<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X
--- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ______ To ______
Commission File Number 1-8278
RELIANCE GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3082071
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 909-1100
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
--- ---
As of May 1, 1996, 114,035,000 shares of common stock of Reliance Group
Holdings, Inc. were outstanding.
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RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income for the Quarters Ended
March 31, 1996 and 1995 (Unaudited)......................... 2
Consolidated Balance Sheet at March 31, 1996 (Unaudited) and
December 31, 1995........................................... 3
Consolidated Statement of Changes in Shareholders' Equity for the
Quarter Ended March 31, 1996 (Unaudited).................... 4
Consolidated Condensed Statement of Cash Flows for the Quarters
Ended March 31, 1996 and 1995 (Unaudited)................... 5
Notes to Consolidated Financial Statements (Unaudited)......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................. 8
PART II. OTHER INFORMATION, AS APPLICABLE............................... 14
SIGNATURES.............................................................. 15
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RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Quarter Ended March 31 1996 1995
================================================================================
(In thousands, except per-share amounts)
Revenues:
Premiums earned ...................................... $ 609,867 $ 604,666
Net investment income ................................ 70,717 69,378
Gain on sales of investments ......................... 4,468 8,286
Other ................................................ 38,734 38,976
--------- ---------
723,786 721,306
--------- ---------
Claims and expenses:
Policy claims and settlement expenses ................ 316,707 323,755
Policy acquisition costs and other insurance expenses 305,495 295,404
Interest ............................................. 22,257 23,137
Other operating expenses ............................. 49,639 51,224
--------- ---------
694,098 693,520
--------- ---------
Income before income taxes and equity in
investee company ................................. 29,688 27,786
Provision for income taxes ........................... (9,200) (8,000)
Equity in investee company ........................... 2,024 1,754
--------- ---------
Net income ........................................... $ 22,512 $ 21,540
========= =========
Per-share information:
Net income ........................................... $ .19 $ .19
========= =========
Average number of common and common equivalent
shares outstanding ............................. 117,490 114,805
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31 December 31
ASSETS 1996 1995
==========================================================================================
(In thousands, except per-share amount)
<S> <C> <C>
Marketable securities:
Fixed maturities held for investment - at amortized cost
(quoted market $761,188 and $791,459) ............... $ 752,643 $ 753,563
Fixed maturities available for sale - at quoted market
(amortized cost $2,472,939 and $2,299,510) .......... 2,469,489 2,371,995
Equity securities - at quoted market (cost $444,882
and $408,054) ....................................... 726,763 672,668
Short-term investments ................................. 188,374 500,284
Cash ........................................................ 42,303 52,914
Premiums and other receivables .............................. 1,347,395 1,211,027
Reinsurance recoverables .................................... 3,256,107 3,163,073
Investments in real estate - at cost, less accumulated
depreciation ........................................... 283,595 281,923
Investment in investee company .............................. 159,468 157,667
Deferred policy acquisition costs ........................... 203,760 194,648
Excess of cost over fair value of net assets acquired, less
accumulated amortization .............................. 256,949 259,444
Other assets ................................................ 350,886 369,007
------------ ------------
$ 10,037,732 $ 9,988,213
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
==========================================================================================
Unearned premiums ........................................... $ 1,395,123 $ 1,299,465
Unpaid claims and related expenses .......................... 6,120,121 6,100,129
Accounts payable and accrued expenses ....................... 572,111 638,009
Reinsurance ceded premiums payable .......................... 342,361 325,246
Federal and foreign income taxes, including deferred taxes .. 60,621 68,597
Term loans and short-term debt .............................. 196,887 188,101
Debentures and notes ........................................ 690,321 690,318
------------ ------------
9,377,545 9,309,865
------------ ------------
Contingencies and commitments
Shareholders' equity:
Common stock, par value $.10 per-share, 225,000
shares authorized, 114,026 and 113,440 shares
issued and outstanding ............................... 11,403 11,344
Additional paid-in capital ............................. 538,721 535,091
Retained earnings (deficit) ............................ (48,309) (61,694)
Net unrealized gain on investments ..................... 182,348 219,356
Net unrealized loss on foreign currency translation .... (23,976) (25,749)
------------ ------------
660,187 678,348
------------ ------------
$ 10,037,732 $ 9,988,213
============ ============
</TABLE>
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
Net
Unrealized
Net Loss on
Additional Retained Unrealized Foreign
Common Paid-In Earnings Gain on Currency Shareholders'
Stock Capital (Deficit) Investments Translation Equity
=====================================================================================================================
(In thousands, except per-share amount)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996................ $11,344 $535,091 $ (61,694) $219,356 $(25,749) $678,348
Issuance of common stock................ 59 4,692 4,751
Transactions of investee
company............................ (1,062) 1,722 660
Net income.............................. 22,512 22,512
Dividends ($.08 per-share).............. (9,127) (9,127)
Depreciation after deferred
income taxes....................... (38,730) (38,730)
Foreign currency translation............ 1,773 1,773
------- -------- --------- -------- -------- --------
Balance, March 31, 1996................. $11,403 $538,721 $ (48,309) $182,348 $(23,976) $660,187
======= ======== ========= ======== ======== ========
</TABLE>
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
Quarter Ended March 31 1996 1995
===========================================================================================
(In thousands)
<S> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES ......................... $ (84,344) $ (64,175)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of fixed maturities available for sale ...... 263,753 128,922
Proceeds from sales of fixed maturities held for investment ..... -- 14,419
Proceeds from redemptions of fixed maturities available for sale 18,073 4,224
Proceeds from redemptions of fixed maturities held for investment 22,421 439
Proceeds from sales of equity securities ........................ 81,805 64,415
Decrease in short-term investments - net ........................ 313,538 55,494
Purchases of fixed maturities available for sale ................ (456,544) (56,821)
Purchases of fixed maturities held for investment ............... (21,545) (33,965)
Purchases of equity securities .................................. (143,816) (59,848)
Other - net ..................................................... (8,362) (20,343)
--------- ---------
69,323 96,936
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in term loans .......................................... 20,816 25,069
Decrease in short-term debt - net ............................... (1,908) (11,257)
Repayments of term loans ........................................ (10,122) (22,620)
Issuance of common stock ........................................ 4,751 241
Debt issuance costs ............................................. -- (356)
Dividends ....................................................... (9,127) (9,055)
--------- ---------
4,410 (17,978)
--------- ---------
Increase (decrease) in cash ..................................... (10,611) 14,783
Cash, beginning of period ....................................... 52,914 48,977
--------- ---------
Cash, end of period ............................................. $ 42,303 $ 63,760
========= =========
Supplemental disclosures of cash flow information:
Interest paid ................................................... $ 3,300 $ 2,200
========= =========
Income taxes refunded (paid) .................................... $ (1,600) $ 1,100
========= =========
</TABLE>
See notes to consolidated financial statements
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<PAGE>
RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments (consisting of normal recurring accruals
only) considered necessary to present fairly the financial position at March 31,
1996, and the results of operations, changes in shareholders' equity and cash
flows for all periods presented. The results of operations for the interim
periods are not necessarily indicative of the results that may be expected for
any other interim period or for the entire year.
