SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to __________.
Commission file number 1-5686.
THE CONTINENTAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-2610607
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, New York 10038
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 212-440-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1.00 per share New York, Midwest and Pacific
Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes ...X... No .......
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
[ ]
The aggregate market value of the voting stock of the registrant
held by non-affiliates of the registrant as of March 8, 1994 was
$1,320,757,812.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of March 8, 1994.
55,330,630 shares of Common Stock
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1993 Annual Report to Shareholders
are incorporated by reference into Parts I and II of this Report.
Portions of the registrant's Proxy Statement in connection with its
1994 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Report.
<PAGE>
PART I
Item 1. Business
General Information
The Continental Corporation ("Continental"), a New York
corporation incorporated in 1968, is an insurance holding company.
Its best known subsidiary, The Continental Insurance Company, was
organized in 1853. The principal business of Continental is the
ownership of a group of property and casualty insurance companies.
Continental's other principal subsidiaries and affiliates provide
investment management, claims adjusting and risk management services.
In 1993, Continental sold its premium financing operations; in 1992,
Continental instituted a plan to withdraw from the traditional
assumed reinsurance and marine reinsurance businesses and the
indigenous international and international marine insurance
businesses. The results of these operations are now reported as
discontinued and previously reported information has been restated
accordingly.
Financial Information Relating to Business Segments
Continental's revenues from insurance operations accounted for
approximately 97% of Continental's consolidated revenues for each of
the three years ended December 31, 1993, 1992, and 1991. The
following table sets forth certain information with respect to
Continental's business segments for each of the last three years:
<TABLE>
Year Ended December 31 (1) (2)
--------------------------------
1993 1992 1991
--------- --------- ---------
(millions)
<S> <C> <C> <C>
Revenues:
Agency & Brokerage Commercial. . . . $ 2,121.3 $ 1,919.5 $ 2,018.1
Agency & Brokerage Personal. . . . . 861.6 777.4 795.3
Specialized Commercial . . . . . . . 1,433.2 1,201.1 1,059.1
--------- --------- ---------
Total Premiums Earned. . . . . . . . 4,416.1 3,898.0 3,872.5
Net Investment Income. . . . . . . . 514.3 559.5 610.6
Realized Capital Gains . . . . . . . 110.3 222.3 115.0
--------- --------- ---------
Insurance Operations . . . . . . . . 5,040.7 4,679.8 4,598.1
Corporate & Other Operations . . . . 133.0 117.2 122.9
--------- --------- ---------
Total. . . . . . . . . . . . . . . $ 5,173.7 $ 4,797.0 $ 4,721.0
========= ========= =========
Income from Continuing Operations
before Income Taxes:
Agency & Brokerage Commercial. . . . $ (234.8) $ (281.0) $ (354.6)
Agency & Brokerage Personal. . . . . (78.1) (127.0) (66.3)
Specialized Commercial . . . . . . . (92.5) (173.6) (146.9)
--------- --------- ---------
GAAP Underwriting Loss . . . . . . . (405.4) (581.6) (567.8)
Net Investment Income. . . . . . . . 514.3 559.5 610.6
Realized Capital Gains . . . . . . . 110.1 222.3 115.0
--------- --------- ---------
Insurance Operations . . . . . . . . 219.0 200.2 157.8
Corporate & Other Operations . . . . (41.1) (69.5) (62.3)
--------- --------- ---------
Total. . . . . . . . . . . . . . . $ 177.9 $ 130.7 $ 95.5
========= ========= =========
Identifiable Assets:
Insurance Operations . . . . . . . . $15,552.1 $15,113.5 $14,031.1
Corporate & Other Operations . . . . 583.9 149.9 283.9
--------- --------- ---------
Total Assets from
Continuing Operations. . . . . . 16,136.0 15,263.4 14,315.0
Net Assets of Discontinued
Operations . . . . . . . . . . . 84.6 310.5 506.9
--------- --------- ---------
Total Assets . . . . . . . . . . . . $16,220.6 $15,573.9 $14,821.9
========= ========= =========
____________________
(1) Distinct investment portfolios are not maintained for each
segment; accordingly, allocation of assets, net investment income and
realized capital gains to each segment is not performed.
(2) Certain reclassifications, primarily for discontinued operations,
have been made to the prior years' financial information to conform
to the 1993 presentation.
</TABLE>
The following table sets forth certain information with respect to
Continental's domestic, Canadian, other foreign and consolidated
operations for each of the last three years:
<TABLE>
<CAPTION>
Year Ended December 31 (1)(2)
--------------------------------
1993 1992 1991
--------- ---------- ----------
(millions)
<S> <C> <C> <C>
United States:
Revenues............................. $ 4,731.7 $ 4,379.1 $ 4,146.6
Income from Continuing
Operations before Income Taxes..... 165.7 144.3 103.2
Identifiable Assets of
Continuing Operations.............. 15,063.0 13,975.5 13,130.6
Canada:
Revenues............................. $ 324.6 $ 340.2 $ 440.2
Loss from Continuing
Operations before Income Taxes..... (5.4) (7.5) (26.0)
Identifiable Assets of
Continuing Operations.............. 1,024.1 926.8 801.5
Other Foreign:
Revenues............................. $ 117.4 $ 77.7 $ 134.2
Income (Loss) from Continuing
Operations before Income Taxes..... 17.6 (6.1) 18.3
Identifiable Assets of
Continuing Operations.............. 48.9 361.1 382.9
Consolidated:
Revenues............................. $ 5,173.7 $ 4,797.0 $ 4,721.0
Income from Continuing
Operations before Income Taxes..... 177.9 130.7 95.5
Identifiable Assets of
Continuing Operations.............. 16,136.0 15,263.4 14,315.0
________________
(1) and (2) - See Footnotes (1) and (2), respectively, on
page 1 herein.
</TABLE>
General Information Relating to Business Segments
Continental's insurance operations (the "Insurance Operations") are
comprised of three segments: Agency & Brokerage Commercial, Agency &
Brokerage Personal and Specialized Commercial. These operations are
conducted by Continental's property and casualty insurance
subsidiaries. One or more of these companies is licensed or admitted
to conduct business in each state or territory of the United States
and in each province or territory of Canada. Continental's other
segment is Corporate & Other Operations, which principally includes
investment management, claims adjusting and risk management services.
Agency & Brokerage Commercial
Continental's Agency & Brokerage Commercial segment focuses on the
production of property and casualty insurance coverage in the United
States and Canada through independent insurance agents and brokers,
almost all of whom also represent other companies. The Agency &
Brokerage Commercial segment includes: (1) Agency and Brokerage
operations; (2) Continental Risk Management Services operations
(formerly Special Risk operations); (3) Continental Canada's
operations; and (4) First Insurance Company of Hawaii, Ltd., a
60%-owned Continental subsidiary ("First of Hawaii"). For the fiscal
year ended December 31, 1993, the Agency & Brokerage Commercial
segment produced 47.7% of Continental's consolidated written
premiums. Premiums on its commercial multi-peril policies
represented 59.2% of the segment's written premiums. Other principal
lines written by the Agency & Brokerage Commercial segment include
workers' compensation, commercial automobile, general liability,
boiler and machinery, and fire & allied lines.
Continental's Agency and Brokerage operations concentrate their
marketing efforts on selected markets through specially designed
programs and products and selected local and national producers.
Agency and Brokerage operations consist of 10 regional offices
containing underwriters and support personnel and a network of
approximately 90 territorial offices responsible for sales and
underwriting. Agency and Brokerage operations also have two
automated business centers which handle underwriting and processing
of personal and small commercial lines. In addition, such operations
have a custom markets unit devoted specifically to developing small
to mid-sized commercial business from national brokers, special
programs for specific business segments, and employee accounts.
Continental Risk Management Services operations market
custom-tailored casualty coverages to Continental's large commercial
accounts, including primary and excess coverage for workers'
compensation, general liability and commercial automobile risks. Such
operations also provide claims management, loss control and actuarial
services for its clients.
Continental Canada's operations, which are considered part of North
American operations and which write commercial and personal property
and casualty coverages in Canada, include: (1) The Dominion Insurance
Corporation, a Continental subsidiary; (2) The Continental Insurance
Company of Canada, a Continental subsidiary; and (3) branch offices
of two of Continental's U.S. property and casualty companies.
Together, they are one of the leading underwriters of commercial
property and casualty coverages in Canada. These operations are
managed by Continental Insurance Management Ltd., a Continental
subsidiary.
First of Hawaii is the largest property and casualty insurer in the
Hawaiian Islands. The Tokio Marine and Fire Insurance Company, Ltd.,
a Japanese insurance company, owns the remaining 40% of the
outstanding shares of First of Hawaii.
The Agency & Brokerage Commercial segment's premiums earned
increased $201 million from 1992. Commercial package premiums earned
increased $132 million due to both price increases and acceptance of
new risks. Workers' compensation premiums earned increased $20
million due to price increases substantially offset by deliberate
reductions in the amount of risk accepted. In addition, the
segment's 1992 premiums earned were reduced by a $39 million charge,
which did not recur in 1993, to reinstate catastrophe reinsurance
coverage. The segment's underwriting results improved $46 million
from 1992, primarily due to a $20 million decrease in net
catastrophe-related charges and growth in business written without a
proportionate increase in operating expenses. Losses and loss
expenses increased $102 million, primarily due to inflation in loss
costs, the increase in the amount of risk accepted and a $19 million
increase in net catastrophe losses. Insurance operating expenses
increased $53 million, primarily due to growth in business written
and a $32 million decrease in servicing carrier income, which is
recorded as a reduction in commission expenses.
Agency & Brokerage Personal
Continental's Agency & Brokerage Personal segment also focuses on
the production of property and casualty insurance coverage in the
United States and Canada through independent insurance agents and
brokers, almost all of whom also represent other companies. The
Agency & Brokerage Personal segment includes: (1) Agency and
Brokerage operations; (2) Continental Canada's operations; and (3)
First of Hawaii, each of which is discussed above. For the fiscal
year ended December 31, 1993, the Agency & Brokerage Personal segment
produced 19.6% of Continental's consolidated written premiums.
Premiums on its personal package policies represented 58.2% of the
segment's written premiums. Other principal lines written by the
Agency & Brokerage Personal segment include automobile, homeowners,
and fire & allied lines.
The Agency & Brokerage Personal segment's premiums earned increased
$85 million from 1992. Personal package premiums earned increased $30
million due to price increases, despite a small reduction in the
amount of risk accepted. Monoline automobile premiums earned
increased $39 million due to an increase in assignments from
involuntary risk pools, primarily from New Jersey. In addition, the
segment's 1992 premiums earned were reduced by a $25 million charge,
which did not recur in 1993, to reinstate catastrophe reinsurance
coverage. The segment's underwriting results improved $49 million
from 1992, primarily due to a $50 million decrease in net
catastrophe-related charges. Losses and loss expenses increased $44
million, despite a $25 million decrease in net catastrophe losses,
primarily due to inflation in loss costs and an increase in losses
from involuntary risk pools resulting from the increase in
assignments. Insurance operating expenses improved $8 million
primarily resulting from cost reductions implemented in 1991.
Specialized Commercial
Continental's Specialized Commercial segment provides specialized
commercial coverages, principally in marine and aviation, workers'
compensation, fidelity & surety, excess and specialty, accident and
health, medical malpractice, customized financial coverage and
multinational lines. This segment accounted for 32.7% of
Continental's consolidated written premiums for the 1993 fiscal
year. The Specialized Commercial segment includes: (1) Marine Office
of America Corporation, a Continental subsidiary ("MOAC"); (2)
Associated Aviation Underwriters, a 50%-owned Continental affiliate
("AAU"); (3) Continental Excess & Select operations; (4) Casualty
Insurance Company, a Continental subsidiary ("Casualty"); (5)
Continental Financial Institutions operations; (6) Continental
Guaranty operations; (7) Continental Credit operations; (8)
Continental Insurance HealthCare operations; (9) The Continental
Insurance Company of Puerto Rico ("Continental Puerto Rico"); and
(10) The Continental Insurance Company (Europe) Limited, a
Continental subsidiary ("Continental Insurance (Europe)").
MOAC underwrites and manages ocean and inland marine insurance
coverages, automobile warranty coverages and service repair warranty
coverages for technical equipment through branch offices located
throughout the United States. It also concentrates on developing
package policies for the transportation, distribution and
manufacturing industries. MOAC supports all of these coverages with
specialized claims handling, surveying, loss control and recovery
services.
AAU writes insurance for many segments of the aviation industry
through branch offices located throughout the United States.
Continental Excess & Select operations are active in the excess and
specialty lines markets. Their principal types of coverage are
stop-loss protection on group health insurance programs, professional
liability insurance for lawyers, accountants and other classes of
professionals, excess liability insurance, directors' and officers'
liability insurance and industry targeted programs of liability
insurance for the railroad, mining, skiing, biotechnology and
pharmaceutical industries. Continental Excess & Select operations
also provide support services to Continental's other excess liability
and specialty lines operations.
Casualty and its subsidiary, Workers' Compensation and Indemnity
Company of California, write certain preselected classes of workers'
compensation exposures in Illinois, Wisconsin, Indiana, Michigan and
southern California.
Continental Financial Institutions operations provide highly
specialized coverages for financial institutions, from fidelity bonds
to directors' and officers' liability and professional liability
insurance, as well as a range of fidelity products for commercial
businesses. Continental Guaranty operations are a major provider of
surety coverages. Continental Credit operations provide credit
insurance. The financial institutions, guaranty and credit
operations were previously divisions of a Continental subsidiary,
Continental Guaranty & Credit Corporation, which is no longer doing
business as a separate corporate entity.
Continental Insurance HealthCare operations primarily provide
medical malpractice insurance. Such operations also provide claims
and risk management services to insureds and other clients.
Continental Puerto Rico writes business in Puerto Rico, primarily
by way of a quota- share reinsurance agreement with an unaffiliated
entity, Puerto-Rican American Insurance Company ("PRAICO"). In 1993,
the quota-share participation of Continental Puerto Rico was 12.1% of
the net premiums written by PRAICO.
Continental Insurance (Europe) writes multinational programs in
Europe.
The Specialized Commercial segment's premiums earned increased $232
million from 1992 due to both price increases and acceptance of new
risks. Premiums earned increased $51 million in domestic marine, $49
million in workers' compensation in selected markets, $49 million in
customized financial coverages, $41 million in specialty casualty and
$25 million in fidelity & surety insurance. In addition, the
segment's 1992 premiums earned were reduced by an $11 million charge,
which did not recur in 1993, to reinstate catastrophe reinsurance
coverage. The segment's underwriting results improved $82 million
from 1992, primarily due to better experience in domestic marine and
specialty casualty insurance, an $18 million decrease in net
catastrophe-related charges and growth in business written without a
proportionate increase in operating expenses. Losses and loss
expenses increased $106 million, despite better experience in certain
lines and a $7 million decrease in net catastrophe losses, primarily
due to inflation in loss costs and the increase in the amount of risk
accepted. Insurance operating expenses increased $44 million,
primarily due to growth in business written.
Corporate & Other Operations
The Corporate & Other Operations segment includes Continental's
corporate operating expenses and the operations of Continental's
non-insurance subsidiaries. Continental's non-insurance subsidiaries
primarily include: (1) Continental Asset Management Corp. ("CAM");
(2) Continental Loss Adjusting Services, Inc. ("CLAS"); (3)
Continental Rehabilitation Resources, Inc. ("CRR"); (4) Ctek, Inc.
("Ctek"); (5) California Central Trust Bank Corporation "CalTrust");
and (6) Settlement Options, Inc. ("Settlement Options").
CAM, a Continental subsidiary registered under the Investment
Advisers Act of 1940, as amended, provides investment advisory
services to Continental, its subsidiaries, its employee benefit
plans, certain affiliates and unrelated parties under investment
advisory agreements.
CLAS provides claims services for Continental's subsidiaries and
other customers. Its wholly-owned subsidiary, CRR, provides medical
and vocational rehabilitation for injured employees of insureds and
other clients.
Ctek engages in risk evaluation and improvement activities designed
to help insureds and other clients reduce or control losses to
property, equipment, materials and human resources.
CalTrust is a limited service bank whose activities are restricted
to the acceptance of deposits, investment of depository funds and
acting as trustee and/or third party administrator for employee
benefit plans. The following table sets forth certain information
with respect to CalTrust's deposit liabilities for each of the last
three years:
<TABLE>
<CAPTION>
1993 1992 1991
_________________ _________________ _________________
% % %
Average Average Average
Average Interest Average Interest Average Interest
Balance Rate Balance Rate Balance Rate
------- -------- ------- -------- ------- -------
(millions, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Savings Deposits
(representing Total
Interest-Bearing
Time and Savings
Deposits)........... $ 123.1 2.8% $ 121.9 3.4% $ 117.2 5.0%
======= ==== ======= ==== ======= ====
</TABLE>
Settlement Options is a general insurance agency which consults
with property and casualty claim organizations on personal injury
losses to reduce settlement costs by arranging structured claim
settlements, and purchases annuities to fund these future periodic
payment obligations.
In 1993, Continental sold its premium financing operations as
well as its computer systems subsidiary, Insurnet, Incorporated, both
of which were previously included in the Corporate & Other Operations
segment. The results of the premium financing operations are now
reported as discontinued. (For information concerning the sale of
the premium financing operations, see "Discontinued Operations"
below.)
Discontinued Operations
In 1993, Continental completed the sale of its premium
financing subsidiaries, AFCO Credit Corporation, AFCO Acceptance
Corporation and CAFO Inc. (collectively, "AFCO"), to Mellon Bank
Corporation ("Mellon"). Continental realized a $36 million gain from
this sale, net of income taxes. In addition, the sale agreement
provides for a contingent payment to Continental based on growth in
AFCO's premiums financed over the next five years, for a potential
maximum payment of up to $78 million. No provision has been made in
Continental's Consolidated Financial Statements for any potential
gain from this contingent payment from Mellon. The 1993 results and
net assets of the premium financing operations, which were previously
reported in the Corporate & Other Operations segment, have been
classified in Continental's Consolidated Financial Statements as
discontinued. Previously reported information has been restated
accordingly.
The following table sets forth certain information with respect
to operating results of the discontinued premium financing operations
for each of the last three years:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1993 1992 1991
---- ---- ----
(millions)
<S> <C> <C> <C>
Total Revenues............................ $92.4 $103.0 $119.3
Total Expenses............................ 75.4 79.5 92.2
----- ------ ------
Income before Income Taxes................ 17.0 23.5 27.1
Income Taxes ............................ 1.7 4.7 5.4
Gain on Disposal of Discontinued
Premium Financing Operations,
Net of Income Taxes..................... 36.0 -- --
----- ------ ------
Net Income from Discontinued Premium
Financing Operations.................... $51.3 $ 18.8 $ 21.7
===== ====== ======
</TABLE>
The following table sets forth certain information with respect to
net assets of the discontinued premium financing operations for each
of the last two years:
December 31
----------------------
1993 1992
---- ----
(millions)
Assets:
Premium Financing Loans Receivable...... $-- $1,083.3
Other Assets............................ -- 32.9
---- --------
-- 1,116.2
---- --------
Liabilities:
Short-Term Debt......................... -- 873.5
Long-Term Debt.......................... -- 26.5
Other Liabilities....................... -- 48.9
---- --------
-- 948.9
---- --------
Net Assets:............................... $-- $ 167.3
==== ========
During 1992, Continental instituted a program to withdraw from the
traditional assumed reinsurance and marine reinsurance businesses as
well as the indigenous international and international marine
insurance businesses. These businesses had premiums earned of $339
million and $458 million and underwriting losses of $304 million and
$196 million in 1992 and 1991, respectively. Continental failed to
develop a sustainable competitive advantage in these businesses as
evidenced by their poor operating performances. In addition, these
businesses had subjected Continental to unmanageable concentrations
of exposures to catastrophes. For example, $28 million of
Continental's $70 million total net loss from hurricane Andrew arose
from reinsurance operations. As a result, Continental withdrew from
these businesses to further concentrate Insurance Operations in their
areas of competitive strength. Continental has been accomplishing
this withdrawal by running off the insurance reserves of certain of
these operations and selling the remaining operations. The results
and net assets of the aforementioned operations have been classified
in Continental's Consolidated Financial Statements as discontinued.
Previously reported information has been restated accordingly.
Discontinued Insurance Operations include Continental's
subsidiaries: Continental Reinsurance Corporation (U.K.) Limited,
Lombard General Insurance Limited and Lombard Insurance Company
Limited, which are either expected to be sold or dissolved.
Continental's subsidiaries, Continental Reinsurance Corporation
International Limited ("CRC-I") and East River Insurance Company
(Bermuda) Ltd. ("ERIC"), both of which are continuing entities, are
managing the assets and reserves of the discontinued operations. In
1992, substantially all of the business of Continental's reinsurance
subsidiary, Continental Reinsurance Corporation, was discontinued, and
substantially all of its insurance reserves, along with an equivalent
amount of assets, were transferred to CRC-I and ERIC. In 1993,
Continental sold Unionamerica Insurance Company, Limited for $95
million in cash and $15 million face value of redeemable preferred
stock.
The traditional assumed reinsurance and marine reinsurance
businesses were autonomous from Continental's primary Insurance
Operations. The product, customer base and distribution system also
varied significantly from Continental's primary Insurance
Operations. Before discontinuance, these businesses generally
included proportional and non-proportional, facultative and treaty,
and property and casualty insurance and reinsurance. The primary
method of reinsurance distribution was through the broker market and
the customer base consisted of other insurance and reinsurance
companies.
Indigenous international insurance was comprised of risks that are
located in countries outside the United States and Canada,
underwritten by companies domiciled or branches licensed outside the
United States or Canada, where the insured is a person or company
located outside the United States or Canada. This business was
generally written and reported on a monoline basis. In contrast,
Continental's United States and Canadian operations focus generally
on package business, and Continental's multinational operations (now
included in the Specialized Commercial segment) write monoline
coverage. Continental's United States and Canadian operations and
multinational operations (other than Casualty) write monoline
coverages, such as workers' compensation insurance, generally as an
accommodation to obtain package business or as specialized coverages
like railroad and surety.
Monoline personal lines coverages, such as secure home policies,
were usually distributed and marketed by savings institutions as part
of a mortgage package. Thus, it was only through prearranged
participation, or brokered after mortgage sales that such a product
was sold.
For commercial risks, the distribution and marketing of indigenous
international insurance was primarily on a co-insurance basis taking
a participation percentage from a lead underwriter. Due to this
standard overseas distribution system, the nature of selling this
product was vastly different from the domestic practice of more
direct links to insureds. Therefore, Continental's focus was on
developing relationships with the various underwriters and brokers,
rather than directly marketing to the insureds' agents. The
servicing of the business was also substantially different, as the
claims adjusting services were not administered directly by
Continental.
The international marine business was underwritten by companies
domiciled or branches licensed outside the United States and Canada.
The international marine business had a different class of customer
and marketing structure, which relied upon the syndication procedures
used by the Institute for London Underwriting ("ILU"). The
distribution and servicing of such business was also unique. The
international marine operations consisted of a small group of
underwriters and a collection group using third-party claims
services. The ILU is an underwriting center as well as a funds
clearing house for claims processing and settlement. Continental
acted as a participant in part of a layer of each policy, rather than
as a direct underwriter and claims servicer. Thus, systems needs and
direct expenses associated with the production of business are
different from Continental's domestic marine business. This
difference in the method of marketing and distribution for
international marine insurance substantially reduces Continental's
records keeping requirements. In contrast, domestic marine insurance
is underwritten in a similar manner to other domestic lines of
business and has similar reporting requirements.
The following table sets forth certain information with respect to
operating results of the discontinued insurance operations for each
of the last three years:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
1993 1992 1991
------ ------ ------
(millions)
<S> <C> <C> <C>
Total Revenues........................... $282.2 $ 549.8 $585.1
Total Expenses........................... 285.5 740.0 654.5
------ ------- ------
Loss before Income Taxes................. (3.3) (190.2) (69.4)
Income Taxes (Benefits).................. (0.7) (9.7) 7.2
Loss on Disposal of Discontinued
Insurance Operations,
Net of Income Taxes.................... -- (13.0) --
------ ------- ------
Net Loss from Discontinued Insurance
Operations............................. $ (2.6) $(193.5) $(76.6)
====== ======= ======
</TABLE>
The following table sets forth certain information with respect to
net assets of the discontinued insurance operations for each of the
last two years:
December 31
----------------------
1993 1992
---- ----
(millions)
Assets:
Cash and Investments........... $1,166.5 $1,461.0
Other Assets................... 528.4 924.3
-------- --------
1,694.9 2,385.3
-------- --------
Liabilities:
Outstanding Losses and
Loss Expenses................ 1,346.0 2,022.2
Unearned Premiums.............. 3.0 91.1
Other Liabilities.............. 261.3 128.8
-------- --------
1,610.3 2,242.1
-------- --------
Net Assets:...................... $ 84.6 $ 143.2
======== ========
Of the $1,346 million in Outstanding Losses and Loss Expenses at
December 31, 1993, Continental currently plans the following: (1)
$36 million of Outstanding Losses and Loss Expenses are recorded by
operations that Continental intends to sell (these reserves are
carried at their nominal amounts, in accordance with the regulations
of the country where such reserves are recorded); (2) $968 million of
Outstanding Losses and Loss Expenses are recorded by ERIC and CRC-I
(Continental intends to run off these insurance reserves, and to
support the reserves, which are carried at economic value in
accordance with Bermuda law (the jurisdiction in which such reserves
are reinsured), with an equal amount of earning assets held in trust
by ERIC and CRC-I); and (3) $342 million of Outstanding Losses and
Loss Expenses are recorded by other operations that Continental
intends to run off (these reserves are carried at their nominal
amounts, in accordance with the regulations of the countries where
such reserves are recorded).
Additional Business Information
Each of Continental's insurance segments principally provides its
own claims service through internal loss-adjusting operations.
Designated employees of these operations have authority to settle
claims, subject to limits on authority and, in large cases, to review
by senior officers.
Continental's Insurance Operations purchase reinsurance on certain
risks which they insure, principally to (1) reduce liability on
individual risks; (2) protect against catastrophe losses; (3) enable
them to write additional insurance in order to diversify risks; and
(4) reduce their total liability in relation to statutory surplus.
The costs of reinsurance, including catastrophe coverages, are
generally increased by adverse loss experience in prior periods. (For
additional information concerning Continental's reinsurance
arrangements, see "Reinsurance" commencing on page 21 herein.)
The industry as a whole has experienced underwriting losses for the
past several years. These losses are generally attributable to price
competition, which has prevented premium rate increases from keeping
pace with losses and loss expenses, and to an unusually high level of
catastrophe losses. According to A.M. Best Company's Review and
Preview, which follows and reports on the industry's financial
results, the industry's aggregate underwriting loss for 1993 was $23
billion.
The underwriting profitability of property and casualty insurers is
affected by many factors, including price competition; the cost and
availability of reinsurance; administrative and other expenses; the
incidence of natural disasters; and insurance regulators' willingness
to grant increases in those rates which they control. Loss frequency
and severity trends are influenced by economic factors, such as a
company's business mix; inflation rates; medical cost inflation;
employment levels; crime rates; general business conditions;
regulatory measures; and court decisions that define and expand the
risks and damages covered by insurance. The incidence of natural
disasters has adversely affected the underwriting profitability
primarily of multi-peril, homeowners, and fire & allied lines of
business. The underwriting profitability of workers' compensation
and commercial and personal automobile business is adversely affected
by (1) lower price levels and higher assumed risks due to mandated
participation in state involuntary programs by companies writing such
business; and (2) rapidly rising medical care costs.
Generally, Continental prices insurance coverages at levels
management considers adequate in relation to costs, including
anticipated claims liability. The Insurance Operations have attempted
to control their costs by (1) implementing technological advances;
(2) changing their distribution systems and marketing methods; (3)
instituting policies designed to increase employees' productivity; (4)
changing the mix of agency and brokerage relationships; (5) reducing
writings of certain less profitable classes of risks; and (6)
becoming more selective in the acceptance of risks.
An indicator of underwriting profitability of property and casualty
insurers is a company's "combined ratio". The combined ratio is the
sum, expressed as a percentage, of (i) the ratio of incurred losses
and loss expenses to premiums earned (the "loss ratio"); and (ii) the
ratio of sales commissions, premium taxes, and administrative and
other underwriting expenses to premiums written (the "expense
ratio"). When the combined ratio is below 100%, underwriting results
are generally considered profitable; when the ratio is over 100%,
underwriting results are generally considered unprofitable. Because
the combined ratio does not reflect net investment income, which is a
significant component of an insurance company's operating results, an
insurance company's operating results for a line of business may be
profitable even though the combined ratio for that line of business
exceeds 100%. (For information concerning net investment income, see
"Investment and Finance" commencing on page 22 herein.)
The following table sets forth certain information (presented in
accordance with statutory accounting practices) with respect to the
underwriting results of the Insurance Operations for the commercial
and personal lines of insurance written by them for each of the last
three years. Information as to premiums written includes premiums on
insurance policies directly written and on policies assumed from
other insurers, pools and associations, in each case net of premiums
ceded to others in connection with reinsurance purchased.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------
Line of Business 1993 1992 1991
---------------- ----------------- ------------------ -------------------
COMMERCIAL (millions, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Multi-Peril
Premiums Written (% of total) $1,277.5 (28.3%) $1,042.5 (25.8%) $1,097.4 (28.1%)
Premiums Earned.............. $1,232.5 $1,023.6 $1,087.3
Loss Ratio................... 74.3% 72.3% 65.9%
Expense Ratio................ 35.3% 37.4% 39.6%
Combined Ratio............... 109.6% 109.7% 105.5%
Workers' Compensation
Premiums Written (% of total) $ 915.1 (20.2%) $ 879.0 (21.7%) $ 863.3 (22.1%)
Premiums Earned.............. $ 941.1 $ 847.9 $ 848.2
Loss Ratio................... 94.7% 103.5% 107.6%
Expense Ratio................ 19.2% 14.7% 14.5%
Combined Ratio............... 113.9% 118.2% 122.1%
General Liability
Premiums Written (% of total) $ 496.1 (11.0%) $ 361.6 (8.9%) $ 259.3 (6.6%)
Premiums Earned.............. $ 459.0 $ 331.3 $ 274.1
Loss Ratio................... 66.3% 69.6% 83.9%
Expense Ratio................ 27.0% 29.5% 36.1%
Combined Ratio............... 93.3% 99.1% 120.0%
Inland/Ocean Marine
Premiums Written (% of total) $ 323.1 (7.1%) $ 262.5 (6.5%) $ 239.0 (6.1%)
Premiums Earned.............. $ 298.3 $ 263.3 $ 233.6
Loss Ratio................... 75.2% 68.3% 67.5%
Expense Ratio................ 35.6% 46.4% 34.3%
Combined Ratio............... 110.8% 114.7% 101.8%
Automobile
Premiums Written (% of total) $ 273.7 (6.1%) $ 297.1 (7.4%) $ 288.5 (7.4%)
Premiums Earned.............. $ 270.0 $ 299.9 $ 292.8
Loss Ratio................... 71.1% 75.9% 73.3%
Expense Ratio................ 32.4% 36.9% 37.3%
Combined Ratio............... 103.5% 112.8% 110.6%
Fidelity/Surety
Premiums Written (% of total) $ 140.9 (3.1%) $ 120.3 (3.0%) $ 107.2 (2.7%)
Premiums Earned.............. $ 138.7 $ 112.1 $ 108.8
Loss Ratio................... 42.8% 44.9% 27.7%
Expense Ratio................ 49.9% 58.2% 64.4%
Combined Ratio............... 92.7% 103.1% 92.1%
Fire & Allied Lines
Premiums Written (% of total) $ 77.0 (1.7%) $ 99.3 (2.5%) $ 93.8 (2.4%)
Premiums Earned.............. $ 75.9 $ 101.8 $ 95.0
Loss Ratio................... 90.0% 100.0% 70.8%
Expense Ratio................ 33.4% 32.6% 43.9%
Combined Ratio............... 123.4% 132.6% 114.7%
Other
Premiums Written (% of total) $ 132.2 (2.9%) $ 165.8 (4.1%) $ 157.4 (4.0%)
Premiums Earned.............. $ 124.6 $ 153.7 $ 155.6
Loss Ratio................... 73.0% 71.6% 86.1%
Expense Ratio................ 46.3% 48.6% 50.0%
Combined Ratio............... 119.3% 120.2% 136.1%
Total Commercial
Premiums Written (% of total) $3,635.6 (80.4%) $3,228.1 (79.9%) $3,105.9 (79.4%)
Premiums Earned.............. $3,540.1 $3,133.6 $3,095.4
Loss Ratio................... 77.6% 80.4% 79.6%
Expense Ratio................ 30.8% 32.2% 33.2%
Combined Ratio............... 108.4% 112.6% 112.8%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------
Line of Business 1993 1992 1991
---------------- ----------------- ------------------ -------------------
PERSONAL (millions, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Automobile
Premiums Written (% of total) $ 605.8 (13.4%) $ 556.3 (13.8%) $ 516.5 (13.2%)
Premiums Earned.............. $ 586.2 $ 535.3 $ 503.6
Loss Ratio................... 75.3% 75.2% 78.5%
Expense Ratio................ 33.5% 36.6% 32.9%
Combined Ratio............... 108.8% 111.8% 111.4%
Homeowners
Premiums Written (% of total) $ 246.1 (5.5%) $ 226.6 (5.6%) $ 256.3 (6.6%)
Premiums Earned.............. $ 239.9 $ 217.7 $ 247.4
Loss Ratio................... 87.9% 89.6% 71.9%
Expense Ratio................ 25.8% 29.6% 33.7%
Combined Ratio............... 113.7% 119.2% 105.6%
Other
Premiums Written (% of total) $ 32.9 (0.7%) $ 30.4 (0.7%) $ 32.2 (0.8%)
Premiums Earned.............. $ 32.8 $ 29.4 $ 31.1
Loss Ratio................... 45.7% 89.5% 47.7%
Expense Ratio................ 26.4% 32.2% 36.3%
Combined Ratio............... 72.1% 121.7% 84.0%
Total Personal
Premiums Written (% of total) $ 884.8 (19.6%) $ 813.3 (20.1%) $ 805.0 (20.6%)
Premiums Earned.............. $ 858.9 $ 782.4 $ 782.1
Loss Ratio................... 77.7% 79.7% 75.1%
Expense Ratio................ 31.1% 34.5% 33.2%
Combined Ratio............... 108.8% 114.2% 108.3%
TOTAL INSURANCE OPERATIONS
Premiums Written (% of total) $4,520.4 (100.0%) $4,041.4 (100.0%) $3,910.9 (100.0%)
Premiums Earned.............. $4,399.0 $3,916.0 $3,877.5
Loss Ratio (1)............... 77.6% 80.2% 78.7%
Expense Ratio (1)............ 30.9% 32.7% 33.2%
Combined Ratio (1)........... 108.5% 112.9% 111.9%
________________
(1) The comparable GAAP loss, expense and combined ratios for the years
ended December 31, 1993, 1992 and 1991 were 77.3%, 31.9% and 109.2%;
81.1%, 33.8% and 114.9%; and 79.6%, 35.0% and 114.6%, respectively.
</TABLE>
<PAGE>
Approximately 61.4% of direct premiums written by the Insurance
Operations during 1993 were written in nine states and Canada. Canada
accounted for 9.9% of those premiums; New York, 9.8%; California,
8.8%; Illinois, 8.7%; New Jersey, 5.2%; Texas, 4.7%; Pennsylvania,
4.2%; Ohio, 4.2%; Florida, 3.1%; and Hawaii, 2.8%. No other state,
country or political subdivision accounted for more than 2.8% of such
premiums. The percentages do not reflect premiums received or paid in
connection with reinsurance transactions.
During the past several years, Continental has shifted its
business mix to emphasize commercial and personal package policies
and speciality commercial lines, while decreasing the amount of
business generated from monoline coverages, such as monoline personal
automobile insurance, that have historically proven to be
unprofitable to Continental. In 1993, the loss and expense ratios
for the Insurance Operations decreased 2.6 percentage points from the
prior year, primarily as a result of lower net catastrophe-related
charges. Underwriting results for the Insurance Operations produced
statutory combined ratios for their personal and commercial lines of
108.8% and 108.4%, respectively, in 1993. These percentages
reflected an improvement in personal and commercial lines from the
prior year of 5.4% and 4.2%, respectively.
Many states require property and casualty insurers to participate
in "plans", "pools" or "facilities" which provide coverages for
defined risks at rates required by regulators which insurers
otherwise would be unwilling to underwrite in view of the nature of
the risks and the claims experience of the insureds or the insurance
classes of which they are members. Continental provides for its share
from its participation in these pools and associations, as well as
its participation in voluntary pools and associations, based upon
results reported to it by these organizations. In 1993, these
involuntary writings totaled approximately $228.4 million, or more
than 5.1% of Insurance Operations' total premiums written. The
statutory underwriting loss on this business was $67 million during
1993, accounting for approximately 16.3% of Insurance Operations'
statutory underwriting loss. In 1993, 52.3%, and 47.7% of these
writings were attributable to automobile and workers' compensation
businesses, respectively. (For additional information concerning
such pools and associations, see "Regulation" commencing on page 13
herein.)
Competition
The property and casualty insurance industry is highly competitive.
Continental's Insurance Operations compete with other stock
companies, specialty insurance organizations, mutual insurance
companies, and other underwriting organizations. As reported by the
Insurance Information Institute, an educational, fact-finding and
communications organization, the property and casualty industry in the
United States is comprised of approximately 900 leading insurance
organizations, none of which has a market share larger than 15% and
the top ten of which account in the aggregate for less than 45% of
the market. Companies in the United States also face competition
from foreign insurance companies and from "captive" insurance
companies and "risk retention" groups (i.e., entities established by
insureds to provide insurance for themselves). In the future, the
industry, including Continental's Insurance Operations, may face
increasing insurance underwriting competition from banks and other
financial institutions.
Based upon the 1993 edition of Best's Aggregates and Averages for
the calendar year 1992, Continental's domestic property and casualty
companies collectively ranked twelfth in overall premium volume among
United States property and casualty insurers. In addition, such
companies are among the leading twenty in such categories as
commercial multi-peril, aircraft, fidelity & surety, farmowners,
homeowners, fire & allied lines, workers' compensation, ocean marine
and inland marine lines, and among the leading twenty-five in
commercial automobile lines. Because of the relatively large size
and underwriting capacity of Continental's property and casualty
companies, many opportunities are available to them that are not
available to smaller companies.
The competitive focus of Continental's Insurance Operations is to
(1) offer combinations of superior products, services and premium
rates; (2) distribute their products efficiently; and (3) market them
effectively. Reliance upon these factors varies from line to line of
insurance and from product to product within lines of insurance.
Rates are not uniform for all insurers and vary according to the
respective types of insurers and methods of operation. Continental's
Insurance Operations have traditionally marketed their products
principally through independent agents and brokers. This system of
marketing is facing increased competition from financial institutions
and other companies that market their insurance products directly to
the consumer. In response to this competition, Continental has
implemented several programs designed to develop a more concentrated
and productive agency and brokerage force by eliminating duplication
of functions, terminating producers of unprofitable business and
providing added incentives and improved support to its more
productive producers. Such incentives include assurances of
continuing representation; expanded promotional and marketing
assistance; specialized account handling; training; and, in certain
cases, financial assistance in connection with agency and brokerage
expansion. Consequently, Continental's Insurance Operations have,
over the past several years, placed computer terminals with many of
their most productive producers, which permit producers to transmit
information directly to Continental's computer centers and to receive
policies, endorsements and other personal lines services overnight.
In response to market conditions, Continental has also developed
package personal and commercial policies for customers having
standard risk exposures, customized products for certain classes of
business and industries, and a strong distribution network comprised
largely of selected producers with professional sales skills and
product knowledge in Continental's targeted markets.
Regulation
Continental's property and casualty companies are subject to
regulation by government agencies in the states and foreign
jurisdictions in which they do business. The nature and extent of
such regulation vary from jurisdiction to jurisdiction, but typically
involve the establishment of premium rates for many lines of
insurance; standards of solvency and minimum amounts of capital and
surplus which must be maintained; limitations on types of
investments; restrictions on the size of risks which may be insured
by a single company; licensing of insurers and their agents; deposits
of securities for the benefit of policyholders; approval of policy
forms; methods of accounting; mandating reserves for losses and loss
expenses; and filing of annual and other reports with respect to
financial condition and other matters. In addition, state regulatory
examiners perform periodic examinations of insurance companies. Such
regulation is generally intended for the protection of policyholders
rather than security holders.
Most states also require property and casualty insurers to become
members of insolvency associations or guaranty funds, which generally
protect policyholders against the insolvency of an insurer writing
insurance in the state. Members of the associations must contribute
to the payment of certain claims made against insolvent insurers.
Maximum contributions required by law in any one year vary generally
between 1% and 2% of annual premiums written by a member in that
state.
Continental's insurance subsidiaries are subject to various state
statutory and regulatory restrictions, applicable generally to each
insurance company in its state of incorporation, which limit the
amount of dividends and other distributions that those subsidiaries
may pay to Continental. The restrictions are generally based on
certain levels of surplus, investment income and operating income, as
determined under statutory insurance accounting practices. Some
restrictions require that dividends, loans, and advances in excess of
stated levels be approved by state regulatory authorities. During
1993, Continental's insurance subsidiaries paid it $120 million in
dividends. Recently, several states in which these insurance
subsidiaries are domiciled enacted more stringent dividend
restrictions based on percentages of surplus and net income from
operations. These restrictions will, under certain circumstances,
significantly reduce the maximum amount of dividends and other
distributions payable to Continental by its insurance subsidiaries
without approval by state regulatory authorities. To the extent that
its insurance subsidiaries do not generate amounts available for
distribution sufficient to meet Continental's cash requirements
without regulatory approval, Continental would seek approval for
additional distributions. Under the restrictions currently in effect,
the maximum amount available for payment of dividends to Continental
by its insurance subsidiaries during the year ending December 31,
1994 without regulatory approval is estimated to be $304 million.
(See Note 10 to Consolidated Financial Statements included in
Continental's 1993 Annual Report to Shareholders.) Continental
anticipates that dividends from its insurance subsidiaries, together
with cash from other sources, will enable it to meet its obligations
for interest and principal payments on debt, corporate expenses,
declared shareholder dividends and taxes in 1994.
Although the federal government does not directly regulate the
business of insurance, federal initiatives often affect the insurance
business in a variety of ways. Some form of universal health care
may be enacted in the near future. The effect of such a system on
certain of Continental's lines of business, including workers'
compensation and automobile insurance, could be significant, although
any such potential effect cannot presently be evaluated. Other
current and proposed federal measures which may significantly affect
the insurance business include federal government participation in
asbestos and other product liability claims, the extension or
modification of the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") in 1994, pension regulation (ERISA),
examination of the taxation of insurers and reinsurers, minimum
levels of liability insurance for air carriers, and air carrier and
automobile safety regulations. (For information concerning matters
relating to environmental claims, see "Reserves for Unpaid Losses and
Loss Expenses" commencing on page 15 herein.) In view of financial
difficulties in the savings and loan and banking industries and
recent insurance insolvencies, several congressional inquiries are
considering the adequacy of existing state regulations related to the
financial health of insurance companies. In addition, congressional
committees are currently reviewing the McCarran-Ferguson Act of 1945,
which presently provides a limited exemption from federal antitrust
laws for the "business of insurance". A number of states have
repealed or are reviewing their statutory exemptions for the
"business of insurance" from their antitrust laws. Continental
believes that some cooperative activity among insurers is essential
for a sound industry and is in the public interest, but that
limitation or elimination of the McCarran-Ferguson or state statutory
antitrust exemptions would not have a significant effect upon
Continental's financial results.
The National Association of Insurance Commissioners ("NAIC") has
developed several proposals to strengthen the existing state
regulatory system, including uniform accreditation of state insurance
regulatory systems; limitations on the payment of dividends by
property and casualty insurance companies; adoption of risk-based
capital standards; actuarial certification of reserves; and
independent audits of insurer financial statements. Adoption of
these proposals will be on a state-by-state basis. Continental favors
stronger solvency standards, but recognizes that more regulation, at
either the state or federal level, will increase the cost of providing
insurance coverage. In the fourth quarter of 1993, the NAIC adopted
a risk based capital ("RBC") standard for use by state insurance
regulators. RBC is intended to be a "tool" for regulators to assess
the capital adequacy of property and casualty insurers and to take
action when capital under the standard is judged to be inadequate.
The NAIC developed a model law which can be adopted on a
state-by-state basis and may be applied, if adopted by the relevant
state regulatory authorities, to Continental's 1994 statutory
financial statements. Based upon the RBC standards developed by the
NAIC as applied to Continental's 1993 statutory financial statements,
Continental believes that its insurance subsidiaries have sufficient
levels of capital for their respective operations.
Insurance companies, including Continental's property and casualty
companies, are also affected by a variety of state and federal
legislative and regulatory measures and judicial decisions that
define and extend the risks and benefits for which insurance is
sought and provided. These include redefinitions of risk exposure in
areas such as product liability; environmental damage; and employee
benefits, including pensions, workers' compensation and disability
benefits. In addition, individual state insurance departments may
prevent premium rates for some classes of insureds from reflecting
the level of risk assumed by the insurer for those classes. Such
developments may result in short-term adverse effects on the
profitability of various lines of insurance. Longer-term adverse
effects on profitability can be minimized, when possible, only
through repricing of coverages or limitation or cessation of the
affected business.
A Continental subsidiary has been involved in continuing disputes
with the State of New Jersey concerning such subsidiary's ultimate
share of the residual private passenger automobile insurance market
during 1984-1993. The lawsuit filed by the New Jersey State Attorney
General's office in 1990 against this subsidiary and thirteen other
servicing carriers of the now-defunct New Jersey Joint Underwriting
Association ("JUA") for recovery of alleged residual market deficits
from 1984 to 1988 was settled in 1992. Also in 1992, the State
commenced proceedings to recover penalties it assessed against
certain carriers participating in the JUA's residual automobile
market successor, the Market Transition Facility ("MTF"). Those
proceedings and all of the penalty assessments were dismissed by the
New Jersey Supreme Court in 1993. Also in 1993, the State announced
the first statutory assessment for the deficit of the
now-discontinued MTF; Continental's subsidiary's market share was
approximately 2%, or approximately $10 million, of such first year
deficit. As part of the 1992 JUA settlement, Continental's
subsidiary paid $3.5 million; and an additional $6 million to the
State with respect to such subsidiary's ultimate MTF deficit
assessment. As a result, Continental's subsidiary's first year MTF
deficit was reduced to approximately $4 million. That amount has
been paid into court pending the resolution of an American Insurance
Association legal challenge to the assessments filed on behalf of all
affected New Jersey insurers.
Reinsurers and international insurance companies are subject to
licensing requirements and other regulation in the jurisdictions in
which they do business. United States regulation of licensed
reinsurers is similar to the regulation of domestic property and
casualty insurers, except that regulation of reinsurers does not
extend to rates, policy forms, or, generally, participation in
insolvency funds. Countries outside of the United States have varying
levels of regulation of insurance and reinsurance companies.
Reserves for Unpaid Losses and Loss Expenses
Continental's insurance subsidiaries establish reserves to cover
their ultimate liability for losses and loss expenses with respect to
reported and unreported claims incurred (except as noted below with
respect to "environmental claims") as of the end of each accounting
period, after taking into effect salvage and subrogation claims. In
establishing such reserves with respect to the period then ended, loss
reserves recorded in prior periods are updated to reflect improved
estimates of ultimate losses and loss expenses as actual experience
develops and payments are made.
The losses and loss expense reserves of Continental's insurance
subsidiaries are estimates of the ultimate liability determined by
using both individual case-basis estimates on reported claims and
statistical projections. The statistical projection models reflect
changes in the volume of business written, as well as claim frequency
and severity. Adjustments to these models are also made for changes
in the mix of business, claims processing and other items which
affect the development patterns over time. Such statistical
projections of ultimate net costs are used to adjust the amount
estimated for individually established case reserves, as well as to
establish estimates for the amount needed for unreported claims.
For more mature accident years, inflation is implicitly considered
in such projections based on actual patterns of reported claims, loss
payments and case-basis reserves. For relatively immature accident
years, in addition to actual loss patterns, explicit assumptions are
made for changes in claim severity and frequency based on the type of
claims, nature of the related risks, industry trends and related cost
indices.
Continental's reserves for losses and loss adjustment expenses
include reserves for reported "environmental claims" (as such term is
described in the next succeeding paragraph). The table on page 17
sets forth information regarding the amounts of these reserves at
December 31, 1993, 1992 and 1991 and payments of losses and loss
expenses on such claims in each of those years. These reserves
represent Continental's estimates of the probable ultimate cost to
resolve such reported claims, either through settlement, litigation
or alternative dispute resolution. The amounts in the table reflect
gross and net undiscounted estimated liability, and do not include
any reserves for unreported claims. (For information concerning
reinsurance relating to environmental claims, see "Reinsurance"
commencing on page 21 herein.) Such reserves incorporate factors
specifically relevant to environmental claims, including the nature
and scope of policy coverage; the number of claimants, defendants and
co-insurers; the timing and severity of injuries or damage; and the
relevant jurisdiction and case law. Continental has managed its
environmental claims from its centralized Environmental Claims
Department since 1981. Continental believes that its centralized
approach to handling environmental claims gives Continental the best
practicable ability to determine its liability.
Continental employs what it believes to be a broad definition of
"environmental claims" to classify those types of claims which are
handled out of its centralized Environmental Claims Department.
"Environmental claims" include claims or lawsuits, for which coverage
is alleged, arising from exposure to hazardous substances or
materials originating from a site, which is the subject of an
investigation or cleanup pursuant to state or federal environmental
legislation; claims or lawsuits involving allegations of bodily
injury or property damage arising out of the discharge or escape of a
pollutant or contaminant; and claims or lawsuits alleging bodily
injury or property damage as a result of exposure over a period of
time to products or substances alleged to be harmful or toxic. Claims
falling under the above categories are classified into two general
claim types: (1) asbestos-related and other toxic torts; and (2)
environmental pollution. The nature of Continental's business that
has resulted in these claim-types is addressed below.
Continental has not marketed nor been in the business of providing
environmental pollution coverages, with the exception of a program
which was in effect from 1981 to 1985, which provided such coverage
on a claims-made basis. There are currently three claims pending
under policies written under this program, for which Continental has
established case reserves which reflect Continental's estimate of the
probable ultimate cost of these claims. The allowable reporting
period under all policies written under this program has expired.
The 1980 enactment of CERCLA, as well as similar state statutes,
resulted in environmental pollution claims brought thereafter under
standard form general liability policies. While most environmental
pollution claims have arisen out of policyholders' obligations under
federal and state regulatory statutes, claims have also been brought
against policyholders by private third-parties, alleging pollution-
related property damage and/or bodily injury. Consistent with the
broad range of entities which may become subject to designation as
"Potentially Responsible Parties" under state and federal
environmental statutes, insureds presenting such claims for coverage
under general liability policies span a broad spectrum of commercial
policyholders. Most of Continental's environmental pollution claims
result from general liability policies written prior to 1986. Certain
provisions of Continental's, and the industry's, standard form
general liability policies written prior to 1986 have been subject to
wide-ranging challenges by policyholders and/or differing
interpretations by courts in various jurisdictions, with inconsistent
conclusions as to the applicability of coverage for environmental
pollution claims. Policies written after 1986 have not been subject
to such wide-ranging challenges by policyholders and/or differing
interpretations by the courts. Continental has consistently
maintained in coverage litigation that its general liability policies
did not provide coverage for environmental pollution liability.
Asbestos-related claims have generally arisen out of product
liability coverage provided by Continental under general liability
policies written prior to 1983. Thereafter, asbestos-product
exclusions were included in general liability policies.
Asbestos-related bodily injury litigation developed during the late
1970's. Initially, the majority of defendant-insureds making claims
under general liability policies were involved in the mining,
processing, distribution and sale of raw asbestos. By 1985, the
category of defendants grew to include companies which produced a
variety of products containing asbestos, including roofing materials,
tile, refractory products, asbestos-containing clothing, and brake
and clutch friction products. Continental had written primary
general liability coverage for only two major asbestos manufacturers,
and had settled all liabilities under those policies by 1989.
Continental had written excess insurance coverage for several other
asbestos manufacturers. In addition, Continental had written primary
general liability coverage for companies which produce products
containing asbestos.
Claims which fall in the other toxic tort category have generally
arisen out of product liability coverage under general liability
policies. These claims involve a variety of allegations of bodily
injury as a result of exposure over a period of time to products
alleged to be harmful or toxic, such as silica, lead-based paint,
pesticides, dust, acids, gases, chemicals, silicone breast implants
and pharmaceutical products.
Typically, the time period of coverage provided by Continental for
all of the above claim-types represents a portion of the overall
coverage available to a policyholder to pay these claims. Whenever
appropriate, Continental actively seeks out opportunities to
participate in cost-sharing agreements with other insurance carriers,
stipulating to an equitable allocation of expenses and indemnity
payments. Cost-sharing agreements are presently in effect with
respect to a large majority of Continental's policyholders involved
in asbestos and other toxic tort litigation.
As of December 31, 1993, there were approximately 3,600 pending
environmental pollution claims involving approximately 800
policyholders, and environmental pollution-related coverage disputes
involving approximately 290 policyholders in 340 actions.
Approximately 1,550 environmental pollution claims closed or settled
during 1993. Continental defines a "claim" as a reserved file which
represents the potential financial exposure to a policy year based on
an analysis of relevant factors, and which arises out of a
policyholder's potential liability at a single site or multiple
sites.
A three-year asbestos-related, other toxic tort and environmental
pollution loss reserve activity analysis is set forth below:
<TABLE>
Asbestos-Related, Other Toxic Tort
and Environmental Pollution Claims
<CAPTION>
Year Ended December 31 (1)
---------------------------------
1993 1992 1991
---- ---- ----
(millions)
<S> <C> <C> <C>
Asbestos-related and
Other Toxic Tort Claims:
Gross Reserves as of January 1 . . . . $ 85.6 $ 76.8 $ 49.7
Gross Incurred Losses and
Loss Adjustment Expenses . . . . . . 46.0 45.0 66.1
Gross Payments for Losses and Loss
Adjustment Expenses. . . . . . . . . (40.3) (36.2) (39.0)
------ ------ ------
Gross Reserves as of December 31 . . . $ 91.3 $ 85.6 $ 76.8
====== ====== ======
Environmental Pollution Claims:
Gross Reserves as of January 1 . . . . $161.5 $144.9 $ 93.7
Gross Incurred Losses and Loss
Adjustment Expenses. . . . . . . . . 68.7 64.2 103.2
Gross Payments for Losses and
Loss Adjustment Expenses . . . . . . (58.0) (47.6) (52.0)
------ ------ ------
Gross Reserves as of December 31 . . . $172.2 $161.5 $144.9
====== ====== ======
Gross Claims Reserves as
of December 31:
Asbestos-related and Other
Toxic Tort . . . . . . . . . . . . . $ 91.3 $ 85.6 $ 76.8
Environmental Pollution. . . . . . . . 172.2 161.5 144.9
Less Reinsurance . . . . . . . . . . . (105.3) ( 79.5) ( 58.2)
------ ------ ------
Net Claims Reserves
as of December 31. . . . . . . . . . . $158.2 $167.6 $163.5
====== ====== ======
___________________________
(1) Prior years' information has been restated to reflect accounting for
Continental's traditional assumed reinsurance and marine reinsurance
businesses and indigenous international and international marine
insurance businesses as discontinued operations. See "Discontinued
Operations" commencing on page 6 herein.
</TABLE>
As of December 31, 1993, Continental's gross loss and loss
adjustment expense reserves for reported asbestos-related, other
toxic tort and environmental pollution claims included gross loss
adjustment expense reserves of $54.4 million, or 21% of such total
reserves (as of December 31, 1992, $55.0 million, or 22% of such
total reserves). The amount of Continental's gross loss adjustment
expense reserves for reported asbestos-related, other toxic tort and
environmental pollution claims, as of December 31, 1993, constituted
less than 5% of Continental's total gross loss adjustment expense
reserves.
Continental does not establish reserves for unreported
asbestos-related, other toxic tort and environmental pollution claims
because of significant uncertainties, which do not allow liabilities
to be reasonably estimated. Such uncertainties include difficulties
in determining the frequency and severity of such potential claims
and in predicting the outcome of judicial decisions, as case law
evolves regarding liability exposure, insurance coverage and
interpretation of policy language. The changes in the last three
years in Continental's estimates of its liability for insured events
of prior years are set forth in the Components of Reserve Development
table on page 21 herein. At this time, the future financial impact of
unreported asbestos-related, other toxic tort and environmental
pollution claims can not be reasonably estimated, and no assessment
can be made with respect to the ultimate impact thereof on
Continental's results of operations or financial condition in the
future.
The actuarial profession is addressing unquantifiable liabilities
(e.g., unreported asbestos-related, other toxic tort and
environmental pollution claims) and is in the initial stage of
developing standards, but has not yet scheduled publication of a
discussion draft. Other uncertainties may be clarified through the
debate, extension or modification of CERCLA in 1994. These
developments will continue to be monitored and assessed by
Continental.
In accordance with individual state insurance laws, certain of the
property and casualty subsidiaries discount certain workers'
compensation pension reserves. The rate of discount varies by
jurisdiction and ranges from 3.0% to 5.0%. The statutory discount on
workers' compensation reserves at December 31, 1993, 1992 and 1991 is
$525 million, or 7.9% of statutory reserves; $522 million, or 8.0% of
statutory reserves; and $505 million, or 7.7% of statutory reserves,
respectively. The discount includes an additional discount on the
reserves at December 31, 1993, 1992 and 1991 for incurred but not
reported claims of $127 million, $187 million and $185 million,
respectively, for losses reported to Continental through its
participation in joint reinsurance pools. In addition, for the
purpose of reporting on a generally accepted accounting principles
basis, these subsidiaries have discounted workers' compensation
pension reserves since 1984 at a rate of 7% to reflect assumed market
yields. Discounting at a rate of 7% in 1993, 1992 and 1991 reduced
total reserves for losses at the end of such years by $696 million,
or 10.5%; $693 million, or 10.6%; and $676 million, or 10.3%,
respectively. As a result of the discounting of such reserves, the
ultimate net cost of the losses would, without taking other factors
into account, be projected to exceed the amount of the carried
reserves by the amount of the discount. The total amount of this
excess will emerge as current year incurred losses develop over many
years. If such excess had been reflected in the table on page 19 as
development of prior year reserves, it would have added $20 million,
or 0.4%; $35 million, or 0.6%; and $44 million, or 0.7%,
respectively, to the 1992, 1991 and 1990 cumulative deficiencies as
of December 31, 1993. However, the yields on these subsidiaries'
investment portfolios have historically been greater than the
discount rate, and any deficiency due to the discounting of such
reserves should be more than offset by investment income.
The table on page 19 shows the annual adjustment to historical
reserves for each year since 1983. The reserves for unpaid losses
and loss expenses are set forth on a cumulative basis for the year
specified and all prior years. Although amounts paid for any year
are reflected in the re-estimated ultimate net loss at the end of
such year, there is no direct correlation in the development patterns
between the two portions of the table because the re-estimated
ultimate net loss includes adjustments for unpaid losses and loss
expenses as well. Finally, an adjustment to an unpaid claim for a
prior year will also be reflected in the adjustments for all
subsequent years. For example, an adjustment made in 1989 for 1983
loss reserves will be reflected in the re-estimated ultimate net loss
for each of the years 1984 through 1988.
<TABLE>
Ten-Year Loss Development Presented Net of Reinsurance
With Supplemental Gross Data (1)(2)(3)
<CAPTION>
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET LIABILITY AS OF
END OF YEAR..........$2,861.7 $2,946.6 $3,464.4 $4,038.9 $4,686.3 $5,339.5 $6,045.0 $5,963.1 $5,901.9 $5,806.5 $5,915.8
PAID AS OF:
One Year Later..... 1,040.1 1,114.9 1,386.6 1,407.5 1,558.0 1,754.0 2,030.1 2,073.1 2,225.1 2,013.7
Two Years Later.... 1,582.3 1,813.8 2,152.1 2,295.6 2,591.6 2,876.0 3,388.2 3,381.7 3,411.3
Three Years Later.. 2,011.2 2,284.5 2,727.4 2,940.3 3,292.2 3,688.5 4,331.9 4,240.8
Four Years Later... 2,295.5 2,648.9 3,157.6 3,399.2 3,810.8 4,270.7 4,942.3
Five Years Later... 2,536.7 2,929.6 3,461.1 3,756.0 4,191.0 4,659.6
Six Years Later.... 2,734.0 3,117.9 3,709.0 4,022.3 4,429.9
Seven Years Later.. 2,876.7 3,299.6 3,907.8 4,185.4
Eight Years Later.. 3,013.2 3,449.8 4,031.4
Nine Years Later... 3,144.6 3,552.7
Ten Years Later.... 3,240.9
NET LIABILITY RE-ESTIMATED
AS OF:
End of Year........ 2,861.7 2,946.6 3,464.4 4,038.9 4,686.3 5,339.5 6,045.0 5,963.1 5,901.9 5,806.5 $5,915.8
One Year Later..... 2,879.9 3,149.9 3,512.2 4,080.8 4,810.5 5,444.7 6,066.6 6,059.6 6,027.2 5,807.6
Two Years Later.... 3,005.8 3,229.7 3,704.0 4,293.8 4,972.3 5,466.4 6,167.3 6,111.2 6,073.1
Three Years Later.. 3,063.4 3,395.3 3,958.1 4,499.1 5,021.4 5,584.3 6,284.8 6,171.5
Four Years Later... 3,204.5 3,551.4 4,170.9 4,558.7 5,145.4 5,649.4 6,404.6
Five Years Later... 3,289.3 3,687.4 4,263.6 4,688.2 5,182.1 5,720.2
Six Years Later.... 3,385.1 3,760.3 4,392.0 4,772.8 5,220.4
Seven Years Later.. 3,434.8 3,861.5 4,510.3 4,814.9
Eight Years Later.. 3,536.3 3,948.5 4,550.9
Nine Years Later... 3,635.4 3,975.2
Ten Years Later.... 3,685.2
NET CUMULATIVE
DEFICIENCY............ 823.5 1,028.6 1,086.5 776.0 534.1 380.7 359.6 208.4 171.2 1.1 --
GROSS LIABILITY AS OF
END OF YEAR........ 9,066.2 9,068.7
REINSURANCE
RECEIVABLES.......... 3,259.7 3,152.9
NET LIABILITY AS
OF END OF YEAR....... 5,806.5 5,915.8
GROSS RE-ESTIMATED
LIABILITY -
LATEST............... 8,809.6
RE-ESTIMATED
RECOVERABLE -
LATEST............... 3,002.0
NET RE-ESTIMATED
LIABILITY -
LATEST............... 5,807.6
GROSS CUMULATIVE
DEFICIENCY
(REDUNDANCY)
(4).................. (256.6)
(1) Information for each year from 1983 - 1991 has been restated to
reflect accounting for Continental's traditional assumed reinsurance
and marine reinsurance businesses and indigenous international
marine insurance businesses as discontinued operations. See
"Discontinued Operations" commencing on page 6 herein.
(2) The reserves of foreign subsidiaries are translated into United States
dollars at the exchange rates as of each year-end. Foreign exchange
factors tend to improve or adversely affect the reserve
development (ultimate loss as compared to initial estimated liability)
of foreign subsidiaries depending upon the relative movement of the
exchange rates.
(3) Excluding title companies' reserves.
(4) The gross reserves include direct written business and assumed
business. In 1993, Continental commuted a reinsurance agreement,
which had the effect of decreasing assumed business and reinsurance
receivables by $208 million, but did not affect net reserves.
This commutation pertains to certain business arising in 1992 and
prior years.
</TABLE>
Reconciliation of Net Reserves for Losses and Loss Expenses
from a Statutory Accounting Principles Basis to a Generally Accepted
Accounting Principles Basis for the Last Two Years
With Supplemental Gross Data
1993 1992
---- ----
(millions)
Total Net Statutory Reserves.......................... $7,029.0 $7,339.0
Less: Net Reserves of Discontinued Operations......... 936.6 1,355.2
-------- --------
Net Statutory Reserves of Continuing Operations....... 6,092.4 5,983.8
Adjustments to a Generally Accepted Accounting
Principles Basis, Principally Discounting of
Workers' Compensation Pension Reserves.............. (176.6) (177.3)
-------- --------
Net Reserves on a Generally Accepted
Accounting Principles Basis......................... 5,915.8 5,806.5
Reinsurance Receivables............................... 3,152.9 3,259.7
-------- --------
Gross Reserves on a Generally Accepted
Accounting Principles Basis......................... $9,068.7 $9,066.2
======== ========
Reconciliation of Net Reserves for Losses and Loss
Expenses for the Last Three Years
With Supplemental Gross Data (1)
1993 1992 1991
-------- --------- --------
(millions)
Net Reserves as of January 1............... $5,806.5 $5,901.9 $5,963.1
Incurred Related to:
Current Year............................ 3,413.0 3,036.3 2,986.5
Prior Years............................. 1.1 125.3 96.5
-------- -------- --------
Total Incurred............................. 3,414.1 3,161.6 3,083.0
--------- -------- --------
Paid Related to:
Current Year............................ 1,291.1 1,031.9 1,071.1
Prior Years............................. 2,013.7 2,225.1 2,073.1
-------- -------- --------
Total Paid................................. 3,304.8 3,257.0 3,144.2
-------- -------- --------
Net Reserves as of December 31............. 5,915.8 5,806.5 $5,901.9
======== ======== ========
Reinsurance Receivables.................... 3,152.9 3,259.7
-------- --------
Gross Reserves............................. $9,068.7 $9,066.2
======== ========
__________________________
(1) 1991 information has been restated to reflect accounting for Continen-
tal's traditional assumed reinsurance and marine reinsurance businesses
and indigenous international and international marine insurance
businesses as discontinued operations. See "Discontinued Operations"
commencing on page 6 herein.
The following table shows the changes in the last three years in
Continental's estimates of its liability for insured events of prior
years, including the extent to which such changes relate to
asbestos-related, other toxic tort and environmental pollution
claims:
Components of Reserve Development
For the Last Three Years (1)
Reserve Increase (Decrease)
at December 31
------------------------------
1993 1992 1991
------- ------ --------
(net basis, millions)
Asbestos-related and Other
Toxic Tort........................ $22.4 $ 33.3 $ 42.6
Environmental Pollution............. 33.5 47.6 66.4
----- ------ ------
Subtotal............................ 55.9 80.9 109.0
All Other........................... (54.8) 44.4 (12.5)
----- ------ ------
Total............................... $ 1.1 $125.3 $ 96.5
===== ====== ======
__________________________
(1) Prior years' information has been restated to reflect accounting for
Continental's traditional assumed reinsurance and marine reinsurance
businesses and indigenous international and international marine
insurance businesses as discontinued operations. See "Discontinued
Operations" commencing on page 6 herein.
The increases in Continental's estimate of its liabilities for
insured events of prior years for total asbestos-related, other toxic
tort and environmental pollution claims during each of the years
1993, 1992 and 1991 was 1.6%, 2.6% and 3.5%, respectively, of
Continental's net reported incurred losses and loss expenses for such
years.
Reinsurance
In the ordinary course of business, Continental cedes business to
other insurers and reinsurers. Purchasing reinsurance enables
Continental to limit its exposure to catastrophic events and other
concentrations of risk. However, purchasing reinsurance does not
relieve Continental of its obligations to its insureds. Continental
reviews the creditworthiness of its reinsurers on an ongoing basis.
To minimize potential problems, Continental's policy is to purchase
reinsurance only from carriers who meet its credit quality
standards. It has also taken and is continuing to take steps to
settle existing reinsurance arrangements with reinsurers which do not
meet its credit quality standards. Continental does not believe that
there is a significant solvency risk concerning these reinsurance
claims. In addition, Continental regularly evaluates the adequacy of
its reserves for uncollectible reinsurance. Continental believes that
it makes adequate provisions for the ultimate collectibility of its
reinsurance claims and therefore believes these net recoveries to be
probable. (See Note 6 to Consolidated Financial Statements included
in Continental's 1993 Annual Report to Shareholders for additional
information regarding reinsurance.)
Continental has in place various reinsurance arrangements with
respect to its current operations. These arrangements are subject to
retentions, coverage limits and other policy terms. Some of the
principal treaty arrangements which are presently in effect are: (1)
an excess-of-loss treaty reducing Continental's liability on
individual property losses; (2) a blanket casualty program reducing
Continental's liability on third party liability losses; (3) a clash
casualty program reducing Continental's liability on multiple
insured/single event losses; and (4) a property catastrophe program,
with a net retention of $50 million in 1993, increased from $20
million in 1992, reducing its liability from catastrophic events.
Continental also uses individual risk facultative and other
facultative agreements to further reduce its liabilities. In 1993,
Continental's gross incurred losses from catastrophic events were
$166 million, and its net incurred losses from catastrophic events
were $153 million. Included in both gross and net incurred
catastrophe losses in 1993 is a $44 million loss from the March east
coast blizzard.
Continental also has in place, for future potential adverse reserve
development, an aggregate excess-of-loss reinsurance contract with a
full limit of $400 million. This agreement was purchased from
National Indemnity Company. It covers losses and allocated loss
expenses for 1991 and prior policy years. The business covered
includes all lines of business written by Continental's domestic
property and casualty insurance subsidiaries, with specific
exclusions for nuclear exposure, war risks, business written through
the Workers' Compensation Reinsurance Bureau and involuntary market
pools, insolvency and guarantee fund assessments, taxes, unallocated
loss adjustment expenses, and extra-contractual obligations.
Continental does not maintain any reinsurance arrangements whose
coverage is limited solely to asbestos-related, other toxic tort and
environmental pollution claims. The amounts of reinsurance
receivables and recoverables that are reflected in Continental's
Consolidated Financial Statements arose under a variety of
reinsurance arrangements put in place generally from 1963 through
1986, which generally are the years in which Continental's general
liability policies were alleged to provide coverage for those types
of claims. As most of Continental's reserves for asbestos-related,
other toxic tort and environmental pollution claims have arisen out
of general liability policies written prior to 1986 (after which such
policies have not generally been subject to wide-ranging challenges
by policyholders and/or differing interpretations by courts in
various jurisdictions), a majority of reinsurance receivables and
recoverables arising out of such claims in 1991, 1992 and 1993
related to reinsurance arrangements put into place prior to 1986.
These reinsurance arrangements include primary casualty treaty
arrangements, excess of loss and umbrella casualty treaty
arrangements, property treaty arrangements and various facultative
agreements.
Investment and Finance
Reserves and surplus balances constitute a pool of funds which are
invested by insurance companies. Investment results combined with
underwriting results produce operating income or losses.
Continental's overall operating results in the insurance business are
significantly affected by the performance of its investment
portfolio.
The following table sets forth the investment results of Continental
and its subsidiaries for each of the past three years:
Average Net Investment Current Realized
Year Investments(1)(3) Income (2) (3) Yield(3) Capital Gains(3)
- ---- ----------------- -------------- -------- ----------------
(millions, except percentages)
1993........ $8,817.0 $542.3 6.2% $124.5
1992........ $8,314.4 $589.9 7.1% $215.6
1991........ $8,009.7 $637.2 8.0% $111.2
____________
(1) Average of investments at beginning and end of calendar year, excluding
operating cash, but including cash equivalents. Bonds and redeemable
preferred stocks are reported at market, except for those investments
intended to be held to maturity, which are reported at cost.
(2) Net investment income after deduction of investment expenses, but
before realized capital gains and applicable income taxes.
(3) Certain reclassifications, primarily for discontinued operations,
have been made to the prior years' financial information to conform
to the 1993 presentation.
Investment strategies are developed based on a variety of factors
including business needs, regulatory requirements and tax
considerations. It is Continental's objective to maximize real
economic surplus by actively managing all investable assets to ensure
a maximum after-tax "total return". The total return concept employs
an integrated approach of tailoring investment strategies to ensure
proper asset/liability management. An asset/liability study is
performed by management to determine the ideal duration of the
investment portfolio, taking into consideration the optimal risk and
return preferences of management.
Continental continually monitors the mix between its fixed
maturities and equity securities portfolios. It is management's
preference to limit equity investments to a percentage of economic
surplus. This equity limit is further reduced by any current
commitments to "high yield" bonds and non-dollar bonds supporting
dollar-based activities. Considering risk and return parameters,
common stock commitments have been limited to no more than 100% of
Continental's property and casualty statutory surplus. The
percentage of Continental's consolidated property and casualty
statutory surplus invested in common stocks at the end of each of the
past three years has ranged between 33% and 39%, and at the end of
1993, was approximately 33%.
Fixed maturities are further managed to ensure maximum profitability
by balancing the portfolio between taxable and tax-exempt
securities. Continental also uses international investment programs
to match its non-dollar business exposures and to enhance the risk
and return parameters of the portfolio backing its U.S.-based
business.
All investments are made in accordance with applicable state
investment laws; further, Continental employs strict internal
guidelines limiting its investments in any particular issue and in
any particular industry. Continental also maintains short-term
investments and cash equivalents for the current and anticipated
near-term liquidity needs of its operations. When maximizing total
return, management recognizes that some capital losses are
inevitable.
Fixed maturities available-for-sale consist of certain bonds and
redeemable preferred stocks that management may not hold until
maturity and which have an average Standard & Poor's rating of AA+
(or its Moody's equivalent). Continental's fixed maturities
available-for-sale had a balance sheet fair value of $6,916 million
at December 31, 1993 (compared with a fair value of $6,240 million at
December 31, 1992) and included mortgage-backed securities with a
fair value of $1,270 million and an amortized cost of $1,255 million
at December 31, 1993 (compared with a fair value of $1,338 million
and an amortized cost of $1,300 million at December 31, 1992).
Continental's mortgage-backed securities have an average Standard &
Poor's rating of AAA (or its Moody's equivalent) and an average of
life of 6.0 years. Continental has an insignificant investment in
collateralized mortgage obligations which put the return of principal
at risk if interest rates or prepayment patterns fluctuate.
At December 31, 1993, Continental's bond portfolio classified by
Moody's rating was as follows:
Percentage of
Bond
Moody's Rating Portfolio
------------------ -------------
Aaa........................ 62.0%
Aa......................... 15.7
A.......................... 11.2
Baa........................ 9.6
Below Baa.................. 1.5
-----
100.0%
At December 31, 1993, the fixed maturities portfolio included an
insignificant amount of securities, the fair value of which is
expected to be lower than its carrying value for more than a
temporary period; such investments have been recorded in
Continental's Consolidated Balance Sheets at their net realizable
value.
Continental also maintains an equity securities portfolio, the fair
value of which was $759 million at December 31, 1993. At December
31, 1993, Continental also had a $112 million investment in
privately-placed direct mortgages, which are included in "Other
Long-Term Investments" in Continental's Consolidated Balance Sheets.
The NAIC is currently developing an Investments of Insurers Model
Act, which, if adopted by state regulatory authorities, would
establish uniform limitations upon the type and amounts of
investments insurers may hold. Based upon the current proposals of
this Model Act, which are subject to review and change, Continental
does not believe a uniform standard would significantly affect the
current investment mix or operations of its insurance subsidiaries.
Unrealized appreciation on investments available-for-sale increased
$170 million, before income taxes, from December 31, 1992. Unrealized
appreciation on fixed maturities increased $152 million. Unrealized
appreciation on common stocks decreased $1 million, while unrealized
appreciation on nonredeemable preferred stocks increased $11
million. Unrealized appreciation on other long-term assets increased
$8 million. In addition, unrealized appreciation on investments held
by discontinued operations increased $15 million, before income
taxes, from December 31, 1992.
In recent years, a small portion of Continental's investment funds
has been committed to alternative areas of investment (i.e., other
than Continental's traditional areas). Continental currently invests
in alternative areas including venture capital partnerships,
high-yield bonds, international diversification investments and
emerging markets. As of December 31, 1993, the total investment in
these areas represented less than 5% of Continental's investment
portfolio.
Continental, through its former participation in the Municipal Bond
Insurance Association, issued guarantees of financial obligations.
During 1986, this association was reorganized as a corporation named
MBIA, Inc. Continental's net par value exposure at December 31,
1993 on guarantees issued before the reorganization is $1.4 billion
(1992 - $1.7 billion), all of which has been reinsured by MBIA, Inc.
In addition, Continental has issued financial guarantees of limited
partners' obligations, municipal lease obligations, industrial
development bonds and other obligations. Continental's net par value
exposure on these guarantees at December 31, 1993 was $151.0 million
(1992 - $173.0 million). The maturity dates of these obligations
range between one and twelve years. Continental continually monitors
its exposure relating to financial guarantees. Continental does not
believe that its exposures relating to financial guarantees are
material.
Miscellaneous
In 1992 and 1993, Continental sold a total of $350 million in Notes
(which provided $346 million to Continental, net of offering and
underwriting costs) under its shelf registration of up to $400
million of debt securities with the Securities and Exchange
Commission. During 1993, Continental used $282 million of net
proceeds from these sales to retire its outstanding 9 3/8% Notes due
July 1, 1993 and $50 million of net proceeds from these sales to
reduce corporate short-term borrowings. Continental intends to sell
an additional $50 million of debt securities under its existing shelf
registration and to register for the sale of up to an additional $100
million of debt securities. Continental plans to use the net proceeds
from these sales to further reduce its short-term borrowings.
As of December 31, 1993, Continental and its subsidiaries had
approximately 12,255 employees, compared with 13,100 at December 31,
1992. Continental and its subsidiaries consider their employee
relations to be satisfactory.
Item 2. Properties
Continental's subsidiaries lease office space in various cities
throughout the United States and in other countries. The following
table sets forth certain information with respect to the principal
office buildings owned or leased by Continental's subsidiaries:
Amount of Building
Owned and Occupied
or Leased by
Continental's
Size Subsidiaries
(in square (in square
Location feet) (1) feet) Principal Usage Operations
- --------------------- ---------- --------- ------------------- ----------
180 Maiden Lane, 1,091,570 572,514 Principal Executive Corporate/
New York, New York(2) Offices of Insurance
Continental Operations/
Asset
Management
1 Continental Drive, 490,993 490,993 Property, Casualty Insurance
Cranbury, New Jersey Insurance Offices Operations
200 S. Wacker Drive, 336,390 245,466 Property, Casualty Insurance
Chicago, Illinois Insurance Offices Operations
1111 E. Broad St., 197,537 197,537 Property, Casualty Insurance
Columbus, Ohio Insurance Offices Operations
1100 Ward Avenue, 186,492 97,831 First Insurance Insurance
Honolulu, Hawaii(2) Company of Hawaii, Operations
Ltd. Headquarters
333 Glen Street, 158,700 158,700 Property, Casualty Insurance
Glens Falls, New York Insurance Offices; Operations
Residual Market
Center
3501 State Highway 129,965 129,965 Data Processing Systems
No. 66, Neptune, Facilities
New Jersey
- -----------------------
(1) Represents the amount of space owned and occupied by or leased to
Continental's subsidiaries. To the extent not occupied
by Continental's subsidiaries, such space is or is intended to
be subleased to third parties.
(2) Represents property owned in fee by Continental's subsidiaries
and held subject to mortgages. (See Note 7 to Consolidated
Financial Statements included in Continental's 1993 Annual Report
to Shareholders.)
Item 3. Legal Proceedings
Continental's subsidiaries are routinely party to litigation
incidental to their business, as well as other litigation of a
nonmaterial nature. Management regularly evaluates the liability of
Continental and its subsidiaries associated with such litigation. The
status of such litigation is reviewed in consultation with
Continental's in-house legal staff, Corporate Claims Department and
Environmental Claims Department, and their respective outside
counsel, all of whom have extensive experience in handling such
matters. Based upon the foregoing evaluative process, Continental
makes a determination as to the effect that such litigation may have
upon its financial condition on a consolidated basis. In the opinion
of Continental, no individual item of litigation, or group of related
items of litigation (including asbestos-related, other toxic tort and
environmental pollution matters), taken net of claims reserves
established therefore and giving effect to reinsurance, is likely to
result in judgments for amounts material to the financial condition of
Continental and its subsidiaries on a consolidated basis.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1993, no matter was submitted to a vote
of Continental's shareholders.
Item 4(A). Executive Officers of the Registrant
Name Title Age
John P. Mascotte Director, Chairman of the Board,
Chief Executive 54
Officer and President
Charles A. Parker Director and Executive Vice President, 59
Investments
Wayne H. Fisher Executive Vice President and President, 49
Special Operations Group
Fredric G. Marziano Executive Vice President and President, 51
The Continental Insurance Companies and
Agency and Brokerage Group
Steven J. Smith Executive Vice President, Office of the 49
Chairman
Adrian M. Tocklin Executive Vice President and President, 42
Continental Risk Management Services
Bruce B. Brodie Senior Vice President and Chief 39
Information Officer
J. Heath Fitzsimmons Senior Vice President and Chief 51
Financial Officer
James P. Flood Senior Vice President, Corporate Claims 43
William F. Gleason,
Jr. Senior Vice President, General
Counsel and Secretary 57
John F. Kirby Senior Vice President 47
Arthur J. O'Connor Senior Vice President, Corporate 41
Communications and Investor Relations
Sheldon Rosenberg Senior Vice President and Chief Actuary 44
Kenneth B. Zeigler Senior Vice President, Human Resources 45
Francis M. Colalucci Vice President and Treasurer 49
William A. Robbie Vice President and Chief
Accounting Officer 42
All Executive Officers of Continental are elected to serve for terms
to expire at the meeting of the Board of Directors following the next
Annual Meeting of Shareholders and until their successors shall have
been elected.
John P. Mascotte has been a Director since February 1981, Chairman of
the Board and Chief Executive Officer of Continental since December
1982 and President since December 1992.
Charles A. Parker has been a Director since May 1989 and Executive
Vice President, Investments, of Continental since May 1983.
Wayne H. Fisher has been an Executive Vice President of Continental
since December 1990 and has been President, Special Operations Group,
since January 1988. Before that time, he was a Senior Vice President
of Continental (December 1988-December 1990).
Fredric G. Marziano has been an Executive Vice President and
President, Agency and Brokerage Group, since January 1987 and
President of The Continental Insurance Companies since November 1992.
Steven J. Smith has been an Executive Vice President, Office of the
Chairman, of Continental since February 1983.
Adrian M. Tocklin has been Executive Vice President of Continental
and President, Continental Risk Management Services, since November
1992. Before that time, she served as Senior Vice President,
Corporate Claims, of Continental (July 1988 - November 1992).
Bruce B. Brodie has been Senior Vice President and Chief Information
Officer of Continental since October 1993. Before that time, he
served as Chief Financial Officer for the Special Operations Group
(April 1990 - October 1993) and Vice President, Office of the
Chairman, of Continental (January 1989 - April 1990).
J. Heath Fitzsimmons has been Senior Vice President and Chief
Financial Officer of Continental since January 1990. Before that
time, he was Vice President, Finance, of Continental (February
1989-December 1989).
James P. Flood has been Senior Vice President, Corporate Claims, of
Continental since November 1992. Before that time, he served as Vice
President, Environmental Claims, of Continental (March 1988 - October
1992).
William F. Gleason, Jr. has been Senior Vice President, General
Counsel and Secretary of Continental since January 1983.
John F. Kirby has been a Senior Vice President of Continental since
January 1990 and a Senior Vice President of The Continental Insurance
Company since March 1987.
Arthur J. O'Connor has been Senior Vice President, Corporate
Communications and Investor Relations, of Continental since November
1992 and served as Vice President, Corporate Communications and
Investors Relations, of Continental (January 1988 - November 1992).
Sheldon Rosenberg has been Senior Vice President and Chief Actuary of
Continental since February 1994. Before that time, he served as Vice
President and Chief Actuary of The Continental Insurance Company
(April 1992 - February 1994), Vice President and Actuary of The
Continental Insurance Company (April 1990-March 1992) and Vice
President and Chief Financial Officer of the Special Operations Group
(April 1988 - March 1990).
Kenneth B. Zeigler has been Senior Vice President, Human Resources,
of Continental since December 1991. Before that time, he served as
Senior Vice President and President of the Marine and International
Group (January 1990-November 1991). Previously, he had been President
of Continental International (July 1988-December 1990).
Francis M. Colalucci has been Vice President and Treasurer of
Continental since May 1991. Before that time, he was Vice President
and Controller of The Continental Insurance Company (November
1980-May 1991).
William A. Robbie has been Vice President and Chief Accounting
Officer since June 1992 and served as Vice President, Financial
Reporting (June 1990 - June 1992). Before that time, he served as
Vice President and Treasurer of Monarch Life Insurance Co. and Vice
President and Corporate Controller of Monarch Capital Corp. (August
1988 - June 1990).
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Material appearing under the captions "Shareholder Information",
"Summarized Consolidated Quarterly Financial Data (Unaudited),
"Selected Consolidated Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Financial Resources and Liquidity", and Notes 9 and 10 to
Consolidated Financial Statements included in Continental's 1993
Annual Report to Shareholders (the "Annual Report") is incorporated
herein by reference.
Item 6. Selected Financial Data
Material appearing under the caption "Selected Consolidated Financial
Data" included in the Annual Report is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Material appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
in the Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements and related Notes, and material
appearing under the captions "Independent Auditors' Report", "Report
on Financial Statements" and "Summarized Consolidated Quarterly
Financial Data (Unaudited)" included in the Annual Report are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Within the 24 months prior to the date of its most recent financial
statements, Continental did not file a report on Form 8-K reporting a
change of accountants.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Executive Officers of Continental appears
under Item 4(A) of this Report. Information as to Directors of
Continental appearing under the caption "Election of Directors"
included in Continental's Proxy Statement in connection with its 1994
Annual Meeting of Shareholders (the "Proxy Statement") is
incorporated herein by reference.
Item 11. Executive Compensation
Material appearing under the captions "Directors' Compensation" and
"Executive Compensation" included in the Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Material appearing under the captions "Election of Directors",
"Security Ownership of Directors and Executive Officers" and "Other
Ownership of Continental Stock" included in the Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Material appearing under the caption "Election of Directors" included
in the Proxy Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) The following documents are filed as part of this Report.
(1) The following is a list of financial statements, together
with schedules thereto, filed as part of this Report, all of which
have been incorporated herein by reference to the material in the
Annual Report as described under Item 8 of this Report.
Report on Financial Statements
Consolidated Statements of Income for the years ended December 31,
1993, 1992 and 1991
Consolidated Balance Sheets at December 31, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended December
31, 1993, 1992 and 1991
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Independent Auditors' Report
Selected Consolidated Financial Data
Summarized Consolidated Quarterly Financial Data (Unaudited)
(2) The following is a list of financial statement schedules
filed with this Report.
Independent Auditors' Report
Consolidated:
Page No.
Schedule I -- Summary of Investments Other Than
Investments in Related Parties at
December 31, 1993..................... 34
II -- Amounts Receivable from Related
Parties and Underwriters, Promoters,
and Employees Other Than Related
Parties for the years ended
December 31, 1993, 1992 and 1991...... 35
III -- Condensed Parent Financial Statements:
-- Statements of Income for the
years ended December 31, 1993,
1992 and 1991..................... 36
-- Balance Sheets at December
31, 1993 and
1992.............................. 37
-- Statements of Cash Flows for the
years ended December 31, 1993,
1992 and 1991..................... 38
IV -- Not Applicable........................ --
V -- Supplementary Insurance Information for
the years ended December 31, 1993, 1992
and 1991............................... 39
VI -- Reinsurance Information for the years
ended December 31, 1993, 1992 and
1991................................... 40
VII -- Not Applicable......................... --
VIII -- Valuation and Qualifying Accounts for
the years ended December 31, 1993, 1992
and 1991............................... 41
IX -- Short-Term Borrowings for the years
ended December 31, 1993, 1992 and
1991................................... 42
X -- Supplemental Information for Property-
Casualty Insurance Underwriters for the
years ended December 31, 1993, 1992 and
1991................................... 43
(3) The following is a list of exhibits hereto required to be
filed by Item 601 of Regulation S-K of the Securities and Exchange
Commission (the "SEC").
3(a)-- Certificate of Incorporation of Continental, as amended,
as filed with the Secretary of the State of New York on
April 6, 1989.
(b)-- By-Laws of Continental, as amended through December 17,
1992.
4(a)-- The following document filed with the SEC on March 3, 1993
as Exhibit 1 to Report on Form 8-K is incorporated herein
by reference:
Supplemental Indenture No. 3 dated as of March 1, 1993
from Continental to The Bank of New York, as Trustee, with
respect to the issuance of $150 million of 7.25% Notes due
March 1, 2003.
(10)(a)-- The Long Term Incentive Plan of Continental (amended and
restated as of December 1, 1993).
(b)-- The Annual Management Incentive Plan of Continental
(amended and restated as of January 1, 1993).
(c)-- The Incentive Savings Plan of Continental (amended and
restated as of January 1, 1994).
(d)-- The Retirement Plan of Continental (amended and restated
as of January 1, 1994).
(e)-- Receivables Purchase and Sale Agreement dated as of
December 14, 1993, among The Continental Insurance Company
("Continental Insurance"), Boston Old Colony Insurance
Company ("Boston"), The Buckeye Union Insurance Company
("Buckeye"), Casualty Insurance Company ("Casualty"),
Commercial Insurance Company of Newark, N.J.
("Commercial"), The Continental Insurance Company of New
Jersey ("Continental - NJ"), Continental Lloyd's Insurance
Company ("Lloyd's"), The Fidelity and Casualty Company of
New York ("Fidelity"), Continental Reinsurance Corporation
("Continental Re"), Firemen's Insurance Company of Newark,
New Jersey ("Firemen's"), The Glens Falls Insurance
Company ("Glens Falls"), Kansas City Fire and Marine
Insurance Company ("Kansas City"), The Mayflower Insurance
Company, Ltd. ("Mayflower"), National-Ben Franklin
Insurance Company of Illinois ("N-BF"), Niagara Fire
Insurance Company ("Niagara"), Pacific Insurance Company
("Pacific") and Workers' Compensation and Indemnity
Company of California ("Workers'"), collectively as
Sellers, and Corporate Asset Funding Company, Inc. ("Asset
Funding"), CIESCO, L.P., Falcon Asset Securitization
Corporation ("Falcon"), Sheffield Receivables Corporation
("Sheffield"), Atlantic Asset Securitization Corp. and
Credit Lyonnais, collectively as Purchasers, and Citicorp
North America, Inc. ("Citicorp"), as Agent.
(f)-- Stock Purchase Agreement dated as of June 30, 1993, among
Continental, Continental Insurance, Continental Re and
Mellon.
(g)-- Share Purchase Agreement dated as of June 30, 1993 (the
"Unionamerica Stock Purchase Agreement"), among
Unionamerica Acquisition Company Ltd. ("Unionamerica"),
Unionamerica Holdings Ltd. ("Unionamerica Holdings") and
Continental.
(h)-- Amendment dated September 1, 1993 to the Unionamerica
Share Purchase Agreement, among Unionamerica, Unionamerica
Holdings and Continental.
(i)-- Stock Purchase Agreement dated as of July 28, 1993 (the
"Alleghany Stock Purchase Agreement"), among Alleghany
Corporation ("Alleghany"), Continental, Goldman, Sachs &
Co. ("Goldman") and certain funds which Goldman either
controls or of which it is a general partner (together,
the "GS Investors"; Continental and the GS Investors
together referred to as the "URHC Stockholders"),
Underwriters Re Holdings Corp. ("Underwriters Holdings")
and Underwriters Re Corporation ("Underwriters").
(j)-- Amendment dated October 7, 1993, to the Alleghany Stock
Purchase Agreement, among Alleghany, Continental, the GS
Investors, Underwriters Holdings and Underwriters.
(k)-- Stock Purchase Agreement dated as of July 28, 1993 (the
"GS Investors Stock Purchase Agreement"), among
Continental and the GS Investors.
(l)-- Letter Agreement dated October 6, 1993, among Continental
and the GS Investors, relating to the GS Investors Stock
Purchase Agreement.
(m)-- Management Stock Purchase Agreement dated as of July 28,
1993 (the "Management Agreement"), among Continental,
Underwriters Holdings, Underwriters and certain Management
Stockholders, as supplemented.
(n)-- Amendment dated as of October 7, 1993, to the Management
Agreement, among Continental, Underwriters Holdings,
Underwriters and certain Management Stockholders.
The following document filed under Exhibit 10 to
Continental's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992 is incorporated herein by
reference:
Receivables Purchase and Sale Agreement dated as of
December 14, 1992, among Continental Insurance, Boston,
Buckeye, Casualty, Commercial, Continental-NJ, Lloyd's,
Fidelity, Firemen's, Glens Falls, Kansas City, Mayflower,
N-BF, Niagara, Pacific and Workers', collectively as
Sellers, and Asset Funding, Falcon, Receivables Capital
Corporation, Sheffield and Credit Lyonais, collectively,
as Purchasers, and Citicorp, as Agent.
(11) -- Continental's Statement re Computation of Per Share
Earnings.
(13) -- Continental's 1993 Annual Report to Shareholders (filed
with the SEC only to the extent incorporated herein by
reference).
(21) -- Subsidiaries of Continental.
(23) -- Consent of KPMG Peat Marwick.
(28) -- Statutory Loss Development of Property and Casualty
Insurance and Reinsurance Subsidiaries.
(b) No Report on Form 8-K was filed by Continental during the last
quarter of the period covered by this Report.
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: March 17, 1994
THE CONTINENTAL CORPORATION
By /s/ JOHN P. MASCOTTE
(John P. Mascotte)
Chairman of the Board,
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
Senior Vice President
/s/ J. HEATH FITZSIMMONS and Chief Financial Officer March 17, 1994
(J. Heath Fitzsimmons)
Vice President
/s/ WILLIAM A. ROBBIE and Chief Accounting Officer March 17, 1994
(William A. Robbie)
/s/ IVAN A. BURNS Director March 17, 1994
(Ivan A. Burns)
/s/ ALEC FLAMM Director March 17, 1994
(Alec Flamm)
/s/ IRVINE O. HOCKADAY, JR. Director March 17, 1994
(Irvine O. Hockaday, Jr.)
/s/ JOHN E. JACOB Director March 17, 1994
(John E. Jacob)
/s/ JOHN P. MASCOTTE Director March 17, 1994
(John P. Mascotte)
/s/ JOHN F. McGILLICUDDY Director March 17, 1994
(John F. McGillicuddy)
/s/ RICHARD de J. OSBORNE Director March 17, 1994
(Richard de J. Osborne)
/s/ CHARLES A. PARKER Director March 17, 1994
(Charles A. Parker)
________________________________ Director
(L. Edwin Smart)
/s/ JOHN W. ROWE, M.D. Director March 17, 1994
(John W. Rowe, M.D.)
/s/ PATRICIA CARRY STEWART Director March 17, 1994
(Patricia Carry Stewart)
________________________________ Director
(Francis T. Vincent, Jr.)
________________________________ Director
(Michael Weintraub)
/s/ ANNE WEXLER Director March 17, 1994
(Anne Wexler)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
THE CONTINENTAL CORPORATION:
Under date of February 10, 1994, we reported on the consolidated
balance sheets of The Continental Corporation and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements
of income, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1993, as contained in the
1993 annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1993. In connection with
our audits of the aforementioned consolidated financial statements,
we also have audited the related financial statement schedules as
listed in Item 14(a)(2). These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on
our audits.
In our opinion, such financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set
forth therein.
As discussed in Note 2 to the consolidated financial statements,
The Continental Corporation and subsidiaries changed their methods of
accounting for multiple-year retrospectively rated reinsurance
contracts and for the adoption of the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits," No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts," and No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," in 1993. The
Continental Corporation and subsidiaries adopted the provisions of
the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and No. 109,
"Accounting for Income Taxes," in 1992.
/s/ KPMG PEAT MARWICK
KPMG Peat Marwick
New York, New York
February 10, 1994
<PAGE>
SCHEDULE I
THE CONTINENTAL CORPORATION
SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES (1)
December 31, 1993
(millions)
- --------------------------------------------------------------------------
Column A Column B Column C Column D
- --------------------------------------------------------------------------
Type of Investment Cost Value Balance
Sheet
- --------------------------------------------------------------------------
FIXED MATURITIES:
BONDS:
United States Government and
Government Agencies . . . . . . . . . $2,832.8 $2,908.6 $2,908.6
States, Municipalities and
Political Subdivisions. . . . . . . . 1,325.2 1,418.6 1,418.6
Foreign Governments . . . . . . . . . . 879.2 943.2 943.2
Public Utilities. . . . . . . . . . . . 132.0 137.8 137.8
All Other Corporate . . . . . . . . . . 1,397.8 1,456.3 1,456.3
-------- -------- --------
Total Bonds . . . . . . . . . . . . . 6,567.0 6,864.5 6,864.5
-------- -------- --------
REDEEMABLE PREFERRED STOCKS. . . . . . . . 48.9 51.9 51.9
-------- -------- --------
Total Fixed Maturities. . . . . . . . . 6,615.9 6,916.4 6,916.4
-------- -------- --------
EQUITY SECURITIES:
COMMON STOCKS:
Public Utilities. . . . . . . . . . . . 72.8 85.1 85.1
Banks, Trusts and Insurance Companies . 77.5 131.4 131.4
All Other Corporate . . . . . . . . . . 350.5 437.2 437.2
-------- -------- --------
Total Common Stocks . . . . . . . . . 500.8 653.7 653.7
-------- -------- --------
OTHER PREFERRED STOCKS . . . . . . . . . . 99.2 105.4 105.4
-------- -------- --------
Total Equity Securities . . . . . . . . 600.0 759.1 759.1
-------- -------- --------
OTHER LONG-TERM INVESTMENTS:
Mortgages Receivable . . . . . . . . . . . 112.2 112.2
Certificates of Deposit. . . . . . . . . . 35.5 35.5
Venture Capital Investments. . . . . . . . 42.7 42.7
Investment in Minority Affiliates. . . . . 1.1 1.1
Other Notes and Participations . . . . . . 10.9 10.9
Investments in Limited Partnerships. . . . 185.5 193.5
-------- --------
Total Other Long-Term
Investments. . . . . . . . . . . . . . . . 387.9 395.9
-------- --------
OTHER SHORT-TERM INVESTMENTS:
Money Market Instruments . . . . . . . . . 1,071.0 1,071.0
-------- --------
Total:. . . . . . . . . . . . . . . . . $8,674.8 $9,142.4
======== ========
_____________________
(1) All fixed maturities are carried at market.
<PAGE>
<TABLE>
SCHEDULE II
THE CONTINENTAL CORPORATION
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
<CAPTION>
- ---------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------
Balance at
Deductions End of Period
--------------------------------------
(i) (ii)
Balance at Amounts
Beginning Amounts Written (i) (ii)
Name of Debtor of Period Additions Collected Off Current Non-Current
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:.... -- -- -- -- -- --
Year Ended December 31, 1992:
Steven H. Newman (1)........... $305,263 -- $305,263 -- -- --
Year Ended December 31, 1991:
Steven H. Newman (1)........... $407,016 -- $101,753 -- $101,753 $203,510
____________________
(1) Represents a loan at 8.95%
</TABLE>
<PAGE>
SCHEDULE III
THE CONTINENTAL CORPORATION - PARENT
STATEMENTS OF INCOME (1) (2)
Year Ended December 31
(millions)
1993 1992 1991
------- ------- -------
REVENUES:
Net Investment Income . . . . . . . . . $ 15.2 $ 17.7 $ 14.2
Realized Capital Losses . . . . . . . . (3.0) (6.0) (3.0)
Equity in Earnings of Subsidiaries
Dividends: $120.0;
1992 - $168.0; 1991 - $140.0. . . . 177.8 221.1 124.7
Equity in Earnings (Loss)
of Discontinued Operations,
Net of Income Taxes
(Benefits)......... . . . . . . . . 48.7 (174.7) (54.9)
Other Revenues. . . . . . . . . . . . . 61.4 6.4 8.8
----- ----- -----
Total Revenues. . . . . . . . . . . 300.1 64.5 89.8
----- ----- -----
EXPENSES:
Interest Expense. . . . . . . . . . . . 48.6 49.5 43.8
Other Expenses. . . . . . . . . . . . . 24.9 59.0 4.7
----- ----- -----
Total Expenses. . . . . . . . . . . 73.5 108.5 48.5
----- ----- -----
Income (Loss) before Income Taxes
and Net Cumulative Effect of
Changes in Accounting Principles. . 226.6 (44.0) 41.3
----- ----- -----
Total Income Taxes (Benefits) (3) . . . 18.2 28.7 (15.1)
----- ----- -----
Income (Loss) Before Net Cumulative
Effect of Changes in
Accounting Principles . . . . . . . 208.4 (72.7) 56.4
Net Cumulative Effect of Changes
in Accounting Principles. . . . . . 1.6 (11.0) --
----- ----- -----
Net Income (Loss) . . . . . . . . . . . $210.0 $(83.7) $56.4
====== ====== =====
_______________________
(1) See Notes to Consolidated Financial Statements included in
Continental's 1993 Annual Report to Shareholders.
(2) Certain reclassifications, primarily for discontinued operations,
have been made to the prior years' financial information to
conform to the 1993 presentation.
(3) Represents Income Taxes (Benefits) for continuing operations.
<PAGE>
SCHEDULE III
(Continued)
THE CONTINENTAL CORPORATION - PARENT
BALANCE SHEETS (1) (2)
DECEMBER 31
(millions, except par values and share amounts)
1993 1992
---- ----
ASSETS:
Fixed Maturities at Market (Amortized Cost -
$40.2; 1992 - $98.4) . . . . . . . . . . $ 39.8 $ 98.0
Equity Securities at Market (Cost -
$15.2; 1992 - $0.2). . . . . . . . . . . 15.3 0.2
Short-Term Investments . . . . . . . . . . 9.0 107.3
Other Long-Term Investments. . . . . . . . 6.1 58.6
Investment in Stocks of Subsidiaries:
Insurance Subsidiaries - Equity Basis . 2,697.7 2,126.3
Discontinued Operations - Equity Basis . 84.6 310.5
Other Subsidiaries - Equity Basis . . . 146.6 147.4
Cash and Cash Equivalents. . . . . . . . . 0.1 3.1
Other Assets . . . . . . . . . . . . . . . 19.1 6.8
-------- --------
Total Assets. . . . . . . . . . . . . . $3,018.3 $2,858.2
======== ========
LIABILITIES:
Short-Term Debt. . . . . . . . . . . . . . $ 223.5 $ 554.0
Notes Payable. . . . . . . . . . . . . . . 346.8 198.6
Intercompany Balances. . . . . . . . . . . 94.9 96.3
Other Liabilities. . . . . . . . . . . . . 170.0 78.2
----- ----
Total Liabilities . . . . . . . . . . . 835.2 927.1
----- -----
Commitments and Contingencies -- --
----- -----
Series C, Redeemable Preferred Stock . . . . . -- 20.5
----- -----
SHAREHOLDERS' EQUITY:
Preferred Stock, $4 Par Value. . . . . . . 0.3 0.3
Common Stock, $1 Par Value . . . . . . . . 65.7 65.7
Authorized Shares: 100,000,000
Issued Shares: 65,720,419;
1992 - 65,717,409
Outstanding Shares: 55,331,060;
1992 - 54,925,639
Paid-in Capital. . . . . . . . . . . . . . 613.2 616.2
Retained Earnings. . . . . . . . . . . . . 1,612.5 1,461.9
Net Unrealized Appreciation of
Investments. . . . . . . . . . . . . . . 322.1 202.0
Cumulative Foreign Currency Translation
Adjustment . . . . . . . . . . . . . . . (61.1) (52.4)
Common Stock in Treasury, at Cost
(10,389,359 Shares: 1992 -
10,790,770 Shares). . . . . . . . . . . (369.6) (383.1)
-------- --------
Total Shareholders' Equity. . . . . . . 2,183.1 1,910.6
-------- --------
Total Liabilities, Commitments and
Contingencies, Redeemable Preferred
Stocks and Shareholders' Equity. . . $3,018.3 $2,858.2
======== ========
__________________
(1) See Notes to Consolidated Financial Statements included in
Continental's 1993 Annual Report to Shareholders.
(2) Certain reclassifications, primarily for discontinued operations,
have been made to the prior years' financial information to conform
to the 1993 presentation.
<PAGE>
SCHEDULE III
(Continued)
THE CONTINENTAL CORPORATION - PARENT
STATEMENTS OF CASH FLOWS (1) (2)
Year Ended December 31
(millions)
1993 1992 1991
------ ------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss). . . . . . . . . . . $210.0 $(83.7) $ 56.4
Adjustments to Reconcile Net Income (Loss)
to Net Cash provided from Operating
Activities:
Realized Capital Losses . . . . . . 3.0 6.0 3.0
Equity in Earnings of
Subsidiaries. . . . . . . . . . (177.8) (221.1) (124.7)
Equity in (Earnings) Loss of
Discontinued Operations . . . . (48.7) 174.7 54.9
Other-Net . . . . . . . . . . . . . 74.1 78.8 (7.4)
----- ----- -----
Net Cash Provided
from (Used in) Operating
Activities. . . . . . . . . . . . 60.6 (45.3) (17.8)
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of Investments Purchased . . . . . (72.0) (197.8) (35.5)
Proceeds from Investments Sold. . . . . 111.9 94.8 37.1
Proceeds from Investments Matured . . . 0.2 3.0 0.1
Proceeds from Sales of Subsidiaries . . 330.0 -- 3.6
Investment in Subsidiaries. . . . . . . (399.3) -- --
Net Decrease (Increase) in Long-Term
Investments . . . . . . . . . . . . . 0.4 2.8 (5.4)
Net Decrease (Increase) in Short-Term
Investments . . . . . . . . . . . . . 98.3 (103.8) 3.5
Dividends Paid by Subsidiaries. . . . . 120.0 168.0 140.0
----- ----- -----
Net Cash Provided from
(Used in) Investing
Activities. . . . . . . . . . . . . 189.5 (33.0) 143.4
----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Borrowings from (Repayments to)
Subsidiaries. . . . . . . . . . . . (1.4) 22.3 (38.6)
Decrease in Long-Term Debt. . . . . . . (1.8) (301.4) --
(Decrease) Increase in Short-Term Debt. (48.8) 275.2 51.9
Issuance of Long-Term Debt. . . . . . . 150.0 200.0 --
Retirement of Debt. . . . . . . . . . . (281.7) -- --
Sale of Treasury Shares . . . . . . . . 10.5 8.0 6.2
Dividends to Shareholders . . . . . . . (59.4) (123.1) (145.5)
Redemption of Redeemable Preferred
Stock. . . . . . . . . . . . . . . . (20.5) -- --
----- ------ -----
Net Cash Provided from (Used in)
Financing Activities. . . . . . . (253.1) 81.0 (126.0)
------ ------ -----
Net Increase (Decrease) in Cash and Cash
Equivalents . . . . . . . . . . . . . . (3.0) 2.7 (0.4)
Cash and Cash Equivalents at Beginning
of Year. . . . . . . . . . . . . . . . . 3.1 0.4 0.8
----- ----- -----
Cash and Cash Equivalents at End
of Year . . . . . . . . . . . . . . . $ 0.1 $ 3.1 $ 0.4
===== ===== ======
Supplemental Cash Flow Information:
Federal, Foreign and State Taxes Paid . $ 4.5 $ 11.0 $ 5.6
====== ======= =======
Interest Paid . . . . . . . . . . . . . $ 56.9 $ 45.6 $ 48.2
====== ======= =======
_______________________
(1) See Notes to Consolidated Financial Statements included in
Continental's 1993 Annual Report to Shareholders.
(2) Certain reclassifications, primarily for discontinued operations,
have been made to the prior years' financial information to conform
to the 1993 presentation.
<PAGE>
<TABLE>
SCHEDULE V
THE CONTINENTAL CORPORATION
SUPPLEMENTARY INSURANCE INFORMATION
(millions)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
- ------------------------------------------------------------------------------------------------------------------------------
<F2>
Outstanding Amortization
Deferred Losses Other Policy Losses of Deferred Other Pre-
Policy and Claims and Net and Policy Insurance miums
Acquisition Loss Unearned Benefits Premiums Investment Loss Acquisition Operating Writ-
Segment Costs Expenses(1) Premiums(1) Payable Earned Income(2) Expenses Costs Expenses ten
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Agency & Brokerage
Commercial. . . . . . . $237.0 $5,366.7 $1,152.6 -- $2,121.3 -- $1,663.9 $ 669.5 $22.7 $2,168.2
Agency & Brokerage
Personal. . . . . . . . 119.1 837.6 578.3 -- 861.6 -- 667.5 269.1 3.2 887.5
Specialized Commercial . 137.9 2,864.4 678.8 -- 1,433.2 -- 1,082.7 431.9 11.0 1,482.1
------ -------- -------- ----- -------- ------- --------- --------- ------ --------
Insurance Operations . . 494.0 9,068.7 2,409.7 -- 4,416.1 $ 514.3 3,414.1 1,370.5 36.9 4,537.8
Corporate & Other. . . . -- -- -- -- -- 28.0 -- -- -- --
------ -------- -------- ----- -------- ------- -------- -------- ----- --------
Total. . . . . . . . . $494.0 $9,068.7 $2,409.7 -- $4,416.1 $ 542.3 $3,414.1 $1,370.5 $36.9 $4,537.8
====== ======== ======== ===== ======== ======= ======== ======== ===== ========
Year Ended December 31, 1992:
Agency & Brokerage
Commercial . . . . . . $226.9 $5,544.1 $1,120.5 -- $1,919.5 -- $1,562.2 $ 607.9 $30.4 $1,895.5
Agency & Brokerage
Personal . . . . . . . 112.8 982.6 556.7 -- 777.4 -- 623.8 280.7 (0.1) 808.3
Specialized Commercial . 127.8 2,539.5 629.0 -- 1,201.1 -- 975.6 394.1 5.0 1,315.2
------ -------- -------- ------ -------- ------ -------- -------- ------ -------
Insurance Operations . . 467.5 9,066.2 2,306.2 -- 3,898.0 $ 559.5 3,161.6 1,282.7 35.3 4,019.0
Corporate & Other. . . . -- -- -- -- -- 30.4 -- -- -- --
------ -------- -------- ------ -------- ------ ------- -------- ------ -------
Total. . . . . . . . . $467.5 $9,066.2 $2,306.2 -- $3,898.0 $ 589.9 $3,161.6 $1,282.7 $35.3 $4,019.0
====== ======== ======== ======= ======== ======= ======== ======== ====== ========
Year Ended December 31, 1991:
Agency & Brokerage
Commercial . . . . . . $225.4 $3,725.4 $ 952.8 -- $2,018.1 -- $1,689.1 $ 629.0 $54.6 $2,015.7
Agency & Brokerage
Personal . . . . . . . 106.5 674.0 450.8 -- 795.3 -- 594.4 267.2 -- 805.0
Specialized Commercial . 98.6 1,502.5 441.9 -- 1,059.1 -- 799.5 391.9 14.6 1,085.2
------ -------- -------- ------ -------- ------- -------- -------- ----- --------
Insurance Operations . . 430.5 5,901.9 1,845.5 -- 3,872.5 $ 610.6 3,083.0 1,288.1 69.2 3,905.9
Corporate & Other. . . . -- -- -- -- -- 26.6 -- -- -- --
------ -------- -------- ------ -------- ------- ------- -------- ----- --------
Total . . . . . . . $430.5 $5,901.9 $1,845.5 -- $3,872.5 $ 637.2 $3,083.0 $1,288.1 $69.2 $3,905.9
====== ======== ======== ====== ======== ======= ======== ======== ===== ========
______________________
(1) 1991 outstanding losses and loss expenses and unearned premiums are
shown net of reinsurance.
(2) Distinct investment portfolios are not maintained for individual insur-
ance segments; accordingly, insurance segments results are shown in the
aggregate.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VI
THE CONTINENTAL CORPORATION
REINSURANCE INFORMATION (1)
(millions, except percentages)
<CAPTION>
- ----------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------------------------------------------------------
Earned Premiums
------------------------ Percentage
Ceded to Assumed of Amount
Gross Other From Other Net Assumed
Amount Companies Companies Amount to Net
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Premiums:
Property and casualty
insurance. . . . . . . . . $5,125.8 $1,213.9 $504.2 $4,416.1 11.4%
-------- -------- ------ -------- -----
Total premiums . . . $5,125.8 $1,213.9 $504.2 $4,416.1 11.4%
======== ======== ====== ======== =====
Year Ended December 31, 1992:
Premiums:
Property and casualty
insurance. . . . . . . . $4,764.3 $1,334.0 $467.7 $3,898.0 12.0%
-------- -------- ------ -------- -----
Total premiums . . . $4,764.3 $1,334.0 $467.7 $3,898.0 12.0%
======== ======== ====== ======== =====
Year Ended December 31, 1991:
Premiums:
Property and casualty
insurance. . . . . . . . $4,665.3 $1,151.6 $358.8 $3,872.5 9.3%
-------- -------- ------ -------- ----
Total premiums. . . . $4,665.3 $1,151.6 $358.8 $3,872.5 9.3%
======== ======== ====== ======== ====
_____________________
(1) Certain reclassifications, primarily for discontinued operations, have been made to
prior years' financial information to conform to the 1993 presentation.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII
THE CONTINENTAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS (1)
(millions)
<CAPTION>
- ---------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------
Additions
--------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deduc- End of
Description of Period Expenses Accounts tions(1) Period
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Investment Reserve . . . . . . $35.0 $20.3 -- $28.3 $27.0
Allowance for doubtful
accounts-loans
and accounts receivable. . . $31.3 $30.9 -- $18.9 $43.3
Allowance against reinsurance
recoverable. . . . . . . . . $41.8 $15.0 -- $30.4 $26.4
Year Ended December 31, 1992:
Investment Reserve . . . . $35.0 $10.0 -- $10.0 $35.0
Allowance for doubful
accounts-loans
and accounts receivable. . . $26.8 $22.7 -- $18.2 $31.3
Allowance against reinsurance
recoverable. . . . . . . $27.8 $41.0 -- $27.0 $41.8
Year Ended December 31, 1991:
Investment Reserve . . . . . $23.0 $19.0 -- $ 7.0 $35.0
Allowance for doubtful
accounts-loans
and accounts receivable. . . $11.6 $42.4 -- $27.2 $26.8
Allowance against reinsurance
recoverable. . . . . . . . $ 8.3 $31.4 -- $11.9 $27.8
____________________________
(1) Represents write-offs of amounts determined to be uncollectable,
net of recoveries.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX
THE CONTINENTAL CORPORATION
SHORT-TERM BORROWINGS (1)
(millions, except percentages)
<CAPTION>
- ----------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------------------------------------------
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate at End Interest During the During the During the
Short-Term Borrowings of Period Rate (2) Period Period (3) Period (4)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1993:
Bank (5) . . . . . $225.1 3.7% $282.3 $244.8 4.4%
Year Ended December 31,
1992:
Bank . . . . . . . $282.3 4.5% $311.4 $300.5 4.5%
Year Ended December 31,
1991:
Bank . . . . . . . $295.9 6.0% $306.4 $282.3 6.3%
_____________________________
(1) Certain reclassifications, primarily for the sale of premium
financing operations, have been made to prior years' financial
information to conform to the 1993 presentation.
(2) Rates illustrated in Column C are based on balances illustrated
in Column B.
(3) Average determined by dividing the total prior 13 months' aggregate
at the end of each month by 13.
(4) Average determined by dividing interest expense for the year by
the Average Amount Outstanding During the Period (Column E).
(5) Various maturities ranging from 1 to 31 days.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE X
THE CONTINENTAL CORPORATION
SUPPLEMENTAL INFORMATION
(For Property-Casualty Insurance Underwriters) (1)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
- --------------------------------------------------------------------------------------------------------------------------------
Loss
Expenses Amortiza-
Incurred tion
Dis- Related to of
Defer- Out- count ---------------- Deferred
red standing if any, Net (i) (ii) Policy Paid
Affiliation Acqui- Losses Deduc- Pre- Invest- Cur- Acquisi- Loss Pre-
with sition and Loss cted in Unearned miums ment rent Prior tion and Loss miums
Registrant Costs Expenses(2) Column C Premiums(2) Earned Income(3) Year Year Costs Expenses Written
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1993:
(a) Consolidated
property-casualty
entities . . . . $494.0 $9,068.7 $696.0 $2,409.7 $4,416.1 $514.3 $3,413.0 $ 1.1 $1,370.5 $3,304.8 $4,537.8
Year Ended December 31,
1992:
(a) Consolidated
property-casualty
entities . . . $467.5 $9,066.2 $692.8 $2,306.2 $3,898.0 $559.5 $3,036.3 $125.3 $1,282.7 $3,257.0 $4,019.0
Year Ended December 31,
1991:
(a) Consolidated
property-casualty
entities . . . $430.5 $5,901.9 $675.7 $1,845.5 $3,872.5 $610.6 $2,986.5 $ 96.5 $1,288.1 $3,144.2 $3,905.9
_____________
(1) Excludes Underwriters Re Acquisition Corp., an equity investment as
of 1987, whose reserves are not consolidated and which
files similar information with the Securities and Exchange
Commission.
(2) 1991 outstanding losses and loss expenses and unearned premiums
are shown net of reinsurance.
(3) Distinct investment portfolios are not maintained for individual
segments; accordingly, insurance segments
results are shown in the aggregate.
</TABLE>
Filed State of New York April 6, 1989
CERTIFICATE OF CHANGE
OF
THE CERTIFICATE OF INCORPORATION
OF
THE CONTINENTAL CORPORATION
Under Section 805A of the
Business Corporation Law
Pursuant to the provisions of Section 805A of the Business
Corporation Law, the undersigned hereby certify:
FIRST: That the name of the corporation is THE CONTINENTAL
CORPORATION.
SECOND: That the Certificate of Incorporation of the corporation
was filed by the Department of State, Albany, New York, on the 15th day
of May, 1968.
THIRD: That the change to the Certificate of Incorporation effected
by this Certificate is as follows:
(a) To change the post office address to which the Secretary
of State shall mail a copy of any process against the corporation
served upon him, so that such address shall hereafter be 180 Maiden
Lane, New York, New York 10038.
FOURTH: That the change of the Certificate of Incorporation was
authorized by the vote of a majority of directors present at a meeting of the
Board on November 17, 1988, at which a quorum was present.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that
the statements made herein are true under the penalties of perjury, this 9th
day of January 1989.
THE CONTINENTAL CORPORATION
/s/ William F. Gleason,Jr.
_____________________________
Senior Vice President
William F. Gleason, Jr.
/s/ Roselyn C. Dlutman
_______________________________
Assistant Secretary
Roselyn C. Dlutman
Filed State of New York July 12, 1988
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE CONTINENTAL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being Senior Vice President and Assistant
Secretary, respectively, of The Continental Corporation, hereby certify and
set forth:
(1) The name of the corporation is THE CONTINENTAL
CORPORATION.
(2) The Certificate of Incorporation of The Continental Corporation
was filed by the Department of State on the 15th day of May, 1968.
(3) The Certificate of Incorporation of The Continental Corporation
is hereby amended to implement provisions of the Business Corporation Law
which permit limiting the personal liability of directors by adding a new
Article 8 thereof to read as follows:
"8. No director of the Corporation shall be liable to
the Corporation or its shareholders for damages for any
breach of duty in such capacity, provided that nothing
contained in this Article shall limit the liability of a director
(a) if a judgment or other final adjudication adverse to the
director establishes that the director's acts or omissions were
in bad faith or involved intentional misconduct or a knowing
violation of law or that the director personally gained in fact
a financial profit or other advantage to which the director
was not legally entitled or that the director's acts violated
Section 719 of the New York Business Corporation Law, or (b)
for any act or omission prior to the adoption of this Article 8."
(4) The amendment of the Certificate of Incorporation set forth in
paragraph (3) above was authorized by vote of the holders of a majority of
all outstanding voting shares of the corporation entitled to vote thereon at
a meeting of shareholders held on May 26, 1988. Said authorization is
subsequent to the affirmative vote of the Board of Directors.
IN WITNESS WHEREOF, the undersigned have executed this
certificate this 16th day of June, 1988. It is affirmed that the statements
contained herein are true under the penalties of perjury.
/s/ William F. Gleason, Jr.
_______________________________
William F. Gleason, Jr.
Senior Vice President,
General Counsel and Secretary
/s/ Roselyn C. Dlutman
________________________________
Roselyn C. Dlutman
Assistant Secretary
Filed State of New York June 30, 1983
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE CONTINENTAL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being Senior Vice President and Assistant
Secretary, respectively, of The Continental Corporation, hereby certify and
set forth:
(1) The name of the corporation is THE CONTINENTAL CORPORATION.
(2) The certificate of incorporation of The Continental Corporation
was filed by the Department of State on the 15th day of May, 1968.
(3) The certificate of incorporation of The Continental Corporation
is hereby amended, pursuant to section 502 of the Business Corporation
Law, by the addition of a provision stating the number, designation, relative
rights, preferences and limitations of the shares of a series of Cumulative
Preferred Stock, Series D (the "Series D Preferred Stock"). The Series D
Preferred Stock was established by a resolution adopted by a majority vote
of the board of directors of The Continental Corporation at a meeting of the
board duly called and held on June 16, 1983. The text of that resolution
is set forth below:
RESOLVED, that pursuant to the authority conferred upon the Board
of Directors by Article Five of the Certificate of Incorporation of this
Corporation, as amended, there is hereby established a series of the
authorized Preferred Stock, par value $4.00 per share, of this Corporation,
which series shall be designated as Cumulative Preferred Stock, Series D
(hereinafter called "Series D Preferred Stock"), shall consist of 40,000
shares and shall have the following relative rights, preferences and
limitations:
1. Dividends. The holders of the shares of Series D Preferred Stock
shall be entitled, when and as the Board of Directors shall declare any
dividend out of earned surplus of the Corporation available therefor, to
receive ratably, in proportion to the number of shares of Series D Preferred
Stock held by them respectively, dividends cumulative at the rate of $75
per annum per share from the date of issuance to and including June 30,
1984 and thereafter at the following annual rate per share:
12 Month Period
Ending June 30 Rate per Annum
1985 $ 90
1986 105
1987 115
1988 125
1989 and each year thereafter 140
which dividends shall be payable quarterly on the January 23, April 23, July
23 and October 23 after each quarter during which shares of Series D
Preferred Stock shall be outstanding, provided that in the case of the first
issuance of shares of Series D Preferred Stock, such dividends shall be
cumulative from the date of issuance and the initial quarterly dividend on
such shares shall be based on the pro rata portion of the annual dividend
and shall be payable on the quarterly dividend payment date next following
the calendar quarter in which such date of issuance occurs.
No dividends shall be declared or paid in any year upon shares of
Common Stock until and unless full cumulative dividends shall have been
paid on all outstanding shares of Series D Preferred Stock for all prior
quarters, or until and unless full dividends for the current quarter to the
holders of outstanding shares of Series D Preferred Stock shall have been
declared and shall have been either paid or set aside for payment.
2. Liquidation Preferences. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the shares of Series D Preferred Stock shall be
entitled to receive out of the assets of the Corporation $1,000 per share,
plus full cumulative dividends at the time unpaid, whether or not earned, but
without interest, before any amount whatsoever shall be paid or assets shall
be distributed to the holders of the shares of Common Stock; and, after
paying $1,000 per share to the holders of the shares of Series D Preferred
Stock plus full cumulative dividends at the time unpaid, whether or not
earned, but without interest, any assets remaining, subject to the
preferences of any other series of Preferred Stock at the time outstanding,
shall be divided among the holders of the shares of Common Stock, in
proportion to the number of shares of Common Stock held by them
respectively. If the assets of the Corporation available for distribution to
the holders of the shares of Series D Preferred Stock shall be insufficient to
permit the payment as aforesaid of $1,000 per share to the holders of the
shares of Series D Preferred Stock plus full cumulative dividends at the time
unpaid, whether or not earned, but without interest, upon any liquidation,
dissolution or winding up, then all of the assets available for distribution
to the holders of such shares shall be distributed ratably among the holders
of the shares of Series D Preferred Stock, in proportion to the number of
shares of Series D Preferred Stock held by them respectively. A
consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale or transfer of substantially all of its
assets as an entirety, shall not be deemed a liquidation or dissolution or
winding up of the Corporation within the meaning of this paragraph 2.
3. Redemption. The Series D Preferred Stock shall be subject to
redemption, at the option of the Corporation out of funds legally available
therefor, on at least sixty days' prior written notice, given as herein
provided, at a redemption price of $1,000 per share and in addition an
amount equal to any dividends thereon in arrears and also the proportionate
amount of the dividends accrued since the last preceding day for the
payment of dividends to the date fixed for redemption, whether or not such
dividends shall have been earned or declared, but only as follows:
Number of Shares of
On and after July 1, Series D Preferred Stock
1986 8,000
1987 8,000
1988 8,000
1989 8,000
1990 8,000
Such right of optional redemption shall be cumulative so that, if in any year
the full amount of shares which the Corporation may so redeem (including
any amount carried over from any preceding year) is not so redeemed, the
number of shares not so redeemed shall be carried forward. In case less
than all of the shares of Series D Preferred Stock at any time outstanding
shall be called for redemption, the shares so to be redeemed shall be
determined in such manner as the Board of Directors may fix. In case the
Board of Directors shall elect to redeem all or any of the shares of Series D
Preferred Stock then outstanding, the Board of Directors shall cause a
written notice to be mailed to each holder of Series D Preferred Stock called
for redemption, addressed to each such shareholder at his last known post
office address as the same shall appear on the stock transfer books of the
Corporation, stating that the shares of Series D Preferred Stock specified in
the notice will be redeemed by the Corporation at the redemption price
aforesaid on a date to be specified in such notice, which shall be at least
sixty days after the date of the mailing of such notice, and requiring the
holders of the shares of Series D Preferred Stock called for redemption to
present the certificates representing such shares held by them respectively
for redemption at the office of a bank or trust company in the Borough of
Manhattan, City and State of New York, to be designated in the notice. On
and after the date specified in the notice, each holder of shares of Series D
Preferred Stock called for redemption, upon presenting and surrendering at
the place designated in the notice the certificates representing the shares
of Series D Preferred Stock held by such holder and called for redemption,
properly endorsed in blank for transfer or accompanied by proper instrument
of assignment or transfer in blank, and bearing all necessary transfer tax
stamps thereto affixed and cancelled, shall be entitled to receive therefor
the redemption price hereinabove specified. The certificates representing
the shares of Series D Preferred Stock so surrendered for redemption shall
be forthwith cancelled. In case the Corporation shall give such notice of the
redemption of shares of Series D Preferred Stock and on or before the date
specified in the notice shall deposit the amount of the aforesaid redemption
price of the shares of Series D Preferred Stock called for redemption with
the bank or trust company designated in the notice, all shares of Series D
Preferred Stock called for redemption shall be deemed to have been
redeemed on the date specified in the notice whether or not the certificates
representing them shall be surrendered for redemption and cancelled, and
the shares of Series D Preferred Stock called for redemption shall from and
after that date cease to represent any interest whatever in the Corporation
or its property and shall not have voting rights, and the holders thereof shall
have no rights other than the right to receive from and out of the deposit
the aforesaid redemption price, but without any dividends or interest from
or after the date specified in the notice for the redemption of the shares.
5. Voting Rights. (a) Except as herein or expressly required by
law, the holders of the shares of Series D Preferred Stock shall have no
right or power to vote on any question or in any proceeding or to be
represented at or to receive notice of any meetings of shareholders.
(b) In the event at any time the Corporation shall fail to
pay six (6) quarterly dividends on all outstanding shares of Series D
Preferred Stock, then at the next annual meeting of shareholders for the
election of directors, and until payment in full of all such dividends then
in default or provision therefor has been made by the declaring and setting
aside thereof, the holders of the outstanding shares of Series D Preferred
Stock, voting separately as a class to the exclusion of the holders of shares
of any other class or series of capital stock of the Corporation, shall be
entitled to vote for and elect two members of the Board of Directors of the
Corporation. Directors elected by the holders of shares of Series D
Preferred Stock voting separately as a class may be removed only by the
concurring vote of the holders of a majority of the outstanding shares of
Series D Preferred Stock, voting separately as a class, so long as the right
of the holders of shares of Series D Preferred Stock voting as a class to
elect two members of the Board of Directors of the Corporation shall
continue.
(c) Whenever a vote of holders of shares of Series D
Preferred Stock is taken, the holders of the shares of Series D Preferred
Stock then issued and outstanding shall be entitled to one vote in person or
by proxy for each share of Series D Preferred Stock held by them
respectively.
IN WITNESS WHEREOF, the undersigned have executed this
certificate this 27th day of June, 1983, and affirm that the statements
herein are true under penalty of perjury.
/s/ William F. Gleason, Jr.
___________________________
William F. Gleason, Jr.
Senior Vice President,
Secretary and General Counsel
/s/ Roselyn C. Dlutman
___________________________
Roselyn C. Dlutman
Assistant Secretary
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
William F. Gleason, Jr., being duly sworn, deposes and says, that he
is one of the persons described in and who executed the foregoing
certificate, that he has read the same and knows the contents thereof, and
that the statements contained therein are true.
/s/ William F. Gleason, Jr.
___________________________
William F. Gleason, Jr.
Sworn to before me this
27th day of June, 1983.
/s/ Roselyn C. Dlutman
Notary Public
Filed State of New York June 30, 1983
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE CONTINENTAL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being Senior Vice President and Assistant
Secretary, respectively, of The Continental Corporation, hereby certify and
set forth:
(1) The name of the corporation is THE CONTINENTAL CORPORATION.
(2) The certificate of incorporation of The Continental Corporation
was filed by the Department of State on the 15th day of May, 1968.
(3) Article 5 of the certificate of incorporation of The Continental
Corporation, relating to the rights, preferences and limitations of its shares,
is hereby amended to eliminate preemptive rights of shareholders of the
corporation by amending Article 5, Section (d) thereof to read as follows:
"(d) No holder of any shares of any class of the Corporation,
as such, shall have any preemptive right to subscribe for or
purchase any shares of any class of the Corporation or any
rights or options to purchase shares of any class of the
Corporation or any shares of any class or other securities
convertible into or carrying rights or options to purchase
shares of any class of the Corporation, whether now or
hereafter authorized."
(4) The amendment of the Certificate of Incorporation set forth in
paragraph (3) above was authorized by vote of the holders of a majority of
all outstanding shares of the corporation's Common Stock, $1.00 par value,
$2.50 Cumulative Convertible Preferred Stock, Series A, $4.00 par value,
$2.50 Cumulative Convertible Preferred Stock, Series B, $4.00 par value,
and $1.50 Cumulative Convertible Preferred Stock, Series C, $4.00 par
value, each voting as a separate class at a meeting of shareholders held on
May 19, 1983.
IN WITNESS WHEREOF, the undersigned have executed this certificate this
27th day of June, 1983. It is affirmed that the statements contained herein
are true under the penalties of perjury.
/s/ William F. Gleason, Jr.
____________________________
William F. Gleason, Jr.
Senior Vice President,
Secretary and General Counsel
/s/ Roselyn C. Dlutman
_____________________________
Roselyn C. Dlutman
Assistant Secretary
Filed State of New York August 6, 1982
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE CONTINENTAL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being Vice President and Assistant Secretary,
respectively, of The Continental Corporation, hereby certify and set forth:
(1) The name of the corporation is THE CONTINENTAL CORPORATION.
(2) The certificate of incorporation of The Continental Corporation
was filed by the Department of State on the 15th day of May, 1968.
(3) The certificate of incorporation of The Continental Corporation is
hereby amended, pursuant to section 502 of the Business Corporation Law,
by the addition of a provision stating the number, designation, relative
right, preferences and limitations of the shares of a series of $150
Cumulative Convertible Preferred Stock, Series C (the "Series C Preferred
Stock"). The Series C Preferred Stock was established by a resolution
adopted by a majority vote of the board of directors of The Continental
Corporation at a meeting of the board duly called and held on July 22, 1982.
The text of that resolution is set forth below:
RESOLVED, that pursuant to the authority conferred
upon the Board of Directors by Article Four of the Certificate
of Incorporation of this Corporation, as amended, there is
hereby established a series of the authorized Preferred Stock,
par value $4.00 per share, of this Corporation, which series
shall be designated as $150 Cumulative Convertible Preferred
Stock, Series C (hereinafter called "Series C Preferred
Stock"), shall consist of 20,500 shares and shall have the
following relative rights, preferences and limitations:
1. Dividends. The holders of the shares of Series
C Preferred Stock shall be entitled, when and as the Board of
Directors shall declare any dividend out of earned surplus of
the Corporation available therefor, to receive ratably, in
proportion to the number of shares of Series C Preferred
Stock held by them respectively, dividends cumulative at the
rate of $150 per annum, from October 1, 1982, payable at
the rate of $37.50 with respect to each calendar quarter
(commencing with the calendar quarter ending December 31,
1982) on the January 23, April 23, July 23, and October 23
after such quarter (commencing on January 23, 1983) before
any dividends are declared or paid to the holders of shares of
Common Stock. Arrears of cumulative dividends shall not
bear interest. Holders of shares of Series C Preferred Stock
shall not as such be entitled to any other or further dividends,
but the Board of Directors may, in its discretion, declare
further dividends on shares of Series C Preferred Stock out of
earned surplus available therefor.
No dividends shall be declared or paid in any
year upon shares of Common Stock until and unless full
cumulative dividends shall have been paid on all outstanding
shares of Series C Preferred Stock for all prior years, or until
and unless full dividends for the current year to the holders
of outstanding shares of Series C Preferred Stock shall have
been declared and shall have been either paid or set aside for
payment.
2. Liquidation Preferences. In the event of any
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of
Series C Preferred Stock shall be entitled to receive out of
the assets of the Corporation $1,000 per share, plus full
cumulative dividends at the time unpaid, whether or not
earned, but without interest, before any amount whatsoever
shall be paid or assets shall be distributed to the holders of
the shares of Common Stock; and, after paying $1,000 per
share to the holders of the shares of Series C Preferred Stock
plus full cumulative dividends at the time unpaid, whether or
not earned, but without interest, any assets remaining,
subject to the preferences of any other series of Preferred
Stock at the time outstanding, shall be divided among the
holders of the shares of Common Stock, in proportion to the
number of shares of Common Stock held by them respectively.
If the assets of the Corporation available for distribution
to the holders of the shares of Series C Preferred Stock
shall be insufficient to permit the payment as aforesaid of
$1,000 per share to the holders of the shares of Series C
Preferred Stock plus full cumulative dividends at the time
unpaid, whether or not earned, but without interest, upon
any liquidation, dissolution or winding up, then all of the
assets available for distribution to the holders of such shares
shall be distributed ratably among the holders of the shares
of Series C Preferred Stock, in proportion to the number of
shares of Series C Preferred Stock held by them respectively.
A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale or transfer of
substantially all of its assets as an entirety, shall not be
deemed a liquidation or dissolution or winding up of the
Corporation within the meaning of this paragraph 2.
3. Redemption. (a) At the Option of the Corporation.
At any time after September 30, 1992, but not before that date,
all of the Series C Preferred Stock then outstanding, or from
time to time thereafter any part thereof less than all, may at
the option of the Board of Directors be redeemed on at least
sixty days' prior written notice, given as herein provided, at
a redemption price of $1,000 per share and in addition an
amount equal to any dividends thereon in arrears and also the
proportionate amount of the dividends accrued since the last
preceding day for the payment of dividends to the date fixed
for redemption, whether or not such dividends shall have been
earned or declared. In case less than all of the shares of
Series C Preferred Stock at any time outstanding shall be called
for redemption, the shares so to be redeemed shall be determined
in such manner as the Board of Directors may fix. In case the
Board of Directors shall elect to redeem all or any of the
shares of Series C Preferred Stock then outstanding, the Board
of Directors shall cause a written notice to be mailed to each
holder of Series C Preferred Stock called for redemption,
addressed to each such shareholder at his last known post office
address as the same shall appear on the stock transfer books of
the Corporation, stating that the shares of Series C Preferred
Stock specified in the notice will be redeemed by the Corporation
at the redemption price aforesaid on a date to be specified in
such notice, which shall be at least sixty days after the date
of the mailing of such notice, and requiring the holders of the
shares of Series C Preferred Stock called for redemption to
present the certificates representing such shares held by them
respectively for redemption at the office of a bank or trust
company in the Borough of Manhattan, City and State of New York,
to be designated in the notice. On and after the date specified
in the notice, each holder of shares of Series C Preferred Stock
called for redemption, upon presenting and surrendering at the
place designated in the notice the certificates representing the
shares of Series C Preferred Stock held by such holder and called
for redemption, properly endorsed in blank for transfer or
accompanied by proper instrument of assignment or transfer in
blank, and bearing all necessary transfer tax stamps thereto
affixed and cancelled, shall be entitled to receive therefor
the redemption price hereinabove specified. The certificates
representing the shares of Series C Preferred Stock so surrendered
for redemption shall be forthwith cancelled. In case the
Corporation shall give such notice of the redemption of shares of
Series C Preferred Stock and on or before the date specified in
the notice shall deposit the amount of the aforesaid redemption
price of the shares of Series C Preferred Stock called for
redemption with the bank or trust company designated in the
notice, all shares of Series C Preferred Stock called for
redemption shall be deemed to have been redeemed on the date
specified in the notice whether or not the certificates
representing them shall be surrendered for redemption and
cancelled, and the shares of Series C Preferred Stock called
for redemption shall from and after that date cease to represent
any interest whatever in the Corporation or its property and
shall not have voting rights, and the holders thereof shall have
no rights other than the right to receive from and out of the
deposit the aforesaid redemption price, but without any dividends
or interest from or after the date specified in the notice for
the redemption of the shares.
(b) At the Option of the Holder. The holder of any
shares of Series C Preferred Stock may, at the option of such
shareholder, require the Corporation, upon at least 60 days'
prior written notice to the Board of Directors, to redeem at
any time after March 31, 1990, but not before such date, all
of the shares of Series C Preferred Stock then held by such
shareholder, or from time to time thereafter less than all, but
not fewer than 1000 shares (or such lesser amount then held by
such shareholder), of the shares of Series C Preferred Stock then
held by such shareholder at a redemption price of $1,000 per
share and in addition, but only if and to the extent of earned
surplus of the Corporation available therefor, an amount equal
to any dividends thereon in arrears and also the proportionate
amount of the dividends accrued since the last preceding day
for the payment of dividends to the redemption date specified in
the aforesaid notice, whether or not such dividends shall have
been declared. Each such notice requiring redemption pursuant
to this subparagraph (b) shall specify the number of shares to be
redeemed and the date of such redemption. On and after the date
specified in such notice, each shareholder requiring redemption
pursuant to this subparagraph (b), upon presenting and
surrendering (at the principal office of the Corporation or
at such other place as the Corporation shall by written notice
designate to such shareholder) the certificates representing the
shares of Series C Preferred Stock offered for redemption, properly
endorsed in blank for transfer or accompanied by proper instrument
of assignment or transfer in blank, and bearing all necessary
transfer tax stamps thereto affixed and cancelled, shall be
entitled to receive therefor the redemption price hereinabove
specified. The certificates representing the shares of Series C
Preferred Stock so surrendered for redemption shall be forthwith
cancelled. In case any shareholder shall give such notice of
redemption and the Corporation shall, on or before the date
specified in the notice, deposit the aforesaid redemption price
of the shares of Series C Preferred Stock to be redeemed with a
bank or trust company and notify in writing such shareholder
thereof, all such shares of Series C Preferred Stock shall be
deemed to have been redeemed on the date specified in such notice
whether or not the certificates representing them shall be
surrendered for redemption and cancelled, and such shares of
Series C Preferred Stock shall from and after that date cease
to represent any interest whatever in the Corporation or its
property and shall not have voting rights, and the holders thereof
shall have no rights other than the right to receive from and out
of the deposit the aforesaid redemption price, but without any
dividends or interest from and after the date specified in the
notice for the redemption of the shares.
4. Conversion Rights. The holders of the shares of Series C
Preferred Stock shall have the following rights to convert such shares into
shares of Common Stock:
(a) The shares of Series C Preferred Stock shall be
convertible at the option of the respective holders thereof, at any time, at
the office of the Corporation, or, if the Corporation shall have a Transfer
Agent for the Series C Preferred Stock, at the office of such Transfer
Agent, into fully paid and nonassessable shares of Common Stock at the
price (in each case taking the Series C Preferred Stock at $1,000 per share)
of $46.00 per share of Common Stock; provided, however, that in case of
a call by the Corporation for redemption of any shares of Series C Preferred
Stock pursuant to subparagraph (a) of paragraph 3 or in case of a
shareholder demand for redemption pursuant to subparagraph (b) or
paragraph 3, such right of conversion shall cease and terminate as to the
shares designated for redemption at the close of business on the date fixed
for such redemption or on such earlier date not more than three days prior
to such redemption date as may be determined by resolution of the Board
of Directors unless default shall be made in the payment of the redemption
price. The price (initially $46.00 per share) at which shares of Common
Stock shall be issuable upon conversion of shares of Series C Preferred
Stock is hereinafter referred to as the "conversion price" of shares of Series
C Preferred Stock. The conversion price shall be subject to adjustments
from time to time in certain instances as hereinafter provided. Upon
conversion the Corporation shall make no payment or adjustments on
account of dividends accrued on the shares of Series C Preferred Stock
surrendered for conversion.
(b) Before any holder of shares of Series C Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates representing them at
the office of the Corporation or the Transfer Agent hereinabove mentioned, and
shall give written notice to the Corporation at the aforesaid office that he
elects to convert the same and shall state in such notice the name or names
in which he wishes the certificate or certificates representing the shares
of Common Stock to be registered. The Corporation will, as soon as
practicable thereafter, issue and deliver at the aforesaid office to the
person for whose account such surrender of shares of Series C Preferred
Stock was made, or to his nominee or nominees, certificates for the number
of full shares of Common Stock to which he shall be entitled as aforesaid
together with the cash payment to be made in respect of any fraction of a
share as herein provided. Such conversion shall be deemed to have been
made as of the date of such surrender of the shares of Series C Preferred
Stock to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common
Stock on that date. Unless otherwise required by law the transfer books
of the Corporation for the shares of Series C Preferred Stock shall not be
closed at any time so long as any of the shares of Series C Preferred Stock
are outstanding but this shall not prevent the fixing of a record date.
(c) If at any time the Corporation shall change, by subdivision
or combination or by the paying of a share dividend, the number of shares
of Common Stock then outstanding into a different number of shares
(hereinafter referred to as "New Shares"), any holder of shares of Series C
Preferred Stock upon conversion thereof shall be entitled to receive, in lieu
of the number of shares of Common Stock to which he would have been
entitled upon conversion at that date had there been no such change, the
New Shares into which such number of shares of Common Stock would
have been changed if the conversion of such shares of Series C Preferred
Stock had been effected prior to such change into New Shares. In the
event of such change, the Corporation agrees, subject to any necessary
approval of shareholders, to take such action as may be required in order
that the aggregate par value or stated value of the New Shares issuable on
the conversion of each share of Series C Preferred Stock shall not be more
than $4.00, plus any stated capital not theretofore allocated to any
designated class or series which is thereupon allocated to such New Shares,
plus any surplus thereupon transferred to stated capital and allocated to
such New Shares.
(d) In case the Corporation shall issue any shares of
Common Stock (other than shares issued upon conversion of shares of
Series A Preferred Stock, or upon conversion of shares of Series B Preferred
Stock, or upon conversion of shares of Series C Preferred Stock, or upon
a change by subdivision or combination or by the paying of a share dividend
of the number of shares of Common Stock then outstanding into a different
number of shares, or upon the exercise of any options intended to qualify
as restricted or qualified stock options as provided in subsubparagraph (D)
of subparagraph (f) below or pursuant to any incentive compensation plan
or other employee benefit plan of the Corporation or any subsidiary) for a
consideration per share less than the conversion price in effect immediately
prior to the issuance of such additional shares, then and thereafter
successively, upon each such issuance, the conversion price in effect
immediately prior to the issuance of such additional shares shall forthwith
be decreased to an amount determined by dividing
(A) an amount equal to (i) the total number of
shares of Common Stock outstanding immediately prior to
such issuance multiplied by the conversion price in effect
immediately prior to the issuance of such additional shares
plus (ii) the number of shares so issued multiplied by the
consideration per share received upon such issuance
by
(B) the total number of shares of Common Stock
outstanding immediately after the issuance of such additional
shares.
In every such case, the Board of Directors of the Corporation shall appoint
a firm of certified public accountants (which may be the firm that regularly
audits the financial statements of the Corporation) which shall give its
opinion as to the adjustmment, if any, of the conversion price required
under the provisions hereof and the conversion price shall thereupon be
adjusted in accordance with such opinion. Such adjusted conversion price
shall be furnished to the Transfer Agent, if any, and, upon request, to any
holders of shares of Series C Preferred Stock. In giving such opinion, such
firm shall rely upon any findings of the Board of Directors of the Corporation
as to values and upon the opinion of counsel (who may be counsel for the
Corporation) as to any matters of law or legal conclusions.
(e) The Corporation shall not be required to make any
decrease in the conversion price pursuant to subparagraph (d) above if the
amount of such decrease would be less than $.50, but in such case any
decrease that would otherwise have been then required shall be carried
forward and shall be made at the time of the next subsequent adjustment
which, together with any decrease so carried forward, shall amount to not
less than $.50. In the event of any decrease in the conversion price
pursuant to the provisions of subparagraph (d) above, the Corporation
agrees, subject to any necessary approval of shareholders, to take such
action as may be required in order that the aggregate par value or stated
value of the shares of Common Stock issuable on the conversion of each
share of Series C Preferred Stock shall not be more than $4.00, plus any
stated capital not theretofore allocated to any designated class or series
which is thereupon allocated to such New Shares, plus any surplus
thereupon transferred to stated capital and allocated to such new shares.
(f) For the purposes of subparagraph (d) above, the following
provisions shall also be applicable:
(A) In the case of the issuance of
additonal shares of Common Stock for cash,
the consideration received by the Corporation
therefor shall be deemed to be the amount of
cash received by the Corporation for such
shares before deducting therefrom any
commissions or other expenses paid or
incurred by the Corporation in any underwriting
of or otherwise in connection with the issuance
of such shares.
(B) In case of the issuance (except as provided in
subsubparagraph (C) below) of additional shares of Common
Stock for a consideration other than cash or a consideration
a part of which shall be other than cash, the amount of the
consideration other than cash received by the Corporation for
such shares shall be deemed to be the value of such
consideration as determined by the Board of Directors.
(C) In case of the issuance of additional shares of
Common Stock upon the conversion or exchange of any
obligations or of any shares of the Corporation other than
shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock, the amount of the consideration
received by the Corporation for such shares of Common
Stock shall be deemed to be the amount of the consideration
received by the Corporation upon the original issuance of
such obligations or shares so converted or exchanged plus
the consideration, if any, other than such obligations or
shares, received by the Corporation upon such conversion or
exchange, except in adjustment of interest or dividends. The
amount of the consideration received by the Corporation
upon the original issuance of such obligations or shares so
converted or exchanged, and the amount of the
consideration, if any, other than such obligations or shares,
received by the Corporation upon such conversion shall be
determined in the manner provided in subsubparagraphs (A)
and (B) above.
(D) In case of the issuance or sale of additional
shares of Common Stock upon the exercise of options
heretofore or hereafter granted or assumed by the
Corporation or a subsidiary, provided such options were
intended to qualify as restricted or qualified stock options for
the purposes of the Internal Revenue Code or any
substantially similar provision of the Internal Revenue Code
in effect at the time such options were granted, or the
issuance or sale of additional shares of Common Stock
pursuant to any incentive compensation plan or other
employee benefit plan of the Corporation or a subsidiary, the
amount of the consideration received by the Corporation for
each such share of Common Stock, if less than the
conversion price in effect immediately prior to the issuance
or sale thereof, shall nevertheless be deemed to be
conversion price.
(E) The number of shares of any class at any time
outstanding shall include all shares of that class then owned
or held by or for the account of the Corporation.
(g) In case
(A) the Corporation shall declare any dividend
payable in shares upon the shares of Common Stock or make
any distribution (other than cash dividends) to the holders of
the shares of Common Stock, or
(B) the Corporation shall offer for subscription to
the holders of the shares of Common Stock any additional
shares of any class or grant to such holders any other rights
or options, or
(C) there shall be any capital reorganization or
reclassification of the capital shares of the Corporation or of
any consolidation or merger of the Corporation with another
corporation or the sale or transfer of all or substantially all of
the property of the Corporation, or
(D) there shall be a liquidation, dissolution or
winding up of the Corporation,
then the Corporation shall cause at least fifteen days' prior notice,
in the cases mentioned in subsubparagraphs (A) and (B) of this
subparagraph (g), and at least thirty days' prior notice, in the cases
mentioned in subsubparagraphs (C) and (D) of the subparagraph (g),
to be mailed to the Transfer Agent, if any, for the shares of Series
C Preferred Stock and to the holders of record of the outstanding
shares of Series C Preferred Stock at the date on which a record is
to be taken for such share dividend, distribution or subscription or
other rights or options or on which such capital reorganization,
reclassification, consolidation, merger, sale, transfer, liquidation or
winding up shall become effective as the case may be.
(h) Shares of Common Stock issued by the Corporation
from time to time upon the conversion of any shares of Series C
Preferred Stock shall be deemed fully paid and not liable to any
further call or assessment thereon.
(i) All shares of Series C Preferred Stock so converted
shall be cancelled and shall not be reissued.
(j) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
shares of Series C Preferred Stock, the full number of shares of
Common Stock deliverable upon conversion of all of the shares of
Series C Preferred Stock from time to time outstanding. The
Corporation shall from time to time in accordance with the laws of
the State of New York, subject to any necessary approval of
shareholders, increase the authorized amount of its shares of
Common Stock if at any time the number of shares of Common
Stock remaining unissued shall not be sufficient to permit the
conversion of all the shares of Series C Preferred Stock at the time
outstanding.
(k) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any of the shares of
Series C Preferred Stock. If any such conversion results in a
fraction, an amount equal to such fraction multiplied by the last sales
price of the shares of Common Stock on the stock exchange in the
City of New York on which the shares of Common Stock shall from
time to time be listed (or the quoted closing bid price, if there be no
sales on such exchange) on the day of conversion (or if such day is
not a trading day on such exchange, on the next preceding day on
which such exchange was open for business) or, if the shares of
Common Stock are not so listed, an amount equal to such fraction
multiplied by the closing bid price on the New York over-the-counter
market on the date of conversion, as reported by the National
Quotation Bureau, shall be paid to such holder in cash by the
Corporation.
(l) The Corporation will pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of
shares of common stock on conversion of shares of Series C
Preferred Stock pursuant hereto. The Corporation shall not,
however, be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that in which the shares of Series C
Preferred Stock so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax, or has
established to the satisfaction of the Corporation that such tax has
been paid.
5. Voting Rights. The holders of the shares of Series C Preferred
Stock shall have full voting power for all purposes. Whenever a vote of
shareholders is taken for any purpose, the holders of the shares of Series
C Preferred Stock then issued and outstanding shall be entitled to one vote
in person or by proxy for each share of Series C Preferred Stock held by
them respectively. Except as otherwise provided in Section 804 of the New
York Business Corporation Law, the holders of the shares of Series A
Preferred Stock, the holders of the shares of Series B Preferred Stock, the
holders of the shares of Series C Preferred Stock and the holders of the
shares of Common Stock shall vote together and not by classes; provided,
however, that so long as any shares of Series C Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote or
written consent of the holders of at least two-thirds of its outstanding
shares of Series C Preferred Stock, amend the certificate of incorporation
of the Corporation in such manner as to alter or change the preferences,
special rights or powers of the shares of Series C Preferred Stock so as to
affect such class adversely, or to increase of decrease the number of
authorized shares of Series C Preferred Stock or to increase or decrease the
par value thereof. In the event at any time the Corporation shall fail to pay
six (6) quarterly dividends on all outstanding shares of Series C Preferred
Stock, then at the next annual meeting of shareholders for the election of
directors, and until payment in full of all such dividends then in default or
provision therefor has been made by the declaring and setting aside thereof,
the holders of the outstanding shares of Series C Preferred Stock, voting
separately as a class to the exclusion of the holders of shares of any other
class or series of capital stock of the Corporation, shall be entitled to vote
for and elect two members of the Board of Directors of the Corporation.
Directors elected by the holders of shares of Series C Preferred Stock voting
separately as a class may be removed only by the concurring vote of the
holders of a majority of the outstanding shares of Series C Preferred Stock,
voting separately as a class, so long as the right of the holders of shares of
Series C Preferred Stock voting as a class to elect two members of the
Board of Directors of the Corporation shall continue.
IN WITNESS WHEREOF, the undersigned have executed this
certificate this 28th day of July, 1982.
/s/ William F. Gleason, Jr.
_______________________________
William F. Gleason, Jr.
Vice President, Secretary
and General Counsel
/s/ Roselyn C. Dlutman
________________________________
Roselyn C. Dlutman
Assistant Secretary
STATE OF NEW YORK )
ss:
COUNTY OF NEW YORK )
William F. Gleason, Jr., being duly sworn, deposes and says, that he
is one of the persons described in and who executed the foregoing
certificate, that he has read the same and knows the contents thereof, and
that the statements contained therein are true.
/s/ William F. Gleason, Jr.
_______________________________
William F. Gleason, Jr.
Sworn to before me this
28th day of July, 1982.
/s/ Maxine Solomon
Notary Public
Filed in State of New York April 20, 1978
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
THE CONTINENTAL CORPORATION
Under Section 805 of the Business Corporation Law
We the undersigned, William F. Gleason, Jr. and Alan R. Bialeck,
being respectively a Vice President and an Assistant Secretary of The
Continental Corporation, hereby certify:
1. The name of the Corporation is
The Continental Corporation
2. The Certificate of Incorporation of the Corporation was filed
by the Department of State on May 15, 1968.
3. The Certificate of Incorporation is hereby amended to increase
the number of shares of Common Stock which the Corporation shall have
the authority to issue, to reduce the par value of the Common Stock which
the Corporation shall have the authority to issue and to effect a 2-for-1
split of the Common Stock.
4. To effect the amendment of the Certificate of Incorporation:
(a) Article 4 of the Certificate of Incorporation relating to
the aggregate number and par value of shares which the Corporation shall
have the authority to issue is hereby amended to read as follows:
"The aggregate number of shares which the
Corporation shall have the authority to issue
shall be one hundred ten million (110,000,000)
of which ten million (10,000,000) shall be
shares of Preferred Stock of the par value of
$4.00 each, and one hundred million
(100,000,000) shall be shares of Common
Stock of the par value of the $1.00 each."
(b) Simultaneously with the foregoing amendment, each of
the 27,094,844 issued shares (including treasury shares) of Common Stock,
par value $2.00 per share, shall be changed into two shares of Common Stock,
par value $1.00 per share.
5. The amendment of the Certificate of Incorporation set forth
in paragraph 4 above was authorized by vote of the holders of a majority of
all outstanding shares of Common Stock, $2.50 Cumulative Convertible
Preferred Stock, Series A, and $2.50 Cumulative Convertible Preferred
Stock, Series B, entitled to vote thereon, voting as a single class at a
meeting of shareholders held on April 20, 1978.
IN WITNESS WHEREOF, we have signed this Certificate on April 20,
1978 and affirm the statements contained herein as true under penalties of
perjury.
/s/ William F. Gleason, Jr.
___________________________
William F. Gleason, Jr.
/s/ Alan R. Bialeck
___________________________
Alan R. Bialeck
Filed in State of New York March 6, 1969
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE CONTINENTAL CORPORATION
Under Section 805 of the Business Corporation Law
of the State of New York
The undersigned, J. VICTOR HERD, President and GEOFFREY
DAVEY, Secretary of The Continental Corporation, hereby certify:
1. The name of the Corporation is
The Continental Corporation
2. The date the certificate of incorporation was filed by the
Department of State was May 15, 1968.
3. The certificate of incorporation hereby is amended, pursuant
to Section 801(b)(12) of the Business Corporation Law by amending the
first sentence of subdivision (iii) of Section (e) of Article 5 thereof
(stating the number, designation, relative rights, preferences, and
limitations of preferred shares of a series of the par value of $4.00 each,
as fixed by the Board of Directors before the issuance of shares of such
series, under authority contained in the certificate of incorporation, none
of the shares of such series having been issued at the date hereof), so that
it shall read as follows:
"At any time after January 15, 1975, but not before
that date, all of the Series B Preferred Stock then
outstanding, or from time to time any part thereof less than
all, may at the option of the Board of Directors be redeemed
on at least sixty days' written notice, given as herein
provided, at a price of $50 per share, and in addition an
amount equal to any dividends thereon in arrears and also the
proportionate amount of the dividends accrued since the last
preceding day for the payment of dividends to the date fixed
for redemption whether or not earned or declared."
4. The foregoing amendment was authorized by the Executive
Committee of the Board of Directors, pursuant to authority delegated by the
Board of Directors as provided in the by-laws and pursuant to Section 712
of the Business Corporation Law, at a meeting of the Committee duly held
on March 6, 1969.
IN WITNESS WHEREOF we have subscribed this certificate the 6th
day of March, 1969.
/s/ Victor Herd
____________________________
J. Victor Herd
President
/s/ Geoffrey Davey
____________________________
Geoffrey Davey
Secretary
STATE OF NEW YORK )
: SS:
COUNTY OF NEW YORK )
GEOFFREY DAVEY, being duly sworn, deposes and says that he is
the Secretary of The Continental Corporation, that he has read the foregoing
certificate and knows the contents thereof, and that the statements contained
therein are true.
/s/ Geoffrey Davey
___________________________
Geoffrey Davey
Sworn to before me this
6th day of March, 1969.
/s/ Muriel L. Rowan
Notary Public
Filed in State of New York December 18, 1968
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE CONTINENTAL CORPORATION
Under Section 805 of the Business Corporation Law
of the State of New York
The undersigned, J. VICTOR HERD, President and GEOFFREY
DAVEY, Secretary of The Continental Corporation, hereby certify:
1. The name of the Corporation is:
The Continental Corporation
2. The date the certificate of incorporation was filed by the
Department of State was May 15, 1968.
3. The certificate of incorporation hereby is amended by adding
to Article 5 thereof a provision, to be designated Section (e), stating the
number, designation, relative rights, preferences, and limitations of preferred
shares of a series of the par value of $4.00 each, as fixed by the Board of
Directors before the issuance of such series, under authority contained in
the certificate of incorporation, which shall read as follows:
(e) One million ninety four thousand ninety-six
(1,094,096) of the shares of Preferred Stock, none of which has been
issued, shall be issued in and as a series to be designated $2.50 Cumulative
Convertible Preferred Stock, Series B (hereinafter called Series B Preferred
Stock), and shall have the following relative rights, preferences and
limitations:
(i) The holders of the shares of Series B Preferred
Stock of the Corporation shall be entitled, when and as the Board of
Directors shall declare any dividend out of accumulated earnings of the
Corporation available therefor, to receive ratably, in proportion to the
number of shares of Series B Preferred Stock held by them respectively,
preferred dividends at the rate of $2.50 per annum, payable quarterly on
March 15, June 15, September 15, and December 15 of each year. In the
case of the first issuance of shares of Series B Preferred Stock, such
dividends shall be cumulative from the date of issuance, and the initial
quarterly dividend on such shares shall be based on the pro rata portion of
the annual dividend and shall be payable the quarterly dividend payment
date next following the date of issuance. In the case of any later issuances
of other shares of Series B Preferred Stock, such dividends with respect to
each such other share shall be cumulative from the quarterly dividend
payment date next preceding the date of issuance of such share to which
dividends have been paid on Series B Preferred Stock (or from the date of
the first issuance of shares of Series B Preferred Stock of such other share
is issued on or prior to the record date for the first dividend declared on
Series B Preferred Stock), unless the date of issuance of such share is a
dividend payment date to which dividends have been paid on Series B
Preferred Stock or a date between the record date for the determination of
holders of Series B Preferred Stock entitled to receive a dividend which has
been declared and the date for payment thereof, in either of which events
such dividends shall be cumulative from such dividend payment date, so
that all holders of record of Series B Preferred Stock outstanding on any
record date for the determination of holders of Series B Preferred Stock
entitled to receive any dividend thereon shall have the same dividend rights
per share. Arrears of cumulative dividends shall not bear interest. Holders
of shares of Series B Preferred Stock shall not as such be entitled to any
other or further dividends.
No dividend shall be declared or paid in any year
upon shares of Common Stock until and unless full cumulative dividends
shall have been paid on all outstanding shares of Series B Preferred Stock
for all prior quarter years, or until and unless full dividends for the
current quarter year to the holders of outstanding shares of Series B Preferred
Stock shall have been declared and shall have been either paid or set aside for
payment.
If shares of both Series A Preferred Stock and
Series B Preferred Stock are outstanding, and the stated dividends are not
paid in full, the shares of both series shall share ratably, share for share,
in the payment of dividends, including accumulations if any.
(ii) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders
of the shares of Series B Preferred Stock shall be entitled to receive out of
the assets of the Corporation $50 per share, plus full cumulative dividends
at the time unpaid, whether or not earned, but without interest, before any
amount whatsoever shall be paid or assets shall be distributed to the
holders of the shares of Common Stock; and, after paying $50 per share to
the holders of the shares of Series B Preferred Stock plus full cumulative
dividends at the time unpaid, whether or not earned but without interest, any
assets remaining, subject to the preferences of shares of any other series
of Preferred Stock at the time outstanding shall be divided among the
holders of the shares of Common Stock, in proportion to the number of
shares of Common Stock held by them respectively. If the assets of the
Corporation available for distribution to the holders of shares of Series B
Preferred Stock shall be insufficient to permit the payment as aforesaid of
$50 per share to the holders of the shares of Series B Preferred Stock plus
full cumulative dividends at the time unpaid, whether or not earned, but
without interest, upon any liquidation, dissolution or winding up, then all of
the assets available for distribution to the holders of such shares shall be
distributed ratably among the holders of the shares of Series B Preferred
Stock, in proportion to the number of shares of Series B Preferred Stock
held by them respectively. A consolidation or merger of the Corporation
with or into any other corporation or corporations, or a sale or transfer of
substantially all of its assets as an entirety, shall not be deemed a
liquidation or dissolution or winding up of the Corporation within the
meaning of this paragraph (ii).
If shares of both Series A Preferred Stock and
Series B Preferred Stock are outstanding and the amounts payable on
liquidation are not paid in full, the shares of both series shall share
ratably, share for share, in any distribution of assets other than by way
of dividends.
(iii) At any time after January 15, 1974, but not
before that date, all of the Series B Preferred Stock then outstanding, or
from time to time any part thereof less than all, may at the option of the
Board of Directors be redeemed on at least sixty days' written notice, given
as herein provided, at a price of $50 per share, and in addition an amount
equal to any dividends thereon in arrears and also the proportionate amount
of the dividends accrued since the last preceding day for the payment of
dividends to the date fixed for redemption whether or not earned or
declared. In case less than all of the shares of Series B Preferred Stock at
any time outstanding shall be called for redemption, the shares so to be
redeemed shall be determined in such manner as the Board of Directors may
fix. In case the Board of Directors shall elect to redeem all or any of the
shares then outstanding of Series B Preferred Stock, the Board of Directors
shall cause a written notice to be mailed to each holder of Series B Preferred
Stock called for redemption, addressed to each such shareholder at his last
known post office address as the same shall appear on the stock transfer
books of the Corporation, stating that the shares of Series B Preferred Stock
specified in the notice will be redeemed by the Corporation at the
redemption price aforesaid on a date to be specified in such notice, which
shall be at least sixty days after the date of the mailing of such notice, and
requiring the holders of the shares of Series B Preferred Stock called for
redemption to present the certificates representing such shares held by
them respectively for redemption at the office of a bank or trust company
in the Borough of Manhattan, City and State of New York, to be designated
in the notice. The Board of Directors shall cause a copy of the notice to be
published in a newspaper of general circulation in the City of New York,
State of New York, once a week for six successive weeks, the first
publication to be at least sixty days prior to the date specified in the
notice for the redemption of the shares. On and after the date specified
in the notice, each holder of shares of Series B Preferred Stock called for
redemption, upon presenting and surrendering at the place designated in the
notice the certificates representing the shares of Series B Preferred Stock
held by him and called for redemption, properly endorsed in blank for
transfer or accompanied by proper instrument of assignment or transfer in
blank, and bearing all necessary transfer tax stamps thereto affixed and
cancelled, shall be entitled to receive therefor the redemption price
hereinabove specified. The certificates representing the shares of Series B
Preferred Stock so surrendered for redemption shall be forthwith cancelled.
In case the Board of Directors shall give such notice of the redemption of
shares of Series B Preferred Stock and on or before the date specified in the
notice shall deposit the amount of the aforesaid redemption price of the
shares of Series B Preferred Stock called for redemption with the bank or
trust company designated in the notice, all shares of Series B Preferred
Stock called for redemption shall be deemed to have been redeemed on the
date specified in the notice whether or not the certificates representing
them shall be surrendered for redemption and cancelled, and the shares of
Series B Preferred Stock called for redemption shall from and after that date
cease to represent any interest whatever in the Corporation or its property
and shall not have voting rights, and the holders thereof shall have no rights
other than the right to receive from and out of the deposit the aforesaid
redemption price, but without any dividends or interest from or after the
date specified in the notice for the redemption of the shares.
(iv) The holders of the shares of Series B Preferred
Stock shall have the following rights to convert such shares into shares of
Common Stock:
(1) the shares of Series B Preferred Stock
shall be convertible at the option of the respective holders thereof, at any
time, at the office of the Corporation, or, if the corporation shall have a
Transfer Agent for the Series B Preferred Stock, at the office of such
Transfer Agent, into fully paid and nonassessable shares of Common Stock
at the price (in each case taking the Series B Preferred Stock at $50 per
share) of $50 per share of Common Stock; provided, however, that in case
of the call for redemption of any shares of Series B Preferred Stock such
right of conversion shall cease and terminate, as to the shares designated
for redemption, at the close of business on the date fixed for such
redemption or on such earlier date not more than three days prior to such
redemption date as may be determined by resolution of the Board of
Directors unless default shall be made in the payment of the redemption
price. The price (initially $50 per share) at which shares of Common Stock
shall be issuable upon conversion of shares of Series B Preferred Stock is
hereinafter referred to as the "conversion price" of shares of Series B
Preferred Stock. The conversion price shall be subject to adjustments from
time to time in certain instances as hereinafter provided. Upon conversion
the Corporation shall make no payment or adjustments on account of
dividends accrued on the shares of Series B Preferred Stock surrendered for
conversion.
(2) Before any holder of shares of Series B
Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates representing
them at the office of the Corporation or Transfer Agent hereinabove
mentioned, and shall give written notice to the Corporation at the aforesaid
office that he elects to convert the same and shall state in such notice the
name or names in which he wishes the certificate or certificates for
Common Shares to be registered. The Corporation will, as soon as
practicable thereafter, issue and deliver at the aforesaid office to the
person for whose account such surrender of shares of Series B Preferred Stock
was made or to his nominee or nominees certificates for the number of full
shares of Common Stock to which he shall be entitled as aforesaid together
with the cash payment to be made in respect of any fraction of a share as
herein provided. Such conversion shall be deemed to have been made as
of the date of such surrender of the shares of Series B Preferred Stock to
be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock
on that date. Unless otherwise required by law the transfer books of the
Corporation for the shares of Series B Preferred Stock shall not be closed
at any time so long as any of the Shares of Series B Preferred Stock are
outstanding but this shall not prevent the fixing of a record date.
(3) If at any time the Corporation shall
change by subdivision or combination or by the paying of a share dividend
the number of shares of Common Stock then outstanding into a different
number of shares (hereinafter referred to as "New Shares"), any holder of
shares of Series B Preferred Stock upon conversion thereof shall be entitled
to receive, in lieu of the number of shares of Common Stock to which he
would have been entitled upon conversion at that date had there been no
such change, the New Shares into which such number of shares of
Common Stock would have been changed if the conversion of such shares
of Series B Preferred Stock had been effected prior to such change into
New Shares. In the event of such change, the Corporation agrees, subject
to any necessary approval of shareholders, to take such action as may be
required in order that the aggregate par value or stated value of the New
Shares issuable on the conversion of each share of Series B Preferred Stock
shall not be more than $4.00, plus any stated capital not theretofore
allocated to any designated class or series which is thereupon allocated to
such New Shares, plus any surplus thereupon transferred to stated capital
and allocated to such New Shares.
