<PAGE>
Exhibit 10.1
-----------------------------------------------------------------------------
TRANSFER AND PURCHASE 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
RELIANCE UNIVERSAL INSURANCE COMPANY,
KEMPER CASUALTY, INC.,
KEMPER CASUALTY INSURANCE COMPANY
and
LUMBERMENS MUTUAL CASUALTY COMPANY
Dated as of July 14, 2000
-----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS
<S> <C>
Section 1.1 Definitions.......................................................................2
Section 1.2 Interpretation...................................................................10
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1 The Closing......................................................................10
Section 2.2 Novation of Certain Insurance Contracts and Related
Customer Contracts ..............................................................10
Section 2.3 Transfer of Transferred Assets...................................................11
Section 2.4 Ancillary Agreements.............................................................11
Section 2.5 Consideration....................................................................11
Section 2.6 Excluded Liabilities.............................................................13
Section 2.7 Purchase Price Allocation........................................................13
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
Section 3.1 Corporate Existence and Power....................................................14
Section 3.2 Corporate Authorization..........................................................14
Section 3.3 Governmental Authorization.......................................................14
Section 3.4 Non-Contravention................................................................14
Section 3.5 Financial Information............................................................15
Section 3.6 [INTENTIONALLY OMITTED]..........................................................15
Section 3.7 Absence of Certain Changes.......................................................15
Section 3.8 Significant Agreements...........................................................16
Section 3.9 Litigation.......................................................................16
Section 3.10 Compliance with Laws.............................................................17
Section 3.11 Properties and Assets............................................................17
Section 3.12 Regulatory Filings...............................................................17
Section 3.13 [INTENTIONALLY OMITTED]..........................................................18
Section 3.14 Proprietary Software.............................................................18
Section 3.15 Solvency; Adequate Capitalization; Ability to Pay Debts..........................20
Section 3.16 [INTENTIONALLY OMITTED]..........................................................20
Section 3.17 [INTENTIONALLY OMITTED]..........................................................20
Section 3.18 Books and Records................................................................20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.19 Cancellation; Threats of Cancellation............................................21
Section 3.20 Brokers..........................................................................21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Section 4.1 Corporate Existence and Power....................................................21
Section 4.2 Corporate Authorization..........................................................21
Section 4.3 Governmental Authorization.......................................................22
Section 4.4 Non-Contravention................................................................22
Section 4.5 Licenses and Permits.............................................................22
Section 4.6 Brokers..........................................................................23
Section 4.7 Solvency; Adequate Capitalization; Ability to Pay Debts..........................23
ARTICLE 5
COVENANTS
Section 5.1 Transfer of the Business.........................................................23
Section 5.2 Novation of the Business.........................................................24
Section 5.3 Cooperation......................................................................25
Section 5.4 Obligation to Obtain Permits.....................................................25
Section 5.5 Licenses and Permits.............................................................25
Section 5.6 Regulatory Compliance............................................................26
Section 5.7 Third Party Consents.............................................................26
Section 5.8 Exclusive Right to Use the Books and Records.....................................26
Section 5.9 Use of Names.....................................................................26
Section 5.10 Employee Matters.................................................................27
Section 5.11 Apportionment of Collateral......................................................27
Section 5.12 Non-Compete......................................................................28
Section 5.13 Non-Solicitation of Certain Employees............................................31
Section 5.14 Non-Renewal......................................................................32
Section 5.15 [Intentionally Omitted]..........................................................32
Section 5.16 Software License Agreement; Use of Third Party
Computer Programs ...............................................................32
Section 5.17 Confidentiality..................................................................32
Section 5.18 Public Announcements and Communications..........................................33
Section 5.19 Certain Obligations..............................................................33
Section 5.20 Key Employee.....................................................................33
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 6
SURVIVAL; INDEMNIFICATION
<S> <C>
Section 6.1 Survival.........................................................................34
Section 6.2 Indemnification..................................................................34
Section 6.3 Procedures for Third Party Claims................................................36
Section 6.4 Procedures for Direct Claims.....................................................37
Section 6.5 Exclusive Remedy.................................................................37
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.1 Entire Agreement.................................................................38
Section 7.2 Assignment; Binding Effect.......................................................38
Section 7.3 No Third-Party Beneficiaries.....................................................38
Section 7.4 Setoff...........................................................................38
Section 7.5 Invalidity.......................................................................38
Section 7.6 Governing Law....................................................................38
Section 7.7 Jurisdiction.....................................................................39
Section 7.8 Waiver of Jury Trial.............................................................39
Section 7.9 Counterparts.....................................................................39
Section 7.10 Headings.........................................................................39
Section 7.11 Notices..........................................................................39
</TABLE>
iii
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A - Assignment Agreement
Exhibit B - [Intentionally Omitted]
Exhibit C - Software License Agreement
Exhibit D - Transition Services Agreement
ii
<PAGE>
INDEX OF SCHEDULES
Schedule 1.1(a) - Insurance Contracts
Schedule 1.1(b) - Persons with Knowledge
Schedule 1.1(c) - Seller Parties' Credit Rating System
Schedule 3.4 - Seller Non-Contravention
Schedule 3.5 - Financial Information
Schedule 3.7 - Absence of Certain Changes
Schedule 3.9(a) - Litigation
Schedule 3.9(b) - Proceedings Challenging Consummation of
Closing
Schedule 3.10 - Compliance with Laws
Schedule 3.11 - Liens on Assets Reasonably Necessary to
Perform Transition Services
Schedule 3.12(d) - Non-Compliant Insurance Contracts
Schedule 3.14(a) - Proprietary Software - Exceptions
Schedule 3.14(c)(i) - Computer Programs - Proprietary Software
(Actuarial)
Schedule 3.14(c)(iii) - Computer Programs
Schedule 3.14(f) - Judgments and Restrictions Relating to
Proprietary Software
Schedule 3.14(g) - Loss or Impairment of Rights with Respect to
Proprietary Software
Schedule 3.14(i) - Year 2000 Compliance
Schedule 3.19(a) - Cancellation from Customers
Schedule 3.19(b) - Threats of Cancellation from Reinsurers
iii
<PAGE>
Schedule 5.13 - Protected IT Empoyees
iv
<PAGE>
TRANSFER AND PURCHASE AGREEMENT
This TRANSFER AND PURCHASE AGREEMENT (this "Agreement"), dated
as of July 14, 2000, is entered into by and among Reliance Group Holdings, Inc.,
a Delaware corporation ("Parent"), Reliance Insurance Company, a Pennsylvania
insurance company and an indirect wholly-owned subsidiary of Parent
("Reliance"), Reliance National Indemnity Company, a Wisconsin insurance company
and a wholly-owned subsidiary of Reliance ("RNIC"), United Pacific Insurance
Company, a Pennsylvania insurance company and a wholly-owned subsidiary of
Reliance ("UPIC"), Reliance Insurance Company of Illinois, an Illinois insurance
company and a wholly-owned subsidiary of Reliance ("RICI"), Reliance National
Insurance Company, a Delaware insurance company and a wholly-owned subsidiary of
Reliance ("Reliance National Insurance") and Reliance Universal Insurance
Company, a California insurance company and wholly-owned subsidiary of Reliance
("RUIC") (Reliance, RNIC, UPIC, RICI, Reliance National Insurance and RUIC,
collectively, the "Seller Insurer Parties," and together with Parent, the
"Seller Parties"), Kemper Casualty, Inc., a Delaware corporation ("KCI"), Kemper
Casualty Insurance Company, an Illinois insurance company and wholly-owned
subsidiary of KCI ("Kemper"), Lumbermens Mutual Casualty Company, an Illinois
mutual insurance company ("Lumbermens", and together with Kemper and KCI,
"Purchasers").
RECITALS:
WHEREAS, Reliance operates, through the Seller Insurer Parties
(collectively, the "Reliance Subsidiaries"), the Business (as defined below);
WHEREAS, Purchasers desire to novate, write and/or reinsure
certain contracts constituting the Business and appoint certain of Seller
Parties' producers as producers of Purchasers and Seller Parties desire to
cooperate with Purchasers in connection therewith; and
WHEREAS, in connection therewith, (i) Seller Parties desire to
transfer to Purchasers and Purchasers desire to acquire from Seller Parties,
certain assets of Seller Parties relating to the Business, (ii) Purchasers
desire to hire certain employees of Seller Parties and (iii) Seller Parties and
Purchasers desire to enter into certain ancillary agreements with respect to the
transactions contemplated hereby, in each case, subject to the terms, conditions
and limitations set forth in this Agreement and the Ancillary Agreements (as
defined below) attached as Exhibits hereto;
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual promises and covenants set forth herein and in the Ancillary
Agreements, 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:
<PAGE>
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. (a) 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.
"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.
"Agreement" shall mean this Transfer and Purchase Agreement.
"Ancillary Agreements" shall mean the Assignment Agreement,
Novation Agreement, Software License Agreement and Transition Services
Agreement.
"Antitrust Division" shall mean the Antitrust Division of the
United States Department of Justice.
"Applicable Law" shall mean any applicable order, law,
statute, regulation, rule, ordinance, writ, injunction, directive, judgment,
decree, principle of 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.
"Assignment Agreement" means the Assignment Agreement between
Purchasers and Seller Parties in the form attached hereto as Exhibit A.
"Books and Records" shall mean, without limitation, the
originals or copies of all contracts, instruments, filings, customer lists and
data (including, without limitation, data bases relating to historical and
actuarial data and systems used exclusively in the Business, data relating to
customer renewals and 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 that relate to the
Business), and other materials relating 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.
2
<PAGE>
"Business" shall mean the business of novating, writing and
administering certain insurance contracts related to the Reliance Subsidiaries'
Risk Management Individual Large Accounts, including Individual Captive
businesses, Construction Wrap-Ups, Large Account Division and Group Captive
businesses, but in no event shall Business include program businesses or
business produced by or through managing general agencies or Construction Large
Account business.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are permitted or
obligated by law to be closed for regular banking business.
"Closing" and "Closing Date" has the meaning set forth in
Section 2.1.
"Charges" has the meaning set forth in Section 5.2(d).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Computer Programs" shall mean (i) any and all computer
software programs, including any and all software implementations of algorithms,
models and methodologies whether in source or object code, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) all descriptions, flow-charts and other
work product used to design, plan, organize and develop any of the foregoing
through June 16, 2000, (iv) all content contained on a Person's Internet
site(s), and (v) all documentation, including user manuals and training
materials, relating to any of the foregoing, in each case, used in the Business,
including but not limited to the Computer Programs set forth on Schedules
3.14(c)(i), (ii) and (iii).
"Damages" shall have the meaning set forth in Section 6.2.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"Excluded Liabilities" has the meaning set forth in Section
2.6.
"Extra Contractual Liabilities" means all liabilities or
obligations, other than those arising under the express terms of and within the
express limits of the Insurance Contracts but including excess of policy limits
claims, whether to an Insured, Governmental Entities or any other person, which
liabilities and obligations shall include, without limitation, any liability for
punitive, exemplary, special or any other form of extracontractual damages
relating to the Insurance Contracts which arises from any act, error or
omission, whether or not intentional, in bad faith or otherwise, including,
without limitation, any act, error or omission relating to (i) the marketing,
underwriting, production, issuance, cancellation or administration of the
3
<PAGE>
Insurance Contracts and Related Customer Contracts, (ii) the investigation,
defense, trial, settlement or handling of claims, benefits, or payments arising
out of or relating to the Insurance Contracts and Related Customer Contracts, or
(iii) the failure to pay or the delay in payment of benefits, claims or any
other amounts due or alleged to be due under or in connection with the Insurance
Contracts and Related Customer Contracts.
"Financially Distressed" shall mean that an Insured has a
senior debt Standard & Poors' rating of "BB-" or lower or a Moody's rating of
Ba3 or lower, or in the event that an Insured's senior debt is not rated by
Standard & Poors' or Moody's, an Insured's financial rating is grade 7 or higher
as determined by Seller Parties' internal credit rating system set forth on
Schedule 1.1(c).