For a summary of significant accounting policies (which have not changed from
December 31, 1995) and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
2. EQUITY IN INVESTEE COMPANY
Equity income in Zenith National Insurance Corp. was $2.0 million for the
quarter ended March 31, 1996 compared to $1.8 million in the corresponding 1995
period.
Summarized financial information for Zenith National Insurance Corp. is as
follows:
Quarter Ended March 31 1996 1995
- -------------------------------------------------------------------------------
(In thousands, except per-share amounts)
Revenues........................................ $ 134,548 $ 127,336
Income from continuing operations before
income taxes................................. 18,914 6,372
Net income...................................... 12,400 6,900
Net income per-share............................ 0.70 0.36
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<PAGE>
3. REINSURANCE
The reconciliation of property and casualty insurance direct premiums to net
premiums is as follows (in thousands):
Quarter Ended March 31
--------------------------------------------
1996 1995
--------------------------------------------
Premiums Premiums Premiums Premiums
Written Earned Written Earned
--------- --------- --------- ---------
Direct.................. $ 774,655 $ 713,714 $ 683,908 $ 681,275
Assumed................. 96,495 73,542 111,369 81,865
Ceded................... (395,667) (347,455) (334,358) (311,335)
--------- --------- --------- ---------
Net Premiums............ $ 475,483 $ 439,801 $ 460,919 $ 451,805
========= ========= ========= =========
The reconciliation of property and casualty insurance gross policy claims and
settlement expenses to net policy claims and settlement expenses is as follows
(in thousands):
Quarter Ended March 31
------------------------
1996 1995
---------- ----------
Gross........................................ $ 464,763 $ 510,470
Reinsurance recoveries....................... (162,622) (200,004)
---------- ----------
Net policy claims and settlement expenses.... $ 302,141 $ 310,466
========== ==========
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<PAGE>
RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
================================================================================
OVERVIEW
The Company had income from operations, before gains on sales of investments, of
$19.6 million ($.17 per share) in the first quarter of 1996 compared to $16.2
million ($.14 per share) in the corresponding 1995 period. The increase in
operating income reflects stronger results in title insurance operations. Net
income in the first quarter of 1996 was $22.5 million ($.19 per share), which
included after-tax gains on sales of investments of $2.9 million ($.02 per
share), compared to $21.5 million ($.19 per share) in the first quarter of 1995,
which included after-tax gains on sales of investments of $5.4 million ($.05 per
share).
PROPERTY AND CASUALTY INSURANCE OPERATIONS
Net premiums written and net premiums earned were $475.5 million and $439.8
million in the first quarter of 1996 compared to $460.9 million and $451.8
million in the corresponding 1995 period. The increase in net written premiums
reflects growth in multiple peril and commercial automobile lines partially
offset by a decline in the general liability line.
Property and casualty underwriting results remain strong. The combined ratio
(calculated on a GAAP basis), after policyholders' dividends, was 101.9% in the
first quarter of 1996 compared to 101.4% in the corresponding 1995 period. The
underwriting loss for the first three months of 1996 was $10.1 million compared
to $5.2 million in the corresponding 1995 period. The increase in underwriting
loss reflects lower underwriting profits in workers' compensation. Underwriting
results in 1996 also reflect an increase in underwriting losses in fire and
allied, as well as ocean and inland marine lines, resulting, in part, from harsh
winter conditions. These results were partially offset by improved underwriting
results in the multiple peril line.
The Company's liability for property and casualty loss reserves (net of
reinsurance recoverables) was $3.19 billion at March 31, 1996. Included in the
net liability for loss reserves at March 31, 1996 are $133.0 million of loss
reserves pertaining to asbestos- related and environmental pollution claims. In
view of recent developments in the insurance industry with regard to reserves
for asbestos-related and environmental pollution claims, the Company is
currently updating its analysis of loss reserves for asbestos-related and
environmental pollution claims, which it anticipates will be completed during
the second quarter of 1996.
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<PAGE>
PROPERTY AND CASUALTY INSURANCE INVESTMENT RESULTS
Net investment income of the property and casualty insurance operations
increased to $63.4 million during the three-month period ending March 31, 1996
from $62.4 million in the corresponding 1995 period. This increase resulted from
growth in the size of the fixed maturity investment portfolio offset, in part,
by the effects of lower interest rates.
Gain on sales of investments was $4.0 million in the first quarter of 1996 and
$8.1 million in the corresponding 1995 period.
TITLE INSURANCE OPERATIONS
Premiums and fees increased in the first quarter of 1996 to $170.1 million from
$152.9 million in the corresponding quarter of 1995 reflecting growth in
residential resale and refinancing activity. The higher levels of refinancing
activity resulted from the lower mortgage interest rates available during early
1996.
Agency commissions were $75.8 million during the three-month period ended March
31, 1996 compared to $75.2 million in the corresponding 1995 period. Other
expenses were $83.8 million in the first quarter of 1996 compared to $75.6
million in the corresponding 1995 period. The increase in other expenses
resulted from growth in direct title insurance premiums. The expense ratio of
the title insurance operations (which includes agency commissions) was 93.0% in
the first quarter of 1996 compared to 98.2% in the corresponding 1995 period.
The improvement in the expense ratio resulted from the increase in direct title
insurance premiums. The provision for claim losses was $14.6 million in the
first three months of 1996 compared to $13.3 million in the first three months
of 1995.
INVESTMENT PORTFOLIO
At March 31, 1996, the Company's investment portfolio aggregated $3.90 billion
(at cost), of which 11% was invested in equity securities. The Company seeks to
maintain a diversified and balanced fixed maturity portfolio representing a
broad spectrum of industries and types of securities. The Company holds
virtually no investments in commercial real estate mortgages in its investment
portfolio. Purchases of fixed maturity securities are researched individually
based on in-depth analysis and objective predetermined investment criteria and
the portfolio is managed to achieve a proper balance of safety, liquidity and
investment yields.
The Company's fixed maturity portfolio consists of investment grade securities
(those rated "BBB" or better by Standard & Poor's) and, to a lesser extent,
non-investment grade and non-rated securities. The risk of default is generally
considered to be greater for non-investment grade securities, when compared to
investment grade securities, since these issues may be more susceptible to
severe economic downturns. At March 31, 1996, the carrying values of
non-investment grade securities and securities not
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<PAGE>
rated by Standard & Poor's were $318.9 million (9% of the fixed income
portfolio) and $46.7 million (1% of the fixed income portfolio), respectively.