(4) In case the Corporation shall issue any
shares of Common Stock (other than shares issued upon conversion of
shares of Series A Preferred Stock, or upon conversion of shares of Series
B Preferred Stock, or upon a change by subdivision or combination or by the
paying of a share dividend of the number of shares of Common Stock then
outstanding into a different number of shares, or upon the exercise of any
options intended to qualify as restricted or qualified stock options as
provided in subparagraph (D) of paragraph (6) below or pursuant to any
incentive compensation plan or other employee benefit plan of the
Corporation or any subsidiary) for a consideration per share less than the
conversion price in effect immediately prior to the issuance of such
additional shares, then and thereafter successively, upon each such
issuance, the conversion price in effect immediately prior to the issuance of
such additional shares shall forthwith be decreased to an amount determined
by dividing
(A) an amount equal to (i) the total
number of shares of Common Stock
outstanding immediately prior to such issuance
multiplied by the conversion price in effect
immediately prior to the issuance of such
additional shares plus (ii) the number of shares
so issued multiplied by the consideration per
share received upon such issuance
by
(B) the total number of shares of
Common Stock outstanding immediately after
the issuance of such additional shares.
In every such case, the Board of Directors of the Corporation shall appoint
a firm of certified public accountants (which may be the firm that regularly
audits the financial statements of the corporation) which shall give its
opinion as to the adjustment, if any, of the conversion price required under
the provisions hereof and the conversion price shall thereupon be adjusted
in accordance with such opinion. Such adjusted conversion price shall be
furnished to the Transfer Agent, if any, and, upon request, to any holders
of shares of Series B Preferred Stock. In giving such opinion, such firm
shall rely upon any findings of the Board of Directors of the Corporation as
to values and upon the opinion of counsel, (who may be counsel for the
Corporation) as to any matters of law or legal conclusions.
(5) The Corporation shall not be required to make any
decrease in the conversion price pursuant to paragraph (4) above if the
amount of such decrease would be less than 50 cents, but in such case
any decrease that would otherwise have been then required shall be carried
forward and shall be made at the time of the next subsequent adjustment
which, together with any decrease so carried forward, shall amount to not
less than 50 cents. In the event of any decrease in the conversion price
pursuant to the provisions of paragraph (4) above, the Corporation agrees,
subject to any necessary approval of shareholders, to take such action as
may be required in order that the aggregate par value or stated value of the
shares of Common Stock issuable on the conversion of each share of Series
B Preferred Stock shall not be more than $4.00, plus any stated capital not
theretofore allocated to any designated class or series which is thereupon
allocated to such New Shares, plus any surplus thereupon transferred to
stated capital and allocated to such New Shares.
(6) For the purposes of paragraph (4) above, the
following provisions shall also be applicable:
(A) In the case of the issuance of
additional shares of Common Stock for cash, the consideration received by
the Corporation therefor shall be deemed to be the amount of cash received
by the Corporation for such shares before deducting therefrom any
commissions or other expenses paid or incurred by the Corporation in any
underwriting of or otherwise in connection with the issuance of such
shares.
(B) In case of the issuance (except
as provided in subparagraph (c) below) of additional shares of Common
Stock for a consideration other than cash or a consideration, a part of which
shall be other than cash, the amount of the consideration other than cash
received by the Corporation for such shares shall be deemed to be the value
of such consideration as determined by the Board of Directors.
(C) In case of the issuance of
additional shares of Common Stock upon the conversion or exchange of any
obligations or of any shares of the Corporation other than shares of Series
B Preferred Stock, the amount of the consideration received by the
Corporation for such shares of Common Stock shall be deemed to be the
amount of the consideration received by the Corporation upon the original
issuance of such obligations or shares so converted or exchanged plus the
consideration, if any, other than such obligations or shares, received by
the Corporation upon such conversion or exchange, except in adjustment of
interest or dividends. The amount of the consideration received by the
Corporation upon the original issuance of such obligations or shares so
converted or exchanged, and the amount of the consideration, if any, other
than such obligations or shares, received by the Corporation upon such
conversion shall be determined in the manner provided in subparagraphs (A)
and (B) above.
(D) In case of the issuance or sale of
additional shares of Common Stock upon the exercise of options heretofore
or hereafter granted or assumed by the Corporation or a subsidiary,
provided such options were intended to qualify as restricted or qualified
stock options for the purposes of the Internal Revenue Code or any
substantially similar provision of the Internal Revenue Code in effect at the
time such options were granted, or the issuance or sale of additional shares
of Common Stock pursuant to any incentive compensation plan or other
employee benefit plan of the Corporation or a subsidiary, the amount of the
consideration received by the Corporation for each such share of Common
Stock, if less than the conversion price in effect immediately prior to the
issuance or sale thereof, shall nevertheless be deemed to be such
conversion price.
(E) The number of shares of any
class at any time outstanding shall include all shares of that class then
owned or held by or for the account of the Corporation.
(7) In case
(A) the Corporation shall declare any
dividend payable in shares upon the shares of Common Stock or make any
distribution (other than cash dividends) to the holders of the shares of
Common Stock, or
(B) the Corporation shall offer for
subscription to the holders of the shares of Common Stock any additional
shares of any class or grant to such holders any other rights or options, or
(C) of any capital reorganization or
reclassification of the Capital shares of the Corporation or of any
consolidation or merger of the Corporation with another corporation or
the sale or transfer of all or substantially all of the property of the
Corporation, or
(D) of the liquidation, dissolution or
winding up of the Corporation,
then the Corporation shall cause at least fifteen days' prior notice in the
cases mentioned in subparagraphs (A) and (B) above and at least thirty
days' prior notice in the cases mentioned in subparagraphs (C) and (D)
above to be mailed to the Transfer Agent, if any, for the shares of Series B
Preferred Stock and to holders of record of the outstanding shares of Series
B Preferred Stock at the date on which a record is to be taken for such
share dividend, distribution or subscription or other rights or options or on
which such capital reorganization, reclassification, consolidation, merger,
sale, transfer, liquidation or winding up shall become effective, as the case
may be.
(8) Shares of Common Stock issued by the
Corporation from time to time upon the conversion of any shares of Series
B Preferred Stock shall be deemed fully paid and not liable to any further
call or assessment thereon.
(9) All shares of Series B Preferred Stock so
converted shall be cancelled and shall not be reissued.
(10) The Corporation shall at all times reserve
and keep available, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of
Series B Preferred Stock, the full number of shares of Common Stock
deliverable upon conversion of all of the shares of Series B Preferred Stock
from time to time outstanding. The Corporation shall from time to time in
accordance with the laws of the State of New york, subject to any
necessary approval of shareholders, increase the authorized amount of its
shares of Common Stock if at any time the number of shares of Common
Stock remaining unissued shall not be sufficient to permit the conversion of
all the shares of Series B Preferred Stock at the time outstanding.
(11) No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any of the shares
of Series B Preferred Stock. If any such conversion results in a fraction, an
amount equal to such fraction multiplied by the last sales price of the shares
of Common Stock on the stock exchange in the City of New York on which
the shares of Common Stock shall from time to time be listed (or the quoted
closing bid price, if there be no sales on such exchange) on the day of
conversion (or if such day is not a trading day on such exchange, on the
next preceding day on which such exchange was open for business) or, if
the shares of Common Stock are not so listed, an amount equal to such
fraction multiplied by the closing bid price on the New York over-the-counter
market on the date of conversion, as reported by the National Quotation
Bureau, shall be paid to such holder in cash by the Corporation.
(12) The Corporation will pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of common stock on conversion of shares of Series B Preferred Stock
pursuant hereto. The Corporation shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue
or delivery of shares of Common Stock in a name other than that in which
the shares of Series B Preferred Stock so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax, or has
established to the satisfaction of the Corporation that such tax has been
paid.
(v) Except as hereinafter set forth, the holders of
the shares of Series A Preferred Stock, the holders of the shares of Series
B Preferred Stock and the holders of the shares of Common Stock shall have
full voting power for all purposes; whenever a vote of shareholders is taken
for any purpose, the holders of the shares of Common Stock then issued
and outstanding shall be entitled to one vote in person or by proxy for each
share of Common Stock held by them respectively; the holders of Series A
Preferred Stock then issued and outstanding shall be entitled to one vote in
person or by proxy for each share of Series A Preferred Stock held by them
respectively; and the holders of the shares of Series B Preferred Stock than
issued and outstanding shall be entitled to one vote in person or by proxy
for each share of Series B Preferred Stock held by them respectively; and,
except as otherwise provided in Section 804 of the New York Business
Corporation Law, the holders of the shares of Series A Preferred Stock, the
holders of the shares of Series B Preferred Stock and the holders of the
shares of Common Stock shall vote together and not by classes; provided,
however, that so long as any shares of Series A Preferred Stock are
outstanding, the holders thereof shall have the voting rights set forth in
paragraph (v) of section (b) of this Article 5; and provided, further, that so
long as any shares of Series B Preferred stock are outstanding, the
Corporation shall not, without the affirmative vote or written consent of the
holders of at least two-thirds of its outstanding shares of Series B Preferred
Stock, amend the certificate of incorporation of the Corporation in such
manner as to alter or change the preferences, special rights or powers of
the shares of Series B Preferred Stock so as to affect such class adversely,
or to increase or decrease the par value of the shares of Series B Preferred
Stock. The foregoing shall not be deemed to preclude action by the Board
of Directors of the Corporation pursuant to Section 502 of the New York
Business Corporation Law and to paragraph (ii) of section (c) of this Article
5, to increase or decrease the number of authorized shares of Series B
Preferred Stock. In the event at any time the Corporation shall fail to pay
six (6) quarterly dividends on all outstanding shares of Series B Preferred
Stock, then at the next annual meeting of shareholders for the election of
directors, and until payment in full of all such dividends, then in default,
or provision therefor has been made by the declaring and setting aside thereof,
the holders of the outstanding shares of Series B Preferred Stock voting
separately as a class to the exclusion of the holders of shares of any other
class or series of capital stock of the Corporation shall be entitled to vote
for and elect two members of the Board of Directors of the Corporation
and, subject to the rights of the holders of outstanding shares of Preferred
Stock of any other series at the time authorized, the holders of shares of
Common Stock voting separately as a class to the exclusion of the holders
of shares of Series B Preferred Stock shall be entitled to vote for and elect
the remaining members of the Board of Directors of the Corporation.
Directors elected by the holders of shares of Series B Preferred Stock voting
separately as a class may be removed only by the concurring vote of the
holders of a majority of the outstanding shares of Series B Preferred Stock,
voting separately as a class, so long as the right of the holders of shares of
Series B Preferred Stock voting as a class to elect two members of the
Board of Directors of the Corporation shall continue.
4. The foregoing amendment was authorized by the Board of
Directors at a meeting of the Board duly held on October 17, 1968.
IN WITNESS WHEREOF we have subscribed this certificate
this 16th day of December, 1968
/s/ J. Victor Herd
__________________________
J. Victor Herd
President
/s/ Geoffrey Davey
__________________________
Geoffrey Davey
Secretary
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
GEOFFREY DAVEY, being duly sworn, desposes and says that he is
the Secretary of The Continental Corporation, that he has read the foregoing
certificate and knows the contents thereof, and that the statements
contained therein are true.
/s/ Geoffrey Davey
___________________________
Geoffrey Davey
Sworn to before me this
16th day of December, 1968
/s/ Muriel L. Rowan
Notary Public
Filed in State of New York May 15, 1968
CERTIFICATE OF INCORPORATION
OF
THE CONTINENTAL CORPORATION
Under Section 402 of the Business Corporation Law of the State of New York
The undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the Business Corporation Law of the State of New York,
certifies:
1. The name of the Corporation shall be
The Continental Corporation
2. The purposes for which it is to be formed are:
(a) To engage in any commercial, mercantile, industrial,
manufacturing, marine, exploration, mining, agricultural, research, licensing,
servicing, agency, securities or brokerage business not prohibited by law,
and any, some or all of the foregoing;
(b) To purchase or otherwise acquire, and to hold, sell,
assign, transfer, exchange, mortgage, pledge, hypothecate, or otherwise
dispose of, as principal, agent or broker, and on commission or otherwise,
securities (which term includes, without limitation of the generality thereof,
any shares of stock, whether common or preferred, or other evidences of
ownership, bonds, debentures, notes, or other evidences of indebtedness,
unsecured or secured by mortgages on real or personal property wherever
situated, and any certificates, receipts, or other instruments representing
rights to receive, purchase, or subscribe for the same, or representing any
other rights or interest therein, or in any property or assets) created or
issued by any persons, firms, associations, corporations, or governments
or subdivisions thereof; to make payment therefor in any lawful manner;
and to exercise, as owner or holder of any securities, any and all rights
powers, and privileges in respect thereof:
(c) To acquire, by purchase, lease, or otherwise, lands and
interests in lands, and to own, hold, improve, develop, and manage any real
estate so acquired, and to erect, or cause to be erected, on any lands
owned, held or occupied by the Corporation, buildings or other structures,
with their appurtenances, and to manage, operate, lease, rebuild, enlarge,
alter or improve any buildings or other structures; now or hereafter
erected on any lands so owned, held, or occupied, and to encumber or
dispose of any lands or interests in lands, and any buildings or other
structures, and any stores, shops, suites, rooms, or part of any buildings
or other structures, at any time owned or held by the Corporation;
(d) To acquire, by purchase, lease, manufacture or
otherwise, any personal property deemed necessary or useful in the
equipment, furnishing, improvement, development, or management of any
property, real or personal, at any time owned, held, or occupied by the
Corporation and to invest, trade, and deal in any personal property deemed
beneficial to the Corporation, and to encumber or dispose of any personal
property at any time owned or held by the Corporation;
(e) To purchase or otherwise acquire, undertake, carry on,
improve or develop, all or any of the business, good will, rights, assets,
and liabilities of any person, firm, association, or corporation carrying
on any kind of business of a similar nature to that which this Corporation
is authorized to carry on, pursuant to the provisions of this certificate;
and to hold, utilize and in any manner dispose of the rights and property
so acquired;
(f) To borrow money and contract debts; to make, issue,
and dispose of bonds, debentures, notes, and other obligations, secured or
unsecured; and to make any lawful contract of guaranty, suretyship, or of
any kind whatsoever in connection with, or in aid of, any corporation or
other organization any of whose securities this Corporation owns or in
which this Corporation has an interest; to secure contracts, obligations,
and liabilities of any thereof, in whole or in part, by mortgage, deed of
trust, pledge, or other lien, upon any or all of the property of this
Corporation wheresoever situated, acquired or to be acquired;
(g) To cause or allow the legal title, or any estate, right,
or interest in any property owned, acquired, controlled, or operated by
this Corporation, to remain or to be vested in the name of any person,
firm, organization, association, or corporation, as agent, trustee, or
nominee of this Corporation, upon such terms or conditions which the Board
of Directors may consider for the benefit of this Corporation;
(h) To such extent as a corporation organized under the
Business Corporation Law of the State of New York now or hereafter
lawfully may do, to do each and every thing necessary, suitable,
convenient, or proper for, or in connection with, or incidental to, the
accomplishment of any one or more of the purposes or the exercise of any
one or more of the powers herein enumerated, or designated directly or
indirectly to promote the interests of the Corporation or to enhance the
value of its properties; and in general to do any and all things and exercise
any and all powers, rights, and privileges for which a corporation may now
or hereafter be organized under the Business Corporation Law of the State
of New York, or under any act amendatory thereof, supplemental thereto,
or substituted therefor.
3. The city and the county within the state in which the office
of the Corporation is to be located shall be the City of New York, County
of New York.
4. The aggregate number of shares which the Corporation shall
have the authority to issue shall be sixty million (60,000,000) of which ten
million (10,000,000) shall be shares of Preferred Stock of the par value of
$4.00 each, and fifty million (50,000,000) shall be shares of Common
Stock of the par value of $2.00 each.
5. The relative rights, preference and limitations of the shares of
each class are as follows:
(a) The holders of shares of Common Stock shall be
entitled to one vote per share on all matters upon which shareholders are
entitled to vote and shall not be entitled to any preferences in the
distribution of dividends or assets.
(b) Two million seven hundred fifty thousand (2,750,000)
of the shares of Preferred Stock shall be designated $2.50 Cumulative
Convertible Preferred Stock, Series A (hereinafter called Series A Preferred
Stock), and shall have the following relative rights, preferences and
limitations:
(i) The holders of the shares of Series A Preferred
Stock of the Corporation shall be entitled, when and as the Board of
Directors shall declare any dividend out of accumulated earnings of the
Corporation available therefor, to receive ratably, in proportion to the
number os shares of Series A Preferred Stock held by them respectively,
dividends cumulative from June 15, 1968, payable quarterly on March 15,
June 15, September 15, and December 15 of each year at the rate of
$2.50 per annum, before any dividends are declared or paid to the holders
of shares of Common Stock; arrears of cumulative dividends shall not bear
interest. Holders of shares of Series A Preferred Stock shall not as such be
entitled to any other or further dividends.
No dividend shall be declared or paid in any year
upon shares of Common Stock until and unless full cumulative dividends
shall have been paid on all outstanding shares of Series A Preferred Stock
for all prior years, or until and unless full dividends for the current year
to the holders of outstanding shares of Series A Preferred Stock shall have
been declared and shall have been either paid or set aside for payment.
(ii) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders
of the shares of Series A Preferred Stock shall be entitled to receive out of
the assets of the Corporation $50 per share, plus full cumulative dividends
at the time unpaid, whether or not earned, but without interest, before any
amount whatsoever shall be paid or assets shall be distributed to the
holders of the shares of Common Stock; and, after paying $50 per share to
the holders of the shares of Series A Preferred Stock plus full cumulative
dividends at the time unpaid, whether or not earned, but without interest,
any assets remaining shall be divided among the holders of the shares of
Common Stock, in proportion to the number of shares of Common Stock
held by them respectively. If the assets of the Corporation available for
distribution to the holders of shares of Series A Preferred Stock shall be
insufficient to permit the payment as aforesaid of $50 per share to the
holders of the shares of Series A Preferred Stock plus full cumulative
dividends at the time unpaid, whether or not earned, but without interest,
upon any liquidation, dissolution or winding up, then all of the assets
available for distribution to the holders of such shares shall be distributed
ratably among the holders of the shares of Series A Preferred Stock, in
proportion to the number of shares of Series A Preferred Stock held by them
respectively. A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale or transfer of substantially all
of its assets as an entirety, shall not be deemed a liquidation or dissolution
or winding up of the Corporation within the meaning of this paragraph (ii).
(iii) At any time all of the Series A Preferred Stock
then outstanding, or from time to time any part thereof less than all, may
at the option of the Board of Directors be redeemed on at least sixty days'
written notice, given as herein provided, at $50 per share and in addition an
amount equal to any dividends thereon in arrears and also the proportionate
amount of the dividends accrued since the last preceding day for the
payment of dividends to the date fixed for redemption whether or not
earned or declared. In case less than all of the shares of Series A Preferred
Stock at any time outstanding shall be called for redemption, the shares so
to be redeemed shall be determined in such manner as the Board of
Directors may fix. In case the Board of Directors shall elect to redeem all
or any of the shares then outstanding of Series A Preferred Stock, the Board
of Directors shall cause a written notice to be mailed to each holder of
Series A Preferred Stock called for redemption, addressed to each such
shareholder at his last known post office address as the same shall appear
on the stock transfer books of the Corporation, stating that the shares of
Series A Preferred Stock specified in the notice will be redeemed by the
Corporation at the redemption price aforesaid on a date to be specified in
such notice, which shall be at least sixty days after the date of the mailing
of such notice, and requiring the holders of the shares of Series A Preferred
Stock called for redemption to present the certificates representing such
shares held by them respectively for redemption at the office of a bank or
trust company in the Borough of Manhattan, City and State of New York,
to be designated in the notice. The Board of Directors shall cause a copy
of the notice to be published in a newspaper of general circulation in the
City of New York, State of New York, once a week for six successive
weeks, the first publication to be at least sixty days prior to the date
specified in the notice for the redemption of the shares. On and after the
date specified in the notice, each holder of shares of Series A Preferred
Stock called for redemption, upon presenting and surrendering at the place
designated in the notice the certificates representing the shares of Series A
Preferred Stock held by him and called for redemption, properly endorsed
in blank for transfer or accompanied by proper instrument of assignment or
transfer in blank, and bearing all necessary transfer tax stamps thereto
affixed and cancelled, shall be entitled to receive therefor the redemption
price hereinabove specified. The certificates representing the shares of
Series A Preferred Stock so surrendered for redemption shall be forthwith
cancelled. In case the Board of Directors shall give such notice of the
redemption of shares of Series A Preferred Stock and on or before the date
specified in the notice shall deposit the amount of the aforesaid redemption
price of the shares of Series A Preferred Stock called for redemption with
the bank or trust company designated in the notice, all shares of Series A
Preferred Stock called for redemption shall be deemed to have been
redeemed on the date specified in the notice whether or not the certificates
representing them shall be surrendered for redemption and cancelled, and
the shares of Series A Preferred Stock called for redemption shall from and
after that date cease to represent any interest whatever in the Corporation
or its property and shall not have voting rights, and the holders thereof shall
have no rights other than the right to receive from and out of the deposit
the aforesaid redemption price, but without any dividends or interest from
or after the date specified in the notice for the redemption of the shares.
(iv) The holders of the shares of Series A Preferred
Stock shall have the following rights to convert such shares into shares of
Common Stock:
(1) The shares of Series A Preferred Stock shall be
convertible at the option of the respective holders thereof, at any
time, at the office of the Corporation, or, if the Corporation shall have
a Transfer Agent for the Series A Preferred Stock, at the office of such
Transfer Agent, into fully paid and nonassessable shares of Common Stock
at the price (in each case taking the Series A Preferred Stock at $50 per
share) of $50 per share of Common Stock; provided, however, that in case
of the call for redemption of any shares of Series A Preferred Stock such
right of conversion shall cease and terminate, as to the shares designated
for redemption, at the close of business on the date fixed for such
redemption or on such earlier date not more than three days prior to such
redemption date as may be determined by resolution of the Board of
Directors unless default shall be made in the payment of the redemption
price. The price (initially $50 per share) at which shares of Common Stock
shall be issuable upon conversion of shares of Series A Preferred Stock is
hereinafter referred to as the "conversion price" of shares of Series A
Preferred Stock. The conversion price shall be subject to adjustments from
time to time in certain instances as hereinafter provided. Upon conversion
the Corporation shall make no payment or adjustments on account of
dividends accrued on the shares of Series A Preferred Stock surrendered for
conversion.
(2) Before any holder of shares of Series A
Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates representing
them at the office of the Corporation or Transfer Agent hereinabove
mentioned, and shall give written notice to the Corporation at the aforesaid
office that he elects to convert the same and shall state in such notice the
name or names in which he wishes the certificate or certificates
representing the shares of Common Stock to be registered. The
Corporation will, as soon as practicable thereafter, issue and deliver at the
aforesaid office to the person for whose account such surrender of shares
of Series A Preferred Stock was made or to his nominee or nominees
certificates for the number of full shares of Common Stock to which he
shall be entitled as aforesaid together with the cash payment to be made in
respect of any fraction of a share as herein provided. Such conversion shall
be deemed to have been made as of the date of such surrender of the
shares of Series A Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on that date. Unless otherwise required
by law the transfer books of the Corporation for the shares of Series A
Preferred Stock shall not be closed at any time so long as any of the shares
of Series A Preferred Stock are outstanding but this shall not prevent the
fixing of a record date.
(3) If at any time the Corporation shall
change by subdivision or combination or by the paying of a share dividend
the number of shares of Common Stock then outstanding into a different
number of shares (hereinafter referred to as "New Shares"), any holder of
shares of Series A Preferred Stock upon conversion thereof shall be entitled
to receive, in lieu of the number of shares of Common Stock to which he
would have been entitled upon conversion at that date had there been no
such change, the New Shares into which such number of shares of
Common Stock would have been changed if the conversion of such shares
of Series A Preferred Stock had been effected prior to such change into
New Shares. In the event of such change, the Corporation agrees, subject
to any necessary approval of shareholders, to take such action as may be
required in order that the aggregate par value or stated value of the New
Shares issuable on the conversion of each share of Series A Preferred Stock
shall not be more than $4.00, plus any stated capital not theretofore
allocated to any designated class or series which is thereupon allocated to
such New Shares, plus any surplus thereupon transferred to stated capital
and allocated to such New Shares.
(4) In case the Corporation shall issue any
shares of Common Stock (other than shares issued upon conversation of
shares of Series A Preferred Stock, or upon a change by subdivision or
combination or by the paying of a share dividend of the number of shares
of Common Stock then outstanding into a different number of shares, or
upon the exercise of any options intended to qualify as restricted or
qualified stock options as provided in subparagraph (D) of paragraph (6)
below or pursuant to any incentive compensation plan or other employee
benefit plan of the Corporation or any subsidiary) for a consideration per
share less than the conversion price in effect immediately prior to the
issuance of such additional shares, then and thereafter successively, upon
each such issuance, the conversion price in effect immediately prior to the
issuance of such additional shares shall forthwith be decreased to an
amount determined by dividing
(A) an amount equal to (i) the total
number of shares of Common Stock
outstanding immediately prior to such
issuance multiplied by the conversion
price in effect immediately prior to the
issuance of such additional shares plus
(ii) the number of shares so issued
multiplied by the consideration per
share received upon such issuance
by
(B) the total number of shares of
Common Stock outstanding
immediately after the issuance of such
additional shares.
In every such case, the Board of Directors of the Corporation shall appoint
a firm of certified public accountants (which may be the firm that regularly
audits the financial statements of the Corporation) which shall give its
opinion as to the adjustment, if any, of the conversion price required under
the provisions hereof and the conversion price shall thereupon be adjusted
in accordance with such opinion. Such adjusted conversion price shall be
furnished to the Transfer Agent, if any, and, upon request, to any holders
of shares of Series A Preferred Stock. In giving such opinion, such firm
shall rely upon any findings of the Board of Directors of the Corporation as
to values and upon the opinion of counsel (who may be counsel for the
Corporation) as to any matters of law or legal conclusions.
(5) The Corporation shall not be required to make any
decrease in the conversion price pursuant to paragraph (4) above if the
amount of such decrease would be less than 50 cents, but in such case
any decrease that would otherwise have been then required shall be carried
forward and shall be made at the time of the next subsequent adjustment
which, together with any decrease so carried forward, shall amount to not
less than 50 cents. In the event of any decrease in the conversion price
pursuant to the provisions of paragraph (4) above, the Corporation agrees,
subject to any necessary approval of shareholders, to take such action as
may be required in order that the aggregate par value or stated value of the
shares of Common Stock issuable on the conversion of each share of Series
A Preferred Stock shall not be more than $4.00, plus any stated capital not
theretofore allocated to any designated class or series which is thereupon
allocated to such New Shares, plus any surplus thereupon transferred to
stated capital and allocated to such New Shares.
(6) For the purposes of paragraph (4) above,
the following provisions shall also be applicable:
(A) In the case of the issuance of
additional shares of Common Stock for cash, the consideration received by
the Corporation therefor shall be deemed to be the amount of cash received
by the Corporation for such shares before deducting therefrom any
commissions or other expenses paid or incurred by the Corporation in any
underwriting of or otherwise in connection with the issuance of such
shares.
(B) In case of the issuance (except
as provided in subparagraph (C) below) of additional shares of Common
Stock for a consideration other than cash or a consideration, a part of which
shall be other than cash, the amount of the consideration other than cash
received by the Corporation for such shares shall be deemed to be the value
of such consideration as determined by the Board of Directors.
(C) In case of the issuance of additional shares of Common
Stock upon the conversion or exchange of any obligations or of any shares
of the Corporation other than shares of Series A Preferred Stock, the amount
of the consideration received by the Corporation for such shares of Common
Stock shall be deemed to be the amount of the consideration received by the
Corporation upon the original issuance of such obligations or shares so
converted or exchanged plus the consideration, if any, other than such
obligations or shares, received by the Corporation upon such conversion or
exchange, except in adjustment of interest or dividends. The amount of the
consideration received by the Corporation upon the original issuance of such
obligations or shares so converted or exchanged, and the amount of the
consideration, if any, other than such obligations or shares, received by
the Corporation upon such conversion shall be determined in the manner
provided in subparagraphs (A) and (B) above.
(D) In case of the issuance or sale of additional shares
of Common Stock upon the exercise of options heretofore or hereafter granted
or assumed by the Corporation or a subsidiary, provided such options were
intended to qualify as restricted or qualified stock options for the purposes
of the Internal Revenue Code or any substantially similar provision of the
Internal Revenue Code in effect at the time such options were granted, or the
issuance or sale of additional shares of Common Stock pursuant to any
incentive compensation plan or other employee benefit plan of the Corporation
or a subsidiary, the amount of the consideration received by the Corporation
for each such share of Common Stock, if less than the conversion price in
effect immediately prior to the issuance or sale thereof, shall nevertheless
be deemed to be such conversion price.
(E) The number of shares of any class at any time outstanding
shall include all shares of that class then owned or held by or for the
account of the Corporation.
(7) In case
(A) the Corporation shall declare any dividend payable
in shares upon the shares of Common Stock or make any distribution (other
than cash dividends) to the holders of the shares of Common Stock, or
(B) the Corporation shall offer for subscription to the
holders of the shares of Common Stock any additional shares of any class
or grant to such holders any other rights or options, or
(C) of any capital reorganization or reclassification of
the capital shares of the Corporation or of any consolidation or merger
of the Corporation with another corporation or the sale or transfer of all
or substantially all of the property of the Corporation, or
(D) of the liquidation, dissolution or winding up of the
Corporation, then the Corporation shall cause at least fifteen days' prior
notice in the cases mentioned in subparagraphs (A) and (B) above and at
least thirty days' prior notice in the cases mentioned in subparagraphs (C)
and (D) above to be mailed to the Transfer Agent, if any, for the shares of
Series A Preferred Stock and to holders of record of the outstanding shares
of Series A Preferred Stock at the date on which a record is to be taken for
such share dividend, distribution or subscription or other rights or options
or on which such capital reorganization, reclassification, consolidation,
merger, sale, transfer, liquidation or winding up shall become effective,
as the case may be.
(8) Shares of Common Stock issued by the Corporation from
time to time upon the conversion of any shares of Series A Preferred Stock
shall be deemed fully paid and not liable to any further call or assessment
thereon.
(9) All shares of Series A Preferred Stock so converted
shall be cancelled and shall not be reissued.
(10) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the shares of
Series A Preferred Stock, the full number of shares of Common Stock
deliverable upon conversion of all of the shares of Series A Preferred Stock
from time to time outstanding. The Corporation shall from time to time in
accordance with the laws of the State of New York, subject to any
necessary approval of shareholders, increase the authorized amount of its
shares of Common Stock if at any time the number of shares of Common
Stock remaining unissued shall not be sufficient to permit the conversion of
all the shares of Series A Preferred Stock at the time outstanding.
(11) No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any of the shares
of Series A Preferred Stock. If any such conversion results in a fraction, an
amount equal to such fraction multiplied by the last sales price of the shares
of Common Stock on the stock exchange in the City of New York on which
the shares of Common Stock shall from time to time be listed (or the quoted
closing bid price, if there be no sales on such exchange) on the day of
conversion (or if such day is not a trading day on such exchange, on the
next preceding day on which such exchange was open for business) or, if
the shares of Common Stock are not so listed, an amount equal to such
fraction multiplied by the closing bid price on the New York over-the-counter
market on the date of conversion, as reported, by the National Quotation
Bureau, shall be paid to such holders in cash by the Corporation.
(12) The Corporation will pay any and all
issue and other taxes that may be payable in respect to any issue or
delivery of shares of Common Stock on conversion of shares of Series A
Preferred Stock pursuant hereto. The Corporation shall not, however, be
required to pay any tax that may be payable in respect to any transfer
involved in the issue or delivery of shares of Common Stock in a name other
than that in which the shares of Series A Preferred Stock so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any
such tax, or has established to the satisfaction of the Corporation, that such
tax has been paid.
(v) Except as hereinafter set forth, the holders of
the shares of Series A Preferred Stock and the holders of the shares of
Common Stock shall have full voting power for all purposes; whenever a
vote of shareholders is taken for any purpose, the holders of the shares of
Common Stock then issued and outstanding shall be entitled to one vote in
person or by proxy for each share of Common Stock held by them
respectively; and the holders of the shares of Series A Preferred Stock then
issued and outstanding shall be entitled to one vote in person or by proxy
for each share of Series A Preferred Stock held by them respectively; and,
except as otherwise provided in Section 804 of the New York Business
Corporation Law, the holders of the shares of Series A Preferred Stock and
the holders of the shares of Common Stock shall vote together and not by
classes; provided, however, that so long as any shares of Series A Preferred
Stock are outstanding, the Corporation shall not, without the affirmative
vote or written consent of the holders of at least two-thirds of its
outstanding shares of Series A Preferred Stock amend the certificate of
incorporation of the Corporation in such manner as to alter or change the
preferences, special rights or powers of the shares of Series A Preferred
Stock so as to affect such class adversely, or to increase or decrease the
number of authorized shares of Series A Preferred Stock or to increase or
decrease the par value thereof. In the event at any time the Corporation
shall fail to pay six (6) quarterly dividends on all outstanding shares of
Series A Preferred Stock, then at the next annual meeting of shareholders
for the election of directors, and until payment in full of all such dividends
then in default, or provision therefor has been made by the declaring and
setting aside thereof, the holders of the outstanding shares of Series A
Preferred Stock voting separately as a class to the exclusion of the holders
of shares of any other class or series of capital stock of the Corporation
shall be entitled to vote for and elect two members of the Board of
Directors of the Corporation and, subject to the rights of the holders of
outstanding shares of Preferred Stock of any other series at the time
authorized, the holders of shares of Common Stock voting separately as a
class to the exclusion of the holders of shares of Series A Preferred Stock
shall be entitled to vote for and elect the remaining members of the Board
of Directors of the Corporation. Directors elected by the holders of shares
of Series A Preferred Stock voting separately as a class may be removed
only by the concurring vote of the holders of a majority of the outstanding
shares of Series A Preferred Stock, voting separately as a class, so long as
the right of the holders of shares of Series A Preferred Stock voting as a
class to elect two members of the Board of Directors of the Corporation
shall continue.
(c) Seven million two hundred fifty thousand (7,250,000)
of the shares of Preferred Stock may be issued from time to time in series.
Each share of a series shall be equal to every other share of the same
series. The Board of Directors shall have authority to establish and
designate series and to fix the number of shares and the relative rights,
preferences and limitations as between series, subject to such limitations
as may be prescribed by law. In particular, the Board of Directors may
establish, designate and fix the following with respect to each series of
Preferred Stock:
(i) The distinctive serial designation of the shares
of the series which shall distinguish those shares from the shares of all
other series;
(ii) The number of shares included in the series,
which may be increased or decreased from time to time unless otherwise
provided by the Board of Directors in creating the series;
(iii) The annual dividend rate for the shares of the
series and the date or dates upon which such dividend shall be payable;
(iv) Whether dividends on the shares of the series
shall be cumulative and, on the shares of any series having cumulative
dividend rights, the date or dates or method of determining the date or
dates from which dividends on the shares of the series shall be cumulative;
(v) The amount or amounts which shall be paid out
of the assets of the Corporation to the holders of the shares of the series
upon the involuntary liquidation, dissolution or winding up of the
Corporation and upon the voluntary liquidation, dissolution or winding up of
the Corporation;
(vi) The price or prices at which, the period or
periods within which and the terms and conditions upon which the shares
of the series may be redeemed, in whole or in part, at the option of the
Corporation;
(vii) The obligation, if any, of the Corporation to
purchase or redeem shares of the series pursuant to a sinking fund and the
price or prices at which, the period or periods within which and the terms
and conditions upon which the shares of the series shall be redeemed, in
whole or in part, pursuant to such sinking fund;
(viii) The period or periods within which and the
terms and conditions, if any, including the price or prices or the rate or
rates of conversion and the terms and conditions of any adjustments thereof,
upon which the shares of the series shall be convertible at the option of the
holder into shares of any class of stock or into shares of any other series of
Preferred Stock, except into a class of shares having rights or preferences
as to dividends or distribution of assets upon liquidation which are prior or
superior in rank to those of the shares being converted;
(ix) The voting rights, if any, of the shares of the
series in addition to those required by law, including the number of votes
per share and the transaction of any business or of any specified item of
business in connection with which the shares of the series shall vote as a
class; and
(x) Any other relative rights, preferences or
limitations of the shares of the series not inconsistent herewith or with
applicable law.
The Corporation may make pro rata distributions
of the authorized but unissued shares of any series of the Preferred Stock
to holders of another class or series of its outstanding shares.
(d) No holder of any shares of any class of the
Corporation, as such, shall have any preemptive right to purchase any other
shares or securities of any class that at any time may be sold or offered for
sale by the Corporation otherwise than for cash.
6. The Secretary of State of the State of New York is designated
as the agent of the Corporation upon whom process against it may be
served. The post-office address to which the Secretary of State shall mail
a copy of any process against the Corporation served upon him is 80
Maiden Lane, New York, New York 10038.
7. The undersigned incorporator is a natural person over the age
of twenty-one years.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate of Incorporation this 14th day of May, 1968.
/s/ Samuel F. Howard, Jr.
Samuel F. Howard, Jr.
350 Park Avenue
New York, New York 10022
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On the 14th day of May, 1968, before me personally came Samuel F.
Howard, Jr. to me known and known to me to be the person described in and
who executed the foregoing Certificate of Incorporation and duly
acknowledged to me that he executed the same.
/s/ William S. Rubinstein
Notary Public
THE CONTINENTAL CORPORATION
BY-LAWS
Adopted May 15, 1968
As Amended through December 17, 1992
ARTICLE I
Shareholders
Section 1. Annual Meeting.
The annual meeting of shareholders of the Corporation shall be held
at 10:30 A.M. Eastern Standard Time on the Thursday next following the
fourteenth day of May in each year if that Thursday is not a legal holiday
(and, if that Thursday is a legal holiday, then on the next succeeding
Thursday not a legal holiday) for the election of Directors and the
transaction of other business, or such other date and hour, as may be fixed
from time to time by the Board of Directors and set forth in the notice or
waiver of notice of such meeting. At an annual meeting of the
shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an
annual meeting, business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before
an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation not later than the close
of business on the 10th day following the day on which such notice of
meeting was mailed. A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address as they appear on the
Corporation's books of the shareholder proposing such business, (c) the
class and number of shares of the Corporation which are beneficially
owned by the shareholder, and (d) any material interest of the shareholder
in such business. Notwithstanding anything in the By-Laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 1. The chairman
of an annual meeting shall, if the facts warrant, determine that business
was not properly brought before the meeting in accordance with the
provisions of this Section 1, and if he should so determine, he shall so
declare to the meeting and such business not properly before the meeting
shall not be transacted.
Section 2. Special Meetings.
Special meetings of the shareholders may be called at any time by
the Chairman of the Board or by written instrument signed by a majority of
the Board of Directors (hereinafter referred to as the "Board"). At a special
meeting of the shareholders no business shall be transacted and no
corporate action shall be taken other than that stated in the notice of
meeting.
Section 3. Place of Meeting.
Unless the Board provides otherwise, every annual meeting of the
shareholders and every other meeting of the shareholders shall be held at
the principal office of the Corporation in the City and State of New York;
but the Board from time to time may provide for the holding of any annual
or special meeting of the shareholders at such other place within or without
the State of New York as the Board by resolution from time to time shall
determine; provided, however, that any meeting of shareholders may be
held at such place within or without the State of New York as may be fixed
by agreement in writing among all the shareholders of the Corporation.
Section 4. Notice.
(a) Notice of each meeting of shareholders shall state the place,
date and hour of the meeting and unless it is an annual meeting shall
indicate that it is being issued by or at the direction of the person or
persons calling the meeting and state the purpose or purposes for which
the meeting is called. If at any meeting action is proposed to be taken
which would, if taken, entitle shareholders fulfilling the requirements of
Section 623 of the Business Corporation Law of the State of New York to
receive payment for their shares, the notice of such meeting shall include
a statement of that purpose and to that effect. Not less than ten (10) nor
more than fifty (50) days before the date of the meeting, the Secretary or
an Assistant Secretary shall give or cause to be given a copy of the notice,
either personally or by mail, to each shareholder entitled to vote at such
meeting. If mailed, such notice is given when deposited in the United
States mail, with postage thereon prepaid, directed to the shareholder at
his address as it appears on the record of shareholders, or, if he shall have
filed with the Secretary a written request that notices to him be mailed to
some other address, in which case it shall be directed to him at such other
address.
(b) When a meeting is adjourned to another time or place, it shall
not be necessary to give any notice of the adjourned meeting if the time
and place to which the meeting is adjourned are announced at the meeting
at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original
date of the meeting. However, if after the adjournment the Board fixes a
new record date for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record on the new record
date entitled to notice hereunder.
Section 5. Quorum.
(a) At any meeting of shareholders, the presence in person or by
proxy of the holders of a majority of the shares entitled to vote at such
meeting shall constitute a quorum for the transaction of any business,
provided that when a specified item of business is required to be voted on
by a class or series, voting as a class, the holders of a majority of the
shares of such class or series shall constitute a quorum for the transaction
of such specified item of business. When a quorum is once present to
organize a meeting, it is not broken by the subsequent withdrawal of any
shareholders.
(b) If a quorum shall not be present in person or by proxy at any
meeting of shareholders, the shareholders present may adjourn the meeting
despite the absence of a quorum.
Section 6. Organization.
(a) The Chairman of the Board, or in his absence, the senior Vice
Chairman of the Board present, or in the absence of both Vice Chairmen of
the Board, the President, or in his absence, the senior Executive Vice
President present, shall call every meeting of the shareholders to order, and
shall act as chairman of the meeting. In the absence of the Chairman of
the Board, both Vice Chairmen of the Board, the President and all Executive
Vice Presidents, the holders of a majority of shares entitled to vote at such
meeting shall elect a chairman.
(b) The Secretary of the Corporation shall act as secretary of all
meetings of the shareholders and keep the minutes; but in the absence of
the Secretary, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 7. Voting.
(a) Unless otherwise provided in the Certificate of Incorporation
every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the record
of shareholders of the Corporation. A list of shareholders, as of the record
date, certified by the corporate officer responsible for its preparation or by
a Transfer Agent, shall be produced at any meeting of shareholders upon
the request thereat or prior thereto of any shareholder.
(b) The Board may prescribe a date not more than fifty (50) nor less
than ten (10) days prior to the date of a meeting of shareholders as the
record date for the purpose of determining the shareholders entitled to
notice of or to vote at such meeting or any adjournment thereof. If no
record date is fixed the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made such determination
shall apply to any adjournment thereof, unless the Board fixes a new record
date for the adjourned meeting.
(c) Every shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize another
person or persons to act for him by proxy. Every proxy must be signed by
the shareholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
shareholder executing it, except as otherwise provided by law.
(d) The vote upon any matter as to which a vote by ballot is
required by law, and, upon the demand of any shareholder, the vote upon
any other matter before the meeting, shall be by ballot. Except as
otherwise provided by law or by the Certificate of Incorporation, all
elections of directors shall be decided by a plurality of the votes cast and
all other corporate action shall be decided by a majority of the votes cast
at a meeting of shareholders by the holder of shares entitled to vote
thereon.
(e) Treasury shares and shares held by another domestic or foreign
corporation of any type or kind, if a majority of the shares entitled to vote
in the election of directors of such other corporations is held by the
Corporation, shall not be shares entitled to vote or to be counted in
determining the total number of outstanding shares.
Section 8. Inspectors.
(a) The Board in advance of every meeting of shareholders may
appoint one or more Inspectors to act at such meeting or any adjournment
thereof. If Inspectors are not so appointed, the person presiding at a
shareholders' meeting may, and on the request of any shareholder entitled
to vote thereat, shall appoint one or more Inspectors. If any person
appointed fails to appear or act, the vacancy may be filled in advance of
the meeting by appointment made by the Board or at the meeting by the
person presiding thereat.
(b) Each Inspector appointed to act at any meeting of the
shareholders before entering upon the discharge of his duties shall take and
sign an oath faithfully to execute the duties of Inspector at such meeting
with strict impartiality and according to the best of his ability. The
Inspectors so appointed shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, and the validity and effect of proxies and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, make a report in writing
of any challenge, question or matter determined by them and execute a
certificate of any fact found by them, and do such acts as are proper to
conduct the election or vote with fairness to all shareholders. Any report
or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
ARTICLE II
Board of Directors
Section 1. Number, Term of Office, Age Limitations, Nomination.
(a) The business of the Corporation shall be managed by the Board
of Directors, which shall consist of not less than twelve (12) nor more than
sixteen (16) persons, who need not be shareholders of the Corporation, but
each of whom shall be at least twenty-one years of age; the number of
directors shall be fixed from time to time by resolution adopted by vote of
a majority of the entire number of directors, provided that no decrease in
number shall shorten the term of any incumbent director. Except as
hereinafter otherwise provided for filling vacancies, the directors shall be
elected at the annual meeting of shareholders to hold office until the next
annual meeting, and shall hold office until the expiration of the term for
which they were elected, and until their successors have been elected and
qualified. No person shall be nominated for initial election as a director in
a calendar year when he attains the age of 65 or more. No director shall
be nominated for reelection in a calendar year following the year he attains
the age of 70. No officer of the Corporation shall be nominated for
reelection as a director after his retirement, resignation or removal as an
officer, except that not more than one retired officer may in the discretion
of the Board be nominated for reelection at the next two annual meetings
of shareholders following the date of his retirement.
(b) Only persons who are nominated in accordance with the
procedures set forth in this Section 1(b) shall be eligible for election as
directors of the Corporation. Nominations of persons for election to the
Board of Directors may be made at any meeting of shareholders (i) by or at
the direction of the Board of Directors or (ii) by any shareholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 1(b). Any
such nomination by a shareholder shall be made pursuant to timely notice
in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which notice of the meeting
was mailed. Such shareholder's notice shall set forth in writing (a) as to
each person whom the shareholder proposes to nominate for election or
reelection as a director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the number of shares of stock of the Corporation which is
beneficially owned by such person, and (iv) any other information relating
to such person that is required to be disclosed in connection with the
solicitation of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including, without limitation, such person's written
consent to being named in a proxy statement as a nominee and to serving
as a director if elected); and (b) as to the shareholder giving the notice (i)
the name and address, as they appear on the Corporation's books, of such
shareholder and (ii) the number of shares of stock of the Corporation as to
which such shareholder has (or shares with another person) voting power.
At the request of the Board of Directors, any person nominated by the
Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. The
chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the
procedures prescribed by these By-Laws and in that event the defective
nomination shall be disregarded.
Section 2. Removal, Vacancies and Additional Directors.
(a) Any director may be removed, with cause, and the vacancy filled
by a vote of the shareholders at any special meeting the notice of which
shall state that it is called for that purpose. Any vacancy caused by such
removal and not filled by the shareholders at the meeting at which such
removal shall have been made, or any vacancy occurring in the Board for
any other reason, and newly created directorships resulting from any
increase in the number of directors, may be filled by vote of a majority of
the directors then in office although less than a quorum; provided,
however, that the term of office of any director so elected shall expire at
the next succeeding annual meeting of shareholders, and at such annual
meeting the shareholders shall elect a successor to the director filling such
vacancy or newly created directorship; and provided further that no person
shall be elected as a successor to fill any vacancy in the Board unless his
name shall have been proposed in writing and submitted to the Board at a
prior meeting thereof or by mailing to each member of the Board a notice
of such proposal at least one week prior to the meeting at which such
vacancy shall be filled.
(b) If the entire Board shall die or resign, any shareholder shall have
power to call a special meeting of shareholders on notice given in the same
manner as prescribed therein for the notice of an annual meeting and
directors for the unexpired term may be elected at such special meeting in
the same manner as prescribed herein for an annual meeting.
Section 3. Place of Meeting.
Except as provided in these By-Laws, the Board and each committee
of the Board may hold its meetings, regular or special, in such place or
places within or without the State of New York as the Board from time to
time shall determine.
Section 4. Regular Meetings.
Unless the Board provides otherwise, the Board shall hold a regular
meeting at 10:00 A.M. on the Thursday next following the fourteenth day
of each February, March, May, July, August, September, November and
December (or, if that Thursday is a legal holiday, then on the next
succeeding Thursday not a legal holiday). The first meeting of the Board
held after each annual meeting of shareholders of the Corporation shall be
the annual meeting of the Board. Each regular meeting shall be held at the
principal office of the Corporation in the City and State of New York or at
such other place within or without the State of New York as the Board by
resolution from time to time shall determine. No notice shall be required for
the regular meetings of the Board; but notice of any change in the time,
date or place of a regular meeting shall be mailed to every director at least
five (5) days before such meeting.
Section 5. Special Meetings.
(a) Special meetings of the Board shall be held whenever called by
direction of the Chairman of the Board, a Vice Chairman of the Board or the
President, or by direction of a majority of the directors for the time being
in office.
(b) The Secretary shall give or cause to be given notice of the time
and place of holding each special meeting by mailing the same to each
director at his residence or regular place of business at least two (2) days
before the meeting or by causing the same to be transmitted personally, or
by telephone, telex, telegraph, cable or radio to such residence or business
address, at least three hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at
any regular or special meeting. Any business may be transacted by the
Board at a meeting at which every director is present, though held without
notice.
Section 6. Quorum.
Subject to the provisions of Section 2 of this Article II, and except
as otherwise expressly required by law the presence in person of a majority
of the entire number of directors shall constitute a quorum for the
transaction of business; provided, however, that if there are ten (10) or
more directors, then the presence in person of one-third of the entire
number of directors, but in any event not less than five (5) directors, shall
constitute a quorum for the transaction of business. The act of a majority
of the directors present at any meeting of the Board at which a quorum is
present shall be the act of the Board. A majority of the directors present,
whether or not a quorum is present, may adjourn the meeting from time to
time without notice other than by announcement at the meeting. At any
adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting as originally
called.
Section 7. Organization.
(a) The Chairman of the Board or in his absence the senior Vice
Chairman of the Board present, or in the absence of both Vice Chairmen of
the Board, the President shall call every meeting of the Board to order and
shall act as Chairman of the meeting. In the absence of the Chairman of
the Board, both Vice Chairmen of the Board and the President, a Chairman
shall be elected from the directors present.
(b) The Secretary of the Corporation shall act as secretary of all
meetings of the directors and keep the minutes; but in the absence of the
secretary, the chairman of the meeting may appoint any person to act as
secretary of the meeting.
(c) At all meetings of the Board business shall be transacted in such
order as from time to time the Board may determine.
Section 8. Committees.
If there are ten (10) or more directors, the Board by resolution
adopted by a majority of the entire Board shall designate from among its
members an Executive Committee to serve at the pleasure of the Board,
consisting of the Chairman of the Board and five (5) other directors who
shall be appointed at the annual meeting of the Board to hold office until
its next annual meeting and until their successors shall have been
appointed. The presence in person of three (3) members of the Executive
Committee shall constitute a quorum for the transaction of business.
Subject to the provisions of Section 712 of the Business Corporation Law
of the State of New York, the Executive Committee shall have all the
powers of the Board when the Board is not in session. Meetings of the
Executive Committee shall be held whenever called by direction of the
Chairman of the Board, a Vice Chairman of the Board or the President, or
by direction of a majority of the members of the Executive Committee for
the time being in office. The Secretary shall give or cause to be given
notice of the time and place of holding each meeting by mailing the same
to each member of the Executive Committee at his residence or regular
place of business at least two (2) days before the meeting or by causing
the same to be transmitted personally, or by telephone, telex, telegraph,
cable or radio to such residence or business address, at least three (3)
hours before the meeting. Unless otherwise indicated in the notice thereof,
and subject to the provisions of Section 712 of the Business Corporation
Law of the State of New York, any and all business may be transacted at
any meeting. Any business may be transacted by the Executive Committee
at a meeting at which every member of such Committee is present, though
held without notice.
(b) The Board by resolution adopted by a majority of the entire
Board may designate from among its members other committees, each
consisting of three or more directors, and, subject to the provisions of
Section 712 of the Business Corporation Law of the State of New York,
define the powers and duties of such other committees as the Board from
time to time may deem advisable.
Section 9. Dividends.
Subject to the provisions of the Certificate of Incorporation, and
except when currently the Corporation is insolvent or would thereby be
made insolvent, the Board shall have the power in its discretion from time
to time to declare and pay dividends upon the outstanding shares of the
Corporation out of surplus only, so that the net assets of the Corporation
remaining after such declaration, payment or distribution shall at least equal
the amount of its stated capital.
Section 10. Determination of Shareholders of Record for Certain
Purposes.
For the purposes of determining the shareholders entitled to express
consent to or dissent from any proposal without a meeting or for the
purpose of determining shareholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other
action, a date as the record date for any such determination of
shareholders may be fixed by the Board, in advance of such date, and the
date so fixed shall not be more than fifty days prior to such action. If no
record date is fixed the record date shall be at the close of business on the
day on which the resolution of the Board relating thereto is adopted. For
the purpose of determining that all shareholders entitled to vote thereon
have consented to any action without a meeting, if no record date is fixed
by the Board and no resolution has been adopted by the Board relating
thereto, such shareholders shall be determined as of the date or time as of
which such consent shall be expressed to be effective.
Section 11. Compensation of Directors.
The directors shall be entitled to receive such compensation for their
services as directors or as members of any committee of the Board as the
Board from time to time shall determine.
Section 12. Action Without a Meeting; Meetings by Conference
Telephone
(a) Any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee may be taken without a
meeting, without prior notice and without a vote, if all the members of the
Board or the committee consent in writing to the adoption of a resolution
authorizing the action, and such writing and resolution are filed with the
minutes of the proceedings of the Board or the committee.
(b) All or any one or more directors may participate in a meeting of
the Board or of any committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE III
OFFICERS
Section 1. Titles and Appointment.
(a) The Officers of the Corporation shall be a Chairman of the Board,
two Vice Chairmen of the Board, a President, one or more Executive Vice
Presidents, one or more Vice Presidents, a Secretary, a Treasurer, and a
Controller. The Board shall appoint officers at the annual meeting of the
Board to continue in office until the next annual meeting of the Board and
until their respective successors shall have been appointed and shall have
qualified. The Chairman of the Board, the Vice Chairmen of the Board and
the President shall be appointed from among the members of the Board.
The other officers may, but need not, be directors. The same person may
hold any two or more offices.
(b) The Board may require any officer to give security for the faithful
performance of his duties and may remove him at pleasure. The
appointment of an officer shall not of itself create any contract rights and
his removal without cause shall be without prejudice to his contract rights,
if any.
(c) In addition to the powers and duties of the officers of the
Corporation set forth in these By-Laws the officers, agents and employees
of the Corporation shall have such powers and perform such duties in the
management of the Corporation, subject to the control of the Board, as the
Board from time to time may prescribe.
Section 2. Chairman of the Board.
Subject to the control of the Board, the Chairman of the Board shall
be the chief executive officer of the Corporation in general charge and
control of its business and affairs. He shall preside at all meetings of
shareholders and at all meetings of the Board, shall be a member of the
Executive Committee, and shall perform such other duties as are incidental
to his office or properly required of him by the Board. He may sign and
execute contracts in the name and on behalf of the Corporation when the
Board shall have so authorized and directed him to do either generally or in
special instances.
Section 3. Vice Chairman of the Board.
A Vice Chairman of the Board may sign and execute contracts in the
name and on behalf of the Corporation when the Board shall have so
authorized and directed him to do, either generally or in special instances,
and shall perform such other duties as are incidental to his office or are
properly required of him by the Board or by the Chairman of the Board. In
the absence of the Chairman of the Board, the senior Vice Chairman of the
Board present shall preside at all meetings of the shareholders and at all
meetings of the Board, shall be ex officio a member of the Executive
Committee and all other committees of the Board, and shall perform all
other duties and may exercise all other powers of the Chairman of the
Board. If the office of Chairman of the Board is vacant, the senior Vice
Chairman of the Board shall assume the powers and duties of the Chairman
of the Board, except such powers and duties as the Board by resolution
shall direct to be assumed by another officer or director.
Section 4. President.
The President may sign and execute contracts in the name and on
behalf of the Corporation when the Board shall have so authorized and
directed him to do, either generally or in special instances; and shall
perform such other duties as are incidental to his office or properly required
of him by the Board or by the Chairman of the Board. In the absence of
both Vice Chairmen of the Board, the President shall perform all of the
duties and may exercise all of the powers of the Vice Chairman of the
Board; and in the absence of both the Chairman of the Board and the Vice
Chairman of the Board the President shall perform all of the duties and may
exercise all of the powers of the Chairman of the Board. If offices of both
Chairman of the Board and Vice Chairman of the Board are vacant, the
President shall assume the powers and duties of the Chairman of the
Board, except such powers and duties as the Board by resolution shall
direct to be assumed by another officer or director.
Section 5. Executive Vice Presidents and Vice Presidents.
Each Executive Vice President and Vice President shall perform such
duties as are incidental to his office or are properly required of him by the
Board or by the Chairman of the Board. In the absence of the President
and Executive Vice President (or, if there are two or more Executive Vice
Presidents, the Executive Vice President in office elected first at the last
previous annual meeting of the Board) shall perform all of the duties and
may exercise all of the powers of the President.
Section 6. Secretary.
Subject to the control of the Board, the Secretary shall have custody
of the corporate seal of the Corporation and shall affix the same to such
documents and other papers as the Board shall authorize and direct. He
shall give or cause to be given notice of all meetings of the Board, of the
Executive Committee and of the shareholders as provided in these By-Laws
and shall act as secretary of the meetings and keep the minutes thereof.
He shall prepare or cause to be prepared and keep or cause to be kept at
the office of the Corporation in the State of New York, or at the office of
a Transfer Agent or Registrar of the Corporation in the State of New York,
a record of shareholders, containing the names and addresses of all persons
who are shareholders of the Corporation, the number and class of shares
held by each and the dates when they respectively became the owners of
record thereof. Any of the foregoing minutes or records may be in written
form or in any other form capable of being converted into written form
within a reasonable time. The Secretary shall have custody of such other
records of the Corporation and shall perform such other duties as are
incidental to his office or properly required of him by the Board or the
Chairman of the Board.
Section 7. Treasurer.
Subject to the control of the Board, the Treasurer shall receive, have
custody of, and, when so authorized, pay out and disburse all moneys and
securities of the Corporation that may come into his hands; and shall have
custody of all muniments of title and other papers and documents relating
to the property of the Corporation. He may endorse in the name and on
behalf of the Corporation for collection checks, notes and other instruments
and shall deposit the same to the credit of the Corporation in such bank or
banks as the Board may designate; and he may sign all receipts and
vouchers for payments made to the Corporation. He shall prepare or cause
to be prepared and shall keep at the office of the Corporation correct books
of account of all its business and transactions, which may be in written
form or in any other form capable of being converted into written form
within a reasonable time; and shall render statements thereof, in such form
and at such times as the Board shall prescribe. He shall perform such other
duties as are incidental to his office or are properly required of him by the
Board or the Chairman of the Board.
Section 8. Controller.
Subject to the control of the Board, the Controller shall be the
principal officer in charge of the books of account of the Corporation, and
he shall perform such other duties as are incidental to his office or are
properly required of him by the Board or the Chairman of the Board.
Section 9. Additional Officers.
(a) The Board from time to time may appoint such other officers
(who may but need not be directors), including but not limited to Assistant
Vice Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant
Controllers, as the Board may deem advisable and the officers so appointed
shall have such powers and perform such duties as the Board or the
Chairman of the Board from time to time may prescribe.
(b) The Board may from time to time by resolution delegate to any
Assistant Treasurer or Treasurers any of the powers or duties herein
assigned to the Treasurer; may similarly delegate to any Assistant
Secretary or Secretaries any of the powers or duties herein assigned to the
Secretary or to any Assistant Controller or Controllers any of the powers
or duties herein assigned to the Controller.
Section 10. Voting Upon Shares.
Unless otherwise ordered by the Board, the Chairman of the Board
shall have full power and authority in the name and on behalf of the
Corporation in person or by proxy to attend and to act and vote at any
meeting of shareholders of any corporation shares of which the Corporation
may hold and at any such meeting shall possess and may exercise, in
person or by proxy, any and all rights, powers and privileges incident to the
ownership of such shares. The Board, by resolution, from time to time may
confer like powers upon any other person or persons.
Section 11. Compensation of Officers.
The Chairman of the Board and the other officers of the Corporation
shall be entitled to receive such compensation for their services as the
Board of Directors from time to time may determine.
Section 12. Indemnification of Directors and Officers.
(a) The Corporation shall indemnify any person made, or threatened
to be made, a party to an action or proceeding (other than one by or in the
right of the Corporation to procure a judgment in its favor), whether civil
or criminal, including an action by or in the right of any other corporation
of any type or kind, domestic or foreign, or any partnership, joint venture,
trust, employee benefit plan or other enterprise, which any director or
officer of the Corporation served in any capacity at the request of the
Corporation, by reason of the fact that he, his testator or intestate, is or
was a director or officer of the Corporation or is or was serving such other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against, judgments, fines, amounts paid in
settlement and expenses (including attorneys' fees) incurred in connection
with any such action or proceeding, or any appeal therein, provided that no
indemnification may be made to or on behalf of such person if (i) his acts
were committed in bad faith or were the result of his active and deliberate
dishonesty and were material to such action or proceeding or (ii) he
personally gained in fact a financial profit or other advantage to which he
was not legally entitled.
(b) The Corporation shall indemnify any person made, or threatened
to be made, a party to an action by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he, his testator
or intestate, is or was a director or officer of the Corporation, or that he,
his testator or intestate is or was a director or officer of the Corporation
and is or was serving at the request of the Corporation any other
corporation of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise in any
capacity, against amounts paid in settlement and expenses (including
attorneys' fees) incurred in connection with such action, or any appeal
therein, provided that no indemnification may be made to or on behalf of
such person if (i) his acts were committed in bad faith or were the result
of his active and deliberate dishonesty and were material to such action or
(ii) he personally gained in fact a financial profit or other advantage to
which he was not legally entitled.
(c) The termination of any civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such person has
not met the standard of conduct set forth herein.
(d) For the purpose of this Section 12:(i) a person shall be deemed
to be serving a corporation at the request of the Corporation if such
corporation is a Subsidiary; (ii) a person shall be deemed to be serving an
employee benefit plan at the request of the Corporation if such plan's
members are employees of the Corporation or one or more of its
Subsidiaries or both and if the performance by such person of his duties to
the Corporation also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan; (iii) a
person shall be deemed to be serving any other corporation or employee
benefit plan or any partnership, joint venture, trust or other enterprise at
the request of the Corporation only if specifically approved by the
Corporation pursuant to procedures adopted by the Corporation for such
purpose; (iv) excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines;
(v) "Subsidiary" shall mean any corporation incorporated in the United
States, a majority of the outstanding voting shares of which shall be owned
by the Corporation or by one or more Subsidiaries or by the Corporation
and one or more Subsidiaries; and (vi) references herein to one gender shall
be deemed to include the other.
(e) A person who has been successful, on the merits or otherwise,
in the defense of a civil or criminal action or proceeding of the character
described in paragraph (a) or (b) of this Section 12 shall be entitled to
indemnification as authorized therein. Any indemnification in any other
case, unless ordered by a court, shall be made by the Corporation only if
authorized in the specific case:
(i) by the Board of Directors acting by a quorum consisting of
directors who are not parties to the action or proceeding giving rise
to the indemnity claim upon a finding that the director or officer has
met the standard of conduct set forth in paragraphs (a) and (b) of
this Section 12; or
(ii) if a quorum under the foregoing clause (i) is not obtainable
or, even if obtainable, a quorum of disinterested directors so directs:
(A) by the Board of Directors upon the opinion in
writing of independent legal counsel (i.e., a reputable lawyer
or law firm not under regular retainer from the Corporation or
any subsidiary corporation) that indemnification is proper in
the circumstances because the standard of conduct set forth
in paragraph (a) and (b) of this Section 12 has been met by
such director or officer, or
(B) by the shareholders of the Corporation upon a
finding that the director or officer has met such standard of
conduct.
(f) Expenses incurred by a director or officer in defending a civil or
criminal action or proceeding shall be paid by the Corporation in advance
of the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount in case he is ultimately found, in accordance with this Section, not
to be entitled to indemnification or, where indemnity is granted, to the
extent the expenses so paid exceed the indemnification to which he is entitled.
(g) Any Indemnification of a director or officer of the Corporation
under this Section or advancement of expense shall be made promptly, and
in any event within sixty (60) days, upon the written request of the director
or officer. The right to indemnification or advancement of expenses
granted by this Section shall be enforceable by the director or officer in any
court of competent jurisdiction if the Corporation denies such request, in
whole or in part, or if no disposition thereof is made within sixty (60) days.
Such person's expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for the
advancement of expenses under paragraph (f) of this Section where the
required undertaking has been received by the Corporation) that the
claimant has not met the standard of conduct set forth in paragraphs (a)
and (b) of this Section 12, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel, and its shareholders) to
have made a determination that indemnification of the claimant is proper
in the circumstances, nor the fact that there has been an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its shareholders) that indemnification of the
claimant is not proper in the circumstances, shall be a defense to the action
or create a presumption that the claimant is not entitled to indemnification.
(h) The foregoing indemnification provisions shall be deemed to be
a contract between the Corporation and each director and officer who
serves in such capacity at any time while these provisions as well as the
relevant provisions of the New York Business Corporation Law are in
effect, and any repeal or modification thereof shall not affect any right or
obligation then existing with respect to any state of facts then or
previously existing or any action or proceeding previously or thereafter
brought or threatened based in whole or in part upon any such state of
facts. Such a contract right may not be modified retroactively without the
consent of such director or officer. If this Section or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction,
then the Corporation shall nevertheless indemnify each director or officer
of the Corporation against judgments, fines, amounts paid in settlement
and expenses (including attorneys' fees) incurred in connection with any
actual or threatened action or proceeding, whether civil or criminal,
including any actual or threatened action by or in the right of the
Corporation, or any appeal therein, to the full extent permitted by any
applicable portion of this Section that shall not have been invalidated and
to the full extent permitted by applicable law. The indemnification provided
by this Section shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any By-Law, agreement, vote of
shareholders or directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such
a person. The Corporation is hereby authorized to provide further
indemnification if it deems it advisable, by resolution of shareholders or
directors, by amendment of these By-Laws or by agreement.
Section 13. Agents and Employees.
The Chairman of the Board shall have power from time to time to
appoint such agents and employees as in his judgment shall be necessary
or desirable for the proper conduct of the business of the Corporation, and
such agents and employees shall possess such powers, perform such
duties and receive such compensation as the Chairman of the Board from
time to time may direct. All such agents and employees shall hold their
respective positions and continue their respective employments during the
pleasure of the Chairman of the Board, unless otherwise expressly provided
by contract in writing.
ARTICLE IV
Shares
Section 1. Certificates for Shares.
(a) Certificates representing shares of the Corporation shall be in
such form, not inconsistent with law and with the Certificate of
Incorporation, as the Board shall approve. All certificates shall be signed
by the Chairman of the Board, a Vice Chairman of the Board, the President,
or an Executive Vice President or Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed
with the seal of the Corporation or a facsimile thereof, and shall not be
valid unless so signed and sealed. No person shall sign a certificate for
shares of the Corporation in two capacities. The signature of the officers
upon a certificate may be facsimiles if the certificate is counter-signed by
a transfer agent or registered by a registrar other than the Corporation itself
or its employees.
(b) If any officer who has signed or whose facsimile signature has
been placed upon a certificate representing shares of the Corporation shall
have ceased to be such officer of the Corporation before the certificate is
issued by the Corporation, the certificate may nevertheless be issued by
the Corporation with the same effect as if he were such officer at the date
of issue.
(c) All certificates representing shares of the Corporation shall be
consecutively numbered as the same are issued. The name of the persons
owning the shares represented thereby with the number of such shares and
the date of issue thereof shall be entered on the Corporation's books.
(d) Except as hereinafter provided, all certificates representing
shares of the Corporation surrendered to the Corporation for transfer shall
be canceled and no new certificates shall be issued until former certificates
for the same number of shares have been surrendered and canceled.
Section 2. Lost, Stolen or Destroyed Certificates.
Whenever a person owning a certificate representing shares of the
Corporation or his legal representative, alleges that it has been lost, stolen
or destroyed, he shall file in the office of the Corporation an affidavit
setting forth, to the best of his knowledge and belief, the time, place and
circumstances of the loss, theft, or destruction, together with a bond of
indemnity sufficient in the opinion of the Board to indemnify the
Corporation against any claim that may be made against it on account of
the alleged loss of any such certificate and with one or more sufficient
sureties approved by the Board. Thereupon the Board may cause to be
issued to such person or his legal representative a new certificate or a
duplicate of the certificate alleged to have been lost, stolen or destroyed.
Upon the stub of every new or duplicate certificate so issued shall be noted
the fact of such issue and the number, date and the name of the registered
owner of the lost, stolen or destroyed certificate in lieu of which the new
or duplicate certificate is issued.
Section 3. Transfer of Shares.
Shares of the Corporation shall be transferred on the books of the
Corporation by the holder thereof, in person or by his attorney thereunto
duly authorized in writing, upon surrender and cancellation of certificates
representing the number of shares to be transferred, except as provided in
the preceding section.
Section 4. Regulations.
The Board shall have power and authority to make such other rules
and regulations not inconsistent with the Certificate of Incorporation or
with these By-Laws as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
ARTICLE V
Miscellaneous Provisions
Section 1. Corporate Seal.
The Board shall provide a suitable seal, containing the name of the
Corporation, and the Secretary shall have custody thereof. If and when so
ordered by the Board, the Treasurer, or any other officer of the Corporation
designated by the Board, may keep and use a duplicate corporate seal. The
seal may be attested by the Secretary or an Assistant Secretary or by the
Treasurer or an Assistant Treasurer.
Section 2. Fiscal Year.
The fiscal year of the Corporation shall begin on the first day of
January in each year and terminate on the thirty-first day of December next
following.
Section 3. Checks, Notes, etc.
(a) All checks, drafts, bills of exchange, acceptances, notes, or
other obligations or orders for the payment of money shall be signed and
countersigned by such officers of the Corporation and/or other persons as
the Board by resolution from time to time shall designate.
(b) Checks, drafts, bills of exchange, acceptances, notes,
obligations and orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation
with a duly authorized depository by the Treasurer, or otherwise as the
Board by resolution from time to time may determine.
Section 4. Investments.
The Chairman of the Board, a Vice Chairman of the Board or the
President, or an Executive Vice President or a Vice President authorized by
the Board for this purpose, shall each have the power, together with the
Treasurer, Secretary or an Assistant Secretary in the name of and as the
act of this Corporation, to buy, sell, lend, deposit as security, and
otherwise deal in all kinds of securities, including but not by way of
limitation shares of stock, bonds, debentures and mortgages, and to
transfer and assign such securities standing in the name of this Corporation
and to make, execute and deliver under its corporate seal any instruments
in writing appropriate to effect such transfers and assignments.
Section 5. Loans.
No loans and no renewals of any loans shall be contracted on behalf
of the Corporation except as authorized by the Board, or as otherwise
provided by these By-Laws. When authorized so to do, any officer or agent
of the Corporation may effect loans and advances for the Corporation from
any bank, trust company or other institution or from any firm, corporation
or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other evidence of indebtedness of the
Corporation. When authorized so to do, any officer or agent of the
Corporation may pledge, hypothecate or transfer, as security for the
payment of any and all loans, advances, indebtedness and liabilities of the
Corporation, and any and all stocks, securities and other personal property
at any time held by the Corporation, and to that end may endorse, assign
and deliver the same. Such authority may be general or confined to
specific instances.
Section 6. Waivers of Notice.
Whenever under the provisions of these By-Laws the shareholders
are authorized to take any action after notice to them or the Board or a
Committee is authorized to take any action after notice to its members,
such action may be taken without notice to any shareholder, director or
Committee member if at any time before or after such action be completed
such shareholder, director or Committee member submits a signed waiver
of notice. The attendance in person or by proxy of any shareholder at any
meeting of shareholders, or the attendance in person of a director at any
meeting of the Board or a Committee member at any meeting of the
Committee, without protesting prior to the meeting or at its
commencement the lack of notice to him shall constitute a waiver of notice
by him.
ARTICLE VI
Amendments
These By-Laws may be amended by the Board at any regular meeting
or at any special meeting, provided that these By-Laws or any amendments
so adopted by the Board may be amended or repealed by the vote of the
shareholders of the Corporation at any annual meeting or at any special
meeting the notice of which shall have stated that amendment of the By-
Laws is to be one of the purposes of the meeting.
THE LONG TERM INCENTIVE PLAN
OF
THE CONTINENTAL CORPORATI0N
Amended and Restated as of December 1, 1993
Table of Contents
Page
ARTICLE I Purpose.................................... 1
ARTICLE II Definitions................................ 1
ARTICLE III Eligibility................................ 5
ARTICLE IV Administration.............................. 5
4.1. Authority.............................. 5
4.2. Award Approval......................... 6
4.3. Records and Reports.................... 6
ARTICLE V Scope and Duration.......................... 6
ARTICLE VI Terms and Conditions of Options............. 7
6.1. Purchase Price......................... 7
6.2. Term of Options........................ 7
6.3. Exercisability......................... 7
6.4. Acceleration of Exercisability......... 7
6.5. Payment................................ 8
6.6. Termination of Employment.............. 8
6.7. Death.................................. 8
6.8. Special Stock Appreciation Right....... 8
ARTICLE VII Terms and Conditions of Performance Shares
and Performance Units...................... 9
7.1. Performance Goals...................... 9
7.2. Determination of Participants,
Target Awards and Incentive Awards... 9
7.3. Vesting of Awards...................... 10
7.4. Special Vesting........................ 10
7.5. Termination of Employment.............. 11
7.6. Payment Date........................... 11
7.7. Method of Payment...................... 12
7.8. Deferral of Payment.................... 13
ARTICLE VIII Capital Adjustments......................... 13
Page
ARTICLE IX Miscellaneous............................... 13
9.1. Effective Date......................... 13
9.2. Amendment or Termination............... 13
9.3. Inalienability of Interests............ 14
9.4. Facility of Payments................... 14
9.5. Excess Parachute Payments.............. 14
9.6. Written Agreements..................... 15
9.7. Withholding............................ 15
9.8. Limited Effect......................... 15
9.9. Number and Gender...................... 15
9.10.Captions............................... 15
9.11.Applicable Law......................... 15
THE LONG TERM INCENTIVE PLAN OF
THE CONTINENTAL CORPORATION
(Amended and Restated as of December 1, 1993)
ARTICLE I
Purpose
The Long Term Incentive Plan of The Continental Corporation (the
"Plan") is intended to foster a closer identity between the
interests of key employees of The Continental Corporation (the
"Corporation") and its subsidiaries and the interests of the
Corporation's shareholders by encouraging and facilitating
acquisition of common stock of the Corporation by key employees, to
enhance the Corporation's ability to attract and retain highly
competent employees essential to its future growth and success, and
to provide incentives to key employees to achieve superior
financial performance over the long term. In furtherance of these
goals, the Compensation Committee of the Board of Directors of the
Corporation (the "Committee") recommended, and the Board voted, on
February 18, 1993, to amend and restate the Plan, subject to
shareholder approval, in order to extend the date for making grants
thereunder, to increase the maximum number of shares of common
stock as to which performance shares and stock options may be
granted and which may be issued in payment of performance units, to
Participants (as defined below) and to make certain other changes.
ARTICLE II
Definitions
2.1. "Act" means the Securities Exchange Act of 1934, as amended.
2.2. "Award" means an award of Performance Units or Performance
Shares.
2.3. "Board" means the Board of Directors of The Continental
Corporation.
2.4. "Change of Control" means the occurrence of any of the
following events:
(i) any "person" or "group" of persons (as such terms are
used in sections 13 and 14 of the Act), other than any
employee benefit plan sponsored by the Corporation,
becomes the "beneficial owner" (as such term is used in
section 13 of the Act) of 30% or more of the
outstanding shares of the Corporation's capital stock
entitled to vote for the election of directors; or
(ii) any shares of any class of the Corporation's capital
stock are purchased pursuant to a tender or exchange
offer (other than an offer by the Corporation or a
Subsidiary); or
(iii) the approval by the requisite vote of the Corporation's
shareholders of any merger, consolidation, sale of
assets, liquidation or reorganization as a result of
which the Corporation will not survive as a publicly-
owned corporation; or
(iv) a change in the composition of the Board during any
period of two consecutive years such that individuals
who at the beginning of such period were members of the
Board cease for any reason to constitute at least a
majority thereof, unless the election, or the
nomination for election by the Corporation's
shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still
in office who were directors at the beginning of the
period.
2.5. "Code" means the Internal Revenue Code of 1986, as amended.
2.6. "Committee" means the Compensation Committee of the Board.
The Committee shall be comprised of at least three directors
all of whom shall be disinterested within the meaning of
Rule l6b-3 of the Securities and Exchange Commission.
2.7. "Common Stock" means common stock of the Corporation, par
value $1.00 per share.
2.8. "Corporation" means The Continental Corporation and its
successors and assigns and any corporation which shall
acquire substantially all of its assets.
2.9. "Completion of the Audit" means, with respect to any year,
the date of the report of the Corporation's independent
public accountants on the consolidated financial statements
of the Corporation and its Subsidiaries for such year.
2.10. "Disability" means a condition qualifying the Participant
for benefits under the Long-Term Disability Plan of The
Continental Corporation, whether or not such Participant
participates therein.
2.11. "Fair Market Value" of Common Stock on any date means the
average of the highest and lowest sales prices of the Common
Stock as reported on the New York Stock Exchange Composite
Tape for such date, or if there were no sales on such date,
on the next preceding date on which there were sales.
2.12. "Incentive Award" means, with respect to any Participant,
such Participant's Target Award for a Performance Cycle as
increased or decreased in accordance with section 7.2.
2.13. "Incentive Stock Option" means a stock option that is
intended to be an incentive stock option under section 422A
of the Code.
2.14. "Nonqualified Option" means a stock option that is not
intended to be an Incentive Stock Option.
2.15. "Option" means an Incentive Stock Option or a Nonqua1ified
Option.
2.16. "Participant" means any full-time or regular part-time key
employee (as determined from time to time by the Committee)
of the Corporation or its Subsidiaries.
2.17. "Performance Cycle" means a period of four consecutive
years, or such other number of years as the Committee or the
Board may determine.
2.18. "Performance Share" means a unit awarded under the
provisions of Article VII and the value of which is measured
by the Fair Market Value of a share of Common Stock.
2.19. "Performance Unit" means a unit awarded under the provisions
of Article VII and the value of which is fixed by the
Committee or the Board.
2.20. "Plan" means The Long Term Incentive Plan of The Continental
Corporation.
2.21. "Qualifying Termination" means a termination of a
Participant's employment with the Corporation or any
Subsidiary (under circumstances where such Participant is no
longer employed by the Corporation or any Subsidiary)
following a Change of Control for any reason other than
(i) death,
(ii) Disability,
(iii) willful misconduct in the performance of such
Participant's duties as an employee,
(iv) Retirement, or
(v) a termination by such Participant, other than for
one or more of the following reasons:
(x) the assignment to such Participant of any
duties inconsistent, in a way significantly
adverse to such Participant, with such
Participant's positions, duties,
responsibilities and status with the
Corporation and its Subsidiaries immediately
prior to such Change of Control, or a
significant reduction in the duties and
responsibilities held by such Participant
immediately prior to such Change of Control; a
change in such Participant's reporting
responsibilities, titles or offices as in
effect immediately prior to such Change of
Control; or any removal of such Participant
from or any failure to re-elect such
Participant to any position with the
Corporation or any Subsidiary that such
Participant held immediately prior to such
Change of Control except in connection with
such Participant's promotion or termination of
employment for any of the reasons specified in
paragraphs (i) through (iv) above; or
(y) a reduction by the Corporation in such
Participant's base salary as in effect
immediately prior to such Change of Control;
the failure by the Corporation to continue in
effect any employee benefit plan or
compensation plan in which such Participant was
participating immediately prior to such Change
of Control unless such Participant is permitted
to participate in other plans providing
substantially comparable benefits to such
Participant; or the taking of any action by the
Corporation that would adversely affect such
Participant's participation in or materially
reduce such Participant's benefits under any
such plan; or
(z) the Corporation's requiring such Participant to
be based anywhere other than such Participant's
present location; or the Corporation's
requiring such Participant to travel on the
Corporation's business to an extent
substantially more burdensome than such
Participant's travel obligations immediately
prior to such Change of Control.
2.22. "Retirement" means any retirement under the terms of The
Retirement Plan of The Continental Corporation other than a
retirement entitling the Participant to a Vested Retirement
Allowance as defined in such Plan.
2.23. "Stock Appreciation Right" means a right granted under
section 6.8.
2.24. "Subsidiary" means any corporation in which the Corporation
owns, directly or indirectly, stock possessing 50% or more
of the total combined voting power.
2.25. "Target Award" means, with respect to any Participant, the
amount to which such Participant will be entitled in respect
of an Award of Performance Units or Performance Shares if
the Committee determines that the Corporation has met the
performance goals established for a Performance Cycle.
ARTICLE III
Eligibility
Participation in the Plan is limited to Participants. The granting
of an Option or an Award to any person under the Plan shall neither
entitle such person to, nor disqualify such person from,
participation in any other incentive plan of the Corporation or any
Subsidiary. No director of the Corporation shall be eligible for
an Option or an Award unless such director is an employee of the
Corporation or any Subsidiary.
ARTICLE IV
Administration
4.1. Authority. The Committee shall have the authority, subject
to the terms of the Plan:
(i) to determine the purchase price per share of Common
Stock covered by each Option, the time or times at
which Options may be granted and exercised, and the
terms and provisions of stock option agreements; to
designate Options as Incentive Stock Options or
Nonqualified Options; with the consent of employees
to whom Options have been granted, to grant in
substitution for outstanding Options replacement
Options, which may be at a lower purchase price
(but, in the case of Incentive Stock Options, at a
purchase price not less than the Fair Market Value
of the Common Stock subject to the replacement
Option at the time of substitution and, in the case
of Nonqualified Options, not less than 75% of the
Fair Market Value of the Common Stock subject to the
replacement Option at the time of substitution), and
to cancel replaced Options;
(ii) to determine the time or times at which Awards shall
be made, the number of shares or units to be covered
by each Award, the Target Awards and Incentive
Awards of each Participant, the length of the
Performance Cycle and other conditions applicable to
Awards, and the terms and provisions of the
agreements by which Awards shall be evidenced;
(iii) to recommend to the Board the Award or Grant of the
Chief Executive Officer and to approve individual
Awards or Grants for all other Participants;
(iv) to interpret the Plan; to establish, amend and
rescind rules and guidelines for administering the
Plan; to determine the effect of all matters and
questions relating to termination of employment; and
to make all other determinations necessary or
advisable, in its sole discretion, for the
administration of the Plan.
The Plan shall be administered by the Committee, provided
that certain ministerial powers and functions of the
Committee under the Plan, except the authority to grant
Options or Awards, may be delegated to the Office of the
Chairman or the senior Human Resources officer as the
Committee considers appropriate, subject to the terms of the
Plan.
4.2. Award Approval. The Office of the Chairman may recommend
for approval by the Committee the grant of Options or Awards
to Participants based on guidelines and procedures approved
by the Board or Committee.
4.3. Records and Reports. The Committee or the Office of the
Chairman shall arrange for the maintenance of records
showing Options and Awards under the Plan and shall arrange
to keep in convenient form such data as may be necessary for
the effective operation of the Plan.
ARTICLE V
Scope and Duration
Subject to adjustment as provided in Article VIII, the maximum
aggregate number of shares of Common Stock (a) as to which Options
and Performance Shares may be granted under the Plan and (b) which
may be issued in payment of Performance Units granted under the
Plan is 9,000,000 shares, which shares in whole or in part, as the
Board shall from time to time determine, may be authorized but
unissued shares of Common Stock or shares of Common Stock held in
the treasury of the Corporation. If for any reason (other than by
reason of the exercise of Stock Appreciation Rights) any shares of
Common Stock as to which an Option has been granted cease to be
subject to purchase under such Option or any Performance Shares are
forfeited to the Corporation, then (unless the Plan shall have been
terminated) such shares shall become available for future grants
under the Plan to the same employee who received the original grant
or to a different employee or employees. No grants of Options or
Awards shall be made hereunder after December 31, 1998.
ARTICLE VI
Terms and Conditions of Options
6.1. Purchase Price. The purchase price of the Common Stock
covered by each Option shall be determined by the Board or
the Committee, provided that such purchase price shall be
not less than the Fair Market Value of a share of Common
Stock on the date of grant thereof. The date of grant of an
Option under the Plan will be the date on which the Board,
Committee or the Office of the Chairman acts to grant such
Option, unless a later date (consistent with the Code and
any rules or regulations thereunder) is specified by the
Board, Committee or the Office of the Chairman.
6.2. Term of Options. Each Option shall expire on the tenth
anniversary of the date of its grant, or on such earlier
date as may be specified in the stock option agreement.
6.3. Exercisability. Subject to section 6.4, section 6.6 and
section 6.7, each Option shall become exercisable in one or
more installments on the date or dates (no earlier than six
months after the date of its grant) and upon the
satisfaction of such conditions as may be specified in the
stock option agreement. Once an Option becomes exercisable
with respect to a portion of the shares subject thereto, it
shall remain exercisable with respect thereto until
expiration or termination of such Option. An Option may be
exercised from time to time, in whole or in part, up to the
total number of shares with respect to which it is then
exercisable. The aggregate Fair Market Value (determined at
the date of grant as provided in section 6.1) of the portion
of shares of Common Stock with respect to which any person
may be granted Incentive Stock Options that are first
exercisable in any one calendar year under the Plan (and any
other stock option plan of the Corporation or any Subsidiary
or a parent) shall not exceed $100,000 or such other amount
as may be provided in the Code.
6.4. Acceleration of Exercisability. Except as provided in
section 9.5, notwithstanding anything to the contrary in the
Plan or in the stock option agreement evidencing an Option,
in the event a Change of Control occurs, then each Option
shall become exercisable, to the extent not then
exercisable, during the period beginning on the date of the
occurrence of such Change of Control and ending on the
sixtieth day following such date, for the purchase of the
full number of shares still subject to such Option, provided
that no Option shall become exercisable, as a result of a
Change of Control, prior to the date six months after the
date of its grant. Upon the expiration of such sixty day
period, such Option shall thereafter remain or become
exercisable according to its original terms.
6.5. Payment. Upon exercise, the purchase price shall be paid in
cash or, in the discretion of the Committee, in shares of
Common Stock, or any other property acceptable to the
Committee, or any combination of cash, shares of Common
Stock and such property, in each case having an aggregate
fair market value (as defined in section 2.11 or otherwise
determined by the Committee) on the exercise date equal to
such purchase price.
6.6. Termination of Employment. If the holder of an Option
ceases, other than by reason of death, to be employed by the
Corporation or any Subsidiary, no further installments of
such Option shall become exercisable and such Option shall
terminate on the earlier of (a) such Option's specified
expiration date and (b) the date three months from the date
of termination of such employment or, in the case of
termination of employment by reason of Retirement or
Disability, the first anniversary of termination of
employment (or in either such case such earlier date as may
be specified in the option agreement). Notwithstanding the
foregoing, if an optionee's retirement date is the month
following the sale of the subsidiary for which he or she worked,
outstanding vested options shall remain exercisable at any time
prior to the earlier of such option's specified expiration date
and the first anniversary of such optionee's termination of
employment.
6.7. Death. If the holder of an Option dies, such Option may be
exercised, to the extent of the number of shares of Common
Stock with respect to which the optionee could have
exercised such Option on the date of death, by such
optionee's estate, personal representative or beneficiary
who acquires such Option by will or by the laws of descent
and distribution at any time prior to the earlier of such
Option's specified expiration date and the first anniversary
of such optionee's death. On the earlier of such dates, the
Option shall terminate.
6.8. Special Stock Appreciation Rights. In the event a Change of
Control occurs, then any optionee who is subject to the
provisions of section 16(b) of the Act shall have the right
to elect (subject to any limitations expressly made
applicable to rights under this section 6.8 and contained in
the stock option agreement) by written notice to the
Treasurer of the Corporation, during the period beginning on
the date of the occurrence of such Change of Control and
ending on the sixtieth day following such date, in lieu of
purchasing shares of Common Stock as to which such Option
shall become exercisable as a result of such Change of
Control, to surrender such Option with respect to any or all
of such shares and to receive a payment in cash from the
Corporation in an amount equal to the amount by which (a)
the Fair Market Value of a share of Common Stock on the date
of such election, multiplied by the number of shares of
Common Stock as to which the Optionee shall have made such
election, exceeds (b) the total purchase price for such
number of shares of Common Stock under such Option. Upon
election by the optionee to receive a payment under this
section 6.8, such Option shall thereafter remain
exercisable, according to its terms, only with respect to
the number of shares of Common Stock as to which it would
otherwise be exercisable less the number of shares of Common
Stock as to which such election shall have been made. Any
shares of Common Stock as to which an election pursuant to
this section 6.8 shall have been made shall not be available
for further grants under this Plan.
ARTICLE VII
Terms and Conditions of
Performance Shares and Performance Units
7.1. Performance Goals. The Committee shall prescribe, no later
than six months after the commencement of each Performance
Cycle, one or more financial performance measurement goals
to be attained by the Corporation during such Performance
Cycle. The performance goals may be based on such criteria
as the Committee shall deem appropriate and in the best
interests of the Corporation. The Committee may at any time
adjust the performance goals in order to reflect
significant, unexpected changes in circumstances.
7.2. Determination of Participants, Target Awards and Incentive
Awards. No later than six months after the commencement of
each Performance Cycle, the Committee shall determine those
employees who shall be Participants in such Performance
Cycle and the Target Award for each Participant for such
Performance Cycle. In the case of a Performance Unit award,
the Target Award shall be the product of the number of
Performance Units awarded to such Participant and the dollar
value of a Performance Unit if the performance goals for the
Performance Cycle are met as fixed by the Committee. In the
case of a Performance Share award, the Target Award shall be
the number of Performance Shares to which such Participant
will be entitled if the performance goals for the
Performance Cycle are met. The Committee may also provide
for an Incentive Award, which shall be a Participant's
Target Award for a Performance Cycle increased or decreased
to the extent considered appropriate by the Committee in
order to reflect the relative level of attainment by the
Corporation and the Participant of the performance goals
established for such Performance Cycle. In making any
increase or decrease, the Committee may take into account
the recommendation of the Office of the Chairman and such
other criteria as the Committee may consider pertinent. The
Committee, in its sole discretion, shall determine whether
to pay to Participants who have a vested Incentive Award
consisting of Performance Shares an amount equal to the
aggregate cash dividends which would have been paid on the
number of Performance Shares for which payment is due
(whether in cash or in shares of Common Stock) from the date
of the grant of the Award to the date of payment had such
Performance Shares been issued as shares of Common Stock on
the date of grant of such Award (sometimes referred to as a
"dividend equivalent").
7.3. Vesting of Awards. At the close of business on the last day
of the final year of each Performance Cycle, each
Participant who shall have been continuously employed by the
Corporation or a Subsidiary from the date such Participant's
Target Award for such Performance Cycle was initially
determined until the close of business on such day shall
become irrevocably vested with the right to receive such
Participant's Incentive Award for such Performance Cycle.
7.4. Special Vesting. If a Participant's employment is
terminated by reason of Retirement, Disability or death, or
if a Change of Control occurs, vesting will be as follows:
(i) Retirement or Disability. If a Participant's
employment is terminated by reason of Retirement or
disability after 25% of a Performance Cycle has
elapsed but before completion of that Performance
Cycle, such Participant on the date of such
termination of employment shall become irrevocably
vested with the right to receive an amount equal to
the product of (a) the Incentive Award of such
Participant for each Performance Cycle that was not
completed prior to termination of employment and (b)
a fraction, the numerator of which is the number of
full months of employment completed by such
Participant during such Performance Cycle to the
date of such termination and the denominator of
which is the total number of months in such
Performance Cycle.
(ii) Death. If a Participant's employment is terminated
by reason of his death after 25% of a Performance
Cycle has elapsed but before completion of that
Performance Cycle, such Participant's estate on the
date of such termination of employment shall become
irrevocably vested with the right to receive an
amount equal to the product of (a) the Target Award
of such Participant for each Performance Cycle that
was not completed prior to his death and (b) a
fraction, the numerator of which is the number of
full months of employment completed by such
Participant during such Performance Cycle to the
date of such termination and the denominator of
which is the total number of months in such
Performance Cycle.
(iii) Change of Control. In the event that any
Participant's employment with the Corporation or any
Subsidiary terminates by reason of a Qualifying
Termination within two years after a Change of
Control, such Participant shall become irrevocably
vested with the right to receive an amount equal to
the product of (a) the Target Award of such
Participant for each Performance Cycle that was not
completed prior to such Qualifying Termination and
(b) a fraction, the numerator of which is the number
of full months of employment completed by such
Participant during such Performance Cycle to the
date of such Qualifying Termination and the
denominator of which is the total number of months
in such Performance Cycle. In the event that a
Change of Control takes place and a Participant's
employment has not terminated as a result of a
Qualifying Termination within two years of such
Change of Control, the foregoing provision shall not
apply to such Participant's Awards and the rights of
such Participant in respect of such Awards shall be
determined in accordance with the other provisions
of the Plan.
7.5. Termination of Employment. Except as provided in section
7.4 or as may otherwise be determined by the Committee if a
Participant's employment terminates before the close of
business on the last day of the final year of a Performance
Cycle, he shall forfeit his Incentive Award for such cycle.
7.6. Payment Date.
(i) Normal Vesting, Retirement or Disability. Within
forty-five days after Completion of the Audit for
the final year of each Performance Cycle the
Corporation shall on the date selected by the
Committee pay to each Participant in such
Performance Cycle any amount not yet paid that has
theretofore vested in such Participant pursuant to
section 7.3 or clause (i) of section 7.4.
(ii) Change of Control. Within thirty days after a
Change of Control the Corporation shall pay to each
Participant the amount of such Participant's
Incentive Award not yet paid for any Performance
Cycle that was completed prior to the date of such
Change of Control, which amount may be reasonably
estimated by the Committee in the event payment is
due hereunder prior to Completion of the Audit for
the final year of such Performance Cycle. In the
event that a Participant receives a payment of an
estimated Incentive Award after a Change of Control
pursuant to the preceding sentence, within forty-
five days after Completion of the Audit for the
final year of the Performance Cycle with respect to
which such Incentive Award has then vested (x) the
Corporation shall pay to such Participant the
excess, if any, of such Participant's vested
Incentive Award over such estimated Incentive Award
payment or (y) such Participant shall pay to the
Corporation the excess, if any, of such estimated
Incentive Award payment over such Participant's
vested Incentive Award. Within thirty days after a
Qualifying Termination of a Participant's employment
as described in clause (iii) of section 7.4, the
Corporation shall pay to such Participant the amount
that such Participant has a vested right to receive
under such clause.
(iii) Death. Within thirty days after a termination of a
Participant's employment as described in clause (ii)
of section 7.4, the Corporation shall pay to such
Participant's estate in cash the amount that the
estate has a vested right to receive under such
clause.
7.7. Method of Payment. The Committee, in its sole discretion,
may elect to pay vested Incentive Awards in cash, Common
Stock or part in cash and part in Common Stock. If
Performance Units are paid in shares of Common Stock, the
number of such shares shall be equal to (a) the dollar value
of the portion of the Award to be paid in shares divided by
(b) the average Fair Market Value for a period of twenty
trading days ending ten calendar days, or such smaller
number of days selected by the Committee, before the date of
payment. If Performance Shares are paid in cash, the amount
of such cash payment shall be equal to (a) the number of
Performance Shares to be paid in cash multiplied by (b) the
average Fair Market Value for a period of twenty trading
days ending ten calendar days, or such smaller number of
days selected by the Committee, before the date of payment.
Any dividend equivalent amount provided for under section
7.2 shall be paid in cash.
7.8. Deferral of Payment. A Participant may elect to defer all
or any portion of a payment to which the Participant is
entitled pursuant to this Article VII under The Deferred
Compensation Plan of The Continental Corporation.
ARTICLE VIII
Capital Adjustments
Except as otherwise provided in any written agreement evidencing an
Option or Award, in the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend, stock
split, combination or exchange of shares, recapitalization,
reclassification, merger, consolidation, spin-off, reorganization
or other similar transaction, the Board or Committee shall make
appropriate adjustments in the aggregate number and class of shares
that may be delivered under the Plan, the number and purchase price
of shares of Common Stock covered by each Option outstanding on the
date of such transaction (by means of a grant of a substitute
Option or an additional Option or otherwise) and to each Award of
Performance Shares outstanding on such date. Any fractional shares
resulting from such adjustments shall be eliminated.
ARTICLE IX
Miscellaneous
9.1. Effective Date. The amendment and restatement of the Plan
shall become effective as of May 20, 1993, subject to
shareholder approval.
9.2. Amendment or Termination. The Board or Committee may
terminate or amend the Plan in any respect at any time and
the Office of the Chairman (or, in the cases of clauses (i)
and (iii) below, the senior Human Resources officer) may
approve in writing any amendment of the Plan when it finds
that such amendment:
(i) is required to conform the Plan to applicable laws
or regulations;
(ii) will not significantly decrease the benefits to, or
rights of, any Participant in the Plan; or
(iii) is intended only to implement transactions approved
by the Board;
provided, that, no such amendment may be made without shareholder
approval if such approval is necessary to comply with any tax,
regulatory or listing requirement or other applicable law,
including for these purposes any approval requirement which is a
prerequisite for exemptive relief under Section 16(b) of the Act.
No action of the Board, the Committee, the Office of the Chairman
or senior Human Resources officer, or the shareholders of the
Corporation, without a Participant's consent, may (x) alter or
impair a Participant's rights under any Option previously granted
or to amounts in respect of Performance Units or Performance Shares
already vested in him, or (y) in connection with a Change of
Control, alter, impair or affect adversely the rights of any
Participant in respect of an Option (including without limitation
such Participant's acceleration rights under section 6.4) or in
respect of Performance Units or Performance Shares with respect to
any year or Performance Cycle that commenced prior to the date of
such Change of Control (including without limitation such
Participant's rights under section 7.4).
9.3. Inalienability of Interests. A Participant's interests
under the Plan shall not be subject to alienation,
assignment, garnishment, execution of levy of any kind, and
any attempt to cause benefits to be so subjected shall not
be recognized. Notwithstanding the foregoing, a
Participant's interests may be transferred by will or by the
laws of descent and distribution. During the lifetime of
any optionee, only the optionee may exercise his Option. At
the request of the holder of an Option, shares of Common
Stock purchased upon the exercise of such Option, or
received on exercise of stock appreciation rights, may be
issued in or transferred into the name of such holder and
another person, jointly with the right of survivorship.
9.4. Facility of Payments. In the event that the Office of the
Chairman or senior Human Resources officer shall find that
any person to whom any payment is due is unable to care for
his affairs because of illness or accident, or otherwise,
the Office of the Chairman or senior Human Resources officer
may direct that any such payment shall be paid to the duly
appointed legal representative of such person, or if there
be no duly appointed legal representative, to the spouse, a
child, a parent or other blood relative of the person or to
any person deemed by the Office of the Chairman or senior
Human Resources officer to have incurred expense for the
benefit of such person, and any such payments so made shall
be a complete discharge of the liabilities of this Plan
therefor.
9.5. Excess Parachute Payments. A Participant's entitlement to
payments under this Plan and the acceleration of the
exercisability of Options under section 6.4 of the Plan
shall be limited to the extent necessary so that no portion
of such payment (or the value of such acceleration, as the
case may be), when aggregated with payments or benefits
(including the value of acceleration of stock options) to
which the Participant is entitled under any other plan or
agreement, shall be subject to the excise tax imposed by
section 4999 of the Code. Any limitation under this section
9.5 of a Participant's entitlement to payments or on the
acceleration of exercisability of Options shall be made in
the manner and in the order directed by such Participant.
9.6. Written Agreements. Options and Awards shall be evidenced
by written agreements in such form or forms and containing
such restrictions, terms and conditions, not inconsistent
with the Plan, as the Board or Committee may from time to
time approve.
9.7. Withholding. The Corporation's obligation to deliver shares
of Common Stock or to make a payment upon the exercise of
any Option or Stock Appreciation Right or to make any
payment in respect of an Award shall be subject to
applicable federal, state and local tax withholding
requirements.
9.8. Limited Effect. The Plan shall not be construed as creating
any contract of employment or otherwise conferring upon any
Participant any legal right to continuation of employment,
nor as limiting or qualifying the right of the Corporation
or a Subsidiary to discharge any Participant without regard
to the effect that such discharge might have upon such
Participant's rights under the Plan.
9.9. Number and Gender. Where from the context it appears
appropriate, each term used in this Plan in either the
singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine,
feminine or neuter gender shall include the masculine,
feminine and neuter.
9.10. Captions. Captions of the Plan are inserted for
convenience of reference only, and the Plan is not to be
construed by interpretation thereof.
9.11. Applicable Law. This Plan shall be interpreted, construed
and administered in accordance with the laws of the State of
New York.
THE ANNUAL MANAGEMENT INCENTIVE PLAN OF
THE CONTINENTAL CORPORATION
(Amended and Restated as of January 1, 1993)
(Incorporates Amendments No. 1 through 7)
ARTICLE I
Purpose
The purpose of this Plan is to provide key employees with increased
incentive, in addition to base compensation, to make significant
and extraordinary contributions to the performance and growth of
the Corporation and its subsidiaries; to attract key employees in
the future and to encourage key employees to remain with the
Corporation and its subsidiaries.
ARTICLE II
Definitions
2.1. Award. An amount determined by the application of
participant performance and organizational modifiers to the Par
Award as specified in paragraphs 2.8(a) through (e) of this
Article.
2.2. Board. The Board of Directors of The Continental
Corporation.
2.3. Committee. The Compensation Committee of the Board as
appointed from time to time.
2.4. Corporation. The Continental Corporation and any
subsidiary corporation at least 50% of whose issued and outstanding
voting stock is owned directly or indirectly by The Continental
Corporation.
2.5. Division. A staff department of the Corporation.
2.6. Group. An identifiable profit center within the
Corporation.
2.7. Par Award. The midpoint of a Participant's salary grade
multiplied by a percentage as determined from time to time by the
Board or Committee.
2.8. Par Award Modifiers.
(a) Participant Performance Modifier (Tier I). A factor
or factors determined by the Committee to reflect the level of
attainment by the Corporation of the Corporate Target Goals or
attainment by a Participant of individual goals for the Plan Year
which may increase or decrease a Tier I Participant's Par Award
within a range from 0% to 250% of par.
(b) Participant Performance Modifiers (Tier II). Percentage
factors determined by the Committee to reflect the level of
attainment by Participants of their respective individual
performance goals for the Plan Year, as determined by individual
performance ratings and modified by a formula adopted by the
Committee. The Par Award for each Tier II Participant is
multiplied by the factors and formula so determined to increase or
decrease the Par Award, provided that participant whose individual
performance rating is 2.4 or less is not eligible to receive an
Award.
(c) Corporate Modifiers. Percentage factors determined by
the Committee, by which the Par Award for each Tier II Participant
will be multiplied to reflect the level of attainment of Corporate
Target Goals, as determined by the Committee.
(d) Group Modifiers. Percentage factors determined by the
Committee, by which the Par Award for each Tier II Participant will
be multiplied to reflect the level of performance of the Group of
such Participant (as determined by the Chairman and the President,
who may take into account the Committee determination of the level
of attainment of Corporate Target Goals); the head of each Group
may further modify such Par Award to reflect the relative
performance of the business unit of such Participant (as determined
by such head of the Group), provided that such further
modifications in the aggregate may not increase or decrease the
total amount payable to all Participants in the Group.
(e) Division Modifier. A percentage factor determined by an
evaluation of the results for the combined property and casualty
operations, as determined by the Chairman and the President.
2.9. Participants. Active full-time or regular part-time
employees of the Corporation at the beginning of, or who qualify
during, the Plan Year and who are employed on December 31 of the
Plan Year, as follows:
(a) Tier I Participant. Senior Management Employees
designated by the Board or Committee.
(b) Tier II Participant. Employees in positions
assigned to salary grades above 46, except any Tier I
Participant.
2.10. Plan. The Annual Management Incentive Plan, as amended
from time to time.
2.11. Plan Year. January 1 to December 31.
2.12. Target Goals. In the case of the Corporate Target
Goals, the criteria and the amounts established by the Board or
Committee prior to or at the beginning of each Plan Year by which
the performance of the Corporation is measured. In the case of
Group Target Goals, the criteria or amounts established by the
Chief Executive Officer of the Corporation which are consistent
with the Corporate Target Goals.
ARTICLE III
Administration
The Plan shall be administered by the Committee who shall report to
the Board with respect to action taken pursuant to the Plan at the
first meeting of the Board following such action. The Committee
may delegate to the Office of the Chairman or the senior Human
Resources officer such of the administrative functions and powers
as the Committee considers appropriate, subject to the terms of the
Plan.
The Committee shall have full authority to administer the Plan,
including, but not limited to, the power to determine the time of
payment of Awards, to interpret the Plan, to determine for each
Plan Year the Participant Performance Modifiers for Tier I and Tier
II, to determine the Corporate and Group Modifiers to reflect the
level of attainment of the Corporate and Group Target Goals for
that Plan Year, to recommend to the Board the Award of the Chief
Executive Officer, and to approve individual Awards for all Tier I
Participants. The Office of the Chairman is authorized to
determine all other Awards, subject to approval in the aggregate by
the Committee.
The Board has the discretion during or after any Plan Year to
increase or decrease the amount of any Target Goal for that Plan
Year to reflect (1) extraordinary, unusual or non-recurring items
or events, or (2) material differences between any significant
assumptions used by the Board in fixing a Target Goal and actual
events or conditions experienced during the Plan Year.
Decisions of the Board, Committee or Office of the Chairman with
respect to the interpretation or administration of the Plan shall
be final, conclusive and binding.
ARTICLE IV
Participation
4.1. Participants as defined in Article II are eligible to
participate in the Plan under the terms and conditions thereof.
4.2. If a Participant ceases to be employed by the Corporation
prior to the end of the Plan Year for any reason other than death,
disability, or normal, early or postponed retirement under The
Retirement Plan of The Continental Corporation, except as provided
in Article 5.3., then the Participant's participation in the Plan
will terminate forthwith and he will not be eligible to receive an
Award for such Plan Year.
4.3. If prior to the end of a Plan Year a Participant having
completed at least six months full time or regular part-time active
service terminates employment by reason of death, disability, or
normal, early or postponed retirement under The Retirement Plan of
The Continental Corporation or if prior to the end of the Plan Year
the Participant's eligibility is terminated because of a change of
Salary Grade, the Participant will receive only that portion of the
Award determined by multiplying the Award, if any, that the
Participant otherwise would have received under the Plan for the
full Plan Year by a fraction, the numerator of which is the number
of calendar months of the Participant's active service during the
Plan Year and the denominator of which is twelve. In the event a
Participant terminates employment by reason of death, the Office of
the Chairman or senior Human Resources officer for employees in
Tier II may determine to pay the pro rata Award to the
Participant's estate prior to or after the end of the Plan Year.
4.4. Subject to the provisions of paragraphs 4.2. and 4.3. of
this Article IV, if the effective date of participation for a
Participant is prior to July 1 of a Plan Year, the Participant will
be entitled to receive only that portion of the Award determined by
multiplying the Award, if any, that the Participant otherwise would
have received under the Plan for the full Plan Year by a fraction,
the numerator of which is the number of calendar months of the
Participant's active service during the Plan Year and the
denominator of which is twelve. No Participant whose effective
date of participation is after June 30 of a Plan Year may receive
an Award for such Plan Year.
4.5. In the event a Participant's Tier level changes during
the Plan Year, or the participant moves from a Division, Group or
Unit to another such organization within the Corporation, the
Participant's Award, if any, will be determined on a pro rata basis
for participation in each Tier level or organization, as the case
may be, by application of fractions, the numerators of which are
the numbers of calendar months of active service in each Tier level
or organization and the denominators of which are twelve.
4.6. Any Participant who is eligible to participate in any
other short term or sales incentive plan within the Corporation is
not eligible to participate herein unless selected for a Special
Award.
4.7. Special Awards may be granted to employees other than the
Chairman, whom the Office of the Chairman may recommend, subject to
approval of the Committee.
ARTICLE V
Payment of Awards
5.1. Standard Method of Payment. Subject to the terms and
conditions of this Plan, the Corporation shall pay each eligible
Participant an Award for each Plan Year.
5.2. Optional Methods of Payment.
(a) Three Installments. A Participant may elect to
receive one third of an Award on the date specified for
payment and one third on the first and second anniversary
dates thereafter.
(b) Deferral Until Retirement. Payment of an Award may
be deferred until a Participant retires under The Retirement
Plan of The Continental Corporation or the first anniversary
thereafter.
(c) Deferral Until A Specific Date. A Participant may
elect to defer payment of an Award until a specific future
date.
(d) Interest On Deferral Awards. Interest will accrue
annually on all deferral amounts and will be paid together
with payment of such amounts. The rate of interest will be
determined periodically by the Chief Financial Officer of the
Corporation, closely paralleling the Corporation's cost of
money.
(e) Upon Death Of A Participant. In the event a
Participant dies prior to any deferral date(s) elected
pursuant to subsections (a) through (c) above, all deferral
amounts of such Participant, together with interest accrued
thereon, shall be paid as directed by the Executor or
Administrator of the Participant's estate.
(f) Payment Upon Termination. If a Participant ceases
to be employed by the Corporation, except as provided in
Article 5.3., for any reason other than death, disability, or
normal, early or postponed retirement under The Retirement
Plan of The Continental Corporation, any deferred Award(s) and
accrued interest thereon shall be computed as of the date of
termination and paid thereafter within a reasonable period of
time.
5.3 Change of Control
(a) A "Change of Control" means the occurrence of any of the
following events: (i) any "person" or "group" of persons (as such
terms are used in sections 13 and 14 of the Securities Exchange Act
of 1934, as amended), other than any employee benefit plan
sponsored by The Continental Corporation ("Continental") becomes
the "beneficial owner" (as such term is used in section 13 of such
Act) of 30% or more of the outstanding shares of Continental's
capital stock entitled to vote for the election of directors; or
(ii) any shares of any class of Continental's capital stock are
purchased pursuant to a tender or exchange offer (other than an
offer by Continental or any subsidiary thereof); (iii) or the
approval by the requisite vote of Continental's shareholders of any
merger, consolidation, sale of assets, liquidation or
reorganization as a result of which Continental will not survive as
a publicly-owned corporation; or (iv) a change in the composition
of the Board during any period of two consecutive years such that
individuals who at the beginning of such period were members of the
Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Corporation's shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(b) "Qualifying Termination" means a termination of a
Participant's employment with the Corporation (under circumstances
where such Participant is no longer employed by the Corporation)
for any reason other than
(i) death,
(ii) Disability,
(iii) willful misconduct in the performance of such
Participant's duties as an employee,
(iv) Retirement, or
(v) a termination by such Participant, other than a
termination for one or more of the following reasons:
(x) the assignment to such Participant of any
duties inconsistent, in a way significantly
adverse to such Participant, with such
Participant's positions, duties,
responsibilities and status with the
Corporation and its Subsidiaries immediately
prior to such Change of Control, or a
significant reduction in the duties and
responsibilities held by such Participant
immediately prior to such Change in Control; a
change in such Participant's reporting
responsibilities, titles or offices as in
effect immediately prior to such Change of
Control; or any removal of such Participant
from or any failure to re-elect such
Participant to any position with the
Corporation that such Participant held
immediately prior to such Change of Control
except in connection with such Participant's
promotion or termination of employment for any
of the reasons specified in paragraphs (i)
through (iv) above; or
(y) a reduction by the Corporation in such
Participant's base salary as in effect
immediately prior to such Change of Control;
the failure by the Corporation to continue in
effect any employee benefit plan or
compensation plan in which such Participant
was participating immediately prior to such
Change of Control unless such Participant is
permitted to participate in other plans
providing substantially comparable benefits to
such Participant; or the taking of any action
by the Corporation that which would adversely
affect such Participant's participation in or
materially reduce such Participant's benefits
under any such plan; or
(z) the Corporation's requiring such
Participant to be based anywhere other than
such Participant's present location; or the
Corporation's requiring such Participant to
travel on the Corporation's business to an
extent substantially more burdensome than such
Participant's travel obligations immediately
prior to such Change of Control.
(c) In the event that any Participant's employment with the
Corporation terminates prior to the end of a Plan Year by reason of
a Qualifying Termination within two years after a Change of
Control, such Participant shall become irrevocably vested with the
right to receive an amount equal to his Par Award for that Plan
Year multiplied by a fraction, the numerator of which is the number
of calendar days from January 1 of such year through the date of
his termination and the denominator of which is 365. The
Corporation shall pay the Participant such amount within 15 days
after the date of such Qualifying Termination of his employment.
ARTICLE VI
Miscellaneous
6.1. Limitations on Participants' Rights. No Participant, or
other person, shall have any right or claim to any Award under the
Plan except in accordance with the provisions of the Plan. The
Plan shall not be construed as creating any contract of employment
or otherwise conferring upon any Participant any legal right to
continuation of employment, nor as limiting or qualifying the right
of any company included within the Corporation to discharge any of
its employees without regard to the effect that such discharge
might have upon such employee's rights under the Plan.
6.2. Non-Assignability of Rights. No interest, right or claim
in or to any Award hereunder shall be assignable, transferable or
subject to sale, mortgage, pledge, hypothecation, commutation,
anticipation, garnishment, attachment, execution, or levy of any
kind, and the Corporation shall not recognize any attempt to
assign, transfer, sell, mortgage, pledge, hypothecate, commute or
anticipate the same, except to the extent required by law.
6.3. Facility of Payments. In the event that the Office of
the Chairman or senior Human Resources officer shall find that any
Participant to whom an Award is payable under the Plan is unable to
care for his affairs because of illness or accident, or otherwise,
the Office of the Chairman or senior Human Resources officer may
direct that any payment due shall be paid to the duly appointed
legal representative of such person, or if there be no duly
appointed legal representative, to the spouse, a child, a parent or
other blood relative of the person, or to any person deemed by the
Office of the Chairman or senior Human Resources officer to have
incurred expense for the benefit of such person, and any such
payments so made shall be a complete discharge of the liabilities
of the Plan therefor.
6.4. Number and Gender. Where from the context it appears
appropriate, each term used in this Plan in either the singular or
the plural shall include the singular and the plural, and pronouns
stated in either the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.
6.5. Captions. Captions of this Plan are inserted for
convenience of reference only, and the Plan is not to be construed
by interpretation thereof.
6.6. Applicable Law. This Plan shall be interpreted,
construed and administered in accordance with the laws of the State
of New York.
6.7. Amendment or Termination. The Board or Committee may
amend, suspend or terminate the Plan. The Office of the Chairman
(or, in the cases of clauses (i) or (iii) below, the senior Human
Resources officer) may approve in writing any amendment of the Plan
when it finds that such amendment:
(i) is required to conform the Plan to applicable laws
or regulations,
(ii) will neither increase the annual cost of the Plan
by more than the greater of 5% or $1 million, nor
significantly decrease the benefits to, or rights
of, any participant in the Plan, or
(iii) is intended only to implement transactions by the
Board,
provided that following, or in connection with, a Change of control
(as defined in Article 5.3.) the Board, Committee or Office of the
Chairman may not amend, suspend or terminate the Plan with respect
to Awards for the Plan Year in which such Change of Control occurs.
THE INCENTIVE SAVINGS PLAN OF
THE CONTINENTAL CORPORATION
(Amended and Restated as of January 1, 1994)
(Incorporates Amendments No. 1 through 28)
To encourage and assist their employees to save regularly, The
Continental Corporation and certain of its United States affiliates
have established the Incentive Savings Plan of The Continental
Corporation hereinafter set forth.
ARTICLE I
Definitions
The following terms when used herein, unless the context clearly
indicates otherwise, shall have the meanings set forth below:
1.1 Accounts. The Participant After-Tax Contributions
Account, Participant Tax-Deferred Contributions Account,
an Employee's Rollover Account and the Company
Contributions Account maintained for a Participant.
1.2 Administrator. An individual appointed by the Incentive
Savings Plan Committee to serve in this capacity. The
Administrator is not precluded from serving as a Trustee.
1.3 Affiliated Corporation.
(a) A corporation controlling, controlled by or under
common control with the Company, through ownership,
directly or indirectly through one or more
intermediaries, of at least a majority of the
voting stock of the controlled corporation; or
(b) A corporation which is a member of a controlled
group of corporations (within the meaning of
Section 1563(a) of the Internal Revenue Code,
determined without regard to Sections 1563(a)(4)
and 1563(e)(3)(C) thereof) of which any Employer is
a member.
1.4 Board of Directors. The Board of Directors of the
Company.
1.5 Break in Service. A period of at least twelve
consecutive months beginning on a person's severance from
service date (as defined in Section 1.12) and ending on
the first anniversary thereof, during which a person does
not perform an Hour of Service.
However, for the purpose of the foregoing, in the event
a person incurs a severance from service date (as defined
in Section 1.12) (i) by reason of such person's
pregnancy, (ii) by reason of the birth of a child of such
person, (iii) by reason of the placement of a child with
such person in connection with the adoption of a child by
such person, or (iv) for the purpose of caring for such
child for a period beginning immediately following such
birth or placement, then a "Break in Service" shall mean
a period of at least twenty-four consecutive months
beginning on the person's severance from service date (as
defined in Section 1.12) and ending on the second
anniversary thereof, during which the person does not
perform an Hour of Service. Additionally, the period
between the first and second anniversaries of the first
day of absence from work shall neither be a period of
service nor a period of severance.
1.6 Company. The Continental Corporation, a New York
corporation.
1.7 Company Contributions. The amounts contributed under the
Plan by the Employers for the benefit of Participants.
1.8 Company Contributions Account. The assets, Investment
Shares and Investment Units credited to a Participant
that are attributable to Company Contributions made with
respect to such Participant.
1.9 Compensation. The regular basic compensation payable to
a Participant by an Employer prior to reduction for
tax-deferred contributions under Section 2.4 of this Plan
or reduction to reflect tax-exempt contributions or
benefit payments, excluding Company contributions under
this or any other employee benefit plan of an Employer,
overtime pay, bonuses, commissions (except to the extent
that under the rules of an Employer commissions are in
lieu of base salary or wages), fees and other occasional
or extraordinary payments. In no event will Compensation
for any pay period exceed $200,000 in 1989, or such
amount as increased by the Secretary of the Treasury for
years after 1988, divided by the number of pay periods in
the calendar year. In no event will Compensation for any
pay period exceed $150,000 in 1994, or such amount as
increased by the Secretary of the Treasury for years
after 1994, divided by the number of pay periods in the
calendar year.
1.10 Employee. A person employed by an Employer excluding any
officer or director who is not compensated by regular
salary.
1.11 Employer. The Company and those of its Affiliated
Corporations it designates.
1.12 Employment. That period of time which begins on a
person's employment or reemployment commencement date and
ends on his severance from service date. A person's
employment commencement date is the date on which he
first performs an Hour of Service. A person's
reemployment commencement date is the first date on which
he performs an Hour of Service after a period of
severance. A period of severance commences on a person's
severance from service date and ends on the first date
thereafter on which he performs an Hour of Service. A
severance from service date is the earlier of the date on
which a person quits, is discharged, retires or dies, or
the first anniversary of the date on which he does not
perform an Hour of Service for any other reason.
1.13 Entry Date. Any pay date.
1.14 ERISA. The Employee Retirement Income Security Act of
1974, as amended from time to time.
1.15 Hour of Service. An hour for which a person is directly
or indirectly compensated (including back pay
irrespective of mitigation of damages) by an Employer or
an Affiliated Corporation which is not an Employer. In
addition, eight Hours of Service shall be credited for
each scheduled workday for which a person is on:
(a) Any period of absence on leave without pay (in the
granting of which, persons in similar circumstances
will be treated in a uniform and nondiscriminatory
manner), provided the person returns to Employment
at or prior to the termination of the leave; and
(b) Any period of absence in the service of the armed
forces of the United States in time of war or
national emergency, provided the person returns to
Employment within 90 days after the termination of
his service in such armed forces or within such
longer period as his employment rights are
protected by law. Notwithstanding the foregoing,
any person who is scheduled to work for the regular
workweek of an Employer or an Affiliated
Corporation at the person's location (or who was
scheduled to do so at the beginning of a period of
absence described in clauses (a) or (b) of the
preceding sentence), shall be credited with 190
Hours of Service for each calendar month for which
he is entitled to be credited with at least one
Hour of Service under the preceding sentence. The
foregoing shall be construed so as to avoid
duplication of credit for Hours of Service for a
single hour.
Hour of Service shall be computed and credited in
accordance with paragraphs (b) and (c) of section
2530.200b-2 of the Department of Labor regulations.
1.16 (a) Investment Shares. The undivided interests in the
Vanguard/Wellington Fund, Vanguard U.S. Growth
Portfolio and Vanguard Index Trust-500 Portfolio of
the Trust Fund provided for in Article IV of the
Plan.
(b) Investment Units. The undivided interests in the
Continental Stock Fund and Interest Savings Fund of
the Trust Fund provided for in Article IV of the
Plan.
1.17 Participant. A person for whom an Account is maintained
under the Plan (other than an Employee for whom only a
Rollover Account is maintained).
1.18 (a) Participant After-Tax Contributions Account. The
assets, Investment Shares and Investment Units
credited to a Participant that are attributable to
all of his own contributions made prior to January
1, 1984 and attributable to his After-Tax
Contributions made after January 1, 1984.
After-Tax Contributions shall mean Participant
Contributions other than Tax-Deferred
Contributions.
(b) Participant Tax-Deferred Contributions Account.
The assets, Investment Shares and Investment Units
credited to a Participant that are attributable to
his own Tax-Deferred Contributions made after
January 1, 1984. Participant Tax-Deferred
Contributions are contributions not subject to
federal income tax when made in accordance with
Section 401(k) of the Internal Revenue Code of 1986
as amended and applicable regulations.
1.19 Plan. This Incentive Savings Plan as herein set forth or, if
hereafter amended, as so amended.
1.19A Plan Year. The Plan Year and the limitation year shall be a
calendar year.
1.20 Trust Agreement. The agreement described in Article IV of the
Plan.
1.21 Trustees. The trustees provided for in Article IV of the Plan
or any successor trustees designated in accordance with the terms
of the Trust Agreement.
1.22 Trust Fund. The cash and investments held at any one time by the
Trustees.
1.23 Years of Vesting Service. One Year of Vesting Service shall be
credited for each 12 months of Employment:
(a) For periods prior to January 1, 1976, measured from the date
a person first became eligible to elect to become a
Participant;
(b) For periods after December 31, 1975, including periods of
no more than twelve months' duration between periods of
Employment (i) which are begun by reason of quit, discharge
or retirement or (ii) which are begun for any other reason
but in the course of which a quit, discharge or retirement
occurs. Periods during which an Employee otherwise eligible
to become a Participant does not become one solely by reason
of his declining to contribute to the Plan are not, however,
included.
Service of individuals who are leased employees or employed in
noncovered employment for the Employer controlled group and
affiliated service group will be counted for vesting purposes.
1.24 Incentive Savings Plan Committee (or "Committee"). A Committee
whose members are the named fiduciaries (as defined by ERISA) of
the Plan. Members of the Incentive Savings Plan Committee are
individuals appointed by the Compensation Committee to serve in
this capacity.
1.25 Compensation Committee. The Compensation Committee of the Board
of Directors as appointed from time to time.
ARTICLE II
Participation and Participants' Contributions
2.1 Participants On January 1, 1993. Every person who is an Employee
on January 1, 1993 and who was a Participant on December 31, 1992
shall continue to be a Participant on January 1, 1993.
2.2 Eligibility.
(a) Every Employee shall be eligible to participate in
accordance with the rules set forth in Section 2.2(b) of
this plan unless he is:
(i) an Employee who is compensated exclusively on a
commission or fee basis (except to the extent that
under the rules of an Employer commissions are in lieu
of base salary or wages);
(ii) an Employee covered by a collective bargaining
agreement between employee representatives and one or
more Employers, if such agreement does not expressly
provide for coverage by this Plan and if retirement
benefits were the subject of good faith bargaining
between such employee representatives and such
Employer or Employers;
(iii) Employee employed in Canada; or
(iv) an Employee employed outside the United States who is
not a citizen of the United States.
(b) Every Employee eligible to participate under Subsection
2.2(a) shall be eligible to elect to become a Participant
on any Entry Date (provided he is then an Employee)
following the close of any twelve-month period during which
he completed 1,000 Hours of Service. A Participant who
incurs a period of severance but returns to Employment shall
again be eligible for Plan participation as of the first
Entry Date coincident with or next following his
reemployment commencement date, provided:
(i) he is eligible to participate under Subsection 2.2(a),
and
(ii) he again satisfies the conditions of Section 2.3.
2.3 Election to Participate. Participation in the Plan by Employees
is voluntary. An Employee who is eligible to elect to become a
Participant on any Entry Date and who wishes to participate in
the Plan must elect to do so by signing and filing with the
Administrator at least 14 days before an Entry Date the form of
election provided by the Administrator for such purpose. In the
form of election to participate, the Employee shall specify the
percentage of Compensation he elects to contribute under the Plan
on each pay date and authorize such amounts to be taken from his
Compensation, and shall agree to be bound by all the terms and
provisions of the Plan. Upon filing such election he shall
become a Participant, and the percentage of Compensation he
elected to contribute under the Plan shall begin to be taken from
his Compensation with the Entry Date elected.
2.4 (a) Amount and Allocation of Participants' Contributions. A
Participant may elect to contribute under the Plan on each
pay date any whole number percentage but not more than 15%
of his Compensation, subject to the limitations of Section
415 of the Internal Revenue Code of 1986, as amended (after
the application of Section 3.1 of this Plan). Participant
Contributions may be After-Tax Contributions or Tax-Deferred
Contributions. However, in no event may the Tax-Deferred
Contribution for a Participant exceed $8,994 during 1993 or
such amount as increased by the Secretary of the Treasury
for years after 1993. In the event that the percentage of
compensation a Participant elects to contribute and allocate
to Tax-Deferred Contributions would result in exceeding the
dollar limitation in the preceding sentence, any excess over
such limitation shall automatically be reallocated to
After-Tax Contributions unless the Participant elects to
cease contributions for the balance of the calendar year.
The percentage of Compensation that the Participant elects
to contribute under the Plan and the allocation of such
percentage between Tax-Deferred (subject to the dollar
limitation in this paragraph) and After-Tax Contributions
will continue in effect so long as he continues to
participate except that effective on any Entry Date after
he becomes a Participant he may increase or decrease the
percentage of Compensation he will contribute on each pay
date thereafter, change such allocation or he may suspend
making contributions, in each case by signing and filing
with the Administrator, at least 14 days before a pay date,
a form provided by the Administrator for such purpose,
specifying (unless he suspends making contributions) the
percentage of Compensation he elects to contribute under the
Plan for each pay date thereafter and authorizing such
amount to be taken from his Compensation or the new
allocation thereof. Upon filing such form, unless he has
elected to suspend making contributions, the new percentage
of Compensation he has elected to contribute under the Plan
and/or the new allocation shall begin to be taken from his
Compensation on the pay date elected. A Participant who has
suspended making contributions may resume making
contributions effective as of any Entry Date thereafter by
complying with the requirements set forth above for
increasing the percentage of Compensation to be contributed.
(b) Contribution Limitations for Employees Residing in Puerto
Rico. The provisions in Section 2.4(a) notwithstanding, if
a Participant resides in Puerto Rico, the Participant's
Tax-Deferred Contributions in any calendar year may not
exceed 10% of compensation and shall be subject to any other
limitations established by applicable laws of the
Commonwealth of Puerto Rico.
(c) Actual Deferral Percentage Limitation. The rules in
subsection 2.4(a) notwithstanding, the following rules and
limitation shall apply to a Participant's Tax Deferred
Contributions. In the event that the Administrator shall
at any time determine that the spread between the percentage
of compensation contributed to the Plan as Tax-Deferred
Contributions for (i) "highly compensated employees" (within
the meaning of Section 414(q) of the Code and the
regulations thereunder) of the participating Employers, and
(ii) all other eligible Employees will not meet either of
the following tests:
(i) the actual deferral percentage for the group of
"highly compensated employees" is not more than the
actual deferral percentage for all other eligible
employees multiplied by 1.25; or
(ii) the excess of the actual deferral percentage for the
group of "highly compensated employees" over that of
all other eligible Employees is not more than 2
percentage points, and the actual deferral percentage
for the group of "highly compensated employees" is
not more than the actual deferral percentage of all
other eligible Employees multiplied by 2.0,
the Administrator, in his sole discretion, may unilaterally
reduce, on a prospective basis, the maximum percentage of
compensation which such "highly compensated employees"
elected to be Tax-Deferred Contributions under the Plan.
Upon written notice from the Administrator to an affected
Participant, the Participant's election of Tax-Deferred
Contributions shall be automatically adjusted as of the date
specified by such notice, without any further action on the
part of such Participant or his Employer, to conform to the
new limitation imposed by the Administrator and unless such
Participant otherwise instructs the Administrator in a
written notice, his election of After-Tax Contributions (if
any) also shall be automatically adjusted so as to increase
the percentage of his compensation which shall be
contributed pursuant thereto by the amount of such automatic
adjustment to the Participant's Tax-Deferred Contributions.
The Administrator, in his sole discretion, may at any time
remove any limitation imposed by him under this Subsection
2.4(c) and, upon written notice from the Administrator to
the affected Participants, any modifications to the
Participant's Tax-Deferred Contributions and Participant's
After-Tax Contributions resulting from such limitation shall
automatically cease to be effective and such elections shall
continue in effect under the terms that existed immediately
prior to such modifications.
If after the close of the Plan Year, the Administrator shall
determine that the spread, as determined by the tests above,
between the percentage of compensation contributed to the
Plan by means of Tax-Deferred Contributions for (i) "highly
compensated employees" of the Participating Employers, and
(ii) the remaining Employees required to be considered under
Section 401(k) of the Code and the regulations thereunder,
for the Plan Year then ended is such that the Tax-Deferred
Contributions would fail to qualify as a "qualified cash or
deferred arrangement" under Section 401(k) of the Code for
such Plan Year, then, to the extent necessary to so qualify
and as permitted by the Internal Revenue Service, a portion
of the Tax-Deferred Contributions for such Plan Year of some
or all of the "highly compensated employees" automatically
shall be converted into After-Tax Contributions or paid to
the Participants. Such conversion will be made by
converting the Tax-Deferred Contributions, to the extent
permitted, of the highly compensated employee with the
highest deferral percentage to After-Tax Contributions to
the extent necessary to meet the applicable test, or to the
extent necessary to equal the deferral percentage of the
next highest deferral percentage of a highly compensated
employee. This process will be repeated until the
applicable test is satisfied. Affected participants will
be notified of conversion within 2-1/2 months after the end
of the applicable year. If payment is required, such
payment shall include a pro rata share of investment
earnings credited to the participant's accounts for the
affected period as determined in accordance with Internal
Revenue Service regulations and shall be paid to the
Participants not later than 2-1/2 months after the end of
the applicable calendar year. The Tax-Deferred and
After-Tax Contributions Accounts of any affected Participant
shall be adjusted accordingly, and the Administrator shall
take, and instruct the appropriate Employers to take, such
other action as shall be necessary or appropriate to
effectuate such conversion or payment. The Administrator
shall notify the affected Participants of the conversion or
payment within 2-1/2 months after the end of the applicable
calendar year.
For purposes of this Section 2.4(c) and Sections 2.4(d) and
2.4(e), the term "compensation" shall mean all compensation
payable by an Employer that is reportable as includable
gross income of an Employee for the applicable year, plus
any amounts not so included for such year that represent
Tax-Deferred Contributions under Section 2.4(a) or
tax-exempt contributions by an Employee that are permissible
under Section 125 of the Internal Revenue Code.
For purposes of this Section 2.4(c) and Sections 2.4(d) and
2.4(e), the Administrator may elect, for the purpose of
determining who are "highly compensated employees", that
(pursuant to the applicable regulations under Section 414(q)
of the Code) the look-back year calculation for a
determination year shall be on the basis of the calendar
year ending with the applicable determination year. If the
Administrator makes the foregoing election, then such
election will also apply to any plan of the Employer or an
Affiliated Corporation which is not an Employer which
qualifies under Section 401(a) of the Code.
(d) Actual Contribution Percentage Limitation. The rules in
Subsection 2.4(a), 2.4.(b) or 2.4(c) notwithstanding, the
following rules and limitations shall apply to a
Participant's After-Tax Contributions. In the event that
the Administrator shall at any time determine that the
spread between the sum of the percentage of compensation
contributed to the Plan as After-Tax Contributions and the
Company Contributions for (i) "highly compensated employees"
(within the meaning of Section 414(q) of the Code and the
regulations thereunder) of the participating Employers, and
(ii) all other eligible Employees will not meet either of
the following tests:
(i) the average of the sum of the percentage of
compensation contributed as After-Tax Contributions
plus Company Contributions calculated separately for
each member of the group of "highly compensated
employees" is not more than the average of such
percentages for all other eligible employees
multiplied by 1.25;
(ii) the excess of the average of the sum of such
percentages for the group of "highly compensated
employees" over that of all other eligible Employees
is not more than 2 percentage points, and the average
of the sum of such percentages for the group of
"highly compensated employees" is not more that the
sum of the average of such percentages of all other
eligible employees multiplied by 2.0,
the Administrator, in his sole discretion, may unilaterally
reduce the maximum percentage of compensation which such
"highly compensated employees" elected to be After-Tax
Contributions under the Plan. Upon written notice from the
Administrator to an affected Participant, the Participant's
election of After-Tax Contributions shall be automatically
adjusted as of the date specified by such notice, without
any further action on the part of such Participant or his
Employer, to conform to the new limitation imposed by the
Administrator, and the Participant's direct compensation
shall be increased by the amount of such adjustment. The
Administrator, in his sole discretion, may at any time
remove any limitation imposed by him under this Subsection
2.4(d) and, upon written notice from the Administrator to
the affected Participants, any modifications to the
Participant's After-Tax Contribution resulting from such
limitation shall automatically cease to be effective and
such elections shall continue in effect under the terms that
existed immediately prior to such modifications.
If after the close of the Plan Year, the Administrator shall
determine that the spread, as determined by the test above,
between the average of the sum of the percentages of
After-Tax and Company Contributions for (i) the group of
"highly compensated employees" of the Participating
Employers, and (ii) the remaining eligible Employees for the
Plan Year then ended is such that the After-Tax and Company
Contributions would fail to qualify under Section 401(m) of
the Code for such Plan Year, then, to the extent necessary
to so qualify, a portion of the After-Tax Contributions for
such Plan Year of some or all of the "highly compensated
employees" shall be reduced by payment of the excess portion
of such contributions, together with a pro rata share of
investment earnings for the applicable year as determined
in accordance with Internal Revenue Service regulations, to
the affected Participants within 2-1/2 months of the end of
such Plan year.
(e) Aggregate Contribution Limitation. Each year after the
determination of the limits and adjustments, if any, to the
contributions of highly compensated employees as required
by Subsections (c) or (d) of this Section 2.4, the rules of
those subsections notwithstanding, the Administrator shall
make further adjustments to the Tax-Deferred Contributions
or After-Tax Contributions of highly compensated employees
if the aggregate contribution limit is exceeded. The
aggregate contribution limit is the sum of (i) and (ii)
where
(i) is 125 percent of the greater of the actual deferral
percentage, as determined under Section 2.4(c), of
non-highly compensated employees eligible to
participate in the Plan or the actual contribution
percentage, as determined under Section 2.4(d) for
such employees, and
(ii) is two percentage points plus the lesser of the actual
deferral percentage or the actual contribution
percentage of the non-highly compensated employees
eligible to participate in the Plan,but not more than
200 percent of the lesser of such percentages.
If an adjustment is required because the aggregate
contribution limit is exceeded, the Administrator shall
reduce the After-Tax Contributions of the highly compensated
employees who are Participants to the extent necessary to
meet the aggregate contribution limit. Such reduction will
be determined using the method described in Section 2.4(c)
for conversions of Tax-Deferred Contributions to After-Tax
Contributions. The amount of any necessary reductions will
be paid, together with the pro rata share of investment
earnings credited to such accounts, to the affected highly
compensated Participants within 2-1/2 months after the end
of the applicable year.
(f) Contribution Limitations. Anything in this Section 2.4 to
the contrary notwithstanding, in no event shall
contributions to this Plan exceed the maximum contributions
permitted under Sections 401(k) and 401(m) of the Internal
Revenue Code of 1986.
2.5 Payment of Participants' Contributions to Trustees. As promptly
as practicable after each pay date, the Employers will transmit
the Participant's contributions to the Trustees to be held in the
Trust Fund for the benefit of the respective Participants. The
amount of each Participant's contributions will be credited to
his Participant After-Tax Contributions Account or Tax-Deferred
Contributions Account as elected in accordance with Section 2.4
and invested in accordance with Article IV of the Plan.
2.6 Rollover Contributions and Account. Subject to the approval of
the Administrator, an Employee (even if not a Participant) may
transfer to the Trust Fund the cash amounts and/or property
accumulated for the Employee under any other qualified corporate
retirement or profit sharing plan or plans, either directly or
through a rollover IRA.
However, the Employee must certify to the Administrator that the
cash amounts and/or property being transferred qualifies as a
"rollover contribution" under application law and regulations.
Such rollover contribution, upon receipt by the Trustee, shall
be converted into cash and deposited in the Employee's Rollover
Account and shall become subject to all of the terms and
conditions of this Plan and the Trust Agreement after it is
transferred. The Employee shall be 100% vested at all times in
his Rollover Account. No transfer subject to Code Section
401(a)(11) will be permitted.
ARTICLE III
Company Contributions
3.1 Amount of Company Contributions. The Employers will contribute
under the Plan on each pay date, out of the current or
accumulated earnings or profits of the Employers, an amount that
shall match the first 6% of Compensation contributed on that pay
date by Participants in accordance with the following schedule:
Amount to be Contributed By
Employers as a Percentage
Fund to Which Participant Has of First 6%of Compensation
Allocated His Contribution Contributed By Participants
Continental Stock Fund 110%
All Other Funds 100%
Company Contributions shall be allocated among the investment
funds in the same proportions as elected by the Participant for
his Contributions.
In addition, the Company Contributions during a Plan Year on
behalf of any Participant shall not exceed the limitations of
Section 415 of the Internal Revenue Code of 1986, as amended.
The provisions of Code Section 415 and the Treasury Department
Regulations promulgated thereunder, shall be incorporated by
reference into the Plan, provided, however, that in the case of
any Participant as to whom the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any year
exceeds 1.0 (prior to the application of this paragraph and
Section 2.4(a)), the projected annual retirement benefit payable
under The Retirement Plan of The Continental Corporation shall
be reduced to the extent required to make such sum 1.0.
The Employers will also contribute, out of the current or
accumulated earnings or profits of the Employers, any amounts
restored for a former Participant pursuant to Section 5.8
hereof. During each year for which an Employer joins in the
filing of a consolidated Federal income tax return, those
Employers joining in such filing will pay the portion of the
Company Contributions made during such year with respect to
Participants who are in the employ of such Employers in such
proportions as may be designated by the Company, provided that,
if the Company has joined in such filing, all such Company
Contributions will be paid by the Company. During each year for
which an Employer does not join in filing a consolidated Federal
income tax return, such Employer will pay the portion of the
Company Contributions made during such year with respect to
Participants who are in the employ of such Employer, but, if
such Employer is prevented from making a contribution which it
would otherwise have made under the Plan, by reason of having
no current or accumulated earnings or profits or because such
earnings or profits are less than the contribution which it
would otherwise have made, then so much of the contribution
which such Employer was so prevented from making may be made,
for the benefit of the employees of such Employer, by any other
Employer or Employers to the extent and in the manner permitted
by Section 404(a)(3)(B) of the Internal Revenue Code as then in
effect or any successor provision of the Federal income tax
laws.
3.2 In the event that Company Contributions made to the Plan can not
be allocated to the accounts of Participants as a result of the
operation of the limitations in Sections 2.4(c), (d) or (e) or
3.1, such Company Contributions will be allocated to a suspense
account and shall be used to reduce future Company Contributions
required under this Plan.
3.3 Payment of Company Contributions to Trustees. Except in the
case of Company Contributions made in Continental Common Stock
to the Continental Stock Fund, which shall be made as promptly
as practicable after each Stock Purchase Date, as defined in
Section 4.2(d), as promptly as practicable after each pay date,
when the Employers transmit the contributions taken from the
Participant's Compensation to the Trustees, the Employers will
also transmit Company Contributions to the Trustees to be held
in the Trust Fund for the benefit of the Participants. When
each Participant's contributions are credited to his Participant
Contribution Accounts, as provided in Section 2.5 hereof, there
will also be credited to the Company Contributions Account
maintained for such Participant the Company Contribution with
respect to such Participant, which shall be invested in
accordance with Article IV of the Plan.
ARTICLE IV
Trust Fund
4.1 Trustees. All Participant's contribution and Company
Contributions shall be paid into, and all distributions herein
provided for shall be paid from, a Trust Fund maintained by
agreement between the Company, on behalf of the Employers, and
Trustees designated by the Compensation Committee. No part of
the Trust Fund may be used for or diverted to purposes other
than for the exclusive benefit of Participants. The Trust
Agreement shall be in such form and contain such provisions as
the Compensation Committee may deem appropriate, including, but
not limited to, provisions with respect to the powers and
authority of the Trust Agreement, the authority of the Board of
Directors or Compensation Committee to amend the Trust
Agreement, the authority of the Board of Directors or
Compensation Committee to settle the accounts of the Trustees
on behalf of all persons having an interest in the Trust Fund,
and the authority of the Compensation Committee to remove a
Trustee and appoint a successor Trustee. When entered into, the
Trust Agreement shall form a part of the Plan and all rights and
benefits that may accrue to any person under the Plan shall be
subject to all the terms and provisions of the Trust Agreement.
The Trustees shall choose brokers to effectuate transactions for
all investment funds.
4.2 (a) Investment of Trust Fund. Except as set forth in Article
VIII, the Trustees at the direction of the Incentive
Savings Plan Committee shall invest and reinvest the Trust
Fund and the income therefrom in either the
Vanguard/Wellington Fund described in Section 4.2(b), the
Interest Savings Fund described in Section 4.2(c), the
Continental Stock Fund described in Section 4.2(d), the
Vanguard U.S. Growth Portfolio described in Section 4.2(e),
or the Vanguard Index Trust - 500 Portfolio described in
Section 4.2(f) maintained in the Trust Fund for this
purpose. Each Participant shall designate, by filing a
notice with the Administrator in the manner prescribed by
the Administrator, the percentage of such Participant
Contributions and Company Contributions made in his behalf
to be invested in each of the investment funds in
multiples of 1% of such contributions. A Participant may
change his election of investment funds for future
Participant and Company Contributions made on his behalf
daily by filing a notice with the Administrator in the
manner prescribed by the Administrator for such purpose.
The election by a Participant of allocations between
investment funds shall be applicable to all contributions
then being made in his behalf.
A Participant may direct the transfer of the total value
of his Accounts from one or more of the investment funds,
as set forth in this Section 4.2, to any other investment
funds as set forth therein. Except for transfers out of
the Continental Stock Fund, a Participant may make such an
election under this Section 4.2(a) daily by filing a
notice with the Administrator in the manner prescribed by
the Administrator. A Participant may make such an election
under this Section 4.2(a) with regard to transfers out of
the Continental Stock Fund by filing a notice with the
Administrator, no more than twice in any calendar quarter,
in the manner prescribed by the Administrator.
(b) Vanguard/Wellington Fund. The Trustees shall invest and
reinvest the Vanguard/Wellington Fund, and the income
therefrom, without distinction between principal and
income, in shares of the Vanguard/Wellington Fund, Inc.,
a diversified investment company which is managed by The
Vanguard Group, Inc. and is a member of The Vanguard Group
of Investment Companies. The Trustees shall maintain such
part of the Vanguard/Wellington Fund in cash uninvested as
they shall deem necessary or desirable. The Trustees shall
be the owner of and have title to all the assets of the
Vanguard/Wellington Fund and shall have full power to
manage the same. Brokerage commissions, transfer taxes,
and other charges and expenses in connection with the
purchase and sale of investments of the Vanguard/Wellington
Fund shall be charged to the Vanguard/Wellington Fund.
(c) Interest Savings Fund. The Trustees at the direction of
the Incentive Savings Plan Committee shall invest and
reinvest the Interest Savings Fund, and the income
therefrom, without distinction between principal and
income, in short-term investments such as credit
investments, commercial paper, certificates of deposit,
bankers' acceptances, U.S. Government or Agency securities,
repurchase agreements and demand notes, all with maturities
of less than one year, and in floating rate notes that
include a provision for resetting the interest rate at
least once each year during the term of the note, or bonds,
notes or other evidence of indebtedness which may be put
back to the issuer within one year of purchase by an
investor. Alternately, the Trustees are authorized to
invest and reinvest the Interest Savings Fund, and the
income therefrom, without distinction between principal and
income, in Guaranteed Interest Contracts ("GIC") and
similar financial instruments guaranteed by an insurance
company, bank or an agency of the U.S. Government.
However, in no event may the Trustees invest the Interest
Savings Fund in any securities or debt instruments of any
kind issued by an Employer or Affiliated Corporation. The
Trustees at the direction of the Incentive Savings Plan
Committee shall maintain such part of the Interest Savings
Fund in cash uninvested as they shall deem necessary or
desirable. The Trustees shall be the owner of and have
title to all the assets of the Interest Savings Fund and
shall have full power to manage the same at the direction
of the Incentive Savings Plan Committee. Brokerage
commissions, transfer taxes, and other charges and expenses
in connection with the purchase and sale of investments of
the Interest Savings Fund shall be charged to the Interest
Savings Fund.
(d) Continental Stock Fund. The Trustee at the direction of
the Incentive Savings Plan Committee shall invest and
reinvest the Continental Stock Fund, and the income
therefrom, in the common stock of The Continental
Corporation. Purchases of common stock of The Continental
Corporation by the Trustee shall be made on any day but,
if purchases cannot be made on such date because the stock
exchanges on which such stock is traded are closed or
because trading in the common stock of The Continental
Corporation has been suspended or halted on such date, the
purchases will be made on the next date on which such
exchanges are open for trading or trading in the Common
Stock of The Continental Corporation is resumed, as the
case may be (the "Stock Purchase Date"). For temporary
periods, until stock purchases are made, the Trustee will
invest cash in short-term investments as permitted for the
Interest Savings Fund and described in Section 4.2(c).
Continental common stock may be purchased from the Company
or from Employers or from other sources, provided that (i)
if the Company issues to its shareholders warrants or
rights for the purchase of Continental common stock or
makes available a dividend reinvestment plan for
shareholders, the Trustee in its discretion may exercise
any warrants or rights the Trustee may hold or subscribe
to such dividend reinvestment plan and (ii) the Company or
any other Employer may, at its election contribute newly
issued or Treasury shares of Continental common stock to
the Trustee in lieu of the equivalent amount of cash, as
provided in Section 3.2. The dollar amount of the Company
Contribution shall be established as soon as practicable
after each payday, however, in the event that the Company
or any other Employer elects to contribute shares of
Continental Common Stock in lieu of cash or if the Trustee
purchases such shares from the Company or any of its
subsidiaries, the purchase price of such shares so
contributed or so purchased shall be the mean of the high
and low prices for sales of common stock of The Continental
Corporation as reported on the composite tape of the New
York Stock Exchange on the next Stock Purchase Date.
Brokerage commissions, transfer taxes, and other charges
and expenses in connection with the purchase and sale of
Continental Common Stock for the Continental Stock Fund
shall be charged to the Continental Stock Fund.
(e) Vanguard U.S. Growth Portfolio. The Trustees shall invest
and reinvest the Vanguard U.S. Growth Portfolio, and the
income therefrom, without distinction between principal and
income, in shares of the Vanguard U.S. Growth Portfolio,
a diversified investment company which is managed by The
Vanguard Group, Inc. and is a member of The Vanguard Group
of Investment Companies. The Trustees shall maintain such
part of the Vanguard U.S. Growth Portfolio in cash
univested as they shall deem necessary or desirable. The
Trustees shall be the owner of and have title to all the
assets of the Vanguard U.S. Growth Portfolio and shall have
full power to manage the same. Brokerage commissions,
transfer taxes, and other charges and expenses in
connection with the purchase and sale of investments of the
Vanguard U.S. Growth Portfolio shall be charged to the
Vanguard U.S. Growth Portfolio.
(f) Vanguard Index Trust - 500 Portfolio. The Trustees shall
invest and reinvest the Vanguard Index Trust - 500
Portfolio, and the income therefrom, without distinction
between principal and income, in shares of the Vanguard
Index Trust - 500 Portfolio, a diversified investment
company which is managed by The Vanguard Group, Inc. and
is a member of The Vanguard Group of Investment Companies.
The Trustees shall maintain such part of the Vanguard Index
Trust -500 Portfolio in cash univested as they shall deem
necessary or desirable. The Trustees shall be the owner
of and have title to all the assets of the Vanguard Index
Trust - 500 Portfolio and shall have full power to manage
the same. Brokerage commissions, transfer taxes, and other
charges and expenses in connection with the purchase and
sale of investments of the Vanguard Index Trust - 500
Portfolio shall be charged to the Vanguard Index Trust -
500 Portfolio.
4.3 Valuation of Investment Shares and Investment Units. The value
of an Investment Share or an Investment Unit shall be determined
on each business day by the Trustees.
4.4 Annual Statement to Participants. As soon as practicable after
the last day of each year the Administrator will furnish by mail
or otherwise to each Participant a statement showing the amount
of his contributions that has been credited to his Participant
After-Tax Contributions Account, his Tax-Deferred Contributions
Account and his Rollover Account, the amount of the Company
Contributions that has been credited to his Company
Contributions Account, and the value of all assets, Investment
Shares and Investment Units credited to his Accounts as of the
last day of such year.
ARTICLE V
Distribution to Participants
5.1 Termination of Employment at or After Age 60 if Employment
Commenced Prior to January 1, 1988, or on Account of Disability
or After 5 Years of Vesting Service. A Participant who
terminates Employment at or after age 60, if employment
commenced prior to January 1, 1988, or who at any age terminates
Employment and is granted long-term disability benefits under
the Company's Long-Term Disability Plan, or who at any age
terminates Employment after 5 Years of Vesting Service, shall,
unless he elects optional deferred distribution in accordance
with Section 5.6, receive a distribution, equal to the value as
of the date the Trustee receives the required documentation of
all assets, Investment Shares and Investment Units then credited
to his Accounts. Notwithstanding the foregoing, a Participant
who is granted long-term disability benefits under the Company's
Long-Term Disability Plan may make an irrevocable election in
writing on or before the date his long-term disability benefits
commence to defer the distribution from his accounts until the
last day of the twelfth month after his long-term disability
benefits commence. The distribution to which the Participant
shall be entitled if he elects such deferral shall be equal to
the value of all assets, Investment Shares and Investment Units
credited to his Accounts as of the deferred distribution date.
5.2 Death of Participant. A Participant may file with the
Administrator a designation of beneficiary, on a form provided
by the Administrator, and at any time may change or revoke the
same by filing with the Administrator a form provided by the
Administrator for such purposes. However, if the Participant
is married and the designated beneficiary is other than the
Participant's spouse, then the foregoing form must be
accompanied by the written consent of such spouse to the
designation of the beneficiary. The consent of the spouse must
acknowledge the effect of the designation and must either be
notarized or witnessed by a plan representative. If a
Participant does not file a designation of beneficiary, or there
is no designated beneficiary living at the Participant's death,
then the Participant's spouse, or if none, the executor of the
Participant's will or the administrator of his estate shall be
deemed to be his beneficiary for the purposes of the Plan. Upon
the death of a Participant, his beneficiary shall receive a
distribution equal to the value, as of the date the Trustee
receives the required documentation, of all assets, Investment
Shares and Investment Units then credited to the Participant's
Account.
5.3 Termination of Participant's Employment for Other Reasons.
Except as provided in Section 8.4 in case of a Change in
Control, a Participant who has not yet been credited with 5
years of Vesting Service and who, if his Employment commenced
prior to January 1, 1988, before age 60 terminates Employment
(other than on account of a disability for which he is granted
long-term disability benefits under the Company's Long Term
Disability Plan) shall, unless he elects optional deferred
distribution in accordance with Section 5.6, receive a
distribution equal to the value, as of the date the Trustee
receives the required documentation, of all assets,, Investment
Shares and Investment Units then credited to his Participant
Contribution Accounts and his Rollover Accounts, in which the
Participant is always 100% vested, and of the percentage of the
assets, Investment Shares and Investment Units then credited to
his Company Contributions Account in which he is then vested
according to the following table:
Number of Full Years Percentage of Company
of Vesting Service Contributions Account
At Termination of Employment Vested in Participant
Less than 1 0
1 20
2 40
3 60
4 80
5 or more 100
In addition, a Participant shall be 100% vested in all his
Accounts upon attaining his Normal Retirement Age which shall
be the later of (a) the date the Participant attains age 65, or
(b) the fifth anniversary of the time the Participant commences
participation in the Plan.
5.4 Forfeiture. When a Participant terminates Employment pursuant
to Section 5.3 hereof and receives a distribution under Section
5.5 hereof, the value of any assets, Investment Shares and
Investment Units credited to his Company Contributions Account
in which he is not vested pursuant to Section 5.3 hereof, shall
be forfeited as of the date his Employment terminates, and shall
be left in the Trust Fund. However, if a Participant terminates
Employment pursuant to Section 5.3 hereof and defers
distribution, then the value of any assets, Investment Shares
and Investment Units credited to his Company Contributions
Account in which he is not vested pursuant to Section 5.3 hereof
shall be forfeited as of the date in which the earlier of the
following events occurs (i) his receipt of a distribution under
Section 5.5 hereof, or (ii) his completion of a five year Break
in Service as defined in Section 1.5 hereof. Forfeitures for
any calendar year shall not increase the benefits any
Participant would otherwise receive under the Plan but shall be
applied to reduce the Company Contributions under the Plan for
that calendar year or to pay the expenses of the Plan as set
forth in Section 7.5 of the Plan.
5.5 Distributions. Subject to Sections 5.6 and 5.7 hereof, a
distribution to a Participant or his beneficiary shall be made
in a single payment as soon as practicable after the earlier of
the death of the Participant, the termination of the
Participant's Employment, or no later than the April 1 next
following the December 31 of the year in which the Participant
attains age 70-1/2, and may be made in cash or in kind or partly
in each, as the Administrator in his sole discretion shall
determine. If a Participant continues to make contributions to
this Plan after the calendar year in which the Participant
attains age 70-1/2, the vested balance in the Participant's
accounts at the end of each calendar year shall be paid in a
single payment as described in the preceding sentence. Benefits
under the Plan will begin, unless the Participant otherwise
elects in writing, no later than the 60th day after the latest
of the Plan year in which (a) the Participant either reaches age
65 or the Plan's Normal Retirement Age, whichever comes first,
(b) occurs the fifth anniversary of the year in which the
Participant began participation under the Plan, or (c) the
Participant terminates Service with the Employer.
5.6 Optional Deferred Distribution. If the value of his Accounts
is more than $3,500 on the applicable valuation date, a
Participant may elect by written notice given in advance of his
termination of Employment to defer a distribution until the
last day of the twelfth month after his Employment terminates
if he terminates prior to age 69-1/2 or, until his 65th birthday
if he terminated prior to age 65. If a Participant electing a
deferred distribution has an outstanding loan under Section 6.6
at the date of deferral, such loan must be repaid by the
Participant through a direct payment to the Plan or a reduction
of his remaining account balances before such deferral may
become effective. Notwithstanding the foregoing, any
Participant who (i) is a Retained Employee (as that term is
defined in Section 5.1(a) of the Stock Purchase Agreement among
The Continental Corporation, The Continental Insurance Company,
Continental Reinsurance Corporation and Mellon Bank Corporation,
dated as of June 30, 1993), (ii) has an outstanding loan under
Section 6.6 and (iii) elects to defer his distribution for a
twelve-month period shall be permitted to continue to repay the
outstanding loan as provided for in Section 6.6. If a
Participant makes an election after December 31, 1988 to defer
a distribution in accordance with this Section 5.6, the vested
value of the Participant's Accounts as determined in Sections
5.1 or 5.3 shall be transferred to the Interest Savings Fund.
The distribution to which the Participant shall be entitled
shall be equal to the value of the Investment Units credited to
such Participant's Accounts as of the last day of the twelfth
month after the Participant's Employment terminates or the date
of his 65th birthday, whichever is applicable. This election
shall be irrevocable and shall constitute a waiver of the
provisions of Article VI of the Plan, but it shall be
inoperative if before his Employment terminates the Participant
dies or becomes disabled. In the event a Participant returns
to Employment prior to the end of his deferral period and again
makes Participant Contributions, the deferral election shall be
cancelled as of the Entry Date on which such Participant
Contributions commence.
5.7 Distribution of Employer Securities. Any Participant or his
beneficiary entitled to a distribution under this Article V of
the Plan from the Continental Stock Fund may elect, by written
request received by the Administrator not later than the
valuation date for such distribution, to receive payment in
common stock of The Continental Corporation held by the Trust
Fund or cash. Any common stock of The Continental Corporation
distributed subject to such election shall be in whole shares
only with the value of fractional share paid in cash.
5.8 Restoration of Forfeited Amounts. If a Participant forfeits any
of his Company Contributions Account pursuant to Section 5.3
hereof and reenters Employment before he has a Break in Service
of at least 60 consecutive months, the dollar amount which he
forfeited shall be restored as of the first Entry Date
coinciding with or next following the date he reenters
Employment in a separate account established for such
Participant as a part of his Company Contributions Account.
Section 5.3 notwithstanding, the Participant shall be vested at
any time thereafter in that amount of such separate account
equal to:
P(AB + (R x D)) - (R x D),
where P is the Participant's vested percentage determined under
Section 5.3 hereof at such time; AB is the balance in the
separate account at such time; D is the amount of the prior
distribution from his Company Contributions Account; and R is
the ratio of the balance in the separate account at such time
to the Participant's balance in his Company Contributions
Account immediately after the prior distribution (but prior to
any forfeiture).
5.9 Payment of Distribution. Any distribution to be made pursuant
to this Article V shall be made as soon as reasonably
practicable after the valuation of the Participant's Accounts
necessary for determining the amount of such distribution has
been completed.
ARTICLE VI
Withdrawals and Loans
6.1 Limitation on Withdrawals. A Participant who makes a withdrawal
from the Plan pursuant to Section 6.2 hereof may not make
another withdrawal pursuant to such section while he remains in
Employment until 12 months after the date following such earlier
withdrawal. He is not, however, precluded from making a
hardship withdrawal pursuant to the provisions of Section 6.4
hereof or receiving a loan pursuant to the provisions of Section
6.6 hereof.
6.2 Amount of Withdrawal. By giving notice in writing to the
Administrator, any Participant may make a withdrawal from his
Accounts while he remains in Employment, subject to Section 6.1
hereof. Such withdrawal may be a specific dollar amount but not
less than $1,000, or the amount of his After-Tax Contributions,
or the value, as of the date such notice is received by the
Trustee, of all assets and Investment Units then credited to
Accounts to the extent vested and available as described in
Section 6.3. If the Participant wishes to withdraw less than
$1,000 he must withdraw the full amount of his Vested accounts
then available unless the withdrawal is limited to his After-Tax
Contributions.
6.3 Order of Withdrawal From Accounts. Any withdrawal requested by
a Participant shall be withdrawn from his Accounts in the
following order until the amount of such withdrawal is obtained.
Withdrawals shall first be made from a Participant's After-Tax
Contributions Account, then if necessary from his Company
Contributions Account (but not to exceed his then Vested
interest therein), then from his Tax-Deferred Contributions
Account and last from his Rollover Account provided that no
withdrawal may be made under this Section from his Tax-Deferred
Contributions Account or amounts in his Rollover Account unless
the Participant has attained age 59-1/2 at the date of such
withdrawal.
6.4 Hardship Withdrawal.
(a) In case of a Participant's illness, unusual need,
emergency, or for the purpose of acquiring or preserving
a home, or of providing for the education of the
Participant or his dependents, the Administrator, in his
sole discretion but in accordance with uniform policies
established by the Administrator providing for treatment
of Participants in similar circumstances in a similar
fashion, may permit such Participant to make a hardship
withdrawal from his After-Tax, or Vested Company
Contributions Accounts (in that order) while he remains in
Employment, upon such Participant's application therefor
and if such Participant, at the time such application is
made, has applied for all withdrawals under Section 6.2
which he is eligible to make at such time. Such hardship
withdrawal shall be in cash and shall equal an amount, as
determined by the Administrator, not exceeding the value,
as of the date the withdrawal becomes effective, of the
assets, Investment Shares and Investment Units then
credited to such Participant's Accounts to which the
Participant would be entitled pursuant to Sections 5.1 or
5.3 hereof if such Participant terminated Employment (other
than on account of a disability for which he is granted
disability benefits under the Company's Long-Term
Disability Plan) on the date the withdrawal becomes
effective. The amount to be withdrawn shall first be
withdrawn from his Participant After-Tax Contributions
Account and to the extent the amount to be withdrawn would
exceed the values of both such accounts combined, the
excess shall be withdrawn from his Company Contributions
Account.
(b) An additional hardship withdrawal from a Participant's
Tax-Deferred Contributions Account or Rollover Account may
be approved by the Administrator, if such withdrawal is
necessary to satisfy an immediate and heavy financial need
of the Participant, and the amount of the additional
hardship withdrawal does not exceed the amount necessary
to satisfy such need. Whether an immediate and heavy
financial need exists shall be determined based on the
relevant facts and circumstances. An immediate and heavy
financial need will be considered to exist for purposes of
this section of the Plan if a withdrawal is requested on
account of:
(i) medical expenses incurred by the Participant, the
Participant's spouse, or any other dependents of the
Participant;
(ii) purchase (excluding mortgage payments) of a principal
residence for the Participant;
(iii) payment of tuition for the next semester or
quarter of post-secondary education for the
Participant, his or her spouse, children, or
other dependents;
(iv) the need to prevent the eviction of the Participant
from his principal residence or foreclosure on the
mortgage of the Participant's principal residence; or
(v) other financial need considered to be immediate and
heavy by the Administrator,
and the Participant has represented, on a form provided by
the Administrator, that the financial need can not
reasonably be met from other financial resources available
to him, including loans under Section 6.6. However, to the
extent that a hardship withdrawal is made from a
Participant's Tax-Deferred Contributions Account, or
Rollover Account, on or after January 1, 1989 and prior to
the Participant attaining age 59-1/2, such withdrawal may
be made only to the extent of the Participant's
contributions to such Accounts, and may not include
investment earnings credited to such Accounts on or after
January 1, 1989.
6.5 Withdrawal of Less Than Full Account Value. In the event that
any withdrawal is for less than the full value of an Account and
such Account includes assets, Investment Shares or Investment
Units in any of the investment funds such withdrawal shall be
made, to the extent possible, proportionately from each
investment fund under rules established by the Administrator for
such purpose.
6.6 Loans. In accordance with uniform policies established by the
Administrator providing for treatment of Participants in similar
circumstances in a similar fashion, the Administrator may, for
any reasonable purpose he approves, lend to a Participant from
the Trust Fund upon such Participant's application therefor, an
amount not exceeding the value, on the day the loan is made, of
the assets, Investment Shares and Investment Units then credited
to his Accounts, subject to the following maximum. The
Participant may borrow up to 50% of the (i) value of his
Participant Contributions Accounts plus his Rollover Account and
(ii) vested value of his Company Contributions Account.
However, in no event may the outstanding balance of all loans
to any Participant exceed $50,000. The $50,000 maximum shall
be reduced by the excess (if any) of the highest outstanding
loan balance from the Plan to such Participant during the
preceding twelve-month period over the outstanding balance of
loans from the Plan on the date the loan is made. Such loan
shall bear interest at such reasonable rates as the
Administrator may from time to time establish, shall be
adequately secured, and shall be repaid over a period not to
exceed five years, or fifteen years in the case of a loan used
to acquire any dwelling unit which within a reasonable time is
to be used (determined at the time the loan is made) as the
principal residence of the Participant, in level payments made
at least quarterly. If at the date of a distribution or
withdrawal of his account balances a Participant has an
outstanding loan balance, such loan balance shall reduce his
account balances available for distribution or withdrawal. If
at the date of termination of employment a Participant has an
outstanding loan balance and elects deferred distribution under
Section 5.6 of the Plan, then any loan balance shall reduce his
account balances being deferred unless he has repaid such loan
by direct payment to the Plan. Notwithstanding the foregoing,
any Participant who (i) is a Retained Employee (as that term is
defined in Section 5.6) and (ii) has an outstanding loan balance
as of the date he makes an election to defer his distribution
for twelve months as provided for in Section 5.6, may continue
to repay his outstanding loan balance by direct payment to the
Plan on the same terms and at the same rate he was repaying such
loan at the date of his deferral election, except that the
payments shall be made on a quarterly basis. Any remaining loan
balance at the end of the twelve-month deferral period shall
reduce his account balances available for distribution. All
loans to a Participant shall be made pro rata from such
Participant's Accounts invested in the investment funds.
6.7 Payment of Withdrawal. Payment of any withdrawal pursuant to
this Article VI shall be made as soon as reasonably practicable
after the valuation of a Participant's Accounts necessary for
determining the amount of such withdrawal has been completed.
6.8 Determination of Vesting After A Withdrawal. Section 5.3
notwithstanding, if a Participant withdraws funds from his
Company Contributions Account before he is 100% vested, then the
Participant shall be vested at any time thereafter in that
amount of his Company Contributions Account equal to:
P(AB + D) - D,
where, for purposes of this Section 6.8, P is the Participant's
vested percentage determined under Section 5.3 hereof at such
time; AB is the balance in his Company Contributions Account at
such time; and D is the amount of the prior withdrawal from his
Company Contributions Account.
ARTICLE VII
Administration of the Plan
7.1 Powers of the Incentive Savings Plan Committee. The Incentive
Savings Plan Committee shall administer the Plan in accordance
with its terms and shall have all powers and authority necessary
or appropriate for carrying out their duties in that respect.
Not in limitation but in amplification of the foregoing, the
Incentive Savings Plan Committee, subject to the provisions of
the Plan, from time to time shall adopt and establish such rules
as they deem necessary or desirable for administering the Plan
and shall establish a procedure for establishing and carrying
out a funding policy and method consistent with the objectives
of the Plan and the requirements of the law, which policy and
method shall be reviewed at least annually. The Incentive
Savings Plan Committee shall have full power and authority to
interpret, construe and administer the Plan, and determine all
questions that may arise hereunder. The Incentive Savings Plan
Committee may correct any error or defect or supply any omission
or reconcile any inconsistency in such manner and to such extent
as they shall deem expedient to carry the Plan into effect, and
they shall be the sole and final judge of such expediency. The
interpretations and constructions of the Incentive Savings Plan
Committee and all other acts and determinations of the Incentive
Savings Plan Committee done or made in good faith, shall be
final, conclusive and binding upon all parties, including each
of the Affiliated Corporations, their employees, and the
beneficiaries of Participants. The Incentive Savings Plan
Committee may appoint in writing such persons, who need not be
members of the Incentive Savings Plan Committee, as they may
deem necessary or desirable for the effective exercise of the
duties and responsibilities of the Incentive Savings Plan
Committee, and may delegate to such persons in writing such
duties and confer upon them in writing such powers,
discretionary or otherwise, as the Incentive Savings Plan
Committee may deemed expedient or appropriate. With respect to
all or any portion of the Plan assets, the Incentive Savings
Plan Committee may appoint an investment manager or managers,
pursuant to Sections 402(c)(3) and 405(c)(1) of ERISA, to
manage, acquire, or dispose of any assets of the Plan. Each
such investment manager shall accept appointment as a fiduciary
of the Plan and shall be either registered as an investment
adviser under the Investment Advisers Act of 1940, a bank as
defined under that Act, or an insurance company qualified under
the laws of more than one state to manage, acquire, or dispose
of Plan assets.
