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Title: |
Asset Transfer Agreement |
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Entities: |
Bear, Stearns & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corp.; Reliance Group Holdings Inc.; Dewey Ballantine LLP; Skadden, Arps, Slate, Meagher & Flom LLP |
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Date: |
2000 |
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Size: |
Preview shows 33KB of 285KB total |
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Price: |
$99 |
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ID: |
#348721 |
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ASSET TRANSFER AGREEMENT
By and Among
RELIANCE GROUP HOLDINGS, INC.,
RELIANCE INSURANCE COMPANY,
RELIANCE NATIONAL INDEMNITY COMPANY,
UNITED PACIFIC INSURANCE COMPANY,
RELIANCE INSURANCE COMPANY OF ILLINOIS,
RELIANCE NATIONAL INSURANCE COMPANY (EUROPE) LTD.,
RELIANCE SURETY COMPANY,
and
TRAVELERS CASUALTY AND SURETY COMPANY
Dated as of April 10, 2000
{PAGE}
TABLE OF CONTENTS
{TABLE}
{CAPTION}
Page
{S} {C}
ARTICLE I DEFINITIONS....................................................................................2
Section 1.1. Definitions.........................................................................2
ARTICLE II PRE-CLOSING AUDIT; TRANSFER OF ASSETS........................................................13
Section 2.1. Pre-Closing Audit..................................................................13
Section 2.2. Consideration......................................................................14
Section 2.3. Transfer of Transferred Assets and Assumption of Assumed Liabilities...............14
Section 2.4. Place and Date of Closing; Closing Financial Statements; Final Financial
Statements ........................................................................16
Section 2.5. Post-Closing Adjustments...........................................................18
Section 2.6. Closing Items, Recording Fees......................................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES............................................23
Section 3.1. Corporate Existence and Power......................................................23
Section 3.2. Corporate Authorization............................................................24
Section 3.3. Governmental Authorization.........................................................24
Section 3.4. Non-Contravention..................................................................24
Section 3.5. Financial Statements...............................................................25
Section 3.6. Seller Financial Statements........................................................25
Section 3.7. Reserves...........................................................................25
Section 3.8. Absence of Certain Changes.........................................................26
Section 3.9. [INTENTIONALLY LEFT BLANK].........................................................27
Section 3.10. Material Contracts.................................................................27
Section 3.11. Litigation.........................................................................28
Section 3.12. Compliance with Laws...............................................................29
Section 3.13. Properties and Assets..............................................................29
Section 3.14. Regulatory Filings.................................................................29
Section 3.15. Intercompany Accounts..............................................................30
Section 3.16. Intellectual Property..............................................................30
Section 3.17. All Assets Necessary...............................................................33
Section 3.18. Third Party Reinsurance Contracts..................................................33
Section 3.19. Solvency; Adequate Capitalization; Ability to Pay Debts............................34
Section 3.20. Taxes..............................................................................34
Section 3.21. Employee Benefit Plans; ERISA......................................................34
Section 3.22. Employee Matters...................................................................35
Section 3.23. Books and Records..................................................................36
Section 3.24. Threats of Cancellation............................................................36
Section 3.25. Brokers............................................................................36
Section 3.26. Treasury Authorization; Treasury Limitations.......................................36
{/TABLE}
i
{PAGE}
{TABLE}
{S} {C}
Section 3.27. Agents; Agency Contracts...........................................................36
Section 3.28. Ratings............................................................................36
Section 3.29. Fairness Opinions..................................................................37
Section 3.30. Collateral and Indemnity Agreements................................................37
