO INC.: 0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Corporate Secretary
INDUSTRIAL COMPANY: 0000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Corporate Secretary
SHIPBUILDING COMPANY: 0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Corporate Secretary
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
15
8.11 Survival. Each of the agreements of the parties herein shall survive
the Distribution Date.
8.12 No Third Party Beneficiaries. This Agreement is made solely for the
benefit of the parties hereto and their respective Covered Persons, and shall
not give rise to any rights of any kind to any other third parties.
8.13 Other. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF
THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO
BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE
COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE
OF DELAWARE. This Agreement, together with the Distribution Agreement and
other Ancillary Agreements (as such term is defined in the Distribution
Agreement), constitutes the entire agreement and supersedes all other prior
and contemporaneous agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof.
8.14 Sole Agent. In all matters relating to this Agreement, including the
resolution of any disputes relating to this Agreement between any members of
different Groups, (i) Tenneco shall be the sole agent for the members of the
Energy Group, (ii) Industrial Company shall be the sole agent for the members
of the Industrial Group, and (iii) Shipbuilding Company shall be the sole
agent for members of the Shipbuilding Group. No member of any Group shall have
any authority to represent itself in any such matter or to terminate such
agency without the prior written consent of each party hereto.
8.15 No Double Recovery. No provision of this Agreement shall be construed
to provide recovery to any Person for any costs, expenses or other amounts for
which such Person has been fully compensated under any other provision of this
Agreement, any other agreement or otherwise.
IN WITNESS WHEREOF, the parties have made and entered into this Insurance
Agreement as of the date first set forth above.
TENNECO INC.
By:__________________________________
Name:________________________________
Title:_______________________________
NEW TENNECO INC.
By:__________________________________
Name:________________________________
Title:_______________________________
NEWPORT NEWS SHIPBUILDING INC.
By:__________________________________
Name:________________________________
Title:_______________________________
16
SCHEDULE A
TO INSURANCE AGREEMENT
CURRENT CLAIMS-MADE POLICIES
See attached (to be updated and made current as of the signing of the
Insurance Agreement).
17
SCHEDULE B
TO INSURANCE AGREEMENT
CURRENT OCCURRENCE-BASED POLICIES
See attached (to be updated and made current as of the signing of the
Insurance Agreement). To the extent a policy listed herein has expired, this
schedule shall be deemed to refer to the successor policy thereto.
18
SCHEDULE C
TO INSURANCE AGREEMENT
EASTERN POLICIES
(to be updated and made current as of the signing of the Insurance Agreement)
Eastern Insurance Company Limited Policy Number 95ED2501
Eastern Insurance Company Limited Contingent Liability Policies (policy
numbers not currently available)
19
SCHEDULE D
TO INSURANCE AGREEMENT
CURRENT RETAINED POLICIES
See attached (to be updated and made current as of the signing of the
Insurance Agreement).
20
SCHEDULE E
TO INSURANCE AGREEMENT
CURRENT TENNECO EXCLUSIVE POLICIES
See attached (to be updated and made current as of the signing of the
Insurance Agreement). To the extent a policy noted herein has expired, this
schedule shall be deemed to refer to the successor policy thereto.
21
SCHEDULE 2.1-A
TO INSURANCE AGREEMENT
TRANSFERRED OCCURRENCE-BASED POLICIES
To be determined by Tenneco prior to execution of Insurance Agreement.
22
SCHEDULE 2.1-B
TO INSURANCE AGREEMENT
CANCELLED OCCURRENCE-BASED POLICIES
To be determined by Tenneco prior to execution of Insurance Agreement.
23
SCHEDULE 2.2-A
TO INSURANCE AGREEMENT
TRANSFERRED CLAIMS-MADE POLICIES
To be determined by Tenneco prior to execution of Insurance Agreement.
24
SCHEDULE 2.2-B
TO INSURANCE AGREEMENT
CANCELLED CLAIMS-MADE POLICIES
To be determined by Tenneco prior to execution of Insurance Agreement.
25
SCHEDULE 7.1-A
TO INSURANCE AGREEMENT
LETTERS OF CREDIT CURRENTLY IN PLACE
Tenneco Inc. is presently maintaining letters of credit totalling
approximately $45 million to secure its obligations under the Retained
Policies. The letters of credit in effect as of the Distribution Date will be
listed hereon.
26
SCHEDULE 7.1-B
TO INSURANCE AGREEMENT
SURETY BONDS CURRENTLY IN PLACE
Tenneco Inc. is presently obligated to indemnify the surety under various
performance bonds and other surety instruments which secure obligations
relating to Energy, Industrial and/or Shipbuilding. Bidder has been provided a
current list thereof. Such surety bonds in effect as of the Distribution Date
will be listed hereon.