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
"Governmental Entity" shall mean any foreign, domestic,
federal, territorial, state or local U.S. or non-U.S. governmental authority,
quasi-governmental authority, instrumentality, court or government,
self-regulatory organization, commission, tribunal or organization or any
political or other subdivision, department, branch or Representative of any of
the foregoing.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" shall have the meaning set forth in
Section 6.3.
"Indemnifying Party" shall have the meaning set forth in
Section 6.3.
"Information" has the meaning set forth in Section 5.8.
"Insurance Contracts" shall mean all in-force insurance
contracts, binders, policies, riders, endorsements and extensions thereto issued
or written by the Reliance Subsidiaries that comprise the Business as of June
16, 2000 and which are listed on Schedule 1.1(a) or Schedule 3.5 attached
hereto.
"Insurance Premium Charges" shall mean the insurance charges
actually received by Kemper or one of its Insurer Affiliates from customers of
the Business for any excess of loss, excess of aggregate or excess of Insured's
retention coverages, net of all reinsurance costs.
4
<PAGE>
"Insured" shall mean each named insured who is a party to an
Insurance Contract.
"Insurer Affiliate" of any Person shall mean an Affiliate of
such Person which is an insurance company.
"January 15th Payment" has the meaning set forth in Section
2.5(c).
"Kemper" has the meaning set forth in the introduction.
"KCI" has the meaning set forth in the introduction.
"Knowledge" or "knowledge" as to any of the Seller Parties or
Purchasers, shall mean the actual knowledge of those employees and officers of
the Seller Parties and Purchasers, as applicable, listed on Schedule 1.1(b)
hereto.
"Liability" or "Liabilities" shall mean a liability,
obligation, expense, claim or cause of action (of any kind or nature whatsoever,
whether absolute, accrued, contingent or other, and whether known or unknown)
related, directly or indirectly, to the Business.
"Lien" shall mean any mortgage, pledge, lien, encumbrance,
charge, adverse claim (whether pending or, to the knowledge of the Person
against whom the adverse claim is being asserted, threatened) or restriction of
any kind affecting title or resulting in an encumbrance against property, real
or personal, tangible or intangible, or a security interest of any kind,
including, without limitation, any conditional sale or other title retention
agreement, any right of first refusal, any lease in the nature thereof, and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statute) of any jurisdiction (other than a
financing statement which is filed or given solely to protect the interest of a
lessor).
"Material Adverse Effect" shall mean a material adverse effect
on the Business novated, written and/or reinsured by Kemper or its Insurer
Affiliates taken as a whole; provided, however that the following shall be
excluded from the definition of "Material Adverse Effect" and from any
determination as to whether a Material Adverse Effect has occurred or may occur:
(i) the effects of changes affecting the economy and securities markets
generally; (ii) the effects of changes affecting the insurance and financial
services industries generally; (iii) any downgrade or potential downgrade of the
financial strength, claims paying ability, insurance or other ratings of
Reliance or any Affiliates of Parent or the financial strength, debt or similar
ratings of Parent; and (iv) any adverse change resulting directly from the
announcement of the transactions contemplated by this Agreement.
"Non-Compete Period" has the meaning set forth in Section
5.12(a).
5
<PAGE>
"Novated Policies" has the meaning set forth in Section
5.2(a).
"Novation" shall mean the assumption by Kemper or one of its
Insurer Affiliates of all of the obligations and liabilities of the Reliance
Subsidiaries under certain of the Insurance Contracts and the Related Customer
Contracts of Seller Insurer Parties as of the Novation Date.
"Novation Agreement" means one or more novation agreements, to
be mutually agreed to by the parties hereto, among Reliance or one of the
Reliance Subsidiaries, or one of its related parties, Kemper or one of its
Insurer Affiliates and the holder of an Insurance Contract and/or Related
Customer Contract, pursuant to which the Novations are implemented.
"Novation Date" has the meaning set forth in Section 5.2.
"Novation Period" shall mean a one-year period commencing on
the Novation Date.
"Parent" has the meaning set forth in the introduction.
"Permit" has the meaning set forth in Section 3.12(b).
"Permitted Liens" shall mean (i) Liens securing the payment of
Taxes, either not yet due and payable or the validity of which is being
contested in good faith by appropriate proceedings; (ii) reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting real
property which do not materially affect the property, or the intended use of the
property, secured thereby; and (iii) Liens of carriers, warehousemen, mechanics,
materialmen, and landlords incurred in the ordinary course of business for sums
not over-due or being contested in good faith by appropriate proceedings.
"Person" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, trust joint venture, labor union, estate, unincorporated organization or
other entity.
"Profit and Administration Charges" shall mean all fees
actually received from customers of the Business for administration and profits
exclusive of claims fees of any type (other than fees paid to Kemper or one of
its Insurer Affiliates to supervise Third Party Administrators), loss costs,
commissions, Insurance Premium Charges, premium taxes and other Taxes
passed-through to Insureds, residual market loads or other "pass-through"
amounts to Insureds. Any ceding commission received from reinsurers on Business
novated, written, or renewed by Purchasers or one of their Affiliates in a
reinsurance transaction will first be
6
<PAGE>
considered applied to "pass-through" amounts to Insureds, with the remainder, if
any, being allocated to profits and administration.
"Proprietary Software" shall mean all Computer Programs and
actuarial databases owned by a Seller Party, including enhancements and
modifications to packaged software or Third Party Computer Programs existing as
of the date hereof.
"Purchase Price" has the meaning set forth in Section 2.5(a).
"Purchasers" has the meaning set forth in the introduction.
"Related Customer Contracts" shall mean all contracts in force
as of June 16, 2000 with or related to customers of the Business (other than the
Insurance Contracts) relating to the Business and the administration of the
Business, including, but not limited to, insurance program agreements,
deductible agreements, retrospective rating agreements, captive agreements,
special indemnification agreements, three-way Third Party Administrator
agreements, collateral and indemnity agreements, trust agreements, surety
agreements, reinsurance contracts, third-party administrator contracts or loss
control contracts.
"Reliance" has the meaning set forth in the introduction.
"Reliance Subsidiaries" has the meaning set forth in the
recitals.
"Representative" shall mean, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, financial advisor, accountant,
actuary, appraiser, analyst, consultant, legal counsel, agent, representative or
expert retained by or acting on behalf of such Person or its subsidiaries).
"Retention Payment" has the meaning set forth in Section
2.5(d).
"RICI" has the meaning set forth in the introduction.
"RNIC" has the meaning set forth in the introduction.
"SAP" shall mean, with respect to any Person, the statutory
accounting principles and practices prescribed or permitted by the domiciliary
state of the relevant Person, consistently applied.
"Seller Financial Information" has the meaning set forth in
Section 3.5.
"Seller Insurer Parties" has the meaning set forth in the
introduction.
7
<PAGE>
"Seller Parties" has the meaning set forth in the
introduction.
"Significant Agreements" has the meaning set forth in Section
3.8.
"60 Day Payment" has the meaning set forth in Section 2.5(b).
"60% Threshold" has the meaning set forth in Section 2.5(d).
"Software License Agreement" means the Software License
Agreement between Purchasers and Seller Parties in the form attached hereto as
Exhibit C.
"Solvent" when used with respect to Parent, shall have the
meaning applicable to Parent under Applicable Law or, when used with respect to
each Purchaser or a Seller Insurer Party, shall have the meaning applicable to
such Purchaser or such Seller Insurer Party under the insurance laws of its
domiciliary state. To the extent that any such law or model act exclusively uses
the term "insolvent" rather than "solvent", "Solvent" when used in this
Agreement in reference to a party shall be interpreted to mean not "insolvent"
as defined in such law.
"Tax Claims" shall have the meaning set forth in Section 6.3.
"Taxes" shall mean all taxes, charges, duties, fees, levies,
or other similar assessments or Liabilities, including without limitation all
net and gross income, gross receipts, ad valorem, premium, excise, real
property, personal property, windfall profit, sales, use, transfer, license,
withholding, employment, payroll, profit, estimated, severance, stamp,
occupation, value added, registration, environmental, workers compensation,
social security and franchise taxes imposed by the United States Internal
Revenue Service or any taxing authority (whether domestic or foreign including,
without limitation, any state, county, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession));
and such term shall include any interest, fines, penalties, assessments, or
additions to tax relating to, resulting from, attributable to, or incurred in
connection with any such tax or any contest or dispute thereof.
"Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
"Third Party Computer Programs" shall have the meaning set
forth in Section 3.14(c).
8
<PAGE>
"Third Party Administrator" shall mean a Person who, directly
or indirectly, solicits or effects coverage of, underwrites, collects charges or
premiums from, or adjusts or settles claims in connection with insurance
coverages.
"Third Party Claims" shall have the meaning set forth in
Section 6.3.
"Trademarks" shall mean all United States and foreign
trademarks (including service marks and trade names, whether registered or at
common law), registrations and applications therefor, Internet domain names,
logos, designs, slogans and general intangibles of like nature owned by a Seller
Party relating to the conduct of the Business, together with the goodwill
associated therewith, including but not limited to those items set forth on
Schedule 3.14(a).
"Transferred Assets" shall mean all of Seller Parties' right,
title and interest in the expirations and renewals of the Insurance Contracts
and the Related Customer Contracts including any and all of Seller Parties'
rights to novate, write or reinsure the Insurance Contracts and the Related
Customer Contracts.
"Transferred Employee" shall mean any employee engaged in the
Business who is hired by Purchasers or any of their Affiliates in connection
with the transactions contemplated by this Agreement.
"Transition Services" means the services performed pursuant to
the Transition Services Agreement.
" Transition Services Agreement" means the Transition
Services Agreement between Purchasers and Seller Parties in the form attached
hereto as Exhibit D.
"UPIC" has the meaning set forth in the introduction.
"Year 2000 Compliant" means for all dates and times,
including, without limitation dates and times before, on and after December 31,
1999, when used on a stand-alone system or in combination with other software or
systems: (i) the application system functions and receives and processes dates
and times correctly without abnormal results; (ii) all date related calculations
are correct (including, without limitation, age calculations, duration
calculations and scheduling calculations); (iii) all manipulations and
comparisons of date-related data produce correct results for all valid date
values within the scope of the application; (iv) all reports and displays are
sorted correctly; and (v) leap years are accounted for and correctly identified
(including, without limitation, that 2000 is recognized as a leap year).
Section 1.2 Interpretation. (a) The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.
Consequently, in the event
9
<PAGE>
that an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this Agreement.
(b) When a reference is made in this Agreement to a Section or
Article, such reference shall be to a section or article of this Agreement
unless otherwise clearly indicated to the contrary. Whenever the words
"include", "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation." The words "hereof,"
"herein" and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement. The meaning assigned to each term used
in this Agreement shall be equally applicable to both the singular and the
plural forms of such term, and words denoting any gender shall include all
genders. Where a word or phrase is defined herein, each of its other grammatical
forms shall have a corresponding meaning.
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on the date of
the execution of this Agreement (the "Closing Date").
Section 2.2 Novation of Certain Insurance Contracts and
Related Customer Contracts. (a) From and after the date hereof, Seller Parties
will cooperate with Purchasers and their Affiliates as reasonably requested by
Purchasers to assist Kemper and its Insurer Affiliates in novating, writing
and/or reinsuring certain of the Insurance Contracts and the Related Customer
Contracts. Such cooperation shall include, but not be limited to, dealing
cooperatively with agents, brokers and other intermediaries who produced the
Insurance Contracts and customers who entered into the Related Customer
Contracts.
