SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934
and
SCHEDULE 13D/A
(AMENDMENT NO. 4)
Under the Securities Exchange Act of 1934
SCOR U.S. Corporation
(Name of Subject Company)
SCOR Merger Sub Corporation
SCOR S.A.
(Bidders)
COMMON STOCK, PAR VALUE $0.30 PER SHARE
(Title of Class of Securities)
78 4027 10 4
(CUSIP Number of Class of Securities)
John T. Andrews, Jr.
Vice President
General Counsel and Secretary
SCOR U.S. Corporation
Two World Trade Center
New York, New York 10048-0178
(212) 390-5200
Copy to:
Allan M. Chapin Esq.
Sullivan & Cromwell
250 Park Avenue
New York, New York 10048-0178
(212) 558-4000
(Name, Address, and Telephone Numbers of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
Calculation of Filing Fee
Transaction Valuation*: Amount of Filing Fee**:
$70,229,727 $14,046
* For purposes of calculating the filing fee only. The filing fee was
calculated, pursuant to Section 13(e)(3) of the Securities Exchange Act
of 1934, as amended, and Rule 0-11 thereunder, on the basis of 4,605,228
Common Stock (the number of Common Stock outstanding on the date hereof,
including vested options to acquire Common Stock, but excluding unvested
options to acquire Common Stock and excluding 14,547,756 Common Stock
owned by SCOR S.A., multiplied by the proposed acquisition price U.S.
$15.25 per share.
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid: Filing Party:
------------ ---------------
Form or Registration No.: Date Filed:
------------ ---------------
<PAGE>
Cusip No 78 4027 10 4 14D-1 and 13D Page 2 of 10 Pages
- --------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCOR S.A.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION France
7 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 14,547,756 shares
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW
(7) 80%
10 TYPE OF REPORTING PERSON HC, IC, CO
<PAGE>
Cusip No 78 4027 10 4 14D-1 and 13D Page 3 of 10 Pages
--------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCOR Merger Sub Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 0 shares
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW
(7) 0%
10 TYPE OF REPORTING PERSON CO
<PAGE>
This Schedule 14D-1 and Schedule 13D/A (Amendment No. 4) (the
"Schedule 14D-1 and 13D") relates to the tender offer by SCOR Merger Sub
Corporation, a newly organized Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under
the laws of The French Republic ("Parent"), to purchase all the outstanding
shares of Common Stock, par value $0.30 per Share (the "Shares"), of SCOR
U.S. Corporation, a Delaware corporation (the "Company"), not currently
directly or indirectly owned by Parent, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase")
and in the related Letter of Transmittal (the "Letter of Transmittal",
together with the Offer to Purchase, the "Offer"), both of which are
annexed to and filed with this Schedule 14D-1 and 13D as Exhibits (a)(1)
and (a)(2), respectively. This Schedule 14D-1 and 13D is being filed on
behalf of the Purchaser and Parent. The item numbers and responses
thereto below are in accordance with the requirements of Schedule 14D-1
and Schedule 13D respectively of the Securities Exchange Act of 1934, as
amended.
Item 1. Security and Subject Company.
----------------------------
(a) The name of the subject company is SCOR U.S. Corporation, a
Delaware corporation (the "Company"), and the address of its principal
executive offices is Two World Trade Center, New York, New York 10048-
0178.
(b) The information set forth in the "INTRODUCTION" of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "THE OFFER - 6. Price Range of
Shares; Dividends" of the Offer to Purchase is incorporated herein by
reference.
Item 2. Identity and Background.
-----------------------
(a)-(d); (g) This Statement is being filed by the Purchaser and
Parent. The information set forth in the "INTRODUCTION", in "THE
OFFER - 9. Certain Information Concerning Parent and the
Purchaser" and in "SCHEDULE I - Directors and Executive Officers
of Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference.
(e); (f) During the last five years, neither Parent, nor the
Purchaser nor, to the best of their knowledge, any of the
directors or executive officers of Parent or the Purchaser has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such law.
Item 3. Past Contacts, Transactions or Negotiations with the Subject
------------------------------------------------------------
Company.
-------
(a)-(b) The information set forth in the "INTRODUCTION", in
"SPECIAL FACTORS - 5. Background of the Offer and the Merger", in
"THE OFFER - 9. Certain Information Concerning Parent and the
Purchaser" and in "THE OFFER - 10. Contacts with the Company"
of the Offer to Purchase is incorporated herein by reference.
(Page 4 of 10 Pages)
<PAGE>
Item 4. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
(a)-(b) The information set forth in "THE OFFER - 12. Source
and Amount of Funds" of the Offer to Purchase is incorporated
herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
----------------------------------------------------------------
(a)-(g) The information set forth in the "INTRODUCTION", in
"SPECIAL FACTORS - 2. Reasons for the Offer and the Merger", in
"SPECIAL FACTORS - 5. Background of the Offer and the Merger", in
"THE OFFER - 7. Effect of the Offer on Market for the Shares,
Stock Exchange Listing, and Exchange Act Registration" and in "THE
OFFER - 11. The Merger Agreement; Appraisal Rights; Effect on the
Debentures" of the Offer to Purchase is incorporated herein by
reference.
Item 6. Interest in Securities of the Subject Company.
---------------------------------------------
(a)-(b) The information set forth in the "INTRODUCTION", in "THE
OFFER - 9. Certain Information Concerning Parent and the
Purchaser" and in "THE OFFER - 10. Contacts with the Company" of
the Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with
-------------------------------------------------------------
Respect to the Subject Company's Securities.
-------------------------------------------
The information set forth in the "INTRODUCTION", in "THE
OFFER - 9. Certain Information Concerning Parent and the
Purchaser", in "THE OFFER - 10. Contacts with the Company"
and in "THE OFFER - 11. The Merger Agreement; Appraisal Rights;
Effect on the Debentures" of the Offer to Purchase is incorporated
herein by reference.
Item 8. Person Retained, Employed or to be Compensated.
----------------------------------------------
The information set forth in "SPECIAL FACTORS - 5. Background of
the Offer and the Merger" and in "THE OFFER - 16. Fees and
Expenses" of the Offer to Purchase is incorporated herein by
reference.
Item 9. Financial Statements of Certain Bidders.
---------------------------------------
Not applicable.
Item 10. Additional Information.
----------------------
(a) The information set forth in "SPECIAL FACTORS - 5. Background
of the Offer and the Merger", in "THE OFFER - 9. Certain
Information Concerning Parent and the Purchaser" and in "THE
OFFER - 10. Contacts with the Company" of the Offer to Purchase
is incorporated herein by reference.
(b)-(c) The information set forth in "THE OFFER - 15. Certain
Legal Matters" of the Offer to Purchase is incorporated herein
by reference.
(Page 5 of 10 Pages)
<PAGE>
(d) The information set forth in "THE OFFER - 7. Effect of the
Offer on Market for the Shares, Stock Exchange Listing, and
Exchange Act Registration" of the Offer to Purchase is incorporated
herein by reference.
(e) The information set forth in "THE OFFER - 15. Certain Legal
Matters" of the Offer to Purchase is incorporated herein by
reference.
(f) The information set forth in the entire Offer to Purchase and
the related Letter of Transmittal, copies of which are attached
hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated
herein by reference in its entirety.
Item 11. Material to be filed as Exhibits.
--------------------------------
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal (including Guidelines for
Certification Taxpayer Identification Number on Form W-9).
(a)(3) Letter dated November 9, 1995, to brokers, dealers,
commercial banks, trust companies and nominees.
(a)(4) Letter to be used by brokers, dealers, commercial banks,
trust companies and nominees to their clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Press Release issued by Parent, dated September 26, 1995.
(a)(7) Press Release issued by Parent and the Purchaser, dated
November 3, 1995.
(a)(8) Form of newspaper advertisement, dated November 9, 1995.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger (the "Merger Agreement"),
dated as of November 2, 1995, among Parent, the Purchaser
and the Company.
(c)(2) Letter Agreement to amend the Merger Agreement, dated as
of November 8, 1995.
(c)(3) SCOR Reinsurance Company 1994 Voting Trust Agreement,
dated as of June 6, 1994, among SCOR Reinsurance Company,
the Company and the Voting Trustees designated therein.
(c)(4) Net Aggregate Excess of Loss Retrocessional Agreement,
dated January 1, 1994, among Parent and SCOR Reinsurance
Company.
(Page 6 of 10 Pages)
<PAGE>
(c)(5) Interests and Liabilities Agreement to the Catastrophe
Excess of Loss Reinsurance Contract, among SCOR
Reinsurance Company and SCOR S.A., effective date
January 1, 1994.
(c)(6) Interests and Liabilities Agreement to the Catastrophe
Excess of Loss Reinsurance Contract,among SCOR
Reinsurance Company and SCOR Reassurance, effective
date January 1, 1995.
(c)(7) Credit Agreement U.S. $20 million, dated January 24, 1995
between Parent and the Company.
(c)(8) Loan Agreement U.S. $20 million, dated October 2, 1995
between Parent and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Complaint, Howard Sands Feldman, Custodian for Jan
---------------------------------------
Sharona Feldman, UGMA v. Jacques P. Blandeau [sic],
--------------------------------------------------
et al, C.A. No. 14577.
-----
(g)(2) Complaint, Crandon Capital Partners v. Jacques P.
------------------------ ----------
Blondeau, et al, C.A. No. 14579.
---------------
(g)(3) Complaint, Daniel Bruno v. Jacques P. Blandeau [sic],
------------ -------------------------
et al, C.A. No. 14582.
-----
(g)(4) Complaint, Jan Baxt v. Jacques P. Blandeau [sic], et al,
-------- --------------------------------
C.A. No. 14585.
(g)(5) Complaint, Kalter and Kaplan Profit Sharing Plan -
----------------------------------------
Keogh F/B/O Ivan Kalter v. Jacques P. Blondeau et al,
----------------------- -------------------------
C.A. No. 14589.
(Page 7 of 10 Pages)
<PAGE>
SIGNATURE
---------
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Dated: November 9, 1995
SCOR S.A.
By: /s/ Jacques P. Blondeau
-------------------------------------------
Name: Jacques P. Blondeau
Title: Chairman and Chief Executive Officer
SCOR Merger Sub Corporation
By: /s/ Jacques P. Blondeau
-------------------------------------------
Name: Jacques P. Blondeau
Title: President and Director
(Page 8 of 10 Pages)
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Exhibit Name Page Number
-------------- ------------ -----------
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal (including
Guidelines for Certification of
Taxpayer Identification Number on Form W-9).
(a)(3) Letter dated November 9, 1995, to brokers,
dealers, commercial banks, trust companies
and nominees.
(a)(4) Letter to be used by brokers, dealers,
commercial banks, trust companies and
nominees to their clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6)* Press Release issued by Parent, dated
September 26, 1995.
(a)(7) Press Release issued by Parent and the
Purchaser, dated November 3, 1995.
(a)(8) Form of newspaper advertisement, dated
November 9, 1995.
(b) Not applicable.
(c)(1)** Agreement and Plan of Merger (the "Merger
Agreement"), dated November 2, 1995, among
Parent, the Purchaser and the Company.
(c)(2) Letter Agreement to amend the Merger
Agreement, dated as of November 8, 1995.
(c)(3)*** SCOR Reinsurance Company 1994 Voting Trust
Agreement, dated as of June 6, 1994, among
SCOR Reinsurance Company, the Company and
the Voting Trustees designated therein.
- ---------------------
* Incorporated by reference from Parent's statement on Schedule 13D/A
Amendment No. 3) dated September 26, 1995.
** Incorporated by reference from the Company's Report on Form 8-K,
dated November 6, 1995.
*** Incorporated by reference from the Company's Annual Report on Form
10-K for the period ending December 31, 1994.
(Page 9 of 10 Pages)
<PAGE>
Exhibit Number Exhibit Name Page Number
-------------- ------------ -----------
(c)(4)*** Net Aggregate Excess of Loss Retrocessional
Agreement, dated January 1, 1994, among
Parent and SCOR Reinsurance Company.
(c)(5) Interests and Liabilities Agreement to
the Catastrophe Excess of Loss Reinsurance
Contract, among SCOR Reinsurance Company
and SCOR S.A., effective date January 1, 1994.
(c)(6) Interests and Liabilities Agreement to the
Catastrophe Excess of Loss Reinsurance Contract,
among SCOR Reinsurance Company and SCOR
Reassurance, effective date January 1, 1995.
(c)(7) Credit Agreement U.S. $20 million, dated
January 24, 1995 between Parent and the Company.
(c)(8) Loan Agreement U.S. $20 million, dated
October 2, 1995 between Parent and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Complaint, Howard Sands Feldman, Custodian for Jan
---------------------------------------
Sharona Feldman, UGMA v. Jacques P. Blandeau [sic],
--------------------------------------------------
et al, C.A. No. 14577.
-----
(g)(2) Complaint, Crandon Capital Partners v. Jacques P.
------------------------ ----------
Blondeau, et al, C.A. No. 14579.
---------------
(g)(3) Complaint, Daniel Bruno v. Jacques P. Blandeau [sic],
------------ -------------------------
et al, C.A. No. 14582.
-----
(g)(4) Complaint, Jan Baxt v. Jacques P. Blandeau [sic], et al,
-------- --------------------------------
C.A. No. 14585.
(g)(5) Complaint, Kalter and Kaplan Profit Sharing Plan -
----------------------------------------
Keogh F/B/O Ivan Kalter v. Jacques P. Blondeau et al,
----------------------- -------------------------
C.A. No. 14589.
- --------------------
*** Incorporated by reference from the Company's Annual Report on Form 10-K
for the period ending December 31, 1994.
(Page 10 of 10 Pages)
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
SCOR U.S. CORPORATION
AT
$15.25 NET PER SHARE
BY
SCOR MERGER SUB CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCOR S.A.
- --------------------------------------------------------------------------------
THE OFFER (AS DEFINED HEREIN) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AS DEFINED HEREIN) WHICH, TOGETHER WITH ANY SHARES CURRENTLY
BENEFICIALLY OWNED DIRECTLY OR INDIRECTLY BY PARENT (AS DEFINED HEREIN), WILL
CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES OUTSTANDING AS OF THE DATE THE
SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER. THE OFFER IS ALSO SUBJECT
TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE "THE
OFFER -- 1. TERMS OF THE OFFER" AND "THE OFFER -- 13. CERTAIN CONDITIONS OF THE
OFFER."
