Question
From:
(Redacted)
Sent:
Friday, July 10, 2009 10:58 AM
To:
Verne, B. Michael
Cc:
(Redacted)
Subject: ProposedTransaction Covered by Ordinary Course Exemption
July 10, 2009
B. Michael Verne
Premerger Notification Office
Federal Trade Commission
Washington DC 20580
Dear Mike:
Thanks so much fortaking the time to talk to (redacted) and me this morning. This is to confirmthat, based on the outline of the proposed transaction described below, youagreed with our view that it was covered by the ordinary course exemption ofSection 7A(c)(1). The proposed acquisition is as follows:
(1) TheSellers are two wholly-owned subsidiaries of a diversified insurance company.Among the various types of business in which Sellers engage is a business offinancing life insurance premiums.
(2) ThePurchaser is a direct subsidiary of a bank (Federal Reserve Member) andindirect subsidiary of a bank holding companylfinancial holding company. ThePurchaser is also currently active in the life insurance premium financebusiness.
(3) Theproposed transaction is an asset purchase, for cash, of the majority ofSellers' existing domestic life insurance premium finance loan portfolio, consistingof approximately 600 loans that will be acquired by Purchaser, with aggregatereceivables having a book value well in excess of any of the currentsize-of-transaction thresholds. The transaction anticipates a simultaneoussigning and closing, planned for summer 2009.
(a) Theloans were made to borrowers to finance the payment of their life insurancepremiums.
(b) Theloans being purchased represent approximately 60% of the Sellers' lifeinsurance premium finance loan portfolio. The Sellers will remain in the lifeinsurance premium finance business.
(c) TheSellers' ultimate parent entity also includes other entities having additionallarge portfolios of other types of loans (such as real estate and consumerloans) that will be retained after the proposed sale is consummated. Ourunderstanding is that, when these other types of loans are taken into account,the loans being purchased constitute substantially less than 10% of the totalloans currently on the books of the Sellers' UPE and its controlled entities.
(4)Purchaser will be hiring approximately 21 of Sellers' approximately 25 existinglife insurance premium finance employees. Approximately 4 other employees fromthis business will remain with the Sellers and continue to service loans there.In addition, several thousand employees will continue to work for the otherlending businesses controlled by the Sellers' UPE.
(5)Although the Sellers will remain in the life insurance premium financebusiness, the parties anticipate executing a Restrictive Covenant Agreement aspart of the Transaction Documents. The Restrictive Covenant Agreement, which iscurrently being negotiated, is expected to include:
(a) a non-competitioncovenant, for a specified duration but limited to Purchaser's operations solelyin the U.S., and further limited to provide exceptions for Sellers' continuedoperation of its retained life insurance premium finance loan portfolio, in theUS as well as Canada;
(b)non-solicitation covenants regarding employees hired as part of thetransaction, and
(c)non-interference covenants related to the Purchaser's operation of its businessand customer relations post-closing.
(6) The Purchaser will notacquire any of Seller's facilities or real estate, but it will acquire certainintellectual property (including a proprietary database system) used inconnection with the life insurance premium finance business.
We understand thatyou agree with us that the transaction as described would fall within the ordinarycourse exemption. If our understanding is incorrect, please let us know as soonas possible. Otherwise, the parties will proceed with the transaction on theassumption that it is exempt from HSR reporting.