7.2 Procedure of the Trustees. Except where the Trustee is a
corporate Trustee, the following provisions shall govern. Where
a corporate Trustee is appointed, it may act through any one or
more of its duly authorized officers or employees. The Trustees
shall designate one of their number as Chairman, and shall
appoint a Secretary, who may, but need not, be a Trustee. The
Chairman shall preside at all meetings of the Trustees at which
he is present, but in his absence any Trustee may call the
meeting to order and preside. The Secretary shall duly record
or cause to be recorded all acts and determinations of the
Trustees, and all records shall be preserved in his custody or
as the Trustees may direct. Any act or determination that the
Plan authorizes or requires the Trustees to do or make may be
done or made by a majority of the Trustees at the time acting
hereunder, and the act or determination of such majority of the
Trustees expressed at any time and from time to time by a vote
at a meeting or in writing without a meeting shall constitute
the act or determination of the Trustees and shall have the same
effect for all purposes as if assented to by all the Trustees
serving at the time. Any person dealing with the Trustees or
with any agent or representative of the Trustees shall be
entitled to rely upon the certificate of the Chairman or
Secretary as to the fact that any act or determination is the
act or determination of the Trustees. The Trustees shall have
the power to adopt rules for the time and place of their
meetings, the notice to be given of such meetings, and all
similar matters governing the conduct of the Trustees' business.
7.3 Administrator. The Administrator shall have the duties and
responsibilities set forth in this Plan and the duties and
responsibilities imposed by law on the administrator of an
employee benefit plan. In addition, the Administrator shall
perform such other duties and responsibilities as may be
delegated to him in writing by the Incentive Savings Plan
Committee, and shall have such powers as may be conferred on him
in writing by the Incentive Savings Plan Committee. The
Administrator may appoint in writing such persons as he may deem
necessary or desirable for the effective exercise of his duties
and may delegate to such persons in writing such duties and
responsibilities and confer upon them in writing such powers,
discretionary or otherwise, as he may deem expedient or
appropriate.
7.4 Advice. The Trustees, Incentive Savings Plan Committee and the
Administrator (and any person or persons to whom the Trustees,
Incentive Savings Plan Committee or the Administrator have
delegated any duties or responsibilities) may employ one or more
persons to render advice with regard to any of the duties or
responsibilities of the Trustees, Incentive Savings Plan
Committee or the Administrator under the Plan.
7.5 Expenses. The expenses of the Trustees, Incentive Savings Plan
Committee and the Administrator in the administration of the
Plan shall be paid, to the extent possible, from forfeitures in
the Trust Fund. Any such expenses not paid from the Trust Fund
shall be defrayed by the Company.
7.6 Exoneration. The Trustees, Incentive Savings Plan Committee and
the Administrator shall be entitled to rely upon all
certificates and reports made by any independent public
accountant, and upon all opinions of law given by any counsel
(who may be counsel to an Employer) and shall be fully protected
in respect to any act done or permitted or determination made
in good faith in reliance upon any such certificate, report or
opinion. Neither a Trustee, Incentive Savings Plan Committee
nor the Administrator shall be liable to an Employer or to any
employee or to any beneficiary of an employee on account of any
act done or omitted or determination made in the performance of
his duties under the Plan, nor for any act done or omitted by
any agent or representative of the Trustees, Incentive Savings
Plan Committee or the Administrator so long as such Trustee,
Incentive Savings Plan Committee or Administrator has acted with
the care, skill prudence, and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. Neither
shall any Trustee be liable to any person for any act done or
omitted by any other Trustee except to the extent prescribed by
law. The Company agrees to indemnify and hold harmless the
Trustees, Incentive Savings Plan Committee and the Administrator
from and against any liability they may incur in the
administration of the Plan, unless arising from their own
negligence or willful misconduct. The provisions of this
Section 7.6 shall be effective only to the extent permitted by
law.
7.7 Benefit Claims Procedure.
(a) In the event that any person makes a claim for benefits
under this Plan and such claim is denied in whole or part,
the Administrator, within a reasonable time, shall furnish
to such person a written notice of such denial setting
forth the specific reasons for such denial, specific
references to the provisions of the Plan upon which such
denial is based, a description of any additional material
or information necessary for such person to provide
including an explanation why such material or information
is necessary, and an explanation of the review procedure
under this Plan.
(b) Any person whose claim for benefits is denied in whole or
part may, within sixty days after receiving the foregoing
notice, request in writing addressed to the Administrator
a review by the Incentive Savings Plan Committee of the
denial. In addition, any person who makes a claim for
benefits under this Plan and does not receive any decision
on such claim within a reasonable time may request a review
by the Incentive Savings Plan Committee of the claim. Any
person requesting a review under this Subsection 7.7(b)
shall have the opportunity to review pertinent documents
and to submit a written statement to the Incentive Savings
Plan Committee, shall be entitled to request a hearing
before the Incentive Savings Plan Committee, and shall be
entitled to have representation in connection with this
review procedure.
(c) Upon receipt of a request for review under Subsection
7.7(b) hereof, the Incentive Savings Plan Committee, shall
render a decision as promptly as possible and in any event
within sixty days from such receipt, unless special
circumstances, such as the need to hold a hearing, require
an extension of time for processing; in which case a
decision shall be rendered as soon as possible, but not
later than 120 days from such receipt. The decision of the
Incentive
Savings Plan Committee shall be in writing and shall
include the specific grounds for the decision and specific
reference to the provisions of this Plan upon which the
decision is based.
ARTICLE VIII
Voting Rights, Tender Offers and Changes in Control
8.1 In General. All rights with respect to Employer Securities in
the Contiental Stock Fund shall be exercised and all directions
to tender Employer Securities in the Continental Stock Fund
pursuant to a tender offer shall be made in accordance with the
following provisions of this Article VIII.
8.2 Notice by Company to Participants and Participants'
Instructions.
Within one hundred and twenty hours of the commencement of a
tender offer (which shall be deemed to commence at 12:01 A.M.
New York time on the day the tender offer is first published or
distributed to shareholders) and in accordance with the Trust
Agreement, the Company shall provide to each Participant (1) the
written tender offer information provided to the shareholders
of the Company, (2) a statement of the number of full and
fractional shares of Employer Securities which the Participant
may direct the Trustees to tender, and (3) the means established
and paid for by the Company by which the Participant may
expeditiously instruct the Trustees to tender or not to tender
part or all of the number of shares of Employer Securities held
in his account in the Continental Stock Fund. Thereafter,
during the pendency of the tender offer, the Company shall
promptly provide each Participant with any additional written
tender offer information that is provided to shareholders of the
Company; but except for directions as to how to use the forms
provided for giving instructions, the Company shall not provide
to Participants any information or guidance not provided to all
shareholders. The Trustees shall tender or not tender (or
withdraw from tender) shares in accordance with such
instructions. The Trustees shall not tender shares for which
no timely instructions have been received. In any event, they
shall not tender any shares until a time not sooner than three
hours before the last time (the "Expiration Time") shares can
be tendered under the terms of the tender offer as announced
prior to the time of tender, except that in the case of an offer
for less than all of the Company's shares, if the pro-ration
period ends before the Expiration Time, the Trustees will tender
such shares not sooner than three hours before the end of the
pro-ration period. If permitted to do so under the terms of the
tender offer and applicable law, the Trustees will withdraw from
the tender offer any shares tendered pursuant to the offer on
behalf of a Participant if the Participant shall have requested
the withdrawal of such shares. A Participant shall not be
limited as to the number of instructions to tender or withdraw
that he may give to the Trustees. All shares that have been
tendered pursuant to Participant's instructions and have not
been withdrawn prior to the expiration of the tender offer will
be withdrawn from the Continental Stock Fund and will be sold
by the Trustees in accordance with the terms of the tender
offer. All proceeds of such sales, the right to receive such
proceeds, and the reinvestment of such proceeds shall be held
in the Participant's account in the Continental Stock Fund.
Tender offer instructions received from Participants shall be
held in confidence by the Trustees and shall not be divulged to
the Company or to any officer or employee thereof, or to any
other person other than such agents of the Trustees as they may
appoint to perform their duties under this Section. In
implementing the foregoing procedures, the Company will act
fairly, in the best interests of each Participant, and in a
manner which will not impose undue pressure on any Participant
as to what tender offer instructions he or she should give to
the Trustees. Specifically, the Company (a) shall assure that
all written information provided to all other shareholders of
the Company about the terms of the tender offer is provided to
Participants on a timely basis and that clearly false or
misleading information is not provided (or is corrected if it
has been provided to Participants by other parties) and (b)
shall not mislead Participants or exert pressure on Participants
to give particular tender offer instructions. The Company shall
certify to the Trustees in writing upon the Trustees' request
that the Company has complied with the provisions of the
previous sentence.
8.3 General. The Trustees shall have no duty to solicit directions
from Participants except as specified herein and in the Trust
Agreement. The Trustees shall have no liability with respect
to the tender or failure to tender of any shares of Employer
Securities made in accordance with the provisions of this
Article VIII.
Notwithstanding the above, no Participant shall have by reason
of this Article VIII any right, title or interest in Employer
Securities or the Continental Stock Fund. However, a
Participant will have the right to instruct the Trustees with
respect to such Employer Securities in the case of a tender
offer as set forth in Section 8.2 of this Plan.
8.4 Change in Control. After a Change in Control, as defined below,
any Participant who terminates Employment shall receive a
distribution, valued as of the date his Employment terminates,
of all assets, Investment Shares and Investment Units then
credited to his Accounts. For purposes of this section, a
"Change in Control" means the occurrence of any of the following
events: (i) any "person" or "group" of persons (as such terms
are used in sections 13 and 14 of the Securities Exchange Act
of 1934, as amended), other than any employee benefit plan
sponsored by the Company, becomes the "beneficial owner" (as
such term is used in section 13 of such Act) of 30% or more of
the outstanding shares of the Company's capital stock entitled
to vote for the election of directors; or (ii) any shares of any
class of the Company's capital stock are purchased pursuant to
a tender or exchange offer (other than an offer by the Company
or a subsidiary thereof); or (iii) the approval by the requisite
vote of the Company's shareholders of any merger, consolidation,
sale of assets, liquidation or reorganization as a result of
which the Company will not survive as a publicly-owned
corporation; or (iv) a change in the composition of the Board
of Directors during any period of two consecutive years such
that individuals who at the beginning of such period were
members of the Board Directors cease for any reason to
constitute at least a majority thereof, unless the election, or
the nomination for election by the Corporation's shareholders,
of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were
directors at the beginning of the period.
8.5 Voting of Other Shares of Continental Stock Held in Continental
Stock Fund. Any other provisions of this Article VIII
notwithstanding, the Trustees shall provide each Participant who
has shares of Continental Corporation common stock credited to
his Accounts invested in the Continental Stock Fund, with a copy
of the proxy solicitation material for each annual meeting or
special meeting of the shareholders of the Corporation, together
with a request for instructions as to how such shares should be
voted at the meeting. Upon receipt of such instructions, the
Trustees shall vote all such shares as instructed. The Trustees
shall vote such shares for which they have not received
instructions in proportion to those shares for which they
receive instructions.
ARTICLE IX
Amendment, Modification or Termination
9.1 Amendment, Modification or Termination.
(a) The Company, on behalf of the Employers, reserves the
right, by and through the Board of Directors or the
Compensation Committee, at any time to terminate the Plan,
in whole or in part, and at any time and from time to time
to amend or modify the Plan. The Office of the Chairman
(or, in the cases of clauses (i) and (iii) below, the
senior Human Resources officer) may approve in writing any
amendment to the Plan when it finds that such amendment:
(i) is required to conform the Plan to applicable laws or
regulations, (ii) will not increase the annual cost of the
Plan by more than the greater of 5% or $1 million, or (iii)
is intended only to implement transactions approved by the
Board. However, no amendment or modification of the Plan
shall make it possible, at any time prior to the
satisfaction of all liabilities with respect to employees
and their beneficiaries under the Plan, for any part of the
corpus or income of the Trust Fund to be (within the
taxable year or thereafter) used for or diverted to,
purposes other than for the exclusive benefit of employees
or their beneficiaries.
(b) If the Board of Directors or Compensation Committee
terminates the Plan, in whole or in part, then every
affected Participant at the date the termination takes
effect shall receive a distribution of the value as of the
date of distribution of all cash and Investment Units
credited to his accounts as of the date of termination.
Distribution to each affected Participant shall be made in
a single payment as soon after termination as practicable,
and may be made in cash or in kind or partly in cash, as
the Administrator in his sole discretion shall determine.
In the event that the Plan is terminated, or upon complete
discontinuance of Company Contributions under the Plan,
with respect to all or some of the Participants, the rights
of all affected Participants at the date the termination
takes effect or at the date of such complete discontinuance
of Company Contributions, as the case may be, to the
amounts credited to their respective Accounts shall become
nonforfeitable.
9.2 Merger, Consolidation and Transfer of Plan Assets. The Board
of Directors or Compensation Committee may direct the
Administrator to do all things necessary to effect a merger or
consolidation of the Plan with, or the transfer of all or a part
of the assets and liabilities of the Plan to, another plan (or
plans) if and only if
(a) Each trust forming a part of such plan (or plans) is a
qualified trust under Section 401 of the Internal Revenue
Code of 1986 and that each such trust is exempt from
Federal income tax under Section 501 of the Internal
Revenue Code of 1986;
(b) Each Participant in the Plan would (if the Plan then
terminated) received a benefit immediately after the
merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to
receive immediately before the merger, consolidation or
transfer (if the Plan had then terminated); and
(c) The Administrator shall have timely filed, pursuant to
Section 6058 of the Internal Revenue Code of 1954, an
actuarial statement of valuation evidencing compliance with
(b) above.
The Board of Directors, the Compensation Committee, the
Trustees and the Administrator shall be entitled to rely
conclusively on the certificate of any actuary stating that
the condition set forth in (b) above has been met.
ARTICLE X
Miscellaneous
10.1 No Right to Continued Employment. The Plan confers no right on
any employee to continue in employment and confers upon no
person any right, claim or interest to any payment under the
Plan or from the Trust Fund except as expressly provided in the
Plan.
10.2 Prohibition of Assignment of Interest. No interest, right or
claim in or to any part of the Trust Fund or any payment
therefrom shall be assignable, transferable, or subject to sale,
mortgage, pledge, hypothecation, commutation, anticipation,
garnishment, attachment, execution or levy of any kind, and the
Administrator shall not recognize any attempt to assign,
transfer, sell, mortgage, pledge, hypothecate, commute, or
anticipate the same, except to the extent required by law.
10.3 Facility of Payments. In the event that the Administrator shall
find that any person to whom a benefit is payable under the Plan
is unable to care for his affairs because of illness or
accident, or otherwise, the Administrator may direct that any
benefit payments due shall be paid to the duly appointed legal
representative of such person, or if there be no duly appointed
legal representative, to the spouse, a child, a parent or other
blood relative of the person, or to any person deemed by the
Administrator to have incurred expense for the benefit of such
person, and any such payments so made shall be a complete
discharge of the liabilities of the Plan therefor.
10.4 Refund of Company Contributions. Once a contribution is made
to the Plan by an Employer on behalf of its Employees, it is not
refundable to the Employer unless the contribution:
(a) was made by a mistake of fact;
(b) was made conditioned upon a favorable determination by the
Internal Revenue Service and such a determination is not
received; or
(c) was made conditioned upon the contribution being allowed
as a deduction for Federal income tax purposes and such
deduction is disallowed.
Any refund under (a) must be made within one year from the
date the contribution was made to the Plan, and any refund
under (b) and (c) must be made within one year from the
date of failure to receive a favorable determination, or
the date of disallowance of the tax deduction,
respectively.
10.5 Number and Gender. Where from the context it appears
appropriate, each term used in this Plan in either the singular
or the plural shall include the singular and the plural, and
pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
10.6 Captions. Captions and Sections of this Plan are inserted for
convenience of reference only, and the Plan is not to be
construed by interpretation thereof.
10.7 Applicable Law. This Plan shall be interpreted, construed and
administered in accordance with the laws of the State of New
York (to the extent not preempted by ERISA), and with a view
toward compliance with ERISA.
ARTICLE XI
Top-Heavy Plan Provisions
11.1 General Rule. For any Plan Year (calendar year) commencing on
or after January 1, 1984 and in which this Plan is a "Top-Heavy
Plan" as defined in Section 11.7 in accordance with Section 416
of the Code and any applicable regulations thereunder, any other
provisions of this Plan to the contrary notwithstanding, this
Plan shall be subject to the following provisions:
(a) The vesting provisions of Section 11.2.
(b) The minimum contribution provision of Section 11.3.
(c) The limitation on compensation set by Section 11.4.
(d) The limitation on contributions set by Section 11.5.
11.2 Vesting Provisions. Each Participant who (i) has completed an
hour of service during any plan year in which the plan is
top-heavy and (ii) has completed the number of years of vesting
service specified in the following table shall have a
nonforfeitable right to the percentage of the benefit accrued
under this plan (derived from employer contributions)
correspondingly specified in the following table:
Percentage of
Years of Nonforfeitable
Vesting Service Benefit
Less than 1 0
1 20
2 40
3 60
4 80
5 of more 100
(a) Vesting Service" as used in this Section 11.2 shall
constitute Years of Vesting Service as defined in Section
1.23 of this Plan and used to determine the percentage of
nonforfeitable benefits under Section 5.3.
(b) Each Participant's nonforfeitable accrued benefit shall not
be less than his nonforfeitable accrued benefit determined
as of the last day of the last plan year in which the Plan
was a Top-Heavy Plan. If the Plan ceases to be top-heavy,
each Participant with five or more years of service,
whether or not consecutive, shall have his nonforfeitable
accrued benefit determined in accordance with this section
and Section 5.3. Each such Participant shall have the
right to elect the applicable schedule within 60 days after
the day the Participant is issued written notice by the
Administrator, or as otherwise provided in accordance with
regulations issued under the provisions of the Internal
Revenue Code of 1954, as amended, relating to change in the
vesting schedule.
(c) This provision shall apply without regard to contributions
or benefits under Social Security or any other Federal or
State Law.
11.3 Minimum Contribution Provisions. Each Employee eligible to
participate in the Plan who (i) is a Non-Key Employee (as
defined in Section 11.9 below) and (ii) is employed on the last
day of the Plan Year shall be entitled to have Company
contributions (including forfeitures) allocated to his Account
of not less than three percent (the "minimum contribution
percentage") of the Participant's Compensation (within the
meaning of Section 415 of the Code).
The minimum contribution percentage set forth above shall be
reduced for any Plan Year to the percentage at which Company
contributions (including forfeitures) are made (or required to
be made) under the Plan for the Plan Year for the Key Employee
for who such percentage is the highest for such Plan Year. For
this purpose, the percentage with respect to a Key Employee (as
defined in Section 11.8 below) shall be determined by dividing
the contributions (including forfeitures) made for such Key
Employees by so much of his Compensation for the Plan Year as
does not exceed $200,000 (adjusted in the same manner as the
amount set forth in Section 11.4 below).
Contributions taken into account under the immediately
preceeding sentence shall include contributions under this Plan
and under all other defined contribution plans required to be
included in an Aggregation Group (as defined in Section 11.7(c)
below) but shall not include any plan required to be included
in such required Aggregation Group if such plan enables a
defined contribution plan required to be included in such group
to meet the requirements of the Code prohibiting discrimination
as to contributions or benefits in favor of employees who are
officers, shareholders or the highly-compensated or prescribing
the minimum participation standards.
Contributions taken into account under this Section 11.3 shall
not include any contributions under the Social Security Act or
any other federal or state law. Participant Tax-Deferred
Contributions shall be taken into account as Company
contributions for purposes of this paragraph.
11.4 Limitation on Compensation. Compensation taken into account
under this section and under Section 1.9 for purposes of
computing contributions under this Plan shall not exceed the
first $200,000, provided that such limit shall be adjusted
automatically for each Plan Year to the amount prescribed by the
Secretary of the Treasury or his delegate pursuant to
regulations for the calendar year in which such Plan Year
commences.
11.5 Limitation on Contributions. In the event that the Company also
maintains a defined benefit plan the following shall apply:
(a) If for the Plan Year this Plan would not be a "Top-Heavy
Plan" as defined in Section 11.7 below if "90 percent" were
substituted for "60 percent", then Section 11.3 shall apply
for such Plan Year as if amended so that "four percent"
were substituted for "three percent" therein.
(b) If for the Plan Year this Plan would continue to be a
"Top-Heavy Plan" as defined in Section 11.7 below if "90
percent" were substituted for "60 percent", then the
denominator of both the defined contribution plan fraction
and the defined benefit plan fraction shall be calculated
as set forth in Section 3.1 for the Plan Year ending by
substituting 1.0 for 1.25 in each place such figure appears
in Sections 415(e)(2)(B) or 415(e)(3)(B) of the Code.
11.6 Coordination with Other Plans. In the event that a defined
benefit plan maintained by an Employer provides contributions
or benefits on behalf of Participants in this Plan, such other
plan shall be treated as a part of this Plan pursuant to
applicable principles (such as Rev. Rul. 81-202 or any successor
ruling) in determining whether this plan satisfies the
requirements of Section 11.3, thereby providing benefits at
least equal to the defined benefit minimum. Such determination
shall be made upon the advice of counsel by the Plan's
Committee.
11.7 Top-Heavy Definition. This Plan shall be a "Top-Heavy Plan" for
any Plan Year if, as of the Determination Date (as defined in
Section 11.7(a) below), the aggregate value of the Accounts
under the Plan for Participants (including former Participants)
who are Key Employees (as defined in Section 11.8 below) exceeds
60 percent of the aggregate value of the Accounts for all
Participants, or if this Plan is in a Required Aggregation Group
which for such Plan Year is a Top-Heavy Group (as defined in
Section 11.7(d) below). For purposes of making this
determination, the present value of the aggregate of the
accounts for a Participant (i) who is not a key employee but who
was a key employee in a prior year or (ii) for plan years
beginning after 12/31/84, who has not performed any service of
the employer at any time during the 5-year period ending on the
determination date, shall be disregarded. However, the Plan
shall not be considered a "Top-Heavy Plan" for any Plan Year in
which the Plan is a part of a Required or Permissive Aggregation
Group which is not top-heavy.
(a) "Determination Date" means for any Plan Year the last day
of the immediately preceding Plan Year (except that for the
first Plan Year of this Plan the determination date means
the last day of such Plan Year).
(b) The present value shall be determined as of the most recent
valuation date that is within the twelve-month period
ending on the determination date, and as described in the
regulations under the Internal Revenue Code as of 1954, as
amended.
(c) "Aggregation Group" means the group of plans, if any, that
includes both the group of plans that are required to be
aggregated and the group of plans that are permitted to be
aggregated.
(A) The group of plans that are required to be aggregated
(the "required aggregation group") includes:
(i) Each plan (including any terminated plan) of an
Employer (as defined in Section 11.10 below) in
which a Key Employee is a Participant, including
collectively-bargained plans, and
(ii) Each other plan (including any terminated plan),
including collectively-bargained plans of the
Employer which enables a plan in which a Key
Employee is a Participant to meet the
requirements of the Code prohibiting
discrimination as to contributions or benefits
in favor of Employees who are officers,
shareholders or the highly-compensated or
prescribing the minimum participation standards.
(B) The group of plans that are permitted to be
aggregated (the "permissive aggregation group")
includes the required Aggregation Group plus one or
more plans of an Employer that is not part of the
Required Aggregation Group and that the Committee
certifies as constituting a plan within the
permissive aggregate group. Such plan or plans may
be added to the permissive aggregation group only if,
after the addition, the aggregation group as a whole
continues not to discriminate as to contributions or
benefits in favor of officers, shareholders or the
highly-compensated and to meet the minimum
participation standards under the Code.
(d) "Top-Heavy Group" means the Aggregation Group, if as of the
applicable Determination Date, the sum of the present value
of the cumulative accrued benefits for Key Employees under
all defined benefit plans included in the Aggregation Group
plus the aggregate of the accounts of Key Employees under
all defined contribution plans included in the Aggregation
Group exceeds 60% of the sum of the present value of the
cumulative accrued benefits for all employees, excluding
former Key Employees, under all such defined benefit plans,
plus the aggregate accounts for all employees, excluding
former Key Employees, under such defined contribution
plans. If the Aggregation Group that is a Top-Heavy Group
is a required Aggregation Group, each plan in the group
will be top-heavy. If the Aggregation Group that is a
Top-Heavy Group is a permissive aggregation Group, only
those plans that are part of the required Aggregation Group
will be treated as top-heavy. If the Aggregation Group is
not a Top-Heavy Group, no plan within such group will be
top-heavy.
(e) In determining whether this Plan constitutes a "Top-Heavy
Plan", the Committee (or its agent) shall make the
following adjustments in connection therewith:
(A) When more than one plan is aggregated, the Committee
shall determine separately for each plan as of each
plan's determination date the present value of the
accrued benefits or account balance. The results
shall then
be aggregated by adding the results of each plan as
the determination dates for such plans that fall
within the same calendar year.
(B) In determining the present value of the cumulative
accrued benefit or the amount of the account of any
employee, such present value or account shall include
the amount in dollar value of the aggregate
distributions made to such employee under the
applicable plan during the five-year period ending on
the determination date, unless reflected in the value
of the accrued benefit or account balance as of the
most recent valuation date. Such amounts shall
include distributions to employees which represented
the entire amount credited to their accounts under
the applicable plan.
(C) Further, in making such determination, such present
value or such account shall include any rollover
contribution or plan-to-plan transfer, as follows:
(i) If the rollover contribution or plan-to-plan
transfer is initiated by the employee or made to
or from a plan maintained by another Employer,
the plan providing the distribution shall
include such distribution in the present value
or such account; the plan accepting the
distribution shall not include such distribution
in the present value or such account unless the
plan accepted it before January 1, 1984.
(ii) If the rollover contribution or plan-to plan
transfer is not initiated by the employer or
made to or from a plan maintained by another
Employer, the plan accepting the distribution
shall include such distribution in the present
value or such account, whether or not the plan
accepted the distribution before January 1,
1984; the plan making the distribution shall not
include the distribution in the present value or
such account.
(D) Effective January 1, 1985, if any individual has not
received any compensation from any Employer
maintaining the plan (other than benefits under the
plan) at any time during the 5-year period ending on
the Determination Date, any accrued benefit for such
individual (and the account of such individual) shall
not be taken into account.
11.8 Key Employee. The term "Key Employee" means any employee or
former employee under this Plan who, at any time during the Plan
Year containing the Determination Date or during any of the four
preceding Plan Years, is or was one of the following:
(a) An officer of the Employer. However, an officer earning
not more than one and one-half times the then applicable
limit in Section 415(c)(1)(A) of the Code shall not be
considered a Key Employee.
Whether an individual is an officer shall be determined by
the committee on the basis of all the facts and
circumstances, such as an individual's authority, duties
and term of office, not on the mere fact that the
individual has the title of an officer. For any such Plan
Year, there shall be treated as officers no more than the
lesser of:
(A) 50 employees, or
(B) the greater of three employees or 10 percent of the
employees.
For the purpose of the preceding sentence, the
highest-paid officers shall be selected first.
(b) One of the ten employees owning (or considered as owning,
within the meaning of the constructive ownership rules of
the Code) the largest interests in the Employer. An
employee who has some ownership interest is considered to
be one of the top ten owners unless at least ten other
employees own a greater interest than that employee.
However, an employee will not be considered a top ten owner
for a Plan Year if the employee does not earn more than the
applicable limitation in Section 415(c)(1)(A) of the Code.
(c) Any person who owns (or is considered as owning within the
meaning of the constructive ownership rules of the Code)
more than five percent of the outstanding stock of the
Employer or stock possessing more than five percent of the
combined total voting power of all stock of the Employer.
(d) A person satisfying (c) above if "one percent" were
substituted for "five percent" and having an annual
Compensation of more than $150,000.
For purposes of parts (a), (b), (c) and (d) of this Section
11.8, a beneficiary of a Key Employee shall be treated as a
Key Employee. For purposes of Subclauses (b), (c) and (d),
each individual Employer is treated separately in determining
ownership percentages; but, in determining the amount of
compensation, all Employers are taken into account.
11.9 Non-Key Employee. The term "Non-Key Employee" means any
employee (and any beneficiary of an employee) who is not a
Key Employee.
11.10 Employer. The term "Employer" means the definition of
Company in Section 1.6 and any Affiliated Corporation as
defined in Section 1.3.
11.11 Collective Bargaining Rules. The provisions of Section 11.2,
11.3 and 11.4 above do not apply with respect to any employee
included in a unit of employees covered by a collective
bargaining agreement if there is evidence that retirement
benefits were the subject of good faith bargaining, unless
the application of such subsections has been agreed upon with
the collective bargaining agent.
11.12 Distributions to 5% Owners. Any other provision of this Plan
to the contrary notwithstanding, distribution of a Member's
interest in this Plan to each person who is or at any time
has been a 5% owner shall commence no later than April 1 of
the calendar year following the calendar year in which he
attains age 70-1/2.
ARTICLE XII
Employees Subject to Securities Exchange Act
12.1 Limitation on Common Stock Transactions. The Incentive
Savings Plan Committee shall establish in writing such rules
so that any transaction by an Employee who is an officer of
the Company (on an Affiliated Corporation) who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") shall be in compliance with Rule 16b-3
of the Exchange Act with regards to any aspect of
participation in the Plan which involves the investment in
or disposition of shares of stock in the Continental Stock
Fund for the account of such officer.
12.2 Administration. The rules established pursuant to Section
12.1 shall be enforced in a manner determined by the
Incentive Savings Plan Committee.
ARTICLE XIII
DIRECT ROLLOVERS
13.1 Distributee's Election. This Article applies to
distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under
this Article, a distributee may elect, at the time and in the
manner prescribed by the Administrator, to have any portion
of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a
direct rollover.
13.2 Eligible Rollover Distribution. An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to
the extent such distribution is required under section
401(a)(9) of the Code; and the portion of any distribution
that is not includiblein gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to employer securities).
13.3 Eligible Retirement Plan. An eligible retirement plan is an
individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in
section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described
in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
13.4 Distributee. A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the
Code, are distributees with regard to the interest of the spouse
or former spouse.
13.5 Direct Rollover. A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
THE RETIREMENT PLAN OF
THE CONTINENTAL CORPORATION
(Amended and Restated As of January 1, 1994)
(Incorporates Amendments No. 1 Thru 35)
THE CONTINENTAL CORPORATION, a New York Corporation, and certain of
its affiliates have adopted the following Retirement Plan for the
benefit of those of their respective employees eligible to
participate therein as hereinafter provided.
ARTICLE I
Definitions
The following terms when used herein, unless the context clearly
indicates otherwise, shall have the meanings set forth below:
1.1 Active Service. A measure of time, expressed in years, used
in determining the vesting of a Benefit.
(a) With respect to periods prior to January 1, 1976, one
year of Active Service shall be credited for each 12
months of service in the employ of an Employer or an
Affiliated Corporation which is not an Employer. For the
purpose of this subsection (a), service shall include:
(i) any period of absence after at least 24 months of
full-time Employment during which a person receives
long-term disability benefits under the Company's
Long Term Disability Plan;
(ii) any period of absence on leave (in the granting of
which, persons in similar circumstances will be
treated in a uniform and nondiscriminatory manner),
with or without pay, provided the person returns to
full-time Employment at or prior to the termination
of the leave; and
(iii) any period of absence in service of the armed
forces of the United States in time of war or
national emergency provided the person returns
to full-time Employment within 90 days after
termination of his service in such armed
forces, or such longer period as his
employment rights are protected by law.
(b) With respect to periods beginning after December 31,
1975, one year of Active Service shall be credited for
each calendar year during which a person has at least
1000 Hours of Service and during any part of which such
person either is a Member or is at least 22 years of age;
provided, however, that if a person becomes a Member by
completing 1000 Hours of Service during the 12-month
period beginning on the date his Employment first began,
and if such 12-month period overlaps two calendar years
in neither of which such person completed 1000 Hours of
Service, such person shall be credited with one year of
Active Service. Service of individuals who are leased
employees or employed in noncovered employment for the
Employer controlled group and affiliated service group
will be counted for vesting purposes.
(c) With respect to an Employee who is in Employment on or
after January 1, 1985, the minimum age referred to in
Section 1.1(b) above shall be 18 rather than 22.
1.2 Administrator. An individual appointed by the Retirement Plan
Committee to serve in this capacity. The Administrator is not
precluded from serving as a Trustee.
1.3 Affiliated Corporation. A corporation during such time as it
is either:
(a) controlling, controlled by or under common control with
the Company, through ownership, directly or indirectly
through one or more intermediaries, of at least a
majority of the voting stock of the controlled
corporation; or
(b) a member of a controlled group of corporations (within
the meaning of Section 1563(a) of the Internal Revenue
Code, determined without regard to Sections 1563(a)(4)
and 1563(e)(3)(C) thereof) of which any Employer is a
member.
Except as may be provided in Exhibit A hereto, service
for a corporation shall be treated as service for an
Affiliated Corporation only if performed during such time
as such corporation is an Affiliated Corporation.
1.4 Beneficiary. The person designated pursuant to Section 4.2
hereof to receive payments in the event of the death of a
Member.
1.5 Benefit. An amount payable under Article III hereof.
1.6 Board of Directors. The Board of Directors of the Company.
1.7 Company. The Continental Corporation, a New York corporation.
1.8 Credited Service. A measure of time, expressed in months, but
not to exceed 480 months, used to determine the amount of a
person's Benefit.
(a) With respect to periods prior to January 1, 1976, one
month of Credited Service shall be credited for each full
month of service as an Employee for one or more
Employers. For the purpose of this subsection (a),
service shall include:
(i) any period of absence after at least 24 months of
full-time service for an Employer during which the
Employee receives long-term disability benefits
under the Company's Long Term Disability Plan;
(ii) any period of absence on leave (in the granting of
which, persons in similar circumstances will be
treated in a uniform and nondiscriminatory manner),
with or without pay, provided the Employee return
to the full-time service of an Employer at or prior
to the termination of the leave; and
(iii) any period of absence in the service of the
armed forces of the United States in time of
war or national emergency, provided the
Employee returns to the full-time service of
an Employer within 90 days after the
termination of his service in such armed
forces, or such longer period as his
employment rights are protected by law.
(b) With respect to periods after December 31, 1975, months
of Credited Service shall be credited on the basis of the
number of Hours of Service as an Employee for one or more
Employers completed during each calendar year, as
follows:
Hours of Service Months of
In Calendar Year Credited Service
900-1049 6
1050-1199 7
1200-1349 8
1350-1499 9
1500-1649 10
1650-1799 11
1800 or more 12
In the event an Employee completes less than 900 Hours of
Service for one or more Employers in either the calendar year
in which he becomes a Member, or the calendar year in which he
dies while in Employment or retires, such Employee shall be
credited with one month of Credited Service for each 150 Hours
of Service for one or more Employers completed during such
year.
(c) Notwithstanding the foregoing; any Employee (other than
a Reemployed Early Retiree) who is scheduled to work for
the regular workweek of an Employer at the Employee's
location (or who was scheduled to do so at the beginning
of a period of absence described in clauses (a), (b), (c)
of Section 1.15), shall be credited with one month of
Credited Service for each calendar month for which he is
entitled to be credited with at least one Hour of Service
under Section 1.15.
(d) The foregoing shall be construed so as to avoid
duplication of credit for Hours of Service for a single
hour. In no event shall Credited Service be credited
with respect to any person who does not become a Member
until after the Effective Date for any period during
which such person was not a Member.
1.9 Effective Date. January 1, 1972.
1.10 Employee. A person employed by an Employer excluding any
officer or director who is not compensated by regular salary.
1.11 Employer.
(a) The Company and those of its Affiliated Corporations it
designates.
(b) Corporations set forth in Exhibit A hereto.
Except as may be provided in Exhibit A hereto, service
for a corporation shall be treated as service for an
Employer only if performed during such time as such
corporation is an Employer.
1.12 Employment. That period of time during which a person is
credited with Hours of Service.
1.13 Equivalent Actuarial Value. An equivalent value computed
using the applicable factors set forth in Exhibit B, C or D to
this Plan. The implementation of the foregoing Equivalent
Actuarial Value Factors will not reduce the accrued benefit of
any Member as of January 1, 1984.
1.14 ERISA. The Employee Retirement Income Security Act of 1974,
as amended from time to time.
1.15 Hour of Service. An hour for which a person is directly or
indirectly compensated (including back pay irrespective of
mitigation of damages) by an Employer or an Affiliated
Corporation which is not an employer. In addition, eight
Hours of Service shall be credited for each scheduled workday
for which a person is on:
(a) Any period of absence, after at least two years of Active
Service, during which such person receives long-term
disability benefits under the Company's Long-Term
Disability Plan;
(b) Any period of absence on leave without pay (in the
granting of which, persons in similar circumstances will
be treated in a uniform and nondiscriminatory manner),
provided the person returns to Employment at or prior to
the termination of the leave; and
(c) Any period of absence in the service of the armed forces
of the United States in time of war or national
emergency, provided the person returns to Employment
within 90 days after the termination of his service in
such armed forces or within such longer period as his
employment rights are protected by law.
Notwithstanding the foregoing, any Employee (other than
a Reemployed Early Retiree) who is scheduled to work for
the regular workweek of an Employer or an Affiliated
Corporation at the Employee's location (or who was
scheduled to do so at the beginning of a period of
absence described in clauses (a), (b), or (c) of the
preceding sentence), shall be credited with 190 Hours of
Service for each calendar month for which he is entitled
to be credited with at least one Hour of Service under
the preceding sentence. The foregoing shall be construed
so as to avoid duplication of credit for Hours of Service
for a single hour.
Hours of Service shall be computed and credited in
accordance with paragraphs (b) and (c) of section
2530.200b-2 of the Department of Labor regulations.
1.16 Member. An Employee who becomes a Member as provided in
Article II hereof.
1.17 Monthly Compensation. With respect to a Member terminating
his Employment after December 31, 1991, the salary or wages
paid or accrued by an Employer, or Affiliated Corporation
which is not an Employer, to a Member during any month of
Employment (prior to any reduction for tax-deferred
contributions to the Incentive Savings Plan or reduction in
order to reflect tax-exempt contributions or benefit
payments), plus any overtime pay, shift differentials, awards
under the Annual Management Incentive Plan or annual business
unit incentive plans and commissions, but excluding (without
limitation) fees, compensation paid or realized through the
Long Term Incentive Plan, Chairman's or President's award
programs, relocation plans or other special compensation (if
any), amounts paid under the Long Term Disability Plan,
reimbursement for expenses, and amounts paid or accrued with
respect to this Plan or any other Plan of deferred
compensation.
Notwithstanding the foregoing, if a Member is credited with
less than 150 Hours of Service in any full month of Employment
subsequent to December 31, 1975, his salary or wages, as
defined previously in this Section, plus overtime and shift
differentials, paid or accrued during such month, shall be
adjusted upward for purposes of Section 3.1 by multiplying it
by a fraction, the numerator of which shall be 150, and the
denominator of which shall be his Hours of Service for such
month. In no event will the sum of Monthly Compensation over
any consecutive 12 month period taken into account for
purposes of this Plan exceed $200,000 during 1989, or such
higher amount as increased by the Secretary of the Treasury
for years after 1988. In no event will the sum of Monthly
Compensation over any consecutive 12 month period taken into
account for purposes of this Plan exceed $150,000 during 1994,
or such higher amount as increased by the Secretary of the
Treasury for years after 1994.
For a Member terminating his Employment on or before December
31, 1991, the definition of Monthly Compensation will be that
as set forth in the Plan prior to January 1, 1992.
1.18 Normal Retirement Date. The later of the first day of the
month coinciding with or next following the date a Member
attains age 65 or the fifth anniversary of the time the Member
commences Employment. A Member will have a nonforfeitable
interest in his Normal Retirement Allowance on attaining his
Normal Retirement Age which is the later of the date a Member
attains age 65 or the fifth anniversary of the time the Member
commences Employment.
1.19 Plan. The retirement plan herein set forth or, if hereafter
amended, as so amended.
1.19A Plan Year. The Plan Year and the limitation year shall
be a calendar year.
1.20 Retirement Credit. The figure computed as provided in Section
3.1 hereof for measuring the amount of a Benefit payable under
the Plan.
1.21 Reemployed Early Retiree. Any Employee who retires prior to
his Normal Retirement Date, is reemployed, who is scheduled to
work less than and completes less than 900 Hours of Service
during the first twelve consecutive months of Employment or
each calendar year commencing after his date of reemployment.
In computing Hours of Service for purposes of this Section,
the next to last paragraph of Section 1.15 shall not apply.
1.22 Trust Agreement. The agreement described in Section 5.1
hereof.
1.23 Trust Fund. The fund described in Section 5.1 hereof.
1.24 Trustees. The individual trustees appointed by the
Compensation Committee as provided in Section 5.1 hereof or
any successor trustees designated in accordance with the terms
of the Trust Agreement.
1.25 Vesting Percentage. After December 31, 1982 the Vesting
Percentage for a Member who is an Employee after December 31,
1982 is the higher of the applicable percentages determined
under Tables A, B, or C below if such Member became an
Employee prior to January 1, 1983:
Table A
Years of Sum of Age Plus
Active Service Years of Active Service Percentage
Less than 5 Less than 45 0
5 45 or 46 50
6 47 or 48 60
7 49 or 50 70
8 51 or 52 80
9 53 or 54 90
10 or more 55 or more 100
The applicable percentage under Table A is the lesser of the
percentages corresponding to the Member's years of Active
Service, or to the sum of the Member's age and years of Active
Service.
Table B
Years of Active Service Percentage
Less than 10 0
10 50
11 60
12 70
13 80
14 90
15 or more 100
The applicable percentage under Table B is percentage
corresponding to the Member's years of Active Service.
Table C
Years of Active Service Percentage
Less than 10 0
10 or more 100
For Members who first became Employees on or after January 1,
1983, the Vesting Percentage shall be determined under Table
C.
Table D
Years of Active Service Percentage
Less than 5 0
5 or more 100
Table D shall apply to all Members who are in Active Service
on or after January 1, 1989.
Notwithstanding the foregoing, the Vesting Percentage of a
Member who has been covered under the provisions of the Plan
as in effect prior to January 1, 1976, shall not be less than
his Vesting Percentage would have been if the provisions of
the Plan as in effect prior to January 1, 1976, had continued
without change.
1.26 Retirement Plan Committee (or "Committee"). A Committee whose
members are the named fiduciaries (as defined by ERISA) of the
Plan. Members of the Retirement Plan Committee are
individuals appointed by the Compensation Committee to serve
in this capacity.
1.27 Compensation Committee. The Compensation Committee of the
Board of Directors as appointed from time to time.
1.28 Covered Social Security Compensation. Covered Social Security
Compensation means with respect to any Member, one-twelfth of
the average of the contribution and benefit bases in effect
under Section 230 of the Social Security Act for each year in
the 35-year period ending with the year in which the Member
attains the ending age indicated in the following table:
Member's Year of Birth Ending Age
Before 1938 65
After 1937 and before 1955 66
After 1954 67
ARTICLE II
Participation
2.1 An Employee shall be eligible to become a Member participating
in the Plan unless he is:
(a) participating in any other plan qualified under Section
401(a) of the Internal Revenue Code of 1954 (except The
Continental Corporation Incentive Savings Plan) to which
an Employer contributes;
(b) covered by a collective bargaining agreement between
employee representatives and one or more Employers, if
such agreement does not expressly provide for coverage by
this Plan and if retirement benefits were the subject of
good faith bargaining between such employee
representatives and such Employer or Employers;
(c) Employed in Canada;
(d) employed outside the United States who is not a citizen
of the United States; or
(e) with respect to periods prior to January 1, 1976, any
person (i) not regularly employed on a full-time basis by
an Employer, (ii) whose customary employment was for not
more than 20 hours in any one week or not more than five
months in any calendar year, or (iii) whose compensation,
hours or work, or conditions of employment were
determined by a collective bargaining agreement that did
not expressly provide for coverage of such person by this
Plan.
2.2 Every Employee who is eligible to become a Member under
Section 2.1 shall become a Member as of the later of the
applicable dates on which he is an Employee as set forth in
Subsection (a) and (b) below:
(a) Periods prior to January 1, 1976. With respect to
periods prior to January 1, 1976.
(1) Every Employee on the Effective Date shall become a
Member as of the Effective Date provided that at
the date his employment by an Employer first began
he was less than 55 years old; and
(2) Any person not an Employee on the Effective Date
shall become a Member on the date his Employment by
an Employer first begins if on such date he is less
than 55 years old.
(b) Periods after December 31, 1975. With respect to periods
after December 31, 1975:
(1) Every person who became a Member pursuant to
Section 2.2(a) hereof shall continue to be a
Member:
(2) Every Employee if not already a Member shall become
a Member as of the later of the following dates on
which he is an Employee:
(A) January 1, 1976;
(B) the day after he attains age 25, or if he is
an Employee who is in Employment on or after
January 1, 1985, the day after he attains age
21; or
(C) the day following the close of the first
12-month period measured from the date he
commenced Employment (or any anniversary
thereof) during which he completed 1,000 Hours
of Service.
2.3 Termination of Participation. A Member's participation in the
Plan shall terminate, and all of his rights under the Plan
(except his rights, if any, under Section 3.5 hereof) shall
cease and determine, upon the termination of his Employment
for any reason prior to the time when he shall have qualified
for a Benefit under this Plan; provided, however, that if a
Member's participation in the Plan terminates and he
thereafter again commences Employment with an Employer, he
shall immediately upon his reemployment be admitted to
participation in the Plan, and his Benefit with respect to
Employment after such reemployment shall take into account all
his prior Active Service and Credited Service, but shall be
adjusted to reflect the amount of any Benefit he has already
received based on his prior Employment.
ARTICLE III
Benefits
3.1 Retirement Credit. Whenever a Member or Member's spouse
becomes entitled to a Benefit as hereafter provided in this
Article III, the Benefit shall be computed by reference to a
Retirement Credit equal to the amount determined under the
Revised Formula, described in Section 3.1(e). However, in no
event will the Retirement Credit be less than the Member had
accrued as of December 31, 1988, based upon Monthly
Compensation and Credited Service before January 1, 1989,
under whichever of the following apply:
-- the Regular Formula described in Section 3.1(a), or
-- in the case of an individual who was a Member prior to
January 1, 1979, the greater of the amount determined
under the Regular Formula or the amount determined under
the Alternative Formula described in Section 3.1(b), or
-- the benefit provided for in Section 3.7 or Exhibit A to
this Plan.
(a) the Regular Formula is one-twelfth of:
(i) the product of (1) two percent of the Member's
average Monthly Compensation for the highest
paid 60 consecutive months of the 120 months
next preceding the date as of which the
Retirement Credit is computed (or, if Monthly
Compensation has been paid or accrued to the
Member for less than 60 consecutive months,
his average Monthly Compensation for all
months) multiplied by (2) the number of months
of his Credited Service not in excess of 240
months; plus
(ii) the products of (1) one percent of the Member's
average Monthly Compensation (as determined in
Section 3.1(a)(i) above), multiplied by (2) the
number of months of his Credited Service in excess
of 240 months; reduced by
(iii) a Social Security offset in an amount equal to
the product of (1) two and one-half percent of
the monthly primary benefit payable to the
Member under the Federal Social Security Act
as in effect on the earlier of the date the
Member's Employment ceases, or the date upon
which he first becomes eligible for unreduced
benefits by virtue of age under the Federal
Social Security Act, multiplied by (2) the
number of months of the Member's Credited
Service not in excess of 240 months; and
(b) The Alternate Formula is one-twelfth of:
(i) the product of (1) one and one-half percent of the
Member's average Monthly Compensation (as
determined in Section 3.1(a)(i) above), multiplied
by (2) the number of months of his Credited
Service; reduced by
(ii) a Social Security offset in an amount equal to the
product of (1) one and one-half percent of the
excess, if any, over $220 per month (being the
approximate maximum primary insurance benefit at
December 31, 1971, for any person aged 65 at
December 31, 1971), of the monthly primary benefit
payable to the Member under the Federal Social
Security Act as in effect on the earlier of the
date the Member's Employment ceases, or the date
upon which he first becomes eligible for unreduced
benefits by virtue of age under the Federal Social
Security Act, multiplied by (2) the number of
months of the Member's Credited Service after the
Effective Date not in excess of 400 months.
(c) If the Member is less than the age at which he first
becomes eligible for unreduced benefits by virtue of age
under the Federal Social Security Act at the time the
Social Security offset is to be computed, then the amount
of the offset is to be determined on the assumption that
the Member will not thereafter receive any income that
would be treated as wages for purposes of the Federal
Social Security Act.
(d) For purposes of this Section 3.1, the age at which a
Member first becomes eligible for unreduced benefits ,by
virtue of age, under the Federal Social Security Act is
determined as set forth in the following table.
Age at Which
Eligible For Unreduced
Year of Member's Birth Social Security Benefits
Prior to 1938 65
1938 through 1942 65 plus 2 months for each
year date of birth is
after 1937
1943 through 1954 66
1955 through 1959 66 plus 2 months for each
year date of birth is
after 1954
1960 and later 67
(e) The Revised Formula is one-twelfth of the sum of (i) and
(ii), where:
(i) is the product of (1) one and fifteen
one-hundredths percent of the Member's average
Monthly Compensation (as determined in Section
3.1(a) (i) above), multiplied by (2) the number of
months of his Credited Service not in excess of 420
months and
(ii) is the product of (1) forty-three one-hundredths
percent of the Member's average Monthly
Compensation (as determined in Section 3.1(a) (i)
above) in excess of Covered Social Security
Compensation, if any, multiplied by (2) the number
of months of his Credited Service not in excess of
420 months.
(f) If the Member is less than his applicable ending age (as
set forth in Section 1.28) at the the time the Retirement
Credit is to be determined under 3.1(e) above, then the
contribution and benefit base for all future years for
purposes of determining the Covered Social Security
Compensation shall be assumed to be the same as the
contribution and benefit base for Social Security at the
time such determination is made.
3.2 Normal Retirement Allowance. If a Member who is in Employment
on the day prior to the later of (a) the fifth anniversary of
the time he commenced Employment, or (b) the date he has
attained the age of 65 retires from Employment, he thereupon
shall be entitled to receive each month for the remainder of
his life (beginning at his Normal Retirement Date) a Normal
Retirement Allowance in an amount per month equal to his
Retirement Credit; provided, however, that if his highest
Early Retirement Allowance determined on any date which could
constitute his Early Retirement Date is greater than such
Retirement Credit determined without regard to any increase
since such Early Retirement Date in the primary Benefit under
the Federal Social Security Act, then his Normal Retirement
Allowance shall be such Early Retirement Allowance.
3.3 Postponed Retirement Allowance.
(a) A Member who continues in full-time Employment after his
Normal Retirement Date shall, upon his actual retirement
from Employment, but not before, be entitled to receive
for the remainder of his life, beginning at the date of
his actual retirement, a Postponed Retirement Allowance
in an amount per month equal to his Retirement Credit
computed as of the date of his actual retirement. This
provision shall be administered in accordance with and
subject to applicable Department of Labor Regulations on
Suspension of Benefits. A Member who so continues in
Employment and who dies before his actual retirement from
Employment shall be deemed for the purpose of payment of
his Benefit under Article IV to have retired on the day
next preceding his death. A Member whose Employment is
on other than a regular full-time basis at any time after
his Normal Retirement Date shall be deemed to have
retired at the date his Employment on a regular full-time
basis ceased. For the purposes of this Section 3.3,
full-time Employment or Employment on a regular full-time
basis shall mean Employment which is scheduled for more
than 20 hours per week for at least six months during a
calendar year.
(b) If a Member who, while in Employment, will have attained
his Normal Retirement Date on or before February 1, 1992
and would have completed ten or more years of Active
Service by December 31, 1992, and for whom the sum of age
and years of Active Service equals at least 85 by such
date, makes an election to retire effective February 1,
1992, and such election is made prior to January 7, 1992,
then that Member's actual retirement date shall be
February 1, 1992 and such Member shall receive a
temporary monthly supplemental payment for each month
starting with February 1992 and ending with January 1993.
The amount of such monthly supplemental payment shall be
70% of the first $833.33 of the Member's average monthly
compensation (as determined in Section 3.4(c)) plus 20%
of the next $2,500 of such average monthly compensation.
For the purposes of this Section 3.3(b), the applicable
formula for determining a Member's Retirement Credit
shall be applied using average monthly compensation as
defined in Section 3.4(c) instead of average Monthly
Compensation as determined in Section 3.1.
3.4 Early Retirement Allowance.
(a) A Member who, while in Employment, has attained age 55
and has completed ten or more years of Active Service,
may retire upon six months advance notice to the
Administrator (or upon such shorter notice as the
Administrator shall in his discretion agree to accept),
and thereupon shall be entitled to receive for the
remainder of his life (beginning at the date of his early
retirement, which date must be the first day of a month
prior to his Normal Retirement Date) an Early Retirement
Allowance in an amount per month equal to his Retirement
Credit computed as of the date of his early retirement,
multiplied by the appropriate factor (interpolated for
calendar months when partial years are involved) from the
following table:
Years By Which Years By Which
Early Retirement Early Retirement
Dates Precede Dates Precede
Normal Retirement Normal Retirement
Dates Factor Dates Factor
1 1.00 6 .85
2 1.00 7 .80
3 1.00 8 .75
4 .95 9 .70
5 .90 10 .65
(b) However, notwithstanding the foregoing, if a Member who,
while in Employment, will have attained at least the age
of 55 and completed twenty or more years of Active
Service during 1982, makes an election to retire
Effective May 1, 1982, and such election is made prior to
April 1, 1982, then that Members' Early Retirement Date
shall be May 1, 1982 and the factor in the preceding
table shall be 1.0 for all years, up to eleven, by which
such Early Retirement Date precedes Normal Retirement
Date unless the Regular
Formula described in Section 3.1(a) shall apply to the
Member. If such Regular Formula shall apply, the factor
shall be as set forth in the table below until such time
as the Member's age precedes his Normal Retirement Date
by seven years.
Years By Which
Early Retirement
Dates Precede
Normal Retirement
Dates Factor
1 but not more than 7 1.00
8 .94
9 .88
10 .82
more than 10 but less than 11 actuarial reduction
A Member retiring in accordance with the provisions of this
paragraph shall also be entitled to receive temporary supplemental
monthly payments in lieu of Social Security benefits as set forth
in the table below.
Supplemental Payment
will Continue Up To
Monthly and Including
Age Last Birthday At Supplemental The Month In Which
Early Retirement Date Payment The Member Attains Age
54 but less than 60 $435 62
60 but less than 65 $550 65
(c) However, notwithstanding the foregoing, if a Member who,
while in Employment, would have attained at least the age
of 55 and completed ten or more years of Active Service
by December 31, 1992, and for whom the sum of age and
years of Active Service equals at least 85 by such date,
makes an election to retire effective February 1, 1992,
and such election is made prior to January 7, 1992, then
that Member's Early Retirement Date shall be February 1,
1992 and the factor in the table in Section 3.4(a) shall
be 1.0 for all years by which such Early Retirement Date
precedes his Normal Retirement Date.
A Member retiring in accordance with the provisions of
this Section 3.4(c) shall also be entitled to receive
temporary supplemental monthly payments in lieu of Social
Security benefits. The amount of such monthly payment
shall be 70% of the first $833.33 of the Member's average
monthly compensation plus 20% of the next $2,500 of such
average monthly compensation if the birth date of the
Member retiring under this Section 3.4(c) was on or
before February 1, 1930, or 80% of the amount so
determined if the birth date of the Member was after
February 1, 1930. For the purpose of this Section
3.4(c), average monthly compensation shall mean one-
sixtieth of the sum of the Member's annual rates of
salary or wages as of December 31st of 1987, 1988, 1989,
1990 and November 1, 1991, plus the average Monthly
Compensation, excluding any amount representing salary or
wages, for the 58 consecutive month period ending on
November 1, 1991. The temporary supplemental monthly
payments as determined under this paragraph shall be
payable for the period as set forth in the following
table.
Member's Date of Birth Supplemental payment will
continue up to and
including the later of
the month of January 1993
or the month prior to the
month in which the Member
attains age
on or before Feb. 1, 1930 65
after February 1, 1930 62
For the purposes of this Section 3.4(c), the applicable
formula for determining a Member's Retirement Credit
shall be applied using average monthly compensation as
defined in this Section 3.4(c) instead of average Monthly
Compensation as determined in Section 3.1.
3.5 Vested Retirement Allowance. A Member who terminates his
Employment prior to his Normal Retirement Date, other than by
death or retirement on an Early Retirement Allowance, but
after the earlier of the date on which he either:
(a) completes five years of Active Service and the sum of his
years of Active Service and his age equals at least 45,
or completes ten years of Active Service, for Members who
became Employees prior to January 1, 1983, or
(b) completes ten years of Active Service, for Members who
became Employees on or after January 1, 1983, or
(c) completes five years of Active Service, for Members who
are in Active Service on or after January 1, 1989,
shall be entitled to receive a Vested Retirement
Allowance in an amount per month equal to his Retirement
Credit multiplied by his Vesting Percentage, each
computed as of the date his Employment terminates. Such
Vested Retirement Allowance shall be paid beginning at
the Member's Normal Retirement Date, except that, in the
case of a Member who has completed ten years of Active
Service at the time his Employment terminates, such
Member may elect, by six months advance written notice to
the Administrator, to have payment of the Vested
Retirement Allowance begin at the first day of any month
after he attains age 55, in which event such allowance
shall be in a reduced amount of Equivalent Actuarial
Value to the Vested Retirement Allowance that such Member
otherwise would have been entitled to receive beginning
at his Normal Retirement Date.
3.6 Surviving Spouse's Allowance.
(a) If a Member dies while in Employment, after completing
ten years of Active Service and either attaining age 55
or after attaining age 45 if the sum of his age and
completed years of Active Service total at least 65, but
before his Normal Retirement Date, and is survived by a
spouse to whom he has been married throughout the
12-month period ending on the date of his death, such
spouse shall be entitled to receive for the remainder of
his or her life, a Surviving Spouse's Allowance in an
amount equal to one-half of the Member's Retirement
Credit computed as of the date of the Member's death,
reduced by an amount determined by applying the
appropriate factor in columns I and II of Table A below.
However, in no event will the Surviving Spouse's
Allowance be less than the greater of I or II in Table B
below.
TABLE A I II
Age of Employee Reduction In Member's Reduction in Member's
at Date of Death Retirement Credit Retirement Credit
55 But Less Than
65 1/3% for each full month 1/4% for each full
that Member's death month by which Spouse
precedes attainment of is more than 5 years
age 65. younger than Member.
45 But Less Than
55 40% plus 1/4% for each 1/4% for each full
full month that Member's month by which Spouse
death precedes attainment is more than 5 years
of age 55. younger than Member.
TABLE B
I. $50 per month.
II. The amount to which such Spouse would be
entitled had the Member's Retirement Credit
as of the date of his death been converted
into a fifty percent joint and survivor
annuity of Equivalent Actuarial Value with
payments to begin immediately and with the
Spouse as the contingent annuitant, and had
the Member died immediately thereafter.
Payments of the Surviving Spouse's Allowance shall
commence on the last day of the month in which the Member
dies (or, if the Member's death occurs on the last day of
a month, on the last day of the next succeeding month)
and shall terminate with the date of the death of the
spouse. Whenever the Member or spouse shall die on other
than the last day of a month, the Surviving Spouse's
Allowance otherwise payable to the spouse for such month
shall be prorated to reflect the date of death.
(b) If a Member (1) performs at least one Hour of Service on
or after August 23, 1984, (2) dies before he begins
receiving a Benefit, (3) has a Vesting Percentage which
is greater than zero, and (4) is survived by a spouse to
whom he has been married throughout the 12-month period
ending on the date of his death and the spouse is not
entitled to a Benefit under Section 3.6(a) or Article IV,
then such spouse shall be entitled to receive a Surviving
Spouse's Allowance computed as follows:
(i) If a Member dies before attaining age 55, then the
surviving spouse shall be entitled to receive for
the remainder of his or her life an amount to which
such spouse would be entitled had the Member
terminated his Employment on the date of his death,
survived until age 55, then converted his
Retirement Credit (based on his Credited Service
and Vesting Percentage at his date of death) into a
fifty percent joint and survivor annuity of
Equivalent Actuarial Value with payments to begin
immediately (with the spouse as the contingent
annuitant) and the Member had died on the following
day. Payments to the surviving spouse shall
commence on the last day of the month in which the
Member would have attained age 55 (or, if such date
occurs on the last day of the month, on the last
day of the next succeeding month) and shall
terminates with the date of the death of the
spouse.
(ii) If a Member dies on or after attaining age 55, then
the surviving spouse shall be entitled to receive
for the remainder of his or her life an amount to
which such spouse would be entitled had the
Member's Retirement Credit as of one day before the
date of his death been converted into a fifty
percent joint and survivor annuity of Equivalent
Actuarial Value with payments to begin immediately
(and with the spouse as the contingent annuitant)
and had the Member died the following day.
Payments to the surviving spouse shall commence on
the last day of the month in which the Member dies
(or, if the Member's death occurs on the last day
of a month, on the last day of the next succeeding
month) and shall terminate with the date of the
death of the spouse.
(iii) Whenever the member or spouse shall die on
other than the last day of a month, the
Surviving Spouse's Allowance otherwise payable
to the spouse for such month shall be prorated
to reflect the date of death.
(c) Notwithstanding Section 3.6(b), if a Member (1)
terminated his Employment prior to August 23, 1984 (but
after December 31, 1975), (2) is not entitled to a
Benefit on August 23, 1984 (and is alive on that day),
(3) had completed 10 years of Active Service, and (4) is
survived by a spouse to whom he has been married
throughout the 12-month period ending on the date of his
death and the spouse is not entitled to a Benefit under
Section 3.6(a) or Article IV, then such spouse shall be
entitled to receive a Surviving Spouse's Allowance
computed under Section 3.6(b).
3.7 Certain Employees. Anything elsewhere in this Plan to the
contrary notwithstanding, (a) every person who became a Member
on the Effective Date and who immediately prior to the
Effective Date participated in the Glen Falls Insurance
Company Retirement Plan or the Title Insurance Company of
Pennsylvania Pension Plan shall have a nonforfeitable right to
a Benefit at a rate not less than those benefits he would have
had a nonforfeitable right to receive pursuant to the Glens
Falls Insurance Company Retirement Plan or the Title Insurance
Company of Pennsylvania Pension Plan, as the case may be; (b)
every person who became a Member on the Effective Date and who
immediately prior to the Effective Date participated in the
Pacific of New York Group Employees' Pension Plan shall have
a nonforfeitable right to a Normal Retirement Allowance at a
rate not less than he would have had a nonforfeitable right to
receive pursuant to the terms of Group Annuity Contract No.
GR-847 issued by the Travelers Insurance Company if the Group
Annuity Contract had been discontinued by reason of
termination of the Pacific of New York Group Employees'
Pension Plan immediately prior to the Effective Date; (c)
there shall be set off against and deducted from any Benefit
payable under this Plan to any person who became a Member on
the Effective Date and who is a former employee of Norwich
Union Fire Insurance Society Ltd. or Scottish Union and
National Insurance Company the amount of any annuity payable
to such person under John Hancock Mutual Life Insurance
Company Group Annuity Contract #342; and (d) there shall be
added to any Retirement Credit determined under this Plan for
any Employee who became a Member on the Effective Date and who
is a former employee of Underwriters Adjusting Company an
amount equal to the pension that would have been payable from
Normal Retirement Date under the former Underwriters Adjusting
Company Retirement Plan if it had continued in effect to the
date of the Employee's retirement, multiplied by a fraction of
which the numerator is the number of months the Employee was
in the employ of Underwriters Adjusting Company prior to April
1, 1967, and the denominator is the sum of such numerator plus
the total number of months of his Credited Service. In
addition, there shall be set off against and deducted from any
Benefit payable under this Plan to an Employee who was employed
by William Penn Life Insurance Company of New York on September
1, 1982 the amount of any benefit payable to such person under
the Retirement Plan for Salaried Employees of Penncorp Financial,
Inc. and Affiliates.
3.8 Employees Retired Prior to Effective Date. Every former
employee of an Employer (or beneficiary of a former employee
of an Employer) who on the Effective Date had retired and was
receiving a retirement benefit pursuant to the Retirement Plan
of The Continental Insurance Company, the Glens Falls
Insurance Company Retirement Plan or the Title Insurance
Company of Pennsylvania Pension Plan shall be deemed to be a
retired Member of this Plan and shall continue to receive from
the Trust Fund a Benefit at the same rate and subject to the
same terms and conditions as the benefit that he was then
receiving. The amount of such Benefit shall not be increased
or decreased by reason of the adoption of this Plan.
3.9 Increases in Benefits.
(a) Benefits payable after May 31, 1974, under Sections 3.2,
3.3, 3.4, 3.6 and 3.8 hereof to any person who (or to the
Beneficiary of any person who) has received a Benefit
under any such Section prior to January 1, 1974, shall be
increased by an amount computed by multiplying the
monthly Benefit otherwise payable (but not in excess of
$833.33) by 0.2 percent of the number of months such
person (or his decedent) received Benefits under this
Plan or its predecessor plan during the years 1970
through 1973.
(b) Benefits payable after June 30, 1978 under Sections 3.2,
3.3, 3.4, 3.5, 3.6 and 3.8 hereof to any person who (or
to the Beneficiary of any person who) was receiving a
Benefit under any such Section on December 31, 1977 shall
be increased by an amount computed by multiplying the
monthly Benefit otherwise payable by the appropriate
percentage from the following table:
Date Benefit First Received
By the Member
(or his Beneficiary, if earlier) Percentage
June 1974 or earlier 10.0%
July 1974 through December 1974 9.0
January 1975 through June 1975 8.0
July 1975 through December 1975 7.0
January 1976 through June 1976 6.0
July 1976 through December 1976 4.5
January 1977 through June 1977 3.0
July 1977 through December 1977 1.5;
provided, however, that in any event such amount not be
less than $2.00 per month.
(c) Benefits payable after June 30, 1982 under Sections 3.2,
3.3, 3.4, 3.6 and 3.8 hereof to any person who (or to the
Beneficiary of any person who) was receiving a Benefit
under any such Section on June 30, 1981, or who had
reached the Normal Retirement Date on June 30, 1981,
shall be increased by an amount computed by multiplying
the monthly Benefit otherwise payable by the appropriate
percentage from the following table:
Earliest of: (1) Date Benefit
First Received by Member (2)
Date Benefit First Received by
Member's Beneficiary, or (3)
Member's Normal Retirement Date Percentage
December 1978 or earlier 15%
January 1979 through June 1979 13%
July 1979 through December 1979 10%
January 1980 through June 1980 8%
July 1980 through December 1980 5%
January 1981 through June 1981 3%
provided, however, that (1) this adjustment will only be
applicable to the first $1,250 of each monthly retirement
allowance, and (2) in any event such amount will not be
less than $3 per month.
(d) Benefits payable after June 30, 1988 under Sections 3.2,
3.3, 3.4, 3.6(a) and 3.8 hereof to any person who (or to
the Beneficiary of any person who) was receiving a
Benefit under any such Section on December 31, 1986, or
who had reached the Normal Retirement Date on December
31, 1986, and retired prior to January 1, 1988, shall be
increased by an amount computed by multiplying the
monthly Benefit otherwise payable, but not including any
temporary supplemental payments in lieu of SociaL
Security benefits described in Section 3.4, by the
appropriate percentage from the following table:
Earliest of: (1) Date Benefit First
Received by Member, (2) Date Benefit First
Received by Member's Beneficiary, or (3)
Member's Normal Retirement Date Percentage
December 1981 or earlier 8%
January 1982 through December 1982 7%
January 1983 through June 1983 6%
July 1983 through December 1983 5%
January 1984 through June 1984 4%
July 1984 through June 1985 3%
July 1985 through December 1986 2%
provided, however, that in any event such amount will not
be less than $3 month.
3.10 Maximum Benefits.
(a) The total annual retirement pension payable to a Member
under Section 4.1, or Section 4.2(a) Option B or Option
D, as adjusted pursuant to Section 3.9, (when added to
the annual retirement pension payable to such member
under all other defined benefit plans of an Employer or
Affiliated Corporation), shall not exceed the lesser of
(i) $90,000, or (ii) 100 percent of the Member's average
compensation from an Employer or an Affiliated
Corporation for the three consecutive years that produced
the highest average. For the purpose of the foregoing
limitation, the term "compensation" shall mean earnings
as reported by the Employer on Form W-2 for the
applicable year. However, if the Member has not
completed 10 years of service with one or more Employers
or Affiliated Corporations, such maximum amount shall be
reduced to an amount equal to such maximum amount
multiplied by the ratio which the number of years (or
part therefore) of his service bears to 10. If the
pension begins before the Member's 62nd birthday, the
maximum amount in (i) above shall be the greater of
$75,000, (or, if the pension begins before the Member's
55th birthday, the actuarial equivalent of a $75,000
pension beginning at age 55) or the equivalent actuarial
value of the maximum amount in (i) beginning at age 62.
For purposes of the preceding sentence, the equivalent
actuarial value shall be based on an interest rate equal
to the greater of five percent per year or the interest
rate otherwise used under this Plan in the determination
of equivalent actuarial value. If the pension begins
after the Member's 65th birthday, the maximum amount in
(i) shall be of equivalent actuarial value based on an
interest rate equal to the lesser of five percent per
year or the interest rate otherwise used under this Plan
in the determination of equivalent actuarial value, to
that maximum benefit payable at age 65. In the event
that a Member elects benefits under Section 4.2(a),
Option D (Other), the total benefits so payable shall be
subject to such maximum limitation (except that if such
benefits constitute a qualified joint and survivor
annuity, only the reduced pension to the Member shall be
subject to such maximum limitation), and such benefit
shall be adjusted to its actuarially equivalent annual
straight life annuity for the purpose of determining
whether such maximum limitation has been exceeded. In
the event that a Member elects benefits under Section
4.2(a), Option A (120 Months Certain), the total benefit
so payable shall be subject to such maximum limitation,
and such benefit shall be adjusted to its actuarially
equivalent annual straight life annuity for the purpose
of determining whether such maximum limitation has been
exceeded. For purposes of the last two sentences, the
determination of actuarial equivalents shall be based on
an interest rate equal to the greater of five percent per
year or the interest rate otherwise used under this Plan
in the determination of equivalent actuarial value. As
of January 1 of each calendar year on and after January
1, 1988, the dollar limitation in (i) above will be
automatically adjusted by the Commissioner of Internal
Revenue. Such adjusted limitation will apply to
limitation years ending on or after the date of such
adjustment. As of January 1 of each calendar year the
limitation in (ii) above shall, with respect to retired
participants, be automatically adjusted by the
Commissioner of Internal Revenue. Such adjusted
limitation will apply to limitation years ending on or
after the date of such adjustment.
Notwithstanding the preceding paragraph, in no event
shall a Member's annual pension payable under this Plan
be less than the benefit which the Member had accrued
under the Plan as of December 31, 1982; provided,
however, that in determining such benefit, no changes in
the Plan on or after July 1, 1982, shall be taken into
account.
Anything in this Section 3.10(a) notwithstanding, in no
event shall benefits under this Plan exceed the maximum
benefits permitted under Section 415(b) of the Internal
Revenue Code of 1986.
(b) In the case of any Member as to whom the sum of the
defined benefit Plan fraction and the defined
contribution Plan fraction for any year exceeds 1.0
(prior to the application of this subsection (b)), the
annual retirement benefit payable under this Plan shall
be reduced to the extent required to make such sum 1.0.
A Member's defined benefit plan fraction for any year is
a fraction the numerator of which is the sum of the
Member's projected annual retirement benefit under all
defined benefit plans (whether or not terminated)
maintained by an Employer or an Affiliated Corporation,
determined as of the close of the year, and the
denominator of which is the lesser of the product of 1.25
multiplied by the dollar limitation in subsection (a)(i)
above or the product of 1.4 multiplied by the amount in
subsection (a)(ii) above. A Member's defined
contribution plan fraction for any year is a fraction the
numerator of which is the sum of the annual additions to
the Member's account under all defined contribution plans
maintained by an Employer or an Affiliated Corporation
(whether or not terminated) for the current and all prior
limitation years (determined as of the close of the
year), and the denominator of which is the sum of the
lesser of the following amounts determined for such year
and for each such prior year of service with an Employer
or an Affiliated Corporation: the product of 1.25
multiplied by the dollar limitation in effect under
Internal Revenue Code section 415(c)(1)(A) for such year,
or the product of 1.4 multiplied by the amount which may
be taken into account under section 415(c)(1)(B) of the
Internal Revenue Code of 1954.
For purposes of the preceding paragraph, a Member's
projected annual retirement benefit is the annual benefit
to which the Member would be entitled under the terms of
this Plan if the Member continued employment until normal
retirement age (or current age, if later) and the
Member's compensation for the limitation year and all
other relevant factors used to determine such benefit
remained constant until normal retirement age (or current
age, if later).
3.11 Transfers from Canada. Anything in the Plan to the contrary
notwithstanding, if an individual is transferred directly from
service with an Employer in Canada to service with an Employer
in the United States:
(a) his period of service with one or more Employers in
Canada shall be considered service as an Employee for the
purpose of determining his Credited Service; and
(b) his Retirement Credit under the Plan shall be reduced by
an amount which has the Equivalent Actuarial Value of any
retirement income attributable to employer contributions
that is payable to him or on his behalf under any pension
or retirement plan of any Employer that is registered
under any Provincial Pension Benefit Act in Canada.
ARTICLE IV
Payment of Benefits
4.1 Standard Method of Payment.
(a) In the absence of an election under Section 4.2 hereof,
every Normal Retirement Allowance, Postponed Retirement
Allowance, Early Retirement Allowance, and Vested
Retirement Allowance shall be paid in equal monthly
installments in an amount equal to the Member's Benefit,
except that, if the Member has a spouse on the date he
becomes entitled to received a Benefit, such Member will
receive a monthly payment in an amount of Equivalent
Actuarial Value to the Benefit to which otherwise he
would be entitled, under which he will receive a reduced
Benefit during his lifetime with the provision that, if
he dies survived by such spouse, then the Benefit shall
continue to be paid to such spouse during the lifetime of
such spouse at a rate equal to 50 percent of the rate at
which the Benefit was paid to the Member. If on or after
the later of his sixty-fifth birthday or the tenth
anniversary of the commencement of his participation in
the Plan, but prior to his Normal Retirement Date, a
Member (whose spouse is not entitled to receive a Benefit
under Section 3.6) dies, shall be deemed to have become
entitled to receive a Benefit on the date prior to the
date of his death. If a Member dies prior to the first
day of a month which next succeeds his having completed
10 years of Active Service, attained age 55, and elected
by six months' advance written notice to the
Administrator to have payment of his Vested Retirement
Allowance begin prior to his Normal Retirement Date, he
shall be deemed to have become entitled to receive such
a Benefit on the date prior to the date of his death.
The standard method of payment of an accrued benefit for
an unmarried Member will be in the form of a straight
life annuity.
(b) The payment of a Member's Benefit shall commence on the
last day of the month in which the Member becomes
entitled to receive the Benefit, and shall terminate on
the death of the Member. If payment is to be made to the
Member's spouse as set forth above, payments to the
spouse shall commence on the last day of the month in
which the Member dies (or, if the Member dies on the last
day of a month, on the last day of the following month)
and shall terminate with the death of the spouse.
Whenever a Member or spouse dies other than on the last
day of a month, the Benefit otherwise payable to such
person for such month shall be prorated to reflect the
date of death.
4.2 Optional Methods of Payments.
(a) In lieu of payment of a Normal Retirement Allowance,
Postponed Retirement Allowance, or Early Retirement
Allowance pursuant to the provisions of Section 4.1
hereof, a Member may elect to receive any of the
following optional forms of payment in an amount of
Equivalent Actuarial Value to the Benefit to which
otherwise he would be entitled:
Option A -- 120 Months Certain
A reduced Benefit payable during the lifetime of the
Member, with the provision that if the Member dies within
the period of 120 months next following the date payment
of the Benefit begins, then the Benefit shall continue to
be paid at the same rate to the Member's Beneficiary
until the end of the period of 120 months.
Option B -- Joint-and-Survivor Annuity
A reduced Benefit payable during the lifetime of the
Member with the provision that, if the Member dies
survived by a spouse, then the Benefit shall continue to
be paid to his spouse during the lifetime of the spouse
at a rate equal to 25 percent, 75 percent, or 100 percent
(as the Member may elect) of the rate at which the
Benefit was paid to the Member.
Option C -- Straight Life Annuity
A Benefit payable in equal monthly installments during
the lifetime of the Member, with no further payments on
his behalf after his death.
(b) A Member entitled to a Vested Retirement Allowance
payable under Section 3.5(b) hereof may elect, in lieu of
payment pursuant to the provisions of Section 4.1 hereof,
to receive the optional form of payment described in
Option C.
(c) No spouse of a Member entitled to receive a Surviving
Spouse's Allowance and no Member entitled to a Vested
Retirement Allowance payable under Section 3.5(a) hereof,
may elect to receive any optional form of payment.
(d) Every election of an optional form of payment shall be
made in writing, signed by the Member, and, if he is
married, consented to (in writing) by his spouse unless
the optional form of payment is a 75 percent or 100
percent joint and survivor annuity described in Option B.
The consent of the spouse must acknowledge the effect of
the election and must either be notarized or witnessed by
a plan representative. The election shall be delivered
to the Administrator at any time during the 90 day period
ending on the Member's Normal, Early or Postponed
Retirement Date, whichever is applicable. The
information with which a married Member must be provided
respecting an election not to receive payment of a
Benefit under the method provided for in Section 4.1(a),
will be mailed or personally delivered to such Member in
such time as is reasonable to assure that it will be
received on or about the date which is nine months before
the date on which he attains age 65 or such earlier date
as on which he can elect to receive a Benefit. If a
married Member requests additional information regarding
the financial effect of being paid under the method
provided for in Section 4.1(a) at any time prior to 60
days before his Normal, Early or Postponed Retirement
Date, which ever is applicable, then notwithstanding the
foregoing, the election period shall be extended to
include the 60 calendar days immediately following the
date that the requested additional information is
personally delivered or mailed to the Member. An
election of an optional form of payment shall take effect
on the date following the expiration of the election
period provided for above, and shall be inoperative
unless both the Member and his beneficiary are alive at
that date. An election of an optional form of payment
may be revoked by the Member at any time prior to the
expiration of the election period, but shall thereafter
be irrevocable. Nothwithstanding any other provision of
this Section the qualified election period shall be a
period within the 90 day period ending on the "annuity
starting date" and the annuity starting date shall mean
(i) the first day of the first period for which an
amount is payable as an annuity (whether by reason of
retirement or disability) or (ii) in the case of a
benefit not payable in the form of an annuity, the first
day on which all events have occurred which entitle the
Member to such benefit.
(e) Each Member who elects Option A or B shall designate a
Beneficiary to receive the payments provided for after
the Member's death by filing with the Administrator a
designation in writing in such form as the Administrator
shall prescribe. In the case of Option B, the designated
Beneficiary must be the Member's spouse. The Member may
change the designation from time to time and at any time
until the election has taken effect, or in the case of
Option A after benefit payments under such Option have
commenced to the Member, by filing with the Administrator
a new designation.
(f) Any other provision of the Plan notwithstanding, if the
Beneficiary under Option A is other than the Member's
spouse, benefit payments commencing under such Option
shall be adjusted so that if any payment would otherwise
be payable more than 5 years after the death of the
Member, or the death of the Member's spouse, where
benefits were being paid to such spouse, all remaining
benefits will have been paid within 5 years of the death
of the Member or his spouse whichever is applicable.
This subsection shall not apply if the period over which
benefits are payable does not exceed the Member's life
expectancy at the time benefit payments commence.
4.3 Lump Sum for Small Pensions. Whenever a Benefit becomes
payable at a time when such Benefit has an Equivalent
Actuarial Value of not more that $3,500, such Benefit shall be
paid in a lump sum amount equal to such Equivalent Actuarial
Value, such payment to be made on the last day of the month in
which the recipient becomes entitled to receive the Benefit.
4.4 Suspension of Payments. Except as provided in Section 3.3
with respect to Employment on other than a regular full-time
basis after Normal Retirement Date, if any retired Member is
restored to Employment (except as a Reemployed Early Retiree),
his retirement allowance payments shall be suspended for such
period as he shall remain in Employment, but not beyond the
April 1 of the year following the year in which he attains age
70-1/2. However, any such suspension of benefits shall be in
accordance with and subject to applicable Department of Labor
Regulations.
4.5 Any rules in this Article IV notwithstanding, in no event will
benefit payments to a Member or his beneficiary commence after
the April 1 of the calendar year following the calendar year
in which the Member attains age 70-1/2. If a Member continues
in Employment after attaining age 70-1/2, his benefit will be
recalculated each year in which he accrues additional
benefits, and his benefit payments increased if required to
meet the minimum distribution requirements of Section
401(a)(9) of the Internal Revenue Code of 1986.
4.6 Any form of Benefit which is paid pursuant to this Article IV
and which involves payments to a person or persons other than
the Member or the Member's spouse shall be such that the
present value of the payments to be made to the Member is more
than 50% of the present value of the total payments to be made
to the Member and such other person or persons.
ARTICLE V
Administration
5.1 Trust Fund. All contributions by an Employer shall be paid
into, and all payments herein provided for shall be paid from,
a Trust Fund maintained by agreement between the Company and
individual trustees designated by the Compensation Committee,
which agreement shall be in such form and contain such
provisions as the Compensation Committee may deemed
appropriate, including, but not limited to, provisions with
respect to the powers and authority of the Trustees, the
authority of the Board of Directors or Compensation Committee
to amend the Trust Agreement and to terminate the trust, and
the authority of the Board of Directors or Compensation
Committee to settle the accounts of the Trustees on behalf of
all persons having an interest in the Trust Fund. When
entered into, the Trust Agreement shall be taken to form a
part of this Plan, and all rights and benefits that may accrue
to any person under this Plan shall be subject all the terms
and provisions of the Trust Agreement. The several Employers
will make all contributions to the Trust Fund, and no
contributions will be required of any Member in connection
therewith. All expenses of administering the Plan and the
Trust Fund shall be paid from the Trust Fund unless paid by
the Company.
5.2 Retirement Plan Committee, Trustees and Administrator.
(a) Retirement Plan Committee shall administer the Plan in
accordance with its terms and shall have all powers and
authority necessary or appropriate for carrying out their
duties in that respect. Not in limitation but in
amplification of the foregoing, the Retirement Plan
Committee, subject to the provisions of the Plan, from
time to time shall adopt and establish such rules as they
deem necessary or desirable for administering the Plan,
and shall adopt appropriate mortality and other tables
and interest rates to be used in administering the
Benefits provided under the Plan. The Retirement Plan
Committee shall establish a procedure for establishing
and carrying out of a funding policy and method
consistent with the objectives of the Plan and the
requirements of the law, which policy and method shall be
reviewed at least annually. The
Retirement Plan Committee shall have full power and
authority to interpret, construe, and administer the
Plan, and determine all questions that may arise
hereunder, including, without limitation, all questions
relating to the eligibility of employees of an Employer
to be Members, and the amount of benefits to which any
person shall be entitled under the Plan; the Retirement
Plan Committee may correct any error or defect or supply
any omission or reconcile any inconsistency in the Plan
in such manner and to such extent as they shall deem
expedient to carry the Plan into effect; and the
Retirement Plan Committee shall be the sole and final
judge of such expediency. The interpretations and
constructions of the Retirement Plan Committee, and all
other acts and determinations of the Retirement Plan
Committee done or made in good faith, shall be final,
conclusive, and binding upon all parties, including the
several Employers, Employees, and Beneficiaries. The
Retirement Plan Committee may appoint in writing such
persons, who need not be members of the Retirement Plan
Committee as they may deem necessary or desirable for the
effective exercise of the duties and responsibilities of
the Retirement Plan Committee and may delegate to such
persons in writing such duties and confer upon them in
writing such powers, discretionary or otherwise, as the
Retirement Plan Committee may deem expedient or
appropriate. With respect to all or any portion of the
Plan assets, the Retirement Plan Committee may appoint an
investment manager or managers, pursuant to Sections
402(c)(3) and 405(c)(1) of ERISA, to manage, acquire, or
dispose of any assets of the Plan. Each such investment
manager shall accept appointment as a fiduciary of the
Plan and shall be either registered as an investment
adviser under the Investment Advisers Act of 1940, a bank
as defined under that Act, or an insurance company
qualified under the laws of more than one state to
manage, acquire, or dispose of Plan assets.
(b) Except where the Trustee is a corporate Trustee, the
following provisions shall govern. Where a corporate
Trustee is appointed, it may act through any one or more
of its duly authorized officers or employees. The
Trustees shall designate one of their number as Chairman,
and shall appoint a Secretary, who may, but need not, be
a Trustee. The Chairman shall preside at all meetings of
the Trustees at which he is present, but in his absence
any Trustee may call the meeting to order and preside.
The Secretary shall duly record or cause to be recorded
all acts and determinations of the Trustees, and all
records shall be preserved in his custody or as the
Trustees may direct. Any act or determination that the
Plan authorizes or requires the Trustees to do or make
may be done or made by a majority of the Trustees at the
time acting hereunder, and the act or determination of
such majority of the Trustees expressed at any time and
from time to time by a vote at a meeting or in writing
without a meeting shall constitute the act or
determination of the Trustees and shall have the same
effect for all purposes as if assented to by all the
Trustees serving at the time. Any person dealing with
the Trustees or with any agent or representative of the
Trustees shall be entitled to rely upon the certificates
of the Chairman or Secretary as to the fact that any act
or determination is the act or determination of the
Trustees.
The Trustees shall have the power to adopt rules for the
time and place of their meetings, the notice to be given
of such meetings, and all similar matters governing the
conduct of the Trustee's business.
(c) The Administrator shall have the duties and
responsibilities imposed by law on the administrator of
an employee benefit plan. In addition, the Administrator
shall perform such other duties and responsibilities as
may be delegated to him in writing by the Retirement Plan
Committee, and shall have such powers as may be conferred
on him in writing by the Retirement Plan Committee. The
Administrator may appoint in writing such persons as he
may deem necessary or desirable for the effective
exercise of his duties and may delegate to such persons
in writing such duties and responsibilities and confer
upon them in writing such powers, discretionary or
otherwise, as he may deem expedient or appropriate.
(d) The Trustees, Retirement Plan Committee and the
Administrator (and any person or persons to whom the
Trustees, Retirement Plan Committee or the Administrator
have delegated any duties or responsibilities) may employ
one or more persons to render advice with regard to any of
the duties or responsibilities of the Trustees,
Retirement Plan Committee or the Administrator under the
Plan.
(e) The Company shall defray all the expenses of the
Trustees, Retirement Plan Committee and the Administrator
in the administration of the Plan.
(f) The Trustees, Retirement Plan Committee and the
Administrator shall be entitled to rely upon all tables,
valuations, certificates and reports furnished by any
actuary, upon all certificates and reports made by any
independent public accountants; and upon all opinions of
law given by any counsel (who may be counsel to an
Employer) and shall be fully protected in respect of any
act done or permitted or determination made in good faith
in reliance upon any such table, valuation, certificate,
report or opinion. Neither a Trustee, Retirement Plan
Committee nor the Administrator shall be liable to an
Employer or to any Employee or to any Beneficiary on
account of any act done or omitted or determination made
in the performance of his duties under the Plan, nor for
any act done or omitted by any agent or representative of
the Trustees, Retirement Plan Committee or the
Administrator so long as such Trustee, Retirement Plan
Committee or the Administrator has acted with the care,
skill, prudence, and diligence under the circumstances
then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with
like aims. Neither shall any Trustee be liable to any
person for any act done or omitted by any other Trustee
except to the extent prescribed by law. The Company
agrees to indemnify and hold harmless the Trustees,
Retirement Plan Committee and the Administrator from and
against any liability they may incur in the
administration of the Plan, unless arising from their own
negligence or willful misconduct. The provisions of this
Section 5.2(f) shall be effective only to the extent
permitted by law.
5.3 Benefit Claims Procedure
(a) In the event that any person makes a claim for benefits
under this Plan and such claim is denied in whole or
part, the Administrator, within a reasonable time, shall
furnish to such person a written notice of such denial
setting forth the specific reasons for such denial,
specific references to the provisions of the Plan upon
which such denial is based, a description of any
additional material or information necessary for such
person to provide including an explanation why such
material or information is necessary, and an explanation
of the review procedure under this Plan.
(b) Any person whose claim for benefits is denied in whole or
part may, within sixty days after receiving the foregoing
notice, request in writing addressed to the Administrator
a review by the Retirement Plan Committee of the denial.
In addition, any person who makes a claim for benefits
under this Plan and does not receive any decision on such
claim within a reasonable time may request a review by
the Retirement Plan Committee of the claim. Any person
requesting a review under this subsection 5.3(b) shall
have the opportunity to review pertinent documents and to
submit a written statement to the Retirement Plan
Committee, shall be entitled to request a hearing before
the Retirement Plan Committee, and shall be entitled to
have representation in connection with this review
procedure.
(c) Upon receipt of a request for review under subsection
5.3(b) hereof, the Retirement Plan Committee shall render
a decision as promptly as possible and in any event
within sixty days from such receipt, unless special
circumstances (such as the need to hold a hearing)
require an extension of time for processing, in which
case a decision shall be rendered as soon as possible,
but not later than 120 days from such receipt. The
decision of the Retirement Plan Committee shall be in
writing and shall include the specific grounds for the
decision and specific reference to the provisions of this
Plan upon which the decision is based.
ARTICLE VI
Amendment, Termination and Merger
6.1 Amendment. The Board of Directors or Compensation Committee
at any time and from time to time, by written notice to the
Trustees and to each Employer, may amend in whole or in part
any or all of the provisions of the Plan. The Office of the
Chairman of The Continental Corporation (or, in the cases of
clauses (1) and (3) below, the senior Human Resources officer)
may amend the Plan when it finds that such amendment (1) is
required to conform the Plan to applicable laws or
regulations, (2) will not increase the annual cost of the Plan
by more than the greater of 5% or $1 million, or (3) is
intended to implement transactions approved by the Board of
Directors. However, no amendment shall authorize or permit
any part of the Trust Fund to be used for or diverted to
purposes other than the exclusive benefit of Members and their
beneficiaries, and no amendment (except to the extent that it
is made retroactive to secure a favorable determination as to
the qualification of this Plan under the Internal Revenue
Code) shall reduce any interest of any person existing
immediately prior to such amendment.
6.2 Termination.
(a) The Board of Directors or Compensation Committee, at any
time, by written notice to the Trustees and to each
Employer, may terminate the Plan in whole or in part.
Upon a complete or partial termination, the rights of all
persons affected by such termination who are then
Members, to Benefits Accrued to the date of such
termination (hereinafter referred to as the Termination
Date), to the extent then funded, shall become
nonforfeitable (subject, however, to the provisions of
Section 6.3 hereof), and upon receipt of notice of such
termination, the Administrator shall allocate the Trust
Fund exclusively for the benefit of Members and
beneficiaries of Members, by providing for payment in
accordance with Section 4044 of ERISA.
(b) The Administrator, in his discretion, shall apply the
amounts allocated under this Section 6.2 for the benefit
of Members and their beneficiaries by cash payments, by
the purchase of annuity contracts from an insurance
company or companies designated by the Administrator or
by the continuance of the Trust Fund and payment of
Benefits therefrom.
(c) If, upon such termination, there is an amount remaining
in the Trust Fund after satisfying all liabilities to
Members and their beneficiaries, then and not otherwise,
the Trustees shall pay over to the several Employers, or
upon their order, their respective shares of the amount
so remaining in the Trust Fund, provided that such
distribution does not contravene any provision of law.
(d) Notwithstanding any such termination, the provisions of
Article V hereof and of the Trust Agreement shall
continue in effect until the Trustees shall have
completed the distribution of the Trust Fund and their
final accounts have been settled.
6.3 Restrictions on Benefits in Event of Early Termination.
(a) If at any time prior to the tenth anniversary of a
Commencement Date (as defined in paragraph (c) of this
Section) (1) the Plan shall be terminated or (2) the full
current costs of the Plan shall not then have been
funded, then, notwithstanding anything in the Plan to the
contrary, the amount of funds under the Plan that can be
used to provide benefits for any of the 25 highest paid
Employees of each Employer on that Commencement Date
whose anticipated Normal Retirement Allowance exceeds
$125 a month shall not exceed the greater of
(i) $20,000; or
(ii) 20 percent of the first $50,000 of the Annual
Compensation (as defined in paragraph (d) of this
Section) of such Employee multiplied by the number
of years between that Commencement Date and the
date of termination of the Plan or the date of the
failure to meet the full current costs of the Plan,
whichever is earlier; or
(iii) If such Employee is a substantial owner as
defined in section 4022(b)(5), of ERISA, a
dollar amount which equals the present value
of the benefit guaranteed for such Employee
under section 4022 of ERISA, or if the Plan
has not terminated, the present value of the
benefit that would be guaranteed if the Plan
terminated on the date the benefit commences,
determined in accordance with the regulations
of the Pension Benefit Guarantee Corporation
("PBGC"). If such Employee is not a
substantial owner as defined in section
4022(b)(5) of ERISA, a dollar amount which
equals the present value of the maximum
benefit described in section 4022(b)(3)(B) of
ERISA (determined on the date the Plan
terminates or on the date benefits commence,
whichever is earlier, and determined in
accordance with regulations of the PBGC)
without regard to any other limitations in
section 4022 of ERISA.
(iv) In the case of any Commencement Date other than the
Effective Date, either (1) the amount of funds
under the Plan that would have been used to provide
Benefits for such Employee if the Plan as in effect
the day before such Commencement Date had been
continued without change or (2) the sum of (A) the
amount of funds under the Plan that would have been
used to provide Benefits for such Employee if the
Plan had been terminated on the day before such
Commencement Date, plus (B) 20 percent of the first
$50,000 of the Annual Compensation of such Employee
multiplied by the number of years between that
Commencement Date and the date of termination of
the Plan or the date of the failure to meet the
full current costs of the Plan, whichever is
earlier.
(b) The provisions of paragraph (a) of this Section
shall not restrict the current payment of full
Benefits called for by the Plan for any Employee
who has retired while the Plan is in full effect
and its current costs have been met.
(c) As used in this Section 6.3, "Commencement Date"
means the Effective Date of the Plan (or with
respect to employees of any Affiliated Corporation
that becomes an Employer after the Effective Date,
the date it becomes an Employer) or the effective
date of any subsequent amendment to the Plan that
changes the Plan so as to increase substantially
the extent of possible discrimination as to an
Employer's contributions and as to Benefits
actually payable in event of the subsequent
termination of the Plan or the subsequent
discontinuance of the Employer's contributions
thereunder.
(d) As used in this Section 6.3, "Annual Compensation"
of an Employee means his average regular annual
compensation during the five calendar years
immediately preceding the earlier of (i) the date
of termination of the Plan, or complete
discontinuance of contributions hereunder, or (ii)
the date of commencement of Benefit payments under
the Plan to that Employee.
6.4 Merger, Consolidation and Transfer of Plan Assets. The Board
of Directors or Compensation Committee may direct the
Administrator to do all things necessary to effect a merger or
consolidation of the Plan with, or the transfer of all or a
part of the assets and liabilities of the Plan to, another
plan (or plans) if and only if
(a) Each trust forming a part of such plan (or plans) is a
qualified trust under Section 401 of the Internal Revenue
Code of 1986 and that each such trust is exempt from
Federal Income Tax under Section 501 of the Internal
Revenue Code of 1986;
(b) Each Member of the Plan would (if the Plan then
terminated) receive a Benefit immediately after the
merger, consolidation or transfer which is equal to or
greater than the Benefit he would have been entitled to
receive immediately before the merger, consolidation or
transfer (if the Plan had then terminated); and
(c) The Administrator shall have timely filed, pursuant to
Section 6058 of the Internal Revenue Code of 1954, an
actuarial statement of valuation of evidencing compliance
with (b) above.
The Board of Directors or Compensation Committee, the
Trustees and the Administrator shall be entitled to rely
conclusively on the certificate of an actuary stating
that the condition set forth in (b) above has been met.
ARTICLE VII
Miscellaneous
7.1 Limitations on Employees' Rights. No Employee, Member or
other person shall have any right or claim to any Benefit
under the Plan except in accordance with the provisions of the
Plan, and then only to the extent that there are funds
available therefore in the hands of the Trustees. The
establishment of the Plan shall not be construed as creating
any contract of employment between any Employer and any person
or otherwise conferring upon any person any legal right to
continuation of employment, nor as limiting or qualifying the
right of each Employer to discharge any of its employees
without regard to the effect that such discharge might have
upon such employee's rights under the Plan.
7.2 Non-Assignability of Rights. No interest, right or claim in
or to any part of the Trust Fund or any payment therefrom
shall be assignable, transferable or subject to sale,
mortgage, pledge, hypothecation, commutation, anticipation,
garnishment, attachment, execution, or levy of any kind, and
the Administrator shall not recognize any attempt to assign,
transfer, sell, mortgage, pledge, hypothecate, commute, or
anticipate the same, except to the extent required by law. If
any person entitled to any Benefit under the Plan shall
adjudicated bankrupt or shall attempt to assign, transfer,
sell, mortgage, pledge hypothecate, commute, or anticipate the
same, then the Administrator in his discretion may forthwith
terminate the right of such person to such Benefit and hold or
apply the amount thereof for the Benefit of such person, his
spouse, children or other dependents or any of them, in such
manner and in such proportion as the Administrator in his
discretion shall determine.
7.3 Facility of Payments. In the event that the Administrator
shall find that any person to whom a Benefit is payable under
the Plan is unable to care for his affairs because of illness
or accident, or otherwise, the Administrator may direct that
any Benefit payments due shall be paid to the duly appointed
legal representative of such person, or if there be no duly
appointed legal representative, to the spouse, a child, a
parent or other blood relative of the person, or to any person
deemed by the Administrator to have incurred expense for the
benefit of such person, and any such payments so made shall be
a complete discharge of the liabilities of the Plan therefor.
7.4 Refund of Employer Contributions. Once a contribution is made
to the Plan by any Employer on behalf of its Employees, it is
not refundable to the Employer unless the contribution:
(a) was made by a mistake of fact;
(b) was made conditioned upon a favorable determination by
the Internal Revenue Service and such a determination is
not received; or
(c) was made conditioned upon the contribution being allowed
as a deduction for Federal income tax purposes and such
deduction is disallowed.
Any refund under (a) must be made within one year from
the date the contribution was made to the Plan, and any
refund under (b) and (c) must be made within one year
from the date of failure to receive a favorable
determination, or the date of disallowance of the tax
deduction, respectively.
7.5 Number and Gender. Where from the context it appears
appropriate, each term used in this Plan in either the
singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine, feminine
or neuter gender shall include the masculine, feminine and
neuter.
7.6 Captions. Captions or Sections of this Plan are inserted for
convenience of reference only, and the Plan is not to be
construed by interpretation thereof.
7.7 Applicable Law. This Plan shall be interpreted, construed and
administered in accordance with the laws of the State of New
York (to the extent not preempted by ERISA), and with a view
toward compliance with ERISA.
ARTICLE VIII
Top-Heavy Plan Provisions
8.1 General Rule. For any calendar year (hereinafter called a
"Plan Year") in which this Plan is a "Top-Heavy Plan" as
defined in Section 8.7 below, any other provisions of this
Plan to the contrary notwithstanding, this Plan shall be
subject to the following provisions:
(a) the vesting provisions of Section 8.2
(b) the minimum benefit provisions of Section 8.3
(c) the limitation on compensation set by Section 8.4
(d) the limitation on benefits set by Section 8.5
8.2 Vesting Provisions. Each Member who (i) has completed an Hour
of Service during any Plan Year in which the Plan is top-heavy
and (ii) has completed the number of Years of Service
specified in the following table shall have a nonforfeitable
right to the percentage of the Retirement Credit under this
Plan correspondingly shown in the following table:
Nonforfeitable
Years of Percentage
Service Of Retirement Credit
Less than 2 years 0%
2 20%
3 40%
4 60%
5 80%
6 or more years 100%
"Years of Service" as used in this Paragraph 8.2 shall
constitute the same years of Active Service as defined in
Section 1.1 of this Plan as used to determine the Member's
vesting percentage under Section 1.25 and 3.5.
Each Member's nonforfeitable Retirement Credit shall not be
less than his nonforfeitable Retirement Credit determined as
of the last day of the last Plan Year in which the Plan was a
Top-Heavy Plan. If the Plan ceases to be top-heavy, each
Member with five (5) or more Years of Service, whether of not
consecutive, shall have his nonforfeitable Retirement Credit
determined in accordance with this Section 8.2 and Section
1.25. Each such Member shall have the right to elect the
applicable schedule within 60 days after the day the Member is
issued written notice by the Committee, or as otherwise
provided in accordance with regulations issued under the
provision of the Internal Revenue Code, relating to changes in
the vesting schedule.
This provision shall apply without regard to contributions or
benefits under Social Security or any other Federal or State
Law.
8.3 Minimum Benefit Provisions. Each Member who (i) is a Non-Key
Employee (as defined in Section 8.9 below) and (ii) has
completed at least 1,000 Hours of Service during the first 12
months of his Employment or a calendar year thereafter shall
be entitled to a Retirement allowance in the form of an annual
pension benefit (as defined in paragraph (1) below) that shall
be not less than the applicable percentage (as defined in
paragraph (2) below) of the Participant's average annual
compensation for years in the testing period (as defined in
paragraph (3) below).
(1) "Annual pension benefit" mean a benefit payable annually
in the form of a single life annuity (with no ancillary
benefits) beginning at Normal Retirement Date or its
Equivalent Actuarial Value.
(2) "Applicable percentage" means the lesser of two percent
multiplied by the number of Top-Heavy Plan Years of
Service (as defined in paragraph (4) below) or 20
percent.
(3) "Testing period" means, with respect to a Member, the
period of consecutive years (not exceeding five) of
employment during which the Member had the greatest
aggregate compensation from the Employer. The testing
period shall not include any year of employment not
included as a Year of Service as defined in paragraph (4)
below. The testing period shall also not include any
Year of Service that ends in a Plan Year beginning before
January 1, 1984 or during which the Plan was not a
Top-Heavy Plan.
(4) "Years of Service" means such Active Service as defined
in Section 1.25 of this Plan and used to determine the
Participants nonforfeitable Retirement Credit under
Section 3.5.
Benefits taken into account under this section shall not
include any benefits payable under the Social Security Act or
any other Federal or State law.
8.4 Limitation on Compensation. Annual compensation taken into
account under this Section 8.4 and under the definition of
Monthly Compensation as set forth in Section 1.17 and average
Monthly Compensation determined in Section 3.1 for purposes of
computing benefits under this Plan shall not exceed the first
$200,000, provided that such limit shall be adjusted
automatically for each Plan Year to the amount prescribed by
the Secretary of the Treasury or his delegate pursuant to
regulations for the calendar year in which such Plan Year
commences.
8.5 Limitations on Benefits. In the event that an Employer should
maintain a defined contribution plan providing contributions
on behalf of Employees who are also Members in this Plan, one
of the two following provisions shall apply:
(a) If for the Plan Year this Plan would not be a "Top-Heavy
Plan" as defined in Section 8.7 below if "90 percent"
were substituted for "60 percent," then Section 8.3 shall
apply for such Plan Year as if amended so that the
"applicable percentage" means the lesser of three percent
multiplied by the number of Years of Service (as defined
in paragraph (4) of Section 8.3) during which the Plan
would be top-heavy and the overall applicable percentage
does not exceed the lesser of (i) 30% or (ii) 20% plus 1%
for each year the Plan is taken into account under this
Section 8.5(a).
(b) If for the Plan Year this Plan would continue to be a
"Top-Heavy Plan" as defined in Section 8.7 below if "90
percent" were substituted for "60 percent," then the
denominator of both the defined contribution plan
fraction and the defined benefit plan fraction shall be
calculated as set for in Section 3.10 for the Plan by
substituting "1.0" for "1.25" in each place such figure
appears, except with respect to any individual for whom
there are no Employer contributions, forfeitures or
voluntary nondeductible contributions allocated or any
accruals for such individual under the defined benefit
plan.
8.6 Coordination with Other Plans. In the event that a defined
contribution plan or another defined benefit plan maintained
by an Employer provides contributions or benefits on behalf of
Members in this Plan, such other plan shall be treated as a
part of this Plan pursuant to applicable principles (such as
Rev. Rul. 81-202 or any successor ruling) in determining
whether this Plan satisfies the requirements of Section 8.3 of
this article. Such determination shall be made upon the
advice of counsel to the Committee.
8.7 Top-Heavy Plan Definition. This Plan shall be a "Top-Heavy
Plan" for any Plan Years if, as of the determination date (as
defined in paragraph (1) below), the present value (as
determined in Paragraph (2) below) of the cumulative accrued
benefits under the Plan for Members (including former Members)
who are Key Employees (as defined in Section 8.8 below)
exceeds 60% of the present value of the cumulative accrued
benefits under the Plan for all Members, excluding former Key
Employees, or if this Plan is required to be in an aggregation
group (as defined in paragraph (3) below) which for such Plan
Year is a Top-Heavy Group (as defined in paragraph (4) below).
However, the Plan shall not be considered a "Top-Heavy Plan"
for any Plan Year in which the Plan is part of a Required or
Permissive Aggregation Group which is not top-heavy. For
purposes of making this determination, the present value of
accrued benefits for a participant (1) who is not a key
employee but who was a key employee in a prior year or (2) for
plan years beginning after 12/31/84, who has not performed any
service for the Employer at any time during the 5-year period
ending on the determination date, shall be disregarded.
(1) "Determination Date" means for any Plan Year the last day
of the immediately preceding Plan Year.
(2) The present value shall be determined as of the most
recent valuation date that is within the twelve-month
period ending on the Determination Date and as described
in the regulations under the Internal Revenue Code.
(3) "Aggregation Group" means the group of plans, if any,
that includes both the group of plans that are required
to be aggregated and the group of plans that are
permitted to be aggregated.
(A) The group of plans that are required to be
aggregated (the "required aggregation group")
includes:
(i) Each plan (including any terminated plan) of
an Employer in which a Key Employee is a
Member, including collectively bargained
plans, and
(ii) Each other plan (including any terminated
plan), including collectively bargained plans
of an Employer which enables a plan in which a
Key Employee is a Member to meet the
requirements of the Internal Revenue Code,
prohibiting discrimination as to contributions
or benefits in favor of Members who are
officers, shareholders or the highly
compensated or prescribing the minimum
participation standards.
(B) The group of plans that are permitted to be
aggregated (the "permissive aggregation group:)
includes the required aggregation group plus one or
more plans of an Employer that is not part of the
required aggregation group and that the Committee
certifies as constituting a plan within the
permissive aggregation group. Such plan or plans
may be added to the permissive aggregation group
only if, after the addition, the aggregation group
as a whole continues not to discriminate as to
contributions or benefits in favor of officers,
shareholders or the highly compensated and to meet
the minimum participation standards under the Code.
(4) "Top-Heavy Group" means the aggregation group, if as of
the applicable Determination Date, the sum of the present
value of the cumulative accrued benefits for Key
Employees under all defined benefit plans included in the
aggregation group plus the aggregate of the accounts of
Key Employees under all defined contribution plans
included in the aggregation group exceeds 60% of the sum
of the present value of the cumulative accrued benefits
for all Members, excluding former Key Employees, under
such defined benefit plans plus the aggregate accounts
for all Participants, excluding former Key Employees,
under such defined contribution plans. If the
aggregation group that is a Top-Heavy Group is a required
aggregation group, each plan in the group will be
top-heavy. If the aggregation group that is a Top-Heavy
Group is a permissive aggregation group, only those plans
that are part of the required aggregation group will be
treated as top-heavy. If the aggregation group is not a
Top-Heavy Group, no plan within such group will be
top-heavy.
(5) In determining whether this plan constitutes a "Top-Heavy
Plan", the Committee shall make the following adjustments
in connection therewith:
(A) When more than one plan is aggregated, the
Committee shall determine separately for each plan
as of each plan's determination date the present
value of the accrued benefits or account balance.
The results shall then be aggregated by adding the
results of each plan as of the Determination Dates
for such plans that fall within the same calendar
year.
(B) In determining the present value of the cumulative
accrued benefit or the amount of the account of any
Member, such present value or account shall include
the amount in dollars value of the aggregate
distributions made to such Member under the
applicable plan during the five-year period ending
on the Determination Date, unless reflected in the
value of the accrued benefit or account balance as
of the most recent valuation date. Such amounts
shall include distributions to Members which
represented the entire amount credited to their
accounts under the applicable plan.
(C) Further, in making such determination, such present
value or such account shall include any rollover
contribution (or similar transfer), as follows:
(i) If the rollover contribution (or similar
transfer) is initiated by the Member or made
to or from a plan maintained by another
Affiliate, the plan providing the distribution
shall include such distribution in the present
value or such account; the plan accepting the
distribution shall not include such
distribution in the present value or such
account unless the plan accepted it before
January 1, 1984.
(ii) If the rollover contribution (or similar
transfer) is not initiated by the Employee or
made from a plan maintained by another
Employer, the plan accepting the distribution
shall include such distribution in the present
value or such account, whether the plan
accepted the distribution before or after
January 1, 1984; the plan making the
distribution shall not include the
distribution in the present value or such
account.
(D) Effective January 1, 1985, if any individual has
not received any compensation from any Employer
maintaining the plan (other than benefits under the
plan) at any time during the 5-year period ending
on the Determination Date, any accrued benefit for
such individual (and the account of such
individual) shall not be taken into account.
8.8 Key Employee. The term "Key Employee" means any Employee or
former Employee under this Plan who, at any time during the
Plan Year containing the Determination Date or during any of
the four preceding Plan Years, is or was one of the following:
(a) An officer of the Employer. However, an officer earning
not more than one and one-half times the then applicable
limit in Section 415(c)(1)(A) of the Code shall not be
considered a Key Employee. Whether an individual is an
officer shall be determined by the Committee on the basis
of all the facts and circumstances, such as an
individual's authority, duties and term of office, not on
the mere fact that the individual has the title of an
officer. For any such Plan Year, there shall be treated
as officers no more than the lesser of:
(1) 50 employees; or
(2) the greater of three employees or 10 percent
of the employees.
For the purpose of the preceding sentence, the
highest-paid officers shall be selected first.
(b) One of the ten employees owning (or considered as owning,
within the meaning of the constructive ownership rules of
the Code) the largest interests in the Employer. An
Employee who has some ownership interest is considered to
be one of the top ten owners unless at least ten other
employees own a greater interest that that employee.
However, an Employee will not be considered a top ten
owner for a Plan Year if the Employee does not earn more
that than the applicable limitation in Section
415(c)(1)(A) of the Code.
(c) Any person who owns (or is considered as owning within
the meaning of the constructive ownership rules of the
Code) more than five percent of the outstanding stock of
the Employer or stock possessing more than five percent
of the combined total voting power of all stock of the
Employer.
(d) A person satisfying (c) above if "one percent" were
substituted for "five percent" and having an annual
Compensation of more than $150,000.
For purposes of parts (a), (b), (c) and (d) of this
Section 8.8, a beneficiary of a Key Employee shall be
treated as a Key Employee. For purposes of Subclauses
(b), (c) and (d), each individual Employer is treated
separately in determining ownership percentages; but, in
determining the amount of compensation, all Employers are
taken into account.
8.9 Non-Key Employee. The term "Non-Key Employee" means any
Member (and any beneficiary of such Member) who is not a Key
Employee.
8.10 Employer. The term "Employer" means the definition of
Employer found in Section 1.11 of the Plan.
8.11 Collective Bargaining Rules. The provisions of Section 8.2,
8.3, 8.4 and 8.5 above do not apply with respect to any Member
included in a unit of employees covered by a collective
bargaining agreement, unless the application of such sections
has been agreed upon with the collective bargaining agent.
ARTICLE IX
DIRECT ROLLOVERS
9.1 Distributee's Election. This Article applies to distributions
made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Article, a
distributee may elect, at the time and in the manner
prescribed by the Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover.
9.2 Eligible Rollover Distribution. An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the
Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
9.3 Eligible Retirement Plan. An eligible retirement plan is an
individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in
section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
9.4 Distributee. A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
9.5 Direct Rollover. A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the distributee.
RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of December 14, 1993
Among
THE CONTINENTAL INSURANCE COMPANY
BOSTON OLD COLONY INSURANCE COMPANY
THE BUCKEYE UNION INSURANCE COMPANY
CASUALTY INSURANCE COMPANY
COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J.
THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY
CONTINENTAL LLOYD'S INSURANCE COMPANY
CONTINENTAL REINSURANCE CORPORATION
THE FIDELITY AND CASUALTY COMPANY OF NEW YORK
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY
THE GLENS FALLS INSURANCE COMPANY
KANSAS CITY FIRE AND MARINE INSURANCE COMPANY
THE MAYFLOWER INSURANCE COMPANY, LTD.
NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS
NIAGARA FIRE INSURANCE COMPANY
PACIFIC INSURANCE COMPANY
WORKERS' COMPENSATION AND INDEMNITY COMPANY OF CALIFORNIA
Collectively as Seller
and
THE PURCHASERS NAMED HEREIN
as Purchasers
and
CITICORP NORTH AMERICA, INC.
as Agent
TABLE OF CONTENTS
Section Page
Preliminary Statements.................. 1
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms................... 2
Adverse Claim........................... 2
Affiliate............................... 2
Assignee................................ 3
Assignment.............................. 3
Business Day............................ 3
Cash Purchase Price..................... 3
Citibank................................ 3
Collection Agent........................ 3
Collection Agent Fee.................... 3
Collections............................. 3
Company................................. 4
Continental............................. 4
Contract................................ 4
Credit and Collection Policy............ 4
Debt.................................... 4
Default Rate............................ 4
Defaulted Receivable.................... 5
Eligible Receivable..................... 5
ERISA................................... 7
Holdback Amount......................... 7
Holdback Termination Date............... 7
Initial Purchasers...................... 7
Insured................................. 7
Intercompany Pooling Agreement.......... 7
Majority Purchasers..................... 8
Originator.............................. 8
Outstanding Balance..................... 8
Ownership Document...................... 8
Past Due................................ 8
Person.................................. 8
Purchase................................ 8
Purchased Receivables................... 8
Purchaser............................... 9
Purchaser Report........................ 9
Receivable.............................. 9
Related Security........................ 9
Section Page
Seller.................................. 9
Settlement Date......................... 10
Share Percentage........................ 10
Target Amount........................... 10
UCC..................................... 10
Section 1.02 Other Terms............................. 10
Section 1.03 Computation of Time Periods............. 10
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASE
Section 2.01 The Purchase............................ 11
Section 2.02 Making the Purchase from the Seller..... 11
Section 2.03 Fees.................................... 12
Section 2.04 Settlement Procedures................... 12
Section 2.05 Commissions............................. 15
Section 2.06 Payments and Computations, Etc.......... 16
Section 2.07 Sharing of Payments, Etc................ 16
ARTICLE III
CONDITIONS OF PURCHASE
Section 3.01 Conditions Precedent to Purchase........ 17
Section 3.02 Conditions Subsequent to Purchase....... 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of
Each Originator......................... 20
Section Page
ARTICLE V
GENERAL COVENANTS OF EACH ORIGINATOR
Section 5.01 Affirmative Covenants of Each
Originator.............................. 25
Section 5.02 Negative Covenants of Each Originator... 27
ARTICLE VI
ADMINISTRATION AND COLLECTION
Section 6.01 Designation of Collection Agent......... 28
Section 6.02 Duties of Collection Agent.............. 29
Section 6.03 Rights of the Agent..................... 31
Section 6.04 Responsibilities of the Seller.......... 32
Section 6.05 Further Action Evidencing
the Purchase.......................... 33
Section 6.06 Application of Collections.............. 34
ARTICLE VII
THE AGENT
Section 7.01 Authorization and Action................ 34
Section 7.02 Agent's Reliance, Etc................... 35
Section 7.03 CNA and Affiliates...................... 36
Section 7.04 Purchaser's Purchase Decision........... 36
ARTICLE VIII
ASSIGNMENT OF SHARE PERCENTAGE
Section 8.01 Assignment.............................. 36
Section 8.02 Authorization of Agent.................. 37
Section Page
Section 8.03 Payments to Agent....................... 37
Section 8.04 Assignment to Seller.................... 37
ARTICLE IX
INDEMNIFICATION
Section 9.01 Indemnities by the Seller and
the Originators....................... 38
ARTICLE X
MISCELLANEOUS
Section 10.01 Amendments, Etc......................... 40
Section 10.02 Notices, Etc............................ 41
Section 10.03 No Waiver; Remedies..................... 41
Section 10.04 Binding Effect; Assignability........... 41
Section 10.05 Governing Law........................... 42
Section 10.06 Costs, Expenses and Taxes............... 42
Section 10.07 No Proceedings.......................... 43
Section 10.08 Confidentiality......................... 43
Section 10.09 Trigger Events.......................... 45
Section 10.10 Independent Decision.................... 48
Section 10.11 Execution in Counterparts............... 48
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE I List of Purchased Receivables
SCHEDULE II Purchaser Allocations
SCHEDULE III Forecasted Collections and Agents' Commissions
EXHIBIT A Form of Ownership Document
EXHIBIT B Form of Assignment of Purchased Receivable
EXHIBIT C Form of Contracts
EXHIBIT D Form of Purchaser Report
EXHIBIT E Form of Opinion(s) of Counsel for Seller and
Each Originator
EXHIBIT E-1 Form of Opinion of Counsel for The Continental
Corporation
EXHIBIT E-2 Form of Opinion of Counsel for Seller and
Each Originator
EXHIBIT F List of Offices of Each Originator Where
Records Are Kept
EXHIBIT G Form of Company Agreement
RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of December 14, 1993
THE CONTINENTAL INSURANCE COMPANY, a New Hampshire
corporation, BOSTON OLD COLONY INSURANCE COMPANY, a Massachusetts
corporation, THE BUCKEYE UNION INSURANCE COMPANY, an Ohio
corporation, CASUALTY INSURANCE COMPANY, an Illinois corporation,
COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J., a New Jersey
corporation, THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY, a New
Jersey corporation, CONTINENTAL LLOYD'S INSURANCE COMPANY, a
Lloyd's organization formed under the Texas Insurance Code,
CONTINENTAL REINSURANCE CORPORATION, a California corporation, THE
FIDELITY AND CASUALTY COMPANY OF NEW YORK, a New Hampshire
corporation, FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, a
New Jersey corporation, THE GLENS FALLS INSURANCE COMPANY, a
Delaware corporation, KANSAS CITY FIRE AND MARINE INSURANCE
COMPANY, a Missouri corporation, THE MAYFLOWER INSURANCE COMPANY,
LTD., an Indiana corporation, NATIONAL-BEN FRANKLIN INSURANCE
COMPANY OF ILLINOIS, an Illinois corporation, NIAGARA FIRE
INSURANCE COMPANY, a Delaware corporation, PACIFIC INSURANCE
COMPANY, a California corporation, and WORKERS' COMPENSATION AND
INDEMNITY COMPANY OF CALIFORNIA, a California corporation (each
such corporation, individually, being herein referred to as an
"Originator" and, collectively, as the "Originators" or the
"Seller"), the purchasers listed on the signature pages hereof
(collectively with any Person that has become an Assignee hereunder
pursuant to Section 8.01, being the "Purchasers" and, individually,
a "Purchaser"), and CITICORP NORTH AMERICA, INC., a Delaware
corporation, individually ("CNA") and as agent for the Purchasers
(the "Agent"), agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are
capitalized and used throughout this Agreement (in addition to
those defined above) are defined in Article I of this Agreement.
(2) As of the date hereof, the Originators constitute all
of the parties to that certain Intercompany Pooling Agreement
effective January 1, 1984 as heretofore amended by certain addenda
thereto (as so amended and as further, from time to time, amended,
modified or supplemented pursuant to one or more addenda or
otherwise, the "Intercompany Pooling Agreement"), pursuant to which
each Originator (other than Continental, Pacific Insurance Company,
Casualty Insurance Company and Workers' Compensation and Indemnity
Company of California) sold, transferred and assigned, and
continues to sell, transfer and assign, to Continental certain
accounts receivable, including the Receivables, to the extent of
such Originator's right, title and interest therein, and
simultaneously therewith Continental sold, transferred and
assigned, and continues to sell, transfer and assign, to each
Originator (other than Continental) a percentage interest and
participation in such accounts receivable and in certain of its
accounts receivable, including the Receivables, to the extent of
its right, title and interest therein.
(3) The Seller wishes to sell and the Purchasers are
prepared to purchase certain Receivables and to assume the
liabilities for commission expenses related thereto.
(4) CNA has been requested and is prepared to act as
Agent.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim of any Person other than a
right or claim (i) created by this Agreement in favor of the
Purchasers, (ii) as against any Contract (but not the related
Purchased Receivables) for payment of a loss, asserted by a Person
who is a loss payee under such Contract, (iii) as against any
Contract (but not the related Purchased Receivables) for
contribution for payment of a loss, asserted by any Originator by
reason of reinsurance provided for in the Intercompany Pooling
Agreement or (iv) asserted by any insurance agent with respect to
commissions, including any lien, security interest, charge or
encumbrance relating to such agent's claim, but only to the extent
the rights and claims referred to in this clause (iv) do not in the
aggregate exceed the amount referred to in Section 4.01(p).
"Affiliate" means (i) as to any Person, any other Person
that (x) directly or indirectly is in control of, is controlled by
or is under common control with such Person or (y) is a director or
officer of such Person or of any other Person that directly or
indirectly is in control of, is controlled by or is under common
control with such Person, (ii) as to CNA, shall also include
Corporate Asset Funding Company, Inc., (iii) as to Atlantic Asset
Securitization Corp., shall also include Credit Lyonnais, (iv) as
to Falcon Asset Securitization Corporation, shall also include The
First National Bank of Chicago and (v) as to Sheffield Receivables
Corporation, shall also include Barclays Bank PLC.
"Assignee" means any Person to which a Share Percentage of
Purchased Receivables has been, or shall be, assigned by a
Purchaser pursuant to Section 8.01; provided, however, that
"Assignee" shall not include any Person that is engaged primarily,
or is a member of a group (consisting of such Person and all of its
Affiliates) which is engaged primarily, in the business of
underwriting or selling insurance.
"Assignment" means an assignment, in substantially the
form of Exhibit B, by which any Share Percentage shall be assigned.
"Business Day" means any day other than a Saturday, Sunday
or public holiday or the equivalent for banks in New York City or
Chicago.
"Cash Purchase Price" for a Purchaser means the amount
shown as the "Cash Purchase Price" for such Purchaser on Schedule
II.
"Citibank" means Citibank, N.A., a national banking
association.
"Collection Agent" means at any time the Person then
authorized pursuant to Article VI to service, administer and
collect on behalf of the Purchasers the Receivables.
"Collection Agent Fee" has the meaning assigned to that
term in Section 2.03.
"Collections" means, with respect to any Purchased
Receivable, all cash collections and other cash proceeds of such
Purchased Receivable, including, without limitation, all cash
proceeds of Related Security with respect to such Purchased
Receivable, and any Collection of such Purchased Receivable deemed
to have been received pursuant to clauses (i) and (ii) of Section
2.04(c).
"Company" means The Continental Corporation, a New York
corporation.
"Continental" means The Continental Insurance Company, a
New Hampshire corporation, and any corporation which may succeed to
the business and assets of such corporation by merger or
consolidation or acquisition of assets.
"Contract" means a policy of insurance issued by an
Originator in favor of another Person, and billed by an invoice in
substantially the form set forth in Exhibit C, pursuant to or under
which such Originator shall provide insurance to such other Person.
"Credit and Collection Policy" means those credit and
collection policies and practices existing on the date hereof which
are being followed by the Seller with respect to Contracts and
Receivables related thereto, including those policies and practices
maintained by the Seller's computer system, as modified in
compliance with Section 5.02(c).
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price
of property or services, (iv) obligations as lessee under leases
which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, (v)
obligations under direct or indirect guaranties (other than
obligations arising under insurance policies and bonds issued by
any Originator in the ordinary course of its business) in respect
of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above (other than
obligations arising under insurance policies and bonds issued by
any Originator in the ordinary course of its business), and (vi)
liabilities in respect of unfunded benefits under plans covered by
Title IV of ERISA.
"Default Rate" means a fluctuating interest rate per annum
as shall be in effect from time to time, which rate per annum shall
at all times be equal to 2% per annum plus the higher of:
(a) the rate of interest announced publicly by Citibank
in New York, New York, from time to time as Citibank's base
rate; or
(b) 1/2 of one percent above the latest three-week moving
average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major
United States money market banks, such three-week moving
average being determined weekly on each Monday (or if such day
is not a Business Day, on the next succeeding Business Day) for
the three-week period ending on the previous Friday by Citibank
on the basis of such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of New
York or, if such publication shall be suspended or terminated,
on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of
recognized standing, in either case adjusted to the nearest 1/4
of one percent or, if there is no nearest 1/4 of one percent,
to the next higher 1/4 of one percent.
"Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, is Past
Due;
(ii) as to which the Insured thereof or any other Person
obligated thereon or owning any Related Security in respect
thereof, has taken any action, or suffered any event to occur,
of the type described in Section 10.09(h);
(iii) which, consistent with the Credit and Collection
Policy, would be written off the Seller's books as
uncollectible;
(iv) as to which the Insured thereof or the Seller has
breached the Contract relating thereto; or
(v) which the insurance agent responsible for the
collection thereof has been unable to collect and an Originator
has undertaken to collect directly from the Insured.
"Eligible Receivable" means a Receivable:
(i) the Insured of which is a United States resident and
is not a government or a governmental subdivision or agency;
provided that the Insured may be a government or a governmental
subdivision or agency so long as the aggregate Outstanding
Balance of Receivables of such Insureds purchased hereunder
does not exceed 10% of the aggregate Cash Purchase Price for
all Purchasers;
(ii) the Insured of which is listed on Schedule I hereto;
(iii) the Insured of which is not the Insured on any
Contract with respect to which there is a Defaulted Receivable;
(iv) which arises under a Contract currently in effect or
the effective date of which will be within 30 days after the
date of Purchase;
(v) which, on the date of Purchase, is not a Defaulted
Receivable;
(vi) which, according to the Contract related thereto, is
required to be paid in full by the earlier of (a) one year
after the effective date of the Contract giving rise thereto or
(b) one year after the date of Purchase hereunder;
(vii) which arises under a Contract which has been duly
authorized and which, together with such Receivable, is in full
force and effect (or which will be in full force and effect
within 30 days after the date of Purchase) and which is not on
the date of Purchase the subject of any dispute;
(viii) which does not arise under a Contract underwritten by
the Marine Office of America Corporation or Associated Aviation
Underwriters providing for commercial marine or commercial
aviation insurance;
(ix) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and
with respect to which Receivable the Originator is not in
violation of any such law, rule or regulation in any material
respect;
(x) which satisfies all applicable requirements of the
Credit and Collection Policy;
(xi) which is an "account receivable representing all or
part of the sales price of merchandise, insurance or services"
within the meaning of Section 3(c)(5) of the Investment Company
Act of 1940, as amended;
(xii) which arose under a transaction which is a "current
transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended;
(xiii) which is an "account" or "general intangible" within
the meaning of Section 9-106 of the UCC of all applicable
jurisdictions;
(xiv) which is denominated and payable only in United
States dollars in the United States of America;
(xv) as to which, at or prior to the time of Purchase
hereunder, the Agent has not notified the Seller that the Agent
has determined, in its sole discretion, that such Receivable
(or class of Receivables) is not acceptable for purchase by a
Purchaser hereunder; and
(xvi) the Outstanding Balance of which, together with the
Outstanding Balance of each other Purchased Receivable of the
same Insured, does not exceed more than 33% of the aggregate
Holdback Amount for all Purchasers.
"ERISA" means the U.S. Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Holdback Amount" for a Purchaser means the amount shown
as the "Holdback Amount" for such Purchaser on Schedule II.
"Holdback Termination Date" has the meaning specified in
Section 2.04(d).
"Initial Purchasers" means the Purchasers as of the date
of the Purchase.
"Insured" means a Person party to a Contract in favor of
whom the policy of insurance evidenced by such Contract has been
issued.
"Intercompany Pooling Agreement" has the meaning specified
in the Preliminary Statements.
"Majority Purchasers" means at any time at least two
Purchasers owning in aggregate a Share Percentage of the Purchased
Receivables of more than 50.00%.
"Originator" has the meaning assigned to such term in the
paragraph preceding the Preliminary Statements.
"Outstanding Balance" means, with respect to any
Receivable at any time, the then outstanding principal balance
thereof without giving effect to any deductions for the payment of
commissions to agents of the Originators in accordance with
Section 2.05, and "Outstanding Balance" means, with respect to all
Purchased Receivables at any time, the then outstanding aggregate
principal balance of all Purchased Receivables without giving
effect to any deductions for the payment of commissions to agents
of the Originators in accordance with Section 2.05.
"Ownership Document" means a document delivered by the
Seller to a Purchaser, in substantially the form of Exhibit A,
evidencing such Purchaser's undivided ownership interest in the
Purchased Receivables.
"Past Due" means, with respect to a Receivable billed
directly by the Seller, 30 days past the date on which such
Receivable is originally due from the Insured to the Seller under
the terms of the Contract, and with respect to a Receivable billed
by an insurance agent of the Seller, 45 days after the last day of
the calendar month in which such Receivable was originally due to
such agent by the Insured under the terms of the Contract (but in
no event more than 75 days past the date such Receivable was
originally due from the Insured to such agent under the terms of
the Contract); for administrative convenience, February shall be
deemed to have 30 days.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Purchase" means the purchase of the Purchased Receivables
that are listed on Schedule I.
"Purchased Receivables" means Receivables purchased from
the Seller, in accordance with Section 2.02(a) and listed on
Schedule I hereto.
"Purchaser" shall have the meaning specified in the
introductory paragraph hereof.
"Purchaser Report" means a report, in substantially the
form of Exhibit D and including such other information as any of
the Initial Purchasers or the Agent, as applicable, may reasonably
request, furnished by the Collection Agent to the Initial
Purchasers or the Agent pursuant to Section 2.04(e).
"Receivable" means all amounts (including premiums and
advance billings for premiums but excluding service charges imposed
on installment payments) from time to time payable by an Insured to
an Originator under (or, in the case of advance billings, relating
to) a Contract arising out of the sale of insurance. For purposes
of Section 2.04(c)(i), each invoice for payment pursuant to such
Contract shall be deemed, for administrative convenience, to
represent a separate Receivable for purposes of this Agreement. In
the case of Receivables arising from a Contract in respect of
worker's compensation or other coverages subject to retrospective
adjustment, the Receivable shall mean the deposit premium without
adjustment for subsequent audit.
"Related Security" means with respect to any Receivable:
(i) all security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such
Receivable or otherwise; and
(ii) all guarantees and other agreements or arrangements
of whatever character from time to time supporting or securing
payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise.
"Seller" has the meaning assigned to such term in the
paragraph preceding the Preliminary Statements. The parties hereto
agree that at any time and from time to time the Originators may
designate a single Originator to act for and on behalf of the
Seller for all purposes under this Agreement; Continental is hereby
so designated (any redesignation shall be effective for purposes
hereof by notice from each of the Originators to the Agent
designating another Originator to act for and on behalf of the
Seller hereunder).
"Settlement Date" means each date set forth on Schedule
III as a "Settlement Date", and in the case of any month subsequent
to such dates, the 15th Business Day after the last day of each
such calendar month.
"Share Percentage" means (a) for each Initial Purchaser,
the undivided percentage interest set forth for such Purchaser on
Schedule II to this Agreement; and (b) immediately following each
assignment pursuant to Article VIII by any assignor to any
Assignee(s), an undivided percentage interest equal (i) in the case
of the Share Percentage of such Assignee, to the product of (A) the
Share Percentage of such assignor immediately prior to such
assignment multiplied by (B) 100% (in the case of an assignment in
full) or the fraction indicated in the related Assignment (in the
case of a partial Assignment) and (ii) in the case of the Share
Percentage of such assignor, to the difference between the Share
Percentage of such assignor immediately prior to giving effect to
such assignment and the related Share Percentage of such
Assignee(s) calculated pursuant to clause (i) above.
"Target Amount" for a Purchaser means the amount shown as
"Target Amount" for such Purchaser on Schedule II.
"UCC" means the Uniform Commercial Code as from time to
time in effect in the specified jurisdiction.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in
Article 9 of the UCC in effect in the State of New York and not
specifically defined herein are used herein as defined in such
Article 9.
SECTION 1.03. Computation of Time Periods. Unless
otherwise stated in this Agreement, in the computation of a period
of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until"
each means "to but excluding".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASE
SECTION 2.01. The Purchase. On the terms and conditions
hereinafter set forth, each Purchaser may, in its sole discretion,
purchase from the Seller, without recourse except for such limited
recourse as is expressly provided for herein, such Purchaser's
Share Percentage of the Receivables to be listed on Schedule I
hereto for a purchase price set forth in Section 2.02.
SECTION 2.02. Making the Purchase from the Seller. (a)
The Purchase shall be made on at least two Business Days' notice
(or such lesser notice as the Purchasers may accept) from the
Seller to the Agent, which notice shall specify the date of the
Purchase. The Agent shall promptly thereafter notify each
Purchaser of the date of the Purchase, and each Purchaser shall
promptly notify the Agent, which shall promptly notify the Seller,
whether such Purchaser has determined to make the Purchase. If any
Purchaser elects to make the Purchase, such Purchaser shall, upon
satisfaction of the conditions precedent set forth in Article III,
pay such Purchaser's Cash Purchase Price as provided in subsection
(b) below and such Purchaser's Holdback Amount as and when provided
in Section 2.04 and assume the liability for commissions as set
forth in Section 2.05. If any Purchaser does not elect to purchase
its Share Percentage of the Receivables on the date specified in
this Section 2.02(a), the Seller may in its sole discretion elect
to sell to one or more other Purchasers a modified Share Percentage
of such Receivables as may be agreed between the Seller and such
Purchaser or Purchasers.
(b) If any Purchaser elects to make the Purchase, on the
date of the Purchase such Purchaser shall, upon satisfaction of the
conditions precedent set forth in Article III, make available to
the Agent at its address referred to in Section 10.02 such
Purchaser's Cash Purchase Price payable to the Seller, as set forth
in Section 2.02(a) above, at an account maintained by the Agent
with Citibank as set forth on the signature pages hereof in
immediately available funds. After receipt by the Agent of such
funds, the Agent will pay the same by wire transfer in same day
funds to the Seller, at Chemical Bank, 270 Park Avenue, New York,
New York 10017, Attention: Tony Forgione, for credit to The
Continental Insurance Company (Account Number 140-0-50093).
SECTION 2.03. Fees. Each Purchaser shall pay to the
Collection Agent until the Holdback Termination Date for each
calendar month such Purchaser's Share Percentage of a collection
fee (the "Collection Agent Fee") in an amount equal to 1/4 of 1% of
the amount of Collections collected during such calendar month.
The Collection Agent Fee for any calendar month shall be deducted
by the Collection Agent from the amount due each Purchaser on
account of such Purchased Receivables for such calendar month
unless the Purchasers and the Collection Agent otherwise agree that
such Collection Agent Fee shall be paid monthly in arrears by each
Purchaser, in an amount equal to such Purchaser's Share Percentage
of the Collection Agent Fee, on the Settlement Date immediately
succeeding such calendar month.
SECTION 2.04. Settlement Procedures. (a) The Collection
Agent shall, on each day on which Collections of Purchased
Receivables are received by it with respect to any Purchased
Receivable (after removing and remitting to the Originator any
service charges excluded from the definition of "Receivables"),
hold such amount in trust for the Purchasers to be applied as
provided in Section 2.04(b) below.
(b) The Collection Agent shall deposit, to the account of
each Initial Purchaser, or, in the case of all other Purchasers, to
the account of the Agent, such Purchaser's Share Percentage of
Collections of Purchased Receivables into such account maintained
with such financial institution as shall be notified from time to
time in writing by the Agent to the Collection Agent (it being
understood that in the case of each Initial Purchaser such account
shall initially be the account set forth on the signature pages
hereof and in the case of all other Purchasers such account shall
initially be the Agent's account, number 4056-3772, maintained with
Citibank) as follows:
(i) Except as provided in (ii) below, all Collections
received in accordance with Section 2.04 on or before the last
day of each calendar month and not previously deposited in such
accounts by the Collection Agent on a prior Settlement Date
shall be so deposited on the Settlement Date occurring in the
immediately succeeding month; and
(ii) At any time that the Majority Purchasers are
reasonably insecure as to the ability of the Collection Agent
or an Originator to perform under this Agreement or are
reasonably dissatisfied with the collection performance of the
Purchased Receivables, and the Agent has been so advised, or if
any event of a type listed in Section 10.09 (without giving
effect to any grace period or required notice) shall occur and
be continuing, and in each case upon three Business Days'
notice from the Agent (such notice to be delivered at the
request of the Majority Purchasers), the Collection Agent shall
(a) segregate, as soon as possible given the practices in
effect on the date hereof, and (b) deposit as soon as possible,
but no less frequently than weekly, in such accounts all
amounts held in trust for the Purchasers in accordance with
Section 2.04 and not previously deposited in such accounts by
the Collection Agent; provided, however, that if the Purchasers
and the Collection Agent so agree in accordance with Section
2.03, the Collection Agent Fee shall be deducted from deposits
made by the Collection Agent pursuant to this Section 2.04(b).
Promptly after its receipt of any such Collections, the Agent
shall make distribution thereof to each Purchaser other than an
Initial Purchaser in an amount equal to such Purchaser's Share
Percentage of such Collections.
(c) For the purposes of this Section 2.04:
(i) if on any day the Outstanding Balance of any
Purchased Receivable is, or is deemed to be, reduced or
adjusted or no longer payable as a result of any cancellation
or deemed cancellation of a Contract, return of any premium, or
failure of an insurance agent to pay over any premium due to
the Seller or to the Collection Agent, or any adjustment made
by the Seller of such Purchased Receivable, then (x) in the
case of any return of any premium, or failure of an insurance
agent to pay over any premium due to the Seller or to the
Collection Agent, or any adjustment made by the Seller thereof,
the Seller shall be deemed to have received on such day a
Collection in respect of such Purchased Receivable in the
amount of such reduction or adjustment; (y) in the case of any
cancellation or deemed cancellation of a Contract, the Seller
shall be deemed to have received (on the date of such
cancellation or deemed cancellation) Collections in respect of
Purchased Receivables relating to such Contract that are not
then due, but the Seller shall not be deemed to have received
Collections in respect of Purchased Receivables that on the
date of the deemed cancellation are Past Due (however,
Collections on such Past Due Purchased Receivables from time to
time actually received shall be paid to the Purchasers in
accordance with Section 2.04); provided that, for the purposes
hereof, the Seller shall be deemed to have (whether or not it
actually has) cancelled any Contract for which a Purchased
Receivable is Past Due, such cancellation being deemed
effective on the date such Receivable becomes Past Due or such
lesser time period pursuant to the Seller's Credit and
Collection Policy;
(ii) if on any day any of the representations or
warranties in Section 4.01(h) is no longer true with respect to
any Purchased Receivable, the Seller shall be deemed to have
received on such day a Collection of such Purchased Receivable
in full; and each Purchaser shall, in accordance with Section
8.04, assign to the Seller all of such Purchaser's Share
Percentage of Purchased Receivables in respect of which the
Seller has been deemed under paragraph (i) or (ii) of this
Section 2.04(c) to have collected in full; for purposes of
determining under clause (ii) of said Section 4.01(h) whether
a Receivable was an "Eligible Receivable", reference shall only
be made to whether it was an "Eligible Receivable" at the time
of the Purchase;
(iii) except as provided in paragraph (i) or (ii) of this
Section 2.04(c), or as otherwise required by law or the
relevant Contract, all collections (whether or not Collections)
received from an Insured of any Receivable shall be applied to
the Receivables of such Insured in the order of the age of such
Receivables, starting with the oldest such Receivable, unless
such Insured designates its payment for application to specific
Receivables; and
(iv) if and to the extent any Purchaser shall be required
for any reason to pay over to an Insured any amount received on
its behalf hereunder, such amount shall be deemed not to have
been so received but rather to have been retained by the
Originator of such Insured's Receivable and, accordingly, such
Purchaser shall have a claim for such amount, payable when and
to the extent that any distribution from or on behalf of such
Insured is made in respect thereof.
(d) On and after the date (the "Holdback Termination
Date") on which each Purchaser shall have received Collections in
an aggregate amount (net of Collection Agent Fees payable pursuant
to Section 2.03 and commissions payable to insurance agents
pursuant to Section 2.05) equal to the sum of (x) the Cash Purchase
Price of such Purchaser and (y) the Target Amount of such
Purchaser, each Purchaser shall (A) pay such portion, if any, of
such Purchaser's Holdback Amount that the Seller may be entitled to
by remitting to the Seller an amount equal to any additional
Collections received by such Purchaser and may, at its option, by
notice to the Collection Agent, direct the Collection Agent to
deposit with the Seller all Collections received after the date
specified in such notice (in which case and notwithstanding
anything to the contrary the Seller shall undertake to pay the fees
of the Collection Agent and all commissions payable to the agents
of the Originators out of Collections on the Purchased Receivables
from such Collections), and (B) not earlier than 180 days after the
invoice date of the Purchased Receivable having the latest maturity
date, assign each Defaulted Receivable to the Originator thereof
without recourse.
(e) The Collection Agent shall prepare and forward to
each Initial Purchaser, not later than two Business Days prior to
each Settlement Date, a Purchaser Report based upon such
Purchaser's Share Percentage of Purchased Receivables, in
substantially the form of Exhibit D hereto. If there are
Purchasers other than the Initial Purchasers, the Collection Agent
shall prepare and forward to the Agent, for such Purchasers, not
later than two Business Days prior to each Settlement Date, a
Purchaser Report relating to the Purchased Receivables.
SECTION 2.05. Commissions. Each Purchaser undertakes to
pay its Share Percentage of all commissions payable to the agents
of the Originators out of and to the extent of its Share Percentage
of Collections on the Purchased Receivables hereunder, but such
Purchaser shall have no liability for any such commission (i) to
the extent it is in excess of the amount represented in Section
4.01(p) hereof or in any schedule or other writing delivered prior
to the purchase date by the Seller or the Originators hereunder or
(ii) for which there has been any failure, neglect, breach of duty
or other fault of an Originator serving as Collection Agent, or a
failure by any Originator to make payments to the Collection Agent
of sums required to be paid hereunder. Each Purchaser authorizes
the Collection Agent, out of Collections, to pay such commissions
promptly when due, and directs the Collection Agent to include a
report of such payments in the Purchaser Reports delivered
hereunder. Each urchaser consents (i) to the withholding by the
agents of the Originators of sums due to them as commissions in
respect of the Purchased Receivables, pursuant to their agency
contracts or practices, and (ii) to the withholding by the
Originators of amounts equal to commissions on Receivables deemed
collected hereunder, in each case not in excess of the amount
referred to in the first sentence of this Section 2.05. Each
Purchaser shall have a credit against its undertaking to pay
commissions hereunder for all commissions paid out of Collections
by the Collection Agent or withheld by agents or Originators
pursuant to the two preceding sentences.
SECTION 2.06. Payments and Computations, Etc. (a) All
amounts to be paid or deposited by the Seller or the Collection
Agent hereunder shall be paid or deposited in accordance with the
terms hereof into the accounts referred to in Section 2.04(b) no
later than 11:00 A.M. (New York City time) on the day when due in
lawful money of the United States of America by wire transfer in
same day funds at the office of the financial institution
designated by each Initial Purchaser on the signature pages hereof
or, as to each other Purchaser, as designated by such Purchaser to
the Agent.
(b) If the Collection Agent is not an Originator, the
Collection Agent shall pay all amounts due to the Seller within
five Business Days after the due date, plus, on any amount not so
paid by the Collection Agent, interest at the Default Rate
commencing after such fifth Business Day, provided, however, that
such interest rate shall not at any time exceed the maximum rate
permitted by applicable law.
(c) The Seller shall, to the extent permitted by
applicable law, pay interest to the Agent on any amount not paid by
the Seller when required to be paid by it hereunder, at an interest
rate per annum equal to the Default Rate, payable on demand,
provided, however, that such interest rate shall not at any time
exceed the maximum rate permitted by applicable law. Such interest
shall be for the account of, and shall be distributed to, each
Purchaser in an amount equal to such Purchaser's Share Percentage
of such interest and shall be paid by the Seller free and clear of,
and without deduction for, any taxes of any kind whatsoever.
(d) All computations of interest under subsection (c)
above shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last
day) elapsed. Whenever any payment or deposit to be made hereunder
shall be stated to be due on a day other than a Business Day, such
payment or deposit shall be made on the next succeeding Business
Day and such extension of time shall in such case be included in
the computation of such payment or deposit.
SECTION 2.07. Sharing of Payments, Etc. If any Purchaser
shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of setoff, or otherwise) on account of
its Share Percentage of Purchased Receivables in excess of its
ratable share of payments on account of the Purchased Receivables,
such Purchaser shall forthwith purchase from the other Purchasers
such participations in the Share Percentages of Purchased
Receivables owned by them as shall be necessary to cause such
purchasing Purchaser to share the excess payment ratably according
to the amounts due to each Purchaser with each of them; provided,
however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Purchaser, such purchase
from each other Purchaser shall be rescinded and each other
Purchaser shall repay to the purchasing Purchaser the purchase
price to the extent of such recovery, together with an amount equal
to such Purchaser's ratable share (according to the proportion of
(i) the amount of such Purchaser's required payment to (ii) the
total amount so recovered from the purchasing Purchaser) of any
interest or other amount paid or payable by the purchasing
Purchaser in respect of the total amount so recovered. For
purposes of this Section 2.07, each reference to any Purchaser or
Purchasers shall be deemed to refer to each such Purchaser and each
of its Affiliates that is a Purchaser hereunder.
ARTICLE III
CONDITIONS OF PURCHASE
SECTION 3.01. Conditions Precedent to Purchase. The
Purchase hereunder is subject to the conditions precedent that the
Agent shall have received on or before the date of Purchase the
following, each (unless otherwise indicated) dated such date, in
form and substance satisfactory to the Agent:
(a) Duly executed Ownership Documents for each Purchaser;
(b) Schedules I, II and III;
(c) A copy of the resolutions of the Executive Committee
of the Board of Directors or the Board of Directors of each
Originator (other than Continental Lloyd's Insurance Company)
and a Certificate of Attorney-in-Fact from Continental Lloyd's
Insurance Company authorizing this Agreement, the Ownership
Documents and the other documents to be delivered by it
hereunder and the transactions contemplated hereby, certified
as of such date by its Secretary or Assistant Secretary or, in
the case of Continental Lloyd's Insurance Company, its
Attorney-in-Fact;
(d) A certificate of the Secretary or Assistant Secretary
of each Originator or, in the case of Continental Lloyd's
Insurance Company, its Attorney-in-Fact, certifying the names
and true signatures of the officers authorized on its behalf to
sign this Agreement, the Ownership Documents and the other
documents to be delivered by it hereunder (on which certificate
the Agent and the Purchasers may conclusively rely unless and
until such time as the Agent shall receive from such Originator
a replacement certificate meeting the requirements of this
subsection (d));
(e) From each Originator, oral confirmation from an
appropriate person that proper Financing Statements (Form
UCC-1) have been filed or, if available, time stamped copies of
proper Financing Statements (Form UCC-1), dated a date
reasonably near to the date of the Purchase, naming such
Originator as the assignor of Purchased Receivables and Related
Security and CNA, as Agent, as assignee, or other similar
instruments or documents, as may be necessary or, in the
opinion of the Agent, desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the
Purchasers' ownership interests in all Purchased Receivables
and Related Security;
(f) From each Originator, time stamped copies of proper
Financing Statements (Form UCC-3), if any, necessary to release
all security interests and other rights of any person in the
Purchased Receivables and Related Security previously granted
by such Originator;
(g) Certified copies of Requests for Information (or a
similar search report certified by a party acceptable to the
Agent), dated a date reasonably near to the date of the
Purchase, listing all effective financing statements which name
each Originator (under its present name and any previous name)
as debtor and which are filed in the jurisdictions in which
filings were made pursuant to subsection (e) above, together
with copies of such financing statements (none of which, except
for the Financing Statements referred to in Section 3.01(e) or
financing statements released by the Financing Statements (Form
UCC-3) referred to in Section 3.01(f), shall cover any
Receivables, Related Security or Contracts);
(h) A favorable opinion of counsel for each Originator
and the opinion of counsel for the Company, in substantially
the form of Exhibit E and Exhibit E-1, respectively, and as to
such other matters as the Agent may reasonably request;
(i) A favorable opinion of Shearman & Sterling, counsel
for the Agent, as the Agent may reasonably request;
(j) From each Originator, a certificate of its chief
financial officer, controller or vice president or, in the case
of Continental Lloyd's Insurance Company, its Attorney-in-Fact,
that the representations and warranties contained in Section
4.01 are correct on and as of such date as though made on and
as of such date;
(k) From Continental, a certificate of its chief
financial officer, controller or vice president that the
information set forth in each document delivered by or on
behalf of the Seller relating to the actual writeoffs and
reserves for losses of the Seller's Receivables is true and
correct, which documents shall be attached to such certificate;
provided, however, that this subsection (k) shall not limit the
representation and warranty set forth in Section 4.01(i);
(l) An agreement of the Company, in favor of the Agent on
behalf of the Purchasers, in substantially the form of Exhibit
G;
(m) A copy of the resolutions of the Board of Directors
of the Company authorizing the agreement referred to in clause
(l) above;
(n) A certificate of the Secretary or Assistant Secretary
of the Company certifying the names and true signatures of the
officers authorized on its behalf to sign the agreement
referred to in clause (l) above; and
(o) Such other approvals, opinions or documents as the
Agent or any Purchaser may reasonably request.
SECTION 3.02. Conditions Subsequent to Purchase. When
available, and in any event within 45 days after the Purchase
hereunder, the Seller shall deliver to the Agent (i) certified
copies of Requests for Information or Copies (Form UCC-11) (or a
similar search report certified by a party acceptable to the
Agent), dated subsequent to the date of the filings made pursuant
to Section 3.01(e), listing all effective financing statements
which name each Originator (under its present name or any previous
name) as debtor and which are filed in the jurisdictions in which
filings were made pursuant to Section 3.01(e), together with copies
of such financing statements (none of which, except for the
Financing Statements referred to in Section 3.01(e), shall cover
any Purchased Receivables, Related Security or Contracts) and (ii)
an opinion of counsel to each Originator, who may be in-house
counsel, in the form appended hereto as Exhibit E-2, confirming
that the Agent, on behalf of the Purchasers, has acquired legal and
equitable title to, and ownership of, the Purchased Receivables
hereunder and the Related Security and Collections with respect
thereto, free and clear of any Adverse Claim.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of Each
Originator. Each Originator (including the Collection Agent, if an
Originator) represents and warrants as follows:
(a) Such Originator is a corporation duly incorporated,
or, in the case of Continental Lloyd's Insurance Company, duly
formed, validly existing and in good standing under the laws of
the jurisdiction of its organization and is duly qualified to
do business, and is in good standing, in every jurisdiction
where the failure to so qualify would materially adversely
affect such Originator's condition, financial or otherwise,
operations or prospects.
(b) The execution, delivery and performance by
suchOriginator of this Agreement, the Ownership Documents and
the other instruments and documents to be delivered by it
hereunder, and the transactions contemplated hereby and
thereby, are within such Originator's corporate powers, have
been duly authorized by all necessary corporate action, do not
contravene (i) such Originator's charter, by-laws or articles
of agreement, (ii) any law, rule or regulation applicable to
such Originator, (iii) any contractual restriction contained in
any indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note, or other agreement or
instrument binding on or affecting such Originator or its
property or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting such Originator or its
property, and do not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or
with respect to any of its properties other than as
contemplated herein; and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
This Agreement has been duly executed and delivered by such
Originator.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by such Originator of this Agreement, the Ownership
Documents or any other document or instrument to be delivered
hereunder except for the filing of the UCC Financing Statements
referred to in Article III, all of which, at the time required
in Article III, shall have been duly made and shall be in full
force and effect.
(d) This Agreement constitutes, and the Ownership
Documents when executed and delivered hereunder shall
constitute, the legal, valid and binding obligation and act of
such Originator.
(e) The Ownership Documents, when executed and delivered
hereunder, will effect the transfer to each Initial Purchaser
of legal and equitable title to, and an undivided percentage
ownership, to the extent of such Purchaser's Share Percentage,
of Receivables purchased or purported to be purchased pursuant
to this Agreement, free and clear of any Adverse Claim.
(f) The statutory balance sheet of such Originator
(including the initial Collection Agent) as at December 31,
1992, and the related statutory statements of income and
surplus of such Originator for the fiscal year then ended, and
the statutory balance sheet for such Originator as at September
30, 1993, and the related statutory statements of income and
surplus of such Originator for the nine-month period then
ended, in each case certified by the controller or other
appropriate officer of such Originator, copies of which have
been furnished to the Agent, fairly present the financial
condition of such Originator for the periods ended on such
dates, all in accordance with accounting principles prescribed
or permitted and authorized by the department of insurance of
the state of incorporation of such Originator and consistently
applied to such financial statements, and since September 30,
1993, there has been no material adverse change in such
condition or operations.
(g) There are no actions, suits or proceedings pending,
or to the knowledge of such Originator threatened, against or
affecting such Originator or any subsidiary, or the property of
such Originator or of any subsidiary, in any court, or before
any arbitrator of any kind, or before or by any governmental
body, which may materially adversely affect either the
financial condition or operations of such Originator or such
Originator and its subsidiaries taken as a whole or the ability
of such Originator to perform its obligations under this
Agreement or the Ownership Documents delivered pursuant hereto.
Neither such Originator nor any subsidiary is in default with
respect to any order of any court, arbitrator or governmental
body, except for defaults, if any, with respect to orders of
governmental agencies which defaults do not have a material
adverse effect on the business or operations of such Originator
or any subsidiary.
(h) Each Receivable that is purchased pursuant to this
Agreement is assignable in accordance with this Agreement and
shall (i) on the date of the Purchase, immediately prior to
such Purchase, be owned by the Originators free and clear of
any Adverse Claim, (ii) at the time of the Purchase, be an
Eligible Receivable, and (iii) together with the Contract
related thereto, at all times after such time be free and clear
of any Adverse Claim. Upon the Purchase, each Purchaser shall
acquire legal and equitable title to, and an undivided
percentage ownership, to the extent of such Purchaser's Share
Percentage, of each Receivable listed on Schedule I hereto and
the Related Security, related Contract and Collections with
respect thereto free and clear of any Adverse Claim; and no
effective financing statement or other instrument similar in
effect covering any such Receivable or the Related Security,
related Contract or Collections with respect thereto shall at
any time be on file in any recording office, or otherwise be
effective, except such as may be filed in favor of the Agent in
accordance with this Agreement.
(i) No Purchaser Report (if prepared by Continental on
behalf of such Originator, or any Person with which the Seller
has subcontracted pursuant to Section 6.01, or to the extent
that information contained therein is supplied by the Seller on
behalf of such Originator or such other Person), information,
exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Agent or any
Purchaser in connection with this Agreement is or shall be
inaccurate in any material respect or omits or shall omit to
state a material fact or any fact necessary to make the
statements contained therein not materially misleading.
(j) The chief executive office of such Originator, other
than Continental Lloyd's Insurance Company and Casualty
Insurance Company, is located at 180 Maiden Lane, New York, New
York 10038. The chief executive office of Continental Lloyd's
Insurance Company is located at 600 North Pearl Street, Dallas,
Texas 75201 and the chief executive office of Casualty
Insurance Company is located at 321 South Clark Street,
Chicago, Illinois 60610. The offices where such Originator
keeps all its books, records and documents evidencing Purchased
Receivables or the related Contracts are located at the
addresses specified in Exhibit F (or at such other locations,
notified to the Agent in accordance with Section 5.01(f), in
jurisdictions where all action required by Section 6.05 has
been taken and completed).
(k) The transactions in which the Receivables
constituting the Purchased Receivables were created and
acquired by the Originators constituted "current transactions"
within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended. The Receivables constituting the Purchased
Receivables are "notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of the
sales price of merchandise, insurance or services" within the
meaning of Section 3(c)(5) of the Investment Company Act of
1940, as amended.
(l) All of the capital stock of such Originator, other
than Continental Lloyd's Insurance Company, is directly or
indirectly owned beneficially and of record by the Company.
All of the interests in Continental Lloyd's Insurance Company
are directly or indirectly beneficially owned by the Company.
(m) Each Purchased Receivable is assignable under
applicable law, and is not subject to any restriction or
limitation upon assignment under the Contract relating thereto.
(n) The Intercompany Pooling Agreement constitutes the
legal, valid and binding obligation of such Originator
enforceable against such Originator in accordance with its
terms. Pursuant to the Intercompany Pooling Agreement, each
Originator (i) has purchased and, immediately prior to the
Purchase, owns, free and clear of any Adverse Claim, a discrete
participation and percentage interest in each Purchased
Receivable, (ii) receives, in connection with the Purchase, an
amount equal to such percentage of the aggregate Cash Purchase
Price therefor, and (iii) together with each other Originator,
is, immediately prior to the Purchase, the owner of such
Purchased Receivable in its entirety.
(o) The invoices in respect of each Purchased Receivable
will be sent to the pertinent Insured in accordance with
Schedule I. According to the Contracts related to the
Purchased Receivables, the Outstanding Balance will be due no
later than the dates shown on Schedule I.
(p) Not more than 20% of the Collections of any Purchased
Receivable is required to be paid to insurance agents as
commissions, and the aggregate amount required to be paid to
insurance agents as commissions is not more than the amount set
forth in Schedule III.
(q) Pursuant to the Credit and Collection Policy, such
Originator is entitled to cancel any Contract on the date any
Purchased Receivable under such Contract becomes Past Due.
(r) Commissions with respect to each Contract are payable
to any insurance agent solely from, and in all material
respects proportionately to the extent of, premiums actually
received from the Insured under such Contract produced by such
insurance agent.
ARTICLE V
GENERAL COVENANTS OF EACH ORIGINATOR
SECTION 5.01. Affirmative Covenants of Each Originator.
Until the Holdback Termination Date, each Originator will, unless
the Agent upon the direction of the Majority Purchasers shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and
orders with respect to it, its business and properties and all
Purchased Receivables, Related Security and related Contracts,
the non-compliance with which (a) would materially adversely
affect it, its business and properties or (b) would materially
adversely affect, in the aggregate, any Purchaser's interest in
the Purchased Receivables, Related Security or related
Contracts.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve
and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the interests
of any Purchaser or the Agent hereunder or in the Purchased
Receivables, or the ability of such Originator or the
Collection Agent to perform their respective obligations under
this Agreement and the Ownership Documents.
(c) Audits. At any time and from time to time during
regular business hours upon two Business Days' prior
notification to such Originator, permit (or, if such
Originator, being the Collection Agent, has subcontracted with
any Person pursuant to Section 6.01, cause such Person to
permit) the Agent, any Initial Purchaser, or any Purchaser
holding a Share Percentage of at least 25%, or its agents or
representatives, (i) to examine and make copies of and
abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession
or under the control of such Originator (or any Person with
which such Originator, being the Collection Agent, has
subcontracted pursuant to Section 6.01) relating to Purchased
Receivables, including, without limitation, the related
Contracts and Related Security, and (ii) to visit the offices
and properties of such Originator (or any Person with which
such Originator, being the Collection Agent, has subcontracted
pursuant to Section 6.01) for the purpose of examining such
materials described in clause (i) above, and to discuss matters
relating to Purchased Receivables sold by it or such
Originator's performance hereunder with any of the responsible
officers or employees of such Originator (or any Person with
which such Originator, being the Collection Agent, has
subcontracted pursuant to Section 6.01) having knowledge of
such matters; provided, however, that no Initial Purchaser that
is also an insurance company, or is a member of a group
(consisting of such Purchaser and all of its Affiliates) that
is engaged primarily in the business of underwriting or selling
insurance, shall be permitted to so examine the materials
described in this Section 5.01(c); provided, further, that no
Purchaser (other than an Initial Purchaser) that is also an
insurance company or an Affiliate of an insurance company shall
be permitted to so examine the materials described in this
Section 5.01(c).
(d) Keeping of Records and Books of Account. Maintain
and implement, or cause to be maintained and implemented,
administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Purchased
Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain,
or cause to be kept and maintained, all documents, books,
records and other information reasonably necessary or advisable
for the collection of all Purchased Receivables (including,
without limitation, records adequate to permit the
identification of each Purchased Receivable and all Collections
of and adjustments to each Purchased Receivable sold by it).
(e) Performance and Compliance with Receivables and
Contracts. At its expense, timely and fully perform and comply
with all material provisions, covenants and other promises
required to be observed by it under the Contracts related to
the Purchased Receivables.
(f) Location of Records. Keep its chief executive
office, and the offices where it keeps its records concerning
the Purchased Receivables and all Contracts related thereto
(and all original documents relating thereto), at the
address(es) of such Originator (or any Person with which such
Originator, if the Collection Agent, has subcontracted pursuant
to Section 6.01) referred to in Section 4.01(j) or, upon 30
days' prior written notice to the Agent, at such other
locations in a jurisdiction where all action required by
Section 6.05 shall have been taken and completed.
(g) Credit and Collection Policies. Comply in all
material respects with the Credit and Collection Policy in
regard to each Purchased Receivable sold by it and the related
Contract.
(h) Reporting. Furnish to the Agent, each Initial
Purchaser, and each Purchaser holding a Share Percentage of at
least 25%:
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of
each fiscal year of such Originator, a statutory balance
sheet of such Originator as of the end of such quarter,
and statutory statements of income and surplus of such
Originator each for the period commencing at the end of
the previous fiscal year and ending with the end of such
quarter, certified by the controller or other appropriate
officer of such Originator; and
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of such Originator,
a copy of the statutory balance sheet of such Originator
as of the end of such year and the related statutory
statements of income and surplus of such Originator for
such year each reported on by the controller or other
appropriate officer of such Originator.
SECTION 5.02. Negative Covenants of Each Originator.
Until the Holdback Termination Date, no Originator shall without
the written consent of the Agent upon the direction of the Majority
Purchasers:
(a) Sales, Liens, Etc. Sell, assign (by operation of law
or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon or with respect to, any Purchased
Receivable, Related Security, related Contract or Collections,
or assign any right to receive income in respect thereof.
(b) Extension or Amendment of Receivables. Extend, amend
or otherwise modify the terms of any Purchased Receivable, or
amend, modify or waive any term or condition of any Contract
related thereto if the effect of such amendment, modification
or waiver of Contract would materially adversely affect the
timeliness of payment or collectibility of the Purchased
Receivables.
(c) Change in Business or Credit and Collection Policy.
Make any change in the character of its business or in the
Credit and Collection Policy, which change would, in either
case, materially impair the timeliness of payment or
collectibility of any Purchased Receivable.
(d) Change in Payment Instructions to Insureds. Make any
change in its instructions to Insureds regarding payments to be
made to such Originator if the effect of such change would
materially adversely affect the timeliness of payment or
collectibility of the Purchased Receivables, unless the Agent
and the Initial Purchasers shall have received prior written
notice of such change.
(e) No Actions Against Insureds. Commence or settle any
legal action to enforce collection of any Purchased Receivable.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The
administration and collection of the Purchased Receivables shall be
conducted by such Person (the "Collection Agent") so designated
from time to time in accordance with this Section 6.01. Until the
Agent gives notice to the Seller of a designation of a new
Collection Agent, Continental is hereby designated as, and hereby
agrees to perform the duties and obligations of, the Collection
Agent pursuant to the terms hereof. The Agent shall, at any time
that it has been so advised by the Majority Purchasers that such
Majority Purchasers are reasonably insecure as to the ability of
the Collection Agent to perform hereunder or are reasonably
dissatisfied with the collection performance of the Purchased
Receivables or if any event of a type listed in Section 10.09
(without giving effect to any grace period or required notice)
shall occur and be continuing, upon three Business Days' notice to
the Seller, designate as the Collection Agent any Person (including
itself), other than a Person in the business of issuing or selling
insurance or any Affiliate of such Person, to succeed Continental
or any successor Collection Agent, on the condition in each case
that any such Person so designated agrees in writing for the
benefit of the parties hereto (a) to perform the duties and
obligations of the Collection Agent pursuant to the terms hereof
and (b) to adhere to the provisions of Section 10.07, which
agreement shall survive the termination of this Agreement or such
writing. For purposes of satisfying the condition contained in the
preceding sentence, the Agent hereby agrees that if and when it
shall designate itself as the Collection Agent, it shall perform
the duties and obligations of the Collection Agent pursuant to the
terms hereof. The Collection Agent may, with the prior consent of
the Agent acting at the direction of the Majority Purchasers,
subcontract with any other Person for the administration and
collection of such Purchased Receivables, provided that the
Collection Agent shall remain liable for the performance of the
duties and obligations of the Collection Agent pursuant to the
terms hereof.
SECTION 6.02. Duties of Collection Agent. (a) The
Collection Agent shall (unless the Agent at the direction of the
Majority Purchasers directs otherwise) take or cause to be taken
only such actions as shall be necessary or customary to collect
each Purchased Receivable, all in accordance with applicable laws,
rules and regulations, with reasonable care and diligence, and
solely in accordance with the Credit and Collection Policy. Each
of the Seller, each Purchaser and the Agent hereby appoints as its
agent the Collection Agent, from time to time designated pursuant
to Section 6.01, to enforce its respective rights and interests in
and under the Purchased Receivables, the Related Security and the
related Contracts. The Collection Agent shall not incur any
expense that would result in a material increase in the Collection
Agent Fee without first obtaining the consent of the Agent at the
direction of all of the Purchasers.
(b) The Collection Agent shall set aside for the
Purchasers the Collections of Purchased Receivables in accordance
with Section 2.04, but shall not be required (except to the extent
set forth in Section 2.04 or requested by the Agent at the
direction of the Majority Purchasers) to segregate the funds
constituting such portion of such Collections prior to the
remittance thereof in accordance with said Section.
(c) The Collection Agent (if not an Originator) may not
extend, amend or otherwise modify the terms of any Purchased
Receivable, or amend, modify or waive any term or condition of any
Contract related thereto, or extend, amend or otherwise modify the
rights of any Originator, in each case, without such Originator's
consent. The Collection Agent may not commence or settle any legal
action to enforce collection of any Purchased Receivable, unless
the Agent at the direction of the Majority Purchasers shall have
otherwise consented in writing.
(d) Each Originator shall deliver to the Collection
Agent, and the Collection Agent shall hold in trust and legend
appropriately for the Seller and the Agent, acting on behalf of the
Purchasers, all computer tapes or disks which evidence or relate to
Purchased Receivables. Upon the Agent's request at the direction
of the Majority Purchasers, the Seller shall deliver to the
Collection Agent, and the Collection Agent shall hold in trust and
legend appropriately for the Seller and the Agent, acting on behalf
of the Purchasers, all documents, instruments and other records
which evidence or relate to Purchased Receivables.
(e) The Collection Agent shall, as soon as practicable
following receipt, turn over to the Seller the Collections of any
Receivable which is not a Purchased Receivable.
(f) The Collection Agent, if other than an Originator,
shall as soon as practicable upon demand deliver to the Seller all
documents, instruments and other records (including, without
limitation, computer tapes or disks) in its possession which
evidence or relate solely to Receivables other than Purchased
Receivables, and copies of documents, instruments and other records
in its possession which evidence or relate to Purchased
Receivables.