(b) As soon as practicable but no later than within thirty
(30) days following the end of each calendar month, Seller Insurer Parties shall
transfer to Kemper 100% of the direct or assumed premium received with respect
to Insurance Contracts novated, written or reinsured by Purchasers, less any
losses paid by Seller Insurer Parties thereunder and any third party
administrators, fees already paid with respect thereto. If Seller Insurer
Parties have ceded any liabilities under such Insurance Contracts to third party
reinsurers, any reinsurance premium paid with respect to such Insurance
Contracts by Seller Insurer Parties to such third party reinsurers shall be
deducted from the amount transferred pursuant to the foregoing sentence. If
Seller Insurer Parties have not paid such reinsurance premium due to a third
party reinsurer,
10
<PAGE>
Seller Insurer Parties shall, as soon as practicable but no later than within
thirty (30) days following the end of each calendar month, transfer to Kemper
100% of direct or assumed premium received with respect to such Insurance
Contracts, less any losses paid by Seller Insurer Parties thereunder and any
third party administrators, fees already paid with respect thereto, and Kemper
shall pay the applicable third party reinsurance premium. Seller Insurer Parties
shall promptly pay all amounts due to third party administrators with respect to
the Insurance Contracts for periods prior to the date of execution of the
Novation Agreement. Purchasers and Seller Parties agree that they will agree
upon an equitable allocation of all treaty reinsurance, and any recoverables or
recoveries relating thereto, applicable to the Business and the Novated
Policies.
Section 2.3 Transfer of Transferred Assets. Upon the terms and
subject to the conditions of this Agreement and the payment of the Purchase
Price on the Closing Date, Seller Parties shall sell, assign and transfer to
Purchasers all of Seller Parties' respective right, title and interest in the
Transferred Assets; provided, however, that in no event shall the foregoing
provision be deemed to require that Seller Parties transfer to Purchasers any
items not included in the definition of "Transferred Assets" or not otherwise
required to be transferred, sold, assigned or conveyed to Purchasers under the
express terms of this Agreement or an Ancillary Agreement. All sales,
assignments and transfers of the Transferred Assets shall be effected by the
Assignment Agreement. Purchasers acknowledge that no provision hereof is
intended to required Seller Insurer Parties to transfer to Purchaser original
copies of any Books and Records.
Section 2.4 Ancillary Agreements. Concurrently with the
execution and delivery of this Agreement, Seller Parties and Purchasers shall
execute and deliver:
(i) the Assignment Agreement;
(ii) the Software License Agreement; and
(iii) the Transition Services Agreement.
The parties hereto agree that each of the Ancillary Agreements shall be
effective and binding on the respective parties thereto at and as of the Closing
Date.
Section 2.5 Consideration.
(a) On the Closing Date, Purchasers shall pay to Reliance, on
behalf of the Seller Insurer Parties, and Reliance, on behalf of the Seller
Insurer Parties, shall accept and acknowledge receipt of, an amount equal to
$3,000,0000 as consideration for the Transferred Assets (the "Purchase Price").
Purchasers' obligations to pay such amount are joint and several.
11
<PAGE>
(b) On the third Business Day after the 60th day after the
Closing, Purchasers shall pay to Reliance, on behalf of the Seller Insurer
Parties, as additional consideration, an amount equal to the sum of (i) 40% of
the annualized Profit and Administration Charges and (ii) 15% of the annualized
Insurance Premium Charges for each of the Insurance Contracts and Related
Customer Contracts novated, written and/or reinsured by Kemper or one of its
Insurer Affiliates between and including June 19, 2000 and sixty (60) days after
the Closing (the "60 Day Payment"). Purchasers' obligations to pay such amount
are joint and several.
(c) On January 15, 2001, Purchasers shall pay to Reliance, on
behalf of the Seller Insurer Parties, as additional consideration, an amount
equal to the sum of (i) 40% of the annualized Profit and Administrative Charges
and (ii) 15% of the annualized Insurance Premium Charges for each of the
Insurance Contracts and Related Customer Contracts novated, written and/or
reinsured by Kemper or one of its Insurer Affiliates from and including June 19,
2000 until and including January 5, 2001, exclusive of Insurance Contracts and
Related Customer Contracts which were subject to the 60 Day Payment (the
"January 15th Payment"). Purchasers' obligations to pay such amount are joint
and several.
(d) At the earlier of (i) June 19, 2001 or (ii) ten (10) days
after the date on which Kemper and its Insurer Affiliates have novated, written
and/or reinsured Insurance Contracts and Related Customer Contracts with
annualized Profit and Administration Charges equal to at least $42.7 million
(the "60% Threshold"), Purchasers shall, subject to the provisions of
subparagraph (e) of this Section 2.5, pay to Reliance on behalf of the Seller
Insurer Parties, as additional consideration, $5,000,000 (the "Retention
Payment"). The 60% Threshold is inclusive of Insurance Contracts and Related
Customer Contracts which were subject to the 60 Day Payment and the January 15th
Payment. Purchasers' obligations to pay such amount are joint and several.
(e) In the event (i) Kemper and its Insurer Affiliates have
not novated, written and/or reinsured Insurance Contracts and Related Customer
Contracts equal to the 60% Threshold on or before June 19, 2001, or (ii) Seller
Parties have, after written notice and a reasonable opportunity to cure,
materially breached any of their obligations under this Agreement (other than
breaches which individually or in the aggregate do not have a material adverse
effect on the benefits which the Purchasers reasonably expect to derive from the
Business), Purchasers shall not owe the Retention Payment to Seller Parties. In
the event that the Seller Parties, after written notice and an opportunity to
cure, have materially breached their obligations under any Ancillary Agreement
(other than breaches which individually or in the aggregate do not have a
material adverse effect on the benefits which the Purchasers reasonably expect
to derive from the Business), Purchasers shall not owe the portion of the
Retention Payment in excess of $3,000,000. In the event that (A) the Retention
Payment is made and reduced pursuant to the foregoing sentence and (B)
Purchasers
12
<PAGE>
commence any action, suit or proceeding seeking Damages in respect of any
Ancillary Agreement, Seller Parties shall only be required to pay to Purchasers
the amount of any Damages awarded that is in excess of $2,000,000.
(f) All payments pursuant to this Section 2.5 shall be paid by
Purchasers to an account designated by Reliance, by wire transfer in immediately
available funds.
(g) Purchasers shall provide the Seller Parties and their
Representatives access (during normal business hours and without undue
disruption of business) to their respective books, records, workpapers and
employees relating to the calculation of the 60 Day Payment, the January 15th
Payment and the Retention Payment.
Section 2.6 Excluded Liabilities. Neither Purchasers nor any
of their Affiliates shall assume or otherwise be liable in respect of, nor be
deemed to have assumed, any debt, claim, obligation or other liability of Seller
Parties or any of their Affiliates of any nature whatsoever other than as
specifically assumed by the Purchasers in this Agreement or any of the Ancillary
Agreements (the "Excluded Liabilities").
Section 2.7 Purchase Price Allocation To the extent permitted
or required by law, the payments set forth in Section 2.5 shall be allocated
among the assets of the Business in accordance with Section 1060 of the Code and
Treasury Regulation Section 1.1060-1T, which allocation shall be prepared by
Purchasers and delivered to the Seller Parties within ninety (90) days after the
Closing. If the Seller Parties dispute the allocation, Purchasers and the Seller
Parties shall cooperate in good faith to resolve any such dispute. Should the
parties fail to reach agreement within thirty (30) days after Purchaser's
delivery of such allocation to Seller Parties, the determination of the
allocation shall be made by a mutually agreed upon and jointly engaged public
accounting firm of national reputation, whose decision shall be final.
Purchasers and the Seller Parties shall each prepare and file, with respect to
the transactions contemplated by this Agreement, all necessary forms or reports
required or permitted to be filed under state or local tax law in accordance
with such allocation. The Seller Parties and Purchasers each agree (i) to
reflect the assets of the Business on their respective books for tax reporting
purposes in accordance with the allocation, (ii) to file all Tax Returns and
determine all Taxes in accordance with and based upon the allocation and (iii)
not to take any position inconsistent with such allocation in any audit or
judicial or administrative proceeding or otherwise, in each case unless
otherwise provided by Applicable Law.
ARTICLE 3
13
<PAGE>
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
Seller Parties jointly and severally represent and warrant to
Purchasers that:
Section 3.1 Corporate Existence and Power. Each of Seller
Parties (i) has been duly incorporated, is validly existing and is in good
standing under the laws of its state of incorporation or domicile, (ii) has all
corporate powers required to carry on its business as now conducted, (iii) has
all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted and (iv) is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, or is duly licensed to do
business and is in good standing in each jurisdiction where such licensing is
necessary, as the case may be, except, in the case of each of clauses (ii)
through (iv), as would not have a Material Adverse Effect. No Seller Party is in
violation of any of the provisions of its charter or bylaws with respect to the
conduct of the Business.
Section 3.2 Corporate Authorization. The execution, delivery
and, subject to the receipt of the approvals referred to in Section 3.3,
performance by Seller Parties of this Agreement and the Ancillary Agreements are
within their powers and have been duly authorized by all necessary corporate
action on the part of Seller Parties. This Agreement constitutes, and when
executed and delivered, the Ancillary Agreements will constitute, valid and
legally binding agreements, enforceable against each party thereto in accordance
with their terms, subject to (i) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and the rights of
creditors of insurance companies generally and (ii) general principles of equity
(regardless of whether considered in a proceeding at law or in equity).
Section 3.3 Governmental Authorization. The execution,
delivery and performance by Seller Parties of this Agreement and the Ancillary
Agreements to which such Seller Party is a party requires no action by or in
respect of, or filing with, any Governmental Entity on the part of Seller
Parties or any Affiliate thereof other than (i) filings and notices not required
to be made or given until after the Closing Date, (ii) filings, at any time, of
Tax Returns and (iii) any such other action or filing not contemplated in the
preceding clauses (i) and (ii) as to which the failure to make or obtain would
not, individually or in the aggregate, materially impair the ability of
Purchasers to novate, write and/or reinsure the Businesses.
Section 3.4 Non-Contravention. Except as set forth in Schedule
3.4, the execution, delivery and performance by Seller Parties of this Agreement
and the Ancillary Agreements, do not and will not (i) violate the charter or
bylaws of any Seller Party, (ii) assuming compliance with the filings, notices,
approvals and other
14
<PAGE>
matters referred to in Section 3.3, violate any Applicable Law, (iii) require
any consent or other action by any Person under, constitute a default under, or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of any Seller Party or to a loss of any benefit to which any
Seller Party is entitled under, any material reinsurance agreement, any material
agreement or any other material instrument binding upon any Seller Party, or any
material license, franchise, permit or other similar authorization held by any
Seller Party, or (iv) result in the creation or imposition of any material Lien
on any Transferred Assets.
Section 3.5 Financial Information. The financial information
on Schedule 3.5 relating to the Business (the "Seller Financial Information")
(i) was prepared from the Books and Records of the Seller Insurer Parties and
(ii) is accurate in all material respects.
Section 3.6 [INTENTIONALLY OMITTED].
Section 3.7 Absence of Certain Changes. Except as disclosed in
Schedule 3.7, since December 31, 1999 (or, with respect to clauses (v) and (vi)
of this Section 3.7, since June 19, 2000) the Business has been conducted in the
ordinary course consistent in all material respects with past practices
(including, without limitation, with regard to underwriting, pricing and
actuarial policies, practices and standards generally) and, to the extent
relating to the Insurance Contracts and Related Customer Contracts novated,
written and/or reinsured by Kemper and its Insurer Affiliates, there has not
been:
(i) any event, claim, occurrence, development or
state of circumstances of facts which has had or would reasonably be
expected to have a Material Adverse Effect;
(ii) any transaction or commitment made, or any
contract or agreement entered into, by Seller Parties (including the
acquisition or disposition of any assets) or any relinquishment by
Seller Parties of any contract or other right, other than transactions
and commitments in the ordinary course of business consistent in all
material respects with past practices;
(iii) any change in any method of accounting or
accounting practice or policy (including, without limitation, any
reserving method, practice or policy) by Seller Parties, except for any
such change as a result of a concurrent change in GAAP, SAP or as
required by Applicable Law;
(iv) any transaction by Seller Parties involving
Transferred Assets other than in the ordinary course of business
consistent in all material respects with past practice;
15
<PAGE>
(v) (i) any entering into of any facultative
reinsurance contract or (ii) any commutation of any facultative
reinsurance contract, or (iii) any entering into or any commutation of
any reinsurance treaty, by Seller Parties, in any such case, other than
in the ordinary course of business consistent in all material respects
with past practice;
(vi) any significant change by Seller Parties in
the compensation structure of, or benefits available to, with respect
to any agent; or
(vii) any agreement or commitment (contingent or
otherwise) by Seller Parties to do any of the foregoing.