Substantially all of the Company's non-investment grade and non-rated securities
are classified as available for sale and, accordingly, are carried at market
value.
OTHER OPERATIONS
RCG International Inc. ("RCG"), a subsidiary of the Company, provides technical
services in the information technology and energy industries. RCG's revenues
were $37.5 million in the first quarter of 1996 compared to $37.8 million in the
first quarter of 1995, which included $7.2 million related to certain consulting
operations which were sold in the second quarter of 1995. Excluding revenues
pertaining to operations sold, revenues increased 22.6% in the first quarter of
1996 compared to the corresponding 1995 period resulting from continued growth
in the information technology business. RCG's operating expenses were $36.6
million in the first quarter of 1996 compared to $36.8 million in the
corresponding 1995 period which included $6.6 million related to the consulting
operations sold during the second quarter of 1995. RCG's revenues and expenses
are included in other revenues and other operating expenses in the accompanying
consolidated statement of income.
At March 31, 1996, the Company's real estate operations had holdings with a
carrying value of $283.6 million, which includes nine shopping centers with an
aggregate carrying value of $120.2 million, office buildings and other
commercial properties, with an aggregate carrying value of $101.8 million, and
undeveloped land with a carrying value of $61.6 million.
INTEREST EXPENSE
Interest expense declined to $22.3 million in the first quarter of 1996 from
$23.1 million in the corresponding 1995 period reflecting lower interest rates.
EQUITY IN INVESTEE COMPANY
Equity in investee company income was $2.0 million in the first quarter of 1996
compared to $1.8 million in the corresponding 1995 period from the Company's
investment in Zenith National Insurance Corp. ("Zenith"). The increase in equity
income reflects Zenith's improved property and casualty underwriting results.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds consist of dividends, advances and net
tax payments from its subsidiaries. These net payments aggregated $23.1 million
for the three months ended March 31, 1996. The Company's ability to receive cash
dividends has depended upon and continues to depend upon the dividend paying
ability of its insurance subsidiaries. The Insurance Law of Pennsylvania, where
Reliance Insurance Company (the Company's principal property and casualty
insurance subsidiary) is
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<PAGE>
domiciled, limits the maximum amount of dividends which may be paid without
approval by the Pennsylvania Insurance Department. Under such law, Reliance
Insurance Company may pay dividends during the year equal to the greater of (a)
10% of the preceding year-end policyholders' surplus or (b) the preceding year's
statutory net income, but in no event to exceed the amount of unassigned funds,
which are defined as "undistributed, accumulated surplus including net income
and unrealized gains since the organization of the insurer". In addition, the
Pennsylvania law specifies factors to be considered by the Pennsylvania
Insurance Department to allow it to determine that statutory surplus after the
payment of dividends is reasonable in relation to an insurance company's
outstanding liabilities and adequate for its financial needs. Such factors
include the size of the company, the extent to which its business is diversified
among several lines of insurance, the number and size of risks insured, the
nature and extent of the company's reinsurance and the adequacy of the company's
reserves. The maximum dividend permitted by law is not indicative of an
insurer's actual ability to pay dividends, which may be constrained by business
and regulatory considerations, such as the impact of dividends on surplus, which
could affect an insurer's ratings, competitive position, the amount of premiums
that can be written and the ability to pay future dividends. Furthermore, the
Pennsylvania Insurance Department has broad discretion to limit the payment of
dividends by insurance companies.
Total common stock dividends paid by Reliance Insurance Company during the first
three months of 1996 were $20.1 million. During 1996, $165.4 million would be
available for dividend payments by Reliance Insurance Company under Pennsylvania
law. The Company believes such amount will be sufficient to meet its cash needs.
There is no assurance that Reliance Insurance Company will meet the tests in
effect from time to time under Pennsylvania law for the payment of dividends
without prior Insurance Department approval or that any requested approval will
be obtained. Reliance Insurance Company has been advised by the Pennsylvania
Insurance Department that any required prior approval will be based upon a
solvency standard and will not be unreasonably withheld. Any significant
limitation of Reliance Insurance Company's dividends would adversely affect the
Company's ability to service its debt and to pay dividends on its common stock.
Reliance Insurance Company collects and invests premiums prior to payment of
associated claims, which are generally made months or years subsequent to the
receipt of premiums. For the three months ended March 31, 1996, Reliance
Insurance Company utilized $64.9 million of cash flow from operating activities.
Cash flow from operating activities is traditionally low during the first
quarter of the year, reflecting the increase in accounts receivable and payments
of certain expenses, such as premium taxes and contingent commissions of the
property and casualty insurance operations, which are accrued during the
previous year. Reliance Insurance Company carefully monitors its cash,
short-term investments and marketable securities to maintain adequate balances
for the timely payment of claims and other operating requirements. At March 31,
1996, Reliance Insurance Company had $229.2 million of cash and short-term
investments.
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<PAGE>
For the three months ended March 31, 1996, the Company utilized $84.3 million of
cash flow for operating activities compared to $64.2 million in the
corresponding 1995 period. The decline in operating cash flow reflects higher
payments for property and casualty policy claims and related expenses.
The Company generated $69.3 million of cash flow from investing activities for
the three months ended March 31, 1996 compared to $96.9 million in the
corresponding 1995 period. Net sales of marketable securities generated $77.7
million of cash flow in 1996 compared to $117.3 million in the corresponding
1995 period.
The Company generated $4.4 million of cash flow from financing activities for
the three months ended March 31, 1996, primarily from term loan borrowings. For
the three months ended March 31, 1995, the Company used $18.0 million of cash
flow for financing activities, principally for the reduction of debt and the
payment of dividends.
The Company has a revolving credit facility with various banks providing for
aggregate maximum outstanding borrowings of $100 million. At March 31, 1996,
borrowings aggregating $27 million were outstanding under this facility.
A subsidiary of Reliance Financial Services Corporation, Saul P. Steinberg and
other executives of the Company are partners in a partnership which owns certain
real estate properties. At March 31, 1996, the partnership's total outstanding
debt was $172.5 million. As of March 31, 1996, Reliance Financial Services
Corporation ("Reliance Financial") guaranteed $38 million of the partnership's
outstanding debt which matures on December 29, 1996. The Company believes that,
to the extent such debt cannot be fully refinanced at maturity, the partnership
will need to seek additional financing from other sources, which may include the
Company. Reliance Financial receives a fee of .5% per annum on the average
outstanding debt covered by the guarantee. The Company has issued a line of
credit to the partnership in the amount of $8.0 million. Borrowings under the
line of credit mature on June 30, 2005 and bear a fixed interest rate of 10%. At
March 31, 1996, borrowings of $7.2 million were outstanding under the line of
credit.