-------------------
THE BOARD OF DIRECTORS OF THE COMPANY AND THE SPECIAL COMMITTEE (AS DEFINED
HEREIN) HAVE UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER (AS DEFINED
HEREIN) ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
-------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock (the "Shares") of the Company should either (1) complete
and sign the Letter of Transmittal accompanying this Offer to Purchase (the
"Letter of Transmittal"), or a facsimile thereof, in accordance with the
instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed if required by Instruction 1 to the Letter of Transmittal,
mail or deliver the Letter of Transmittal (or such facsimile) or, in the case of
a book-entry transfer of Shares effected pursuant to the procedure set forth in
"THE OFFER -- 3. Procedure for Tendering Shares", an Agent's Message (as defined
herein) in lieu of the Letter of Transmittal, and any other required documents
to the Depositary (as defined herein) and either deliver the Letter of
Transmittal (or such facsimile) together with the certificate(s) representing
the tendered Shares or deliver such Shares pursuant to the procedure for
book-entry transfer set forth in "THE OFFER -- 3. Procedure for Tendering
Shares", or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are urged to contact such
broker, dealer, commercial bank, trust company or other nominee if they desire
to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedures for guaranteed delivery set forth in
"THE OFFER -- 3. Procedure for Tendering Shares".
The Purchaser makes no recommendation to any stockholder as to whether to
tender or refrain from tendering Shares. Stockholders must make their own
decisions whether to tender Shares and, if so, how many Shares to tender.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) or to the Dealer Managers (as defined herein) at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase, the
Letter of Transmittal and other tender offer materials may be directed to the
Information Agent, the Dealer Managers or to brokers, dealers, commercial banks
or trust companies, and copies will be furnished promptly at the Purchaser's
expense.
-------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR THE MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
-------------------
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
-------------------
The date of this Offer to Purchase is November 9, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- --------------------------------------------------------------------------------------- ----
<C> <S> <C>
INTRODUCTION........................................................................... 1
SPECIAL FACTORS........................................................................ 3
1. History of Company........................................................... 3
2. Reasons for the Offer and the Merger......................................... 4
3. Fairness of the Offer and the Merger......................................... 6
4. Interests of Certain Persons in the Offer and the Merger; Potential
Conflicts of Interests..................................................... 7
5. Background of the Offer and the Merger....................................... 8
6. Recommendation of the Company's Board of Directors and the Special
Committee.................................................................... 19
THE OFFER.............................................................................. 24
1. Terms of the Offer........................................................... 24
2. Acceptance for Payment and Payment for Shares................................ 26
3. Procedure for Tendering Shares............................................... 27
4. Rights of Withdrawal......................................................... 30
5. Certain Federal Income Tax Consequences of the Offer and the Merger.......... 31
6. Price Range of Shares; Dividends............................................. 31
7. Effect of the Offer on Market for the Shares, Stock Exchange Listing,
and Exchange Act Registration.............................................. 32
8. Certain Information Concerning the Company................................... 33
9. Certain Information Concerning Parent and the Purchaser...................... 41
10. Contacts with the Company.................................................... 42
11. The Merger Agreement; Appraisal Rights; Effect on the Debentures............. 49
12. Source and Amount of Funds................................................... 54
13. Certain Conditions of the Offer.............................................. 54
14. Dividends and Distributions.................................................. 55
15. Certain Legal Matters........................................................ 56
16. Fees and Expenses............................................................ 58
17. Miscellaneous................................................................ 60
</TABLE>
<TABLE>
<S> <C> <C>
SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser........ I-1
SCHEDULE II -- Appraisal Rights of Dissenting Stockholders under Delaware Law...... II-1
SCHEDULE III -- Opinion of Dillon, Read & Co. Inc................................... III-1
Appendix A -- Financial Statements from the Company's Annual Report on Form 10-K
for the Year Ended December 31, 1994................................ A-1
Appendix B -- Financial Results for the Quarterly Period Ended September 30, 1995
as Reported in the Company's Press Release, dated October 24,
1995................................................................ B-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock of SCOR U.S. Corporation:
INTRODUCTION
SCOR Merger Sub Corporation, a newly organized Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of SCOR S.A., a societe anonyme
organized under the laws of The French Republic ("Parent"), hereby offers to
purchase all of the outstanding shares of Common Stock, par value $0.30 per
share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the
"Company"), not currently directly or indirectly owned by Parent, at a price of
$15.25 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the Letter of Transmittal (which together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Purchaser. The Purchaser will pay all
charges and expenses of Goldman, Sachs & Co. (in such capacity, the "Dealer
Managers"), The Bank of New York, as depositary (the "Depositary"), and D.F.
King & Co., Inc. (the "Information Agent").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR
INDIRECTLY BY PARENT, WILL CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES
OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE
OFFER (THE "MINIMUM TENDER CONDITION"). SUBJECT TO APPLICABLE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE
PURCHASER RESERVES THE RIGHT, WHICH IT PRESENTLY HAS NO INTENTION OF EXERCISING,
TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION AND TO ELECT TO PURCHASE,
PURSUANT TO THE OFFER, LESS THAN THE MINIMUM NUMBER OF SHARES NECESSARY TO
SATISFY THE MINIMUM TENDER CONDITION. THE OFFER IS ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE "THE OFFER -- 1. TERMS
OF THE OFFER" AND "THE OFFER -- 13. CERTAIN CONDITIONS OF THE OFFER".
THE BOARD OF DIRECTORS OF THE COMPANY AND THE COMMITTEE OF THE BOARD OF
DIRECTORS OF THE COMPANY COMPRISED OF ALL DIRECTORS OF THE COMPANY WHO ARE
NEITHER OFFICERS OR DIRECTORS OF THE PURCHASER OR PARENT NOR OFFICERS OF THE
COMPANY (THE "SPECIAL COMMITTEE") HAVE UNANIMOUSLY DETERMINED THAT THE OFFER AND
THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER. SEE "SPECIAL FACTORS--6. RECOMMENDATION OF THE COMPANY'S BOARD OF
DIRECTORS AND THE SPECIAL COMMITTEE".
The Special Committee's financial advisor, Dillon, Read & Co. Inc. ("Dillon
Read"), has delivered to the Special Committee its written opinion, dated as of
November 2, 1995, that as of such date the $15.25 per Share cash consideration
to be received by the holders of Shares (other than Parent) pursuant to the
Offer and the Merger is fair to such holders from a financial point of view. A
copy of the opinion of Dillon Read is set forth as Schedule III hereto and is
contained in the Company's Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders together
with this Offer to Purchase. See "SPECIAL FACTORS--6. Recommendation of the
Company's Board of Directors and the Special Committee".
The Company has advised the Purchaser and Parent that, as of November 2,
1995, there were 18,170,971 Shares outstanding. Parent owned 14,547,756 Shares,
or approximately 80% of the outstanding Shares, as of such date. According to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994
(the "1994 Annual Report"), there were approximately 140 recordholders of the
Shares as of March 28, 1995. The Company has also advised the Purchaser and
Parent that, as of November 2, 1995, the Company had outstanding $75,950,000
aggregate
<PAGE>
principal amount of 5 1/4% Convertible Subordinated Debentures due April 1, 2000
(the "Debentures"), which were issued by the Company on March 29, 1993 at a
price equal to the principal amount thereof through a private offering. The
Debentures are not redeemable by the Company prior to April 3, 1996, and
outstanding Debentures are currently convertible into approximately 2.99 million
Shares at a conversion price of $25.375 per Share. The Company has advised the
Purchaser and Parent that during 1994 the Company repurchased in the open market
$3,900,000 in principal amount of the Debentures and between January 1, 1995 and
June 30, 1995 the Company repurchased in the open market $6,400,000 in principal
amount of the Debentures. Under the terms of the indenture pursuant to which the
Debentures were issued (the "Indenture"), in the event that Parent beneficially
owns, after giving effect to the purchase of Shares pursuant to the Offer or the
acquisition of Shares pursuant to the Merger, in excess of 90% of the
outstanding Shares (a "Repurchase Event"), the holders of the Debentures shall
have the right to require the Company to repurchase the Debentures at a
repurchase price equal to 100% of the principal amount thereof together with
accrued and unpaid interest to the date of such repurchase, which date shall be
45 days after the date on which the Company notifies the holders of the
Debentures of such Repurchase Event.
The Company has advised the Purchaser and Parent that under the Company's
1986 Stock Incentive Plan for Key Executives, the Company's 1990 Stock Option
Plan for Directors and the Company's 1991 Stock Option Plan for Key Employees
(collectively, the "Company Stock and Option Plans") there were, as of November
2, 1995, vested options outstanding for a total of 982,013 Shares, exercisable
at prices ranging from $9.00 to $17.00, and, as of November 2, 1995, unvested
options outstanding for a total of 455,003 Shares. According to the 1994 Annual
Report, the number of Shares available for future grant at December 31, 1994 was
552,000.
Based on the foregoing, assuming that no additional Shares are issued after
November 2, 1995, the Minimum Tender Condition would be satisfied if at least
1,806,118 Shares are validly tendered prior to the expiration of the Offer and
not withdrawn.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 2, 1995 (the "Merger Agreement"), among Parent, the Purchaser and
the Company. The Merger Agreement provides that, among other things, promptly
after the purchase of Shares pursuant to the Offer and the receipt of any
required approval of the Merger Agreement by the Company's stockholders and the
satisfaction or waiver of certain other conditions, the Purchaser will be merged
(the "Merger") into the Company. Following consummation of the Merger, the
Company will continue as the surviving corporation and will become a wholly
owned subsidiary of Parent. Upon consummation of the Merger (the "Effective
Time"), each then outstanding Share not owned by Parent or any subsidiary of
Parent (other than Shares held by stockholders of the Company who have properly
exercised their appraisal rights in accordance with Section 262 of the DGCL)
will be converted into the right to receive an amount in cash equal to the per
Share price paid pursuant to the Offer (the "Offer Price"). Pursuant to the
Merger Agreement, at the Effective Time each option to purchase Shares under the
Company Stock and Option Plans, whether or not then vested, will be cancelled
and each holder thereof will be thereafter entitled to receive only the
difference, if positive, between the Offer Price and the exercise price of such
options, multiplied by the number of Shares subject to such options. In
addition, in the event the Merger is consummated, the holders of the Debentures
will be entitled to convert the Debentures into the right to receive the
consideration receivable upon the Merger by a holder of the number of Shares
into which such Debentures could have been converted immediately prior to the
Merger. The Merger Agreement is more fully described in "THE OFFER -- 11. The
Merger Agreement; Appraisal Rights; Effect on the Debentures".
If the Minimum Tender Condition is satisfied, Parent will hold, directly or
indirectly, 90% or more of the outstanding Shares, and Parent intends to
contribute its Shares to the Purchaser and cause
2
<PAGE>
the Purchaser to effect the Merger without a vote of the Company's stockholders
pursuant to the short-form merger provisions of the Delaware General Corporation
Law (the "DGCL"). The Merger Agreement provides that, if the Minimum Tender
Condition is satisfied, the Company, the Purchaser and Parent will take all
necessary and appropriate action, at the request of Parent or the Purchaser, to
cause the Merger to become effective as soon as practicable after the acceptance
for payment and purchase of Shares by the Purchaser pursuant to the Offer
without a meeting of stockholders of the Company pursuant to such short-form
merger provisions of the DGCL. If the Purchaser were to waive the Minimum Tender
Condition and the number of outstanding Shares validly tendered and purchased
pursuant to the Offer results in Parent and the Purchaser holding less than 90%
of the outstanding Shares, then the Merger, which has already been approved by
the Company's Board of Directors, would have to be approved by the Company's
stockholders. Under the DGCL, the vote of the holders of a majority of the
outstanding Shares would be required to approve the Merger under such
circumstances. Since Parent currently owns approximately 80% of the Shares
outstanding, Parent would have sufficient voting power to, and intends to, cause
the approval of the Merger without the affirmative vote of any other
stockholders of the Company. However, it is a condition to the parties'
obligation to complete the Merger that the Purchaser have purchased Shares
pursuant to the Offer. Accordingly, if the Minimum Tender Condition or any other
condition to the Offer is not satisfied and Parent and the Purchaser elect not
to waive any such condition, none of Parent, the Purchaser or the Company will
be obligated to effect the Merger.
No appraisal rights are available in connection with the Offer. Stockholders
will have appraisal rights in connection with the Merger, subject to compliance
with the requirements of the DGCL, even if the Merger is consummated pursuant to
the short-form merger provisions of the DGCL. See "THE OFFER -- 11. The Merger
Agreement; Appraisal Rights; Effect on the Debentures".
By accepting the Offer through the tender of Shares and upon receipt of
payment for Shares, a tendering stockholder will be (under Parent's view of
applicable law) barred from thereafter attacking in any legal proceeding the
fairness of the consideration received by stockholders in the Offer. For this
reason, the Letter of Transmittal to be executed by tendering stockholders
includes a release of any such claims, which will be effective upon receipt of
payment for tendered Shares.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
SPECIAL FACTORS
1. HISTORY OF THE COMPANY.
The Company is a Delaware corporation that was formed in December 1981.
Prior to the offering of 4,000,000 shares to the public on September 25, 1986 at
a price of $14.50 per Share, the Company was owned by Societe Commerciale de
Reassurance ("SCOR Paris"), a French reinsurance company, and by Caisse Centrale
de Reassurance ("CCR"), a reinsurer wholly owned by the French government which
also owned approximately 30% of SCOR Paris. As a result of a corporate
reorganization completed in France in November 1989, SCOR Paris became a wholly
owned subsidiary of Parent. In December 1990, SCOR Paris and another subsidiary
of Parent, UAP Reassurances ("UAP Re") were merged into Parent.
In June 1990, Rockleigh Management Corporation ("Rockleigh"), a wholly owned
subsidiary of UAP Re, was merged into the Company. Rockleigh owned 100% of both
The Unity Fire and General Insurance Company ("Unity Fire") and General Security
Assurance Corporation of New York ("General Security"), each of which was a
professional reinsurance company. Effective January 1, 1991, all reinsurance
business of Unity Fire, including related assets and liabilities as of that
date, were transferred to General Security pursuant to an assumption reinsurance
agreement. Subsequently, Unity Fire became a subsidiary of General Security. On
January 1, 1994, General Security
3
<PAGE>
was merged into SCOR Reinsurance Company ("SCOR Re"), the Company's principal
operating subsidiary, to form a single operating entity for the Company's
assumed reinsurance business.
In March 1993, the Company issued $86,250,000 aggregate principal amount of
5.25% Debentures, of which $10,300,000 aggregate principal amount had, as of
November 2, 1995, been repurchased by the Company in the open market. During
1994 the Company repurchased in the open market $3,900,000 in principal amount
of the Debentures and between January 1, 1995 and June 30, 1995 the Company
repurchased in the open market $6,400,000 in principal amount of the outstanding
Debentures. The outstanding Debentures are currently convertible into
approximately 2.99 million Shares at a conversion price of $25.375 per Share.
As a result of the issuance of common shares of the Company to UAP Re in the
Rockleigh merger, SCOR Paris' participation in the Company's stock repurchase
programs and various other purchases, as well as SCOR Paris' purchase of a
portion of CCR's shares of the Company, Parent owned approximately 80% of the
outstanding common stock of the Company at November 2, 1995. The remaining
3,623,215 outstanding Shares are held publicly and represent approximately 20%
of the outstanding Shares.