Section 3.8 Significant Agreements. "Significant Agreements"
shall mean the Insurance Contracts, Related Customer Contracts and third party
reinsurance contracts relating thereto which are novated, written and/or
reinsured by Kemper and its Insurer Affiliates pursuant to this Agreement.
Seller Parties heretofore furnished or made available to Purchasers complete and
correct copies of each of the Significant Agreements. Except as would not
materially and adversely effect the benefits taken as a whole which Purchasers
could reasonably expect to derive from consummation of the transactions
contemplated hereunder, each of the Significant Agreements is in full force and
effect and enforceable in accordance with its terms, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and the rights of creditors of insurance companies generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity); no Seller Party has received any written notice or, to the
knowledge of Seller Parties, oral notice, of cancellation or termination of, or
any expression or indication of an intention or desire to cancel or terminate,
any of the Significant Agreements; no Significant Agreement is the subject of,
or, to the knowledge of Seller Parties, has been threatened to be made the
subject of, any arbitration, suit or other legal proceeding; with respect to any
Significant Agreement which by its terms will terminate as of a certain date
unless renewed or unless an option to extend such Significant Agreement is
exercised, no Seller Party has received any written notice or, to the knowledge
of Seller Parties, oral notice, or otherwise has any knowledge, that any such
Significant Agreement will not be so renewed or that any such extension option
will not be exercised; and there exists no material event of default or
occurrence, condition or act on the part of a Seller Party or, to the knowledge
of Seller Party, on the part of the other parties to the Significant Agreements,
which constitutes or would constitute (with notice or lapse of time or both) a
material breach of or material default under any of the Significant Agreements.
Section 3.9 Litigation. (a) Schedule 3.9(a) sets forth each
action, suit, investigation, judgment or proceeding (other than with respect to
claims under Insurance Contracts in the ordinary course of business) against or
affecting the
16
<PAGE>
properties of a Seller Party as regards the Business or Transferred Assets,
pending before any court or arbitrator or any governmental body, agency or
official (in each case, other than those arising from complaints which have been
filed but not served as the date hereof on any Seller Party) or, to the
knowledge of Seller Parties, threatened by any Person. Except as set forth on
Schedule 3.9(a), there is no material action, suit, investigation, judgment or
proceeding (other than with respect to claims under Insurance Contracts in the
ordinary course of business) against or affecting the properties of a Seller
Party as regards the Business or Transferred Assets pending before any court or
arbitrator or any governmental body, agency or official or, to the knowledge of
Seller Parties, threatened by any Person.
(b) There is no action, suit, investigation or proceeding
pending against, or affecting the properties of, a Seller Party as regards the
Business or Transferred Assets before any court or arbitrator or any
governmental body, agency or official which challenges or seeks to prevent the
transactions contemplated hereby. Except as disclosed in Schedule 3.9(b), no
Seller Party nor any of its properties is subject to any order, writ, judgment,
injunction, decree, determination or award which would prevent or delay the
consummation of transactions contemplated hereby.
Section 3.10 Compliance with Laws. Except as set forth on
Schedule 3.10, no Seller Party has received any written notice since July 1,
1999 from any Governmental Entity (other than a workers' compensation rating
bureau) alleging any material violation of any Applicable Law in the conduct of
the Business or directing a Seller Party to take any remedial action with
respect to such Applicable Law. There are no presently existing circumstances
that could reasonably be expected to result in any material violation of any
Applicable Law relating to the Business.
Section 3.11 Properties and Assets. Except as set forth on
Schedule 3.11, each Seller Party has good title to, or in the case of leased
property has valid leasehold interests in, or valid licenses to, all of its
respective assets which are reasonably necessary to perform its obligations
under the Transition Services Agreement.
Section 3.12 Regulatory Filings.
(a) The Business is being conducted in compliance in all
material respects with all Applicable Laws, including, without limitation, all
insurance laws, ordinances, rules, regulations, decrees and orders of any
Governmental Entity.
(b) Each Seller Party has all permits and insurance and other
licenses, franchises, approvals, authorizations, exemptions, classifications,
certificates, registrations and similar documents necessary to its conduct of
the Business (each of which, a "Permit") as it is currently conducted in each
jurisdiction in which the Seller Parties require such Permits. The Business has
been and is being conducted
17
<PAGE>
in compliance, in all material respects, with all such Permits. All such Permits
are in full force and effect, and there is no proceeding or investigation
pending or, to the knowledge of Seller Parties, threatened which would
reasonably be expected to lead to the revocation, amendment, failure to renew,
limitation, modification, suspension or restriction of any such Permit. No
Seller Party is operating under any agreement or understanding with the
regulatory authority of any state which in any way restricts its authority to
conduct the Business or requires any Seller Party to take, or refrain from
taking, any action relating to the conduct of the Business otherwise permitted
by Applicable Law.
(c) Seller Parties have made available for inspection by
Purchasers complete (i) copies of all material registrations, filings and
submissions relating to the Business made since July 1, 1999 by the Seller
Parties with any Governmental Entity and any (ii) reports of examinations issued
since July 1, 1999 by any such Governmental Entity that relate to the Seller
Parties.
(d) All Insurance Contracts issued or sold by the Reliance
Subsidiaries since July 1, 1999 and being novated, written and/or reinsured by
Kemper hereunder are on forms approved by the insurance regulatory authority of
the jurisdiction where issued or sold or have been filed with and not objected
to by such authority within the period provided for objection, and have been
filed or registered or are subject to exemption from such filing or registration
as required with all other applicable Governmental Entities, except as would not
have a Material Adverse Effect. Except as set forth on Schedule 3.12(d), all
Insurance Contracts issued or sold by the Reliance Subsidiaries since July 1,
1999 complied in all material respects as to form when issued or sold, with the
provisions of Applicable Law. All the premium rates required to be filed with or
approved by insurance regulatory authorities since July 1, 1999 have been so
filed or approved or not objected to within the period provided for objection,
or are subject to exemption from such filing, and all premiums charged conform
in all material respects thereto, except as would not have a Material Adverse
Effect. No Seller Parties or their Affiliates has, since July 1, 1999,
advertised or used other literature in connection with the Business that does
not comply in all material respects with Applicable Laws.
Section 3.13 [INTENTIONALLY OMITTED].
Section 3.14 Proprietary Software. (a) Except as set forth on
Schedule 3.14(a), Seller Parties are the sole and exclusive owners of, or have
the valid right to use all Proprietary Software free and clear of all Liens or
other encumbrances.
(b) [Intentionally omitted.]
(c) Schedules 3.14(c)(i) and (iii) list all of the Computer
Programs which are owned, licensed, leased or otherwise used by Seller Parties
in connection
18
<PAGE>
with the operation of the Business as currently conducted, and identifies which
is owned, licensed, leased, or otherwise used, as the case may be. Schedule
3.14(c)(i) sets forth each Computer Program that is Proprietary Software; and
Schedule 3.14(c)(iii) sets forth each Computer Program that is used under rights
granted to a Seller Party pursuant to a written agreement, license or lease from
a third party, copies of which written agreement, license or lease have been
made available to the Purchasers ("Third Party Computer Programs"). Seller
Parties use the Computer Programs set forth on Schedules 3.14(c)(i) and (iii) in
connection with the operation of the Business as conducted on the date hereof
and such use, to the knowledge of Seller Parties, does not violate the rights of
any third party. To the knowledge of Seller Parties, all Proprietary Software
identified in Schedule 3.14(c)(i) was either developed by (i) employees of
Seller Parties within the scope of their employment; (ii) independent
contractors as "works-made-for-hire", as that term is defined under Section 101
of the United States copyright laws, pursuant to written agreements; or (iii)
third parties who have assigned their rights to a Seller Party pursuant to
written agreements. No present, and to the knowledge of Seller Parties, no
former employees, officers or directors of the Seller Parties retain any rights
of ownership or use of the Proprietary Software.
(d) [Intentionally omitted.]
(e) [Intentionally omitted.]
(f) To the knowledge of Seller Parties, the conduct of the
Business by the Seller Parties does not infringe, violate or dilute any
intellectual property rights owned or controlled by any third party, and no
third party is misappropriating infringing, diluting or violating any
Proprietary Software owned by any Seller Party, and no such claims have been
made against a third party by Seller Party. There are no claims or suits pending
or, to the knowledge of the Seller Parties, threatened, and no Seller Parties
have received written notice of a third party claim or suit (a) alleging that
Seller Parties' activities or the conduct of the Business infringes upon or
constitutes the unauthorized use of the proprietary rights of any third party,
or (b) challenging the ownership, use, validity or enforceability of the
Proprietary Software owned by Seller Parties. Except as set forth on Schedules
3.14(f) and 3.14(d)(ii), there are no settlements, consents, judgments, or
orders or other agreements which restrict a Seller Parties's rights to use any
Proprietary Software, and no concurrent use or other agreements which restrict a
Seller Parties' rights to use any Proprietary Software owned by a Seller Party.
No trade secret or confidential know-how material to the Business as currently
operated or planned to be operated has been disclosed or authorized to be
disclosed to any third party, other than pursuant to a non-disclosure agreement
that protects Seller Parties' proprietary interests in and to such trade secrets
and confidential know-how;
19
<PAGE>
(g) Except as set forth on Schedule 3.14(g) or as otherwise
provided in this Agreement, the consummation of the transactions contemplated
hereby will not result in the loss or impairment of a Seller Party's right to
own or use any of the Proprietary Software nor will it require the consent of
any Governmental Entity or third party in respect of any such Proprietary
Software.
(h) No present and, to the knowledge of Seller Parties, no
former employee, officer or director of a Seller Party has any right, title, or
interest, directly or indirectly, in whole or in part, in any of the Proprietary
Software owned by the Seller Party.
(i) Except as set forth on Schedule 3.14(i), all Proprietary
Software is Year 2000 Compliant.
(j) Seller Parties represent and warrant that each and all of
the Proprietary Software used in the performance of the Transition Services
(except for the Proprietary Software indicated with an asterisk on Schedule
3.14(c)(i)) (i) shall be free from any material defects in material and
workmanship; and (ii) shall perform in all material respects in accordance with
its intended purpose. Documentation applicable to such Proprietary Software
accurately reflects in all material respects the Proprietary Software.
Section 3.15 Solvency; Adequate Capitalization; Ability to Pay
Debts. Each Seller Party is and, prior to and immediately after giving effect to
the consummation of this Agreement and the Ancillary Agreements, will be Solvent
and not Impaired. At the time of and immediately after giving effect to the
consummation of the transactions contemplated hereby, no Seller Party will have
unreasonably small capital with which to conduct its business or shall be
generally unable to pay its debts as they become due (in each case as
contemplated under Applicable Laws with respect to voidable or fraudulent
transfers and obligations). No Seller Insurer Party is subject to any
supervision, conservation, liquidation, rehabilitation, delinquency or similar
proceeding, or investigation or inquiry which is reasonably likely to result in
any such proceeding, under Applicable Law. Parent is not subject to any action,
suit, investigation, judgment or proceeding under Federal bankruptcy law, or any
investigation or inquiry which is reasonably likely to result in any of the
foregoing.
Section 3.16 [INTENTIONALLY OMITTED].
Section 3.17 [INTENTIONALLY OMITTED].
Section 3.18 Books and Records. The Books and Records are
complete and accurate in all material respects. Seller Parties have made
available to Purchasers on or prior to the Closing Date copies of all material
written underwriting and claim service policies, procedures and guidelines
relating to the Business.