(g) The Collection Agent shall, at any time and from time
to time at the request of the Agent at the direction of the
Majority Purchasers, furnish to the Agent (within five Business
Days after any such request) a calculation of the amounts set aside
for the Purchasers pursuant to Section 2.04(b)(ii).
(h) The Collection Agent shall, to the extent permitted
by applicable law, pay interest to the Agent on any amount not paid
by the Collection Agent when required to be paid by it hereunder,
at an interest rate per annum equal to the Default Rate, payable on
demand, provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such
interest shall be for the account of, and shall be distributed to,
the Purchasers and shall be paid by the Collection Agent free and
clear of and without deduction for any taxes of any kind
whatsoever.
(i) Except as set forth in Section 2.04(d), the
Collection Agent's authorization under this Agreement shall
terminate on the Holdback Termination Date.
SECTION 6.03. Rights of the Agent. At any time following
the designation of a Collection Agent other than any Originator
pursuant to Section 6.01:
(a) The Agent at the direction of the Majority Purchasers
may direct any or all of the Insureds of Purchased Receivables
to make payment of all amounts payable under any Purchased
Receivable directly to the Agent or its designee.
(b) The Seller shall, at the Agent's request at the
direction of the Majority Purchasers and at the Seller's
expense, give notice of the ownership of the Purchased
Receivables by the Purchasers to each said Insured and direct
that payments be made directly to the Agent or its designee.
(c) The Seller shall, at the Agent's request at the
direction of the Majority Purchasers and at the Seller's
expense, (i) assemble all of the documents instruments and
other records (including, without limitation, computer tapes
and disks), or true and correct copies thereof, which evidence
or relate to the Purchased Receivables, and the related
Contracts and Related Security, or which are otherwise
necessary or desirable to collect such Purchased Receivables,
and shall make the same available to the Agent at a place
selected by the Agent or its designee, and (ii) without
limiting any other rights under this Agreement, segregate all
cash, checks and other instruments received by it from time to
time constituting Collections of Purchased Receivables in a
manner acceptable to the Agent and shall, promptly upon
receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the
Agent or its designee.
(d) The Seller and each Purchaser each hereby authorizes
the Agent to take any and all steps in the Seller's name and on
behalf of the Seller and the Purchasers necessary or desirable,
in the determination of the Agent, to collect all amounts due
under any and all Purchased Receivables sold by it, including,
without limitation, endorsing any Originator's name on checks
and other instruments representing Collections of Purchased
Receivables and enforcing such Purchased Receivables and taking
action or causing action to be taken with respect to any
Related Security, including with respect to transferring
possession of the same to the Agent or its designee.
SECTION 6.04. Responsibilities of the Seller.
(a) The Seller shall remain responsible and liable to perform all
of its duties and obligations under the Contracts related to the
Purchased Receivables, to the extent set forth therein; provided
that the Seller shall have no obligation under such Contracts or
otherwise with respect to commissions payable to its agents until
the Holdback Termination Date.
(b) The exercise by the Agent or any Purchaser of any of
its rights hereunder shall not release the Seller from any of its
duties or obligations with respect to any Purchased Receivables or
under the Contracts related to such Purchased Receivables.
(c) Neither the Agent nor any Purchaser shall have any
obligation or liability (other than expressly provided in Section
2.05 herein) with respect to any Purchased Receivables or related
Contracts, nor shall any of them be obligated to perform any of the
obligations of the Seller or any Originator thereunder.
(d) The Seller shall promptly notify the Agent and the
Initial Purchasers of any claim or threatened claim probable, in
the opinion of the management of the Seller, to result in any
liability referred to in Article IX.
(e) The Seller shall, within ten Business Days of such
time as the Agent at the direction of the Majority Purchasers may
request, furnish to the Agent such Purchaser Reports, and other
report, information, document, book or record as the Agent at the
direction of the Majority Purchasers may reasonably request
relating to the Purchased Receivables.
(f) The Seller shall, within ten Business Days after the
end of each calendar month, or at such other times as the
Collection Agent shall reasonably request, provide to the
Collection Agent such information and records as are necessary for
the determination of commissions required to be paid to insurance
agents out of Collections.
SECTION 6.05. Further Action Evidencing the Purchase.
(a) The Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
that the Agent at the direction of the Majority Purchasers may
reasonably request in order to perfect, protect or more fully
evidence the Purchased Receivables, or to enable the Purchasers or
the Agent to exercise or enforce any of their respective rights
hereunder or under the Ownership Documents. Without limiting the
generality of the foregoing, each Originator will create separate
data processing records evidencing such Purchased Receivables and
related Contracts with a legend, acceptable to the Agent,
evidencing that the Purchased Receivables have been sold in
accordance with this Agreement and will, upon the request of the
Agent at the direction of the Majority Purchasers: (i) execute and
file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate; and (ii) mark
conspicuously each invoice sent by it and use its best efforts to
cause its agents to mark conspicuously each invoice sent by them
evidencing each Purchased Receivable and the related Contract with
a legend, acceptable to the Agent, evidencing that the Purchased
Receivable has been sold in accordance with this Agreement.
(b) The Seller hereby authorizes the Agent to file or
cause to be filed one or more financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or
any of the Purchased Receivables and the Related Security now
existing or hereafter arising without the signature of the Seller
or any Originator where permitted by law.
(c) If the Seller fails to perform any of its agreements
or obligations under this Agreement, the Agent may (but shall not
be required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of the Agent incurred in
connection therewith shall be payable by the Seller as provided in
Section 10.06.
SECTION 6.06. Application of Collections. Any payment
made by an Insured to any Originator shall, except as otherwise
specified by such Insured or otherwise required by contract or law
and unless otherwise instructed by the Agent at the direction of
the Majority Purchasers, be applied as a collection of any
Purchased Receivable or any other Receivables of such Insured to
the extent of any amounts then due and payable thereunder before
being applied to any other indebtedness of such Insured.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. (a) Each
Purchaser hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. In
furtherance, and without limiting the generality, of the foregoing,
each Purchaser hereby appoints the Agent as its agent to execute
and deliver all further instruments and documents, and take all
further action that the Agent may deem necessary or appropriate in
order to protect or more fully evidence the Share Percentage of
Purchased Receivables purchased by the Purchasers hereunder, or to
enable any of the Purchasers to exercise or enforce any of their
respective rights hereunder or under the Ownership Documents,
including, without limitation, the execution by the Agent as
assignee of such financing, release or termination statements, or
amendments thereto or assignments thereof, relative to all or any
of the Purchased Receivables and the Related Security now existing
or hereafter arising, and such other instruments or notices, as may
be necessary or appropriate for the purposes stated hereinabove.
(b) Each Purchaser and the Seller expressly recognize and
agree that the Agent may be listed as the assignee of record on the
various UCC filings required to be made hereunder in order to
protect or evidence the transfer of the Purchased Receivables from
the Seller to the Purchasers, that the Agent shall sign UCC
financing, release or termination statements and shall otherwise
act as agent for the Purchasers as undivided percentage owners of
all of the Purchased Receivables. In addition, such listing shall
impose no duties on the Agent other than those expressly and
specifically undertaken in accordance with the provisions of this
Article VII.
(c) The Seller shall be entitled to rely without
investigation upon any notice or request received from the Agent or
other action by the Agent that recites that it is appropriately
authorized pursuant to the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be
liable to any Purchaser or Assignee for any action taken or omitted
to be taken by it or them as Agent under or in connection with this
Agreement (including, without limitation, any action taken or
omitted to be taken by it or them if designated as the Collection
Agent pursuant to Section 6.01), except for its or their own gross
negligence or willful misconduct. Without limiting the foregoing,
the Agent: (i) may consult with legal counsel (including counsel
for the Seller), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (ii) makes no
warranty or representation to any Purchaser and shall not be
responsible to any Purchaser for any statements, warranties or
representations made in or in connection with this Agreement; (iii)
shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Seller, any
Originator or the Collection Agent or to inspect the property
(including the books and records) of any Originator or the
Collection Agent; (iv) shall not be responsible to any Purchaser
for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, the Ownership
Documents or any other instrument or document furnished pursuant
hereto; and (v) shall incur no liability under or in respect of
this Agreement by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing
(which may be by telex) believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 7.03. CNA and Affiliates. With respect to any
Share Percentage which may be held by CNA, CNA shall have the same
rights and powers under this Agreement as would any other Purchaser
and may exercise the same as though it were not the Agent. CNA and
its Affiliates may generally engage in any kind of business with
the Seller or any Insured, any of their respective Affiliates and
any Person who may do business with or own securities of the Seller
or any Insured or any of their respective Affiliates, all as if CNA
were not the Agent and without any duty to account therefor to any
Purchaser.
SECTION 7.04. Purchaser's Purchase Decision. Each
Purchaser acknowledges that it has, independently and without
reliance upon the Agent or any of its Affiliates and based on such
documents and information as it has deemed appropriate, made its
own evaluation and decision to enter into this Agreement and, if it
so determines, to purchase Eligible Receivables hereunder. Each
Purchaser also acknowledges that it will, independently and without
reliance upon the Agent or any of its Affiliates and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action
under this Agreement.
ARTICLE VIII
ASSIGNMENT OF SHARE PERCENTAGE
SECTION 8.01. Assignment. Each Purchaser may assign to
any Assignee, and any such Assignee may assign to any other
Assignee, such Purchaser's Share Percentage of any Purchased
Receivable owned by it, in whole or in part, and, upon any such
assignment, the Assignee shall become the Purchaser of such Share
Percentage of Purchased Receivables. Such assignments shall be
upon such terms and conditions as the assignor and the Assignee of
such Share Percentage of Purchased Receivables may mutually agree.
The assignor of any Share Percentage of Purchased Receivables shall
deliver to the Assignee an Assignment, duly executed by such
assignor, assigning such Share Percentage of Purchased Receivables,
in whole or in part, to the Assignee (indicating, in each case
whether such assignment is in whole or in part and the fraction of
Share Percentage being assigned), and such assignor shall promptly
execute and deliver all further instruments and documents, and take
all further action, that the Assignee may reasonably request, in
order to perfect, protect or more fully evidence the Assignee's
right, title and interest in and to such Share Percentage of
Purchased Receivables, and to enable the Assignee to exercise or
enforce any rights hereunder or under the Ownership Documents
relating to such Share Percentage of Purchased Receivables. The
Assignee shall promptly execute and deliver a written undertaking
agreeing to the terms of Section 10.07, which agreement shall
survive the termination of this Agreement or such undertaking.
Upon the assignment of any Share Percentage of Purchased
Receivables as described above, the Assignee thereof shall have all
of the rights and obligations of a Purchaser hereunder with respect
to such Share Percentage of Purchased Receivables. An assignor of
a Share Percentage of Purchased Receivables shall provide notice to
the Agent and the Seller of any assignment of a Share Percentage of
Purchased Receivables by such assignor hereunder, which notice
shall state the Share Percentage of the Assignee's interest and the
remaining Share Percentage, if any, of the assignor's interest.
The Agent and the Seller are entitled to rely conclusively upon
such notice or the absence thereof and shall not be required to
treat an Assignee as a Purchaser in the absence of such notice.
SECTION 8.02. Authorization of Agent. Each of the
Purchasers authorizes the Agent to, and the Agent agrees that it
shall, endorse the applicable Ownership Document to reflect any
assignments made pursuant to Section 8.01 or otherwise.
SECTION 8.03. Payments to Agent. Notwithstanding any
assignment pursuant to Section 8.01, the Collection Agent may pay
the Agent for the account of each Purchaser, other than the Initial
Purchasers, all amounts owing to such Purchaser, and neither the
Collection Agent nor the Seller shall have any duty or obligation
with respect to the Agent's application of such amount.
SECTION 8.04. Assignment to Seller. The Purchasers shall
assign to the Seller by execution of an Assignment, in addition to
any assignments required pursuant to Section 2.04(d), such
Purchaser's Share Percentage of all Purchased Receivables that have
been deemed to have been collected in full under Section 2.04(c),
or which are the subject of indemnification under Section 9.01, and
such indemnification has been made.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Indemnities by the Seller and the
Originators. Without limiting any other rights that the Agent, the
Purchasers or their Affiliates may have hereunder or under
applicable law, the Seller and each Originator hereby agree to
indemnify such Persons and their Affiliates from and against any
and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements,
awarded against or incurred by any of them arising out of or as a
result of:
(i) any Receivable, at the time of the Purchase, not
being an Eligible Receivable;
(ii) its reliance on any representation or warranty made
or deemed made by any Originator or the Seller (or any of its
officers) under or in connection with this Agreement, any
Purchaser Report or any other information or report delivered
by such Originator or the Seller pursuant hereto, which shall
have been false or incorrect in any material respect when made
or deemed made;
(iii) the failure by any Originator or the Seller to comply
with any applicable law, rule or regulation with respect to any
Purchased Receivable, Related Security or the related Contract,
or the nonconformity of any Purchased Receivable, Related
Security or the related Contract with any such applicable law,
rule or regulation;
(iv) the failure to vest in any Purchaser, or to transfer
to any Purchaser, legal and equitable title to, and ownership
of, to the extent of such Purchaser's Share Percentage, each
Purchased Receivable, free and clear of any and all Adverse
Claims and keep the same vested free and clear of any and all
Adverse Claims;
(v) the failure to file, or any delay in filing,
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Purchased Receivable, any
Contract or Related Security whether at the time of any
Purchase or at any subsequent time;
(vi) any dispute or claim resulting from the sale of the
insurance related to such Purchased Receivable or the
furnishing or failure to furnish such insurance;
(vii) any failure of any Originator, as Collection Agent or
otherwise, to perform its duties or obligations including,
without limitation, sending invoices to the pertinent Insured
in accordance with Schedule I and the turnover of amounts
pursuant to Section 2.04, in accordance with the provisions of
Article VI;
(viii) the commingling of Collections of Purchased
Receivables at any time with other funds;
(ix) any dispute or offset or Adverse Claim against or
with respect to Purchased Receivables, or any sale, pledge, or
assignment (by operation of law or otherwise) or other
disposition of Collections of Purchased Receivables by the
Seller or any Originator, as Collection Agent or otherwise;
(x) any action or omission by any Originator or any
Affiliate of such Originator, whether as Collection Agent or
otherwise, reducing or impairing the rights of any Purchaser
with respect to any Purchased Receivable or the value of any
Purchased Receivable, including, but not limited to, the
cancellation, extension, amendment, modification, compromise or
settlement of any Purchased Receivable or any term thereof, the
extension, amendment, modification or waiver of any term or
condition of any Contract related thereto, the sale, pledge or
assignment of, or grant of security interest in, any Purchased
Receivable, any change in the character of its business or in
the Credit and Collection Policy, the commencement or
settlement of any legal action to enforce collection of any
Purchased Receivable, the failure to send the invoice in
respect of a Purchased Receivable to the pertinent Insured in
accordance with Schedule I, the failure to comply with any
material provision, covenant or other promise required to be
observed by such Originator under any Contract related to any
Purchased Receivable, the failure to comply with the Credit and
Collection Policy, or the withdrawal, cancellation or other
termination for any reason of any insurance policy related to
any Purchased Receivable or the failure of any insurance policy
or Contract related to any Purchased Receivable to be issued or
to become effective;
(xi) any failure by an insurance agent to pay to any
Originator, the Seller or the Collection Agent the amount of
any insurance premium or other Collections received from any
Insured;
(xii) any investigation, litigation, or proceeding related
to any use of the proceeds of the Purchase or related to any
acquisition or proposed acquisition by any Originator, or by
any subsidiary of such Originator, of all or any portion of the
stock or substantially all the assets of any person whether or
not the Agent, any Purchaser or any of their Affiliates is a
party thereto; or
(xiii) failure of a Contract to become effective within 30
days after Purchase.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement nor consent to any departure by
any Originator or the Seller therefrom shall in any event be
effective unless the same shall be in writing and signed by the
Seller, the Agent and the Majority Purchasers, and then such
amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given;
provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by the Seller, the Agent and all the
Purchasers, do any of the following: (a) waive any of the
conditions specified in Section 3.01 or 3.02, (b) change the Share
Percentage of any Purchaser or subject the Purchasers to any
additional obligations, (c) change the definition of "Eligible
Receivable", "Defaulted Receivable", "Share Percentage" or
"Majority Purchasers", (d) postpone any Settlement Date, (e) change
the Purchasers' Share Percentage of Receivables which shall be
required for the Purchasers or any of them to take any action
hereunder, (f) amend Section 2.04(c), (g) amend this Section 10.01,
(h) amend or release any provision of the Agreement of the Company
in favor of the Agent on behalf of the Purchasers provided pursuant
to Section 3.01(l) herein, or (i) increase the Collection Agent
Fee; and provided, further, that no amendment, waiver or consent
shall, unless in writing and signed by the Agent in addition to the
Seller and the Purchasers required above to take such action,
affect the rights or duties of the Agent under this Agreement.
This Agreement contains a final and complete integration of all
prior expressions by the parties hereto with respect to the subject
matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings.
SECTION 10.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telex communication) and
mailed or telexed or delivered, as to each party hereto, at its
address set forth under its name on the signature pages hereof or
at such other address as shall be designated by such party in a
written notice to the other parties hereto; provided, however, that
any such notice or communication to the Seller or any Originator
shall be mailed or delivered to Continental. All such notices and
communications shall be effective, in the case of written notice,
when deposited in the mails, and, in the case of notice by telex,
when telexed against receipt of answer back, in each case addressed
as aforesaid, except that notices and communications pursuant to
Article II shall not be effective until received. All amounts
deposited by the Collection Agent into such accounts referred to in
Section 2.04 shall be deposited at the offices of such financial
institutions designated by each Initial Purchaser on the signature
pages hereof or as notified to the Agent, or as to each other
Purchaser, as designated by such Purchaser to the Agent.
SECTION 10.03. No Waiver; Remedies. No failure on the
part of the Agent or any Purchaser to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 10.04. Binding Effect; Assignability. (a) This
Agreement shall be binding upon and inure to the benefit of the
Seller, each Originator, the Agent, each Purchaser and their
respective successors and assigns; provided, however, that neither
the Seller nor any Originator shall assign its rights or
obligations hereunder or any interest herein (other than pursuant
to the Intercompany Pooling Agreement, as may be amended) without
the prior written consent of the Agent and all the Purchasers and
provided further that the Agent shall not assign its rights and
obligations hereunder and no other Person shall be appointed in
substitution of the Agent named herein, except in each case such
Person that is (i) an Affiliate (other than an Affiliate that is a
natural person) of an Initial Purchaser or (ii) a commercial bank
organized or licensed in the United States with a combined capital
and surplus of at least $500,000,000 and is approved by the Seller,
which approval shall not be unreasonably withheld.
(b) The following shall be continuing and shall survive
any termination of this Agreement: (i) the rights of any Purchaser
to collect the Outstanding Balance of all Purchased Receivables,
(ii) the rights and remedies of any Purchaser with respect to any
breach of any representation and warranty made by any Originator
pursuant to Article IV or Section 3.01, (iii) the indemnification
provisions of Article IX and Section 10.06, (iv) the rights of the
Agent and the Collection Agent to be paid the fees, costs and
expenses provided for hereunder, (v) the agreement set forth in
Section 10.07, (vi) the right of the Seller to collect the Holdback
Amount from any Purchaser (or such portion thereof, if any, that
the Seller may be entitled to), (vii) the obligations of the Agent
under Section 2.05 and (viii) the obligations under Section 10.08.
SECTION 10.05. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of New York, except to the extent that the perfection of the
interests of any Purchaser in the Receivables, the Related Security
and the Collections, or remedies hereunder in respect thereof, are
governed by the laws of a jurisdiction other than the State of New
York.
SECTION 10.06. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted under Article IX
hereof, the Seller hereby agrees to pay on demand (i) all costs and
expenses in connection with the preparation, execution, delivery
and administration (including periodic auditing) of this Agreement,
the Ownership Documents and other documents in connection herewith,
including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent and the Purchasers
as to their respective rights and remedies under this Agreement,
and (ii) all costs and expenses, if any (including reasonable
counsel fees and expenses), incurred by any Purchaser in connection
with the enforcement of this Agreement, the Ownership Documents and
other documents in connection herewith; provided that nothing in
this Section 10.06(a) shall obligate the Seller or any Originator
to pay any Collection Agent Fees, other costs of collecting the
Purchased Receivables or commissions of the insurance agents of any
Originator or costs with respect to any assignment of the Purchased
Receivables by any Purchaser.
(b) In addition, the Seller hereby agrees to pay any and
all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing,
recording or enforcement of this Agreement, the Ownership Documents
or the other documents to be delivered hereunder (except with
respect to any assignment of Purchased Receivables delivered
hereunder), and agrees to save each Purchaser and the Agent
harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes
and fees; provided that each Purchaser will pay (or reimburse the
Seller or such Originator for) all property, excise, sales or
similar taxes imposed on Purchased Receivables (except to the
extent such taxes are imposed because of the initial assignment by
the Seller of Purchased Receivables).
SECTION 10.07. No Proceedings. The Seller, each
Originator, each Purchaser and the Agent each hereby agrees that it
will not institute against any Purchaser that is a Purchaser which
primarily engages in the business of purchasing or accepting
assignments or transfers of, or making secured loans in respect of,
accounts receivable, chattel paper or general intangibles or
interests therein or, in the case of each Purchaser, any other such
Purchaser, any proceeding of the type referred to in clause (i) of
Section 10.09(h) so long as any commercial paper issued by such
Purchaser shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such commercial
paper shall have been outstanding. Any provision in this Agreement
notwithstanding, no Purchaser shall have any obligation to make any
payments under this Agreement otherwise than by deducting such
amounts from Collections.
SECTION 10.08. Confidentiality. (a) Unless otherwise
required by applicable law, the Seller and each Originator agrees
to maintain the confidentiality of this Agreement (and all drafts
thereof) in communications with third parties and otherwise;
provided, however, that this Agreement may be disclosed to third
parties to the extent such disclosure is (i) required in connection
with a sale of securities of such Originator, (ii) made solely to
persons who are legal counsel for the purchaser or underwriter of
such securities, (iii) limited in scope to the provisions of
Articles V and VI, and, to the extent defined terms are used in
Articles V and VI, such terms defined in Article I of this
Agreement and (iv) made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to
the Agent; provided further, however, that the Agreement may be
disclosed to the Seller's accountants and legal counsel retained in
connection with the negotiation, execution and delivery of this
Agreement; and provided further, however, that the Seller shall
have no obligation of confidentiality in respect of any information
which may be generally available to the public or become available
to the public through no fault of the Seller.
(b) Each Purchaser, the Agent and the Collection Agent,
if other than an Originator, each hereby acknowledges that in
connection with this Agreement each Originator will be required (i)
to disclose to the Agent, the Collection Agent, if other than the
Originator, and their respective agents and representatives certain
confidential and proprietary information relating to such
Originator's business activities, including, without limitation,
certain books, lists, records and documents (including computer
tapes and disks) in the possession or under the control of such
Originator relating to the Purchased Receivables, including,
without limitation, the related Contracts and Related Security,
(ii) to allow the Agent or its agents and representatives to visit
the offices of such Originator for the purpose of examining the
materials described in clause (i) above, and (iii) to allow the
Agent or its agents or representatives to discuss matters relating
to Purchased Receivables sold by such Originator or such
Originator's performance hereunder with any of the responsible
officers or employees of such Originator having knowledge of such
matters. Each Purchaser, the Agent and the Collection Agent, if
other than an Originator, each hereby agrees that (i) it will not
disclose and will not permit any of such agents or representatives
to disclose (other than to its employees, auditors or counsel) any
information with respect to any Originator which is furnished or
delivered pursuant to Section 5.01(c), (ii) it will refrain from
using and will not permit any of such agents or representatives to
use any such information except as permitted by the terms of this
Agreement, and (iii) it will maintain the confidentiality of this
Agreement (and all drafts thereof); provided, however, that each
Purchaser, the Agent or the Collection Agent, if other than an
Originator, and such agents or representatives, may make such
disclosure (A) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over it,
(B) as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation, (C) as may be
required by or in order to comply with any law, order, regulation
or ruling (D) as may be required or appropriate to any Assignee or
to any prospective Assignee, (E) as may be required or appropriate
to any rating agency that rates or may rate the securities of any
Purchaser or (F) as may be required or appropriate to any Person
providing credit or liquidity support to a Purchaser, provided that
such a Person providing liquidity support is not also an insurance
company or a member of a group (consisting of such agency or Person
and all of its Affiliates) that is engaged primarily in the
business of underwriting or selling insurance other than financial
guarantors and provided, further, in the case of any disclosure
permitted by clause (D), (E) or (F) hereof, that any such Assignee,
prospective Assignee, rating agency or Person providing credit or
liquidity support agrees to treat such disclosure confidentially;
provided further, however, that there shall be no obligation of
confidentiality in respect of any information which may be
generally available to the public or become available to the public
through no fault of such Purchaser, the Agent or the Collection
Agent, if other than an Originator, as the case may be.
SECTION 10.09. Trigger Events. If any of the following
events shall occur and be continuing:
(a) The Collection Agent (if other than the Agent or its
designee) (i) shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to in
clause (ii) of this subsection (a)) and such failure shall
remain unremedied for three Business Days or (ii) shall fail to
make any payment or deposit to be made by it hereunder when
due; or
(b) Any Originator shall fail (i) to transfer to the
Agent when requested by the Agent any rights pursuant to this
Agreement which it has as Collection Agent, (ii) to make any
payment required under Section 9.01 or (iii) to turn over to
the Collection Agent the amounts referred to in Sections
2.04(c)(i) and (ii); or
(c) Any representation or warranty made or deemed made by
any Originator or the Seller (or any of its officers) under or
in connection with this Agreement, any Purchaser Report or any
other information or report delivered pursuant hereto shall
prove to have been incorrect in any material respect when made
or deemed made; or
(d) The Seller or any Originator shall fail to perform or
observe any other term, covenant or agreement contained in this
Agreement on its part to be performed or observed and any such
failure shall remain unremedied for 10 days after written
notice thereof shall have been given to the Seller by the Agent
at the direction of the Majority Purchasers; or
(e) Any Originator or any of its subsidiaries shall fail
to pay any principal of or premium or interest on any Debt
which is outstanding in a principal amount of at least
$5,000,000 in the aggregate of such Originator or such
subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared
to be due and payable, or required to be prepaid (other than by
a regularly scheduled required prepayment), prior to the stated
maturity thereof; or
(f) An event of default as defined in any agreement,
mortgage, indenture or instrument under which there may be
issued, or by which there may be secured or evidenced any Debt
of the Company whether such Debt now exists or shall hereafter
be created, in a principal amount then outstanding of
$25,000,000 or more, shall occur and shall result in such Debt
of the Company becoming or being declared due and payable prior
to the date on which it would otherwise become due and payable,
and such acceleration shall not be rescinded or annulled; or
(g) The Purchase of Purchased Receivables pursuant hereto
shall for any reason, except to the extent permitted by the
terms hereof, cease to create legal and equitable title to, and
ownership of, each Purchased Receivable and the Related
Security and Collections with respect thereto; or any Ownership
Document delivered hereunder shall for any reason cease to
evidence the transfer to the owner thereof of legal and
equitable title to, and ownership of, Purchased Receivables and
Related Security to the extent of the Receivable purchased (or
purported to be purchased) thereunder; or
(h) (i) Any Originator, any of its subsidiaries or the
Company shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or
against any Originator or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property
and, if instituted against any Originator or any of its
subsidiaries, either such proceeding shall not be stayed or
dismissed for 45 days or any of the actions sought in such
proceeding (including, without limitation, the entry of an
order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or any person or
entity having authority over such Originator shall commence any
delinquency proceeding or initiate any action or enter any
order asserting or seeking to assert powers of supervision,
rehabilitation or liquidation with respect to such Originator
pursuant to applicable laws; or (ii) any Originator or any of
its subsidiaries shall take any corporate action to authorize
any of the actions set forth in clause (i) above in this
subsection (h); or
(i) There shall have been any material adverse change in
the financial condition or operations of any Originator or the
Company since September 30, 1993; or there shall have occurred
any event which may materially adversely affect the ability of
the Seller to perform its obligations under this Agreement and
the Ownership Documents; or
(j) The agreement referred to in Section 3.01(l) shall no
longer be in full force and effect; or
(k) The Company shall not maintain a long-term senior
debt rating of at least BBB- by Standard & Poor's Corporation
and at least Baa3 by Moody's Investors Service, Inc; then, and
in any such event, (i) the Agent and each Purchaser shall have,
in addition to the rights and remedies which they may have
under this Agreement or at law, including, without limitation,
the right to require the Collection Agent to segregate and
deposit in each Purchaser's account all amounts held in trust
and the right to replace the Collection Agent, all other rights
and remedies provided under the UCC of the applicable
jurisdiction or jurisdictions and other applicable laws, which
rights shall be cumulative, and (ii) the Seller shall pay each
Purchaser an amount equal to .25% of the then Outstanding
Balance of each Purchaser's Share Percentage of Purchased
Receivables.
SECTION 10.10. Independent Decision. The Seller and each
Originator acknowledges that it has, independently and without
reliance upon any Purchaser, the Agent, CNA, any financial
institution designated by any Initial Purchaser on the signature
page hereof or any Affiliate thereof and based upon such documents
and information as it has deemed appropriate, made its own analysis
and decision to enter into this Agreement.
SECTION 10.11. Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
SELLER: THE CONTINENTAL INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
180 Maiden Lane, 12th Floor
New York, New York 10038
Attention: Martin D. Haber, Esq.
General Counsel
Telecopy No.: (212) 440-7982
with a copy to:
The Continental Insurance Companies
One Continental Drive
Cranbury, New Jersey 08570
Attention: Mr. Francis M. Colalucci
Vice President
Telecopy No.: (609) 395-5957
BOSTON OLD COLONY INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
THE BUCKEYE UNION INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
CASUALTY INSURANCE COMPANY
By /s/Charles Parker
Vice President
COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J.
By /s/J. Heath Fitzsimmons
Senior Vice President
THE CONTINENTAL INSURANCE COMPANY OF
NEW JERSEY
By /s/J. Heath Fitzsimmons
Senior Vice President
CONTINENTAL LLOYD'S INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Attorney-in-Fact
CONTINENTAL REINSURANCE CORPORATION
By /s/J. Heath Fitzsimmons
Senior Vice President
THE FIDELITY AND CASUALTY COMPANY OF NEW YORK
By /s/J. Heath Fitzsimmons
Senior Vice President
FIREMEN'S INSURANCE COMPANY OF NEWARK,
NEW JERSEY
By /s/J. Heath Fitzsimmons
Senior Vice President
THE GLENS FALLS INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
KANSAS CITY FIRE AND MARINE INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
THE MAYFLOWER INSURANCE COMPANY, LTD.
By /s/J. Heath Fitzsimmons
Senior Vice President
NATIONAL-BEN FRANKLIN INSURANCE COMPANY
OF ILLINOIS
By /s/J. Heath Fitzsimmons
Senior Vice President
NIAGARA FIRE INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
PACIFIC INSURANCE COMPANY
By /s/J. Heath Fitzsimmons
Senior Vice President
WORKERS' COMPENSATION AND INDEMNITY COMPANY
OF CALIFORNIA
By /s/Charles Parker
Vice President
AGENT: CITICORP NORTH AMERICA, INC.,
Individually and as Agent
By /s/Robin M. Beckett
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: Corporate Asset Funding
Department
Telex No.: TWX 510 600 5528
Answerback: CIC CAF UD
Telecopy No.: (914) 899-7890
PURCHASERS: CORPORATE ASSET FUNDING COMPANY, INC.
By CITICORP NORTH AMERICA, INC.,
its Managing Agent
By /s/Robin M. Beckett
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: Corporate Asset Funding
Department
Telex No.: TWX 510 600 5528
Answerback: CIC CAF UD
Telecopy No.: (914) 899-7890
Account for Deposits:
Bank: Citibank, N.A.
399 Park Avenue
New York, New York 10043
Account Name: Citicorp North America, Inc.,
as managing agent for
Corporate Asset Funding
Company, Inc.
Account Number: 4056-3414
FALCON ASSET SECURITIZATION CORPORATION
By /s/Sheila Stamps
Authorized Signor
One First National Plaza
Suite 0596, 21st Floor
Chicago, Illinois 60670
Attention: The Asset-Backed
Markets Division
Telecopy No.: (312) 732-4487
Account for Deposits:
Bank: The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Account Name: Falcon Asset Securitization
Corporation
Account Number: 58-14810
ATLANTIC ASSET SECURITIZATION CORP.
Credit Lyonnais New York Branch
as Attorney-in-fact for Atlantic Asset
Securitization Corp.
By /s/Barbara Kellc
Authorized Signor
1301 Avenue of the Americas
18th Floor
New York, NY 10019
Facsimile No.: (212) 459-3258
Attention: Merchant Banking
Barbara Kellc
Account for Deposits:
Bank: Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Account Name: Atlantic Asset Securitization
Corp.
Account Number: 1-25680-0001-00
ABA Number: 0260-0807-3
SHEFFIELD RECEIVABLES CORPORATION
By /s/James F. Moore
Authorized Signor
222 Broadway
New York, New York 10038
Account for Deposits:
Bank: Barclays Bank PLC
75 Wall Street
New York, New York 10065
Account Name: Sheffield Receivables Corporation
Account No.: 050-786393
ABA Number: 026002574
STOCK PURCHASE AGREEMENT
among
THE CONTINENTAL CORPORATION,
THE CONTINENTAL INSURANCE COMPANY,
CONTINENTAL REINSURANCE CORPORATION
and
MELLON BANK CORPORATION
AFCO CREDIT CORPORATION
CAFO INC.
Dated as of June 30, 1993
TABLE OF CONTENTS
Section Page
ARTICLE I
SALE AND PURCHASE
1.1 Sale and Purchase of the Shares 1
1.2 Closing 1
1.3 Certain Contingent Payments 2
1.4 Allocation of Purchase Price 6
1.5 Canadian Tax Matters 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
2.1 Corporate Status and Authority 7
2.2 No Conflicts, etc. 8
2.3 Corporate Status of the Companies 8
2.4 The Shares 8
2.5 Subsidiaries 9
2.6 Financial Statements 9
2.7 Absence of Undisclosed Liabilities 10
2.8 Properties, etc. 10
2.9 Contracts 11
2.10 Employee Benefits 11
2.10.1 Employment Agreements and Plan 11
2.10.2 Liabilities, Encumbrances and Tax Treatment 12
2.10.3 Compliance with Plan Provisions and
Applicable Laws 12
2.10.4 Retiree Welfare Benefits 12
2.10.5 Severance Pay; Accelerated Benefits 12
2.10.6 Plan Amendment or Termination 13
2.10.7 Labor Matters 13
2.10.8 Nonqualified Arrangements 13
2.10.9 CAFO Plans 13
2.11 Insurance 13
2.12 Governmental Authorizations; Compliance
with Laws 13
2.13 Litigation 14
2.14 Tax Matters 14
2.15 Absence of Changes 16
2.16 Brokers 16
2.17 Environmental Matters 17
2.18 Accurate and Complete Disclosure 17
2.19 Intellectual Property 17
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES
OF CONTINENTAL
2.20 Corporate Status and Authority 18
2.21 No Conflicts, etc. 18
2.22 Litigation 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
3.1 Corporate Status and Authority 19
3.2 No Conflicts 19
3.3 Litigation 20
3.4 Purchase for Investment 20
3.5 Brokers 20
ARTICLE IV
CERTAIN COVENANTS
4.1 Obligations of the Parties 20
4.2 Conduct of Business, etc. 20
4.3 Access and Information 21
4.4 Payment of Certain Taxes; Filing of Certain
Tax Returns 21
4.5 Solicitation of Employees 21
4.6 Tax Sharing Agreements; Tax Attributes 22
4.6.1 Termination of Existing
Agreements 22
4.6.2 Tax Attributes 22
4.7 Taxes 23
4.7.1 Payment of Tax Liabilities 23
4.7.2 Filing of Tax Returns 23
4.7.3 Bridge Period 23
4.7.4 Audits and Other Proceedings 24
4.7.5 Conduct of Business, Section 338 Election 25
4.7.6 Tax Refunds 26
4.7.7 Cooperation 27
4.8 Certain Pre-Closing Transactions 27
4.8.1 Pre-Closing Dividend 27
4.8.2 Intercompany Indebtedness 28
4.8.3 Resignation of Directors 28
4.8.4 Credit Support Arrangements 28
4.8.5 Transfer of Certain Property 28
4.9 Publicity 28
4.10 Covenant not to Compete 29
4.11 Transitional Matters 29
ARTICLE V
EMPLOYEE MATTERS
5.1 Employee Matters 29
5.2 Retirement Plan 30
5.3 Savings Plan 31
5.4 Welfare Plans 31
5.5 Executive Compensation and Benefits 34
5.6 Cessation of Participation 34
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Preamble 34
6.2 Conditions to Obligations of both
Parties 35
6.2.1 Consents and Approvals 35
6.2.2 No Injunction 35
6.3 Conditions to Obligations of the
Sellers 35
6.3.1 Representations and Warranties of
the Purchaser 35
6.3.2 Officer's Certificate 36
6.3.3 Opinion of Counsel 36
6.3.4 Release From Credit Support
and Other Arrangements 36
6.3.5 Third Party Consents 36
6.3.6 Real Property Transfer Tax
Filings 36
6.4 Conditions to Obligations of the Purchaser 36
6.4.1 Representations and Warranties of
the Sellers 36
6.4.2 Officer's Certificate 36
6.4.3 Opinion of Counsel 37
6.4.4 Third Party Consents 37
6.4.5 Real Property Transfer Tax
Filings 37
6.4.6 Combined Shareholders' Equity 37
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations and
Warranties 37
7.2 Indemnification 37
7.2.1 By the Sellers 37
7.2.2 By the Purchaser 38
7.2.3 Indemnification Procedures 39
7.3 Continental Guaranty 40
ARTICLE VIII
DISPUTE RESOLUTION 41
ARTICLE IX
DEFINITIONS 42
ARTICLE X
GENERAL PROVISIONS
10.1 Modification; Waiver 46
10.2 Entire Agreement 46
10.3 Termination 46
10.4 Expenses 46
10.5 Further Actions 46
10.6 Post-Closing Access 46
10.7 Notices 47
10.8 Assignment 48
10.9 Counterparts 48
10.10 Headings 48
10.11 Governing Law 49
Exhibit A Form of Opinion of the Purchaser's Counsel
Exhibit B Form of Opinion of the Sellers' U.S. Counsel
Exhibit C Form of Opinion of the Sellers' General
Counsel
Exhibit D Form of Opinion of Sellers' Canadian Counsel
STOCK PURCHASE AGREEMENT, dated as of June 30, 1993,
among THE CONTINENTAL CORPORATION, a New York corporation
("Continental"), THE CONTINENTAL INSURANCE COMPANY, a New Hampshire
insurance corporation ("Continental Insurance"), CONTINENTAL
REINSURANCE CORPORATION, a California insurance corporation
("Continental Reinsurance", and together with Continental
Insurance, the "Sellers"), and MELLON BANK CORPORATION, a
Pennsylvania corporation (the "Purchaser"). Capitalized terms not
otherwise defined are defined in Article IX hereof.
ARTICLE I
Sale and Purchase
Section 1.1. Sale and Purchase of the Shares. Subject
to the terms and conditions of this Agreement and in reliance upon
the representations, warranties and covenants contained herein, at
the Closing, (i) Continental Insurance will sell, transfer and
deliver to the Purchaser or its nominee all the outstanding capital
stock (the "AFCO Shares") of AFCO Credit Corporation, a New York
corporation ("AFCO"), and (ii) Continental Reinsurance will sell,
transfer and deliver to the Purchaser or its nominee all the
outstanding capital stock (the "CAFO Shares", and together with the
AFCO Shares, the "Shares") of CAFO Inc., a corporation incorporated
under the federal laws of Canada ("CAFO", and together with AFCO,
the "Companies"), and the Purchaser will deliver to the Sellers the
Closing Date Purchase Price in accordance with the provisions of
Section 1.2.
Section 1.2. Closing. The closing of the purchase and
sale of the Shares (the "Closing") will take place at the offices
of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022
at 10:00 a.m., New York time on the first business day of the month
following satisfaction of all conditions set forth in Section 6.2.1
hereof, or at such other date and time as the parties shall have
agreed to in writing (the "Closing Date"). At the Closing:
(a) each of Continental Insurance and Continental Reinsurance
will deliver to the Purchaser or its nominee(s) the AFCO Shares and
the CAFO Shares, respectively, free and clear of all liens, charges,
pledges or encumbrances, by delivering the certificates representing
such Shares, endorsed or accompanied by stock powers in favor of the
Purchaser or its nominee(s); and
(b) the Purchaser will pay $100 million (the "Closing Date
Purchase Price") in cash in the amount of (i) $5 million to Continental
Insurance in respect of the covenant not to compete set forth in Section
4.10 hereof, (ii) the book value of the CAFO Shares as of the Closing Date
to Continental Reinsurance in respect of the CAFO Shares, and (iii) the
remainder to Continental Insurance in respect of the AFCO Shares, by, at
each Seller's option, (x) a bank check drawn on the Federal Reserve Bank
of New York, or (y) a wire transfer of immediately available funds to a
bank account designated by such Seller.
Section 1.3. Certain Contingent Payments. In addition to the
Closing Date Purchase Price, the Purchaser shall be obligated to make
contingent cash payments to Continental Insurance or such affiliates of
Continental Insurance as Continental Insurance shall designate (the
"Continental Payee") subject to and in accordance with the following
provisions:
(a) In respect of each twelve month period immediately preceding
the first five anniversaries of the Closing Date (each a "Term Year"),
the Purchaser shall calculate a notional amount (the "Notional Amount")
in accordance with the following formula:
Pn = [O - (V x 1.05n)] x 1.20%
where:
Pn = the Notional Amount for the Term Year in respect of which
such Notional Amount is being calculated;
O = the Origination Volume for the Term Year in respect of
which such Notional Amount is being calculated;
V = the Origination Volume for the twelve month period ending
on the last day of the month immediately preceding the
month in which the Closing Date occurs; and
n = the number of Term Years elapsed since the Closing
Date.
(b) The Purchaser will pay to the Continental Payee cash
in an amount equal to the sum of the Notional Amounts for each of
the five Term Years following the Closing Date (the "Final
Payment") in accordance with the provisions of paragraphs (g) and
(h) of this Section 1.3; provided that, notwithstanding anything
herein to the contrary, the Final Payment shall not be less than
zero or more than $78 million.
(c) Within 10 days of each of the first two
anniversaries of the Closing Date, the Purchaser will pay to the
Continental Payee cash in an amount equal to $2.1 million (each
such payment a "Provisional Interest Payment").
(d) Within 10 days of the third anniversary of the
Closing Date, the Purchaser will pay to the Continental Payee cash
in an amount equal to the excess of (i) the product of (x) 6%,
times (y) the Projected Present Value of the Notional Amounts,
times (z) three (the "Interim Interest Amount"), over (ii) the
aggregate amount of payments made to any Continental Payee pursuant
to subsection (c) above (the "Provisional Payment Amount");
provided, that if the Interim Interest Amount shall be less than
the Provisional Payment Amount, the Continental Payee shall pay to
the Purchaser cash in an amount equal to the difference between the
Provisional Payment Amount and the Interim Interest Amount.
(e) Within 10 days of the fourth anniversary of the
Closing Date, the Purchaser will pay to the Continental Payee cash
in an amount equal to 6% of the Projected Present Value of the
Notional Amounts.
(f) The Purchaser will pay to the Continental Payee cash
in an amount equal to the excess of (i) the product of (x) 6%,
times (y) the Present Value of the Notional Amounts, times (z) five
(the "Final Interest Amount"), over (ii) the aggregate amount of
payments made to any Continental Payee pursuant to subsections (c),
(d) and (e) above (the "Adjusted Payment Amount") in accordance
with the provisions of paragraphs (g) and (h) of this Section 1.3;
provided, that if the Final Interest Amount shall be less than the
Adjusted Payment Amount, the Continental Payee shall pay to the
Purchaser cash in an amount equal to the difference between the
Adjusted Payment Amount and the Final Interest Amount.
(g) Within 30 days of the end of each of the first four
Term Years, the Purchaser will deliver to Continental Insurance a
written notice (an "Interim Notice") setting forth the Purchaser's
calculation of the Notional Amount for such Term Year. Within 30 days
of the end of the Term Year expiring on the fifth anniversary of the
Closing Date, the Purchaser will deliver to Continental Insurance a
written notice (the "Final Notice") setting forth the Purchaser's
calculations of the Notional Amount for such Term Year, the Final
Payment, the Present Value of the Notional Amounts, the Final Interest
Amount and the amount payable by or to the Purchaser pursuant to the
provisions of this Section 1.3. Such Interim Notices and the Final
Notice shall include such financial statements, workpapers and other
supporting documentation as Continental Insurance shall reasonably
request. Continental Insurance and its representatives shall have the
right to review all workpapers and procedures used to prepare the
Interim Notices and Final Notices and shall have the right to perform
any other reasonable procedures to verify the accuracy thereof. In
addition, and without limiting the foregoing, Continental Insurance
shall have the right to request an audit by its independent public
accountants of Purchaser's calculations set forth in the Interim and
Final Notices; provided, that Continental Insurance shall not have the
right to request an audit in respect of any Interim Notice unless, in
its reasonable discretion, it determines that there is a reasonable
basis therefor. In such event, the Purchaser shall provide to
Continental Insurance's independent public accountants such access to
the Purchaser's and its affiliates' (including the Companies and their
Subsidiaries) books, records and personnel as shall be reasonably
required in order for such independent public accountants to verify
the calculations made by the Purchaser pursuant to this Section 1.3.
The costs of any such audit shall be borne equally by the Purchaser
and Continental Insurance.
(h) Continental Insurance may, within 30 days after receipt
of the Final Notice (the "Review Period"), give the Purchaser either
(i) written notice (an "Acceptance Notice") that it accepts the
calculations set forth in the Final Notice, or (ii) written notice (an
"Objection Notice") that it objects to the calculations set forth in
the Final Notice and specifying the reasons therefor. The Final
Notice shall become final and binding on the parties for purposes of
this Agreement upon, and the Purchaser or the Continental Payee, as
the case may be, shall pay to the other party the amount set forth in
the Final Notice within seven days of, the earlier of (x) delivery by
Continental Insurance of an Acceptance Notice, or (y) the expiration
of the Review Period without delivery of an Objection Notice by
Continental Insurance. If the Purchaser and Continental Insurance are
unable to resolve any matter or matters in dispute within 30 days
after an Objection Notice has been given, the dispute shall be
submitted to a nationally recognized public accounting firm mutually
agreed upon by the Purchaser and Continental Insurance. Continental
Insurance and the Purchaser shall, and shall cause the Companies and
the Subsidiaries to, provide full cooperation to such accounting firm.
Such accounting firm shall make a final and binding determination as
to the matter or matters in dispute within 45 days of the submission
of the matter or matters in dispute to such accounting firm. The fees
and expenses of such accounting firm shall be borne equally by the
Purchaser and Continental Insurance. The Purchaser and Continental
Insurance agree to cooperate with each other and with each other's
authorized representatives in order to resolve such dispute as soon as
practicable. Any amounts owing by Purchaser or the Continental Payee,
as the case may be, shall be paid to the other party within seven days
of the resolution of such dispute. Any payments made by the parties
pursuant to this Section 1.3 shall be made in cash at the payee's
option by certified or bank check or by wire transfer in immediately
available funds to a bank account designated by the payee.
(i) The Purchaser's obligations to make the contingent cash
payments set forth in this Section 1.3 may be assigned to and assumed
by another person in connection with any subsequent sale of all or a
substantial portion of the Business to such person; provided that
prior to fulfillment of the Purchaser's obligations under this Section
1.3, the Purchaser shall consult with Continental Insurance on a
confidential basis with respect to the identity of any potential
purchaser or list of potential purchasers of the Business; and
provided, further, that any such assignment and assumption shall be
subject to Continental Insurance's prior written consent, which
consent shall not be unreasonably withheld.
(j) If prior to the fulfillment of the Purchaser's
obligations under this Section 1.3 the Business or a substantial
portion of the Business is discontinued or sold by the Purchaser to an
unaffiliated third party without Continental Insurance's prior written
consent to the assignment and assumption of the Purchaser's
obligations under this Section 1.3 to such person, Continental
Insurance may, at its option, notify the Purchaser in writing that it
wishes to accelerate the payment of the Final Payment (the date of
such notice being hereafter referred to as the "Acceleration Date").
Within 30 days of receipt of such notice, the Purchaser shall deliver
to Continental Insurance a written notice setting forth the
information required to be provided by the Purchaser to Continental
Insurance pursuant to the second sentence of paragraph (g) above;
provided, that for purposes of calculating the Present Value of the
Notional Amounts and the Final Payment, the Notional Amount for the
Term Year in which such notice is given and for the remaining Term
Years prior to the fifth anniversary of the Closing Date shall be
calculated based on the assumption that Origination Volume grew over
each such Term Year at a rate equal to the greater of (x) the average
rate of growth in the Origination Volume for each of the Term Years
ending prior to the date of such acceleration, or (y) 6.0%; and
provided, further, that the Final Interest Amount shall be equal to
(A) 6%, times (B) the Present Value of the Notional Amounts
(calculated in accordance with the foregoing proviso), times (C) the
number of whole or partial Term Years elapsed from the Closing Date to
the Acceleration Date (including such portion of the current Term
Year, expressed in decimal form, as shall be applicable). Upon
delivery of such notice, the provisions of the third through seventh
sentences of paragraph (g) and paragraph (h) shall thereafter apply as
if the Final Payment made pursuant to this paragraph (j) were the
Final Payment made pursuant to paragraph (b).
(k) In the event that the Purchaser or any of its
affiliates shall, at any time prior to the fulfillment of the
Purchaser's obligations under this Section 1.3:
(i) acquire any business entity or assets engaged in the
premium finance business;
(ii) engage in the premium finance business through any
affiliate other than the Companies or the Subsidiaries;
or
(iii) withdraw or materially curtail the amount of
financing available to the Companies and their
subsidiaries as a result of a material deterioration in
the credit standing of the Purchaser;
and such event results in a Material Change to the Business (as
such term is defined below), then, at either party's election by
delivery of a written notice to the other party (an "Adjustment
Notice"), the Purchaser and Continental Insurance shall negotiate
in good faith an equitable adjustment to the calculation of
Origination Volume to account for any direct or indirect loss or
gain in the business opportunities available to the Companies and
the Subsidiaries resulting therefrom; provided, that if the parties
are unable to reach agreement on such an equitable adjustment
within 45 days of the delivery of an Adjustment Notice, either
party may elect at any time thereafter to submit such matter to
binding arbitration in accordance with the provisions of Article
VIII hereof, and provided, further, that in no event shall any such
adjustment increase the amount of the Final Payment to more than
$78 million or decrease the amount of the Final Payment to less
than zero. For purposes of this Section 1.3(k), a "Material Change
to the Business" shall mean a change in the Business that causes a
material change in the growth rate of the Origination Volume of the
Business from the growth rate in effect immediately prior to the
event which causes such material change.
(l) Within 45 days of the end of each fiscal quarter and
60 days of the end of each fiscal year, the Purchaser shall deliver
to Continental Insurance copies of unaudited consolidated interim
and annual financial statements, as the case may be, for each of
the Companies, which financial statements shall include a balance
sheet, statement of income and retained earnings and a statement of
cash flows, all prepared in accordance with generally accepted
accounting principles applied on a consistent basis; provided,
however, that the Purchaser's obligation to deliver such financial
statements shall immediately terminate if at any time Continental
or any of its affiliates directly or indirectly engages, or has any
ownership interest in any firm, corporation, partnership or other
business entity (except as a passive investor holding a less than
5% equity interest in such business entity) that engages, in the
activities constituting the Business at such time in the United
States and Canada (other than as permitted in Section 4.10 hereof).
Section 1.4. Allocation of Purchase Price. The
Purchaser and the Sellers agree to allocate (i) the fixed
consideration under Section 1.2 hereof in accordance with the
payments made pursuant to Section 1.2(b) and (ii) the contingent
consideration under Section 1.3 hereof to the AFCO Shares. The
Purchaser and the Sellers each agree to file all Tax Returns in
accordance with such allocations and will not, without the consent
of the others, take any contrary position with any government or
taxing authority.
Section 1.5. Canadian Tax Matters. (a) If a certificate
issued by the Minister of Revenue Canada pursuant to Section 116(2)
of the Income Tax Act (Canada) is not delivered to the Purchaser by
Continental Reinsurance at or before the Closing Date, the
Purchaser shall be entitled to withhold from the portion of the
Closing Date Purchase Price payable in respect of the CAFO Shares
the amount required to be withheld pursuant to section 116 of the
Income Tax Act (Canada) with respect to the Closing Date Purchase
Price (the "Withheld Amount").
(b) If Continental Reinsurance delivers to the Purchaser
prior to the 30th day after the end of the month in which the
Closing Date occurs, a certificate issued by the Minister of
National Revenue under Section 116(4) of the Income Tax Act
(Canada), the Purchaser shall promptly pay to Continental
Reinsurance the Withheld Amount.
(c) If Continental Reinsurance does not deliver to the
Purchaser within the specified time a certificate described in
paragraph (a) or (b) above and the Purchaser has withheld the
Withheld Amount, the Purchaser shall (i) remit to the Receiver
General the amount required to be remitted pursuant to section 116
of the Income Tax Act (Canada) and the amount so remitted shall be
credited to the Purchaser as a payment to the Purchaser on account
of the Closing Date, and (ii) pay the remaining portion of the
Withheld Amount, if any, to Continental Reinsurance.
(d) All references in this Agreement to the Income Tax
Act (Canada) and to amounts to be withheld pursuant thereto shall
be deemed to be made to the Income Tax Act (Canada), as now enacted
or as it may from time to time be amended, reenacted or replaced,
and in the case of any such amendment, reenactment or replacement,
any references herein to the Income Tax Act (Canada) and to amounts
to be withheld pursuant thereto shall be read as referring to such
amended, reenacted or replaced provisions.
ARTICLE II
Representations and Warranties of the Sellers
Each of the Sellers represents and warrants to the
Purchaser as follows:
Section 2.1. Corporate Status and Authority. Continental
Insurance is an insurance corporation duly incorporated and validly
existing under the laws of the State of New Hampshire and has the
corporate power to own the AFCO Shares, and Continental Reinsurance
is an insurance corporation duly incorporated and validly existing
under the laws of the State of California and has the corporate
power to own the CAFO Shares. Each of the Sellers has the corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and
performance of this Agreement by each Seller have been duly
authorized by its Board of Directors, which constitutes all
necessary corporate action on the part of such Seller for such
authorization. This Agreement constitutes the valid and legally
binding obligation of each Seller, enforceable against such Seller
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and to general
principles of equity, regardless of whether enforcement is sought
in a proceeding in equity or at law.
Section 2.2. No Conflicts, etc. (a) Except as
otherwise set forth in this Agreement or in the Sellers' Disclosure
Schedule, the execution, delivery and performance of this Agreement
by the Sellers will not result in (i) any conflict with the charter
documents or by-laws of any of the Sellers, the Companies or the
Subsidiaries, (ii) any material breach or violation of or default
under any statute, regulation, judgment, order or any mortgage,
agreement, deed of trust, indenture or any other instrument to
which any of the Sellers, the Companies or the Subsidiaries is a
party or by which any of them or any of their respective properties
or assets are bound, except for such breaches, violations or
defaults which would not, individually or in the aggregate, have a
Material Adverse Effect, or (iii) the creation or imposition of any
lien, charge or encumbrance thereon, except for such liens,
charges, pledges or encumbrances which would not, individually or
in the aggregate, have a Material Adverse Effect.
(b) No consent, approval or authorization of or filing
with any governmental authority is required on the part of any of
the Sellers, the Companies or the Subsidiaries in connection with
the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, except (i) filings required
with respect to the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"), (ii) as otherwise set forth in the Sellers'
Disclosure Schedule, and (iii) filings, consents or approvals,
which, if not made or obtained would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 2.3. Corporate Status of the Companies. AFCO is
a corporation duly incorporated and validly existing under the laws
of the State of New York; and CAFO is a corporation existing and
not dissolved under the federal laws of Canada. Each of the
Companies has full corporate power and authority to conduct its
business and to own or lease its properties, as now conducted,
owned or leased. Each of the Companies is duly qualified to
transact business in each jurisdiction in which the failure to be
so qualified would have a Material Adverse Effect.
Section 2.4. The Shares. (a) The authorized capital
stock of AFCO consists of 2000 shares of common stock, no par
value, all of which are issued and outstanding and owned by
Continental Insurance, free and clear of any liens, charges or
encumbrances. The authorized capital stock of CAFO consists of an
unlimited number of shares of common stock, no par value, 2000 of
which are issued and outstanding and owned by Continental
Reinsurance, free and clear of any liens, charges or encumbrances.
Subject to any Canadian governmental approvals or consents that
must be obtained by the Purchaser in connection with the transfer
of the CAFO Shares pursuant hereto, upon consummation of the
transactions contemplated hereby, the Purchaser or its nominee(s)
will acquire good title to the Shares, free and clear of all
pledges, security interests, liens, charges, encumbrances,
equities, claims, options or rights of others of whatever nature.
(b) All the Shares have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth
in the Sellers' Disclosure Schedule, there are no outstanding
options, warrants, conversion or other rights or other agreements
of any kind (other than this Agreement) for the purchase or
acquisition from, or the sale or issuance by, any of the Sellers or
the Companies of any shares of capital stock of any of the
Companies, and no authorization therefor has been given.
Section 2.5. Subsidiaries. (a) The Sellers' Disclosure
Schedule lists all of the subsidiaries of the Companies (each a
"Subsidiary" and collectively the "Subsidiaries") and shows for
each: its name; the jurisdiction of its incorporation; its
authorized and outstanding shares of capital stock of each class;
the shareholders thereof; and the total number of shares owned by
each shareholder. Except as otherwise set forth in the Sellers'
Disclosure Schedule, all of such outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, are owned by the
shareholder or shareholders indicated in the Sellers' Disclosure
Schedule, and are owned free and clear of any liens, charges or
encumbrances. Except as set forth in the Sellers' Disclosure
Schedule, there are no outstanding options, warrants, conversion or
other rights or other agreements of any kind (other than this
Agreement or any shareholders' preemptive rights, if any) for the
purchase or acquisition from, or the sale or issuance by, any of
the Sellers, the Companies or the Subsidiaries of any shares of
capital stock of any Subsidiary, and no authorization therefor has
been given.
(b) Each Subsidiary is a corporation duly incorporated
and validly existing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct
its business and to own or lease its properties as now conducted,
owned or leased. Each Subsidiary is duly qualified to do business
in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect.
Section 2.6. Financial Statements. There have been
delivered to the Purchaser the Companies' Financial Statements.
Except as otherwise set forth in the Sellers' Disclosure Schedule,
the AFCO Financial Statements and the CAFO Financial Statements
each present fairly the financial condition and results of
operations of AFCO and CAFO, respectively, as of the dates and for
the periods indicated (subject in the case of the Companies'
Interim Statements to normal year-end adjustments consistent with
those made in the AFCO Financial Statements and the CAFO Financial
Statements, respectively) and have been prepared in accordance with
generally accepted accounting principles, except as noted therein.
Section 2.7. Absence of Undisclosed Liabilities. Except
for liabilities reflected or reserved against in the Companies'
Financial Statements, or reflected in the Sellers' Disclosure
Schedule, and except with respect to Taxes (which are provided for
in Section 2.14), the Companies and the Subsidiaries have no
liabilities or obligations, except for liabilities incurred in the
ordinary course of business.
Section 2.8. Properties, etc. The Sellers' Disclosure
Schedule lists all items of real property owned or leased by any of
the Companies or the Subsidiaries. Except as otherwise set forth
in the Sellers' Disclosure Schedule, a Company or a Subsidiary has
(a) good and valid title to the real property listed in the
Sellers' Disclosure Schedule as owned by it, (b) valid and
subsisting leasehold estates in the real property listed in the
Sellers' Disclosure Schedule as leased by it, and (c) good and
valid title to all of its tangible personal property (except for
properties disposed of since the date hereof in the ordinary course
of business), in each case subject to no mortgage, lien, charge,
easement or encumbrance, except (i) mortgages, liens, charges,
easements and other encumbrances reflected in the Companies' Finan-
cial Statements, (ii) liens for taxes and assessments not due and
payable or which are being contested in good faith by appropriate
proceedings, (iii) as shown in title reports or other writings
which have been made available to the Purchaser for review and (iv)
charges, easements and other encumbrances which do not materially
interfere with the current use of the properties affected thereby.
Section 2.9. Contracts. The Sellers' Disclosure
Schedule lists all agreements, contracts and commitments of the
following types to which any of the Companies or the Subsidiaries
is a party or by which any of the Companies or the Subsidiaries or
any of their respective properties is bound as of the date hereof
(other than real property leases and labor or employment-related
agreements, which are provided for in Sections 2.8 and 2.10,
respectively, or agreements with respect to Taxes which are
provided for in Section 2.14): (a) joint venture, general and
limited partnership agreements, (b) mortgages, indentures, loan or
credit agreements, security agreements and other agreements and
instruments relating to the borrowing of money or extension of
credit in any case in excess of $500,000, (c) contracts containing
any covenant not to compete or any covenant relating to the
disclosure by the Company or the Subsidiaries of proprietary
information, (d) contracts relating to the acquisition or
disposition of assets (other than in the ordinary course of
business), (e) material contracts or other arrangements with
brokers and agents, (f) contracts with respect to services provided
by the Sellers or any affiliate of the Sellers to the Companies or
any Subsidiary, and (g) other agreements, contracts and commitments
which in any case require payment by a Company or any Subsidiary
within any fiscal year ending after the date hereof of more than
$500,000. Complete and correct copies of all such agreements have
been made available to the Purchaser for review.
Section 2.10. Employee Benefits.
2.10.1. Employment Agreements and Plans. The Sellers'
Disclosure Schedule lists all agreements, contracts and commitments
of the following types which are maintained by any of the Sellers,
the Companies or the Subsidiaries or to which any of the Sellers,
Companies or the Subsidiaries is a party and which provides
benefits or compensation to employees of the Companies or the
Subsidiaries: (a) employment and consulting agreements (excluding
any employment or consulting agreement pursuant to which less than
$100,000 or CDN $127,000 was paid in 1992 or to which less than
$100,000 or CDN $127,000 is payable in 1993 or in any year
thereafter), (b) collective bargaining agreements, (c) profit-
sharing, pension, retirement, deferred compensation, or other
plans, including each "employee pension benefit plan" within the
meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (the "Pension Plans"), and (d)
bonus, incentive compensation, stock option, severance, vacation,
tuition assistance or reimbursement, legal services, salary
continuation, medical insurance or benefits, life insurance or
death benefits, travel or accident insurance or benefits,
disability insurance or benefits, unemployment benefits, or other
plans, including each "employee welfare benefit plan" within the
meaning of Section 3(3) of ERISA. The agreements, contracts and
commitments referenced in (a) through (d) are sometimes hereinafter
collectively referred to as the "Plans". None of the Plans is a
"multiemployer pension plan" within the meaning of Section 3(37) of
ERISA or a "multiple employer plan" within the meaning of Section
413(c) of the Code. The Seller has provided the Purchaser true and
complete copies of all written Plans; descriptions of all unwritten
Plans; all related trust agreements or other funding arrangements;
all summary plan descriptions, employee handbooks and material
employee communications; the most recent actuarial and trust
reports prepared for any such Plan; the most recent schedules
attached thereto; and the most recent determination letter issued
in respect of each such Plan.
2.10.2. Liabilities, Encumbrances and Tax Treatment. No
event has occurred with respect to any of the Companies or the
Subsidiaries, and there exists no condition or set of circumstances
with respect to the Companies or the Subsidiaries, in connection
with which the Companies or the Subsidiaries are directly or
indirectly, through any other trade or business (whether or not
incorporated) which together with the Companies or the Subsidiaries
would be deemed to be part of a "controlled group" within the
meaning of Section 4001 of ERISA (an "ERISA Affiliate"), subject to
any liability, lien or encumbrance or loss of tax deduction with
respect to any Plan (other than any Plan described in Section
2.10.9) under ERISA or the Code, or any other law, regulation or
governmental order including, without limitation, ERISA
Sections 409, 502(i), 502(l), Part 6 of Title I, 4062 or 4069 or
Code Sections 401(a)(29), 4971, 4972, 4975, 4976, 4977, 4978,
4978B, 4979, 4980 or 4980B or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which any
of the Companies or the Subsidiaries has indemnified or is required
to indemnify any person against any such liability which would have
a Material Adverse Effect. No material liability (other than
annual premiums, all of which premiums due to date have been paid)
to the Pension Benefit Guaranty Corporation has been incurred by
the Companies or the Subsidiaries with respect to any Pension Plan
subject to Title IV of ERISA.
2.10.3. Compliance With Plan Provisions and Applicable
Laws. With respect to each Plan (other than any Plan described in
Section 2.10.9 hereof): (a) Each of the Companies and the
Subsidiaries, as the case may be, have made and/or accrued all
payments due from them with respect to periods ending on or prior
to the date hereof; (b) no such Plan which is subject to Part 3 of
Subtitle B of Title I of ERISA has incurred any "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code, whether or not waived; (c) each such Plan
is in material compliance with all applicable laws and regulations,
including, but not limited to ERISA and the Code; (d) each such
Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter and nothing has
occurred since the date of such letter that would adversely affect
such qualification; and (e) there is no contract or arrangement
with respect to which any of the Companies or the Subsidiaries is
directly or indirectly liable that would result in the payment of
any amount that would not, by operation of Code Section 280G, be
deductible.
2.10.4. Retiree Welfare Benefits. No employee welfare
benefit plan (as defined in Section 3(1) of ERISA) maintained or
sponsored by the Companies or the Subsidiaries provides medical or
death benefits (whether or not insured) with respect to Retained
Employees beyond their date of retirement or other termination of
service (other than coverage mandated by Section 601 of ERISA, the
cost of which is fully paid by the Retained Employee or his or her
dependents).
2.10.5. Severance Pay; Accelerated Benefits. The
consummation of the transactions contemplated by this Agreement
will not obligate any of the Companies or the Subsidiaries to
provide any Retained Employees (other than Canadian Retained
Employees) with severance pay, unemployment compensation or any
similar payment, nor accelerate the time of payment or vesting, or
increase any compensation due to any such Retained Employee under
any Plan.
2.10.6. Plan Amendment or Termination. None of the
Sellers, the Companies or any Subsidiary has taken any action which
would commit any of the Companies or any Subsidiary to continue any
Plan for any Retained Employees, nor have the Sellers, any Company
or any Subsidiary taken any action which would prevent any Company
or any Subsidiary from changing or terminating the Plans at any
time.
2.10.7. Labor Matters. No Company or any Subsidiary has
experienced any work stoppage or other material labor difficulty,
and none is presently pending or threatened against any Company or
any Subsidiary which Sellers reasonably believe will have a
Material Adverse Effect. No Company or Subsidiary is represented
by a labor organization or collective bargaining agent and no
activities by any such organization or agent to organize or
represent any Company or any Subsidiary are pending or threatened.
2.10.8. Nonqualified Arrangements. Other than
Michael M. Nisbet, no Retained Employee, as of the date hereof,
participates in any Plan which is an excess benefit plan as defined
in Section 3(36) of ERISA, supplemental pension or retirement plan
or similar pension, retirement or deferred compensation
arrangement.
2.10.9. CAFO Plans. (a) All of the Plans established,
maintained or contributed to by CAFO (the "CAFO Plans") are duly
registered where required by, and are in good standing under, all
applicable Canadian legislation, (b) all required contributions by
CAFO have been made to the CAFO Plans, (c) the CAFO Plans are
funded in accordance with the rules under applicable Canadian
legislation and (d) as of the date of the last required actuarial
valuation, no actuarial unfunded liability or solvency deficit
exists under the CAFO Plans. No employees of CAFO are covered by
any Plans other than the CAFO Plans and the Long-Term Incentive
Plan and the Annual Management Incentive Plan of the Continental
Corporation.
Section 2.11. Insurance. The Sellers' Disclosure
Schedule lists all insurance policies owned by any of the Companies
or the Subsidiaries and, except as indicated therein, all premiums
have been paid on such policies, no notice of termination or
threatened termination of any of such policies has been received by
any of the Sellers, the Companies or the Subsidiaries, and, to the
best knowledge of the Sellers, such policies are in full force and
effect.
Section 2.12. Governmental Authorizations; Compliance
with Laws. Except as otherwise set forth in the Sellers'
Disclosure Schedule, the Companies and the Subsidiaries hold all
licenses, permits and other governmental authorizations material to
the Business as presently conducted and none of the Companies and
the Subsidiaries is in violation of any statute, rule, regulation,
judgment, order, decree, permit, concession, franchise or other
governmental authorization or approval applicable to it or to any
of its properties, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
Section 2.13. Litigation. Except as otherwise set forth
in the Sellers' Disclosure Schedule, there are no judicial or
administrative actions, proceedings or investigations (including
without limitation examinations by federal, foreign, state and
local taxing authorities) pending or, to the best knowledge of the
Sellers, threatened against the Sellers, the Companies or the
Subsidiaries, which might reasonably be expected to have a Material
Adverse Effect, or which question the validity or enforceability of
this Agreement or any action taken or to be taken by the Sellers or
the Companies in connection herewith.
Section 2.14. Tax Matters. (a) Except as otherwise set
forth in the Sellers' Disclosure Schedule, or as reflected or reserved
against in the Companies' Financial Statements, (i) the Sellers, the
Companies and the Subsidiaries and all affiliated, combined,
consolidated or unitary tax group of which any of the Companies or the
Subsidiaries is or has been a member have filed all material federal,
foreign, state and local Tax returns, reports and declarations which
are required to include any Tax items relating to the Business having
a filing date (including extensions) prior to the date hereof,
(ii) all Taxes shown as due thereon have been paid, and (iii) no
material claim for the assessment and collection of Taxes is being
asserted in writing against any of the Sellers, the Companies or the
Subsidiaries in respect of the Business, other than assessments for
Taxes neither due nor in default.
(b) Subject to Section 1.5, the Purchaser shall not be
required to deduct and withhold any amount with respect to Taxes upon
the transfer of the Shares to the Purchaser.
(c) The Companies and the Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations
relating to the reporting, payment and withholding of Taxes in
connection with amounts paid to their employees, creditors,
independent contractors or other third parties and have within the
time and in the manner prescribed by law, withheld from such amounts
and timely paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under all applicable
laws.
(d) The periods for the assessment of federal Taxes of the
Companies and the Subsidiaries and any affiliated, combined,
consolidated or unitary tax group of which any of the Companies or the
Subsidiaries is or has been a member are closed either by agreement
with the Internal Revenue Service or by operation of the applicable
statute of limitations for all taxable periods to and including 1984.
Except as set forth in the Sellers' Disclosure Schedule, no agreement
or other document waiving the statute of limitation in respect of any
Tax or extension of time with respect to a Tax assessment or
deficiency has been executed or filed with any taxing authority by or
on behalf of the Companies or any of the Subsidiaries. No power of
attorney has been granted by or on behalf of any of the Companies and
the Subsidiaries.
(e) No claim has been made in writing by an authority in a
jurisdiction where any of the Companies or the Subsidiaries does not
file Tax Returns that such Companies or Subsidiaries are or may be
subject to taxation by that jurisdiction nor, to the best of the
Sellers' knowledge, does such a valid claim exist.
(f) The Companies or, in the case of CAFO, its public
accountants, possess, or will possess at the Closing Date, all
previously filed Tax Returns and related workpapers (federal income
Tax Returns will be pro forma Forms 1120 containing the separate
return information for the Companies and the Subsidiaries only) and
workpapers for all Tax Years beginning with 1982 including a schedule
showing all adjustments made in consolidation or combination of the
Companies, the Subsidiaries and the Sellers.
(g) None of the Companies or the Subsidiaries, or any
predecessor corporation with respect to any of them, has filed or had
filed on its behalf a consent pursuant to Section 341(f) of the Code
or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a Section 341(f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by any of them. None of the
Companies or the Subsidiaries is obligated to make any payments, or is
a party to any agreement that could obligate it to make any payments
that will not be deductible under Code Section 280G. The Sellers'
Disclosure Schedule sets forth all statements under Code Section 6662
or its predecessor that have been filed with respect to such Companies
and Subsidiaries by the consolidated federal income tax group of which
any of the Companies and the Subsidiaries are members. The Sellers'
Disclosure Schedule sets forth all federal income tax elections under
the Code, and all elections or agreements under state tax laws that
will be binding upon any of the Companies or the Subsidiaries after
the Closing Date. There are no deferred intercompany transactions
under Reg. 1.1502-13 or 13T, nor deferred losses under Code Section
267, between any of the Companies or the Subsidiaries and any other
affiliates of the Sellers which would cause a deferred tax asset on
the financial statements to become unrecognizable for Tax purposes or
would impose liability for Taxes on any of the Companies or the
Subsidiaries after the Closing Date. None of the Companies or the
Subsidiaries has adopted a method of tax accounting pursuant to which
items of income received prior to the Closing Date will be recognized
for Tax purposes later than they will be recognized for financial
accounting purposes nor will any of the Companies or the Subsidiaries
change or request permission to change any method of accounting for
Taxable Years preceding the Closing Date that would increase the
income or decrease the deductions or credits of any of the Companies
or the Subsidiaries for Taxable Years ending after the Closing Date.
No property of any of the Companies or the Subsidiaries is or will be
required to be treated as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Code (as in effect prior to
amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.
Section 2.15. Absence of Changes. Since December 31, 1992,
except as otherwise set forth in this Agreement or reflected in the
Sellers' Disclosure Schedule delivered to the Purchaser on the date
hereof or the Companies' Financial Statements, the Business has been
conducted in substantially the same manner in which it previously has
been conducted, and none of the Companies or the Subsidiaries has:
(a) purchased or redeemed any shares of their capital stock
or, in the case of the Companies, declared or made any dividend or
other distribution in respect of its capital stock, except as
contemplated by Section 4.9.1 of this Agreement;
(b) incurred any material liabilities or obligations,
except current liabilities and obligations incurred in the ordinary
course of business and advances from affiliates consistent in all
respects, including inter alia, amount and purpose, with past
practice;
(c) mortgaged any of its properties or assets;
(d) pledged or subjected to any lien or security interest
any of its properties or assets except in the ordinary course of
business;
(e) increased the compensation of any officer or employee,
except as consistent with past practice or custom;
(f) disposed or agreed to dispose of any of its properties
or assets, except in the ordinary course of business;
(g) cancelled or forgiven any material debts or claims;
(h) entered into any transaction other than in the ordinary
course of business; or
(i) suffered any material adverse change in its business,
condition (financial or otherwise) or operations.
Section 2.16. Brokers. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried
out without the intervention of any person acting on behalf of the
Sellers or the Companies in such manner as to give rise to any valid
claim against the Purchasers, the Sellers or the Companies for any
brokerage or finder's commission, fee or similar compensation, except
for Lazard Freres & Co. whose fees in respect hereof shall be paid by
Continental.
Section 2.17. Environmental Matters. Except as set forth
in the Sellers' Disclosure Schedule, there are no claims pending or,
to the knowledge of the Sellers, threatened, and neither the Sellers,
nor, to the knowledge of the Sellers, any of the Companies or the
Subsidiaries has received notice, that any of the Companies or the
Subsidiaries is in violation of or noncompliance with any applicable
pollution or environmental control laws, orders or regulations,
including, without limitation, laws, orders or regulations as to
effluent disposal, ambient air quality or solid waste which are
reasonably likely, as to any violation or series of violations or
noncompliance, to have a Material Adverse Effect.
Section 2.18. Accurate and Complete Disclosure. All
information contained in the Sellers' Disclosure Schedule is true and
accurate in all material respects as of the date hereof and does not
omit to state any material fact necessary to make such information not
misleading at such time in light of the circumstances in which it was
provided.
Section 2.19. Intellectual Property. Except as set forth
in the Sellers' Disclosure Schedule, no patents, patent applications,
trademarks (whether registered or unregistered), trademark
applications, service marks, names (trade, service, fictitious or
otherwise), copyrights, technology (including but not limited to
computer programs and software), processes, data bases or other rights
(collectively "Intellectual Property"), are owned by or licensed to
the Companies or any Subsidiary or are presently being used by the
Companies or any Subsidiary in the providing or marketing of any
products or services in connection with the Business, except for such
Intellectual Property the absence of which would not have a Material
Adverse Effect. Except as disclosed in the Sellers' Disclosure
Schedule, the Business is not dependent to any material extent on any
Intellectual Property or assignment thereof. The Companies and the
Subsidiaries have the right to use, and after the consummation of the
transactions contemplated hereby will have the right to use, free and
clear of any claims of others, all Intellectual Property necessary to
own and operate its properties and to carry on the Business as
currently conducted, except where such failure to have such rights or
such claims of others would not have a Material Adverse Effect.
ARTICLE IIA
Representations and Warranties of Continental
Continental represents and warrants to the Purchaser as
follows:
Section 2.20. Corporate Status and Authority. Continental
is a corporation duly incorporated and validly existing under the laws
of the State of New York. Continental has the corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder, and the execution, delivery and performance of
this Agreement by Continental has been duly authorized by its Board of
Directors, which constitutes all necessary corporate action on the
part of Continental for such authorization. This Agreement
constitutes the valid and legally binding obligation of Continental,
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and to
general principles of equity, regardless of whether enforcement is
sought in a proceeding in equity or at law.
Section 2.21. No Conflicts, etc. (a) Except as otherwise
set forth in this Agreement or in the Sellers' Disclosure Schedule,
the execution, delivery and performance of this Agreement by
Continental will not result in (i) any conflict with the charter
documents or by-laws of Continental, (ii) any material breach or
violation of or default under any statute, regulation, judgment, order
or any mortgage, agreement, deed of trust, indenture or any other
instrument to which Continental is a party or by which it or any of
its properties or assets are bound, except for such breaches,
violations or defaults which would not, individually or in the
aggregate, have a material adverse effect on the business, condition
(financial or otherwise), or operations of Continental and its
subsidiaries taken as a whole, or (iii) the creation or imposition of
any lien, charge or encumbrance thereon, except for such liens,
charges, pledges or encumbrances which would not, individually or in
the aggregate, have a material adverse effect on the business,
condition (financial or otherwise), or operations of Continental and
its subsidiaries taken as a whole.
(b) No consent, approval or authorization of or filing with
any governmental authority is required on the part of Continental in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby except filings
required with respect to the HSR Act and as otherwise set forth in the
Sellers' Disclosure Schedule.
Section 2.22. Litigation. Except as otherwise set forth in
the Sellers' Disclosure Schedule, there are no judicial or
administrative actions, proceedings or investigations pending or, to
the best knowledge of Continental, threatened, against Continental
which question the validity or enforceability of this Agreement or any
action taken or to be taken by Continental in connection herewith.
ARTICLE III
Representations and Warranties of the Purchaser
The Purchaser represents and warrants to each of the Sellers
as follows:
Section 3.1. Corporate Status and Authority. The Purchaser
is a corporation duly incorporated and validly existing under the laws
of the Commonwealth of Pennsylvania, with the corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. The Purchaser has heretofore delivered to the
Sellers complete and correct copies of its articles of incorporation
and bylaws (or other similar documents) as currently in effect. The
execution, delivery and performance of this Agreement have been duly
authorized by the Purchaser's Board of Directors, which constitutes
all necessary corporate action on the part of the Purchaser for such
authorization. This Agreement constitutes the valid and legally
binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and to general principles
of equity, regardless of whether enforcement is sought in a proceeding
in equity or at law.
Section 3.2. No Conflicts. (a) Except as otherwise set
forth in this Agreement or in the Purchaser's Disclosure Schedule, the
execution, delivery and performance of this Agreement by the Purchaser
will not result in (i) any conflict with the articles of incorporation
or by-laws of the Purchaser, (ii) any material breach or violation of
or default under any statute, regulation, judgment, order or decree or
any mortgage, agreement, deed of trust, indenture or any other
instrument by which the Purchaser or any of its properties or assets
are bound, or (iii) the creation or imposition of any lien, charge,
pledge or encumbrance thereon, except in the case of clauses (ii) and
(iii) for such breaches, violations or defaults and such liens,
charges, pledges or encumbrances which would not, individually or in
the aggregate, have a material adverse effect on the business,
condition (financial or otherwise) or operations of the Purchaser and
its subsidiaries taken as a whole.
(b) No consent, approval or authorization of or filing with
any governmental authority is required on the part of the Purchaser in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except filings
required with respect to the HSR Act, the Bank Act (Canada) in respect
of the acquisition of the CAFO Shares by the Purchaser and as
otherwise set forth in the Purchaser's Disclosure Schedule.
Section 3.3. Litigation. There are no judicial or
administrative actions, proceedings or investigations (including
without limitation examinations by federal, foreign, state and local
taxing authorities) pending or, to the best knowledge of the
Purchaser, threatened, against the Purchaser which question the
validity or enforceability of this Agreement or any action taken or to
be taken by the Purchaser in connection herewith.
Section 3.4. Purchase for Investment. The Purchaser is
acquiring the Shares for investment and not with a view toward any
distribution thereof except in compliance with the Securities Act of
1933, as amended.
Section 3.5. Brokers. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried
out without the intervention of any person acting on behalf of the
Purchaser in such manner as to give rise to any valid claim against
the Purchaser, the Sellers or the Companies for any brokerage or
finder's commission, fee or similar compensation, except for The First
Boston Corporation whose fees in respect hereof shall be paid by the
Purchaser.
ARTICLE IV
Certain Covenants
Section 4.1. Obligations of the Parties. The parties shall
apply for and diligently prosecute all applications for, and shall use
their reasonable efforts promptly to obtain, such consents, approvals
and authorizations from such governmental authorities and other
persons as shall be necessary to permit the consummation of the
transactions contemplated by this Agreement, and shall use their
reasonable efforts to bring about the satisfaction as soon as
practicable of all the conditions contained in Article VI and to
effect the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Conduct of Business, etc. From the date
hereof until the Closing, except as permitted by this Agreement or as
otherwise consented to by the Purchaser in writing, such consent not
to be unreasonably withheld or delayed, the Sellers shall cause each
Company and each Subsidiary to:
(a) carry on its business only in the ordinary course, in
substantially the same manner in which it previously has been
conducted and, to the extent consistent with such business, use
reasonable efforts to preserve intact its present business
organization and to preserve its relationships with brokers, agents,
customers, suppliers and others having business dealings with it; and
(b) maintain its books of account and records in its usual,
regular and ordinary manner, consistent with its past practice and in
accordance with generally accepted accounting principles.
Section 4.3. Access and Information. The Sellers shall
cause the Companies to give to the Purchaser and its representatives
full access at all reasonable times to the books and records of the
Companies and the Subsidiaries and to furnish such information and
documents in their possession relating to the Companies and the
Subsidiaries as the Purchaser may reasonably request. All such
information and documents obtained by the Purchaser pursuant to this
Section shall be subject to the terms of the Confidentiality
Agreement.
Section 4.4. Payment of Certain Taxes; Filing of Certain
Tax Returns. (a) Except as provided below, all excise, sales, use and
transfer Taxes that are payable or that arise as a result of this
Agreement or the consummation of the purchase and sale contemplated by
this Agreement shall be shared equally by the Sellers and the
Purchaser. Any realty transfer tax or realty gain tax imposed as a
result of this Agreement or the transactions contemplated by this
Agreement shall be borne by the Sellers. Realty or real estate Taxes
shall be governed by Section 4.7 of this Agreement.
(b) On or prior to the Closing Date and no later than the
date due for filing, Continental Insurance shall (i) (A) along with
the Purchaser, jointly complete Form TP-584, New York State Combined
Real Property Transfer Gains Tax Affidavit, Real Estate Transfer Tax
Return, and Credit Line Mortgage Certificate with respect to the
transactions contemplated hereby, as required pursuant to the New York
State Real Estate Transfer Tax and the New York State Real Property
Transfer Gains Tax, (B) along with the Purchaser, jointly complete
Form NYC-RPT, New York City Real Property Transfer Tax Return with
respect to the transactions contemplated hereby, as required pursuant
to section 11-2105 of Title 11, Chapter 21 of the New York City
Administrative Code, and (C) complete any other required Tax Returns
in connection with the Taxes referred to in subclauses (A) and (B)
above; (ii) file any such completed Tax Return, together with all
supporting materials required to be filed therewith; and (iii) pay all
Taxes due as shown on any such Tax Return.
Section 4.5. Solicitation of Employees. Neither
Continental nor any of its affiliates shall at any time from the
Closing until the third anniversary of the Closing Date solicit the
employment of or otherwise negotiate in respect of the employment of,
or provision of any services by, any employee of the Companies or the
Subsidiaries at any time such person is employed by the Companies or
the Subsidiaries.
Section 4.6. Tax Sharing Agreements; Tax Attributes.
4.6.1. Termination of Existing Agreements. Any Tax
allocation or sharing agreement or arrangement which, prior to the
Closing Date, may have been entered into between any of the Companies
or the Subsidiaries on the one hand, and any of the Sellers or any
affiliate of the Sellers (other than the Companies and the
Subsidiaries), on the other hand, shall terminate with respect to the
Companies and the Subsidiaries as of the end of the day immediately
preceding the Closing Date. Except as provided in this Section 4.6
and Sections 4.7 and 7.2, the Companies and the Subsidiaries shall
have no claim against any of the Sellers or any affiliate of the
Sellers, and the Sellers and any affiliates of the Sellers shall have
no claim against any of the Companies or the Subsidiaries, for any
amount that might be payable to or by, as the case may be, any of the
Companies and the Subsidiaries with respect to Taxes.
4.6.2. Tax Attributes. On or before June 15, 1994,
Continental will provide to the Purchaser a tentative schedule of the
amount, if any, of the allocable portion of any Tax carryforwards of
losses, Tax credits or other Tax benefits of the consolidated federal
income tax group of which Continental is the common parent (the
"Sellers' Group") that will be available to the Companies and the
Subsidiaries for tax periods beginning after the Closing Date. On or
before August 15, 1994, Continental will provide to the Purchaser a
final schedule of Tax attributes. Such schedule will be for
information purposes and no warranty as to the existence or
availability of such carryforwards shall be given or implied.
Continental will promptly inform the Purchaser in writing of any
adjustments to such carryforwards determined in connection with the
filing of the Sellers' Group's consolidated United States federal
income tax return, which may result from any Internal Revenue Service
audit or other proceeding with respect to Sellers' Group; or which may
be required as a result of a change in law or regulations. The
Sellers shall, and the Purchaser will cause the Companies, the
Subsidiaries, and any consolidated group of which any of the Companies
or Subsidiaries is a member after the Closing to, file their United
States federal income tax returns in a manner consistent with such
schedule, adjusted as described above. If in any period beginning
after the Closing Date, any of the Companies, the Subsidiaries or any
consolidated group of which any Company or Subsidiary is a member,
utilizes such carryforwards, the Purchaser shall pay to Continental an
amount equal to any reduction of the Tax liability of such Company,
Subsidiary or group that is attributable to the use of such
carryforwards. Any payment to Continental under this Section 4.6.2
will be made 30 days after the filing of the Tax Return which gives
rise to the payment; provided that if such reduction in Tax liability
requires the Internal Revenue Service to pay a Tax refund to such
Company, Subsidiary or group, the payment to Continental under this
Section 4.6.2 attributable to such refund shall be paid within 10 days
after receipt of such refund from the Internal Revenue Service.
Thereafter, if, as a result of any adjustment resulting from any
audit, the Tax liability of such Company, Subsidiary or group is
adjusted so as to affect the availability or utilization of any Tax
benefit carryforward which resulted in a payment under this Section
4.6.2., Continental will pay to the Purchaser or the Purchaser will
pay to Continental, as the case may be, within 30 days after the
making of such adjustment, such amount as is necessary to reflect such
adjustment in the computation under this Section 4.6.2, including
(i) any interest actually received by such Company, Subsidiary or
group from the U.S. government in connection with such adjustment and
(ii) to the extent that such adjustment is directly attributable to a
determination that such Tax benefit carryforward was not available as
a carryforward from Sellers' Group, the amount of interest and
penalties imposed on such Company, Subsidiary or group as a result of
such adjustment. With respect to each period following the Closing
Date to which any such carryforward may be carried, the Purchaser will
provide to Continental a true and complete schedule of the utilization
of such carryforwards.
Section 4.7. Taxes.
Section 4.7.1. Payment of Tax Liabilities. Continental
shall pay or cause to be paid all Taxes on or measured by net income,
and all franchise and capital stock Taxes imposed in lieu of Taxes on
or measured by net income, that are payable by or with respect to the
Companies and the Subsidiaries for all periods ending on or prior to
the Closing Date. The Purchaser shall pay or cause to be paid all
other Taxes payable by or with respect to any of the Companies or the
Subsidiaries.
Section 4.7.2. Filing of Tax Returns. Continental and the
Purchaser shall cause the Companies and the Subsidiaries, to the
extent permitted by law, to join, for all taxable periods ending on or
prior to the Closing Date, in the consolidated federal income Tax
Return of the Sellers' Group. Continental shall file, or cause to be
filed, all other Tax Returns relating to the Business required to be
filed by any of the Companies or the Subsidiaries on or before the
Closing Date and shall prepare for filing by the Purchaser all other
Tax Returns relating to the Business for periods ending on or before
the Closing Date. Continental shall forward such prepared Returns to
the Purchaser at least 30 days prior to the due date of such Returns
including any extensions thereof. The Purchaser shall timely file or
cause to be timely filed any Tax Return of the Companies or the
Subsidiaries (including any amendments thereto) due after the Closing
Date. For purposes of preparing all income Tax Returns for periods
including the Closing Date, the income, deductions and credits of the
Companies and the Subsidiaries shall be allocated in a manner
consistent with the method provided in Section 4.7.3.
4.7.3. Bridge Period. If, for any state, local or foreign
tax purpose, a taxable year or taxable period of any of the Companies
or any Subsidiary which begins before the Closing Date and ends after
the Closing Date (a "Bridge Period") does not terminate on the Closing
Date, the parties hereto will, to the extent permitted by applicable
law, elect with the relevant taxing authority to treat the portion of
the Bridge Period on or before the Closing Date ("Seller Period") for
all purposes as a short taxable period ending as of the close of the
Closing Date and such short taxable period shall be treated as a Pre-
Closing Period for purposes of this Agreement. In any case where
applicable law does not permit such an election to be made, for
purposes of (i) calculating the amount of Taxes to be paid by
Continental pursuant to Section 4.7.1 and (ii) determining under
Section 7.2 whether the representation in Section 2.6 has been
satisfied, Taxes for the Bridge Period shall be allocated between the
Seller Period and the portion of the Bridge Period after the Closing
Date using an interim-closing of the books method assuming that the
Sellers' taxable period ended at the end of the Closing Date, except
that (i) exemptions, allowances or deductions that are calculated on
an annual basis (such as the deduction for depreciation) shall be
apportioned on a per diem basis, (ii) real property taxes shall be
allocated in accordance with Section 164(d) of the Code and
(iii) personal property taxes that are calculated on annual basis
shall be apportioned on a per diem basis.
4.7.4. Audits and Other Proceedings. Following the Closing
Date, Continental shall, and shall be furnished by the Purchaser, a
Company or a Subsidiary, as the case may be, with powers of attorney,
or any other document or authorization necessary or appropriate to
enable it to, control the conduct of all stages of any audit or other
administrative or judicial proceeding with respect to Taxes for which
Continental is liable pursuant to Section 4.7.1 and the Purchaser
shall control the conduct of all other audits or administrative or
judicial proceedings with respect to the Tax liability of the
Companies and the Subsidiaries for any tax period or portion thereof.
(i) With respect to any audit or other proceeding that
it controls, Continental (x) shall give prompt notice to the
Purchaser of any Tax adjustment proposed in writing pursuant
to any audit or other proceeding controlled by Continental
with respect to the assets or activities of any of the
Companies or the Subsidiaries, (y) upon the Purchaser's
reasonable request shall discuss with the Purchaser and the
Purchaser's counsel the position that Continental intends to
take regarding any issue concerning such assets or
activities, and (z) shall not, and shall not permit any of
its affiliates to, enter into any settlement or agreement in
compromise of any proposed adjustment which purports to bind
the Purchaser, the Companies or any Subsidiary with respect
to any Tax period ending after the Closing Date without the
express written consent of the Purchaser, which consent
shall not be unreasonably withheld, and
(ii) The Purchaser (x) shall give prompt notice to
Continental of the commencement of any audit or other
proceeding which could give rise to a claim for payment
against Continental under this Agreement; (y) with respect
to any audit or proceeding controlled by the Purchaser,
afford Continental and its counsel a reasonable opportunity
to participate in the conduct of any administrative or
judicial proceeding regarding a proposed adjustment
described in clause (x) above including, without limitation,
the right to participate in conferences with tax authorities
and submit pertinent material in support of Continental's
position, and (z) shall not, and shall not permit any of its
affiliates to, accept any proposed adjustment or enter into
any settlement or agreement in compromise which would result
in a claim for indemnification against Continental pursuant
to this Agreement without Continental's express written
consent, which consent shall not be unreasonably withheld.
Section 4.7.5. Conduct of Business, Section 338
Election. (a) Notwithstanding any other provision of this
Agreement, the Purchaser shall be responsible for and neither
Continental nor any of the Sellers shall bear, (i) any Taxes that
arise due to the failure, following the Closing, of the Purchaser
to cause the Companies and the Subsidiaries to carry on their
business on the Closing Date only in the ordinary course and in
substantially the same manner as heretofore conducted, and
(ii) except as provided in paragraph (b) below, any Taxes that
relate to any actual or deemed election pursuant to section 338 of
the Code or the regulations thereunder or any comparable provision
of state or local law.
(b) Continental and the Purchaser shall cooperate in good
faith to determine the Tax Benefit to the Purchaser and its
affiliates and the Tax Cost to Continental and its affiliates of
making a joint election under section 338(h)(10) of the Code and
any comparable provision of state law in respect of the purchase
and sale of the Shares (a "Section 338(h)(10) Election"). Such
determination shall (i) take into account the Tax consequences to
the Purchaser and its affiliates and to the Sellers and their
affiliates of any payments pursuant to this Section 4.7.5(b) and
(ii) be made as if the Closing Date Purchase Price was $103
million, of which $5 million is allocated to the covenant described
in Section 4.10 hereof. If, based on such determination,
Continental and the Purchaser agree to make a Section 338(h)(10)
Election, the Sellers shall receive the following additional
consideration: (1) an amount equal to the Tax Cost incurred by the
Sellers and their affiliates as a result of the Section 338(h)(10)
Election and (2) an amount equal to 50% of the excess of the Tax
Benefit to the Purchaser and its affiliates over the Tax Cost to
Continental and its affiliates of the Section 338(h)(10) Election,
in each case computed as described in the previous sentence. Any
additional payments under this Section 4.7.5(b) shall be made at
such time and in such manner as shall be agreed upon by the parties
prior to the filing of the Section 338(h)(10) Election; provided
that the time and manner of making such payments shall take into
account the timing of the Tax Benefits and Tax Costs realized by
the parties and their affiliates.
4.7.6. Tax Refunds. The Sellers shall be entitled to
retain, or receive immediate payment from the Purchaser of, any
refunds of Taxes (other than refunds reflected in Companies'
Combined Shareholder's Equity), that were paid by or with respect
to any of the Companies or the Subsidiaries for a period ending on
or before the Closing Date and any Sellers' Period (including,
without limitation, refunds arising by reason of amended returns
filed after the Closing Date and amounts allowable as a credit
against Tax liability, including refunds of overpayments of
estimated Taxes) relating to any of the Companies or the
Subsidiaries, plus any interest thereon actually received from the
applicable taxing authority, except that, to the extent that a
refund of Taxes paid during a pre-Closing Date period relates to
the carryback of a loss, credit, deduction, or other item
attributable to a post-Closing Date period, the Purchaser shall be
entitled to the Tax Benefit of such Refund; provided, that the
Purchaser shall elect, or cause the relevant party to elect, to
forego any such carryback to a consolidated federal income Tax
Return of the Sellers' affiliated group unless (i) such election is
prohibited by law or (ii) as a result of making such election, the
affiliated federal income tax group of which the Company or
Subsidiary is a member following the Closing Date would be required
to forego a carryback to the Purchaser's own consolidated return
year that is more than 150% of the amount that would be carried
back to the Tax Return of the Sellers' affiliated group. The
Purchaser shall cooperate, and shall cause the Companies and the
Subsidiaries to cooperate, with the Sellers with respect to
claiming any refund referred to in this Section 4.7.6, including
notifying Continental of the existence of any state of facts that
would constitute a reasonable basis for claiming such a refund,
providing all relevant information available to Continental with
respect to any such claim, filing and diligently pursuing such
claim (including by litigation, if appropriate), paying over to
Continental any amount received by the Purchaser, the Companies or
the Subsidiaries with respect to such claim, and consulting with
Continental prior to agreement to any disposition of such claim.
The Purchaser shall be entitled to the Tax Benefit of any refund or
credit of federal, state, local, or foreign Taxes (plus any
interest thereon received from the applicable taxing authority)
relating to the Companies or the Subsidiaries that were paid with
respect to a period beginning after the Closing Date and to which
the Sellers are not otherwise entitled under this Section. To the
extent that one party is to enjoy the economic benefit of a refund
under this Section 4.7.6, that party shall bear the expenses of the
other party reasonably incurred in respect of such refund and shall
repay the amount of such refund as may be required to be repaid to
any taxing authority as a result of any adjustment on audit,
together with applicable interest and penalties.
4.7.7. Cooperation. The Purchaser and the Sellers shall
cooperate, and the Purchaser shall cause the Companies and the
Subsidiaries to cooperate with the Sellers with respect to the
preparation and filing of any Tax Return or the conduct of any Tax
audit or other proceeding for which the other is responsible
pursuant to this Section 4.7. Such cooperation shall include,
without limitation, making its employees available for consultation
and making workpapers and other records available during regular
business hours, provided that each shall pay any out-of-pocket
costs incurred by the other in connection with such cooperation.
Such cooperation shall also include Continental's provision to the
Purchaser of a calculation prepared by Continental for its own use
of the Companies' and the Subsidiaries' earnings and profits as of
the Closing Date for federal income tax purposes. All Tax Returns
for which the Purchaser is responsible shall, insofar as they
relate to items for periods that include days on or before the
Closing Date and to the extent permitted by applicable Tax law, be
on a basis consistent with the last previous such Tax Returns filed
in respect of the Companies and Subsidiaries. After the Closing
Date each Tax Return filed by a Company, any Subsidiary or by the
Purchaser with respect to any Company or Subsidiary which relates
to any period that includes days on or before the Closing Date
(including, without limitation, all Tax Returns prepared by
Continental for filing by or with respect to any Company or any
Subsidiary pursuant to Section 4.7.2) shall be subject to pre-
filing approval by Continental and, in the event of any
disagreement between Continental and the Purchaser, a Company or a
Subsidiary, as the case may be, such disagreement shall be resolved
by a firm of public accountants of recognized standing selected by
the Purchaser and Continental, and any such determination by such
accountants shall be final. The fees and expenses of such
accountants shall be borne equally by the Purchaser and
Continental. Unless otherwise agreed to by the parties, Tax
Returns subject to such pre-filing approval shall be submitted by
the Purchaser, the Companies or the Subsidiaries to Continental at
least 45 days prior to the due date (including extensions) of such
Tax Returns and Continental shall either approve or provide written
comments on such Tax Returns within 15 days of receipt of such Tax
Returns.
Section 4.8. Certain Pre-Closing Transactions.
4.8.1. Pre-Closing Dividend. Immediately prior to the
Closing, the Sellers shall cause the Companies to declare and pay
cash dividends to the Sellers in an aggregate amount equal to the
excess of (a) the Companies' Combined Shareholders' Equity as of
the last day of the month immediately preceding the month in which
the Closing Date falls, over (b) $46.3 million.
4.8.2. Intercompany Indebtedness. Immediately prior to the
Closing, any intercompany accounts between any of the Companies or the
Subsidiaries, on the one hand, and any of the Sellers (which term
shall include, for purposes of this Section 4.8, the Sellers'
subsidiaries and affiliates other than the Companies and the
Subsidiaries), on the other hand, as at Closing shall be cancelled as
follows: (a) to the extent that a Company or a Subsidiary is indebted
to a Seller, Continental or any affiliate of Continental, such debt
shall be cancelled and the amount of the debt so cancelled (other than
any write-off by Continental of any indebtedness due from the
Companies or their Subsidiaries in respect of overhead or other
corporate charges for services provided by Continental to the
Companies or the Subsidiaries) shall be deemed a capital contribution
by such party to such Company, provided, that any debt of CAFO to
Continental Reinsurance shall be paid by set-off against amounts owed
by Continental Reinsurance to CAFO to the extent of the amount thereof
and any excess shall be paid by the issuance of common shares of CAFO
having stated capital and fair market value equal to such excess, and
(b) to the extent a Seller, Continental or any affiliate of
Continental, is indebted to a Company or a Subsidiary after any set-
off described in clause (a) above, such debt shall be cancelled and
the amount of the debt so cancelled shall be deemed a dividend from
such Company to such party.
4.8.3. Resignation of Directors. Prior to, but effective
as of, the Closing Date, the Sellers shall procure and deliver to the
Purchaser the resignations of each director of any of the Companies or
the Subsidiaries.
4.8.4. Credit Support Arrangements. Prior to, but
effective as of the Closing Date, the Sellers shall cause all
guarantees, credit support and other arrangements in respect of the
Business by which any of the Sellers or their affiliates (other than
the Companies and the Subsidiaries) is bound to be terminated or
otherwise provided for in a manner reasonably satisfactory to the
parties hereto. The Purchaser shall use its reasonable efforts to
assist the Sellers in connection with the assumption by the Purchaser
of Continental's guaranty obligations in respect of AFCO's medium term
notes on terms reasonably satisfactory to the parties hereto.
4.8.5. Transfer of Certain Property. Prior to the Closing,
the Sellers shall cause AFCO to transfer to Continental or its nominee
all its right, title and interest in and to the trust holding title to
certain property located in Houlton, Maine. In connection therewith,
AFCO shall assign, and Continental or its nominee shall assume, any
and all liabilities and obligations of AFCO with respect thereto.
Section 4.9. Publicity. All press releases, filings and
other publicity concerning the transactions contemplated hereby will
be subject to review and approval by both Continental and the
Purchaser, such approval not to be unreasonably withheld. Such
approval shall not be required if the person issuing such publicity
reasonably believes, upon written advice of counsel, that such
disclosure is necessary to comply with law; provided that the party
issuing such publicity gives the other party as much advance notice of
such publicity (including the content thereof) as practicable.
Section 4.10. Covenant not to Compete. Neither the Sellers
nor any of their subsidiaries shall at any time from the Closing until
the third anniversary of the Closing Date, directly or indirectly,
engage, or have any ownership interest in any firm, corporation,
partnership or other business entity (except as a passive investor
holding a less than 5% equity interest in such business entity) that
engages, in the activities constituting the Business on the Closing
Date in the United States or Canada; provided that, notwithstanding
anything herein to the contrary, neither the Sellers nor any of their
subsidiaries shall be prohibited from financing premiums payable with
respect to insurance policies written by Continental or any of its
affiliates.
Section 4.11. Transitional Matters. The Sellers shall
cooperate with the Purchaser in connection with joint calls on key
brokers and agents and shall use their reasonable efforts to assist in
the orderly transition of the Business. The Purchaser and the Sellers
shall use reasonable efforts to cause the Companies to retain their
senior management officers prior to the Closing. Prior to the Closing
Date, the Purchaser and Continental or its affiliates shall use
reasonable efforts to enter into an Operating Services Agreement on
mutually satisfactory terms, in respect of certain administrative
services to be provided by Continental or its affiliates after the
Closing Date.
ARTICLE V
Employee Matters
Section 5.1. Employee Matters. (a) For purposes of this
Agreement, the term "Retained Employee" shall mean (i) any employee of
any of the Companies or the Subsidiaries who is (1) actively employed
on the Closing Date or (2) on inactive status receiving short or long
term disability benefits, worker's compensation, or other authorized
leave of absence benefits and who returns to active status prior to
the expiration of the 90 day period commencing on the Closing Date,
(ii) any employee of the Sellers and/or their affiliates who performs
substantially all of his services for the Companies or the
Subsidiaries and who is listed on the Sellers' Disclosure Schedule and
who does not retire pursuant to Section 5.1(a)(iii) below; and (iii)
any individual employed by the Companies or the Subsidiaries or any
individual described in Section 5.1(a)(ii) who retires under the early
retirement provisions of The Retirement Plan of The Continental
Corporation on or after the date hereof and before the Closing Date.
The term "Canadian Retained Employee" shall mean any Retained Employee
of CAFO.
(b) The Purchaser shall cause each Company and Subsidiary
to continue the employment on and after the Closing Date of all
Retained Employees described in Section 5.1(a)(i) and to offer
employment on the Closing Date to Retained Employees described in
Section 5.1(a)(ii) and (iii) in accordance with the provisions of this
Article V. Notwithstanding anything in this subsection (b) to the
contrary, any such continued employment or offer of employment shall
not be construed to limit the ability of the Purchaser to terminate
Retained Employees at any time for any reason, or to change their
terms and conditions of employment, including, but not limited to, the
levels of compensation and employee benefits in effect on the Closing
Date and any pension, welfare and/or fringe benefit made available to
such Retained Employees as of the Closing Date.
Section 5.2. Retirement Plan. (a) Effective on the Closing
Date, each participant in The Retirement Plan of the Continental
Corporation or the Retirement Plan of Continental Insurance Management
Ltd. (collectively, the "Sellers' Retirement Plan") who is a Retained
Employee shall cease to be an active participant under such plan.
Effective on the Closing Date, Retained Employees, other than Canadian
Retained Employees, shall commence participation in the Mellon Bank
Retirement Plan (the "Purchaser's Retirement Plan"). The Purchaser's
Retirement Plan shall recognize the service and earnings of each such
Retained Employee described in Section 5.1(a)(i) and 5.1(a)(ii) with
the Companies, the Subsidiaries and any ERISA Affiliate prior to the
Closing Date for all purposes, to the extent credited under the terms
of the Sellers' Retirement Plan. As soon as practicable after the
Closing Date, the Sellers will transfer, or cause to be transferred,
to the Purchaser's Retirement Plan all liabilities for benefits
accrued by Retained Employees, other than Canadian Retained Employees,
under the Sellers' Retirement Plan plus an amount (the "Transferred
Amount"), calculated as of the Closing Date, in cash equal to the
actuarial present value of such accrued benefits, calculated on a
projected benefit obligation ("PBO") basis, as defined in the
Statement of Financial Accounting Standards No. 87, reduced by the
amount of distributions, if any, to such Retained Employees made in
accordance with the terms of the Sellers' Retirement Plan between the
Closing Date and the date of transfer (the "Transfer Date") and
increased by interest on the Transferred Amount between the date which
is 37 days after the date of receipt by the Sellers from the Purchaser
of a notice containing the Purchaser's calculation of the Transferred
Amount and the Transfer Date at the average federal funds rate in
effect between such dates; provided that the Transferred Amount shall
be calculated using the methods and applicable assumptions employed by
the Purchaser's actuary as of January 1, 1993 and set forth in the
Sellers' Disclosure Schedule. Such transfer shall be effected as soon
as practicable after the later of (i) the expiration of a 30-day
period following the date of filing of any required notices with the
Internal Revenue Service by both the Purchaser and the Sellers,
including an actuarial statement of valuation in accordance with the
provisions of section 6058(b) of the Code and notification of the
transfer on Form 5310-A with the Internal Revenue Service and (ii) the
receipt by the Sellers of an opinion of the Purchaser's counsel that
the terms of the Purchaser's Retirement Plan meet the requirements of
section 401(a) of the Code. Notwithstanding any contrary provision in
Section 5.2, in no event shall the Transferred Amount be less than the
amount Sellers' actuary certifies as the minimum amount required to
comply with Section 414(1) of the Code. Retained Employees described
in Section 5.1(a)(iii) shall not receive credit for service with the
Companies, the Subsidiaries or any ERISA Affiliate, except as
otherwise required under ERISA or the Code.
(b) None of the Companies, the Subsidiaries or the
Purchaser shall become responsible for, and the Sellers and the
Sellers' Retirement Plan shall retain, any pension benefit liabilities
or obligations with respect to Canadian Retained Employees under the
Sellers' Retirement Plan or any other pension or retirement plan
maintained or contributed to by the Sellers or CAFO prior to the
Closing Date in respect of service up to and including the Closing
Date. Effective as of the Closing Date, Canadian Retained Employees
shall commence participation in The R-M Trust Company Pension Plan (or
in another pension plan that provides the same pension benefits as
that pension plan) and service of a Canadian Retained Employee that
was recognized at the Closing Date for the purposes of the Sellers'
Retirement Plan shall be recognized for the purposes of determining
eligibility and vesting of any such pension benefits (but shall not be
so recognized for any future accrual or pension benefits except as may
be required by any applicable laws).
Section 5.3. Savings Plan. Effective on the Closing Date,
each participant in The Incentive Savings Plan of the Continental
Corporation or The Continental Insurance Management Ltd. Employee
Savings Plan (collectively, the "Sellers' Savings Plan") who is a
Retained Employee shall cease to be an active participant under such
plan. Retained Employees, other than Canadian Retained Employees,
shall immediately become eligible to participate in the Mellon Bank
Corporation Retirement Savings Plan and Canadian Retained Employees
shall immediately become eligible to participate in, or in a plan that
is substantially the same as, The R-M Trust Group Registered
Retirement Savings Plan (collectively, the "Purchaser's Savings
Plan"). Sellers' Savings Plan shall retain responsibility for all
account balances under the Sellers' Savings Plan with respect to all
employees and former employees of any of the Companies or Subsidiaries
without regard to whether they become Retained Employees and none of
the Companies, the Subsidiaries, the Purchaser or the Purchaser's
Savings Plan shall have any liability under the Sellers' Savings Plan.
No account balances shall be transferred from the Sellers' Savings
Plan to any plan, fund or program established or maintained by the
Purchaser as a result of the transactions contemplated by this
Agreement. The account balances of Retained Employees under the
Sellers' Savings Plan shall become payable to Retained Employees in
accordance with the terms of the Sellers' Savings Plan.
Section 5.4. Welfare Plans. (a) Subject to Section 5.4(b)
and 5.4(c)(iv) below, effective on the Closing Date, the Purchaser
shall, or shall cause the Companies and the Subsidiaries to, assume
and be responsible for, and shall indemnify and hold harmless the
Sellers from and against, any and all direct and indirect damages,
costs, liabilities or other obligations including, without limitation,
any claims, interest, penalties and reasonable attorney's fees,
imposed upon or incurred by Sellers (collectively, the "Losses") in
respect of any Retained Employees, including Canadian Retained
Employees, their beneficiaries and spouses under any welfare benefit
plan within the meaning of Section 3(1) of ERISA and any insurance or
other CAFO Plan similar thereto described on the Sellers' Disclosure
Schedule (the "Welfare Plans"), to the extent such Losses relate to
events, transactions or occurrences occurring on or after the Closing
Date or the date on which the individual became a Retained Employee,
if later. The Sellers shall be responsible for any and all expenses
incurred by any Retained Employee, including any Canadian Retained
Employee, dependent or spouse under the Welfare Plans prior to the
Closing Date or the date on which the individual became a Retained
Employee, if later.
(b) For a period commencing on the Closing Date and ending
on December 31, 1993 (the "Transition Period"), the Sellers agree to
continue to make available coverage (including COBRA continuation
coverage required under Section 601 of ERISA) and claims processing
services in respect of the Retained Employees, including Canadian
Retained Employees, under the Welfare Plans identified on the Sellers'
Disclosure Schedule and which provide for medical, dental and employee
and family life insurance coverage, AD&D coverage, and travel accident
insurance; provided that the Purchaser shall, or shall cause the
Companies or the Subsidiaries to, reimburse the Sellers for the actual
cost of providing such coverages during the Transition Period plus an
administrative fee equal to 2% of such actual cost within 45 days
after the Sellers submit written proof of such cost to the Purchaser,
the Companies or the Subsidiaries except that the Sellers shall be
responsible for, and shall not receive reimbursement from, the
Purchaser, the Companies or the Subsidiaries for any Losses under any
Welfare Plan, without regard to whether it is identified on the
Sellers' Disclosure Schedule, in respect of any inactive employee who
becomes a Retained Employee after the Closing Date, incurred or
accrued prior to the date the inactive employee described in
Section 5.1(a)(i)(2) becomes actively employed by the Purchaser, the
Companies or the Subsidiaries. Notwithstanding anything in this
Section 5.4(b) to the contrary, in no event shall Purchaser be
required to honor any such request for reimbursement presented after
August 31, 1994 or such later date as agreed to by the Sellers and the
Purchasers.
(c) Subject to Sections 5.2 and 5.3, from and after
January 1, 1994, Retained Employees shall be eligible to participate
in the total program of pension, welfare and/or fringe benefits which
are available to similarly situated employees of the Purchaser or, in
the case of Canadian Retained Employees, of the Purchaser's Canadian
subsidiary, The R-M Trust Company ("Purchaser's Benefits") on the same
basis as such benefits are otherwise made available to similarly
situated employees of the Purchaser (or, in the case of Canadian
Retained Employees, of the Purchaser's Canadian subsidiary, The R-M
Trust Company). Notwithstanding anything in this Section 5.4 to the
contrary, (i) at any time of reference, the weeks of vacation provided
by the Purchaser to a Retained Employee with less than 25 years of
service with the Companies and Subsidiaries shall equal the greater of
(A) the weeks of vacation (not in excess of 4) provided to the
employees by the Companies or any Subsidiary on the day before the
Closing Date, and (B) the maximum vacation which may be earned by
similarly situated employees of the Purchaser; (ii) a Retained
Employee with 25 or more years of service with the Companies and the
Subsidiaries shall be entitled to the weeks of vacation to which they
were entitled on the day before the Closing; with such entitlement
continuing through December 31, 1994; (iii) on or after January 1,
1995, a Retained Employee will be entitled to the vacation which may
be earned by similarly situated employees of the Purchaser; provided
that, except as required by applicable laws, in no event shall
Purchaser be required to compensate Retained Employees for unused
weeks of vacation to which they were entitled on the day before the
Closing Date; and (iv) all preexisting illnesses, injuries and
pregnancies of Retained Employees that would have been covered under
Purchaser's Benefits but for their occurrence prior to the Closing
Date, or the date on which the individual became a Retained Employee,
if later, will be covered under the comparable plans of the Purchaser
from and after the Closing Date or the date on which the individual
became a Retained Employee, if later.
(d) Sellers shall indemnify and hold harmless the Purchaser
and, from and after the Closing Date, the Companies and the
Subsidiaries, from and against any and all Losses with respect to any
former employee of the Companies or the Subsidiaries who was a former
employee on the Closing Date and any and all losses with respect to
any Retained Employee described in Section 5.1(a)(iii) under any
Welfare Plan providing retiree medical or life insurance benefits.
(e) Purchaser shall, and shall cause the Companies and the
Subsidiaries to, assume and be responsible for, and shall indemnify
and hold harmless the Sellers from and against, any and all claims for
severance pay, unemployment benefits or any other liabilities, claims,
interest, penalties and reasonable attorney's fees, asserted against,
resulting to, imposed upon or incurred by the Seller, arising from or
relating to claims by any Retained Employee, including any Canadian
Retained Employee, for claims for actual or constructive termination
on or after the Closing Date. For purposes of this Section 5.4(e),
constructive termination shall mean (i) a material decrease in a
Retained Employee's base pay or salary; (ii) a job transfer of a
Retained Employee to a lesser position, or comparable action, or (iii)
a transfer of the Retained Employee's principal workplace to a
location more than 50 miles from the Retained Employee's workplace on
the Closing Date or (iv) a material change in the type or amount of
benefits provided to the Retained Employees under the Sellers' Plans
immediately prior to the Closing Date.
(f) Effective as of the Closing Date, and subject to the
other provisions of this Section 5.4, Retained Employees who are
participants in the Welfare Plans shall cease to be active
participants in such Plans and no further benefits shall accrue under
the Welfare Plans with respect to such Retained Employees.
Section 5.5. Executive Compensation and Benefits. The
Sellers shall retain responsibility for, and shall indemnify and hold
harmless the Purchaser, and from and after the Closing Date, the
Companies and the Subsidiaries, from and against any and all Damages
in respect of any Retained Employee arising from or relating in any
way to the Long-Term Incentive Plan of the Continental Corporation and
any and all Damages in respect of any Retained Employee attributable
to performance periods occurring prior to the Closing Date arising
from or relating in any way to The Annual Management Incentive Plan of
the Continental Corporation (the "Incentive Plan") and the Sellers may
pay the Retained Employees a bonus under the Incentive Plan for the
1993 performance period occurring prior to the Closing Date in an
amount determined in a manner consistent with the Incentive Plan
provisions. Effective on the Closing Date, the Purchaser shall, or
shall cause the Companies and the Subsidiaries to, assume and be
solely responsible for, and shall indemnify and hold harmless the
Sellers from and against any and all Damages in respect of any
Retained Employee attributable to performance periods occurring on or
after the Closing Date, arising from or relating in any way to the
Incentive Plan and, in the event the Sellers determine in accordance
with the terms of the Incentive Plan that a bonus is payable to
Retained Employees under the Incentive Plan for the 1993 performance
period, the Purchaser shall, or shall cause the Companies or the
Subsidiaries to, pay the Retained Employees that portion of such bonus
attributable to the 1993 performance period occurring on and after the
Closing Date.
Section 5.6. Cessation of Participation. Except as
otherwise provided in this Article V, effective as of the Closing
Date, each Canadian Retained Employee who is a participant in any CAFO
Plan shall cease to be an active participant in such CAFO Plan and no
further benefits shall accrue under the CAFO Plan with respect to such
Canadian Retained Employee.
ARTICLE VI
Conditions Precedent
Section 6.1. Preamble. The respective obligations set
forth herein of the Sellers and the Purchaser to consummate the sale
and purchase of the Shares and the transactions to be consummated at
the Closing hereunder shall be subject to the fulfillment, on or
before the Closing Date, in the case of the Sellers, of the conditions
set forth in Section 6.2 and 6.3, and in the case of the Purchaser, of
the conditions set forth in Sections 6.2 and 6.4; provided, that the
Purchaser shall be precluded from asserting that a condition set forth
in this Article VI has not been satisfied by reason of any matter,
fact, failure or circumstance reflected in the Sellers' Disclosure
Schedule, as amended from time to time, except that this proviso shall
not preclude the Purchaser from asserting that the condition set forth
in Section 6.4.1 has not been satisfied due to a breach of the
representation and warranty set forth in Section 2.15 by reason of any
item added to, or amended in, the Sellers' Disclosure Schedule by the
Sellers between the date hereof and the Closing Date.
Section 6.2. Conditions to Obligations of both Parties.
6.2.1. Consents and Approvals. The waiting period under
the HSR Act shall have been terminated or expired, any filing
requirements under the Bank Act (Canada) in connection with the
acquisition of the CAFO Shares by the Purchaser or its nominee shall
have been satisfied, and each of the other governmental consents,
approvals, authorizations or filings set forth in Schedule 2.2 of the
Sellers' Disclosure Schedule and Schedule 3.2 of the Purchaser's
Disclosure Schedule required to be made or obtained prior to Closing
shall have been obtained or made (which may include, for this purpose,
the expiration of any waiting or other time period required to pass
before governmental consent or acquiescence may be assumed or relied
upon).
6.2.2. No Injunction. No court order shall have been
entered that enjoins, restrains or prohibits consummation of the
transactions contemplated by this Agreement or questions the validity
of this Agreement, and there shall not be pending or threatened any
litigation, proceeding or investigation that restrains, prohibits or
prevents or, in the reasonable opinion of the Purchaser's or
Continental's counsel, presents a significant risk of restraining,
prohibiting or preventing, or changing the terms of or obtaining
damages in connection with, the transactions contemplated by this
Agreement or which otherwise would have a Material Adverse Effect.
Section 6.3. Conditions to Obligations of the Sellers.
6.3.1. Representations and Warranties of the Purchaser.
The representations and warranties in Article III shall be true and
correct when made and at and as of the Closing with the same effect as
though made at and as of such time, with such exceptions to the
representations and warranties not qualified by a materiality standard
as are not, individually or in the aggregate, material to the
business, condition (financial or otherwise) or operations of the
Purchaser and its subsidiaries taken as a whole. The Purchaser shall
have duly performed and complied in all material respects with all
agreements contained herein required to be performed or complied with
by it at or before the Closing.
6.3.2. Officer's Certificate. The Purchaser shall have
delivered to the Sellers a certificate, dated the Closing Date and
signed by its Chairman, President or a Vice President, as to the
fulfillment of the conditions set forth in Section 6.3.1.
6.3.3. Opinion of Counsel. The Sellers shall have received
from Reed Smith Shaw & McClay, counsel for the Purchaser, an opinion
in form and substance substantially the same as Exhibit A-1 and from
General Counsel to the Purchaser, an opinion in form and substance
substantially the same as Exhibit A-2.
6.3.4 Release From Credit Support and Other Arrangements.
The Purchaser shall have (i) provided funds, from borrowings by the
Companies secured by the assets of the Companies or otherwise, which,
together with interest resulting from the investment thereof in
appropriate governmental obligations, are sufficient to provide for
the payment when due of the principal amount of the obligations of the
Companies secured by any guarantees or credit support of Continental
or its affiliates (other than the Companies and the Subsidiaries) plus
interest thereon accruing after the Closing Date and until maturity or
(ii) in the case of the medium term notes of AFCO outstanding on the
date hereof, assumed the obligations of Continental with respect
thereto, as contemplated by Section 4.8.4 hereof.
6.3.5. Third Party Consents. The Sellers shall have
received all such third party approvals, consents, authorizations and
waivers set forth in the Sellers' Disclosure Schedule as may be
required to consummate the transactions contemplated hereby.
6.3.6. Real Property Transfer Tax Filings. The Purchaser
shall have satisfied its obligations under Section 4.4(b) required to
be satisfied on or prior to the Closing Date.
Section 6.4. Conditions to Obligations of the Purchaser.
6.4.1. Representations and Warranties of the Sellers. The
representations and warranties in Article II shall be true and correct
when made and at and as of the Closing with the same effect as though
made at and as of such time, with such exceptions to the
representations and warranties not qualified by a materiality standard
as shall not, individually or in the aggregate, have a Material
Adverse Effect. The Sellers shall have duly performed and complied in
all material respects with all agreements contained herein required to
be performed or complied with by it at or before the Closing.
6.4.2. Officer's Certificates. The Sellers shall have
delivered to the Purchaser certificates, dated the Closing Date and
signed by a President or a Vice President of each Seller, as to the
fulfillment of the conditions set forth in Section 6.4.1.
6.4.3. Opinion of Counsel. The Purchaser shall have
received from Debevoise & Plimpton, counsel for the Sellers, from the
General Counsel of Continental, and from Stikeman, Elliott, Canadian
counsel for the Sellers, opinions in form and substance substantially
the same as Exhibits B, C and D, respectively.
6.4.4. Third Party Consents. The Purchaser shall have
received all such third party approvals, consents, authorizations and
waivers set forth in the Purchaser's Disclosure Schedule as may be
required to consummate the transactions contemplated hereby.
6.4.5. Real Property Transfer Tax Filings. Continental
Insurance shall have satisfied its obligations under Section 4.4(b)
required to be satisfied on or prior to the Closing Date.
6.4.6. Combined Shareholders' Equity. The Companies'
Combined Shareholders' Equity shall be not less than $46.3 million.
ARTICLE VII
Indemnification
Section 7.1. Survival of Representations and Warranties.
The representations and warranties contained in Articles II and III of
this Agreement shall survive until the second anniversary of the
Closing Date, except for the provisions of Section 2.14, which shall
survive until the expiration of the applicable statutes of
limitations, including any waivers or extensions thereof. No action
for indemnification under this Article VII may be brought with respect
to such representations and warranties after the dates indicated in
the preceding sentence unless, prior to the date such representations
and warranties expire, the party seeking indemnification has notified
in reasonable detail the party from whom indemnification is sought of
a claim for indemnity hereunder.
Section 7.2. Indemnification.
7.2.1. By the Sellers. Subject to Section 7.1, from and
after the Closing, the Sellers jointly and severally agree to
indemnify the Purchaser and hold the Purchaser harmless from and
against any out-of-pocket loss, liability or damage (including
reasonable attorneys' fees and other costs and expenses)
(collectively, "Damages") incurred or sustained by the Purchaser as a
result of the nonfulfillment of any agreement (including, without
limitation, Section 4.7) or the breach of any representation or
warranty on the part of the Sellers under this Agreement; provided
that there shall not be any duplicative payments or indemnities by any
of the Sellers. The Purchaser's right to indemnity under this Section
7.2.1 shall include, by example and without limitation, any out-of-
pocket loss, liability or damage (including reasonable attorney's fees
and others costs and expenses) incurred or sustained by the Purchaser
with respect to the property described in Section 4.8.5 hereof.
The Purchaser's rights to indemnification under this Article
VII shall be limited as follows:
(a) The amount of any Damages incurred by the Purchaser
shall be reduced by the net amount of the Tax Benefits actually
realized by the Purchaser or the Companies by reason of such loss,
liability or damage.
(b) The amount of any Damages incurred by the Purchaser
shall be reduced by the net amount the Purchaser or any of the
Companies or the Subsidiaries recover (after deducting all attorneys'
fees, expenses, and other costs of recovery) from any insurer or other
party liable for such Damages, and the Purchaser shall use reasonable
efforts to effect any such recovery.
(c) Except for any liability or obligation with respect to
federal, state, local and foreign income Taxes which relate to periods
ending on or prior to the Closing Date, the Purchaser shall be
entitled to indemnification only to the extent that the aggregate
amount of such Damages exceeds an amount equal to (i) $3,500,000 less
(ii) amounts up to $3,500,000 actually paid by the Purchaser, a
Company or any Subsidiary in respect of any matter reflected in any
amendment made to the Sellers' Disclosure Schedule after the date
hereof, and then only to the extent the aggregate amount of such
Damages exceeds such amount.
(d) The Sellers' liability under this Section 7.2.1 shall
not exceed $100 million.
7.2.2. By the Purchaser. Subject to Section 7.1, from and
after the Closing, the Purchaser agrees to, and agrees to cause the
Companies to, indemnify the Sellers and hold them harmless from and
against any Damages incurred or sustained by any of the Sellers as a
result of the nonfulfillment of any agreement (including, without
limitation, Section 4.7) or the breach of any representation or
warranty on the part of the Purchaser under this Agreement; provided
that there shall not be any duplicative payments or indemnities by the
Purchaser.
The Sellers' rights to indemnification under this Article
VII shall be limited as follows:
(a) The amount of any Damages incurred by the Sellers shall
be reduced by the net amount of the tax benefits actually realized by
the Sellers by reason of such loss, liability or damage.
(b) The amount of any Damages incurred by the Sellers shall
be reduced by the net amount the Sellers recover (after deducting all
attorneys' fees, expenses, and other costs of recovery) from any
insurer or other party liable for such loss, liability or damage, and
the Sellers shall use reasonable efforts to effect any such recovery.
(c) The Sellers shall be entitled to indemnification under
this Section 7.2.2 only to the extent that the aggregate amount of
such Damages exceeds $3,500,000, and then only to the extent the
aggregate amount of such Damages exceeds $3,500,000.
(d) The Purchaser's liability under this Section 7.2.2
shall not exceed $100 million.
7.2.3. Indemnification Procedures. A party entitled to
indemnification hereunder shall herein be referred to as an
"Indemnitee." A party obligated to indemnify an Indemnitee hereunder
shall herein be referred to as an "Indemnitor." Promptly after receipt
by an Indemnitee of notice of any claim or the commencement of any
action, or upon discovery of any facts which an Indemnitee believes
may give rise to a claim for indemnification from an Indemnitor
hereunder, such Indemnitee shall, if a claim in respect thereof is to
be made against an Indemnitor under this Article VII, notify such
Indemnitor in writing of the claim or the commencement of such action.
If any such claim shall be brought against such Indemnitee, it shall
notify such Indemnitor thereof, the Indemnitor shall be entitled to
participate therein, and to assume the defense thereof with counsel
reasonably satisfactory to the Indemnitee, and to settle or compromise
any such claim or action; provided that if the Indemnitee has elected
to be represented by separate counsel pursuant to the proviso to the
following sentence, such settlement or compromise shall be effected
only with the consent of the Indemnitee, which consent shall not be
unreasonably withheld. After notice to the Indemnitee of the
Indemnitor's election to assume the defense of such claim or action,
the Indemnitor shall not be liable to the Indemnitee under this
Article VII for any legal or other expenses subsequently incurred by
the Indemnitee in connection with the defense thereof other than
reasonable costs of investigation, provided that the Indemnitee shall
have the right to employ counsel to represent it if, in the
Indemnitee's reasonable judgment, it is advisable for the Indemnitee
to be represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Indemnitee. If
the Indemnitor does not elect to assume the defense of such claim or
action, the Indemnitee shall act reasonably and in accordance with its
good faith business judgment with respect thereto, and shall not
settle or compromise any such claim or action without the consent of
the Indemnitor which consent shall not be unreasonably withheld. The
parties hereto agree to render to each other such assistance as may
reasonably be requested in order in insure the proper and adequate
defense of any such claim or proceeding. This Section 7.2.3 shall not
apply with respect to audits and other proceedings with respect to
Taxes, which shall be governed by Section 4.7.
7.3. Continental Guaranty. (a) Continental hereby
guarantees to the Purchaser the prompt payment in full when due of all
payment obligations of the Sellers to the Purchaser under
Sections 1.3, 4.4, 4.6, 4.7, 5.2, 5.4, 5.5, 5.6 and 7.2 of this
Agreement (the payment obligations guaranteed hereunder being herein
collectively called the "Guaranteed Obligations" and individually a
"Guaranteed Obligation"), in accordance with the terms of this
Agreement. Subject to the proviso set forth in paragraph (b) below,
Continental hereby further agrees that if the Sellers shall fail to
pay in full when due any of the Guaranteed Obligations, Continental
will pay the same, without demand or notice whatsoever.
(b) Continental's obligations under this Agreement are
absolute, unconditional and irrevocable, irrespective of (i) any
modification, amendment or variation in or addition to the terms of
any of the Guaranteed Obligations made in accordance with the terms of
this Agreement, (ii) any extension of time for performance or waiver
of performance of any Guaranteed Obligation, or any failure or
omission to enforce any right with regard to, any of the Guaranteed
Obligations, (iii) any exchange, surrender, release of any other
guaranty of or security for any of the Guaranteed Obligations or (iv)
any other circumstance with regard to any of the Guaranteed
Obligations that may or may not in any manner constitute a legal or
equitable discharge or defense of a surety or a guarantor, it being
the intent hereof that the obligations of Continental shall be
absolute and unconditional under any and all circumstances; provided,
that Continental's obligation shall be subject to, and Continental
shall have the right to raise, any defenses available to the Sellers
other than any such defenses available under any bankruptcy,
insolvency, rehabilitation, conservation, reorganization or other
similar laws applicable to any Seller.
(c) Continental hereby expressly waives diligence,
presentment, demand, protest and all notices whatsoever with regard to
any of the Guaranteed Obligations, any requirement that the Purchaser
exhaust any right, power or remedy or proceed against either Seller
or, subject to Section 7.2.1(b), any other person under this Agreement
and any and all other events and circumstances, whether similar or
dissimilar to any of the above, which might otherwise constitute a
legal or equitable discharge, release or defense of a guarantor or
surety or which might otherwise limit recourse against Continental,
excepting only full, strict and indefeasible payment of the Guaranteed
Obligations.
(d) The guaranty of Continental hereunder shall be
automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Sellers is rescinded or must be
otherwise restored by the Purchaser, whether as a result of any
proceedings in bankruptcy, reorganization or otherwise.
(e) This guaranty shall continue in full force and effect
and be binding upon Continental and its successors notwithstanding the
liquidation, dissolution, bankruptcy of, or any like event with
respect to, any other party liable upon or in respect of any
Guaranteed Obligation.
ARTICLE VIII
Dispute Resolution
Any controversy or claim arising out of or relating to this
Agreement or any breach thereof shall be settled by arbitration. The
arbitration shall be held in New York, New York and, except to the
extent inconsistent with this Article VIII, shall be conducted in
accordance with the rules of the American Arbitration Association in
effect at the time of the arbitration. The arbitration proceedings,
all documents and all testimony, written or oral, produced in
connection therewith, and the arbitration award shall be confidential.
The arbitration panel shall consist of three arbitrators. The party
initiating arbitration (the "Claimant") shall appoint its arbitrator
in its demand (the "Demand"). The other party (the "Respondent")
shall appoint its arbitrator within 30 days of receipt of the Demand
and shall notify the Claimant of such appointment in writing. If the
Respondent fails to appoint an arbitrator within such 30-day period,
the arbitrator named in the Demand shall decide the controversy or
claim as a sole arbitrator. Otherwise, the two arbitrators appointed
by the parties shall appoint a third arbitrator within 45 days after
the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. When the arbitrators appointed by the
Claimant and Respondent have appointed a third arbitrator and the
third arbitrator has accepted the appointment, the two arbitrators
shall promptly notify the parties of the appointment of the third
arbitrator. If the two arbitrators appointed by the parties fail or
are unable so to appoint a third arbitrator or so to notify the
parties, either party may request the then President of the American
Arbitration Association to appoint the third arbitrator. The
President of the American Arbitration Association shall appoint the
third arbitrator within 30 days after such request and shall notify
the parties of the appointment. The third arbitrator shall act as
chairman of the tribunal. The arbitral award may grant any relief
deemed by the arbitrators to be just and equitable, including, without
limitation, specific performance; provided that in no event shall an
award for monetary damages, together with all other awards or payments
made hereunder or under Article VII by the Sellers or the Purchaser
exceed $100 million. The arbitral award shall state the reasons for
the award and relief granted, shall be final and binding on the
parties to the arbitration, and may include an award of costs,
including reasonable attorneys' fees and disbursements. Any award
rendered may be confirmed, judgment upon any award rendered may be
entered, and such award of the judgment thereon may be enforced in any
court of any state or country having jurisdiction over the parties
and/or their assets. Both parties shall continue to perform their
obligations under this Agreement during the pendency of any
arbitration provided for by this Section.
ARTICLE IX
Definitions
Certain defined terms used herein are defined in the text of
the sections of this Agreement set forth below:
Defined Term Section
"Adjusted Payment Amount" 1.3(f)
"AFCO" 1.1
"AFCO Shares" 1.1
"Bridge Period" 4.7.3
"CAFO" 1.1
"CAFO Shares" 1.1
"Claimant" Article VIII
"Closing" 1.2
"Closing Date" 1.2
"Closing Date Purchase Price" 1.2(b)
"Companies" 1.1
"Continental" Preamble
"Continental Insurance" Preamble
"Continental Payee" 1.3
"Continental Reinsurance" Preamble
"Damages" 7.2.1
"Demand" Art. VIII
"ERISA" 2.10.1
"ERISA Affiliate" 2.10.2
"Final Interest Amount" 1.3(f)
"Final Payment" 1.3(b)
"Final Notice" 1.3(g)
"HSR Act" 2.2(b)
"Indemnitee" 7.2.3
"Interim Interest Amount" 1.3(d)
"Interim Notice" 1.3(g)
"Notional Amount" 1.3(a)
"Objection Notice" 1.3(h)
"Pension Plans" 2.10.1
"Plans" 2.10.1
"Provisional Interest Payment" 1.3(c)
"Provisional Payment Amount" 1.3(d)
"Purchaser" Preamble
"Respondent" Article VIII
"Retained Employee" 5.1
"Review Period" 1.3(h)
"Sellers" Preamble
"Sellers' Period" 4.7.3
"Shares" 1.1
"Subsidiary" 2.5(a)
"Term Year" 1.3(a)
"Welfare Plans" 5.4(a)
In addition, as used herein, the following terms have the
following meanings:
"AFCO Financial Statements" shall mean the audited
financial statements of AFCO as of December 31, 1991 and 1992 and
for the years then ended, including consolidated balance sheets,
consolidated statements of income and retained earnings, and
consolidated statements of cash flows, together with the notes to
such financial statements and the report thereon of KPMG Peat
Marwick, and the AFCO Interim Statements.
"AFCO Interim Statements" shall mean the unaudited
consolidated balance sheet, consolidated statement of income and
retained earnings and consolidated statement of cash flows of AFCO
as of March 31, 1993 and for the comparable periods for 1992.
"Business" shall mean the business, activities,
interests, assets and properties of the Companies and the
Subsidiaries taken as a whole.
"CAFO Financial Statements" shall mean the audited
financial statements of CAFO as of December 31, 1991 and 1992 and
for the years then ended, including a balance sheet, a statement of
earnings and retained earnings, and a statement of changes in
financial position, together with the notes to such financial
statements and the report thereon of Peat Marwick Thorne, and the
CAFO Interim Statements.
"CAFO Interim Statements" shall mean the unaudited
balance sheet, statement of earnings and retained earnings and
statement of changes in financial position of CAFO as of March 31,
1993 and for the comparable periods for 1992.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Companies' Combined Shareholder's Equity" shall mean, as
of any date of determination, the aggregate combined shareholder's
equity of AFCO and CAFO, after eliminating (i) all intercompany
transactions among the Companies, and (ii) all liabilities and
reserves for Taxes that are required to be borne by Continental
pursuant to Section 4.7.1; provided that the Companies' Combined
Shareholders' Equity shall not be increased by the amount of any
write-off by Continental of receivables or other indebtedness due
from the Companies or their Subsidiaries in respect of overhead and
other corporate charges for services provided by Continental to the
Companies or the Subsidiaries. For purposes of computing
Companies' Combined Shareholder's Equity, the Companies' liability
for Taxes with respect to any Sellers' Period that are not required
to be borne by Continental pursuant to Section 4.7.1, shall be
determined using the method provided in Section 4.7.3.
"Companies' Financial Statements" shall mean the AFCO
Financial Statements and the CAFO Financial Statements.
"Companies' Interim Statements" shall mean the AFCO
Interim Statements and the CAFO Interim Statements.
"Confidential Memorandum" shall mean the Confidential
Memorandum prepared by Lazard, Freres & Co. with respect to the
Companies.
"Confidentiality Agreement" shall mean the letter
agreement, dated February 17, 1993, between Mellon Bank Corporation
and Continental with respect to the confidentiality of the
Confidential Memorandum and certain other information.
"Material Adverse Effect" shall mean a material adverse
effect on the business, condition (financial or otherwise) or
operations of the Companies and their Subsidiaries, taken as a
whole.
"Origination Volume" shall mean, for any period of
determination, the gross amount of insurance premiums payable under
all insurance policies financed by the Companies and the
Subsidiaries during such period of determination. For purposes of
performing this calculation, any premiums payable in Canadian
dollars or other foreign currency shall be converted into U.S.
dollars at an exchange rate equal to an average of the applicable
exchange rates quoted in The Wall Street Journal on the last
business day of each calendar month occurring during such period of
determination.
"Present Value of the Notional Amounts" shall mean the
net present value, discounted at an annual rate of 12% and
calculated as of the Closing Date, of a revenue stream consisting
of the Notional Amounts for each of the five Term Years following
the Closing Date.
"Projected Present Value of the Notional Amounts" shall
mean the net present value, discounted at an annual rate of 12% and
calculated as of the Closing Date, of a hypothetical revenue stream
consisting of the Notional Amounts for each of the five Term Years
following the Closing Date, assuming growth rates in Origination
Volume for each of the Term Years equal to the arithmetical mean of
the actual growth rates in Origination Volume experienced over the
first three Term Years.
"Purchaser's Disclosure Schedule" shall mean the
Disclosure Schedule delivered by the Purchaser on the date hereof.
Section numbers in the Purchaser's Disclosure Schedule refer to the
corresponding section numbers in this Agreement. Matters set forth
in one section of the Purchaser's Disclosure Schedule need not be
set forth in any other section thereof.
"Sellers' Disclosure Schedule" shall mean the Disclosure
Schedule delivered by the Sellers, as amended from time to time in
accordance with Section 6.1 hereof. Section numbers in the Sellers'
Disclosure Schedule refer to the corresponding section numbers in this
Agreement. Matters set forth in one section of the Sellers'
Disclosure Schedule need not be set forth in any other section
thereof.
"Short Taxable Year" shall mean a Taxable Year or taxable
period of any of the Companies or any Subsidiary which begins before
the Closing Date and ends on the Closing Date as a result of the
transactions contemplated in this Agreement.
"Taxes" shall mean all taxes, however denominated, including
any interest, penalties or additions to tax that may become payable in
respect thereof, imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality
of the foregoing, all income taxes, payroll and employee withholding
taxes, backup withholding taxes, unemployment insurance taxes, social
security taxes, sale and use taxes, excise taxes, franchise taxes,
gross receipts taxes, occupation taxes, real and personal property
taxes, stamp taxes, transfer taxes, workers' compensation taxes,
capital stock taxes, taxes on services, and other obligations of the
same or of a similar nature, whether arising before, on or after the
Closing Date.
"Tax Benefit" or "Tax Cost" shall mean the amount of Tax
savings or cost realized as a result of an item by the Companies or
the Subsidiaries, the Purchaser, the Sellers, or any of their
affiliates as the case may be, equal to the difference between (i) the
actual Taxes of such taxpayer without giving effect to the item at
issue and (ii) the actual Tax liability of such taxpayer after giving
full effect to such Adjustment. A Tax Benefit shall be deemed to be
realized at the earlier of (i) the time that either a refund or a
credit for refund is received as a result of such Tax Benefit or (ii)
the Tax liability of the taxpayer is offset or otherwise reduced and
a Tax Return reflecting such Tax Benefit is filed. A Tax Cost shall
be deemed paid at the earlier of (1) the time that additional taxes
are actually paid as a result of such Tax Cost or (2) the time of the
filing of any Tax Return that reflects such Tax Cost.
"Tax Return" shall mean any return, report, filing,
estimate, declaration, or information statement related to, or
required to be filed in connection with, any Tax pursuant to statutes,
rules and regulations of any federal, state, local or foreign
government taxing authority.
"Taxable Year" shall mean any taxable year or other period
which is treated as a taxable year (including any Short Taxable Year)
with respect to which any Tax may be imposed under any applicable
statute, rule or regulation.
ARTICLE X
General Provisions
Section 10.1. Modification; Waiver. This Agreement may be
modified only by a written instrument executed by the parties hereto.
Any of the terms and conditions of this Agreement may be waived in
writing at any time on or prior to the Closing Date by the party
entitled to the benefits thereof.
Section 10.2. Entire Agreement. This Agreement supersedes
all other prior agreements, understandings, representations and
warranties, oral or written, between the parties hereto in respect of
the subject matter hereof (including, without limitation, the
Confidential Memorandum), except that this Agreement does not
supersede the Confidentiality Agreement, the terms and conditions of
which the parties hereto expressly reaffirm.
Section 10.3. Termination. This Agreement may be
terminated:
(a)at any time prior to the Closing Date by mutual consent of
the Purchaser, Continental and the Sellers; or
(b) by the Purchaser, Continental or the Sellers, if the Closing
shall not have taken place on or before December 31, 1993 or such later
date as the parties shall have agreed to in writing, provided that the non-
occurrence of the Closing is not attributable to a breach of the terms
hereof by the party seeking termination.
Section 10.4. Expenses. Except as expressly provided herein,
whether or not the transactions contemplated herein shall be consummated,
each party shall pay its own expenses incident to the preparation and
performance of this Agreement.
Section 10.5. Further Actions. Each party shall execute and
deliver such certificates, agreements and other documents and take such
other actions as may reasonably be requested by the other party in order
to consummate or implement the transactions contemplated hereby.
Section 10.6. Post-Closing Access. In connection with any
matter relating to any period prior to, or any period ending on, the
Closing, the Purchaser shall, upon the request and at the expense of the
Sellers, permit the Sellers and their representatives full access at all
reasonable times to the books and records of the Companies and the
Subsidiaries which shall have been transferred to the Purchaser and the
Purchaser shall execute (and shall cause the Companies and the Subsidiaries
to execute) such documents as the Sellers may reasonably request to enable
the Sellers to file any required reports relating to the Company. The
Purchaser shall not dispose of such books and records during the seven-year
period beginning with the Closing Date without Continental's prior written
consent, which shall not be unreasonably withheld. Following the
expiration of such seven-year period, the Purchaser may dispose of such
books and records at any time upon giving 60 days prior written notice to
Continental, unless Continental agrees to take possession of such books and
records within 60 days at no expense to the Purchaser.
Section 10.7. Notices. All notices, requests, demands, and
other communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered or mailed, registered mail, first-class
postage paid, return receipt requested, or any other delivery service with
proof of delivery;
if to the Sellers:
The Continental Corporation
180 Maiden Lane
New York, NY 10038
Attention: General Counsel
with a copy to:
The Continental Corporation
180 Maiden Lane
New York, NY 10038
Attention: Wayne H. Fisher
if to the Purchaser:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258
Attention: Martin G. McGuinn
with copies to:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258
Attention: Assistant General Counsel
and
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258
Attention: Chief Financial Officer
or to such other address or to such other person as either party
hereto shall have last designated by notice to the other party.
Section 10.8. Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but shall not be
assignable, by operation of law or otherwise, by Continental, any
of the Sellers or by the Purchaser, without the prior written
consent of the Purchaser or Continental and the Sellers,
respectively; provided, that no such consent shall be required in
connection with an assignment by the Purchaser to any affiliate
thereof if in connection with such assignment the Purchaser agrees,
on terms reasonably satisfactory to the Sellers, to guaranty or
otherwise remain liable for such affiliate's obligations hereunder.
Section 10.9. Counterparts. This Agreement may be
executed in counterparts, both of which shall constitute one and
the same instrument.
Section 10.10. Headings. The article and section
headings in this Agreement are for convenience of reference only
and shall not be deemed to alter or affect the meaning or
interpretation of any provision hereof.
Section 10.11. Governing Law. This Agreement shall be
construed, performed and enforced in accordance with the laws of
the State of New York, without giving effect to the conflict of
laws rules thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
THE CONTINENTAL CORPORATION
By /s/ Wayne H. Fisher
Title: Executive Vice President
THE CONTINENTAL INSURANCE
COMPANY
By /s/ Wayne H. Fisher
Title: Senior Vice President
CONTINENTAL REINSURANCE
CORPORATION
By /s/ Wayne H. Fisher
Title: Senior Vice President
MELLON BANK CORPORATION
By /s/ Martin G. McGuinn
Title: Vice Chairman
SHARE PURCHASE AGREEMENT
dated as of June 30, 1993
among
UNIONAMERICA ACQUISITION COMPANY LTD.,
an English private company limited by shares,
UNIONAMERICA HOLDINGS LTD.,
an English private company limited by shares,
and
THE CONTINENTAL CORPORATION,
a New York corporation
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF SHARES; EXCHANGE OF
BUYER SHARES
SECTION 1.1. Purchase and Sale of Shares . . 1
SECTION 1.2. Exchange of Buyer Shares for A
Senior Preference Shares. . . . . . . 2
ARTICLE II
CLOSING
SECTION 2.1. Closing . . . . . . . . . . . . 3
SECTION 2.2. Documents to be Delivered . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.1. Corporate Existence . . . . . . 8
SECTION 3.2. Authorization; Enforcement. . . 8
SECTION 3.3. Consents and Approvals. . . . . 9
SECTION 3.4. No Conflicts. . . . . . . . . . 9
SECTION 3.5. Capital Structure . . . . . . . 10
SECTION 3.6. Subsidiaries. . . . . . . . . . 10
SECTION 3.7. Company Documents . . . . . . . 10
SECTION 3.8. Financial Statements. . . . . . 11
SECTION 3.9. Annual Statements . . . . . . . 12
SECTION 3.10. Absence of Certain Changes or
Events. . . . . . . . . . . . . . . . 13
SECTION 3.11. Contracts . . . . . . . . . . . 14
SECTION 3.12. Litigation. . . . . . . . . . . 17
SECTION 3.13. Liabilities and Reserves. . . . 17
SECTION 3.14. Taxation. . . . . . . . . . . . 18
SECTION 3.15. Assets. . . . . . . . . . . 27
SECTION 3.16. Compliance with Laws, etc. . 28
SECTION 3.17. Insurance for Company's
Operations . . . . . . . . . 28
SECTION 3.18. Insurance Business . . . . . 29
SECTION 3.19. Reinsurance. . . . . . . . . 29
SECTION 3.20. Service Marks, Trademarks,
Intellectual Property, etc.. . . . . . . . 30
SECTION 3.21. Employee Benefit Plans . . . 31
SECTION 3.22. Directors, Officers and
Employees . . . . . . . . . . . . . . 33
SECTION 3.23. Banks, Brokerage Accounts and
Powers of Attorney . . . . . . . 33
SECTION 3.24. Brokers and Finders, etc.. . . 34
SECTION 3.25. Securities . . . . . . . . . . 34
SECTION 3.26. Contribution . . . . . . . . . 34
SECTION 3.27. Unionamerica Reorganization . 34
SECTION 3.28. Termination of Certain Affiliate
Contracts. . . . . . . . . . . . 34
SECTION 3.29. Full Disclosure. . . . . . . . 34
SECTION 3.30. No Representation as to
Insurance or Reinsurance Reserves. . . 34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
AND PARENT
SECTION 4.1. Corporate Existence. . . . . 35
SECTION 4.2. Authorization; Enforcement . . 35
SECTION 4.3. Consents and Approvals . . . . 35
SECTION 4.4. No Conflicts . . . . . . . . . 36
SECTION 4.5. Capital Structure . . . . . . . 36
SECTION 4.6. Brokers and Finders, etc. . . . 37
SECTION 4.7. Available Funds . . . . . . . . 37
SECTION 4.8. Securities. . . . . . . . . . . 37
SECTION 4.9. Full Disclosure . . . . . . . . 37
ARTICLE V
COVENANTS
SECTION 5.1. Operations in the Ordinary
Course. . . . . . . . . . . . . . . . 37
SECTION 5.2. Restrictions. . . . . . . . . . 38
SECTION 5.3. Related Matters. . . . . . . . 40
SECTION 5.4. Access to Information. . . . . 41
SECTION 5.5. Termination of Certain Affiliate
Agreements . . . . . . . . . . 42
SECTION 5.6. No Solicitation . . . . . . . . 42
SECTION 5.7. Financing . . . . . . . . . . . 43
SECTION 5.8. Filings and Authorizations. . . 43
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Buyer's and
Parent's Obligations. . . . . . . . . 43
SECTION 6.2. Conditions to Seller's
Obligations . . . . . . . . . . . . . 45
ARTICLE VII
FURTHER AGREEMENTS
SECTION 7.1. Pension Agreement . . . . . . . 45
SECTION 7.2. Non-Competition . . . . . . . . 50
SECTION 7.3. Public Announcements . . . . . 50
SECTION 7.4. Expenses. . . . . . . . . . . . 51
SECTION 7.5. D & O Insurance.. . . . . . . . 51
SECTION 7.6. Seller's Covenants Regarding
Senior Preference Shares.. . . . . . 52
SECTION 7.7. Use of Certain Names. . . . . . 52
SECTION 7.8. Further Assurances. . . . . . . 53
SECTION 7.9. Books and Records . . . . . . . 53
SECTION 7.10. Amendments of Schedules . . . . 53
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Survival of Representations,
etc. . . . . . . . . . . . 54
SECTION 8.2. Indemnification . . . . . . . . 54
SECTION 8.3. Indemnification Procedures. . . 58
SECTION 8.4. LUC Indemnification . . . . . . 60
SECTION 8.5. Indemnification Payments. . . . 69
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Termination . . . . . . . . . . 70
SECTION 9.2. Effect of Termination . . . . . 70
SECTION 9.3. Consent to Jurisdiction and
Service of Process . . . . . . . . . . 71
SECTION 9.4. Notices . . . . . . . . . . . . 71
SECTION 9.5. Entire Agreement; No Third Party
Beneficiaries. . . . . . . . . 73
SECTION 9.6. Waivers and Amendments; Non-
Contractual Remedies; Preservation
of Remedies . . . . . . . . . . . . . 74
SECTION 9.7. Payments and Currency . . . . . 74
SECTION 9.8. Binding Effect; No Assignment . 75
SECTION 9.9. Severability. . . . . . . . . . 75
SECTION 9.10. Counterparts. . . . . . . . . . 75
SECTION 9.11. Interpretation. . . . . . . . . 75
SECTION 9.12. Governing Law . . . . . . . . . 76
SECTION 9.13. Waiver of Jury Trial. . . . . 76
Exhibit A Form of Contingent Payment
Agreement between Parent and
Seller
Exhibit B Terms of Senior Preference Shares
Exhibit C Form of Tax Indemnification
Agreement between Seller and
Buyer
Exhibit D Form of Senior Preference Share
Support Agreement between
Parent and Seller
Exhibit E Form of Run-Off and Accounting
Services Agreement between
CRC(UK) and the Company
Exhibit F Form of Assignment of
Trademarks between Seller and
the Company
Exhibit G Form of Greenwich View Transfer
Documents between Company and
Lombard
Exhibit H Form of 77 Gracechurch Street
Agreement between CIH (Europe)
and the Company
Exhibit I Form of 85 Gracechurch Street
License between UA Management
and the Company
Exhibit J Form of 85 Gracechurch Street
Agreement between UA
Management and the Company
Exhibit K Form of Information Technology
Services Agreement between UA
Management and the Company
Exhibit L Form of Opinion of Debevoise &
Plimpton
Exhibit M Form of Opinion of Lovell White
Durrant
Exhibit N Form of Opinion of Freshfields
Exhibit O Form of Opinion of LeBoeuf,
Lamb, Leiby & MacRae
SCHEDULES
Schedule 2.2 Resigning Directors and
Officers
Schedule 3.6 Subsidiaries, Joint Ventures, etc.
Schedule 3.8(b) Financial Statements
Schedule 3.8(c) Changes in Investment Portfolio
Schedule 3.9 Annual Statements
Schedule 3.10 Certain Changes or Events
Since the Balance Sheet Date
Schedule 3.11 Contracts
Schedule 3.12 Litigation
Schedule 3.13(a) Balance Sheet - Additional
Matters
Schedule 3.13(d) KPMG Report Information
Schedule 3.14 Tax Matters
Schedule 3.15(a)(1) Investments
Schedule 3.15(a)(2) Transactions Affecting
Company's Investment Portfolio
Schedule 3.15(c) Other Property
Schedule 3.16 Compliance with Laws
Schedule 3.17 Insurance
Schedule 3.19 Reinsurance
Schedule 3.20(a)(1) Service Marks, Trademarks,
Intellectual Property
Schedule 3.20(a)(2) Software Matters
Schedule 3.21 Employee Benefit Plans
Schedule 3.22 Key Employees
Schedule 3.23 Banks, Brokerage Accounts and
Powers of Attorney
Schedule 3.24 Brokers and Finders
Schedule 5.5 Terminating Affiliate Contracts
Schedule 7.1 Actuary's Letter
Schedule 7.8(b) Accounting Treatment
DEFINITIONS
Defined Term Section No.
1992 Company Financials 3.14(b)(1)
77 Gracechurch Street Agreement 2.2(e)(8)
85 Gracechurch Street Agreement 2.2(e)(10)
85 Gracechurch Street License 2.2(e)(9)
A Senior Preference Shares 1.2
Accommodation 8.4(a)(1)(B)
Accord 3.11(a)(8)
Actuary's Letter 7.1(a)(2)
Affiliate 2.2(e)(16)
Agency Contracts 3.11(a)(12)
Annual Statements 3.9(a)
Assignment of Trademarks 2.2(e)(6)
B Senior Preference Shares 4.5
Balance Sheet Date 3.8(a)(1)
Business Days 1.1(b)(1)
Buyer Preamble
Buyer Shares 1.1(b)(2)
Buyer's Actuary 7.1(a)(5)
Buyer's Scheme 7.1(a)(6)
Buyer Tax Benefit 8.2(b)(1)
Cash Consideration 1.1(b)(1)
CIH (Europe) 2.2(e)(8)
Closing 2.1
Closing Date 2.1
Commitment Date 5.7
Company Preamble
Company Balance Sheet 3.8(a)(1)
Company Financials 3.8(a)(1)
Companies Act 3.7(a)
Confidential Information 5.4
Confidentiality Agreement 5.4
Consents 3.3
Contingent Payment Agreement 1.1(d)
Contract 3.11(a)
CRC(UK) 2.2(e)(5)
Damages 8.2(a)
Development Agreement 8.4(a)(2)(A)(i)(I)
Employee 3.10(c)
Employee Benefit Plans 3.10(c)
Event 3.14(a)(1)
Exchange Act 2.2(e)(15)
Excess Space 8.4(a)(2)(A)(ii)(II)
Governmental Authority 3.3
Greenwich View Transfer Documents 2.2(e)(7)
Group Relief 3.14(a)(2)
IRC 3.14(b)(6)
IT Services Agreement 2.2(e)(10)
Indemnified Person 8.3(a)
Indemnifying Person 8.3(a)
Information 8.4(e)(1)
Initial Due Diligence Period 5.4
Insurance Arrangements 3.4(b)
Insurance Companies Act 3.9(a)
Intellectual Property Right 3.20(a)
Interest 7.1(a)(3)
Interim Period 7.1(a)(7)
Intervening Event 7.10(a)
Investment Policies 3.8(c)
Investment Proposal 5.6
Investments 3.15(a)(1)
Key Employee 3.22(a)
KPMG Report 3.13(d)
Liens 1.1(a)
Litigation 3.12(a)
Lombard 2.2(e)(7)
LUC 8.4(a)(1)(B)
LUC Benefits 8.4(a)(1)
LUC Liabilities 8.4(a)(2)
Material Adverse Effect 3.4(b)
Material Properties 3.15(c)
MBL 8.4(a)(1)(A)
Parent Preamble
Payment Date 7.1(a)(4)
Pension Transfer Date 7.1(a)(7)
Permit 3.18
Person 3.5
Purchase Price 1.1(b)
Reinsurance Agreement 3.19
Reinsurance Provider 8.2(a)(4)
Relevant Employees 7.1(a)(8)
Relief 3.14(a)(3)
Return 3.14(b)(3)
Run-Off Agreement 2.2(e)(5)
Scheduled Contract 3.11(a)
Scheduled Investments 3.15(a)(1)
Securities Act 3.25
Seller Preamble
Seller's Actuary 7.1(a)(11)
Seller Tax Benefit 8.2(d)(1)
Senior Preference Shares 4.5
Shareholders Agreement 8.4(a)(2)(A)(ii)(I)
Shares Preamble
State 3.3
Support Agreement 2.2(e)(4)
Tax 3.14(a)(4)
Tax Authority 3.14(a)(5)
Tax Clearance 3.14(b)(4)
Tax Indemnification Agreement 2.2(e)(3)
Taxes Act 3.14(a)(6)
this Agreement Preamble
to the knowledge of Seller 9.11
Transaction Documents 2.2(h)
Transfer Amount 7.1(a)(1)
Transferring Employees 7.1(a)(9)
UA Management 2.2(e)(9)
UK Accounting Standards 3.13(a)
Unaudited Financials 3.8(a)(2)
Unionamerica Business 7.2
Unionamerica Reorganization 3.27
Unionamerica Scheme 7.1(a)(10)
VAT 3.14(a)(7)
VAT Legislation 3.14(a)(8)
SHARE PURCHASE AGREEMENT, dated as of June 30, 1993 ("this
Agreement"), among UNIONAMERICA ACQUISITION COMPANY LTD., an English
private company limited by shares ("Buyer"), UNIONAMERICA HOLDINGS
LTD., an English private company limited by shares ("Parent"),
and THE CONTINENTAL CORPORATION, a New York corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns beneficially 40,700,000 ordinary shares
of US $1 each of UNIONAMERICA INSURANCE COMPANY LIMITED, an English
private company limited by shares (the "Company"), constituting all
of the issued or allotted share capital of the Company (the "Shares"),
which Shares are represented by share warrants to bearer of the
Company;
WHEREAS, Seller desires to sell the Shares to
Buyer, and Buyer desires to purchase the Shares from Seller,
on the terms and subject to the conditions set forth herein;
and
WHEREAS, Parent owns beneficially all of the
issued share capital of Buyer and desires that Buyer purchase
the Shares from Seller, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the
premises and representations, warranties and agreements
herein contained, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES; EXCHANGE OF BUYER SHARES
SECTION 1.1. Purchase and Sale of Shares.
(a) On the terms and subject to the
conditions set forth herein, Seller agrees to sell and transfer,
and Buyer agrees to purchase, at the Closing, the Shares
(represented by share warrants to bearer), free from all liens,
pledges, mortgages, security interests, leases, charges, options,
rights of first refusal, easements, servitudes, encumbrances,
equities, claims or other third party rights (including rights of
pre-emption), restrictions or limitations, in each case of any
nature whatsoever (collectively, "Liens"), together with all
rights which now are, or at any time hereafter may become,
attached to the Shares (including the right to receive all
dividends and other distributions declared, made or paid after
the date hereof).
(b) As consideration for the purchase of the
Shares and for Seller's agreements set forth in Section 7.2, at
the Closing, Buyer shall pay to Seller an aggregate purchase
price of One Hundred Ten Million United States Dollars
(US $110,000,000), subject to adjustment as provided in
Section 1.1(c) (as so adjusted, the "Purchase Price"), consisting
of cash and securities as follows: (1) cash in the amount of
Ninety-Five Million United States Dollars (US $95,000,000),
subject to adjustment as provided in Section 1.1(c) (as so
adjusted, the "Cash Consideration"), payable by wire transfer
in immediately available funds to an account that Seller shall
designate in writing to Buyer no less than five (5) "Business
Days" (which, for purposes of this Agreement, means any day
that is not a Saturday, Sunday or other day on which
commercial banks in New York City or London, England are
required or authorized by law to be closed) prior to the
Closing Date; and (2) 15,000,000 ordinary shares of US $1
each of Buyer (the "Buyer Shares") (represented by share
warrants to bearer), free from all Liens (other than Liens
which may be required by lenders to Buyer or Parent in
connection with financing for this transaction), together with
all rights which now are, or at any time hereafter may
become, attached to the Buyer Shares (including the right to
receive all dividends and other distributions declared, made or
paid after the date hereof).
(c) The Purchase Price shall be subject to
adjustment as provided in this paragraph (c):
(1) if the Closing occurs before August
31, 1993, then the amount of cash payable pursuant to
Section 1.1(b)(1) shall be reduced by an amount equal
to the product of (A) US $110,000,000 multiplied by (B)
a fraction, the numerator of which is the number of
calendar days from (but excluding) the Closing Date to
(and including) August 31, 1993 and the denominator
of which is 365, multiplied by (C) 6.75%;
(2) if the Closing occurs after August
31, 1993, then the amount of cash payable pursuant to
Section 1.1(b)(1) shall be increased by an amount equal
to the product of (A) US $110,000,000 multiplied by (B)
a fraction, the numerator of which is the number of
calendar days from (but excluding) August 31, 1993 to
(and including) the Closing Date and the denominator
of which is 365, multiplied by (C) 6.75%; and
(3) if the Closing occurs on August 31,
1993, then the Purchase Price shall not be adjusted.
(d) In addition to the Purchase Price,
following the Closing, Parent shall pay to Seller the
payment(s) (if any) to the extent required by, and on the
terms and subject to the conditions set forth in, the
Contingent Payment Agreement between Parent and Seller,
substantially in the form of Exhibit A (the "Contingent
Payment Agreement").
SECTION 1.2. Exchange of Buyer Shares for A
Senior Preference Shares. On the terms and subject to the
conditions contained herein, at the Closing, Parent agrees to
allot and issue to Seller (or its nominee) 15,000,000 A Senior
Preference Shares of US $1 each of Parent, having the terms
set forth in Exhibit B (the "A Senior Preference Shares") (and
deliver to Seller (or its nominee) the relative share
certificate(s) in the name of Seller (or its nominee)), free
from all Liens, together with all rights which now are, or at
any time hereafter may become, attached to such A Senior
Preference Shares (including the right to receive all dividends
and other distributions declared, made or paid after the
Closing Date), in exchange for all of the Buyer Shares allotted
and issued to Seller (as represented by share warrants to
bearer) pursuant to Section 1.1(b)(2); and Seller agrees to
exchange immediately the Buyer Shares (as represented by
share warrants to bearer), free from all Liens (except as
provided in Section 1.1(b)) and together with all rights which
now are, or at any time hereafter may become, attached to the
Buyer Shares (including the right to receive all dividends and
other distributions declared, made or paid after the date
hereof) for the A Senior Preference Shares.
ARTICLE II
CLOSING
SECTION 2.1. Closing. The Closing of the
transactions contemplated herein shall take place at 10:00
a.m., local time, on the date that is five (5) Business Days
after the satisfaction of the conditions set forth in Article VI
(or waiver thereof, to the extent permitted by the terms of this
Agreement), at the offices of Freshfields, 65 Fleet Street,
London EC4Y 1HS, England, or at such other time and place
as the parties may mutually determine in writing (the
"Closing"). The actual date on which the Closing shall occur
is referred to herein as the "Closing Date".
SECTION 2.2. Documents to be Delivered. To
effect the transactions referred to in Article I, Buyer, Parent
and Seller shall, at the Closing, deliver the following:
(a) The Shares. Seller shall deliver to Buyer
the share warrants to bearer in respect of all the Shares.
(b) The Cash Consideration. Buyer shall
deliver to Seller the Cash Consideration pursuant to Section
1.1.
(c) The Buyer Shares. Buyer shall allot and
issue to Seller the Buyer Shares (and deliver to Seller the
share warrants to bearer in respect thereof), for immediate
exchange pursuant to Section 1.2.
(d) The A Senior Preference Shares. In
exchange for the sale and transfer to it by Seller of all of the
Buyer Shares, Parent shall allot and issue to Seller (or its
nominee) the A Senior Preference Shares (and deliver to
Seller (or its nominee) the relative share certificate(s) in the
name of Seller (or its nominee)) pursuant to Section 1.2.