The National Association of Insurance Commissioners has a risk-based capital
requirement for the property and casualty insurance industry. Risk-based capital
refers to the determination of the amount of statutory capital required for an
insurer based on the risks assumed by the insurer (including, for example,
investment risks, credit risks relating to reinsurance recoverables and
underwriting risks) rather than just the amount of net premiums written by the
insurer. A formula that applies prescribed factors to the various risk elements
in an insurer's business is used to determine the minimum statutory capital
requirement for the insurer. An insurer having less statutory capital than the
formula calculates would be subject to varying degrees of regulatory
intervention, depending on the level of capital inadequacy. All of the Company's
statutory insurance companies have statutory capital in excess of the minimum
required risk-based capital.
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<PAGE>
Maintaining appropriate levels of statutory surplus is considered important by
the Company's management, state insurance regulatory authorities and the
agencies that rate insurers' claims-paying abilities and financial strength.
Failure to maintain certain levels of statutory capital and surplus could result
in increased scrutiny or, in some cases, action taken by state regulatory
authorities and/or downgrades in an insurer's ratings.
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<PAGE>
RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Employment Agreement between Reliance Group Holdings, Inc. and
Saul P. Steinberg, dated as of February 15, 1996 (and Schedule
attached thereto pursuant to Instruction 2 to Item 601 of
Regulation S-K).
10.2 Employment Agreement between Reliance Insurance Company and
Saul P. Steinberg, dated as of February 15, 1996 (and Schedule
attached thereto pursuant to Instruction 2 to Item 601 of
Regulation S-K).
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March 31,
1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements 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.
RELIANCE GROUP HOLDINGS, INC.
----------------------------------------
(Registrant)
Date: May 13, 1996 /s/ George E. Bello
----------------------------------------
George E. Bello
Executive Vice President and Controller
(Chief Accounting Officer)
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<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into and as of the 15th day of
February 1996, by and between Saul P. Steinberg (the "Executive") and RELIANCE
GROUP HOLDINGS, INC., a Delaware corporation having its principal place of
business at Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055
(the "Company").
1. Employment.
----------
(a) The Company agrees to employ the Executive, and the Executive
agrees to be employed by the Company, as a senior executive officer of the
Company having his existing title and duties. During the term hereinafter
specified, the Executive agrees to perform such duties and render such services,
consistent with his current duties and services, as from time to time may be
requested of him by the Board of Directors of the Company or any duly empowered
committee thereof (the "Board of Directors").
(b) During the term of this Agreement, the Executive shall devote his
full working time during customary business hours and his best efforts, and
apply all of his skill and experience, to the proper performance of his duties
hereunder and to the business and affairs of the Company and its subsidiaries.
2. Term. Subject to Sections 4 and 5 hereof, the term of employment of
----
the Executive hereunder shall be for the period commencing on the date hereof
and ending on February 14, 2001; provided that such term may be extended, at the
--------
option of either the Company or the Executive, for three successive one year
periods thereafter by written notice to the Executive from the Company or to the
Company from the Executive, as the case may be, given at least sixty (60) days
prior to the end of the then applicable term of employment.
3. Compensation.
------------
(a) Base Salary. The Company will pay to the Executive during the
-----------
term of his employment hereunder a base salary ("Base Salary") of not less than
Executive's annual base salary on January 1, 1996, payable in accordance with
the Company's usual and customary pay procedures. The Base Salary shall be
subject to increase by the Board of Directors in their absolute discretion
during the term of the Executive's employment hereunder. Any increase in the
base salary shall become the new Base Salary for all purposes hereof.
(b) Bonus. For each calendar year of the Company during the term of
-----
the Executive's employment, the Executive shall be eligible to receive a bonus
based on a percentage of his Base Salary for such year (not less than 115%) as
determined pursuant to the Company's existing Executive Bonus Plan (or any other
subsequent executive bonus compensation plan in which the chief executive
officer or chief operating officer participate
<PAGE>
and which has been approved by the stockholders and does not reduce the
Executive's bonus potential below 100% of Base Salary), provided that, except in
the case of the bonus for the calendar year in which this Agreement terminates
in accordance with Section 2 hereof, the Executive has not "voluntarily
resigned" or been terminated for "cause" prior to the time of payment of the
bonus. The Executive's bonus for 1995 shall not be affected by this Agreement.
(c) Reimbursement of Expenses. The Company shall pay or reimburse
-------------------------
the Executive for all reasonable business expenses actually incurred or paid by
the Executive during the term of his employment under this Agreement in the
performance of his services hereunder in accordance with the current policies of
the Company applicable to the Executive, subject to modification from time to
time hereafter, provided that such modification does not significantly and
adversely affect the Executive's payments or reimbursements thereunder. Such
payment or reimbursement shall be made upon presentation of expense statements
or vouchers or such other supporting information as the Company may customarily
require of its senior executives.
(d) Vacations. The Executive shall be entitled to not less than four
---------
weeks' paid vacation. Vacation shall be taken at times reasonably consistent
with the needs of the Company. Vacation earned for a year but not taken during
that year shall not be paid for nor taken in a subsequent year.
(e) Supplementary Pension Benefits. For purposes of the Company's
------------------------------
Supplemental Pension Plan, (i) the pension benefit payable to the Executive
shall be calculated using total IRS Form W-2 compensation (excluding any
compensation attributable to exercise of employee stock options) for the
immediately preceding five years instead of Base Salary for such period, and
(ii) the Executive will be credited with all years of actual service with the
Company and its predecessors and with all years during which the Executive could
have received payments pursuant to Section 2 hereof, unless he is terminated for
cause in which case he be credited only with all years of actual service with
the Company and its predecessors.
(f) Perquisites. The Executive shall be entitled to such other
-----------
perquisites as are currently provided to the Executive.
(g) Withholding. The Executive acknowledges and agrees that the
-----------
Company shall be entitled to withhold from his compensation, or otherwise
provide for, all federal, state or local income or other taxes which the Company
determines are required to be withheld on amounts payable to the Executive
pursuant to this Agreement or otherwise.
4. Termination of Employment.
-------------------------
(a) With or Without Cause; Resignation. The Company shall have the
----------------------------------
right to terminate the employment of the Executive with or without "cause" (as
hereinafter
2
<PAGE>
defined) and the Executive shall have the right to resign from his
employment by the Company. If (i) the Executive's employment with the Company
is terminated for "cause", or (ii) the Executive has "voluntarily resigned" (as
hereinafter defined) his employment, the Company shall have no further
obligation to the Executive hereunder, except, in the case of clause (ii), to
pay to the Executive the amounts, if any, due him pursuant to subsections (c),
(d) and (e) of Section 3 hereof.