20
<PAGE>
Section 3.19 Cancellation; Threats of Cancellation.
(a) Except as disclosed in Schedule 3.19(a), since June 19,
2000, no Insured, reinsurer with respect to the Business or Persons writing,
selling, or producing, either directly or through reinsurance assumed, the
Insurance Contracts and the Related Customer Contracts for the Business, has
terminated its relationship with a Reliance Subsidiary.
(b) Except as disclosed in Schedule 3.19(b), since June 19,
2000, to the knowledge of a Seller Party, no reinsurer of the Business has
threatened to terminate its reinsurance with the Seller Parties with respect to
the Insurance Contracts.
Section 3.20 Brokers. Except for Donaldson, Lufkin & Jenrette
Securities Corp. and Bear Stearns & Co. Inc., there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of any Seller Party who might be entitled to any fee or
commission upon consummation of the transactions contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers jointly and severally represent and warrant to
Seller Parties that:
Section 4.1 Corporate Existence and Power. KCI is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Illinois and has the corporate power and authority to own, lease
and operate its assets and to carry on its business as it is now being
conducted. Kemper is an insurance company duly organized, validly existing and
in good standing under the laws of the state of Illinois and has the corporate
power and authority to own, lease and operate its assets and to carry on its
business as it is now being conducted. Lumbermens is a mutual insurance company
duly organized, validly existing and in good standing under the laws of the
state of Illinois and has the power and authority to own, lease and operate its
assets and to carry on its business as it is now being conducted.
Section 4.2 Corporate Authorization. The execution, delivery
and, subject to the receipt of the approvals referred to in Section 4.3,
performance by Purchasers of this Agreement and the Ancillary Agreements are
within the corporate powers of Purchasers and have been duly authorized by all
necessary corporate action on the part of Purchasers. This Agreement
constitutes, and when executed and delivered each other Ancillary Agreements
will constitute, a valid and legally binding
21
<PAGE>
agreement of Purchasers, enforceable against Purchasers in accordance with its
terms, subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and the rights of creditors
of insurance companies generally and (ii) general principles of equity
(regardless of whether considered in a proceeding at law or in equity).
Section 4.3 Governmental Authorization. The execution,
delivery and performance by Purchasers of this Agreement and each other
Ancillary Agreement requires no action by or in respect of, or filing with, any
Governmental Entity on the part of Purchasers or any Affiliate thereof other
than (i) filings and notices not required to be made or given until after the
Closing Date, (ii) filings, at any time, of Tax Returns and (iii) any such other
action or filing not contemplated in the preceding clauses (i) and (ii) as to
which the failure to make or obtain would not, individually or in the aggregate,
materially impair the ability of Purchasers to novate, write and/or reinsure the
Business.
Section 4.4 Non-Contravention. The execution, delivery and
performance by Purchasers of this Agreement and the Ancillary Agreements do not
and will not (i) violate the certificate of incorporation or by-laws of
Purchasers, (ii) assuming compliance with the filings, notices, approvals and
other matters referred to in Section 4.3, violate any Applicable Law, (iii)
require any consent or other action by any Person under, constitute a default
under, or give rise to any right to termination, cancellation or acceleration of
any right or obligation of Purchasers or to a loss of any benefit to which
Purchasers are entitled under, any material agreement or other instrument
binding upon Purchasers or any material license, franchise, permit or other
similar authorization held by Purchasers or (iv) result in the creation or
imposition of any material Lien on any material assets.
Section 4.5 Licenses and Permits. Kemper and its Insurer
Affiliates have all Permits necessary to novate, write and/or reinsure the
Insurance Contracts and the Related Customer Contracts and otherwise perform
their obligations under this Agreement and each Ancillary Agreement. All such
Permits are valid and in full force and effect, and Purchasers are not operating
under any agreement or understanding with any Governmental Entity which
restricts their authority to do business or requires Purchasers to take, or
refrain from taking, any action relating to the conduct of the Business
otherwise permitted by Applicable Law. No material violations exist in respect
of any such Permit and no investigation or proceeding is pending or, to the
knowledge of Purchasers, threatened, which would reasonably be expected to
result in the revocation, amendment, failure to renew, limitation, modification,
suspension or revocation of any such Permit and, to the knowledge of Purchasers,
there is no reasonable basis for the assertion of any such violation or the
institution of any such proceeding or investigation.
22
<PAGE>
Section 4.6 Brokers. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Purchasers who might be entitled to any fee or commission upon
consummation of the transactions contemplated by this Agreement.
Section 4.7 Solvency; Adequate Capitalization; Ability to Pay
Debts. Purchasers are and, prior to and immediately after giving effect to the
consummation of this Agreement and the Ancillary Agreements, will be Solvent and
not Impaired. Purchasers are not subject to any supervision, conservation,
liquidation, rehabilitation, delinquency or similar proceeding, or investigation
or inquiry which is reasonably likely to result in any such proceeding, under
Applicable Law.
ARTICLE 5
COVENANTS
Section 5.1 Transfer of the Business.
(a) To the extent permitted by Applicable Law and contractual
obligations, Seller Parties shall afford Purchasers and their Affiliates
reasonable access during normal business hours and without undue disruption of
business to all of the Books and Records, and shall furnish promptly to
Purchasers and their Affiliates copies of such records, documents, data and
information contained in the Books and Records as Purchasers or such Affiliates
shall reasonably request, for the purpose of assisting Purchasers and their
Affiliates in assessing the Business and in novating, writing and/or reinsuring
the Insurance Contracts and the Related Customer Contracts as they shall seek to
novate, write and/or reinsure in their sole discretion. Purchasers covenant and
agree that they shall not, and shall not permit any of their Affiliates to, use
the Books and Records in a manner that would cause Seller Parties to be in
breach of any contract with any of their agents or brokers.
(b) To the extent permitted by Applicable Law and contractual
obligations, and subject to receipt of written consent of the applicable
employees, Seller Parties shall afford Purchasers and their Affiliates
reasonable access during normal business hours and without undue disruption of
business to all employment records of Seller Parties' employees who have
responsibility for the Business, and shall furnish promptly to Purchasers and
their Affiliates copies of such records as Purchasers or such Affiliates shall
reasonably request, for the purpose of assisting them in determining whether to
offer employment to any such employees. Seller Parties hereby consent to any
such offers of employment by Purchasers and their Affiliates and acknowledges,
subject to Section 5.10, that such offers shall be made in the sole discretion
of Purchasers and their Affiliates.
23
<PAGE>
(c) To the extent permitted by Applicable Law and contractual
obligations, and subject to receipt of written consent of the applicable agents
and brokers if required under any Seller Party's agency or brokerage contract
with such agent or broker, Seller Parties shall afford Purchasers and their
Affiliates reasonable access during normal business hours and without undue
disruption of business to all of their records relating to the agents and
brokers who produced the Business, and shall furnish promptly to Purchasers and
their Affiliates copies of such records as Purchasers and such Affiliates shall
reasonably request, for the purpose of assisting Purchasers and their Affiliates
in determining whether to enter into agreements with any such customers, agents
and brokers of the Business. Purchasers covenant and agree that they shall not,
and shall not permit any of their Affiliates to, use such records in a matter
that would cause Seller Parties to be in breach of any contract with any of
their customers, agents or brokers.
Section 5.2 Novation of the Business.
(a) With respect to those risks meeting Purchasers'
underwriting standards and other requirements, Kemper or one of its Insurer
Affiliates will consider offering, in their sole discretion, replacement
coverages to customers of the Business retroactive to the policy inception date
(for one-year policies) or the policy anniversary date (for multi-year policies)
(the "Novation Date") (collectively, the "Novated Policies"). For those risks
which Purchasers, in their sole discretion, decide not to retroactively insure,
Kemper or one of its Insurer Affiliates will agree to consider renewing at the
end of the applicable policy period. Notwithstanding any other provision in this
Agreement or any of the Ancillary Agreements to the contrary, Purchasers shall
have no obligation to offer novations, renewals or other replacement coverages
for any individual risk or account or any class of risks or accounts which do
not meet Purchasers' underwriting standards and other requirements.
(b) Upon request by Kemper or one of its Insurer Affiliates,
Seller Parties shall promptly (i) execute a form of the Novation Agreement,
endorsements and any other related agreements with individual customers of the
Business necessary to transfer the Business, and (ii) cancel any Interstate
Commerce Commission filings or other certificates pertaining to the Novated
Policies.
(c) After the Closing, Seller Parties shall promptly notify
the Purchasers of any inquiry from customers of the Business with respect to the
Novated Policies and shall reasonably coordinate in all respects with the
Purchasers in responding to any inquiries involving such Novated Policies from
third parties, including brokers, customers, rating agencies and others.
(d) Purchasers will be entitled to receive from Seller
Parties, on a monthly bordereau basis, upon providing notice that it is
novating, writing and/or reinsuring any of the Insurance Contracts and Related
Customer Contracts, all of the
24
<PAGE>
unearned Profit and Administration Charges due and payable with respect to
periods on and after the date a Novation is executed plus 100% of the Insurance
Premium Charges (less paid losses, net of reinsurance recoverables, relating to
such paid losses) for the Novation Period (the "Charges"); provided, however, in
the event Parent or any of the Reliance Subsidiaries has been placed in, or has
filed for, bankruptcy, insolvency, rehabilitation, conservation or any other
delinquency proceedings, Purchasers shall have the right to collect all unpaid
Charges pertaining to the Insurance Contracts and Related Customer Contracts
directly from the customers of the Business.
(e) Seller Parties shall retain for their own account all
Profit and Administration Charges relating to periods prior to the execution
date of a Novation.
Section 5.3 Cooperation. Seller Parties and Purchasers shall
cooperate with each other by furnishing any additional information and executing
and delivering any additional documents as may be reasonably requested by the
other party to further perfect or evidence the consummation of, or otherwise
implement, any transaction contemplated by this Agreement or the Ancillary
Agreements, including, but not limited to, the Novation of certain Insurance
Contracts and Related Customer Contracts; provided, however, that any such
additional documents must be reasonably satisfactory to each of the parties and
not impose upon either party any material liability, risk or obligation not
contemplated by this Agreement or the Ancillary Agreements. Seller Parties and
Purchasers shall cooperate with each other by furnishing any additional
information and executing and delivering any additional documents as may be
reasonably requested by the other party for use in the preparation of such
party's regulatory filings, financial statements or Tax Returns.
Section 5.4 Obligation to Obtain Permits. Seller Parties and
Purchasers will cooperate fully in (i) obtaining all necessary additional
federal, state, local and any other approval and/or consent that may be required
to consummate the transactions contemplated hereby and (ii) complying with any
notice or filing requirements of such jurisdiction, required to consummate the
transactions contemplated hereby. Each party will be responsible for its own
fees and expenses in connection therewith.
Section 5.5 Licenses and Permits.
(a) Kemper and its Insurer Affiliates will use their
reasonable best efforts to obtain all Permits, rates and forms necessary to
enable them to novate, write and/or reinsure the Novated Policies and the
Related Customer Contracts and to perform their obligations under this Agreement
and each Ancillary Agreement.
(b) Until July 1, 2001, Seller Parties will use their
reasonable best efforts to maintain all existing Permits, rates and forms
necessary to enable Kemper
25
<PAGE>
or one of its Insurer Affiliates to novate, write and/or reinsure the Novated
Policies and the Related Customer Contracts.
Section 5.6 Regulatory Compliance. Purchasers, Seller Parties
and their respective agents, Representatives and Affiliates shall comply in all
material respects with all laws, regulations, administrative orders, bulletins
and governmental pronouncements applicable to their conduct in performing their
obligations under this Agreement and the Ancillary Agreements.
Section 5.7 Third Party Consents.
(a) Seller Parties shall use their reasonable best efforts to
obtain (i) approvals from reinsurers of the Business to either novate and/or
replicate Seller Parties' reinsurance program relating to the Business for the
benefit of Purchasers and (ii) any consents or approvals from Third Party
Administrators and captive reinsurance companies required in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements. Kemper
shall be responsible for any costs payable to a third party which are incurred
in obtaining such third party's consent necessary for the consummation of the
transactions contemplated hereby. Seller Parties will not incur any costs which
are reimbursable by Kemper without Kemper's consent.
