= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of Earliest Event Reported) - July 14, 2000
---------------
RELIANCE GROUP HOLDINGS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-8278 13-3082071
-------- ------ ----------
(State or other jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055
---------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212) 909-1100
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------
Not applicable
------------------------------------------------------
(Former name or address, if changed since last report)
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
Item 5. Other Events.
On July 14, 2000, Reliance Group Holdings, Inc. and certain of its
subsidiaries ("Reliance") consummated the sale (the "Sale") to Kemper Casualty,
Inc., Kemper Casualty Insurance Company and Lumbermens Mutual and Casualty
Company (collectively, "Kemper") of the renewal rights with respect to
Reliance's Risk Management Individual Large Accounts business, including
Individual Captive businesses, Construction Wrap-Ups, Large Account Division and
Group Captive businesses (the "Business").
In consideration of the Sale, Kemper paid Reliance $3,000,000 on July
14, 2000. Additionally, Kemper will pay Reliance (i) on September 15, 2000, an
amount equal to the sum of (x) 40% of the annualized Profit and Administrative
Charges (as defined in the Transfer and Purchase Agreement) and (y) 15% of the
annualized Insurance Premium Charges (as defined in the Transfer and Purchase
Agreement), for each of the insurance contracts of the Business which have been
novated, written and/or reinsured by Kemper between and including June 19, 2000
and September 12, 2000 (the "September 15th Payment"), (ii) on January 15, 2001,
an amount equal to the sum of (x) 40% of the annualized Profit and
Administrative Charges and (y) 15% of the annualized Insurance Premium Charges,
for each of the insurance contracts of the Business which have been novated,
written and/or administered by Kemper from and including June 19, 2000 until and
including January 5, 2001, exclusive of the insurance contracts which were
subject to the September 15th Payment (the "January 15th Payment"), and (iii) at
the earlier of (x) June 19, 2001 or (y) ten (10) days after the date on which
Kemper has novated, written and/or reinsured insurance contracts of the Business
with an annualized Profit and Administration Charges equal to at least
$42,700,000, inclusive of the insurance contracts of the Business which were
subject to the September 15th Payment and the January 15th Payment, $5,000,000
(the "Final Payment"). In the event (i) Kemper has not novated, written and/or
reinsured insurance contracts of the Business with an annualized Profit and
Administration Charges equal to at least $42,700,000 on or before June 19, 2001
or (ii) Reliance has materially breached any of its obligations under the
Transfer and Purchase Agreement, Kemper shall not owe Reliance the Final
Payment. In the event that Reliance has materially breached any of its
obligations under the Transition Services Agreement, the Assignment Agreement,
the Software License Agreement or a Novation Agreement (as defined in the
Transfer and Purchase Agreement), the Final Payment shall be reduced to
$3,000,000. Kemper is not assuming any liabilities in connection with the Sale.
The aggregate consideration for the Sale was determined based on an arm's length
negotiation between Reliance and Kemper.
Beginning July 14, 2000, Reliance will provide certain transition
services to Kemper in connection with the Business for no longer than one year
for specified consideration.
Prior to the Sale, no material relationship existed between Kemper and
Reliance, or any of its affiliates, any director or officer of Reliance or any
associate of any such director or officer.
2
In connection with the Sale, Reliance has entered into:
o the Transfer and Purchase Agreement (the "Transfer and
Purchase Agreement") by and among Reliance Group Holdings,
Inc., Reliance Insurance Company, Reliance National Indemnity,
United Pacific Insurance Company, Reliance Insurance Company
of Illinois, Reliance National Insurance Company, Reliance
Universal Insurance Company, Kemper Casualty, Inc., Kemper
Insurance Company and Lumbermens Mutual Casualty Company,
dated as of July 14, 2000. The Transfer and Purchase Agreement
is included herein as Exhibit 10.1.