The Company is a holding company, the principal operating subsidiary of
which is SCOR Re. The Company also operates through SCOR Re's wholly owned
subsidiaries, General Security Insurance Company ("GSIC"), Unity Fire and
General Security Indemnity Company ("GSIND") (SCOR Re, GSIC, Unity Fire and
GSIND are collectively referred to as the "Operating Subsidiaries").
2. REASONS FOR THE OFFER AND THE MERGER.
The purpose of the Offer is to enable the Purchaser to acquire for cash as
many outstanding Shares as possible as a first step in acquiring the entire
equity interest in the Company, subject to satisfaction of the Minimum Tender
Condition and the other conditions of the Offer. See "THE OFFER -- 13. Certain
Conditions of the Offer". If the Minimum Tender Condition is satisfied, Parent
and the Purchaser will hold 90% or more of the outstanding Shares and, as soon
as practicable following the consummation of the Offer, Parent intends to
contribute its Shares to the Purchaser. The Merger Agreement provides that,
promptly after the purchase of Shares pursuant to the Offer and subject to the
satisfaction or waiver of the terms and conditions of the Merger, the Purchaser
will be merged into the Company. If the Minimum Tender Condition is satisfied,
such Merger would be effected without a vote of the Company's stockholders
pursuant to the short-form merger provisions of the DGCL. In the Merger, each
Share not owned by Parent or any subsidiary of Parent (other than Shares held by
stockholders of the Company who have properly exercised their appraisal rights
under Section 262 of the DGCL) at the Effective Time will be converted into the
right to receive an amount in cash equal to the Offer Price. The purpose of the
Merger is to enable Parent to acquire any remaining Shares not acquired pursuant
to the Offer. Following consummation of the Merger, the Company will continue as
the surviving corporation and will become a wholly owned subsidiary of Parent.
THE BOARD OF DIRECTORS OF THE COMPANY AND THE SPECIAL COMMITTEE HAVE UNANIMOUSLY
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND
RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER. In determining to seek the purchase of the
outstanding Shares and effect the Merger at this time, Parent focused on a
number of factors, including those set forth below.
The primary reason for the Offer and the Merger is that the listing of the
Shares on the New York Stock Exchange, Inc. ("NYSE") has not achieved the
benefits hoped for by Parent in 1986 at the time of the offering of Shares to
the public, and, in Parent's view, the costs associated with such listing now
outweigh any resulting benefits. The Shares have attracted limited interest from
4
<PAGE>
institutional investors and generally have low trading volumes. This
illiquidity, together with the Company's financial results, have caused the
Shares to trade only occasionally at or above their net book value per Share
since 1993. Also, the Company's ability to utilize Shares for acquisitions or
capital-raising has not been as great as had been hoped for in 1986. The present
requirement to maintain the listing of the Shares on the NYSE and registration
of the Shares under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), imposes on the Company significant direct and indirect
compliance costs. In addition, compliance with such ongoing requirements imposes
an administrative burden on the Company, resulting in the diversion of
management time and resources. The Purchaser intends to seek the delisting of
the Shares from the NYSE and termination of registration of the Shares under the
Exchange Act as soon as possible after consummation of the Offer or the Merger,
if the requirements for the delisting and termination of registration are met.
The Company's businesses are complementary with Parent's businesses, and
Parent intends to integrate some of the Company's operations into those of
Parent in order to obtain certain operating benefits and achieve certain cost
savings, as well as to incorporate the Company's strategy into Parent's
worldwide strategic planning. In particular, Parent will be able to avail itself
of the Company's demonstrated skills and technical expertise in evaluating and
underwriting certain types of risks, and enhance its ability to achieve its
global strategic plans. The increasing globalization of world economies presents
opportunities for Parent to pool the resources of the group and to invest on a
group-wide basis in the human and technical resources necessary to improve
productivity, develop and provide a broader range of international products
grounded on global expertise and to build consistent, company-wide service
standards to better meet customer needs. Parent's ability to achieve the
foregoing objectives under the present ownership structure is complicated by
legal obligations of the Board of Directors of the Company to manage the Company
in the best interests of all stockholders. Accordingly, each decision made by
Parent which could affect the Company must be made with a view to its effect on
the Company's minority stockholders, with the result that Parent's flexibility
in dealing with its significant investment in the insurance and reinsurance
industry in the United States is limited.
In addition, Parent believes that the interest of the public stockholders of
the Company in its near-term earnings results may sometimes be inconsistent with
the Company's long-term business strategy to solidify and enhance its position
in the United States' insurance and reinsurance industry. The operating results
of the property and casualty insurance and reinsurance industry are subject to
significant fluctuations due to competition, catastrophic events, general
economic conditions, interest rates and other factors such as changes in tax
laws and regulations. The operating results of the Company have been influenced
by these cycles and events. Many of the factors that have contributed to the
Company's volatile earnings results and reduced surplus in recent years
continue, and Parent cannot predict if, when or to what extent general market
conditions will improve for the insurance and reinsurance industry. Parent
believes that acquiring the entire equity interest in the Company will
facilitate the realization of productivity gains necessary to achieve a
sustainable improvement in the Company's profitability, to achieve consistent
earnings growth in all its product offerings, to enhance its credit strength and
to improve its return on equity. The Company's long-term business strategy will
also require significant capital investments in technology, including investment
as part of Parent's worldwide systems development project, which will provide
additional systems availability for the Company over the next two years. In
Parent's opinion, these strategies could adversely affect the Company's
near-term earnings and the trading price of the Shares.
Other factors that Parent considered in determining to proceed with the
Offer and the Merger at this time included a stronger French Franc/U.S. Dollar
exchange rate than has existed in recent years and a cash reserve of U.S.
dollars generated by Parent's group that can be used for the acquisition of
Shares tendered in the Offer. In addition, Parent considered the improvement of
the
5
<PAGE>
Company's results in 1995 over its 1994 results, the fact that the additional
investment that would be made by Parent to increase its percentage ownership in
the Company pursuant to the Offer and the Merger would not dilute the earnings
of Parent, projections as to future results of the Company (see "THE OFFER -- 8.
Certain Information Concerning the Company") and the fact that the Company's
stock price has generally traded below its net book value since 1993.
Parent also considered certain information provided to it by its financial
advisor, Goldman Sachs International ("Goldman Sachs"), including information
with respect to other businesses similar in some respects to the Company and
with respect to premiums paid in other acquisitions of minority interests. Such
information is contained in Goldman Sachs' analyses that have been filed by
Parent and Purchaser as an Exhibit to their Rule 13e-3 Transaction Statement on
Schedule 13E-3 filed with the Commission in connection with the Offer (the
"Schedule 13E-3") and may be examined and copied at the office of the Commission
in Washington, D.C. as set forth below under "THE OFFER -- 8. Certain
Information Concerning the Company". In addition, such analyses are described
below in "SPECIAL FACTORS -- 5. Background of the Offer and the Merger" and are
available for inspection and copying at the principal offices of the Purchaser
and Parent during their respective regular business hours by any interested
holder of Shares or his representative who has been so designated in writing.
In making the decision to proceed with the Offer and the Merger, Parent also
took into account the state of the insurance and reinsurance industry in
general, including the industry's volatility over the past few years and
expected future volatility. Parent believes that the industry's volatility can
be better managed by the Company once the Offer and Merger are completed. The
trend toward consolidation in the insurance and reinsurance industry has forced
smaller companies out of the market and shifted business to larger, better
capitalized reinsurers. By acquiring the Shares it does not presently own,
Parent's ability to combine the capacity of Parent's group as a whole with that
of the Company in the United States will be enhanced, better enabling the
Company to benefit from the trend toward consolidation being experienced in the
industry and to pool the group's resources to develop particular lines of
business in order to capitalize opportunistically on price increases achievable
in particular sectors of the industry.
3. FAIRNESS OF THE OFFER AND THE MERGER.
Parent believes that the $15.25 cash consideration proposed to be paid in
the Offer and pursuant to the Merger is fair to the minority stockholders of the
Company. It provides a substantial premium over pre-announcement market prices
to holders of the Shares and enables the Company's stockholders to receive cash
for their stockholdings now at a premium per share price. The $15.25 offer price
represents a premium of 73.7% over the weighted average of the market price of
the Company's Common Stock during the period from January 1, 1995 to September
15, 1995, a premium of 37.1% over the market price of the Company's Common Stock
as of September 25, 1995 of $11.125 per Share, a multiple of 15.9 times the
latest twelve months' income for the period ended September 30, 1995 and a
multiple of 17.3 times publicly forecasted earnings per Share for 1995. Based on
the foregoing and in light of the Company's historical results and the fact that
the Shares have since 1993 traded below the Company's net book value per Share
value, which as of September 30, 1995 was $15.27 per Share, Parent believes the
consideration proposed to be paid in the Offer and the Merger is fair to the
minority stockholders of the Company.
As a result of the Minimum Tender Condition, the tender of slightly less
than a majority of the outstanding Shares not owned directly or indirectly by
Parent is a condition to the obligation of the Purchaser to accept Shares for
payment. Such condition, however, may be waived at the sole discretion of Parent
or Purchaser.
6
<PAGE>
None of the Purchaser, Parent or Goldman Sachs solicited other offers for
the Company or its assets, and there can be no assurance that the terms of the
Offer are as favorable to the public stockholders of the Company as could be
obtained in a transaction, or one or more transactions, with an unaffiliated
party or parties. Neither Parent nor any of its affiliates has received any firm
offers or inquiries with respect to the business and assets of the Company or
its investment therein from any unaffiliated party during the period from
January 1, 1993 to the date of this Offer to Purchase.
Goldman Sachs was not asked to render, and has not rendered, any opinion as
to the fairness of the Offer or the Merger to either the Company or the public
stockholders of the Company. Neither Parent nor the Purchaser has obtained any
opinions as to the fairness of the Offer or the Merger to the public
stockholders of the Company or any valuation or appraisal of the Company's
assets from any independent party in connection with the Offer or the Merger.
Representatives of Parent have had access to certain non-public information
concerning the Company, including the projections which are summarized elsewhere
in this Offer to Purchase. See "THE OFFER -- 8. Certain Information Concerning
the Company".
Following the delivery by Parent of the letter, dated September 25, 1995,
described under "SPECIAL FACTORS--5. Background of the Offer and the Merger"
below, the Company announced that the proposal contained in such letter was
being referred to the Special Committee, which would consider the proposal. The
Special Committee is composed of all of the directors of the Company who are
neither officers or directors of the Purchaser or Parent nor officers of the
Company. The Special Committee retained Dillon Read as its financial advisor to
analyze the terms of the Offer and the Merger. Dillon Read has provided the
Board of Directors with its written opinion that, as of November 2, 1995, the
$15.25 cash consideration to be received by the holders of Shares (other than
Parent) pursuant to the Offer and the Merger is fair to such holders from a
financial point of view. The Board of Directors of the Company and the Special
Committee have unanimously determined that the Offer and the Merger are fair to
and in the best interests of the Company and its stockholders, have approved the
Offer and the Merger and recommend that the Company's stockholders accept the
Offer and tender their Shares pursuant to the Offer. See "SPECIAL FACTORS -- 6.
Recommendation of the Company's Board of Directors and the Special Committee."
4. INTERESTS OF CERTAIN PERSONS IN THE OFFER; POTENTIAL CONFLICTS OF INTERESTS.
Stockholders should be aware that members of the Board of Directors of the
Company (collectively, the "Board" and each a "Director"), other than the
members of the Special Committee, have certain interests which are referred to
below, and which may present them with actual or potential conflicts of interest
in connection with the Offer. Among other things, Parent already owns
approximately 80% of the outstanding Shares and, after the consummation of the
Offer, it is expected that the Chairman of the Board of the Company will
continue to serve on the board of directors of the Company and that the
President and Chief Executive Officer of the Company will continue to be
employed by the Company and serve as a member of the board of directors of the
Company. In addition, the Merger Agreement provides that the directors of the
Company will continue as directors of the Company after consummation of the
Merger.
Five of the thirteen members of the Board are also members of the Board of
Directors of the Parent or are officers of Parent. Allan M. Chapin, who is a
voting trustee of the SCOR U.S. Voting Trust (See "THE OFFER -- 10. Contacts
with the Company"), is a partner in the law firm of Sullivan & Cromwell, which
has provided legal services on an on-going basis to Parent and the Company.
Sullivan & Cromwell are acting as United States legal counsel to the Parent and
the Purchaser in connection with the Offer, the Merger and the other
transactions contemplated herein.
7
<PAGE>
5. BACKGROUND OF THE OFFER AND THE MERGER.
Parent has from time to time in recent years considered acquiring all of the
Shares not owned by Parent and began such considerations again during July,
1995. During July, management of Parent began to consult with representatives of
its outside United States legal counsel and financial advisors concerning the
manner in which the minority interest in the Company could be acquired. In
mid-September of 1995, management of Parent determined they were prepared to
recommend to Parent's Board of Directors the acquisition by Parent of the
minority interest in the Company and on September 21, 1995, representatives of
Sullivan & Cromwell, the United States legal counsel to Parent, and Goldman
Sachs, the financial advisor to Parent, met with management of Parent to discuss
the legal alternatives available to effect the acquisition of the minority
interest in the Company and certain financial information relevant to a
determination of an appropriate price to propose for acquisition of the minority
Shares. During the September 21, 1995 meeting, Goldman Sachs provided Parent
with certain financial analyses. Those analyses are described below and are
filed as an exhibit to the Schedule 13E-3 filed with the Commission in
connection with the Offer, and such analyses shall be made available for
inspection and copying at the principal executive offices of Parent and the
Purchaser during their respective regular business hours by any interested
holder of Shares or his representitive who has been so designated in writing.
The description below is qualified by reference to text of such analyses.
Goldman Sachs has not been requested to, and has not, given any opinion to
Parent, the Purchaser or any other person with respect to the fairness of the
consideration proposed to be paid for the Shares in the Offer and the Merger.
Neither Parent nor the Purchaser has obtained any opinions as to the fairness of
the Offer or the Merger to the holders of Shares or any valuation or appraisal
of the Company's assets from any independent party in connection with the Offer
or the Merger. During the September 21, 1995 meeting, management determined to
recommend a price of $14.00 per Share to the Board of Directors of Parent. On
October 24, 1995, the Company provided Goldman Sachs with updated financial
information, including earnings and other financial information for the third
fiscal quarter and the nine months ended September 30, 1995 that were publicly
reported on October 24, 1995 and financial projections, and, subsequently,
Goldman Sachs prepared and provided to Parent updates, reflecting the more
current information, to certain of its analyses. These updated analyses are also
filed as an exhibit to the Schedule 13E-3 and are available in the same manner
as that described above for the original analyses. The description of the
analyses set forth below is qualified by reference to the text of such analyses.