(b) Prior to the Closing Date, Seller Parties shall have
obtained the consent of Leucadia National Corporation to enter into the
transactions contemplated by this Agreement and the Ancillary Agreements.
Section 5.8 Exclusive Right to Use the Books and Records.
(a) Each Seller Party acknowledges that the intent of this
Agreement and the Ancillary Agreements is to convey to Purchasers copies of the
Books and Records, data and information relating to the Business (collectively,
the "Information").
(b) Seller Parties agree that the covenant in this Section 5.8
is for the benefit of Purchasers and each of their Affiliates.
Section 5.9 Use of Names.
(a) Except as contemplated by this Agreement or any of the
Ancillary Agreements, neither party to this Agreement shall have any right to
use, nor shall any such party use, any corporate name or acronym of the other
party hereto or any of its Affiliates in any jurisdiction, or any other name,
term or identification that suggests, simulates or is otherwise confusing due to
its similarity to the foregoing.
26
<PAGE>
(b) The parties hereto acknowledge and agree that any damage
caused to a party hereto or any of its Affiliates by reason of a material breach
by the other party or any of its Affiliates of this Section 5.9 would cause
irreparable harm that could not be adequately compensated for in monetary
damages alone; therefore, each party agrees that, in addition to any other
remedies, at law or otherwise, the non-breaching party and any of its Affiliates
shall be entitled to an injunction issued by a court of competent jurisdiction
restraining and enjoining any violation by the other party or any of its
Affiliates of this Section 5.9.
Section 5.10 Employee Matters.
(a) For every ten (10) Insureds which Purchasers reasonably
anticipate will agree to the transfer of their Insurance Contracts to
Purchasers, Purchasers shall as soon as practicable following the Closing Date
extend an offer of employment to one (1) employee of the Business engaged in
underwriting activities whom Purchasers deems appropriate.
(b) For every fifteen (15) Insureds which Purchasers
reasonably anticipate will agree to the transfer of their Insurance Contracts to
Purchasers, Purchasers shall as soon as practicable following the Closing Date
extend an offer of employment to one (1) account claims manager of the Business
whom Purchasers deem appropriate.
(c) Purchasers shall consider hiring among employees of the
Seller Parties necessary management and support staff to administer the
Business; provided, however, Purchasers shall offer employment on terms and
conditions Purchasers deem appropriate. For the avoidance of doubt, Purchasers
shall not have incurred or assumed any liabilities of any nature whatsoever
relating to pre-Closing employee and employee benefit matters of Seller Parties.
Section 5.11 Apportionment of Collateral.
(a) Seller Parties and Purchasers agree to take whatever
action is required to apportion or establish collateral for all Novated Policies
in conformity with this Section 5.11.
(b) On the date of execution of the Novation Agreement, Seller
Parties and Kemper shall each use reasonable best efforts to cause the customers
of the Business, in a manner mutually agreeable to all parties, to transfer
collateral to Kemper or one of its Insurer Affiliates equal to 100% of the
actuarially determined expected ultimate outstanding losses and loss adjustment
expenses including ultimate outstanding unallocated loss adjustment expense as
of the date of execution of a Novation Agreement relating to the Novated Policy
times a fraction, the numerator of which is the aggregate dollar amount of all
collateral held by Seller Parties for all
27
<PAGE>
policy years for a particular customer of the Business and the denominator of
which is the actuarially determined expected ultimate outstanding losses and
loss adjustment expenses including ultimate outstanding unallocated loss
adjustment expenses as of the date of the execution of a Novation Agreement for
all policy years with respect to the particular customer.
(c) Acceptable collateral include the following: (i) letters
of credit issued by banks rated A or B by LACE Financial Corporation; (ii) trust
accounts; (iii) cash with security and pledge agreements; and (iv) surety bonds
at no more than 20% of total collateral. For accounts for which the collateral
does not meet the above criteria, in whole or in part, Seller Parties and
Purchasers shall negotiate a mutually agreeable allocation of the collateral.
(d) With respect to Insureds, whose Insurance Contracts which
have been novated, written and/or reinsured by Kemper or any of its Insurer
Affiliates between June 19, 2000 and June 19, 2001, Seller Parties shall
promptly permit such Insureds to adjust held collateral to the level of expected
ultimate outstanding losses and loss adjustment expenses, including ultimate
outstanding unallocated loss adjustment expenses as of the date of each policy
anniversary, as determined by a standard actuarial review to be conducted within
30 days of such policy anniversary date, for expired policy years for Insurance
Contracts not novated, written and/or reinsured by Kemper or any of its Insurer
Affiliates. In the case of accounts which have become Financially Distressed,
Seller Parties may hold in excess of 100% collateralization, subject to approval
of Purchasers, which approval shall not be unreasonably withheld, delayed or
conditioned.
Section 5.12 Non-Compete.
(a) Except as contemplated by this Agreement or any of the
Ancillary Agreements, until 36 months from the date hereof (the "Non-Compete
Period"), Reliance and its insurer subsidiaries shall not (i) solicit, quote or
underwrite, directly or indirectly, any of the Novated Policies and Related
Customer Contracts, (ii) enter into any partnership, joint venture or other
similar agreements or arrangements that would allow Reliance, any of its insurer
subsidiaries or such partnership, joint venture or similar entity to solicit,
quote or underwrite, directly or indirectly, any of the Novated Policies and
Related Customer Contracts, (iii) establish or acquire any entity which would
solicit, quote or underwrite, directly or indirectly, any of the Novated
Policies and Related Customer Contracts, (iv) generally take any actions which
would allow Reliance or any of its insurer subsidiaries to solicit, quote or
underwrite any of the Novated Policies and Related Customer Contracts directly
or indirectly, other than through broad-based general marketing methods not
specifically targeted towards the customers under the Novated Policies and
Related Customer Contracts; provided, however, that any inadvertent
non-compliance by Reliance or any of its insurer subsidiaries with the terms of
this Section 5.12 shall not be deemed
28
<PAGE>
a breach hereof; provided, further, that any non-compliance by Reliance or any
of its insurer subsidiaries with the terms of this Section 5.12, which occurs
incidentally as a result of a stock or asset acquisition, joint venture, merger,
consolidation, amalgamation, business combination or assumption or insurance
program shall not be deemed a breach thereof. Subject to Applicable Law, with
respect to any Insurance Contract which has expired or terminated in accordance
with its terms, Reliance and its insurer subsidiaries shall not offer to renew,
rewrite or assume reinsurance with respect to such policy until 180 days after
the expiration or termination date of such policy. Subject to Applicable Law,
with respect to (A) any Insurance Contracts with respect to which Kemper has
notified Reliance pursuant to the immediately succeeding sentence that Kemper
and its Insurer Affiliates do not intend to novate, write and/or reinsure such
policy and (B) any Insurance Contracts otherwise expiring or terminating,
Reliance and its insurer subsidiaries shall not offer to renew or rewrite any
such policy until 10 days after the expiration or termination date of such
policy, and the provisions of Section 5.12 shall thenceforth not apply with
respect to such policy. Kemper shall notify Reliance in writing promptly
following its determination not to novate, write and/or reinsure an Insurance
Contract.
(b) Reliance and its insurer subsidiaries shall not, during
the Non-Compete Period, assist any Person not a party to this Agreement to
compete, directly or indirectly, with Kemper and its Insurer Affiliates for the
Business.
(c) Notwithstanding the foregoing, Reliance and its insurer
subsidiaries may not, directly or indirectly, take any action, or facilitate,
permit or encourage any other Seller Party, Affiliate thereof not bound by the
provisions of Section 5.12 or unaffiliated third party to, directly or
indirectly, take any action , which would involve the use of, or sale or other
transfer to an Affiliate thereof not bound by the provisions of Section 5.12 or
unaffiliated third party of, any of the Information relating to either (i) the
Novated Policies and Related Customer Contracts or (ii) any other Insurance
Contracts and Related Customer Contracts. The provisions of this paragraph shall
apply until the earlier of (i) June 19, 2001 and (ii) six months following a
determination by Kemper and/or its Insurer Affiliates whether to enter, or
refrain from entering, into a Novation with respect to any such Novated
Insurance Policy or other Insurance Contract.
(d) Notwithstanding any other provision of this Section 5.12
to the contrary, Reliance and its insurer subsidiaries shall not be prohibited
from (A) making investments of assets in the ordinary course of business in
entities that compete, directly or indirectly, with the Business, provided that
each such investment is a passive investment where neither Reliance nor any of
its insurer subsidiaries (i) intends to or has the right to influence or direct
the operation or management of any such entity or (ii) is a participant with any
other Person in any group with such intention or right; (B) making investments
in Purchaser and its Affiliates; (C) acquiring any business that includes
operations the conduct of which by Reliance and its
29
<PAGE>
insurer subsidiaries would otherwise violate paragraph (a) above, provided that
(i) such operations do not, in the aggregate, represent more than ten (10)
percent of the consolidated assets or contribute more than ten (10) percent of
the consolidated revenues of the overall business so acquired and (ii) Reliance
or such insurer subsidiary, as applicable, sells or otherwise disposes of any
such operations within twelve (12) months of such acquisition (regardless of
whether such twelve (12) month period would terminate subsequent to the
prohibition contained in this Section 5.12(d)); provided, however, that Reliance
and its insurer subsidiaries agree that they shall not, directly or indirectly,
take any action which would facilitate conduct by any Person (including, but not
limited to, Seller Parties, Affiliate thereof not bound by the provisions of
Section 5.12(a) or unaffiliated third party) who competes, directly or
indirectly, with the Business that would, if engaged in by Reliance or its
insurer subsidiaries, be inconsistent with the provisions of this Section 5.12;
(D) managing investment funds that make investments in the ordinary course of
business in such entities; (E) subject to Section 5.19(c), selling Parent or any
of its assets or businesses to a Person engaged in lines of business that
compete with the Business; (F) performing their respective obligations under the
Ancillary Agreements pursuant to the express terms thereof; (G) conducting any
business of any nature whatsoever outside of the United States, or with Persons
who or which are not citizens of the United States or organized under laws of
the United States or any state thereof, other than relating to the Insurance
Contracts and Related Customer Contracts; or (H) writing, renewing and/or
assuming reinsurance with respect to any Insurance Contract and Related Customer
Contract (i) following 180 days from the expiration or termination of such
Insurance Contract or (ii) which Kemper and its Insurer Affiliates do not intend
to novate, write or reinsure.
(e) The parties to this Agreement acknowledge that the
covenants set forth in this Section 5.12 are an essential element of this
Agreement and that, but for these covenants, the parties would not have entered
into this Agreement. The parties to this Agreement acknowledge that this Section
5.12 constitutes an independent covenant and shall not be affected by
performance or nonperformance of any other provision of this Agreement or any
Ancillary Agreement by the parties.
(f) The parties to this Agreement acknowledge that the type
and periods of restriction imposed in the provisions of this Section 5.12 are
fair and reasonable and are reasonably required for the protection of the
parties. If any of the restrictions or covenants in paragraphs (a), (b) or (c)
of this Section 5.12 are hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions. If any of the
restrictions or covenants contained in paragraphs (a), (b) or (c) of this
Section 5.12, or any portion thereof, are deemed to be unenforceable because
such covenant or restriction is held to cover a geographic area or to be of such
duration as is not permitted under Applicable Law, the parties agree that the
court making such determination shall have the power to reduce the duration
and/or
30
<PAGE>
areas of such provision and, in its reduced from, said provision shall then be
enforceable. The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in paragraphs (a), (b) or (c) of this Section
5.12 upon the courts of any state or other jurisdiction within the geographical
scope of such covenants. In the event that the courts of any one or more of such
jurisdictions shall hold such covenants wholly unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the parties hereto
that such determination not bar or in any way affect the parties' rights to the
relief provided above in the courts of any states or jurisdictions within the
geographical scope of such covenants as to breaches of such covenants in such
other respective states or jurisdictions, the above covenants as they relate to
each such jurisdiction being, for this purpose, severable into diverse and
independent covenants.