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER..................................................37
Section 4.1. Corporate Existence and Power......................................................37
Section 4.2. Corporate Authorization............................................................37
Section 4.3. Governmental Authorization.........................................................38
Section 4.4. Non-Contravention..................................................................38
Section 4.5. Ratings............................................................................38
Section 4.6. Licenses and Permits...............................................................38
Section 4.7. Brokers............................................................................38
Section 4.8. Assets Necessary to Perform Administrative Services................................39
Section 4.9. Purchaser Financial Statements.....................................................39
Section 4.10. Solvency; Adequate Capitalization; Ability to Pay Debts............................39
ARTICLE V COVENANTS.....................................................................................39
Section 5.1. Conduct of Seller Parties Prior to the Closing Date................................39
Section 5.2. No Alternative Proposals...........................................................42
Section 5.3. Investigations; Books and Records..................................................44
Section 5.4. HSR Act Filings....................................................................44
Section 5.5. Cooperation and Reasonable Best Efforts............................................44
Section 5.6. Further Assurances.................................................................45
Section 5.7. Notices of Certain Events..........................................................46
Section 5.8. Public Announcements...............................................................46
Section 5.9. Expenses...........................................................................46
Section 5.10. Supplemental Disclosure............................................................47
Section 5.11. Tax Matters........................................................................47
Section 5.12. Reinsurance Treaties...............................................................47
Section 5.13. Certain Intercompany Matters.......................................................48
Section 5.14. Employees..........................................................................48
Section 5.15. Employee Benefits..................................................................49
Section 5.16. Allocation of Purchase Price and Assumed Liabilities...............................52
Section 5.17. Lockboxes..........................................................................53
Section 5.18. Confidentiality....................................................................53
Section 5.19. Non-Compete; Non-Solicitation......................................................54
Section 5.20. Confidentiality Agreements.........................................................56
Section 5.21. Reorganizations and Restructurings.................................................56
Section 5.22. Continuity of Agreements...........................................................57
Section 5.23. Agents.............................................................................57
Section 5.24. Collateral and Indemnity Agreements................................................57
Section 5.25. Administrative Services Agreement..................................................58
Section 5.26. Bill of Sale.......................................................................58
Section 5.27. Loss and Unearned Premium Reserve Portfolio Reinsurance Agreement..................58
{/TABLE}
ii
{PAGE}
{TABLE}
{S} {C}
Section 5.28. Quota Share Reinsurance Agreements.................................................58
Section 5.29. General Assignment and Assumption Agreement........................................58
Section 5.30. Software License Agreement; Use of Third Party Computer Programs...................58
Section 5.31. Transition Services Agreement......................................................60
Section 5.32. Trademark License Agreement........................................................60
Section 5.33. Travelers/Reliance Indemnity Agreement.............................................60
Section 5.34. Additional Intellectual Property Agreements........................................60
Section 5.35. Exclusive Right to Use the Books and Records and Business Intellectual Property....60
Section 5.36. Certain Accounts Receivable........................................................61
Section 5.37. Ratings............................................................................62
Section 5.38. Assignment of Subrogation and Salvage Rights.......................................62
Section 5.39. UCC Financing Statements...........................................................63
Section 5.40. Dissolution of Reliance Surety Group, Inc.; Use of Trademark.......................63