(b) Definitions of Cause and Voluntarily Resigned. For purposes of
---------------------------------------------
this Agreement, "cause" shall mean:
(i) conviction of the Executive of a felony, or of any lesser
crime or offense involving the property of the Company or any of
its subsidiaries or affiliates;
(ii) willful misconduct by the Executive in connection with the
performance of his duties hereunder, or material and wilful
breach by him of any of the provisions of this Agreement and
failure to cure such misconduct or breach within two (2) weeks
after receipt of written notice thereof;
(iii) the Executive's conviction in a court of law of any
criminal offense involving moral turpitude under the laws of the
United States or any other jurisdiction the laws of which may
apply; and
(iv) the Executive's willful failure to perform specific written
directives of the Board of Directors of the Company, which
directives are consistent with the scope and nature of the
Executive's existing duties and responsibilities as set forth in
Section 1 hereof, and failure to cure such failure within two
(2) weeks after receipt of written notice thereof.
For purposes of this Agreement, "voluntarily resigned" shall mean the
Executive's decision to no longer serve as an executive officer of the Company,
which decision shall not have resulted from any of the following:
(i) a substantial diminution of the Executive's duties without
the Executive's written consent;
(ii) a demotion in title;
(iii) a relocation or attempted relocation of the Executive
without the Executive's written consent to an office outside a
25-mile radius of New York City; or
3
<PAGE>
(iv) an increase in any year in the amount of travel required of
the Executive by more than 20% of the average amount of travel
required during the previous three years.
(c) Discharge Without Cause; Resignation. If the Executive is
------------------------------------
discharged without "cause" or has not "voluntarily resigned", the Company shall
have no obligation to the Executive hereunder, except (i) to continue to provide
the Executive with the benefits under the medical and dental plans of the
Company then in effect for senior executives of the Company until February 14,
2004, at the same charge to the Executive as he would have paid as an active
employee of the Company, (ii) to fully vest all stock option grants held by the
Executive and permit the immediate exercise thereof for a period of 12 months
after the date of such discharge or such resignation, (iii) to pay to the
Executive, within 20 days after the date of such discharge or such resignation,
a lump sum in the amount determined by multiplying (A) the number of years
(including fractional years) remaining from the date of such discharge or such
resignation to February 14, 2004, times (B) the sum of Base Salary and the
average bonus paid pursuant to subsection (b) of Section 3 hereof for the two
years immediately prior to the date of such discharge or such resignation and
(iv) to pay the amounts due him under subsections (c), (d) and (e) of Section 3
hereof.
5. Death or Disability.
-------------------
(a) Termination. The term of employment of the Executive shall
-----------
terminate forthwith in the event of the death of the Executive, and, at the
option of the Company upon written notice to the Executive, in the event that
the Executive shall fail for a period of four consecutive months to render and
perform the services required of him under this Agreement because of
"disability" (as currently defined in the Company's existing long-term
disability plan). Upon a termination of the Executive's employment hereunder
because of death or "disability", the Executive shall be entitled to receive and
shall be paid as provided for in subsection (b) of Section 5 hereof and the
Company shall have no further obligation to him hereunder, except (i) to pay to
the Executive or his estate, as the case may be, the amounts, if any, due him
pursuant to subsection (c), (d) and (e) of Section 3 hereof and (ii) solely in
the case of "disability", to continue to provide the Executive with the benefits
under the medical and dental plans of the Company then in effect for senior
executives of the Company until February 14, 2004, at the same charge to the
Executive as he would have paid as an active employee of the Company.
(b) Payments Required.
-----------------
(i) In the event of the death of the Executive, his estate shall
be paid, within 20 days after the date of his death, a lump sum
in the amount equal to the sum of (A) Base Salary for one year
from the date of his death and (B) the average bonus paid
pursuant to subsection (b) of Section 3 hereof for the two years
immediately prior to the date of the Executive's death.
4
<PAGE>
(ii) In the event of a "total disability" (as currently defined
in the Company's existing long-term disability plan), the
Executive shall continue to be paid, until the third anniversary
of the date of his termination for "disability", his Base Salary
and shall receive a bonus, at the time bonuses are paid to other
senior executives, in an amount equal to the average bonus paid
pursuant to subsection (b) of Section 3 hereof for the two years
immediately prior to the date of the Executive's termination for
"disability".
(iii) In the event of a "partial disability" (as currently
defined in the Company's existing long-term disability plan), the
Executive shall continue to be paid, until the fifth (fourth, if
such termination occurs in 2002, third, if such event occurs in
2003, second, if such event occurs in 2004) anniversary of the
date of his termination for "disability", his Base Salary and
shall receive a bonus, at the time bonuses are paid to other
senior executives, in an amount equal to the average bonus paid
pursuant to subsection (b) of Section 3 hereof for the two years
immediately prior to the date of the Executive's termination for
"disability".
(iv) All amounts payable pursuant to clause (ii) or (iii) of this
subsection (b) shall be reduced by amounts paid to the Executive
under any of the Company's disability plans.
6. Covenant Not to Interfere; Confidential Information; and Injunctive
-------------------------------------------------------------------
Relief.
------
(a) Covenant Not to Interfere. The Executive agrees and covenants
-------------------------
that, for a period of two (2) years after the date of expiration or termination
of this Agreement, the Executive shall not, without the prior written approval
of the Board of Directors, Interfere directly or indirectly in any way with the
Company or any of its affiliates. For purposes of this Agreement, "Interfere"
shall mean, to influence or attempt to influence, directly or indirectly,
present or prospective clients (i.e., persons or entities identified by the
Company as prospective clients of the Company or any of its affiliates within
twelve (12) months of termination or expiration of the Executive's employment
hereunder and with whom the Company or such affiliates have had substantial
contact), employees, or independent contractors of the Company or any of its
affiliates to restrict, reduce, sever or otherwise alter their relationship with
the Company or any of its affiliates. In the event any court having
jurisdiction shall reduce the duration or scope of the covenant not to interfere
set forth in this subsection (a), such covenant, in its reduced form, shall be
enforceable.
(b) Confidential Information. The Executive agrees that during the
------------------------
term of his employment and thereafter, he shall not disclose, without the prior
written consent of the Board of Directors, directly or indirectly, any
confidential or non-public proprietary knowledge or information pertaining to
the Company or any of its affiliates, including,
5
<PAGE>
without limitation, with respect to their management, financial condition,
subscription, mailing or customer lists, sources of supply, business, personnel,
policies or prospects, to any person, firm, corporation or other entity, for any
reason or purposes whatsoever or use such knowledge or information (other than
in connection with his duties hereunder).
(c) Memoranda, Etc. The Executive acknowledges and agrees that all
--------------
memoranda, notes, reports, records and other documents made or compiled by the
Executive, or made available to the Executive during the term of his employment
concerning the business of the Company or any of its affiliates, shall be the
Company's property and shall be delivered to the Company upon the termination of
the Executive's employment hereunder or at any other time upon request by the
Board of Directors. Following the expiration or termination of the Executive's
employment hereunder, the Executive agrees to cooperate, for a period of five
(5) years with respect to legal matters and for a period of one (1) year with
respect to all other matters, with the Company and its affiliates with respect
to matters with which the Executive was involved during the term of his
employment.