(g) If any party hereto commits a breach, or is about to
commit a breach, of any of the provisions of this Section 5.12 each of the other
parties hereto shall have the right to have the provisions of this Section 5.12
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach may cause
irreparable injury to each of the non-breaching parties and that money damages
may not provide an adequate remedy to such parties. In addition, in connection
with this Section 5.12, each of the parties hereto may take all such other
actions and remedies available to it under law or in equity and shall be
entitled to such damages as it can show it has sustained by reason of such
breach.
(h) Seller Parties agree that the covenants in this Section
5.12 are for the benefit of Purchaser and each of its Affiliates.
Section 5.13 Non-Solicitation of Certain Employees. The
Purchasers covenant and agree that, for a period of one (1) year following the
Closing Date, neither it nor any of its subsidiaries or Affiliates will, and the
Purchasers shall cause their subsidiaries and Affiliates not to, solicit,
recruit or hire any of the Persons listed on Schedule 5.13 hereto; provided,
however, that (A) if Reliance does not outsource the performance of Information
Technology Transition Services by September 30th, 2000, then Ray Rossi and two
other Persons listed on Schedule 5.13 that are mutually agreed to by the parties
may be solicited, recruited or hired notwithstanding the provisions of this
Section 5.13 and (B) if Ray Rossi and the other Persons referred to in the
foregoing clause (A) are actually hired by Purchasers or their subsidiaries or
Affiliates, then within a reasonable time period thereafter Reliance shall not
be obligated to continue to provide support for the WIN System. Notwithstanding
the foregoing, nothing shall prohibit Purchasers from hiring (i) any Person who
contacts Purchasers or their subsidiaries or Affiliates on his or her own
initiative without any direct or indirect solicitation by Purchasers or their
subsidiaries or Affiliates, (ii) Persons who respond to a general solicitation
or advertisement that is not specifically directed only to the employees of
Seller Parties; (iii) Persons who are referred to
31
<PAGE>
Seller Parties by search firms, employment agencies or other similar entities
provided that such entities have not been instructed to solicit the employees of
Purchaser or (iv) Persons who have ceased being employed by Purchaser without
having been solicited by Seller Parties.
Section 5.14 Non-Renewal. Nothing in this Agreement shall be
deemed to prohibit the Seller Insurer Parties from issuing any notice of
non-renewal required under Applicable Law with respect to any Insurance Contract
and Related Customer Contract.
Section 5.15 [Intentionally Omitted].
Section 5.16 Software License Agreement; Use of Third Party
Computer Programs. (a) With respect to all Third Party Computer Programs not
used exclusively in the Business as that business is conducted as of the date
hereof, Seller Parties shall assist and use their reasonable best efforts to
enable Purchasers to (i) obtain a separate license in the name of the entities
to be designated by Purchasers, such license to grant equivalent or greater
rights than Purchasers' in the Third Party Computer Programs; or (ii) obtain
equivalent or greater rights in the Third Party Computer Programs under existing
licenses, in the name of the entities to be designated by Purchasers. The
foregoing choice with respect to Third Party Computer Programs shall be at
Purchasers' election, but only to the extent permitted by the applicable third
party vendor.
(b) In the event that Seller Parties are unable to effect the
transfer or license to the Purchasers of any such Computer Programs, Seller
Parties shall continue following the Closing to use their reasonable best
efforts to effect such transfer or license in accordance with this Section 5.16,
and shall in the interim make arrangements for the provision of replacement
Computer Programs to the Purchasers, which replacement Computer Programs shall
be reasonably acceptable to Purchasers.
Section 5.17 Confidentiality. Each party hereto (Seller
Parties and Purchasers each to be considered to be one party for purposes of
this Section 5.17) will hold, and will use its commercially reasonable efforts
to cause its Affiliates, and their respective Representatives to hold, in strict
confidence from any Person (other than any such Affiliates or Representatives),
except with the prior written consent of the other party or unless (i) compelled
to disclose by judicial or administrative process (including without limitation
in connection with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of governmental or regulatory authorities) or
by other requirements of Applicable Law, (ii) disclosed in an action or
proceeding brought by a party hereto in pursuit of its rights or in the exercise
of its remedies hereunder or (iii) disclosed in conjunction with such party's
communications with any agent, producer or broker, all documents and information
concerning the other party or any of its Affiliates furnished to it by
32
<PAGE>
the other party or such other party's Representatives in connection with this
Agreement or any Ancillary Agreement or the transactions contemplated hereby or
thereby, except to the extent that such documents or information can be shown to
have been (a) previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after the furnishing
of such documents or information hereunder) through no fault of such receiving
party or (c) later acquired by the receiving party from another source if the
receiving party is not aware that such source is under an obligation or duty to
another party hereto to keep such documents and information confidential;
provided that following the Closing the foregoing restrictions will not apply to
Purchaser's use of documents and information relating exclusively to the
Business and Transferred Assets furnished by Seller Parties hereunder. In the
event the transactions contemplated by this Agreement are not consummated, upon
the request of the other party, each party hereto will, and will cause its
Affiliates and their respective Representatives to promptly redeliver or cause
to be redelivered all copies of confidential documents and information furnished
by the other party in connection with this Agreement or any Ancillary Agreement
or the transactions contemplated hereby or thereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings related thereto or based thereon prepared by the party furnished such
documents and information or its Representatives.
Section 5.18 Public Announcements and Communications. Seller
Parties and Purchasers will consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement
and the transactions contemplated hereby and will not issue any such press
release or make any such public statement without the consent of the other
unless such action is required by law or the rules of the New York Stock
Exchange. Any consent requested by a party hereunder shall not be unreasonably
withheld or delayed.
Section 5.19 Certain Obligations. Seller Parties shall remain
solely and exclusively liable for any claim relating to the Novated Policies and
Related Customer Contracts which arises from any bad faith and willful
misconduct by any Seller Party for Extra Contractual Liabilities attributable to
acts or omissions of a Seller Party prior to the date of execution of a Novation
Agreement. Purchasers shall cooperate with Seller Parties to attempt to assure
that third parties, including, but not limited to, Insureds, reinsurers and
third party administrators, remain liable to Seller Insurer Parties for any
Extra Contractual Liabilities but only to the extent that they would have been
liable in the absence of this Agreement.
Section 5.20 Key Employee. At Kemper's option, Reliance will
continue to offer employment to Bill Watson to manage the Business for Reliance
and to act as Reliance's empowered representative for transition until June 15,
2001 at Reliance's sole expense. Kemper may, at any time upon giving Reliance
thirty (30) days written notice, extend an offer of employment to Bill Watson.
33
<PAGE>
ARTICLE 6
SURVIVAL; INDEMNIFICATION
Section 6.1 Survival. All representations and warranties made
by Seller Parties and Purchasers in Articles III and IV of this Agreement, in
the Ancillary Agreements and in any document, certificate, schedule or
instrument delivered or executed in connection herewith or therewith shall
survive for a period of 24 months after the date hereof, whereupon they shall
expire, and all claims for breach of said representations and warranties will be
deemed waived unless the non-breaching party notifies the breaching party of the
matters constituting the breach prior to the expiration of said 24-month period.
All covenants, undertakings and agreements contained in this Agreement, the
Ancillary Agreements or any document, certificate, schedule or instrument
delivered or executed in connection herewith or therewith to be performed or
complied after the date hereof shall survive for the period of the applicable
statute of limitations.
Section 6.2 Indemnification. (a) Seller Parties hereby
indemnify Purchaser and its Affiliates against and agrees to hold each of them
harmless on an after-Tax basis (subject to Section 6.2(c)) from any and all
damage, loss, liability and expense (including, without limitation, reasonable
attorneys' fees and reasonable expenses of investigation in connection with any
action, suit or proceeding) ("Damages"), incurred or suffered by Purchaser or
any Affiliate of Purchaser, arising out of (i) any misrepresentation or breach
of warranty, covenant or agreement made or to be performed by Seller Parties
pursuant to this Agreement (other than pursuant to Article 6), (ii) the
operation of the Business prior to the Closing, (iii) any claim by any present
or former employee of a Seller Party or Affiliate thereof, including, without
limitation, the Transferred Employees, which arises under federal, state or
local statute (including, without limitation, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act
of 1990, the Equal Pay Act, the Americans with Disabilities Act of 1990, ERISA
and all other statutes regulating the terms and conditions of employment),
regulation or ordinance, under the common law or in equity (including any claims
for wrongful discharge or otherwise), or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between a Seller
Party or Affiliate thereof and such present or former employee, which arose out
of any action, event or omission that occurred (or, in the case of omissions,
failed to occur) prior to the Closing, or (iv) the enforcement of their rights
under this Section 6.2; provided, however, that Seller Parties shall not be
liable under the foregoing clause (i) of this Section 6.2(a) for any
misrepresentation or breach of warranty (x) unless the aggregate amount of
Damages with respect to all misrepresentations and breaches of warranties
referred to in this Section 6.2(a) exceeds 1 1/2% of the aggregate payments made
(at the time the indemnification claim is paid) pursuant to Section 2.5 and (y)
in an amount exceeding
34
<PAGE>
100% of the aggregate payments made (at the time the indemnification claim is
paid) pursuant to Section 2.5.
(b) Purchasers hereby indemnify Seller Parties and their
Affiliates against and agrees to hold each of them harmless on an after-Tax
basis (subject to Section 6.2(c)) from any and all Damages incurred or suffered
by Seller Parties or any of its Affiliates arising out of (i) any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by Purchasers pursuant to this Agreement, (ii) the enforcement of
their rights under this Section 6.2, (iii) any liability under any Insurance
Contract and Related Customer Contracts novated, written and/or reinsured by
Kemper or its Insurer Affiliates, (iv) the operation of the Business following
the Closing as it relates to Insurance Contracts and Related Customer Contracts
novated, written and/or reinsured by Kemper or its Insurer Affiliates, (v) any
action (or failure to act) by Purchasers in violation of Applicable Law, with
respect to the hiring or terms of employment of any person who is an Employee
immediately before the Closing Date, or (vi) any claim by any present or former
employee of a Seller Party or Affiliate thereof, including, without limitation,
the Transferred Employees, which arises under federal, state or local statute
(including, without limitation, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1990, the
Equal Pay Act, the Americans with Disabilities Act of 1990, ERISA and all other
statutes regulating the terms and conditions of employment), regulation or
ordinance, under the common law or in equity (including any claims for wrongful
discharge or otherwise), or under any employee benefit plan or program of
Purchasers or any Affiliate of Purchasers, or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between
Purchasers or an Affiliate thereof and such present or former employee, which
arose out of any action, event or omission that occurred (or, in the case of
omissions, failed to occur) following the Closing provided, however, that
Purchasers shall not be liable under the foregoing clause (i) of this Section
6.2(b) for any misrepresentation or breach of warranty (x) unless the aggregate
amount of Damages with respect to all misrepresentations and breaches of
warranties referred to in this Section 6.2(b) exceeds 1 1/2% of the aggregate
payments made (at the time the indemnification claim is paid) pursuant to
Section 2.5 and (y) in an amount exceeding 100% of the aggregate payments made
(at the time the indemnification claim is paid) pursuant to Section 2.5.
(c) Required payments by any Indemnifying Party (as
hereinafter defined) pursuant to this Article 6 shall be limited to the amount
of any Damages that remains after deducting therefrom (i) any insurance proceeds
recoverable by any Indemnified party (less any increase in premium reasonably
related to the incurrence of such Damages) and (ii) any indemnity, contribution
or other similar payment recoverable by any Indemnified Party from any third
party, in each case with respect to such Damages. The Indemnified Party shall
use commercially reasonable efforts to
35
<PAGE>
collect all such insurance proceeds and indemnity, contribution and other
similar payments.