GOLDMAN SACHS' ANALYSES. The following is a summary of certain of the
financial analyses used by Goldman Sachs in connection with its discussions with
the management of Parent on September 21, 1995. The presentations of Goldman
Sachs containing, among other things, the financial analyses and updated
financial analyses summarized below, have been filed as exhibits to the Schedule
13E-3.
Historical Stock Trading Analysis. Goldman Sachs reviewed the historical
trading prices and volumes for the Shares. Such review included, among other
things, Goldman Sachs' analysis of the weighted average market prices of the
Shares and the total volume of Shares traded as a percentage of Shares
outstanding during the period from January 1, 1992 to September 15, 1995 and
during the period from January 1, 1995 to September 15, 1995. Such analysis
indicated a weighted average market price of $12.07 per share (based on
closing prices for the Shares from January 1, 1992 to September 15, 1995)
with 44.3% of the total outstanding Shares traded in such period and a
weighted average market price of $8.78 per Share (based on closing prices
for the Shares from January 1, 1995 to September 15, 1995) with 5.3% of the
total outstanding Shares traded in such period. Such review also included
Goldman Sachs' analysis of the indexed historical trading prices of the
Shares during the period from December 27, 1991 to August 31, 1995 as
compared to the Standard & Poor's 500 Index and a composite index comprised
of seven other publicly traded corporations in the
8
<PAGE>
reinsurance industry: General Re Corporation, American Re Corporation,
Transatlantic Holdings, Inc., NAC Re Corp., National Re Corporation,
Trenwick Group Inc. and Zurich Centre Re Holdings (the "Selected
Companies"). Representatives of Goldman Sachs advised the management of
Parent that there are no publicly traded companies directly comparable to
the Company and that the analysis had to be considered in light of that
qualification. The analysis of such indexed historical share trading prices
indicated that the Shares underperformed both the Standard & Poor's 500
Index and the comparable composite index during that period. During such
period, the Standard & Poor's 500 Index increased approximately 50%, the
comparable composite index increased approximately 78%, and the value of the
Shares decreased approximately 29%.
Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis based on estimated cash flow per Share, consisting of
projected dividends per Share for the period from December 31, 1995 through
December 31, 1999, and a projected terminal value at December 31, 1999.
Goldman Sachs calculated present value per Share of such estimated cash
flows using discount rates of 12.5% and 15% for three scenarios for the
compound annual growth rate ("CAGR") for earnings per share ("EPS") for the
Company of 5%, 10% and 15%. In each such scenario, IBES median EPS estimates
for 1995-1996 were used and the scenario growth rate was applied to estimate
EPS thereafter. Goldman Sachs calculated dividends per Share assuming a 34%
payout ratio to EPS and calculated the Company's terminal value based on
multiples of projected net income for calendar year 1999 ranging from 8x to
15x. Those calculations indicated present value per Share values based on
the 5% EPS CAGR scenario ranging from $6 per Share at a 15.0% discount rate
to $12 per Share at a 12.5% discount rate, implied per Share values based on
the 10% EPS CAGR scenario ranging from $7 per Share at a 15.0% discount rate
to $13 per Share at a 12.5% discount rate and implied per Share values based
on the 15% EPS CAGR scenario ranging from $8 per Share at a 15.0% discount
rate to $15 per Share at a 12.5% discount rate. Goldman Sachs' updated
"Discounted Cash Flow Analysis" is discussed below.
Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial information relating to the Company to corresponding financial
information, ratios and public market multiples for the following direct
reinsurance companies: American Re Corporation, General Re Corporation and
National Re Corporation (the "Direct Reinsurance Companies"), and for the
following broker reinsurance companies: NAC Re Corp., Transatlantic
Holdings, Inc. and Trenwick Inc. (the "Broker Reinsurance Companies"). The
public market multiples of the Company were calculated using the price of
$11.25 per Share, representing the closing price of the Shares on the NYSE
on September 19, 1995. The multiples and ratios for the Company and for each
of the Direct Reinsurance Companies and the Broker Reinsurance Companies
(together, the "Analyzed Companies") were based on generally accepted
accounting principles ("GAAP") financial data as of June 30, 1995, IBES
median estimates as of September 7, 1995 and other recent publicly available
information. Representatives of Goldman Sachs advised the management of
Parent that there are no companies directly comparable to the Company and
that the analysis had to be considered in light of that qualification. The
review indicated that the percentage of the 52-week high trading prices
ranged from 97.1% to 99.8%, compared to 93.8% at $11.25 per Share for the
Company, that the current dividend yield for the Analyzed Companies ranged
from 0.5% to 2.2%, with a mean of 0.8% for the Direct Reinsurance Companies
and 1.1% for the Broker Reinsurance Companies, compared to 1.8% at $11.25
per Share for the Company, and that the calendar year 1994 return on equity
for the Analyzed Companies ranged from 7.2% to 12.9%, with a mean of 10.8%
for the Direct Reinsurance Companies and 10.9% for the Broker Reinsurance
Companies, compared to negative return on equity for the Company. Goldman
Sachs also considered for the Analyzed Companies: estimated calendar year
1995 and 1996 price/earnings ratios, which ranged from 12.2x to 16.4x for
estimated calendar year 1995, with a mean of 14.2x for the Direct
9
<PAGE>
Reinsurance Companies and 14.3x for the Broker Reinsurance Companies, and
10.8x to 14.7x for estimated calendar year 1996, with a mean of 12.4x for
the Analyzed Companies as a group, compared to 12.8x and 11.8x at $11.25 per
Share, respectively, for the Company; statutory combined ratios for calendar
years 1992, 1993 and 1994, which ranged from 102.8% to 126.9% for calendar
year 1992, with a mean of 104.8% for the Direct Reinsurance Companies and
117.5% for the Broker Reinsurance Companies, 99.5% to 110.9% for calendar
year 1993, with a mean of 100.3% for the Direct Reinsurance Companies and
106.8% for the Broker Reinsurance Companies, and 98.4% to 105.7% for
calendar year 1994, with a mean of 101.2% for the Direct Reinsurance
Companies and 104.8% for the Broker Reinsurance Companies, compared to
123.3%, 103.7% and 118.8%, respectively, for the Company; and estimated EPS
(based on IBES median estimates as of September 7, 1995) for calendar years
1995 and 1996, which ranged from $2.40 to $9.25 per share for estimated
calendar year 1995, compared to $0.88 per Share for the Company, and ranged
from $2.80 to $10.35 per share for estimated calendar year 1996, compared to
$0.95 per Share for the Company. Goldman Sachs also compared for the
Analyzed Companies the book value per share and the price to book value per
share ratios, which book value per share ranged from $2.80 to $69.59 for the
Analyzed Companies, compared to $15.02 per Share for the Company, and which
price to book value per share ratios ranged from 1.51x to 2.18x for the
Analyzed Companies, with a mean of 1.97x for the Direct Reinsurance
Companies and 1.64x for the Broker Reinsurance Companies, compared to 0.75x
per Share for the Company.
Analysis at Various Prices. Goldman Sachs calculated alternative values
for the aggregate consideration (including the price of the outstanding
Debentures) based upon nine price per Share values ranging from $11.25 to
$16.00 per Share. Those calculations yielded aggregate consideration values
ranging from $117 million to $134 million for the outstanding Shares not
beneficially owned directly or indirectly by Parent and the outstanding
Debentures, excluding any severance obligations and transaction costs.
Goldman Sachs considered the consideration per Share as a premium over the
market price quoted on the NYSE on September 19, 1995 for the Shares of
$11.25, as a multiple of actual twelve months ended June 30, 1995 ("LTM")
EPS of $0.75 and IBES estimates for calendar year 1995 and 1996 EPS of $0.88
and $0.95, respectively, and as a multiple of stated book value per Share of
$15.01 as of June 30, 1995 and tangible book value per Share of $14.74 as of
June 30, 1995. Goldman Sachs' analyses indicated consideration per Share
premiums over market ranging from 0.0% to 42.2%, with a premium of 24.4%
based on the consideration per Share of $14.00 initially proposed by Parent
on September 25, 1995; consideration per Share multiples of LTM EPS ranging
from 15.0x to 21.3x, with a multiple of 18.7x based on the consideration per
Share of $14.00 initially proposed by Parent on September 25, 1995, of
estimated calendar year 1995 EPS ranging from 12.8x to 18.2x, with a
multiple of 15.9x based on the consideration per Share of $14.00 initially
proposed by Parent on September 25, 1995, and of estimated calendar year
1996 EPS ranging from 11.8x to 16.8x, with a multiple of 14.7x based on the
consideration per Share of $14.00 initially proposed by Parent on September
25, 1995; and consideration per Share multiples of stated book value per
Share ranging from 0.75x to 1.07x, with a multiple of 0.93x based on the
consideration per Share of $14.00 initially proposed by Parent on September
25, 1995, and of tangible book value per Share ranging from 0.76x to 1.09x,
with a multiple of 0.95x based on the consideration per Share of $14.00
initially proposed by Parent on September 25, 1995. Goldman Sachs' updated
"Analysis at Various Prices" is discussed below.
Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to recent acquisitions of U.S. property/casualty
reinsurance companies since 1987 (the "Selected Transactions"). Such
analysis indicated that for the Selected Transactions: (A) based on GAAP,
aggregate consideration as a multiple of (x) net written premiums for the
twelve month period ending prior to announcement of each selected
transaction ranged from
10
<PAGE>
0.48x to 1.80x, with a mean and median of 1.17x, (y) net income for the
twelve month period ending prior to announcement of each selected
transaction ranged from 6.72x to 21.40x, with a mean of 12.88x and median of
9.91x, and (z) tangible book value ranged from 0.82x to 3.10x, with a mean
of 1.37x and median of 1.17x; and (B) based on statutory accounting
principles, aggregate consideration as a multiple of (x) net income for the
twelve month period ended prior to the announcement of each selected
transaction ranged from 7.69x to 27.90x, with a mean of 12.83x and median of
10.32x, and (y) book value ranged from 0.91x to 1.94x, with a mean of 1.26x
and median of 1.13x.
Selected Buyouts Analysis. Goldman Sachs analyzed certain information
relating to selected buyouts by significant existing stockholders since 1989
(the "Selected Buyouts"). Such analysis indicated that for the Selected
Buyouts: (A) as an average for all buyouts, (i) pre-announcement stock price
as a percentage of the 52-week high closing price per share was 80.9%, (ii)
the initial offer premium to the closing price one NYSE trading day prior to
the public announcement of the parents' proposals was 23.4% and the discount
to the 52-week high closing price was 1.6%, (iii) the increase in the offer
price paid was 9.3% and (iv) the final offer price premium to the closing
price one NYSE trading day prior to the public announcement of the
significant existing stockholders' proposals was 35.0% and to the 52-week
high closing price was 8.0%; (B) as an average for all U.S. buyouts by a
European parent, (i) pre-announcement stock price as a percentage of the
52-week high closing price per share was 82.3%, (ii) the initial offer
premium to the closing price one NYSE trading day prior to the public
announcement of the parents' proposals was 19.1% and the discount to the
52-week high closing price was 2.6%, (iii) the increase in the offer price
paid was 6.9% and (iv) the final offer price premium to the closing price
one NYSE trading day prior to the public announcement of the significant
existing stockholders' proposals was 26.6% and to the 52-week high closing
price was 4.1%; and (C) as an average for all buyouts of an approximate 20
percent minority stake, (i) pre-announcement stock price as a percentage of
the 52-week high closing price per share was 82.1%, (ii) the initial offer
premium to the closing price one NYSE trading day prior to the public
announcement of the significant existing stockholders' proposals was 16.9%
and the discount to the 52-week high closing price was 5.1%, (iii) the
increase in the offer price paid was 6.6% and (iv) the final offer price
premium to the closing price one NYSE trading day prior to the public
announcement of the parents' proposals was 23.2% and to the 52-week high
closing price was 0.8%.
As described above, Goldman Sachs has updated its "Discounted Cash Flow
Analysis" and "Analysis at Various Prices" set forth in its earlier presentation
to take into account the September 30,1995 updated financial information. The
updated "Discounted Cash Flow Analysis" was based on management projections for
1995-1997 EPS and indicated present value per Share values for the scenario
assuming 5% EPS CAGR after 1997 ranging from $9 per Share at a 15.0% discount
rate to $17 per Share at a 12.5% discount rate, present value per Share values
for the scenario assuming 10% EPS CAGR after 1997 ranging from $10 per Share at
a 15.0% discount rate to $18 per Share at a 12.5% discount rate and present
value per Share values for the scenario assuming 15% EPS CAGR after 1997 ranging
from $11 per Share at a 15.0% discount rate to $20 per Share at a 12.5% discount
rate.
In the updated "Analysis at Various Prices", Goldman Sachs calculated
alternative values for the aggregate consideration (including the price of the
oustanding Debentures) based upon nine price per Share values ranging from
$11.25 to $16.00, and considered the consideration per Share as a multiple of
the twelve months ended September 30, 1995 EPS of $0.96 and management
projections for calendar year 1995 and 1996 EPS of $1.01 and $1.19,
respectively, and as a multiple of reported book value per Share of $15.10 as of
September 30, 1995 and tangible book value per Share of $14.83 as of September
30, 1995. These calculations indicated consideration per Share multiples of EPS
for the twelve months period ended September 30, 1995 ranging from 11.7x to
16.7x, with a multiple of 14.6x based on the consideration per Share of $14.00
initially
11
<PAGE>
proposed by Parent on September 25, 1995, of projected calendar year 1995 EPS
ranging from 11.1x to 15.8x, with a multiple of 13.9x based on the consideration
per Share of $14.00 initially proposed by Parent on September 25, 1995, of
projected calendar year 1996 EPS ranging from 9.5x to 13.4x, with a multiple of
11.8x based on the consideration per Share of $14.00 initially proposed by
Parent on September 25, 1995, of reported book value per Share ranging from
0.74x to 1.06x, with a multiple of 0.93x based on the consideration per Share of
$14.00 initially proposed by Parent on September 25, 1995, and of tangible book
value per Share ranging from 0.76x to 1.08x, with a multiple of 0.94x based on
the consideration per Share of $14.00 initially proposed by Parent on September
25, 1995.
Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors and events beyond the
control of the parties or their respective advisors, none of Parent, the
Purchaser, the Company, Goldman Sachs or any other person assumes responsibility
if future results are materially different from those forecast.
As described above, Goldman Sachs' presentation to the management of Parent
was one of many factors taken into consideration by Parent in making its
determination to propose the Offer and the Merger. The foregoing summary does
not purport to be a complete description of the analyses performed by Goldman
Sachs and is qualified by reference to the presentations containing Goldman
Sachs' analyses filed as exhibits to the Schedule 13E-3.