(e) Seller's Documents. Seller shall deliver or
cause to be delivered to Buyer (or to any Person (as defined
in Section 3.5) whom Buyer may designate):
(1) confirmation and/or evidence, in a
form reasonably satisfactory to Buyer, of the fulfillment
of the conditions specified in Section 6.1;
(2) a counterpart original of the
Contingent Payment Agreement, duly executed by
Seller;
(3) a counterpart original of the Tax
Indemnification Agreement, substantially in the form of
Exhibit C (the "Tax Indemnification Agreement"), duly
executed by Seller;
(4) a counterpart original of the Senior
Preference Share Support Agreement, substantially in
the form of Exhibit D (the "Support Agreement"), duly
executed by Seller;
(5) a counterpart original of the Run-Off
and Accounting Services Agreement, substantially in
the form of Exhibit E (the "Run-Off Agreement"), duly
executed by Continental Reinsurance Corporation
(UK) Limited ("CRC(UK)") and the Company;
(6) a counterpart original of the
Assignment of Trademarks, substantially in the form of
Exhibit F (the "Assignment of Trademarks"), duly
executed by Seller and the Company;
(7) a counterpart original of (i) the
transfer, (ii) the assignment of certain contractual rights
and (iii) the covenant by Lombard Continental
Insurance plc ("Lombard") with the property's
management company, in each case relating to the
transfer to Lombard (or its designee) of the Greenwich
View Place property, substantially in the form of
Exhibit G (the "Greenwich View Transfer Documents"),
duly executed by Lombard and the Company;
(8) a counterpart original of the
agreement for lease relating to the office space
currently occupied by the Company located at 77
Gracechurch Street, London, England, substantially in
the form of Exhibit H (the "77 Gracechurch Street
Agreement"), duly executed by The Continental
Insurance Holdings (Europe) Limited ("CIH (Europe)")
as lessor, and the Company, as lessee;
(9) a counterpart original of the license
relating to the office space currently occupied by the
Company located at 85 Gracechurch Street, London,
England, substantially in the form of Exhibit I (the "85
Gracechurch Street License"), duly executed by
Unionamerica Management Company Limited ("UA
Management"), as licensor, and the Company, as
licensee;
(10) a counterpart original of the
agreement for the sale and purchase of the basement
premises of 85 Gracechurch, London, England,
substantially in the form of Exhibit J (the "85
Gracechurch Street Agreement"), duly executed by UA
Management and the Company;
(11) a counterpart original of the
Information Technology Services Agreement,
substantially in the form of Exhibit K (the "IT Services
Agreement"), duly executed by UA Management and
the Company;
(12) the Certificate of Incorporation, a
true, complete and correct copy of the Memorandum
and Articles of Association, the Common Seal, all
minute books, Share Registers and Share Certificate
Books (with any unissued share certificates) and other
statutory books (which shall be written-up to (but not
including) the Closing Date) of the Company;
(13) all such documents (including any
powers of attorney under which any document required
to be delivered under this Section 2.2 has been
executed and any necessary waivers or consents of
Seller and/or any of its Affiliates (as defined below))
as may be reasonably required (if any) to enable Buyer
and/or its nominee to be the holder(s) of the Shares
(as represented by the share warrants to bearer) and to
permit each of Seller and/or such Affiliates to
consummate the transactions contemplated by this
Agreement;
(14) a letter of resignation in the form of
the agreed draft, duly executed as a Deed, by each of
the directors and officers of the Company listed on
Schedule 2.2;
(15) copies of the minutes (certified by a
duly appointed officer to be true, complete and correct)
of meetings of the Boards of Directors of:
(A) the Company, authorizing
the execution and delivery of, and the
performance by the Company of its obligations
under, the Run-Off Agreement, the Assignment
of Trademarks, the Greenwich View Transfer
Documents, the 77 Gracechurch Street
Agreement, the 85 Gracechurch Street License,
the 85 Gracechurch Street Agreement, and the
IT Services Agreement;
(B) Seller, authorizing the
execution and delivery of, and the performance
by Seller of its obligations under, this
Agreement, the Contingent Payment Agreement,
the Tax Indemnification Agreement, the Support
Agreement, the Assignment of Trademarks and
the Greenwich View Transfer Documents;
(C) CRC(UK), authorizing the
execution and delivery of, and the performance
by CRC(UK) of its obligations under, the Run-
Off Agreement;
(D) Lombard, authorizing the
execution and delivery of, and the performance
by Lombard of its obligations under, the
Greenwich View Transfer Documents;
(E) CIH (Europe), authorizing
the execution and delivery of, and the
performance by CIH (Europe) of its obligations
under, the 77 Gracechurch Street Agreement;
and
(F) UA Management, authorizing the execution
and delivery of, and the performance by UA Management
of its obligations under, the 85 Gracechurch Street
License, the 85 Gracechurch Street Agreement,
and the IT Services Agreement; and
(16) all documentation, duly executed by
Seller and/or its applicable Affiliates and in form and
substance reasonably satisfactory to Buyer, evidencing
the termination of the Contracts (as defined in Section
3.11(a)) listed on Schedule 5.5. As used in this
Agreement, "Affiliate" has the meaning ascribed to such
term in Rule 12b-2 under the United States Securities
Exchange Act of 1934, as amended (the "Exchange
Act").
(f) Buyer's Documents. Buyer shall deliver or
cause to be delivered to Seller (or to any Person whom Seller
may designate):
(1) confirmation and/or evidence, in a
form reasonably satisfactory to Seller, of the fulfillment
of the conditions specified in Section 6.2;
(2) a counterpart original of the
Contingent Payment Agreement, duly executed by Parent;
(3) a counterpart original of the Tax
Indemnification Agreement, duly executed by Buyer;
(4) a counterpart original of the Support
Agreement, duly executed by Parent;
(5) copies of the minutes (certified by a
duly appointed officer to be true, complete and correct)
of meetings of the Boards of Directors of:
(A) Buyer, authorizing (i) the
execution and delivery of, and the performance
by Buyer of its obligations under, this
Agreement and the Tax Indemnification
Agreement and (ii) the issuance of the Buyer
Shares; and
(B) Parent, authorizing (i) the
execution and delivery of, and the performance
by Parent of its obligations under, this
Agreement, the Contingent Payment Agreement
and the Support Agreement and (ii) the issuance
of the Senior Preference Shares (as defined in
Section 4.5);
(6) a certificate, dated the Closing
Date, of the Secretary of Buyer attaching a true,
complete and correct copy of the Memorandum and
Articles of Association of Buyer;
(7) a certificate, dated the Closing Date,
of the Secretary of Parent attaching a true, complete
and correct copy of the Memorandum and Articles of
Association of Parent (containing the terms of the A
Senior Preference Shares and the B Senior Preference
Shares (as defined in Section 4.5) set forth in Exhibit
B); and
(8) all such documents (including any
powers of attorney under which any document required
to be delivered under this Section 2.2 has been
executed and any necessary waivers or consents of
Buyer and/or Parent) as may be reasonably required (if
any) to enable Seller (or its nominee) to be the holder
of the Buyer Shares and the A Senior Preference
Shares and to permit each of Buyer and Parent to
consummate the transactions contemplated by this
Agreement.
(g) Closing Documents. Seller, Buyer and Parent shall
each deliver all documents required to be delivered pursuant to
Sections 6.1 and 6.2.
(h) Satisfaction with Documents. All
Transaction Documents executed and delivered by Buyer
and/or Parent shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to Seller. All
Transaction Documents executed and delivered by Seller
and/or its Affiliates, shall be in form and substance, and shall
be executed in a manner, reasonably satisfactory to Buyer and
Parent. As used in this Agreement, "Transaction Documents"
means this Agreement, the Contingent Payment Agreement,
the Tax Indemnification Agreement, the Support Agreement,
the Run-Off Agreement, the Assignment of Trademarks, the
Greenwich View Transfer Documents, the 77 Gracechurch
Street Agreement, the 85 Gracechurch Street License, the 85
Gracechurch Street Agreement, and the IT Services
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer and
Parent as follows:
SECTION 3.1. Corporate Existence.
(a) Seller's Existence. Seller is a corporation
duly incorporated, validly existing and in good standing under
the laws of the State of New York and has full power and
authority and possesses all rights, licenses, authorizations and
approvals, governmental or otherwise, necessary to entitle it to
own the Shares and to perform its obligations under the
Transaction Documents to which it is a party.
(b) Company's Existence. The Company is a
private company limited by shares, incorporated in England
and registered in England with registered no. 1022903. No
order has been made or resolution passed for the winding up
of the Company, nor has any liquidator, receiver,
administrative receiver or administrator been appointed in
respect of the Company or any of its assets or business. The
Company has full power and authority and possesses all rights,
licenses, authorizations and approvals, governmental or
otherwise, necessary to entitle it: (1) to enter into and
perform its obligations under the Transaction Documents to
which it is a party; (2) to own, lease or otherwise hold its
properties and assets and to carry on its business as currently
conducted; and (3) subject to Section 3.20, to use the
"Unionamerica" name.
SECTION 3.2. Authorization; Enforcement.
Each of Seller and its Affiliates has all necessary corporate
power and authority to execute and deliver the Transaction
Documents to which it is a party, and to perform its
obligations under such Transaction Documents in accordance
with the terms of such Transaction Documents. Each of
Seller and its Affiliates has taken all necessary corporate
action to duly and validly authorize the execution and delivery
of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated by such
Transaction Documents including, in the case of Seller, all
corporate action necessary to conclusively and irrevocably
effect the contribution in the amount of US $44,928,493 made
on June 17, 1993 from Seller to the Company. This
Agreement has been duly executed and delivered by Seller
and constitutes a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms. On or
before the Closing Date, each of the other Transaction
Documents to which Seller or any of its Affiliates is a party
will be duly executed and delivered by Seller or such Affiliate,
as the case may be, and when executed and delivered by
Seller or such Affiliate, as the case may be, will constitute a
valid and legally binding obligation of Seller or such Affiliate,
as the case may be, enforceable against Seller or such
Affiliate, as the case may be, in accordance with its terms.
SECTION 3.3. Consents and Approvals. No
consent, approval, authorization, license or order of, or
registration or filing with, or notice to, any United Kingdom,
United States Federal, "State" (which for purposes of this
Agreement shall mean any state of the United States, the
District of Columbia, the Commonwealth of Puerto Rico or
any possession or territory of the United States), local, foreign
or other court, administrative agency or commission, insurance
or securities regulatory authority or other governmental
authority or instrumentality or regulatory or self-regulatory
body or securities or commodities exchange (each, a
"Governmental Authority") (such consents, approvals,
authorizations, licenses, orders, registrations, filings and
notices being herein called, collectively, "Consents") is
required to be obtained, made or given by or with respect to
Seller or any of its Affiliates in connection with the execution
and delivery by Seller or any of its Affiliates of any of the
Transaction Documents to which Seller or such Affiliate is a
party, the performance by Seller or such Affiliate of its
obligations under any of such Transaction Documents or the
consummation of the transactions contemplated by such
Transaction Documents, other than as described in
Sections 6.1(e) and 6.1(f).
SECTION 3.4. No Conflicts. Neither the
execution or the delivery by Seller or any of its Affiliates of
the Transaction Documents to which Seller or such Affiliate is
a party, nor the performance by Seller or any such Affiliate of
such Transaction Documents, or the consummation of the
transactions contemplated by such Transaction Documents,
will:
(a) conflict with or result in a breach of any
provision of the Certificate of Incorporation, By-Laws,
Memorandum and Articles of Association or other charter or
organizational documents of Seller or such Affiliate; or
(b) result in any conflict with, breach or
violation of, or default (or event which, with notice or lapse of
time or both, would constitute a default) under, require any
consent or approval which has not been obtained with respect
to, give rise to any right of termination, cancellation or
acceleration of any obligations or loss of any benefit under, or
result in the imposition of any Liens on any of the properties
or assets of Seller or such Affiliate under: (1) any Contract
(as defined in Section 3.11(a)) (other than insurance or
reinsurance Contracts and related letters of credit, trust
arrangements, custodial arrangements and structured
settlements entered into by the Company in the ordinary
course of business consistent with past practice (collectively,
the "Insurance Arrangements") and other than as provided in
Section 8.4(e) hereof) or permit, concession, franchise or
license to which Seller or such Affiliate is a party or by which
it or any of its properties or assets is bound or (2) any order,
decree, injunction, law, rule or regulation applicable to Seller
or such Affiliate or any of its properties or assets, which
conflict, breach, violation or default, or failure to obtain
consent or approval, or right of termination, cancellation or
acceleration or loss of benefit or imposition of any Lien would
have, in any case or in the aggregate, a material adverse effect
on the Company's business, operations, assets, liabilities or
financial condition (a "Material Adverse Effect") or which
would interfere in any material way with the ability of Seller
or such Affiliate to consummate the transactions contemplated
by such Transaction Documents.
SECTION 3.5. Capital Structure. The
authorized share capital of the Company consists of 45,000,000
ordinary shares of US $1 each, of which 40,700,000 shares are
issued and constitute the Shares. No other shares of any class
in the capital of the Company are authorized, allotted or
issued. All of the Shares have been duly authorized and
validly issued, are fully paid and are represented by share
warrants to bearer. Seller owns beneficially all of the Shares,
free and clear of all Liens. There are no warrants, options,
Contracts, convertible or exchangeable securities or other
preferential rights, arrangements or commitments pursuant to
which the Company is or may become obligated to allot, issue,
sell, purchase or redeem any shares in its capital or other
equity ownership interests or securities, other than as
contemplated by this Agreement. There are no standstill,
voting or similar agreements or Contracts nor any rights of
first offer or first refusal to which Seller or any of its Affiliates
is a party that currently or in the future will limit the ability of
any individual, corporation, partnership, firm, joint venture,
unincorporated organization, governmental or regulatory
authority or other entity (each, a "Person") to acquire, vote,
sell, hold or otherwise deal with the Shares or any interest
therein or right in respect thereof. Upon consummation of
the transactions contemplated by this Agreement, Buyer will
acquire from Seller beneficial ownership of the Shares, free
and clear of all Liens, together with all rights which now are,
or at any time hereafter may become, attached to them,
including the right to receive all dividends and other
distributions declared, made or paid after the date hereof.
SECTION 3.6. Subsidiaries. Except as set forth
on Schedule 3.6, the Company does not own, or have any
interest of any nature whatsoever in, directly or indirectly,
more than five percent (5%) of the outstanding equity
securities of, or otherwise possess, directly or indirectly, the
power to direct or cause the direction of the management and
policies of any Person nor is the Company a party to any joint
venture, consortium, partnership or other profit (or loss)
sharing agreement or Contract, other than Insurance
Arrangements.
SECTION 3.7. Company Documents. (a) Seller has delivered
to Buyer and/or Parent prior to the date of this Agreement:
(1) true, complete and correct copies of
the Memorandum and Articles of Association of the
Company, with all amendments thereof, having
attached thereto all of the resolutions required by the
Companies Act 1985, as amended by the Companies
Act 1989 (as so amended, the "Companies Act"), to be
so attached; and
(2) all of the forms, filings and
information supplied to the Registrar of Companies
under the Companies Act since May 1, 1987, which are
all of the forms, filings and information required by the
Companies Act to be so supplied since such date.
(b) Seller has made available for inspection by
Buyer and Parent copies of the minutes of all meetings and
written resolutions in lieu of meetings of the Board of
Directors of the Company and of its shareholders since May 1,
1987. The books of account of the Company have been
properly completed in all material respects and the statutory
books and other records of the Company (other than the
books of account) have been properly and accurately
completed in all material respects. The books of account,
statutory books and other records of the Company contain all
material information required to be recorded in them, have
been maintained in all material respects in accordance with all
applicable laws and generally accepted accounting practices on
a proper and consistent basis, and are in its possession or
under its control.
SECTION 3.8. Financial Statements.
(a) Seller has delivered to Buyer and Parent the
following financial statements (which term, as used in this
Agreement, includes all footnotes and schedules, if any,
thereto): (1) the audited balance sheet of the Company (the
"Company Balance Sheet") as at December 31, 1992 (the
"Balance Sheet Date"), December 31, 1991 and December 31,
1990, and the related underwriting revenue accounts and
profit and loss accounts for each of the three fiscal years
ended December 31, 1992, December 31, 1991 and
December 31, 1990, including the reports of KPMG Peat
Marwick thereon (collectively, the "Company Financials"); and
(2) the unaudited balance sheet of the Company as at March
31, 1993 and the related underwriting revenue accounts and
profit and loss accounts (collectively, the "Unaudited
Financials").
(b) Except as set forth on Schedule 3.8(b), the
Company Financials are based on the books and records of
the Company, fairly present the financial position and results
of operations of the Company, as at the dates and for the
periods indicated therein, and have been prepared (except as
otherwise noted therein) on a consistent basis and in all
material respects in accordance with the provisions of the
Companies Act applicable to insurance companies and the
Statement of Recommended Practice on Accounting for
Insurance Business issued by the Association of the British
Insurers in May 1990. The Company Financials have been
audited by KPMG Peat Marwick, whose audit opinion states
that the Company Financials have been properly prepared and
comply with the requirements of the Companies Act
applicable to insurance companies. The Unaudited Financials
are derived from the books and records of the Company, fairly
present the financial position and results of operations of the
Company as at the date thereof and for the period indicated
therein, and have been prepared in order to accommodate the
consolidated financial reporting requirements of Seller and its
subsidiaries under United States generally accepted accounting
principles. While certain classification differences exist
between the Unaudited Financials and the Company
Financials, reserving practices (as indicated by unearned
premiums (net of deferred acquisition costs)) and outstanding
claims (including claims incurred but not reported) in the
Unaudited Financials and the Company Financials are
consistent in all material respects, and shareholders' funds in
the Unaudited Financials and the Company Financials are
computed on a consistent basis in all material respects, except
for unrealized appreciation of investments, which are reported
at amortized cost in the Unaudited Financials and at market
value in the Company Financials.
(c) Except as set forth on Schedule 3.8(c) or
otherwise indicated in the Company Financials, since the
Balance Sheet Date, there has not been any material change
by the Company in its Investment Policies (as defined below)
or financial, tax or accounting methods, principles or practices
(including any material change with respect to the
establishment of reserves for unearned premiums, reserves for
losses (including incurred but not reported losses) and loss
adjustment expenses, or any material change in depreciation
or amortization policies or rates). As used in this Agreement,
"Investment Policies" means the overall investment
policies used in the management of the Company's investment
portfolio, including the Company's policies with respect to
duration, liquidity, currency, asset allocation and asset quality.
SECTION 3.9. Annual Statements.
(a) Seller has delivered to Buyer and Parent
true, complete and correct copies of the returns of the
Company for the years ended December 31, 1992,
December 31, 1991 and December 31, 1990, together with all
exhibits and schedules thereto (the "Annual Statements"), as
furnished to the Department of Trade and Industry pursuant
to the Insurance Companies Act 1982 (the "Insurance
Companies Act"). Except as set forth on Schedule 3.9, the
information concerning the Company contained in the Annual
Statements was, at the time each such Annual Statement was
filed, true, complete and correct in all material respects.
(b) The Annual Statements (and all exhibits
and schedules thereto) have been audited and prepared and
reported upon in all material respects in accordance with
accounting practices prescribed or permitted for general
insurance companies in the United Kingdom, and such
accounting practices have been applied on a consistent basis
throughout the periods involved, except as expressly set forth
or disclosed in the notes, exhibits or schedules thereto or in
the Company Financials.
(c) All information in the Annual Statements
was prepared in compliance in all material respects with all
requirements of the Insurance Companies Act and the
regulations having effect for purposes of that Act. Except as
set forth on Schedule 3.9, all of the assets and liabilities of the
Company were reflected in the Annual Statements to the
extent permitted by, and were valued in accordance with,
Parts V and VI of the Insurance Companies Regulations 1981.
Since the Balance Sheet Date, no event has occurred or
circumstance has arisen such that the method or basis of
valuation of any of the Company's assets shown on the Annual
Statement for the year ended December 31, 1992 would be
required to be materially changed from the method or basis
adopted for the purposes of such Annual Statement.
SECTION 3.10. Absence of Certain Changes or
Events. Except as set forth on Schedules 3.10 or 3.14 or as
otherwise specifically contemplated by Sections 3.26 and 5.5,
since the Balance Sheet Date, the Company has conducted its
business only in the ordinary course consistent with past
practices, and there has not been:
(a) any damage, destruction or loss to any of
the properties of the Company, whether covered by insurance
or reinsurance or not, that has had a Material Adverse Effect;
(b) any declaration or payment or making of
any dividend or other distribution (whether in cash, securities
or other property or any combination thereof) in respect of
the capital of the Company, or any repurchase, redemption or
other acquisition by the Company of any of its capital, or any
proposal by the Company to effect any of the foregoing;
(c) any entry into any Contract with, or the
making of any assurance or undertaking to, any past or
present director, officer or employee of the Company or any
other Key Employee (as defined in Section 3.22) (each, an
"Employee") providing for his/her employment, any material
increase in salary or other regularly paid remuneration or any
increase in severance or termination benefits payable or to
become payable by the Company to any Employee, any
general increase in salaries of all or a substantial portion of
the Employees, or the exercise of any power or discretion to
materially augment or introduce benefits under any pension
scheme in respect of any present Employee (and any past
Employee, if the Company has any remaining obligations
thereunder) or the introduction of, or any material increase in
benefits under, any collective bargaining agreement or similar
Contract or in benefits under any bonus, pension, profit
sharing, deferred compensation, incentive compensation, share
ownership, share purchase, share option, profit sharing,
phantom stock, retirement, vacation, severance, disability,
death benefit, medical/health, insurance or other plan or
arrangement or understanding providing benefits to any
present Employee (and any past Employee, if the Company
has any remaining obligations thereunder) (collectively,
"Employee Benefit Plans");
(d) any loan or advance to any Employee, or
any Contract therefor, other than advances for travel and
other expenses in the ordinary course of business consistent
with past practice;
(e) any entry into any Contract or transaction
(including any borrowing, capital expenditure or capital
financing) by the Company material to the business,
operations, assets, liabilities or financial condition of the
Company, except Contracts or transactions in the ordinary
course of business consistent with past practice;
(f) any payments, distributions, management
fees or other compensation made to any Person (including
Seller and its Affiliates) under or in connection with any
Contracts (other than employment Contracts) relating to the
management or operation of the insurance and reinsurance
business of the Company (including the Underwriting
Management Agreement between the Company and UA
Management dated 6 February 1987); or
(g) any change in the business, operations,
assets, liabilities or financial condition of the Company, other
than seasonal changes in the business of the Company and
matters of a general economic nature that, in any case or in
the aggregate, would have a Material Adverse Effect.
SECTION 3.11. Contracts.
(a) As used in this Agreement, "Contract"
means any in-force contract, agreement, instrument,
commitment or other arrangement, written or unwritten,
including any deed, loan or credit agreement, note, bond,
mortgage, indenture or lease to which the Company is a party
or by which any of its material assets or properties is bound.
Schedule 3.11 contains a true, complete and correct list of the
following Contracts (each, a "Scheduled Contract") (true,
complete and correct copies (or, if none exist, written
descriptions) of which have been made available to Buyer
and/or Parent prior to the date of this Agreement):
(1) Contracts relating to the borrowing
of money, guarantees, security agreements, factoring
agreements and deferred purchase or hire purchase
Contracts, including obligations for reimbursement
under letters of credit or reimbursement agreements
therefor (other than letters of credit or reimbursement
agreements therefor that are (A) fully secured or
collateralized and (B) related to reinsurance Contracts
entered into by the Company in the ordinary course of
business consistent with past practice) in any case
representing future liabilities in excess of US $100,000;
(2) Contracts (other than Insurance
Arrangements) which permit a financial institution or
other Person to block or otherwise restrict the
Company's immediate access to deposits or other
monies held thereby, in any case involving amounts in
excess of US $100,000;
(3) Contracts with any Employee
pursuant to which the Company owes any monetary
obligation (other than those Contracts involving annual
payments in any case of less than US $50,000 or which
are cancelable by the Company on not more than
ninety (90) days' notice without cause or penalty);
(4) Contracts with insurance agents and
agencies, managing general agents with binding
authority, brokers, third party administrators and
consultants (other than those Contracts which are
cancelable by the Company on not more than
thirty (30) days' notice without cause or penalty),
provided that with respect to such Contracts with
managing general agents, Schedule 3.11 shall also set
forth (A) a brief description of each managing general
agent, including its jurisdiction of domicile, its address
of record and (where reasonably available) information
regarding the ultimate beneficial ownership thereof,
and (B) the aggregate amount of insurance which such
managing general agent has written and is authorized
to write on behalf of the Company;
(5) Contracts containing any provision or
covenant limiting the ability of the Company to engage
in any line of business or compete with any Person
(other than Contracts with insurance agents and
agencies or managing general agents with binding
authority entered into by the Company in the ordinary
course of business consistent with past practice);
(6) leases, subleases, rental or use
Contracts to which the Company is a party involving a
single annual payment in any case in excess of
US $50,000 or aggregate annual payments in excess of
US $250,000;
(7) Contracts with any trade union or
staff association or other body representing (or, to the
knowledge of Seller, purporting to represent) any
present Employee;
(8) Contracts between the Company and
its Affiliates (including in any event any reinsurance
Contracts with Accord Re Limited ("Accord") and the
50% quota share reinsurance Contract relating to the
so-called LMX business, but excluding other Insurance
Arrangements entered into by the Company with any of
its Affiliates);
(9) Contracts in which any Employee has
any monetary or other interest in any case in excess of
US $50,000;
(10) Contracts (other than Insurance
Arrangements) involving the sale, transfer, assignment
or other disposition of the Company's assets or
liabilities having a value in any case in excess of
US $100,000 pursuant to which the Company has given
representations and/or indemnities which continue to
be in effect or pursuant to which liability could
reasonably be expected to arise;
(11) investment management agreements, investment
custody agreements and similar Contracts (other than
Insurance Arrangements pursuant to which the Company has
(A) deposited funds with Governmental Authorities in order
to qualify as an approved or eligible excess and surplus
lines insurer or (B) pledged funds to secure obligations
under reinsurance Contracts);
(12) Contracts (other than Insurance
Arrangements) with each insurance agent (including
each managing general agent) or agency (the "Agency
Contracts") that individually produced US $250,000 or
more of gross written premiums for the Company
during the year ended December 31, 1992 or is
reasonably expected by the Company individually to
produce US $250,000 or more of gross written
premiums for the Company during the year ended
December 31, 1993 which are subject to termination
upon the occurrence of a change of ownership or
control of the Company;
(13) Contracts (other than the Scheduled
Contracts referred to in Section 3.11(a)(4), Agency
Contracts and Insurance Arrangements) representing
future liabilities in any case in excess of US $250,000
individually that are subject to termination upon the
occurrence of a change of ownership or control of the
Company, provided, that the aggregate future liabilities
for all Contracts (other than the Scheduled Contracts
referred to in Section 3.11(a)(4), Agency Contracts and
Insurance Arrangements) representing future liabilities
in any case of less than US $250,000 that are subject to
termination upon the occurrence of a change of
ownership or control of the Company and not listed on
Schedule 3.11 does not exceed US $1,000,000;
(14) Contracts pursuant to which the
Company has agreed to grant or has granted an option
or similar right to another Person affecting any asset of
the Company (other than assets held by the Company
in its investment portfolio); and
(15) all other Contracts (other than
Insurance Arrangements) material to the business,
operations, assets, liabilities or financial condition of
the Company in any case representing future liabilities
(to the extent reasonably ascertainable) in excess of
US $50,000 individually (other than those Contracts
which are cancelable by the Company on not more
than ninety (90) days' notice without cause or penalty)
and which are not listed on any other Schedule hereto.
(b) Except as set forth on Schedule 3.11, each
of the Scheduled Contracts is in full force and effect and is
binding upon and enforceable against the parties thereto in
accordance with their respective terms. The Company is not
in, or, to the knowledge of Seller, claimed to be in, breach or
default in any respect under any of the Scheduled Contracts
and there does not exist under any of the Scheduled Contracts
any event which, with the giving of notice or lapse of time,
would constitute a material breach or default by the Company.
To the knowledge of Seller, no other party to any of the
Scheduled Contracts is in or has claimed to be in breach or
default in any material respect thereunder.
SECTION 3.12. Litigation.
(a) Except as set forth on Schedule 3.12, there
is no claim, action, proceeding, arbitration, investigation,
inquiry, charge or complaint (excluding claims, actions,
proceedings, arbitrations, investigations, inquiries, charges and
complaints in the ordinary course of business under insurance
or reinsurance Contracts where the damage alleged or remedy
requested in any case is less than US $50,000) before or by
any Governmental Authority or any private arbitration
tribunal (collectively, "Litigation") now pending, or to the
knowledge of Seller threatened, against or relating to the
Company or any director or officer of the Company (in
his/her capacity as such) or the assets, properties or business
of the Company, or the transactions contemplated by the
Transaction Documents or which questions the validity or
enforceability of any of the Transaction Documents or any
action taken or to be taken by Seller or any of its Affiliates in
connection with the Transaction Documents. To the
knowledge of Seller, there is no fact or circumstance
(including any act or omission) which is reasonably likely to
give rise to such a claim.
(b) Except as set forth on Schedule 3.12,
neither the Company nor any of its directors or officers (in
his/her capacity as such) is subject to any permanent,
preliminary or temporary injunction or prohibitive order,
judgment or decree of any Governmental Authority (including
any action taken by the Secretary of State for Trade and
Industry under sections 38 to 45 of the Insurance Companies
Act).
SECTION 3.13. Liabilities and Reserves.
(a) Except as set forth on Schedule 3.13(a), the
balance sheet included in the Unaudited Financials reflects
full provision (on an undiscounted basis) for all obligations
and liabilities of the Company at March 31, 1993 on a basis
consistent with the Company Financials and in accordance
with the requirements of all relevant statements of standard
accounting practice and/or financial reporting standards issued
or adopted by the Accounting Standards Board
("UK Accounting Standards"). Except to the extent
specifically disclosed, reflected or reserved against in such
balance sheet and the notes thereto, the Company does not
have any material obligations or liabilities of any nature
(whether accrued, absolute, contingent or otherwise, and
whether or not due, or arising out of transactions entered into,
or any state of facts existing, prior to such date), other than
liabilities incurred since March 31, 1993 in the ordinary course
of business consistent with past practice.
(b) By reference to the facts now existing, the
directors of the Company could now properly give a certificate
in the form prescribed by Schedule 6, Part I of the Insurance
Companies (Accounts and Statements) Regulations 1983
without qualification, amplification or explanation, and
without the exclusions provided for in paragraph 8 of Part I of
such regulations.
(c) The reserving and valuation bases adopted
by the Company in preparing the Company Financials, the
Unaudited Financials and the Annual Statements apply levels
of prudence which are not less than those generally accepted
for similar companies carrying on insurance business in the
United Kingdom.
(d) Prior to the date of this Agreement, Seller
has furnished Buyer and Parent true, complete and authentic
copies of (1) the "Report by KPMG Actuarial Service dated
(30 September 1992) in respect of Company's Loss Reserves
at 30 June 1992" (the "KPMG Report") and (2) the
information described on Schedule 3.13(d), which information
constitutes all of the information provided to KPMG Actuarial
Service by Seller and/or its Affiliates in connection with the
preparation of the KPMG Report. No other external study of
the Company's loss reserves or loss adjustment expense
reserves has been prepared during the five (5) year period
immediately preceding the date of this Agreement other than
in connection with the preparation of the audited financial
statements of the Company. Buyer and Parent acknowledge
that the Seller is making no representation or warranty with
respect to the contents of the KPMG Report and Seller
expressly disclaims the contents of such report. Buyer and
Parent represent and warrant that they are not relying on the
KPMG Report in any respect.
SECTION 3.14. Taxation. The representations
and warranties contained in this Section 3.14 are given subject
to the matters disclosed in Schedule 3.14 and to any relevant
provisions of the Tax Indemnification Agreement.
(a) Definitions. The following terms shall have
the following meanings for purposes of this Agreement and
Schedule 3.14:
(1) "Event" means the winding up or
dissolution of any Person, and any act, transaction or
omission whatsoever, and any reference to an event
occurring on or before a particular date shall include
events which for Tax purposes are deemed to have, or
are treated or regarded as having, occurred on or
before that date.
(2) "Group Relief" means: (A) Relief
surrendered or claimed pursuant to Chapter IV of
Part X of the Taxes Act; (B) advance corporation tax
surrendered or claimed pursuant to section 240 of the
Taxes Act; and (C) any Tax refund surrendered or
claimed pursuant to section 102 of the Finance Act of
1989 of the United Kingdom.
(3) "Relief" means, unless the context
otherwise requires, any allowance, credit, deduction,
exemption or set-off in respect of any Tax or relevant
to the computation of any income, profits or gains for
the purposes of any Tax; and (A) any reference to the
"use" or "set off" of Relief shall be construed
accordingly and shall include use or set off in part; and
(B) any reference to the "loss" of a Relief shall include
the absence or non-existence of any such Relief, or to
such Relief being available only in a reduced amount.
(4) "Tax" means corporation tax, advance
corporation tax, income tax (including income tax or
amounts on account of income tax required to be
deducted or withheld from or accounted for in respect
of any payment), capital gains tax, development land
tax, inheritance tax, VAT, national insurance
contributions, capital duty, stamp duty, stamp duty
reserve tax, duties of customs and excise, petroleum
revenue tax, local authority rates and charges, all taxes,
duties or charges replaced by or replacing any of them,
and all other taxes or similar impost on gross or net
income, profits or gains, distributions, receipts, sales,
use, occupation, franchise, value added and personal
property, taxes on premiums (whether calculated on the
gross or net amount thereof), and all levies, imposts,
duties, charges or withholdings of any nature
whatsoever chargeable by any Tax Authority, and any
payment whatsoever which the Company may be or
become bound to make to any Person as a result of the
discharge by that Person of any Tax which the
Company has failed to discharge, together with all
penalties, charges and interest relating to any of the
foregoing or to any late or incorrect return (or failure
to file such return or other form or statement) in
respect of any of them, and regardless of whether any
such taxes, levies, duties, imposts, charges, withholdings,
penalties and interest are chargeable directly or
primarily against or attributable directly or primarily to
the Company or any other Person and of whether any
amount in respect of any of them is recoverable from
any other Person.
(5) "Tax Authority" means any taxing or
other authority (whether within or outside the United
Kingdom, including the United States or any State)
competent to impose any Tax liability.
(6) "Taxes Act" means the Income and
Corporation Taxes Act 1988.
(7) "VAT" means value added tax, being
the Tax created and administered by and according to
the VAT Legislation.
(8) "VAT Legislation" shall include the
Value Added Tax Act 1983, the Finance Act 1985 and
all other enactments in relation to VAT and all notices,
provisions and conditions made or issued thereunder,
including the terms of any agreement reached with
HM Customs & Excise or any concession disclosed to
Buyer and Parent in writing prior to the date of this
Agreement.
(9) Any reference to income, profits or
gains "earned", "accrued" or "received" on or before a
particular date or in respect of a particular period shall
include income, profits or gains which for Tax purposes
are deemed to have been or are treated or regarded as
earned, accrued or received on or before that date or
in respect of that period.
(10) Any reference to something
occurring (including a Tax liability arising) "in the
ordinary course of business" shall, without prejudice to
the generality thereof, be deemed not to include:
(A) anything which results in the
Company receiving a valid Tax claim in respect
of any liability to Tax of, or properly attributable
to, another Person (other than the Company);
(B) anything which relates to or
involves the acquisition or disposal of an asset
or the supply of services (including the lending
of money, or the hiring or licensing of tangible
or intangible property) in a transaction which is
not entered into on arm's length terms;
(C) anything which relates to or
involves the making of a distribution for Tax
purposes, the creation, cancellation or
reorganization of share or loan capital, the
creation, cancellation or repayment of any intra-
group debt or any company becoming or ceasing
or being treated as ceasing to be a member of a
group of companies or as becoming or ceasing
to be associated or connected with any other
company for any Tax purposes; or
(D) anything which relates to a
transaction or arrangement which includes, or a
series of transactions or arrangements which
includes, any step or steps having no commercial
or business purpose apart from the reduction,
avoidance or deferral of a Tax liability.
(11) Persons shall be treated as
"connected" for the purposes of this Section 3.14 if they
are connected within the meaning of section 839 of the
Taxes Act.
(12) References to any provision of an
enactment include any provision re-enacted by such
provision.
(b) General/Compliance.
(1) All material liabilities, whether
actual, deferred, contingent or disputed, of the
Company for Tax measured by reference to income,
profits or gains earned, accrued or received (or
premiums earned, accrued or received) on or before
the Balance Sheet Date, or arising in respect of an
Event occurring or deemed to occur on or before the
Balance Sheet Date, are provided for or (as
appropriate) disclosed in the Company Financials for
the year ended December 31, 1992 (the "1992 Company
Financials") in accordance with UK Accounting
Standards and the accounting policies set out in the
1992 Company Financials. All other warranties relating
to specific Tax matters set out in this Section 3.14 are
made without prejudice to the generality of the
foregoing.
(2) Since the Balance Sheet Date:
(A) the Company has not been
involved in any transaction which has given or
may give rise to a liability to Tax on the
Company (or would have given or might give
rise to such a liability but for the availability of
any Relief) other than Tax in respect of
transactions entered into by it in the ordinary
course of business;
(B) no accounting period (as
defined in section 12 of the Taxes Act) of the
Company has ended as referred to in
section 12(3) of the Taxes Act; and
(C) the Company has not been a
party to, nor has it or any of its assets or
properties been subject to, any tax sharing
agreement or arrangement with any Person
effective for any tax year subsequent to the
financial year ended December 31, 1992; and
since the Balance Sheet Date, the Company has
not made, nor is it liable for, any payments or
other compensation for any such tax sharing
agreement or arrangement, other than payments
to be made to Affiliates pursuant to this
Agreement or the Tax Indemnification
Agreement.
(3) The Company has duly, and within
any appropriate time limits, made all returns, given all
notices and supplied all other forms, statements and
information (each, a "Return") required to be supplied
to all relevant Tax Authorities. All such Returns were
and remain, to the knowledge of Seller, true, complete
and correct in all material respects and were made on
a proper basis and do not, and to the knowledge of
Seller are not likely to, reveal any transactions which
may be the subject of any dispute with any Tax
Authority. The Company is neither involved in any
current dispute with any Tax Authority nor is it (nor
has it in the last seven (7) years been) the subject of
any investigation, audit or non-routine visit by any Tax
Authority. The Company has not been informed of any
planned investigation, audit or non-routine visit by any
Tax Authority and, to the knowledge of Seller, there
are no facts which are likely to cause such an
investigation, audit or non-routine visit to be instituted
in respect of the Company. Within the past seven (7)
years, neither the Company nor, to the knowledge of
Seller, any director or officer of the Company (in
his/her capacity as such) has paid or become liable to
pay, and to the knowledge of Seller there are no
circumstances by reason of which it or they may
become liable to pay, to any Tax Authority, any
penalty, fine, surcharge or interest in respect of any Tax
(including in respect of any failure to make, give or
supply any Return to any relevant Tax Authority, or
any failure to pay Tax on the due date for payment).
(4) No transaction in respect of which
any ruling, consent or clearance (each, a "Tax
Clearance") was required or sought from any Tax
Authority has been entered into or carried out by the
Company without a Tax Clearance having first been
properly obtained, and all information supplied to any
Tax Authority or other appropriate authority in
connection with any such Tax Clearance fully and
accurately disclosed all facts and circumstances material
to the giving of the Tax Clearance. Any transaction for
which a Tax Clearance was obtained has been carried
out only in accordance with the terms of such Tax
Clearance and the application on which the Tax
Clearance was based and at a time when the Tax
Clearance was valid and effective. To the knowledge
of Seller, no facts or circumstances have arisen since
any such Tax Clearance was obtained which would
cause the Tax Clearance to become invalid or
ineffective.
(5) No Tax Authority has operated or
agreed to operate any special arrangement (being an
arrangement which departs from any relevant
legislation or any published practice or concession) in
relation to the Company's affairs.
(6) The Company has not made, nor is
there in effect with respect to the Company, an election
pursuant to sections 953(c)(3)(C) or 953(d) of the
United States Internal Revenue Code of 1986, as
amended (the "IRC"). The Company has not been, and
has no reason to believe that it will be, characterized as
a "passive foreign investment corporation" (as defined
in Section 1291 et seq. of the IRC).
(7) Prior to the date of this Agreement,
Seller has disclosed to Buyer and Parent full details of
the rights of the Company to make any claim for Relief
or any election for a basis or method of Tax or type of
Relief and any rights to make an appeal against an
assessment or an application for postponement of any
Tax, which have not been exercised or which have been
notified to a Tax Authority but where the Company's
claim or notification has not been finally accepted and
which (in each case) were taken into account in
preparing the provisions for Tax or deferred Tax in the
1992 Company Financials. To the knowledge of Seller,
the Company is not, nor will it become, liable to pay,
or make reimbursement or indemnity in respect of, any
Tax in consequence of the failure by any other Person
to discharge that Tax within any specified period or
otherwise, where such Tax relates to income, profits or
gains, earned, accrued or received (or premiums
earned, accrued or received), or to any Event or
circumstance occurring or arising or deemed to occur
or arise (whether wholly or partly) prior to the Closing.
No Relief has been claimed by and/or given to the
Company and/or taken into account in determining or
eliminating any provision for Tax or deferred Tax in
the 1992 Company Financials, which, to the knowledge
of Seller, is not validly available to the Company and
Seller is not aware of (or, if it is aware of, has fully
disclosed to Buyer) any challenge made by, or grounds
for a challenge available to, a Tax Authority in relation
thereto.
(8) To the knowledge of Seller, the
Company has made all deductions and retentions of or
on account of Tax as it was or is obliged or entitled to
make, and all such payments of or on account of Tax as
should have been made to any Tax Authority in respect
of such deductions or retentions.
(c) Employees/Pensions. All United Kingdom
National Insurance contributions and sums payable to the
Inland Revenue under P.A.Y.E. system and any amounts of a
corresponding nature payable to any foreign Tax Authority
due and payable by the Company up to the date hereof have
been paid, and, to the knowledge of Seller, the Company has
made all such deductions and retentions as should have been
made under section 203 of the Taxes Act and all regulations
made thereunder or under any comparable laws or regulations
of any relevant foreign jurisdiction, including United States
Federal and State wage withholding, Social Security and other
similar systems. The Company has not adopted and does not
operate, and is not part of, any scheme approved, or for which
approval has been or is to be sought, under section 202 of the
Taxes Act (charities: payroll deduction scheme) or
Chapter III of Part V of the Taxes Act (profit related pay).
Since the Balance Sheet Date, no payment has been made to
the Company to which section 601 of the Taxes Act applies
(pension scheme surpluses: payments to employers).
(d) Capital Gains and Other Realization
Proceeds. If the Company had disposed of the investments
referred to in Note (6) to the 1992 Company Financials for
their market value as taken into account for the said Note (6),
the liability to Tax which would arise thereby (leaving out of
account any Reliefs etc. available to the Company) would not
exceed the provision for deferred Tax arising on unrealized
gains on investments (US $2,294,000) contained in the 1992
Company Financials. Upon the Closing or the execution and
delivery of this Agreement or otherwise as a result of any
matter contemplated by this Agreement, the Company will not
incur any liability pursuant to section 178 or 179 of the
Taxation of Chargeable Gains Act 1992 of the United
Kingdom.
(e) Group Relief.
(1) Seller has disclosed to Buyer and
Parent in writing prior to the date of this Agreement
full, accurate and complete details of all arrangements
or agreements to which the Company is a party or
which in any way affect the Company and which relate
to Group Relief and of any such arrangements or
agreements under which any claim could be made by
any Person either for the surrender to it by or by it to
the Company of Group Relief or for the making or
repayment of any payment in relation to Group Relief.
Seller also has disclosed full details of all claims made
(whether agreed with the Inland Revenue or not) for
the surrender by or to the Company of Group Relief
and of any such claims intended to be so made or
which were taken into account or assumed in preparing
the Company Financials and of the terms of any
arrangements or agreements pursuant to which such
surrenders were or are to be or were assumed to be
made.
(2) The Company is not a dual
resident investing company within the meaning of
section 404 of the Taxes Act. The Company is not, and
at no time within the seven (7) years immediately
preceding the date of this Agreement has been, a close
company as defined in section 414 of the Taxes Act.
(f) Distributions, etc. The Company has not on
or after April 6, 1965: (1) made any distribution or deemed
distribution within the meanings of section 209, 210 or 418 of
the Taxes Act (distributions and deemed distributions) except
as provided for in its audited accounts; (2) repaid, redeemed
or purchased or agreed to repay, redeem or purchase any of
its share capital; or (3) capitalized or agreed to capitalize in
the form of shares or debentures any profits or reserves of any
class or description, or otherwise issued or agreed to issue
share capital otherwise than for new consideration (as defined
in section 254 of the Taxes Act). The Company has not been
concerned in any exempt distribution within section 213 of the
Taxes Act within the seven (7) years immediately preceding
the date of this Agreement (demergers: exempt distributions).
The Company has not issued any share capital which is of a
relevant class as defined in section 249(2) of the Taxes Act.
The Company has not issued any security (as defined in
section 254(1) of the Taxes Act) outstanding on Closing in
circumstances such that any interest or other payment payable
in respect of it may be treated as a distribution under
section 209 of the Taxes Act, and has not agreed to issue any
such security.
(g) Controlled Foreign Companies. The
Company has not received any notice of the making of a
direction under section 747 of the Taxes Act and no
circumstances exist which would entitle the Inland Revenue to
make such a direction and to apportion to the Company any
profits of a controlled foreign company pursuant to
section 752 of the Taxes Act.
(h) Company Residence, Treasury Consents and
Migration. The Company is and has at all times in the seven
(7) years immediately preceding the date of this Agreement
been accepted by the UK Inland Revenue as resident in the
United Kingdom for Tax purposes and is not and has not
been treated for the purposes of any double taxation
arrangements having effect by virtue of section 788 of the
Taxes Act or for any other Tax purpose as resident in any
other jurisdiction (including the conduct of the affairs of the
Company so as to be engaged in a United States trade or
business through a permanent establishment within the
meaning of Article 5 of the Convention Between the
Government of the United States of America and the
Government of the United Kingdom of Great Britain and
Northern Ireland for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with Respect to Taxes on
Income and Capital Gains), nor is the Company nor has it
been directly subject to Tax in any other jurisdiction, except
for United States Federal excise taxes imposed under section
4371 et seq. of the IRC in the circumstances described in
Schedule 3.14. The Company has not carried out or caused or
permitted to be carried out any of the transactions specified at
the relevant time in section 765(1) of the Taxes Act otherwise
than with the prior consent of HM Treasury (and, in the case
of a special consent, full particulars of which have been
disclosed to Buyer and Parent in writing prior to the date
hereof; and any conditions subject to which such consent was
given have been complied with in full) or specified at the
relevant time in section 765A of the Taxes Act without having
duly provided the required information to the Inland Revenue.
(i) Value Added Tax.
(1) This Section 3.14(i) shall apply, with
appropriate modifications, to any equivalent sales or
turnover tax in any jurisdiction other than the United
Kingdom to which the Company is subject.
(2) The Company:
(A) is registered for the purposes
of VAT, has been so registered at all times that
it has been required to be registered by VAT
Legislation, and such registration is not subject
to any conditions imposed by or agreed with
HM Customs & Excise; and has complied fully
with and observed in all material respects the
terms of VAT Legislation;
(B) has maintained and obtained
all the records, invoices and other documents (as
the case may be) required by the VAT
Legislation and has preserved such records,
invoices and other documents in such form and
for such periods as are required by VAT
Legislation;
(C) has disclosed to Buyer in
writing (i) full details of any method approved
or directed for use by the Company by the
Commissioners of Customs & Excise under
regulation 31 of the Value Added Tax (General)
Regulations 1985 (SI 1985/886 as amended) or
under regulation 30(5) of such Regulations as in
force before the substitution effected by the
Value Added Tax (General) (Amendment)
Regulations 1992 (SI 1992/645) and which
continues in force and effect whether by specific
agreement with such Commissioners or
otherwise and (ii) the average percentage input
tax recovery obtained by the Company in the
last eight (8) prescribed accounting periods
ending before the date of this Agreement
(prescribed accounting period having the
meaning ascribed to that expression by
regulation 58 of the said Regulations of 1985);
(D) is a member of a group for
VAT purposes but is not the representative
member of that group;
(E) is not required to make
payments on account of VAT for which it may
become liable in a prescribed accounting period
(pursuant to The Value Added Tax (Payments
on Account) Regulations 1992); and
(F) is not and has not been
subject under VAT Legislation to any penalty
liability notice, written warning of failure to
comply, surcharge liability notice or requirement
to give security as a condition of making taxable
supplies.
(3) In respect of each of the assets of the
Company (if any) which is a capital item for the
purpose of Part VA of the Value Added Tax (General)
Regulations 1985, Seller has disclosed to Buyer and
Parent in writing, prior to the date of this Agreement,
full details of the capital item affected, the amount of
the total input tax (within the meaning of such
Regulations) which is subject to adjustment, the
percentage of the total input tax which was reclaimable
on the capital item in the first interval applicable to it
and any adjustments made or to be made having regard
to Events occurred up to the date of this Agreement,
the date of acquisition of the capital item and the
number of intervals in the adjustment period remaining
from the date of this Agreement, and full details of all
matters to date relevant in determining any
adjustments.
(j) Stamp Duties. All documents in the
possession or under the control of the Company or to the
production of which the Company is entitled which establish
or are necessary to establish the title of the Company to any
asset have been duly stamped and any applicable stamp duties
or charges in respect of such documents have been duly
accounted for and paid, and no such documents which are
outside the United Kingdom would attract stamp duty if they
were brought into the United Kingdom.
SECTION 3.15. Assets.
(a) Investments. (1) Schedule 3.15(a)(1) sets
forth a true, complete and correct list of all securities,
mortgages and other investments, including those held by
Accord under its reinsurance Contracts with the Company
(collectively, the "Investments"), owned by the Company on
June 30, 1993, together with the date of purchase, cost basis
and book value thereof as of June 30, 1993. Except as set
forth on Schedule 3.15(a)(1), the Company has good and
marketable title to all the Investments listed on
Schedule 3.15(a)(1) or acquired in the ordinary course of
business since June 30, 1993 (in each case, other than with
respect to those Investments disposed of in the ordinary
course of business consistent with past practice since June 30,
1993) (collectively, the "Scheduled Investments"). As of June
30, 1993, none of the Scheduled Investments is in default in
the payment of principal or interest and, except as disclosed
on Schedule 3.15(a)(1), the ratings assigned to each of the
Scheduled Investments that are rated by a rating agency have
not been lowered or downgraded since March 31, 1993.
There are no Liens on any of the Scheduled Investments,
except as set forth on Schedule 3.15(a)(1).
(2) Schedule 3.15(a)(2) sets forth a true,
complete and correct list, as of June 30, 1993, of all sales,
purchases, exchanges or other transactions in or affecting the
Company's investment portfolio since the Balance Sheet Date.
(b) Real Property. Other than the Greenwich
View Place property (all of the rights and interests in which
will be transferred out of the Company as a result of the
execution and delivery of the Greenwich View Transfer
Documents), the Company does not own any right or interest
in any land or buildings. Other than the agreement for lease
and the license for the Company's current office space located
at 77 Gracechurch Street and 85 Gracechurch Street,
respectively, the Company is not actually or contingently liable
as an original contracting party to, or as guarantor of any
party to, or otherwise contractually liable in respect of, any
lease or leasehold property or license connected therewith.
(c) Other Property. Except as otherwise set
forth on Schedule 3.15(c), the Company has good and
marketable title to or valid leasehold or license interests in all
property and other assets (including all tangible personal
property and assets but excluding Investments and real
property, because they are covered by Sections 3.15(a) and
3.15(b), respectively) reflected in the Company Balance Sheet
and all other properties or assets (including the assets
acquired by the Company in the Unionamerica
Reorganization (as defined in Section 3.27) which, individually
or in the aggregate, are material to the operation of the
Company (other than that disposed of in the ordinary course
of business consistent with past practice prior to the date
hereof) (all such properties and assets being referred to
collectively as the "Material Properties"). Except as otherwise
set forth on Schedule 3.15(c), the Company owns each of the
Material Properties free and clear of all Liens other than (A)
Liens reflected in the Company Financials, (B) Liens for taxes
not yet due and payable or which are being contested in good
faith by appropriate proceedings (for which provisions or
reserves have been made by the Company to the extent
required by UK Accounting Standards) and (C) Liens which
do not materially impair the value or interfere with the use of
the properties affected thereby.
SECTION 3.16. Compliance with Laws, etc.
(a) Except as set forth on Schedule 3.16, the
Company is in compliance with all United Kingdom, United
States Federal, State, local or foreign judgments, orders,
injunctions, laws, statutes, regulations and ordinances, and all
licenses, approvals and permits issued by any Governmental
Authority, applicable to it or any of its properties, assets,
operations or business, except where the failure of the
Company to be so in compliance would not in any case or in
the aggregate have a Material Adverse Effect. Without
prejudice to the generality of the foregoing, the Company and
its directors and officers (in their capacities as such) have
complied in all material respects with all their respective
obligations under the Insurance Companies Act and there are
no matters arising from such compliance which are the subject
of any dispute with the Department of Trade and Industry.
(b) The Company has filed or otherwise
provided all material reports, data, statements, documents,
applications, registrations, filings or submissions required to be
filed with or otherwise provided to any Governmental
Authority with jurisdiction over the Company or its business
or operations. All such filings complied with applicable laws
and regulations in all material respects. The Company has
not received written notice of any material deficiencies
asserted by any Governmental Authority with respect to any
such filings which have not been cured or otherwise resolved
to the satisfaction of such Governmental Authority and, except
as otherwise disclosed on Schedule 3.16, there have been no
material disputes or controversies with, or investigations
undertaken by, any such Governmental Authority with respect
to the Company or its business or operations.
SECTION 3.17. Insurance for Company's
Operations. Schedule 3.17 contains a true, complete and
correct list of all liability, property and casualty, employee
liability, directors and officers liability, surety bonds, key man
life insurance and other similar insurance Contracts that
insure the business, properties, operations or affairs of the
Company or affect or relate to the ownership, use or
operations of the Company's assets or properties and the
amount of coverage under each such insurance Contract. All
premiums due on all such insurance Contracts have been paid,
no notice of termination of any such insurance Contract has
been received and, to the knowledge of Seller, all such
insurance Contracts are in full force and effect.
SECTION 3.18. Insurance Business. The
Company possesses all licenses, certificates of authority, excess
and surplus lines eligibilities, permits, orders, approvals or
other authorizations (each, a "Permit") required to transact or
accept insurance or reinsurance in or from all jurisdictions in
or from which the Company now transacts or accepts
insurance or reinsurance (including jurisdictions in which
CRC(UK) transacted or accepted insurance or reinsurance
which has been assumed by the Company), except where the
failure to possess a Permit would not in any case or in the
aggregate have a Material Adverse Effect. All such Permits
are in full force and effect, except where the failure of any of
the Permits to be in full force and effect would not in any
case or in the aggregate have a Material Adverse Effect.
Neither the Company nor any of its Affiliates has received any
notice of any event, inquiry, investigation or proceeding that
could reasonably be expected to result in the suspension,
revocation, non-renewal or limitation of any such Permit or
the imposition of any restrictions or requirements with respect
thereto and, to the knowledge of Seller, there is no
sustainable basis that could reasonably be expected to result in
any such suspension, revocation, non-renewal or limitation or
the imposition of any restrictions or requirements with respect
thereto, except where the suspension, revocation, non-renewal
or limitation of a Permit or the imposition of any restrictions
or requirements with respect thereto would not in any case or
in the aggregate have a Material Adverse Effect.
SECTION 3.19. Reinsurance. Schedule 3.19
contains a true, complete and correct list of all Contracts
pursuant to which the Company has ceded insurance or
reinsurance of more than US $15,000 of liabilities in any
single case or more than US $50,000 of liabilities in the
aggregate to any single reinsurer or retrocessionaire (each a
"Reinsurance Agreement"). Schedule 3.19 sets forth, with
respect to each such reinsurer and retrocessionaire: (a) where
reasonably available to the Company, the name and
jurisdiction of domicile of such reinsurer or retrocessionaire;
(b) the amounts due in respect of such reinsurer's or
retrocessionaire's Reinsurance Agreements; (c) whether the
Company or, to the knowledge of Seller, such reinsurer and
retrocessionaire is in default under any such Reinsurance
Agreements; and (d) any funds withheld or letters of credit or
other security provided pursuant to or in connection with such
Reinsurance Agreement. To the knowledge of Seller and
except as set forth on Schedule 3.12, each of the Reinsurance
Agreements is valid and binding in all material respects in
accordance with its terms; provided, however, that,
notwithstanding anything contained in any of the Transaction
Documents, Seller makes no further representation as to the
collectibility of any amounts due under any of the Reinsurance
Agreements. Schedule 3.19 also sets forth a true, correct and
complete copy of the Company's most recent aged reinsurance
balances receivables report prior to the date of this
Agreement, which discloses all receivables overdue under the
terms of the Reinsurance Agreements as of the date of such
report. Except as set forth on Schedule 3.19, none of the
Reinsurance Agreements contains any provision providing that
the other party thereto may terminate such Reinsurance
Agreement by reason of the transactions contemplated by this
Agreement. The Company is entitled to take full credit
(without any requirement to provide against future payments
of premium) in its statutory financial statements for
reinsurance, coinsurance or excess insurance ceded pursuant
to such Reinsurance Agreements under applicable insurance
laws.
SECTION 3.20. Service Marks, Trademarks,
Intellectual Property, etc.
(a) Schedules 3.20(a)(1) and 3.20(a)(2) set forth
true, complete and correct lists (including the current status of
any registrations) of all foreign and domestic patents,
trademarks, service marks, trade names, corporate and
assumed names, design rights, copyrights (excluding rights in
computer software other than those items of computer
software set forth in Schedule 3.20(a)(2)), copyright
registrations and applications therefor, rights in know-how and
other intangible and intellectual property rights of any kind
that are material to the business or operation of the Company,
in each case whether registered or unregistered and including
applications for the grant of any of the foregoing and all rights
or forms of protection having equivalent or similar effect to
any of the foregoing which may subsist anywhere in the world
(each, an "Intellectual Property Right"), in each case held or
beneficially owned by, licensed to or registered in the
Company or used in its business. At the Closing, pursuant to
the Assignment of Trademarks or otherwise, the Company will
have vested in it all right and title to use the word
"Unionamerica" in respect of the business of the Company to
the extent that Seller and its Affiliates (including the
Company) have such rights as of the date of this Agreement.
No registrations have been sought or obtained with respect to
the word "Unionamerica" in any countries in the world other
than those set out in the Assignment of Trademarks. Except
as set forth on Schedule 3.20(a)(1), (1) the Company is the
sole owner, or has a valid and effective license or otherwise
has the right to use, all of the Intellectual Property Rights and
(2) the Company has the right to use, free and clear of any
royalty or other payment obligations, claims of infringement or
Liens, all Intellectual Property Rights that are material to the
conduct of its business. With respect to the software set forth
on Schedule 3.20(a)(2), and except as otherwise set forth on
such Schedule, either UA Management or the Company or
one of its Affiliates is the sole owner, or has a valid and
effective license or otherwise has the right to use (free and
clear of any royalty or other payment obligations, claims of
infringement or Liens), all of such software. The Company
has made all material payments and performed all of its other
material obligations and covenants in connection therewith
and the representations and warranties of the Company to the
licensors and sublicensors thereof were materially true and
correct when made.
(b) Except as set forth on Schedule 3.20(a)(1),
(1) the Company has not been charged and has not received
any claim or charge (written or, to the knowledge of Seller,
oral), and to the knowledge of Seller there is no basis for any
such claim or charge, with respect to the infringement
(whether in the past or as an ongoing matter) of any
unexpired patent, trademark, trade name, service mark or
design, copyright, copyright registration or other proprietary
right of any Person (including Seller and its Affiliates) and (2)
to the knowledge of Seller, the Company has not made
unlicensed use of confidential information. No act has been
done or omitted to be done, and no event has occurred or to
the knowledge of Seller is reasonably likely to occur, which
may render any of the Intellectual Property Rights subject to
revocation, compulsory license, cancellation or amendment or
may prevent the grant or registration of a valid intellectual
property right pursuant to a pending application. To the
knowledge of Seller, no Person other than the Company (and
other Affiliates of Seller to the extent set forth on Schedule
3.20(a)(1)) uses any of the service marks listed on Schedule
3.20(a)(1) and no Person has disputed the right of the
Company to use without restriction any such service marks.
No Intellectual Property Rights owned or used by the
Company and no use by or license for use granted to the
Company will be lost, or rendered liable to any right of
termination by any Persons, by reason of the transactions
contemplated by this Agreement.
(c) All the records and systems (including
computer systems) and all data and information of the
Company are recorded, stored, maintained or operated or
otherwise held by the Company (or by Seller or its Affiliates
for the benefit of the Company), free from any Lien.
SECTION 3.21. Employee Benefit Plans.
(a) Except as otherwise disclosed on
Schedule 3.21, none of the Employees is a member or
proposing to become a member of, and the Company is not a
party to, any share incentive scheme, share option scheme or
profit sharing, bonus or other such incentive scheme.
(b) Except with respect to the Unionamerica
Scheme (as defined below) (and except as otherwise disclosed
in Schedule 3.21), Seller has no obligation (whether
contractual or otherwise) or intention to pay or provide for
any "relevant benefits" within the meaning of Section 612 of
the Taxes Act or any disability insurance or permanent health
insurance.
(c) No changes in or augmentation of the
benefits currently provided under the Unionamerica Scheme
have been announced by any Person or are being considered
by Seller or the Company or the trustees of the Unionamerica
Scheme or the principal company of the Unionamerica
Scheme.
(d) True, complete and correct information
regarding the Unionamerica Scheme (as in effect on June 30,
1993) has been disclosed to Buyer and are set out in Schedule
3.21 and no changes have been made to the Unionamerica
Scheme since such date.
(e) The Company participates in the
Unionamerica Scheme. All companies participating in the
Unionamerica Scheme have been properly admitted to
participate therein and participate therein on the same terms
as apply to all other participating employers.
(f) True, complete and correct copies of the
Trust Deed and Rules and other documents containing the
provisions currently governing the Unionamerica Scheme,
along with true, complete and correct information regarding
the benefits and entitlements thereunder, have been delivered
to Buyer as well as a current membership list, and the
Company (except as otherwise disclosed on Schedule 3.21) has
no liability (including any liability connected with the making
of transfer payments by the Unionamerica Scheme) to any
Person in respect of or connected with the membership or
former membership in the Unionamerica Scheme of any
Person other than as revealed in such documents and
information. The information which has been made available
to Buyer is true, complete and correct and fairly presented;
and to the extent that it related to the assets or membership
data of the Unionamerica Scheme at a particular date, there
has been no material adverse change in the Unionamerica
Scheme, except as disclosed to Buyer's Actuary.
(g) True, complete and correct copies of the
latest actuarial valuation report and of the latest accounts to
the Unionamerica Scheme have been delivered to Buyer.
(h) The Unionamerica Scheme is an "exempt
approved scheme" (within the meaning of Chapter I of the
Part XIV of ICTA 1988) and has at all times complied with
and been administered in accordance with all applicable laws,
regulations and requirements, including the requirements of
the Inland Revenue for continued approval as an exempt
approved scheme and of trust law; and there is not and never
has been an appropriate contracting-out certificate (within the
meaning of Section 3 of the Social Security Pensions Act
1975) in force in respect of the Unionamerica Scheme. There
is no reason why approval of the Unionamerica Scheme by the
Board of Inland Revenue should be withdrawn or cease to
apply.
(i) To the knowledge of Seller, there is no
dispute with regard to the benefits payable under the
Unionamerica Scheme and no legal proceedings by or against
the trustees of the Unionamerica Scheme in their capacity as
such are pending, threatened or expected, and to the
knowledge of Seller there is no fact or circumstance likely to
give rise to any such proceedings.
(j) No refund of assets or monies to any
employer participating in the Unionamerica Scheme has been
or is proposed to be made.
(k) The Company, the trustees and the
administrator of the Unionamerica Scheme have each duly
complied with all their obligations and duties (including
statutory obligations) under and in respect of the
Unionamerica Scheme; all amounts due to the trustees of the
Unionamerica Scheme and to any insurance company in
connection with the Unionamerica Scheme have been paid;
and there are no material actions, suits or claims pending or
threatened in respect of the Unionamerica Scheme (other
than routine claims for benefits).
(l) The Company (except as otherwise
disclosed on Schedule 3.21) has no obligation or liability
(actual or contingent, present or future) to contribute to any
personal pension scheme (as defined in section 630 of the
Taxes Act) in respect of any of its Employees.
SECTION 3.22. Directors, Officers and
Employees.
(a) Schedule 3.22 contains a true, complete and
correct list of certain individuals who are employed by the
Company or who, as of the Closing, will be employed by the
Company (each, a "Key Employee"), including, with respect to
each such Key Employee, the annual salary or compensation
of such Key Employee and any bonuses or incentive awards or
other benefits paid or to which such Key Employee was or is
entitled in 1992 and 1993. None of the Key Employees has
served notice of termination of his/her employment with the
Company. To the knowledge of Seller, there is not in
existence any Contract of employment with any Employee (or
any Contract for services with any individual) which, if
terminated or purported to be terminated by three (3) months'
notice or less, would give rise to a claim for material damages
or compensation (in addition to any right to a claim for a
statutory redundancy payment or statutory compensation for
unfair dismissal).
(b) No material dispute has arisen within the
two (2) years immediately preceding the date of this
Agreement between the Company and a material number or
category of the Employees (or any trade union or other body
representing all or any of the Employees) and, to the
knowledge of Seller, there are no present circumstances which
are likely to give rise to any such dispute. No material
liability has been incurred by the Company for breach of any
Contract of service or for services, for redundancy payments,
protective awards or for compensation for wrongful dismissal
or for failure to comply with any order for the reinstatement
or re-engagement of any Employee for any other material
liability accruing from the termination of employment or
services.
SECTION 3.23. Banks, Brokerage Accounts
and Powers of Attorney. Schedule 3.23 contains a true,
complete and correct list of: (a) the name of each bank, trust
company, securities or other broker or other financial
institution with which the Company has an account, credit line
or safe deposit box or vault, or otherwise maintains business
relations; (b) the name of each Person authorized by the
Company to draw thereon or to have access to any safe
deposit box or vault; and (c) the names of all Persons
authorized by powers of attorney, proxies or other instruments
to act on behalf of the Company (other than those Persons
who are managing general agents and set forth on Schedule
3.11).
SECTION 3.24. Brokers and Finders, etc.
Neither Seller nor the Company, nor any of their respective
officers, directors or employees, nor any of their Affiliates, has
employed any broker, agent or finder, or incurred any liability
for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this
Agreement, other than fees to the Persons listed on Schedule
3.24, which fees are obligations solely of Seller and will be
duly paid by Seller.
SECTION 3.25. Securities. Seller is acquiring
the Buyer Shares and the Senior Preference Shares solely for
its own account and not with a view to any distribution of the
Buyer Shares or the Senior Preference Shares or any part
thereof, or interest therein, except in accordance with the
United States Securities Act of 1933, as amended (the
"Securities Act").
SECTION 3.26. Contribution. The cash
contribution of US $44,928,493.00 made on June 17, 1993 by
Seller to the Company, is properly characterized as profits
available for distribution (distributable reserves) in accordance
with section 263(3) of the Companies Act and in accordance
with applicable UK Accounting Standards.
SECTION 3.27. Unionamerica Reorganization.
Prior to the date of this Agreement, Seller has made available
to Buyer true, complete and correct copies of those certain
agreements between the Company and certain of its Affiliates
pursuant to which the Company acquired the assets set forth
in those agreements (the "Unionamerica Reorganization").
SECTION 3.28. Termination of Certain
Affiliate Contracts. As of the Closing, the Company shall
have no liabilities or obligations (whether actual or
contingent) under any of the Contracts set forth on Schedule
5.5.
SECTION 3.29. Full Disclosure. No
representation or warranty of Seller herein contains an untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made not
misleading.
SECTION 3.30. No Representation as to
Insurance or Reinsurance Reserves. Notwithstanding anything
contained in any of the Transaction Documents, including,
without limitation, any of the representations and warranties
contained in this Article III, Seller makes no representation or
warranty with respect to the adequacy of the Company's
reserves for losses (including losses incurred but not reported)
or loss adjustment expenses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND
PARENT
Buyer and Parent represent and warrant as
follows:
SECTION 4.1. Corporate Existence. Each of
Buyer and Parent is a private company limited by shares,
incorporated in England, and has full power and authority and
possesses all rights, licenses, authorizations and approvals,
governmental or otherwise, necessary to entitle it to use its
name, to own, lease or otherwise hold its properties and
assets, to carry on its business as currently conducted and to
perform its obligations under the Transaction Documents to
which it is a party. Neither Buyer nor Parent has conducted
any business other than in connection with the transactions
contemplated by the Transaction Documents.
SECTION 4.2. Authorization; Enforcement.
Each of Buyer and Parent has all necessary corporate power
and authority to execute and deliver the Transaction
Documents to which it is a party, and to perform its
obligations under the Transaction Documents to which it is a
party in accordance with the terms of such Transaction
Documents. Each of Buyer and Parent has taken all
necessary corporate action to duly and validly authorize its
execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby. As
of the Closing, each of Buyer and Parent will have taken all
necessary corporate action to duly and validly authorize its
execution and delivery of the Transaction Documents (other
than this Agreement) to which it is a party and the
consummation of the transactions contemplated by such
Transaction Documents. This Agreement has been duly
executed and delivered by each of Buyer and Parent and
constitutes a valid and legally binding obligation of each of
Buyer and Parent, enforceable against each of them in
accordance with its terms. On or before the Closing Date,
each of the other Transaction Documents to which Buyer or
Parent is a party will be duly executed and delivered by Buyer
or Parent, as the case may be, and when executed and
delivered by Buyer and Parent, as the case may be, will
constitute a valid and legally binding obligation of Buyer or
Parent, as the case may be, enforceable against Buyer or
Parent, as the case may be, in accordance with its terms.
SECTION 4.3. Consents and Approvals. No
Consent is required to be obtained, made or given by or with
respect to Buyer or Parent in connection with the execution
and delivery by Buyer or Parent of any of the Transaction
Documents to which Buyer or Parent, as the case may be, is a
party, the performance by Buyer or Parent of its obligations
under any of such Transaction Documents or the
consummation of the transactions contemplated by the
Transaction Documents, other than as described in Sections
6.1(e) and 6.1(f).
SECTION 4.4. No Conflicts. Neither (i) the
execution or the delivery by Buyer or Parent of this
Agreement, or the performance by Buyer or Parent of this
Agreement, or the consummation of the transactions
contemplated by this Agreement, nor (ii) the execution or the
delivery by Buyer or Parent of the Transaction Documents
(other than this Agreement) to which Buyer or Parent is a
party, or the performance by Buyer or Parent of such
Transaction Documents, or the consummation of the
transactions contemplated by such Transaction Documents,
will at the time of such execution, delivery, performance or
consummation (as the case may be):
(a) conflict with or result in a breach of any
provision of the Memorandum and Articles of Association of
Buyer or Parent;
(b) result in any conflict with, breach or
violation of, or default (or event which, with the giving of
notice or lapse of time or both, would constitute a default)
under, require any consent or approval which has not been
obtained with respect to, give rise to any right of termination,
cancellation or acceleration of any obligations or loss of any
benefit under, or result in the imposition of any Liens on any
of the properties or assets of Buyer or Parent under: (1) any
Contract or permit, concession, franchise or license to which
Buyer or Parent is a party or by which it or any of its
properties or assets is bound or (2) any order, decree,
injunction, law, rule or regulation applicable to Buyer or
Parent or any of its properties or assets, which conflict,
breach, violation or default, or failure to obtain consent or
approval, or right of termination, cancellation or acceleration,
or loss of benefit or imposition of any Lien, would have, in
any case or in the aggregate, a material adverse effect on
Buyer's or Parent's business, operations, assets, liabilities or
financial condition or which would interfere in any material
way with the ability of Buyer or Parent to consummate the
transactions contemplated by such Transaction Documents.
SECTION 4.5. Capital Structure. As of the
Closing, the Buyer Shares will have been duly authorized and,
immediately prior to delivery of the relative share warrants to
bearer in respect thereof in the manner described herein, will
be validly issued and fully paid. Upon the exchange of the
Buyer Shares for the A Senior Preference Shares pursuant to
Section 1.2, the A Senior Preference Shares will have been
duly authorized, will have the benefit of the applicable rights
and covenants set forth in Exhibit B, and will rank senior in
priority above any and all other classes of authorized share
capital of Parent (other than the B Senior Preference Shares).
Upon the exchange of the Buyer Shares for the A Senior
Preference Shares pursuant to Section 1.2, the B Senior
Preference Shares of US $1 each of Parent (the "B Senior
Preference Shares" and, together with the A Senior Preference
Shares, the "Senior Preference Shares") will have been duly
authorized, and, upon issue, will have the benefit of the
applicable rights and covenants set forth in Exhibit B and will
rank senior in priority above any and all other classes of
authorized share capital of Parent (other than the A Senior
Preference Shares). Upon allotment and delivery of the
relative share certificate(s) in respect of the A Senior
Preference Shares in the manner described herein, the A
Senior Preference Shares will be validly issued and fully paid.
There are no standstill, voting or similar agreements or
Contracts nor rights of first offer or first refusal to which
Buyer, Parent or any of their respective Affiliates is a party
that currently or in the future will limit the ability of any
Person to acquire, vote, sell, hold or otherwise deal with the
Buyer Shares (other than Liens which may be required by
lenders to Buyer or Parent in connection with financing for
this transaction) or the Senior Preference Shares. Upon the
consummation of the transactions contemplated by this
Agreement, Seller will acquire from Parent beneficial
ownership of the A Senior Preference Shares, free and clear
of all Liens, together with all rights which now are, or at any
time hereafter may become, attached to them, including the
right to receive all dividends and other distributions declared,
made or paid after the Closing Date.
SECTION 4.6. Brokers and Finders, etc.
Neither Buyer nor Parent nor any of their respective directors,
officers or employees, nor any of their Affiliates, has
employed any broker, agent or finder or incurred any liability
for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this
Agreement.
SECTION 4.7. Available Funds. Subject only
to the satisfaction of the condition set forth in Section 6.1(h),
Buyer will have sufficient funds at the Closing to purchase the
Shares pursuant to this Agreement.
SECTION 4.8. Securities. Buyer is acquiring
the Shares solely for its own account and not with a view to
any distribution or other disposition of the Shares or any part
thereof, or interest therein, except in accordance with the
Securities Act.
SECTION 4.9. Full Disclosure. No
representation or warranty of Buyer or Parent contained in
this Agreement contains an untrue statement of a material
fact or omits to state a material fact necessary in order to
make the statements made not misleading.
ARTICLE V
COVENANTS
SECTION 5.1. Operations in the Ordinary
Course. Except as otherwise contemplated by this Agreement
or consented to in writing by Buyer, from the date of this
Agreement through the Closing Date, Seller will cause the
Company to conduct its business only in the usual, regular and
ordinary course consistent with past practices. Without
limiting the generality of the foregoing, Seller will cause the
Company to:
(a) use reasonable efforts to maintain insurance
coverages on the assets and properties of the Company on a
basis consistent with past practice;
(b) maintain its books, accounts and records on
a basis consistent with past practice;
(c) comply in all material respects with all
applicable judgments, orders, injunctions, laws, statutes,
regulations, ordinances and Permits of Governmental
Authorities and preserve in full force and effect all Permits
material to the Company's business and operations;
(d) maintain and keep its material properties
and equipment in good repair, working order and condition,
subject to reasonable and normal wear and tear;
(e) perform in all material respects its
obligations under all Scheduled Contracts and under all
insurance and reinsurance Contracts to which the Company is
a party (in each case, on a basis consistent with past practice);
and
(f) use its reasonable efforts to maintain and
preserve its business organization, retain the services of the
Key Employees, and maintain its relationships with its agents,
policyholders, suppliers and customers.
SECTION 5.2. Restrictions. Except as
otherwise contemplated by this Agreement or the Tax
Indemnification Agreement or consented to in writing by
Buyer, from the date of this Agreement through the Closing
Date, Seller will not permit the Company to:
(a) incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt
securities of the Company or guarantee any debt securities of
other Persons other than in the ordinary course of business
consistent with past practice;
(b) grant or create any Lien on any of its assets
other than Liens in the ordinary course of business consistent
with past practice;
(c) make any material changes in its Investment
Policies or make any material change in its financial, tax or
accounting methods, principles or practices (including any
material change with respect to the establishment of reserves
for unearned premiums, losses (including incurred but not
reported losses) and loss adjustment expenses or any change
in depreciation or amortization policies or rates adopted by
it), except as may be required by law or applicable UK
Accounting Standards;
(d) grant to any Employee any increase in
salary or other regularly paid remuneration which would
constitute a material increase in the salary or other
remuneration of such Employee, or grant to any Employee
any increase in severance or termination pay; grant or approve
any general increase in salaries of all or a substantial portion
of the Employees; pay or award any bonus, incentive
compensation, service award or other like benefit for or to the
credit of any Employee; enter into any employment Contract
with any Employee except as may be required under any
employment Contract set forth on Schedule 3.11; or adopt or
amend in any material respect any Employee Benefit Plan;
(e) authorize, allot, issue, deliver or sell any
shares in the capital of the Company or obligations or
securities convertible into or exchangeable for, or warrants,
options or other rights in respect of, any such shares;
(f) amend its Memorandum or Articles of
Association;
(g) declare, pay or make any dividends or other
distributions (whether in cash, securities or other property or
any combination thereof) or reduce, repurchase, redeem or
otherwise acquire any of its share capital;
(h) acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any
other manner, any business or any Person or otherwise
acquire any assets or properties that are material, individually
or in the aggregate, to the Company;
(i) sell, lease or otherwise dispose of any of its
assets or properties that are material, individually or in the
aggregate, to the Company (other than transactions involving
securities in its investment portfolio in the ordinary course of
business consistent with past practice, except as set forth in
paragraph (p) of this Section 5.2);
(j) make any capital expenditure or execute any
lease or incur any commitment or liability therefor not
contained in a written budget prepared by the management of
the Company on or before the date of this Agreement
involving annual payments in excess of 15,000 pounds individually or
50,000 pounds in the aggregate (other than expenditures, leases,
commitments or liabilities arising from the purchase or lease
of automobiles owned by the Company for use in its business,
if such automobiles are purchased or leased to replace an
existing Company automobile and the purchase price or lease
price for such new automobile is not materially greater than
that for the automobile being so replaced);
(k) enter into any Contract that would meet any
criterion for inclusion on Schedule 3.11, or terminate, amend
or modify any Scheduled Contract involving future liabilities
in excess of 100,000 pounds in any case;
(l) commute any reinsurance Contract with any
of Seller's Affiliates;
(m) cancel any indebtedness involving liabilities
in excess of 10,000 pounds in any case;
(n) waive or compromise any rights having an
economic value to the Company in excess of 20,000 pounds in any
case (other than commutations of insurance or reinsurance
Contracts (other than those referred to in Section 5.2(l)) and
settlements of insurance and reinsurance claims in the
ordinary course of business consistent with past practice);
(o) settle pending or threatened Litigation
(other than insurance or reinsurance Litigation in the ordinary
course of business consistent with past practice) in an amount
exceeding 25,000 pounds in the aggregate;
(p) take any capital gains (or realize any
investment profit) in excess of US $500,000 in the aggregate
or decrease the level of its technical reserves (other than the
payment of claims under Insurance Arrangements in the
ordinary course of business consistent with past practice);
(q) purchase or otherwise invest in any interest
in (1) real property (including any extension of credit secured
by a mortgage or deed of trust), (2) common or ordinary
shares or (3) bonds, notes, debentures or other evidence of
indebtedness rated lower than "Aa" by Moody's Investors
Service, Inc. or "AA" by Standard & Poor's Corporation at the
time of purchase;
(r) make any payments to its Affiliates (other
than pursuant to the terms of the Scheduled Contracts
described in Section 3.11(a)(8) and Insurance Arrangements);
(s) take any action, or omit to take any action,
that would result in, (1) any of the representations and
warranties of Seller that are qualified as to materiality
becoming untrue or any of such representations or warranties
that are not so qualified becoming untrue in any material
respect or (2) any of the conditions to the Closing not being
satisfied; or
(t) authorize any of, or commit or agree to take
any of, the foregoing actions.
SECTION 5.3. Related Matters.
(a) Seller shall promptly report to Buyer the
termination of employment of, or a written threat to terminate
employment made by, any of the Key Employees.
(b) Seller shall promptly notify Buyer in writing
of any event, condition, change or effect having, or which,
insofar as reasonably can be foreseen, would have, a Material
Adverse Effect.
(c) Seller shall promptly notify Buyer in writing
of any matter or change that affects or, insofar as reasonably
can be foreseen, would affect the accuracy or completeness of
any representation or warranty made by Seller in this
Agreement. If such representation or warranty is of a nature
that can be made accurate, Seller shall use its reasonable
efforts to promptly effect appropriate curative action and shall
provide Buyer with evidence thereof reasonably satisfactory to
Buyer.
(d) Seller shall promptly notify Buyer in
writing if it fails to perform or observe any covenant or
agreement to be performed or observed by it under this
Agreement and shall use its reasonable efforts to promptly
effect appropriate curative action and shall provide Buyer with
evidence thereof reasonably satisfactory to Buyer.
SECTION 5.4. Access to Information. Seller
shall cause the Company to afford to Buyer, and to Buyer's
accountants, counsel, financial advisers and other
representatives, at reasonable times (during normal business
hours) during the twenty (20) Business Days following the
execution of this Agreement (subject to extension by written
agreement of Buyer and Seller) (the "Initial Due Diligence
Period") and thereafter until the Closing Date, access to all of
its books, records, Contracts, facilities and personnel, including
management and Employees, so that Buyer may investigate
the Company (including its financial statements, accounting
methods, assets, liabilities, insurance and reinsurance
Contracts and other arrangements, client lists, administrative
procedures, operations and business plans and prospects); and
Seller shall cause the Company to furnish promptly to Buyer
from the date hereof until the Closing: (a) a copy of each
material document filed by it or provided during such period
pursuant to the requirements of any United Kingdom, State or
other applicable insurance law or regulation; (b) updated
financial statements comparable to those described in Section
3.8(a) promptly after such financial statements have been
prepared by the Company in accordance with past practice, in
the case of each quarterly financial statement, certified by the
Finance Director of the Company and, in the case of each
annual financial statement, signed by the directors and audited
by KPMG Peat Marwick; (c) after the end of each month, its
management financial reports (together with all accompanying
documents), underwriting revenue accounts and profits and
loss accounts, in each case prepared with respect to such
month in accordance with past practice; (d) each written
report or examination of financial condition or market
conduct (whether in draft or final form) of the Company
issued by any Governmental Authority that has been received
by the Company; (e) after the end of each month, status
reports of the Scheduled Investments and any other
Investments in the Company's investment portfolio after the
date hereof, showing the composition and valuation of the
investment portfolio as of the end of such month (provided
that during the month immediately preceding the anticipated
Closing Date, Seller shall cause Buyer to be furnished with
such investment portfolio status reports at the end of each
week); (f) all auditors' working papers (to the extent
reasonably obtainable) and internal work papers utilized or
referred to in the preparation of the Company Financials;
(g) all material correspondence with any Governmental
Authority or Tax Authority; (h) all correspondence, internal
memoranda and filings relating to any material Litigation or
claims against the Company (other than in connection with
Insurance Arrangements) solely to the extent that furnishing
such documents would not, in the reasonable judgment of
counsel to Seller, breach any attorney-client privilege; and
(i) all other information and documents concerning the
Company's business, properties and personnel as Buyer may
reasonably request. All nonpublic information received
pursuant to this Section 5.4 shall be deemed by the parties
hereto to be "Confidential Information" for purposes of the
Confidentiality Agreement dated October 12, 1992 between
Lazard Brothers & Co., Limited and International Insurance
Advisors, Inc. (the "Confidentiality Agreement") and shall be
subject to the Confidentiality Agreement.
SECTION 5.5. Termination of Certain Affiliate
Agreements. Seller shall cause each of the Contracts between
the Company and its Affiliates listed on Schedule 5.5 to be
terminated prior to the Closing with settlement values not to
exceed amounts actually accrued under such Contracts and in
no event to include compensation for early termination
(except in the case of the inwards reinsurance agreement with
The Continental Insurance Company which will be cancelled
in exchange for a payment by the Company not exceeding the
Company's net reserves recorded in its books as at the date of
cancellation in respect of its net retention under that
agreement and the outwards reinsurance contract with Bayside
Reinsurance Company, which will be cancelled without
compensation).
SECTION 5.6. No Solicitation. Seller shall not,
nor shall it permit any of its Affiliates to, nor shall it authorize
or permit any director, officer or employee (or any investment
banker, attorney or other advisor or representative) of Seller
or any of its Affiliates to, directly or indirectly, (a) solicit,
initiate or encourage the submission of any Investment
Proposal (as defined below), (b) enter into any Contract with
respect to any Investment Proposal, (c) participate in any
discussions or negotiations regarding, or furnish to any Person
any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
Investment Proposal. Without limiting the generality of the
foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any director, officer or
employee (or any investment banker, attorney or other advisor
or representative) of Seller or any of its Affiliates, with the
knowledge of Seller but whether or not such Person is
purporting to act on behalf of Seller or otherwise, shall be
deemed to be a breach of this covenant by Seller. For the
purposes of this Agreement, "Investment Proposal" means any
proposal or offer (other than an offer by Buyer or any of its
Affiliates) for a merger, consolidation or other business
combination involving the Company or any proposal or offer
(other than a proposal or offer by Buyer or any of its
Affiliates) to acquire in any manner, directly or indirectly, an
equity interest in any voting securities of or a substantial
portion of the assets of the Company.
SECTION 5.7. Financing. Buyer shall use its
best efforts to obtain within ten (10) Business Days following
the expiration of the Initial Due Diligence Period (the
"Commitment Date"), one or more commitment letters
between Buyer and lenders which, subject to the satisfaction
or waiver of certain conditions, commit such lenders to make
available to Buyer an aggregate of not less than
US $80,000,000.
SECTION 5.8. Filings and Authorizations.
Each of Buyer, Parent and Seller shall, as promptly as
practicable, file or supply, or cause to be filed or supplied, all
applications, notifications and information required to be filed
or supplied by it pursuant to applicable law in connection with
the transactions contemplated by this Agreement, including
such documentation and information as may be requested by
the Secretary of State (as referred to in the Insurance
Companies Act) in order to obtain the approval described in
Section 6.1(e). Each of Buyer, Parent and Seller, as promptly
as practicable, shall (a) make, or cause to be made, all such
filings and submissions under laws, rules and regulations
applicable to it, or to its Affiliates, and give such reasonable
undertakings, as may be required for it to consummate the
transactions contemplated by this Agreement, (b) use its
reasonable efforts to obtain or cause to be obtained, all
authorizations, approvals, consents and waivers from all
Persons and Governmental Authorities necessary to be
obtained by it, or its Affiliates, in order for it so to
consummate such transactions and (c) use its reasonable
efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order for it to fulfill its
obligations hereunder. Buyer, Parent and Seller will
coordinate and cooperate with one another in exchanging such
information and supplying such reasonable assistance as may
be reasonably requested by each in connection with the
foregoing.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Buyer's and
Parent's Obligations. The obligations of Buyer and Parent to
consummate the Closing are subject to the delivery of all
documents required to be delivered by Seller pursuant to
Section 2.2 and to the satisfaction in full, prior to or at the
Closing, of each of the following conditions precedent (any
one or more of which may be waived by Buyer and Parent):
(a) Representations and Warranties. All
representations and warranties of Seller contained in Article
III qualified as to materiality shall be true, complete and
correct, and those not so qualified shall be true, complete and
correct in all material respects, at and as of the Closing Date
as if such representations and warranties were made at and as
of the Closing Date, except as affected by actions taken after
the date of this Agreement in compliance with the terms
hereof.
(b) Compliance with Agreements and
Conditions. Seller shall have performed and complied in all
material respects with all covenants, agreements, obligations
and conditions required by this Agreement to be performed or
complied with by it at or before the Closing Date.
(c) Seller's Certificates. Seller shall have
delivered to Buyer and Parent: (1) a certificate, dated the
Closing Date, signed on behalf of Seller by two (2) of its
officers who shall be executive vice presidents and/or senior
vice presidents, to the effect that the conditions set forth in
Sections 6.1(a) and 6.1(b) have been satisfied; and (2) a
certificate, dated the Closing Date, signed on behalf of Seller
by its chief financial officer, to the effect that the contribution
of US $44,928,493 contributed to the Company by Seller as
described in Section 3.26 is properly characterized as profits
available for distribution (distributable reserves) in accordance
with section 263(3) of the Companies Act and in accordance
with applicable UK Accounting Standards as of the Closing
Date.
(d) Litigation. The consummation of the
Closing shall not have been prohibited or restrained by any
order, injunction, decree or judgment of any Governmental
Authority.
(e) Insurance Companies Act Approval. Either
(1) Buyer shall have received from the Secretary of State,
before the expiration of the three (3) month period from the
date of service on him of the notice of intention of each of
Buyer, Parent and certain of their Affiliates to become a
controller of the Company and comply with section 61 of the
Insurance Companies Act, a written notice stating that the
Secretary of State has no objection to each such Person
becoming a controller of the Company, or (2) such three (3)
month period shall have elapsed without the Secretary of
State having served a written notice of objection in respect of
any such Person becoming a controller.
(f) Monopolies and Mergers Approval. Buyer
shall have received, in form and substance reasonably
satisfactory to it, confirmation from the Secretary of State for
Trade and Industry that the proposed acquisition and any
matters arising therefrom will not be referred to the
Monopolies and Mergers Commission.
(g) Opinions. Buyer shall have received the
opinions dated the Closing Date, addressed to Buyer, of (1)
Debevoise & Plimpton, United States counsel to Seller,
substantially in the form of Exhibit L; and (2) Lovell White
Durrant, English solicitors to Seller and the Company,
substantially in the form of Exhibit M.
(h) Financing. Buyer shall have obtained
proceeds from financing sources in an aggregate amount of
not less than US $80,000,000 on substantially the terms and
conditions set forth in the letters described in Section 5.7 to
enable it to consummate the transactions contemplated
hereby.
SECTION 6.2. Conditions to Seller's
Obligations. Seller's obligations to consummate the Closing
are subject to the delivery of all documents required to be
delivered by Buyer or Parent pursuant to Section 2.2 and to
the satisfaction in full, prior to or at the Closing, of each of
the following conditions precedent (any one or more of which
may be waived by Seller):
(a) Representations and Warranties. All
representations and warranties of Buyer and Parent contained
in Article IV qualified as to materiality shall be true, complete
and correct, and those not so qualified shall be true, complete
and correct in all material respects, at and as of the Closing
Date as if such representations and warranties were made at
and as of the Closing Date, except as affected by actions taken
after the date of this Agreement in compliance with the terms
hereof.
(b) Compliance with Agreements and
Conditions. Buyer and Parent shall have performed and
complied in all material respects with all covenants,
agreements, obligations and conditions required by this
Agreement to be performed or complied with by them at or
before the Closing Date.
(c) Buyer's Certificates. Buyer and Parent shall
have delivered to Seller certificates, dated the Closing Date,
signed on behalf of Buyer by two (2) of its directors, and on
behalf of Parent by two (2) of its directors, to the effect that
the conditions set forth in Sections 6.2(a) and 6.2(b),
respectively, have been satisfied.
(d) Litigation. The consummation of the
Closing shall not have been prohibited or restrained by any
order, injunction, decree or judgment of any Governmental
Authority.
(e) Consents. The Consents described in
Sections 6.1(e) and 6.1(f) shall have been duly obtained, made
or given and shall be in full force and effect at the Closing.
(f) Opinions. Seller shall have received the
opinion dated the Closing Date, addressed to Seller, of (1)
Freshfields, English solicitors to Buyer and Parent,
substantially in the form of Exhibit N, and (2) LeBoeuf,
Lamb, Leiby & MacRae, United States counsel to Buyer and
Parent, substantially in the form of Exhibit O.
ARTICLE VII
FURTHER AGREEMENTS
SECTION 7.1. Pension Agreement.
(a) Definitions. In this Section 7.1, unless the
context otherwise requires, expressions shall have the
following meanings:
(1) "Transfer Amount" means the
transfer amount calculated in accordance with the
Actuary's Letter.
(2) "Actuary's Letter" means the letter
from Seller's Actuary to Buyer's Actuary, a copy of
which is attached in the agreed form as Schedule 7.1.
(3) "Interest" means, in relation to any
amount, the increase in the value of a unit in the
Scottish Widows Pension Management (SWF) Limited
Managed Fund between one day before the Payment
Date and one day before the date of actual payment.
(4) "Payment Date" means such date as
shall be agreed in writing by Seller and Buyer falling
on or after the Pension Transfer Date or, in default of
agreement, seven (7) days after the later of the
following dates:
(A) The date the Transfer
Amount is agreed upon by Buyer's Actuary in
accordance with Section 7.1(d) or the date of
final determination of the Transfer Amount in
accordance with Section 7.1(g) (as the case may
be), or
(B) The date the Inland Revenue
approves the transfer from the Unionamerica
Scheme to Buyer's Scheme (if such approval is
necessary).
(5) "Buyer's Actuary" means Mr. Ian
Boonin of Coopers & Lybrand or such other Actuary as
Buyer may from time to time appoint for the purposes
of this Section 7.1.
(6) "Buyer's Scheme" means a scheme or
schemes to be nominated in accordance with Section
7.1(c), and where the context requires, means the
trustees of Buyer's Scheme.
(7) "Pension Transfer Date" means
Closing or where Buyer so requests a period of
continued participation by the Company as an
Employer under the Unionamerica Scheme (such
period being an "Interim Period") a date not later than
December 31, 1993 or such prior date falling between
Closing and December 31, 1993 as Buyer shall on
written notice to Seller select. Any participation during
an Interim Period shall be upon such terms and
conditions as Seller and Buyer shall agree but subject
always to the terms and conditions for participation by
an Employer set out in the Unionamerica Scheme at
the date of this Agreement.
(8) "Relevant Employees" means those
Key Employees who are active members of the
Unionamerica Scheme at Closing.
(9) "Transferring Employees" means
those of the Relevant Employees who continue to be
employed by the Company after Closing and who
become members of Buyer's Scheme with effect from
the Pension Transfer Date pursuant to the offer of
membership referred to in Section 7.1(c) and who
consent to a payment or transfer from the
Unionamerica Scheme to Buyer's Scheme in respect of
the benefits accrued up to the Pension Transfer Date
under the Unionamerica Scheme for and in respect of
them.
(10) "Unionamerica Scheme" means the
Unionamerica Pension Scheme (formerly known as the
Continental Reinsurance London Pension Scheme and
prior to that and from its inception known as the
Unionamerica Management Co. Ltd. Retirement and
Death Benefits Scheme) established by a declaration of
trust dated December 13, 1972 and now governed by a
Trust Deed and Rules dated August 22, 1991.
(11) "Seller's Actuary" means Mr.
Christopher Carr of The Alexander Consulting Group
or such other Actuary as Seller may from time to time
appoint for the purposes of this Section 7.1.
(b) Period between Exchange of Contracts and
Closing/Payment Date.
It is hereby agreed that:
(1) Seller shall procure that the
Unionamerica Scheme shall be maintained in full force
and effect until the Payment Date and shall use its best
efforts to procure that the Unionamerica Scheme
retains approval as an exempt approved scheme under
Chapter 1 of Part XIV of the Taxes Act.
(2) Seller shall procure that, with the
exception of such amendments as may be necessary to
enable the Unionamerica Scheme to comply with any
statutory provision or regulation or any direction from
or requirement of the Inland Revenue, no amendment
to the Unionamerica Scheme will be made prior to the
Payment Date if such amendment would affect the
Transfer Amount or the amount to be received by
Buyer's Scheme pursuant to this Section 7.1.
(3) Seller shall use its best efforts to
procure that, except with Buyer's prior written consent,
no act or omission shall occur before the Pension
Transfer Date which causes or would cause:
(A) The transfer of all or any
part of the Transfer Amount to Buyer's
Scheme to be unreasonably delayed or
prevented; or
(B) An enhancement or change
before the Payment Date of any benefits
payable or contingently payable under the
Unionamerica Scheme to any Relevant
Employee.
(4) Until the Pension Transfer Date all
benefits payable under the Unionamerica Scheme on
the death of a Relevant Employee before normal
pension age while in employment will be fully insured
under a policy with an insurance company of good
repute authorized to issue such insurance.
(c) Buyer's Scheme. Subject to Seller
complying with Section 7.1(b) above in all material respects,
Buyer shall use all reasonable efforts to procure before
Closing and shall in any event procure that before the
Payment Date and with effect from a date no later than the
Pension Transfer Date, Buyer will have nominated or
established (or become a party to) a retirement benefits
scheme which is approved or capable of approval under
Chapter I of Part XIV of the Taxes Act and to which the
trustees of the Unionamerica Scheme can make a transfer of
cash and/or assets without prejudicing the approval of the
Unionamerica Scheme as an exempt approved scheme. Buyer
shall procure that each of the Relevant Employees who
remain employed by the Company and who have not attained
the normal pension age under either Buyer's Scheme or the
Unionamerica Scheme at the Pension Transfer Date will be
offered membership of Buyer's Scheme with effect from the
Pension Transfer Date.
Subject to receipt by Buyer's Scheme of the
Transfer Amount together with Interest, if any, Buyer shall
procure that Buyer's Scheme shall credit the Transferring
Employees in respect of their pensionable service in the
Unionamerica Scheme before the Pension Transfer Date with
benefits on the terms of Buyer's Scheme which are, agreed by
Seller's Actuary and Buyer's Actuary, as being no less
favorable overall in value to those benefits which apply to the
Transferring Employees at the date of this Agreement.
(d) Determination of Transfer Amount.
(1) As soon as reasonably practicable
after the date of this Agreement, Seller shall instruct
Seller's Actuary to prepare prior to Closing such
calculations as may reasonably be required by Buyer's
Actuary for the purpose of verifying the Transfer
Amount and to make available such calculations
promptly to Buyer's Actuary.
(2) As soon as reasonably practicable
after Closing, Seller shall instruct Seller's Actuary to
calculate the Transfer Amount and to submit his
findings to Buyer's Actuary for verification and
agreement by him. If Buyer's Actuary agrees that such
computation is in accordance with this Section 7.1, he
shall notify in writing, within thirty (30) days after
receipt of Seller's Actuary's findings, Seller's Actuary
and Buyer of such agreement. If Buyer's Actuary does
not agree as aforesaid, Seller's Actuary and Buyer's
Actuary will then seek within thirty (30) days to
negotiate a satisfactory agreement. If Seller's Actuary
and Buyer's Actuary remain unable to agree upon the
Transfer Amount after such period, the matter shall be
referred to an Independent Actuary pursuant to Section
7.1(g).
(3) Seller shall use its best efforts to
procure that all such information as Buyer's Actuary
may reasonably require for the purpose of verifying and
agreeing the Transfer Amount shall be made promptly
available to Buyer's Actuary and that all such
information shall be true and complete.
(4) Seller and Buyer shall use their best
efforts to expedite the calculation and agreement of the
Transfer Amount.
(e) Payment of Transfer Amount. Seller hereby
(subject to Buyer complying in all material respects with its
obligations under Section 7.1(c) above) consents to the
trustees of the Unionamerica Scheme making a payment in
cash (or such other assets of mid-market value as Buyer may
agree or a combination of both) equal to the Transfer
Amount on the Payment Date together with Interest, if any,
from the Payment Date to the date of actual payment. Seller
shall procure that with effect from the Pension Transfer Date
the Company is released and discharged from all liabilities
under or in connection with the Unionamerica Scheme or to
the trustees of the Unionamerica Scheme.
To the extent that the amount received on or
before the Payment Date by Buyer's Scheme from the
Unionamerica Scheme falls short of that which would have
been paid (or if no amount is paid) but is payable had the
Transfer Amount in respect of Transferring Employees been
calculated in accordance with the Actuary's Letter and this
Section 7.1 (the amount of such difference being referred to in
this paragraph as the "shortfall"), Seller then shall pay
forthwith to Buyer within seven (7) days of the Payment Date
an amount equal to the shortfall together with Interest. Buyer
shall cause an amount equal to the shortfall to be paid to the
trustees of Buyer's Scheme as soon as reasonably practicable
and in any event no later than one month after receipt of the
shortfall by Buyer.
(f) Additional Voluntary Contributions. Any
money purchase benefits (as defined in Section 66(1) of the
Social Security Pension Act of 1975) attributable to additional
voluntary contributions made (or deemed to have been made)
by the Transferring Employees to the Unionamerica Scheme
together with the accrued investment return thereon shall be
disregarded for the purpose of determining the Transfer
Amount.
Seller shall use its best efforts to procure that on
the Payment Date, where a Transferring Employee so requests
and subject to applicable legislative and regulatory
requirements, the trustees of the Unionamerica Scheme shall
pay or transfer to the trustees of Buyer's Scheme, in addition
to the Transfer Amount together with Interest, if any, all sums
or policies which Seller's Actuary determines and Buyer's
Actuary agrees to relate to the additional voluntary
contributions paid by the Transferring Employees to the
Unionamerica Scheme.
(g) Disputes. Any dispute between Seller and
Buyer or Seller's Actuary and Buyer's Actuary concerning the
calculation of the Transfer Amount in accordance with the
Actuary's Letter or any other matter of an actuarial nature, in
the absence of agreement between them, shall be referred to
an independent actuary agreed by Seller and Buyer or, failing
such agreement within fourteen (14) days of one party calling
upon the other in writing so to agree, appointed by the
President for the time being of the Institute of Actuaries of
England and Wales. Any such independent actuary shall
reach his decision on the basis of the provisions of this Section
7.1 and the Actuary's Letter and shall be final and binding
upon Seller and Buyer. The charges and expenses of the
independent actuary in respect of any such reference shall be
borne equally by Seller and Buyer.
SECTION 7.2. Non-Competition. From the
date of this Agreement to the Closing Date, and for a period
of two (2) years after the Closing Date, Seller covenants that
except in connection with the transactions contemplated by
this Agreement, it shall not, and it shall cause its Affiliates not
to, individually or jointly with others, directly or indirectly,
whether for its own account or for that of any other Person,
own or hold any ownership or other participating interest in,
or manage, operate, control or otherwise participate as such
in, or act as a partner, principal or proprietor of any Person
engaged primarily in the traditional assumed treaty and
assumed facultative reinsurance business (exclusive of co-
insurance and business reinsured under cedents' marine
accounts) originated in the London Market and serviced from
within the United Kingdom (the "Unionamerica Business");
provided, however, that it shall not be a violation of this
Section 7.2 for Seller and its Affiliates to (a) own or hold a
passive investment as part of its investment portfolio in any
Person which engages in the Unionamerica Business, so long
as any such investment that is an equity investment does not
exceed five percent (5%) of the aggregate outstanding capital
stock (or other equity ownership interest) of such Person,
(b) acquire a Person no more than five percent (5%) of the
consolidated revenues of which for each of the three (3) fiscal
years of such Person ended prior to the acquisition of such
Person by Seller or any of its Affiliates were derived from the
Unionamerica Business, or (c) underwrite insurance and/or
reinsurance and/or provide insurance and/or reinsurance
related services to existing and successor insureds, insurers,
reinsurers, retrocessionaires and other clients of Seller and its
Affiliates (other than the Company and CRC(UK) to the
extent of the Unionamerica Business) in continuance of
arrangements and contracts existing with Seller and its
Affiliates (other than the Company and CRC(UK) to the
extent of the Unionamerica Business) on the date of this
Agreement (including all renewals or extensions thereof).
SECTION 7.3. Public Announcements. Buyer,
Parent and Seller will consult with each other before issuing
any press release or otherwise making any public statements
regarding the transactions contemplated by the Transaction
Documents, and will not issue any such release or make any
such statement, prior to such consultation or, after such
consultation, if any party is not reasonably satisfied with the
substance of such release or statement. Notwithstanding the
foregoing, any party hereto may make any disclosure required
to be made by it under applicable law (including United
States Federal securities law), stock exchange regulations or
order of a court of competent jurisdiction if it determines in
good faith, upon advice of counsel, that it is necessary to do
so and gives prior notice to the other parties hereto, using its
best efforts (given any time constraints) to contact the other
parties hereto and discuss such disclosure with such other
party(s).
SECTION 7.4. Expenses.
(a) Whether or not the transactions
contemplated by this Agreement are consummated or this
Agreement is terminated pursuant to Section 9.1, except as
provided in Section 7.4(b), all fees and expenses incurred in
connection with the Transaction Documents and the
transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses.
(b) If this Agreement is terminated by Buyer
pursuant to (1) Section 9.1(c), as a result of a breach that has
or can reasonably be expected to have a financial consequence
to the Company of US $3,000,000 or more or materially
impairs the ability of any party to consummate the
transactions contemplated by this Agreement, or (2) Section
9.1(d), as a result of Buyer's rejection (pursuant to Section
7.10) of Seller's proposed amendment of a Schedule to this
Agreement, which proposed amendment was required to
reflect changes resulting from an act or omission of Seller or
any of its Affiliates, then, in each such case, Seller shall pay to
Buyer, in next day funds, an amount equal to 66-2/3% of the
reasonable out-of-pocket fees and expenses incurred or paid
by or on behalf of Buyer and its Affiliates in connection with
the Transaction Documents (including Buyer's due diligence
investigation, negotiations and the letter of intent preceding
this Agreement) or the consummation of any transactions
contemplated by the Transaction Documents, including all
reasonable fees and expenses of counsel, investment bankers,
accountants, actuaries, lenders, experts and consultants to
Buyer and its Affiliates; provided, however, that Seller's
aggregate liability for such fees and expenses shall not exceed
US $1,000,000; and, provided, further, that Buyer shall
provide Seller with reasonable documentation of the fees and
expenses for which Buyer seeks payment hereunder.
SECTION 7.5. D & O Insurance. On and after
the Closing Date, Seller shall provide (a) insurance coverage
for M.A.J. Hayden covering the matters described in Section
8.2(a)(5) regardless of when claims arose or are made, without
any coverage limitations, and (b) insurance coverage for all
present and former directors and officers of the Company
covering claims made after the Closing Date in respect of acts
or omissions occurring prior to the Closing Date, subject to
coverage limitations similar to those set forth in the directors
and officers insurance coverage that the Company has
obtained for its directors and officers as of the date the claim
is made but in any event with a coverage limit of 5,000,000 pounds in
the aggregate per annum, provided, however, that such
coverage shall not extend to any such director or officer who
does not cooperate in a reasonable manner with Seller in the
defense of any such claim. Parent and Buyer shall (and shall
cause the Company to) use reasonable commercial efforts to
obtain the cooperation of such directors and officers in the
defense of any claims, actions and proceedings covered by
such insurance.
SECTION 7.6. Seller's Covenants Regarding
Senior Preference Shares. In connection with any sale,
transfer or other disposition of all or any part of the Senior
Preference Shares under an exemption from registration under
the Securities Act, if requested by Parent, Seller will deliver to
Parent an opinion of counsel experienced in Securities Act
matters (which may be the General Counsel of Seller),
reasonably satisfactory in form and substance to Parent, that
such exemption is available. Seller hereby agrees and
acknowledges that upon original issuance thereof, and until
such time as the same is no longer required under the
applicable requirements of the Securities Act, the Senior
Preference Shares (and all securities issued in exchange
therefor or substitution thereof) shall bear, until such
restrictions are no longer applicable, the following legend:
"THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"). THEY MAY
NOT BE SOLD OR TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF THE 1933
ACT AND ANY APPLICABLE STATE BLUE
SKY LAWS OR SECURITIES LAWS OR
PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH PROVISIONS."
SECTION 7.7. Use of Certain Names.
Immediately following the Closing, Seller shall, and shall
cause all of its Affiliates to, cease conducting business under
the name "Unionamerica" or any variant thereof, whether
alone or in combination, and shall promptly cause any
Affiliate whose corporate name contains such words to change
its name to a name that does not contain such words (it being
understood that the licenses referred to in Schedule 3.20(a)(1)
with respect to the Unionamerica service mark will be
terminated at or immediately prior to the Closing). At or
immediately prior to the Closing, Seller shall assign to the
Company all of its right, title and interest in and to the service
marks set forth on Schedule 3.20, free from any material
Liens, pursuant to the Assignment of Trademarks. Seller shall
cause a duly executed assignment to the Company to be
recorded at each relevant national trademark registry (or
similar Governmental Authority), the reasonable costs
incurred in such recordings to be borne by Buyer. Except as
may be necessary in connection with the performance of their
obligations under the Run-Off Agreement, Buyer, Parent and
their Affiliates shall be prohibited from using the name
"Continental" or any variant thereof, whether alone or in
combination.
SECTION 7.8. Further Assurances. (a) On and
after the Closing Date, Buyer, Parent and Seller will take all
appropriate actions and execute all documents, instruments or
conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including
those in order to put Buyer in possession and operating
control of the business of the Company.
(b) The parties shall cause the accounting
treatment of the contribution in the amount of US $44,928,493
(referred to in Section 3.26) in the accounts of the Company
(including the accounts of the Company to be prepared and
audited in respect of the year ending December 31, 1993 for
the purpose of the Companies Act) to be as set forth in
Schedule 7.8(b).
SECTION 7.9. Books and Records. Buyer and
Seller agree that with respect to any books, records and files
relating to the business, properties, assets or operations of the
Company, prior to the Closing Date in the possession of Buyer
and its Affiliates, on the one hand, or Seller and its Affiliates,
on the other hand, each party (at its expense) shall have the
right, to the extent reasonably requested by such party, to
inspect and to make copies of the same at any time during
normal business hours for any proper purpose. Seller further
agrees that, to the extent any such books, records and files
have not otherwise been delivered to the Company or Buyer,
Seller will not, and will not permit any of its Affiliates to,
destroy or dispose of any such books, records or files without
first offering to provide such books, records or files to Buyer
at no expense to Seller or any of its Affiliates. Buyer further
agrees that it will not, and will not permit any of its Affiliates
to, destroy or dispose of any such books, records or files
without first offering to provide such books, records or files to
Seller at no expense to Buyer or any of its Affiliates.
SECTION 7.10. Amendments of Schedules.
(a) Seller shall be permitted to amend the
Schedules to this Agreement only to the extent necessary to
reflect changes resulting from events occurring after the date
of this Agreement (each, an "Intervening Event").
Notwithstanding anything contained in this Section 7.10, Seller
shall not be permitted to amend any of the Schedules for any
other reason, including to correct or complete Schedules that
did not provide accurate disclosure of facts and circumstances
existing as of the date of this Agreement.
(b) If Seller proposes to amend a Schedule
prior to the Closing Date, Seller shall provide Buyer a copy of
the proposed amendment of such Schedule, together with a
certificate, duly executed by an executive officer of Seller,
setting forth a description of the Intervening Event (including
the date on which such Intervening Event occurred) requiring
such proposed amendment. Buyer shall in good faith review
such proposed amendment and certificate and shall promptly
notify Seller in writing whether it accepts or rejects such
proposed amendment; provided, however, that Buyer may not
reject any such proposed amendment unless Buyer determines,
in its good faith reasonable judgment, that without such
proposed amendment, the applicable representation and
warranty would not be true, complete and correct (if such
representation and warranty is qualified as to materiality) or
would not be true, complete and correct in all material
respects (if such representation and warranty is not qualified
as to materiality). If Buyer accepts such proposed
amendment, then the applicable Schedule and the related
representation and warranty shall be amended to reflect such
proposed amendment, effective as of the date of Buyer's
acceptance. If Buyer rejects such proposed amendment, then
Buyer may, by written notice to Seller, terminate this
Agreement pursuant to Section 9.1(d). Any notice of rejection
provided by Buyer hereunder must be accompanied by a
certificate, duly executed by a director of Buyer, setting forth
the basis for such rejection.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Survival of Representations, etc.
All representations and warranties contained in Articles III
and IV or made pursuant thereto shall not be affected by any
right of investigation by the parties or any knowledge of facts
determined in accordance therewith, and shall survive the
Closing until the date that is the first anniversary of the
Closing Date except that (a) the representations and
warranties in Sections 3.8, 3.9, 3.10, 3.13, 3.15, 3.19, 3.21, and
3.27 shall survive the Closing until May 31, 1995 and (b) the
representations and warranties in Section 3.14 shall survive
the Closing until the expiration of the applicable statutes of
limitation and (c) the representations and warranties in
Sections 3.5, 3.26 and 4.5 shall survive the Closing and
continue indefinitely. No action for indemnification under this
Article VIII may be brought with respect to such
representations and warranties after the expiration dates
indicated in the preceding sentence unless, prior to the date
such representations and warranties expire, the party seeking
indemnification has notified in reasonable detail the party
from whom indemnification is sought of a claim for indemnity
hereunder.
SECTION 8.2. Indemnification.
(a) Subject to Sections 3.30, 8.1 and 8.2(b)
and further subject (without limitation) to Section 6.2 of the
Tax Indemnification Agreement, and as limited by Sections
8.2(a)(4) and 8.2(a)(5), from and after the Closing, Seller
agrees to indemnify Buyer, Parent and the Company against,
and hold Buyer, Parent and the Company harmless from, any
damage (including punitive damages and treble damages),
claim, liability or expense, including interest, fines, penalties
and reasonable attorneys' fees, in each case whether incurred
in connection with a final judgment, award or disposition of
the matter or settlement (collectively "Damages"), arising out
of:
(1) the breach of any representation
or warranty of Seller that survives the Closing for such
period of survival as provided in Section 8.1 and the
breach of any covenant or agreement of Seller
contained in this Agreement, provided, that in no event
shall Seller have any liability with respect to the
conversion of the Shares into warrants to bearer;
(2) the contribution by Seller to the
Company (more fully described in Section 3.26);
(3) the Company's ownership or
leasehold interest in any real property, including any
Damages relating to pollution, human health and safety
or protection of the environment;
(4) those lawsuits consolidated by
order of the Judicial Panel on Multidistrict Litigation
and known as the Insurance Antitrust Litigation,
brought against the Company by any State attorneys
general or private plaintiffs alleging violations by the
Company of United States Federal or State antitrust
laws during the period prior to the Closing Date,
provided, that Seller's indemnification obligation for
such matters shall be limited to money Damages
(including cash required of the Company in order to
fund any reinsurance entity separate from the
Company established under any settlement or final
award or adjudication or other final disposition (a
"Reinsurance Provider")) and all fees and expenses
incurred by plaintiffs' counsel to the extent the
Company is liable therefor but in no event shall include
any loss of business or consequential damages or
damages resulting from any change in the manner in
which the business of the Company is operated as a
result of such settlement, final award, adjudication or
other final disposition, and, provided, further, that
Seller shall, at its option, either (A) acquire any shares
or other ownership interest in any Reinsurance
Provider that the Company or any of its Affiliates
would otherwise be required to acquire in connection
with any such settlement, final award, adjudication or
other final disposition or (B) indemnify the Company
for any Damages arising out of the Company's
acquisition of such ownership interests, provided that in
the case of clause (B) above, Seller shall receive all
benefits associated with any such ownership interests;
and
(5) any judgment after final
adjudication or settlement, with specific damages
awarded or agreed to against M.A.J. Hayden under the
first, second, and fifth counts of the complaints of New
England Reinsurance Corporation in the pending
lawsuits captioned New England Reinsurance
Corporation v. Palange & Associates, Inc. et al.
(Commonwealth of Massachusetts Superior Court,
Suffolk, Docket Nos. 90-4383 and 90-1926) and in any
subsequent actions brought against M.A.J. Hayden by
private plaintiffs, arising out of the same facts and only
for the same allegations; it being understood that to the
extent that the Company has indemnified M.A.J.
Hayden for such liability, and/or to the extent of any
judgment after final adjudication or settlement, with
specific damages awarded or agreed to against the
Company under the aforesaid counts or allegations
solely for its vicarious liability for the alleged actions of
M.A.J. Hayden, the Seller shall indemnify the
Company. Reasonable attorneys' fees for joint counsel
and defense costs and expenses in connection with the
above counts or allegations shall be apportioned to the
Seller on the same basis that the specific damages
finally awarded or agreed to against M.A.J. Hayden
and/or the Company for such vicarious liability on
those counts or allegations bear to the specific damages
finally awarded or agreed to against the Company for
its direct liability under such counts or allegations and
under all other counts or allegations. Parent and Buyer
shall (and shall cause the Company to) use reasonable
commercial efforts to obtain the cooperation of M.A.J.
Hayden in the defense of such lawsuits.
(b) In addition to the limitations set forth in Section
8.2(a), Seller's indemnification obligation shall be
limited as follows:
(1) the amount of any Damages to be
indemnified by Seller under this Section 8.2 or Sections
7.1 or 8.4 shall be reduced by an amount (the "Buyer
Tax Benefit") equal to the excess of (A) the amount of
Taxes that would have been payable in a taxable year
by Buyer, Parent or the Company, as the case may be,
if Buyer, Parent or the Company had not incurred the
Damages over (B) the Taxes actually payable by Buyer,
Parent or the Company, as the case may be, in such
taxable year, provided, that the Buyer Tax Benefit shall
include any refund or reduction of Taxes actually
received or realized from the incurrence of the
Damages;
(2) the amount of any Damages to be
indemnified by Seller under this Section 8.2 or Sections
7.1 or 8.4 shall be reduced by the net amount that
Buyer, Parent or the Company, as the case may be,
recovers (after deducting all attorneys' fees, expenses
and other costs of recovery) from any insurer or third
party liable for such Damages provided, that Buyer,
Parent, or the Company, as the case may be, shall not
be obligated to request, pursue or obtain such
insurance or third party proceeds prior to receiving
indemnification proceeds from Seller, and provided,
further, that to the extent that Seller makes any
indemnification payment to Buyer, Parent or the
Company, Seller shall be subrogated to the rights of
Buyer, Parent or the Company, as the case may be, to
obtain such insurance or third party proceeds, and,
upon its receipt of the full amount of the
indemnification payment owing hereunder with respect
to such matter, Buyer, Parent or the Company, as the
case may be, shall assign all such rights to Seller (it
being understood that if such rights are not assignable,
then Buyer, Parent or the Company, as the case may
be, will cooperate with Seller to the extent reasonably
requested in order to pursue such subrogated rights);
(3) Buyer, Parent and the Company
shall be entitled to indemnification for Damages under
this Section 8.2 only when the aggregate of all such
Damages exceeds US $1,000,000 (in which event Buyer,
Parent and the Company shall be entitled to
indemnification for such Damages in excess of
US $500,000), provided, that the limitations set forth in
this subparagraph (b)(3) shall not (subject to
subparagraph (b)(5) below) limit any claim for
indemnification under the Tax Indemnification
Agreement (which is made in accordance with the
terms thereof) even though the matter that resulted in
such claim also resulted in a breach of Section 3.14;
(4) Seller's aggregate liability under
this Section 8.2 shall not exceed US $50,000,000,
provided, that the limitations or indemnification for
Damages set forth in this subparagraph (b)(4) shall not
(subject to subparagraph (b)(5) below) limit any claim
for indemnification under the Tax Indemnification
Agreement (which is made in accordance with the
terms thereof) even though the matter that resulted in
such claim also resulted in a breach of Section 3.14;
and
(5) Seller shall not be liable for
duplicative indemnification payments under the
Transaction Documents. In the event that Buyer could
proceed against Seller either in relation to any of the
matters contained in Section 3.14 hereof or under the
Tax Indemnification Agreement in respect of the same
matter and chooses to proceed under Section 3.14,
Buyer shall not be entitled to any greater recovery than
it would have been entitled to if it had proceeded
under the Tax Indemnification Agreement.
(c) Subject to Section 8.2(d), from and after
the Closing, Buyer and Parent (jointly and severally) agree to
indemnify Seller and its Affiliates and to cause the Company
to indemnify Seller and its Affiliates against and hold Seller
and its Affiliates harmless, from any Damages (1) arising out
of the breach of any representation or warranty of Buyer or
Parent that survives the Closing for such period of survival as
provided in Section 8.1, and the breach of any covenant or
agreement of Buyer or Parent contained in this Agreement,
and (2) any liability (other than liability relating to Taxes)
arising solely from the events and occurrences described in
Section 3.10 of the Tax Indemnification Agreement.
(d) In addition to the limitations set forth in
Section 8.2(c), the Buyer's and Parent's indemnification
obligations shall be limited as follows:
(1) the amount of any Damages to be
indemnified by Buyer and Parent under this Section 8.2
shall be reduced by an amount (the "Seller Tax
Benefit") equal to the excess of (A) the amount of
Taxes that would have been payable in a taxable year
by Seller if Seller had not incurred the Damages over
(B) the Taxes actually payable by Seller in such taxable
year, provided, that the Seller Tax Benefit shall include
any refund or reduction of Taxes actually received or
realized from the incurrence of the Damages;
(2) the amount of any Damages to be
indemnified under this Section 8.2 shall be reduced by
the net amount that Seller or its Affiliates recovers
(after deducting all attorneys' fees, expenses, and other
costs of recovery) from any insurer or third party liable
for such Damages, provided, that Seller or its Affiliates
shall not be obligated to request, pursue or obtain such
insurance or third party proceeds prior to enforcing or
receiving indemnification proceeds from Buyer and/or
Parent, and provided, further, that to the extent that
Buyer makes any indemnification payment to Seller or
its Affiliates, Buyer or Parent shall be subrogated to
the rights of Seller or its Affiliates, as the case may be,
to obtain such insurance or third party proceeds and,
upon its receipt of the full amount of the
indemnification payment owing hereunder, with respect
to such matter, Seller or its Affiliates, as the case shall
be, shall assign all such rights to Buyer or Parent (it
being understood that if such rights are not assignable,
then Seller or its Affiliates, as the case may be, will
cooperate with Buyer and Parent to the extent
reasonably requested in order to pursue such
subrogated rights);
(3) Seller shall be entitled to
indemnification for Damages under this Section 8.2
only when the aggregate of all such Damages exceeds
US $1,000,000 (in which event Seller shall be entitled
to indemnification for such Damages in excess of
US $500,000);
(4) the aggregate liability of Buyer and
Parent under this Section 8.2 shall not exceed
US $50,000,000; and
(5) Buyer and Parent shall not be
liable for duplicative indemnification payments under
the Transaction Documents.
SECTION 8.3. Indemnification Procedures.
(a) This Section 8.3 shall not apply to claims
relating to Tax matters (Section 3.14) or to LUC
Indemnification (Section 8.4) or to claims under the Tax
Indemnification Agreement, the procedures relating to such
issues being set forth in the respective Section of this
Agreement or in the Tax Indemnification Agreement, as the
case may be. Upon any Person entitled to be indemnified
under Section 8.2 (the "Indemnified Person") receiving notice
of any claim or the commencement of any action, or otherwise
becoming aware of a fact, condition or event for which
indemnification is provided under Section 8.2, the Indemnified
Person will reasonably promptly notify the Person from whom
indemnification is sought (the "Indemnifying Person") in
writing of such fact, condition or event, but in any event
within ten (10) days after such Indemnified Person has actual
knowledge of the facts constituting the basis for
indemnification; provided, however, that the failure to provide
such notice shall not relieve the Indemnifying Person of its
indemnification obligations hereunder unless such failure
materially prejudices the ability of such Indemnifying Person
to contest such Damages. If such fact, condition or event is
the assertion of a claim or the bringing of any action or
proceeding by a third party, then the Indemnifying Person will
be entitled to participate in or take charge of the defense or
investigation of such claim, action or proceeding (or that part
of any claim, action or proceeding for which indemnification is
being provided) with counsel reasonably satisfactory to the
Indemnified Person; provided, however, that the Indemnifying
Person and its counsel shall proceed with diligence and in
good faith with respect thereto. If such fact, condition or
event involves a dispute or review by any Governmental
Authority or Tax Authority or could affect the Indemnified
Person's relationship with any Governmental Authority or Tax
Authority, then the Indemnifying Person shall regularly consult
with the Indemnified Person regarding the Indemnifying
Person's course of action. After notice to the Indemnified
Person of the Indemnifying Person's election to assume the
defense or investigation of any such claim, action or
proceeding or part thereof (as the case may be), the
Indemnifying Person shall not be liable to the Indemnified
Person under this Article VIII for any legal or other expenses
in connection with the defense thereof other than reasonable
costs of investigation, provided that the Indemnified Person
shall have the right to employ separate counsel and to
participate in the defense or investigation of such claim, action
or proceeding or part thereof (as the case may be) if (1) the
Indemnified Person has reasonably concluded that use of
counsel of the Indemnifying Person's choice could reasonably
be expected to give rise to a conflict of interest (in which
event the Indemnifying Person shall bear one-half (.5) of the
expenses of such separate counsel) or (2) the Indemnifying
Person shall not have employed counsel to represent the
Indemnified Person within a reasonable time after notice of
the assertion of any such claim or institution of any such
action or proceeding (in which event the Indemnifying Person
shall bear all the reasonable expenses of such separate
counsel). In the event that an Indemnifying Person elects not
to assume the defense of a claim, action or proceeding or part
thereof (as the case may be), the Indemnified Person and its
counsel shall proceed with diligence and in good faith with
respect thereto and the Indemnifying Person will not be
obligated to pay the fees and expenses of more than one
counsel for all Indemnified Persons with respect to such claim,
action or proceeding unless the Indemnified Person has
reasonably concluded that use of one counsel would
reasonably be expected to give rise to a conflict of interest
between such Indemnified Person and any other of such
Indemnified Persons with respect to such claim or part thereof
(as the case may be) in which event the Indemnifying Person
shall bear one-half (.5) of the expenses of such additional
counsel. The parties hereto agree to render to each other
such assistance as may be reasonably requested in order to
insure the proper and adequate defense of any such claim,
action or proceeding.
(b) If the Indemnifying Person has elected to
assume the defense or investigation of any claim, action or
proceeding or part thereof pursuant to Section 8.3(a), the
Indemnifying Person shall be entitled to settle or compromise
such claim, action or proceeding or part thereof; provided,
however, that any such settlement or compromise involving
the imposition of equitable remedies or involving the
imposition of any material obligations on the Indemnified
Person other than financial obligations for which such
Indemnified Person shall be indemnified hereunder shall
require the prior written consent of the Indemnified Person
(which consent shall not be unreasonably withheld). If the
Indemnifying Person elects not to assume the defense of a
claim, action or proceeding or part thereof (as the case may
be) pursuant to Section 8.3(a), the Indemnified Person shall
be entitled to settle or compromise such claim, action or
proceeding or part thereof (as the case may be) only with the
consent of the Indemnifying Person (which consent shall not
be unreasonably withheld). If the Indemnified Person is
represented by separate counsel pursuant to Section 8.3(a),
such settlement or compromise shall be effected only with the
prior written consent of the Indemnified Person (which
consent shall not be unreasonably withheld). No Indemnifying
Person shall be required to consent to entry of any judgment
or enter into any settlement or compromise which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Person of a release
from all liability in respect to such claim or litigation.
Whenever the Indemnified Person or the Indemnifying Person
either receives or makes a firm offer to settle a claim for
which indemnification is sought under Section 8.2, it shall
promptly notify the other of such offer. If the Indemnifying
Person refuses to accept such offer within ten (10) Business
Days after receipt of such offer (or of notice thereof), such
claim shall continue to be contested and, if such claim is
within the scope of the Indemnifying Person's indemnity
contained in Section 8.2, the Indemnified Person shall be
indemnified pursuant to the terms hereof. If the Indemnifying
Person notifies the Indemnified Person in writing that the
Indemnifying Person desires to accept such offer, but the
Indemnified Person refuses to accept such offer within
ten (10) Business Days after receipt of such notice, the
Indemnified Person may continue to contest such claim and,
in such event, the total maximum liability of the Indemnifying
Person to indemnify or otherwise reimburse the Indemnified
Person hereunder with respect to such claim shall be limited
to, and shall not exceed, the amount of such offer, plus
reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and disbursements) to the date of
notice that the Indemnifying Person desires to accept such
offer; provided, however, that this sentence shall not apply to
any settlement of any claim involving the imposition of
equitable remedies or to any settlement imposing any material
obligations on such Indemnified Person other than financial
obligations for which such Indemnified Person will be
indemnified hereunder.
SECTION 8.4. LUC Indemnification.
(a) As used in this Agreement:
(1) "LUC Benefits" means the aggregate value, net
of all Taxes thereon, of all amounts or benefits in money
or money's worth for the time being received by the
Company:
(A) under or by virtue of the
Shareholders Agreement (as defined in Section
8.4(a)(2)(A)(ii)(I)) or any documents entered
into by the Company pursuant thereto or the
membership of or the holding by the Company
of any shares or securities in Market Building
Limited ("MBL") other than any such shares or
securities voluntarily acquired by the Company
after the date hereof; and
(B) by virtue of the Company
securing one or more underleases of
accommodation in Number 3 Minster Court
London EC3 (also known as the London
Underwriting Centre ("LUC"))
("Accommodation") on rental or other terms
more favorable to the Company (by virtue of its
status as a shareholder in MBL or its
participation in the Shareholders Agreement)
than would have been available in the open
market to a non-shareholder in MBL in respect
of a similar underlease of similar
accommodation space granted at the same time
as the relevant underlease (it being
acknowledged that the terms currently proposed
by MBL on which the Company is proposing to
take an underlease of Suite 1/2 in the LUC are
no more favorable to the Company than those
available in the open market to a non-
shareholder in MBL) unless at the time of the
grant of the relevant underlease the only shares
in MBL held by the Company are shares
voluntarily acquired by the Company after the
date hereof; and
(C) being the net proceeds of
sale arising from a disposal of (i) the shares in
MBL which are owned by the Company as at
the date hereof less their value as of the date of
this Agreement which is agreed at UK 10,000 and
(ii) any other shares in MBL acquired by the
Company other than any voluntarily acquired by
the Company after the date hereof; and
(D) amounts received by the Company under any
sub-underlease of Excess Space (as defined below);
provided, however, that in the case of any benefit not
comprising the receipt by the Company of cash the
value of such benefit shall not be treated as having
been received by the Company until such benefit shall
have been realized by the Company and the value of
such benefit shall be the value realized by the
Company in respect thereof;
but does not include:
(E) any amounts or benefits
with a value or aggregate value for any calendar
year of less than UK 10,000; and
(F) the repayment by MBL of
any loan made by the Company to MBL prior to
the date hereof and interest paid by MBL on
such loan; and
(G) any amounts or benefits
arising under or by virtue of any shares or
securities in MBL or the ownership thereof
which have been voluntarily acquired by the
Company after the date hereof or any benefits
received by the Company under or by virtue of
the Shareholders Agreement at a time when the
only shares in MBL owned by the Company are
shares voluntarily acquired after the date hereof.
(2) "LUC Liabilities" means:
(A) all sums paid by the
Company by virtue of the obligations undertaken
or incurred by the Company pursuant to:
(i) any guarantee or similar
assurance given by the Company, or
required to be given by the Company,
pursuant to the Shareholders Agreement
or otherwise, in relation to or in
connection with the LUC or the
construction or fitting out thereof or the
supply of goods thereto including:
(I) the guarantee by the
Company of the obligations of
MBL and/or The London
Underwriting Centre Limited
contained in the Agreement
relating to the development and
leasing of the LUC dated 27
February 1990 (the "Development
Agreement"); and
(II) the guarantee by the
Company of the Equipment Lease
Agreement dated 28 September
1990; and
(III) the guarantee
of the Company to be contained in
the Lease of the LUC to be
granted to MBL pursuant to the
Development Agreement; and
(IV) any liability of
the Company as tenant or
otherwise in the event of the
Company or any other guarantor
of the said Lease of the LUC
(whether alone or with others)
being required to accept and take
up a new Lease by virtue of its
obligations to be contained in the
guarantee referred to in sub-
paragraph (III) of this Section
8.4(a)(2)(A)(i); and
(V) any guarantee or
assurance to be given in any
sublease of part of the LUC
(excluding any such guarantees or
assurances given by the Company
in relation to any underlease of
Accommodation for the use and
enjoyment of the Company or any
Affiliate and any related or
supplemental documentation
required to be entered into
pursuant to or in conjunction with
the grant of such underlease of
Accommodation);
(ii) (I) the Shareholders
Agreement dated 13 June 1989
relating to MBL as varied and
supplemented by a Supplemental
Shareholders Agreement dated 27
February 1990 and a Second
Supplemental Shareholders
Agreement dated 13 November
1990 (together "the Shareholders
Agreement") (save and except for
any sublease of Accommodation
required to be entered into
pursuant to Clause 10 thereof and
except for Clauses 11.2 and 12
thereof) (including any documents
or liabilities the Company may be
required to enter into or undertake
pursuant to the Shareholders
Agreement) or the membership of
or the holding by the Company of
any shares or securities in MBL
(other than any voluntarily
acquired by the Company after the
date of this Agreement) or any
nominee of the Company being a
director thereof; and
(II) any sublease of
Accommodation (and all liabilities
and outgoings associated
therewith) required to be entered
into pursuant to Clause 10 of the
Shareholders Agreement (other
than the initial underlease of Suite
1/2 in the LUC which the
Company is proposing to accept
even if a requirement to accept the
same shall be made under the said
Clause 10); provided, however,
that if the Company or any of its
Affiliates shall occupy such
Accommodation or any part
thereof the liabilities and
outgoings associated with such
Accommodation or the relevant
part thereof (duly apportioned pro
rata to the net lettable area
occupied compared to the total net
lettable area thereof) shall be
excluded from the LUC Liabilities
(any such Accommodation in
excess of the requirements of the
Company or its Affiliates being
herein referred as "Excess Space");
and the references to the documents and
agreements referred to above in this
Section 8.4(a)(2)(A) shall be deemed to include
references to the same as varied, supplemented
or replaced from time to time whether before or
after the date hereof;
(B) any unrecovered costs,
expenses and liabilities incurred by the Company
pursuant to Section 8.4(d) and in connection
with performing its obligations under Section
8.4(d)(4) and in enforcing any sub-underlease of
Excess Space; and
(C) any liability of the
Company for breach of Clause 11.2 of the
Shareholders Agreement by virtue of compliance
by the Company with the provisions of Section
8.4(e) or Section 8.4(f)(2) or in respect of the
Company's agreement herein to take actions
which will or may breach the said Clause 11.2
unless such liability arises by virtue of a breach
by the Company of Section 8.4(e)(2)(B)(ii);
provided, however, that there shall be excluded from the LUC
Liabilities any amount of Tax to the extent that the Company
is able to reclaim the same or claim a credit against any other
liability to Tax in its dealings with the relevant Tax Authority.
(b) (1) Notwithstanding and without
regard to the application of Section 8.1, Seller hereby
covenants with Buyer to indemnify the Company
against any and all Damages which the Company has
incurred but not yet discharged or which the Company
incurs in the future under or in connection with the
LUC Liabilities;
(2) Buyer hereby covenants with Seller
to procure the Company to pay to Seller a sum or sums
equivalent to the LUC Benefits which the Company
receives;
(3) (A) Payments under
paragraphs (1) and (2) above shall be accounted
for as set out in Section 8.4(c) below.
(B) In respect of amounts or
benefits the aggregate of which for the relevant
calendar year is initially less than UK 10,000 but
which subsequently exceeds that amount in the
relevant calendar year and fall within the
definition of LUC Benefits, the full amount of
the same then received in the relevant calendar
year shall be treated as an LUC Benefit
received by the Company in the fiscal quarter in
which the Company receives the amount as a
result of which the said aggregate exceeds
UK 10,000, and subsequent receipts in that calendar
year of amounts or benefits in excess of the
initial UK 10,000 shall be accounted for as received
without reference to the said figure of UK 10,000.
(c)(1) At the end of each fiscal quarter, the
LUC Liabilities incurred by the Company in that quarter and
the LUC Benefits received by the Company in that quarter
shall be calculated and:
(A) if the LUC Liabilities incurred by
the Company in that quarter are greater than the LUC
Benefits received by the Company in that quarter then
Seller shall pay the difference to the Company.
(B) if the LUC Benefits received by
the Company in that quarter are greater than the LUC
Liabilities incurred by the Company in that quarter,
then the Company shall pay the difference to Seller.
(C) if the LUC Liabilities incurred by
the Company in that quarter equal the LUC Benefits
received by the Company in that quarter then no
payment under this Section 8.4(c) shall be payable in
respect of the relevant fiscal quarter.
(2) The calculations at the end of each fiscal
quarter required by Section 8.4(c)(1) shall be produced by the
Company and shall be subject to the review of Seller.
(d) Throughout the duration of the indemnity
contained in this Section 8.4, Buyer will procure that the
Company will use commercially reasonable efforts to keep to
the minimum the amount of the LUC Liabilities and to
maximize the LUC Benefits so far as it is reasonably able to
do so and that in that connection the Company shall:
(1) as often as Seller reasonably requests
and so far as it may then be commercially practicable
to cause the release of the Company from obligations
which may give rise to any future LUC Liabilities and
the sale of the Company's shareholding in MBL and
any securities of whatever nature issued by MBL to the
Company whether as security for any loan made by the
Company to MBL or otherwise (excluding any shares
or securities voluntarily acquired by the Company after
the date of this Agreement), provided that the
Company's obligations under this Section 8.4(d)(1) are
subject to the terms of the sale being such that the
Company receives at least UK 10,000 for the Company's
shares in MBL which are held as of the date of this
Agreement and a sum equivalent to the amount of any
loan and interest payable to the Company as referred
to in Section 8.4(a)(1)(F) (or, in the event that and to
the extent that such amounts are not paid, Seller shall
make good the difference to the Company);
(2) take reasonable steps to pursue every right of
contribution, insurance, claim, right of indemnity, right
of set-off or counterclaim and every other right enjoyed
by the Company as far as is commercially reasonable which
would have the effect of minimizing or reducing the amount
of the LUC Liabilities or maximizing or increasing the LUC
Benefits;
(3) accept an underlease of Suites 1/2
in the LUC on the terms offered to other shareholders
in MBL for the proposed initial term of approximately
five and one-half (5.5) years (and if the Company shall
not do so, the liabilities of Seller under this Section 8.4
shall not exceed those which would have arisen had the
Company done so); provided that for this purpose the
Company shall not be required to accept any
underlease for any further terms or occupy any space in
the LUC; and
(4) use reasonable efforts to obtain all
necessary consents to allow any Excess Space to be sub-
underlet and to sub-underlet such Excess Space to
Seller or as Seller may reasonably require on arms
length open market terms and thereafter to enforce the
terms of any relevant sub-underlease of Excess Space.
(e) (1) Buyer will procure that the
Company shall so far as the Company is reasonably
able to do so provide Seller upon request with copies
of all documents, correspondence, information,
accounts, bills or other records relating to the subject
matter of this Section 8.4 which are in the possession,
custody or power of the Company or to which it may
have access (collectively, "Information") and provide
Seller with reasonable facilities to inspect the originals
of such copies.
(2) (A) The Company's
obligations to provide Information as referred to
in Section 8.4(e)(1) above and under Section
8.4(f) are subject to the Company's
confidentiality obligations under the
Shareholders Agreement.
(B) (i) Seller shall keep
confidential all Information supplied by the
Company pursuant to this Section 8.4 except
insofar as such information is in the public
domain (otherwise than by virtue of a breach by
Seller of its confidentiality obligations).
(ii) The parties hereto
shall (without prejudice to any other
confidentiality provision herein contained) keep
confidential the existence of the provisions of
this Section 8.4(e) and Section 8.4(f) and the
fact of disclosure of any Information pursuant to
this Section 8.4(e) or Section 8.4(f).
(C) If the Company and Seller
so agree (but not otherwise) Buyer will procure
that the Company shall use all reasonable efforts
to procure that the parties to the Shareholders
Agreement agree that the Information may be
provided to Seller and for that purpose Seller
shall enter into such undertakings as to
confidentiality as may be reasonably required.
(D) (i) In the event that the
Company is prevented by process of law from
disclosing in whole or in part any Information
(and for this purpose the threat of proceedings
by any party to the Shareholders Agreement
shall be treated as prevention by process of law),
Buyer will procure that the Company shall using
utmost good faith certify to Seller in writing the
amount of any relevant LUC Liabilities and of
any LUC Benefits received and shall provide
such Information in connection therewith as the
Company may lawfully do.
(ii) In the event that any
error or misstatement shall be found in any
certificate provided pursuant to Section
8.4(e)(2)(D)(i) there shall forthwith be made
such adjustments of accounts between the
parties as shall be found to be necessary.
(E) Seller hereby covenants
with Buyer to indemnify the Company on
demand against all Damages arising by virtue of
(i) any breach of Clause 11.2 of the
Shareholders Agreement caused by the
disclosure to Seller of any Information pursuant
to this Agreement or any matter pursuant to
Section 8.4(f) or (ii) its agreement herein to do
so.
(f)(1) If the Company is requested or
makes a proposal to assume any obligation or liability
under or by virtue of the Shareholders Agreement or
otherwise which would increase the LUC Liabilities by
more than UK 10,000 and the Company is not then
obliged to assume the same or has voting rights as to
whether or not the same shall be assumed, then any
additional obligation or liability which the Company
assumes pursuant to that request or proposal and which
would not otherwise have been incurred shall not form
part of the LUC Liabilities unless:
(A) the Company did not vote
in favor of assuming the same, or
(B) the Company did vote in
favor of assuming the same and either;
(i) Seller had agreed or
subsequently agrees to the Company so voting or
assuming the same; or
(ii) the Company would
have been obliged to assume the same even if
the Company had not voted in favor of assuming
the same.
(2) Notwithstanding the provisions of
Section 8.4(e)(1) and without prejudice to the
remainder of Section 8.4(e), Buyer will procure
that the Company shall disclose to Seller any
fact, information, or circumstance known to the
Company which is likely to lead to a material
increase in the LUC Liabilities.
(g) If Seller shall request the Company to
sell its shares and/or other securities in MBL to Seller or any
third party who is ready, willing and able (subject to any pre-
emption provision in the Shareholders Agreement or pursuant
to the Articles of Association of MBL) to buy the same, Seller
shall fully set out in writing the terms on which Seller or the
third party is proposing to acquire the same, and the Company
may by notice in writing to Seller within twenty-eight (28) days
of receipt of the full terms decline to proceed with the sale, in
which event:
(1) Buyer will procure that the
Company shall on the date of giving the
Company's notice pay to Seller the price agreed
to be paid by Seller or the third party for the
shares or other securities (to the extent that, in
the case of the shares in MBL held by the
Company as at the date hereof, the price or
value exceeds UK 10,000 and, in the case of other
securities, the amounts secured thereby (or the
payment thereof) form part of the LUC
Benefits) and, if Seller had agreed to pay any
amount to the third party, Seller shall on that
date pay such amount to the Company, and any
amount so paid by Seller shall not be treated as
part of the LUC Benefits; and
(2) Buyer's obligation to procure the
Company to seek to sell the same pursuant to
Section 8.4(d)(1) shall cease; and
(3) any amounts or benefits
subsequently received by the Company under or
by virtue of such shares and/or securities or
ownership thereof and any proceeds of disposal
thereof shall not form part of the LUC Benefits
and may be retained by the Company for its own
account; and
(4) Seller's obligations under this
Section 8.4 shall thenceforth be construed as if
any sums paid under any liabilities arising after
the date of the Company's notice under or by
virtue of the relevant shares and/or securities or
ownership thereof were excluded from the LUC
Liabilities; and
(5) (A) if it was a term of the sale
that Seller would procure the release in whole
or in part of the Company from any liability and
amounts paid by the Company by virtue of that
liability would form part of the LUC Liabilities,
then any amounts paid by the Company under
or by virtue of any such liability, to the extent
the same was intended to have been released
and which arises after the date of the Company's
notice, shall be excluded from the LUC
Liabilities.
(B) if it was a term of the sale
that the third party would counter-indemnify
Seller against its liability to indemnify the
Company against LUC Liabilities under this
Section 8.4 or any of them, then in relation to
LUC Liabilities arising after the date of the
Company's notice or the relevant ones thereof
which were to be the subject of the counter-
indemnity the indemnity contained in this
Section 8.4 shall terminate.
(6) any shares or securities which the
Company shall decline to sell under this Clause 8.4(g)
shall be treated for all purposes of this Section 8.4 as
shares or securities voluntarily acquired by the
Company on the date of the giving of the Company's
notice.
(7) to the extent that any LUC
Benefits derive from or are attributable to either:
(A) shares or securities
retained by the Company pursuant to this Clause
8.4(g) or
(B) any obligations of the
Company, sums paid in relation to which would
but for the operation of this Clause 8.4(g) have
formed part of the LUC Liabilities or been the
subject of Seller's indemnity
Buyer's obligations to procure the Company to account
for such LUC Benefits shall cease.
SECTION 8.5. Indemnification Payments.
Notwithstanding any other provisions of this Agreement to the
contrary, all payments due from Seller in respect of Seller's
indemnification obligations under this Agreement or any of
the Transaction Documents shall be paid to Buyer. Such
payments shall be treated by Seller and Buyer as a reduction
in the purchase price payable under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Termination. This Agreement
may be terminated at any time prior to the Closing Date:
(a) by mutual agreement in writing of Buyer,
Parent and Seller;
(b) by either Buyer or Seller upon written
notice to the other parties (1) if the Closing shall not have
occurred by September 30, 1993 or such later date as the
parties shall have agreed to in writing, provided that the non-
occurrence of the Closing is not attributable to a breach of the
terms hereof by the party seeking termination, or (2) if any
Governmental Authority shall have issued an injunction,
decree or order or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Closing;
(c) by Buyer if there has been a breach by
Seller of any representation, warranty, covenant or agreement
set forth in this Agreement that is qualified as to materiality
or a material breach by Seller of any representation, warranty,
covenant or agreement that is not so qualified, and such
breach shall not have been corrected or cured to the
reasonable satisfaction of Buyer within ten (10) Business Days
after Buyer has provided written notice thereof to Seller;
(d) by Buyer if it rejects a proposed amendment
of a Schedule pursuant to Section 7.10;
(e) by Seller if there has been a breach by
Buyer or Parent of any representation, warranty,
covenant or agreement set forth in this Agreement that is
qualified as to materiality or a material breach of any
representation, warranty, covenant or agreement that is not so
qualified and such breach shall not have been corrected or
cured to the reasonable satisfaction of Seller within ten (10)
Business Days after Buyer or Parent has provided written
notice thereof to Seller;
(f) by Buyer not later than the first Business
Day following the Initial Due Diligence Period if Buyer is not
satisfied, in its sole discretion, with its due diligence
investigation of the Company pursuant to Section 5.4; and
(g) by either Buyer or Seller if Buyer fails to
obtain the letters described in Section 5.7 by the Commitment
Date.
SECTION 9.2. Effect of Termination. In the
event of the termination of this Agreement by Buyer, Parent
or Seller as provided in Section 9.1, this Agreement shall
forthwith become void and there shall be no liability or
obligation on the part of Buyer, Parent or Seller or their
respective directors, officers or Affiliates; provided, however,
that, notwithstanding a termination of this Agreement, the
provisions of Section 5.4 (relating to the obligation of Buyer
and Parent to keep confidential and not to use certain
information and data obtained by them from the Company),
and Sections 7.3 and 7.4, shall continue in full force and
effect.
SECTION 9.3. Consent to Jurisdiction and
Service of Process. Any legal action, suit or proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby may be instituted in any United States
Federal court located in the Southern District of New York,
State of New York, and each party hereto agrees not to assert
as a defense in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such
court, that its property is exempt or immune from attachment
or execution, that the action, suit or proceeding is brought in
an inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. Each
party further irrevocably submits to the jurisdiction of such
court in any such action, suit or proceeding. Buyer and Parent
hereby appoint LeBoeuf, Lamb, Leiby & MacRae, Attention:
Alexander M. Dye, at its offices at 125 West 55th Street, New
York, New York 10019, or its offices at such other address in
New York, New York, as it hereafter furnishes to the parties
to this Agreement, as their authorized agent to accept and
acknowledge on such parties' behalf service of any and all
process that may be served in any such action, suit or
proceeding. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective
against any party if given properly pursuant to the United
States Federal Rules of Civil Procedure or other applicable
rules. Nothing herein contained shall be deemed to affect the
right of any party to serve process in any manner permitted by
law or to commence legal proceedings or otherwise proceed
against any other party in any jurisdiction other than New
York.
SECTION 9.4. Notices. Unless otherwise
provided herein, any notice or other communication required
or permitted to be given hereunder shall be in writing and
shall be effective (a) when received, if delivered personally or
telecopied on a Business Day during normal business hours
(at the place of receipt) (with confirmation of receipt thereof
immediately thereafter) at the address or telecopy number
designated below or (b) on the second Business Day following
the date of delivery to an internationally recognized overnight
courier, if so delivered and marked for overnight (or the most
expediently available) delivery and fully prepaid, in each case,
addressed as follows:
if to Buyer:
Unionamerica Acquisition Company Ltd.
77 Gracechurch Street
London EC3V 0DA
England
Telephone: 071-548-5987
Telecopy: 071-621-1105
Attention: Peter J. Cooper
if to Parent:
Unionamerica Holdings Ltd.
77 Gracechurch Street
London EC3V 0DA
England
Telephone: 071-548-5987
Telecopy: 071-621-1105
Attention: Peter J. Cooper
in either case with copies to:
International Insurance Advisors, Inc.
33 Whitehall Street - 27th Floor
New York, New York 10004
U.S.A.
Telephone: (212) 487-3647
Telecopy: (212) 487-3894
Attention: Paul H. Warren
Oak Hill Partners
Park Avenue Tower
65 East 55th Street
New York, New York 10022
U.S.A.
Telephone: (212) 326-1500
Telecopy: (212) 754-5685
Attention: Jeffrey H. Freed
LeBoeuf, Lamb, Leiby & MacRae
125 West 55th Street
New York, New York 10019-5389
U.S.A.
Telephone: (212) 424-8000
Telecopy: (212) 424-8500
Attention: Alexander M. Dye, Esq.
if to Seller:
The Continental Corporation
180 Maiden Lane - 40th Floor
New York, New York 10038
U.S.A.
Telephone: (212) 440-3000
Telecopy: (212) 440-7982
Attention: Chief Financial Officer
with copies to:
The Continental Corporation
180 Maiden Lane - 40th Floor
New York, New York 10038
U.S.A.
Telephone: (212) 440-3000
Telecopy: (212) 440-7982
Attention: General Counsel
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
U.S.A.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
Attention: Deborah F. Stiles, Esq.
Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
England
Telephone: 071-236-0066
Telecopy: 071-248-4212
Attention: John T. Young, Esq.
Any party may, from time to time, by five (5) days' notice
given in accordance with this Section 9.4 to the other parties,
designate another address or person for receipt of notices
hereunder.
SECTION 9.5. Entire Agreement; No Third
Party Beneficiaries. This Agreement (together with the
exhibits and schedules hereto, the other Transaction
Documents, and the Confidentiality Agreement) (a) contains
the entire agreement among the parties with respect to the
subject matter hereof, and supersedes all prior agreements,
written or oral, with respect thereto, and (b) except as set
forth in Section 7.5 or as otherwise expressly specified herein,
is not intended to confer upon any person other than the
parties any rights or remedies hereunder.
SECTION 9.6. Waivers and Amendments; Non-
Contractual Remedies; Preservation of Remedies. This
Agreement may be amended, modified or supplemented, and
the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party
waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part
of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies
herein provided are cumulative and are not exclusive of any
rights or remedies that any party may otherwise have at law or
in equity. The rights and remedies of any party based upon,
arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the
fact that the act, omission, occurrence or other state of facts
upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in
this Agreement (or in any other Contract between the parties)
as to which there is no inaccuracy or breach.
SECTION 9.7. Payments and Currency.
(a) Any and all amounts payable hereunder,
whether at the Closing or otherwise, shall be paid to the
appropriate party in United States dollars. No payment
obligation hereunder shall be discharged by amounts paid in
another currency.
(b) If (1) any monies owing under or pursuant
to this Agreement are received or recovered by one party
hereunder from any other party hereunder in a currency other
than United States dollars or (2) any judgment, settlement or
final adjudication of amounts owing under or pursuant to this
Agreement by one party hereunder to any other party
hereunder is denominated in a currency other than United
States dollars, then such monies, judgment, settlement or final
adjudication shall be converted into United States dollars at
the New York foreign exchange selling rate applicable to
trading among banks in amounts of US $1,000,000 or more (as
quoted at 3:00 p.m. Eastern time) as set forth in The Wall
Street Journal (Eastern Edition) with respect to the date on
which such monies are received or recovered or the date on
which payment pursuant to such judgment, settlement or final
adjudication is due and owing.
(c) If any of the monetary amounts specified in
Articles III, IV or V of this Agreement must be converted
from United States dollars to pounds sterling (or vice versa),
then such amounts shall be converted at the New York
foreign exchange selling rate applicable to trading among
banks in amounts of US $1,000,000 or more (as quoted at 3:00
p.m. Eastern time) as set forth in the July 1, 1993 edition of
The Wall Street Journal (Eastern Edition) with respect to
June 30, 1993.
SECTION 9.8. Binding Effect; No Assignment.
This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and legal
representatives. This Agreement shall not be assigned, in
whole or in part, by any party hereto.
SECTION 9.9. Severability. If at any time any
provision of this Agreement is or becomes illegal, invalid, void
or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity, or enforceability of
the remaining provisions hereof nor the legality, validity or
enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby,
the remainder of the provisions of this Agreement shall
remain in full force and effect. The parties shall endeavor in
good faith negotiations to replace any invalid, illegal, void or
unenforceable provision with a valid, legal and enforceable
provision, the economic effect of which comes as close as
possible to the invalid, illegal, void or unenforceable provision.
SECTION 9.10. Counterparts. This Agreement
may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart
may consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto.
SECTION 9.11. Interpretation. The Exhibits
and Schedules are a part of this Agreement as if fully set forth
herein. All references herein to Sections, clauses, Exhibits
and Schedules shall be deemed references to such parts of this
Agreement, unless the context otherwise requires. The table
of contents and headings in this Agreement are for reference
only, and shall not affect the interpretation of this Agreement.
All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the
context may require. The phrase "to the knowledge of Seller"
or any similar phrase shall be deemed to refer to the
knowledge of any of the senior officers of Seller or the
Company, in each case, who were involved in the negotiation
of this Agreement or the preparation of any of the Schedules,
with such officers being deemed to have made reasonable
inquiry of the appropriate personnel of Seller, the Company
and other relevant Affiliates of Seller with respect to the
matter in question. The definitions of terms in this
Agreement shall be applicable to both the singular and the
plural forms of the terms defined where either such form is
used in this Agreement. 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 word "herein," "hereof" and "hereunder," and other words
of similar import, refer to this Agreement as a whole and not
to any particular Section or clause. The adoption of the
various monetary amounts as de minimis or maximum levels
(such as in Sections 5.1 and 5.2) or as a criterion resulting in
certain occurrences (such as in Section 7.4) is not intended by
the parties to be, and should not be construed as, an
indication of immateriality or materiality for purposes of any
of the Transaction Documents.
SECTION 9.12. Governing Law. THIS
AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
SECTION 9.13. Waiver of Jury Trial. Each
party hereby waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of,
under or in connection with any of the Transaction
Documents. Each party (a) certifies that no representative,
agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (b)
acknowledges that it and the other parties have been induced
to enter into the Transaction Documents by, among other
things, the mutual waivers and certifications in this Section
9.13.
IN WITNESS WHEREOF, Buyer, Parent and
Seller have caused this Agreement to be duly executed by
their respective authorized officers as of the date first above
written.
UNIONAMERICA ACQUISITION COMPANY LTD.
By: /s/Paul H. Warren
Name:
Title: Director
UNIONAMERICA HOLDINGS LTD.
By: /s/Paul H. Warren
Name:
Title: Director
THE CONTINENTAL CORPORATION
By: /s/John F. Kirby
Name:
Title: Senior Vice President
AMENDMENT TO SHARE PURCHASE AGREEMENT
AMENDMENT TO SHARE PURCHASE AGREEMENT, dated as of September 1,
1993 (this Amendment), among UNIONAMERICA ACQUISITION COMPANY LTD.,
an English private company limited by shares (Buyer), UNIONAMERICA
HOLDINGS LTD., an English private company limited by shares
(Parent), and THE CONTINENTAL CORPORATION, a New York corporation
(Seller).
WITNESSETH:
WHEREAS, Buyer, Parent and Seller have entered into that certain
Share Purchase Agreement, dated as of June 30, 1993 (the Share
Purchase Agreement);
WHEREAS, Buyer, Parent and Seller have agreed to amend the Share
Purchase Agreement as set forth herein; and
WHEREAS, all capitalized terms used but not defined herein shall
have the respective meanings assigned to such terms in the Share
Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENT TO SECTION 1
Section 1 of the Share Purchase Agreement is amended by the
addition of a new Section 1.3 which reads in its entirety as
follows:
"SECTION 1.3 New Holding Company
(a) Seller undertakes to Parent that it will forthwith after
receiving notice that the board of directors of Parent (the
Board) has resolved that all the members of Parent (the
Shareholders) should be required to effect an exchange of
shares as provided in this clause:
(1) if so requested by the Board, take (in its capacity as a
Shareholder) all such actions (including but not limited
to the exercise of voting rights) and execute all such
documentation as the Board shall reasonably determine to
be necessary to convert all shares then held by Seller in
Parent to share warrants to bearer; and/or
(2) take (in its capacity as a Shareholder) all such actions
(including but not limited to the exercise of voting
rights) as the Board shall reasonably determine to be
necessary to transfer the whole of its legal and
beneficial interest in all shares then held by it in
Parent to a newly incorporated public company (Newco) in
consideration for the issue by Newco to it of, in respect
of each share so transferred, one share of the same
nominal amount and same class in the capital of Newco and
having the same rights and being subject to the same
restrictions, mutatis mutandis, in each case as its
shares in Parent prior to such transfer, so that
immediately after the completion of such transfer the
issued share capital of Newco comprises (apart from not
more than two initial subscribers' shares of a nominal
value of not more that $1 or 1 pound each) the same number of
shares with the same nominal amount and of the same
classes as the issued share capital of Parent immediately
prior to such transfer.
(b) The obligations of Seller in Section 1.3(a) are subject to the
satisfaction in full, prior to or simultaneously with the
performance of such obligations, of each of the following
conditions precedent (any one or more of which may be waived
by Seller):
(1) Seller shall in its sole discretion be satisfied that it
will suffer no immediate or delayed adverse tax
consequence as a direct or indirect result of the
performance of its obligations or shall have received a
written indemnity from Newco in terms reasonably
satisfactory to it against any such liability that may
occur.
(2) All Shareholders shall take steps identical, mutatis
mutandis, to those taken by Seller pursuant to this
clause in relation to the shares held by them in Parent
such that Parent becomes immediately after such steps
have been taken a wholly owned subsidiary of Newco.
(3) All representations and warranties of Buyer and Parent
contained in Article IV shall be true, complete and
accurate as of the time of the performance of the
obligations set out in Section 1.3(a) as if reference
therein to Buyer or Parent were to Newco (save that the
reference in Section 4.1 to a "private company" shall be
replaced by a reference to a "public company" and the
references to licenses and authorizations shall be deemed
to exclude the necessary certificate under Section 117 of
the Companies Act 1985 which certificate will be obtained
forthwith after the completion of the steps to be taken
by the Shareholders and the Seller as referred to above);
as if references to the Transaction Documents or to the
Agreement were to the documents necessary to perform the
obligations set out in this Section; as if references to
the Closing were to the performance in full of the
obligations set out in Section 1.3(a) and references to
the Closing Date were to the date of such performance; as
if reference to the Buyer Shares were to the shares to be
transferred by Seller pursuant to this Section; and as if
references to the A Senior Preference Shares and the B
Senior Preference Shares and the Senior Preference Shares
were, respectively, to the shares to be issued by Newco
pursuant to this Section 1.3 in exchange for those
shares.
(c) Contemporaneously with and as conditions precedent to the
performance by Seller of its obligations pursuant to Section
1.3(a):
(1) Parent shall procure that Newco shall deliver to Seller,
and Newco shall have delivered to Seller, a legally
binding document containing in terms reasonably
satisfactory to Seller warranties and indemnities in the
terms described in Section 1.3(b)(3), and containing in
favor of Seller indemnification provisions identical,
mutatis mutandis, to those set out in Sections 8.1,
8.2(c) and (d) and 8.3 and subject to limitations only as
set out therein.
(2) Seller shall enter into and Parent shall procure that
Newco shall enter into agreements having the same effect,
mutatis mutandis, as the Contingent Payment Agreement and
the Senior Preference Share Support Agreement (the
Replacement Agreements) on the basis that the Replacement
Agreements shall be read and construed as if they had
been entered into on the Closing Date and as if the acts
and omissions of Seller and Parent respectively in
relation to or in connection with the Contingent Payment
Agreement and the Senior Preference Share Support
Agreement were and had been the acts and omissions of
Seller and Newco in relation to the Replacement
Agreements or in connection therewith and so that without
prejudice to the generality of the foregoing Newco will
assume all liability under the Replacement Agreements
which Parent would have had in relation to or arising out
of or in connection with the Contingent Payment Agreement
and the Senior Preference Share Support Agreement and so
that all references in the Replacement Agreements
replacing the Senior Preference Share Support Agreement
to the Company or Buyer shall refer also to Parent; and
with effect from the entry into of the Replacement
Agreements Seller and Parent shall mutually release each
other from all obligations and liabilities, actual,
contingent or otherwise, under the Contingent Payment
Agreement and Senior Preference Share Support Agreement."
SECTION 2. AMENDMENT TO SECTION 9.8
Section 9.8 of the Share Purchase Agreement is amended to read in
its entirety as follows:
"SECTION 9.8. Binding Effect; Assignment
This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal
representatives. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other
parties, except that (a) Parent may assign, in its sole discretion,
any or all of its rights and interests hereunder to Buyer and (b)
Buyer and Parent may assign, in their sole discretion, any or all
of their respective rights and interests hereunder to, and grant a
security interest with respect thereto for the benefit of, any and
all Persons providing the financing referred to in Section 6.1(h)
and any and all Persons providing subsequent refinancings, if any,
of such financing."
SECTION 3. EFFECT UPON SHARE PURCHASE AGREEMENT AND TRANSACTION
DOCUMENTS
(a) On and after the date hereof, each reference in the Share
Purchase Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import, and each reference to the
Share Purchase Agreement in any other Transaction Document or
any other document, shall mean and be a reference to the Share
Purchase Agreement as amended hereby.
(b) Except as specifically amended in Sections 1 and 2, the Share
Purchase Agreement shall remain in full force and effect and
all of its terms and conditions are hereby ratified and
confirmed.
(c) The execution and delivery of this Amendment by the parties
hereto shall not, except as expressly provide herein, operate
as a waiver of any right, power or remedy of any party under
the Share Purchase Agreement, any Transaction Document or any
related document, or constitute a waiver of any provision
thereunder.
SECTION 4. EXECUTION IN COUNTERPARTS
This Amendment may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute
one and the same instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together
signed by all of the parties hereto.
SECTION 5. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective authorized officers as of the
date first above written.
UNIONAMERICA ACQUISITION COMPANY LTD.
By: /s/Paul H. Warren
Name: Paul H. Warren
Title: Director
UNIONAMERICA HOLDINGS LTD.
By: /s/Paul H. Warren
Name: Paul H. Warren
Title: Director
THE CONTINENTAL CORPORATION
By: /s/J. Heath Fitzsimmons
Name: J. Heath Fitzsimmons
Title: Senior Vice President
and Chief Financial Officer
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as
of July 28, 1993, among ALLEGHANY CORPORATION, a Delaware
corporation ("Alleghany"), THE CONTINENTAL CORPORATION, a New
York corporation ("Continental"), GOLDMAN, SACHS & CO. and
certain funds which Goldman, Sachs & Co. either control or of
which they are general partner (together, the "GS Investors")
(Continental and the GS Investors together referred to as the
"URHC Stockholders"), UNDERWRITERS RE HOLDINGS CORP., a
Delaware corporation ("URHC"), and UNDERWRITERS RE
CORPORATION, a Delaware corporation ("URC").
W I T N E S S E T H:
WHEREAS, the URHC Stockholders hold approximately
90 percent of the issued and outstanding capital stock of
URHC; URHC is the owner of all of the issued and outstanding
capital stock of URC; URC is the owner of all of the issued
and outstanding capital stock of Underwriters Reinsurance
Company, a New Hampshire insurance company ("Underwriters
Reinsurance"), and URC Risk Managers, Inc., a Delaware
corporation ("Risk Managers"); and Underwriters Reinsurance
is the owner of all of the issued and outstanding capital
stock of Commercial Underwriters Insurance Company, a
California insurance company ("Commercial Underwriters");
WHEREAS, prior to the Closing Date (as defined
below), a new wholly owned subsidiary ("NHC") of URC will be
organized in the State of Delaware and, as of the Closing
Date, NHC will hold all of the issued and outstanding capital
stock of Underwriters Reinsurance and Risk Managers (NHC,
Underwriters Reinsurance, Risk Managers and Commercial
Underwriters are together referred to as the "Companies");
WHEREAS, contemporaneous with the execution hereof,
Continental has entered into a Management Stock Purchase
Agreement with the management stockholders of URHC in the
form annexed hereto as Exhibit A (the "Management Stock
Purchase Agreement"), pursuant to which such management
stockholders will acquire prior to the Closing Date (as
defined below) at least 633,758 shares of capital stock of
NHC, which number of shares will constitute about 7 percent
of the outstanding shares of capital stock of NHC, in
exchange for the shares of capital stock of URHC currently
owned by them and to be owned by them upon exercise of all
outstanding stock options;
WHEREAS, Alleghany desires to purchase and URC
desires to sell all of the issued and outstanding capital
stock of NHC to be held by URC after the closing under the
Management Stock Purchase Agreement (the "Shares"), which
will be 8,648,372 shares of capital stock of NHC, which
number of shares will constitute about 93 percent of the
outstanding capital stock of NHC, subject to adjustment to
decrease such number of shares by up to 22,162 in respect of
shares of NHC to be sold to any one or more of Stephen C.
Kolakowski, Mark A. Bennett, Theodore A. Blundell, Denise A.
Coleman, Pamela Falzone, Todd J. Hess, Michael J. Kruse, Judy
Mann and Nancy Moore, such number being the number set forth
on Schedule 5, as supplemented, to the Stock Purchase Related
Agreement, which Schedule shall be supplemented not later
than August 12, 1993; and
WHEREAS, contemporaneous with the execution hereof,
Alleghany has entered into a Stock Purchase Related Agreement
with the management stockholders of URHC in the form annexed
hereto as Exhibit B (the "Stock Purchase Related Agreement");
NOW, THEREFORE, in consideration of the premises
and the mutual covenants, agreements and provisions contained
herein, the parties hereto agree as follows:
1. PURCHASE OF SHARES AND CLOSING.
1.1. Purchase of Shares. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as
defined below), URC agrees to sell, convey, assign, transfer
and deliver the Shares to Alleghany, or a subsidiary of
Alleghany designated by Alleghany pursuant to Section 13.6
hereof, and Alleghany, or such subsidiary, shall acquire the
Shares from URC.
1.2. Consideration. At the Closing (as defined
below), Alleghany shall pay by wire transfer to URC an amount
in immediately available funds equal to Two Hundred Million,
Seven Hundred Fifteen Thousand, Nine Hundred Thirty-Five
Dollars ($200,715,935), subject to adjustment as hereinafter
provided (the "Cash Consideration"). The Cash Consideration
shall be increased by an amount equal to the product of (x)
$23.50, and (y) the difference between (a) 22,162 shares and
(b) that number of shares of common stock of NHC, not
exceeding 22,162 shares, which are sold to any one or more of
Stephen C. Kolakowski, Mark A. Bennett, Theodore A. Blundell,
Denise A. Coleman, Pamela Falzone, Todd J. Hess, Michael J.
Kruse, Judy Mann and Nancy Moore, such number being the
number set forth on Schedule 5, as supplemented, to the
Stock Purchase Related Agreement, which Schedule shall be
supplemented not later than August 12, 1993.
1.3. Closing. The purchase and sale of the Shares
pursuant to this Agreement (the "Closing") shall take place
at such time of day and place agreed to by the parties as
soon as reasonably practicable but not on the first or second
business day of a week and no later than five (5) business
days after satisfaction or waiver of the conditions precedent
set forth herein (the "Closing Date"), or on such other date
as the parties hereto agree in writing. At the Closing, (i)
URC shall deliver to Alleghany a certificate or certificates
representing the Shares, duly endorsed in blank or with
appropriate stock powers attached, free and clear of all
liens, security interests, pledges, agreements, claims,
charges, options or encumbrances of any nature whatsoever
(collectively, "Liens"), and (ii) Alleghany shall make
payment to URC of the Cash Consideration by wire transfer to
such account or accounts as designated to Alleghany by URC in
the manner specified herein for delivery of notices not less
than two (2) business days prior to the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF URHC AND URC.
Each of URHC and URC, jointly and severally,
represents and warrants to Alleghany as follows:
2.1. Title to Shares. As of the date of the
organization of NHC and the issuance of shares of its capital
stock to URC as provided herein (the "Organization Date"),
URC will own beneficially and of record all of the issued and
outstanding shares of capital stock of NHC, free and clear of
all Liens except for this Agreement, the Management Stock
Purchase Agreement, the Shareholders Agreement dated as of
December 29, 1987, and amended as of July 6, 1988, May 29,
1991 and May 1, 1993, among URHC and the shareholders listed
therein (the "Shareholders Agreement"), and the Credit
Agreement dated as of November 16, 1992, among URC, the
lenders named therein and First National Bank of Chicago, as
agent (the "Credit Agreement"). As of the Closing Date, URC
will own, beneficially and of record all of the Shares, free
and clear of all Liens (subject to the granting of the
Sellers Approvals, as defined below). Upon delivery of the
Cash Consideration as herein provided, URC will convey good
title to the Shares, free and clear of all Liens.
2.2. Organization and Standing. Each of URHC and
URC is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation,
and has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder.