27
SCHEDULE A
TYPE OF COVERAGE POLICY NUMBER POLICY DATES UNDERWRITER LIMITS DEDUCTIBLES
---------------- ----------------- ------------ -------------------- ------------ -----------
Excess Liability XLUMB 00912 9/1/95-96 XL Insurance Company $100,000,000 xs
Bermuda $100,000,000
Excess Liability UO5138609 9/1/95-96 OCIL
Excess Liability TGT 5035/4 9/1/95-96 ACE Insurance $200,000,000 xs
Company--Bermuda $300,000,000
Fiduciary Liability NIA 0120995-96 3/1/96-97 Reliance $50,000,000 $500,000
71FF 101007525BCM Aetna
8141-48-49-A Federal
ERISA Bond (Crime) 000-00-00 9/1/95-96 National Union Fire $15,000,000 NIL
(AIG)
28
SCHEDULE B
POLICY
TYPE OF COVERAGE NUMBER POLICY DATES UNDERWRITERS LIMITS DEDUCTIBLES
---------------- ------------ ------------ ------------------------ ---------------------- -----------------
Excess Liability DL039795 9/1/95-96 Xxxxxxx-Konzern $10,000,000 xs
$10,000,000
Excess Liability BE8180249RA 9/1/95-96 American International $25,000,000 xs
(AIG) $20,000,000
Excess Liability 95ER2501 9/1/95-96 Eastern Insurance Co. $10,000,000 p/o
(Front for AME Re) $55,000,000 xs
$45,000,000
Excess Liability 8784725 9/1/95-96 Lexington $5,000,000 p/o
$55,000,000 xs
$45,000,000
Excess Liability CSR2839501 9/1/95-96 Fireman's Fund $20,000,000 p/o
$55,000,000 xs
$45,000,000
Excess Liability EU 08355330 9/1/95-96 Steadfast Zurich $20,000,000 p/o
$55,000,000 xs
$45,000,000
Automobile--Mexico HLN 00261 1/1/96-97 Serguros Commercial BI:$30,000/$60,000
America PD:$30,000
Aviation Hull & 87BVH-153922 7/1/94-97 Associated Aviation $100,000,000
Liability Underwriters Per Occurrence
Ocean Cargo EIPH1006 7/1/94-96 ESIS International, Inc. $10,000,000 $10,000,000
One Conveyance Per Occurrence
All Risk Property 213601-95 6/1/95-96 Protection Mutual $10,318,608,000 $5,000,000
Damage/Business Blanket Per Occurrence Per Occurrence
Interruption
(USA/Canada)
All Risk Property TBD 6/1/95-96 Royal Insurance $1,771,781,531 $75,000 PD
Damage/Business Blanket Per $150,000 BI
Interruption Occurrence Per Occurrence
(International)
Comprehensive Boiler & BMI-SA- 11/1/95-96 Hartford Steam Boiler $100,000,000 $5,000,000
Machinery Property 9138264-20 Per Accident Any One Accident
Damage/ Business
Interruption
Foreign Public & 62/99102/D 9/1/95-96 Xxxxxxx-Konzern $2,000,000 $5,000 Per Claim
Products Liability Per Occurrence $50,000 Pollution
Insurance
(Primary Cover)
Umbrella Excess W51010 9/1/95-96 Winterthur $8,000,000
Liability (Front for Eastern Any One Occurrence
Insurance Company) xs
$2,000,000
29
SCHEDULE D
POLICY
TYPE OF COVERAGE NUMBER POLICY DATES UNDERWRITER LIMITS DEDUCTIBLES
---------------- ------------ ------------ --------------- ------------------ -----------
Workers' Compensation CCSC6162624 9/1/95-96 CIGNA $2,000,000 $2,000,000
Texas--Ded
Workers' Compensation WLRC36163008 9/1/95-96 CIGNA $2,000,000 $2,000,000
NE--Ded
Workers' Compensation WLRC36162600 9/1/95-96 CIGNA $2,000,000 $2,000,000
Other States--Ded
Workers' Compensation CCSC36162624 9/1/95-96 CIGNA $2,000,000 $2,000,000
Retro
Workers' Compensation 1810017884 9/1/95-96 Maine Employers $100,000/$500,000/ $5,000
Maine Mutual $100,000
General Liability HDOG13214001 9/1/95-96 CIGNA $2,000,000 $2,000,000
Automobile Liability ISA042952 9/1/95-96 CIGNA $2,000,000 $2,000,000
Environmental HDCG13214013 9/1/95-96 CIGNA $1,000,000 $1,000,000
Automobile--Canada XXX000000 9/1/95-96 CIGNA $2,000,000 $2,000,000
General Liability-- CGL23835 9/1/95-96 CIGNA $2,000,000 $2,000,000
Canada
30
SCHEDULE E
POLICY
TYPE OF COVERAGE NUMBER POLICY DATES UNDERWRITER LIMITS DEDUCTIBLES
---------------- ----------- --------------- ----------------------- ----------------- ------------------
Tenneco Gas Production JHB 503266 6/19/95-96 Sphere Drake $1,000,000 $5,000 Land
General Liability $10,000 Offshore
Tenneco Gas Production JHB 000297 6/19/95-96 Commercial Underwriters $5,000,000 xs
Excess Liability Ins. Co. $1,000,000
Tenneco Gas South 62/900194/D 7/24/95-1/24/97 Xxxxxxx Konzern $2,000,000 $10,000
Australia Construction
Risk Liability
Tenneco Gas Australia CXC 042840 7/24/95-1/24/97 CIGNA $8,000,000 xs
Construction Risk $2,000,000
Liability
Railroad Protective HDOG 8/1/95-96 CIGNA $2,000,000/ $2,000,000/
Bessemer & Lake Erie RR 13214025 $6,000,000 $6,000,000
Co.