COMMUNICATIONS REGARDING PARENT'S PROPOSAL. On September 25, 1995, the Board
of Parent met and approved making a proposal to the Company to acquire the
Shares not owned by Parent at a price of $14.00 per Share and authorized the
management of Parent to cause Parent to take such action as the management
deemed necessary or advisable to acquire all Shares not already owned by Parent.
On September 25, 1995, Parent sent the following letter to the Board of the
Company:
September 25, 1995
Board of Directors
SCOR U.S. Corporation
Two World Trade Center, 23rd Floor
New York, NY 10048-0178
Dear Sirs,
On behalf of SCOR S.A. ("Parent"), I am pleased to make a proposal to
acquire all of the outstanding shares of common stock, par value $0.30 per
share (the "Common Stock"), of SCOR U.S. Corporation (the "Company") not
currently owned by Parent at a price of $14 per share in cash.
As you know, Parent has owned a substantial majority of the outstanding
shares of Common Stock since before the public offering by the Company of
its Common Stock in 1986, and Parent currently owns approximately 80% of the
Company's outstanding Common Stock. Parent believes it would be in the
mutual best interest of Parent, the Company and the shareholders of the
Company for Parent to acquire the shares of Common Stock that it does not
already own on the terms and conditions set forth in this letter.
Accordingly, Parent hereby submits for your consideration the following
proposal.
Parent is prepared to enter into a merger agreement pursuant to which a
newly organized United States subsidiary of Parent would acquire all issued
and outstanding shares of Common Stock that are not currently directly or
indirectly owned by Parent at a price of $14 per share in
12
<PAGE>
cash. The merger agreement could be in a form customary for transactions of
this type. Our proposal presumes that there has been no material adverse
change since June 30, 1995 in the results of operations, business or
financial condition of the Company and its subsidiaries taken together.
The transactions contemplated by this proposal would also give the
holders of the Company's outstanding 5 1/4% Convertible Subordinated
Debentures due April 1, 2000 (the "Debentures") the right to require the
Company to repurchase the Debentures at a repurchase price equal to 100% of
the principal amount thereof together with accrued and unpaid interest to
the date of such repurchase.
We believe that this proposal is fair to the minority stockholders of
the Company. It provides a substantial premium to current market prices to
holders of the Company's Common Stock and enables the Company's shareholders
to receive cash for their shareholdings now at a premium per share price
which they are unable to recognize in the market.
The $14 offer price represents a premium of 59.5% over the weighted
average of the market price of the Company's Common Stock during the period
from January 1, 1995 to September 15, 1995, a premium of 24.4% over the
market price of the Company's Common Stock as of September 19, 1995, a
multiple of 18.7 times the latest twelve months' income and a multiple of
15.9 times publicly forecasted earnings per share for 1995.
We are in a position to proceed on an expedited basis and urge that the
Company act responsibly and, in order to minimize uncertainty, as quickly as
possible, in considering our proposal. We expect that the directors of the
Company who are not affiliated with Parent may wish to engage independent
legal and financial advisors. If that is so, we would request that they do
so quickly.
We would like to make it clear that Parent's interest in the Company is
not for sale and thus this proposal is not made in view of the sale of the
Company to a third party.
We welcome the opportunity to meet with the Directors and further
outline our proposal at Director's meetings to be held on September 28 and
29.
Sincerely yours,
/s/ Jacques Blondeau
Jacques Blondeau
On September 26, 1995, Parent issued a press release announcing its proposal
to the Board of a merger at a price of U.S. dollars 14.00 per Share in cash.
On September 27, 1995, representatives of the United States legal counsel to
Parent met with the General Counsel and other members of the legal department of
the Company to discuss regulatory implications of the Company becoming a
wholly-owned subsidiary of Parent. Counsel to Parent also requested that
Parent's financial advisor be given the opportunity to perform a due diligence
investigation on the Company.
At a September 28, 1995 meeting of the members of the Board of the Directors
of the Company who are neither officers of the Company nor officers or directors
of the Purchaser or Parent (the "Unaffiliated Directors"), those directors
determined to form the Special Committee to review Parent's proposal and its
fairness to the minority stockholders of the Company and to negotiate the
proposal with the Parent. The Special Committee was formed on September 28,
13
<PAGE>
1995. The members of the Special Committee were John R. Cox, Raymond H. Deck,
Michel J. Gudefin, Richard M. Murray, John W. Popp, David J. Sherwood and Ellen
E. Thrower. The Special Committee was granted authority to retain legal and
financial advisors to assist it in evaluating the interest expressed by Parent
in acquiring the outstanding Shares. Subsequently, the Special Committee hired
Davis Polk & Wardwell as its outside legal counsel and Dillon Read to act as
financial advisor to the Special Committee.
In a meeting with the Special Committee held on September 28, 1995, a
representative of Parent discussed Parent's proposal contained in its September
26, 1995 letter and advised the Special Committee that Parent would likely
commence a tender offer for the Shares in advance of entering into a Merger
Agreement, but that Parent would defer commencing the tender offer to give the
Special Committee time to retain legal and financial advisors and begin their
review of the $14.00 proposal. The Special Committee and the representatives of
Parent agreed that it was in the best interests of the Company and its
stockholders to resolve promptly whether Parent would be acquiring the Shares
not already owned by it and that the Special Committee would endeavor to be in a
position to respond to Parent's proposal by October 26, 1995, the date of a
previously scheduled meeting of the Executive Committee of the Board of
Directors of the Company.
On September 29, 1995, the Company issued a press release concerning
Parent's September 25, 1995 proposal.
On September 29 and October 3, 1995, representatives of the United States
legal counsel to Parent called a representative of counsel for the Special
Committee to discuss issues potentially associated with the possible
commencement of a tender offer and to inquire as to the timing for retention of
a financial advisor. During those calls, counsel to the Special Committee
expressed concern that a tender offer might place the Special Committee under
timing constraints in responding to Parent's proposal. United States legal
counsel to Parent indicated that consummation of any tender offer would likely
be conditioned upon prior approval of the Special Committee. During the October
3rd call, counsel to the Special Committee also indicated that Goldman Sachs
would be provided with access to confidential information concerning the Company
only after and to the extent that the Special Committee and its financial
advisor determined that such access was appropriate.
On October 10, 1995, representatives of United States legal counsel to
Parent called a representative of counsel to the Special Committee to discuss
again the timing of the retention by the Special Committee of its financial
advisor and the possibility of a tender offer by Parent for the Shares prior to
entering into a merger agreement. During the course of that telephone call, the
representative of counsel to the Special Committee reiterated concerns relating
to the commencement of a tender offer before the Special Committee had delivered
its response to Parent's proposal contained in its September 25, 1995 letter. In
response to a question raised by counsel to the Special Committee, the
representatives of United States legal counsel to Parent indicated they planned
to forward a draft of a Merger Agreement to counsel to the Special Committee
promptly.
On October 10, 1995, the Special Committee retained Dillon Read as its
financial advisor to assist in its evaluation of, and negotiations with respect
to, Parent's proposal.
On October 10, 1995, the Company provided to Parent's United States legal
advisors certain initial documents relating to the Company for review. On
October 12, 1995, representatives of Parent's United States legal advisors sent
a preliminary due diligence request list to the Company outlining the types of
documents sought for review. On October 16, 1995, representatives of Parent's
United States legal advisors spoke with representatives of the Company to
schedule the due diligence process. During the period from October 16 to October
26, 1995, representatives of Parent's financial and United States legal advisors
performed due diligence at the Company's
14
<PAGE>
offices, were provided with due diligence materials relating to the Company and
engaged in conversations with management of the Company. Additional due
diligence materials were provided to representatives of Parent's United States
legal advisors by the Company on November 2, 1995.
On October 13, 1995, representatives of Goldman Sachs, Dillon Read and legal
counsel to the Special Committee met with members of the senior management of
the Company to discuss the Company's business, historical financial results and
projected financial results.
During the course of the October 13 meeting, the Company's management
indicated that it then expected the Company to achieve operating earnings of no
less than $.86 per share in 1995 compared to several then current Wall Street
analysts' projections of earnings of $.88 per share for 1995. The Company's
management indicated that the projected financial results for 1995 were based on
expectations that gross underwriting premiums for 1995 will be less than
previous estimates prepared by the Company, but that the net income results
would not be materially different from previously forecasted results because of
a reduction in the amount of anticipated losses. The Company's management
indicated that it then believed the Company has avoided any material losses that
might arise from most of the catastrophes that have occurred during the course
of 1995. Management noted that most of the loss incurred by the Company in 1994
was the result of losses arising from the Northridge, California earthquake. The
Company's management also indicated that it then expected to achieve earnings of
$1.12 per share in 1996 compared to several then current Wall Street analysts'
projections of earnings of $.95 per share for that year and that it then
expected the Company to record earnings per share of $1.42 in 1997. The
Company's management indicated that the significant assumptions used in the
preparation of such projections included: (i) an assumption that the reinsurance
market will not improve significantly over the next two years; (ii) the
Company's exposure to property catastrophe loss will be less in the future
because of increased management of aggregate exposures to losses arising out of
that line of business; (iii) an anticipated reduction in the premiums that the
Company will be able to charge and (iv) the possibility that the Company could
become less competitive in the future because of higher capital bases for some
of the Company's competitors.
The Company management indicated at the October 13 meeting that they were in
the process of updating the projected financial results of the Company. Certain
of those updated financial projections, which were delivered to Parent's United
States legal and financial advisors on October 23, 1995, are described in "THE
OFFER -- 8. Certain Information Concerning the Company".
In addition to the general review of the Company's business and results of
operations discussed above, during the October 13 meeting, the Company's
management discussed a number of specific matters relating to the Company's
various lines of business. In the course of those discussions, the Company noted
that Parent has provided 33-40% of the Company's catastrophe retrocession
program and has been the Company's largest retrocessionaire by a significant
margin. The Company's management indicated that it expects that all catastrophe
retrocession will be provided by Parent by January 1, 1996. This increase is
part of Parent's world-wide plan to provide all retrocession capacity for its
subsidiaries' catastrophe reinsurance and then to retrocede such exposure to
other companies. The Company indicated that the increase in Parent's position
leading to Parent becoming the sole retrocessionaire of the Company's
catastrophe program was decided upon prior to Parent's proposal to acquire the
minority interest in the Company. The Company's management indicated its
confidence in Parent's ability to satisfy its retrocession obligations. The
Company's management also indicated that the Company's broker relationship is
extremely concentrated. Forty percent of the brokered premiums written by the
Company are sourced from two brokers. Such brokers account for 23% and 16.5%,
respectively, of the total brokered premiums and single treaties account for 50%
of each of those amounts. Such treaties have been in effect since 1992 and 1987,
respectively.
15
<PAGE>
During the course of the October 13 meetings with Goldman Sachs and Dillon
Read, the Company's management discussed the historical price of the Company's
stock. Management pointed out that the stock has in recent years traded at
levels that are below the Company's net asset value. Reasons given by the
Company's management for the price level of the Company's stock included: (i)
low liquidity and trading volumes, (ii) depressed earnings history and return on
equity and (iii) the "overhang" in the market caused by Parent's 80% ownership
of the common stock.
On October 19, 1995, United States legal counsel to Parent forwarded a draft
of a Merger Agreement to the Special Committee's legal counsel.
On October 20 and 23, 1995, the Special Committee met with its legal and
financial advisors to discuss the proposal and the draft of the Merger
Agreement. During such period, the Special Committee's legal and financial
advisors continued their due diligence investigation of the Company.
On October 24, 1995, the Company announced its financial results for the
third fiscal quarter of 1995 and for the nine months ended September 30, 1995.
The text of the press release announcing such results (excluding the financial
statements, which are attached hereto as Appendix B) is set forth below:
SCOR U.S. REPORTS THIRD QUARTER AND NINE MONTH RESULTS
New York, N.Y., October 24, 1995--SCOR U.S. Corporation (NYSE:SUR)
reported today that income from operations for the three months ended
September 30, 1995, excluding net realized investment gains, was $4.7
million, or $.26 per share. This compares with $2.2 million or $.12 per
share, for the third quarter of 1994. During the 1995 third quarter, the
Company experienced $230,000, or less than $.01 per share after-tax, of
net favorable development on pre-1995 property catastrophe events. The
Company's 1994 third quarter results include pretax charges for
catastrophes of $2.1 million, or $.08 per share after-tax.
Net income for the three months ended September 30, 1995 was $4.8
million, or $.26 per share, including after-tax realized investment gains
of $79,000, or less than $.01 per share. In the year earlier period, the
Company reported net income of $2.4 million, or $.13 per share, including
after-tax realized investment gains of $210,000, or $.01 per share.
For the 1995 nine month period, excluding net realized investment
gains, the Company reported income from operations of $13.0 million, or
$.71 per share, compared with an operating loss of $12.1 million, or $.67
per share, for the nine month period of 1994. The Company's 1995 year to
date results include pretax charges for pre-1995 catastrophe events of
$4.3 million, or $.15 per share after tax, of which $3.4 million relates
to the Northridge earthquake. Results for the 1994 nine month period
include pretax charges of $38.7 million, or $1.39 per share on an
after-tax basis, for catastrophe events, principally related to the
Northridge earthquake.
Net income for the 1995 nine month period was $14.1 million, or $.77
per share, including after-tax realized investment gains of $463,000, or
$.03 per share, and an extraordinary gain of $552,000, or $.03 per share,
resulting from the Company's repurchase of its debentures.
Comparatively, the Company reported a net loss of $11.4 million, or
$.63 per share, in the year earlier period, including after-tax realized
investment gains of $688,000, or $.04 per share.
16
<PAGE>
In the 1995 third quarter, net premiums written were $54.6 million,
compared with $55.8 million for the 1994 third quarter. For the 1995 nine
month period, net premiums written were $181.6 million, compared with
$184.7 million for the corresponding 1994 period.
The Company's 1995 third quarter and nine month statutory combined
ratios were 100.7% and 104.2%, respectively, compared with 107.2% and
122.8%, respectively, for the third quarter and nine months of 1994.
Net investment income for the 1995 nine month period increased to
$31.8 million from $30.4 million in the corresponding 1994 period.
Net cash provided by operating activities for the nine months ended
September 30, 1995 was $3.0 million, compared with cash used in
operations of $8.5 million for the corresponding 1994 period.
At September 30, 1995, the statutory capital and surplus of the
Company's operating subsidiaries stood at an estimated $256.8 million.
Based upon preliminary available information concerning the recent
hurricane activity, the Company does not expect any material adverse
impact from losses arising out of those hurricanes.
As previously announced, the Company's Board of Directors has
received a proposal from its majority shareholder, SCOR S.A., to
repurchase the Company's outstanding publicly held shares. A committee
consisting of all independent directors is evaluating that proposal.