Section 5.41. Use of "Firemark"..................................................................63
Section 5.42. Recordable Intellectual Property Assignments.......................................63
Section 5.43. Accrued Bonuses....................................................................63
Section 5.44. Third Party Computer Programs/Workstations Audit...................................64
Section 5.45. Novation of Travelers/Reliance Indemnity Agreement.................................64
Section 5.46. Purchase Price and Ceding Commission Paid to RIC...................................64
ARTICLE VI CONDITIONS TO THE CLOSING....................................................................64
Section 6.1. Conditions to Obligations of Purchaser and Seller Parties..........................64
Section 6.2. Conditions to Obligations of Purchaser.............................................65
Section 6.3. Conditions to Obligation of Seller Parties.........................................67
ARTICLE VII SURVIVAL; INDEMNIFICATION...................................................................68
Section 7.1. Survival...........................................................................68
Section 7.2. Indemnification....................................................................68
Section 7.3. Procedures for Third Party Claims..................................................70
Section 7.4. Procedures for Direct Claims.......................................................71
Section 7.5. Exclusive Remedy...................................................................72
ARTICLE VIII TERMINATION................................................................................72
Section 8.1. Grounds for Termination............................................................72
Section 8.2. Effect of Termination..............................................................73
ARTICLE IX MISCELLANEOUS PROVISIONS.....................................................................74
Section 9.1. Post-Closing Payments..............................................................74
Section 9.2. Entire Agreement...................................................................74
Section 9.3. Binding Effect.....................................................................74
Section 9.4. No Third-Party Beneficiaries.......................................................74
Section 9.5. Invalidity.........................................................................74
Section 9.6. Governing Law......................................................................75
{/TABLE}
iii
{PAGE}
{TABLE}
{S} {C}
Section 9.7. Jurisdiction.......................................................................75
Section 9.8. WAIVER OF JURY TRIAL...............................................................75
Section 9.9. Counterparts.......................................................................75
Section 9.10. Headings...........................................................................75
Section 9.11. Notices............................................................................75
{/TABLE}
iv
{PAGE}
INDEX OF EXHIBITS
-----------------
Exhibit A - Administrative Services Agreements
Exhibit B - Bill of Sale
Exhibit C - General Assignment and Assumption Agreement
Exhibit D - Loss and Unearned Premium Reserve Portfolio
Reinsurance Agreement
Exhibit E - Quota Share Reinsurance Agreements
Exhibit F - Software License Agreements
Exhibit G - Trademark License Agreements
Exhibit H - Transaction Calculation Memo
Exhibit I - Transition Services Term Sheet
Exhibit J - Travelers/Reliance Indemnity Agreement
v
{PAGE}
INDEX OF SCHEDULES
Schedule 1.1(a) - Assigned and Assumed Contracts
Schedule 1.1(b) - Assumed Liabilities
Schedule 1.1(c) - Business Intellectual Property
Schedule 1.1(d) - Knowledge
Schedule 1.1(e) - Leases
Schedule 1.1(f) - Reliance National Profit Center
Schedule 1.1(g) - Reliance Profit Center
Schedule 1.1(h) - Reliance Surety Profit Center
Schedule 1.1(i) - Retained Assets
Schedule 1.1(j) - Retained Financial Statement Liabilities
Schedule 1.1(k) - Assumed Reinsurance Transactions
Schedule 1.1(l) - Other Transfer Assets
Schedule 2.1(a) - Special Purpose Balance Sheet and Income
Statement
Schedule 3.3 - Approvals or Filings Under Insurance Laws
Schedule 3.4 - Non-Contravention
Schedule 3.8 - Absence of Certain Changes
Schedule 3.10 - Material Contracts
Schedule 3.11(a) - Litigation
Schedule 3.11(b) - Proceedings Challenging Consummation of
Closing
Schedule 3.12 - Compliance with Laws
Schedule 3.13(a) - Material Liens on Transferred Assets
Schedule 3.13(b) - Liens on Business Assets Reasonably
Necessary to Perform Transition Services
Schedule 3.14(b) - Permits
Schedule 3.14(d) - Non-Compliant Subject Contracts
vi
{PAGE}
Schedule 3.15 - Intercompany Accounts Liability
Schedule 3.16(a) - Patents, Trademarks, Copyrights
Schedule 3.16(c)(i) - Computer Programs - Proprietary Software
Schedule 3.16(c)(ii) - Computer Programs - Public Domain
Schedule 3.16(c)(iii) - Computer Programs - Third Party Software
Schedule 3.16(d)(i) - Agreements Granting Third Parties Rights to
Use Intellectual Property
Schedule 3.16(d)(ii) - Agreements Permitting Seller Parties to Use