2.3. Consents and Approvals. The execution and
delivery by each of URHC and URC of this Agreement, the
performance by each of URHC and URC of its obligations
hereunder, and the consummation by each of URHC and URC of
the transactions contemplated hereby do not require either
URHC or URC to obtain any consent, approval, authorization or
action of, or make any filing with or give any notice to, any
third party, or any public, governmental or judicial
authority except (a) as set forth on Schedule 2.3 hereto; (b)
such filings made with governmental agencies such as the
Securities and Exchange Commission which are (i) part of the
regular disclosure obligations of URHC and URC and (ii)
available as public documents; or (c) such consents,
approvals, authorizations, actions, filings or notices of
which the failure to obtain, make or give would not have a
material adverse effect on the business, financial condition
or results of operations of the Companies taken as a whole or
interfere in any material way with the ability of either URHC
or URC to consummate the transactions contemplated hereby.
The consents, approvals, authorizations, actions, filings and
notices set forth on Schedules 2.3, 3.1 and 8.4 hereto are
together referred to as the "Sellers Approvals."
2.4. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of
each of URHC and URC. This Agreement constitutes a legal,
valid and binding obligation of each of URHC and URC,
enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Neither
the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will
(i) conflict with or result in a breach or violation of any
of the terms, conditions or provisions of the charter or by-
laws of URHC or URC; (ii) subject to the granting of the
Sellers Approvals, conflict with or result in a breach or
violation of, or default or loss of a material benefit under,
or permit the acceleration of any obligation under any
provision of any agreement, indenture, mortgage, lien, lease
or other instrument or restriction of any kind to which
either URHC or URC is a party or by which any of its assets
or properties is otherwise bound, which conflict, breach,
violation, default, loss or acceleration, individually or in
the aggregate, would interfere in any material way with the
ability of either URHC or URC to consummate the transactions
contemplated by this Agreement; or (iii) subject to the
granting of the Sellers Approvals, require URHC or URC to
obtain any consent, approval, authorization or action of, or
make any filing with or give any notice to, any third party,
or any public, governmental or judicial authority, or violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to either URHC or URC or any of its
assets or properties, the failure to make, obtain or give or
the effect of which violation, individually or in the
aggregate, would interfere in any material way with the
ability of either URHC or URC to consummate the transactions
contemplated by this Agreement.
2.5. Organization and Standing of NHC. As of the
Organization Date and the Closing Date, NHC will be a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, and
will have all requisite corporate power and authority to own
its properties and to carry on its business as being
conducted at such dates; and NHC will be duly qualified and
licensed to do business and will be in good standing in each
jurisdiction where the nature of the property owned or
business conducted requires such qualification or licensing.
Schedule 2.5 hereto will set forth a true and complete list
as of the Closing Date of NHC and all of the entities in
which NHC will have directly or indirectly at least a fifty
percent equity interest (the "Subsidiaries"), their
jurisdictions of incorporation and the jurisdictions in which
they are qualified to do business as a foreign corporation.
2.6. Charter and By-Laws. The forms of charter
and by-laws that will be used for the organization of NHC are
set forth on Schedule 2.6(a) hereto. Schedule 2.6(b) hereto
is a true and complete list of the officers and directors of
NHC who will be in office at the Organization Date and the
Closing Date, which Schedule may be updated as of such dates
subject to Section 8.15 hereof.
2.7. Capital Stock. As of the Organization Date
and the Closing Date, the authorized capital stock of NHC
will consist of Ten Million (10,000,000) shares of common
stock, par value $0.01 per share ("Common Stock"), 9,282,130
shares of which will be issued and outstanding, and all of
the issued and outstanding shares of Common Stock of NHC will
be duly authorized, validly issued, fully paid and
nonassessable. As of the Organization Date, all of the
issued and outstanding shares of Common Stock of NHC will be
owned by URC free and clear of all Liens except for this
Agreement, the Management Stock Purchase Agreement, the
Shareholders Agreement and the Credit Agreement. As of the
Closing Date, all of the Shares will be owned by URC free and
clear of all Liens (subject to the granting of the Sellers
Approvals), and all of the remaining issued and outstanding
shares of Common Stock of NHC will be owned only by the
Management Stockholders as provided in the Management Stock
Purchase Agreement. All of the issued and outstanding shares
of the capital stock of Underwriters Reinsurance and Risk
Managers are held by URC as of the date hereof, and will be
held by NHC as of the Closing Date, and all of the issued and
outstanding shares of the capital stock of Commercial
Underwriters are held by Underwriters Reinsurance and, except
as set forth on Schedule 2.7 hereto, to the knowledge of URHC
or URC such shares are so held free and clear of all Liens
(subject to the granting of the Sellers Approvals). No
shares of capital stock of any of the Companies are held in
treasury. To the knowledge of URHC or URC, all of the issued
and outstanding shares of capital stock of the Subsidiaries
have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth on Schedule 2.7
hereto, to the knowledge of URHC or URC none of the Companies
is bound by, has granted, issued or made or agreed to grant,
issue or make any warrants, options, subscription rights or
any other commitments of any character relating to the issued
or unissued shares of capital stock of any of the Companies,
nor is there any agreement providing for the amendment of the
charters of any of the Companies so as to increase the amount
of authorized capital stock of such corporation. Except as
set forth on Schedule 2.7 hereto, to the knowledge of URHC or
URC none of the Companies is a party to any voting trust or
other agreement or understanding with respect to the voting
of the capital stock of any of the Companies.
2.8. Rights, Assets and Liabilities. Immediately
prior to the Closing, URHC and URC shall transfer to the
Companies such rights, assets and liabilities possessed by
URHC and URC as are necessary so that the Companies shall own
at the Closing all of the rights, assets and liabilities
owned by URHC, URC and the Companies immediately prior to
such transfer, provided that the rights, assets and
liabilities listed on Schedule 10.2(b)(i) hereto shall not be
so transferred and the rights, assets and liabilities so
transferred shall include without limitation those set forth
on Schedule 10.2(b)(ii) hereto. Such transfers shall cause
no diminution or impairment whatsoever of any such rights,
assets or liabilities.
2.9. Registration Statement. On or prior to the
Closing Date, application will be made to the Securities and
Exchange Commission for the withdrawal of the Registration
Statement on Form S-1, as amended by Amendment No. 1 to Form
S-1, filed with the Securities and Exchange Commission on
June 15, 1993 by URHC under the Securities Act of 1933 (the
"Registration Statement").
3. REPRESENTATIONS AND WARRANTIES OF THE URHC
STOCKHOLDERS.
Each URHC Stockholder, severally and not jointly,
represents and warrants to Alleghany as follows:
3.1. Consents and Approvals. The execution and
delivery by such URHC Stockholder of this Agreement, the
performance by such URHC Stockholder of its obligations
hereunder, and the consummation by such URHC Stockholder of
the transactions contemplated hereby do not require such URHC
Stockholder to obtain any consent, approval, authorization or
action of, or make any filing with or give any notice to, any
third party, or any public, governmental or judicial
authority except (a) as set forth on Schedule 3.1 hereto; (b)
such filings made with governmental agencies such as the
Securities and Exchange Commission which are (i) part of the
regular disclosure obligations of such URHC Stockholder and
(ii) available as public documents; or (c) such consents,
approvals, authorizations, actions, filings or notices of
which the failure to obtain, make or give would not have a
material adverse effect on the business, financial condition
or results of operations of the Companies taken as a whole or
interfere in any material way with the ability of such URHC
Stockholder to consummate the transactions contemplated
hereby.
3.2. Transactions with URHC Stockholders.
Schedule 3.2 hereto is a true and correct list of
transactions, contracts and other obligations since December
31, 1991 between any of the Companies and (i) Continental or
any entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, Continental, or (ii) any of the GS
Investors or any of the entities in which The Goldman Group,
L.P. directly or indirectly owns an equity interest of 50
percent or more (the "Goldman Subsidiaries"), (except in each
case for broker, dealer or investment transactions occurring
in the ordinary course of business with Goldman, Sachs & Co.
or Continental Asset Management Corp. ("Ordinary Course
Broker, Dealer or Investment Transactions"), market making
activities by Goldman, Sachs & Co. with respect to the 15%
Senior Notes Due 1997 of URC (the "Notes") and sales by
Goldman, Sachs & Co. of the Notes to URC (together, the "Note
Transactions")), including all such transactions involving,
in each case, $60,000 or more. As of the Closing Date, none
of the Companies shall have any obligations involving $60,000
or more to such URHC Stockholder or such entity, except
(x) for Ordinary Course Broker, Dealer or Investment
Transactions, (y) as reflected on Schedule 3.2 hereto or
(z) pursuant to this Agreement, the Tax Sharing Agreement,
the Loan Agreement or the Stock Purchase Related Agreement.
3.3. Brokers. Except as set forth on Schedule 3.3
hereto, no agent, broker, investment banker, person or firm
acting on behalf of such URHC Stockholder or under authority
of such URHC Stockholder is or will be entitled to any
broker's, finder's or investment banker's fee or any other
commission or similar fee directly or indirectly from
Alleghany or any of the Companies in connection with the
negotiation of any of the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL.
Continental represents and warrants to Alleghany as
follows:
4.1. Organization and Standing. Continental is a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, and
has all requisite corporate power and authority to enter into
this Agreement and to perform its obligations hereunder.
4.2. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of
Continental. This Agreement constitutes a legal, valid and
binding obligation of Continental, enforceable against
Continental in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Neither
the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will
(i) conflict with or result in a breach or violation of any
of the terms, conditions or provisions of the charter or by-
laws of Continental; (ii) subject to the granting of the
Sellers Approvals, conflict with or result in a breach or
violation of, or default or loss of a material benefit under,
or permit the acceleration of any obligation under any
provision of any agreement, indenture, mortgage, lien, lease
or other instrument or restriction of any kind to which
Continental is a party or by which any of its assets or
properties is otherwise bound, which conflict, breach,
violation, default, loss or acceleration, individually or in
the aggregate, would interfere in any material way with the
ability of Continental to consummate the transactions
contemplated by this Agreement; or (iii) subject to the
granting of the Sellers Approvals, require Continental to
obtain any consent, approval, authorization or action of, or
make any filing with or give any notice to, any third party,
or any public, governmental or judicial authority, or violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to Continental or any of its assets or
properties, the failure to make, obtain or give or the effect
of which violation, individually or in the aggregate, would
interfere in any material way with the ability of Continental
to consummate the transactions contemplated by this
Agreement.
4.3. Reinsurance Agreements with Continental.
Each of (i) the Aggregate Excess of Loss Reinsurance
Agreement dated as of January 1, 1988 between Continental
Reinsurance Corporation International Limited and
Underwriters Reinsurance, reinsuring losses attributable to
pre-1987 business of Underwriters Reinsurance subject to an
absolute limit of liability of $168,600,000, (ii) the
Aggregate Excess of Loss Reinsurance Agreement dated as of
January 1, 1988 between Continental Reinsurance Corporation
International Limited and Underwriters Reinsurance,
reinsuring losses attributable to pre-1987 business of
Underwriters Reinsurance subject to an absolute limit of
liability of $31,400,000 (the agreements referred to in (i)
and (ii), hereinafter the "Continental Reinsurance
Agreements"), (iii) the Reinsurance Guaranty dated as of
January 1, 1988 between Continental and Underwriters
Reinsurance, and (iv) the Trust Agreement dated as of
January 1, 1988 among Continental Reinsurance Corporation
International Limited, as Grantor, Underwriters Reinsurance,
as Beneficiary, and Morgan Guaranty Trust Company of New York
as Trustee, as amended by the First Amendment to Trust
Agreement dated September 6, 1991, is in full force and
effect and constitutes a legal, valid and binding obligation
of Continental or its affiliates, as the case may be,
enforceable against each of them in accordance with its
terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating
to or affecting creditors' rights and to general equity
principles. Continental Reinsurance Corporation
International Limited has, as of the date hereof, provided
for letters of credit totalling approximately $92 million,
and a trust fund with Chemical Bank (formerly known as
Manufacturers Hanover Trust Company), with a fair market
value of not less than $108 million as of June 30, 1993,
under the Continental Reinsurance Agreements and the Trust
Agreement. None of Continental or its affiliates, as the
case may be, and to Continental's knowledge no other party,
is in material breach or violation of, or default under, any
of the Continental Reinsurance Agreements, the Reinsurance
Guaranty or the Trust Agreement, and no event has occurred
which, solely with the giving of notice or the passage of
time or both, would constitute a material breach, violation
or default by any of Continental or its affiliates, as the
case may be, or to Continental's knowledge any other party
thereto, of any of the foregoing agreements.
5. REPRESENTATIONS AND WARRANTIES OF THE GS INVESTORS.
Each GS Investor, severally and not jointly,
represents and warrants to Alleghany as follows:
5.1. Organization and Standing. Such GS Investor
is duly organized and validly existing under the laws of its
state of organization, and has all requisite partnership
power and authority to enter into this Agreement and to
perform its obligations hereunder.
5.2. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary partnership action on the part of
such GS Investor. This Agreement constitutes a legal, valid
and binding obligation of such GS Investor, enforceable
against such GS Investor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
Neither the execution nor the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby,
will (i) conflict with or result in a breach or violation of
any of the terms, conditions or provisions of the partnership
agreements of such GS Investor; (ii) subject to the granting
of the Sellers Approvals, conflict with or result in a breach
or violation of, or default or loss of a material benefit
under, or permit the acceleration of any obligation under any
provision of any agreement, indenture, mortgage, lien, lease
or other instrument or restriction of any kind to which such
GS Investor is a party or by which any of its assets or
properties is otherwise bound, which conflict, breach,
violation, default, loss or acceleration, individually or in
the aggregate, would interfere in any material way with the
ability of such GS Investor to consummate the transactions
contemplated by this Agreement; or (iii) subject to the
granting of the Sellers Approvals, require such GS Investor
to obtain any consent, approval, authorization or action of,
or make any filing with or give any notice to, any third
party, or any public, governmental or judicial authority, or
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to such GS Investor or any of its
assets or properties, the failure to make, obtain or give or
the effect of which violation, individually or in the
aggregate, would interfere in any material way with the
ability of such GS Investor to consummate the transactions
contemplated by this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF ALLEGHANY.
Alleghany represents and warrants to each of URHC,
URC and the URHC Stockholders as follows:
6.1. Organization and Standing. Alleghany is a
corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation,
and has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder.
6.2. Certificate of Incorporation and By-Laws.
The copies of the Restated Certificate of Incorporation and
By-Laws of Alleghany which have heretofore been delivered to
each of the URHC Stockholders are true, accurate and complete
and reflect all amendments or changes in effect.
6.3. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of
Alleghany and this Agreement constitutes a legal, valid and
binding obligation of Alleghany enforceable against Alleghany
in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles. Neither the
execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will
(i) conflict with or result in a breach or violation of any
of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of Alleghany; or (ii) subject to the
granting of the qualifications, approvals and consents of
third parties and regulatory authorities set forth on
Schedule 6.3 hereto (the "Alleghany Approvals"), conflict
with or result in a breach or violation of, or default or
loss of a material benefit under, or permit the acceleration
of any obligation under any provision of any agreement,
indenture, mortgage, lien, lease or other instrument or
restriction of any kind to which Alleghany is a party or by
which its assets or properties is otherwise bound, which
conflict, breach, violation, default, loss or acceleration,
individually or in the aggregate, would interfere in any
material way with the ability of Alleghany to consummate the
transactions contemplated by this Agreement; or (iii) subject
to the granting of the Alleghany Approvals, require Alleghany
to obtain any consent, approval, authorization or action of,
or make any filing with or give any notice to, any third
party, or any public, governmental or judicial authority or
violate any order, writ, injunction, decree, statutes, rule
or regulation applicable to Alleghany or its assets or
properties, the failure to make, obtain or give or the effect
of which violation, individually or in the aggregate, would
interfere in any material way with the ability of Alleghany
to consummate the transactions contemplated by this
Agreement.
6.4. Brokers. No agent, broker, investment
banker, person or firm acting on behalf of Alleghany or under
authority of Alleghany is or will be entitled to any
broker's, finder's or investment banker's fee or any other
commission or similar fee directly or indirectly from any of
the URHC Stockholders in connection with the negotiation of
any of the transactions contemplated hereby.
7. CONDITIONS TO OBLIGATIONS OF ALLEGHANY.
The obligations of Alleghany under this Agreement
are subject to the satisfaction, on or before the Closing
Date, of each of the following conditions:
7.1. Compliance with Agreement. Each of URHC, URC
and the URHC Stockholders shall have performed and complied
in all material respects with all the obligations required by
this Agreement to be performed or complied with by each of
them on or before the Closing Date, and Alleghany shall have
received from each of URHC, URC and the URHC Stockholders at
the Closing a certificate, dated the Closing Date, to that
effect. Attached to such certificate shall be a certified
copy of the resolutions of the Board of Directors of
Continental, URHC and URC or a certified copy of the written
consent of the GS Investors, as the case may be, in each case
authorizing this Agreement and the transactions contemplated
hereby.
7.2. Representations and Warranties. The repre-
sentations and warranties made by each of URHC, URC and the
URHC Stockholders in Sections 2, 3, 4 and 5 of this Agreement
shall be true and correct in all material respects as of the
Closing Date as though such representations and warranties
were made at and as of such time (except for any
representation and warranty made or given as of a specified
date, which shall have been true and correct in all material
respects as of such specified date, and except for any
changes permitted by the terms hereof or consented to by
Alleghany). Alleghany shall have received from each of URHC,
URC and the URHC Stockholders at the Closing a certificate,
dated the Closing Date, to that effect, which certificate
shall specify in reasonable detail any matters to be excepted
in accordance with this Section 7.2. Delivery of such
certificate shall constitute a representation and warranty by
each of URHC, URC and the URHC Stockholders as to the matters
stated therein, but this shall not alter the provision for
survival of representations and warranties set forth in
Section 12.1 hereof.
7.3. Opinion of Counsel for URHC, URC and the URHC
Stockholders. Alleghany shall have received an opinion from
each of (a) Debevoise & Plimpton, special counsel for
Continental, (b) the Senior Vice President, General Counsel
and Secretary of Continental, (c) Sullivan & Cromwell,
counsel for the GS Investors, (d) the General Counsel or an
Associate General Counsel or Assistant General Counsel of
Goldman, Sachs & Co., (e) Arnold & Porter, counsel for URHC
and URC, (f) Buchalter, Nemer, Fields & Younger, special
California counsel for URHC and URC, and (g) Roussos, Hage &
Hodes, special New Hampshire counsel for URHC and URC, in
each case dated the Closing Date and substantially to the
effect set forth in Exhibits C, D, E, F, G, H and I hereto,
respectively.
7.4. Approvals. All Alleghany Approvals and all
Sellers Approvals shall have been obtained and be in full
force and effect on the Closing Date. Without limiting the
generality of the foregoing, Alleghany shall have received
the requisite approvals of the consummation of the purchase
and sale of the Shares, and the transactions contemplated
hereby, from the relevant state insurance regulatory
authorities, and such approvals shall be in full force and
effect, and no such approvals shall impose upon Alleghany or
any of the Companies any conditions which materially
adversely impair the ability of any of the Companies to
conduct their business in substantially the same manner as
such business is presently being conducted.
7.5. Absence of Certain Litigation. On the
Closing Date (i) there shall be no injunction, restraining
order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any
material transaction contemplated hereby shall not be
consummated as herein provided or compels or would compel
Alleghany to dispose of or discontinue a significant portion
of the business conducted by Alleghany and its subsidiaries
or of the business conducted by the Companies as a result of
the consummation of the transactions contemplated hereby; and
(ii) there shall be no suit, action or other proceeding by
the United States (or any agency thereof) or by any state (or
any agency thereof) pending before any court or governmental
agency, or threatened to be filed or initiated, wherein such
complainant seeks the restraint or prohibition of the
consummation of any material transaction contemplated hereby
or asserts the illegality of any material transaction
contemplated hereby.
7.6. Transfer Taxes. Each of URHC and URC shall
have paid, or caused to be paid, all stock transfer and other
transfer taxes required to be paid in connection with the
sale and delivery to Alleghany of the Shares, and shall have
caused all appropriate stock transfer tax stamps to be
affixed to the certificate or certificates representing the
Shares so sold and delivered. Each URHC Stockholder shall
have paid, or caused to be paid, all stock transfer and other
transfer taxes required to be paid by it in connection with
the transactions contemplated by this Agreement.
7.7. Shareholders Agreement. The Shareholders
Agreement shall have been terminated in accordance with its
terms, with no further force and effect upon the management
stockholders who are parties to the Management Stock Purchase
Agreement.
7.8. Arrangements with Management Stockholders.
The closing under the Management Stock Purchase Agreement and
the closing under the Stock Purchase Related Agreement shall
have occurred, and there shall have been no modification of
the Management Stock Purchase Agreement other than pursuant
to Section 10.2 thereof without the consent of Alleghany, and
there shall be no modification of the Stock Purchase Related
Agreement other than pursuant to Section 33 thereof without
the consent of Continental; provided, however, that the
failure of the persons listed in Section 1.2 hereof to
purchase not more than one-half of the shares of Common Stock
of NHC that they were obligated to purchase in the aggregate
pursuant to the Management Stock Purchase Agreement shall not
be deemed to be a failure of the foregoing condition.
7.9. Tax Sharing Agreement. On or prior to the
Closing Date, Continental, URHC, URC, NHC, Risk Managers,
Underwriters Reinsurance and Commercial Underwriters shall
have entered into a Tax Sharing Agreement, substantially in
the form annexed hereto as Exhibit J (the "Tax Sharing
Agreement"). The Tax Sharing Agreement shall be in full
force and effect on the Closing Date and there shall have
been no modification of the Tax Sharing Agreement without the
consent of Alleghany.
7.10. Loan Agreement. On or prior to the Closing
Date, Continental or an affiliate of Continental and NHC
shall have entered into a Loan Agreement, substantially in
the form annexed hereto as Exhibit K (the "Loan Agreement").
7.11. California Tax Election. On or prior to the
Closing Date, Alleghany and URC shall have executed and
delivered to URC six copies of IRS Form 8023 (marked to
indicate that it applies for California tax purposes only)
for filing with the Franchise Tax Board of California
pursuant to the California Bank and Corporation Tax Law
Sections 24451 and 23051.5(g) to treat the sale of the stock
of NHC as a sale of NHC's assets, as described in Section
338(h)(10) of the Code, for California tax purposes only.
8. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ALLEGHANY.
In addition, the obligations of Alleghany under
this Agreement are subject to the condition that all of the
following representations and warranties of NHC (which shall
have been given by NHC on the Closing Date) (a) which speak
as of the date hereof shall be true and correct in all
material respects as of the date hereof as if the defined
term "Companies" includes URHC and URC and does not include
NHC, and (b) which speak as of the Organization Date or the
Closing Date shall be true and correct in all material
respects as of the Organization Date or the Closing Date, as
the case may be (except in each case for any representation
and warranty which speaks as of any other date, which shall
be true and correct in all material respects as of such date,
and except for any changes permitted by the terms hereof or
consented to by Alleghany), and Alleghany shall have received
from the President and Chief Financial Officer of NHC a
certificate, on behalf of NHC, dated the Closing Date, to the
foregoing effect:
8.1. Organization and Standing of the Companies.
As of the date hereof (or as of the Organization Date with
respect to NHC) and as of the Closing Date, each of the
Companies is a corporation duly organized, validly existing
and in good standing under the laws of its state of
incorporation, and has all requisite corporate power and
authority to own its properties and to carry on its business
as now being conducted; and each of the Companies is duly
qualified and licensed to do business and is in good standing
in each jurisdiction where the nature of the property owned
or business conducted requires such qualification or
licensing, except for such failures to be so qualified,
licensed or in good standing as would not have a material
adverse effect on the business, financial condition or
results of operations of the Companies taken as a whole. As
of the date hereof (or as of the Organization Date with
respect to NHC) and as of the Closing Date, Schedule 8.1
hereto sets forth a true and complete list of the Companies
and all of the entities in which any of the Companies has
directly or indirectly at least a fifty percent equity
interest (the "Subsidiaries"), their jurisdictions of
incorporation and the jurisdictions in which they are
qualified to do business as a foreign corporation.
8.2. Charter and By-Laws. As of the date hereof
(or as of the Organization Date with respect to NHC) and as
of the Closing Date, the copies of the charter and by-laws of
each of the Companies which have heretofore been delivered to
Alleghany or Alleghany's counsel are true, accurate and
complete and reflect all amendments or changes in effect. As
of the date hereof (or as of the Organization Date with
respect to NHC) and as of the Closing Date, Schedule 8.2
hereto is a true and complete list of the officers and
directors of each of the Companies, which Schedule may be
updated as of the Closing Date subject to Section 8.15
hereof.
8.3. Capital Stock. As of the Organization Date
and the Closing Date, the authorized capital stock of NHC
will consist of Ten Million (10,000,000) shares of Common
Stock, 9,282,130 shares of which will be issued and
outstanding, and all of the issued and outstanding shares of
Common Stock of NHC will be duly authorized, validly issued,
fully paid and nonassessable. As of the Organization Date,
all of the issued and outstanding shares of Common Stock of
NHC will be owned by URC free and clear of all Liens except
for this Agreement, the Management Stock Purchase Agreement,
the Shareholders Agreement and the Credit Agreement. As of
the Closing Date, all of the Shares will be owned by URC free
and clear of all Liens (subject to the granting of the
Sellers Approvals). All of the issued and outstanding shares
of the capital stock of Underwriters Reinsurance and Risk
Managers are held by URC as of the date hereof, and will be
held by NHC as of the Closing Date, and all of the issued and
outstanding shares of the capital stock of Commercial
Underwriters are held by Underwriters Reinsurance, in each
case, except as set forth on Schedule 2.7 hereto, free and
clear of all Liens (subject to the granting of the Sellers
Approvals). No shares of capital stock of any of the
Companies are held in treasury. All of the issued and
outstanding shares of capital stock of the Subsidiaries have
been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth on Schedule 2.7
hereto, none of the Companies is bound by, has granted,
issued or made or agreed to grant, issue or make any
warrants, options, subscription rights or any other commit-
ments of any character relating to the issued or unissued
shares of capital stock of any of the Companies, nor is there
any agreement providing for the amendment of the charters of
any of the Companies so as to increase the amount of
authorized capital stock of such corporation. Except as set
forth on Schedule 2.7 hereto, none of the Companies is a
party to any voting trust or other agreement or understanding
with respect to the voting of the capital stock of any of the
Companies.
8.4. Authority. Neither the execution nor the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or
result in a breach or violation of any of the terms,
conditions or provisions of the charters or by-laws of the
Companies; (ii) subject to the granting of the Sellers
Approvals, conflict with or result in a breach or violation
of, or default or loss of a material benefit under, or permit
the acceleration of any obligation under any provision of any
agreement, indenture, mortgage, lien, lease or other instru-
ment or restriction of any kind to which any of the Companies
is a party or by which any of their respective assets or
properties is otherwise bound, which conflict, breach,
violation, default, loss or acceleration, individually or in
the aggregate, would have a material adverse effect upon the
business, financial condition or results of operations of the
Companies taken as a whole or interfere in any material way
with the ability of any of URHC, URC or Continental to
consummate the transactions contemplated by this Agreement;
or (iii) subject to the granting of the Sellers Approvals,
require any of the Companies to obtain any consent, approval,
authorization or action of, or make any filing with or give
any notice to, any third party, or any public, governmental
or judicial authority (such consents, approvals,
authorizations, actions, filings and notices required on the
part of the Companies are set forth on Schedule 8.4 hereto),
or violate any order, writ, injunction, decree, statute, rule
or regulation applicable to any of URHC, URC or the Companies
or any of their assets or properties, the failure to make,
obtain or give or the effect of which violation, individually
or in the aggregate, would have a material adverse effect on
the business, financial condition or results of operations of
the Companies taken as a whole or interfere in any material
way with the ability of any of URHC, URC or Continental to
consummate the transactions contemplated by this Agreement.
8.5. Compliance. Except as set forth on Schedule
8.5 hereto, (a) none of the Companies is in violation of any
applicable order, judgment, injunction, award or decree, the
violation of which would have a material adverse effect upon
the business, financial condition or results of operations of
the Companies taken as a whole, and (b) none of the Companies
has received written notice that any such violation is being
alleged. Except as set forth on Schedule 8.5 hereto, none of
the Companies is in violation of any federal, state and local
laws, regulations, ordinances and governmental requirements
applicable to the operation of its business, the violation of
which would have a material adverse effect upon the business,
financial condition or results of operations of the Companies
taken as a whole, and none of the Companies has received
written notice that any such violation is being alleged.
Schedule 8.5 hereto is a true and complete list of the
jurisdictions in which each of the Companies is licensed and
authorized to engage in insurance and reinsurance or other
business and the lines of insurance or types of business it
is licensed to write or engage in in each such jurisdiction,
which Schedule may be updated as of the Closing Date provided
that the number of jurisdictions listed for each of the
Companies in the updated Schedule is not materially fewer
than listed in the Schedule as of the date hereof. Except as
set forth on Schedule 8.5 hereto, all such licenses are valid
and in full force and effect, except for such failures to be
valid or in full force and effect which would not have a
material adverse effect on the business, financial condition
or results of operations of the Companies taken as a whole.
Each of the Companies conducts no insurance or reinsurance or
other business in any other jurisdiction nor writes any line
of insurance or engages in any type of business other than
those for which it is currently licensed in any jurisdiction,
except where the failure to be so licensed would not have a
material adverse effect on the business, financial condition
or results of operations of the Companies taken as a whole.
Schedule 8.5 hereto is a true and complete list of all the
jurisdictions in which each of the Companies, within the last
five years, had its license or other qualification to conduct
an insurance business revoked, restricted or suspended
(voluntarily or involuntarily) or, to the knowledge of NHC
received any threat of action to revoke, restrict or suspend
such license or qualification. Also set forth on Schedule
8.5 are the jurisdictions in which each of the Companies
within the last five years has been involved in a proceeding
to revoke, restrict or suspend its license or other
qualification, or in which there is any proceeding pending to
revoke, restrict or suspend such license or qualification. A
copy of the report relating to the last completed insurance
regulatory examination and audit of Underwriters Reinsurance
and Commercial Underwriters, if any, has heretofore been
delivered to Alleghany or Alleghany's counsel. Except for
generally applicable legal requirements and as set forth on
Schedules 2.3, 3.1, 8.4 and 8.5 hereto, there are no agree-
ments or understandings between any of the URHC Stockholders
or any of the Companies and any regulatory authority
concerning the payment of dividends by the Companies or the
maintenance of any reserves.
8.6. Financial Statements.
(a) GAAP Financial Statements.
(i) The audited consolidated balance sheet of
URHC and its subsidiaries as of December 31, 1992 and 1991
and the related audited consolidated statements of income,
stockholders' equity and cash flows for each of the years
then ended (the "Annual Financial Statements"), which
heretofore have been delivered to Alleghany or Alleghany's
counsel, present fairly the consolidated financial position
and results of the operations of URHC and its subsidiaries
as of the dates and for the periods indicated therein in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods
indicated, except as may otherwise be specifically indicated
in such financial statements.
(ii) The unaudited consolidated balance sheet of
URHC and its subsidiaries as of March 31, 1993 and the
related unaudited consolidated statements of income,
stockholders' equity and cash flows for the respective three
months then ended (the "March Financial Statements"), which
heretofore have been delivered to Alleghany or Alleghany's
counsel, present fairly (subject to normal, recurring year-
end adjustments) the consolidated financial position and
results of operations of URHC and its subsidiaries as of the
dates and for the periods indicated therein in accordance
with generally accepted accounting principles applied on a
basis consistent with the Annual Financial Statements
(except as may otherwise be specifically indicated in the
notes thereto, and except that footnote presentation is as
permitted by Form 10-Q of the Securities and Exchange
Commission).
(iii) The unaudited consolidated balance sheet of
URHC and its subsidiaries as of June 30, 1993 and the
related consolidated unaudited statements of income,
stockholders' equity and cash flows for the respective six
months then ended, which will be prepared and delivered to
Alleghany or Alleghany's counsel prior to the Closing Date,
will present fairly (subject to normal, recurring year-end
adjustments) the financial position and results of
operations of URHC and its subsidiaries as of the dates and
for the periods indicated therein in accordance with
generally accepted accounting principles applied on a basis
consistent with the Annual Financial Statements (except as
may otherwise be specifically indicated in the notes
thereto, and except that footnote presentation is as
permitted by Form 10-Q of the Securities and Exchange
Commission).
(b) Statutory Financial Statements.
(i) All Annual Convention Statements required to
be filed since December 31, 1987 and the Quarterly
Convention Statements required to be filed during the period
January 1, 1993 to the date hereof with any insurance
regulatory agencies by Underwriters Reinsurance and
Commercial Underwriters have been duly filed. Such Annual
Convention Statements for the fiscal years ended December
31, 1992 and 1991 and such Quarterly Convention Statements
for the period ending March 31, 1993 (including the
financial statements on a statutory basis and the
accompanying exhibits and schedules), which have heretofore
been delivered to Alleghany or Alleghany's counsel, were
prepared in accordance with accounting practices prescribed
or permitted for insurance companies by state regulatory
authorities, applied on a consistent basis throughout such
period except as otherwise stated therein, and present
fairly, in accordance with such practices, the statutory
financial position as at the date of, and the result of its
operations for the period covered by, such Annual or
Quarterly Convention Statements. Other than as may be
reflected in the Quarterly Convention Statements for the
three months ending March 31, 1993, there has not been any
material adverse change in the statutory condition of
Underwriters Reinsurance and Commercial Underwriters taken
as a whole since the date of the Annual Convention
Statements for the fiscal year ended December 31, 1992.
(ii) As soon as reasonably practicable after they
become available, URC shall have caused Underwriters
Reinsurance to furnish to Alleghany the Quarterly Convention
Statements of Underwriters Reinsurance and Commercial
Underwriters for all interim quarterly periods subsequent to
March 31, 1993 and prior to the Closing Date. The Quarterly
Convention Statements referred to above required to be filed
with any insurance regulatory agencies shall have been duly
filed. Such Quarterly Convention Statements (including the
financial statements on a statutory basis and the
accompanying exhibits and schedules) will have been prepared
in accordance with accounting practices prescribed or
permitted for insurance companies by state regulatory
authorities, applied on a consistent basis throughout such
period except as otherwise stated therein, and will have
presented fairly in accordance with such practices the
statutory financial position of Underwriters Reinsurance and
Commercial Underwriters as at the date of, and the result of
its operations for the period covered by, such Quarterly
Convention Statements.
8.7. Investments and Other Assets.
(a) Schedule 8.7 hereto is a true and complete
list of all investments in (and the custodial location of)
bonds, stocks and other securities ("Investments") owned by
any of the Companies, other than shares of capital stock of
any of the Companies held by any of the other Companies, as
of the last day of the month immediately preceding the month
hereof, all of which Investments comply in all material
respects with applicable insurance laws and regulations,
which Schedule may be updated as of the Closing Date to
reflect transactions consistent with the Investment
Objectives set forth on Schedule 8.7 hereto. All
Investments of each of Underwriters Reinsurance and
Commercial Underwriters are admitted assets under applicable
insurance laws and regulations and statutory accounting
practices, except to the extent that failure to be admitted
assets would not have a material adverse effect on the
business, financial condition or results of operations of
Underwriters Reinsurance and Commercial Underwriters taken
as a whole. Except as disclosed on Schedule 8.7 hereto,
each of the Companies has good and marketable title to all
its Investments listed on Schedule 8.7 hereto or acquired in
the ordinary course of business since the last day of the
month immediately preceding the month hereof other than with
respect to those Investments which have been disposed of in
the ordinary course of business since such date, free and
clear of all Liens except for Liens for taxes not yet due
and payable or which are being contested in good faith by
appropriate proceedings and for which reserves have been
provided in accordance with generally accepted accounting
principles.
(b) None of the Companies has received written
notice that any of the Investments listed on Schedule 8.7
hereto or acquired in the ordinary course of business since
the last day of the month immediately preceding the month
hereof is currently in default in the payment of principal
or interest.
(c) Except as set forth on Schedule 8.7 hereto,
since March 31, 1993, except as required by agreements in
effect on March 31, 1993 and other than workouts, extensions
or enforcement of security interests on Investments owned on
March 31, 1993, none of the Companies has (i) purchased or
otherwise invested in or committed to purchase or otherwise
invest in any interest in real property (including without
limitation any extension of credit secured by a mortgage or
deed of trust on real property, but excluding instruments of
a type commonly known as mortgage-backed securities), (ii)
purchased or otherwise invested in or committed to purchase
or otherwise invest in bonds, notes, debentures or other
evidence of indebtedness rated lower than "Aa" by Moody's
Investors Service Inc. or "AA" by Standard & Poor's
Corporation at the time of purchase or the equivalent
commercial paper ratings by such rating agencies, (iii)
entered into any agreement or commitment with respect to the
purchase or other acquisition, sale or other disposition or
allocation of any Investment with any Affiliate (as defined
in Section 8.18 hereof) or (iv) entered into any agreement
or commitment with respect to any foreign investments. None
of the Companies owns any real property which is material to
the business of any of the Companies.
(d) Schedule 8.7 hereto sets forth a true and
complete list of all of the assets of the Companies that are
material to the business of the Companies taken as a whole
other than the Investments, the shares of capital stock of
any of the Companies held by any of the other Companies and
rights of the Companies under the contracts set forth on
Schedule 8.9 hereto. All such assets, and all of the rights
of the Companies under the contracts set forth on Schedule
8.9 hereto, are owned free and clear of all Liens except
those Liens that do not materially adversely affect the
value of the assets or rights of the Companies taken as a
whole. All reinsurance letters of credit and trust funds
listed on Schedule F-Part 2A-Section 1 of the Annual
Convention Statements for the fiscal year ended December 31,
1992 of each of Underwriters Reinsurance and Commercial
Underwriters are in full force and effect and comply with
requirements set by state insurance regulatory authorities
to obtain reinsurance credit therefor, except for such
failures to be in full force and effect or to comply which
would not have a material adverse effect on the business,
financial condition or results of operations of Underwriters
Reinsurance and Commercial Underwriters taken as a whole.
8.8. Intangible Property. The Companies own,
have registered or have valid rights to use such trademarks,
service marks, trade names and copyrights as are material to
the business of the Companies taken as a whole. None of the
Companies has received written notice that any of them is
infringing any such trademarks, service marks, trade names,
copyright or any application pending therefor. Each of the
Companies has valid rights, title to or interest in the
trade secrets and other proprietary rights that are material
to the businesses of the Companies taken as a whole.
8.9. Contracts and Commitments. Except as set
forth on Schedule 8.9 hereto, none of the Companies is a
party to any written or oral:
(a) contracts or commitments (including, without
limitation, reinsurance and retrocession agreements and
treaties with any person and agreements with, and
undertakings or commitments to, any governmental or
regulatory authority) materially affecting the business of
the Companies taken as a whole;
(b) retrocession agreements for business ceded by
any of the Companies that do not qualify as risk transfer in
the Annual Financial Statements or the statutory financial
statements set forth in the Annual Convention Statements;
i.e., surplus relief contracts or treaties, or assumption
reinsurance agreements which provide for the transfer and
novation of contracts of insurance;
(c) contracts or agreements containing covenants
limiting the freedom of any of the Companies in any material
respect to engage in any line of business in any geographic
area or to compete with any person;
(d) employment contracts, including without
limitation contracts to employ executive officers and other
contracts with officers or directors of any of the
Companies, which cannot be terminated by any of the
Companies upon notice of sixty days or less without penalty
or premium and involve annual salary in excess of $50,000
individually; or
(e) leases which are material to the Companies
taken as a whole.
None of the Companies is (and to the knowledge of
NHC no other party is) in breach or violation of, or default
under, any of such contracts, commitments or agreements and
no event has occurred which, with the giving of notice or
the passage of time or both, would constitute a breach,
violation or default by any of the Companies (or to the
knowledge of NHC of any other party thereto) of any of such
contracts, commitments or agreements, except for such
breaches, violations, defaults and events which would not
have a material adverse effect on the business, financial
condition or results of operations of the Companies taken as
a whole.
8.10. Accounting Practices. Except as set forth
on Schedule 8.10 hereto and except for changes disclosed in
Quarterly Convention Statements or the March Financial
Statements, since December 31, 1992, none of the Companies
has made any change in its accounting policies or any
material change in accounting methods or practices,
including, without limitation, the establishment of reserves
for unearned premiums, losses (including incurred but not
reported losses) and loss adjustment expenses, or made any
change in depreciation or amortization policies or rates
adopted by it, except as required by law, generally accepted
accounting principles or statutory accounting practices
prescribed or permitted by state regulatory authorities.
8.11. Litigation. As of the date hereof, except
as set forth on Schedule 8.11 hereto, there are no actions,
suits, proceedings, claims, investigations or examinations
pending or to the knowledge of NHC threatened against any of
the Companies or any of their respective businesses,
properties, assets, or securities, at law or in equity,
before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, having jurisdiction
or before any private arbitration panel (the "Actions")
which, if adversely determined, would result in a judgment
of more than $500,000 or which would have a material adverse
effect on the business, financial condition or results of
operations of the Companies taken as a whole. As of the
Closing Date, except as set forth on Schedule 8.11 hereto,
there are no Actions which in the reasonable judgment of
outside counsel for Alleghany (which shall be in writing and
delivered to the parties hereto) are likely to be adversely
determined and, if adversely determined, would result in a
judgment of more than Five Million Dollars ($5,000,000)
liability to the Company or which would have a material
adverse effect on the business, financial condition or
results of operations of the Companies taken as a whole.
8.12. Tax Matters.
(a) Except as disclosed on Schedule 8.12(a)
hereto, the Companies have duly and timely filed (either
separately or on a consolidated or combined basis) with the
appropriate government agencies, all material returns,
declarations, reports, information returns, statements or
extensions relating to Taxes (as hereinafter defined),
including any schedule or attachment thereto or any
amendment thereof (the "Tax Returns"), and the Tax Returns
are true, correct and complete in all material respects.
The term "Taxes", as used in this Agreement, shall mean any
federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use,
transfer, real property transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any interest, penalty or
addition thereto.
(b) Except as disclosed on Schedule 8.12(b)
hereto, all material Taxes of the Companies for all periods
ending on the Closing Date have been (i) properly and fully
paid to the extent due and payable, and (ii) withheld and
paid over or deposited in the case of any Taxes required to
be withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, stockholder,
claimant, creditor or other party. Except as disclosed on
Schedule 8.12(b) hereto, there are no Liens on any of the
assets of the Companies that arose in connection with any
failure (or alleged failure) to pay any Taxes except for
Liens which would not have a material adverse effect on the
business, financial condition or results of operations of
the Companies taken as a whole. Except as disclosed on
Schedule 8.12(b) hereto, none of the Companies has requested
any extension of time within which to pay any material Taxes
or file any material Tax Returns except to the extent that
such Taxes will have been paid or such Tax Returns will have
been filed by the Closing Date. Except as disclosed on
Schedule 8.12(b) hereto, there is no agreement, waiver or
consent providing for an extension of time with respect to
the assessment of any material Tax deficiency against the
Companies. Except as disclosed on Schedule 8.12(b) hereto,
there is no action, suit, proceeding, investigation, audit
or claim now pending against, or with respect to any of the
Companies with regard to any Taxes, nor is any claim for
additional Taxes or assessment of Taxes threatened or
asserted in writing by any tax authority, except, in each
case, for such actions, suits, proceedings, investigations,
audits or claims that could not result in payment of an
amount of Taxes that would have a material adverse effect on
the business, financial condition or results of operations
of the Companies taken as a whole. All applicable
limitation periods for the assessment of any Taxes against
the Companies or against any corporation or other entity
included in a federal, state or local consolidated or
combined income tax return filed by or otherwise including
any of the Companies for all taxable periods ending on or
before December 31, 1986, have closed or expired.
(c) The federal and state income and premium Tax
Returns of, or which include, the Companies have not been
examined by the Internal Revenue Service or other taxing au-
thority having the responsibility for auditing such Tax
Returns for all periods beginning after the Companies'
taxable year ending December 31, 1987. Alleghany has been
provided with true and complete copies of all federal, state
and local income tax returns constituting part of the Tax
Returns which relate to the conduct of the businesses of the
Companies, as well as any correspondence and agreements with
the Internal Revenue Service or such other similar taxing
authority having the responsibility for auditing any such
income tax returns for the jurisdictions in which such
returns are filed for all periods for which assessments are
not barred by operation of the relevant statute of
limitations. The representations and warranties contained
in this paragraph (c) and all but the second sentence of
paragraph (b) of this Section 8.12 shall not apply with
respect to the federal income Taxes and the federal income
Tax Returns of any consolidated group of which any of the
Companies was a member prior to December 31, 1987.
(d) Except as set forth on Schedule 8.12(d)
hereto, (i) each of the Companies has disclosed on its
federal income Tax Returns all positions required to be
disclosed by it under Section 6662 of the Internal Revenue
Code of 1986, as amended (the "Code"), except for such
positions that, if successfully challenged by the Internal
Revenue Service, could not result in payment of an amount of
Taxes that would have a material adverse effect on the
business, financial condition or results of operations of
the Companies taken as a whole; and (ii) none of the
Companies has any liability for the Taxes of any other
person (other than another of the Companies) under Section
1.1502-6 of the Treasury Regulations, any similar provision
of state, local or foreign law.
8.13. Employee Benefit Plans. (a) Schedule 8.13
hereto sets forth a true and complete list of all employee
benefit plans, agreements, arrangements, funds, and programs
(including, without limitation, all "employee benefit plans"
within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA")) (i) which are sponsored, maintained or
contributed to by any of the Companies for the benefit of
current or former employees or directors of any of the
Companies or (ii) with respect to which any of the Companies
has any liability, whether direct or indirect, actual or
contingent (individually, a "Benefit Plan" and collectively,
the "Benefit Plans"). Except as set forth on Schedule 8.13
hereto, no other employee benefit plan, agreement,
arrangement, fund or program sponsored or maintained by any
entity currently or formerly affiliated under Section 414 of
the Code or Section 4001 of ERISA with any of the Companies
provides benefits to current or former employees or
directors of any of the Companies.
(b) With respect to each Benefit Plan, the
Companies have delivered to Alleghany copies of (i) all
Benefit Plan documents, including summary plan descriptions
and material employee communications; (ii) the two most
recent annual reports (Form 5500 series, including all
schedules and attachments); (iii) the two most recent annual
and periodic accountings of plan assets, if applicable; (iv)
the two most recent actuarial valuations, if applicable; and
(v) the most recent determination letter received from the
Internal Revenue Service.
(c) With respect to each Benefit Plan, (i) such
Benefit Plan has been administered in compliance in all
material respects with its terms and all applicable laws;
(ii) no material actions, suits or claims are pending or
threatened in respect thereof; (iii) if such Benefit Plan is
intended to qualify under Section 401(a) or 403(a) of the
Code, (A) such Benefit Plan so qualifies, (B) such Benefit
Plan has received from the Internal Revenue Service a
favorable determination letter covering the Benefit Plan as
originally adopted, and as amended by certain amendments
thereto; and (C) such Benefit Plan's qualified status is
protected with respect to subsequent amendments thereto that
are not covered by the determination letter because such
amendments may be (and will be) corrected or augmented, as
necessary, within the remedial amendment period under
Section 401(b) of the Code, which period extends beyond the
Closing Date; (iv) no fiduciary breaches or prohibited
transactions have occurred which would subject the Companies
to material liability under Title I of ERISA or Section 4975
of the Code; (v) all contributions thereto have been timely
made or reflected on the consolidated financial statements
of the Companies; (vi) all unpaid liabilities with respect
thereto have been fully reflected on the consolidated
financial statements of Underwriters Re and its
subsidiaries; and (vii) the assets of such Benefit Plan, if
a "pension plan" within the meaning of Section 3(2) of
ERISA, are not currently invested in any insurance or
annuity contract issued by an insurance company that is not
rated "A++(Superior)" in claims paying ability by A.M. Best
Company, Inc.
(d) Each Benefit Plan which is subject to Section
302 of ERISA or Section 412 of the Code (i) has no
"accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not
waived; (ii) uses a funding method permissible under ERISA
and the actuarial assumptions used in connection therewith
are permissible and reasonable, both individually and in the
aggregate; and (iii) as of the last day of the most recent
plan year ended prior to the date hereof, based on such
assumptions, had assets the fair market value of which were
at least equal to the present value of all benefit
liabilities within the meaning of Section 4001(a)(16) of
ERISA.
(e) With respect to each Benefit Plan which is an
"employee welfare benefit plan" (as defined in Section 3(1)
of ERISA): (i) the trust relating thereto, if any, satisfies
the requirements of Section 501(c)(9) of the Code; (ii) such
Benefit Plan has been administered in compliance in all
material respects with all requirements imposed under
Section 4980B of the Code and Sections 601-608 of ERISA; and
(iii) except as set forth on Schedule 8.13 hereto, no such
Benefit Plan provides health or death benefits to any
individual beyond his retirement or other termination of
employment (other than statutorily mandated continuation
coverage or conversion rights to individual coverage).
(f) No Benefit Plan is a "multiemployer plan" as
defined in Section 3(37) or 4001 of ERISA or a "multiple
employer plan" within the meaning of Section 413(c) of the
Code or Section 4064 of ERISA and none of the Companies has
any liability or obligation, whether actual or contingent,
with respect to such a multiemployer plan or a multiple
employer plan.
(g) Other than as permitted under the Management
Stock Purchase Agreement and other than the acceleration of
the vesting and the payment of the stock appreciation rights
granted under the Five Year Stock Equivalent Plan of UHRC,
the consummation of the transactions contemplated herein
shall not entitle any current or former employee of any of
the Companies to severance pay, or accelerate the time of
payment or vesting, or increase the amount of any
compensation due to any such employee or former employee.
No payment under any Benefit Plan would fail to be
deductible because of Section 280G of the Code.
8.14. Agencies, Powers of Attorney, etc.
(i) Schedule 8.14 hereto is a true and complete
list as of a current date of the names and addresses of each
agency of any of the Companies that has any authority to
bind any of them to issue an insurance policy, with a
general description of the type of agency or binding
authority granted, which Schedule may be updated as of the
Closing Date provided that any changes in the updated
Schedule will not have a material adverse effect on the
ability of Commercial Underwriters to conduct its business
as now being conducted.
(ii) The Companies have made available to
Alleghany copies of all forms of agreements or other
instruments granting any powers of attorney, agency or
binding authority, including all current form agency
contracts, of each of the Companies.
8.15. Employees. Schedule 8.15 hereto is a true
and complete list of all employees of each of the Companies
whose annual salary exceeds $50,000, the current salary of
each such employee (which information may be updated as of
the Closing Date subject to the other provisions of this
Section 8.15), the salaries, incentive awards, bonuses and
other compensation paid to each such employee for the year
ended December 31, 1992 (shown separately), and whether any
such employee has a written employment agreement with any of
the Companies. All such employment agreements will continue
in full force and effect after the Closing, except for the
modifications set forth on Schedule 10.1(b)(i) hereto,
without triggering any severance payments or other
penalties. The employees of the Companies listed on
Schedule 8.15(a) hereto are actively employed by the
Companies and have not given notice of termination or
resignation. Except as set forth on Schedule 8.15 hereto
(which information may be updated as of the Closing Date
subject to the other provisions of this Section 8.15), since
December 31, 1992, none of the Companies has terminated or
experienced the resignation of any employee whose annual
salary exceeded $50,000. There are no collective bargaining
agreements relating to any employees of any of the
Companies. Within the last two years none of the Companies
has experienced any material work stoppage or union
recognition efforts, or has been the subject of any
collective bargaining or a party to any collective
bargaining agreement.
8.16. Insurance. Schedule 8.16 hereto sets forth
a true and complete list of all policies of insurance
(excluding retrocession agreements and similar agreements)
maintained by each of the Companies with respect to their
respective properties and the conduct of their respective
businesses, showing the subject matter, the beneficiary and
the amount of coverage for each policy, which Schedule may
be updated as of the Closing Date provided that coverage and
premiums continue to be substantially similar to those
reflected in the Schedule as of the date hereof. Other than
life insurance policies, the insurance coverage provided by
such policies of insurance in force is reasonably adequate
for the conduct of the business conducted by each of the
Companies in accordance with sound business practices.
8.17. Brokers. Except as set forth on Schedule
8.17 hereto, no agent, broker, investment banker, person or
firm acting on behalf of any of the Companies or under
authority of any of them is or will be entitled to any
broker's, finder's or investment banker's fee or any other
commission or similar fee directly or indirectly from any of
the parties hereto in connection with the negotiation of any
of the transactions contemplated hereby.
8.18. Transactions with Affiliates. Schedule
8.18 hereto is a true and correct list of transactions,
contracts and other obligations (other than payments of
salary, bonus, employee benefits and other employee-related
expense reimbursements paid to employees of any of the
Companies) since December 31, 1991 between any one of the
Companies and (i) any stockholders, directors, officers,
employees or agents of any of the Companies; (ii) any person
that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, any of the persons listed in clause (i)
hereof (except, with respect to the GS Investors, this
clause (ii) shall apply only to the Goldman Subsidiaries);
or (iii) any member of the immediate family (as defined in
Rule 16a-1(e) of the Securities and Exchange Commission) of
any of the persons listed in clause (i) hereof (the persons
referred to in clauses (ii) and (iii) hereof are together
referred to as the "Affiliates"), (except in each case for
Ordinary Course Broker, Dealer or Investment Transactions
and the Note Transactions), including all such transactions
involving, in each case, $60,000 or more. As of the Closing
Date, none of the Companies shall have any obligations
involving $60,000 or more to URHC, URC, any of the
stockholders, directors, officers, employees or agents of
either URHC or URC, or any of their respective Affiliates,
except (x) for Ordinary Course Broker, Dealer or Investment
Transactions, (y) as reflected on Schedule 8.18 hereto or
(z) pursuant to this Agreement, the Tax Sharing Agreement,
the Loan Agreement or the Stock Purchase Related Agreement.
8.19. Regulatory Filings. Except with respect to
Taxes and Benefit Plans, which are subject to the provisions
of Sections 8.12 and 8.13, respectively, each of the
Companies has filed all reports, statements, documents,
registrations, filings or submissions required to be filed
by it with any governmental or regulatory agency, except
where failure to so file would not have a material adverse
effect on the business, financial condition or results of
operations of the Companies taken as a whole, and except (i)
those with respect to which the imposition, levy or
collection of all fines, penalties, assessments, taxes,
forfeitures, money judgments or sanctions of any type are
barred by statute of limitations, and (ii) as otherwise
agreed to in writing by the applicable governmental or
regulatory agency. Except as indicated on Schedule 8.19
hereto, (x) all such registrations, filings and submissions
were in compliance with applicable law when filed, and (y)
no deficiencies have been asserted by any such governmental
or regulatory agency with respect to such registrations,
filings or submissions that have not been satisfied, except
for such failure to comply and deficiencies which would not
have a material adverse effect on the business, financial
condition or results of operations of the Companies taken as
a whole.
8.20. Registration Statement. A copy of the
Registration Statement has been furnished to Alleghany. As
of its filing date, the Registration Statement did not
contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the
statements made therein, in light of the circumstances under
which they were made, not misleading, except that no
representation or warranty is made with respect to the
matters set forth on Schedule 8.20 hereto to the extent such
matters were not described in the Registration Statement, or
with respect to the accounting treatment for funded covers
as reflected in the Registration Statement to the extent
that such treatment is inconsistent with the accounting
treatment therefor referred to in Note 1 to the Annual
Financial Statements and reflected in the Annual Financial
Statements.
8.21. Reserves. Except for any action taken
pursuant to Section 10.1(j) hereof, the insurance reserving
practices and policies of any of the Companies have not
changed in any material respect since December 31, 1992, and
the results of the application of such practices and
policies are reflected in the Convention Statements, it
being understood that for this purpose any change in
reserves resulting from the change in accounting policy
described in Note 1 to the Annual Financial Statements shall
not be deemed a change in reserving practices or policies.
All information in the possession of any of the Companies
and requested by Alleghany with reasonable specificity that
is material to an evaluation of the adequacy of the loss
reserves (including, without limitation, incurred but not
reported reserves), loss adjustment expense reserves and
unearned premium reserves of the Companies as of December
31, 1992 has been made available to Alleghany.
8.22. Absence of Bank or Savings and Loan Status.
None of the Companies (a) is an "insured bank" or is
eligible for federal deposit insurance within the meaning of
the Federal Deposit Insurance Act, as amended; (b) is a
"savings association" for purposes of the Regulations for
Savings and Loan Holding Companies, 12 CFR Section 583-584 and
the Regulations for the Acquisition of Control of Savings
Associations, 12 CFR Section 574; (c) accepts deposits within the
meaning of 12 U.S.C. Section 378; (d) is a "bank" or a "bank
holding company"; (e) owns or "controls" 5 percent or more
of the voting securities of a "bank" or "bank holding
company," as such terms are defined in the Bank Holding
Company Act of 1956, as amended, and the regulations
promulgated thereunder; (f) is regulated as a bank under the
laws or regulations of its jurisdiction of incorporation;
(g) is a "savings and loan holding company"; (h) "controls"
any "savings association," as such terms are defined in 12
CFR Section 574 and 583; (i) has acquired by purchase or
otherwise, or retains, more than 5 percent of the voting
stock or shares of a "savings association" or "savings and
loan holding company," as such terms are defined in 12 CFR
Section 583; or (j) is regulated as a savings and loan institution
under the laws or regulations of its jurisdiction of
incorporation.
8.23. No Material Adverse Change. Since December
31, 1992, there has not been any material adverse change in
the business, financial condition or results of operations
of the Companies taken as a whole as reflected in the Annual
Financial Statements as of December 31, 1992, whether or not
arising from transactions in the ordinary course of
business.
8.24. No Dividends. Except as set forth in the
Registration Statement or on Schedule 8.24 hereto, and
except as permitted by Section 10.1(b)(iv) hereof, since
December 31, 1992, there has not been any declaration,
setting aside or payment of any dividend or other
distribution in respect of the capital stock of any of the
Companies or any direct or indirect redemption, purchase or
other acquisition by any of the Companies of any such stock;
or except as required pursuant to Section 10.2(b) hereof,
since December 31, 1992, there has not been any sale,
assignment, transfer or other disposition of any Investment
other than in the ordinary course of business and consistent
with the Investment Objectives set forth on Schedule 8.7
hereto, or any amendment, termination or waiver of any right
of substantial value belonging to or held by any of the
Companies.
9. CONDITIONS TO OBLIGATIONS OF URHC, URC AND THE URHC
STOCKHOLDERS.
The obligations of URHC, URC and the URHC
Stockholders under this Agreement are subject to the
satisfaction, on or before the Closing Date, of each of the
following conditions:
9.1. Compliance with Agreement. Alleghany shall
have performed and complied in all material respects with
all the obligations required by this Agreement to be
performed or complied with by it on or before the Closing
Date, and each of URHC, URC and the URHC Stockholders shall
have received from Alleghany at the Closing a certificate,
dated the Closing Date, to that effect. Attached to such
certificate shall be a certified copy of the resolutions of
the Board of Directors of Alleghany authorizing this
Agreement and the transactions contemplated hereby.
9.2. Representations and Warranties. The repre-
sentations and warranties made by Alleghany in Section 6 of
this Agreement shall be true and correct in all material
respects as of the Closing Date as though such
representations and warranties were made at and as of such
time (except for any representation and warranty made or
given as of a specified date, which shall have been true and
correct in all material respects as of such specified date,
and except for any changes permitted by the terms hereof or
consented to by each of URHC, URC and the URHC
Stockholders). Each of the URHC Stockholders shall have
received from Alleghany at the Closing a certificate, dated
the Closing Date, to that effect, which certificate shall
specify in reasonable detail any matters to be excepted in
accordance with this Section 9.2. Delivery of such
certificate shall constitute a representation and warranty
by Alleghany as to the matters stated therein, but this
shall not alter the provision for survival of
representations and warranties set forth in Section 12.1
hereof.
9.3. Opinion of Counsel for Alleghany. Each of
URHC, URC and the URHC Stockholders shall have received an
opinion from Messrs. Donovan Leisure Newton & Irvine,
counsel for Alleghany, dated the Closing Date substantially
to the effect set forth in Exhibit L hereto.
9.4. Approvals. All Alleghany Approvals and
Sellers Approvals shall have been obtained and be in full
force and effect on the Closing Date.
9.5. Absence of Certain Litigation. On the
Closing Date (i) there shall be no injunction, restraining
order or order of any nature issued by any court of
competent jurisdiction which directs that this Agreement or
any material transaction contemplated hereby shall not be
consummated as herein provided or compels or would compel
Alleghany to dispose of or discontinue a significant portion
of the business conducted by Alleghany and its subsidiaries
or of the business conducted by the Companies as a result of
the consummation of the transactions contemplated hereby;
and (ii) there shall be no suit, action or other proceeding
by the United States (or any agency thereof) or by any state
(or any agency thereof) pending before any court or
governmental agency, or threatened to be filed or initiated,
wherein such complainant seeks the restraint or prohibition
of the consummation of any material transaction contemplated
hereby or asserts the illegality of any material transaction
contemplated hereby.
9.6. Transfer Taxes. Alleghany shall have filed,
independently or jointly with each of URHC, URC and the URHC
Stockholder, as the law requires, all real property and
other transfer tax filings required to be filed by or with
the cooperation of Alleghany in connection with the sale and
delivery to Alleghany of the Shares.
9.7. Arrangements with Management Stockholders.
The closing under the Management Stock Purchase Agreement
and the closing under the Stock Purchase Related Agreement
shall have occurred, and there shall have been no
modification of the Management Stock Purchase Agreement
other than pursuant to Section 10.2 thereof without the
consent of Alleghany, and there shall be no modification of
the Stock Purchase Related Agreement other than pursuant to
Section 33 thereof without the consent of Continental;
provided, however, that the failure of the persons listed in
Section 1.2 hereof to purchase not more than one-half of the
shares of Common Stock of NHC that they were obligated to
purchase in the aggregate pursuant to the Management Stock
Purchase Agreement shall not be deemed to be a failure of
the foregoing condition.
9.8. Tax Sharing Agreement. On or prior to the
Closing Date, Continental, URHC, URC, NHC, Risk Managers,
Underwriters Reinsurance and Commercial Underwriters shall
have entered into the Tax Sharing Agreement. The Tax
Sharing Agreement shall be in full force and effect on the
Closing Date and there shall have been no modification of
the Tax Sharing Agreement without the consent of Alleghany.
9.9. California Tax Election. On or prior to the
Closing Date, Alleghany and URC shall have executed and
delivered to URC six copies of IRS Form 8023 (marked to
indicate that it applies for California tax purposes only)
for filing with the Franchise Tax Board of California
pursuant to the California Bank and Corporation Tax Law
Sections 24451 and 23051.5(g) to treat the sale of the stock
of NHC as a sale of NHC's assets, as described in Section
338(h)(10) of the Code, for California tax purposes only.
10. COVENANTS.
10.1. Covenants Pending the Closing. From and
after the date hereof and until the Closing Date each of the
parties hereto agrees that, for purposes of this Section
10.1 the defined term "Companies" includes URHC and URC
until but only until the actions to be taken pursuant to
Section 10.2(b) have been taken, and each of URHC and URC
agrees that:
(a) Access to Properties, Books and Records.
Each of URHC and URC shall use its reasonable efforts to
cause to be afforded upon reasonable notice to the officers,
attorneys, accountants and other authorized representatives
of Alleghany, free and full access during normal business
hours to the Companies and to the employees, properties,
books and records of each of the foregoing in order to
afford Alleghany the opportunity to make such investigations
of the affairs of the Companies as they deem desirable.
Each of URHC and URC shall use reasonable efforts to cause
the Companies to furnish to Alleghany such information
relating to their respective businesses and affairs (and
which is reasonably available to the Companies) as Alleghany
shall from time to time reasonably request. Alleghany will
treat all information obtained as a result of its
investigation as confidential in accordance with the
provisions of the letter agreement dated June 4, 1993
between URHC and Alleghany. The parties agree that such
letter agreement shall remain in full force and effect in
accordance with its terms until the Closing, and that
nothing contained herein shall limit Alleghany's covenants
and agreements therein. In the event that the Closing shall
not take place for any reason, Alleghany shall return or
destroy all materials furnished and shall destroy all copies
of such materials made by Alleghany, and agrees not to
disclose to any third party any information contained
therein or derived therefrom and not to use such information
to the competitive disadvantage of URHC and its
subsidiaries.
(b) Carry On in Regular Course. Each of URHC
and URC shall use its reasonable efforts to cause each of
the Companies to carry on its business in the ordinary
course in substantially the same manner as heretofore
conducted, and consistent with the representations and
warranties set forth in Section 8 hereof. Each of URHC and
URC shall use its reasonable efforts to cause each of the
Companies not to, without the prior written consent of
Alleghany, (i) enter into any written employment agreements
or any other employment agreements which cannot be
terminated by any of the Companies upon notice of sixty days
or less without penalty or premium, or grant any bonuses to
any of its employees or alter or increase the present
compensation of its employees other than in the ordinary
course of business consistent with past practice or in any
way amend the current terms of the employee benefit plans
applicable to its employees, except in each case (A) as
required by law; (B) as provided on Schedule 10.1(b)(i)
hereto; (C) as permitted under the Management Stock Purchase
Agreement; (D) not later than two (2) business days before
the Closing Date, the vesting of the stock appreciation
rights under the Five Year Stock Equivalent Plan of UHRC may
be accelerated and a liability for payment thereof may be
accrued, pursuant to Section 10.2(f) hereof; (E) prior to
December 1993, URHC may make employer matching contributions
under the Incentive Savings Plan and the Supplemental
Incentive Savings Plan for the 1993 plan year in an
aggregate amount not to exceed $550,000, and URHC may accrue
liabilities on its financial statements relating to the
profit-sharing component of the Incentive Savings Plan and
the Supplemental Incentive Savings Plan for the 1993 plan
year in an aggregate amount of between $802,000 and
$1,337,000; (F) prior to December 1993, URHC may determine
and pay bonus awards under the Annual Management Incentive
Plan to certain employees for 1993 based upon the applicable
individual performance ratings for 1992; (G) prior to
December 1993, URHC may terminate the Defined Benefit
Retirement Plan and provide for the allocation and
distribution of the vested benefits thereunder, and may
amend the Supplemental Retirement Plan to provide for new
payment options; and (H) URHC may make the payments to
Steven H. Newman, Peter A. Bengelsdorf and Russell T. John
required pursuant to letter agreements dated July 28, 1993
between URHC and each of such persons pursuant to Section
10.2(h) hereof; (ii) incur or contract for any capital
expenditures in excess of $400,000 in the aggregate; (iii)
except for actions pursuant to Section 10.1(j) hereof, make
any material change in accounting methods or practices
(including without limitation any change with respect to
establishment of reserves for unearned premiums, losses
(including without limitation incurred but not reported
losses) and loss adjustment expenses, or any change in
depreciation or amortization policies or rates adopted by
it), except as required by law, generally accepted
accounting principles or statutory accounting practices
prescribed or permitted for insurance companies by state
regulatory authorities; (iv) declare, set aside or pay any
dividend or other distribution in respect of the capital
stock of any of the Companies except as set forth on
Schedule 10.1(b)(iv) hereto, or directly or indirectly
redeem, purchase or otherwise acquire any of such stock
except as permitted by this Agreement and the Management
Stock Purchase Agreement; provided, however, that, except as
may be required by the Shareholders Agreement with respect
to a maximum of 22,162 shares of common stock of URHC owned
by the persons in Section 1.2 hereof, URHC shall not
declare, set aside or pay any dividend or other distribution
in respect of its capital stock, and shall not directly or
indirectly redeem, purchase or otherwise acquire any of its
capital stock; or (v) do any other act which would render
NHC unable to provide the certificate required by Section 8
hereof, or cause any representation or warranty of URHC, URC
or any URHC Stockholder in this Agreement to be or become
untrue in any material respect as of the date made or given
or to be made or to be given.
(c) Preservation of Organization. Each of URHC
and URC shall use its reasonable efforts to cause each of
the Companies to maintain its corporate existence and powers
and its qualifications as a foreign corporation in any
jurisdiction where it is so qualified and to maintain its
books, accounts and records on a basis consistent with that
of its prior periods and in a manner which permits
presentation of information in accordance with generally
accepted accounting principles. Each of URHC and URC shall
use its reasonable efforts to cause each of the Companies to
(i) preserve intact its business organization, (ii) keep
available to Alleghany its present key officers and
employees, (iii) maintain all of its properties (except for
obsolete property) in customary repair, order and condition,
(iv) take all steps reasonably necessary to maintain its
intangible assets, and (v) preserve for Alleghany its
relationships with its clients, suppliers and others having
business relations with it.
(d) No Mergers, Consolidations, Sale of Stock,
Etc. URHC and URC will not and will not cause any of the
Companies to, directly or indirectly, solicit any inquiries
or proposals or enter into or continue any discussions,
negotiations or agreements relating to the sale or exchange
of any Shares, the merger of any of the Companies with, or,
except as permitted by this Agreement, the direct or
indirect disposition of a significant amount of any of the
Companies' assets or business to, any person other than
Alleghany or provide any assistance or any information to or
otherwise cooperate with any person in connection with any
such inquiry, proposal or transaction. In the event that
URHC, URC or any URHC Stockholder receives a solicited or
unsolicited offer for such a transaction or obtains
information that such an offer is likely to be made, it will
provide or will cause to be provided to Alleghany notice
thereof as soon as practical after receipt thereof,
including the identity of the prospective purchaser or
soliciting party.
(e) Reinsurance Agreements. URHC and URC shall
use its reasonable efforts to cause the Companies not to,
without the prior written approval of Alleghany, and except
pursuant to commitments existing on the date hereof, (i)
enter into or commit to enter into any commutation, loss
portfolio transfer or other similar transaction, agreement
or arrangement or series of related transactions, agreements
or arrangements involving any assumed or ceded reinsurance
of any of the Companies that involves payments to or from
any of the Companies in an amount in excess of $2.5 million
or (ii) enter into or commit to enter into any reinsurance
or retrocession contract, treaty or other arrangement or
series of contracts, treaties or other arrangements that
create any liability in excess of $2.5 million.
(f) Consent of Alleghany. Consents which may be
given or withheld by Alleghany regarding the conduct of the
business of the Companies prior to the Closing shall not
constitute an undertaking, commitment or representation by
Alleghany nor give rise to any obligation or liability of
Alleghany with respect to the subject matter of such
consent; provided, however, that nothing shall relieve
Alleghany of any obligation to act reasonably in connection
with withholding its consent.
(g) Filings and Approvals. URHC, URC, the URHC
Stockholders and Alleghany shall duly make all regulatory
filings required to be made by each in respect of this
Agreement or the transactions contemplated hereby.
Alleghany shall use its reasonable efforts to obtain, and
each of URHC, URC, the URHC Stockholders and the Companies
shall use its reasonable efforts to assist Alleghany in
obtaining, all Alleghany Approvals.
(h) Reasonable Efforts. Each of the parties
hereto agrees to use its reasonable efforts to take such
reasonable action as may be necessary or appropriate in
order to effectuate the transactions contemplated hereby as
promptly as reasonably practicable. Subject to the
satisfaction or waiver of the conditions precedent set forth
herein, each of the parties hereto agrees to use its
reasonable efforts to effectuate the Closing not later than
one (1) day after the sale of shares of common stock of URHC
by the GS Investors to Continental.
(i) Publicity. Except as required by law, the
parties agree to notify each other prior to issuing any
press release or making any public statement regarding the
transactions contemplated hereby, and will attempt to obtain
the reasonable approval of the other parties prior to making
such release or statement, and the parties hereto shall
issue a mutually acceptable press release as soon as
practicable after the execution of this Agreement and after
the Closing Date.
(j) Reserves. Alleghany may cause NHC to make
such additional provisions to reserves immediately prior to
the Closing as Alleghany and the President and Chief
Executive Officer of NHC may by mutual agreement determine;
provided, however, that any such additional provisions to
reserves shall not be made until the satisfaction or waiver
of the conditions precedent set forth herein and, provided
further, that the making of any such additional provisions
to reserves shall not be deemed to be a material adverse
change in the business, financial condition or results of
operations of the Companies taken as a whole as reflected in
the Annual Financial Statements as at December 31, 1992.
10.2. Covenants on or Prior to the Closing Date.
(a) Organization and Capitalization of NHC.
Prior to the Closing Date, URHC and URC shall cause NHC to
be organized by filing the form of charter for NHC set forth
on Schedule 2.6(a) hereto with the Secretary of State of the
State of Delaware, and shall cause NHC to issue to URC
9,282,130 shares of Common Stock of NHC, all in a manner
consistent with the representations and warranties in this
Agreement.
(b) Rights, Assets and Liabilities. Immediately
prior to the Closing, URHC and URC shall transfer to the
Companies such rights, assets and liabilities possessed by
URHC and URC as are necessary so that the Companies shall
own at the Closing all of the rights, assets and liabilities
owned by URHC, URC and the Companies immediately prior to
such transfer, provided that the rights, assets and
liabilities listed on Schedule 10.2(b)(i) hereto shall not
be so transferred and the rights, assets and liabilities so
transferred shall include without limitation those set forth
on Schedule 10.2(b)(ii) hereto. Such transfers shall cause
no diminution or impairment whatsoever of any such rights,
assets or liabilities.
(c) FIRPTA. On or prior to the Closing Date,
each of URHC, URC and the URHC Stockholders shall provide
Alleghany with a certificate of its non-foreign status that
meets the requirements of Section 1.1445-2(b)(2)(i) of the
Treasury Regulations.
(d) Credit Agreement. Alleghany agrees that it
will enter into appropriate arrangements with URC and the
lenders under the Credit Agreement (which may include
refinancing provided directly by Alleghany) to release URC
from all obligations under the Credit Agreement on or prior
to the Closing Date. Each of Continental, URHC and URC
agrees to cooperate with Alleghany to take such reasonable
action as may be necessary or appropriate on or prior to the
Closing Date in order to replace the Credit Agreement with
substantially comparable arrangements.
(e) Certain Expenses. Alleghany agrees that the
Companies shall be liable for the reasonable expenses
incurred by URHC, URC or any of the Companies in connection
with the Registration Statement as set forth on Schedule
10.2(e) hereto, and the reasonable out-of-pocket expenses,
including fees and disbursements of counsel, incurred by
Goldman, Sachs & Co. as financial advisor to URHC and URC,
not in excess of Two Million Dollars ($2,000,000) in the
aggregate. Payment of such reasonable expenses identified
on Schedule 10.2(e) hereto and such reasonable out-of-pocket
expenses incurred by Goldman, Sachs & Co. shall be against
documentation thereof which is reasonably acceptable to
Alleghany.
(f) SARs. URHC shall (i) terminate the Five Year
Stock Equivalent Plan of URHC (the "SAR Plan") not later
than two (2) business days before the Closing Date (the "SAR
Termination Date"), (ii) cause all rights of all
participants which are then outstanding under the SAR Plan
(the "SAR Rights") to become fully vested and
nonforfeitable, (iii) cause the amount payable to each
participant in the SAR Plan with respect to the SAR Rights
held by such participant to become fixed, due and payable as
of the SAR Termination Date (the "Fixed SAR Amount"),
(iv) deem all such SAR Rights to be exercised as of the SAR
Termination Date, and (v) cancel the SAR Rights of each
participant under the SAR Plan as of the SAR Termination
Date (subject only to the requirement that such participant
receive payment of the applicable Fixed SAR Amount as soon
as practicable after such SAR Termination Date).
(g) Stock Options. URHC shall cause all stock
options held by the Management Stockholders (as defined in
the Management Stock Purchase Agreement) granted under the
Underwriters Re 1987 Stock Option Plan (the "Option Plan")
that are not currently exercisable to become exercisable not
later than two (2) business days before the Closing Date and
shall cause each of the Management Stockholders to exercise
any and all of the stock options granted to such Management
Stockholder under the Option Plan that are then outstanding
not later than two (2) business days before the Closing Date
in accordance with the terms of any applicable Nonstatutory
Stock Option Agreement entered into between URHC and a
Management Stockholder.
(h) On or before the Closing Date, Continental
shall contribute to URHC an amount in cash equal to the
aggregate amount payable by URHC pursuant to letter
agreements dated July 28, 1993 between URHC and each of
Steven H. Newman, Peter A. Bengelsdorf and Russell T. John.
10.3. Additional Covenants.
(a) Further Assurances. Each of URHC, URC and
the URHC Stockholders agrees, severally and not jointly,
that it will from time to time at and subsequent to the
Closing Date, at the request of Alleghany and without
further consideration, execute and deliver such other
instruments of conveyance, assignment and transfer and take
such other actions as Alleghany may reasonably request in
order more effectively to convey, assign, transfer to and
vest in Alleghany, or any of Alleghany's wholly owned
subsidiaries designated hereunder, (i) the Shares and the
right to operate the businesses of the Companies, and
(ii) all of the rights, assets and liabilities of URHC and
URC which are to be transferred to the Companies as provided
in this Agreement.
(b) Non-Solicitation. Each of Continental, URHC
and URC agrees that, for a period of three years after the
Closing Date, it will not participate or engage, directly or
indirectly, in the solicitation for employment with an
employer other than the Companies of any of the current
employees of URHC, URC or any of the Companies and, except
as set forth on Schedule 10.3(b) hereto, Goldman, Sachs &
Co. agrees that, for a period of three years after the
Closing Date, neither the Principal Investment Area nor the
Investment Banking Division of Goldman, Sachs & Co. will
participate or engage, directly or indirectly, in the
solicitation for employment with an employer other than the
Companies of any of the employees of URHC, URC or any of the
Companies listed on Schedule 8.15 hereto; provided, however,
that such solicitation may be made by those entities that
are subject to the foregoing prohibitions with respect to
employees covered by the foregoing prohibitions who (i) are
terminated by any of the Companies but not earlier than
fifteen (15) months after such termination, or (ii) resign
from such employ but not earlier than two years after such
resignation.
(c) California Tax Election. URC and Alleghany
agree to (i) cooperate in the preparation of revisions to
Form 8023 (as described in Sections 7.11 and 9.9) to make
any necessary corrections, amendments or supplements thereto
which are mutually acceptable to URC and Alleghany and
(ii) file jointly such Form with the Franchise Tax Board of
California on or before the fifteenth day of the ninth month
beginning after the Closing Date.
(d) Change of Name. Each of URHC and URC agrees
to change its name immediately after the Closing Date to a
name that does not use the word "Underwriters," and agrees
not to use the word "Underwriters" in its name thereafter.
11. TERMINATION, AMENDMENT, WAIVERS.
11.1. Termination. At any time prior to the
Closing Date, this Agreement may be terminated:
(i) by mutual written consent of the parties
hereto;
(ii) by Alleghany at any time after December 31,
1993, if any of the conditions set forth in Articles 7
and 8 hereof have not been met and have not been waived
in writing by Alleghany; or
(iii) by URHC, URC or any of the URHC
Stockholders at any time after December 31, 1993, if
any of the conditions set forth in Article 9 hereof
have not been met and have not been waived in writing
by each of URHC, URC or the URHC Stockholders.
In the event of any termination pursuant to this Section
11.1, this Agreement shall thereupon become void and of no
further force or effect (other than the obligations of
Alleghany pursuant to Section 10.1(a) hereof, the agreement
of Continental pursuant to Section 13.2 hereof, and the
obligations of all parties hereto pursuant to Sections 12.2
and 12.3 hereof, which shall in each case continue in full
force and effect) and there shall be no liability for breach
of any representation, warranty, covenant or agreement
contained herein or for indemnification under
Sections 12.2(a), 12.2(b), 12.2(c), 12.2(d) or 12.3 hereof
on account of any breach of any representation, warranty,
covenant or agreement contained herein, on the part of any
party hereto or their respective officers, directors or
partners in respect thereof, except for any breach of the
agreement of Continental set forth in Section 13.2 hereof
and except for a willful breach by such party hereto of any
of its representations, warranties, covenants or agreements
set forth in this Agreement which results in such
termination.
11.2. Amendment. This Agreement may be amended,
modified, superseded or supplemented only by an instrument
in writing executed and delivered on behalf of each of the
parties hereto.
11.3. Waivers. The representations, warranties,
covenants or conditions of this Agreement may be waived only
by a written instrument executed by the party so waiving.
The failure of any party at any time or times to require
performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce
the same. No waiver by any party of any condition, or
breach of any term, covenant, agreement, representation or
warranty contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of
any other condition or of the breach of any other term,
covenant, agreement, representation or warranty contained in
this Agreement.
12. INDEMNIFICATION.
12.1. Survival of Representations, Etc. The
representations and warranties, covenants and obligations of
each of URHC, URC, the URHC Stockholders and Alleghany
contained herein shall not survive the Closing Date, except
that the representations and warranties contained in Section
2.1 (Title to Shares), Section 2.7 (Capital Stock), Section
2.8 (Rights, Assets and Liabilities), Section 3.2
(Transactions with URHC Stockholders) and Section 4.3
(Reinsurance Agreements with Continental), the covenants
contained in Section 10.3 and the agreement of Continental
contained in Section 13.2, shall survive the Closing Date,
without regard to any investigation made by the parties
hereto (provided that Section 10.3(b) shall survive only for
a period of four years after the Closing Date).
Notwithstanding the foregoing, the provisions of this
Section 12 shall survive the Closing.
12.2. Indemnification. (a) Each URHC
Stockholder shall, severally and not jointly, indemnify
Alleghany and each of the Companies and their affiliates for
any damage, claim, liability or expense, including without
limitation, interest, penalties and reasonable attorneys'
fees, but excluding lost profit and consequential damages
(collectively "Damages"), arising out of (i) in the event of
a Closing, the breach of any representation, warranty or
covenant of such URHC Stockholder contained in this
Agreement which survives the Closing, and (ii) in the event
that a Closing does not take place, the willful breach of
any representation, warranty, covenant or agreement of such
URHC Stockholder contained in this Agreement.
(b) Continental shall indemnify Alleghany and
each of the Companies and their affiliates for any Damages
arising out of (i) in the event of a Closing, the breach of
any representation, warranty or covenant of URHC or URC
contained in this Agreement which survives the Closing, and
(ii) in the event that a Closing does not take place, the
willful breach of any representation, warranty, covenant or
agreement of URHC or URC contained in this Agreement.
(c) Each of URHC and URC shall indemnify
Alleghany and each of the Companies and their affiliates for
any Damages arising out of (i) in the event of a Closing,
the breach of any representation, warranty or covenant of
URHC or URC contained in this Agreement which survives the
Closing, and (ii) in the event that a Closing does not take
place, the willful breach of any representation, warranty,
covenant or agreement of URHC or URC contained in this
Agreement.
(d) Alleghany shall indemnify each of URHC, URC
and the URHC Stockholders for any Damages arising out of the
willful breach of any representation, warranty, covenant or
agreement of Alleghany contained in this Agreement in the
event that a Closing does not take place.
(e) Other than with respect to such tax matters
as are provided for in the Tax Sharing Agreement,
Continental shall indemnify Alleghany and each of the
Companies for any Damages or diminution or impairment of any
rights or assets of URHC, URC or the Companies, or any
benefits possessed by URHC, URC or the Companies,
immediately prior to the transfer, arising out of
(i) Alleghany's purchase of the Shares that Alleghany or any
of the Companies would not have incurred or suffered if
Alleghany had acquired about 93 percent of the outstanding
capital stock of URHC at the Closing (which percentage
includes the stock of URHC to have been acquired from the
management stockholders), and no changes had occurred in the
ownership of URHC capital stock prior to the Closing, and
(ii) the Companies having been majority-owned subsidiaries
of Continental prior to the Closing, including without
limitation liabilities of Continental and its affiliates
arising under Section 414 of the Code or Section 4001 of
ERISA.
12.3. Indemnification Procedures.
(a) Any party hereto entitled to indemnification
pursuant to Section 12.2 (the "Indemnitee") shall promptly
notify the party or parties responsible for such
indemnification (the "Indemnitor") if the Indemnitee becomes
aware of any Damages with respect to which indemnity may be
asserted; and the failure to give such notice promptly shall
not relieve the Indemnitor of its obligations hereunder
except to the extent the Indemnitor is prejudiced thereby.
Promptly after (x) the receipt by an Indemnitee of notice
under Section 12.2 of any third party claim or (y) the
commencement of any action or proceeding, the Indemnitee
will, if a claim with respect thereto is to be made against
the Indemnitor, give the Indemnitor written notice in
reasonable detail of such claim or the commencement of such
action or proceeding and shall permit the Indemnitor to
assume the defense of any such claim or any litigation
resulting from such claim. Failure by the Indemnitor to
notify the Indemnitee of its election to defend any such
action within a reasonable time, but in no event more than
thirty days after notice thereof shall have been given to
the Indemnitor, shall be deemed a waiver by the Indemnitor
of its right to defend such action.
(b) If the Indemnitor assumes the defense of any
such claim or litigation resulting therefrom, the
obligations of the Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or
settlement of such claim or litigation resulting therefrom
and to holding Indemnitee harmless from and against any and
all losses, damages and liabilities caused by, arising out
of or relating to any settlement approved by the Indemnitor
or any judgment in connection with such claim or litigation
resulting therefrom. The Indemnitee may participate, at its
expense, in the defense of such claim or litigation provided
that the Indemnitor shall direct and control the defense of
such claim or litigation. The Indemnitor shall not, in the
defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any
settlement other than a judgment or settlement involving
only the payment of money, except with the written consent
of Indemnitee, which consent shall not be unreasonably
withheld.
(c) If the Indemnitor shall not assume the
defense of any such claim or litigation resulting therefrom,
the Indemnitee may defend against such claim or litigation
in such manner as it may deem appropriate. The Indemnitee
shall not enter into any settlement of such claim or
litigation without the written consent of the Indemnitor,
which consent shall not be unreasonably withheld. The
Indemnitor shall promptly reimburse the Indemnitee for the
amount of all reasonable expenses, legal or otherwise,
incurred by the Indemnitee in connection with the defense
against or settlement of such claims or litigation. If no
settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for the
amount of any judgment rendered with respect to such claim
or in such litigation and of all reasonable expenses, legal
or otherwise, incurred by the Indemnitee in the defense of
such claim or litigation.
(d) No indemnification amount shall be payable by
any Indemnitor to an Indemnitee pursuant to Section 12 until
such time that the aggregate Damages subject to
indemnification hereunder by such Indemnitor exceeds
$500,000, but then in an amount of the aggregate Damages
including such $500,000; provided, however, that the
foregoing threshold amount shall not apply in respect of
Damages arising out of the breach of Sections 2.8 and
10.3(a) hereof or amounts claimed under Section 12.2(e)
hereof, and such Damages shall not be considered in
determining whether the foregoing threshold amount has been
met. For purposes of the immediately preceding sentence
(but not for purposes of any other provision of Section 12),
the GS Investors shall be considered one Indemnitor or one
Indemnitee, as applicable, and Continental, URHC and URC
shall be considered one Indemnitor or one Indemnitee, as
applicable. No indemnification amount shall be payable by
(i) any of the GS Investors pursuant to Section 12 in an
amount in excess of the amount received for the URHC Shares
currently held by the GS Investors; or (ii) all of URHC, URC
and Continental pursuant to Section 12 in an amount in
excess of the Cash Consideration; provided, however, that
there shall be no limit on any indemnification amount
payable by Continental pursuant to Section 12.2(e)(ii). No
indemnification amount shall be payable to all of URHC, URC
and the URHC Stockholders pursuant to Section 12 in an
amount in excess of the Cash Consideration.
13. MISCELLANEOUS PROVISIONS.
13.1. No Implied Representations, Etc. None of
URHC, URC or any URHC Stockholder has made or shall be
deemed to have made any representation, warranty, covenant
or agreement with respect to the Companies or the
transactions contemplated hereby or otherwise in connection
herewith (including, without limitation, any warranty of
merchantability or fitness for a particular purpose) except
as expressly set forth herein, and no such representation,
warranty, covenant or agreement shall be implied in any
provision of this Agreement or otherwise. No
representation, warranty, covenant or agreement has been
made or shall be deemed to be made by URHC, URC or any URHC
Stockholder or implied with respect to any oral or written
statement made, document delivered or instrument executed by
any of them, any of the Companies or any other person except
for such representations, warranties, covenants and
agreements made by it and expressly set forth as such in
this Agreement. Without limiting the generality of the
foregoing, none of URHC, URC or any URHC Stockholder makes
any representation or warranty as to whether the statements
set forth in Section 8 hereof are or will be true or whether
the conditions set forth in Sections 7 and 8 hereof, or any
of them, are or will be satisfied. Nothing in this Section
13.1 shall relieve any of URHC, URC or any URHC Stockholder
from any liability it would otherwise have under the federal
securities laws for, or in respect of, any untrue statement
of a material fact, or failure to state a material fact
necessary to make the statements made, in the light of the
circumstances under which they were made, not misleading in
connection with the transactions contemplated by this
Agreement.
13.2. Expenses. Whether or not the Closing takes
place and regardless of whether this Agreement is
terminated, each party hereto shall pay all of the costs and
expenses incurred by it in connection with this Agreement or
in consummating the transactions contemplated hereby
(including, without limitation, disbursements and expenses
of its attorneys, accountants and advisors); provided,
however, that Continental agrees to pay all reasonable
out-of-pocket expenses incurred by each of Alleghany and the
Companies on or prior to the Closing Date relating to the
purchase of the Shares that would not have been incurred if
Alleghany had acquired about 93 percent of the outstanding
capital stock of URHC at the Closing (which percentage
includes the stock of URHC to have been acquired from the
management stockholders), and no changes had occurred in the
ownership of URHC capital stock prior to the Closing, as
reasonably determined by Alleghany. Schedule 13.2 sets
forth firms engaged by Alleghany that Alleghany believes
have provided services for which payment by Continental will
be required pursuant to this Section 13.2. Payment of such
reasonable expenses shall be against documentation thereof
which is reasonably acceptable to Continental.
13.3. Notices. All notices or other
communications required or permitted under this Agreement
shall be in writing and shall be given (and shall be deemed
to have been duly given upon receipt) by delivery
personally, by facsimile transmission, or by registered,
certified or express mail, postage prepaid, addressed as
follows:
If to Alleghany, to
Theodore E. Somerville, Esq.
Vice President and General Counsel
Alleghany Corporation
Park Avenue Plaza
New York, New York 10055
Facsimile: (212) 759-8149
with a copy to
Robert M. Hart, Esq.
Donovan Leisure Newton & Irvine
30 Rockefeller Plaza
New York, New York 10112
Facsimile: (212) 632-3315
If to Continental, to
William F. Gleason, Esq.
Senior Vice President, General Counsel
and Secretary
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Facsimile: (212) 440-7982
with a copy to
Deborah F. Stiles, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Facsimile: (212) 909-6836
If to the GS Investors, to
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: General Counsel
Facsimile: (212) 902-3876
with a copy to
Frank H. Golay, Jr., Esq.
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 683-0457
If to URHC or URC, to
Mr. Steven H. Newman
Underwriters Re Holdings Corp.
22801 Ventura Boulevard
Woodland Hills, California 91364
Facsimile: (818) 225-8915
with copies to Continental,
the GS Investors, Debevoise &
Plimpton and Sullivan & Cromwell
at the addresses set forth above,
and to
John A. Willett, Esq.
Arnold & Porter
399 Park Avenue
New York, New York 10022
Facsimile: (212) 715-1399
Any party may change the person and addresses to which
notices or other communications are to be sent to it by
giving written notice of any such change in the manner
provided herein for giving notice.
13.4. Entire Agreement. Except as otherwise
provided herein, this Agreement, together with the exhibits
and schedules hereto, sets forth the entire agreement and
understanding of the parties hereto in respect of the
transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings relating to the
subject matter hereof.
13.5. No Third Party Beneficiaries. Nothing in
this Agreement 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 any provision contained herein.
13.6. No Assignment. This Agreement shall inure
to the benefit of, and be binding upon, the respective
successors and assigns of the parties hereto; provided,
however, that no assignment of any rights or delegation of
any obligations provided for herein shall be made by any
party hereto without the express prior written consent of
the other party, except that Alleghany shall be permitted,
without such consent, to assign any of its rights hereunder
(but not to delegate any of its obligations hereunder) to
any of its wholly owned domestic subsidiaries (provided that
Alleghany may not, following such assignment to such a
subsidiary, transfer or dispose of such subsidiary, or any
equity interest therein, to any third party without the
express prior written consent of each of URHC, URC and the
URHC Stockholders).
13.7. Goldman, Sachs & Co. Advisory Fee.
Immediately prior to the Closing, NHC or Underwriters
Reinsurance shall pay to Goldman, Sachs & Co. an advisory
fee in an amount equal to 1.25 percent of the Cash
Consideration, in respect of the transactions contemplated
by this Agreement.
13.8. Liability Only for Willful Breach. In the
event that a Closing does not take place, there shall be no
liability hereunder for breach of any representation,
warranty, covenant or agreement contained herein, on the
part of any party hereto or their respective officers,
directors or partners in respect thereof, except for any
breach of the agreement of Continental set forth in Section
13.2 hereof and except for a willful breach by such party
hereto of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
13.9. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of New York applicable to agreements made and to
be performed entirely within such State, except (a) matters
related to the validity of corporate or partnership action,
which shall be governed by the laws of the state or other
jurisdiction of organization of the relevant corporation or
partnership and (b) matters related to compliance of the
transactions contemplated hereby with applicable insurance
regulatory statutes, which shall be governed by the laws of
the state or other jurisdiction the insurance regulatory
statutes of which apply.
13.10. Counterparts. This Agreement may be
executed in any number of separate counterparts, each of
which shall be deemed to be an original, but which together
shall constitute one and the same instrument.
13.11. Headings. The section headings contained
in this Agreement are inserted for convenience of reference
only and shall not affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, each party hereto has caused
this Agreement to be duly executed on the date first above
written.
ALLEGHANY CORPORATION
By /s/David B. Cuming
Attest:
By /s/John E. Conway
Secretary
THE CONTINENTAL CORPORATION
By /s/Wayne Fisher
Attest:
By /s/Deborah B. LaCivita
Asst. Secretary
STONE STREET FUND 1986
BY: Stone Street Advisors Corp.,
General Partner
By /s/Richard A. Friedman
Vice President
Attest:
By /s/Carla Skodinski
STONE STREET FUND 1987
BY: Stone Street Capital Corp.,
General Partner
By /s/Richard A. Friedman
Vice President
Attest:
By /s/Carla Skodinski
BROAD STREET INVESTMENT FUND I, L.P.
BY: Goldman, Sachs & Co.,
General Partner
By /s/Richard A. Friedman
Partner
Attest:
By /s/Carla Skodinski
BRIDGE STREET FUND 1986
BY: Stone Street Advisors Corp.,
Managing General Partner
By /s/Richard A. Friedman
Vice President
Attest:
By /s/Carla Skodinski
BRIDGE STREET FUND 1987
BY: Stone Street Capital Corp.,
Managing General Partner
By /s/Richard A. Friedman
Vice President
Attest:
By /s/Carla Skodinski
GOLDMAN, SACHS & CO.
By /s/Richard A. Friedman
General Partner
Attest:
By /s/Carla Skodinski
UNDERWRITERS RE HOLDINGS CORP.
By /s/Peter A. Bergelsdorf
Attest:
By /s/Pamela Falzone
Secretary
UNDERWRITERS RE CORPORATION
By /s/Peter A. Bengelsdorf
Attest:
By /s/Pamela Falzone
Secretary
LISTS OF EXHIBITS
Exhibit Description
A Management Stock Purchase Agreement
B Stock Purchase Related Agreement
C Debevoise & Plimpton Opinion
D Continental Opinion
E Sullivan & Cromwell Opinion
F Goldman, Sachs & Co. Opinion
G Arnold & Porter Opinion
H Buchalter, Nemer, Fields & Younger Opinion
I Roussos, Hage & Hodes Opinion
J Tax Sharing Agreement
K Loan Agreement
L Donovan Leisure Newton & Irvine Opinion
LIST OF SCHEDULES
Schedule Description
2.3 URHC and URC Consents and Approvals
2.5 NHC Subsidiaries
2.6(a) Form of Charter and By-laws of NHC
2.6(b) Officers and Directors of NHC
2.7 Capital Stock
3.1 URHC Stockholder Consents and Approvals
3.2 Transactions with URHC Stockholders
3.3 URHC Stockholder Brokers
6.3 Alleghany Approvals
8.1 The Companies
8.2 Officers and Directors of the Companies
8.4 Companies Consents and Approvals
8.5 Compliance and Licenses
8.7 Investments and Other Assets
8.9 Material Contracts
8.10 Accounting Practices
8.11 Litigation
8.12(a) Tax Filings
8.12(b) Payment of Taxes
8.12(d) Undisclosed Tax Positions
8.13 Employee Benefit Plans
8.14 Agencies
8.15 Employees
8.15(a) Active Employees
8.16 Insurance Policies
8.17 Companies Brokers
8.18 Transactions with Affiliates
8.19 Regulatory Filings
8.20 Changes to the Registration Statement
8.24 Dividends
10.1(b)(i) Permitted Modifications to Employment Agreements
10.1(b)(iv) Dividends between the Date of the Agreement and
Closing
10.2(b)(i) Rights, Assets and Liabilities Not to be Held by
the Companies on the Closing Date
10.2(b)(ii) Certain of the Rights, Assets and Liabilities to
be Held by the Companies on the Closing Date
10.2(e) Registration Statement Expenses and Goldman,
Sachs Co. Expenses
10.3(b) Non-Solicitation
13.2 Alleghany Firms
AMENDMENT TO
STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement is made
on October 7, 1993 by and among ALLEGHANY CORPORATION, a
Delaware corporation, THE CONTINENTAL CORPORATION, a New
York corporation, GOLDMAN, SACHS & CO. and certain funds
which Goldman, Sachs & Co. either control or of which they
are general partner, UNDERWRITERS RE HOLDINGS CORP., a
Delaware corporation, and UNDERWRITERS RE CORPORATION, a
Delaware corporation. All capitalized terms used but not
defined herein shall have the meaning ascribed to such terms
in the Stock Purchase Agreement, as defined below.
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into a
Stock Purchase Agreement (the "Stock Purchase Agreement")
dated as of July 28, 1993; and
WHEREAS, the parties hereto desire to amend the
Stock Purchase Agreement to accurately reflect the number of
shares of Common Stock of NHC to be issued and outstanding
as of the Closing Date;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants, agreements and provisions
contained herein, the parties hereto agree as follows:
1. Amendment. It is understood and agreed that
all references in the Stock Purchase Agreement to the number
"9,282,130" as it relates to the number of shares of Common
Stock of NHC to be issued and outstanding as of the Closing
Date be and hereby are amended to be "9,282,129". It is
further understood and agreed that any breach or default
that would have occurred absent this Amendment to Stock
Purchase Agreement be and hereby is waived.
2. Effectiveness. This Amendment to Stock
Purchase Agreement shall be deemed to be effective, upon
execution of the parties below, as of July 28, 1993.
3. Governing Law. This Amendment to Stock
Purchase Agreement shall be governed by and construed in
accordance with the laws and in the manner contemplated by
the Stock Purchase Agreement.
IN WITNESS WHEREOF, each party hereto has caused
this Amendment to Stock Purchase Agreement to be duly
executed on the date first above written.
ALLEGHANY CORPORATION
By: /s/David B. Cuming
Title: Senior Vice President
THE CONTINENTAL CORPORATION
By: /s/Wayne H. Fisher
Title: Executive Vice President
STONE STREET FUND 1986
BY: Stone Street Advisors Corp.,
General Partner
By: /s/Carla Skodinski
Title: Vice President
STONE STREET FUND 1987
BY: Stone Street Capital Corp.,
General Partner
By: /s/Carla Skodinski
Title: Vice President
BROAD STREET INVESTMENT
FUND I, L.P.
BY: Goldman, Sachs & Co.,
General Partner
By: /s/Richard A. Friedmen
Title: Partner
BRIDGE STREET FUND 1986
BY: Stone Street Advisors Corp.,
Managing General Partner
By: /s/Carla Skodinski
Title: Vice President
BRIDGE STREET FUND 1987
BY: Stone Street Capital Corp.,
Managing General Partner
By: /s/Carla Skodinski
Title: Vice President
GOLDMAN, SACHS & CO.
By: Richard A. Friedman
Title: General Partner
UNDERWRITERS RE HOLDINGS CORP.
By: /s/Peter A. Bengelsdorf
Title: Chief Financial Officer
UNDERWRITERS RE CORPORATION
By: /s/Peter A. Bengelsdorf
Title: Chief Financial Officer
STOCK PURCHASE AGREEMENT
between
THE CONTINENTAL CORPORATION
and
THE SELLING STOCKHOLDERS
NAMED HEREIN
Dated as of July 28, 1993
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Section Page
1. PURCHASE OF SHARES AND CLOSING
1.1. Purchase of Shares. . . . . . . . . . . . . . 2
1.2. Consideration . . . . . . . . . . . . . . . . 2
1.3. Closing . . . . . . . . . . . . . . . . . . . 2
2. REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS
2.1. Title to Shares . . . . . . . . . . . . . . . 3
2.2. Organization and Standing . . . . . . . . . . 3
2.3. Authority . . . . . . . . . . . . . . . . . . 3
2.4. Other Representations and Warranties. . . . . 4
3. REPRESENTATIONS AND WARRANTIES OF
CONTINENTAL
3.1. Organization and Standing . . . . . . . . . . 4
3.2. Authority . . . . . . . . . . . . . . . . . . 4
3.3. Other Representations and Warranties. . . . . 5
4. CONDITIONS TO OBLIGATIONS OF CONTINENTAL
4.1. Compliance with Agreement . . . . . . . . . . 5
4.2. Representations and Warranties. . . . . . . . 5
4.3. Opinion of Counsel for the
Selling Stockholders. . . . . . . . . . . . 5
4.4. Approvals . . . . . . . . . . . . . . . . . . 6
4.5. Absence of Certain Litigation . . . . . . . . 6
4.6. Transfer Taxes. . . . . . . . . . . . . . . . 6
4.7. Other Conditions. . . . . . . . . . . . . . . 6
5. CONDITIONS TO OBLIGATIONS OF
THE SELLING STOCKHOLDERS
5.1. Compliance with Agreement . . . . . . . . . . 7
5.2. Representations and Warranties. . . . . . . . 7
5.3. Opinion of Counsel for Continental. . . . . . 7
5.4. Approvals . . . . . . . . . . . . . . . . . . 7
5.5. Absence of Certain Litigation . . . . . . . . 7
5.6. Transfer Taxes. . . . . . . . . . . . . . . . 8
5.7. Other Conditions. . . . . . . . . . . . . . . 8
6. COVENANTS
6.1. Covenants Pending the Closing . . . . . . . . 8
(a) Filings and Approvals. . . . . . . . . . 8
(b) Reasonable Efforts . . . . . . . . . . . 8
(c) Publicity. . . . . . . . . . . . . . . . 9
(d) FIRPTA . . . . . . . . . . . . . . . . . 9
6.2. Additional Covenants. . . . . . . . . . . . . 9
(a) Further Assurances . . . . . . . . . . . 9
(b) Performance of Agreement . . . . . . . . 9
(c) Closing of Agreements. . . . . . . . . . 9
7. TERMINATION, AMENDMENT, WAIVERS
7.1. Termination . . . . . . . . . . . . . . . . . 10
7.2. Amendment . . . . . . . . . . . . . . . . . . 10
7.3. Waivers . . . . . . . . . . . . . . . . . . . 11
8. INDEMNIFICATION
8.1. Survival of Representations, Etc. . . . . . . 11
8.2. Indemnification . . . . . . . . . . . . . . . 11
8.3. Indemnification Procedures. . . . . . . . . . 12
8.4. Tax Indemnification . . . . . . . . . . . . . 14
9. OPTION
9.1. Exercise of Option. . . . . . . . . . . . . . 17
9.2. Option Closing. . . . . . . . . . . . . . . . 17
9.3. Conditions to Option Closing. . . . . . . . . 18
9.4. Further Assurances. . . . . . . . . . . . . . 19
9.5. Effect of Exercise. . . . . . . . . . . . . . 19
9.6. Termination of Option . . . . . . . . . . . . 20
10. MISCELLANEOUS PROVISIONS
10.1. Expenses . . . . . . . . . . . . . . . . . . 20
10.2. Notices. . . . . . . . . . . . . . . . . . . 20
10.3. Entire Agreement . . . . . . . . . . . . . . 21
10.4. No Third Party Beneficiaries . . . . . . . . 21
10.5. No Assignment. . . . . . . . . . . . . . . . 21
10.6. Governing Law. . . . . . . . . . . . . . . . 22
10.7. Counterparts . . . . . . . . . . . . . . . . 22
10.8. Headings . . . . . . . . . . . . . . . . . . 22
EXHIBIT A - [Reserved]
EXHIBIT B - Opinion of Sullivan & Cromwell
EXHIBIT C - Opinion of Debevoise & Plimpton
EXHIBIT D - Officer's Certificate
SCHEDULE 1.2 - Selling Stockholders
SCHEDULE 2.1 - Liens on Shares
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated
as of July 28, 1993, among THE CONTINENTAL CORPORATION, a
New York corporation ("Continental"), and GOLDMAN, SACHS &
CO. and certain funds which Goldman, Sachs & Co. either
control or of which they are general partner (together, the
"Selling Stockholders").
W I T N E S S E T H:
WHEREAS, Continental and the Selling Stockholders
together hold approximately 90% of the issued and
outstanding capital stock of Underwriters Re Holdings
Corporation, a Delaware corporation ("Underwriters Re");
Underwriters Re is the owner of all of the issued and
outstanding capital stock of Underwriters Re Corporation, a
Delaware corporation ("Underwriters Re Corporation");
Underwriters Re Corporation is the owner of all of the
issued and outstanding capital stock of Underwriters
Reinsurance Company, a New Hampshire insurance company
("Underwriters Reinsurance"), and URC Risk Managers, Inc., a
Delaware corporation ("URC"); and Underwriters Reinsurance
is the owner of all of the issued and outstanding capital
stock of Commercial Underwriters Insurance Company, a
California insurance company ("Commercial Underwriters")
(Underwriters Re, Underwriters Re Corporation, Underwriters
Reinsurance, URC and Commercial Underwriters, together
referred to as the "Companies");
WHEREAS, Continental, the Selling Stockholders,
Underwriters Re and Underwriters Re Corporation are entering
into a Stock Purchase Agreement, dated as of July 28, 1993,
with Alleghany Corporation, a Delaware corporation
("Alleghany"), providing for the purchase by Alleghany of
all of the issued and outstanding capital stock of New
Holding Corporation, a Delaware corporation ("NHC") to be
formed to hold all of the issued and outstanding capital
stock of Underwriters Reinsurance (in the form executed by
the parties today, the "Alleghany Stock Purchase
Agreement");
WHEREAS, Underwriters Re has a total of 8,877,772
issued and outstanding shares of common stock, par value
$.01 per share (the "Common Stock");
WHEREAS, Continental presently holds 3,991,228
shares of Common Stock;
WHEREAS, Continental is entering into a management
stock purchase agreement with the management stockholders of
Underwriters Re, providing for the purchase by Continental
or a subsidiary of Continental designated by Continental at
or prior to the closing under the Alleghany Stock Purchase
Agreement (the "Alleghany Closing") of the shares of Common
Stock currently owned by such stockholders and to be owned
by them upon exercise of all outstanding stock options held
by them; and
WHEREAS, Continental desires to purchase from the
Selling Stockholders and the Selling Stockholders desire to
sell to Continental 3,991,228 shares of Common Stock, which
are held by the Selling Stockholders (the "Shares");
NOW, THEREFORE, in consideration of the premises
and the mutual covenants, agreements and provisions
contained herein, the parties hereto agree as follows:
1. PURCHASE OF SHARES AND CLOSING.
1.1. Purchase of Shares. Subject to the terms
and conditions set forth in this Agreement, at the Closing
(as defined below), each Selling Stockholder, severally and
not jointly, agrees to sell, convey, assign, transfer and
deliver such Selling Stockholder's Shares to Continental, or
a subsidiary of Continental designated by Continental, and
Continental, or such subsidiary, shall acquire from each
Selling Stockholder such Selling Stockholder's Shares.
1.2. Consideration. At the Closing, Continental
shall pay to each of the Selling Stockholders an amount
equal to $23.50 per Share multiplied by the number of Shares
set forth opposite the name of such Selling Stockholder on
Schedule 1.2, for an aggregate consideration for all the
Shares of Ninety-three Million Seven Hundred Ninety-three
Thousand Eight Hundred Fifty-eight Dollars ($93,793,858)
(the "Consideration").
1.3. Closing. The purchase and sale of the
Shares pursuant to this Agreement (the "Closing") shall take
place one business day prior to such time and at such place
as is set for the Alleghany Closing and after satisfaction
or waiver of the conditions precedent therefor (the "Closing
Date"), or on such other date as the parties hereto agree in
writing; provided, that both the Closing and the Option
Closing (as defined below) must occur (i) on or before
November 26, 1993 or (ii) after such date and on or before
December 31, 1993. At the Closing, (i) each Selling
Stockholder shall deliver to Continental a certificate or
certificates representing the Shares owned by such Selling
Stockholder, duly endorsed in blank or with appropriate
stock powers attached, free and clear of all liens, security
interests, pledges, agreements, claims, charges, options or
encumbrances of any nature whatsoever (collectively,
"Liens"), and (ii) Continental shall make payment to each
Selling Stockholder of such Selling Stockholder's portion of
the Consideration by certified or official bank check or
checks, payable to the order of such Selling Stockholder in
New York Clearing House (next day) funds as is set forth on
Schedule 1.2 opposite the name of such Selling Stockholder.
2. REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS.
Each Selling Stockholder, severally and not
jointly, represents and warrants to Continental as follows:
2.1. Title to Shares. Such Selling Stockholder
owns beneficially and of record, free and clear of all
Liens, or owns of record and has full power and authority to
convey free and clear of all Liens, in each case except for
Liens set forth in Schedule 2.1, all of the Shares owned by
such Selling Stockholder as set forth in Schedule 2.1. Upon
delivery of the Consideration as herein provided, such
Selling Stockholder will convey good title thereto, free and
clear of all Liens.
2.2. Organization and Standing. Such Selling
Stockholder is duly organized, validly existing and in good
standing under the laws of its state of organization, and
has all requisite partnership power and authority to enter
into this Agreement and to perform its obligations
hereunder.
2.3. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary partnership action on the part
of such Selling Stockholder. This Agreement constitutes a
legal, valid and binding obligation of such Selling
Stockholder, enforceable against such Selling Stockholder in
accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles.
2.4. Other Representations and Warranties. The
representations and warranties of such Selling Stockholder
in Section 3.1 (Consents and Approvals) and the third
sentence of Section 5.2 (Authority) of the Alleghany Stock
Purchase Agreement are hereby incorporated by reference,
including the schedules relating thereto, and such Selling
Stockholder represents and warrants the same to Continental
(subject to the exceptions and qualifications set forth in
such representations and warranties and schedules, mutatis
mutandis), as if set out herein at length save that
identical terms defined both therein and herein shall be
deemed to have the respective meanings ascribed thereto in
this Agreement and all uses therein of the word "hereby"
shall refer to this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL.
Continental represents and warrants to each of the
Selling Stockholders as follows:
3.1. Organization and Standing. Continental is a
corporation, duly organized, validly existing and in good
standing under the laws of its state of incorporation, and
has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations
hereunder.
3.2. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of
Continental. This Agreement constitutes a legal, valid and
binding obligation of Continental, enforceable against
Continental in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
3.3. Other Representations and Warranties. The
representations and warranties of Continental in Section 3.1
(Consents and Approvals) and the third sentence of
Section 4.2 (Authority) of the Alleghany Stock Purchase
Agreement are hereby incorporated by reference, including
the schedules relating thereto, and Continental represents
and warrants the same to each of the Selling Stockholders
(subject to the exceptions and qualifications set forth in
such representations and warranties and schedules, mutatis
mutandis), as if set out herein at length save that
identical terms defined both therein and herein shall be
deemed to have the respective meanings ascribed thereto in
this Agreement and all uses therein of the word "hereby"
shall refer to this Agreement.
4. CONDITIONS TO OBLIGATIONS OF CONTINENTAL.
The obligations of Continental under this
Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the following conditions:
4.1. Compliance with Agreement. Each of the
Selling Stockholders shall have performed and complied in
all material respects with all the obligations required by
this Agreement to be performed or complied with by each of
them on or before the Closing Date, and Continental shall
have received from each of the Selling Stockholders at the
Closing a certificate, dated the Closing Date, to that
effect. Attached to such certificate shall be a certified
copy of the determination of a general partner of each of
the Selling Stockholders, in each case authorizing this
Agreement and the transactions contemplated hereby.
4.2. Representations and Warranties. The
representations and warranties made by each of the Selling
Stockholders in Section 2 of this Agreement shall be true
and correct in all material respects as of the Closing Date
as though such representations and warranties were made at
and as of such time. Continental shall have received from
each of the Selling Stockholders at the Closing a
certificate, dated the Closing Date, to that effect.
4.3. Opinion of Counsel for the Selling
Stockholders. Continental shall have received an opinion
from Sullivan & Cromwell, counsel for the Selling
Stockholders, dated the Closing Date and substantially to
the effect set forth in Exhibit B hereto.
4.4. Approvals. All Alleghany Approvals and all
Sellers Approvals (as such terms are defined in the
Alleghany Stock Purchase Agreement) shall have been obtained
and be in full force and effect on the Closing Date.
Without limiting the generality of the foregoing,
Continental shall have received the requisite approvals of
the consummation of the purchase and sale of the Shares, and
the transactions contemplated hereby, from the relevant
state insurance regulatory authorities, and such approvals
shall be in full force and effect, and no such approvals
shall impose upon Continental or any of the Companies any
conditions which materially adversely impair the ability of
the Companies to conduct their business in substantially the
same manner as such business is presently being conducted.
4.5. Absence of Certain Litigation. On the
Closing Date (i) there shall be no injunction, restraining
order or order of any nature issued by any court of
competent jurisdiction which directs that this Agreement or
any material transaction contemplated hereby shall not be
consummated as herein provided or compels or would compel
Continental to dispose of or discontinue a significant
portion of the business conducted by Continental and its
subsidiaries or of the business conducted by the Companies
as a result of the consummation of the transactions
contemplated hereby; and (ii) there shall be no suit, action
or other proceeding by the United States (or any agency
thereof) or by any state (or any agency thereof) pending
before any court or governmental agency, or threatened to be
filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any material
transaction contemplated hereby or asserts the illegality of
any material transaction contemplated hereby.
4.6. Transfer Taxes. Each of the Selling
Stockholders shall have paid, or caused to be paid, all
stock transfer and other transfer taxes required to be paid
in connection with the sale and delivery to Continental of
the Shares owned by such Selling Stockholder, and shall have
caused all appropriate stock transfer tax stamps to be
affixed to the certificate or certificates representing the
Shares so sold and delivered by such Selling Stockholder.
4.7. Other Conditions. All conditions to the
obligations of Alleghany in Sections 7 and 8 of the
Alleghany Stock Purchase Agreement (other than the condition
in Section 7.8 thereof) shall have been satisfied or waived.
5. CONDITIONS TO OBLIGATIONS OF
THE SELLING STOCKHOLDERS.
The obligations of the Selling Stockholders under
this Agreement are subject to the satisfaction, on or before
the Closing Date, of each of the following conditions:
5.1. Compliance with Agreement. Continental
shall have performed and complied in all material respects
with all the obligations required by this Agreement to be
performed or complied with by it on or before the Closing
Date, and each Selling Stockholder shall have received from
Continental at the Closing a certificate, dated the Closing
Date, to that effect. Attached to such certificate shall be
a certified copy of the resolutions of the Board of
Directors of Continental authorizing this Agreement and the
transactions contemplated hereby.
5.2. Representations and Warranties. The
representations and warranties made by Continental in
Section 3 of this Agreement shall be true and correct in all
material respects as of the Closing Date as though such
representations and warranties were made at and as of such
time. The Selling Stockholders shall have received from
Continental at the Closing a certificate, dated the Closing
Date, to that effect.
5.3. Opinion of Counsel for Continental. The
Selling Stockholders shall have received an opinion from
Debevoise & Plimpton, special counsel for Continental, dated
the Closing Date and substantially to the effect set forth
in Exhibit C hereto.
5.4. Approvals. All Alleghany Approvals and all
Sellers Approvals (as such terms are defined in the
Alleghany Stock Purchase Agreement) shall have been obtained
and be in full force and effect on the Closing Date.
5.5. Absence of Certain Litigation. On the
Closing Date (i) there shall be no injunction, restraining
order or order of any nature issued by any court of
competent jurisdiction which directs that this Agreement or
any material transaction contemplated hereby shall not be
consummated as herein provided or compels or would compel
Continental to dispose of or discontinue a significant
portion of the business conducted by Continental and its
subsidiaries or of the business conducted by the Companies
as a result of the consummation of the transactions
contemplated hereby; and (ii) there shall be no suit, action
or other proceeding by the United States (or any agency
thereof) or by any state (or any agency thereof) pending
before any court or governmental agency, or threatened to be
filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any material
transaction contemplated hereby or asserts the illegality of
any material transaction contemplated hereby.
5.6. Transfer Taxes. Continental shall have
filed, independently or jointly with each Selling
Stockholder, as the law requires, all real property and
other transfer tax filings required to be filed by or with
the cooperation of Continental in connection with the sale
and delivery to Continental of the Shares.
5.7. Other Conditions. All conditions to the
obligations of Continental and the Selling Stockholders in
Section 9 of the Alleghany Stock Purchase Agreement (other
than the condition in Section 9.7 thereof) shall have been
satisfied or waived.
6. COVENANTS.
6.1. Covenants Pending the Closing. From and
after the date hereof and until the Closing Date Continental
and each of the Selling Stockholders agrees, severally and
not jointly, that:
(a) Filings and Approvals. The Selling
Stockholders and Continental shall duly make all
regulatory filings required to be made by each in
respect of this Agreement or the transactions
contemplated hereby and shall use their reasonable
efforts to assist Alleghany in obtaining, all Alleghany
Approvals.
(b) Reasonable Efforts. Each of Continental and
the Selling Stockholders agrees to use its reasonable
efforts to take such reasonable action as may be
necessary or appropriate in order to effectuate the
transactions contemplated hereby as promptly as
reasonably practicable.
(c) Publicity. Except as required by law, the
parties agree to notify each other prior to issuing any
press release or making any public statement regarding
the transactions contemplated hereby, and will attempt
to obtain the reasonable approval of the other parties
hereto prior to making such release or statement.
(d) FIRPTA. On or prior to the Closing Date,
each of the Selling Stockholders shall provide
Continental with a certificate of its non-foreign
status that meets the requirements of Section 1.1445-
2(b)(2)(i) of the Internal Revenue Service treasury
regulations.
6.2. Additional Covenants.
(a) Further Assurances. Each of the Selling
Stockholders agrees that it will from time to time at
and subsequent to the Closing Date, at the request of
Continental and without further consideration, execute
and deliver such other instruments of conveyance,
assignment and transfer and take such other actions as
Continental may reasonably request in order more
effectively to convey, assign, transfer to and vest in
Continental, or any of Continental's wholly owned
subsidiaries designated hereunder, the Shares and the
right to operate the businesses of the Companies.
(b) Performance of Agreement. From and after the
Closing Date, each of Continental and the Selling
Stockholders agrees to use its reasonable efforts to
perform its obligations under the Alleghany Stock
Purchase Agreement and to cause the actions specified
in Sections 10.2(f) and 10.2(g) of the Alleghany Stock
Purchase Agreement to occur not more than two business
days before the Alleghany Closing.
(c) Closing of Agreements. From and after the
Closing Date, Continental agrees to use its reasonable
efforts to cause (i) the closing under the Management
Stock Purchase Agreement to occur on the date of, and
immediately prior to, the closing under the Stock
Purchase Related Agreement and (ii) the closing under
the Stock Purchase Related Agreement to occur on the
date of, and immediately prior to or simultaneously
with, the closing under the Alleghany Stock Purchase
Agreement (each such capitalized term having the
meaning ascribed thereto in the Alleghany Stock
Purchase Agreement).
7. TERMINATION, AMENDMENT, WAIVERS.
7.1. Termination. At any time prior to the
Closing Date, this Agreement may be terminated:
(i) by mutual written consent of the parties
hereto;
(ii) by Continental at any time after
December 31, 1993, if any of the conditions set forth
in Section 4 hereof have not been met and have not been
waived in writing by Continental; or
(iii) by any of the Selling Stockholders at any
time after December 31, 1993, if any of the conditions
set forth in Section 5 hereof have not been met and
have not been waived in writing by each of the Selling
Stockholders.
In the event of any termination pursuant to this Section 7.1
this Agreement shall thereupon become void and of no further
force or effect and there shall be no liability or
obligation on the part of any party hereto or their
respective officers, directors and partners in respect
hereof or of any representation, warranty, covenant or
agreement contained herein except for the last sentence of
Section 8.2(c), which shall survive such termination, and
except to the extent that such termination results from the
willful breach by a party hereto of any of its
representations, warranties, covenants or agreements set
forth in this Agreement, in which case the aggrieved party
may recover from the breaching party or parties its out-of-
pocket expenses (including reasonable fees and disbursements
of counsel, but excluding lost profit and consequential
damages) reasonably and actually incurred by such party in
connection with this Agreement and the transactions
contemplated hereby.
7.2. Amendment. This Agreement may be amended,
modified, superseded or supplemented only by an instrument
in writing executed and delivered on behalf of each of the
parties hereto.
7.3. Waivers. The representations, warranties,
covenants or conditions of this Agreement may be waived only
by a written instrument executed by the party so waiving.
The failure of any party at any time or times to require
performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce
the same. No waiver by any party of any condition, or
breach of any term, covenant, agreement, representation or
warranty contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of
any other condition or of the breach of any other term,
covenant, agreement, representation or warranty contained in
this Agreement.
8. INDEMNIFICATION.
8.1. Survival of Representations, Etc. The
representations and warranties, covenants and obligations of
each of the Selling Stockholders and Continental contained
herein shall not survive the Closing Date, except that the
representations and warranties contained in Section 2.2
(Title to Shares) and the covenants contained in Section 6.2
shall survive the Closing Date, without regard to any
investigation made by the parties hereto.
8.2. Indemnification.
(a) Each Selling Stockholder shall, severally and
not jointly, indemnify Continental and each of the
Companies and their affiliates for any damage, claim,
liability or expense, including without limitation,
interest, penalties and reasonable attorneys' fees, but
excluding lost profit and consequential damages
(collectively "Damages"), arising out of the breach by
such Selling Stockholder of any warranty,
representation, covenant or agreement contained in this
Agreement which survives the Closing. Continental
shall indemnify each of the Selling Stockholders for
any Damages arising out of the breach of any
representation, warranty, covenant or agreement of
Continental contained in this Agreement which survives
the Closing.
(b) Continental shall indemnify each Selling
Stockholder for any Damages arising out of Alleghany's
purchase of the outstanding capital stock of NHC that
any such Selling Stockholder would not have incurred if
Alleghany had acquired approximately 93% of the
outstanding capital stock of Underwriters Re at the
closing pursuant to the Alleghany Stock Purchase
Agreement (which percentage includes the stock of
Underwriters Re to have been acquired from the
management stockholders of Underwriters Re), and no
changes had occurred in the ownership of Underwriters
Re capital stock prior to such closing.
(c) Continental shall indemnify each Selling
Stockholder for any Damages or diminution or impairment
of any rights, assets or benefits possessed by such
Selling Stockholder in respect of such Selling
Stockholder's Shares immediately prior to the Closing
(except with respect to taxes that are provided for in
Section 8.4 of this Agreement) arising out of (i) the
Companies having been majority-owned subsidiaries of
Continental prior to the Option Closing (as defined
below), including without limitation liabilities of
Continental and its affiliates arising under the
Internal Revenue Code of 1986, as amended (the "Code"),
or the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), by application of the aggregation
rules of Section 414 of the Code or Section 4001 of
ERISA or (ii) Continental's purchase of such Selling
Stockholder's Shares at the Closing and such Selling
Stockholders' repurchase thereof at the Option Closing,
that such Selling Stockholder would not have incurred
if the Closing and the Option Closing had not occurred.
Continental shall indemnify each Selling Stockholder
for any Damages or diminution or impairment of any
rights, assets or benefits possessed by such Selling
Stockholder in respect of such Selling Stockholder's
Shares immediately prior to the time any action is
taken that is required to be taken pursuant to Sections
10.2(f) and 10.2(g) of Alleghany Stock Purchase
Agreement arising out of the taking of such action in
the event that (i) the Closing does not occur or (ii)
the Closing and the Option Closing both occur.
8.3. Indemnification Procedures.
(a) Any party hereto entitled to indemnification
pursuant to Section 8.2 hereof (the "Indemnitee") shall
promptly notify the party or parties responsible for
such indemnification (the "Indemnitor") if the
Indemnitee becomes aware of any Damages with respect to
which indemnity may be asserted; and the failure to
give such notice promptly shall not relieve the
Indemnitor of its obligations hereunder except to the
extent the Indemnitor is prejudiced thereby. Promptly
after (x) the receipt by an Indemnitee of notice under
Section 8.2 hereof of any third party claim or (y) the
commencement of any action or proceeding the Indemnitee
will, if a claim with respect thereto is to be made
against the Indemnitor, give the Indemnitor written
notice in reasonable detail of such claim or the
commencement of such action or proceeding and shall
permit the Indemnitor to assume the defense of any such
claim or any litigation resulting from such claim.
Failure by the Indemnitor to notify the Indemnitee of
its election to defend any such action within a
reasonable time, but in no event more than thirty days
after notice thereof shall have been given to the
Indemnitor, shall be deemed a waiver by the Indemnitor
of its right to defend such action.
(b) If the Indemnitor assumes the defense of any
such claim or litigation resulting therefrom, the
obligations of the Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or
settlement of such claim or litigation resulting
therefrom and to holding Indemnitee harmless from and
against any and all losses, damages and liabilities
caused by, arising out of or relating to any settlement
approved by the Indemnitor or any judgment in
connection with such claim or litigation resulting
therefrom. The Indemnitee may participate, at its
expense, in the defense of such claim or litigation
provided that the Indemnitor shall direct and control
the defense of such claim or litigation. The
Indemnitor shall not, in the defense of such claim or
any litigation resulting therefrom, consent to entry of
any judgment or enter into any settlement other than a
judgment or settlement involving only the payment of
money, except with the written consent of Indemnitee,
which consent shall not be unreasonably withheld.
(c) If the Indemnitor shall not assume the
defense of any such claim or litigation resulting
therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem
appropriate. The Indemnitee shall not enter into any
settlement of such claim or litigation without the
written consent of the Indemnitor, which consent shall
not be unreasonably withheld. The Indemnitor shall
promptly reimburse the Indemnitee for the amount of all
reasonable expenses, legal or otherwise, incurred by
the Indemnitee in connection with the defense against
or settlement of such claims or litigation. If no
settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for
the amount of any judgment rendered with respect to
such claim or in such litigation and of all reasonable
expenses, legal or otherwise, incurred by the
Indemnitee in the defense of such claim or litigation.
(d) No indemnification amount shall be payable to
or by any Selling Stockholder pursuant to this
Section 8 in an amount in excess of the portion of the
Consideration payable to such Selling Stockholder
hereunder.
8.4. Tax Indemnification.
(a) If the Option Closing occurs, Continental
shall indemnify and hold harmless each of the Selling
Stockholders on an after-tax basis from and against any
taxes, including interest and penalties, imposed on
such Selling Stockholder or any partner (as defined in
Section 6231(a)(2) of the Code) of such Selling
Stockholder (hereinafter a "Partner") that would not
have been imposed but for the sale of the Shares by
such Selling Stockholder at the Closing and the
repurchase thereof at the Option Closing; provided,
that if such Selling Stockholder or such Partner
subsequently realizes any reduction in taxes (on a sale
of such Shares, or of any property the basis of which
is determined by reference to such Shares, or
otherwise) that would not have been realized but for
such sale of the Shares at the Closing, or if such
Selling Stockholder or such Partner shall receive a
refund or credit with respect to any taxes for which
Continental has made a payment pursuant to this Section
8.4, then such Selling Stockholder shall pay to
Continental the amount of such reduction in taxes,
refund or credit, plus the reduction in taxes realized
by such Selling Stockholder or such Partner as a result
of such Selling Stockholder's payment to Continental;
and provided, further, that such Selling Stockholder
shall not be required to pay to Continental pursuant to
the previous proviso amounts in excess of the amounts
received by such Selling Stockholder from Continental
pursuant to this Section 8.4.
(b) Continental shall be obligated to make
payments to a Selling Stockholder pursuant to Section
8.4(a) only if and to the extent that:
(i) such Selling Stockholder and Partners of
such Selling Stockholder (to the extent of such
Partners' interests in such Selling Stockholder)
report the transactions contemplated by this
Agreement on all federal, state and local tax
returns and reports (including reports to
Partners) in a manner that does not show liability
for taxes for which Continental is responsible
pursuant to this Section 8.4; provided, that this
clause (i) shall not apply with respect to a
return or report if and to the extent that such
Selling Stockholder or such Partner provides to
Continental, at least 30 days before the filing of
such return or report, an opinion of independent
tax counsel to the effect that (x) in the case of
federal income tax returns and all other returns
and reports on which the transactions contemplated
by this Agreement may be reported in accordance
with their Federal income tax treatment, there is
no substantial authority (within the meaning of
Section 6662 of the Code) for reporting in
accordance with this clause (i) because of a
change in law that became effective after the date
hereof, and (y) in the case of all other returns
and reports, there is no substantial authority
(within the meaning of Section 6662 of the Code)
for reporting in accordance with this clause (i);
and
(ii) (x) such Selling Stockholder or any
affected Partner of such Selling Stockholder, as
the case may be, provides Continental with prompt
notice of the commencement of any audit or other
administrative or judicial proceeding which could
give rise to a claim for payment against
Continental pursuant to this Section 8.4, (y) such
Selling Stockholder and each Partner of such
Selling Stockholder (to the extent relevant)
consults with Continental and provides such
cooperation and information as Continental
reasonably requests in connection with the conduct
of such audit or other proceeding, considers in
good faith Continental's opinions and requests
with respect thereto, and takes such actions to
contest any proposed adjustment as it would with
respect to any other item of equal magnitude for
which such Selling Stockholder or such Partner (to
the extent relevant) would be responsible without
the possibility of indemnification; provided, that
such Selling Stockholder or such Partner (to the
extent relevant) shall control such audit or other
proceeding, including the choice of counsel and
forum.
(c) For purposes of this Section 8.4, in
calculating the amount of any income taxes imposed on a
Partner and the amount of any reduction in taxes
realized by such Partner for purposes of this Section
8.4, it shall be assumed that such Partner, (i) if it
is a Partner in BROAD STREET INVESTMENT FUND I, L.P. or
is Goldman, Sachs & Co., pays tax at the highest
marginal federal, New York State and New York City tax
rates applicable to corporations on the type of income
affected, and (ii) if it is a Partner in STONE STREET
FUND 1986, STONE STREET FUND 1987, BRIDGE STREET FUND
1986 or BRIDGE STREET FUND 1987, pays tax at the
highest marginal federal, New York State and New York
City tax rates applicable to individuals on the type of
income affected, in each case taking into account the
deductibility of New York State and New York City
income taxes for federal income tax purposes and the
deductibility of New York City income taxes for New
York State corporate income tax purposes.
(d) Any payment required to be made by
Continental pursuant to this Section 8.4 shall be made
no later than 5 business days prior to the time that
the payment of taxes to which such payment relates is
required to be made. If such taxes are contested
without the prior payment of any amounts to the
relevant taxing authority, the payment pursuant to this
Section 8.4 with respect to such taxes shall not be
required to be made until 10 business days after a
final determination of the amount of such tax is made.
Any payment required to be made by any Selling
Stockholder to Continental pursuant to this Section 8.4
shall be made no later than (x) in the case of a
reduction of taxes, the due date (not including
extensions) for the filing of the return reflecting the
reduction of taxes to which such payment relates, and
(y) in the case of a refund or credit, the date such
refund is received from or credit is made by the
relevant taxing authority.
(e) All payments made to a Selling Stockholder
with respect to taxes of a Partner of such Selling
Stockholder shall discharge Continental's obligation to
such Partner with respect to such taxes.
9. OPTION.
9.1. Exercise of Option. If the Alleghany
Closing shall not have occurred within seven business days
following the Closing hereunder (the "Option Period"),
except if the failure of the Alleghany Closing to occur
within the Option Period results solely from the breach by
Continental of any representation, warranty, covenant or
agreement of Continental contained in the Alleghany Stock
Purchase Agreement, Continental shall have the right (the
"Option") to require all, but not less than all, of the
Selling Stockholders to purchase, and upon the exercise of
such right each Selling Stockholder shall purchase, subject
to the terms and conditions set forth in this Section 9 and
having the effect set forth in Section 9.5, from
Continental, all, but not less than all, of the Shares
Continental purchased from such Selling Stockholder at the
Closing (the "Option Shares") at a price equal to the
Consideration paid to such Selling Stockholder at the
Closing (the "Option Price"). To exercise the Option,
Continental shall deliver to each Selling Stockholder an
irrevocable written notice to such effect no later than the
last day of the Option Period (the "Option Notice").
9.2. Option Closing. If Continental exercises
the Option, the closing of the purchase of the Option Shares
shall, subject to the terms and conditions set forth in this
Section 9, take place at such time and place as is indicated
in the Option Notice (but in no event later than five
business days after the delivery of the Option Notice) or as
Continental and the Selling Stockholders may agree (the
"Option Closing"), provided that the timing of the Option
Closing must comply with the proviso to Section 1.3. At the
Option Closing, Continental shall sell, convey, transfer and
deliver to each Selling Stockholder full right, title and
interest in and to all of the Option Shares to be sold to
such Selling Stockholder, free and clear of all Liens, and
shall deliver a certificate or certificates representing
such Option Shares duly endorsed for transfer or accompanied
by appropriate stock powers duly endorsed for transfer. The
cost of any stock transfer tax stamps or any other transfer
tax payable, if any, in connection with the purchase of
Option Shares by the Selling Stockholder purchasing the same
shall be borne by, and the right to receive any refund in
respect thereof shall inure to the benefit of, such Selling
Stockholder. At the Option Closing, each Selling
Stockholder shall pay to Continental by wire transfer in
immediately available funds to such account or accounts as
was designated to such Selling Stockholder by Continental in
the Option Notice an amount equal to the Option Price of the
Option Shares being purchased by such Selling Stockholder.
9.3. Conditions to Option Closing. The
obligations of the Selling Stockholders under this Section 9
are subject to the satisfaction, on or before the date of
the Option Closing (the "Option Closing Date"), of each of
the following conditions:
(a) Compliance with Agreement. Each Selling
Stockholder shall have received from Continental at the
Option Closing a certificate, dated the Option Closing
Date and executed by an executive officer of
Continental, substantially in the form of Exhibit D
hereto (the "Officer's Certificate"), to the effect
that Continental shall have performed and complied in
all material respects with all the obligations required
by this Agreement to be performed or complied with by
it on or before the Option Closing Date.
(b) Representations and Warranties. The
Officer's Certificate shall be to the effect that the
representations and warranties made by Continental in
Section 3 hereof shall be true and correct in all
material respects as of the Option Closing Date.
(c) Absence of Certain Litigation. On the Option
Closing Date (i) there shall be no injunction,
restraining order or order of any nature issued by any
court of competent jurisdiction which directs that this
Agreement or any material transaction contemplated
hereby shall not be consummated as herein provided or
compels or would compel the Companies to dispose of or
discontinue a significant portion of the business
conducted by the Companies as a result of the
consummation of the transactions contemplated hereby;
and (ii) there shall be no suit, action or other
proceeding by the United States (or any agency thereof)
or by any state (or any agency thereof) pending before
any court or governmental agency, or threatened to be
filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any
material transaction contemplated hereby or asserts the
illegality of any material transaction contemplated
hereby.
(d) Transfer Taxes. Continental shall have paid,
or caused to be paid, all stock transfer and other
transfer taxes required to be paid in connection with
the sale and delivery to the Selling Stockholders of
the Shares, and shall have caused all appropriate stock
transfer tax stamps to be affixed to the certificate or
certificates representing the Shares so sold and
delivered.
9.4. Further Assurances. Continental agrees that
it will from time to time at and subsequent to the Option
Closing Date, at the request of any Selling Stockholder and
without further consideration, execute and deliver such
other instruments of conveyance, assignment and transfer and
take such other actions as such Selling Stockholder may
reasonably request in order more effectively to convey,
assign, transfer to and vest in such Selling Stockholder the
Shares purchased by such Selling Stockholder at the Option
Closing.
9.5. Effect of Exercise. If Continental
exercises the Option, upon the conclusion of the Option
Closing this Agreement shall terminate and have no further
force or effect and there shall be no liability or
obligation on the part of either Continental or any of the
Selling Stockholders in respect of any covenant, condition
or agreement contained herein and the purchase and sale of
the Shares pursuant to Section 1.1 hereof shall be
rescinded, and each party shall be restored to the condition
existing prior to such purchase and sale, except that
(a) the representations and warranties contained in
Paragraphs 1 and 2 of the Officer's Certificate, (b) the
covenants of Continental contained in Section 9.4 hereof and
(c) the obligations of Continental contained in
Sections 8.2(c) (including the procedures with respect
thereto set forth in Section 8.3 hereof) and 8.4 hereof
shall survive the Option Closing, without regard to any
investigation made by the parties hereto. In such event,
each party hereto agrees, at its own expense, to execute,
deliver, file and record any instrument, document, agreement
or other paper and take any other action that the other
party may reasonably request from time to time or that the
other party shall become aware may be necessary or
desirable, in order to effect the foregoing. If between the
Closing and the Option Closing Continental shall receive any
dividends or other distributions (whether in the form of
cash, securities or other property) from Underwriters Re in
respect of the Shares acquired by Continental at the
Closing, Continental shall at the Option Closing pay such
dividends or other distributions over to the Selling
Stockholders, pro rata, in proportion to their respective
interests in such Shares.
9.6. Termination of Option. If the Alleghany
Closing shall have occurred at any time during the Option
Period or if Continental shall not have delivered an Option
Notice pursuant to the terms of this Section 9 during the
Option Period, then the Option shall terminate and have no
further force or effect.
10. MISCELLANEOUS PROVISIONS.
10.1. Expenses. Whether or not the Closing takes
place and regardless of whether this Agreement is
terminated, each party hereto shall pay all of the costs and
expenses incurred by it in connection with this Agreement or
in consummating the transactions contemplated hereby
(including, without limitation, disbursements and expenses
of its attorneys, accountants and advisors).
10.2. Notices. All notices or other
communications require or permitted under this Agreement
shall be in writing and shall be given (and shall be deemed
to have been duly given upon receipt) by personal delivery,
by facsimile transmission, or by registered, certified or
express mail, postage prepaid, addressed as follows:
If to Continental, to
William F. Gleason, Jr., Esq.
Senior Vice President,
General Counsel and Secretary
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-7982
with a copy to
Deborah F. Stiles, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
If to the Selling Stockholders, to
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: General Counsel
Telecopy: (212) 902-3000
with a copy to
Frank H. Golay, Jr., Esq.
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Telecopy: (212) 683-0457
Any party may change the person and addresses to which
notices or other communications are to be sent to it by
giving written notice of any such change in the manner
provided herein for giving notice.
10.3. Entire Agreement. Except as otherwise
provided herein, this Agreement, together with the exhibits
and schedules hereto, sets forth the entire agreement and
understanding of the parties hereto in respect of the
transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings relating to the
subject matter hereof.
10.4. No Third Party Beneficiaries. Nothing in
this Agreement 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 any provision contained herein.
10.5. No Assignment. This Agreement shall inure
to the benefit of, and be binding upon, the respective
successors and assigns of the parties hereto; provided,
however, that no assignment of any rights or delegation of
any obligations provided for herein shall be made by any
party hereto without the express prior written consent of
the other party, except that Continental shall be permitted,
without such consent, to assign any of its rights hereunder
(but not to delegate any of its obligations hereunder) to
any of its wholly owned subsidiaries (provided that
Continental may not, following such assignment to such a
subsidiary, transfer or dispose of such subsidiary, or any
equity interest therein, to any third party without the
express prior written consent of each Selling Stockholder).
10.6. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of New York applicable to agreements made and to
be performed entirely within such State, except (a) matters
related to the validity of corporate or partnership action,
which shall be governed by the laws of the state or other
jurisdiction of incorporation or organization of the
relevant corporation or partnership, as the case may be, and
(b) matters related to compliance of the transactions
contemplated hereby with applicable insurance regulatory
statutes, which shall be governed by the laws of the state
or other jurisdiction the insurance regulatory statutes of
which apply.
10.7. Counterparts. This Agreement may be
executed in any number of separate counterparts, each of
which shall be deemed to be an original, but which together
shall constitute one and the same instrument.
10.8. Headings. The section headings contained
in this Agreement are inserted for convenience of reference
only and shall not affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, each party hereto has caused
this Agreement to be duly executed on the date first above
written.
THE CONTINENTAL CORPORATION
By /s/Wayne H. Fisher
STONE STREET FUND 1986 BRIDGE STREET FUND 1986
BY: Stone Street Advisors Corp., BY: Stone Street Advisors Corp.,
General Partner Managing General Partner
BY: /s/Richard A. Friedman BY: /s/Richard A. Friedman
Vice President Vice President
STONE STREET FUND 1987 BRIDGE STREET FUND 1987
BY: Stone Street Capital Corp., BY: Stone Street Capital Corp.,
General Partner Managing General Partner
BY: Richard A. Friedman BY: Richard A. Friedman
Vice President Vice President
BROAD STREET INVESTMENT FUND I, LP.
BY: Goldman, Sachs & Co.,
General Partner
BY: /s/Richard A. Friedman
Partner
GOLDMAN, SACHS & CO.
BY: /s/Richard A. Friedman
General Partner
Schedule 1.2
Selling Stockholder Number of Shares
Goldman, Sachs & Co. 293,498
Stone Street Fund 1986 100,000
Stone Street Fund 1987 166,666
Broad Street Investment 3,297,730
Fund I, L.P
Bridge Street Fund 1986 66,667
Bridge Street Fund 1987 66,667
Schedule 2.1
The Shares are held subject to the Shareholders'
Agreement dated as of December 29, 1987, as amended on
July 6, 1988, May 29, 1991 and May 1, 1993, among
Continental, the Selling Stockholders and certain management
stockholders named therein.
THE CONTINENTAL CORPORATION
180 Maiden Lane
New York, New York 10038
October 6, 1993
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Broad Street Investment Fund I, L.P.
85 Broad Street
New York, New York 10004
Stone Street Fund 1986
85 Broad Street
New York, New York 10004
Stone Street Fund 1987
85 Broad Street
New York, New York 10004
Bridge Street Fund 1986
85 Broad Street
New York, New York 10004
Bridge Street Fund 1987
85 Broad Street
New York, New York 10004
Dear Sirs:
In connection with the Stock Purchase Agreement, dated
July 28, 1993 (the "Agreement"), among The Continental Corporation
("Continental") and Goldman, Sachs & Co. and certain funds which Goldman,
Sachs & Co. either control or of which they are general partner (collectively,
the "Selling Stockholders"), this is to confirm our agreement that,
notwithstanding the Agreement, payment for the shares to be sold by each
Selling Stockholder under the Agreement shall, subject to the terms and
conditions thereof, be made by certified or official bank check or checks,
payable to the order of such Selling Stockholder in immediately available
funds.
If the foregoing is in accordance with your understanding, please sign where
indicated below.
Very truly yours,
THE CONTINENTAL CORPORATION
By: /s/William F. Gleason
Senior Vice President
General Counsel and
Secretary
Accepted as of the date hereof:
GLDMAN, SACHS & CO. BROAD STREET INVESTMENT
FUND I, L.P.
By: Goldman, Sachs & Co.,
By: /s/Richard A. Friedman General Partner
General Partner
By: /s/Richard A. Friedman
Partner
STONE STREET FUND 1986 BRIDGE STREET FUND 1986
By: Stone Street Advisors Corp., By: Stone Street Advisors Corp.,
General Partner Managing General Partner
By: /s/Carla Skodinski By: /s/Carla Skodinski
Vice President Vice President
STONE STREET FUND 1987 BRIDGE STREET FUND 1987
By: Stone Street Capital Corp., By: Stone Street Capital Corp.,
General Partner Managing General Partner
By: /s/Carla Skodinski By: /s/Carla Skodinski
Vice President Vice President
MANAGEMENT STOCK PURCHASE AGREEMENT
MANAGEMENT STOCK PURCHASE AGREEMENT (the "Agreement") dated
as of July 28, 1993, among THE CONTINENTAL CORPORATION, a New York
corporation ("Continental"), UNDERWRITERS RE HOLDINGS CORP., a
Delaware corporation ("Underwriters Re"), UNDERWRITERS RE
CORPORATION, a Delaware corporation ("Underwriters Re Corporation")
and each of the individuals listed on the signature pages hereof (the
"Management Stockholders").
W I T N E S S E T H:
WHEREAS, Underwriters Re is the owner of all of the issued
and outstanding capital stock of Underwriters Re Corporation; and
Underwriters Re Corporation is the owner of all of the issued and
outstanding capital stock of Underwriters Reinsurance Company, a New
Hampshire insurance company ("Underwriters Reinsurance");
WHEREAS, Continental, Underwriters Re and Underwriters Re
Corporation have entered into a Stock Purchase Agreement, dated as of
July 28, 1993, with Alleghany Corporation, a Delaware corporation
("Alleghany"), providing for the purchase by Alleghany of a portion
of the issued and outstanding capital stock of New Holding
Corporation, a Delaware Corporation ("NHC") to be formed to hold all
of the issued and outstanding capital stock of Underwriters
Reinsurance (the "Alleghany Stock Purchase Agreement"); and
WHEREAS, Continental and Underwriters Re Corporation
desire to purchase from the Management Stockholders and the
Management Stockholders desire to sell to Continental and
Underwriters Re Corporation the shares of common stock, par value
$.01 per share (the "Common Stock"), of Underwriters Re described in
Section 1 below;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, agreements and provisions contained herein, the
parties hereto agree as follows:
1. EXERCISE OF OPTIONS, PURCHASE OF SHARES AND CLOSING.
1.1. Outstanding Options. Underwriters Re shall cause all
stock options held by the Management Stockholders granted under the
Underwriters Re 1987 Stock Option Plan (the "Option Plan") that are
not currently exercisable to become exercisable not later than two
business days before the Closing Date. Each of the Management
Stockholders shall exercise any and all of the stock options granted
to such Management Stockholder under the Option Plan that are then
outstanding not later than two business days before the Closing Date
in accordance with the terms of any applicable Nonstatutory Stock
Option Agreement entered into between Underwriters Re and a
Management Stockholder (the "Option Agreements"). Notwithstanding
anything contained in this Agreement or the Option Agreements to the
contrary, each Management Shareholder shall be entitled (i) to pay
the exercise price for stock options using Common Stock owned prior
to such exercise and (ii) to satisfy any applicable tax withholding
requirements using Common Stock owned prior to such exercise or
issuable upon the exercise of such stock options, in each case using
$23.50 per share as the fair market value of such Common Stock.
1.2. Purchase of Shares. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as defined
below), each Management Stockholder agrees to sell, convey, assign,
transfer and deliver the remainder of (i) the shares of Common Stock
owned on the date hereof and the shares of Common Stock acquired in
conjunction with the exercise of stock options as contemplated in
Section 1.1 less (ii) any shares of Common Stock used to exercise any
stock options or pay such Management Stockholder's withholding
obligations in accordance with Section 1.1 (such net amount of Common
Stock hereinafter referred to as the "Shares") to Continental or a
subsidiary of Continental designated by Continental (the "Continental
Purchaser") and Underwriters Re Corporation (hereafter collectively
referred to as the "Companies"), and the Continental Purchaser and
Underwriters Re Corporation shall acquire the Shares from the
Management Stockholder in the manner described below.
1.3. Consideration. At the Closing, as consideration
for the sale of Shares, (i) the Continental Purchaser will deliver to
each Management Stockholder cash in an aggregate amount equal to the
product of $23.50 and the number of Shares that such Management
Stockholder has identified as to be purchased for cash and (ii)
Underwriters Re Corporation shall deliver to the Management
Stockholder that number of shares of the capital stock of NHC owned
by it which represents the same proportionate ownership interest in
NHC as the number of Shares less the number of Shares sold to the
Continental Purchaser pursuant to clause (i) represented in
Underwriters Re immediately prior to the Closing Date. The Shares
held by the Management Stockholders listed on Schedule 1.3 which are
to purchased for cash shall be those identified on such schedule. The
Shares held by the Management Stockholders not listed on Schedule 1.3
which are to purchased for cash shall be identified to Continental in
writing not later than two business days prior to the Closing Date.
Any property delivered to a Management Stockholder pursuant to this
Sec- tion 1.3 shall be free and clear of all liens, security
interests, pledges, agreements, claims, charges, options or
encumbrances of any nature whatsoever (collectively "Liens").
1.4. Closing. The purchase and sale of the Shares
pursuant to this Agreement (the "Closing") shall take place after
satisfaction or waiver of the conditions precedent set forth herein
at the place specified for, and on the same date as (but prior to),
the closing under Alleghany Stock Purchase Agreement (the "Closing
Date"), or on such other date as the parties hereto agree in
writing. At the Closing, (i) each Management Stockholder shall
deliver to the Continental Purchaser and Underwriters Re Corporation
a certificate or certificates representing the Shares owned by such
Management Stockholder, duly endorsed in blank or with appropriate
stock powers attached, free and clear of all Liens and (ii) the
Continental Purchaser and Underwriters Re Corporation shall deliver
to each Management Stockholder the consideration payable to such
Management Stockholder in accordance with Section 1.3.
2. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT
STOCKHOLDERS.
Each of the Management Stockholders, severally but not
jointly, represents and warrants to the Companies as follows:
2.1. Title to Shares. Each Management Stockholder owns
beneficially and of record, free and clear of all Liens, or owns of
record and has full power and authority to convey free and clear of
all Liens, in each case except for Liens set forth in Schedule 2.1,
all of such Management Stockholder's Shares. Upon delivery of the
Consideration as herein provided, such Management Stockholder will
convey good title thereto, free and clear of all Liens.
2.2. Authority. This Agreement constitutes a legal, valid
and binding obligation of each Management Stockholder, enforceable
against such Management Stockholder in accordance with its terms,
subject to bankruptcy, insolvency, moratorium and other laws of
general applicability relating to or affecting creditors' rights and
to general equity principles.
3. REPRESENTATIONS AND WARRANTIES OF UNDERWRITERS RE
CORPORATION.
Underwriters Re Corporation represents and warrants to each
Management Stockholder as follows:
3.1. Organization and Standing. Underwriters Re
Corporation is a corporation, duly organized, validly existing and
in good standing under the laws of its state of incorporation, and
has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder.
3.2. Authority. The execution, delivery and performance
of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Underwriters Re
Corporation. This Agreement constitutes a legal, valid and binding
obligation of Underwriters Re Corporation, enforceable against
Underwriters Re Corporation in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws
of general applicability relating to or affecting creditors' rights
and to general equity principles.
3.3. Other Representations and Warranties. The
representations and warranties of Underwriters Re Corporation in
Section 2.3 (Consents and Approvals) and the third sentence of
Section 2.4 (Authority) of the Alleghany Stock Purchase Agreement are
hereby incorporated by reference, and Underwriters Re Corporation
represents and warrants the same to each of the Management
Stockholders (subject to the exceptions and qualifications set forth
therein, mutatis mutandis), as if set out herein at length save that
identical terms defined both therein and herein shall be deemed to
have the respective meanings ascribed thereto in this Agreement and
all uses therein of the word "hereby" shall refer to this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL.
Continental represents and warrants to each Management
Stockholder as follows:
4.1. Organization and Standing. Continental is a
corporation, duly organized, validly existing and in good standing
under the laws of its state of incorporation, and has all requisite
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.
4.2. Authority. The execution, delivery and performance
of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Continental. This
Agreement constitutes a legal, valid and binding obligation of
Continental, enforceable against Continental accordance with its
terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
4.3. Other Representations and Warranties. The
representations and warranties of Continental in Section 3.1
(Consents and Approvals) and the third sentence of Section 4.2
(Authority) of the Alleghany Stock Purchase Agreement are hereby
incorporated by reference, and Continental represents and warrants
the same to each of the Management Stockholders (subject to the
exceptions and qualifications set forth therein, mutatis mutandis),
as if set out herein at length save that identical terms defined both
therein and herein shall be deemed to have the respective meanings
ascribed thereto in this Agreement and all uses therein of the word
"hereby" shall refer to this Agreement.
5. REPRESENTATIONS AND WARRANTIES AND COVENANTS.
Underwriters Re represents and warrants to each Management
Stockholder as follows:
5.1. Organization and Standing. Underwriters Re is a
corporation, duly organized, validly existing and in good standing
under the laws of its state of incorporation, and has all requisite
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.
5.2. Authority. The execution, delivery and performance
of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Underwriters Re. This
Agreement constitutes a legal, valid and binding obligation of
Underwriters Re, enforceable against Underwriters Re in accordance
with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
6. CONDITIONS TO OBLIGATIONS OF THE COMPANIES AND
UNDERWRITERS RE.
The obligations of the Companies and Underwriters Re under
this Agreement are subject to the satisfaction, on or before the
Closing Date and separately as to each Management Stockholder, of
each of the following conditions:
6.1. Compliance with Agreement. Each Management
Stockholder shall have performed and complied in all material
respects with all the obligations required by this Agreement to be
performed or complied with by such Management Stockholder on or
before the Closing Date.
6.2. Representations and Warranties. The representations
and warranties made by each Management Stockholder in Section 2 of
this Agreement shall be true and correct in all material respects as
of the Closing Date as though such representations and warranties
were made at and as of such time.
6.3. Approvals. All Alleghany Approvals and all Sellers
Approvals (as such terms are defined in the Alleghany Stock Purchase
Agreement) shall have been obtained and be in full force and effect
on the Closing Date. Without limiting the generality of the
foregoing, Continental shall have received the requisite approvals of
the consummation of the purchase and sale of the Shares, and the
transactions contemplated hereby, from the relevant state insurance
regulatory authorities, and such approvals shall be in full force and
effect, and no such approvals shall impose upon Continental,
Underwriters Re or Underwriters Re Corporation or any of its direct
or indirect subsidiaries any conditions which materially adversely
impair the ability of such entities to conduct their business in
substantially the same manner as such business is presently being
conducted.
6.4. Absence of Certain Litigation. On the Clos- ing Date
(i) there shall be no injunction, restraining order or order of any
nature issued by any court of competent jurisdiction which directs
that this Agreement or any material transaction contemplated hereby
shall not be consummated as herein provided or compels or would
compel Continental to dispose of or discontinue a significant por-
tion of the business conducted by the Underwriter Re, Underwriters Re
Corporation or any of the subsidiaries of Underwriters Re Corporation
as a result of the consummation of the transactions contemplated
hereby; and (ii) there shall be no suit, action or other proceeding
by the United States (or any agency thereof) or by any state (or any
agency thereof) pending before any court or governmental agency, or
threatened to be filed or initiated, wherein such complainant seeks
the restraint or prohibition of the consummation of any material
transaction contemplated hereby or asserts the illegality of any
material transaction contemplated hereby.
<PAGE>
6.5. Transfer Taxes. Each of the Management Stockholders
shall have paid, or caused to be paid, all stock transfer taxes
required to be paid in connection with the sale and delivery to the
Companies of the Shares owned by such Management Stockholder, and
shall have caused all appropriate stock transfer tax stamps to be
affixed to the certificate or certificates representing the Shares so
sold and delivered by such Management Stockholder.
6.6. Other Conditions. All conditions to the obligations
of the parties to the Alleghany Stock Purchase Agreement (other than
the conditions set forth in Sections 7.8 and 9.7 thereof) shall have
been satisfied or waived.
7. CONDITIONS TO OBLIGATIONS OF THE MANAGEMENT
STOCKHOLDERS.
The obligations of each Management Stockholder under this
Agreement are subject to the satisfaction, on or before the Closing
Date, of each of the following conditions:
7.1. Compliance with Agreement. The Companies shall have
performed and complied in all material respects with all the
obligations required by this Agreement to be performed or complied
with by them on or before the Closing Date.
7.2. Representations and Warranties. The representations
and warranties made by Underwriters Re Corporation in Section 3 of
this Agreement, by Continental in Section 4 of this Agreement and by
Underwriters Re in Section 5 of this Agreement shall be true and
correct in all material respects as of the Closing Date as though
such representations and warranties were made at and as of such time.
7.3. Approvals. All Alleghany Approvals and all Sellers
Approvals (as such terms are defined in the Alleghany Stock Purchase
Agreement) shall have been obtained and be in full force and effect
on the Closing Date.
7.4. Other Conditions. All conditions to the obligations
of the parties to the Alleghany Stock Purchase Agreement (other than
the conditions set forth in Sections 7.8 and 9.7 thereof) shall have
been satisfied or waived.
8. COVENANTS.
8.1. Covenants Pending the Closing. From and after the
date hereof and until the Closing Date, each of the Companies and
each of the Management Stockholders agrees to use reasonable efforts
to take such reasonable action as may be necessary or appropriate in
order to effectuate the transactions contemplated hereby as promptly
as reasonably practicable.
8.2. Further Assurances. Each Management Stockholder
agrees from time to time at and subsequent to the Closing Date, at
the request of either of the Companies and without further
consideration, to execute and deliver such other instruments of
conveyance, assignment and transfer and take such other actions as
either of the Companies may reasonably request in order more
effectively to convey, assign, transfer to and vest in the Companies,
the Shares.
9. TERMINATION, AMENDMENT, WAIVERS.
9.1. Termination. At any time prior to the Closing
Date, this Agreement may be terminated as to any of the Management
Stockholders:
(i) by mutual written consent of the affected
parties hereto;
(ii) by either of the Companies at any time after
December 31, 1993, if any of the conditions set forth
in Section 6 hereof with respect to such Management
Stockholder have not been met and have not been waived
in writing by both of the Companies; or
(iii) by such Management Stockholder at any time
after December 31, 1993, if any of the conditions set
forth in Section 7 hereof have not been met and have
not been waived in writing by such Management Stock-
holder.
In the event of any termination pursuant to this Section 8.1 this
Agreement shall thereupon become void and of no further force or
effect and there shall be no liability or obligation on the part of
any party hereto or their respective agents in respect hereof or of
any representation, warranty, covenant or agreement contained herein
except to the extent that such termination results from the willful
breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement, in which case
the aggrieved party may recover its out-of-pocket expenses (including
reasonable fees, but excluding lost profit and consequential damages)
reasonably and actually incurred by such party by virtue of such
breach.
9.2. Unwinding. Notwithstanding anything to the contrary
contained herein, if the closing under the Alleghany Stock Purchase
Agreement shall not occur pursuant to the terms thereof by December
31, 1993, this Agreement shall thereupon terminate and have no
further force or effect. The respective obligations of the
Companies, Underwriters Re and the Management Stockholders hereunder
shall thereupon cease and there shall be no liability or obligation
on the part of any of the Companies, Underwriters Re or the
Management Stockholders in respect of any covenant, condition or
agreement contained herein, and the Companies, Underwriters Re and
the Management Stockholders shall be placed in the same position with
respect to each other as they would have been but for their execution
of the Alleghany Stock Purchase Agreement and this Agreement.
9.3. Amendment. This Agreement may be amended, modified,
superseded or supplemented only by an instrument in writing executed
and delivered on behalf of each of the parties hereto.
9.4. Waivers. The representations, warranties, covenants
or conditions of this Agreement may be waived only by a written
instrument executed by the party so waiving. The failure of any party
at any time or times to require performance of any provision hereof
shall in no manner affect the right of such party at a later time to
enforce the same. No waiver by any party of any condition, or breach
of any term, covenant, agreement, representation or warranty
contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of any other condition or of
the breach of any other term, covenant, agreement, representation or
warranty contained in this Agreement.
10. MISCELLANEOUS PROVISIONS.
10.1. Survival of Representations, Etc. The
representations and warranties, covenants and obligations of the
Management Stockholders, Continental, Underwriters Re Corporation and
Underwriters Re contained herein shall not survive the Closing Date,
except that the representations and warranties contained in Section
2.1 (Title to Shares) and 2.2 (Organization and Standing) and the
covenants contained in Section 7.2 (Further Assurances) shall survive
the Closing Date, without regard to any investigation made by the
parties hereto.
10.2. Counterparts and Supplements. This Agreement may be
executed in one or more counterparts, all of which shall constitute
one and the same instrument. On or before August 12, 1993, any one
or more of Stephen C. Kolakowski, Mark A. Bennett, Theodore A.
Blundell, Denise A. Coleman, Pamela Falzone, Todd J. Hess, Michael
J. Kruse, Judy Mann and Nancy Moore may become a party hereto, and a
Stockholder hereunder, by executing a counterpart hereof with
attached supplemented Schedules providing all of the information
called for by this Agreement in respect of such additional
Stockholders. The Agreement, as so supplemented, shall constitute
the Agreement for all purposes hereof.
10.3. Expenses. Whether or not the Closing takes place
and regardless of whether this Agreement is terminated, each party
hereto shall pay all of the costs and expenses incurred by it in
connection with this Agreement or in consummating the transactions
contemplated hereby (including, without limitation, disbursements
and expenses of its attorneys, accountants and advisors).
10.4. Notices. All notices or other communications
require or permitted under this Agreement shall be in writing and
shall be given (and shall be deemed to have been duly given upon
receipt) by personal delivery, by facsimile transmission, or by
registered, certified or express mail, postage prepaid, addressed as
follows:
If to Continental to:
Thomas A. Eff, Esq.
Vice President and
Associate General Counsel
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-7982 and
with a copy to:
Deborah F. Stiles, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
If to either of the Companies:
to the Secretary of each of the Companies at
their principal business offices
with a copy to each of:
Thomas A. Eff, Esq.
Vice President and
Associate General Counsel
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-7982 and
Deborah F. Stiles, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
If to any Management Stockholder:
to the address of such Management Stockholder
listed on the records of Underwriters Re
Any party may change the person and addresses to which notices or
other communications are to be sent to it by giving written notice of
any such change in the manner pro- vided herein for giving notice.
10.5. Entire Agreement. Except as otherwise provided
herein, this Agreement, together with the exhibits and schedules
hereto, sets forth the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated hereby,
and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
10.6. No Third Party Beneficiaries. Nothing in this
Agreement 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 any provision
contained herein.
10.7. No Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the respective successors and
assigns of the parties hereto; provided, however, that no
assignment of any rights or delegation of any obligations provided
for herein shall be made by any party hereto without the express
prior written consent of the other party, except that the Companies
shall be permitted, without such consent, to assign any of its rights
hereunder (but not to delegate any of its obligations hereunder) to
any of its wholly owned subsidiaries (provided that the Companies may
not, following such assignment to such a subsidiary, transfer or
dispose of such subsidiary, or any equity interest therein, to any
third party without the express prior written consent of the
Management Stockholders).
10.8. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York
applicable to agreements made and to be performed entirely within
such State, except (a) matters related to the validity of corporate
action, which shall be governed by the laws of the state or other
jurisdiction of incorporation the relevant corporation, and (b)
matters related to compliance of the transactions contemplated hereby
with applicable insurance regulatory statutes, which shall be
governed by the laws of the state or other jurisdiction the
insurance regulatory statutes of which apply.
10.9. Counterparts. This Agreement may be execu- ted in
any number of separate counterparts, each of which shall be deemed to
be an original, but which together shall constitute one and the same
instrument.
10.10. Headings. The section headings contained in this
Agreement are inserted for convenience of reference only and shall
not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be duly executed on the date first above written.
THE CONTINENTAL CORPORATION
By /s/ Wayne H. Fisher
Attest:
By /s/ Deborah B. Lacivita
Secretary
UNDERWRITERS RE HOLDING
CORPORATION
By /s/ Steven H. Newman
Attest:
By /s/ Pamela Falzone
Secretary
UNDERWRITERS RE CORPORATION
By /s/ Steven H. Newman
Attest:
By /s/ Pamela Falzone
Secretary
MANAGEMENT STOCKHOLDERS
/s/ Dennis E. Arnold
/s/ Peter A. Bengelsdorf
/s/ Mark A. Bennett
/s/ Theodore A. Blundell
/s/ Denise A. Coleman
/s/ Pamela Falzone
/s/ Todd J. Hess
/s/ F. Paul Japp
/s/ Russell T. John
/s/ Stephen C. Kolakowski
/s/ Michael J. Kruse
/s/ Judy Mann
/s/ Nancy Moore
/s/ Steven H. Newman
/s/ M. Bernard Puckett
/s/ James P. Rapp
/s/ Edwin Seaman
AMENDMENT TO MANAGEMENT
STOCK PURCHASE AGREEMENT
This Amendment (this "Amendment") to Management Stock Purchase
Agreement dated as of July 28, 1993, among The Continental
Corporation, a New York corporation ("Continental"), Underwriters Re
Holdings Corp., a Delaware corporation ("Underwriters Re"),
Underwriters Re Corporation, a Delaware corporation ("Underwriters Re
Corporation") and each of the individuals listed on the signature
pages thereof (the "Management Stockholders"), as supplemented by the
August 12, 1993 Supplement to Management Stock Purchase Agreement (as
supplemented, the "Management Stock Purchase Agreement") is made as
of the 7th day of October, 1993 by the parties hereto. All
capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Management Stock Purchase Agreement.
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Management
Stock Purchase Agreement to accurately reflect the ownership of
Shares by Management Stockholders;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, agreements and provisions contained herein, the
parties hereto agree as follows:
1. Amendments.
(a) The phrase, "or owns of record and has full power and
authority to convey free and clear of all Liens" contained in Section
2.1 of the Management Stock Purchase Agreement, be and hereby is
amended to read as follows: "or owns beneficially through a trust or
similar entity has full power and authority to convey free and clear
of all Liens."
(b) The number appearing opposite Steven H. Newman's name
on Schedule 1.3 to the Management Stock Purchase Agreement is hereby
amended to read "341,522."
(c) The numbers appearing opposite the names of each of
Pamela Falzone and Judy Mann on the Supplement to Schedule 1.3 to the
Management Stock Purchase Agreement are hereby amended, in each case,
to read "666."
2. It is understood that of the Shares appearing opposite
Steven H. Newman's name on Schedule 1.3 to the Management Stock
Purchase Agreement, 31,000 Shares are held by Chemical Bank as
custodian for Steven H. Newman - IRA, that the Shares appearing
opposite Peter A. Bengelsdorf's name are held by The Bengelsdorf
Family Trust, and that of the Shares appearing opposite Russell T.
John's name on Schedule 1.3 to the Management Stock Purchase
Agreement, 5,466 Shares are held by the Russell and Eileen John
Irrevocable Trust.
3. Effectiveness. This Amendment shall be deemed to be
effective upon execution of the parties below, as of July 28, 1993.
4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws and in the manner contemplated
by the Management Stock Purchase Agreement.
IN WITNESS WHEREOF, each party hereto has caused this Amendment
to be duly executed on the date referenced above.
THE CONTINENTAL CORPORATION
By: /s/Wayne Fisher
UNDERWRITERS RE HOLDINGS
CORP.