Railroad Protective ORPG 8/1/95-96 CIGNA $2,000,000/ $2,000,000/
Boston & Marine Corp. 13214037 $6,000,000 $6,000,000
Railroad Protective ORP 4/8/96-97 CIGNA $2,000,000/ $2,000,000/
National RR Passenger G18967923 $6,000,000 $6,000,000
Corp. (AMTRAK)
Railroad Protective ORP 4/8/96-97 CIGNA $2,000,000/ $2,000,000/
Massachusetts Bay G18967881 $6,000,000 $6,000,000
Transp.
Michigan Production BE 9320742 4/26/96-97 National Union $10,000,000 $500,000
Company Fire Ins. Co. (AIG)
Owners & Contractors OCPG 10/10/95-96 CIGNA $500,000/ $500,000/
Protective Liability 14231298 $500,000 $500,000
Offshore Property/OEE MMA 95-126 7/27/95-96 SEC. IA SEC. IA SEC. IA
Package UNI 25.0% -- Per Schedule -- $5,000,000
SEC. 1A & B--OFFSHORE Gjensidige 15.0% Assured's Int. AOO
PROP. Vesta 15.0% SEC. IB
SEC. II--OEE Protector 10.5% -- Per Schedule SEC. IB
SEC. III--CHARTERER'S Commonwealth 3.0% -- $1,000,000
LIAB. Hull & Co. 5.0% SEC. II (100%)
C.T. Bowring 26.5% OEE $50,000,000 AOO
OCSLA $35,000,000
SEC. IB, II, & III CCC $5,000,000 SEC. II
Gjensidige 17.5% -- $200,000
Vesta 15.0% SEC. III (100%) AOO
Protector 16.0% -- $1,000,000
Commonwealth 20.0% OCSLA $200,000
Hull & Co. 5.0% (100%) Per Occ.
C.T. Bowring 26.5%
CCC $200,000
(100%) Per Occ.
SEC. III
-- $50,000
(100%) AOO
Construction All Risk HG 015595 10/5/95-10/1/96 National Vulcan Aus. $209,032,000 Aus. $30,000
Cornhill Ins. All Perils
SR International except:
Royal Insurance Global Aus. $250,000
Generali Windstorm, Flood,
SCOR and Earth Movement
31
POLICY
TYPE OF COVERAGE NUMBER POLICY DATES UNDERWRITER LIMITS DEDUCTIBLES
---------------- ------------ ------------ ------------------------------------- ------------------ --------------------
Worker's Employer Xx. XXX XXX
Xxxxxxxxxxxx X 0000000
Xxxxx Xxxxxxxxx
Employer Cost CPA 000134 7/31/95-96 CIGNA Maximum Weekly
Control Benefit: $500
Insurance
Professional 9517VK18625 7/28/95-96 HIH Casualty & General Insurance Ltd. TBD A $20,000
Indemnity each and every claim
Motor Vehicle MV 452743 7/31/95-96 CIC Insurance Own Damage:
$24,000
T/P Claim: $1,000
Each and Every Claim
Personal Accident 5 011 9265 9/1/95-96 CIGNA PERSONAL ACCIDENT:
Insurance GBP 2,500,000
Any One Claim or
Series of Claims
Arising Out of
Single Incident
GBP 900,000
Per Person Any
One Claim
MEDICAL EXPENSES:
GBP 75,000
Per Event and
Per Person
Increased to
GBP 500,000
Per Event and
Per Person for
Claims Arising in
USA/Canada
RESCUE
Unlimited
32