o the Transition Services Agreement (the "Transition Services
Agreement") by and among Reliance Group Holdings, Inc.,
Reliance Insurance Company, Kemper Casualty, Inc. and Kemper
Casualty Insurance Company, dated as of July 14, 2000. The
Transition Services Agreement is included herein as Exhibit
10.2.
o the Assignment Agreement (the "Assignment Agreement") by and
among Reliance Group Holdings, Inc., Reliance Insurance
Company, United Pacific Insurance Company, Reliance Insurance
Company of Illinois, Reliance National Insurance Company,
Reliance National Indemnity Company, Reliance Universal
Insurance Company, Kemper Casualty, Inc., Kemper Casualty
Insurance Company and Lumbermens Mutual Casualty Company,
dated as of July 14, 2000. The Assignment Agreement is
included herein as Exhibit 10.3.
o Software License Agreement (the "Software License Agreement")
by and among Reliance Insurance Company, Kemper Casualty, Inc.
an Kemper Casualty Insurance Company, dated as of July 14,
2000. The Software License Agreement is included herein as
Exhibit 10.4.
The foregoing description of and reference to all of the
above-mentioned agreements and documents are qualified in their entirety by
reference to the complete texts of the agreements and documents, which are
incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
10.1 Transfer and Purchase Agreement by and among Reliance Group
Holdings, Inc., Reliance Insurance Company, Reliance National
Indemnity, United Pacific Insurance Company, Reliance
Insurance Company of Illinois, Reliance National Insurance
Company, Reliance Universal Insurance Company, Kemper
Casualty, Inc., Kemper Insurance
3
Company and Lumbermens Mutual Casualty Company, dated as of
July 14, 2000.
10.2 Transition Services Agreement by and among Reliance Group
Holdings, Inc., Reliance Insurance Company, Kemper Casualty,
Inc. and Kemper Casualty Insurance Company, dated as of July
14, 2000.
10.3 Assignment Agreement by and among Reliance Group Holdings,
Inc., Reliance Insurance Company, United Pacific Insurance
Company, Reliance Insurance Company of Illinois, Reliance
National Insurance Company, Reliance National Indemnity
Company, Reliance Universal Insurance Company, Kemper
Casualty, Inc., Kemper Casualty Insurance Company and
Lumbermens Mutual Casualty Company, dated as of July 14, 2000.
10.4 Software License Agreement by and among Reliance Insurance
Company, Kemper Casualty, Inc. an Kemper Casualty Insurance
Company, dated as of July 14, 2000.
4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended Reliance Group Holdings, Inc. has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
RELIANCE GROUP HOLDINGS, INC.
By:/s/ Lowell C. Freiberg
------------------------------
Name: Lowell C. Freiberg
Title: Executive Vice President and
Chief Financial Officer
Date: July 31, 2000
5
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Transfer and Purchase Agreement by and among Reliance
Group Holdings, Inc., Reliance Insurance Company, Reliance
National Indemnity, United Pacific Insurance Company,
Reliance Insurance Company of Illinois, Reliance National
Insurance Company, Reliance Universal Insurance Company,
Kemper Casualty, Inc., Kemper Insurance Company and
Lumbermens Mutual Casualty Company, dated as of July 14,
2000.
10.2 Transition Services Agreement by and among Reliance Group
Holdings, Inc., Reliance Insurance Company, Kemper
Casualty, Inc. and Kemper Casualty Insurance Company,
dated as of July 14, 2000.
10.3 Assignment Agreement by and among Reliance Group Holdings,
Inc., Reliance Insurance Company, United Pacific Insurance
Company, Reliance Insurance Company of Illinois, Reliance
National Insurance Company, Reliance National Indemnity
Company, Reliance Universal Insurance Company, Kemper
Casualty, Inc., Kemper Casualty Insurance Company and
Lumbermens Mutual Casualty Company, dated as of July 14,
2000.
10.4 Software License Agreement by and among Reliance Insurance
Company, Kemper Casualty, Inc. an Kemper Casualty
Insurance Company, dated as of July 14, 2000.
6