Intellectual Property
Schedule 3.16(f) - Judgments and Restrictions Relating to
Intellectual Property
Schedule 3.16(g) - Loss or Impairment of Rights with Respect to
Intellectual Property
Schedule 3.16(i) - Year 2000 Non-Compliant Proprietary Software
Schedule 3.17 - All Assets Necessary
Schedule 3.18(a) - Third Party Reinsurance Contracts
Schedule 3.18(b) - Notices of Commutation of Third Party
Reinsurance Agreements
Schedule 3.20(a) - Taxes
Schedule 3.21 - Employee Benefit Plans; ERISA
Schedule 3.21(c) - Employees Entitled to Severance
Schedule 3.22 - Employment at Will
Schedule 3.24 - Threats of Cancellation
Schedule 3.26 - Treasury Limitations
Schedule 3.27(a) - Agents
Schedule 3.27(b) - Agency Contracts Not in Full Force and
Effect
Schedule 4.3 - Approvals or Filings Under Insurance Laws
vii
{PAGE}
Schedule 4.4 - Non-Contravention
Schedule 4.6 - Licenses and Permits
Schedule 5.1(i) - Form of Commutation Agreement
Schedule 5.2(a) - Form of Agreement Pursuant to Section 5.2
Schedule 5.13 - Certain Intercompany Matters
Schedule 5.19(b) - Carve-Outs to the Non-Compete
Schedule 6.2(iii) - Third Party Consents and Approvals
Schedule 6.2(viii) - Third Party Reinsurer Consents
viii
{PAGE}
ASSET TRANSFER AGREEMENT
This ASSET TRANSFER AGREEMENT (this "Agreement"), dated as of
April 10, 2000, is entered into by and among Reliance Group Holdings, Inc., a
Delaware corporation ("Parent"), Reliance Insurance Company, a Pennsylvania
insurance company and wholly-owned subsidiary of Parent ("RIC"), Reliance
National Indemnity Company, a Wisconsin insurance company and a wholly-owned
subsidiary of RIC ("RNIC"), United Pacific Insurance Company, a Pennsylvania
insurance company and a wholly-owned subsidiary of RIC ("UPIC"), Reliance
Insurance Company of Illinois, an Illinois insurance company and a wholly-owned
subsidiary of RIC ("RICI"), Reliance Surety Company, a Delaware insurance
company and a wholly-owned subsidiary of RIC ("RSC") and Reliance National
Insurance Company (Europe) Ltd., an insurance company organized under the laws
of England and Wales and a wholly-owned subsidiary of RIC ("RNIC Europe")(RIC,
RNIC, UPIC, RICI, RSC and RNIC Europe, collectively, the "Seller Insurer
Parties," and together with Parent, the "Seller Parties"), and Travelers
Casualty and Surety Company, a Connecticut insurance company ("Purchaser").
RECITALS:
WHEREAS, Seller Parties own and operate, and desire to sell to
Purchaser, the Business (as defined below), upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined below), the parties hereto will execute
and deliver the following agreements and instruments dated as of the Closing
Date (as defined below) or a date prior thereto: (i) certain Seller Insurer
Parties and Purchaser will enter into the Specified Reinsurance Agreements (as
defined below) providing for, upon the terms and conditions and for the
consideration set forth therein, reinsurance by Purchaser of the liabilities of
Seller Insurer Parties under the Subject Contracts (as defined below); (ii) each
Seller Insurer Party and Purchaser will enter into an Administrative Services
Agreement (as defined below) providing for the servicing by Purchaser of the
Subject Contracts issued in the name of a Seller Party, (iii) the Seller Parties
and Purchaser will enter into a Transition Services Agreement (as defined below)
providing for the provision by the Seller Parties or their Affiliates (as
defined below), as applicable, of certain services to the Business (as defined
below) currently provided by a Seller Party or an Affiliate (as defined below)
of a Seller Party and requested by Purchaser as necessary to enable Purchaser to
operate the Business; (iv) the Seller Parties and Purchaser will enter into the
General Assignment and Assumption Agreement (as defined below) to provide for
the assignment by Seller Parties of certain assets and Leases and the assumption
by Purchaser of certain noninsurance obligations and liabilities relating to the
Business; (v) the Seller Parties and Purchaser will enter into the Software
License Agreement (as defined below); (vi) the Seller Parties and Purchaser will
enter into the Trademark License Agreement (as defined below); and (vii) each
Seller Party will execute and deliver to Purchaser all necessary instruments of
transfer, including, but not limited to, the Bill of Sale (as defined below);
{PAGE}
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual promises and covenants set forth herein and in the Ancillary
Agreements (as defined below), and in reliance upon the representations,
warranties, conditions and covenants contained herein and in the Ancillary
Agreements, and intending to be legally bound hereby and thereby, the parties
hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms, when used in
this Agreement, shall have the meanings set forth herein. The terms defined
below shall be deemed to refer to the singular or plural as the context
requires.
"Adjusted GAAP Net Worth" shall have the meaning set forth in
Section 2.4(e).
"Adjusted Policyholders' Surplus" shall have the meaning set
forth in Section 2.4(e).
"Administrative Services" means the services performed
pursuant to the Administrative Services Agreements.