SCOR U.S. Corporation, a holding company, provides property and
casualty insurance and reinsurance in the treaty and facultative markets
through its operating subsidiaries. All of the SCOR U.S. Corporation's
operating insurance and reinsurance subsidiaries are rated "A"
(excellent) by A.M. Best Company.
On October 24, 1995, representatives of Dillon Read telephoned
representatives of Goldman Sachs and informed Goldman Sachs that the Special
Committee would recommend an offer at a price of $18.00 per Share.
Representatives of Goldman Sachs then informed Dillon Read that Goldman Sachs
would communicate that information to Parent. On the same day and shortly
thereafter, Goldman Sachs communicated to Parent that representatives of Dillon
Read had stated that the Special Committee would recommend a proposed offer by
Parent at $18.00 per Share. Management of Parent then indicated to Goldman Sachs
that Parent would not proceed at an $18.00 per Share price and requested Goldman
Sachs to communicate that fact to Dillon Read. On the same day and shortly after
the telephone call with Parent's management, representatives of Goldman Sachs
telephoned Dillon Read and informed its representatives that Parent believed the
$18.00 price was unsupportable and that Parent continued to believe $14.00 was
an appropriate and fair price for the Shares.
On October 26, 1995, representatives of Parent met with representatives of
the Special Committee and informed them that Parent was not willing to pay the
$18.00 per Share that had been requested by the Special Committee and that
Parent would be willing to pay a maximum of $15.00 per Share. Representatives of
the Special Committee then indicated that they believed they could obtain
Special Committee support for a transaction at $16.00 per Share. Representatives
of the Special Committee and Parent were unable to narrow further their
disagreement over the appropriate price for a transaction and ended discussions
on that day by agreeing to have their respective financial advisors discuss
their views on the per Share consideration proposed to be paid.
17
<PAGE>
On October 27, 1995, representatives of the financial advisors to the
Special Committee telephoned financial advisors to Parent to discuss their views
on the per Share consideration proposed to be paid. During the course of that
meeting, representatives of Goldman Sachs discussed with representatives of
Dillon Read Parent's reasons for having made an offer to purchase the Shares
that it did not already own at a price of $14.00 per Share, including certain of
the Goldman Sachs analyses contained in Goldman Sachs' presentation to
management of Parent on September 21, 1995. In response to that discussion by
representatives of Goldman Sachs, the representatives of Dillon Read indicated
that the Special Committee would not accept a price per Share that did not
represent a moderate premium over the book value. Although a net book value, of
$15.10 per Share had been publicly announced by the Company, Dillon Read's
representatives indicated to representatives of Goldman Sachs that Dillon Read
believed the net book value of the Company to be in the range of $15.05 to
$15.50 per Share based on information that had been made available to Dillon
Read.
On October 30, 1995, the legal counsel to the Special Committee communicated
to legal counsel to Parent that the Special Committee would not support a
transaction at $15.00 but would likely consider a price that represented a
premium over the book value.
On October 31, 1995, legal counsel to Parent responded to legal counsel to
the Special Committee that Parent would agree to a transaction at $15.25 if such
transaction were supported by the Special Committee, was the subject of a
favorable fairness opinion of the financial advisor to the Special Committee,
was approved by counsel for the various plaintiffs in pending shareholder claims
made following Parent's initial proposal, and was effected pursuant to a
mutually agreeable merger agreement. Legal counsel to the Special Committee
confirmed that a price per Share of $15.25 would satisfy the criteria of the
Special Committee and would likely be considered favorably by the Special
Committee. See "THE OFFER -- 15. Certain Legal Matters".
Also on October 31, 1995, representatives of the Special Committee's legal
advisors forwarded to representatives of Parent's United States legal counsel
their and the Special Committee's comments on the draft of the Merger Agreement.
On November 1, 1995, representatives of Parent's United States legal counsel
discussed with the Special Committee's legal advisors and Arter & Hadden,
special counsel to the Special Committee for directors' and officers' liability
and insurance matters, various provisions of the draft of the Merger Agreement
and the comments of the Special Committee and the Special Committee's legal
advisors on the draft of the Merger Agreement. On November 2, 1995,
representatives of the Special Committee's legal counsel sought to narrow the
representations and warranties and conditions to the Offer proposed by Parent in
the draft Merger Agreement, and Arter & Hadden sought to modify the obligation
of the Company and Parent to purchase directors and officers' liability
insurance. On November 2, 1995, representatives of Parent's and the Special
Committee's legal advisors again discussed various provisions of the Merger
Agreement. After that conversation, the remaining unresolved issues were
whether, as requested by Parent, the tender offer would be subject to the
Minimum Tender Condition and the timing of the purchase by the Company of
directors' and officers' liability insurance and the amount of such insurance
that would be purchased by the Company.
On November 1, 1995, representatives of counsel to the plaintiffs in the
shareholder actions agreed with representatives of Parent's United States legal
counsel that they were prepared to negotiate a settlement if a price per Share
of $15.25 were offered to the Company's stockholders. See "THE OFFER -- 15.
Certain Legal Matters".
On the afternoon of November 2, 1995, the Special Committee and its legal
and financial advisors met to discuss the Offer and the Merger. At that meeting,
the Special Committee agreed to resolve the remaining outstanding issues on the
draft Merger Agreement in the manner reflected in the Merger Agreement. A copy
of the Merger Agreement has been filed as an exhibit to the
18
<PAGE>
Schedule 14D-1 and the Schedule 13E-3, and the Merger Agreement is summarized in
"THE OFFER -- 11. The Merger Agreement; Appraisal Rights; Effect on the
Debentures". The Special Committee unanimously approved each of the Merger
Agreement, the Offer and the Merger and determined that the terms of the Offer
and the Merger are fair to, and in the best interest of, the stockholders of the
Company and recommended that the stockholders of the Company tender their Shares
and that the Board of Directors of the Company approve the same. At that meeting
of the Special Committee, Dillon Read orally advised the Special Committee that
it was Dillon Read's opinion that the consideration to be received by the
holders of Shares (other than Parent) is fair to such holders from a financial
point of view as of such date. See "SPECIAL FACTORS -- 6. Recommendation of the
Company's Board of Directors and the Special Committee". After the meeting of
the Special Committee referred to in the preceding sentence, the Board of
Directors of the Company met. After receiving a report from the Special
Committee on its deliberations and a recommendation from the Special Committee
that the Board of Directors approve the Merger Agreement, the Offer and the
Merger, the Board of Directors unanimously approved the Merger Agreement, the
Offer and the Merger, determined that the Offer and the Merger are fair to, and
in the best interest of, the stockholders of the Company and recommended that
all stockholders of the Company accept the Offer and tender their Shares
pursuant to the Offer.
The Merger Agreement was executed and delivered by the parties thereto on
November 2, 1995, and the transaction was announced on the morning of November
3, 1995.
On November 8, 1995, the Purchaser and the Company agreed to modify the
Minimum Tender Condition to the form set forth herein. The modification
eliminated all options from the denominator for purposes of calculating whether
Parent beneficially owns, directly or indirectly, 90% of the Shares.
6. RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE.
At the November 2, 1995 meeting of the Board of Directors of the Company,
the Board of Directors of the Company, including those members of the Board of
Directors of the Company constituting the Special Committee, acting upon the
unanimous recommendation of the Special Committee, unanimously approved the
Merger Agreement, the Offer and the Merger, determined that the terms of the
Offer and the Merger are fair to, and in the best interest of, the stockholders
of the Company and recommended that all stockholders of the Company accept the
Offer and tender their Shares pursuant to the Offer.
Reasons for Recommendation.
See "SPECIAL FACTORS -- Background of the Offer and the Merger" for a
description of certain events preceding the Board of Director's consideration of
the Offer and the Merger.
The Special Committee received presentations from, and reviewed the Offer
and the Merger with, senior management of the Company as well as the Special
Committee's financial advisor, Dillon Read. The Special Committee, in
determining whether to recommend the approval of the Merger Agreement and the
transactions contemplated thereby to the full Board of Directors, considered a
number of factors, including, but not limited to, the following:
(i) The belief, based on its familiarity with the Company's business,
its current financial condition and results of operations and its future
prospects, and the current and anticipated developments in the Company's
industry, that the consideration to be received by the Company's
stockholders in the Offer and Merger fairly reflects the Company's intrinsic
value.
(ii) The oral and written presentations made by the Company's management
and Dillon Read at a meeting held on October 20, 1995 as to various
financial and other considerations deemed relevant to the evaluation of the
Offer and the Merger, including, but not limited to, a review of (A) the
business prospects and financial condition of the Company, (B) historical
19
<PAGE>
business information and financial results of the Company, (C) nonpublic
financial and operating results of the Company, (D) financial projections
and budgets prepared by the Company's management, (E) information obtained
from meetings with senior management of the Company, (F) the trading range
and volume history of the Shares, (G) public financial information of
comparable companies and (H) public information of comparable acquisitions.
(iii) The opinion of Dillon Read that the consideration to be received
by the Company's stockholders pursuant to the Merger Agreement is fair to
such stockholders (other than Purchaser) from a financial point of view. In
considering Dillon Read's opinion, the Board was aware that Dillon Read is
entitled to a fee in accordance with the terms of its engagement described
below.
(iv) The relationship between the consideration to be received by
stockholders as a result of the Offer and the Merger and the historical
market prices and recent trading activity of the Shares.
(v) The recognition that, following consummation of the Offer and the
Merger, the current Stockholders of the Company will no longer be able to
participate in any increases or decreases in the value of the Company's
business and properties. The Board and the Special Committee concluded,
however, that this consideration did not justify foregoing the opportunity
for stockholders to receive an immediate and substantial cash purchase price
for their Shares.
(vi) The fact that the terms of the Offer, and the increase in the
consideration offered to the public stockholders from $14.00 per Share to
$15.25 per Share, were determined through arm's-length negotiations with
Parent by the Special Committee and its financial and legal advisors, all of
whom are unaffiliated with Parent, and the judgment of the Special Committee
and Dillon Read that, based upon the negotiations that transpired, a price
higher than $15.25 per Share could not likely be obtained and that further
negotiations with Parent could cause Parent to abandon the Offer, with the
resulting possibility that the market price for the Shares could fall
substantially below $15.25, and possibly $14.00, per Share, or to commence a
tender offer without the involvement of the Special Committee at a price
less than $15.25 per Share.
(vii) Parent's ownership of approximately 80% of the currently
outstanding Shares and the effects of such ownership on the alternatives
available to the Company and the fact that, as a practical matter, no
strategic alternative could be effected without the support of Parent; and
the consequences of continuing to operate the Company as a majority-owned
subsidiary of Parent.
(viii) The terms and conditions of the Merger Agreement, the fact that
there are no unusual requirements or conditions to the Offer and the Merger,
and the fact that Parent has the financial resources to consummate the Offer
and the Merger expeditiously.
(ix) The fact that the consideration to be paid to the Company's public
stockholders in the Offer and the Merger is all cash.
(x) The fact that the Offer and the Merger have been structured to
include a first-step cash tender offer for any and all outstanding Shares,
thereby enabling stockholders who tender their Shares to promptly receive
$15.25 per Share in cash, and the fact that any public stockholders who do
not tender their Shares or properly exercise appraisal rights will receive
the same price per Share in the subsequent Merger.
(xi) The possible conflicts of interest of certain directors and members
of management of both the Company and Parent discussed in "Item
3(b) -- Interests of Certain Persons" of the Company's Schedule 14D-9.
20
<PAGE>
(xii) The fact that, while no appraisal rights are available to
stockholders as a result of the Offer, stockholders who do not tender
pursuant to the Offer will have the right to dissent from the Merger and to
demand appraisal of the fair value of their Shares under the DGCL. See "THE
OFFER -- 11. The Merger Agreement; Appraisal Rights; Effect on the
Debentures."
The Special Committee considered each of the factors listed above during the
course of its deliberations prior to recommending that the Company enter into
the Merger Agreement. In light of its knowledge of the business and operations
of the Company and its business judgment, the Special Committee believed that
each of these factors supported its respective conclusions. In view of the wide
variety of factors considered, the Special Committee did not find it practicable
to, and did not, quantify the specific factors considered in making its
determination, although the Special Committee did place a special emphasis on
the opinion and analysis of Dillon Read which in turn did place a special
emphasis on a valuation range determined using an analysis of trading values of
comparable companies and an economic book value analysis as described below
under "Opinion of Financial Advisor".
The Board of Directors of the Company, a majority of the members of which
were members of the Special Committee, approved the Merger Agreement and the
transactions contemplated thereby after receiving a report from the Special
Committee on its deliberations and recommendation. In reaching this decision,
the Board of Directors principally considered the recommendation of the Special
Committee and its familiarity with the Company's business, its current financial
condition and results of operations and future prospects, and current and
anticipated developments in the Company's industry.
Opinion of Financial Advisor
On November 2, 1995, Dillon Read delivered its opinion to the Special
Committee to the effect that the consideration to be paid to the holders of
Shares and certain of the Company's stock options pursuant to the Merger
Agreement is fair to such holders (other than Parent) from a financial point of
view as of the date thereof. A copy of Dillon Read's opinion is attached as
Schedule III hereto. The summary of the opinion set forth herein is qualified in
its entirety by such Schedule III which is incorporated herein by reference.
Stockholders are urged to read the opinion in its entirety for a description of
the assumptions made, matters considered and procedures followed by Dillon Read.
The consideration to be paid pursuant to the Offer and Merger was determined by
negotiations on behalf of the Company and Parent and was not determined by
Dillon Read. In arriving at its opinion, Dillon Read, among other things, (1)
reviewed certain publicly available business and financial information relating
to the Company; (2) reviewed the reported price and trading activity for the
Shares; (3) reviewed certain internal financial information and other data
provided to Dillon Reed by the Company relating to the business and prospects of
the Company, including financial projections prepared by the management; (4)
conducted discussions with members of the senior management of the Company; (5)
reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions which Dillon Read considered relevant; (6) reviewed
publicly available financial and securities market data pertaining to certain
publicly-held companies in lines of business generally comparable to those of
the Company; and (7) conducted such other financial studies, analyses and
investigations, and considered such other information as Dillon Read deemed
necessary and appropriate. In reaching its opinion and conducting its analysis,
Dillon Read did not assume any responsibility for independent verification of
any of the foregoing information and relied upon it being complete and accurate
in all material respects. Dillon Read was not requested to and did not make an
independent evaluation or appraisal of any assets or liabilities (contingent or
otherwise) of the Company or any of its subsidiaries, nor were they furnished
with any such evaluation or appraisal. Dillon Read also assumed that all of the
information, including the projections, provided to Dillon Read by the Company's
management was prepared on a basis reflecting the best currently available
estimates and judgments of the Company's management as to the future of the
financial performance of the
21
<PAGE>
Company and was based upon the historical performance and certain estimates and
assumptions which were reasonable at the time made. In addition, Dillon Read was
not asked to and did not express any opinion as to the after-tax consequences of
the sale of such Shares by the stockholders. Dillon Read's opinion is based on
economic, monetary and market conditions existing on the date thereof. In
rendering their opinion, Dillon Read did not render any opinion as to the value
of the Company and did not make any recommendation to the shareholders with
respect to the advisability of voting in favor of the transaction. No
limitations were imposed by the Special Committee, the Company or Parent upon
Dillon Read with respect to the investigations made or the procedures followed
by Dillon Read in rendering its opinion, and the Company and the members of its
management cooperated fully with Dillon Read in connection with its
investigation.