By: /s/Peter A. Bengelsdorf
Name: Peter A. Bengelsdorf
Title: Chief Financial Officer
UNDERWRITERS RE CORPORATION
By: /s/Peter A. Bengelsdorf
Name: Peter A. Bengelsdorf
Title: Chief Financial Officer
MANAGEMENT STOCKHOLDERS
/s/Dennis E. Arnold
/s/Peter A. Bengelsdorf
/s/Mark A. Bennett
/s/Theodore A. Blundell
/s/Denise A. Coleman
/s/Pamela Falzone
/s/Todd J. Hess
/s/F. Paul Japp
/s/Russell T. John
/s/Stephen C. Kolakowski
/s/Michael J. Kruse
/s/Judy Mann
/s/Nancy Moore
/s/Steven H. Newman
/s/M. Bernard Puckett
/s/James P. Rapp
/s/Edwin Seaman
THE CONTINENTAL CORPORATION EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(millions, except share and per share amounts)
Column A Column B Column C Column D
Preferred Per Common Share
Earnings dividends Fully
Description (loss) for primary Primary(1) Diluted(2)
Year Ended December 31, 1993:
Income from Continuing Operations $ 159.7 $ 3.2 $ 2.83 $ 2.86
Income from Discontinued Operations,
Net of Income Taxes $ 48.7 $ - $ .88 $ .87
Income before Net Cumulative
Effect of Changes in Accounting
Principles $ 208.4 $ 3.2 $ 3.71 $ 3.73
Net Cumulative Effect of Changes in
Accounting Principles $ 1.6 $ - $ .03 $ .03
Net Income $ 210.0 $ 3.2 $ 3.74 $ 3.76
Weighted Average Shares of
Common Stock Outstanding
Primary - 55,306,330
Fully Diluted - 55,846,590
Year Ended December 31, 1992:
Income from Continuing Operations $ 102.0 $ 3.2 $ 1.80 $ 1.84
Loss from Discontinued Operations,
Net of Income Taxe s $ (174.7) $ - $ (3.18) $ (3.15)
Loss before Net Cumulative Effect
of Changes in Accounting Principles$ (72.7) $ 3.2 $ (1.38) $ (1.31)
Net Cumulative Effect of Changes in
Accounting Principles $ (11.0) $ - $ (0.20) $ (0.20)
Net Loss $ (83.7) $ 3.2 $ (1.58) $ (1.51)
Weighted Average Shares of
Common Stock Outstanding
Primary - 54,898,736
Fully Diluted - 55,486,242
Year Ended December 31, 1991:
Income from Continuing Operations $ 110.6 $ 3.2 $ 1.97 $ 2.00
Loss from Discontinued Operations,
Net of Income Taxes $ (54.9) $ - $ (1.01) $ (0.99)
Income before Extraordinary Item $ 55.7 $ 3.2 $ 0.96 $ 1.01
Net Income $ 56.4 $ 3.2 $ 0.98 $ 1.03
Weighted Average Shares of
Common Stock Outstanding
Primary - 54,556,987
Fully Diluted - 55,150,556
(1) Per share amounts are computed on the weighted average number of common
equivalent shares outstanding during the period. Common equivalent shares in-
clude the dilutive effect of stock options and shares which would become iss-
uable pursuant to performance awards (See Note 12 of Notes to Consolidated
Financial Statements in the 1993 Annual Report to Shareholders). Dividend re-
quirements on all preferred shares are deducted from earnings to derive common
earnings, upon which primary per share earnings are based.
(2) Fully diluted per share amounts are computed on the weighted average number
of common equivalent shares outstanding during the period, increased by the as-
sumed conversion of all convertible securities as of the beginning of each
period. Fully diluted earnings amounts are based on earnings after deduction of
preferred dividends on shares which are not convertible, but before deduction of
dividends on convertible preferred shares.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Business Operations: Continental's principal business is property and casualty
insurance. These Insurance Operations are comprised of three segments: Agency
& Brokerage Commercial, Agency & Brokerage Personal and Specialized
Commercial. The results of Continental's non-insurance operations, including
investment management, claims adjusting and risk management, are reported in
the Corporate & Other Operations segment. Insurance Operations generated 97%
of 1993 revenues, including 85% from premiums earned and 12% from investment
activities (net investment income and realized capital gains). In 1993,
Continental sold its premium financing operations; in 1992, Continental
instituted a plan to withdraw from the traditional assumed reinsurance and
marine reinsurance businesses and the indigenous international and
international marine insurance businesses. The results of these operations are
now reported as discontinued, and previously reported information has been
restated accordingly.
Results of Operations - 1993 compared with 1992
Summary: Net income for 1993 included $160 million of income from continuing
operations, $48 million of income from discontinued operations and $2
million of income from the cumulative effect of changes in accounting
principles. The net result for 1992 included $102 million of income from
continuing operations, a $175 million loss from discontinued operations and an
$11 million charge for the cumulative effect of changes in accounting
principles.
Insurance Operations: Insurance Operations contributed 1993 income before
income taxes of $219 million, an increase of $19 million from the previous
year. Underwriting results improved $177 million while investment results
decreased $158 million, including a $112 million decrease in realized capital
gains and a $46 million decrease in net investment income.
Premiums earned increased $518 million, primarily due to growth in commercial
and personal package business and certain specialty commercial lines resulting
from both price increases and acceptance of new risks. In addition, 1992
premiums earned were reduced by a $75 million charge, which did not recur in
1993, to reinstate Continental's catastrophe reinsurance coverage following
hurricanes Andrew and Iniki.
Underwriting results improved $177 million from 1992, primarily due to an $88
million decrease in net catastrophe-related charges and growth in business
written without a proportionate increase in operating expenses. Losses and
loss expenses increased $252 million, despite a $13 million decrease in net
catastrophe losses, primarily due to inflation in loss costs and the increase
in the amount of risk accepted. Insurance operating expenses increased $89
million, primarily due to growth in business written and a $32 million
decrease in servicing carrier income, which is recorded as a reduction in
commission expenses.
Underwriting results included pretax net catastrophe-related charges of $153
million, compared with $241 million in 1992. The 1993 net charges included a
$44 million loss from the March East Coast blizzard; the 1992 charges included
losses of $42 million from Hurricane Andrew, $54 million from Hurricane Iniki
and $23 million from the December Northeast storm, together with the $75
million charge to reinstate catastrophe reinsurance coverage.
The insurance segments' premiums earned and underwriting results for the past
two years ended December 31 were as follows:
(millions) Premiums Earned Underwriting Results
INSURANCE SEGMENT* 1993 1992 1993 1992
Agency & Brokerage Commercial $2,121 $1,920 $ (235) $ (281)
Agency & Brokerage Personal 862 777 (78) (127)
Specialized Commercial 1,433 1,201 (92) (174)
Total Insurance Operations $4,416 $3,898 $(405) $(582)
* Distinct investment portfolios are not maintained for individual insurance
segments; accordingly, Insurance Operations' investment results are explained
in aggregate on the following page.
The Agency & Brokerage Commercial segment's premiums earned increased $201
million from 1992. Commercial package premiums earned increased $132 million
due to both price increases and acceptance of new risks. Workers' compensation
premiums earned increased $20 million due to price increases substantially
offset by deliberate reductions in the amount of risk accepted. In addition,
the segment's 1992 premiums earned were reduced by a $39 million charge, which
did not recur in 1993, to reinstate catastrophere insurance coverage. The
segment's underwriting results improved $46 million from 1992, primarily due
to a $20 million decrease in net catastrophe-related charges and growth in
business written without a proportionate increase in operating expenses.
Losses and loss expenses increased $102 million, primarily due to inflation in
loss costs, the increase in the amount of risk accepted and a $19 million
increase in net catastrophe losses. Insurance operating expenses increased $53
million, primarily due to growth in business written and a $32 million
decrease in servicing carrier income.
The Agency & Brokerage Personal segment's premiums earned increased $85
million from 1992. Personal package premiums earned increased $30 million due
to price increases, despite a small reduction in the amount of risk accepted.
Monoline automobile premiums earned increased $39 million due to an increase
in assignments from involuntary risk pools, primarily from New Jersey. In
addition, the segment's 1992 premiums earned were reduced by a $25 million
charge, which did not recur in 1993, to reinstate catastrophe reinsurance
coverage. The segment's underwriting results improved $49 million from 1992,
primarily due to a $50 million decrease in net catastrophe-related charges.
Losses and loss expenses increased $44 million, despite a $25 million decrease
in net catastrophe losses, primarily due to inflation in loss costs and an
increase in losses from involuntary risk pools resulting from the increase in
assignments. Insurance operating expenses improved $8 million, primarily
resulting from cost reductions implemented in 1991.
The Specialized Commercial segment's premiums earned increased $232 million
from 1992 due to both price increases and acceptance of new risks. Premiums
earned increased $51 million in domestic marine, $49 million in workers'
compensation in selected markets, $49 million in customized financial
coverages, $41 million in specialty casualty and $25 million in fidelity and
surety insurance. In addition, the segment's 1992 premiums earned were reduced
by an $11 million charge, which did not recur in 1993, to reinstate
catastrophe reinsurance coverage. The segment's underwriting results improved
$82 million from 1992, primarily due to better experience in domestic marine
and specialty casualty insurance, an $18 million decrease in net
catastrophe-related charges and growth in business written without a
proportionate increase in operating expenses. Losses and loss expenses
increased $106 million, despite better experience in certain lines and a $7
million decrease in net catastrophe losses, primarily due to inflation in loss
costs and the increase in the amount of risk accepted. Insurance operating
expenses increased $44 million, primarily due to growth in business written.
Net investment income for Insurance Operations was $514 million, down $46
million from 1992. The decrease was primarily due to the reinvestment of
proceeds from sales, redemptions and maturities of fixed income securities
(short-term investments, fixed maturities investments and nonredeemable
preferred stock), which comprise over 88% of Continental's investments, into
lower available short-term and intermediate-term yields.
Realized capital gains for Insurance Operations were $110 million, compared
with $222 million in 1992. In 1992, Continental sold fixed income securities
to improve statutory capital after sustaining losses from hurricanes Andrew
and Iniki. These sales produced net realized capital gains of $146 million.
Other sales of appreciated securities in the fixed income portfolio produced
$53 million of net realized capital gains, compared with $43 million in 1992.
Sales of appreciated securities in the common stock portfolio produced $57
million of net realized capital gains, compared with $33 million in 1992.
Corporate & Other Operations: Corporate & Other Operations generated a $41
million loss before income taxes for 1993, an improvement of $28 million from
the previous year, primarily due to higher corporate realized capital gains.
Income Taxes: In 1993, Continental recorded federal, foreign, and state and
other income tax expenses of $13 million, $4 million and $1 million,
respectively. In 1992, Continental recorded federal and state and other income
tax expenses of $28 million and $1 million, respectively, but virtually no
foreign income tax expense or benefit. The decrease in the federal income tax
expense is primarily due to a decrease in the valuation reserve caused by a
reversal of temporary differences between reported and tax return income and
expense amounts partially offset by increased income (see Income Taxes on
page 15).
Discontinued Operations: Discontinued premium financing operations had income,
net of income taxes, of $51 million, an increase of $33 million from 1992,
primarily due to a $36 million after-tax gain on the 1993 sale of these
operations. Discontinued insurance operations produced a loss, net of income
taxes, of $3 million, an improvement of $191 million from 1992, which included
a $133 million after-tax charge in connection with Continental's announced
withdrawal from the traditional assumed reinsurance and marine reinsurance
businesses, as well as the indigenous international and international marine
insurance businesses, all of which had been performing poorly.
Results of Operations - 1992 compared with 1991
Summary: The net result for 1992 included $102 million of income from
continuing operations, a $175 million loss from discontinued operations and an
$11 million charge for the cumulative effect of changes in accounting
principles. Net income for 1991 included $111 million of income from
continuing operations, a $55 million loss from discontinued operations and $1
million of income from the utilization of net operating loss carryforwards,
which was recorded as an extraordinary item.
Insurance Operations: Insurance Operations contributed 1992 income before
income taxes of $200 million, an increase of $42 million from the previous
year. Underwriting results deteriorated $14 million while investment results
increased $56 million, including a $107 million increase in realized capital
gains and a $51 million decrease in net investment income.
Premiums earned increased $26 million, primarily due to growth in certain
specialty commercial lines resulting from both price increases and acceptance
of new risks. This growth was limited by a $75 million charge to 1992 premiums
earned to reinstate Continental's catastrophe reinsurance coverage following
hurricanes Andrew and Iniki.
Underwriting results deteriorated $14 million from 1991, primarily due to a
$146 million increase in net catastrophe-related charges substantially offset
by better experience in commercial lines due to reductions in the amount of
risk accepted over the past four years. Losses and loss expenses increased $78
million, primarily due to a $71 million increase in net catastrophe losses.
Insurance operating expenses decreased $39 million, primarily due to a $17
million increase in servicing carrier income and cost reductions implemented
in 1991.
The insurance segments' premiums earned and underwriting results for the past
two years ended December 31 were as follows:
(millions) Premiums Earned Underwriting Results
INSURANCE SEGMENT* 1992 1991 1992 1991
Agency & Brokerage Commercial $1,920 $2,018 $(281) $(355)
Agency & Brokerage Personal 777 795 (127) (66)
Specialized Commercial 1,201 1,059 (174) (147)
Total Insurance Operations $3,898 $3,872 $(582) $(568)
* Distinct investment portfolios are not maintained for individual insurance
segments; accordingly, Insurance Operations' investment results are explained
in aggregate below.
The Agency & Brokerage Commercial segment's premiums earned decreased $98
million from 1991. The decrease was primarily due to a reduction in the amount
of risk accepted and a $39 million charge to reinstate catastrophe reinsurance
coverage. The segment's underwriting results improved $74 million from 1991,
despite a $73 million increase in net catastrophe-related charges, due to
better experience as a result of reductions in the amount of risk accepted
over the past four years. Losses and loss expenses improved $127 million,
despite a $34 million increase in net catastrophe losses, due to the
aforementioned reductions in the amount of risk accepted. Insurance operating
expenses decreased $45 million, primarily due to a decrease in business
written and a $17 million increase in servicing carrier income.
The Agency & Brokerage Personal segment's premiums earned decreased $18
million from 1991. Monoline, or single coverage, premiums earned decreased $19
million due to a reduction in the amount of risk accepted partially offset by
price increases, while personal package premiums earned increased $24 million
due to price increases. In addition, the segment's 1992 premiums earned were
reduced by a $25 million charge to reinstate catastrophe reinsurance coverage.
The segment's underwriting results deteriorated $61 million from 1991,
primarily due to a $44 million increase in net catastrophe-related charges and
poor monoline experience. Losses and loss expenses increased $29 million,
primarily due to a $19 million increase in net catastrophe losses.
The Specialized Commercial segment's premiums earned increased $142 million
from 1991, despite an $11 million charge to reinstate catastrophe reinsurance
coverage, due to both price increases and acceptance of new risks. Premiums
earned increased $74 million in customized financial coverages, $25 million in
domestic marine, $18 million in specialty casualty and $11 million in workers'
compensation insurance in selected markets. The segment's underwriting results
deteriorated $27 million from 1991, primarily due to a $29 million increase in
net catastrophe-related charges. Losses and loss expenses increased $176
million, primarily due to inflation in loss costs, the increase in the amount
of risk accepted and an $18 million increase in net catastrophe losses.
Insurance operating expenses improved $7 million, primarily due to cost
reductions implemented in 1991.
Net investment income for Insurance Operations was $560 million, down $51
million from 1991. The decrease was primarily due to the reinvestment of
proceeds from sales, redemptions and maturities of fixed income securities
into lower available short-term and intermediate-term yields.
Realized capital gains for Insurance Operations were $222 million, compared
with $115 million in 1991. In 1992, Continental sold fixed income securities
to improve statutory capital after sustaining losses from hurricanes Andrew
and Iniki. These sales produced net realized capital gains of $146 million.
Other sales of appreciated securities in the fixed income portfolio produced
$43 million of net realized capital gains, compared with $85 million in 1991.
Sales of appreciated securities in the common stock portfolio produced $33
million of net realized capital gains, compared with $30 million in 1991.
Corporate & Other Operations: Corporate & Other Operations generated a $69
million loss before income taxes for 1992, an increase of $6 million from the
previous year, primarily due to higher interest expenses resulting from an
increase in corporate borrowings.
Income Taxes: In 1992, Continental recorded federal and state and other income
tax expenses of $28 million and $1 million, respectively, but virtually no
foreign income tax expense or benefit. In 1991, Continental recorded a federal
income tax benefit of $2 million, a foreign income tax benefit of $14 million
and state and other income tax expenses of $1 million.
The $30 million increase in federal income tax expense is primarily due to the
January 1, 1992 adoption of Statement of Financial Accounting Standards (SFAS)
No. 109. Under SFAS No. 109, deferred income taxes are calculated under a
balance sheet, rather than an income statement, method. Deferred income taxes
are based on temporary differences between reported and tax return income and
expense amounts and are established according to the tax laws and rates in
effect when the taxes become payable rather than those in effect in the
current year.
The adoption of SFAS No. 109 resulted in a $26 million increase in income tax
expense net of a $20 million deferred tax benefit for Alternative Minimum Tax
(AMT). No valuation allowance was established against this benefit primarily
because Continental had the ability to elect Section 847 of the Internal
Revenue Code. Section 847 allows a current tax deduction to reduce current
income subject to the AMT, provided a Special Estimated Tax Payment is made
and taxable income in a future designated year is recognized. This future
taxable income can be offset by future deductions which gave rise to a
deferred tax asset and eliminate the need for a valuation allowance against
that asset. This would result in a potential recovery of the Special Estimated
Tax Payment.
The adoption of SFAS No. 109 provided a $178 million cumulative benefit to the
1992 results. The cumulative benefit consists of $704 million of gross
deferred tax assets reduced by $386 million of gross deferred tax liabilities
and a $140 million valuation allowance as of January 1, 1992. The valuation
allowance increased to $159 million at December 31, 1992 due to an increase in
the net deferred tax asset not fully realizable. The valuation allowance is
based on an estimate of future taxable income derived from historical taxable
income for a base five-year period adjusted for nonrecurring items such as the
sale of subsidiaries. Based on this estimate, Continental concluded that more
likely than not, it will not fully realize the benefit of all temporary
differences.
The $14 million decrease in foreign tax benefits is primarily due to the
utilization of Canadian tax loss carrybacks associated with 1991 losses from
Canadian operations.
During 1991, Continental increased its net income by $1 million through the
utilization of net operating loss carryforwards, which is shown as an
extraordinary item in the accompanying Consolidated Statements of Income.
Under SFAS No. 109, net operating loss carryforwards are included in the
provision for income tax expenses rather than reported as an extraordinary
item.
Discontinued Operations: Discontinued premium financing operations had income,
net of income taxes, of $19 million, a decrease of $3 million from 1991.
Discontinued insurance operations produced a loss, net of income taxes, of
$194 million, an increase of $117 million from 1991. The increased loss was
primarily due to a $133 million after-tax charge in connection with
Continental's announced withdrawal from the traditional assumed reinsurance
and marine reinsurance businesses, as well as the indigenous international and
international marine insurance businesses, all of which had been performing
poorly.
Other Developments:
Economic Issues: Price levels in the property and casualty insurance markets
are cyclical and materially affect Continental's underwriting results.
Continental's strategy is to write business in those areas in which management
believes Continental has a competitive advantage. However, Continental's
willingness to write this business is limited by management's belief that
prices continue to be inadequate relative to loss costs in some commercial and
specialty lines. The property and casualty industry's apparent capacity to
provide insurance coverage, at present, substantially exceeds demand for that
coverage. The strength in the domestic stock and bond markets over the current
pricing cycle is exacerbating the perception of overcapacity by increasing the
value of the industry's investments. It is not possible to determine when the
insurance markets will permit more adequate pricing or whether current market
conditions will continue. Continental will continue its efforts to obtain
adequate prices and increase writings in its strategic lines. Premiums, net
income and cash flow will improve to the degree that Continental successfully
implements its strategy.
Inflation generally increases the cost of losses covered by insurance
contracts. However, the effect of inflation varies by line of business. Since
the overall rate of inflation has been relatively constant and historically
normal in recent years, such effects have been less significant than in
previous years, except in medical care costs. The medical cost inflation rate,
while now generally decreasing in anticipation of enactment of a comprehensive
health care reform program, is still higher than the overall inflation rate.
Lines of insurance involving medical care costs, such as automobile, workers'
compensation and medical malpractice, comprised 42% of Continental's 1993
premiums earned. The method used by Continental to estimate individual case
reserves and reserves for unreported claims implicitly considers the effect of
inflation in the projection of ultimate costs.
Inflation is also an important consideration in the management of Continental's
investment portfolio, as changes in interest rates, which reflect expectations
of changes in the rate of inflation, are inversely correlated with changes in
market prices of fixed maturities investments. In order to mitigate the impact
of changes in the rate of inflation on overall results, Continental practices
asset/liability management. Accordingly, Continental sets the duration of its
fixed maturities portfolio after taking into account the expected duration of
its insurance liabilities.
Asbestos-Related, Other Toxic Tort and Environmental Pollution Claims:
Included in Continental's liability for outstanding losses and loss expenses
are gross undiscounted reserves for asbestos-related, other toxic tort and
environmental pollution claims of $264 million at December 31, 1993 ($247
million at December 31, 1992). Included in Continental's reinsurance assets
are amounts due for asbestos-related, other toxic tort and environmental
pollution claims of $105 million at December 31, 1993 ($80 million at December
31, 1992) (see "Reinsurance" discussion on page 20). Included in net losses
and loss expenses are charges for asbestos-related, other toxic tort and
environmental pollution claims of $56 million, $81 million and $109 million
for the years ended December 31, 1993, 1992 and 1991, respectively.
Most of Continental's environmental pollution claims result from general
liability policies written prior to 1986. Certain provisions of these policies
have been subject to wide-ranging challenges by policyholders and/or differing
interpretations by courts in various jurisdictions, with inconsistent
conclusions as to the applicability of coverage for environmental pollution
claims. Asbestos-related claims have generally arisen out of product liability
coverage provided by Continental under general liability policies written
prior to 1983. Thereafter, asbestos-product exclusions were included in
general liability policies. Other toxic tort claims have also generally arisen
out of product liability coverage under general liability policies. These
claims involve a variety of allegations of bodily injury arising from exposure
over a period of time to products alleged to be harmful or toxic.
Continental does not establish reserves for unreported asbestos-related, other
toxic tort and environmental pollution claims because of significant
uncertainties, which do not allow liabilities to be reasonably estimated. Such
uncertainties include difficulties in determining the frequency and severity
of such potential claims and in predicting the outcome of judicial decisions,
as case law evolves regarding liability exposure, insurance coverage and
interpretation of policy language. At this time, the future financial impact
of unreported asbestos-related, other toxic tort and environmental pollution
claims cannot be reasonably estimated, and no assessment can be made with
respect to the ultimate impact thereof on Continental's results of operations
or financial condition in the future.
The actuarial profession is addressing unquantifiable liabilities (e.g.,
unreported asbestos-related, other toxic tort and environmental pollution
claims) and is in the initial stage of developing standards, but has not yet
scheduled publication of a discussion draft. Other uncertainties may be
clarified through the debate, extension or modification of the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) in 1994.
These developments will continue to be monitored and assessed by Continental.
Discontinued Operations: In 1993, Continental completed the sale of its
premium financing operations, AFCO Credit Corporation, AFCO Acceptance
Corporation and Canadian affiliate CAFO Inc., to Mellon Bank Corporation
("Mellon"). Continental realized a $36 million gain from this sale, net of
income taxes. In addition, the sale agreement provides for a contingent
payment to Continental based on growth in AFCO's premiums financed over the
next five years, for a potential maximum payment of up to $78 million. No
provision has been made in the accompanying Consolidated Financial Statements
for any potential gain from this contingent payment from Mellon. The 1993
results and net assets of these premium financing operations, which were
previously reported in the Corporate & Other Operations segment, have been
classified in the accompanying Consolidated Financial Statements as
discontinued. Previously reported information has been restated accordingly.
In 1992, Continental instituted a program to withdraw from the traditional
assumed reinsurance and marine reinsurance businesses, as well as the
indigenous international and international marine insurance businesses. These
businesses had premiums earned of $339 million and $458 million and
underwriting losses of $304 million and $196 million in 1992 and 1991,
respectively. Continental failed to develop a sustainable competitive
advantage in these businesses as evidenced by their poor operating
performances. In addition, these businesses had subjected Continental to
unmanageable concentrations of exposures to catastrophes. For example, $28
million of Continental's $70 million total net loss from Hurricane Andrew
arose from reinsurance operations. As a result, Continental withdrew from
these businesses to further concentrate Insurance Operations in their areas of
competitive strength. Continental has been accomplishing this withdrawal by
running off the insurance reserves of certain of these operations and selling
the remaining operations, including Unionamerica Insurance Company, Limited,
which was sold in 1993. The results and net assets of the aforementioned
operations have been classified in the accompanying Consolidated Financial
Statements as discontinued. Previously reported information has been restated
accordingly.
New Accounting Pronouncements: Effective January 1, 1993, Continental adopted
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which
requires it to accrue for certain postemployment benefits such as salary
continuation, supplemental unemployment benefits, severance benefits,
disability-related benefits, job training and continuation of health care and
life insurance coverage. The cumulative change to Continental's results from
this adoption was a net charge of $4 million.
Effective January 1, 1993, Continental also adopted Emerging Issues Task Force
issue No. 93-6, "Accounting for Multiple-Year Retrospectively Rated Contracts
by Ceding and Assuming Enterprises," which requires that charges or benefits
from retrospective rating provisions under multi-year contracts be accrued in
the period that they are incurred or paid. The cumulative change to
Continental's results from this adoption was a net benefit of $6 million.
In addition, effective January 1, 1993, Continental adopted SFAS No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts," which requires that reinsurance receivables and prepaid
reinsurance premiums be reported as assets rather than being netted against
outstanding losses and loss expenses and unearned premiums on the Consolidated
Balance Sheets. SFAS No. 113 also requires that contracts with reinsurers
which do not involve a transfer of risk be classified as deposits rather than
reinsurance and that funds associated with these contracts be recorded as
deposit liabilities rather than as premiums earned. Its adoption did not have
a material effect on Continental's financial results.
Effective December 31, 1993, Continental adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires debt
securities that management intends and has the ability to hold until maturity
be reported at amortized cost, debt and equity securities bought principally
for the purpose of short-term trading be reported at fair trade value with
unrealized gains and losses included in earnings and all other debt and equity
securities be reported at fair value with unrealized gains and losses reported
as a separate component of shareholders' equity. This SFAS did not change the
way Continental accounts for investments or have a material impact on its
financial results.
Effective January 1, 1992, Continental adopted SFAS No. 109, "Accounting for
Income Taxes," and SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The cumulative change to Continental's results
from these adoptions was a net charge of $11 million (see Note 2 of Notes to
Consolidated Financial Statements).
Financial Resources and Liquidity
Cash Flow Analysis: Operating activities for 1993 provided $335 million in
cash and cash equivalents, whereas operating activities for 1992 used cash and
cash equivalents of $68 million. The principal causes for the increase in cash
provided by operations were a $373 million increase in premiums collected and
a $74 million decrease in losses and loss expenses paid, partially offset by a
$16 million increase in underwriting expenses paid and a $12 million decrease
in investment income received.
Investing activities for 1993 used $408 million in cash and cash equivalents,
whereas investing activities for 1992 used $58 million in cash and cash
equivalents. Increases in investments are reported as uses of cash and cash
equivalents, and proceeds from sales, redemptions and maturities of
investments are reported as provisions of cash and cash equivalents. The
increase in cash used by investing activities is primarily due to higher 1993
net purchases of securities as a result of increased cash provided by
operating activities.
Financing activities for 1993 used $264 million in cash and cash equivalents,
whereas financing activities for 1992 provided cash and cash equivalents of
$48 million. Increases in borrowings are reported as provisions of cash and
cash equivalents, while decreases in borrowings and payments of dividends are
reported as uses of cash and cash equivalents. The increase in cash used by
financing activities is primarily due to the retirement in July 1993 of $282
million of 93/8% Notes which were due July 1, 1993, and a $50 million
reduction in corporate short-term borrowings during 1993. These uses of cash
were partially offset by the March 1993 issuance of $150 million of 7.25%
Notes due March 1, 2003, which provided $148 million in cash net of offering
and underwriting costs. In addition, dividends paid to shareholders amounted
to $59 million in 1993, a decrease of $64 million from 1992.
As a result of the operating, investing and financing activities described
above, cash and cash equivalents used in continuing operations increased $259
million from December 31, 1992.
In addition, discontinued operations provided $284 million in cash and cash
equivalents for 1993, an increase of $262 million from 1992, primarily due to
the sales of the premium financing operations and Unionamerica Insurance
Company, Limited.
Liquidity: To meet its cash obligations, including claims payments, operating
expenses, interest and principal payments on debt, declared shareholder
dividends and taxes, Continental holds cash reserves, short-term money market
instruments and other fixed income securities with maturities of less than one
year.
In 1992 and 1993, Continental sold a total of $350 million of Notes (which
provided $346 million in cash, net of offering and underwriting costs) under
its shelf registration of up to $400 million of debt securities with the
Securities and Exchange Commission. During 1993, Continental used $282 million
of net proceeds from these sales to retire its outstanding 93/8% Notes due
July 1, 1993 and $50 million of net proceeds from these sales to reduce
corporate short-term borrowings. Continental intends to sell an additional $50
million of debt securities under its existing shelf registration and to
register for the sale of up to an additional $100 million of debt securities.
It plans to use the net proceeds from these sales to further reduce its
short-term borrowings.
During 1993, Continental's insurance subsidiaries paid it $120 million in
dividends. Recently, several states in which these insurance subsidiaries are
domiciled enacted more stringent dividend restrictions based on percentages of
surplus and net income from operations. These restrictions will, under certain
circumstances, significantly reduce the maximum amount of dividends and other
distributions payable to Continental by its subsidiaries without approval by
state regulatory authorities. To the extent that its insurance subsidiaries do
not generate amounts available for distribution sufficient to meet
Continental's cash requirements without regulatory approval, Continental would
seek approval for additional distributions. Under the restrictions currently
in effect, the maximum amount available for payment of dividends to
Continental by its insurance subsidiaries during the year ending December 31,
1994 without regulatory approval is estimated to be $304 million
(see Note 10 of Notes to Consolidated Financial Statements). Continental
anticipates that dividends from its insurance subsidiaries, together with cash
from other sources, will enable it to meet its obligations for interest and
principal payments on debt, corporate expenses, declared shareholder dividends
and taxes in 1994.
The National Association of Insurance Commissioners (NAIC), which is not
itself a regulatory authority but makes recommendations to and takes other
actions affecting state regulatory authorities, adopted a Risk-Based Capital
(RBC) standard in the fourth quarter of 1993 for use by state insurance
regulators. RBC is intended to be a "tool" for regulators to assess the
capital adequacy of property and casualty insurers and to take action when
capital under the standard is judged to be inadequate. The NAIC developed a
model law which can be adopted on a state-by-state basis and may be applied,
if adopted by the relevant state regulatory authorities, to Continental's 1994
statutory financial statements. Based upon the RBC standards developed by the
NAIC as applied to its 1993 statutory financial statements,Continental
believes that its insurance subsidiaries have sufficient levels of capital for
their respective operations.
In 1993, Continental entered into a revolving credit facility, providing for
borrowings of up to $150 million from a syndicate of banks. Funds borrowed
through the facility may be used for general corporate purposes, but
Continental intends to use the facility primarily as an alternative to
existing sources of short-term borrowings. At December 31, 1993,Continental
had not borrowed any funds through the facility. Commitment fees associated
with this facility are not significant, nor does this facility require
compensating balance arrangements with the lenders.
Investments: Fixed maturities available-for-sale consist of certain bonds and
redeemable preferred stocks that management may not hold until maturity and
which have an average Standard & Poor's rating of AA+ (or its Moody's
equivalent). Continental's fixed maturities available for sale had a balance
sheet fair value of $6,916 million at December 31, 1993 (compared with a fair
value of $6,240 million at December 31, 1992) and included mortgage-backed
securities with a fair value of $1,270 million and an amortized cost of $1,255
million at December 31, 1993 (compared with a fair value of $1,338 million and
an amortized cost of $1,300 million at December 31, 1992). Continental's
mortgage-backed securities have an average Standard & Poor's rating of AAA
(or its Moody's equivalent) and an average life of 6.0 years. Continental has
an insignificant investment in collateralized mortgage obligations which put
the return of principal at risk if interest rates or prepayment patterns
fluctuate.
At December 31, 1993, the fixed maturities portfolio included an insignificant
amount of securities, the fair value of which is expected to be lower than
their carrying value for more than a temporary period; such investments have
been recorded in the accompanying Consolidated Balance Sheets at their net
realizable value.
Continental also maintains an equity securities portfolio, the fair value of
which was $759 million at December 31, 1993. At December 31, 1993, Continental
also had a $112 million investment in privately placed direct mortgages, which
are included in the balance sheet caption "Other Long-Term Investments."
The NAIC is currently developing an Investments of Insurers Model Act, which
would, if adopted by state regulatory authorities, establish uniform
limitations upon the type and amounts of investments insurers may hold. Based
upon the current proposals of this Model Act, which are subject to review and
change, Continental does not believe a uniform standard would significantly
affect the current investment mix or operations of its insurance subsidiaries.
Unrealized appreciation on investments available-for-sale increased $170
million, before income taxes, from December 31, 1992. Unrealized appreciation
on fixed maturities increased $152 million. Unrealized appreciation on common
stocks decreased $1 million, while unrealized appreciation on nonredeemable
preferred stocks increased $11 million. Unrealized appreciation on
other long-term assets increased $8 million. In addition, unrealized
appreciation on investments held by discontinued operations increased $15
million, before income taxes, from December 31, 1992.
Continental's book value per share at December 31, 1993 was $39.40,
compared with $34.73 at year-end 1992.
Reinsurance: In the ordinary course of business, Continental cedes business to
other insurers and reinsurers. Purchasing reinsurance enables Continental to
limit its exposure to catastrophic events and other concentrations of risk.
However, purchasing reinsurance does not relieve Continental of its
obligations to its insureds. Continental reviews the creditworthiness of its
reinsurers on an ongoing basis. To minimize potential problems, Continental's
policy is to purchase reinsurance only from carriers who meet its credit
quality standards. It has also taken and is continuing to take steps to
settle existing reinsurance arrangements with reinsurers who do not meet its
credit quality standards. Continental does not believe that there is a
significant solvency risk concerning its reinsurance claims. In addition,
Continental regularly evaluates the adequacy of its reserves for uncollectible
reinsurance. Continental believes that it makes adequate provisions for the
ultimate collectibility of its reinsurance claims and therefore believes these
net recoveries to be probable.
Continental has in place various reinsurance arrangements with respect to its
current operations. These arrangements are subject to retentions, coverage
limits and other policy terms. Some of the principal treaty arrangements which
are presently in effect are an excess of loss treaty reducing Continental's
liability on individual property losses, a blanket casualty program reducing
Continental's liability on third party liability losses, a clash casualty
program reducing Continental's liability on multiple insured/single event
losses, and a property catastrophe program, with a net retention of $50
million in 1993, increased from $20 million in 1992, reducing its liability
from catastrophic events. Continental also uses individual risk facultative
and other facultative agreements to further reduce its liabilities.
Continental also has in place, for future potential adverse reserve
development, an aggregate excess of loss reinsurance contract with a full
limit of $400 million, which covers substantially all domestic losses and loss
expenses for 1991 and prior policy years.
Sale of Premiums Receivable: In December 1993, Continental sold $513 million
of premiums receivable balances. Cash received from this sale is net of
transaction costs. As a result, the balance sheet caption "Premiums
Receivable" is lower by $513 million at December 31, 1993 than it otherwise
would have been. This sale accelerated the cash flow from the sold
receivables, increasing cash provided by operations in 1993 by $491 million,
whereas a similar sale in 1992 reduced 1993 cash provided by operations by
$528 million. The 1993 sale of receivables will decrease cash provided by
operations in 1994. In the event that the receivables are not collected,
Continental's credit risk will be limited to the amount that the purchasers of
these receivables hold as a deposit ($15 million at December 31, 1993).
Subsequent Events: Losses from the snow and ice storms occurring in the East
and Midwest during January are estimated to be about $43 million pretax.
Continental also estimates its pretax losses from the California earthquake at
about $30 million. These losses are net of reinsurance and will be included in
Continental's first quarter results.
Report on Financial Statements
The accompanying Consolidated Financial Statements were prepared by
Continental, which is responsible for their integrity and objectivity. The
statements have been prepared in conformity with generally accepted accounting
principles, appropriate in the circumstances, and necessarily include some
amounts that are based on Continental's best estimates and judgments. The
financial information contained elsewhere in the Annual Report is consistent
with that in the Consolidated Financial Statements.
Continental maintains an effective system of internal accounting controls
through established policies and procedures including a code of conduct. Such
controls are designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that the processes of
accumulating and developing financial records are reliable for use in preparing
financial statements and maintaining accountability of assets. The concept of
reasonable assurance is based on the recognition that the cost of a system of
internal control must not exceed the related benefits and that the possibility
of human error or circumvention or override of controls exists. The system is
continuously reviewed through an extensive program undertaken by a team of
internal auditors.
Continental's Consolidated Financial Statements have been audited by KPMG Peat
Marwick, independent auditors, whose audits were made in accordance with
generally accepted auditing standards and included a consideration of the
internal accounting controls to the extent necessary to opine on the fairness
of the Consolidated Financial Statements.
The Audit Committee of the Board of Directors, comprised solely of directors
from outside Continental, meets regularly with financial management, the
independent auditors and the internal auditors to review the work and
procedures of each. The independent auditors and the internal auditors have
free access to the Audit Committee, without the presence of management, to
discuss the results of their work and their consideration of Continental's
internal accounting controls and the quality of Continental's financial
reporting. The Board of Directors, upon the recommendation of the Audit
Committee, appoints the independent auditors, subject to shareholder approval.
/s/ John P. Mascotte
Chairman
and Chief Executive Officer
/s/ J. Heath Fitzsimmons
Senior Vice President
and Chief Financial Officer
February 10, 1994
Consolidated Statements of Income
Year Ended December 31 (millions, except share and per share amounts)
Revenues: 1993 1992 1991
Premiums $4,416.1 $ 3,898.0 $3,872.5
Net Investment Income 542.3 589.9 637.2
Realized Capital Gains 124.5 215.6 111.2
Other Revenues 90.8 93.5 100.1
Total Revenues 5,173.7 4,797.0 4,721.0
Expenses:
Losses and Loss Expenses 3,414.1 3,161.6 3,083.0
Insurance Operating Expenses 1,407.4 1,318.0 1,357.1
Other Expenses 125.7 137.2 141.6
Interest on Corporate Borrowings 48.6 49.5 43.8
Total Expenses 4,995.8 4,666.3 4,625.5
Income from Continuing Operations before
Income Taxes 177.9 130.7 95.5
Income Taxes (Benefits):
Current 20.6 50.6 (16.4)
Deferred (2.4) (21.9) 1.3
Total Income Taxes (Benefits) 18.2 28.7 (15.1)
Income from Continuing Operations 159.7 102.0 110.6
Income (Loss) from Discontinued Operations,
Net of Income Taxes 12.7 (161.7) (54.9)
Gain (Loss) on Disposal of Discontinued
Operations, Net of Income Taxes 36.0 (13.0) -
Total Income (Loss) from Discontinued
Operations, Net of Income Taxes 48.7 (174.7) (54.9)
Income (Loss) before Extraordinary
Item and Net Cumulative Effect of
Changes in Accounting Principles 208.4 (72.7) 55.7
Extraordinary Item - Utilization of
Net Operating Loss Carryforwards - - 0.7
Net Cumulative Effect of Changes in
Accounting Principles 1.6 (11.0) -
Net Income (Loss) $210.0 $(83.7) $56.4
Net Income (Loss) Available to Common
Shareholders $206.8 $(86.9) $53.2
Per Common Share:
Income from Continuing Operations $2.83 $ 1.80 $1.97
Income (Loss) from Discontinued Operations,
Net of Income Taxes 0.23 (2.94) (1.01)
Gain (Loss) on Disposal of Discontinued
Operations, Net of Income Taxes 0.65 (0.24) -
Total Income (Loss) from Discontinued
Operations, Net of Income Taxes 0.88 (3.18) (1.01)
Income (Loss) before Extraordinary Item and
Net Cumulative Effect of Changes in
Accounting Principles 3.71 (1.38) 0.96
Net Cumulative Effect of Changes in
Accounting Principles 0.03 (0.20) -
Net Income (Loss) $ 3.74 $(1.58) $0.98
Weighted Average Shares of Common
Stock Outstanding 55,306,330 54,898,736 54,556,987
See Notes to Consolidated Financial Statements.
Consolidated Balance Sheets
December 31 (Millions, except par values and share amounts) 1993 1992
ASSETS:
Fixed Maturities Held-to-Maturity at Amortized Cost
(Market $0.0; 1992 - $383.7) $ - $354.5
Fixed Maturities Available-for-Sale at Fair Value
(Amortized Cost $6,615.9;1992 - $6,091.9) 6,916.4 6,240.1
Equity Securities Available-for-Sale at Fair Value
(Cost $600.0; 1992 - $759.7) 759.1 908.8
Other Long-Term Investments at Fair Value
(Cost $387.9; 1992 - $340.2) 395.9 340.2
Other Short-Term Investments 1,071.0 647.9
Total Investments 9,142.4 8,491.5
Cash and Cash Equivalents 58.5 111.5
Premiums Receivable 1,021.0 947.0
Accrued Interest and Dividends 160.7 124.6
Reinsurance Receivables 3,152.9 3,259.7
Prepaid Reinsurance Premiums 321.5 339.8
Reinsurance Recoverable 329.0 387.1
Deferred Policy Acquisition Costs 494.0 467.5
Property and Equipment, Net 463.5 450.2
Deferred Tax Asset 41.7 98.9
Other Assets 950.8 585.6
Net Assets of Discontinued Operations 84.6 310.5
Total Assets $16,220.6 $15,573.9
LIABILITIES:
Outstanding Losses and Loss Expenses $9,068.7 $9,066.2
Unearned Premiums 2,409.7 2,306.2
Short-Term Debt 229.1 567.7
Long-Term Debt 774.4 624.1
Accounts Payable and Accrued Expenses 107.9 96.4
Accrued Employee Benefits 308.3 280.9
Other Liabilities 1,139.4 701.3
Total Liabilities 14,037.5 13,642.8
Commitments and Contingencies - -
Redeemable Preferred Stocks at Redemption Value - 20.5
SHAREHOLDERS' EQUITY:
Preferred Stock - $4 Par Value 0.3 0.3
Common Stock - $1 Par Value 65.7 65.7
Authorized Shares: 100,000,000
Issued Shares: 65,720,419; 1992 - 65,716,409
Outstanding Shares: 55,331,060; 1992 - 54,925,639
Paid-in Capital 613.2 616.2
Retained Earnings 1,612.5 1,461.9
Net Unrealized Appreciation of Investments 322.1 202.0
Cumulative Foreign Currency Translation Adjustment (61.1) (52.4)
Common Stock in Treasury at Cost (10,389,359 shares;1992
- 10,790,770 shares) (369.6) (383.1)
Total Shareholders' Equity 2,183.1 1,910.6
Total Liabilities, Commitments and Contingencies,
Redeemable Preferred Stocks
and Shareholders' Equity $16,220.6 $15,573.9
See Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
Year Ended December 31 (millions) 1993 1992 1991
Cash Flows from Operating Activities:
Income from Continuing Operations $ 159.7 $ 102.0 $ 110.6
Adjustments to Reconcile Net Income to
Net Cash Provided from (Used in) Continuing
Operating Activities:
Realized Capital Gains (124.5) (215.6) (111.2)
Outstanding Losses and Loss Expenses 2.5 331.3 907.1
Unearned Premiums 103.5 144.4 85.5
Premiums Receivable (74.0) 72.4 94.6
Reinsurance Receivables 106.8 (426.7) (968.3)
Prepaid Reinsurance Premiums 18.3 (23.5) (50.5)
Reinsurance Recoverable 58.1 (63.5) 38.8
Depreciation and Amortization 38.8 38.0 46.5
Other - Net 45.9 (26.7) (27.9)
Net Cash Provided from (Used in) Continuing
Operating Activities 335.1 (67.9) 125.2
Net Cash Provided from (Used in)
Discontinued Operations 284.0 21.6 (28.8)
619.1 (46.3) 96.4
Cash Flows from Investing Activities:
Net Purchase of Property and Equipment (52.1) (2.9) (28.6)
Cost of Investments Purchased (6,126.2)(7,168.5)(7,054.3)
Proceeds from Investments Sold 5,430.9 6,751.6 6,784.9
Proceeds from Investments Matured 838.6 607.6 453.5
Net Increase in Long-Term Investments (76.3) (10.9) (34.2)
Net Increase in Short-Term Investments (423.1) (257.3) (132.0)
Decrease in Net Receivable on Sale of Securities - 22.2 11.7
Net Cash Provided from (Used in) Continuing
Investing Activities (408.2) (58.2) 1.0
Cash Flows from Financing Activities:
Proceeds from Treasury Shares Sold 10.5 8.0 6.2
Redemption of Redeemable Preferred Stocks (20.5) - -
Dividends to Shareholders (59.4) (123.1) (145.5)
Increase (Decrease) in Short-Term Debt (56.9) 268.1 60.5
Issuance of Long-Term Debt 150.0 200.0 -
Retirement of Debt (281.7) - -
Other Decrease in Long-Term Debt (5.9) (304.8) (1.8)
Net Cash Provided from (Used in) Continuing
Financing Activities (263.9) 48.2 (80.6)
Net Increase (Decrease) in Cash
and Cash Equivalents (53.0) (56.3) 16.8
Cash and Cash Equivalents at Beginning of Year 111.5 167.8 151.0
Cash and Cash Equivalents at End of Year $ 58.5 $ 111.5 $ 167.8
Supplemental Cash Flow Information:
Federal, Foreign and State Taxes Paid (Recovered) $ (0.6) $ 2.7 $ 4.7
Interest Paid $ 105.4 $ 100.6 $ 101.4
See Notes to Consolidated Financial Statements.
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
Net Cumulative
Unrealized Foreign
Appreciation Currency Common Total
Preferred Common Paid-in Retained of Translation Stock in Shareholders'
(Millions) Stock Stock Capital Earnings Investments Adjustment Treasury Equity
<C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 $ 0.3 $ 65.7 $ 616.1 $1,757.8 $ 49.6 $ (31.4) $(397.2) $ 2,060.9
Net Income 56.4 56.4
Increase in Net Unrealized
Appreciation of Investments 110.6 110.6
Increase in Foreign Currency
Translation Adjustment 10.4 10.4
Dividends:
Preferred (3.2) (3.2)
Common (142.3) (142.3)
Treasury Stock Sold 0.1 6.1 6.2
Balance at December 31, 1991 $ 0.3 $ 65.7 $ 616.2 $1,668.7 $160.2 $ (21.0) $(391.1) $ 2,099.0
Net Loss (83.7) (83.7)
Increase in Net Unrealized
Appreciation of Investments 41.8 41.8
Decrease in Foreign Currency
Translation Adjustment (31.4) (31.4)
Dividends:
Preferred (3.2) (3.2)
Common (119.9) (119.9)
Treasury Stock Sold 8.0 8.0
Balance at December 31, 1992 $ 0.3 $ 65.7 $ 616.2 $1,461.9 $202.0 $ (52.4) $(383.1) $ 1,910.6
Net Income 210.0 210.0
Increase in Net Unrealized
Appreciation of Investments 120.1 120.1
Decrease in Foreign Currency
Translation Adjustment (8.7) (8.7)
Dividends:
Preferred (3.2) (3.2)
Common (56.2) (56.2)
Treasury Stock Sold (3.0) 13.5 10.5
Balance at December 31, 1993 $ 0.3 $ 65.7 $ 613.2 $1,612.5 $322.1 $ (61.1) $(369.6) $ 2,183.1
See Notes to Consolidated Financial Statements.
<FN>
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
Principles of Consolidation: The Consolidated Financial Statements are
presented in accordance with generally accepted accounting principles and
include the accounts of The Continental Corporation and its majority-owned
subsidiaries (collectively, "Continental"). Certain reclassifications,
primarily for discontinued operations and the adoption of new accounting
pronouncements, have been made to the prior years' financial information to
conform to the 1993 presentation.
Investments: Fixed maturities held-to-maturity consist of certain bonds
presented at amortized cost that management intends and has the ability to
hold until maturity. Fixed maturities available-for-sale consist of certain
bonds and redeemable preferred stocks, presented at fair value, that
management may not hold until maturity.
Equity securities available-for-sale are comprised of common stocks and
nonredeemable preferred stocks which are reported at fair values.
Other investments are comprised of money market instruments, mortgages
receivable and certificates of deposit, which are reported at amortized cost;
notes receivable, time deposits, federal funds sold and securities purchased
under resale agreements, which are reported at cost; venture capital
investments, which are reported at lower of cost or fair value; investments in
minority affiliates, which are reported under the equity method of accounting;
and investments in limited partnerships, which are reported at fair value.
These other investments are classified as short term if their maturity date is
within one year of the balance sheet date. All investment transactions are
recorded on the settlement date.
Realized capital gains and losses on the sales of investments are included as
a component of revenues, based upon the specific identification method.
Provisions for other than temporary impairment of investment carrying values
are included in realized capital losses. Unrealized gains and losses on
investments reported at fair value, net of related deferred taxes, are
reflected in shareholders' equity.
At December 31, 1993, Continental did not invest in the securities of any
issuer, except securities issued/backed by U.S. or Canadian government
agencies, in excess of 10% of total shareholders' equity.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and
certain money market funds and other debt issues that have an original
maturity of ninety days or less and that are designated as necessary for use
by operations.
Insurance: Direct, assumed and ceded premiums are reflected as revenues on a
pro rata basis over the terms of the policies and include estimates for audit
and retrospectively rated policies.
Outstanding losses and loss expenses are reported gross of reinsurance and net
of estimated amounts recoverable for salvage and subrogation. Outstanding
losses and loss expenses are necessarily based upon estimates for all reported
claims and all unreported claims incurred except "environmental type" claims
(see Note 14). Workers' compensation pension reserves are discounted to
present value using an assumed market yield of 7% which is higher than the
assumptions used for statutory purposes; the use of this discount rate did not
impact income before income taxes in 1993, 1992 and 1991, respectively.
Premium Receivable: In December 1993, Continental sold $513.4 million of
premiums receivable balances due within the next twelve months ($527.8 million
were sold in December 1992). These sales accelerated the cash flow associated
with the premiums receivable, increasing cash in the year of the sale and
reducing it during the following year, when such receivables would otherwise
have been collected. These receivables are sold on a nonrecourse basis by
Continental. In the event of nonpayment, Continental's credit risk is limited
to the amount that the purchaser of the receivables holds as a deposit ($15.0
million in 1993 and $15.2 million in 1992).
Deferred Policy Acquisition Costs: Variable costs that are directly related to
the production of business, such as commissions and premium taxes, are
deferred and amortized over the period in which the related premiums are
earned. Deferred policy acquisition costs are limited to their net realizable
value after consideration of investment income on the related premiums.
Policy acquisition costs deferred during the year amounted to $1,397.0 million
(1992 - $1,319.7 million; 1991 - $1,299.9 million). Deferred policy
acquisition costs amortized to income during the year amounted to $1,370.5
million (1992 - $1,282.7 million; 1991 - $1,288.1 million).
Property and Equipment: Property and equipment are reported at depreciated
cost using the straight-line method over the estimated useful lives of the
assets. Property and equipment are recorded net of accumulated depreciation of
$218.5 million and $186.5 million at December 31, 1993 and 1992, respectively.
Depreciation expense charged to operations amounted to $38.8 million for the
year ended December 31, 1993 (1992 - $38.0 million; 1991 - $46.5 million).
Income Taxes: Continental adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
retroactive to January 1, 1992. SFAS No. 109 requires a company to recognize
deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax assets and liabilities and the
related expenses and benefits are determined based on the difference between
the financial statement carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Foreign subsidiaries are taxed under
applicable foreign regulations. In addition, Continental provides for deferred
taxes on the net unrealized appreciation of investments that are reported at
market value.
Earnings per Common Share: Earnings per common share are computed using net
income less preferred dividends declared ($3.2 million in 1993, 1992 and 1991,
respectively) divided by the weighted average number of common shares and
common share equivalents outstanding. Shares issuable under Continental's
Long-Term Incentive Plan are considered as common share equivalents in
computing earnings per share. There is no significant difference between
earnings per share on a primary or fully diluted basis.
Note 2: Changes in Accounting Principles
Effective January 1, 1993, Continental adopted Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment
Benefits," which affects accounting for certain postemployment benefits such
as salary continuation, supplemental unemployment benefits, severance
benefits, disability-related benefits, job training and continuation of health
care and life insurance.
Effective January 1, 1993, Continental adopted the Financial Accounting
Standards Board's Emerging Issues Task Force Issue No. 93-6, "Accounting for
Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming
Enterprises," (EITF 93-6) which affects accounting for certain nontraditional
reinsurance contracts, primarily funded cover reinsurance.
Effective January 1, 1993, Continental adopted SFAS No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts,"
which requires reinsurance receivables and prepaid reinsurance premiums to be
reported as assets rather than being netted against outstanding losses and
loss expenses and unearned premiums on the accompanying Consolidated Balance
Sheets. Outstanding losses and unearned premiums have been reclassified to
reflect a gross presentation and are higher than previously presented by
$3,152.9 million and $321.5 million, respectively in 1993, and by $3,259.7
million and $339.8 million, respectively in 1992. These increased liabilities
were offset by a corresponding increase in the asset captions "Reinsurance
Receivables" and "Prepaid Reinsurance Premiums." SFAS No. 113 also requires
that contracts with reinsurers which do not involve a transfer of risk be
classified as deposits rather than reinsurance and that funds associated with
these contracts be recorded as deposit liabilities rather than premiums
earned.
Effective December 31, 1993, Continental adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This SFAS requires debt
securities that management intends and has the ability to hold until maturity
be reported at amortized cost, debt and equity securities bought principally
for the purpose of short-term trading be reported at fair value with
unrealized gains and losses included in earnings and all other debt and equity
securities be reported at fair value with unrealized gains and losses reported
as a separate component of shareholders' equity.
The adoption of SFAS No. 112, EITF 93-6, SFAS No. 113 and SFAS No. 115 did not
have a significant impact on the 1993 income before income taxes.
Effective January 1, 1992, Continental adopted SFAS No. 109, "Accounting for
Income Taxes," and SFAS No.106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."
The net cumulative effect of changes in accounting principles is comprised of
the following:
(millions, Except Per Share Amounts) 1993 1992
Net Cumulative Effect of the Change
in Accounting for Postemployment
Benefits $(3.6) $ _
Net Cumulative Effect of the Change
in Accounting for Retrospectively
Rated Reinsurance Contracts 5.2 _
Net Cumulative Effect of the Change
in Accounting for Income Taxes _ 185.4
Net Cumulative Effect of the Change
in Accounting for Postretirement
Benefits Other Than Pensions _ (196.4)
Net Cumulative Effect of Changes in
Accounting Principles $ 1.6 $ (11.0)
Per Common Share: 1993 1992
Net Cumulative Effect of the Change
in Accounting for Postemployment
Benefits $(0.06) $ _
Net Cumulative Effect of the Change
in Accounting for Retrospectively
Rated Reinsurance Contracts 0.09 _
Net Cumulative Effect of the Change
in Accounting for Income Taxes _ 3.37
Net Cumulative Effect of the Change
in Accounting for Postretirement
Benefits Other Than Pensions _ (3.57)
Net Cumulative Effect of Changes
in Accounting Principles $ 0.03 $ (0.20)
Note 3: Discontinued Operations
In 1993, Continental sold its premium financing operations, AFCO Credit
Corporation, AFCO Acceptance Corporation and Canadian affiliate CAFO Inc., to
Mellon Bank Corporation ("Mellon"). Continental realized a fourth quarter
pretax gain from the sale of approximately $45.0 million. Proceeds from the
sale approximated $220.0 million, comprised of a $120.0 million dividend from
AFCO to Continentaland $100.0 million in cash from Mellon. In addition, the
sale agreement provides for a contingent payment to Continental based on
AFCO's premium finance growth for the next five years, for a potential maximum
payment of up to $78.0 million. No provision has been made in the accompanying
Consolidated Financial Statements for any potential gain from this contingent
payment from Mellon.
In 1992, Continental's management instituted a program to withdraw from
traditional assumed reinsurance and marine reinsurance businesses, as well as
indigenous international and international marine insurance businesses.
Continental has been accomplishing this withdrawal by running off the
insurance reserves of certain of these discontinued operations and by selling
the remaining operations which included the 1993 sale of Unionamerica
Insurance Company, Limited, a United Kingdom insurance subsidiary for $95.0
million in cash and $15.0 million face value of redeemable preferred stock.
The results and net assets of these operations are now reported as
discontinued.
The financial statements reflect the operating results and balance sheet items
of the discontinued insurance and premium financing operations separately from
continuing operations.
Operating results of the discontinued insurance operations were as follows:
(MILLIONS) 1993 1992 1991
Total Revenues $ 282.2 $ 549.8 $ 585.1
Total Expenses 285.5 740.0 654.5
Loss before Income Taxes (3.3) (190.2) (69.4)
Income Taxes (Benefits) (.7) (9.7) 7.2
Loss on Disposal of
Discontinued Insurance
Operations, Net of
Income Taxes _ (13.0) _
Net Loss from
Discontinued
Insurance Operations $ (2.6) $(193.5) $ (76.6)
Operating results of the discontinued premium financing operations were as
follows:
(MILLIONS) 1993 1992 1991
Total Revenues $ 92.4 $ 103.0 $ 119.3
Total Expenses 75.4 79.5 92.2
Income before
Income Taxes 17.0 23.5 27.1
Income Taxes 1.7 4.7 5.4
Gain on Disposal of
Discontinued Premium
Financing Operations,
Net of Income Taxes 36.0 _ _
Net Income from
Discontinued Premium
Financing Operations $ 51.3 $ 18.8 $ 21.7
Net assets of discontinued insurance operations at December 31 were as follows:
(millions) 1993 1992
Assets
Cash and Investments $1,166.5 $1,461.0
Other Assets 528.4 924.3
1,694.9 2,385.3
Liabilities
Outstanding Losses and Loss Expenses 1,346.0 2,022.2
Unearned Premiums 3.0 91.1
Other Liabilities 261.3 128.8
1,610.3 2,242.1
Net Assets $ 84.6 $143.2
Net assets of discontinued premium financing operations at December 31 were as
follows:
(millions) 1993 1992
Assets
Premium Financing Loans Receivable $ - $1,083.3
Other Assets - 32.9
- 1,116.2
Liabilities
Short-Term Debt - 873.5
Long-Term Debt - 26.5
Other Liabilities - 48.9
- 948.9
Net Assets $ - $ 167.3
Note 4: Investments
Fixed Maturities Held-to-Maturity: The amortized cost and estimated market
values of the fixed maturities held-to-maturity portfolio at December 31, 1992
are as follows:
1992
Gross Gross
Amortized Unrealized Unrealized Market
(millions) Cost Appreciation Depreciation Value
Tax-Exempt
Securities $ 354.5 $ 30.6 $ 1.4 $ 383.7
In 1993, Continental reclassified the balance of fixed maturities
held-to-maturity to fixed maturities available-for-sale because management may
not hold these securities until maturity. Proceeds from sales (1992 and 1991
only), calls and maturities of investments from fixed maturities
held-to-maturity during 1993 were $72.9 million (1992 - $3,582.4 million,
1991 - $3,861.2 million). Gross gains of $4.6 million (1992 - $138.4 million,
1991 - $73.5 million) and gross losses of $0.2 million (1992 - $22
1991 - $11.6 million) were realized on those transactions.
The amortized cost and estimated market value of the fixed maturities
available-for-sale at December 31, 1993, by contractual maturity date are
shown in the following table. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Amortized Market
(millions) Cost Value
Due in One Year or Less $ 449.1 $ 449.3
Due after One Year through Five Years 2,401.9 2,499.1
Due after Five Years through Ten Years 1,104.9 1,192.7
Due after Ten Years 2,660.0 2,775.3
$ 6,615.9 $6,916.4
Fixed Maturities Available-for-Sale and Equity Securities
Available-for-Sale: The amortized cost and estimated market
values of the fixed maturities available-for-sale and equity
securities available-for-sale portfolios at December 31 are as
follows:
1993
GROSS GROSS NET
AMORTIZED UNREALIZED UNREALIZED UNREALIZED MARKET
(MILLIONS) COST APPRECIATION DEPRECIATION APPRECIATION VALUE
Fixed Maturities
Available-for-Sale:
U.S. Treasury
Securities $ 1,647.9 $ 63.7 $ 5.1 $ 58.6 $ 1,706.5
U.S. Agency
Securities 25.3 2.0 0.2 1.8 27.1
Tax-Exempt
Securities 1,325.2 95.1 1.7 93.4 1,418.6
Canadian
Government,
Provincial
and Municipal
Securities 518.0 41.2 0.2 41.0 559.0
Other
International
Securities 646.8 44.4 1.3 43.1 689.9
Corporate
Securities 1,148.7 53.5 9.1 44.4 1,193.1
Mortgage-Backed
Securities 1,255.1 21.6 6.4 15.2 1,270.3
Redeemable
Preferred Stocks 48.9 3.0 _ 3.0 51.9
6,615.9 324.5 24.0 300.5 6,916.4
Equity Securities
Available-for-Sale:
Common Stocks 500.8 166.1 13.2 152.9 653.7
Nonredeemable
Preferred Stocks 99.2 6.6 0.4 6.2 105.4
$ 600.0 $ 172.7 $13.6 $ 159.1 $ 759.1
Unrealized Appreciation on Fixed Maturities and
Equity Securities Available-for-Sale 459.6
Unrealized Appreciation on Other Long-Term Investments 8.0
Unrealized Appreciation 467.6
Less: Deferred Taxes (Net of $4.5 Million
in Tax Rate Change) (160.6)
Discontinued Operations (Net of $8.1 Million
Deferred Taxes) 15.1
Net Unrealized Appreciation of Investments $ 322.1
1992
GROSS GROSS NET
AMORTIZED UNREALIZED UNREALIZED UNREALIZED MARKET
(MILLIONS) COST APPRECIATION DEPRECIATION APPRECIATION VALUE
Fixed Maturities
Available-for-Sale:
U.S. Treasury
Securities $1,432.6 $ 28.0 $ 7.3 $ 20.7 $1,453.3
U.S. Agency
Securities 46.0 1.1 0.4 0.7 46.7
Tax-Exempt
Securities 724.8 40.1 1.3 38.8 763.6
Canadian Government,
Provincial and
Municipal Securities 476.7 12.9 2.4 10.5 487.2
Other International
Securities 743.5 31.1 7.1 24.0 767.5
Corporate
Securities 1,313.0 32.3 18.6 13.7 1,326.7
Mortgage-Backed
Securities 1,299.7 41.1 3.3 37.8 1,337.5
Redeemable
Preferred Stocks 55.6 2.1 0.1 2.0 57.6
6,091.9 188.7 40.5 148.2 6,240.1
Equity Securities
Available-for-Sale:
Common Stocks 583.6 167.6 13.3 154.3 737.9
Nonredeemable
Preferred Stocks 176.1 11.5 16.7 (5.2) 170.9
$ 759.7 $179.1 $30.0 $149.1 908.8
Unrealized Appreciation 297.3
Less: Deferred Taxes (101.0)
Discontinued Operations
(Net of $2.8 Million Deferred Taxes) 5.7
Net Unrealized Appreciation of Investments $202.0
Financial instruments with off-balance-sheet risk and their associated
contractor notional amounts as of December 31, 1993 and 1992 are foreign
currency exchange contracts of $0.0 million and $48.1 million, interest rate
swaps of $208.0 million and $31.2 million, currency-linked medium-term notes
of $5.0 million and $58.2 million, and futures contracts of $123.0 million and
$0.0 million, respectively. Continental does not participate in these types
of financial instruments as an intermediary and, therefore, believes it limits
its credit risk of nonperformance by any counterparty to an insignificant
amount.
Continental has established a securities lending program. At December 31, 1993
and 1992 the estimated fair value of securities on loan was $275.8 million and
$314.1 million, respectively. The company requires in return for the
securities a minimum collateral of 105% of the fair value of loaned
securities.
Continental manages its investments to limit credit risk by diversifying its
portfolio among various security types and industry sectors. The credit risk
of financial instruments is controlled through credit approvals, limits and
monitoring procedures. Management believes that significant concentrations of
credit risk do not exist.
Included in other liabilities at December 31, 1993 are obligations under
reverse repurchase and dollar reverse repurchase agreements aggregating $188.1
million ($39.7 million in 1992).
Note 5: Net Investment Income and Realized Capital Gains (Losses)
Net investment income by source for the year ended December 31 is as follows:
(MILLIONS) 1993 1992 1991
Fixed Maturities Held-to-Maturity $ 17.2 $ 326.1 $ 440.1
Fixed Maturities Available-for-Sale 465.5 202.9 118.3
Equity Securities Available-for-Sale:
Common Stocks 17.5 18.4 23.2
Nonredeemable Preferred Stocks 10.0 16.4 20.3
Minority Affiliates* 10.1 11.7 11.9
Other Long-Term Investments 22.6 20.6 24.2
Other Short-Term Investments 34.5 26.8 49.6
Investment Income 577.4 622.9 687.6
Less: Applicable Expenses 35.1 33.0 50.4
Net Investment Income $ 542.3 $ 589.9 $ 637.2
*Earnings in minority affiliates are shown net of taxes accrued by such
affiliates. Dividends paid by minority affiliates aggregated $0.0 million in
1993 (1992 - $1.0 million; 1991 - $0.6 million).
Set forth below are summaries of realized capital gains (losses) for the year
ended December 31:
(MILLIONS) 1993 1992 1991
Fixed Maturities Held-to-Maturity $ 4.4 $ 115.6 $ 61.9
Fixed Maturities Available-for-Sale 87.8 69.6 31.0
Equity Securities Available-for-Sale 59.9 34.5 47.9
Gains on Sales of Subsidiaries 1.0 _ 0.4
Other (28.6) (4.1) (30.0)
Realized Capital Gains $ 124.5 $ 215.6 $ 111.2
Note 6: Reinsurance
In the ordinary course of business, Continental cedes business to other
insurers and reinsurers. Purchasing reinsurance enables Continental to limit
its exposure to catastrophic events and other concentrations of risk. However,
purchasing reinsurance does not relieve Continental of its obligations to its
insureds. Continental assumes business from other reinsurance organizations,
primarily through its participation in voluntary and involuntary risk-sharing
pools.
Premiums written, premiums earned and losses and loss expenses information by
direct, assumed and ceded for the year ended December 31 is as follows:
Premiums Written
(MILLIONS) 1993 1992 1991
Direct Business $ 5,199.7 $ 4,774.7 $ 4,595.2
Reinsurance Assumed 533.7 601.8 547.8
Reinsurance Ceded 1,195.6 1,357.5 1,237.1
Premiums Written $ 4,537.8 $ 4,019.0 $ 3,905.9
Premiums
(MILLIONS) 1993 1992 1991
Direct Business $ 5,125.8 $ 4,764.3 $ 4,665.3
Reinsurance Assumed 504.2 467.7 358.8
Reinsurance Ceded 1,213.9 1,334.0 1,151.6
Premiums Earned $ 4,416.1 $ 3,898.0 $ 3,872.5
Losses and Loss Expenses
(MILLIONS) 1993 1992 1991
Direct Business $ 3,590.8 $ 3,924.7 $ 3,839.2
Reinsurance Assumed 686.1 899.4 426.8
Reinsurance Ceded 862.8 1,662.5 1,183.0
Losses and Loss Expenses $ 3,414.1 $ 3,161.6 $ 3,083.0
Continental conducts systematic reviews of the financial condition of its
reinsurers because a critical element of reinsurance is their financial
stability. As a result of these reviews, Continental reevaluates its position
with these companies with respect to both existing and future reinsurance.
During 1993, Continental charged $15.0 million to earnings for uncollectible
reinsurance ($41.0 million in 1992; $31.4 million in 1991).
Continental has in place various reinsurance arrangements with respect to its
current operations. These arrangements are subject to retentions, coverage
limits and other policy terms. Some of the principal treaty arrangements which
are presently in effect are an excess of loss treaty reducing Continental's
liability on individual property losses, a blanket casualty program reducing
Continental's liability on third party liability losses, a clash casualty
program reducing Continental's liability on multiple insured/single event
losses and a property catastrophe program with a net retention of $50.0
million in 1993, increased from $20.0 million in 1992, reducing its liability
from catastrophic events. Continental also uses individual risk facultative
and other facultative agreements to further reduce its liabilities.
Continental also has in place, for future potential adverse reserve
development, an aggregate excess of loss reinsurance contract with a full
limit of $400.0 million. This contract was purchased from National Indemnity
Insurance Company. It covers losses and allocated loss expenses for 1991 and
prior policy years. The business covered includes all lines of business
written by Continental's domestic property and casualty insurance subsidiaries
with specific exclusions for nuclear exposure, war risks and business written
through the Workers' Compensation Reinsurance Bureau and involuntary market
pools, insolvency and guarantee fund assessments, taxes, unallocated loss
adjustment expenses and extra contractual obligations.
Note 7: Debt
Short-term and long-term debt consisted of the following at December 31:
At Book Value At Market Value
(MILLIONS) 1993 1992 1993 1992
Short-Term
Notes Payable $ 225.1 $ 282.3 $ 225.1 $ 282.3
Current Portion of
Long-Term Debt 4.0 285.4 4.0 285.4
Total Short-Term Debt $ 229.1 $ 567.7 $ 229.1 $ 567.7
Long-Term
Secured Debt:
Mortgage Notes Payable,
11.0%, Final Installment
Due 6/2013 $ 373.4 $ 367.1 $ 415.7 $ 432.0
Capitalized Leases, Rates
Ranging from 8.0% to 13.7%,
Due through 12/2011 48.2 48.7 65.1 66.8
Total Secured Debt 421.6 415.8 480.8 498.8
Unsecured Debt:
8.25% Notes Due 4/15/1999 100.0 100.0 108.5 107.3
7.25% Notes Due 3/1/2003 150.0 _ 154.7 _
83/8% Notes Due 8/15/2012 100.0 100.0 113.4 104.0
Other 2.8 8.3 2.8 8.3
Total Unsecured Debt 352.8 208.3 379.4 219.6
Total Long-Term Debt $ 774.4 $ 624.1 $ 860.2 $ 718.4
Short-term notes payable represent unsecured borrowings, with an average
interest rate of 3.68%, which are due through January 31, 1994.
Mortgage notes are payable in monthly installments of $3.1 million through
June 1998, $4.4 million from July 1998 to June 2004 and $5.2 million from July
2004 until June 2013, at which time the mortgages will be completely
amortized. The effective interest rate for the mortgage notes is 11.0%. The
mortgages are secured by buildings and land with a carrying value of $299.3
million at December 31, 1993.
Obligations pursuant to capital leases are payable in installments through the
year 2011 at imputed interest rates ranging from 8.0% to 13.7%, and are
secured by assets (primarily occupied buildings) with a carrying value of
$49.2 million at December 31, 1993. The payment schedule is as follows:
(MILLIONS) Payment
1994 $ 6.6
1995 6.6
1996 6.6
1997 6.6
1998 6.5
Thereafter 84.1
Total Payments 117.0
Less: Amount Representing Interest 67.8
Obligations under Capital Leases
Included in Current Portion
of Long-Term Debt 1.0
Obligations under Capital Leases $ 48.2
In 1993, Continental completed a public offering of $150.0 million of 7.25%
Notes due March 1, 2003. In 1992, Continental completed public offerings of
$100.0 million of 8.25% Notes due April 15, 1999 and $100.0 million of 83/8%
Notes due August 15, 2012. These notes (which provided $346.0 million to
Continental, net of offering and underwriting costs) were sold under
Continental's shelf registration of up to $400.0 million of debt securities
with the Securities and Exchange Commission. Continental may sell an
additional $50.0 million in debt securities (with varying maturities, interest
rates and other terms) under the shelf registration from time to time as
market conditions warrant.
During 1993, Continental used $281.7 million of net proceeds to retire its
outstanding 93/8% Notes and $50.0 million of net proceeds to reduce corporate
short-term borrowings. Continental plans to use the net proceeds from any
subsequent sales to reduce its short-term borrowings.
Continental intends to register for the sale of up to an additional $100.0
million of debt securities.
Maturities of capitalized lease obligations and other long-term debt for each
of the next five years are as follows: 1994 - $4.0 million; 1995 - $3.9
million; 1996 - $2.8 million; 1997 - $2.1 million; 1998 - $2.0 million.
In December 1993, Continental entered into a revolving credit facility,
providing for borrowings of up to $150.0 million from a syndicate of banks. At
December 31, 1993, Continental had not borrowed any funds through the
facility.
Interest expense is reported in the following lines in the accompanying
Consolidated Statements of Income:
Insurance Interest on
Operating Other Corporate
(MILLIONS) Expenses Expenses Borrowings Total
1993 $ 47.6 4.1 48.6 $ 100.3
1992 $ 47.1 4.1 49.5 $ 100.7
1991 $ 46.6 5.9 43.8 96.3
Note 8: Income Taxes
Continental files consolidated federal income tax returns with its eligible
subsidiaries. Under the tax reform act of 1986 (the"Act"), deductibility of
unearned premium and loss reserves and exclusions of income that were
tax-exempt under prior law have been limited. The adjustment associated with
the initial recomputation (discounting) of reserves as of January 1, 1987 was
not taxed ("fresh start"). Under the Act, Continental must pay the higher of
the regular tax on taxable income or an Alternative Minimum Tax (AMT) which,
in the event it is applicable, creates a credit which can be carried forward
indefinitely.
The Omnibus Budget Reconciliation Act of 1990 requires an accrual for
discounted estimates of salvage. The 1990 Act further provides a "fresh start"
for 87% of the January 1, 1990 discounted salvage accrual. The Omnibus Budget
Reconciliation Act of 1993 increased the corporate tax rate from 34% to 35%,
resulting in an increase in Continental's net deferred tax asset before
valuation allowance of $4.7 million.
Continental files foreign tax returns in those jurisdictions where it is
required.
Provision has not been made for foreign taxes on undistributed earnings of
foreign subsidiaries or for additional U.S. tax on pre-January 1, 1993
undistributed earnings of Continental's domestic subsidiaries which are less
than 80% owned. These earnings could become subject to additional tax if they
were remitted as dividends, or if Continental should sell its stock in a
subsidiary. It is not practicable to estimate the amount of additional tax
that might be payable on the foreign earnings; however, Continental believes
that U.S. foreign tax credits would largely eliminate any U.S. tax.
Continental adopted the provisions of SFAS No. 109 retroactive to January
1,1992. SFAS No. 109 requires a company to recognize deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities and the related expenses and
benefits are determined based on the difference between the financial
statement carrying amounts and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse.
The provision for income taxes from continuing operations was as follows for
the year ended December 31:
(MILLIONS) 1993 1992 1991
Current Taxes (Benefits)
U.S. Federal $ 14.8 $ 50.6 $ (0.8)
State and Local 0.6 1.0 0.6
Foreign 5.2 (1.0) (16.2)
Total Current Taxes (Benefits) 20.6 50.6 (16.4)
Deferred Taxes (Benefits)
U.S. Federal (1.0) (22.7) (1.2)
State and Local (0.1) _ _
Foreign (1.3) 0.8 2.5
Total Deferred Taxes
(Benefits) (2.4) (21.9) 1.3
Total Income Taxes (Benefits) $ 18.2 $ 28.7 $ (15.1)
Set forth below are the significant differences between the U.S. federal
income tax rate (1993 - 35%; 1992 and 1991 - 34%) and the effective tax rates
as reflected in the accompanying Consolidated Statements of Income for the
year ended December 31:
1993 1992 1991
% of Pretax % of Pretax % of Pretax
(Millions,
Except Percentages) Amount Income Amount Income Amount Income
Income from
Continuing
Operations before
Income Taxes $177.9 $130.7 $ 95.5
Statutory Federal
Corporate Tax 62.3 35% 44.4 34% 32.5 34%
Increases (
Deductions) in
Taxes Resulting
from:
Tax-Exempt
Interest (23.1) (13) (20.0) (15) (19.9) (21)
Dividends
Received
Deduction (5.5) (3) (7.1) (6) (9.8) (10)
Foreign
Income at
Higher Rates (2.5) (1) (4.9) (4) (16.1) (17)
Prior Year Tax
Adjustment (2.9) (2) _ _ (4.8) (5)
Booked Alternative
Minimum Tax (AMT) in
Excess of Regular Tax _ _ _ _ 3.5 4
Change in Valuation
Allowance (26.4) (15) 19.2 15 _ _
Effect of Rate
Change on Unrealized
Appreciation of
Investments 4.5 3 _ _ _ _
Effect of Rate
Change on Deferred
Tax Assets and
Liabilities (5.4) (3) _ _ _ _
Benefits Used
against Discontinued
Operations 18.5 10 _ _ _ _
Other Items, Net (1.3) (1) (2.9) (2) (0.5) (1)
Total Income Taxes
(Benefits) $ 18.2 10% $28.7 22% $(15.1) (16)%
Income taxes currently payable for 1993 were reduced by $1.0 million through
the utilization of tax credit carry- forwards. The extraordinary item of $0.7
million for the year ended December 31, 1991 was the result of a reduction of
federal income taxes arising from the carryforward of prior years' operating
losses.
Unused domestic net operating loss carryforwards at December 31, 1993,
available for use in future years on a tax return basis, amount to $220.6
million for regular tax and expire at various stages through the year 2006.
There are no operating loss carryforwards available for use in future years
with respect to AMT. Continental also has a foreign tax credit, general
business credit and AMT credit carryforwards of $30.9 million, $9.7 million
and $21.4 million, respectively; the foreign tax and general business credits
expire at various stages through the year 2000.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993 and 1992, and the provision for deferred income taxes under SFAS No.
109 for the years ended December 31, 1993 and 1992 are as follows:
1992 1993
Deferred Deferred
Balance Tax Balance Tax Balance
January 1, (Expense) December (Expense) December
1992 Benefit 31, 1992 Benefit 31, 1993
(Millions)
Deferred Tax Assets:
Unearned Premium Reserve $ 105.3 $ 7.0 $ 112.3 $ 14.3 $ 126.6
Loss Reserve Discounting 289.9 (20.7) 269.2 (23.8) 245.4
Adoption of SFAS No. 106 66.3 2.1 68.4 2.0 70.4
Net Operating Loss
Carryforwards 73.0 (73.0) _ _ _
Tax Credit Carryforwards 51.9 24.4 76.3 (3.8) 72.5
Real Estate Basis
Differences 52.2 (2.2) 50.0 (3.3) 46.7
Allowance for Bad Debts 12.1 9.5 21.6 (5.5) 16.1
Capital Leases 14.9 _ 14.9 0.2 15.1
Provision for Early
Retirement 14.8 (1.2) 13.6 1.2 14.8
Other Items 23.5 11.2 34.7 (6.7) 28.0
Total Gross Deferred
Tax Assets 703.9 (42.9) 661.0 (25.4) 635.6
Valuation Allowance (139.5) (19.2) (158.7) 22.7 (136.0)
Net Deferred Tax Assets 564.4 (62.1) 502.3 (2.7) 499.6
Deferred Tax Liabilities:
Deferred Acquisition Costs 128.8 (11.0) 139.8 (14.0) 153.8
Accrual for Retrospectively
Rated Premiums 71.6 58.5 13.1 _ 13.1
Audit Premiums 42.1 _ 42.1 (1.2) 43.3
Installment Receivables 14.9 _ 14.9 (3.2) 18.1
Other Items 129.0 36.5 92.5 28.0 64.5
Total Gross Deferred
Tax Liabilities 386.4 84.0 302.4 9.6 292.8
Net Deferred Tax Asset
before Unrealized
Appreciation 178.0 $ 21.9 199.9 6.9 206.8
Deferred Taxes on
Unrealized Appreciation (80.2) (101.0) (4.5) (165.1)
Net Deferred Tax Asset $ 97.8 $ 98.9 $ 2.4 $ 41.7
Continental has provided a valuation allowance because it believes that more
likely than not some portion of the deferred tax asset will not be realized.
Prior to the adoption of SFAS No. 109, the sources of timing differences and
the related provision for deferred income tax benefits for the year ended
December 31, 1991 are as follows:
(Millions) 1991
Deferred Acquisition Costs $ 3.8
Loss Reserve Discounting for Tax Return (23.6)
Capital Losses (4.2)
Acceleration of Earned Premiums for
Tax Return (17.1)
Utilization of Net Operating
Loss Carryforwards 44.8
Doubtful Reinsurance Recoverable (10.7)
Foreign Income 2.5
Other Items, Net 5.8
Total Deferred Income Taxes $ 1.3
Note 9: Common, Preferred and Redeemable Preferred Stock
Common Stock: Continental has authorized a total of 100,000,000 shares of $1
par value common stock. At December 31, 1993, 55,331,060 shares were
outstanding. These common shares paid dividends of $1.00 per share in 1993,
$2.20 per share in 1992 and $2.60 per share in 1991. Aggregate annual
dividends paid on common shares were $56.2 million in 1993 (1992 - $119.9
million; 1991 - $142.3 million).
Preferred Stock: Continental has issued two series of preferred stock: Series A
and B. Series A (2,750,000 shares authorized and issued) and Series B
(1,094,096 shares authorized and issued) are $4 par value $2.50 cumulative,
convertible preferred stock. These preferred shares are convertible into common
shares at the rate of 2.2 shares of common stock for each share of preferred
stock. In the event of liquidation or redemption by Continental, the holders of
these preferred shares are entitled to receive $50 per share plus accrued
dividends. The aggregate liquidation value of Series A and B preferred shares
outstanding at December 31, 1993, amounted to $2.8 million. These preferred
shares paid dividends of $2.50 per share in each of the years in the three-year
period ended December 31, 1993. Aggregate annual dividends paid on these
preferred shares were $0.1 million in 1993, 1992 and 1991, respectively.
Redeemable Preferred Stock: The Series C (20,500 shares authorized and issued)
is $4 par value redeemable, cumulative, convertible preferred stock. Due to the
redemption feature of this issue, it is not classified as Shareholders' Equity
in the accompanying Consolidated Balance Sheets. These preferred shares were
redeemed in 1993 for $1,000 per share plus accrued dividends. These preferred
shares paid dividends of $150 per share in each of the years in the three-year
period ended December 31, 1993. Aggregate annual dividends paid on these
preferred shares were $3.1 million in 1993, 1992 and 1991, respectively.
A summary of common and preferred share activity is set forth below:
Common Stock Outstanding Preferred Stock, Series
Issued In Treasury A B C
Balance at
December 31, 1990 65,699,233 11,311,546 35,749 28,967 20,500
Conversion of Shares 6,041 (2,267) (489)
Treasury Stock Sold (258,916)
Balance at
December 31, 1991 65,705,274 11,052,630 33,482 28,478 20,500
Conversion of Shares 11,135 (2,648) (2,420)
Treasury Stock Sold (261,860)
Balance at
December 31, 1992 65,716,409 10,790,770 30,834 26,058 20,500
Conversion of Shares 4,010 (1,509) (278)
Treasury Stock Sold (401,411)
Redemption of Shares 20,500
Balance at
December 31, 1993 65,720,419 10,389,359 29,325 25,780 -
Note 10: Dividend Restrictions
Continental's insurance subsidiaries are subject to various state statutory and
regulatory restrictions, applicable generally to each insurance company in its
state of incorporation, which limit the amounts of dividends and other
distributions that those subsidiaries may pay to Continental. The restrictions
are generally based on certain levels of surplus, investment income and
operating income, as determined under statutory insurance accounting practices.
Recently, several states in which Continental's insurance subsidiaries are
domiciled enacted more stringent dividend restrictions based on percentages of
surplus and net income from operations. These restrictions will, under certain
circumstances, significantly reduce the maximum amount of dividends and other
distributions payable to Continental by its subsidiaries without approval by
state regulatory authorities.
To the extent that its insurance subsidiaries do not generate amounts available
for distributions sufficient to meet Continental's cash requirements without
regulatory approval, Continental would seek approval for additional
distributions. Under the restrictions currently in effect, the maximum amount
available for payment of dividends to Continental by its insurance subsidiaries
during the year ending December 31, 1994 without regulatory approval is
estimated to be $303.6 million as of December 31, 1993.
The statutory surplus at December 31, 1993, for the insurance subsidiaries was
$1,952.1 million (1992 - $1,882.7 million; 1991 - $1,936.0 million). The
insurance subsidiaries' statutory net income (loss), including realized capital
gains for 1993, was $283.8 million (1992 - $(52.2) million; 1991 - $3.5
million).
Note 11: Financial Guarantees
Continental, through its former participation in the Municipal Bond Insurance
Association, issued guarantees of financial obligations. During 1986, this
association was reorganized as a corporation named MBIA, Inc. Continental's
net par value exposure at December 31, 1993 on guarantees issued before the
reorganization is $1.4 billion (1992 - $1.7 billion) all of which has been
reinsured by MBIA, Inc. In addition, Continental has issued financial
guarantees of limited partners' obligations, municipal lease obligations,
industrial development bonds and other obligations. Continental's net par value
exposure on these guarantees at December 31, 1993 was $151.0 million (1992 -
$173.0 million). The maturity dates of these obligations range between 1 and 12
years.
Note 12: Employee Benefit Plans
Pension Plans: Continental has a defined benefit retirement plan that covers
substantially all its United States employees. Benefits are based on an
employee's years of service and average compensation for the highest paid 60
consecutive months of the last 120 months of credited service. Continental's
funding policy is to provide, on a systematic basis, amounts sufficient to
provide expected benefits to participants as of their retirement dates. Plan
assets consist principally of equity and fixed-income securities, of which
$23.0 million (at market value) at December 31, 1993 is invested in the common
stock of The Continental Corporation.
Continental has a separate defined benefit plan covering substantially all
Canadian employees. The provisions of the plan are similar to those of the
United States plan. In addition, Continental's other foreign subsidiaries
provide retirement benefits for their employees consistent with local
practices.
Pension costs for the United States and Canadian plans include the following:
(Millions, Except Percentages) 1993 1992 1991
Service Cost: Benefits Earned During the Period $ 19.3 $ 16.5 $ 14.8
Interest Cost on Projected Benefit Obligation 51.4 51.2 44.8
Actual Return on Assets (44.9) (32.9) (69.6)
Net Amortization and Deferral 3.7 (12.6) 25.6
Voluntary Special Retirement Program _ _ 14.0
Net Pension Cost $ 29.5 $ 22.2 $ 29.6
Assumptions Used for U.S. Plan:*
Discount Rate for Obligations 7.50% 8.00% 9.00%
Rate of Compensation Increase 5.75 6.00 7.00
Long-Term Rate of Return on Assets 8.25 8.00 9.00
*Pension costs are determined using the assumptions as of the prior year.
The financial status of the retirement plans at December 31 follows:
1993 1992
(Millions) Underfunded Overfunded Underfunded Overfunded
Actuarial Present Value of:
Vested Benefit Obligation $ (499.0) $ (33.7) $ (477.2) $(28.5)
Accumulated Benefit Obligation (516.1) (33.7) (492.2) (28.5)
Projected Benefit Obligation (PBO)(630.4) (43.6) (607.6) (36.2)
Plan Assets at Fair Value 480.5 51.5 457.7 52.5
PBO (in Excess of) Less
Than Plan Assets (149.9) 7.9 (149.9) 16.3
Unrecognized Net Loss (Gain) 72.6 (8.8) 81.2 (9.8)
Unrecognized Prior Service Cost 21.3 1.1 23.8 1.2
Unrecognized Net Asset (Liability)
at Date of Initial Obligation (18.7) 11.3 (22.6) 3.3
Prepaid Pension Asset
(Pension Liability) $ (74.7) $ 11.5 $ (67.5) $ 11.0
Health Care and Postretirement Benefits: Comprehensive health care and dental
care benefits are provided by Continental to enrolled domestic employees and
their families if they elect such coverage. Benefits are funded through
employer and employee contributions to a trust fund. Funding levels are set on
the basis of current benefit payments.
Canadian employees and certain retirees are covered by
government-sponsored health care plans that are generally funded
through company contributions. Continental additionally offers to these
employees extended health care coverage and dental care benefits. In Canada,
the costs are shared equally between Continental and the employees.
Group term life insurance is provided by Continental to full-time
United States and Canadian employees. For the United States plan,
amounts of insurance are subject to reduction upon retirement.
For the United States and Canadian plans, employer and employee
contributions are used to pay premiums for such insurance.
In addition to pension benefits, Continental provides certain health care and
life insurance benefits to substantially all of its retired domestic employees
and retired employees at certain foreign locations. Prior to 1992, the cost of
retiree health care and life insurance benefits was recognized as an expense as
claims were paid. Continental's cost for postretirement health care benefits
was approximately $10.9 million in 1991. The cost for postretirement group life
insurance benefits was $0.5 million in 1991.
Effective January 1, 1992, Continental adopted SFAS No. 106. This statement
requires accrual, during the years that an employee renders service to
Continental, of the expected cost of providing postretirement benefits other
than pensions to an employee and the employee's beneficiaries. Prior years'
Consolidated Financial Statements have not been restated to reflect the adoption
of SFAS No. 106. The components of Continental's cost for postretirement
benefits in 1993 and 1992 (excluding the cumulative effect of the change in
accounting principle) and the accumulated postretirement benefit obligation at
December 31, 1993 and 1992 were as follows:
(Millions) 1993 1992
Net Periodic Cost
Service Cost - Benefits Earned
during the Period: $ 2.1 $ 2.1
Interest Cost on Accumulated Benefits 14.8 15.4
Net Cost $ 16.9 $ 17.5
Accumulated Postretirement
Benefit Obligation:
Retirees $ 165.8 $ 168.8
Fully Eligible Active Plan Participants 1.4 1.3
Other Active Plan Participants 36.5 31.7
Unrecognized Net (Gains)
Losses, Including Effects of
Assumption Changes 2.3 -
Total $ 206.0 $ 201.8
The major assumptions used to compute the accumulated postretirement benefit as
of December 31, 1993, are as follows: a discount rate for obligations of 7.5%,
a rate of compensation increase of 6% and an ultimate rate of health and dental
care inflation of 6% by utilizing an initial inflation rate of 15% grading down
to 6% over 10 years (8%, 6% and 6%, respectively at January 1, 1992).
The effect of a one percentage point increase in health and dental care
inflation for each future year would increase the net periodic cost for the
year ended December 31, 1993 and the accumulated postretirement benefit
obligation at December 31, 1993 by $0.8 million and $9.8 million, respectively.
Long-Term Incentive Plans: Continental has a long-term incentive plan under
which it issues stock options and grants performance awards to key employees.
Continental has granted both incentive stock options and nonqualified stock
options under the plan. Nine million shares of common stock, the maximum number
of shares that may be issued under the plan, have been reserved for issuance.
No employee stock options have been granted below the market price of
Continental's common stock at the time of grant.
Stock options become exercisable beginning one year after the day of grant.
Generally, 50% can be exercised at that time, and the remaining 50% become
exercisable the following year. All options expire on the tenth anniversary of
the day of grant.Stock option activity during 1992 and 1993 was as follows:
Weighted
Average
Exercise
Options For Price
Common Shares Per Share
1991
Outstanding at Year-End 4,373,878 $31.49
1992
Granted 902,450 25.52
Exercised 144,750 26.90
Canceled 339,435 32.28
Outstanding at Year-End 4,792,143 30.45
1993
Granted 780,950 26.90
Exercised 308,800 25.42
Canceled 582,800 33.73
Outstanding at Year-End 4,681,493 29.78
Options exercisable and weighted average exercise price per share at year-end
1993 and 1992 were 3,532,518 ($30.88 per share) and 3,502,593 ($32.39 per
share), respectively.
Performance awards are payable in either cash or shares of The Continental
Corporation's common stock in amounts determined on the basis of review, by the
Compensation Committee of the Board of Directors, of Continental's performance
for four-year award cycles. As of December 31, 1993, there were 481,458 common
shares reserved for possible payment of such awards.
Continental offers a 401(k) Incentive Savings Plan, where eligible
employees may voluntarily contribute a percentage of compensation
of up to 15%. In addition, Continental matches contributions of up to
6% of compensation. Employer costs for the Incentive Savings Plan for
December 31, 1993, 1992 and 1991 were $20.8 million, $20.5 million and
$20.4 million, respectively.
Note 13: Segment Reporting
Continental's principal business is property and casualty insurance. This
business (Insurance Segments) is comprised of three segments: Agency &
Brokerage Commercial, Agency & Brokerage Personal, and Specialized Commercial.
The customized financial coverages that were previously included in the former
International & Reinsurance segment are now included in the Specialized
Commercial segment. The internal reinsurance operations that comprised the
remainder of the former International & Reinsurance segment are now included in
the segments of the primary operations they cover. Previously reported segment
information has been adjusted accordingly.
Continental's other segment is Corporate & Other Operations, which includes
investment management, claims adjusting and risk management services.
The insurance segments are the primary sources of Continental's foreign
business, which is conducted primarily in Canada. Multinational accounts are
written in European Market countries, Latin America and the Pacific Basin.
Identifiable assets by business segment - December 31:
(millions) 1993 1992 1991
Insurance Segments* $ 15,552.1 $ 15,113.5 $ 14,031.1
Corporate & Other Operations 583.9 149.9 283.9
Total Assets from Continuing Operations 16,136.0 15,263.4 14,315.0
Net Assets of Discontinued Operations 84.6 310.5 506.9
Total Assets $ 16,220.6 $ 15,573.9 $ 14,821.9
*Distinct investment portfolios are not maintained for each segment, and
accordingly, allocation of assets to each segment is not performed.
Operational information by business segment for the year ended December 31:
Revenues
(Millions) 1993 1992 1991
Agency & Brokerage
Commercial $ 2,121.3 $1,919.5 $ 2,018.1
Agency & Brokerage
Personal 861.6 777.4 795.3
Specialized Commercial 1,433.2 1,201.1 1,059.1
Total Premiums Earned 4,416.1 3,898.0 3,872.5
Net Investment Income* 514.3 559.5 610.6
Realized Capital Gains* 110.3 222.3 115.0
Insurance Segments 5,040.7 4,679.8 4,598.1
Corporate &
Other Operations 133.0 117.2 122.9
Total $ 5,173.7 $4,797.0 $ 4,721.0
Income before Income Taxes
(millions) 1993 1992 1991
Agency & Brokerage
Commercial $ (234.8) $(281.0) $ (354.6)
Agency & Brokerage
Personal (78.1) (127.0) (66.3)
Specialized Commercial (92.5) (173.6) (146.9)
GAAP Underwriting Loss (405.4) (581.6) (567.8)
Net Investment Income* 514.3 559.5 610.6
Realized Capital Gains* 110.1 222.3 115.0
Insurance Segments 219.0 200.2 157.8
Corporate &
Other Operations (41.1) (69.5) (62.3)
Total $ 177.9 $ 130.7 $ 95.5
*Distinct investment portfolios are not maintained for each segment, and
accordingly, allocation of net investment income and realized capital gains to
each segment is not performed.
Information by geographic area - December 31:
Income
(Loss) From
Continuing
Operations Assets of
before Continuing
(millions) Revenues Income Taxes Operations
United States
1993 $4,731.7 $165.7 $15,063.0
1992 4,379.1 144.3 13,975.5
1991 4,146.6 103.2 13,130.6
Canada
1993 324.6 (5.4) 1,024.1
1992 340.2 (7.5) 926.8
1991 440.2 (26.0) 801.5
Other Foreign
1993 117.4 17.6 48.9
1992 77.7 (6.1) 361.1
1991 134.2 18.3 382.9
Consolidated
1993 $5,173.7 $177.9 $16,136.0
1992 4,797.0 130.7 15,263.4
1991 4,721.0 95.5 14,315.0
Note 14: Commitments and Contingencies
Operating Lease Commitments: Continental leases certain office facilities and
operating equipment under cancelable and noncancelable agreements. Total rental
expense under these agreements amounted to $90.7 million in 1993 (1992 - $100.5
million; 1991 - $107.4 million). At December 31, 1993, the minimum aggregate
rental commitment under all noncancelable leases (net of subleases) is as
follows:
(millions)
1994 $ 85.5
1995 74.3
1996 61.8
1997 52.9
1998 39.6
Thereafter 169.5
Total $ 483.6
Certain of these leases provide for additional charges based on increases in
property taxes or other negotiated items, and certain of these leases require
the payment of property taxes directly by the lessee.
Outstanding Losses and Loss Expenses: Included in Continental's liability for
outstanding loss and loss expenses are reserves for asbestos-related, other
toxic tort and environmental pollution claims of $263.5 million at December 31,
1993 ($247.2 million at December 31, 1992). Included in Continental's
reinsurance assets are amounts due for asbestos-related, other toxic tort and
environmental pollution claims of $105.3 million at December 31, 1993 ($79.7
million at December 31, 1992). Included in net losses and loss expenses are
charges for asbestos-related, other toxic tort and environmental pollution
claims of $55.9 million, $80.9 million and $109.0 million for the years ended
December 31, 1993, 1992 and 1991, respectively.
Most of Continental's environmental pollution claims result from general
liability policies written prior to 1986. Certain provisions of these policies
have been subject to wide-ranging challenges by policyholders and/or differing
interpretations by courts in various jurisdictions, with inconsistent
conclusions as to the applicability of coverage for environmental pollution
claims. Asbestos-related claims have generally arisen out of product liability
coverage provided by Continental under general liability policies written prior
to 1983. Thereafter, asbestos product exclusions were included in general
liability policies. Other toxic tort claims have also generally arisen out of
product liability coverage under general liability policies. These claims
involve a variety of allegations of bodily injury arising from exposure over a
period of time to products alleged to be harmful or toxic.
Continental does not establish reserves for unreported asbestos-related, other
toxic tort and environmental pollution claims because of significant
uncertainties, which do not allow liabilities to be reasonably estimated. Such
uncertainties include difficulties in determining the frequency and severity of
such potential claims and in predicting the outcome of judicial decisions, as
case law evolves regarding liability exposure, insurance coverage and
interpretation of policy language. At this time, the future financial impact of
unreported asbestos-related, other toxic tort and environmental pollution
claims cannot be reasonably estimated, and no assessment can be made with
respect to the ultimate impact thereof on Continental's results of operations or
financial condition in the future.
The actuarial profession is addressing unquantifiable liabilities (e.g.,
unreported asbestos-related, other toxic tort and environmental pollution
claims) and is in the initial stage of developing standards, but has not yet
scheduled publication of a discussion draft. Other uncertainties may be
clarified through the debate, extension or modification of the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) in 1994. These
developments will continue to be monitored and assessed by Continental.
Sale of Discontinued Premium Finance Operations: The agreement for the sale of
AFCO Credit Corporation, AFCO Acceptance Corporation and Canadian affiliate
CAFO Inc. to Mellon Bank Corporation provides for a contingent payment to
Continental based on growth in AFCO's premiums financed over the next five
years, for a potential maximum payment of up to $78.0 million. No provision has
been made in the accompanying Consolidated Financial Statements for any
potential gain from this contingent payment from Mellon.
Legal Proceedings: Continental and its subsidiaries are defendants in various
lawsuits generally incidental to their business. Management does not expect
the ultimate disposition of these lawsuits to have a material effect on
Continental's financial condition.
Independent Auditor's Report
The Board of Directors and Shareholders
The Continental Corporation:
We have audited the accompanying consolidated balance sheets of The
Continental Corporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1993.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Continental Corporation and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, The
Continental Corporation and subsidiaries changed their methods of accounting
for multiple-year retrospectively rated reinsurance contracts and for the
adoption of the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits," No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," and No. 115,
"Accounting For Certain Investments in Debt and Equity Securities," in 1993.
The Continental Corporation and subsidiaries adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," and No. 109, "Accounting for Income Taxes," in 1992.
/s/ KPMG Peat Marwick
New York, New York
February 10, 1994
Selected Consolidated Financial Data
Year ended December 31
(millions, except per
share amounts) 1993 1992 1991 1990 1989
Revenues:
Premiums $ 4,416.1 $ 3,898.0 $ 3,872.5 $ 4,112.8 $ 4,415.0
Investment Results 666.8 805.5 748.4 781.2 854.3
Other Revenues 90.8 93.5 100.1 98.0 87.3
Total Revenues 5,173.7 4,797.0 4,721.0 4,992.0 5,356.6
Expenses:
Losses and Loss Expenses 3,414.1 3,161.6 3,083.0 3,203.8 3,453.7
Insurance Operating Expenses 1,407.4 1,318.0 1,357.1 1,391.8 1,496.0
Other Expenses (Including
Interest on Corporate
Borrowings) 174.3 186.7 185.4 199.9 214.8
Total Expenses 4,995.8 4,666.3 4,625.5 4,795.5 5,164.5
Income from Continuing
Operations before
Income Taxes 177.9 130.7 95.5 196.5 192.1
Total Income Taxes (Benefits) 18.2 28.7 (15.1) 25.2 23.1
Income from Continuing
Operations 159.7 102.0 110.6 171.3 169.0
Total Income (Loss)
from Discontinued Operations,
Net of Income Taxes 48.7 (174.7) (54.9) (30.2) (15.9)
Income (Loss) before
Extraordinary Item and Net
Cumulative Effect of Changes
in Accounting Principles 208.4 (72.7) 55.7 141.1 153.1
Extraordinary Item -
Utilization of Net Operating
Loss Carryforwards - - 0.7 - -
Net Cumulative Effect of Changes
in Accounting Principles 1.6 (11.0) - - -
Net Income (Loss) $ 210.0 $ (83.7) $ 56.4 $ 141.1 $ 153.1
Total Assets $16,220.6 $15,573.9 $14,821.9 $13,767.6 $14,211.7
Long-Term Debt 774.4 624.1 723.6 731.4 730.9
Redeemable Preferred
Stocks at Redemption Value - 20.5 20.5 20.5 28.5
Shareholders' Equity 2,183.1 1,910.6 2,099.0 2,060.9 2,287.1
Per Common Share:
Income from Continuing
Operations $ 2.83 $ 1.80 $ 1.97 $ 3.09 $ 3.03
Total Income (Loss) from
Discontinued Operations,
Net of Income Taxes 0.88 (3.18) (1.01) (0.56) (0.29)
Income (Loss) before
Extraordinary Item and Net
Cumulative Effect of Changes
in Accounting Principles 3.71 (1.38) 0.96 2.53 2.74
Net Cumulative Effect of
Changes in Accounting
Principles 0.03 (0.20) - - -
Net Income (Loss) 3.74 (1.58) 0.98 2.53 2.74
Book Value 39.40 34.73 38.35 37.83 42.24
Book Value (Securities
at Market) 39.40 35.08 42.38 38.29 43.22
Market Price at Year-End 27.63 26.88 27.63 24.88 31.13
Dividends Declared 1.00 2.20 2.60 2.60 2.60
Shareholders of Record at
Year-End 14,197 16,202 18,274 18,956 20,100
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Summarized Consolidated Quarterly Financial Data (Unaudited)
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
(Millions,
except per share
amounts) 1993 1992 1993 1992 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Premiums $1,049.2 $ 977.5 $1,082.1 $ 953.3 $1,175.3 $ 910.8 $1,109.5 $1,056.4
Investment Results 162.1 192.6 193.0 178.6 158.9 310.2 152.8 124.1
Other Revenues 22.2 23.6 28.5 24.6 21.3 19.7 18.8 25.6
Total Revenues 1,233.5 1,193.7 1,303.6 1,156.5 1,355.5 1,240.7 1,281.1 1,206.1
Expenses:
Losses and
Loss Expenses 823.5 741.5 822.8 749.8 920.8 856.4 847.0 813.9
Insurance Operating
Expenses 338.0 335.5 347.8 309.0 352.5 338.0 369.1 335.5
Other Expenses
(Including Interest
on Corporate
Borrowings) 45.8 39.8 50.3 49.5 34.4 44.0 43.8 53.4
Total Expenses 1,207.3 1,116.8 1,220.9 1,108.3 1,307.7 1,238.4 1,259.9 1,202.8
Income from
Continuing Operations
before Income Taxes 26.2 76.9 82.7 48.2 47.8 2.3 21.2 3.3
Total Income
Taxes (Benefits) 7.3 15.9 14.9 8.6 3.4 (7.3) (7.4) 11.5
Income (Loss) from
Continuing Operations 18.9 61.0 67.8 39.6 44.4 9.6 28.6 (8.2)
Total Income (Loss) from
Discontinued Operations,
Net of Income Taxes 3.7 (17.7) 4.0 (7.6) 0.6 (151.7) 40.4 2.3
Income (Loss) before
Net Cumulative Effect
of Changes in
Accounting Principles 22.6 43.3 71.8 32.0 45.0 (142.1) 69.0 (5.9)
Net Cumulative Effect
of Changes in
Accounting Principles 1.6 (11.0) - - - - - -
Net Income (Loss) $ 24.2 $ 32.3 $ 71.8 $ 32.0 $ 45.0 $ (142.1) $ 69.0 $ (5.9)
Net Income (Loss)
Available to Common
Shareholders $ 23.4 $ 31.5 $ 71.0 $ 31.2 $ 44.2 $ (142.9) $ 68.2 $ (6.7)
<FN>
</TABLE>
<TABLE>
Summarized Consolidated Quarterly Financial Data (Unaudited) (cont.)
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
(Millions,
except per share
amounts) 1993 1992 1993 1992 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Common Share:
Income (Loss) from
Continuing
Operations $ 0.33 $ 1.10 $ 1.22 $ 0.71 $ 0.79 $ 0.16 $ 0.50 $ (0.16)
Income (Loss) from
Discontinued Operations,
Net of Income Taxes 0.07 (0.32) 0.07 (0.14) 0.01 (2.76) 0.73 0.04
Income (Loss) before
Net Cumulative Effect
of Changes in
Accounting Principles 0.40 0.78 1.29 0.57 0.80 (2.60) 1.23 (0.12)
Net Cumulative Effect of
Changes in
Accounting Principles 0.03 (0.20) - - - - - -
Net Income (Loss) $ 0.43 $ 0.58 $ 1.29 $ 0.57 $ 0.80 $ (2.60) $ 1.23 $ (0.12)
Common Stock data:
Dividends Declared $ 0.25 $ 0.65 $ 0.25 $ 0.65 $ 0.25 $ 0.65 $ 0.25 $ 0.25
High Stock Price 29.50 29.50 31.25 29.63 34.63 34.75 33.00 28.00
Low Stock Price 24.75 26.38 24.38 25.38 30.38 22.00 27.50 23.88
<FN>
</TABLE>
Exhibit 21
<TABLE>
THE CONTINENTAL CORPORATION
SUBSIDIARIES OF THE CONTINENTAL CORPORATION
<CAPTION>
State or Other
Jurisdiction
Name of Subsidiary of Incorporation
<S> <C>
Afco Agent Service Corporation Delaware
Boston Old Colony Insurance Company Massachusetts
The Buckeye Union Insurance Company Ohio
California Central Trust Bank Corporation California
Casualty Insurance Company Illinois
Commercial Insurance Company of Newark, N.J. New Jersey
Continental Asset Management Corp. New York
Continental Center Associates New York
Continental Guaranty & Credit Corporation New York
The Continental Insurance Company New Hampshire
The Continental Insurance Company of Canada Canada
The Continental Insurance Company of New Jersey New Jersey
The Continental Insurance Company (Europe) Limited United Kingdom
The Continental Insurance Company of Puerto Rico Puerto Rico
The Continental Insurance Holdings (Europe) Limited United Kingdom
Continental International Insurance, Limited Puerto Rico
Continental Loss Adjusting Services, Inc. Illinois
Continental Reinsurance Corporation California
Continental Reinsurance Corporation International Limited Bermuda
Continental Reinsurance Corporation (UK) Limited United Kingdom
The CPI Group Incorporated Delaware
CPI Pension Services, Inc. California
Ctek, Inc. New Jersey
The Dominion Insurance Corporation Canada
East River Insurance Company, Ltd. Barbados
East River Insurance Company (Bermuda) Ltd. Bermuda
The Fidelity and Casualty Company of New York New Hampshire
Firemen's Insurance Company of Newark, New Jersey New Jersey
First Fire and Casualty Insurance of Hawaii, Inc. Hawaii
First Indemnity Insurance of Hawaii, Ltd. Hawaii
First Insurance Company of Hawaii, Inc. Hawaii
The Glens Falls Insurance Company Delaware
The HongKong Fire Insurance Company Limited Hong Kong
Kansas City Fire and Marine Insurance Company Missouri
Lombard Continental Insurance PLC United Kingdom
The Maiden Lane Syndicate Inc. New York
The Mayflower Insurance Company, Ltd. Indiana
National-Ben Franklin Insurance Company of Illinois Illinois
Niagara Fire Insurance Company Delaware
Pacific Insurance Company California
The South Place Syndicate Inc. New York
TCC Acquisition Corp. Delaware
TCC Properties Inc. New York
UAM Limited United Kingdom
Workers' Compensation and Indemnity Company California
of California
</TABLE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
The Continental Corporation:
We consent to incorporation by reference in the registration
statement No. 33-43824 on Form S-3 of The Continental Corporation
and the registration statement No. 2-97474 on Form S-8 of The
Continental Corporation of our report dated February 10, 1994,
relating to the consolidated balance sheets of The Continental
Corporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, shareholders'
equity, and cash flows and related schedules for each of the years
in the three-year period ended December 31, 1993, which report
appears in the December 31, 1993 annual report on Form 10-K of The
Continental Corporation.
Our reports refer to The Continental Corporation and subsidiaries'
change in methods of accounting for multiple-year retrospectively
rated reinsurance contracts and for the adoption of the provisions
of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," No. 113, "Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts," and
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," in 1993. The Continental Corporation and subsidiaries
adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," and No. 109, "Accounting for Income Taxes," in 1992.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
New York, New York
March 25, 1994
The Continental Corporation
The following is a reconciliation of reserves for losses and loss expenses
reflected in the Combined Schedule P included herein, and the aggregate
property and casualty statutory reserves.
Reconciliation of Reserves for Loss 1993
and Loss Expenses (Millions)
Schedule P - Part 1 - Summary
Net Loss Unpaid $4,954.0
Net Loss Expenses Unpaid 751.1
Total Schedule P Losses and
Loss Expenses Unpaid 5,705.1
Plus: Foriegn Subsidiaries (1) 387.3
----------
Total Net Statutory Reserves of
Continuing Operations $6,092.4
==========
==========
(1) Not required to file Schedule P with insurance requlatory authorities.
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - ANALYSIS OF LOSSES AND LOSS EXPENSES
Notes to Schedule P
(1) The Parts of Schedule P:
Part 1 - detailed information on losses and loss expenses.
Part 2 - history of incurred losses and allocated expenses.
Part 3 - history of loss and allocated expense payments.
Part 4 - history of bulk and incurred-but-not reported reserves.
Schedule P Interrogatories
(2) Lines of business A through M and R are groupings of the lines of
business used on Page 14, the state page.
(3) Reinsurance A, B, C, and D (lines N to Q) are:
Reinsurance A = nonproportional property (1988 and subsequent)
Reinsurance B = nonproportional liability (1988 and subsequent)
Reinsurance C = financial lines (1988 and subsequent)
Reinsurance D = old Schedule O line 30 (1987 and prior)
(4) The Instructions to Schedule P contain directions necessary for
filling out Schedule P.
SCHEDULE P - PART 1 - SUMMARY
(000 omitted)
-----------------------------------------------------------------------
| | Premiums Earned |
| 1 |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 113,728 |
| 2. 1984.....| 3,126,993 | 675,910 | 2,451,083 | 2,465,627 |
| 3. 1985.....| 3,685,789 | 808,413 | 2,877,376 | 2,934,980 |
| 4. 1986.....| 4,673,896 | 1,074,379 | 3,599,517 | 2,489,914 |
| 5. 1987.....| 5,150,610 | 1,100,758 | 4,049,852 | 2,800,589 |
| 6. 1988.....| 5,661,236 | 1,494,084 | 4,167,152 | 3,204,567 |
| 7. 1989.....| 5,523,905 | 1,441,672 | 4,082,233 | 4,200,872 |
| 8. 1990.....| 5,255,258 | 1,427,260 | 3,827,998 | 2,799,192 |
| 9. 1991.....| 4,961,965 | 1,352,090 | 3,609,875 | 2,464,592 |
|10. 1992.....| 5,164,534 | 1,573,011 | 3,591,523 | 2,751,802 |
|11. 1993.....| 5,357,315 | 1,336,721 | 4,020,594 | 1,323,143 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 27,549,006 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
----------------------------------------------------------------------------
| | Loss and Loss Expense Payments
| |--------------------------------------------------------------
| | Loss Payments | Allocated Loss | 9 |
| | | Expense Payments | |
| |----------------|-----------------------------| Salvage |
| | 6 | 7 | 8 | and |
| | | Direct | | Subrogation |
| | Ceded | and Assumed | Ceded | Received |
|-------------|----------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 66,107 | 50,754 | (175)| 1,343 |
| 2. 1984.....| 500,615 | 305,646 | 46,884 | 57,113 |
| 3. 1985.....| 715,077 | 309,968 | 38,836 | 58,862 |
| 4. 1986.....| 480,775 | 289,810 | 34,589 | 57,210 |
| 5. 1987.....| 586,963 | 300,447 | 28,608 | 53,808 |
| 6. 1988.....| 810,407 | 342,648 | 39,478 | 55,859 |
| 7. 1989.....| 1,730,785 | 355,172 | 73,584 | 51,141 |
| 8. 1990.....| 797,951 | 272,505 | 34,451 | 46,025 |
| 9. 1991.....| 621,770 | 222,982 | 23,565 | 38,251 |
|10. 1992.....| 1,225,078 | 185,191 | 28,995 | 26,513 |
|11. 1993.....| 441,359 | 123,836 | 2,315 | 16,043 |
|-------------|----------------|--------------|--------------|--------------|
|12. Totals ..| 7,976,887 | 2,758,959 | 351,130 | 462,168 |
----------------------------------------------------------------------------
-------------|--------------------------------------------
| |Loss and Loss Expense Payment| |
| |-----------------------------| 12 |
| | 10 | 11 | |
| | | | Number of |
| | Unallocated | Total | Claims |
| | Loss | Net Paid | Reported - |
| | Expense | (5 - 6 + 7 | Direct and |
| | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 2,784 | 101,334 | X X X X |
| 2. 1984.....| 43,687 | 2,267,461 | X X X X |
| 3. 1985.....| 45,817 | 2,536,852 | X X X X |
| 4. 1986.....| 44,286 | 2,308,646 | X X X X |
| 5. 1987.....| 49,885 | 2,535,350 | X X X X |
| 6. 1988.....| 58,586 | 2,755,916 | X X X X |
| 7. 1989.....| 69,021 | 2,820,696 | X X X X |
| 8. 1990.....| 64,968 | 2,304,263 | X X X X |
| 9. 1991.....| 58,936 | 2,101,175 | X X X X |
|10. 1992.....| 57,258 | 1,740,178 | X X X X |
|11. 1993.....| 56,425 | 1,059,730 | X X X X |
|-------------|--------------|--------------|--------------|
|12. Total ...| 551,653 | 22,531,601 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 770,828 | 393,415 | 21,601 | 5,231 |
| 2. 1984.....| 104,860 | 44,438 | 12,188 | 4,255 |
| 3. 1985.....| 153,472 | 74,814 | 12,658 | 5,467 |
| 4. 1986.....| 118,455 | 46,015 | 16,513 | 7,388 |
| 5. 1987.....| 168,674 | 60,745 | 42,234 | 18,730 |
| 6. 1988.....| 291,320 | 101,142 | 58,266 | 29,147 |
| 7. 1989.....| 416,511 | 151,632 | 96,394 | 43,604 |
| 8. 1990.....| 519,389 | 187,495 | 161,066 | 65,101 |
| 9. 1991.....| 617,642 | 154,189 | 262,115 | 151,735 |
|10. 1992.....| 975,861 | 358,068 | 612,930 | 326,057 |
|11. 1993.....| 1,015,040 | 166,168 | 1,469,488 | 568,672 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 5,152,052 | 1,738,121 | 2,765,453 | 1,225,387 |
-----------------------------------------------------------------------
-----------------------------------------------------------
| | Allocated Loss Expenses Unpaid
| |---------------------------------------------
| | Case Basis | Bulk + IBNR
| |-----------------------------|---------------
| | 17 | 18 | 19 |
| | Direct | | Direct |
| | and Assumed | Ceded | and Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 0 | 0 | 26,091 |
| 2. 1984.....| 0 | 0 | 7,663 |
| 3. 1985.....| 0 | 0 | 10,069 |
| 4. 1986.....| 0 | 0 | 12,189 |
| 5. 1987.....| 0 | 0 | 21,236 |
| 6. 1988.....| 0 | 0 | 38,967 |
| 7. 1989.....| 0 | 0 | 52,342 |
| 8. 1990.....| 0 | 0 | 81,385 |
| 9. 1991.....| 0 | 0 | 121,057 |
|10. 1992.....| 0 | 0 | 231,352 |
|11. 1993.....| 0 | 0 | 301,146 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 903,497 |
-----------------------------------------------------------
-----------------------------------------------------------------------
| | | | | |
| |-------------| 21 | 22 | 23 |
| | Bulk + IBNR | | | |
| |-------------| Salvage | Unallocated | Total |
| | 20 | and | Loss | Net Losses |
| | | Subrogation | Expenses | and Expenses |
| | Ceded | Anticipated | Unpaid | Unpaid |
| ------------|-------------|-------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 3,851 | 1,030 | 1,103 | 417,126 |
| 2. 1984.....| 1,221 | 612 | 463 | 75,260 |
| 3. 1985.....| 1,648 | 1,201 | 593 | 94,863 |
| 4. 1986.....| 3,068 | 1,924 | 811 | 91,497 |
| 5. 1987.....| 6,559 | 3,491 | 1,148 | 147,258 |
| 6. 1988.....| 10,896 | 7,328 | 2,332 | 249,700 |
| 7. 1989.....| 16,395 | 13,063 | 3,542 | 357,158 |
| 8. 1990.....| 22,157 | 14,644 | 6,050 | 493,137 |
| 9. 1991.....| 24,042 | 19,127 | 12,366 | 683,214 |
|10. 1992.....| 75,122 | 26,311 | 18,037 | 1,078,933 |
|11. 1993.....| 61,589 | 46,164 | 27,696 | 2,016,941 |
|-------------|-------------|-------------|--------------|--------------|
|12. Totals ..| 226,548 | 134,895 | 74,141 | 5,705,087 |
-----------------------------------------------------------------------
--------------------------- -------------------------------------------
| | 24 | Total Losses and |
| | Number of | Loss Expenses Incurred |
| | Claims |------------------------------------------|
| |Outstanding -| 25 | 26 | 27 |
| | Direct | Direct | | |
| | and Assumed | and Assumed | Ceded | Net * |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | | X X X X | X X X X |
| 2. 1984.....| X X X X | 2,940,134 | 597,413 | 2,342,721 |
| 3. 1985.....| X X X X | 3,467,557 | 835,842 | 2,631,715 |
| 4. 1986.....| X X X X | 2,971,978 | 571,835 | 2,400,143 |
| 5. 1987.....| X X X X | 3,384,213 | 701,605 | 2,682,608 |
| 6. 1988.....| X X X X | 3,996,686 | 991,070 | 3,005,616 |
| 7. 1989.....| X X X X | 5,193,854 | 2,016,000 | 3,177,854 |
| 8. 1990.....| X X X X | 3,904,555 | 1,107,155 | 2,797,400 |
| 9. 1991.....| X X X X | 3,759,690 | 975,301 | 2,784,389 |
|10. 1992.....| X X X X | 4,832,431 | 2,013,320 | 2,819,111 |
|11. 1993.....| X X X X | 4,316,812 | 1,240,141 | 3,076,671 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
-----------------------------------------------------------
| | Loss and Loss Expense Percentage |
| | (Incurred/Premiums Earned) |
| |--------------------------------------------|
| | 28 | 29 | 30 |
| | Direct | | |
| | and Assumed | Ceded | Net |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | X X X X | X X X X |
| 2. 1984.....| 94.0 | 88.4 | 95.6 |
| 3. 1985.....| 94.1 | 103.4 | 91.5 |
| 4. 1986.....| 63.6 | 53.2 | 66.7 |
| 5. 1987.....| 65.7 | 63.7 | 66.2 |
| 6. 1988.....| 70.6 | 66.3 | 72.1 |
| 7. 1989.....| 94.0 | 139.8 | 77.8 |
| 8. 1990.....| 74.3 | 77.6 | 73.1 |
| 9. 1991.....| 75.8 | 72.1 | 77.1 |
|10. 1992.....| 93.6 | 128.0 | 78.5 |
|11. 1993.....| 80.6 | 92.8 | 76.5 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X |
-----------------------------------------------------------
-----------------------------------------------------------
| | Discount for Time | |
| | Value of Money | 33 |
| |-----------------------------|Inter-Company |
| | 31 | 32 | Pooling |
| | | Loss |Participation |
| | Loss | Expense | Percentage |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 0 | 0 | X X X X |
| 2. 1984.....| 0 | 0 | 100.0 |
| 3. 1985.....| 0 | 0 | 100.0 |
| 4. 1986.....| 0 | 0 | 100.0 |
| 5. 1987.....| 0 | 0 | 100.0 |
| 6. 1988.....| 0 | 0 | 100.0 |
| 7. 1989.....| 0 | 0 | 100.0 |
| 8. 1990.....| 0 | 0 | 100.0 |
| 9. 1991.....| 0 | 0 | 100.0 |
|10. 1992.....| 0 | 0 | 100.0 |
|11. 1993.....| 0 | 0 | 100.0 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | X X X X |
-----------------------------------------------------------
------------------------------------------
| | Net Balance Sheet Reserves|
| | After Discount |
| |----------------------------|
| | 34 | 35 |
| | Losses |Loss Expenses|
| | Unpaid | Unpaid |
|-------------|--------------|-------------|
| | | |
| 1. Prior ...| 393,783 | 23,343 |
| 2. 1984.....| 68,355 | 6,905 |
| 3. 1985.....| 85,849 | 9,014 |
| 4. 1986.....| 81,565 | 9,932 |
| 5. 1987.....| 131,433 | 15,825 |
| 6. 1988.....| 219,297 | 30,403 |
| 7. 1989.....| 317,669 | 39,489 |
| 8. 1990.....| 427,859 | 65,278 |
| 9. 1991.....| 573,833 | 109,381 |
|10. 1992.....| 904,666 | 174,267 |
|11. 1993.....| 1,749,688 | 267,253 |
|-------------|--------------|-------------|
|12. Totals ..| 4,953,997 | 751,090 |
------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 2 - SUMMARY
(000 omitted)
----------------------------------------------------------------
| | Incurred Losses and Allocated Expenses
| 1 | Reported At Year End (000 omitted)
| Years in Which |--------------------------------------------
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
|-------------------|---------------|-------------|-------------|
| | | | |
| | | | |
| 1. Prior ......| 1,747,702 * | 1,891,639 | 1,927,528 |
| 2. 1984........| 1,951,369 | 2,072,850 | 2,109,125 |
| 3. 1985........| X X X X | 2,266,866 | 2,269,931 |
| 4. 1986........| X X X X | X X X X | 2,600,948 |
| 5. 1987........| X X X X | X X X X | X X X X |
| 6. 1988........| X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X |
|----------------------------------------------------------------
| 12. Totals .................................................
----------------------------------------------------------------
*Reported reserves only. Subsequent development relates only to
subsequent payments and reserves.
**Current year less first or second prior year, showing
(redundant) or adverse.
--------------------------------------------------------------
| | Incurred Losses and Allocated Expense
| 1 | Reported At Year End (000 omitted)
| Years in Which |------------------------------------------
| Losses Were | 5 | 6 | 7 |
| Incurred | 1987 | 1988 | 1989 |
|-------------------|-------------|-------------|-------------|
| | | | |
| | | | |
| 1. Prior ......| 2,054,681 | 2,156,767 | 2,283,221 |
| 2. 1984........| 2,152,705 | 2,195,743 | 2,254,545 |
| 3. 1985........| 2,321,010 | 2,411,134 | 2,487,602 |
| 4. 1986........| 2,457,402 | 2,427,011 | 2,385,452 |
| 5. 1987........| 2,797,606 | 2,714,719 | 2,679,047 |
| 6. 1988........| X X X X | 2,933,669 | 2,887,861 |
| 7. 1989........| X X X X | X X X X | 3,068,278 |
| 8. 1990........| X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X |
|--------------------------------------------------------------
| 12. Totals ...............................................
--------------------------------------------------------------
--------------------------------------------------------------
| | Incurred Losses and Allocated Expense
| 1 | Reported At Year End (000 omitted)
| Years in Which |------------------------------------------
| Losses Were | 8 | 9 | 10 |
| Incurred | 1990 | 1991 | 1992 |
|-------------------|-------------|-------------|-------------|
| | | | |
| | | | |
| 1. Prior ......| 2,350,928 | 2,457,490 | 2,577,463 |
| 2. 1984........| 2,271,250 | 2,290,755 | 2,293,739 |
| 3. 1985........| 2,521,188 | 2,549,178 | 2,574,806 |
| 4. 1986........| 2,369,109 | 2,368,950 | 2,352,555 |
| 5. 1987........| 2,673,536 | 2,672,468 | 2,630,671 |
| 6. 1988........| 2,887,231 | 2,877,014 | 2,914,024 |
| 7. 1989........| 3,074,108 | 3,045,344 | 3,096,107 |
| 8. 1990........| 2,787,639 | 2,759,614 | 2,724,188 |
| 9. 1991........| X X X X | 2,709,812 | 2,718,467 |
| 10. 1992........| X X X X | X X X X | 2,790,082 |
| 11. 1993........| X X X X | X X X X | X X X X |
|--------------------------------------------------------------
| 12. Totals ...............................................
--------------------------------------------------------------
-------------------------------------------------------------
| 1 | | Development** |
| Years in Which |-------------|---------------------------|
| Losses Were | 11 | 12 | 13 |
| Incurred | 1993 | One Year | Two Year |
|-------------------|-------------|-------------|-------------|
| | | | |
| | | | |
| 1. Prior ......| 2,628,236 | 50,773 | 170,746 |
| 2. 1984........| 2,298,571 | 4,832 | 7,816 |
| 3. 1985........| 2,585,305 | 10,499 | 36,127 |
| 4. 1986........| 2,355,046 | 2,491 | (13,904)|
| 5. 1987........| 2,631,575 | 904 | (40,893)|
| 6. 1988........| 2,944,698 | 30,674 | 67,684 |
| 7. 1989........| 3,105,291 | 9,184 | 59,947 |
| 8. 1990........| 2,726,382 | 2,194 | (33,232)|
| 9. 1991........| 2,713,087 | (5,380)| 3,275 |
| 10. 1992........| 2,743,816 | (46,266)| X X X X |
| 11. 1993........| 2,992,550 | X X X X | X X X X |
|---------------------------------|-------------|-------------|
| 12. Totals ..................| 59,905 | 257,566 |
-------------------------------------------------------------
SCHEDULE P - PART 3 - SUMMARY
----------------------------------------------------------------
| | Cumulative Paid in Losses and Allocated
| 1 | Expenses At Year End (000 omitted)
| Years in Which |--------------------------------------------
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-------------------|---------------|-------------|-------------|
| | | | |
| 1. Prior ......| 000 | 513,253 | 933,844 |
| 2. 1984........| 838,668 | 1,378,759 | 1,660,734 |
| 3. 1985........| X X X X | 891,344 | 1,537,733 |
| 4. 1986........| X X X X | X X X X | 812,557 |
| 5. 1987........| X X X X | X X X X | X X X X |
| 6. 1988........| X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X |
----------------------------------------------------------------
Note: Net of salvage and subrogation received.