"Administrative Services Agreements" means the Administrative
Services Agreements between Purchaser and each Seller Insurer Party in the form
attached hereto as Exhibit A.
"Affiliate" of any Person shall mean another Person that
directly or indirectly controls, is controlled by, or is under common control
with, such first Person, where "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise.
"Allocable Amount" shall have the meaning set forth in
Section 5.16.
"Alternative Proposal" shall have the meaning set forth in
Section 5.2.
"Ancillary Agreements" shall mean the Administrative Services
Agreements, Bill of Sale, General Assignment and Assumption Agreements, Loss and
Unearned Premium Reserve Portfolio Reinsurance Agreement, Quota Share
Reinsurance Agreement, Software License Agreements, Trademark License
Agreements, Transition Services Agreement, Travelers/Reliance Indemnity
Agreement, Trademark Assignment and Copyright Assignment.
"Antitrust Division" shall have the meaning set forth in
Section 5.4.
"Applicable Law" shall mean any applicable order, law,
statute, regulation, rule, ordinance, writ, injunction, directive, judgment,
decree, principle of
2
{PAGE}
common law, constitution or treaty enacted, promulgated, issued, enforced or
entered by any Governmental Entity applicable to the parties hereto, or any of
their respective businesses, properties or assets.
"Assigned and Assumed Contracts" means the contracts listed on
Schedule 1.1(a) hereto.
"Assumed Liabilities" shall mean the Liabilities of Seller
Parties assumed by Purchaser pursuant to the General Assignment and Assumption
Agreement identified on Schedule 1.1(b) hereto; provided, however, that in no
event shall Assumed Liabilities be deemed to include Retained Financial
Statement Liabilities, Purchaser Indemnified Liabilities, or any Liabilities of
Seller Parties, their Affiliates or the Business incurred before or after the
Closing that are not expressly assumed by Purchaser under this Agreement or any
Ancillary Agreement.
"Assumed Reinsurance Transactions" shall have the meaning set
forth within the definition of "Subject Contracts," below.
"Audited Opening Financial Statements" shall have the meaning
set forth in Section 2.1.
"Audited Special-Purpose Statements" shall have the meaning
set forth in Section 3.6.
"Bill of Sale" means the Bill of Sale between Purchaser and
Seller Parties in the form attached hereto as Exhibit B.
"Board of Directors" shall mean, with respect to any Person,
such Person's board of directors or any duly authorized committee thereof.
"Books and Records" shall mean, without limitation, the
originals or copies of all contracts, instruments, filings, customer lists and
data (including, without limitation, data relating to customer renewals and
Subject Contract expirations and information concerning customer identities,
customer performance, marketing and rating methodology), lists of all agents and
brokers, administrative and pricing manuals, records (including, without
limitation, claim records, sales records, underwriting records, financial
records, compliance records and tax records) and other materials relating
principally to the Business, whether or not (i) in the possession of a Seller
Party or its Affiliates or (ii) stored in hardcopy form or on magnetic, optical
or other media.
"Business" means the business of the Reliance Surety Profit
Center relating to the Subject Contracts and the operations and activities of
Seller Parties conducted by the Reliance Surety Profit Center or involved in the
issuance, renewal and, except as contemplated by the Transition Services
Agreement, administration of the Subject Contracts, but excluding (i) the
business, operations and activities of any other Reliance profit center,
including, without limitation, the Reliance National Profit Center and the
Reliance Profit Center and (ii) any issuance of bonds or insurance policies
through Environmental Consulting Services, Inc.
3
{PAGE}
"Business Assets" shall mean any tangible or intangible assets
(whether or not required by GAAP or SAP to be reflected on a balance sheet)
beneficially owned by a Seller Party that relates to the Business, but not
including investment assets in the investment portfolio of any Seller Party.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York or Connecticut are
permitted or obligated by law to be closed for regular banking business.
"Business Intellectual Property" shall mean the Intellectual
Property used exclusively in the Business, including, but not limited to, those
items listed on Schedule 1.1(c). Notwithstanding the foregoing, "Business
Intellectual Property" shall not include the following: "RSC", "Reliance
Surety", "Reliance Surety Company" and "RelianceSurety.com", all of which shall
be transferred pursuant to the Trademark License Agreement.
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