In delivering its opinion and making its presentation to the Board and the
Special Committee, Dillon Read discussed certain financial and comparative
analyses and other matters it deemed relevant. Among the various financial
analyses that Dillon Read discussed were:
(i) Comparable Trading Analysis. Dillon Read undertook a comparable
public company analysis. In conducting this analysis, Dillon Read reviewed
certain financial results of seven companies in the reinsurance industry
which Dillon Read believed to be comparable to the Company. Dillon Read
calculated trading multiples of (1) 1996 expected earnings per share (based
on median estimates supplied by Institutional Brokers Estimate System
database), (2) book value as of June 30, 1995 and (3) surplus as of June 30,
1995. Such multiples ranged between 11.0x and 15.0x, 1.0x and 1.3x, and 1.1x
and 1.4x, respectively. Based on such multiples, Dillon Read estimated a
reference range of $14.49 to $18.98 per Share.
(ii) Comparable Acquisition Analysis. Dillon Read reviewed 32
acquisitions of property/ casualty reinsurance companies in the United
States and Europe, which had occurred between 1987 and 1995 and summarized
financial ratios and statistics for the nine most comparable transactions in
the United States. The values of certain multiples (i.e., net income, book
value, net premiums and market value) for all nine transactions were
derived, as available. Such multiples ranged between 8.9x and 24.6x, 0.8x
and 1.8x, 0.6x and 1.7x, and 1.3x and 1.6x, respectively. The multiples were
then applied (1) to the Company's Net Premiums for the twelve month period
ending September 30, 1995 and (2) to the Company's book value as of
September 30, 1995. On this basis, Dillon Read estimated an average
reference range of between $14.70 to $20.32 per Share.
(iii) Economic Book Value Analysis. Dillon Read calculated the economic
book value of the Company as of September 30, 1995. In calculating the
economic book value of the Company, Dillon Read took into consideration the
following factors, among others: (1) good will of the Company, (2)
mark-to-market of the investment portfolio, (3) adjustments for the market
value of the electronic data processing system and leasehold improvements,
(4) adjustments for the valuation of the deferred income tax benefits and
publicly traded debt, (5) ranges of differences between the stated amounts
and net present value of the prepaid reinsurance, loss reserves and unearned
premiums and (6) a range of value for any reserve deficiency. On this basis,
Dillon Read calculated a reference range of the Company between $15.24 and
$17.08.
(iv) Discounted Cash Flow Analysis. Dillon Read calculated the present
value of future cash flows that the Company could be expected to generate
over the next five years (the "Discounted Cash Flow Analysis"). In preparing
the Discounted Cash Flow Analysis, Dillon Read took into consideration the
following: (1) the Company's recent operating and financial performance
including, (a) management's business plan for fiscal year 1995 and (b) the
historical operating results for the three most recently completed fiscal
years, (2) management's business plan for fiscal 1996 and 1997 and (3)
projections, reports and other materials prepared by the Company and its
management or representatives that were provided to Dillon
22
<PAGE>
Read. In addition, representatives of Dillon Read met with representatives
of the Company's management to discuss the Company's current and projected
operations. In developing its Discounted Cash Flow Analysis for each case,
Dillon Read took the "free cash flow" that the Company was expected to
generate from fiscal year 1995 to 2000 and discounted these cash flows to
present values. Dillon Read applied discount rates ranging from 11% to 13%
determined as the most appropriate range for the Company. Dillon Read
arrived at this range of appropriate discount rates by determining the
weighted average cost of capital for publicly traded companies in businesses
similar to the Company. To approximate the residual value of the Company
after this five-year period, Dillon Read applied multiples of operating
income ranging from 10.5x to 12.5x. Dillon Read's determination of the most
appropriate range of multiples was based on an assessment of the multiples
of operating income which have been paid in recent publicly announced
acquisitions of similar businesses. These residual value estimates were then
discounted to present value using each of the above range discount rates.
Dillon Read summed the discounted cash flows and residual value for each
multiple of operating income described above, which indicated a matrix of
present values for the Company of $14.48 to $19.05 per Share.
(v) Premium Analysis. Dillon Read reviewed 29 transactions involving the
close-out of minority shareholder positions, which had occurred between 1990
and 1995. Dillon Read considered only those transactions in which between
10% and 45% of all outstanding shares of a target corporation were acquired
in the close-out transaction and in which the acquiring company owned
approximately 100% of the target corporation stock upon completion of the
transaction. For each company, Dillon Read calculated for each target
corporation the premium paid for each share over the trading value of such
share (A) one day prior to the transaction, (B) one week prior to the
transaction and (C) four weeks prior to the transaction. Dillon Read then
calculated the average of all premiums paid over the target corporation's
trading price at each valuation date (calculated as a percentage of such
share price). Applying such average premiums to the Company's trading value
at each such valuation date, Dillon Read calculated a reference range of the
Company between $14.37 and $15.63.
The summary set forth above does not purport to be a complete description of
either Dillon Read's analyses or presentations to the Special Committee. Dillon
Read believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create an incomplete view of the
processes underlying its opinion. The preparation of a fairness opinion is a
complex process and not necessarily susceptible to partial analyses or summary
description. In its analyses, Dillon Read made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. Any estimates contained
therein are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth therein. Estimates of
value of companies do not purport to be appraisals or necessarily reflect the
prices at which companies may actually be sold. Because such estimates are
inherently subject to uncertainty, none of the Company, Parent, the Purchaser,
Dillon Read and any other person assumes responsibility for their accuracy.
The Company has retained Dillon Read as the Special Committee's financial
advisor in connection with the Merger, the Offer and other matters arising in
connection therewith pursuant to an engagement letter dated October 10, 1995
(the "Engagement Letter") between the Company and Dillon Read. The Engagement
Letter provides, among other things, that the Company will pay to Dillon Read a
fee equal to $500,000. In addition, the Company has agreed to reimburse Dillon
Read for its reasonable out-of-pocket expenses, including reasonable legal
expenses, and to indemnify Dillon Read against certain liabilities.
The Special Committee selected Dillon Read as its financial advisor because
Dillon Read is an internationally recognized investment banking firm and
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions.
23
<PAGE>
THE OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the Purchaser will accept for payment, and pay
for, all Shares validly tendered on or prior to the Expiration Date (as herein
defined) and not withdrawn as permitted by "THE OFFER -- 4. Rights of
Withdrawal". The term "Expiration Date" means 12:00 Midnight, New York City
time, on Friday, December 8, 1995, unless and until the Purchaser shall, in its
sole discretion, have extended the period for which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date on which
the Offer, as so extended by the Purchaser, shall expire.
This Offer is subject to various terms and conditions described herein. See
"THE OFFER -- 13. Certain Conditions of the Offer".
Subject to the applicable rules and regulations of the Commission, the
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, and regardless of whether or not any of the events set forth
in "THE OFFER -- 13. Certain Conditions of the Offer" shall have occurred or
shall have been determined by the Purchaser to have occurred, to (i) extend the
period of time during which the Offer is open, and thereby delay acceptance for
payment of, regardless of whether such Shares were theretofore accepted for
payment, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend the Offer in any other respect
by giving oral or written notice of such amendment. The Purchaser shall not have
any obligation to pay interest on the purchase price for tendered Shares,
whether or not the Purchaser exercises its right to extend the Offer. The rights
reserved by the Purchaser in this paragraph are in addition to the Purchaser's
right to terminate the Offer pursuant to the provisions of "THE OFFER -- 13.
Certain Conditions of the Offer".
If by the Expiration Date, any or all conditions to the Offer have not been
satisfied or waived, the Purchaser reserves the right (but shall not be
obligated), in its sole discretion subject to the applicable rules and
regulations of the Commission, to (i) terminate the Offer and not accept for
payment any Shares and return all tendered Shares, (ii) waive all the
unsatisfied conditions and, subject to the applicable rules and regulations of
the Commission, accept for payment and pay for all Shares validly tendered prior
to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer
and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares that have been tendered during the period or
periods for which the Offer is extended, or (iv) amend the Offer in any respect
by giving oral and written notice of such termination, waiver, extension, delay
or amendment to the Depositary or by making public announcement thereof.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. See "THE OFFER -- 13. Certain Conditions to the Offer". Any
extension, delay, amendment, waiver or termination will be followed as promptly
as practicable by public announcement. In the case of an extension, Rule
14e-1(d) under the Exchange Act requires that the announcement be made no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which the Purchaser may choose to
make any public announcements, the Purchaser will not have any obligations to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service.
24
<PAGE>
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of the tendered Shares) is delayed in its
acceptance for payment of or payment for the Shares or if the Purchaser is
unable to accept for payment or pay for the Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal right as described in "THE OFFER -- 4. Rights of
Withdrawal". However, the ability of the Purchaser to delay the payment for the
Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c)
under the Exchange Act, which requires that a bidder pay the consideration
offered or return the securities deposited by or on behalf of holders of
securities promptly after the termination or withdrawal of such bidder's offer.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Tender Condition and the other conditions set forth in "THE OFFER -- 13. Certain
Conditions of the Offer". The Purchaser reserves the right (but shall not be
obligated) to waive any or all such conditions and to waive the Minimum Tender
Condition and to accept for payment pursuant to the Offer less than the minimum
number of Shares necessary to satisfy the Minimum Tender Condition, to the
extent permitted under applicable law.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including a waiver or reduction of the Minimum Tender Condition), the Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer, other
than a change in price or a change in the percentage of securities sought, or a
change in the dealer's advisory fee, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. In the Commission's view, an offer should remain open for
a minimum of five business days from the date a material change is first
published, sent or given to security holders, and, if material changes are made
with respect to information that approaches the significance of price and share
levels, a minimum of ten business days may be required to allow for adequate
dissemination and investor response. With respect to a change in price or,
subject to certain limitations, a change in the percentage of securities sought
or a change in a dealer's solicitation fee, a minimum period of ten business
days from the date of such change is generally required under the applicable
rules and regulations of the Commission to allow for adequate dissemination to
stockholders and investor response. Accordingly, if prior to the Expiration
Date, the Purchaser should decrease the number of Shares being sought, or
increase or decrease the consideration offered pursuant to the Offer, or change
the dealer's solicitation fee, and if the Offer is scheduled to expire at any
time earlier than the period ending on the tenth business day from and including
the date that notice of such change is first published, sent or given to holders
of Shares, the Offer will be extended at least until the expiration of such
ten-business day period. As used herein, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time period from
12:01 a.m. through midnight, New York City time.
The Company has provided to the Purchaser the Company's stockholder list and
security position lists for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase, the Letter of Transmittal and other relevant
materials will be mailed to recordholders of the Shares whose names appear on
the Company's stockholder list and will be mailed to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on such stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
25
<PAGE>
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will purchase, by accepting for payment, and will pay
for, Shares validly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with "THE OFFER -- 4. Rights of Withdrawal" as promptly
as practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the terms and conditions set forth in "THE OFFER --
13. Certain Conditions of the Offer". Any determination concerning the
satisfaction or waiver of the terms and conditions will be within the sole
discretion of the Purchaser, and such determination will be final and binding on
all holders of Shares. See "THE OFFER -- 1. Terms of the Offer" and "THE OFFER
- -- 13. Certain Conditions of the Offer". The Purchaser expressly reserves the
right, in its sole discretion, to delay acceptance for payment of or payment for
Shares in order to comply in whole or in part with any applicable law. Any such
delays will be effected in compliance with the Purchaser's obligation under Rule
14e-1(c) under the Exchange Act to pay for or return tendered Shares promptly
after the termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to the holders of Shares pursuant to the Offer, the Purchaser will pay
such increased consideration for all Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in the
consideration.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to the Purchaser and not
withdrawn if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment. Upon the
terms and subject to the conditions of the Offer, payment for Shares accepted
for payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which shall act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to the tendering stockholders whose shares have been
received for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE
PURCHASER ON THE PURCHASE PRICE OF THE SHARES TENDERED PURSUANT TO THE OFFER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN ACCEPTING FOR PAYMENT
OR MAKING SUCH PAYMENT.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or timely Book-Entry Confirmation (as defined herein) of the
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined herein) pursuant to the procedures set
forth in "THE OFFER -- 3. Procedure for Tendering Shares"), (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined herein) in lieu of the Letter of Transmittal) and
(iii) any other documents required by such Letter of Transmittal.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to the Purchaser's obligations under Rule 14e-1(c) under
the Exchange Act to pay for or return the Shares promptly after the termination
or withdrawal of the Offer), the Depositary may, nevertheless, on behalf of the
Purchaser, retain tendered Shares, and such Shares may not be withdrawn except
to the extent tendering stockholders are entitled to exercise, and duly
exercise, withdrawal rights as described in "THE OFFER -- 4. Rights of
Withdrawal".