Section 6.3 Procedures for Third Party Claims. (a) The party
seeking indemnification under Section 6.2 (the "Indemnified Party") agrees to
give prompt notice (in accordance with Section 7.11) to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding in respect of which indemnity
may be sought under Section 6.2 (the "Third Party Claims"). Such notice referred
to in the preceding sentence shall state the relevant facts and include
therewith relevant documents and a statement in reasonable detail as to the
basis for the indemnification sought. The failure by any Indemnified Party so to
notify the Indemnifying Party shall not relieve any Indemnifying Party from any
Liability which it may have to such Indemnified Party with respect to any claim
made pursuant to this Section 6.3, except to the extent such failure shall
actually prejudice an Indemnifying Party. In the event of the assertion of any
claim or the commencement of any suit, action or proceeding in respect of which
indemnity would be sought by the Indemnified Party but for the fact that the
notice of such claim, suit, action or proceeding was sent to the Indemnifying
Party, the Indemnifying Party shall give prompt notice to the Indemnified Party
of such claim, suit, action or proceeding.
(b) Upon receipt of notice from the Indemnified Party pursuant
to Section 6.3(a), the Indemnifying Party will have the right to, subject to the
provisions of Section 6.3(c), assume the defense and control of such Third Party
Claims. In the event the Indemnifying Party assumes the defense of a Third Party
Claim, the Indemnified Party shall have the right but not the obligation to
participate in the defense of such Third Party Claim with their own counsel and
at their own expense (except as provided in Section 6.3(c)) and the Indemnifying
Party will cooperate with the Indemnified Party. Any election by an Indemnifying
Party not to assume the defense of a Third Party Claim must be received by the
Indemnified Party reasonably promptly following its receipt of the Indemnified
Party's notice delivered pursuant to Section 6.3(a). If the Indemnifying Party
elects to assume the defense of a Third Party Claim, the Indemnifying Party
shall select counsel reasonably acceptable to the Indemnified Party; shall take
all steps necessary in the defense or settlement of such Third Party Claims; and
shall at all times diligently and promptly pursue the resolution of such Third
Party Claims. The Indemnified Party shall, and shall cause each of their
Affiliates and Representatives to, cooperate fully with the Indemnifying Party
in the defense of any Third Party Claim defended by the Indemnifying Party.
(c) Except with respect to Tax Claims (as defined below), the
Indemnifying Party shall be authorized to consent to a settlement of, or the
entry of any judgment arising from, any Third Party Claim as to which the
Indemnifying Party has assumed the defense in accordance with the terms of
Section 6.3(b), without the consent of any Indemnified Party, but only to the
extent that such settlement or entry
36
<PAGE>
of judgment (i) provides solely for the payment of money by the Indemnifying
Party or imposes an obligation of confidentiality and (ii) provides a complete
release of any Indemnified Party potentially affected by such Third Party Claim
from all matters that were or could have been asserted in connection with such
claims. Except as provided in the foregoing sentence, settlement or consent to
entry of judgment shall require the prior approval of the Indemnified Party,
such approval not to be unreasonably withheld, delayed or conditioned. The
Indemnifying Party shall be authorized to consent to a settlement of, or the
entry of any judgment arising from, any audit, contest, examination, litigation
or similar proceeding as it relates to Taxes ("Tax Claims") as to which the
Indemnifying Party has assumed the defense in accordance with the terms of
Section 6.3(b) without the consent of the Indemnified Party, but only if such
settlement or entry of judgment would not be binding on the Indemnified Party or
the Business as conducted by Purchasers after the Closing (in the case where the
Indemnified Party is the Purchasers) for periods after the Closing or otherwise
cause an adverse effect to the Indemnified Party or the Business as conducted by
Purchasers after the Closing (in the case where the Indemnified Party is the
Purchasers); provided, however, that the Indemnified Party's consent as required
by this Section 6.3(c) for any settlement of, or the entry of any judgment
arising from, any Tax Claim shall not be unreasonably withheld, delayed or
conditioned.
Section 6.4 Procedures for Direct Claims. In the event any
Indemnified Party shall have a claim for indemnity against any Indemnifying
Party that does not involve a Third Party Claim, the Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying
Party. Such notice referred to in the preceding sentence shall state the
relevant facts and include therewith relevant documents and a statement in
reasonable detail as to the basis for the indemnification sought. The failure by
any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any Liability that it may have to such Indemnified Party
with respect to any claim made pursuant to this Section 6.4, it being understood
that notices for claims in respect of a breach of a representation or warranty
must be delivered prior to the expiration of the survival period for such
representation or warranty.
Section 6.5 Exclusive Remedy. The parties hereto expressly
acknowledge that (i) the provisions of this Article 6 shall be the sole and
exclusive remedy for Damages caused as a result of breaches of the
representations and warranties contained in this Agreement and (ii) no
Indemnifying Party shall be liable for punitive or treble Damages in connection
with any action, suit or proceeding brought by Purchaser against one or more
Seller Parties or by one or more Seller Parties against Purchaser.
ARTICLE 7
37
<PAGE>
MISCELLANEOUS PROVISIONS
Section 7.1 Entire Agreement. This Agreement, including all
Schedules and Exhibits attached hereto, constitute the entire contract between
the parties and there are no understandings other than as expressed in this
Agreement or the Ancillary Agreements. All Schedules and Exhibits hereto are
expressly made a part of this Agreement as fully as though completely set forth
herein. Any amendment or modification hereto shall be null and void unless made
by amendment to this Agreement, and signed by the parties affected by such
amendment.
Section 7.2 Assignment; Binding Effect. This Agreement may be
assigned by any party hereto, provided, however, that, notwithstanding such
assignment, the assigning party shall remain liable for all of its obligations
hereunder. This Agreement and the Ancillary Agreements shall apply to, and inure
to the benefit of and be binding upon and enforceable against, each party hereto
and its successors and permitted assigns.
Section 7.3 No Third-Party Beneficiaries. Nothing in this
Agreement and the Ancillary Agreements is intended or shall be construed to give
any person, other than the parties hereto, any legal or equitable right, remedy
or claim under or in respect of this Agreement or the Ancillary Agreements or
any provision contained herein, unless otherwise expressly provided herein.
Section 7.4 Setoff. Each of Seller Parties and Purchasers
agree that it shall have the right to off-set or set-off any payment due
pursuant to this Agreement or any Ancillary Agreement against any other payment
to be made pursuant to this Agreement or any Ancillary Agreement.
Section 7.5 Invalidity. Unless the invalidity or
unenforceability of any provision or portion thereof frustrates the intent of
the parties or the purpose of this Agreement or the Ancillary Agreements, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions or portions thereof. In the event that such provision
shall be declared unenforceable by a court of competent jurisdiction, such
provision or portion thereof, to the extent declared unenforceable, shall be
stricken. However, in the event any such provision or portion thereof shall be
declared unenforceable due to its scope, breadth or duration, then it shall be
modified to the scope, breadth or duration permitted by law and shall continue
to the be fully enforceable as so modified.
Section 7.6 Governing Law. This Agreement shall be deemed to
have been made under and governed by the laws of New York, without regard to New
York choice of law rules.
38
<PAGE>
Section 7.7 Jurisdiction. Each of the parties hereto
irrevocably and unconditionally submits to the exclusive jurisdiction of The
United States District Court for the Southern District of New York or, if such
court does not have jurisdiction, New York State Supreme Court in the borough of
Manhattan, for purposes of enforcing this Agreement. The parties shall take such
actions as are within their control to cause any matter contemplated hereby to
be assigned to the Commercial Division of the Supreme Court. In any such action,
suit or other proceeding, each of the parties hereto irrevocably and
unconditionally waives and agrees not to assert by way of motion, as a defense
or otherwise any claims that it is not subject to the jurisdiction of the above
court, that such action or suit is brought in an inconvenient forum or that the
venue of such action, suit or other proceeding is improper. Each of the parties
hereto also agrees that any final and unappealable judgment against a party
hereto in connection with any action, suit or other proceeding shall be
conclusive and binding on such party and that such award or judgment may be
enforced in any court of competent jurisdiction, either within or outside of the
United States. A certified or exemplified copy of such award or judgment shall
be conclusive evidence of the fact and amount of such award or judgment. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 7.11 shall be deemed effective service of process on such
party.
Section 7.8 Waiver of Jury Trial. Each of the Parties hereto
hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or related to this Agreement or the transactions
contemplated hereby.
Section 7.9 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other parties hereto.
Section 7.10 Headings. The headings in this Agreement are for
the convenience of reference only and shall not affect its interpretations.
Section 7.11 Notices. All notices and other communications
under this Agreement shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by overnight courier or certified, registered
or express mail, postage prepaid. Any such notice or other communication shall
be deemed given: (i) upon actual delivery if presented personally or sent by
facsimile transmission, (ii) one (1) Business Day following delivery to an
overnight courier or (iii) three (3) Business Days following deposit in the
United States mail, if sent by certified, registered or express mail, postage
prepaid, in each case to the following addresses:
39
<PAGE>
(i) If to Purchasers:
Kemper Casualty, Inc.
One World Trade Center
35th Floor
New York, NY 10048
Attn: James F. Meehan, General Counsel
Facsimile No.: (212) 313-4124
and
Lumbermens Mutual Casualty Company
One Kemper Drive
Long Grove, IL 60049
Attn: John Conway, General Counsel
Facsimile No.: (847) 320-4202
With concurrent copies, which shall not constitute
notice, to:
Robert J. Sullivan, Esq.
Skadden, Arps, Slate, Meagher & Flom, LLP
Four Times Square
New York, NY 10036-6522
Facsimile No.: (212) 735-2000
(ii) If to Seller Parties:
Reliance Insurance Company
77 Water Street
New York, New York 10005
Attn: General Counsel
Facsimile No.: (212) 858-9118
With concurrent copies, which shall not constitute
notice, to:
Reliance Group Holdings
Park Avenue Plaza
55 East 52nd Street, 29th Floor
New York, NY 10055
Attn: General Counsel
Facsimile No.: (212) 909-1864
40
<PAGE>
and
Jonathan L. Freedman, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Facsimile No.: (212) 259-6333
41
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Purchasers and Seller Parties as of
the date first above written.
RELIANCE GROUP HOLDINGS, INC.
By: /s/ David Grill
-------------------------------------------------
Name: David Grill
Title: Vice President & Treasurer
RELIANCE INSURANCE COMPANY
By: /s/ George Terry Van Gilder
-------------------------------------------------
Name: George Terry Van Gilder
Title: President & CEO
RELIANCE NATIONAL INDEMNITY
COMPANY
By: /s/ George Terry Van Gilder
-------------------------------------------------
Name: George Terry Van Gilder
Title: President & CEO
UNITED PACIFIC INSURANCE COMPANY
By: /s/ George Terry Van Gilder
-------------------------------------------------
Name: George Terry Van Gilder
Title: President & CEO
RELIANCE INSURANCE COMPANY OF ILLINOIS
By: /s/ George Terry Van Gilder
-------------------------------------------------
Name: George Terry Van Gilder
Title: President & CEO
<PAGE>
RELIANCE NATIONAL INSURANCE
COMPANY
By: /s/ George Terry Van Gilder
------------------------------------------------
Name: George Terry Van Gilder
Title: President & CEO
RELIANCE UNIVERSAL INSURANCE
COMPANY
By: /s/ George Terry Van Gilder
------------------------------------------------
Name: George Terry Van Gilder
Title: President & CEO
KEMPER CASUALTY, INC.
By: /s/ Dennis Kane
------------------------------------------------
Name: Dennis Kane
Title: President & CEO
KEMPER CASUALTY INSURANCE COMPANY
By: /s/ Dennis Kane
------------------------------------------------
Name: Dennis Kane
Title: President & CEO
LUMBERMENS MURUAL CASULATY
COMPANY
By: /s/ Dennis Kane
------------------------------------------------
Name: Dennis Kane
Title: President & CEO