--------------------------------------------------------------
| |
| 1 |
| Years in Which |------------------------------------------
| Losses Were | 5 | 6 | 7 |
| Incurred | 1987 | 1988 | 1989 |
| | | | |
|-------------------|-------------|-------------|-------------|
| | | | |
| 1. Prior ......| 1,204,549 | 1,443,213 | 1,640,802 |
| 2. 1984........| 1,854,464 | 1,979,750 | 2,068,842 |
| 3. 1985........| 1,845,251 | 2,060,441 | 2,215,265 |
| 4. 1986........| 1,370,763 | 1,676,563 | 1,888,323 |
| 5. 1987........| 855,804 | 1,477,035 | 1,886,289 |
| 6. 1988........| X X X X | 918,107 | 1,626,830 |
| 7. 1989........| X X X X | X X X X | 929,122 |
| 8. 1990........| X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X |
--------------------------------------------------------------
--------------------------------------------------------------
| |
| 1 |
| Years in Which |------------------------------------------
| Losses Were | 8 | 9 | 10 |
| Incurred | 1990 | 1991 | 1992 |
| | | | |
|-------------------|-------------|-------------|-------------|
| | | | |
| 1. Prior ......| 1,793,830 | 1,935,097 | 2,113,663 |
| 2. 1984........| 2,124,483 | 2,175,059 | 2,212,357 |
| 3. 1985........| 2,333,530 | 2,401,220 | 2,469,356 |
| 4. 1986........| 2,035,363 | 2,136,220 | 2,221,293 |
| 5. 1987........| 2,123,358 | 2,286,723 | 2,413,472 |
| 6. 1988........| 2,057,209 | 2,348,676 | 2,547,211 |
| 7. 1989........| 1,752,683 | 2,186,823 | 2,539,595 |
| 8. 1990........| 837,137 | 1,559,605 | 1,983,924 |
| 9. 1991........| X X X X | 899,804 | 1,690,358 |
| 10. 1992........| X X X X | X X X X | 1,004,238 |
| 11. 1993........| X X X X | X X X X | X X X X |
--------------------------------------------------------------
-------------------------------------------------------------
| | | 12 | 13 |
| 1 | | Number of | Number of |
| Years in Which |-------------| Claims | Claims |
| Losses Were | 11 | Closed With | Closed |
| Incurred | 1993 | Loss |Without Loss |
| | | Payment | Payment |
|-------------------|-------------|-------------|-------------|
| | | | |
| 1. Prior ......| 2,212,213 | X X X X | X X X X |
| 2. 1984........| 2,223,774 | X X X X | X X X X |
| 3. 1985........| 2,491,035 | X X X X | X X X X |
| 4. 1986........| 2,264,360 | X X X X | X X X X |
| 5. 1987........| 2,485,465 | X X X X | X X X X |
| 6. 1988........| 2,697,330 | X X X X | X X X X |
| 7. 1989........| 2,751,675 | X X X X | X X X X |
| 8. 1990........| 2,239,295 | X X X X | X X X X |
| 9. 1991........| 2,042,239 | X X X X | X X X X |
| 10. 1992........| 1,682,920 | X X X X | X X X X |
| 11. 1993........| 1,003,305 | X X X X | X X X X |
-------------------------------------------------------------
SCHEDULE P - PART 4 - SUMMARY
---------------------------------------------------------------
| | Bulk and Incurred But Not Reported Reserves
| 1 | on Losses and Allocated at Year End (000 omitted)
| Years in Which | ------------------------------------------
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
|-------------------|--------------|-------------|-------------|
| | | | |
| 1. Prior .....| 370,082 | 274,073 | 135,754 |
| 2. 1984.......| 510,488 | 151,223 | 66,421 |
| 3. 1985.......| X X X X | 659,220 | 191,556 |
| 4. 1986.......| X X X X | X X X X | 995,450 |
| 5. 1987.......| X X X X | X X X X | X X X X |
| 6. 1988.......| X X X X | X X X X | X X X X |
| 7. 1989.......| X X X X | X X X X | X X X X |
| 8. 1990.......| X X X X | X X X X | X X X X |
| 9. 1991.......| X X X X | X X X X | X X X X |
| 10. 1992.......| X X X X | X X X X | X X X X |
| 11. 1993.......| X X X X | X X X X | X X X X |
---------------------------------------------------------------
---------------------------------------------------------------
| 1 |
| Years in Which | ------------------------------------------
| Losses Were | 5 | 6 | 7 |
| Incurred | 1987 | 1988 | 1989 |
|-------------------|--------------|-------------|-------------|
| | | | |
| 1. Prior .....| 130,798 | 109,891 | 103,074 |
| 2. 1984.......| 50,471 | 41,116 | 41,268 |
| 3. 1985.......| 111,575 | 74,480 | 61,799 |
| 4. 1986.......| 375,423 | 206,066 | 164,322 |
| 5. 1987.......| 1,077,609 | 479,183 | 311,285 |
| 6. 1988.......| X X X X | 1,162,184 | 510,267 |
| 7. 1989.......| X X X X | X X X X | 1,156,304 |
| 8. 1990.......| X X X X | X X X X | X X X X |
| 9. 1991.......| X X X X | X X X X | X X X X |
| 10. 1992.......| X X X X | X X X X | X X X X |
| 11. 1993.......| X X X X | X X X X | X X X X |
---------------------------------------------------------------
---------------------------------------------------------------
| 1 |
| Years in Which | ------------------------------------------
| Losses Were | 8 | 9 | 10 |
| Incurred | 1990 | 1991 | 1992 |
|-------------------|--------------|-------------|-------------|
| | | | |
| 1. Prior .....| 67,180 | 53,297 | 50,274 |
| 2. 1984.......| 31,629 | 21,352 | 17,120 |
| 3. 1985.......| 43,232 | 32,679 | 17,346 |
| 4. 1986.......| 107,154 | 67,062 | 36,666 |
| 5. 1987.......| 227,358 | 140,942 | 79,198 |
| 6. 1988.......| 318,898 | 203,943 | 120,761 |
| 7. 1989.......| 563,711 | 318,039 | 180,909 |
| 8. 1990.......| 1,059,916 | 489,987 | 286,981 |
| 9. 1991.......| X X X X | 967,827 | 420,180 |
| 10. 1992.......| X X X X | X X X X | 939,369 |
| 11. 1993.......| X X X X | X X X X | X X X X |
---------------------------------------------------------------
----------------------------------
| 1 | |
| Years in Which | -------------|
| Losses Were | 11 |
| Incurred | 1993 |
|-------------------|--------------|
| | |
| 1. Prior .....| 38,610 |
| 2. 1984.......| 14,375 |
| 3. 1985.......| 15,612 |
| 4. 1986.......| 18,246 |
| 5. 1987.......| 38,181 |
| 6. 1988.......| 57,190 |
| 7. 1989.......| 88,737 |
| 8. 1990.......| 155,193 |
| 9. 1991.......| 207,395 |
| 10. 1992.......| 443,103 |
| 11. 1993.......| 1,140,373 |
----------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS
(000 omitted)
----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|--------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 217 |
| 2. 1984.....| 345,361 | 48,105 | 297,256 | 211,992 |
| 3. 1985.....| 381,544 | 71,535 | 310,009 | 272,949 |
| 4. 1986.....| 358,516 | 56,746 | 301,770 | 204,791 |
| 5. 1987.....| 328,588 | 48,143 | 280,445 | 168,262 |
| 6. 1988.....| 303,786 | 53,252 | 250,534 | 180,342 |
| 7. 1989.....| 287,732 | 64,623 | 223,109 | 397,572 |
| 8. 1990.....| 266,259 | 48,634 | 217,625 | 157,584 |
| 9. 1991.....| 254,040 | 17,986 | 236,054 | 183,653 |
|10. 1992.....| 257,413 | 40,681 | 216,732 | 371,813 |
|11. 1993.....| 271,693 | 40,594 | 231,099 | 131,945 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 2,281,120 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
-----------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |---------------------------------------------
| Years | | Allocated Loss |
| in Which | | Expense Payments |
|Premiums Were|--------------|-----------------------------|
| Earned and | 6 | 7 | 8 |
| Losses Were | | Direct | |
| Incurred | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 1,685 | (893)| 651 |
| 2. 1984.....| 11,091 | 24,013 | 790 |
| 3. 1985.....| 40,030 | 24,357 | 3,630 |
| 4. 1986.....| 25,064 | 20,354 | 1,318 |
| 5. 1987.....| 14,986 | 20,516 | 1,144 |
| 6. 1988.....| 17,116 | 19,199 | 2,082 |
| 7. 1989.....| 258,744 | 24,994 | 4,584 |
| 8. 1990.....| 21,579 | 16,451 | 517 |
| 9. 1991.....| 15,728 | 14,891 | 535 |
|10. 1992.....| 204,659 | 15,094 | 2,007 |
|11. 1993.....| 11,036 | 14,723 | (32)|
|-------------|--------------|--------------|--------------|
|12. Totals ..| 621,718 | 193,699 | 17,226 |
-----------------------------------------------------------
-----------------------------------------------------------
| 1 | |
| |--------------------------------------------|
| Years | 9 | 10 | 11 |
| in Which | | | |
|Premiums Were| Salvage | Unallocated | Total |
| Earned and | and | Loss | Net Paid |
| Losses Were | Subrogation | Expense | (5 - 6 + 7 |
| Incurred | Received | Payments | - 8 + 10) |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 23 | (23)| (3,035)|
| 2. 1984.....| 2,062 | 2,294 | 226,418 |
| 3. 1985.....| 1,802 | 2,408 | 256,054 |
| 4. 1986.....| 2,009 | 1,921 | 200,684 |
| 5. 1987.....| 1,001 | 2,292 | 174,940 |
| 6. 1988.....| 1,995 | 2,446 | 182,789 |
| 7. 1989.....| 1,583 | 2,950 | 162,188 |
| 8. 1990.....| 1,260 | 3,886 | 155,825 |
| 9. 1991.....| 916 | 3,827 | 186,108 |
|10. 1992.....| 1,208 | 4,595 | 184,836 |
|11. 1993.....| 216 | 4,233 | 139,897 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 14,075 | 30,829 | 1,866,704 |
-----------------------------------------------------------
-----------------------------------------------------------------------
| | | Losses Unpaid
| | 12 |------------------------------------------
| | Number of | Case Basis | Bulk & IBNR
| | Claims |---------------------------|--------------
| | Reported - | 13 | 14 | 15 |
| | Direct and | Direct | | Direct |
| | Assumed | and Assumed | Ceded | and Assumed |
|-------------|--------------|-------------|-------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | 1,317 | 253 | 1 |
| 2. 1984.....| 128,346 | 306 | 7 | 0 |
| 3. 1985.....| 121,212 | 1,136 | 538 | 0 |
| 4. 1986.....| 94,879 | 1,139 | 131 | 0 |
| 5. 1987.....| 81,825 | 877 | 3 | 0 |
| 6. 1988.....| 72,248 | 1,214 | 86 | 0 |
| 7. 1989.....| 27,063 | 3,909 | 547 | 164 |
| 8. 1990.....| 67,055 | 4,687 | 573 | 427 |
| 9. 1991.....| 76,077 | 9,798 | 470 | 1,109 |
|10. 1992.....| 71,096 | 10,008 | (2,110)| 2,301 |
|11. 1993.....| 58,230 | 25,159 | (1,032)| 12,713 |
|-------------|--------------|-------------|-------------|-------------|
|12. Totals ..| X X X X | 59,550 | (534)| 16,715 |
---------------------------- ------------------------------------------
-----------------------------------------------------------
| | | Allocated Loss Expenses Unpaid
| |--------------|------------------------------
| | | Case Basis |
| |--------------|-----------------------------|
| | 16 | 17 | 18 |
| | | Direct | |
| | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 0 |
| 6. 1988.....| 0 | 0 | 0 |
| 7. 1989.....| 0 | 0 | 0 |
| 8. 1990.....| 9 | 0 | 0 |
| 9. 1991.....| 87 | 0 | 0 |
|10. 1992.....| 479 | 0 | 0 |
|11. 1993.....| 2,889 | 0 | 0 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 3,464 | 0 | 0 |
-----------------------------------------------------------
-----------------------------------------------------------
| | | |
| |-----------------------------| 21 |
| | Bulk + IBNR | |
| |-----------------------------| Salvage |
| | 19 | 20 | and |
| | Direct | | Subrogation |
| | and Assumed | Ceded | Anticipated |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 145 | 2 | 6 |
| 2. 1984.....| 28 | 2 | 8 |
| 3. 1985.....| 144 | 0 | 6 |
| 4. 1986.....| 141 | 7 | 9 |
| 5. 1987.....| 154 | 2 | 13 |
| 6. 1988.....| 175 | 0 | 83 |
| 7. 1989.....| 410 | 5 | 171 |
| 8. 1990.....| 760 | 27 | 264 |
| 9. 1991.....| 1,316 | 20 | 213 |
|10. 1992.....| 2,103 | 70 | 328 |
|11. 1993.....| 8,395 | 538 | 919 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 13,771 | 673 | 2,020 |
-----------------------------------------------------------
---------------------------------------------------------
| | | | |
| | 22 | 23 | 24 |
| | | | Number of |
| | Unallocated | Total | Claims |
| | Loss | Net Losses |Outstanding -|
| | Expenses | and Expenses | Direct and |
| | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|-------------|
| | | | |
| | | | |
| 1. Prior ...| 4 | 1,212 | 105 |
| 2. 1984.....| 1 | 326 | 39 |
| 3. 1985.....| 4 | 746 | 44 |
| 4. 1986.....| 4 | 1,146 | 34 |
| 5. 1987.....| 4 | 1,030 | 54 |
| 6. 1988.....| 6 | 1,309 | 71 |
| 7. 1989.....| 15 | 3,946 | 125 |
| 8. 1990.....| 54 | 5,319 | 218 |
| 9. 1991.....| 57 | 11,703 | 402 |
|10. 1992.....| 99 | 16,072 | 783 |
|11. 1993.....| 318 | 44,190 | 4,483 |
|-------------|--------------|--------------|-------------|
|12. Totals ..| 566 | 86,999 | 6,358 |
---------------------------------------------------------
-----------------------------------------------------------------------
| | |Loss and Loss
| | Total Losses and |Expense Percentage
| | Loss Expenses Incurred |(Incurred/Premium
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 238,634 | 11,890 | 226,744 | 69.1 |
| 3. 1985.....| 300,998 | 44,198 | 256,800 | 78.9 |
| 4. 1986.....| 228,350 | 26,520 | 201,830 | 63.7 |
| 5. 1987.....| 192,105 | 16,135 | 175,970 | 58.5 |
| 6. 1988.....| 203,382 | 19,284 | 184,098 | 66.9 |
| 7. 1989.....| 430,014 | 263,880 | 166,134 | 149.4 |
| 8. 1990.....| 183,849 | 22,705 | 161,144 | 69.0 |
| 9. 1991.....| 214,651 | 16,840 | 197,811 | 84.5 |
|10. 1992.....| 406,013 | 205,105 | 200,908 | 157.7 |
|11. 1993.....| 197,486 | 13,399 | 184,087 | 72.7 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
-----------------------------------------------------------
| | | Discount for Time
| | | Value of Money
| |-----------------------------|---------------
| | 29 | 30 | 31 |
| | | | |
| | | | |
| | Ceded | Net | Loss |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | X X X X | 0 |
| 2. 1984.....| 24.7 | 76.3 | 0 |
| 3. 1985.....| 61.8 | 82.8 | 0 |
| 4. 1986.....| 46.7 | 66.9 | 0 |
| 5. 1987.....| 33.5 | 62.7 | 0 |
| 6. 1988.....| 36.2 | 73.5 | 0 |
| 7. 1989.....| 408.3 | 74.5 | 0 |
| 8. 1990.....| 46.7 | 74.0 | 0 |
| 9. 1991.....| 93.6 | 83.8 | 0 |
|10. 1992.....| 504.2 | 92.7 | 0 |
|11. 1993.....| 33.0 | 79.7 | 0 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 |
-----------------------------------------------------------
-----------------------------------------------------------
| | | | Net Balance Sheet Reserves
| | | 33 | After Discount
| |--------------| |---------------
| | 32 |Inter-Company | 34 |
| | | Pooling | |
| | Loss |Participation | Losses |
| | Expense | Percentage | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 0 | X X X X | 1,065 |
| 2. 1984.....| 0 | 100.0 | 299 |
| 3. 1985.....| 0 | 100.0 | 598 |
| 4. 1986.....| 0 | 100.0 | 1,008 |
| 5. 1987.....| 0 | 100.0 | 874 |
| 6. 1988.....| 0 | 100.0 | 1,128 |
| 7. 1989.....| 0 | 100.0 | 3,526 |
| 8. 1990.....| 0 | 100.0 | 4,532 |
| 9. 1991.....| 0 | 100.0 | 10,350 |
|10. 1992.....| 0 | 100.0 | 13,940 |
|11. 1993.....| 0 | 100.0 | 36,015 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 0 | X X X X | 73,335 |
-----------------------------------------------------------
----------------------------
| | |
| | |
| |--------------|
| | 35 |
| | Loss |
| | Expenses |
| | Unpaid |
|-------------|--------------|
| | |
| | |
| 1. Prior ...| 147 |
| 2. 1984.....| 27 |
| 3. 1985.....| 148 |
| 4. 1986.....| 138 |
| 5. 1987.....| 156 |
| 6. 1988.....| 181 |
| 7. 1989.....| 420 |
| 8. 1990.....| 787 |
| 9. 1991.....| 1,353 |
|10. 1992.....| 2,132 |
|11. 1993.....| 8,175 |
|-------------|--------------|
|12. Totals ..| 13,664 |
----------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 2,234 |
| 2. 1984.....| 364,107 | 5,776 | 358,331 | 327,189 |
| 3. 1985.....| 373,878 | 6,696 | 367,182 | 350,542 |
| 4. 1986.....| 389,236 | 7,119 | 382,117 | 346,377 |
| 5. 1987.....| 386,054 | 8,193 | 377,861 | 320,315 |
| 6. 1988.....| 361,601 | 15,393 | 346,208 | 296,785 |
| 7. 1989.....| 334,346 | 14,273 | 320,073 | 284,844 |
| 8. 1990.....| 351,594 | 60,195 | 291,399 | 239,146 |
| 9. 1991.....| 310,130 | 45,565 | 264,565 | 197,984 |
|10. 1992.....| 321,898 | 44,583 | 277,315 | 150,280 |
|11. 1993.....| 353,246 | 9,579 | 343,667 | 73,426 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 2,589,122 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
-----------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |---------------------------------------------
| Years | | Allocated Loss |
| in Which | | Expense Payments |
|Premiums Were|--------------|-----------------------------|
| Earned and | 6 | 7 | 8 |
| Losses Were | | Direct | |
| Incurred | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 939 | 82 | (23)|
| 2. 1984.....| 3,168 | 41,493 | 573 |
| 3. 1985.....| 8,769 | 40,431 | 782 |
| 4. 1986.....| 7,723 | 38,324 | 1,100 |
| 5. 1987.....| 12,321 | 38,630 | 1,138 |
| 6. 1988.....| 18,139 | 33,262 | 1,623 |
| 7. 1989.....| 30,886 | 26,897 | 2,939 |
| 8. 1990.....| 36,007 | 25,699 | 1,607 |
| 9. 1991.....| 13,350 | 19,549 | 558 |
|10. 1992.....| 8,848 | 15,883 | 109 |
|11. 1993.....| 2,096 | 14,389 | 18 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 142,246 | 294,639 | 10,424 |
-----------------------------------------------------------
-------------------------------------------------------------------------
| 1 | | |
| |--------------------------------------------| |
| Years | 9 | 10 | 11 | 12 |
| in Which | | | | Number of |
|Premiums Were| Salvage | Unallocated | Total | Claims |
| Earned and | and | Loss | Net Paid | Reported - |
| Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Received | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 19 | 20 | 1,420 | X X X X |
| 2. 1984.....| 2,893 | 4,607 | 369,548 | 150,574 |
| 3. 1985.....| 3,193 | 5,215 | 386,637 | 144,685 |
| 4. 1986.....| 3,048 | 5,078 | 380,956 | 127,684 |
| 5. 1987.....| 2,573 | 5,324 | 350,810 | 102,701 |
| 6. 1988.....| 2,177 | 5,437 | 315,722 | 90,446 |
| 7. 1989.....| 2,401 | 5,728 | 283,644 | 86,364 |
| 8. 1990.....| 1,924 | 6,973 | 234,204 | 79,722 |
| 9. 1991.....| 1,672 | 5,909 | 209,534 | 81,438 |
|10. 1992.....| 1,390 | 5,685 | 162,891 | 73,134 |
|11. 1993.....| 728 | 4,910 | 90,611 | 59,596 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 22,018 | 54,886 | 2,785,977 | X X X X |
-------------------------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 10,812 | 10,494 | 90 | 0 |
| 2. 1984.....| 3,755 | 1,010 | 131 | 0 |
| 3. 1985.....| 4,908 | 1,657 | 154 | 0 |
| 4. 1986.....| 3,691 | 541 | 164 | 35 |
| 5. 1987.....| 4,900 | 971 | 476 | 216 |
| 6. 1988.....| 10,451 | 5,044 | 1,027 | 349 |
| 7. 1989.....| 14,897 | 5,885 | 873 | 654 |
| 8. 1990.....| 20,956 | 3,506 | 3,046 | 800 |
| 9. 1991.....| 44,265 | 2,121 | 1,883 | 1,074 |
|10. 1992.....| 70,146 | 2,378 | 23,255 | 13,015 |
|11. 1993.....| 125,331 | 3,914 | 107,863 | 12,891 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 314,112 | 37,521 | 138,962 | 29,034 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 278 | 2 |
| 2. 1984.....| 0 | 0 | 139 | 0 |
| 3. 1985.....| 0 | 0 | 182 | 0 |
| 4. 1986.....| 0 | 0 | 379 | 0 |
| 5. 1987.....| 0 | 0 | 770 | 11 |
| 6. 1988.....| 0 | 0 | 1,174 | 16 |
| 7. 1989.....| 0 | 0 | 2,818 | 11 |
| 8. 1990.....| 0 | 0 | 3,852 | 106 |
| 9. 1991.....| 0 | 0 | 4,395 | 509 |
|10. 1992.....| 0 | 0 | 13,177 | 1,871 |
|11. 1993.....| 0 | 0 | 20,546 | 4,519 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 47,710 | 7,045 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 11 | 17 | 701 | 449 |
| 2. 1984.....| 18 | 11 | 3,026 | 116 |
| 3. 1985.....| 26 | 22 | 3,609 | 155 |
| 4. 1986.....| 36 | 34 | 3,692 | 167 |
| 5. 1987.....| 91 | 45 | 4,993 | 237 |
| 6. 1988.....| 121 | 92 | 7,335 | 426 |
| 7. 1989.....| 170 | 188 | 12,226 | 670 |
| 8. 1990.....| 261 | 453 | 23,895 | 1,085 |
| 9. 1991.....| 543 | 891 | 47,730 | 1,956 |
|10. 1992.....| 842 | 1,523 | 90,837 | 4,898 |
|11. 1993.....| 1,555 | 2,682 | 235,098 | 19,051 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 3,674 | 5,958 | 433,142 | 29,210 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premium
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 377,325 | 4,751 | 372,574 | 103.6 |
| 3. 1985.....| 401,454 | 11,208 | 390,246 | 107.4 |
| 4. 1986.....| 394,047 | 9,399 | 384,648 | 101.2 |
| 5. 1987.....| 370,460 | 14,657 | 355,803 | 96.0 |
| 6. 1988.....| 348,228 | 25,171 | 323,057 | 96.3 |
| 7. 1989.....| 336,245 | 40,375 | 295,870 | 100.6 |
| 8. 1990.....| 300,125 | 42,026 | 258,099 | 85.4 |
| 9. 1991.....| 274,876 | 17,612 | 257,264 | 88.6 |
|10. 1992.....| 279,949 | 26,221 | 253,728 | 87.0 |
|11. 1993.....| 349,147 | 23,438 | 325,709 | 98.8 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 82.3 | 104.0 | 0 | 0 |
| 3. 1985.....| 167.4 | 106.3 | 0 | 0 |
| 4. 1986.....| 132.0 | 100.7 | 0 | 0 |
| 5. 1987.....| 178.9 | 94.2 | 0 | 0 |
| 6. 1988.....| 163.5 | 93.3 | 0 | 0 |
| 7. 1989.....| 282.9 | 92.4 | 0 | 0 |
| 8. 1990.....| 69.8 | 88.6 | 0 | 0 |
| 9. 1991.....| 38.7 | 97.2 | 0 | 0 |
|10. 1992.....| 58.8 | 91.5 | 0 | 0 |
|11. 1993.....| 244.7 | 94.8 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 408 | 293 |
| 2. 1984.....| 100.0 | 2,876 | 150 |
| 3. 1985.....| 100.0 | 3,405 | 204 |
| 4. 1986.....| 100.0 | 3,279 | 413 |
| 5. 1987.....| 100.0 | 4,189 | 804 |
| 6. 1988.....| 100.0 | 6,085 | 1,250 |
| 7. 1989.....| 100.0 | 9,231 | 2,995 |
| 8. 1990.....| 100.0 | 19,696 | 4,199 |
| 9. 1991.....| 100.0 | 42,953 | 4,777 |
|10. 1992.....| 100.0 | 78,008 | 12,829 |
|11. 1993.....| 100.0 | 216,389 | 18,709 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 386,519 | 46,623 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 2,481 |
| 2. 1984.....| 149,038 | 20,571 | 128,467 | 157,026 |
| 3. 1985.....| 193,393 | 28,567 | 164,826 | 190,124 |
| 4. 1986.....| 253,295 | 31,617 | 221,678 | 182,660 |
| 5. 1987.....| 271,150 | 31,190 | 239,960 | 178,058 |
| 6. 1988.....| 274,764 | 29,725 | 245,039 | 192,494 |
| 7. 1989.....| 250,096 | 30,219 | 219,877 | 164,357 |
| 8. 1990.....| 222,033 | 26,054 | 195,979 | 114,588 |
| 9. 1991.....| 197,209 | 19,730 | 177,479 | 91,974 |
|10. 1992.....| 201,821 | 23,312 | 178,509 | 51,815 |
|11. 1993.....| 199,697 | 21,005 | 178,692 | 20,751 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 1,346,328 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 1,503 | 570 | 258 | (17)|
| 2. 1984.....| 14,940 | 18,225 | 1,234 | 858 |
| 3. 1985.....| 19,491 | 23,436 | 2,937 | 887 |
| 4. 1986.....| 18,943 | 20,746 | 1,267 | 661 |
| 5. 1987.....| 12,802 | 20,051 | 1,269 | 702 |
| 6. 1988.....| 15,102 | 19,259 | 1,227 | 836 |
| 7. 1989.....| 10,523 | 17,790 | 931 | 651 |
| 8. 1990.....| 9,130 | 11,985 | 820 | 757 |
| 9. 1991.....| 7,689 | 10,157 | 610 | 532 |
|10. 1992.....| 6,688 | 8,560 | 197 | 330 |
|11. 1993.....| 719 | 6,508 | 42 | 186 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 117,530 | 157,287 | 10,792 | 6,383 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 8 | 1,298 | X X X X |
| 2. 1984.....| 2,634 | 161,711 | 39,017 |
| 3. 1985.....| 2,930 | 194,062 | 36,717 |
| 4. 1986.....| 2,981 | 186,177 | 37,802 |
| 5. 1987.....| 3,280 | 187,318 | 37,244 |
| 6. 1988.....| 3,801 | 199,225 | 37,181 |
| 7. 1989.....| 3,599 | 174,292 | 34,813 |
| 8. 1990.....| 3,398 | 120,021 | 29,179 |
| 9. 1991.....| 3,107 | 96,939 | 24,182 |
|10. 1992.....| 3,008 | 56,498 | 22,628 |
|11. 1993.....| 2,281 | 28,779 | 18,829 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 31,027 | 1,406,320 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 6,646 | 761 | 18 | 0 |
| 2. 1984.....| 1,242 | 521 | 33 | 0 |
| 3. 1985.....| 2,318 | 337 | 52 | 0 |
| 4. 1986.....| 3,379 | 82 | 97 | 0 |
| 5. 1987.....| 7,322 | 2,415 | 340 | 68 |
| 6. 1988.....| 10,628 | 64 | 443 | 300 |
| 7. 1989.....| 21,729 | 2,071 | 691 | 134 |
| 8. 1990.....| 20,812 | 1,407 | 743 | 207 |
| 9. 1991.....| 28,885 | 3,001 | 3,709 | 407 |
|10. 1992.....| 46,363 | 2,647 | 14,058 | 1,733 |
|11. 1993.....| 48,363 | (273)| 65,493 | 10,004 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 197,687 | 13,033 | 85,677 | 12,853 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 159 | 2 |
| 2. 1984.....| 0 | 0 | 61 | 0 |
| 3. 1985.....| 0 | 0 | 149 | 0 |
| 4. 1986.....| 0 | 0 | 434 | 1 |
| 5. 1987.....| 0 | 0 | 624 | 11 |
| 6. 1988.....| 0 | 0 | 677 | 16 |
| 7. 1989.....| 0 | 0 | 1,442 | 19 |
| 8. 1990.....| 0 | 0 | 2,186 | 9 |
| 9. 1991.....| 0 | 0 | 4,897 | 9 |
|10. 1992.....| 0 | 0 | 7,090 | 1,017 |
|11. 1993.....| 0 | 0 | 9,536 | 2,010 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 27,255 | 3,094 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 5 | 39 | 6,099 | 481 |
| 2. 1984.....| 13 | 13 | 828 | 181 |
| 3. 1985.....| 20 | 19 | 2,201 | 228 |
| 4. 1986.....| 17 | 54 | 3,881 | 266 |
| 5. 1987.....| 61 | 77 | 5,869 | 517 |
| 6. 1988.....| 61 | 142 | 11,510 | 508 |
| 7. 1989.....| 144 | 192 | 21,830 | 605 |
| 8. 1990.....| 232 | 367 | 22,485 | 817 |
| 9. 1991.....| 361 | 637 | 34,711 | 1,391 |
|10. 1992.....| 561 | 1,170 | 63,284 | 2,804 |
|11. 1993.....| 1,044 | 1,742 | 113,393 | 5,862 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 2,519 | 4,452 | 286,091 | 13,660 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 179,234 | 16,695 | 162,539 | 120.3 |
| 3. 1985.....| 219,028 | 22,765 | 196,263 | 113.3 |
| 4. 1986.....| 210,351 | 20,293 | 190,058 | 83.0 |
| 5. 1987.....| 209,752 | 16,565 | 193,187 | 77.4 |
| 6. 1988.....| 227,444 | 16,709 | 210,735 | 82.8 |
| 7. 1989.....| 209,800 | 13,678 | 196,122 | 83.9 |
| 8. 1990.....| 154,079 | 11,573 | 142,506 | 69.4 |
| 9. 1991.....| 143,366 | 11,716 | 131,650 | 72.7 |
|10. 1992.....| 132,064 | 12,282 | 119,782 | 65.4 |
|11. 1993.....| 154,674 | 12,502 | 142,172 | 77.5 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 81.2 | 126.5 | 0 | 0 |
| 3. 1985.....| 79.7 | 119.1 | 0 | 0 |
| 4. 1986.....| 64.2 | 85.7 | 0 | 0 |
| 5. 1987.....| 53.1 | 80.5 | 0 | 0 |
| 6. 1988.....| 56.2 | 86.0 | 0 | 0 |
| 7. 1989.....| 45.3 | 89.2 | 0 | 0 |
| 8. 1990.....| 44.4 | 72.7 | 0 | 0 |
| 9. 1991.....| 59.4 | 74.2 | 0 | 0 |
|10. 1992.....| 52.7 | 67.1 | 0 | 0 |
|11. 1993.....| 59.5 | 79.6 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 5,903 | 196 |
| 2. 1984.....| 100.0 | 754 | 74 |
| 3. 1985.....| 100.0 | 2,033 | 168 |
| 4. 1986.....| 100.0 | 3,394 | 487 |
| 5. 1987.....| 100.0 | 5,179 | 690 |
| 6. 1988.....| 100.0 | 10,707 | 803 |
| 7. 1989.....| 100.0 | 20,215 | 1,615 |
| 8. 1990.....| 100.0 | 19,941 | 2,544 |
| 9. 1991.....| 100.0 | 29,186 | 5,525 |
|10. 1992.....| 100.0 | 56,041 | 7,243 |
|11. 1993.....| 100.0 | 104,125 | 9,268 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 257,478 | 28,613 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1D - WORKERS' COMPENSATION
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 27,891 |
| 2. 1984.....| 353,354 | 39,214 | 314,140 | 325,746 |
| 3. 1985.....| 511,954 | 109,858 | 402,096 | 472,059 |
| 4. 1986.....| 695,318 | 166,599 | 528,719 | 568,264 |
| 5. 1987.....| 886,240 | 251,154 | 635,086 | 715,757 |
| 6. 1988.....| 1,113,903 | 325,033 | 788,870 | 838,551 |
| 7. 1989.....| 1,218,623 | 360,007 | 858,616 | 919,063 |
| 8. 1990.....| 1,283,788 | 405,735 | 878,053 | 849,769 |
| 9. 1991.....| 1,331,954 | 468,720 | 863,234 | 666,993 |
|10. 1992.....| 1,319,019 | 464,572 | 854,447 | 479,765 |
|11. 1993.....| 1,321,759 | 383,806 | 937,953 | 396,442 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 6,260,300 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 12,866 | 1,884 | 159 | 263 |
| 2. 1984.....| 48,928 | 34,571 | 2,629 | 5,742 |
| 3. 1985.....| 86,521 | 43,662 | 3,414 | 6,237 |
| 4. 1986.....| 148,746 | 52,989 | 4,084 | 6,760 |
| 5. 1987.....| 197,269 | 62,499 | 5,768 | 6,425 |
| 6. 1988.....| 237,711 | 72,752 | 7,281 | 7,292 |
| 7. 1989.....| 278,815 | 73,006 | 9,010 | 7,989 |
| 8. 1990.....| 275,425 | 74,379 | 6,219 | 5,322 |
| 9. 1991.....| 224,740 | 61,002 | 4,294 | 3,439 |
|10. 1992.....| 169,103 | 42,247 | 2,290 | 1,727 |
|11. 1993.....| 268,332 | 24,032 | 385 | 392 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 1,948,456 | 543,023 | 45,533 | 51,588 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 194 | 16,944 | X X X X |
| 2. 1984.....| 6,721 | 315,481 | 163,909 |
| 3. 1985.....| 6,710 | 432,496 | 210,247 |
| 4. 1986.....| 7,643 | 476,066 | 214,925 |
| 5. 1987.....| 9,690 | 584,909 | 204,781 |
| 6. 1988.....| 11,434 | 677,745 | 260,753 |
| 7. 1989.....| 16,342 | 720,586 | 276,348 |
| 8. 1990.....| 13,589 | 656,093 | 247,967 |
| 9. 1991.....| 13,517 | 512,478 | 191,393 |
|10. 1992.....| 12,346 | 362,965 | 175,667 |
|11. 1993.....| 9,503 | 161,260 | 145,821 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 107,689 | 4,917,023 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 349,114 | 120,784 | 8,817 | 3,765 |
| 2. 1984.....| 44,902 | 13,320 | 2,341 | 1,131 |
| 3. 1985.....| 79,324 | 43,335 | 1,971 | 1,227 |
| 4. 1986.....| 73,822 | 33,121 | 2,192 | 1,197 |
| 5. 1987.....| 90,371 | 40,809 | 2,311 | 1,215 |
| 6. 1988.....| 133,662 | 57,082 | 4,588 | 2,383 |
| 7. 1989.....| 183,805 | 66,445 | 6,882 | 2,908 |
| 8. 1990.....| 230,098 | 85,383 | 14,159 | 5,479 |
| 9. 1991.....| 276,249 | 92,861 | 75,608 | 37,681 |
|10. 1992.....| 342,274 | 113,394 | 183,716 | 52,304 |
|11. 1993.....| 296,037 | 34,678 | 316,715 | 24,599 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 2,099,658 | 701,212 | 619,300 | 133,889 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 20,097 | 447 |
| 2. 1984.....| 0 | 0 | 4,396 | 253 |
| 3. 1985.....| 0 | 0 | 4,879 | 288 |
| 4. 1986.....| 0 | 0 | 4,700 | 354 |
| 5. 1987.....| 0 | 0 | 6,793 | 430 |
| 6. 1988.....| 0 | 0 | 8,576 | 643 |
| 7. 1989.....| 0 | 0 | 8,185 | 772 |
| 8. 1990.....| 0 | 0 | 16,917 | 1,094 |
| 9. 1991.....| 0 | 0 | 24,048 | 1,761 |
|10. 1992.....| 0 | 0 | 32,122 | 4,476 |
|11. 1993.....| 0 | 0 | 50,863 | 6,855 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 181,576 | 17,373 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 821 | 336 | 253,368 | 5,909 |
| 2. 1984.....| 421 | 147 | 37,082 | 748 |
| 3. 1985.....| 807 | 200 | 41,524 | 1,433 |
| 4. 1986.....| 1,432 | 235 | 46,277 | 1,574 |
| 5. 1987.....| 2,623 | 267 | 57,288 | 2,329 |
| 6. 1988.....| 5,044 | 411 | 87,129 | 3,529 |
| 7. 1989.....| 8,718 | 836 | 129,583 | 5,618 |
| 8. 1990.....| 9,267 | 1,424 | 170,642 | 8,782 |
| 9. 1991.....| 12,635 | 2,609 | 246,211 | 13,237 |
|10. 1992.....| 13,326 | 6,600 | 394,538 | 19,422 |
|11. 1993.....| 13,842 | 12,351 | 609,834 | 42,692 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 68,936 | 25,416 | 2,073,476 | 105,273 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 418,824 | 66,261 | 352,563 | 118.5 |
| 3. 1985.....| 608,805 | 134,785 | 474,020 | 118.9 |
| 4. 1986.....| 709,845 | 187,502 | 522,343 | 102.1 |
| 5. 1987.....| 887,688 | 245,491 | 642,197 | 100.2 |
| 6. 1988.....| 1,069,974 | 305,100 | 764,874 | 96.1 |
| 7. 1989.....| 1,208,119 | 357,950 | 850,169 | 99.1 |
| 8. 1990.....| 1,200,335 | 373,600 | 826,735 | 93.5 |
| 9. 1991.....| 1,120,026 | 361,337 | 758,689 | 84.1 |
|10. 1992.....| 1,099,070 | 341,567 | 757,503 | 83.3 |
|11. 1993.....| 1,105,943 | 334,849 | 771,094 | 83.7 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 169.0 | 112.2 | 0 | 0 |
| 3. 1985.....| 122.7 | 117.9 | 0 | 0 |
| 4. 1986.....| 112.5 | 98.8 | 0 | 0 |
| 5. 1987.....| 97.7 | 101.1 | 0 | 0 |
| 6. 1988.....| 93.9 | 97.0 | 0 | 0 |
| 7. 1989.....| 99.4 | 99.0 | 0 | 0 |
| 8. 1990.....| 92.1 | 94.2 | 0 | 0 |
| 9. 1991.....| 77.1 | 87.9 | 0 | 0 |
|10. 1992.....| 73.5 | 88.7 | 0 | 0 |
|11. 1993.....| 87.2 | 82.2 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 233,382 | 19,986 |
| 2. 1984.....| 100.0 | 32,792 | 4,290 |
| 3. 1985.....| 100.0 | 36,733 | 4,791 |
| 4. 1986.....| 100.0 | 41,696 | 4,581 |
| 5. 1987.....| 100.0 | 50,658 | 6,630 |
| 6. 1988.....| 100.0 | 78,785 | 8,344 |
| 7. 1989.....| 100.0 | 121,334 | 8,249 |
| 8. 1990.....| 100.0 | 153,395 | 17,247 |
| 9. 1991.....| 100.0 | 221,315 | 24,896 |
|10. 1992.....| 100.0 | 360,292 | 34,246 |
|11. 1993.....| 100.0 | 553,475 | 56,359 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 1,883,857 | 189,619 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss P
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 5,336 |
| 2. 1984.....| 338,616 | 62,413 | 276,203 | 280,469 |
| 3. 1985.....| 517,170 | 80,670 | 436,500 | 357,434 |
| 4. 1986.....| 800,815 | 109,286 | 691,529 | 301,975 |
| 5. 1987.....| 979,830 | 120,699 | 859,131 | 326,035 |
| 6. 1988.....| 1,075,410 | 102,440 | 972,970 | 423,472 |
| 7. 1989.....| 990,307 | 100,633 | 889,674 | 673,457 |
| 8. 1990.....| 978,631 | 86,509 | 892,122 | 386,034 |
| 9. 1991.....| 972,713 | 100,341 | 872,372 | 311,717 |
|10. 1992.....| 988,913 | 127,562 | 861,351 | 600,171 |
|11. 1993.....| 1,090,983 | 106,697 | 984,286 | 200,916 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 3,867,016 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 1,820 | 10,195 | 239 | 18 |
| 2. 1984.....| 58,198 | 50,828 | 2,921 | 12,685 |
| 3. 1985.....| 73,238 | 54,889 | 2,462 | 5,608 |
| 4. 1986.....| 20,179 | 53,653 | 779 | 5,667 |
| 5. 1987.....| 12,669 | 58,389 | 682 | 5,103 |
| 6. 1988.....| 39,720 | 74,376 | 3,392 | 7,771 |
| 7. 1989.....| 275,199 | 75,856 | 4,870 | 8,032 |
| 8. 1990.....| 25,159 | 60,372 | 2,320 | 5,719 |
| 9. 1991.....| 12,191 | 52,986 | 1,565 | 5,203 |
|10. 1992.....| 338,224 | 52,849 | 9,853 | 4,566 |
|11. 1993.....| 6,551 | 32,642 | 249 | 2,958 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 863,148 | 577,035 | 29,332 | 63,330 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 109 | 13,581 | X X X X |
| 2. 1984.....| 4,939 | 275,117 | 76,571 |
| 3. 1985.....| 5,294 | 341,917 | 82,882 |
| 4. 1986.....| 6,414 | 341,084 | 71,705 |
| 5. 1987.....| 8,070 | 379,143 | 79,629 |
| 6. 1988.....| 10,593 | 465,329 | 91,380 |
| 7. 1989.....| 13,619 | 482,863 | 100,837 |
| 8. 1990.....| 14,545 | 433,472 | 100,162 |
| 9. 1991.....| 16,816 | 367,763 | 101,936 |
|10. 1992.....| 17,274 | 322,217 | 104,548 |
|11. 1993.....| 18,076 | 244,834 | 94,253 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 115,749 | 3,667,320 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 25,985 | 3,649 | 132 | 0 |
| 2. 1984.....| 6,139 | 2,725 | 197 | 4 |
| 3. 1985.....| 4,905 | 207 | 285 | 4 |
| 4. 1986.....| 6,851 | 10 | 415 | 5 |
| 5. 1987.....| 17,283 | 28 | 1,225 | 49 |
| 6. 1988.....| 28,320 | 358 | 3,282 | 61 |
| 7. 1989.....| 56,229 | 1,464 | 8,901 | 1,272 |
| 8. 1990.....| 76,845 | 2,038 | 13,874 | 5,096 |
| 9. 1991.....| 123,456 | 7,709 | 16,628 | 9,048 |
|10. 1992.....| 190,774 | 36,279 | 73,300 | 23,985 |
|11. 1993.....| 196,364 | 211 | 198,508 | 46,486 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 733,151 | 54,678 | 316,747 | 86,010 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 9 | 2 |
| 2. 1984.....| 0 | 0 | 86 | 1 |
| 3. 1985.....| 0 | 0 | 117 | 1 |
| 4. 1986.....| 0 | 0 | 178 | 1 |
| 5. 1987.....| 0 | 0 | 570 | 47 |
| 6. 1988.....| 0 | 0 | 3,157 | 49 |
| 7. 1989.....| 0 | 0 | 5,793 | 516 |
| 8. 1990.....| 0 | 0 | 11,433 | 1,288 |
| 9. 1991.....| 0 | 0 | 25,964 | 2,169 |
|10. 1992.....| 0 | 0 | 52,199 | 2,741 |
|11. 1993.....| 0 | 0 | 51,107 | 5,966 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 150,613 | 12,781 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 51 | 57 | 22,532 | 1,257 |
| 2. 1984.....| 45 | 15 | 3,707 | 227 |
| 3. 1985.....| 93 | 28 | 5,123 | 228 |
| 4. 1986.....| 156 | 31 | 7,459 | 284 |
| 5. 1987.....| 187 | 55 | 19,009 | 518 |
| 6. 1988.....| 888 | 84 | 34,375 | 789 |
| 7. 1989.....| 1,030 | 175 | 67,846 | 1,584 |
| 8. 1990.....| 1,226 | 295 | 94,025 | 2,193 |
| 9. 1991.....| 1,804 | 535 | 147,657 | 3,737 |
|10. 1992.....| 3,738 | 895 | 254,163 | 7,751 |
|11. 1993.....| 11,186 | 1,466 | 394,782 | 19,092 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 20,404 | 3,636 | 1,050,678 | 37,660 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 342,673 | 63,849 | 278,824 | 101.2 |
| 3. 1985.....| 422,952 | 75,912 | 347,040 | 81.8 |
| 4. 1986.....| 369,517 | 20,974 | 348,543 | 46.1 |
| 5. 1987.....| 411,627 | 13,475 | 398,152 | 42.0 |
| 6. 1988.....| 543,284 | 43,580 | 499,704 | 50.5 |
| 7. 1989.....| 834,030 | 283,321 | 550,709 | 84.2 |
| 8. 1990.....| 563,398 | 35,901 | 527,497 | 57.6 |
| 9. 1991.....| 548,102 | 32,682 | 515,420 | 56.3 |
|10. 1992.....| 987,462 | 411,082 | 576,380 | 99.9 |
|11. 1993.....| 699,079 | 59,463 | 639,616 | 64.1 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 102.3 | 100.9 | 0 | 0 |
| 3. 1985.....| 94.1 | 79.5 | 0 | 0 |
| 4. 1986.....| 19.2 | 50.4 | 0 | 0 |
| 5. 1987.....| 11.2 | 46.3 | 0 | 0 |
| 6. 1988.....| 42.5 | 51.4 | 0 | 0 |
| 7. 1989.....| 281.5 | 61.9 | 0 | 0 |
| 8. 1990.....| 41.5 | 59.1 | 0 | 0 |
| 9. 1991.....| 32.6 | 59.1 | 0 | 0 |
|10. 1992.....| 322.3 | 66.9 | 0 | 0 |
|11. 1993.....| 55.7 | 65.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 22,468 | 64 |
| 2. 1984.....| 100.0 | 3,607 | 100 |
| 3. 1985.....| 100.0 | 4,979 | 144 |
| 4. 1986.....| 100.0 | 7,251 | 208 |
| 5. 1987.....| 100.0 | 18,431 | 578 |
| 6. 1988.....| 100.0 | 31,183 | 3,192 |
| 7. 1989.....| 100.0 | 62,394 | 5,452 |
| 8. 1990.....| 100.0 | 83,585 | 10,440 |
| 9. 1991.....| 100.0 | 123,327 | 24,330 |
|10. 1992.....| 100.0 | 203,810 | 50,353 |
|11. 1993.....| 100.0 | 348,175 | 46,607 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 909,210 | 141,468 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 4,422 |
| 2. 1984.....| 3,982 | 537 | 3,445 | 4,452 |
| 3. 1985.....| 9,980 | 2,351 | 7,629 | 7,549 |
| 4. 1986.....| 17,369 | 4,311 | 13,058 | 4,141 |
| 5. 1987.....| 3,296 | 739 | 2,557 | 10,891 |
| 6. 1988.....| 4,542 | 790 | 3,752 | 14,205 |
| 7. 1989.....| 5,875 | 1,426 | 4,449 | 13,078 |
| 8. 1990.....| 4,250 | 748 | 3,502 | 7,509 |
| 9. 1991.....| 10,018 | 2,918 | 7,100 | 640 |
|10. 1992.....| 3,098 | 801 | 2,297 | 297 |
|11. 1993.....| 12,139 | 12,014 | 125 | 30 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 67,214 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 1,486 | 711 | (9)| 0 |
| 2. 1984.....| 476 | 1,802 | 75 | 0 |
| 3. 1985.....| 1,208 | 2,486 | 161 | 17 |
| 4. 1986.....| 673 | 2,011 | (1)| 10 |
| 5. 1987.....| 3,217 | 3,588 | 114 | 0 |
| 6. 1988.....| 3,744 | 4,766 | 642 | 0 |
| 7. 1989.....| 8,085 | 5,315 | 3,083 | 0 |
| 8. 1990.....| 8,735 | 2,649 | 2,856 | 0 |
| 9. 1991.....| 152 | 216 | 94 | 0 |
|10. 1992.....| 8 | 155 | 6 | 0 |
|11. 1993.....| 0 | 41 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 27,784 | 23,740 | 7,021 | 27 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 451 | 4,107 | X X X X |
| 2. 1984.....| 491 | 6,194 | 219 |
| 3. 1985.....| 443 | 9,109 | 327 |
| 4. 1986.....| 341 | 5,821 | 201 |
| 5. 1987.....| 398 | 11,546 | 334 |
| 6. 1988.....| 622 | 15,207 | 417 |
| 7. 1989.....| 646 | 7,871 | 722 |
| 8. 1990.....| 111 | (1,322)| 145 |
| 9. 1991.....| 123 | 733 | (513)|
|10. 1992.....| 276 | 714 | (390)|
|11. 1993.....| 29 | 100 | 41 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 3,931 | 60,080 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 4,756 | 626 | 1,443 | 494 |
| 2. 1984.....| 798 | 422 | 679 | 13 |
| 3. 1985.....| 15 | 0 | 203 | 70 |
| 4. 1986.....| 0 | 0 | 88 | 87 |
| 5. 1987.....| 105 | (105)| 256 | 161 |
| 6. 1988.....| 209 | 13 | 194 | 168 |
| 7. 1989.....| (2,544)| (2,760)| 206 | 184 |
| 8. 1990.....| (4,145)| (4,397)| 2,371 | 342 |
| 9. 1991.....| 715 | 17 | 2,525 | 1,077 |
|10. 1992.....| 1,326 | 31 | 5,076 | 3,041 |
|11. 1993.....| 888 | 1 | 5,178 | 5,018 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 2,123 | (6,152)| 18,219 | 10,655 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 594 | 89 |
| 2. 1984.....| 0 | 0 | 204 | 11 |
| 3. 1985.....| 0 | 0 | 64 | 24 |
| 4. 1986.....| 0 | 0 | 38 | 38 |
| 5. 1987.....| 0 | 0 | 76 | 49 |
| 6. 1988.....| 0 | 0 | 68 | 67 |
| 7. 1989.....| 0 | 0 | 93 | 92 |
| 8. 1990.....| 0 | 0 | 148 | 143 |
| 9. 1991.....| 0 | 0 | 284 | 233 |
|10. 1992.....| 0 | 0 | 810 | 491 |
|11. 1993.....| 0 | 0 | 1,046 | 934 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 3,425 | 2,171 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 6 | 5,590 | 427 |
| 2. 1984.....| 0 | 30 | 1,265 | 7 |
| 3. 1985.....| 0 | 7 | 195 | 1 |
| 4. 1986.....| 0 | 0 | 1 | 0 |
| 5. 1987.....| 0 | 15 | 347 | 7 |
| 6. 1988.....| 0 | 6 | 229 | 15 |
| 7. 1989.....| 0 | 5 | 244 | 26 |
| 8. 1990.....| 0 | 8 | 2,294 | 9 |
| 9. 1991.....| 0 | 6 | 2,203 | 9 |
|10. 1992.....| 0 | 25 | 3,674 | 10 |
|11. 1993.....| 0 | 2 | 1,161 | 14 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 0 | 110 | 17,203 | 525 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 8,456 | 997 | 7,459 | 212.4 |
| 3. 1985.....| 10,767 | 1,463 | 9,304 | 107.9 |
| 4. 1986.....| 6,619 | 797 | 5,822 | 38.1 |
| 5. 1987.....| 15,329 | 3,436 | 11,893 | 465.1 |
| 6. 1988.....| 20,070 | 4,634 | 15,436 | 441.9 |
| 7. 1989.....| 16,799 | 8,684 | 8,115 | 285.9 |
| 8. 1990.....| 8,651 | 7,679 | 972 | 203.6 |
| 9. 1991.....| 4,509 | 1,573 | 2,936 | 45.0 |
|10. 1992.....| 7,965 | 3,577 | 4,388 | 257.1 |
|11. 1993.....| 7,214 | 5,953 | 1,261 | 59.4 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 185.7 | 216.5 | 0 | 0 |
| 3. 1985.....| 62.2 | 122.0 | 0 | 0 |
| 4. 1986.....| 18.5 | 44.6 | 0 | 0 |
| 5. 1987.....| 465.0 | 465.1 | 0 | 0 |
| 6. 1988.....| 586.6 | 411.4 | 0 | 0 |
| 7. 1989.....| 609.0 | 182.4 | 0 | 0 |
| 8. 1990.....| 1,026.6 | 27.8 | 0 | 0 |
| 9. 1991.....| 53.9 | 41.4 | 0 | 0 |
|10. 1992.....| 446.6 | 191.0 | 0 | 0 |
|11. 1993.....| 49.6 | 1,008.8 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 5,079 | 511 |
| 2. 1984.....| 100.0 | 1,042 | 223 |
| 3. 1985.....| 100.0 | 148 | 47 |
| 4. 1986.....| 100.0 | 1 | 0 |
| 5. 1987.....| 100.0 | 305 | 42 |
| 6. 1988.....| 100.0 | 222 | 7 |
| 7. 1989.....| 100.0 | 238 | 6 |
| 8. 1990.....| 100.0 | 2,281 | 13 |
| 9. 1991.....| 100.0 | 2,146 | 57 |
|10. 1992.....| 100.0 | 3,330 | 344 |
|11. 1993.....| 100.0 | 1,047 | 114 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 15,839 | 1,364 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 62 |
| 2. 1984.....| 0 | 0 | 0 | (50)|
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 3 |
| 5. 1987.....| 27,911 | 6,365 | 21,546 | 7,290 |
| 6. 1988.....| 39,164 | 6,905 | 32,259 | 3,554 |
| 7. 1989.....| 54,247 | 13,160 | 41,087 | 9,683 |
| 8. 1990.....| 52,096 | 9,224 | 42,872 | 10,882 |
| 9. 1991.....| 58,487 | 17,044 | 41,443 | 29,610 |
|10. 1992.....| 63,423 | 16,422 | 47,001 | (39,518)|
|11. 1993.....| 89,603 | 23,267 | 66,336 | 3,189 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 24,705 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 30 | 0 | 0 | 0 |
| 2. 1984.....| (24)| 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 2 | 0 | 0 | 0 |
| 5. 1987.....| 3,239 | 763 | 23 | 0 |
| 6. 1988.....| 824 | 1,847 | 52 | 0 |
| 7. 1989.....| 1,673 | 5,912 | 444 | 0 |
| 8. 1990.....| 2,016 | 4,149 | 660 | 0 |
| 9. 1991.....| 4,928 | 7,544 | 132 | 0 |
|10. 1992.....| (44,300)| 2,344 | 25 | 0 |
|11. 1993.....| 2,962 | 72 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| (28,650)| 22,631 | 1,336 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 0 | 32 | X X X X |
| 2. 1984.....| 0 | (26)| 2 |
| 3. 1985.....| 0 | 0 | 6 |
| 4. 1986.....| 0 | 1 | 30 |
| 5. 1987.....| 209 | 5,000 | 83 |
| 6. 1988.....| 255 | 4,780 | 363 |
| 7. 1989.....| 794 | 14,272 | 2,018 |
| 8. 1990.....| 680 | 13,035 | 1,934 |
| 9. 1991.....| 1,349 | 33,443 | 1,968 |
|10. 1992.....| 447 | 7,548 | 2,300 |
|11. 1993.....| 1,005 | 1,304 | 384 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 4,739 | 79,389 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 55 | 18 | 0 | 0 |
| 2. 1984.....| (44)| (14)| 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 2 | 0 | 0 | 0 |
| 5. 1987.....| 6,811 | 1,978 | 9,513 | 8,116 |
| 6. 1988.....| 5,958 | 628 | 2,247 | 1,644 |
| 7. 1989.....| 12,021 | 2,969 | 2,919 | 2,139 |
| 8. 1990.....| 16,291 | 4,718 | 4,759 | 3,457 |
| 9. 1991.....| 22,716 | 2,254 | 14,980 | 10,888 |
|10. 1992.....| 91,781 | 75,810 | 32,563 | 27,366 |
|11. 1993.....| 21,836 | 15,159 | 73,132 | 50,742 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 177,427 | 103,520 | 140,113 | 104,352 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 2,777 | 2,083 |
| 6. 1988.....| 0 | 0 | 758 | 655 |
| 7. 1989.....| 0 | 0 | 1,073 | 1,010 |
| 8. 1990.....| 0 | 0 | 1,637 | 1,441 |
| 9. 1991.....| 0 | 0 | 3,346 | 2,357 |
|10. 1992.....| 0 | 0 | 5,820 | 2,967 |
|11. 1993.....| 0 | 0 | 16,604 | 6,442 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 32,015 | 16,955 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 37 | 11 |
| 2. 1984.....| 0 | 0 | (30)| 1 |
| 3. 1985.....| 0 | 0 | 0 | 4 |
| 4. 1986.....| 0 | 0 | 2 | 19 |
| 5. 1987.....| 0 | 216 | 7,140 | 26 |
| 6. 1988.....| 0 | 148 | 6,184 | 86 |
| 7. 1989.....| 0 | 256 | 10,151 | 136 |
| 8. 1990.....| 0 | 341 | 13,412 | 235 |
| 9. 1991.....| 0 | 182 | 25,725 | 491 |
|10. 1992.....| 0 | 222 | 24,243 | 525 |
|11. 1993.....| 0 | 230 | 39,459 | 317 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 0 | 1,595 | 126,323 | 1,851 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| (94)| (38)| (56)| 0.0 |
| 3. 1985.....| 0 | 0 | 0 | 0.0 |
| 4. 1986.....| 5 | 2 | 3 | 0.0 |
| 5. 1987.....| 27,579 | 15,439 | 12,140 | 98.8 |
| 6. 1988.....| 14,767 | 3,803 | 10,964 | 37.7 |
| 7. 1989.....| 32,658 | 8,235 | 24,423 | 60.2 |
| 8. 1990.....| 38,739 | 12,292 | 26,447 | 74.4 |
| 9. 1991.....| 79,727 | 20,559 | 59,168 | 136.3 |
|10. 1992.....| 93,659 | 61,868 | 31,791 | 147.7 |
|11. 1993.....| 116,068 | 75,305 | 40,763 | 129.5 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 0.0 | 0.0 | 0 | 0 |
| 3. 1985.....| 0.0 | 0.0 | 0 | 0 |
| 4. 1986.....| 0.0 | 0.0 | 0 | 0 |
| 5. 1987.....| 242.6 | 56.3 | 0 | 0 |
| 6. 1988.....| 55.1 | 34.0 | 0 | 0 |
| 7. 1989.....| 62.6 | 59.4 | 0 | 0 |
| 8. 1990.....| 133.3 | 61.7 | 0 | 0 |
| 9. 1991.....| 120.6 | 142.8 | 0 | 0 |
|10. 1992.....| 376.7 | 67.6 | 0 | 0 |
|11. 1993.....| 323.7 | 61.4 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 37 | 0 |
| 2. 1984.....| 100.0 | (30)| 0 |
| 3. 1985.....| 100.0 | 0 | 0 |
| 4. 1986.....| 100.0 | 2 | 0 |
| 5. 1987.....| 100.0 | 6,230 | 910 |
| 6. 1988.....| 100.0 | 5,933 | 251 |
| 7. 1989.....| 100.0 | 9,832 | 319 |
| 8. 1990.....| 100.0 | 12,875 | 537 |
| 9. 1991.....| 100.0 | 24,554 | 1,171 |
|10. 1992.....| 100.0 | 21,168 | 3,075 |
|11. 1993.....| 100.0 | 29,067 | 10,392 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 109,668 | 16,655 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 6,435 |
| 2. 1984.....| 308,846 | 104,367 | 204,479 | 236,072 |
| 3. 1985.....| 323,837 | 176,515 | 147,322 | 188,397 |
| 4. 1986.....| 330,056 | 167,189 | 162,867 | 130,543 |
| 5. 1987.....| 383,438 | 149,011 | 234,427 | 271,871 |
| 6. 1988.....| 430,300 | 220,732 | 209,568 | 312,575 |
| 7. 1989.....| 392,484 | 191,061 | 201,423 | 343,113 |
| 8. 1990.....| 321,738 | 151,662 | 170,076 | 231,411 |
| 9. 1991.....| 320,139 | 156,382 | 163,757 | 207,823 |
|10. 1992.....| 357,369 | 224,689 | 132,680 | 142,905 |
|11. 1993.....| 372,075 | 175,209 | 196,866 | 85,230 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 2,156,375 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| (4,232)| 1,352 | 1,006 | 160 |
| 2. 1984.....| 86,341 | 10,694 | 2,829 | 4,632 |
| 3. 1985.....| 58,245 | 12,263 | 3,677 | 3,796 |
| 4. 1986.....| 36,172 | 10,712 | 5,203 | 5,255 |
| 5. 1987.....| 98,263 | 14,422 | 7,601 | 4,480 |
| 6. 1988.....| 129,576 | 17,797 | 10,264 | 4,809 |
| 7. 1989.....| 177,928 | 15,668 | 10,263 | 1,712 |
| 8. 1990.....| 92,101 | 9,817 | 5,041 | 1,936 |
| 9. 1991.....| 100,043 | 12,273 | 6,703 | 574 |
|10. 1992.....| 68,772 | 7,046 | 2,607 | (2,065)|
|11. 1993.....| 29,007 | 3,500 | 387 | 753 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 872,216 | 115,544 | 55,581 | 26,042 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 4 | 11,017 | X X X X |
| 2. 1984.....| 4,542 | 162,138 | 0 |
| 3. 1985.....| 4,394 | 143,132 | 0 |
| 4. 1986.....| 4,173 | 104,053 | 0 |
| 5. 1987.....| 4,977 | 185,406 | 0 |
| 6. 1988.....| 5,093 | 195,625 | 0 |
| 7. 1989.....| 4,107 | 174,697 | 0 |
| 8. 1990.....| 2,844 | 146,930 | 0 |
| 9. 1991.....| 181 | 113,531 | 0 |
|10. 1992.....| 153 | 78,725 | 0 |
|11. 1993.....| 98 | 59,434 | 0 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 30,566 | 1,374,688 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 44,515 | 31,854 | 4,258 | 67 |
| 2. 1984.....| 2,651 | 865 | 2,293 | 68 |
| 3. 1985.....| 9,797 | 3,842 | 2,292 | 68 |
| 4. 1986.....| 7,566 | 5,760 | 2,308 | 95 |
| 5. 1987.....| 10,816 | 9,257 | 2,634 | 311 |
| 6. 1988.....| 47,189 | 43,146 | 2,725 | 1,369 |
| 7. 1989.....| 34,310 | 28,788 | 3,586 | 2,117 |
| 8. 1990.....| 34,732 | 37,575 | 15,221 | 4,298 |
| 9. 1991.....| 30,310 | 25,130 | 52,384 | 29,436 |
|10. 1992.....| 73,617 | 51,551 | 106,361 | 84,612 |
|11. 1993.....| 66,377 | 17,118 | 163,970 | 93,511 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 361,880 | 254,886 | 358,032 | 215,952 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 13 | 7 |
| 2. 1984.....| 0 | 0 | 12 | 9 |
| 3. 1985.....| 0 | 0 | 12 | 9 |
| 4. 1986.....| 0 | 0 | 17 | 13 |
| 5. 1987.....| 0 | 0 | 55 | 42 |
| 6. 1988.....| 0 | 0 | 3,254 | 3,176 |
| 7. 1989.....| 0 | 0 | 3,401 | 3,291 |
| 8. 1990.....| 0 | 0 | 4,813 | 4,575 |
| 9. 1991.....| 0 | 0 | 5,174 | 1,938 |
|10. 1992.....| 0 | 0 | 14,736 | 9,320 |
|11. 1993.....| 0 | 0 | 24,591 | 13,239 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 56,078 | 35,619 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 25 | 0 | 16,858 | 7,599 |
| 2. 1984.....| 25 | 2 | 4,016 | 369 |
| 3. 1985.....| 50 | 2 | 8,184 | 304 |
| 4. 1986.....| 50 | 2 | 4,025 | 261 |
| 5. 1987.....| 150 | 4 | 3,899 | 311 |
| 6. 1988.....| 175 | 40 | 5,517 | 343 |
| 7. 1989.....| 475 | 51 | 7,152 | 377 |
| 8. 1990.....| 900 | 117 | 8,435 | 394 |
| 9. 1991.....| 1,050 | 261 | 31,625 | 497 |
|10. 1992.....| 2,700 | 794 | 50,025 | 611 |
|11. 1993.....| 4,225 | 2,111 | 133,181 | 1,573 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 9,825 | 3,384 | 272,917 | 12,639 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 256,266 | 90,112 | 166,154 | 83.0 |
| 3. 1985.....| 217,157 | 65,841 | 151,316 | 67.1 |
| 4. 1986.....| 155,321 | 47,243 | 108,078 | 47.1 |
| 5. 1987.....| 304,779 | 115,474 | 189,305 | 79.5 |
| 6. 1988.....| 388,673 | 187,531 | 201,142 | 90.3 |
| 7. 1989.....| 404,236 | 222,387 | 181,849 | 103.0 |
| 8. 1990.....| 298,955 | 143,590 | 155,365 | 92.9 |
| 9. 1991.....| 308,406 | 163,250 | 145,156 | 96.3 |
|10. 1992.....| 345,612 | 216,862 | 128,750 | 96.7 |
|11. 1993.....| 345,877 | 153,262 | 192,615 | 93.0 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 86.3 | 81.3 | 0 | 0 |
| 3. 1985.....| 37.3 | 102.7 | 0 | 0 |
| 4. 1986.....| 28.3 | 66.4 | 0 | 0 |
| 5. 1987.....| 77.5 | 80.8 | 0 | 0 |
| 6. 1988.....| 85.0 | 96.0 | 0 | 0 |
| 7. 1989.....| 116.4 | 90.3 | 0 | 0 |
| 8. 1990.....| 94.7 | 91.4 | 0 | 0 |
| 9. 1991.....| 104.4 | 88.6 | 0 | 0 |
|10. 1992.....| 96.5 | 97.0 | 0 | 0 |
|11. 1993.....| 87.5 | 97.8 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 16,852 | 6 |
| 2. 1984.....| 100.0 | 4,011 | 5 |
| 3. 1985.....| 100.0 | 8,179 | 5 |
| 4. 1986.....| 100.0 | 4,019 | 6 |
| 5. 1987.....| 100.0 | 3,882 | 17 |
| 6. 1988.....| 100.0 | 5,399 | 118 |
| 7. 1989.....| 100.0 | 6,991 | 161 |
| 8. 1990.....| 100.0 | 8,080 | 355 |
| 9. 1991.....| 100.0 | 28,128 | 3,497 |
|10. 1992.....| 100.0 | 43,815 | 6,210 |
|11. 1993.....| 100.0 | 119,718 | 13,463 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 249,074 | 23,843 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 27,695 |
| 2. 1984.....| 159,778 | 50,894 | 108,884 | 235,626 |
| 3. 1985.....| 252,680 | 72,762 | 179,918 | 307,589 |
| 4. 1986.....| 412,116 | 146,511 | 265,605 | 188,222 |
| 5. 1987.....| 519,927 | 151,804 | 368,123 | 135,923 |
| 6. 1988.....| 600,049 | 199,659 | 400,390 | 213,822 |
| 7. 1989.....| 595,214 | 173,319 | 421,895 | 207,875 |
| 8. 1990.....| 439,444 | 142,629 | 296,815 | 85,410 |
| 9. 1991.....| 213,910 | 86,005 | 127,905 | 40,883 |
|10. 1992.....| 271,116 | 104,922 | 166,194 | 129,227 |
|11. 1993.....| 286,391 | 73,491 | 212,900 | 40,668 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 1,612,940 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 31,435 | 18,882 | 8,277 | 539 |
| 2. 1984.....| 105,331 | 50,352 | 17,219 | 165 |
| 3. 1985.....| 135,750 | 41,287 | 6,935 | (1,117)|
| 4. 1986.....| 65,415 | 39,505 | 8,698 | 547 |
| 5. 1987.....| 19,796 | 25,948 | 2,239 | 213 |
| 6. 1988.....| 58,387 | 43,777 | 2,490 | 479 |
| 7. 1989.....| 54,908 | 41,399 | 3,947 | 180 |
| 8. 1990.....| 41,022 | 19,357 | 2,469 | 76 |
| 9. 1991.....| 8,876 | 8,242 | 831 | 101 |
|10. 1992.....| 72,148 | 5,627 | 5,146 | 101 |
|11. 1993.....| 3,895 | 3,331 | 120 | 28 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 596,963 | 297,707 | 58,371 | 1,312 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| (123)| 6,742 | X X X X |
| 2. 1984.....| 6,835 | 170,263 | 17,885 |
| 3. 1985.....| 8,478 | 214,669 | 15,373 |
| 4. 1986.....| 7,578 | 161,192 | 26,210 |
| 5. 1987.....| 6,806 | 146,642 | 14,024 |
| 6. 1988.....| 8,640 | 205,362 | 28,439 |
| 7. 1989.....| 10,773 | 201,192 | 22,052 |
| 8. 1990.....| 7,052 | 68,328 | 19,180 |
| 9. 1991.....| 5,326 | 44,744 | 15,298 |
|10. 1992.....| 5,366 | 62,926 | 12,170 |
|11. 1993.....| 6,058 | 46,042 | 9,088 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 72,789 | 1,328,102 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 234,403 | 175,191 | 4,946 | 500 |
| 2. 1984.....| 40,997 | 21,745 | 5,797 | 2,708 |
| 3. 1985.....| 40,806 | 19,305 | 6,543 | 3,800 |
| 4. 1986.....| 14,708 | 2,158 | 8,655 | 5,096 |
| 5. 1987.....| 16,428 | (3,192)| 20,234 | 6,628 |
| 6. 1988.....| 40,207 | (14,270)| 36,035 | 20,272 |
| 7. 1989.....| 62,985 | 14,597 | 63,530 | 30,881 |
| 8. 1990.....| 58,661 | 25,895 | 98,143 | 41,741 |
| 9. 1991.....| 31,039 | (6,517)| 59,111 | 44,285 |
|10. 1992.....| 28,329 | 4,198 | 85,388 | 63,801 |
|11. 1993.....| 48,606 | 12,336 | 136,996 | 75,688 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 617,169 | 251,446 | 525,378 | 295,400 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 4,128 | 3,004 |
| 2. 1984.....| 0 | 0 | 2,210 | 901 |
| 3. 1985.....| 0 | 0 | 3,653 | 1,213 |
| 4. 1986.....| 0 | 0 | 5,115 | 2,395 |
| 5. 1987.....| 0 | 0 | 7,961 | 3,562 |
| 6. 1988.....| 0 | 0 | 18,941 | 5,645 |
| 7. 1989.....| 0 | 0 | 26,525 | 9,706 |
| 8. 1990.....| 0 | 0 | 33,624 | 11,838 |
| 9. 1991.....| 0 | 0 | 33,822 | 7,664 |
|10. 1992.....| 0 | 0 | 36,222 | 8,195 |
|11. 1993.....| 0 | 0 | 47,663 | 9,103 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 219,864 | 63,226 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 37 | 126 | 64,908 | 3,333 |
| 2. 1984.....| 0 | 149 | 23,799 | 433 |
| 3. 1985.....| 22 | 141 | 26,825 | 523 |
| 4. 1986.....| (1)| 313 | 19,142 | 314 |
| 5. 1987.....| 1 | 301 | 37,926 | 460 |
| 6. 1988.....| (1)| 1,190 | 84,726 | 977 |
| 7. 1989.....| 0 | 1,622 | 99,478 | 1,332 |
| 8. 1990.....| 2 | 2,476 | 113,430 | 1,370 |
| 9. 1991.....| 15 | 3,888 | 82,428 | 1,553 |
|10. 1992.....| 15 | 2,996 | 76,741 | 2,274 |
|11. 1993.....| 33 | 4,131 | 140,269 | 4,434 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 123 | 17,333 | 769,672 | 17,003 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 341,966 | 147,904 | 194,062 | 214.0 |
| 3. 1985.....| 408,497 | 167,003 | 241,494 | 161.7 |
| 4. 1986.....| 264,096 | 83,762 | 180,334 | 64.1 |
| 5. 1987.....| 213,601 | 29,033 | 184,568 | 41.1 |
| 6. 1988.....| 362,612 | 72,524 | 290,088 | 60.4 |
| 7. 1989.....| 414,709 | 114,039 | 300,670 | 69.7 |
| 8. 1990.....| 304,723 | 122,965 | 181,758 | 69.3 |
| 9. 1991.....| 182,311 | 55,139 | 127,172 | 85.2 |
|10. 1992.....| 293,155 | 153,488 | 139,667 | 108.1 |
|11. 1993.....| 287,453 | 101,142 | 186,311 | 100.4 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 290.6 | 178.2 | 0 | 0 |
| 3. 1985.....| 229.5 | 134.2 | 0 | 0 |
| 4. 1986.....| 57.2 | 67.9 | 0 | 0 |
| 5. 1987.....| 19.1 | 50.1 | 0 | 0 |
| 6. 1988.....| 36.3 | 72.5 | 0 | 0 |
| 7. 1989.....| 65.8 | 71.3 | 0 | 0 |
| 8. 1990.....| 86.2 | 61.2 | 0 | 0 |
| 9. 1991.....| 64.1 | 99.4 | 0 | 0 |
|10. 1992.....| 146.3 | 84.0 | 0 | 0 |
|11. 1993.....| 137.6 | 87.5 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 63,658 | 1,250 |
| 2. 1984.....| 100.0 | 22,341 | 1,458 |
| 3. 1985.....| 100.0 | 24,244 | 2,581 |
| 4. 1986.....| 100.0 | 16,109 | 3,033 |
| 5. 1987.....| 100.0 | 33,226 | 4,700 |
| 6. 1988.....| 100.0 | 70,240 | 14,486 |
| 7. 1989.....| 100.0 | 81,037 | 18,441 |
| 8. 1990.....| 100.0 | 89,168 | 24,262 |
| 9. 1991.....| 100.0 | 52,382 | 30,046 |
|10. 1992.....| 100.0 | 45,718 | 31,023 |
|11. 1993.....| 100.0 | 97,578 | 42,691 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 595,701 | 173,971 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 72 |
| 2. 1984.....| 0 | 0 | 0 | (37)|
| 3. 1985.....| 0 | 0 | 0 | 5 |
| 4. 1986.....| 0 | 0 | 0 | 3 |
| 5. 1987.....| 0 | 0 | 0 | 30 |
| 6. 1988.....| 0 | 0 | 0 | 49 |
| 7. 1989.....| 0 | 0 | 0 | (122)|
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 120,760 | 48,999 | 71,761 | 33,070 |
|10. 1992.....| 134,611 | 51,702 | 82,909 | 15,107 |
|11. 1993.....| 185,852 | 39,961 | 145,891 | 425 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 48,602 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 68 | 3 | 15 | 0 |
| 2. 1984.....| (41)| 2 | (3)| 0 |
| 3. 1985.....| 0 | 0 | 1 | 0 |
| 4. 1986.....| (1)| 1 | 1 | 0 |
| 5. 1987.....| 9 | 0 | 0 | 0 |
| 6. 1988.....| 3 | 2 | 3 | 0 |
| 7. 1989.....| (38)| (8)| (17)| 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 7,986 | 753 | 90 | 0 |
|10. 1992.....| 9 | 687 | 0 | 4 |
|11. 1993.....| 0 | 286 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 7,995 | 1,726 | 90 | 4 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| 0 | (8)| X X X X |
| 2. 1984.....| 0 | 9 | 23 |
| 3. 1985.....| 0 | 4 | 19 |
| 4. 1986.....| 0 | 4 | 61 |
| 5. 1987.....| 0 | 21 | 43 |
| 6. 1988.....| 0 | 45 | 83 |
| 7. 1989.....| 0 | (75)| 190 |
| 8. 1990.....| 0 | 0 | 336 |
| 9. 1991.....| 517 | 26,264 | 2,999 |
|10. 1992.....| 189 | 15,974 | 2,265 |
|11. 1993.....| 51 | 762 | 953 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 757 | 43,000 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 543 | 312 | 0 | 0 |
| 2. 1984.....| (399)| (229)| 0 | 0 |
| 3. 1985.....| 33 | 12 | 0 | 0 |
| 4. 1986.....| 9 | 4 | 0 | 0 |
| 5. 1987.....| 10 | 3 | 0 | 0 |
| 6. 1988.....| 87 | 81 | 0 | 0 |
| 7. 1989.....| (283)| (183)| 0 | 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 9,147 | 1,772 | 21,006 | 11,593 |
|10. 1992.....| 26,174 | 7,398 | 29,738 | 15,376 |
|11. 1993.....| 35,971 | 23,571 | 57,230 | 8,751 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 71,292 | 32,741 | 107,974 | 35,720 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 0 | 0 |
| 6. 1988.....| 0 | 0 | 0 | 0 |
| 7. 1989.....| 0 | 0 | 0 | 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 0 | 0 | 4,489 | 1,816 |
|10. 1992.....| 0 | 0 | 12,982 | 1,844 |
|11. 1993.....| 0 | 0 | 37,623 | 2,289 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 55,094 | 5,949 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| | | | | |
| 1. Prior ...| 0 | 0 | 231 | 33 |
| 2. 1984.....| 0 | 0 | (170)| 12 |
| 3. 1985.....| 0 | 0 | 21 | 11 |
| 4. 1986.....| 0 | 0 | 5 | 36 |
| 5. 1987.....| 0 | 0 | 7 | 28 |
| 6. 1988.....| 0 | 0 | 6 | 46 |
| 7. 1989.....| 0 | 0 | (100)| 126 |
| 8. 1990.....| 0 | 0 | 0 | 198 |
| 9. 1991.....| 0 | 2,836 | 22,297 | 301 |
|10. 1992.....| 0 | 2,101 | 46,377 | 446 |
|11. 1993.....| 0 | 1,248 | 97,461 | 576 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 0 | 6,185 | 166,135 | 1,813 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| (434)| (273)| (161)| 0.0 |
| 3. 1985.....| 38 | 13 | 25 | 0.0 |
| 4. 1986.....| 13 | 4 | 9 | 0.0 |
| 5. 1987.....| 40 | 12 | 28 | 0.0 |
| 6. 1988.....| 138 | 87 | 51 | 0.0 |
| 7. 1989.....| (413)| (238)| (175)| 0.0 |
| 8. 1990.....| 0 | 0 | 0 | 0.0 |
| 9. 1991.....| 71,818 | 23,257 | 48,561 | 59.5 |
|10. 1992.....| 86,978 | 24,627 | 62,351 | 64.6 |
|11. 1993.....| 132,834 | 34,611 | 98,223 | 71.5 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 0.0 | 0.0 | 0 | 0 |
| 3. 1985.....| 0.0 | 0.0 | 0 | 0 |
| 4. 1986.....| 0.0 | 0.0 | 0 | 0 |
| 5. 1987.....| 0.0 | 0.0 | 0 | 0 |
| 6. 1988.....| 0.0 | 0.0 | 0 | 0 |
| 7. 1989.....| 0.0 | 0.0 | 0 | 0 |
| 8. 1990.....| 0.0 | 0.0 | 0 | 0 |
| 9. 1991.....| 47.5 | 67.7 | 0 | 0 |
|10. 1992.....| 47.6 | 75.2 | 0 | 0 |
|11. 1993.....| 86.6 | 67.3 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves|
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | Loss |
| |Participation | Losses | Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| | | | |
| 1. Prior ...| X X X X | 231 | 0 |
| 2. 1984.....| 100.0 | (170)| 0 |
| 3. 1985.....| 100.0 | 21 | 0 |
| 4. 1986.....| 100.0 | 5 | 0 |
| 5. 1987.....| 100.0 | 7 | 0 |
| 6. 1988.....| 100.0 | 6 | 0 |
| 7. 1989.....| 100.0 | (100)| 0 |
| 8. 1990.....| 100.0 | 0 | 0 |
| 9. 1991.....| 100.0 | 16,788 | 5,509 |
|10. 1992.....| 100.0 | 33,138 | 13,239 |
|11. 1993.....| 100.0 | 60,879 | 36,582 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 110,805 | 55,330 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES,
INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT)
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 56,732 |
| 2. 1992.....| 564,283 | 269,460 | 294,823 | 570,780 |
| 3. 1993.....| 559,178 | 298,998 | 260,180 | 203,531 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | 831,043 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
-------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 41,725 | 6,453 | 2,705 | 6,206 |
| 2. 1992.....| 373,099 | 15,195 | 4,592 | 4,446 |
| 3. 1993.....| 101,372 | 4,675 | 871 | 1,999 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 516,196 | 26,323 | 8,168 | 12,651 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 90 | 18,845 | X X X X |
| 2. 1992.....| 2,065 | 210,349 | X X X X |
| 3. 1993.....| 1,676 | 107,639 | X X X X |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| 3,831 | 336,833 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 91,684 | 83,171 | 63 | 12 |
| 2. 1992.....| 69,994 | 46,673 | 15,074 | 13,360 |
| 3. 1993.....| 91,334 | 47,689 | 206,595 | 166,561 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| 253,012 | 177,533 | 221,732 | 179,933 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 3,174 | 2,998 |
| 2. 1992.....| 0 | 0 | 38,450 | 36,724 |
| 3. 1993.....| 0 | 0 | 8,944 | 1,152 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 0 | 0 | 50,568 | 40,874 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 1,265 | 10 | 8,750 | 3,103 |
| 2. 1992.....| 948 | 180 | 26,941 | 1,702 |
| 3. 1993.....| 1,921 | 405 | 91,876 | 6,043 |
|-------------|--------------|--------------|--------------|-------------|
| 4. Totals ..| 4,134 | 595 | 127,567 | 10,848 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.....| 711,738 | 474,448 | 237,290 | 126.1 |
| 3. 1993.....| 517,160 | 317,645 | 199,515 | 92.5 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1992.....| 176.1 | 80.5 | 0 | 0 |
| 3. 1993.....| 106.2 | 76.7 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | 8,564 | 186 |
| 2. 1992.....| 100.0 | 25,035 | 1,906 |
| 3. 1993.....| 100.0 | 83,679 | 8,197 |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | 117,278 | 10,289 |
----------------------------------------------------------
SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 3,091 |
| 2. 1992.....| 241,372 | 24,712 | 216,660 | 117,825 |
| 3. 1993.....| 259,172 | 16,175 | 242,997 | 112,460 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | 233,376 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 518 | 1,111 | 236 | 1,397 |
| 2. 1992.....| 8,113 | 15,172 | 444 | 14,035 |
| 3. 1993.....| 3,132 | 18,021 | 80 | 7,688 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 11,763 | 34,304 | 760 | 23,120 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 48 | 3,496 | X X X X |
| 2. 1992.....| 4,193 | 128,633 | 146,435 |
| 3. 1993.....| 4,934 | 132,203 | 102,682 |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| 9,175 | 264,332 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 4,892 | 3,911 | 411 | 193 |
| 2. 1992.....| 997 | (437)| 2,909 | 1,537 |
| 3. 1993.....| 6,281 | 245 | 5,509 | 2,513 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| 12,170 | 3,719 | 8,829 | 4,243 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 605 | 151 |
| 2. 1992.....| 0 | 0 | 938 | 184 |
| 3. 1993.....| 0 | 0 | 3,081 | 543 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 0 | 0 | 4,624 | 878 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 1,739 | 0 | 1,653 | 1,965 |
| 2. 1992.....| 1,901 | 139 | 3,699 | 748 |
| 3. 1993.....| 9,233 | 249 | 11,819 | 5,236 |
|-------------|--------------|--------------|--------------|-------------|
| 4. Totals ..| 12,873 | 388 | 17,171 | 7,949 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.....| 142,173 | 9,841 | 132,332 | 58.9 |
| 3. 1993.....| 150,535 | 6,513 | 144,022 | 58.1 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1992.....| 39.8 | 61.1 | 0 | 0 |
| 3. 1993.....| 40.3 | 59.3 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | 1,199 | 454 |
| 2. 1992.....| 100.0 | 2,806 | 893 |
| 3. 1993.....| 100.0 | 9,032 | 2,787 |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | 13,037 | 4,134 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1K - FIDELITY, SURETY, FINANCIAL GUARANTY,
MORTGAGE GUARANTY
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 7,558 |
| 2. 1992.....| 128,726 | 36,572 | 92,154 | 38,376 |
| 3. 1993.....| 141,181 | 6,056 | 135,125 | 23,257 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | 69,191 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| (3,451)| 1,682 | (331)| 3,920 |
| 2. 1992.....| 23,461 | 1,725 | 121 | 631 |
| 3. 1993.....| 40 | 1,155 | (1)| 993 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 20,050 | 4,562 | (211)| 5,544 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 114 | 13,136 | X X X X |
| 2. 1992.....| 479 | 16,998 | X X X X |
| 3. 1993.....| 607 | 24,980 | X X X X |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| 1,200 | 55,114 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 38,264 | 14,180 | 2,938 | 941 |
| 2. 1992.....| 5,315 | 7,626 | 11,194 | 3,264 |
| 3. 1993.....| 27,358 | 3,997 | 45,649 | 24,291 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| 70,937 | 25,803 | 59,781 | 28,496 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 2,420 | 402 |
| 2. 1992.....| 0 | 0 | 5,341 | 1,948 |
| 3. 1993.....| 0 | 0 | 7,801 | 3,612 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 0 | 0 | 15,562 | 5,962 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 5,271 | 62 | 28,161 | 1,072 |
| 2. 1992.....| 1,692 | 39 | 9,051 | 214 |
| 3. 1993.....| 1,053 | 139 | 49,047 | 658 |
|-------------|--------------|--------------|--------------|-------------|
| 4. Totals ..| 8,016 | 240 | 86,259 | 1,944 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.....| 62,469 | 36,420 | 26,049 | 48.5 |
| 3. 1993.....| 105,966 | 31,939 | 74,027 | 75.1 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1992.....| 99.6 | 28.3 | 0 | 0 |
| 3. 1993.....| 527.4 | 54.8 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | 26,081 | 2,080 |
| 2. 1992.....| 100.0 | 5,619 | 3,432 |
| 3. 1993.....| 100.0 | 44,719 | 4,328 |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | 76,419 | 9,840 |
----------------------------------------------------------
SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 6,074 |
| 2. 1992.....| 141,347 | 54,796 | 86,551 | 89,856 |
| 3. 1993.....| 111,012 | 69,964 | 41,048 | 27,019 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | 122,949 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 6,284 | 354 | 73 | 1,453 |
| 2. 1992.....| 38,679 | 844 | 389 | 256 |
| 3. 1993.....| 11,213 | 131 | 47 | 59 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 56,176 | 1,329 | 509 | 1,768 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 1 | 72 | X X X X |
| 2. 1992.....| 123 | 51,755 | X X X X |
| 3. 1993.....| 70 | 15,960 | X X X X |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| 194 | 67,787 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 4,519 | 4,133 | 7 | (1)|
| 2. 1992.....| 4,859 | 2,760 | 1,042 | 815 |
| 3. 1993.....| 20,843 | 7,195 | 19,166 | 13,841 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| 30,221 | 14,088 | 20,215 | 14,655 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 913 | 889 |
| 2. 1992.....| 0 | 0 | 965 | 732 |
| 3. 1993.....| 0 | 0 | 4,623 | 1,453 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| 0 | 0 | 6,501 | 3,074 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 950 | 0 | 418 | 263 |
| 2. 1992.....| 259 | 828 | 3,387 | 1,214 |
| 3. 1993.....| 1,150 | 92 | 22,235 | 944 |
|-------------|--------------|--------------|--------------|-------------|
| 4. Totals ..| 2,359 | 920 | 26,040 | 2,421 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.....| 98,517 | 43,375 | 55,142 | 69.7 |
| 3. 1993.....| 71,944 | 33,749 | 38,195 | 64.8 |
|-------------|-------------|-------------|-------------|--------------|
| 4. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1992.....| 79.2 | 63.7 | 0 | 0 |
| 3. 1993.....| 48.2 | 93.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | 394 | 24 |
| 2. 1992.....| 100.0 | 2,326 | 1,061 |
| 3. 1993.....| 100.0 | 18,973 | 3,262 |
|-------------|--------------|--------------|--------------|
| 4. Totals ..| X X X X | 21,693 | 4,347 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1M - INTERNATIONAL
(000 omitted)
-----------------------------------------------------------------------
| | Premiums Earned |
| 1 |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ..| X X X X | X X X X | X X X X | 0 |
| 2. 1984....| 0 | 0 | 0 | 0 |
| 3. 1985....| 0 | 0 | 0 | 0 |
| 4. 1986....| 0 | 0 | 0 | 0 |
| 5. 1987....| 0 | 0 | 0 | 0 |
| 6. 1988....| 0 | 0 | 0 | 0 |
| 7. 1989....| 0 | 0 | 0 | 0 |
| 8. 1990....| 0 | 0 | 0 | (8,905)|
| 9. 1991....| 16,182 | 0 | 16,182 | 6,146 |
|10. 1992....| 14,670 | 0 | 14,670 | 5,687 |
|11. 1993....| 12,377 | 0 | 12,377 | 2,622 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 5,550 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| |
| 1 |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ..| 0 | 0 | 0 | 0 |
| 2. 1984....| 0 | 0 | 0 | 0 |
| 3. 1985....| 0 | 0 | 0 | 0 |
| 4. 1986....| 0 | 0 | 0 | 0 |
| 5. 1987....| 0 | 0 | 0 | 0 |
| 6. 1988....| 0 | 0 | 0 | 0 |
| 7. 1989....| 0 | 0 | 0 | 0 |
| 8. 1990....| 0 | 2,210 | 0 | 307 |
| 9. 1991....| 0 | 528 | 0 | 66 |
|10. 1992....| 0 | 373 | 0 | 39 |
|11. 1993....| 0 | 109 | 0 | 43 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 3,220 | 0 | 455 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | |
| 1 |-----------------------------| 12 |
| Years | 10 | 11 | |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ..| 0 | 0 | X X X X |
| 2. 1984....| 0 | 0 | X X X X |
| 3. 1985....| 0 | 0 | X X X X |
| 4. 1986....| 0 | 0 | X X X X |
| 5. 1987....| 0 | 0 | X X X X |
| 6. 1988....| 0 | 0 | X X X X |
| 7. 1989....| 0 | 0 | X X X X |
| 8. 1990....| 0 | (6,695)| X X X X |
| 9. 1991....| 0 | 6,674 | X X X X |
|10. 1992....| 0 | 6,060 | X X X X |
|11. 1993....| 0 | 2,731 | X X X X |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 8,770 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ..| 2 | 2 | 0 | 0 |
| 2. 1984....| 0 | 0 | 0 | 0 |
| 3. 1985....| 0 | 0 | 0 | 0 |
| 4. 1986....| 0 | 0 | 0 | 0 |
| 5. 1987....| 0 | 0 | 0 | 0 |
| 6. 1988....| 0 | 0 | 0 | 0 |
| 7. 1989....| 0 | 0 | 0 | 0 |
| 8. 1990....| 4,405 | 0 | 2,076 | 0 |
| 9. 1991....| 1,600 | 0 | 1,655 | 0 |
|10. 1992....| 1,566 | 0 | 1,831 | 0 |
|11. 1993....| 2,096 | 0 | 4,122 | 1 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 9,669 | 2 | 9,684 | 1 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ..| 0 | 0 | 0 | 0 |
| 2. 1984....| 0 | 0 | 0 | 0 |
| 3. 1985....| 0 | 0 | 0 | 0 |
| 4. 1986....| 0 | 0 | 0 | 0 |
| 5. 1987....| 0 | 0 | 0 | 0 |
| 6. 1988....| 0 | 0 | 0 | 0 |
| 7. 1989....| 0 | 0 | 0 | 0 |
| 8. 1990....| 0 | 0 | 619 | 0 |
| 9. 1991....| 0 | 0 | 498 | 0 |
|10. 1992....| 0 | 0 | 547 | 0 |
|11. 1993....| 0 | 0 | 641 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 2,305 | 0 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct |
| | Anticipated | Unpaid | Unpaid | and Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ..| 0 | 0 | 0 | 0 |
| 2. 1984....| 0 | 0 | 0 | 0 |
| 3. 1985....| 0 | 0 | 0 | 0 |
| 4. 1986....| 0 | 0 | 0 | 0 |
| 5. 1987....| 0 | 0 | 0 | 0 |
| 6. 1988....| 0 | 0 | 0 | 0 |
| 7. 1989....| 0 | 0 | 0 | 0 |
| 8. 1990....| 0 | 94 | 7,194 | 0 |
| 9. 1991....| 0 | 46 | 3,799 | 0 |
|10. 1992....| 0 | 46 | 3,990 | 0 |
|11. 1993....| 0 | 70 | 6,928 | 0 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 0 | 256 | 21,911 | 0 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ..| X X X X | X X X X | X X X X | X X X X |
| 2. 1984....| 0 | 0 | 0 | 0.0 |
| 3. 1985....| 0 | 0 | 0 | 0.0 |
| 4. 1986....| 0 | 0 | 0 | 0.0 |
| 5. 1987....| 0 | 0 | 0 | 0.0 |
| 6. 1988....| 0 | 0 | 0 | 0.0 |
| 7. 1989....| 0 | 0 | 0 | 0.0 |
| 8. 1990....| 499 | 0 | 499 | 0.0 |
| 9. 1991....| 10,473 | 0 | 10,473 | 64.7 |
|10. 1992....| 10,050 | 0 | 10,050 | 68.5 |
|11. 1993....| 9,660 | 1 | 9,659 | 78.0 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ..| X X X X | X X X X | 0 | 0 |
| 2. 1984....| 0.0 | 0.0 | 0 | 0 |
| 3. 1985....| 0.0 | 0.0 | 0 | 0 |
| 4. 1986....| 0.0 | 0.0 | 0 | 0 |
| 5. 1987....| 0.0 | 0.0 | 0 | 0 |
| 6. 1988....| 0.0 | 0.0 | 0 | 0 |
| 7. 1989....| 0.0 | 0.0 | 0 | 0 |
| 8. 1990....| 0.0 | 0.0 | 0 | 0 |
| 9. 1991....| 0.0 | 64.7 | 0 | 0 |
|10. 1992....| 0.0 | 68.5 | 0 | 0 |
|11. 1993....| 0.0 | 78.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| |Inter-Company |-----------------------------|
| | Pooling | 34 | 35 |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ..| X X X X | 0 | 0 |
| 2. 1984....| 100.0 | 0 | 0 |
| 3. 1985....| 100.0 | 0 | 0 |
| 4. 1986....| 100.0 | 0 | 0 |
| 5. 1987....| 100.0 | 0 | 0 |
| 6. 1988....| 100.0 | 0 | 0 |
| 7. 1989....| 100.0 | 0 | 0 |
| 8. 1990....| 100.0 | 6,481 | 713 |
| 9. 1991....| 100.0 | 3,255 | 544 |
|10. 1992....| 100.0 | 3,397 | 593 |
|11. 1993....| 100.0 | 6,217 | 711 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 19,350 | 2,561 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1N - REINSURANCE A
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 21,526 | 0 | 21,526 | 16,695 |
| 2. 1989.....| 43,987 | 13,766 | 30,221 | 101,162 |
| 3. 1990.....| 48,212 | 21,768 | 26,444 | 56,202 |
| 4. 1991.....| 48,327 | 23,187 | 25,140 | 39,457 |
| 5. 1992.....| 93,382 | 57,234 | 36,148 | 20,922 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| X X X X | X X X X | X X X X | 234,438 |
-----------------------------------------------------------------------
NOTE: Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 13,558 | 0 | 0 | 53 |
| 2. 1989.....| 56,592 | 0 | 0 | 126 |
| 3. 1990.....| 16,129 | 0 | 0 | 5 |
| 4. 1991.....| 8,826 | 0 | 0 | 14 |
| 5. 1992.....| (33,788)| 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| 61,317 | 0 | 0 | 198 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. 1988.....| 0 | 3,137 | X X X X |
| 2. 1989.....| 0 | 44,570 | X X X X |
| 3. 1990.....| 0 | 40,073 | X X X X |
| 4. 1991.....| 0 | 30,631 | X X X X |
| 5. 1992.....| 0 | 54,710 | X X X X |
| 6. 1993.....| 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|
| 7. Totals ..| 0 | 173,121 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | 0 |
| 2. 1989.....| 0 | 0 | 0 | 0 |
| 3. 1990.....| 0 | 0 | 0 | 0 |
| 4. 1991.....| 0 | 0 | 0 | 0 |
| 5. 1992.....| 0 | 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| 0 | 0 | 0 | 0 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | 0 |
| 2. 1989.....| 0 | 0 | 0 | 0 |
| 3. 1990.....| 0 | 0 | 0 | 0 |
| 4. 1991.....| 0 | 0 | 0 | 0 |
| 5. 1992.....| 0 | 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| 0 | 0 | 0 | 0 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | X X X X |
| 2. 1989.....| 0 | 0 | 0 | X X X X |
| 3. 1990.....| 0 | 0 | 0 | X X X X |
| 4. 1991.....| 0 | 0 | 0 | X X X X |
| 5. 1992.....| 0 | 0 | 0 | X X X X |
| 6. 1993.....| 0 | 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|-------------|
| 7. Totals ..| 0 | 0 | 0 | X X X X |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | |
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 16,695 | 13,558 | 3,137 | 77.6 |
| 2. 1989.....| 101,162 | 56,592 | 44,570 | 230.0 |
| 3. 1990.....| 56,202 | 16,129 | 40,073 | 116.6 |
| 4. 1991.....| 39,457 | 8,826 | 30,631 | 81.6 |
| 5. 1992.....| 20,922 | (33,788)| 54,710 | 22.4 |
| 6. 1993.....| 0 | 0 | 0 | 0.0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 0.0 | 14.6 | 0 | 0 |
| 2. 1989.....| 411.1 | 147.5 | 0 | 0 |
| 3. 1990.....| 74.1 | 151.5 | 0 | 0 |
| 4. 1991.....| 38.1 | 121.8 | 0 | 0 |
| 5. 1992.....| (59.0)| 151.4 | 0 | 0 |
| 6. 1993.....| 0.0 | 0.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. 1988.....| 100.0 | 0 | 0 |
| 2. 1989.....| 100.0 | 0 | 0 |
| 3. 1990.....| 100.0 | 0 | 0 |
| 4. 1991.....| 100.0 | 0 | 0 |
| 5. 1992.....| 100.0 | 0 | 0 |
| 6. 1993.....| 100.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|
| 7. Totals ..| X X X X | 0 | 0 |
----------------------------------------------------------
SCHEDULE P - PART 1O - REINSURANCE B
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 16,456 | 15,794 | 662 | 20,557 |
| 2. 1989.....| 61,546 | 4,037 | 57,509 | 54,685 |
| 3. 1990.....| 38,232 | 2,339 | 35,893 | 15,026 |
| 4. 1991.....| 17,169 | 591 | 16,578 | 884 |
| 5. 1992.....| 20,645 | 2,920 | 17,725 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| X X X X | X X X X | X X X X | 91,152 |
-----------------------------------------------------------------------
NOTE: Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 28,426 | 0 | 0 | 1 |
| 2. 1989.....| (3,595)| 0 | 0 | 7 |
| 3. 1990.....| (11,328)| 0 | 0 | 143 |
| 4. 1991.....| (13,756)| 0 | 0 | 105 |
| 5. 1992.....| (13,212)| 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| (13,465)| 0 | 0 | 256 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. 1988.....| 0 | (7,869)| X X X X |
| 2. 1989.....| 0 | 58,280 | X X X X |
| 3. 1990.....| 0 | 26,354 | X X X X |
| 4. 1991.....| 0 | 14,640 | X X X X |
| 5. 1992.....| 0 | 13,212 | X X X X |
| 6. 1993.....| 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|
| 7. Totals ..| 0 | 104,617 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | 0 |
| 2. 1989.....| 0 | 0 | 0 | 0 |
| 3. 1990.....| 0 | 0 | 0 | 0 |
| 4. 1991.....| 0 | 0 | 0 | 0 |
| 5. 1992.....| 0 | 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| 0 | 0 | 0 | 0 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | 0 |
| 2. 1989.....| 0 | 0 | 0 | 0 |
| 3. 1990.....| 0 | 0 | 0 | 0 |
| 4. 1991.....| 0 | 0 | 0 | 0 |
| 5. 1992.....| 0 | 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| 0 | 0 | 0 | 0 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | X X X X |
| 2. 1989.....| 0 | 0 | 0 | X X X X |
| 3. 1990.....| 0 | 0 | 0 | X X X X |
| 4. 1991.....| 0 | 0 | 0 | X X X X |
| 5. 1992.....| 0 | 0 | 0 | X X X X |
| 6. 1993.....| 0 | 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|-------------|
| 7. Totals ..| 0 | 0 | 0 | X X X X |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 20,557 | 28,426 | (7,869)| 124.9 |
| 2. 1989.....| 54,685 | (3,595)| 58,280 | 88.9 |
| 3. 1990.....| 15,026 | (11,328)| 26,354 | 39.3 |
| 4. 1991.....| 884 | (13,756)| 14,640 | 5.1 |
| 5. 1992.....| 0 | (13,212)| 13,212 | 0.0 |
| 6. 1993.....| 0 | 0 | 0 | 0.0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 180.0 | (1,188.7)| 0 | 0 |
| 2. 1989.....| (89.1)| 101.3 | 0 | 0 |
| 3. 1990.....| (484.3)| 73.4 | 0 | 0 |
| 4. 1991.....| (2,327.6)| 88.3 | 0 | 0 |
| 5. 1992.....| (452.5)| 74.5 | 0 | 0 |
| 6. 1993.....| 0.0 | 0.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. 1988.....| 100.0 | 0 | 0 |
| 2. 1989.....| 100.0 | 0 | 0 |
| 3. 1990.....| 100.0 | 0 | 0 |
| 4. 1991.....| 100.0 | 0 | 0 |
| 5. 1992.....| 100.0 | 0 | 0 |
| 6. 1993.....| 100.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|
| 7. Totals ..| X X X X | 0 | 0 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1P - REINSURANCE C
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 588 | 0 | 588 | 541 |
| 2. 1989.....| 364 | 40 | 324 | 23 |
| 3. 1990.....| 293 | 137 | 156 | (154)|
| 4. 1991.....| 20 | 9 | 11 | 1 |
| 5. 1992.....| 96 | 76 | 20 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| X X X X | X X X X | X X X X | 411 |
-----------------------------------------------------------------------
NOTE: Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| (51)| 0 | 0 | 0 |
| 2. 1989.....| (34)| 0 | 0 | 0 |
| 3. 1990.....| (41)| 0 | 0 | 0 |
| 4. 1991.....| (3)| 0 | 0 | 0 |
| 5. 1992.....| (16)| 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| (145)| 0 | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. 1988.....| 0 | 592 | X X X X |
| 2. 1989.....| 0 | 57 | X X X X |
| 3. 1990.....| 0 | (113)| X X X X |
| 4. 1991.....| 0 | 4 | X X X X |
| 5. 1992.....| 0 | 16 | X X X X |
| 6. 1993.....| 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|
| 7. Totals ..| 0 | 556 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | 0 |
| 2. 1989.....| 0 | 0 | 0 | 0 |
| 3. 1990.....| 0 | 0 | 0 | 0 |
| 4. 1991.....| 0 | 0 | 0 | 0 |
| 5. 1992.....| 0 | 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| 0 | 0 | 0 | 0 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | 0 |
| 2. 1989.....| 0 | 0 | 0 | 0 |
| 3. 1990.....| 0 | 0 | 0 | 0 |
| 4. 1991.....| 0 | 0 | 0 | 0 |
| 5. 1992.....| 0 | 0 | 0 | 0 |
| 6. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| 0 | 0 | 0 | 0 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. 1988.....| 0 | 0 | 0 | X X X X |
| 2. 1989.....| 0 | 0 | 0 | X X X X |
| 3. 1990.....| 0 | 0 | 0 | X X X X |
| 4. 1991.....| 0 | 0 | 0 | X X X X |
| 5. 1992.....| 0 | 0 | 0 | X X X X |
| 6. 1993.....| 0 | 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|-------------|
| 7. Totals ..| 0 | 0 | 0 | X X X X |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. 1988.....| 541 | (51)| 592 | 92.0 |
| 2. 1989.....| 23 | (34)| 57 | 6.3 |
| 3. 1990.....| (154)| (41)| (113)| (52.6)|
| 4. 1991.....| 1 | (3)| 4 | 5.0 |
| 5. 1992.....| 0 | (16)| 16 | 0.0 |
| 6. 1993.....| 0 | 0 | 0 | 0.0 |
|-------------|-------------|-------------|-------------|--------------|
| 7. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. 1988.....| 0.0 | 100.7 | 0 | 0 |
| 2. 1989.....| (85.0)| 17.6 | 0 | 0 |
| 3. 1990.....| (29.9)| (72.4)| 0 | 0 |
| 4. 1991.....| (33.3)| 36.4 | 0 | 0 |
| 5. 1992.....| (21.1)| 80.0 | 0 | 0 |
| 6. 1993.....| 0.0 | 0.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 7. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. 1988.....| 100.0 | 0 | 0 |
| 2. 1989.....| 100.0 | 0 | 0 |
| 3. 1990.....| 100.0 | 0 | 0 |
| 4. 1991.....| 100.0 | 0 | 0 |
| 5. 1992.....| 100.0 | 0 | 0 |
| 6. 1993.....| 100.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|
| 7. Totals ..| X X X X | 0 | 0 |
----------------------------------------------------------
SCHEDULE P - PART 1Q - REINSURANCE D
(000 omitted)
-----------------------------------------------------------------------
| 1 | Premiums Earned |
| |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 156 |
| 2. 1984.....| 3,948 | 2,238 | 1,710 | 10,957 |
| 3. 1985.....| 4,119 | 3,827 | 292 | 45,422 |
| 4. 1986.....| 2,823 | 166 | 2,657 | 1,261 |
| 5. 1987.....| 4,249 | 2,551 | 1,698 | 41,946 |
|-------------|-------------|-------------|-------------|--------------|
| 6. Totals ..| X X X X | X X X X | X X X X | 99,742 |
-----------------------------------------------------------------------
NOTE: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| 1 | Loss and Loss Expense Payments
| |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 257 | 0 | (1)| 0 |
| 2. 1984.....| 7,494 | (1)| 0 | 0 |
| 3. 1985.....| 43,966 | 0 | 0 | 0 |
| 4. 1986.....| 2,705 | 0 | 0 | 0 |
| 5. 1987.....| 42,852 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 6. Totals ..| 97,274 | (1)| (1)| 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| 1 | | |
| |-----------------------------| |
| Years | 10 | 11 | 12 |
| Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 0 | (100)| X X X X |
| 2. 1984.....| 0 | 3,462 | X X X X |
| 3. 1985.....| 0 | 1,456 | X X X X |
| 4. 1986.....| 0 | (1,444)| X X X X |
| 5. 1987.....| 0 | (906)| X X X X |
|-------------|--------------|--------------|--------------|
| 6. Totals ..| 0 | 2,468 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 363 | 366 | 177 | 177 |
| 2. 1984.....| 6 | 4 | 2 | 2 |
| 3. 1985.....| 2 | 1 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 0 | 0 |
|-------------|-------------|-------------|-------------|--------------|
| 6. Totals ..| 371 | 371 | 179 | 179 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 6. Totals ..| 0 | 0 | 0 | 0 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expense | and Expenses | Direct and |
| | Anticipated | Unpaid | Unpaid | Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 0 | 0 | (3)| X X X X |
| 2. 1984.....| 0 | 0 | 2 | X X X X |
| 3. 1985.....| 0 | 0 | 1 | X X X X |
| 4. 1986.....| 0 | 0 | 0 | X X X X |
| 5. 1987.....| 0 | 0 | 0 | X X X X |
|-------------|--------------|--------------|--------------|-------------|
| 6. Totals ..| 0 | 0 | 0 | X X X X |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | | | | |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 10,964 | 7,500 | 3,464 | 277.7 |
| 3. 1985.....| 45,424 | 43,967 | 1,457 | 1,102.8 |
| 4. 1986.....| 1,261 | 2,705 | (1,444)| 44.7 |
| 5. 1987.....| 41,946 | 42,852 | (906)| 987.2 |
|-------------|-------------|-------------|-------------|--------------|
| 6. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 335.1 | 202.6 | 0 | 0 |
| 3. 1985.....| 1,148.9 | 499.0 | 0 | 0 |
| 4. 1986.....| 1,629.5 | (54.3)| 0 | 0 |
| 5. 1987.....| 1,679.8 | (53.4)| 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
| 6. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| | |-----------------------------|
| |Inter-Company | 34 | 35 |
| | Pooling | | |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 0.0 | (3)| 0 |
| 2. 1984.....| 100.0 | 2 | 0 |
| 3. 1985.....| 100.0 | 1 | 0 |
| 4. 1986.....| 100.0 | 0 | 0 |
| 5. 1987.....| 100.0 | 0 | 0 |
|-------------|--------------|--------------|--------------|
| 6. Totals ..| X X X X | 0 | 0 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
(000 omitted)
-----------------------------------------------------------------------
| | Premiums Earned |
| 1 |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 27,333 |
| 2. 1984.....| 42,202 | 17,140 | 25,062 | 31,513 |
| 3. 1985.....| 72,460 | 28,965 | 43,495 | 34,615 |
| 4. 1986.....| 136,542 | 52,582 | 83,960 | 22,060 |
| 5. 1987.....| 137,211 | 59,259 | 77,952 | 15,041 |
| 6. 1988.....| 73,500 | 31,421 | 42,079 | 16,262 |
| 7. 1989.....| 56,106 | 24,872 | 31,234 | 28,671 |
| 8. 1990.....| 38,733 | 17,641 | 21,092 | 17,067 |
| 9. 1991.....| 45,308 | 28,404 | 16,904 | 16,168 |
|10. 1992.....| 40,975 | 27,855 | 13,120 | 6,492 |
|11. 1993.....| 89,201 | 59,905 | 29,296 | 1,220 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 216,442 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| |
| 1 |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 8,523 | 17,812 | (10,491)| 7 |
| 2. 1984.....| 15,613 | 22,690 | 12,604 | (19)|
| 3. 1985.....| 24,631 | 19,261 | 9,730 | 46 |
| 4. 1986.....| 13,418 | 12,363 | 6,370 | 71 |
| 5. 1987.....| 4,238 | 12,756 | 2,713 | (22)|
| 6. 1988.....| (3,980)| 15,752 | 3,558 | 8 |
| 7. 1989.....| 24,115 | 11,339 | 6,613 | 41 |
| 8. 1990.....| 10,774 | 6,972 | 4,952 | (2)|
| 9. 1991.....| 13,481 | 2,907 | 2,626 | (24)|
|10. 1992.....| 4,581 | 1,390 | 1,209 | (155)|
|11. 1993.....| 1,004 | 221 | 149 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 116,398 | 123,463 | 40,033 | (49)|
--------------------------------------------------------------------------
----------------------------------------------------------
| | | |
| 1 |-----------------------------| 12 |
| Years | 10 | 11 | |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 2,109 | 49,222 | X X X X |
| 2. 1984.....| 1,338 | 27,324 | 3,703 |
| 3. 1985.....| 597 | 20,112 | 3,610 |
| 4. 1986.....| 979 | 15,614 | 3,945 |
| 5. 1987.....| 1,003 | 21,849 | 1,675 |
| 6. 1988.....| 2,159 | 34,595 | 1,362 |
| 7. 1989.....| 454 | 9,736 | 573 |
| 8. 1990.....| 1,235 | 9,548 | 440 |
| 9. 1991.....| 1,940 | 4,908 | 455 |
|10. 1992.....| 1,059 | 3,151 | 263 |
|11. 1993.....| 2,856 | 3,144 | 8 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 15,729 | 199,203 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 69,296 | 25,973 | 1,672 | 228 |
| 2. 1984.....| 2,654 | 1,890 | 715 | 329 |
| 3. 1985.....| 2,734 | 2,470 | 1,158 | 298 |
| 4. 1986.....| 2,766 | 2,141 | 2,594 | 868 |
| 5. 1987.....| 6,202 | 3,141 | 5,245 | 1,966 |
| 6. 1988.....| 5,232 | 2,125 | 7,725 | 2,601 |
| 7. 1989.....| 10,901 | 7,100 | 8,642 | 3,315 |
| 8. 1990.....| 13,989 | 8,742 | 6,247 | 3,672 |
| 9. 1991.....| 13,315 | 9,440 | 8,145 | 5,019 |
|10. 1992.....| 12,338 | 9,870 | 25,124 | 21,369 |
|11. 1993.....| 2,087 | 1,358 | 49,615 | 30,888 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 141,514 | 74,250 | 116,882 | 70,553 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 661 | 296 |
| 2. 1984.....| 0 | 0 | 527 | 44 |
| 3. 1985.....| 0 | 0 | 869 | 113 |
| 4. 1986.....| 0 | 0 | 1,187 | 259 |
| 5. 1987.....| 0 | 0 | 1,456 | 322 |
| 6. 1988.....| 0 | 0 | 2,187 | 629 |
| 7. 1989.....| 0 | 0 | 2,602 | 973 |
| 8. 1990.....| 0 | 0 | 5,396 | 1,636 |
| 9. 1991.....| 0 | 0 | 5,719 | 1,126 |
|10. 1992.....| 0 | 0 | 7,850 | 2,542 |
|11. 1993.....| 0 | 0 | 7,242 | 2,934 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 35,696 | 10,874 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct |
| | Anticipated | Unpaid | Unpaid | and Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 5 | 519 | 45,651 | 3,282 |
| 2. 1984.....| 0 | 95 | 1,728 | 175 |
| 3. 1985.....| 3 | 170 | 2,050 | 128 |
| 4. 1986.....| 0 | 138 | 3,417 | 64 |
| 5. 1987.....| 0 | 164 | 7,638 | 58 |
| 6. 1988.....| 0 | 213 | 10,002 | 56 |
| 7. 1989.....| 0 | 202 | 10,959 | 69 |
| 8. 1990.....| (1)| 421 | 12,003 | 52 |
| 9. 1991.....| 1 | 345 | 11,939 | 84 |
|10. 1992.....| 1 | 380 | 11,911 | 51 |
|11. 1993.....| 3 | 384 | 24,148 | 30 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 12 | 3,031 | 141,446 | 4,049 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 59,532 | 30,480 | 29,052 | 141.1 |
| 3. 1985.....| 59,404 | 37,242 | 22,162 | 82.0 |
| 4. 1986.....| 42,087 | 23,056 | 19,031 | 30.8 |
| 5. 1987.....| 41,867 | 12,380 | 29,487 | 30.5 |
| 6. 1988.....| 49,530 | 4,933 | 44,597 | 67.4 |
| 7. 1989.....| 62,811 | 42,116 | 20,695 | 112.0 |
| 8. 1990.....| 51,327 | 29,776 | 21,551 | 132.5 |
| 9. 1991.....| 48,539 | 31,692 | 16,847 | 107.1 |
|10. 1992.....| 54,633 | 39,571 | 15,062 | 133.3 |
|11. 1993.....| 63,625 | 36,333 | 27,292 | 71.3 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 177.8 | 115.9 | 0 | 0 |
| 3. 1985.....| 128.6 | 51.0 | 0 | 0 |
| 4. 1986.....| 43.8 | 22.7 | 0 | 0 |
| 5. 1987.....| 20.9 | 37.8 | 0 | 0 |
| 6. 1988.....| 15.7 | 106.0 | 0 | 0 |
| 7. 1989.....| 169.3 | 66.3 | 0 | 0 |
| 8. 1990.....| 168.8 | 102.2 | 0 | 0 |
| 9. 1991.....| 111.6 | 99.7 | 0 | 0 |
|10. 1992.....| 142.1 | 114.8 | 0 | 0 |
|11. 1993.....| 60.7 | 93.2 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| |Inter-Company |-----------------------------|
| | Pooling | 34 | 35 |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | 44,767 | 884 |
| 2. 1984.....| 100.0 | 1,150 | 578 |
| 3. 1985.....| 100.0 | 1,124 | 926 |
| 4. 1986.....| 100.0 | 2,351 | 1,066 |
| 5. 1987.....| 100.0 | 6,340 | 1,298 |
| 6. 1988.....| 100.0 | 8,231 | 1,771 |
| 7. 1989.....| 100.0 | 9,128 | 1,831 |
| 8. 1990.....| 100.0 | 7,822 | 4,181 |
| 9. 1991.....| 100.0 | 7,001 | 4,938 |
|10. 1992.....| 100.0 | 6,223 | 5,688 |
|11. 1993.....| 100.0 | 19,456 | 4,692 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 113,593 | 27,853 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 1R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
(000 omitted)
-----------------------------------------------------------------------
| | Premiums Earned |
| 1 |-----------------------------------------|---------------
| Years | 2 | 3 | 4 | Loss Payments
| in Which | | | |
|Premiums Were| | | |---------------
| Earned and | Direct | | Net | 5 |
| Losses Were | and | Ceded | (2 - 3) | Direct |
| Incurred | Assumed | | | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 0 | 0 |
| 6. 1988.....| 0 | 0 | 0 | 0 |
| 7. 1989.....| 0 | 0 | 0 | 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 0 | 0 | 0 | 0 |
|10. 1992.....| 0 | 0 | 0 | 0 |
|11. 1993.....| 1,756 | 0 | 1,756 | 12 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | 12 |
-----------------------------------------------------------------------
Note: For "prior," report amounts paid or received in current year only.
Report cumulative amounts paid or received for specific years.
Report loss payments net of salvage and subrogation received.
--------------------------------------------------------------------------
| |
| 1 |------------------------------------------------------------
| Years | | Allocated Loss | 9 |
| in Which | | Expense Payments | |
|Premiums Were|--------------|-----------------------------| Salvage |
| Earned and | 6 | 7 | 8 | and |
| Losses Were | | Direct | | Subrogation |
| Incurred | Ceded | and Assumed | Ceded | Received |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| (30)| 0 | 0 | 0 |
| 2. 1984.....| 24 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 1 | 0 | 0 |
| 6. 1988.....| (8)| 0 | 0 | 0 |
| 7. 1989.....| 14 | (1)| 0 | 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 0 | 0 | 0 | 0 |
|10. 1992.....| 0 | 0 | 0 | 0 |
|11. 1993.....| 0 | 0 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | |
| 1 |-----------------------------| 12 |
| Years | 10 | 11 | |
| in Which | | | Number of |
|Premiums Were| Unallocated | Total | Claims |
| Earned and | Loss | Net Paid | Reported - |
| Losses Were | Expense | (5 - 6 + 7 | Direct and |
| Incurred | Payments | - 8 + 10) | Assumed |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| 0 | 30 | X X X X |
| 2. 1984.....| 0 | (24)| 0 |
| 3. 1985.....| 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 |
| 5. 1987.....| 6 | 7 | 0 |
| 6. 1988.....| 10 | 18 | 0 |
| 7. 1989.....| (13)| (28)| 0 |
| 8. 1990.....| 0 | 0 | 0 |
| 9. 1991.....| 0 | 0 | 0 |
|10. 1992.....| 0 | 0 | 0 |
|11. 1993.....| 38 | 50 | 0 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| 41 | 53 | X X X X |
----------------------------------------------------------
-----------------------------------------------------------------------
| | Losses Unpaid |
| |--------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |---------------------------|----------------------------|
| | 13 | 14 | 15 | 16 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 4 | 3 | 0 | 0 |
| 6. 1988.....| 0 | 0 | 0 | 0 |
| 7. 1989.....| (4)| 0 | 0 | 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 0 | 0 | 0 | 0 |
|10. 1992.....| 0 | 0 | 0 | 0 |
|11. 1993.....| 108 | 0 | 1,036 | 0 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| 108 | 3 | 1,036 | 0 |
-----------------------------------------------------------------------
--------------------------------------------------------------------------
| | Allocated Loss Expenses Unpaid |
| |-----------------------------------------------------------|
| | Case Basis | Bulk + IBNR |
| |-----------------------------|-----------------------------|
| | 17 | 18 | 19 | 20 |
| | Direct | | Direct | |
| | and Assumed | Ceded | and Assumed | Ceded |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 0 |
| 5. 1987.....| 0 | 0 | 0 | 0 |
| 6. 1988.....| 0 | 0 | 0 | 0 |
| 7. 1989.....| 0 | 0 | 0 | 0 |
| 8. 1990.....| 0 | 0 | 0 | 0 |
| 9. 1991.....| 0 | 0 | 0 | 0 |
|10. 1992.....| 0 | 0 | 0 | 0 |
|11. 1993.....| 0 | 0 | 840 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| 0 | 0 | 840 | 0 |
--------------------------------------------------------------------------
------------------------------------------------------------------------
| | | | | |
| | 21 | 22 | 23 | 24 |
| | | | | Number of |
| | Salvage | Unallocated | Total | Claims |
| | and | Loss | Net Losses |Outstanding -|
| | Subrogation | Expenses | and Expenses | Direct |
| | Anticipated | Unpaid | Unpaid | and Assumed |
|-------------|--------------|--------------|--------------|-------------|
| | | | | |
| 1. Prior ...| 0 | 0 | 0 | 0 |
| 2. 1984.....| 0 | 0 | 0 | 0 |
| 3. 1985.....| 0 | 0 | 0 | 0 |
| 4. 1986.....| 0 | 0 | 0 | 1 |
| 5. 1987.....| 0 | 0 | 1 | 2 |
| 6. 1988.....| 0 | 0 | 0 | 1 |
| 7. 1989.....| 0 | 0 | (4)| 8 |
| 8. 1990.....| 0 | 0 | 0 | 1 |
| 9. 1991.....| 0 | 0 | 0 | 2 |
|10. 1992.....| 0 | 0 | 0 | 5 |
|11. 1993.....| 0 | 76 | 2,060 | 17 |
|-------------|--------------|--------------|--------------|-------------|
|12. Totals ..| 0 | 76 | 2,057 | 37 |
------------------------------------------------------------------------
-----------------------------------------------------------------------
| | | Loss and Loss
| | Total Losses and | Expense Percentage
| | Loss Expenses Incurred | (Incurred/Premiums
| | | Earned)
| |-----------------------------------------|---------------
| | 25 | 26 | 27 | 28 |
| | Direct | | | Direct |
| | and Assumed | Ceded | Net * | and Assumed |
|-------------|-------------|-------------|-------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | X X X X | X X X X |
| 2. 1984.....| 0 | 24 | (24)| 0.0 |
| 3. 1985.....| 0 | 0 | 0 | 0.0 |
| 4. 1986.....| 0 | 0 | 0 | 0.0 |
| 5. 1987.....| 11 | 3 | 8 | 0.0 |
| 6. 1988.....| 10 | (8)| 18 | 0.0 |
| 7. 1989.....| (18)| 14 | (32)| 0.0 |
| 8. 1990.....| 0 | 0 | 0 | 0.0 |
| 9. 1991.....| 0 | 0 | 0 | 0.0 |
|10. 1992.....| 0 | 0 | 0 | 0.0 |
|11. 1993.....| 2,110 | 0 | 2,110 | 120.2 |
|-------------|-------------|-------------|-------------|--------------|
|12. Totals ..| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------
*Net = (25 - 26) = (11 + 23)
--------------------------------------------------------------------------
| | | Discount for Time |
| | | Value of Money |
| |-----------------------------|-----------------------------|
| | 29 | 30 | 31 | 32 |
| | | | | Loss |
| | Ceded | Net | Loss | Expense |
|-------------|--------------|--------------|--------------|--------------|
| | | | | |
| 1. Prior ...| X X X X | X X X X | 0 | 0 |
| 2. 1984.....| 0.0 | 0.0 | 0 | 0 |
| 3. 1985.....| 0.0 | 0.0 | 0 | 0 |
| 4. 1986.....| 0.0 | 0.0 | 0 | 0 |
| 5. 1987.....| 0.0 | 0.0 | 0 | 0 |
| 6. 1988.....| 0.0 | 0.0 | 0 | 0 |
| 7. 1989.....| 0.0 | 0.0 | 0 | 0 |
| 8. 1990.....| 0.0 | 0.0 | 0 | 0 |
| 9. 1991.....| 0.0 | 0.0 | 0 | 0 |
|10. 1992.....| 0.0 | 0.0 | 0 | 0 |
|11. 1993.....| 0.0 | 120.2 | 0 | 0 |
|-------------|--------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | X X X X | 0 | 0 |
--------------------------------------------------------------------------
----------------------------------------------------------
| | | Net Balance Sheet Reserves |
| | 33 | After Discount |
| |Inter-Company |-----------------------------|
| | Pooling | 34 | 35 |
| |Participation | Losses |Loss Expenses |
| | Percentage | Unpaid | Unpaid |
|-------------|--------------|--------------|--------------|
| | | | |
| 1. Prior ...| X X X X | 0 | 0 |
| 2. 1984.....| 100.0 | 0 | 0 |
| 3. 1985.....| 100.0 | 0 | 0 |
| 4. 1986.....| 100.0 | 0 | 0 |
| 5. 1987.....| 100.0 | 1 | 0 |
| 6. 1988.....| 100.0 | 0 | 0 |
| 7. 1989.....| 100.0 | (4)| 0 |
| 8. 1990.....| 100.0 | 0 | 0 |
| 9. 1991.....| 100.0 | 0 | 0 |
|10. 1992.....| 100.0 | 0 | 0 |
|11. 1993.....| 100.0 | 1,144 | 916 |
|-------------|--------------|--------------|--------------|
|12. Totals ..| X X X X | 1,141 | 916 |
----------------------------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 2A - HOMEOWNERS/FARMOWNERS
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior ......| 49,994 * | 51,087 | 53,981 | 56,473 |
| 2. 1984........| 219,097 | 222,547 | 225,733 | 224,964 |
| 3. 1985........| X X X X | 254,121 | 258,964 | 254,416 |
| 4. 1986........| X X X X | X X X X | 219,477 | 212,292 |
| 5. 1987........| X X X X | X X X X | X X X X | 189,534 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
56,707 | 56,754 | 56,309 | 56,566 | 59,882 |
224,433 | 226,069 | 225,982 | 226,075 | 225,708 |
253,875 | 254,678 | 254,796 | 254,558 | 254,180 |
204,570 | 202,853 | 199,953 | 199,603 | 199,275 |
186,110 | 177,742 | 175,058 | 175,031 | 174,761 |
190,120 | 187,692 | 185,309 | 179,440 | 178,980 |
X X X X | 165,386 | 162,781 | 163,403 | 162,172 |
X X X X | X X X X | 149,717 | 155,297 | 157,516 |
X X X X | X X X X | X X X X | 184,083 | 192,187 |
X X X X | X X X X | X X X X | X X X X | 192,517 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
| | |
56,408 | (3,475)| (159)|
224,449 | (1,259)| (1,626)|
254,388 | 208 | (170)|
199,905 | 630 | 302 |
173,674 | (1,087)| (1,357)|
181,646 | 2,666 | 2,206 |
163,169 | 997 | (234)|
157,204 | (312)| 1,907 |
193,927 | 1,740 | 9,844 |
196,214 | 3,697 | X X X X |
179,536 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 3,805 | 10,713 |
---------------------------
SCHEDULE P - PART 2B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 212,523 * | 242,360 | 238,627 | 241,673 |
| 2. 1984........| 312,001 | 356,158 | 356,276 | 356,282 |
| 3. 1985........| X X X X | 369,386 | 356,025 | 361,261 |
| 4. 1986........| X X X X | X X X X | 410,836 | 396,107 |
| 5. 1987........| X X X X | X X X X | X X X X | 388,120 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
240,447 | 249,363 | 249,456 | 253,056 | 254,994 |
358,615 | 366,233 | 365,709 | 365,404 | 365,518 |
374,966 | 385,193 | 386,098 | 385,790 | 382,940 |
392,858 | 386,952 | 383,912 | 379,429 | 377,023 |
382,497 | 357,959 | 357,046 | 355,300 | 348,444 |
332,162 | 321,176 | 318,623 | 317,335 | 315,302 |
X X X X | 293,194 | 292,183 | 286,763 | 283,770 |
X X X X | X X X X | 253,512 | 252,095 | 250,005 |
X X X X | X X X X | X X X X | 222,993 | 243,331 |
X X X X | X X X X | X X X X | X X X X | 247,326 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
251,611 | (3,383)| (1,445)|
367,956 | 2,438 | 2,552 |
385,009 | 2,069 | (781)|
379,536 | 2,513 | 107 |
350,434 | 1,990 | (4,866)|
317,528 | 2,226 | 193 |
289,954 | 6,184 | 3,191 |
250,673 | 668 | (1,422)|
250,464 | 7,133 | 27,471 |
246,520 | (806)| X X X X |
318,117 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 21,032 | 25,000 |
---------------------------
SCHEDULE P - PART 2C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 128,238 * | 151,303 | 158,200 | 164,942 |
| 2. 1984........| 115,329 | 131,966 | 140,449 | 148,601 |
| 3. 1985........| X X X X | 122,724 | 139,955 | 145,427 |
| 4. 1986........| X X X X | X X X X | 147,117 | 157,213 |
| 5. 1987........| X X X X | X X X X | X X X X | 162,309 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
166,212 | 162,044 | 168,216 | 164,858 | 165,025 |
151,246 | 157,203 | 158,961 | 158,985 | 160,039 |
157,861 | 175,805 | 181,856 | 187,398 | 190,738 |
155,809 | 165,894 | 172,330 | 178,571 | 184,306 |
158,569 | 161,385 | 170,118 | 173,373 | 183,948 |
176,480 | 173,389 | 179,671 | 183,610 | 195,509 |
X X X X | 165,842 | 162,494 | 159,220 | 181,013 |
X X X X | X X X X | 146,850 | 145,582 | 134,536 |
X X X X | X X X X | X X X X | 129,929 | 121,633 |
X X X X | X X X X | X X X X | X X X X | 122,008 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
169,664 | 4,639 | 4,806 |
159,892 | (147)| 907 |
193,314 | 2,576 | 5,916 |
187,023 | 2,717 | 8,452 |
189,830 | 5,882 | 16,457 |
206,792 | 11,283 | 23,182 |
192,331 | 11,318 | 33,111 |
138,741 | 4,205 | (6,841)|
127,906 | 6,273 | (2,023)|
115,604 | (6,404)| X X X X |
138,149 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 42,342 | 83,967 |
---------------------------
SCHEDULE P - PART 2D - WORKERS' COMPENSATION
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 569,802 * | 571,966 | 579,783 | 594,480 |
| 2. 1984........| 257,767 | 302,199 | 315,934 | 328,998 |
| 3. 1985........| X X X X | 363,260 | 373,847 | 380,559 |
| 4. 1986........| X X X X | X X X X | 478,137 | 477,061 |
| 5. 1987........| X X X X | X X X X | X X X X | 562,000 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
611,432 | 625,561 | 631,427 | 645,931 | 674,118 |
335,328 | 337,963 | 340,330 | 344,038 | 343,799 |
413,441 | 435,823 | 443,604 | 453,448 | 465,043 |
472,576 | 482,185 | 483,505 | 498,753 | 516,220 |
563,012 | 580,798 | 585,372 | 602,634 | 629,881 |
675,143 | 704,615 | 716,215 | 725,393 | 753,077 |
X X X X | 758,045 | 774,893 | 789,110 | 799,679 |
X X X X | X X X X | 782,395 | 799,824 | 807,084 |
X X X X | X X X X | X X X X | 809,256 | 783,207 |
X X X X | X X X X | X X X X | X X X X | 761,487 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
694,498 | 20,380 | 48,567 |
345,695 | 1,896 | 1,657 |
467,110 | 2,067 | 13,662 |
514,465 | (1,755)| 15,712 |
632,240 | 2,359 | 29,606 |
753,028 | (49)| 27,636 |
832,991 | 33,312 | 43,881 |
811,722 | 4,638 | 11,898 |
742,563 | (40,644)| (66,693)|
738,557 | (22,930)| X X X X |
749,240 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | (726)| 125,926 |
---------------------------
SCHEDULE P - PART 2E - COMMERCIAL MULTIPLE PERIL
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 208,712 * | 260,419 | 261,266 | 279,454 |
| 2. 1984........| 238,837 | 236,764 | 236,820 | 234,617 |
| 3. 1985........| X X X X | 310,403 | 310,461 | 302,719 |
| 4. 1986........| X X X X | X X X X | 407,517 | 371,931 |
| 5. 1987........| X X X X | X X X X | X X X X | 450,439 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
*Reported reserves only. Subsequent development relates only to subsequent
payments and reserves.
**Current year less first or second prior year, showing (redundant) or
adverse.
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
296,115 | 309,190 | 311,909 | 321,134 | 341,909 |
248,679 | 262,233 | 268,478 | 275,950 | 276,203 |
317,067 | 333,146 | 338,962 | 341,878 | 340,928 |
359,554 | 347,551 | 343,996 | 341,844 | 340,678 |
430,394 | 407,486 | 400,356 | 391,547 | 388,928 |
522,018 | 499,787 | 503,431 | 495,055 | 489,478 |
X X X X | 544,785 | 547,815 | 540,682 | 533,009 |
X X X X | X X X X | 509,105 | 509,862 | 508,479 |
X X X X | X X X X | X X X X | 519,500 | 494,239 |
X X X X | X X X X | X X X X | X X X X | 583,308 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
349,344 | 7,435 | 28,210 |
273,870 | (2,333)| (2,080)|
341,718 | 790 | (160)|
342,098 | 1,420 | 254 |
390,027 | 1,099 | (1,520)|
489,027 | (451)| (6,028)|
536,915 | 3,906 | (3,767)|
512,657 | 4,178 | 2,795 |
498,069 | 3,830 | (21,431)|
558,211 | (25,097)| X X X X |
620,074 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | (5,223)| (3,727)|
---------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 2F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior ......| 42,020 * | 50,951 | 49,882 | 49,924 |
| 2. 1984........| 1,704 | 4,670 | 5,039 | 5,955 |
| 3. 1985........| X X X X | 6,173 | 5,919 | 7,086 |
| 4. 1986........| X X X X | X X X X | 9,025 | 6,847 |
| 5. 1987........| X X X X | X X X X | X X X X | 10,457 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
48,777 | 50,300 | 49,693 | 49,592 | 48,674 |
5,926 | 6,321 | 6,436 | 6,858 | 6,650 |
9,130 | 9,165 | 9,209 | 9,102 | 9,564 |
6,386 | 7,050 | 6,773 | 6,340 | 6,564 |
11,184 | 11,889 | 11,936 | 12,661 | 13,243 |
10,357 | 12,265 | 15,505 | 11,585 | 16,783 |
X X X X | 8,878 | 6,351 | 8,022 | 10,385 |
X X X X | X X X X | 1,177 | 6,658 | 2,452 |
X X X X | X X X X | X X X X | 1,193 | 3,003 |
X X X X | X X X X | X X X X | X X X X | 1,968 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
| | |
50,815 | 2,141 | 1,223 |
6,938 | 288 | 80 |
8,854 | (710)| (248)|
5,481 | (1,083)| (859)|
11,480 | (1,763)| (1,181)|
14,808 | (1,975)| 3,223 |
7,473 | (2,921)| (558)|
853 | (1,599)| (5,805)|
2,807 | (196)| 1,614 |
4,087 | 2,119 | X X X X |
1,230 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | (5,699)| (2,511)|
---------------------------
SCHEDULE P - PART 2F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 0 * | 0 | 0 | 0 |
| 2. 1984........| 0 | 0 | 0 | 0 |
| 3. 1985........| X X X X | 0 | 0 | 0 |
| 4. 1986........| X X X X | X X X X | 0 | 0 |
| 5. 1987........| X X X X | X X X X | X X X X | 7,919 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
5,386 | 3,679 | 3,682 | 3,226 | 1,607 |
18,686 | 12,717 | 8,030 | 5,847 | 4,733 |
X X X X | 25,958 | 37,947 | 17,476 | 12,504 |
X X X X | X X X X | 26,973 | 20,199 | 17,891 |
X X X X | X X X X | X X X X | 61,958 | 65,410 |
X X X X | X X X X | X X X X | X X X X | 50,145 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
69 | 69 | 69 |
(56)| (56)| (56)|
0 | 0 | 0 |
3 | 3 | 3 |
11,715 | 10,108 | 8,489 |
10,561 | 5,828 | 4,714 |
23,373 | 10,869 | 5,897 |
25,426 | 7,535 | 5,227 |
57,637 | (7,773)| (4,321)|
31,122 | (19,023)| X X X X |
39,528 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 7,560 | 20,022 |
---------------------------
SCHEDULE P - PART 2G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 86,609 * | 72,756 | 68,111 | 75,306 |
| 2. 1984........| 143,588 | 142,438 | 142,169 | 152,006 |
| 3. 1985........| X X X X | 119,021 | 112,659 | 128,003 |
| 4. 1986........| X X X X | X X X X | 109,079 | 96,657 |
| 5. 1987........| X X X X | X X X X | X X X X | 147,612 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
77,036 | 81,870 | 77,391 | 80,716 | 96,943 |
155,877 | 157,067 | 157,475 | 158,659 | 160,788 |
138,729 | 139,679 | 137,569 | 139,459 | 142,820 |
96,366 | 97,146 | 95,419 | 97,792 | 101,032 |
147,685 | 160,557 | 165,232 | 170,071 | 175,572 |
152,058 | 151,628 | 158,295 | 175,538 | 190,504 |
X X X X | 133,068 | 138,956 | 139,754 | 161,398 |
X X X X | X X X X | 137,842 | 133,723 | 141,333 |
X X X X | X X X X | X X X X | 117,227 | 114,716 |
X X X X | X X X X | X X X X | X X X X | 97,177 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
106,386 | 9,443 | 25,670 |
161,610 | 822 | 2,951 |
146,920 | 4,100 | 7,461 |
103,903 | 2,871 | 6,111 |
184,324 | 8,752 | 14,253 |
196,009 | 5,505 | 20,471 |
177,691 | 16,293 | 37,937 |
152,404 | 11,071 | 18,681 |
144,714 | 29,998 | 27,487 |
127,803 | 30,626 | X X X X |
190,406 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 119,481 | 161,022 |
---------------------------
SCHEDULE P - PART 2H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 243,006 * | 259,033 | 275,660 | 334,805 |
| 2. 1984........| 113,840 | 119,154 | 121,588 | 132,953 |
| 3. 1985........| X X X X | 164,402 | 164,880 | 172,254 |
| 4. 1986........| X X X X | X X X X | 259,316 | 256,094 |
| 5. 1987........| X X X X | X X X X | X X X X | 295,805 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
385,666 | 439,821 | 477,617 | 521,474 | 566,758 |
149,982 | 163,554 | 169,204 | 175,661 | 183,282 |
188,675 | 194,994 | 203,647 | 213,508 | 233,160 |
249,989 | 231,532 | 222,130 | 209,537 | 178,102 |
303,656 | 294,768 | 287,552 | 273,009 | 205,621 |
312,816 | 313,861 | 313,798 | 298,664 | 285,256 |
X X X X | 360,786 | 358,984 | 349,228 | 342,921 |
X X X X | X X X X | 246,681 | 238,784 | 218,474 |
X X X X | X X X X | X X X X | 117,072 | 122,731 |
X X X X | X X X X | X X X X | X X X X | 192,666 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
542,377 | (24,381)| 20,903 |
187,078 | 3,796 | 11,417 |
232,875 | (285)| 19,367 |
172,443 | (5,659)| (37,094)|
177,461 | (28,160)| (95,548)|
280,258 | (4,998)| (18,406)|
288,275 | (54,646)| (60,953)|
172,230 | (46,244)| (66,554)|
117,958 | (4,773)| 886 |
131,305 | (61,361)| X X X X |
176,122 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | (226,711)| (225,982)|
---------------------------
SCHEDULE P - PART 2H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
------------------------------------------------------------------------------
| 1 | Incurred Losses and Allocated Expenses Reported at
| | Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
|-------------------|---------------|-------------|-------------|-------------|
| 1. Prior ......| 0 * | 0 | 0 | 0 |
| 2. 1984........| 0 | 0 | 0 | 0 |
| 3. 1985........| X X X X | 0 | 0 | 0 |
| 4. 1986........| X X X X | X X X X | 0 | 0 |
| 5. 1987........| X X X X | X X X X | X X X X | 0 |
| 6. 1988........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993........| X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
*Reported reserves only. Subsequent development relates only to subsequent
payments and reserves.
**Current year less first or second prior year, showing (redundant) or
adverse.
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
X X X X | 0 | 0 | 0 | 0 |
X X X X | X X X X | 0 | 0 | 0 |
X X X X | X X X X | X X X X | 52,840 | 39,844 |
X X X X | X X X X | X X X X | X X X X | 25,661 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
- -------------|-------------|-------------|
223 | 223 | 223 |
(161)| (161)| (161)|
25 | 25 | 25 |
9 | 9 | 9 |
28 | 28 | 28 |
51 | 51 | 51 |
(175)| (175)| (175)|
0 | 0 | 0 |
45,208 | 5,364 | (7,632)|
60,061 | 34,400 | X X X X |
96,924 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 39,764 | (7,632)|
---------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 2I - SPECIAL PROPERTY (FIRE, ALLIED LINES,
INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT)
--------------------------------------------------------------
| | Incurred Losses and Allocated Expenses
| 1 | Reported at Year End (000 omitted)
| |--------------------------------------------
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
|-----------------|---------------|-------------|-------------|
| | | | |
| 1. Prior .....| X X X X | X X X X | X X X X |
| 2. 1992.......| X X X X | X X X X | X X X X |
| 3. 1993.......| X X X X | X X X X | X X X X |
--------------------------------------------------------------
------------------------------------------------------------------------
5 | 6 | 7 | 8 | 9 |
1987 | 1988 | 1989 | 1990 | 1991 |
| | | | |
| | | | |
-------------|-------------|-------------|-------------|---------------|
| | | | |
X X X X | X X X X | X X X X | X X X X | 121,259 * |
X X X X | X X X X | X X X X | X X X X | X X X X |
X X X X | X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------
-------------------------------------------------------
| Development** |
---------------------------|---------------------------|
10 | 11 | 12 | 13 |
1992 | 1993 | One Year | Two Year |
| | | |
| | | |
-------------|-------------|-------------|-------------|
| | | |
170,125 | 163,647 | (6,478)| 42,388 |
198,285 | 235,045 | 36,760 | X X X X |
X X X X | 197,434 | X X X X | X X X X |
---------------------------|-------------|-------------|
4. Totals | 30,282 | 42,388 |
---------------------------
SCHEDULE P - PART 2J - AUTO PHYSICAL DAMAGE
--------------------------------------------------------------
| | Incurred Losses and Allocated Expenses
| 1 | Reported at Year End (000 omitted)
| |--------------------------------------------
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
|-----------------|---------------|-------------|-------------|
| | | | |
| 1. Prior .....| X X X X | X X X X | X X X X |
| 2. 1992.......| X X X X | X X X X | X X X X |
| 3. 1993.......| X X X X | X X X X | X X X X |
--------------------------------------------------------------
------------------------------------------------------------------------
5 | 6 | 7 | 8 | 9 |
1987 | 1988 | 1989 | 1990 | 1991 |
| | | | |
| | | | |
-------------|-------------|-------------|-------------|---------------|
| | | | |
X X X X | X X X X | X X X X | X X X X | 16,183 * |
X X X X | X X X X | X X X X | X X X X | X X X X |
X X X X | X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------
-------------------------------------------------------
| Development** |
---------------------------|---------------------------|
10 | 11 | 12 | 13 |
1992 | 1993 | One Year | Two Year |
| | | |
| | | |
-------------|-------------|-------------|-------------|
| | | |
25,597 | 24,602 | (995)| 8,419 |
125,198 | 128,000 | 2,802 | X X X X |
X X X X | 138,839 | X X X X | X X X X |
---------------------------|-------------|-------------|
4. Totals | 1,807 | 8,419 |
---------------------------
SCHEDULE P - PART 2K - FIDELITY, SURETY, FINANCIAL GUARANTY,
MORTGAGE GUARANTY
--------------------------------------------------------------
| | Incurred Losses and Allocated Expenses
| 1 | Reported at Year End (000 omitted)
| |--------------------------------------------
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
|-----------------|---------------|-------------|-------------|
| | | | |
| 1. Prior .....| X X X X | X X X X | X X X X |
| 2. 1992.......| X X X X | X X X X | X X X X |
| 3. 1993.......| X X X X | X X X X | X X X X |
--------------------------------------------------------------
------------------------------------------------------------------------
5 | 6 | 7 | 8 | 9 |
1987 | 1988 | 1989 | 1990 | 1991 |
| | | | |
| | | | |
-------------|-------------|-------------|-------------|---------------|
| | | | |
X X X X | X X X X | X X X X | X X X X | 80,783 * |
X X X X | X X X X | X X X X | X X X X | X X X X |
X X X X | X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------
-------------------------------------------------------
| Development** |
---------------------------|---------------------------|
10 | 11 | 12 | 13 |
1992 | 1993 | One Year | Two Year |
| | | |
| | | |
-------------|-------------|-------------|-------------|
| | | |
57,561 | 64,421 | 6,860 | (16,362)|
58,169 | 25,531 | (32,638)| X X X X |
X X X X | 73,281 | X X X X | X X X X |
---------------------------|-------------|-------------|
4. Totals | (25,778)| (16,362)|
---------------------------
SCHEDULE P - PART 2L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
--------------------------------------------------------------
| | Incurred Losses and Allocated Expenses
| 1 | Reported at Year End (000 omitted)
| |--------------------------------------------
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
|-----------------|---------------|-------------|-------------|
| | | | |
| 1. Prior .....| X X X X | X X X X | X X X X |
| 2. 1992.......| X X X X | X X X X | X X X X |
| 3. 1993.......| X X X X | X X X X | X X X X |
--------------------------------------------------------------
------------------------------------------------------------------------
5 | 6 | 7 | 8 | 9 |
1987 | 1988 | 1989 | 1990 | 1991 |
| | | | |
| | | | |
-------------|-------------|-------------|-------------|---------------|
| | | | |
X X X X | X X X X | X X X X | X X X X | 40,023 * |
X X X X | X X X X | X X X X | X X X X | X X X X |
X X X X | X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------
-------------------------------------------------------
| Development** |
---------------------------|---------------------------|
10 | 11 | 12 | 13 |
1992 | 1993 | One Year | Two Year |
| | | |
| | | |
-------------|-------------|-------------|-------------|
| | | |
58,592 | 50,738 | (7,854)| 10,715 |
38,992 | 54,191 | 15,199 | X X X X |
X X X X | 38,033 | X X X X | X X X X |
---------------------------|-------------|-------------|
4. Totals | 7,345 | 10,715 |
---------------------------
SCHEDULE P - PART 2M - INTERNATIONAL
--------------------------------------------------------------
| | Incurred Losses and Allocated Expenses
| 1 | Reported at Year End (000 omitted)
| |--------------------------------------------
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
|-----------------|---------------|-------------|-------------|
| | | | |
| 1. Prior .....| 0 * | 0 | 0 |
| 2. 1984.......| 0 | 0 | 0 |
| 3. 1985.......| X X X X | 0 | 0 |
| 4. 1986.......| X X X X | X X X X | 0 |
| 5. 1987.......| X X X X | X X X X | X X X X |
| 6. 1988.......| X X X X | X X X X | X X X X |
| 7. 1989.......| X X X X | X X X X | X X X X |
| 8. 1990.......| X X X X | X X X X | X X X X |
| 9. 1991.......| X X X X | X X X X | X X X X |
| 10. 1992.......| X X X X | X X X X | X X X X |
| 11. 1993.......| X X X X | X X X X | X X X X |
--------------------------------------------------------------
*Reported reserves only. Subsequent development relates only
to subsequent payments and reserves.
**Current year less first or second prior year, showing
(redundant) or adverse.
------------------------------------------------------------------------
5 | 6 | 7 | 8 | 9 |
1987 | 1988 | 1989 | 1990 | 1991 |
| | | | |
| | | | |
-------------|-------------|-------------|-------------|---------------|
| | | | |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
X X X X | 0 | 0 | 0 | 0 |
X X X X | X X X X | 0 | 0 | 0 |
X X X X | X X X X | X X X X | 0 | 61 |
X X X X | X X X X | X X X X | X X X X | 10,948 |
X X X X | X X X X | X X X X | X X X X | X X X X |
X X X X | X X X X | X X X X | X X X X | X X X X |
------------------------------------------------------------------------
-------------------------------------------------------
| Development** |
---------------------------|---------------------------|
10 | 11 | 12 | 13 |
1992 | 1993 | One Year | Two Year |
| | | |
| | | |
-------------|-------------|-------------|-------------|
| | | |
0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 |
(1,961)| 405 | 2,366 | 344 |
9,438 | 10,427 | 989 | (521)|
8,372 | 10,004 | 1,632 | X X X X |
X X X X | 9,589 | X X X X | X X X X |
---------------------------|-------------|-------------|
12. Totals | 4,987 | (177)|
---------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 2N - REINSURANCE A
----------------------------------------------------------------------------
| | Incurred Losses and Allocated Expenses Reported at
| 1 | at Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|-----------------|---------------|-------------|-------------|-------------|
| 1. 1988.......| X X X X | X X X X | X X X X | X X X X |
| 2. 1989.......| X X X X | X X X X | X X X X | X X X X |
| 3. 1990.......| X X X X | X X X X | X X X X | X X X X |
| 4. 1991.......| X X X X | X X X X | X X X X | X X X X |
| 5. 1992.......| X X X X | X X X X | X X X X | X X X X |
| 6. 1993.......| X X X X | X X X X | X X X X | X X X X |
----------------------------------------------------------------------------
- ------------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|---------------|-------------|
10,042 | 8,768 | 3,162 | 996 | 3,137 |
X X X X | 35,851 | 38,479 | 41,796 | 44,570 |
X X X X | X X X X | 35,297 | 40,884 | 40,073 |
X X X X | X X X X | X X X X | 30,666 | 30,631 |
X X X X | X X X X | X X X X | X X X X | 61,557 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ------------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
| | |
- -------------|-------------|-------------|
3,137 | 0 | 2,141 |
44,570 | 0 | 2,774 |
40,073 | 0 | (811)|
30,631 | 0 | (35)|
54,710 | (6,847)| X X X X |
0 | X X X X | X X X X |
- -------------|-------------|-------------|
7. Totals | (6,847)| 4,069 |
---------------------------
SCHEDULE P - PART 2O - REINSURANCE B
----------------------------------------------------------------------------
| | Incurred Losses and Allocated Expenses Reported at
| 1 | at Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|-----------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. 1988.......| X X X X | X X X X | X X X X | X X X X |
| 2. 1989.......| X X X X | X X X X | X X X X | X X X X |
| 3. 1990.......| X X X X | X X X X | X X X X | X X X X |
| 4. 1991.......| X X X X | X X X X | X X X X | X X X X |
| 5. 1992.......| X X X X | X X X X | X X X X | X X X X |
| 6. 1993.......| X X X X | X X X X | X X X X | X X X X |
----------------------------------------------------------------------------
- ------------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|---------------|-------------|
| | | | |
11,497 | 8,156 | (203)| (2,100) | (7,869)|
X X X X | 57,399 | 56,670 | 57,457 | 58,280 |
X X X X | X X X X | 29,696 | 24,884 | 26,354 |
X X X X | X X X X | X X X X | 14,095 | 14,640 |
X X X X | X X X X | X X X X | X X X X | 14,317 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ------------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
| | |
- -------------|-------------|-------------|
| | |
(7,869)| 0 | (5,769)|
58,280 | 0 | 823 |
26,354 | 0 | 1,470 |
14,640 | 0 | 545 |
13,212 | (1,105)| X X X X |
0 | X X X X | X X X X |
- -------------|-------------|-------------|
7. Totals | (1,105)| (2,931)|
---------------------------
SCHEDULE P - PART 2P - REINSURANCE C
----------------------------------------------------------------------------
| | Incurred Losses and Allocated Expenses Reported at
| 1 | at Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|-----------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. 1988.......| X X X X | X X X X | X X X X | X X X X |
| 2. 1989.......| X X X X | X X X X | X X X X | X X X X |
| 3. 1990.......| X X X X | X X X X | X X X X | X X X X |
| 4. 1991.......| X X X X | X X X X | X X X X | X X X X |
| 5. 1992.......| X X X X | X X X X | X X X X | X X X X |
| 6. 1993.......| X X X X | X X X X | X X X X | X X X X |
----------------------------------------------------------------------------
- ------------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|---------------|-------------|
| | | | |
62 | 38 | 61 | 95 | 592 |
X X X X | 159 | 137 | 72 | 57 |
X X X X | X X X X | 115 | 66 | (113)|
X X X X | X X X X | X X X X | 12 | 4 |
X X X X | X X X X | X X X X | X X X X | 16 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ------------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
| | |
- -------------|-------------|-------------|
| | |
592 | 0 | 497 |
57 | 0 | (15)|
(113)| 0 | (179)|
4 | 0 | (8)|
16 | 0 | X X X X |
0 | X X X X | X X X X |
- -------------|-------------|-------------|
7. Totals | 0 | 295 |
---------------------------
SCHEDULE P - PART 2Q - REINSURANCE D
----------------------------------------------------------------------------
| | Incurred Losses and Allocated Expenses Reported at
| 1 | at Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|-----------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .....| 281 | 211 | 39 | 61 |
| 2. 1984.......| 1,288 | 922 | 505 | 1,086 |
| 3. 1985.......| X X X X | 0 | 0 | 0 |
| 4. 1986.......| X X X X | X X X X | (253)| (730)|
| 5. 1987.......| X X X X | X X X X | X X X X | 968 |
----------------------------------------------------------------------------
- ------------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|---------------|-------------|
| | | | |
62 | 26 | 84 | 142 | 719 |
2,114 | 2,545 | 2,985 | 3,091 | 3,462 |
19 | 32 | 147 | 679 | 1,466 |
(730)| (730)| (730)| (664) | (1,444)|
968 | 968 | 969 | 185 | (906)|
- ------------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
| | |
- -------------|-------------|-------------|
| | |
601 | (118)| 459 |
3,464 | 2 | 373 |
1,457 | (9)| 778 |
(1,444)| 0 | (780)|
(906)| 0 | (1,091)|
- -------------|-------------|-------------|
6. Totals | (125)| (261)|
---------------------------
SCHEDULE P - PART 2R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
----------------------------------------------------------------------------
| | Incurred Losses and Allocated Expenses Reported at
| 1 | at Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|-----------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .....| 111,575 * | 138,610 | 149,607 | 168,740 |
| 2. 1984.......| 21,582 | 27,501 | 29,789 | 31,256 |
| 3. 1985.......| X X X X | 26,285 | 25,650 | 25,751 |
| 4. 1986.......| X X X X | X X X X | 47,156 | 37,327 |
| 5. 1987.......| X X X X | X X X X | X X X X | 43,887 |
| 6. 1988.......| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.......| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.......| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.......| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.......| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.......| X X X X | X X X X | X X X X | X X X X |
----------------------------------------------------------------------------
- ------------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|---------------|-------------|
| | | | |
187,624 | 212,648 | 232,972 | 262,124 | 270,701 |
31,021 | 32,810 | 33,096 | 34,689 | 28,085 |
27,033 | 27,660 | 29,725 | 26,656 | 21,731 |
37,214 | 36,728 | 34,437 | 30,087 | 21,014 |
45,474 | 43,528 | 38,650 | 35,969 | 29,554 |
42,818 | 39,900 | 37,838 | 34,348 | 30,407 |
X X X X | 27,211 | 27,644 | 27,935 | 19,491 |
X X X X | X X X X | 16,649 | 19,172 | 19,950 |
X X X X | X X X X | X X X X | 12,736 | 12,233 |
X X X X | X X X X | X X X X | X X X X | 10,913 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ------------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
| | |
- -------------|-------------|-------------|
| | |
312,194 | 41,493 | 50,070 |
27,619 | (466)| (7,070)|
21,395 | (336)| (5,261)|
17,914 | (3,100)| (12,173)|
28,320 | (1,234)| (7,649)|
42,225 | 11,818 | 7,877 |
20,039 | 548 | (7,896)|
19,895 | (55)| 723 |
14,562 | 2,329 | 1,826 |
13,623 | 2,710 | X X X X |
24,052 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | 53,707 | 20,447 |
---------------------------
SCHEDULE P - PART 2R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
----------------------------------------------------------------------------
| | Incurred Losses and Allocated Expenses Reported at
| 1 | at Year End (000 omitted)
| |----------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|-----------------|---------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .....| 0 * | 0 | 0 | 0 |
| 2. 1984.......| 0 | 0 | 0 | 0 |
| 3. 1985.......| X X X X | 0 | 0 | 0 |
| 4. 1986.......| X X X X | X X X X | 0 | 0 |
| 5. 1987.......| X X X X | X X X X | X X X X | 0 |
| 6. 1988.......| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.......| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.......| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.......| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.......| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.......| X X X X | X X X X | X X X X | X X X X |
----------------------------------------------------------------------------
*Reported reserves only. Subsequent development relates only to subsequent
payments and reserves.
**Current year less first or second prior year, showing (redundant) or
adverse.
- ------------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|---------------|-------------|
| | | | |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
X X X X | 0 | 0 | 0 | 0 |
X X X X | X X X X | 0 | 0 | 0 |
X X X X | X X X X | X X X X | 0 | 0 |
X X X X | X X X X | X X X X | X X X X | 0 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ------------------------------------------------------------------------
- -----------------------------------------
| Development** |
- -------------|---------------------------|
11 | 12 | 13 |
1993 | One Year | Two Year |
| | |
| | |
- -------------|-------------|-------------|
| | |
30 | 30 | 30 |
(24)| (24)| (24)|
0 | 0 | 0 |
0 | 0 | 0 |
2 | 2 | 2 |
8 | 8 | 8 |
(19)| (19)| (19)|
0 | 0 | 0 |
0 | 0 | 0 |
0 | 0 | X X X X |
1,996 | X X X X | X X X X |
- -------------|-------------|-------------|
12. Totals | (3)| (3)|
---------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 3A - HOMEOWNERS/FARMOWNERS
-----------------------------------------------------------------------------
| 1 | Cumulative Paid Losses and Allocated Expenses at
| | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 18,452 | 33,108 | 44,024 |
| 2. 1984.........| 144,708 | 198,979 | 209,177 | 217,705 |
| 3. 1985.........| X X X X | 172,863 | 234,296 | 243,489 |
| 4. 1986.........| X X X X | X X X X | 138,456 | 180,026 |
| 5. 1987.........| X X X X | X X X X | X X X X | 118,359 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
49,808 | 52,138 | 53,442 | 54,302 | 58,211 |
220,838 | 222,316 | 223,111 | 223,613 | 224,398 |
248,341 | 250,549 | 252,525 | 252,608 | 252,970 |
188,276 | 193,000 | 195,625 | 196,930 | 197,889 |
155,390 | 163,776 | 168,599 | 171,573 | 173,127 |
119,538 | 157,056 | 167,784 | 171,953 | 175,480 |
X X X X | 97,570 | 140,505 | 149,605 | 154,652 |
X X X X | X X X X | 101,685 | 140,060 | 148,688 |
X X X X | X X X X | X X X X | 135,038 | 176,215 |
X X X X | X X X X | X X X X | X X X X | 138,676 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss | Without |
| Payment |Loss Payment |
- -------------|-------------|-------------|
| | |
55,199 | 3 | 2 |
224,124 | 2 | 2 |
253,646 | 5 | 8 |
198,763 | 9 | 4 |
172,648 | 11 | 26 |
180,343 | 18 | 31 |
159,238 | 24,259 | 2,674 |
151,939 | 59,547 | 7,290 |
182,281 | 67,566 | 8,109 |
180,241 | 62,503 | 7,810 |
135,664 | 48,100 | 5,647 |
- -----------------------------------------
SCHEDULE P - PART 3B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
-----------------------------------------------------------------------------
| 1 | Cumulative Paid Losses and Allocated Expenses at
| | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 107,102 | 166,778 | 198,864 |
| 2. 1984.........| 101,284 | 212,382 | 288,394 | 325,695 |
| 3. 1985.........| X X X X | 109,917 | 231,700 | 304,814 |
| 4. 1986.........| X X X X | X X X X | 114,171 | 236,693 |
| 5. 1987.........| X X X X | X X X X | X X X X | 106,647 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
216,708 | 234,139 | 239,597 | 244,183 | 249,527 |
345,830 | 355,180 | 359,565 | 361,512 | 363,575 |
343,340 | 364,887 | 375,290 | 379,519 | 380,029 |
303,120 | 340,019 | 359,483 | 367,828 | 372,287 |
210,903 | 280,051 | 315,981 | 335,955 | 340,554 |
96,134 | 191,476 | 250,602 | 283,351 | 299,045 |
X X X X | 82,735 | 177,779 | 229,842 | 257,095 |
X X X X | X X X X | 77,350 | 158,644 | 207,161 |
X X X X | X X X X | X X X X | 67,249 | 153,242 |
X X X X | X X X X | X X X X | X X X X | 73,216 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss | Without |
| Payment |Loss Payment |
- -------------|-------------|-------------|
| | |
250,927 | 62 | 16 |
364,941 | 17 | 3 |
381,422 | 31 | 6 |
375,878 | 65 | 22 |
345,486 | 93 | 37 |
310,285 | 173 | 87 |
277,916 | 66,002 | 19,688 |
227,231 | 60,946 | 17,691 |
203,625 | 63,148 | 16,334 |
157,206 | 55,148 | 13,088 |
85,701 | 32,690 | 7,855 |
- -----------------------------------------
SCHEDULE P - PART 3C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
-----------------------------------------------------------------------------
| 1 | Cumulative Paid Losses and Allocated Expenses at
| | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 67,322 | 110,265 | 132,153 |
| 2. 1984.........| 36,034 | 70,559 | 103,472 | 126,142 |
| 3. 1985.........| X X X X | 30,417 | 74,840 | 110,928 |
| 4. 1986.........| X X X X | X X X X | 29,223 | 69,332 |
| 5. 1987.........| X X X X | X X X X | X X X X | 30,101 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
147,475 | 147,961 | 154,414 | 157,869 | 162,314 |
142,883 | 149,340 | 152,212 | 155,475 | 158,588 |
143,044 | 161,157 | 173,582 | 181,209 | 188,465 |
107,530 | 139,655 | 158,836 | 170,723 | 179,735 |
68,540 | 110,949 | 139,217 | 158,072 | 177,462 |
32,438 | 80,371 | 129,560 | 163,244 | 185,138 |
X X X X | 26,991 | 71,844 | 113,322 | 147,916 |
X X X X | X X X X | 25,174 | 64,456 | 94,579 |
X X X X | X X X X | X X X X | 20,115 | 66,512 |
X X X X | X X X X | X X X X | X X X X | 25,299 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss | Without |
| Payment |Loss Payment |
- -------------|-------------|-------------|
| | |
163,604 | 21 | 4 |
159,077 | 6 | 0 |
191,132 | 10 | 4 |
183,196 | 26 | 16 |
184,038 | 37 | 61 |
195,424 | 94 | 114 |
170,693 | 24,588 | 9,587 |
116,623 | 20,595 | 7,767 |
93,832 | 16,434 | 6,357 |
53,490 | 14,787 | 5,037 |
26,498 | 9,871 | 3,096 |
- -----------------------------------------
SCHEDULE P - PART 3D - WORKERS' COMPENSATION
-----------------------------------------------------------------------------
| 1 | Cumulative Paid Losses and Allocated Expenses at
| | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 82,151 | 172,382 | 229,362 |
| 2. 1984.........| 63,034 | 150,953 | 203,181 | 236,237 |
| 3. 1985.........| X X X X | 87,694 | 206,862 | 270,859 |
| 4. 1986.........| X X X X | X X X X | 99,342 | 232,204 |
| 5. 1987.........| X X X X | X X X X | X X X X | 124,662 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
284,656 | 325,484 | 361,573 | 392,709 | 424,716 |
259,875 | 276,325 | 288,394 | 298,449 | 305,071 |
318,116 | 355,089 | 379,213 | 397,138 | 417,901 |
311,434 | 367,252 | 404,700 | 431,101 | 455,053 |
289,152 | 416,831 | 481,625 | 526,659 | 557,061 |
160,218 | 357,615 | 484,438 | 568,687 | 631,295 |
X X X X | 158,068 | 394,025 | 536,559 | 638,453 |
X X X X | X X X X | 170,441 | 396,089 | 550,561 |
X X X X | X X X X | X X X X | 160,391 | 371,676 |
X X X X | X X X X | X X X X | X X X X | 152,267 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss | Without |
| Payment |Loss Payment |
- -------------|-------------|-------------|
| | |
441,466 | 231 | 57 |
308,760 | 63 | 19 |
425,786 | 68 | 6 |
468,423 | 120 | 26 |
575,219 | 218 | 45 |
666,310 | 371 | 69 |
704,244 | 246,442 | 24,266 |
642,504 | 218,517 | 20,668 |
498,961 | 164,070 | 14,086 |
350,619 | 144,029 | 12,216 |
151,757 | 93,668 | 9,461 |
- -----------------------------------------
SCHEDULE P - PART 3E - COMMERCIAL MULTIPLE PERIL
-----------------------------------------------------------------------------
| 1 | Cumulative Paid Losses and Allocated Expenses at
| | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 74,686 | 142,246 | 187,525 |
| 2. 1984.........| 79,864 | 135,093 | 168,970 | 200,958 |
| 3. 1985.........| X X X X | 113,406 | 190,856 | 229,730 |
| 4. 1986.........| X X X X | X X X X | 113,802 | 188,036 |
| 5. 1987.........| X X X X | X X X X | X X X X | 118,421 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
Note: Net of salvage and subrogation received.
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
225,385 | 260,082 | 270,867 | 292,460 | 313,397 |
225,179 | 242,113 | 254,278 | 264,808 | 268,126 |
270,425 | 298,087 | 316,912 | 325,299 | 332,411 |
234,630 | 269,564 | 299,471 | 315,984 | 328,265 |
209,092 | 264,243 | 306,436 | 336,317 | 356,266 |
165,406 | 272,733 | 341,170 | 391,047 | 425,566 |
X X X X | 171,235 | 306,152 | 376,189 | 430,034 |
X X X X | X X X X | 162,381 | 288,198 | 358,059 |
X X X X | X X X X | X X X X | 169,879 | 281,223 |
X X X X | X X X X | X X X X | X X X X | 225,443 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss | Without |
| Payment |Loss Payment |
- -------------|-------------|-------------|
| | |
326,869 | 1 | 5 |
270,178 | 8 | 20 |
336,623 | 4 | 17 |
334,670 | 7 | 38 |
371,073 | 21 | 64 |
454,736 | 53 | 114 |
469,244 | 71,599 | 27,649 |
418,927 | 70,253 | 27,716 |
350,947 | 69,958 | 28,241 |
304,943 | 69,307 | 27,490 |
226,758 | 56,408 | 18,753 |
- -----------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 3F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 4,529 | 11,962 | 18,712 |
| 2. 1984.........| (265)| 58 | 1,084 | 2,268 |
| 3. 1985.........| X X X X | 124 | 1,128 | 2,720 |
| 4. 1986.........| X X X X | X X X X | 275 | 1,052 |
| 5. 1987.........| X X X X | X X X X | X X X X | 958 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
25,004 | 29,928 | 34,843 | 39,168 | 41,575 |
3,241 | 4,176 | 5,247 | 5,376 | 5,432 |
4,706 | 6,242 | 7,484 | 8,001 | 8,545 |
2,370 | 3,381 | 4,471 | 4,958 | 5,430 |
3,231 | 5,544 | 7,795 | 10,150 | 11,202 |
679 | 4,560 | 9,488 | 12,629 | 14,597 |
X X X X | 1,113 | 3,307 | 5,400 | 7,326 |
X X X X | X X X X | 30 | 288 | 1,015 |
X X X X | X X X X | X X X X | 20 | 66 |
X X X X | X X X X | X X X X | X X X X | 144 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
45,231 | 0 | 0 |
5,703 | 0 | 0 |
8,666 | 0 | 0 |
5,480 | 0 | 0 |
11,148 | 0 | 0 |
14,585 | 0 | 0 |
7,234 | 217 | 579 |
(1,433)| 68 | 287 |
610 | 16 | 24 |
438 | 16 | 43 |
71 | 3 | 24 |
- -----------------------------------------
SCHEDULE P - PART 3F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 0 | 0 | 0 |
| 2. 1984.........| 0 | 0 | 0 | 0 |
| 3. 1985.........| X X X X | 0 | 0 | 0 |
| 4. 1986.........| X X X X | X X X X | 0 | 0 |
| 5. 1987.........| X X X X | X X X X | X X X X | 33 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
140 | 281 | 261 | 309 | 877 |
162 | 591 | 1,299 | 1,760 | 2,121 |
X X X X | 428 | 1,518 | 4,589 | 5,721 |
X X X X | X X X X | 934 | 2,882 | 5,415 |
X X X X | X X X X | X X X X | 10,449 | 22,751 |
X X X X | X X X X | X X X X | X X X X | 3,276 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
32 | 0 | 0 |
(26)| 0 | 0 |
0 | 0 | 0 |
1 | 0 | 0 |
4,791 | 0 | 0 |
4,525 | 0 | 0 |
13,478 | 62 | 452 |
12,355 | 81 | 783 |
32,094 | 209 | 624 |
7,101 | 103 | 609 |
299 | 17 | 50 |
- -----------------------------------------
SCHEDULE P - PART 3G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 19,688 | 35,539 | 34,285 |
| 2. 1984.........| 71,612 | 104,884 | 120,401 | 132,118 |
| 3. 1985.........| X X X X | 42,456 | 85,674 | 102,399 |
| 4. 1986.........| X X X X | X X X X | 31,851 | 45,609 |
| 5. 1987.........| X X X X | X X X X | X X X X | 38,519 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
46,268 | 51,516 | 55,261 | 59,914 | 78,515 |
141,267 | 148,347 | 151,271 | 154,642 | 160,119 |
115,520 | 125,286 | 131,387 | 135,035 | 140,891 |
65,275 | 79,969 | 85,800 | 92,477 | 98,961 |
88,600 | 129,596 | 151,393 | 162,427 | 173,031 |
42,329 | 95,876 | 138,663 | 162,758 | 183,186 |
X X X X | 34,205 | 82,336 | 116,307 | 148,306 |
X X X X | X X X X | 31,802 | 82,168 | 121,173 |
X X X X | X X X X | X X X X | 42,931 | 94,283 |
X X X X | X X X X | X X X X | X X X X | 37,744 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
89,528 | X X X X | X X X X |
157,596 | X X X X | X X X X |
138,738 | X X X X | X X X X |
99,880 | X X X X | X X X X |
180,429 | X X X X | X X X X |
190,532 | X X X X | X X X X |
170,590 | X X X X | X X X X |
144,086 | X X X X | X X X X |
113,350 | X X X X | X X X X |
78,572 | X X X X | X X X X |
59,336 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 51,941 | 136,557 | 197,235 |
| 2. 1984.........| 20,284 | 36,491 | 62,495 | 85,158 |
| 3. 1985.........| X X X X | 11,025 | 47,289 | 71,205 |
| 4. 1986.........| X X X X | X X X X | 6,104 | 27,018 |
| 5. 1987.........| X X X X | X X X X | X X X X | 15,965 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
256,178 | 313,958 | 357,854 | 399,334 | 470,730 |
99,297 | 116,457 | 128,041 | 142,396 | 158,174 |
99,065 | 128,004 | 153,780 | 176,593 | 199,412 |
47,872 | 72,398 | 95,700 | 115,971 | 144,443 |
36,287 | 60,614 | 81,092 | 100,727 | 130,099 |
15,160 | 43,035 | 86,045 | 126,154 | 161,974 |
X X X X | 25,451 | 63,015 | 108,281 | 161,844 |
X X X X | X X X X | 9,261 | 32,905 | 51,464 |
X X X X | X X X X | X X X X | 9,995 | 31,591 |
X X X X | X X X X | X X X X | X X X X | 13,869 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
477,595 | 1,406 | 905 |
163,466 | 376 | 276 |
206,190 | 631 | 641 |
153,620 | 458 | 480 |
139,826 | 506 | 502 |
196,727 | 365 | 361 |
190,427 | 9,782 | 10,959 |
61,235 | 9,031 | 8,822 |
39,465 | 7,228 | 6,567 |
57,560 | 5,726 | 4,205 |
39,984 | 2,401 | 2,253 |
- -----------------------------------------
SCHEDULE P - PART 3H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 0 | 0 | 0 |
| 2. 1984.........| 0 | 0 | 0 | 0 |
| 3. 1985.........| X X X X | 0 | 0 | 0 |
| 4. 1986.........| X X X X | X X X X | 0 | 0 |
| 5. 1987.........| X X X X | X X X X | X X X X | 0 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
Note: Net of salvage and subrogation received.
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
X X X X | 0 | 0 | 0 | 0 |
X X X X | X X X X | 0 | 0 | 0 |
X X X X | X X X X | X X X X | 3,040 | 11,088 |
X X X X | X X X X | X X X X | X X X X | 6,552 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- ------------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims | Claims |
11 | Closed | Closed |
1993 | With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
(8)| 0 | 0 |
9 | 0 | 0 |
4 | 0 | 0 |
4 | 0 | 0 |
21 | 0 | 0 |
45 | 0 | 0 |
(75)| 18 | 46 |
0 | 30 | 108 |
25,747 | 141 | 357 |
15,785 | 63 | 192 |
711 | 279 | 98 |
- -----------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 3I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,
EARTHQUAKE, GLASS, BURGLARY AND THEFT)
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
X X X X | X X X X | X X X X | 000 | 136,152 |
X X X X | X X X X | X X X X | X X X X | 113,230 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims |Claims Closed|
11 | Closed With | Without |
1993 |Loss Payment |Loss Payment |
| | |
- -------------|-------------|-------------|
| | |
154,907 | X X X X | X X X X |
208,284 | X X X X | X X X X |
105,963 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3J - AUTO PHYSICAL DAMAGE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
X X X X | X X X X | X X X X | 000 | 19,501 |
X X X X | X X X X | X X X X | X X X X | 110,499 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims |Claims Closed|
11 | Closed With | Without |
1993 |Loss Payment |Loss Payment |
| | |
- -------------|-------------|-------------|
| | |
22,949 | 191,563 | 21,735 |
124,440 | 133,625 | 12,062 |
127,269 | 89,629 | 7,817 |
- -----------------------------------------
SCHEDULE P - PART 3K - FIDELITY, SURETY, FINANCIAL GUARANTY,
MORTGAGE GUARANTY
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
X X X X | X X X X | X X X X | 000 | 23,300 |
X X X X | X X X X | X X X X | X X X X | 13,951 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims |Claims Closed|
11 | Closed With | Without |
1993 |Loss Payment |Loss Payment |
| | |
- -------------|-------------|-------------|
| | |
36,322 | X X X X | X X X X |
16,519 | X X X X | X X X X |
24,373 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| X X X X | X X X X | X X X X | X X X X |
| 2. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
X X X X | X X X X | X X X X | 000 | 50,249 |
X X X X | X X X X | X X X X | X X X X | 17,734 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims |Claims Closed|
11 | Closed With | Without |
1993 |Loss Payment |Loss Payment |
| | |
- -------------|-------------|-------------|
| | |
50,320 | X X X X | X X X X |
51,632 | X X X X | X X X X |
15,890 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3M - INTERNATIONAL
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | | | | |
| Losses Were | 2 | 3 | 4 | 5 |
| Incurred | 1984 | 1985 | 1986 | 1987 |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 0 | 0 | 0 |
| 2. 1984.........| 0 | 0 | 0 | 0 |
| 3. 1985.........| X X X X | 0 | 0 | 0 |
| 4. 1986.........| X X X X | X X X X | 0 | 0 |
| 5. 1987.........| X X X X | X X X X | X X X X | 0 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
Note: Net of salvage and subrogation received.
- ----------------------------------------------------------------------
| | | | |
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
X X X X | 0 | 0 | 0 | 0 |
X X X X | X X X X | (25,938)| (18,824)| (11,144)|
X X X X | X X X X | X X X X | 3,151 | 5,755 |
X X X X | X X X X | X X X X | X X X X | 4,100 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
| Claims |Claims Closed|
11 | Closed With | Without |
1993 |Loss Payment |Loss Payment |
| | |
- -------------|-------------|-------------|
| | |
0 | X X X X | X X X X |
0 | X X X X | X X X X |
0 | X X X X | X X X X |
0 | X X X X | X X X X |
0 | X X X X | X X X X |
0 | X X X X | X X X X |
0 | X X X X | X X X X |
(6,695)| X X X X | X X X X |
6,674 | X X X X | X X X X |
6,060 | X X X X | X X X X |
2,731 | X X X X | X X X X |
- -----------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 3N - REINSURANCE A
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| 1. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 2. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 4. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 5. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 6. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
1,190 | 5,328 | (37)| (1,400)| 3,137 |
X X X X | 16,100 | 32,169 | 35,293 | 44,570 |
X X X X | X X X X | 17,223 | 29,974 | 40,073 |
X X X X | X X X X | X X X X | 12,762 | 30,631 |
X X X X | X X X X | X X X X | X X X X | 54,710 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
11 | Claims | Claims |
1993 | Closed | Closed |
| With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
3,137 | X X X X | X X X X |
44,570 | X X X X | X X X X |
40,073 | X X X X | X X X X |
30,631 | X X X X | X X X X |
54,710 | X X X X | X X X X |
0 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3O - REINSURANCE B
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 2. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 4. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 5. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 6. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
668 | 2,828 | 4,472 | 5,250 | (7,869)|
X X X X | 42,287 | 43,729 | 44,323 | 58,280 |
X X X X | X X X X | 11,335 | 13,303 | 26,354 |
X X X X | X X X X | X X X X | 121 | 14,640 |
X X X X | X X X X | X X X X | X X X X | 13,212 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
11 | Claims | Claims |
1993 | Closed | Closed |
| With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
(7,869)| X X X X | X X X X |
58,280 | X X X X | X X X X |
26,354 | X X X X | X X X X |
14,640 | X X X X | X X X X |
13,212 | X X X X | X X X X |
0 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3P - REINSURANCE C
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 2. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 3. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 4. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 5. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 6. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
0 | 0 | 38 | 38 | 592 |
X X X X | 0 | 1 | (2)| 57 |
X X X X | X X X X | 7 | 12 | (113)|
X X X X | X X X X | X X X X | 1 | 4 |
X X X X | X X X X | X X X X | X X X X | 16 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
11 | Claims | Claims |
1993 | Closed | Closed |
| With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
592 | X X X X | X X X X |
57 | X X X X | X X X X |
(113)| X X X X | X X X X |
4 | X X X X | X X X X |
16 | X X X X | X X X X |
0 | X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3Q - REINSURANCE D
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 0 | 2 | 4 |
| 2. 1984.........| 0 | 0 | 199 | 795 |
| 3. 1985.........| X X X X | 0 | 0 | 0 |
| 4. 1986.........| X X X X | X X X X | (332)| (730)|
| 5. 1987.........| X X X X | X X X X | X X X X | 968 |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
5 | 25 | 26 | 141 | 704 |
1,783 | 2,272 | 2,817 | 2,934 | 3,462 |
0 | 13 | 80 | 668 | 1,466 |
(730)| (730)| (730)| (664)| (1,444)|
968 | 968 | 968 | 184 | (906)|
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
11 | Claims | Claims |
1993 | Closed | Closed |
| With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
604 | X X X X | X X X X |
3,462 | X X X X | X X X X |
1,456 | X X X X | X X X X |
(1,444)| X X X X | X X X X |
(906)| X X X X | X X X X |
- -----------------------------------------
SCHEDULE P - PART 3R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 50,055 | 65,703 | 92,912 |
| 2. 1984.........| 793 | 2,527 | 5,708 | 10,178 |
| 3. 1985.........| X X X X | 453 | 2,283 | 7,533 |
| 4. 1986.........| X X X X | X X X X | 506 | 1,752 |
| 5. 1987.........| X X X X | X X X X | X X X X | 2,243 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
118,963 | 146,073 | 179,709 | 207,775 | 219,949 |
14,439 | 18,821 | 23,479 | 28,109 | 24,860 |
10,517 | 13,243 | 17,889 | 18,188 | 17,484 |
4,574 | 7,385 | 13,145 | 17,785 | 13,737 |
3,550 | 8,479 | 9,543 | 15,142 | 18,458 |
2,206 | 5,319 | 8,812 | 14,440 | 18,922 |
X X X X | 972 | 2,518 | 5,121 | 7,923 |
X X X X | X X X X | 571 | 2,207 | 3,701 |
X X X X | X X X X | X X X X | 564 | 1,013 |
X X X X | X X X X | X X X X | X X X X | 300 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
11 | Claims | Claims |
1993 | Closed | Closed |
| With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
267,062 | 0 | 0 |
25,986 | 0 | 0 |
19,515 | 0 | 1 |
14,635 | 0 | 0 |
20,846 | 0 | 0 |
32,436 | 2 | 5 |
9,282 | 152 | 278 |
8,313 | 71 | 101 |
2,968 | 118 | 113 |
2,092 | 193 | 60 |
288 | 23 | 20 |
- -----------------------------------------
SCHEDULE P - PART 3R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
-----------------------------------------------------------------------------
| | Cumulative Paid Losses and Allocated Expenses at
| 1 | Year End (000 omitted)
| |--------------------------------------------------------
| Years in Which | 2 | 3 | 4 | 5 |
| Losses Were | 1984 | 1985 | 1986 | 1987 |
| Incurred | | | | |
| | | | | |
|--------------------|-------------|-------------|-------------|-------------|
| | | | | |
| 1. Prior .......| 000 | 0 | 0 | 0 |
| 2. 1984.........| 0 | 0 | 0 | 0 |
| 3. 1985.........| X X X X | 0 | 0 | 0 |
| 4. 1986.........| X X X X | X X X X | 0 | 0 |
| 5. 1987.........| X X X X | X X X X | X X X X | 0 |
| 6. 1988.........| X X X X | X X X X | X X X X | X X X X |
| 7. 1989.........| X X X X | X X X X | X X X X | X X X X |
| 8. 1990.........| X X X X | X X X X | X X X X | X X X X |
| 9. 1991.........| X X X X | X X X X | X X X X | X X X X |
| 10. 1992.........| X X X X | X X X X | X X X X | X X X X |
| 11. 1993.........| X X X X | X X X X | X X X X | X X X X |
-----------------------------------------------------------------------------
Note: Net of salvage and subrogation received.
- ----------------------------------------------------------------------
6 | 7 | 8 | 9 | 10 |
1988 | 1989 | 1990 | 1991 | 1992 |
| | | | |
| | | | |
- -------------|-------------|-------------|-------------|-------------|
| | | | |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | 0 |
X X X X | 0 | 0 | 0 | 0 |
X X X X | X X X X | 0 | 0 | 0 |
X X X X | X X X X | X X X X | 0 | 0 |
X X X X | X X X X | X X X X | X X X X | 0 |
X X X X | X X X X | X X X X | X X X X | X X X X |
- ----------------------------------------------------------------------
- -----------------------------------------
| 12 | 13 |
- -------------| Number of | Number of |
11 | Claims | Claims |
1993 | Closed | Closed |
| With Loss |Without Loss |
| Payment | Payment |
- -------------|-------------|-------------|
| | |
30 | 0 | 0 |
(24)| 0 | 0 |
0 | 0 | 0 |
0 | 0 | 0 |
1 | 0 | 0 |
8 | 0 | 0 |
(15)| 0 | 1 |
0 | 0 | 3 |
0 | 0 | 2 |
0 | 0 | 2 |
12 | 1 | 6 |
- -----------------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 4A - HOMEOWNERS/FARMOWNERS
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 13,513 | 6,394 | 2,832 |
| 2. 1984................| 37,320 | 5,226 | 1,817 |
| 3. 1985................| X X X X | 37,436 | 5,210 |
| 4. 1986................| X X X X | X X X X | 39,849 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
1,301 | 997 | 574 | 409 | 521
922 | 537 | 306 | 169 | 238
1,455 | 883 | 448 | 346 | 229
11,836 | 4,805 | 2,377 | 557 | 421
38,365 | 15,331 | 5,892 | 1,510 | 792
X X X X | 37,737 | 16,221 | 3,104 | 1,958
X X X X | X X X X | 44,160 | 7,270 | 4,203
X X X X | X X X X | X X X X | 24,259 | 4,113
X X X X | X X X X | X X X X | X X X X | 21,598
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 163 | 144 |
| 138 | 26 |
| 129 | 144 |
| 145 | 134 |
| 167 | 152 |
| 548 | 175 |
| 1,153 | 569 |
| 2,342 | 1,151 |
| 3,949 | 2,318 |
| 16,882 | 3,855 |
| X X X X | 17,681 |
- --------------------------------
SCHEDULE P - PART 4B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 36,824 | 29,668 | 10,548 |
| 2. 1984................| 90,374 | 26,698 | 10,106 |
| 3. 1985................| X X X X | 118,405 | 28,156 |
| 4. 1986................| X X X X | X X X X | 126,670 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
4,379 | 2,253 | 1,920 | 811 | 876
3,498 | 1,433 | 2,411 | 1,437 | 496
8,765 | 3,463 | 4,566 | 2,678 | 1,197
38,940 | 12,271 | 12,189 | 7,260 | 1,839
117,022 | 40,823 | 17,752 | 10,810 | 4,590
X X X X | 102,749 | 35,576 | 15,353 | 6,458
X X X X | X X X X | 69,984 | 42,316 | 14,129
X X X X | X X X X | X X X X | 79,424 | 28,302
X X X X | X X X X | X X X X | X X X X | 56,067
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 615 | 366 |
| 324 | 270 |
| 489 | 336 |
| 887 | 508 |
| 1,561 | 1,019 |
| 3,226 | 1,836 |
| 3,861 | 3,026 |
| 8,467 | 5,992 |
| 15,123 | 4,695 |
| 78,568 | 21,546 |
| X X X X | 110,999 |
- --------------------------------
SCHEDULE P - PART 4C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 15,394 | 10,494 | 4,833 |
| 2. 1984................| 32,895 | 9,579 | 4,493 |
| 3. 1985................| X X X X | 35,315 | 12,230 |
| 4. 1986................| X X X X | X X X X | 57,020 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
2,276 | 1,511 | 1,868 | 1,082 | 551
1,879 | 966 | 1,899 | 1,541 | 522
4,890 | 2,722 | 1,964 | 2,312 | 1,722
22,557 | 10,128 | 6,742 | 4,322 | 2,823
62,981 | 28,411 | 12,734 | 7,996 | 4,967
X X X X | 64,751 | 31,248 | 9,070 | 5,101
X X X X | X X X X | 64,923 | 22,574 | 8,198
X X X X | X X X X | X X X X | 53,460 | 19,140
X X X X | X X X X | X X X X | X X X X | 40,050
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 258 | 175 |
| 193 | 94 |
| 510 | 201 |
| 830 | 530 |
| 714 | 885 |
| 1,634 | 804 |
| 2,645 | 1,980 |
| 8,040 | 2,713 |
| 13,152 | 8,190 |
| 56,235 | 18,398 |
| X X X X | 63,015 |
- --------------------------------
SCHEDULE P - PART 4D - WORKERS' COMPENSATION
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 54,785 | 53,276 | 27,301 |
| 2. 1984................| 46,541 | 16,385 | 8,181 |
| 3. 1985................| X X X X | 75,532 | 17,474 |
| 4. 1986................| X X X X | X X X X | 129,077 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
29,244 | 25,294 | 20,861 | 14,942 | 11,162
9,417 | 7,863 | 6,212 | 5,390 | 5,593
12,816 | 10,234 | 9,523 | 6,033 | 5,393
35,801 | 16,289 | 18,237 | 7,155 | 6,196
141,569 | 51,553 | 26,472 | 13,861 | 7,375
X X X X | 194,846 | 63,338 | 27,378 | 13,555
X X X X | X X X X | 235,722 | 92,241 | 30,029
X X X X | X X X X | X X X X | 285,795 | 106,508
X X X X | X X X X | X X X X | X X X X | 348,314
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 28,885 | 24,702 |
| 5,061 | 5,353 |
| 5,052 | 5,335 |
| 7,060 | 5,341 |
| 10,297 | 7,459 |
| 15,189 | 10,138 |
| 21,826 | 11,387 |
| 64,073 | 24,503 |
| 176,962 | 60,214 |
| 347,087 | 159,058 |
| X X X X | 336,124 |
- --------------------------------
SCHEDULE P - PART 4E - COMMERCIAL MULTIPLE PERIL
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 46,430 | 33,236 | 16,304 |
| 2. 1984................| 95,550 | 23,652 | 10,538 |
| 3. 1985................| X X X X | 115,328 | 28,581 |
| 4. 1986................| X X X X | X X X X | 191,308 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
10,671 | 8,361 | 7,139 | 3,940 | 2,599
6,576 | 3,953 | 3,299 | 2,897 | 1,406
10,921 | 8,376 | 6,514 | 4,839 | 2,664
67,069 | 30,488 | 18,778 | 9,631 | 5,512
211,701 | 93,417 | 48,496 | 28,843 | 14,136
X X X X | 229,445 | 87,053 | 58,683 | 32,407
X X X X | X X X X | 223,514 | 98,912 | 55,530
X X X X | X X X X | X X X X | 210,464 | 92,933
X X X X | X X X X | X X X X | X X X X | 209,325
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 405 | 139 |
| 387 | 278 |
| 567 | 397 |
| 1,597 | 587 |
| 8,009 | 1,699 |
| 15,564 | 6,329 |
| 22,204 | 12,906 |
| 46,794 | 18,923 |
| 73,804 | 31,375 |
| 204,500 | 98,773 |
| X X X X | 197,163 |
- --------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 4F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 25,442 | 26,260 | 19,239 |
| 2. 1984................| 1,179 | 1,160 | 831 |
| 3. 1985................| X X X X | 4,266 | 1,149 |
| 4. 1986................| X X X X | X X X X | 6,207 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
14,866 | 12,587 | 10,354 | 8,952 | 7,755
1,258 | 1,196 | 1,012 | 870 | 986
322 | 532 | 852 | 747 | 713
2,683 | 2,172 | 994 | 593 | 615
5,452 | 3,143 | 1,933 | 1,302 | 540
X X X X | 4,374 | 2,520 | 957 | 667
X X X X | X X X X | 4,726 | 2,549 | 879
X X X X | X X X X | X X X X | 3,283 | 1,208
X X X X | X X X X | X X X X | X X X X | 4,780
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 3,104 | 1,454 |
| 976 | 859 |
| 854 | 173 |
| 465 | 1 |
| 495 | 122 |
| 227 | 27 |
| 300 | 23 |
| 1,182 | 2,034 |
| 1,964 | 1,499 |
| 1,211 | 2,354 |
| X X X X | 272 |
- --------------------------------
SCHEDULE P - PART 4F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 0 | 0 | 0 |
| 2. 1984................| 0 | 0 | 0 |
| 3. 1985................| X X X X | 0 | 0 |
| 4. 1986................| X X X X | X X X X | 0 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
6,890 | 3,744 | 2,280 | 2,099 | 1,591
X X X X | 13,223 | 8,138 | 4,130 | 2,228
X X X X | X X X X | 17,137 | 22,369 | 7,034
X X X X | X X X X | X X X X | 15,988 | 9,449
X X X X | X X X X | X X X X | X X X X | 28,106
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 329 | 2,091 |
| 1,175 | 706 |
| 3,062 | 843 |
| 5,626 | 1,498 |
| 19,238 | 5,081 |
| 21,136 | 8,050 |
| X X X X | 32,552 |
- --------------------------------
SCHEDULE P - PART 4G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 11,930 | 6,808 | 3,075 |
| 2. 1984................| 27,413 | 5,373 | 2,516 |
| 3. 1985................| X X X X | 34,291 | 4,409 |
| 4. 1986................| X X X X | X X X X | 43,756 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
1,880 | 1,589 | 1,503 | 267 | 593
1,433 | 863 | 1,050 | 561 | 163
2,369 | 1,297 | 1,212 | 910 | 182
22,215 | 9,305 | 1,919 | 885 | 687
66,365 | 29,375 | 5,744 | 1,681 | 1,226
X X X X | 66,032 | 25,110 | 4,867 | 1,616
X X X X | X X X X | 59,265 | 8,833 | 3,372
X X X X | X X X X | X X X X | 52,466 | 12,094
X X X X | X X X X | X X X X | X X X X | 25,708
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 416 | 4,197 |
| 221 | 2,228 |
| 211 | 2,227 |
| 326 | 2,217 |
| 419 | 2,336 |
| 579 | 1,434 |
| 1,135 | 1,579 |
| 5,989 | 11,161 |
| 6,895 | 26,184 |
| 25,682 | 27,163 |
| X X X X | 81,792 |
- --------------------------------
SCHEDULE P - PART 4H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 101,282 | 69,191 | 27,755 |
| 2. 1984................| 62,112 | 35,872 | 17,151 |
| 3. 1985................| X X X X | 110,599 | 63,829 |
| 4. 1986................| X X X X | X X X X | 218,317 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
42,967 | 35,099 | 37,069 | 25,546 | 23,378
16,471 | 17,036 | 17,924 | 13,180 | 9,747
53,998 | 33,355 | 23,934 | 18,626 | 14,627
132,263 | 94,338 | 79,528 | 60,046 | 39,126
236,463 | 167,895 | 154,407 | 134,272 | 91,910
X X X X | 269,216 | 183,396 | 160,726 | 117,061
X X X X | X X X X | 272,255 | 216,739 | 165,622
X X X X | X X X X | X X X X | 204,740 | 163,654
X X X X | X X X X | X X X X | X X X X | 93,861
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 13,803 | 5,570 |
| 8,239 | 4,398 |
| 6,887 | 5,183 |
| 20,458 | 6,279 |
| 50,365 | 18,005 |
| 75,020 | 29,059 |
| 117,792 | 49,468 |
| 127,446 | 78,188 |
| 59,290 | 40,984 |
| 99,255 | 49,614 |
| X X X X | 99,868 |
- --------------------------------
SCHEDULE P - PART 4H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| 1 | (000 omitted)
| |------------------------------------------------
| Years in Which | | | |
| Losses Were | 2 | 3 | 4 |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 0 | 0 | 0 |
| 2. 1984................| 0 | 0 | 0 |
| 3. 1985................| X X X X | 0 | 0 |
| 4. 1986................| X X X X | X X X X | 0 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
X X X X | 0 | 0 | 0 | 0
X X X X | X X X X | 0 | 0 | 0
X X X X | X X X X | X X X X | 0 | 0
X X X X | X X X X | X X X X | X X X X | 37,342
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 18,504 | 12,086 |
| 12,296 | 25,500 |
| X X X X | 83,813 |
- --------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 4I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,
EARTHQUAKE, GLASS, BURGLARY AND THEFT)
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | | | |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| X X X X | X X X X | X X X X |
| 2 1992................| X X X X | X X X X | X X X X |
| 3. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
| | | |
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
X X X X | X X X X | X X X X | X X X X | 25,160
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| | |
| 1992 | 1993 |
| | |
| | |
|---------------|---------------|
| | |
| 3,529 | 227 |
| 14,163 | 3,440 |
| X X X X | 47,826 |
- --------------------------------
SCHEDULE P - PART 4J - AUTO PHYSICAL DAMAGE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | | | |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| X X X X | X X X X | X X X X |
| 2 1992................| X X X X | X X X X | X X X X |
| 3. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
X X X X | X X X X | X X X X | X X X X | 11,156
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| | |
| 1992 | 1993 |
| | |
| | |
|---------------|---------------|
| | |
| 3,197 | 663 |
| 9,143 | 2,097 |
| X X X X | 5,380 |
- --------------------------------
SCHEDULE P - PART 4K - FIDELITY, SURETY, FINANCIAL GUARANTY,
MORTGAGE GUARANTY
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | | | |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| X X X X | X X X X | X X X X |
| 2 1992................| X X X X | X X X X | X X X X |
| 3. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
X X X X | X X X X | X X X X | X X X X | 40,619
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| | |
| 1992 | 1993 |
| | |
| | |
|---------------|---------------|
| | |
| 14,895 | 4,015 |
| 29,992 | 11,323 |
| X X X X | 25,547 |
- --------------------------------
SCHEDULE P - PART 4L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | | | |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| X X X X | X X X X | X X X X |
| 2 1992................| X X X X | X X X X | X X X X |
| 3. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
X X X X | X X X X | X X X X | X X X X | 7,086
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| | |
| 1992 | 1993 |
| | |
| | |
|---------------|---------------|
| | |
| 438 | 32 |
| 6,370 | 460 |
| X X X X | 8,495 |
- --------------------------------
SCHEDULE P - PART 4M - INTERNATIONAL
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | | | |
| Incurred | 1984 | 1985 | 1986 |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 0 | 0 | 0 |
| 2. 1984................| 0 | 0 | 0 |
| 3. 1985................| X X X X | 0 | 0 |
| 4. 1986................| X X X X | X X X X | 0 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
X X X X | 0 | 0 | 0 | 0
X X X X | X X X X | 0 | 0 | 0
X X X X | X X X X | X X X X | 9,301 | 8,397
X X X X | X X X X | X X X X | X X X X | 4,739
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| | |
| 1992 | 1993 |
| | |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 2,518 | 2,695 |
| 1,707 | 2,153 |
| 2,069 | 2,378 |
| X X X X | 4,762 |
- --------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P - PART 4N - REINSURANCE A
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| 1. 1988................| X X X X | X X X X | X X X X |
| 2. 1989................| X X X X | X X X X | X X X X |
| 3. 1990................| X X X X | X X X X | X X X X |
| 4. 1991................| X X X X | X X X X | X X X X |
| 5. 1992................| X X X X | X X X X | X X X X |
| 6. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
X X X X | 6,436 | 2,783 | 1,089 | 915
X X X X | X X X X | 7,933 | 3,195 | 1,795
X X X X | X X X X | X X X X | 8,079 | 4,093
X X X X | X X X X | X X X X | X X X X | 8,464
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
| | |
| | |
|---------------|---------------|
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 4,798 | 0 |
| X X X X | 0 |
- --------------------------------
SCHEDULE P - PART 4O - REINSURANCE B
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. 1988................| X X X X | X X X X | X X X X |
| 2. 1989................| X X X X | X X X X | X X X X |
| 3. 1990................| X X X X | X X X X | X X X X |
| 4. 1991................| X X X X | X X X X | X X X X |
| 5. 1992................| X X X X | X X X X | X X X X |
| 6. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
X X X X | 9,202 | 9,052 | 6,300 | 5,133
X X X X | X X X X | 13,994 | 11,719 | 9,407
X X X X | X X X X | X X X X | 16,487 | 10,163
X X X X | X X X X | X X X X | X X X X | 13,319
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
| | |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 1,105 | 0 |
| X X X X | 0 |
- --------------------------------
SCHEDULE P - PART 4P - REINSURANCE C
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. 1988................| X X X X | X X X X | X X X X |
| 2. 1989................| X X X X | X X X X | X X X X |
| 3. 1990................| X X X X | X X X X | X X X X |
| 4. 1991................| X X X X | X X X X | X X X X |
| 5. 1992................| X X X X | X X X X | X X X X |
| 6. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
X X X X | 59 | 36 | 22 | 19
X X X X | X X X X | 110 | 104 | 69
X X X X | X X X X | X X X X | 89 | 45
X X X X | X X X X | X X X X | X X X X | 6
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
| | |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| X X X X | 0 |
- --------------------------------
SCHEDULE P - PART 4Q - REINSURANCE D
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 0 | 0 | 0 |
| 2. 1984................| 1,267 | 1,118 | 0 |
| 3. 1985................| X X X X | 0 | 0 |
| 4. 1986................| X X X X | X X X X | 0 |
| 5. 1987................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
| | |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
- --------------------------------
SCHEDULE P - PART 4R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 43,692 | 33,697 | 21,706 |
| 2. 1984................| 18,257 | 11,891 | 7,157 |
| 3. 1985................| X X X X | 22,289 | 16,241 |
| 4. 1986................| X X X X | X X X X | 41,667 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
22,406 | 19,694 | 20,298 | 10,541 | 3,462
7,384 | 5,328 | 5,723 | 3,750 | 2,243
11,578 | 10,802 | 9,958 | 5,159 | 3,912
25,595 | 24,140 | 21,482 | 15,592 | 8,759
37,070 | 30,194 | 25,657 | 21,101 | 10,181
X X X X | 36,261 | 24,875 | 21,484 | 15,345
X X X X | X X X X | 22,754 | 17,664 | 14,109
X X X X | X X X X | X X X X | 13,994 | 11,541
X X X X | X X X X | X X X X | X X X X | 10,179
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
| | |
| | |
|---------------|---------------|
| | |
| 2,593 | 1,809 |
| 1,553 | 869 |
| 2,558 | 1,616 |
| 4,769 | 2,654 |
| 6,294 | 4,413 |
| 6,664 | 6,682 |
| 5,901 | 6,956 |
| 7,223 | 6,335 |
| 8,525 | 7,719 |
| 8,877 | 9,063 |
| X X X X | 23,035 |
- --------------------------------
SCHEDULE P - PART 4R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
------------------------------------------------------------------------------
| | BULK AND INCURRED BUT NOT REPORTED ON LOSSES
| | AND ALLOCATED EXPENSES AT YEAR END
| | (000 omitted)
| 1 |------------------------------------------------
| | | | |
| Years in Which | 2 | 3 | 4 |
| Losses Were | 1984 | 1985 | 1986 |
| Incurred | | | |
| | | | |
| | | | |
|-----------------------------|---------------|---------------|---------------|
| | | | |
| 1. Prior ..............| 0 | 0 | 0 |
| 2. 1984................| 0 | 0 | 0 |
| 3. 1985................| X X X X | 0 | 0 |
| 4. 1986................| X X X X | X X X X | 0 |
| 5. 1987................| X X X X | X X X X | X X X X |
| 6. 1988................| X X X X | X X X X | X X X X |
| 7. 1989................| X X X X | X X X X | X X X X |
| 8. 1990................| X X X X | X X X X | X X X X |
| 9. 1991................| X X X X | X X X X | X X X X |
| 10. 1992................| X X X X | X X X X | X X X X |
| 11. 1993................| X X X X | X X X X | X X X X |
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
| | | |
5 | 6 | 7 | 8 | 9
1987 | 1988 | 1989 | 1990 | 1991
| | | |
| | | |
| | | |
- ---------------|---------------|---------------|---------------|---------------
| | | |
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
0 | 0 | 0 | 0 | 0
X X X X | 0 | 0 | 0 | 0
X X X X | X X X X | 0 | 0 | 0
X X X X | X X X X | X X X X | 0 | 0
X X X X | X X X X | X X X X | X X X X | 0
X X X X | X X X X | X X X X | X X X X | X X X X
X X X X | X X X X | X X X X | X X X X | X X X X
- -------------------------------------------------------------------------------
- --------------------------------|
| | |
| 10 | 11 |
| 1992 | 1993 |
| | |
| | |
| | |
|---------------|---------------|
| | |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| 0 | 0 |
| X X X X | 1,876 |
- --------------------------------
CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS
..................................................................
(Name)
SCHEDULE P INTERROGATORIES
-----------------------------------------------------------------------------
| |
| |
| 1. Computation of excess statutory reserves over statement reserves. |
| See Instructions for explanation and formulas. |
| |
| (a) Auto Liability (private passenger and commercial) |
| |
| 1993 $0 ( 75.0%) 1992 $0 ( 75.0%) |
| ---------------------- ---------------------- |
| 1991 $0 ( 75.0%) Total $0 |
| ---------------------- ----------------------- |
| |
| (b) Other Liability and Products Liability |
| |
| 1993 $0 ( 60.0%) 1992 $0 ( 60.0%) |
| ---------------------- ---------------------- |
| 1991 $0 ( 60.0%) Total $0 |
| ---------------------- ----------------------- |
| |
| (c) Medical Malpractice |
| |
| 1993 $0 ( 60.0%) 1992 $0 ( 60.0%) |
| ----------------------- ---------------------- |
| 1991 $0 ( 60.0%) Total $0 |
| ----------------------- ----------------------- |
| |
| (d) Workers' Compensation |
| |
| 1993 $0 ( 75.0%) 1992 $0 ( 75.0%) |
| ------------------------ ---------------------- |
| 1991 $0 ( 75.0%) Total $0 |
| ------------------------ ----------------------- |
| |
| (e) Credit Total $0 |
| ----------------------- |
| |
| (f) All Lines Total (Report here and Page 3) |
| Total $0 |
| ------------------------ |
| 2. What is the extended loss and expense reserve - direct and assumed |
| - for the following classes? An example of an extended |
| expense reserve is the actuarial reserve for the free-tail co |
| arising upon death, disability or retirement in most medical |
| policies. Such a liability is to be reported here even if it was |
| not reported elsewhere in Schedule P, but otherwise reported as a |
| liability item on page 3. Show the full reserve amount |
| the change during the current year. |
| |
| |
| ---------------------------------------------------------------- |
| | Year in which premiums | 1 | 2 | 3 | |
| | were earned and losses | Medical | Other | Products | |
| | were incurred | Malpractice | Liability | Liability | |
| |--------------------------|-------------|-----------|-----------| |
| | (a) 1987 | | | | |
| | (b) 1988 | | | | |
| | (c) 1989 | 50,000 | | | |
| | (d) 1990 | 150,000 | | | |
| | (e) 1991 | 300,000 | | | |
| | (f) 1992 | 400,000 | | | |
| | (g) 1993 | 500,000 | | | |
| |--------------------------|-------------|-----------|-----------| |
| | (h) Totals | 1,500,000 | 0 | 0 | |
| ---------------------------------------------------------------- |
| |
| 3. The term "Loss expense" includes all payments for legal expenses, |
| including attorney's and witness fees and court costs, salaries and |
| expenses of investigators, adjustors and field men, rents, |
| stationery, telegraph and telephone charges, postage, salaries and |
| expenses of office employees, home office expense and all other |
| payments under or on account of such injuries, whether the payments |
| are allocated to specfic claims or are unallocated. Are they so |
| reported in this statement? |
| Answer: Yes[ X ] No[ ] |
| |
| 4. The unallocated loss expense payments paid during the most recent |
| calendar year should be distributed to the various years in which |
| losses were incurred as follows: (1) 45% to the most recent year, |
| (2) 5% to the next most recent year, and (3) the balance to all |
| years, including the most recent, in proportion to the amount of |
| loss payments paid for each year during the most recent calendar |
| year. If the distribution in (1) or (2) produces an accumlated |
| distribution to such year in excess of 10% of the premiums |
| earned for such year, disregarding all distributions made under |
| (3), such accumulated distribution should be limited to 10% of |
| premiums earned and the balance distributed in accordance with (3). |
| Are they so reported in this Statement? |
| Answer: Yes[ X ] No[ ] |
| |
| 5. Do any lines in Schedule P include reserves which are reported |
| gross of any discount to present value of future payments, but are |
| reported net of such discounts on page 10? |
| Answer: Yes[ ] No[ X ] |
| |
| If yes, proper reporting must be made in the Notes to Financial |
| Statements, as specified in the Instructions. Also, the discount |
| must be reported in Schedule P - Part 1, Columns 31 and 32. |
| |
| Schedule P must be completed gross of non-tabular discounting. Work |
| papers relating to discount calculations must be available for |
| examination upon request. |
| |
| Discounting is allowed only if expressly permitted by the state |
| insurance department to which this Annual Statment is being filed. |
| |
| 6. What were the net premiums in force at the end of the year for: |
| (in thousands of dollars) |
| (a) Fidelity $35,573 |
| (b) Surety $110,878 |
| |
| 7. Claim count information is reported (check one) |
| If not the same in all years, explain in Question 8. |
| (a) per claim _____ |
| (b) per claimant __X__ |
| |
| 8. The information provided in Schedule P will be used by many persons |
| to estimate the adequacy of the current loss and expense reserves, |
| amoung other things. Are there any especially significant events, |
| coverage, retention or accounting changes which have occurred which |
| must be considered when making such analyses (An extended |
| statement may be attached)? The group commuted a portion of its |
| total reinsurance with the Workers Compensation Reinsurance Bureau |
| (WCB) in December 1993 for the calendar years 1980 through 1992. |
| Outlined below are the results of this transaction: |
| ASSUMED CEDED NET |
| Losses Unpaid - Case Basis $ (97,000,000) $ (97,000,000) $ 0 |
| Losses Unpaid - IBNR Basis (103,000,000) (111,000,000) 8,000,000 |
| Losses Paid (200,000,000) (200,000,000) 0 |
| Losses Incurred $ 0 $ (8,000,000) $ 8,000,000 |
| |
----------------------------------------------------------------------------