(d) Survival. The provisions of this Section 6 shall survive the
--------
termination or expiration of this Agreement and the Executive's term of
employment hereunder.
(e) Injunctive Relief. The Executive consents and agrees that, if he
-----------------
violates any of the provisions of this Agreement with respect to
non-interference or confidentiality, the Company would sustain irreparable harm
and, therefore, in addition to any other remedies which the Company may have
under this Agreement or otherwise, the Company shall be entitled to apply to any
court of competent jurisdiction for an injunction restraining the Executive from
committing or continuing any such violation of this Agreement, and the Executive
shall not object to any such application.
7. Assignment.
----------
(a) This Agreement is personal as to the Executive and shall not be
assignable by the Executive.
(b) This Agreement shall not be assigned by the Company without the
prior written consent of the Executive.
8. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally (when delivered), sent by registered mail, return receipt
requested (upon confirmation of receipt) or by recognized overnight courier (one
day after being sent) to the address shown below, or to such other address as
the applicable party hereto may designate by notice to the other party given as
herein provided:
If to the Company, to:
6
<PAGE>
Reliance Group Holdings, Inc.
55 East 52nd Street
New York, New York 10055
Attention: President
If to the Executive to:
Saul P. Steinberg
740 Park Avenue
New York, New York 10021
9. Complete Understanding. This Agreement constitutes the sole and
----------------------
entire agreement between the Executive and the Company with respect to the
Company's continued employment of the Executive and shall not be altered,
modified or amended except by written instrument signed by the party against
whom such alteration, modification or amendment is sought to be enforced. This
Agreement does not alter, amend or modify any rights of the Executive to
indemnification under either the Company's Charter or By-laws or his
indemnification agreement with the Company. The parties hereto hereby terminate,
effective the date hereof, the Employment Agreement, dated as of January 1,
1992, as amended, between the parties.
10. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of and be enforceable by the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
11. Termination of Agreement. This Agreement (other than the provisions
------------------------
of Sections 3(e), 4 (c), 5(b) and 6 hereof) shall terminate upon the expiration
or termination, in accordance with the terms hereof, of the Executive's
employment hereunder.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
13. Severability. The invalidity of all or any part of any provision of
------------
this Agreement shall not invalidate the remainder of this Agreement or the
remainder of any paragraph which can be given effect without such invalid
provision.
14. Paragraph Headings. The paragraph headings contained in this
------------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and the Executive has executed
this Agreement, in each case, as of the day and year first above written.
RELIANCE GROUP HOLDINGS, INC.
By: /s/ George E. Bello
-------------------------------------------
Title: Executive Vice President and Controller
/s/ Saul P. Steinberg
-------------------------------------------
Name: Saul P. Steinberg
8
<PAGE>
Schedule to Exhibit 10.1
Each of George E. Bello, Lowell C. Freiberg, Howard E. Steinberg and Robert
M. Steinberg (each, the "Executive") entered into an Employment Agreement (the
"Executive Employment Agreements") with Reliance Group Holdings, Inc. (the
"Company") which is identical to Exhibit 10.1 hereto in all material respects
other than the following:
1. Each Executive agrees to perform such duties and render such services,
consistent with his current duties and services, as from time to time may be
requested of him by the chief executive officer or the Board of Directors of the
Company (or any duly empowered committee thereof).
2. Pursuant to the terms of Robert M. Steinberg's Executive Employment
Agreement, the base salary of Robert M. Steinberg may be reduced by not more
than 15% by the Board of Directors (or any duly empowered committee thereof) for
any year in which the base salary of the chief executive officer of the Company
is similarly reduced.
3. Pursuant to the terms of the Executive Employment Agreements of each
of Messrs. Bello, Freiberg and Howard E. Steinberg, the base salary of each of
Messrs. Bello, Freiberg and Howard E. Steinberg may be reduced by not more than
15% by the Board of Directors (or any duly empowered committee thereof) for any
year in which the base salaries of the Company's chief executive officer and
chief operating officer are similarly reduced.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into and as of the 15th day of
February 1996, by and between Saul P. Steinberg (the "Executive") and RELIANCE
INSURANCE COMPANY, a Pennsylvania insurance corporation having its principal
place of business at 4 Penn Center Plaza, Philadelphia, Pennsylvania 19103 (the
"Company").
1. Employment.
----------
(a) The Company agrees to employ the Executive, and the Executive
agrees to be employed by the Company, as a senior executive officer of the
Company having his existing title and duties. During the term hereinafter
specified, the Executive agrees to perform such duties and render such services,
consistent with his current duties and services, as from time to time may be
requested of him by the Board of Directors of the Company or any duly empowered
committee thereof (the "Board of Directors").
(b) During the term of this Agreement, the Executive shall devote his
full working time during customary business hours and his best efforts, and
apply all of his skill and experience, to the proper performance of his duties
hereunder and to the business and affairs of the Company and its affiliates.
2. Term. Subject to Sections 4 and 5 hereof, the term of employment of
----
the Executive hereunder shall be for the period commencing on the date hereof
and ending on February 14, 2001; provided that such term may be extended, at the
--------
option of either the Company or the Executive, for three successive one year
periods thereafter by written notice to the Executive from the Company or to the
Company from the Executive, as the case may be, given at least sixty (60) days
prior to the end of the then applicable term of employment.
3. Compensation.
------------
(a) Base Salary. The Company will pay to the Executive during the
-----------
term of his employment hereunder a base salary ("Base Salary") of not less than
Executive's annual base salary on January 1, 1996, payable in accordance with
the Company's usual and customary pay procedures. The Base Salary shall be
subject to increase by the Board of Directors in their absolute discretion
during the term of the Executive's employment hereunder. Any increase in the
base salary shall become the new Base Salary for all purposes hereof.
(b) Bonus. For each calendar year of the Company during the term of
-----
the Executive's employment, the Executive shall be eligible to receive a bonus
based on a percentage of his Base Salary for such year (not less than 115%) as
determined pursuant to Reliance Group Holdings, Inc.'s existing Executive Bonus
Plan (or any other subsequent executive bonus compensation plan in which the
chief executive officer or chief operating
<PAGE>
officer participate and which has been approved by the stockholders and does not
reduce the Executive's bonus potential below 100% of Base Salary), provided
that, except in the case of the bonus for the calendar year in which this
Agreement terminates in accordance with Section 2 hereof, the Executive has not
"voluntarily resigned" or been terminated for "cause" prior to the time of
payment of the bonus. The Executive's bonus for 1995 shall not be affected by
this Agreement.
(c) Reimbursement of Expenses. The Company shall pay or reimburse
-------------------------
the Executive for all reasonable business expenses actually incurred or paid by
the Executive during the term of his employment under this Agreement in the
performance of his services hereunder in accordance with the current policies of
the Company applicable to the Executive, subject to modification from time to
time hereafter, provided that such modification does not significantly and
adversely affect the Executive's payments or reimbursements thereunder. Such
payment or reimbursement shall be made upon presentation of expense statements
or vouchers or such other supporting information as the Company may customarily
require of its senior executives.
(d) Vacations. The Executive shall be entitled to not less than four
---------
weeks' paid vacation. Vacation shall be taken at times reasonably consistent
with the needs of the Company. Vacation earned for a year but not taken during
that year shall not be paid for nor taken in a subsequent year.
(e) Supplementary Pension Benefits. For purposes of the Company's
------------------------------
Supplemental Pension Plan, (i) the pension benefit payable to the Executive
shall be calculated using total IRS Form W-2 compensation (excluding any
compensation attributable to exercise of employee stock options) for the
immediately preceding five years instead of Base Salary for such period, and
(ii) the Executive will be credited with all years of actual service with the
Company and its predecessors and with all years during which the Executive could
have received payments pursuant to Section 2 hereof, unless he is terminated for
cause in which case he be credited only with all years of actual service with
the Company and its predecessors.
(f) Perquisites. The Executive shall be entitled to such other
-----------
perquisites as are currently provided to the Executive.
(g) Withholding. The Executive acknowledges and agrees that the
-----------
Company shall be entitled to withhold from his compensation, or otherwise
provide for, all federal, state or local income or other taxes which the Company
determines are required to be withheld on amounts payable to the Executive
pursuant to this Agreement or otherwise.
4. Termination of Employment.
-------------------------
(a) With or Without Cause; Resignation. The Company shall have the
right to terminate the employment of the Executive with or without "cause" (as
hereinafter
2
<PAGE>
defined) and the Executive shall have the right to resign from his employment by
the Company. If (i) the Executive's employment with the Company is terminated
for "cause", or (ii) the Executive has "voluntarily resigned" (as hereinafter
defined) his employment, the Company shall have no further obligation to the
Executive hereunder, except, in the case of clause (ii), to pay to the Executive
the amounts, if any, due him pursuant to subsections (c), (d) and (e) of Section
3 hereof.
(b) Definitions of Cause and Voluntarily Resigned. For purposes of
---------------------------------------------
this Agreement, "cause" shall mean:
(i) conviction of the Executive of a felony, or of any lesser
crime or offense involving the property of the Company or any of
its subsidiaries or affiliates;
(ii) willful misconduct by the Executive in connection with the
performance of his duties hereunder, or material and wilful
breach by him of any of the provisions of this Agreement and
failure to cure such misconduct or breach within two (2) weeks
after receipt of written notice thereof;
(iii) the Executive's conviction in a court of law of any
criminal offense involving moral turpitude under the laws of the
United States or any other jurisdiction the laws of which may
apply; and
(iv) the Executive's willful failure to perform specific written
directives of the Board of Directors of the Company, which
directives are consistent with the scope and nature of the
Executive's existing duties and responsibilities as set forth in
Section 1 hereof, and failure to cure such failure within two
(2) weeks after receipt of written notice thereof.
For purposes of this Agreement, "voluntarily resigned" shall mean the
Executive's decision to no longer serve as an executive officer of the Company,
which decision shall not have resulted from any of the following:
(i) a substantial diminution of the Executive's duties without
the Executive's written consent;
(ii) a demotion in title;
(iii) a relocation or attempted relocation of the Executive
without the Executive's written consent to an office outside a
25-mile radius of New York City; or
3
<PAGE>
(iv) an increase in any year in the amount of travel required of
the Executive by more than 20% of the average amount of travel
required during the previous three years.
(c) Discharge Without Cause; Resignation. If the Executive is
------------------------------------
discharged without "cause" or has not "voluntarily resigned", the Company shall
have no obligation to the Executive hereunder, except (i) to continue to provide
the Executive with the benefits under the medical and dental plans of the
Company then in effect for senior executives of the Company until February 14,
2004, at the same charge to the Executive as he would have paid as an active
employee of the Company, (ii) to fully vest all stock option grants held by the
Executive and permit the immediate exercise thereof for a period of 12 months
after the date of such discharge or such resignation, (iii) to pay to the
Executive, within 20 days after the date of such discharge or such resignation,
a lump sum in the amount determined by multiplying (A) the number of years
(including fractional years) remaining from the date of such discharge or such
resignation to February 14, 2004, times (B) the sum of Base Salary and the
average bonus paid pursuant to subsection (b) of Section 3 hereof for the two
years immediately prior to the date of such discharge or such resignation and
(iv) to pay the amounts due him under subsections (c), (d) and (e) of Section 3
hereof.
5. Death or Disability.
-------------------
(a) Termination. The term of employment of the Executive shall
-----------
terminate forthwith in the event of the death of the Executive, and, at the
option of the Company upon written notice to the Executive, in the event that
the Executive shall fail for a period of four consecutive months to render and
perform the services required of him under this Agreement because of
"disability" (as currently defined in the Company's existing long-term
disability plan). Upon a termination of the Executive's employment hereunder
because of death or "disability", the Executive shall be entitled to receive and
shall be paid as provided for in subsection (b) of Section 5 hereof and the
Company shall have no further obligation to him hereunder, except (i) to pay to
the Executive or his estate, as the case may be, the amounts, if any, due him
pursuant to subsection (c), (d) and (e) of Section 3 hereof and (ii) solely in
the case of "disability", to continue to provide the Executive with the benefits
under the medical and dental plans of the Company then in effect for senior
executives of the Company until February 14, 2004, at the same charge to the
Executive as he would have paid as an active employee of the Company.
(b) Payments Required.
-----------------
(i) In the event of the death of the Executive, his estate shall
be paid, within 20 days after the date of his death, a lump sum
in the amount equal to the sum of (A) Base Salary for one year
from the date of his death and (B) the average bonus paid
pursuant to subsection (b) of Section 3 hereof for the two years
immediately prior to the date of the Executive's death.
4
<PAGE>
(ii) In the event of a "total disability" (as currently defined
in the Company's existing long-term disability plan), the
Executive shall continue to be paid, until the third anniversary
of the date of his termination for "disability", his Base Salary
and shall receive a bonus, at the time bonuses are paid to other
senior executives, in an amount equal to the average bonus paid
pursuant to subsection (b) of Section 3 hereof for the two years
immediately prior to the date of the Executive's termination for
"disability".
(iii) In the event of a "partial disability" (as currently
defined in the Company's existing long-term disability plan), the
Executive shall continue to be paid, until the fifth (fourth, if
such termination occurs in 2002, third, if such event occurs in
2003, second, if such event occurs in 2004) anniversary of the
date of his termination for "disability", his Base Salary and
shall receive a bonus, at the time bonuses are paid to other
senior executives, in an amount equal to the average bonus paid
pursuant to subsection (b) of Section 3 hereof for the two years
immediately prior to the date of the Executive's termination for
"disability".
(iv) All amounts payable pursuant to clause (ii) or (iii) of this
subsection (b) shall be reduced by amounts paid to the Executive
under any of the Company's disability plans.
6. Covenant Not to Interfere; Confidential Information; and Injunctive
-------------------------------------------------------------------
Relief.
- ------
(a) Covenant Not to Interfere. The Executive agrees and covenants
-------------------------
that, for a period of two (2) years after the date of expiration or termination
of this Agreement, the Executive shall not, without the prior written approval
of the Board of Directors, Interfere directly or indirectly in any way with the
Company or any of its affiliates. For purposes of this Agreement, "Interfere"
shall mean, to influence or attempt to influence, directly or indirectly,
present or prospective clients (i.e., persons or entities identified by the
Company as prospective clients of the Company or any of its affiliates within
twelve (12) months of termination or expiration of the Executive's employment
hereunder and with whom the Company or such affiliates have had substantial
contact), employees, or independent contractors of the Company or any of its
affiliates to restrict, reduce, sever or otherwise alter their relationship with
the Company or any of its affiliates. In the event any court having
jurisdiction shall reduce the duration or scope of the covenant not to interfere
set forth in this subsection (a), such covenant, in its reduced form, shall be
enforceable.
(b) Confidential Information. The Executive agrees that during the
------------------------
term of his employment and thereafter, he shall not disclose, without the prior
written consent of the Board of Directors, directly or indirectly, any
confidential or non-public proprietary knowledge or information pertaining to
the Company or any of its affiliates, including,
5
without limitation, with respect to their management, financial condition,
subscription, mailing or customer lists, sources of supply, business, personnel,
policies or prospects, to any person, firm, corporation or other entity, for any
reason or purposes whatsoever or use such knowledge or information (other than
in connection with his duties hereunder).
(c) Memoranda, Etc. The Executive acknowledges and agrees that all
--------------
memoranda, notes, reports, records and other documents made or compiled by the
Executive, or made available to the Executive during the term of his employment
concerning the business of the Company or any of its affiliates, shall be the
Company's property and shall be delivered to the Company upon the termination of
the Executive's employment hereunder or at any other time upon request by the
Board of Directors. Following the expiration or termination of the Executive's
employment hereunder, the Executive agrees to cooperate, for a period of five
(5) years with respect to legal matters and for a period of one (1) year with
respect to all other matters, with the Company and its affiliates with respect
to matters with which the Executive was involved during the term of his
employment.
(d) Survival. The provisions of this Section 6 shall survive the
--------
termination or expiration of this Agreement and the Executive's term of
employment hereunder.
(e) Injunctive Relief. The Executive consents and agrees that, if he
-----------------
violates any of the provisions of this Agreement with respect to
non-interference or confidentiality, the Company would sustain irreparable harm
and, therefore, in addition to any other remedies which the Company may have
under this Agreement or otherwise, the Company shall be entitled to apply to any
court of competent jurisdiction for an injunction restraining the Executive from
committing or continuing any such violation of this Agreement, and the Executive
shall not object to any such application.
7. Assignment.
----------
(a) This Agreement is personal as to the Executive and shall not be
assignable by the Executive.
(b) This Agreement shall not be assigned by the Company without the
prior written consent of the Executive.
8. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally (when delivered), sent by registered mail, return receipt
requested (upon confirmation of receipt) or by recognized overnight courier (one
day after being sent) to the address shown below, or to such other address as
the applicable party hereto may designate by notice to the other party given as
herein provided:
If to the Company, to:
6
<PAGE>
Reliance Insurance Company
4 Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: President
If to the Executive to:
Saul P. Steinberg
740 Park Avenue
New York, New York 10021
9. Complete Understanding. This Agreement constitutes the sole and
----------------------
entire agreement between the Executive and the Company with respect to the
Company's continued employment of the Executive and shall not be altered,
modified or amended except by written instrument signed by the party against
whom such alteration, modification or amendment is sought to be enforced. This
Agreement does not alter, amend or modify any rights of the Executive to
indemnification under either the Company's Charter or By-laws or his
indemnification agreement with the Company. The parties hereto hereby terminate,
effective the date hereof, the Employment Agreement, dated as of January 1,
1992, as amended, between the parties.
10. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of and be enforceable by the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
11. Termination of Agreement. This Agreement (other than the provisions
------------------------
of Sections 3(e), 4 (c), 5(b) and 6 hereof) shall terminate upon the expiration
or termination, in accordance with the terms hereof, of the Executive's
employment hereunder.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
13. Severability. The invalidity of all or any part of any provision of
------------
this Agreement shall not invalidate the remainder of this Agreement or the
remainder of any paragraph which can be given effect without such invalid
provision.
14. Paragraph Headings. The paragraph headings contained in this
------------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and the Executive has executed
this Agreement, in each case, as of the day and year first above written.
RELIANCE INSURANCE COMPANY
By: /s/ Lowell C. Freiberg
-------------------------------
Title: Senior Vice President
/s/ Saul P. Steinberg
__________________________________
Name: Saul P. Steinberg
8
<PAGE>
Schedule to Exhibit 10.2
Robert M. Steinberg entered into an Employment Agreement (the "RMS
Employment Agreement") with Reliance Insurance Company ("RIC") which is
identical to Exhibit 10.2 hereto in all material respects.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet and the Consolidated Statement of Income
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 2,469,489
<DEBT-CARRYING-VALUE> 752,643
<DEBT-MARKET-VALUE> 761,188
<EQUITIES> 726,763
<MORTGAGE> 0
<REAL-ESTATE> 283,595
<TOTAL-INVEST> 4,420,864
<CASH> 42,303
<RECOVER-REINSURE> 3,256,107
<DEFERRED-ACQUISITION> 203,760
<TOTAL-ASSETS> 10,037,732
<POLICY-LOSSES> 6,120,121
<UNEARNED-PREMIUMS> 1,395,123
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 887,208
0
0
<COMMON> 11,403
<OTHER-SE> 648,784
<TOTAL-LIABILITY-AND-EQUITY> 10,037,732
609,867
<INVESTMENT-INCOME> 70,717
<INVESTMENT-GAINS> 4,468
<OTHER-INCOME> 38,734
<BENEFITS> 316,707
<UNDERWRITING-AMORTIZATION> 305,495
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 29,688
<INCOME-TAX> (9,200)
<INCOME-CONTINUING> 22,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,512
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