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be returned,
without expense, to the tendering stockholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the
26
<PAGE>
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in "THE OFFER -- 3. Procedure for Tendering Shares", such
Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration, termination or
withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of the
Purchaser the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
By accepting the benefits of the Offer through the tender of Shares and the
receipt of payment for Shares, a tendering stockholder is (under the Purchaser's
view of applicable law) barred from thereafter attacking in any legal proceeding
the fairness of the consideration received by stockholders in the Offer. For
this reason, the Letter of Transmittal to be executed by tendering stockholders
includes a release of any such claims, which will be effective upon receipt of
payment for tendered shares.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. To tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) or, in
the case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal, and any other documents required by the Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase and either (i) certificates for the Shares to be
tendered must be received by the Depositary at one of such addresses or (ii)
Shares must be delivered pursuant to the procedures for book-entry transfer
described below (and a confirmation of such delivery received by the Depositary,
including an Agent's Message if the tendering stockholder has not delivered a
Letter of Transmittal), in each case by the Expiration Date, or (b) the
guaranteed delivery procedure described below must be complied with. The term
"Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility
to and received by the Depositary and forming a part of a book-entry
confirmation, which states that such Book-Entry Transfer Facility has received
an express acknowledgement from the participant in such Book-Entry Transfer
Facility tendering the Shares which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
Letter of Transmittal and that the Purchaser may enforce such agreement against
such participant.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company, Midwest Securities Trust Company
and Philadelphia Depository Trust Company (collectively referred to as the
"Book-Entry Transfer Facilities") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in the system of any Book-Entry Transfer Facility may make
delivery of Shares by causing such Book-Entry Transfer Facility to transfer such
Shares in the Depositary's account in accordance with the procedures of such
Book-Entry Transfer Facility. However, although delivery of Shares may be
effected through book-entry transfer, either the Letter of Transmittal (or
facsimile thereof) properly completed and duly executed together with any
required signature guarantees (or, in the case of book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal), and any other required
documents must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase by the
Expiration Date, or the guaranteed delivery procedure described below must be
complied with. The confirmation of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation". DELIVERY OF THE LETTER OF
27
<PAGE>
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY
DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantee. Except as otherwise provided below, all signatures on a
Letter of Transmittal must be guaranteed by a financial institution (including
most banks, savings and loan associations and brokerage houses) which is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion
Program (an "Eligible Institution"). Signatures on a Letter of Transmittal need
not be guaranteed (a) if the Letter of Transmittal is signed by the registered
holder of the Shares tendered therewith and such holder has not completed the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are
tendered for the account of an Eligible Institution. See Instructions 1 and 5 of
the Letter of Transmittal. If the certificates are registered in the name of a
person other than the signer of the Letter of Transmittal or if payment is to be
made or certificates for Shares not accepted for payment or not tendered are to
be returned to a person other than the registered holder, then the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appears on the certificates, with the signatures on the certificates or
stock power guaranteed as described above. See Instructions 1 and 5 to the
Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and cannot deliver such Shares and all other required documents to the
Depositary by the Expiration Date, or such stockholder cannot complete the
procedure for delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by
the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for such tendered Shares (or a Book-Entry
Confirmation with respect to such Shares), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof)
with any required signature guarantee (or, in the case of book-entry
transfer, an Agent's Message in lieu of the Letter of Transmittal), and any
other documents required by the Letter of Transmittal, are received by the
Depositary within three trading days on the NYSE after the date of execution
of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING
THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Other Requirements. Notwithstanding any other provision hereof, in all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a timely Book-Entry Confirmation with respect to such
Shares), properly completed and duly executed Letter(s) of Transmittal (or
facsimile(s) thereof) for such Shares together with any required signature
guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu
of the Letter of Transmittal), and any other
28
<PAGE>
required documents. Accordingly, tendering stockholders may be paid at different
times depending upon when certificates for Shares or Book-Entry Confirmations of
such Shares and such other documents are actually received by the Depositary.
Under no circumstances will interest be paid by the Purchaser on the purchase
price of the Shares to any tendering stockholders, regardless of any extension
of the Offer or any delay in accepting for payment or making such payment.
Tender Constitutes an Agreement. The tender of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
Appointment of Proxy After Acceptance for Payment. By executing a Letter of
Transmittal as set forth above, the tendering stockholder irrevocably appoints
the designees of the Purchaser, and each of them, the attorneys-in-fact and
proxies of such stockholder, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all cash dividends, distributions, rights, other Shares and other securities
issued or issuable in respect of such Shares on or after the date of this Offer
to Purchase ("Distributions"). Such appointment is effective when, and only to
the extent that, the Purchaser deposits the payment for such Shares with the
Depositary. All such proxies and powers of attorney shall be irrevocable and
coupled with an interest in the tendered Shares. Upon the effectiveness of such
appointment, without further action, all prior proxies with respect to the
Shares (and any associated Distributions) given by such stockholder will be
revoked, and no subsequent proxies may be given nor subsequent written consents
executed (and, if given or executed, will not be deemed to be effective) with
respect thereto by the Stockholder. The Purchaser's designees will, with respect
to the Shares (and any associated Distributions) for which the appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they, in their sole discretion, may deem proper at any annual,
special or adjourned meeting of the stockholders of the Company, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's payment for such Shares, the Purchaser must be
able to exercise full voting rights with respect to such Shares (and any
associated Distributions) (including voting at any meeting then scheduled or
actions by written consent). See "THE OFFER -- 6. Price Range of Shares;
Dividends."
Release of Claims. By accepting the Offer through the tender of Shares
pursuant to the Offer, the tendering stockholder agrees to release, and
releases, all claims with respect to or in respect of the Shares other than the
right to receive payment for the tendered Shares expressly provided herein and
that, upon payment for the Shares, to waive any right to attack (and agrees to
be barred from thereafter attacking) in any legal proceeding the fairness of the
consideration paid in the Offer.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance for payment of which may, in the opinion of its counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
Shares. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. Neither the Purchaser, the
Depositary, the Information Agent or the Dealer Managers nor any other person
will be under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such notification.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and Instructions thereto) will be final and
binding.
29
<PAGE>
Backup Withholding. In order to avoid backup withholding of federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares
in the Offer must provide the Depositary with such stockholder's correct
taxpayer identification number ("TIN") on a Substitute Form W-9 and certify
under penalties of perjury that such TIN is correct and that such stockholder is
not subject to backup withholding. Certain stockholders (including, among
others, all corporations and certain foreign individuals and entities) are not
subject to backup withholding. If a stockholder does not provide its correct TIN
or fails to provide the certifications described above, under federal income tax
laws, the Depositary will be required to withhold 31% of the amount of any
payment made to certain stockholders pursuant to the Offer. All stockholders
tendering Shares pursuant to the Offer should complete and sign the main
signature form and Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is provided in a
manner satisfactory to the Purchaser and the Depositary). Non-corporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 10 to the
Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable except that Shares tendered pursuant to
the Offer may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after January 8, 1996.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder, if different from that of the person who tendered such
Shares. If certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, the name of the registered holder and the serial numbers
shown on such certificates must also be submitted to the Depositary and, unless
such Shares have been tendered for the account of any Eligible Institution, the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
book-entry tender as set forth in "THE OFFER -- 3. Procedure for Tendering
Shares", any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures
for such withdrawal, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of tenders of Shares may not be
rescinded, and any Share properly withdrawn will thereafter be deemed not
validly tendered for the purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described above in "THE
OFFER -- 3. Procedure for Tendering Shares" at any time on or prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. None of the
Purchaser, Parent, the Dealer Managers, the Depositary, the Information Agent,
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give such notification.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares, or is unable to accept for payment Shares pursuant to the Offer, for
any reason, then, without prejudice
30
<PAGE>
to the Purchaser's rights under this Offer, the Depositary may, nevertheless, on
behalf of the Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth in this Section 4. Under no circumstances will
interest be paid by the Purchaser on the purchase price of the Shares tendered
pursuant to the Offer, regardless of any extension of the Offer or any delay in
making payment.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER.
Sales of Shares pursuant to the Offer will be taxable transactions for
Federal income tax purposes and may also be taxable under applicable state,
local and other tax laws. For Federal income tax purposes, a stockholder whose
Shares are purchased pursuant to the Offer, or who receives cash as a result of
the Merger, will realize gain or loss equal to the difference between the
adjusted basis of the Shares sold or exchanged and the amount of cash received
therefor. Such gain or loss will be capital gain or loss if the Shares are held
as capital assets by the stockholder. Under current Federal income tax law, net
capital gain of an individual or other non-corporate taxpayer may be subject to
tax at a preferential tax rate. In addition, a taxpayer's ability to deduct
capital losses may be limited.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED
STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed on the NYSE under the symbol "SUR". The following
table sets forth, for the calendar quarters indicated, the high and low sales
prices for the Shares on the NYSE Composite Tape and the amount of cash
dividends paid per Share, based upon public sources:
<TABLE>
<CAPTION>
SHARES
-----------------------------------------------------
CASH DIVIDENDS
CALENDAR YEAR HIGH LOW PAID
- --------------------------------------------------------- ----------------- -------------- --------------
<S> <C> <C> <C>
1993:
First Quarter........................................ $ 20 3/4 $ 17 $ .08
Second Quarter....................................... 19 3/4 16 1/8 .08
Third Quarter........................................ 16 7/8 14 7/8 .08
Fourth Quarter....................................... 16 3/4 12 3/8 .08
1994:
First Quarter........................................ $ 13 $ 10 1/4 $ .09
Second Quarter....................................... 12 1/4 10 1/8 .09
Third Quarter........................................ 12 1/4 11 .09
Fourth Quarter....................................... 11 3/8 7 1/2 .09
1995:
First Quarter........................................ $ 8 3/4 $ 7 3/4 $ .05
Second Quarter....................................... 9 1/4 7 1/2 .05
Third Quarter........................................ 15 1/2 9 .05
Fourth Quarter (through November 8, 1995)............ 15 3/4 15 N/A
</TABLE>
On September 25, 1995, the last full trading day prior to the public
announcement of Parent's intention to seek to cause the Company to become a
wholly-owned subsidiary of Parent in a transaction in which holders of Shares
would receive $14.00 in cash per share, the reported
31
<PAGE>
closing price on the NYSE Composite Tape was $11 1/8 per Share. On November 2,
1995, the last full NYSE trading day prior to the public announcement of
execution of the Merger Agreement and the Purchaser's agreement to commence the
Offer, the reported closing price on the NYSE Composite Tape was $15 1/4 per
Share. Stockholders are urged to obtain a current market quotation for the
Shares.
At its regular December meetings, the Board of Directors of the Company
historically has declared a regularly quarterly dividend payable on or about
December 31 of each year to stockholders of record on approximately the twelfth
day preceding such dividend payment date. Declarations of dividends are within
the discretion of the Board of Directors of the Company, and there can be no
assurance that the Board of Directors will declare a dividend payable in
December 1995.
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, STOCK EXCHANGE LISTING, AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares by the Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and would reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by the public.
The Shares are currently listed on the NYSE. According to the NYSE's
published guidelines, the NYSE would consider delisting the Shares if, among
other things, the number of holders of at least 100 Shares (exclusive of NYSE
"Excluded Holdings") should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers and directors of the Company and their
immediate families and other concentrated holdings of 10% or more) should fall
below 600,000, or the aggregate market value of the publicly held Shares
(exclusive of NYSE "Excluded Holdings") should fall below $5,000,000. According
to the 1994 Annual Report, there were approximately 140 holders of record of
Shares on March 28, 1995, and the Company has advised the Purchaser and Parent
that, as of November 2, 1995, there were 18,170,971 Shares outstanding. Parent
owned 14,547,756 Shares as of such date.
If such exchange were to delist the Shares, the market therefor could be
adversely affected. It is possible that the Shares would be traded on other
securities exchanges or in the over-the-counter market, and that price
quotations would be reported by such exchanges, or through the National
Association of Securities Dealers Automated Quotation System, Inc. ("NASDAQ") or
other sources. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors. The Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade, or the termination
of registration of outstanding Shares under the Exchange Act, would have an
adverse effect on the market price for or the marketability of Shares.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated by the Company upon application to the Commission
if the outstanding Shares are not listed on a national securities exchange and
if there are fewer than 300 holders of record of Shares. Termination of
registration of the Shares under the Exchange Act would reduce the information
required to be furnished by the Company to its stockholders and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings pursuant
to Section 14(a), the related requirement of furnishing annual and
32
<PAGE>
transition reports to stockholders pursuant to Section 15(d) of the Exchange Act
and the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable with respect to the Shares.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 under the Securities Act of 1933, as amended, may be impaired or
eliminated. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be eligible for NYSE reporting.
The Purchaser intends to seek delisting of the Shares from the NYSE and
termination of registration of the Shares as soon as possible after consummation
of the Offer or the Merger if, and as soon as, the requirements for delisting
and termination of registration are met.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares for the purpose of buying, carrying or trading
in securities ("Purpose Loans"). Depending upon factors similar to those
described above regarding the continued listing, public trading and market
quotations of the Shares, it is possible that, following the purchase of the
shares pursuant to the Offer, the Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for Purpose Loans made
by brokers. In addition, if registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be "margin securities" or be
eligible for NYSE reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at Two World Trade Center, New York, New York 10048-0178. The following
description of the Company's business has been taken from the 1994 Annual Report
at page I-3:
The Company, through its subsidiaries, provides property and casualty
insurance and reinsurance. Reinsurance is provided to primary insurance
companies on both a treaty and facultative basis. SCOR Re specializes in
underwriting treaties covering non-standard automobile, commercial and
technical risks and provides property, casualty and special risk coverages
on a facultative basis. SCOR Re writes treaty business almost exclusively
through reinsurance intermediaries and writes facultative business directly
with primary insurance companies and through reinsurance intermediaries.
GSIC and Unity Fire provide commercial property and casualty insurance on
both a primary and excess basis and underwrite alternative risk market
coverages. GSIND provides commercial property and casualty coverages on a
surplus lines basis.
FINANCIAL INFORMATION. Set forth below is certain summary consolidated
financial information for the Company's last three fiscal years as contained in
the 1994 Annual Report and for the six months ended June 30, 1995 and June 30,
1994 as contained in the Company's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1995 and June 30, 1994. More comprehensive financial
information is included in such reports (including management's discussion and
analysis of financial condition and results of operation) and other documents
filed by the Company with the Commission, and the following summary is qualified
in its entirety by reference to such reports and other documents and all of the
financial information and notes contained therein. Copies of such reports and
other documents may be examined at or obtained from the Commission or from the
NYSE in the manner set forth below. Copies of the financial statements (and the
notes thereto) of the Company contained in the 1994 Annual Report and copies of
the financial results for the three and nine months ended September 30, 1995, as
set forth in the Company's October 24, 1995 press release, are attached to this
Offer to Purchase as Appendices A and B, respectively. The book value per Share
set forth in Appendix B has been revised since the October 24, 1995 press
release (which reported a $15.10 per Share book value), and the revised book
value per Share as of September 30, 1995 has been set forth in Appendix B.
33
<PAGE>
SCOR U.S. CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
(UNAUDITED)
-------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1994 1993 1992
---------- ---------- ---------- ---------- ----------
OPERATING DATA:
Net premiums earned................. $ 128,804 $ 117,668 $ 228,244 $ 236,051 $ 192,050
Net investment income............... 21,072 20,206 40,990 42,044 42,880
Net realized investment gains....... 592 736 984 12,930 15,048
---------- ---------- ---------- ---------- ----------
Total revenue....................... 150,468 138,610 270,218 291,025 249,978
Losses and expenses, net............ 85,500 113,498 191,270 156,292 160,545
Commissions, net.................... 36,551 31,875 59,434 61,324 55,960
Other underwriting and
administration expenses........... 13,167 12,787 26,009 26,420 23,918
Other expenses...................... 24 1,475 4,039 4,073 4,346
Interest expense.................... 4,310 4,528 8,920 8,005 4,579
---------- ---------- ---------- ---------- ----------
Total expenses...................... 139,552 164,163 289,672 256,114 249,348
Income (loss) from operations before
income taxes...................... 10,916 (25,553) (19,454) 34,911 630
Income taxes (benefit).............. 2,241 (11,738) (11,262) 6,983 (3,771)
---------- ---------- ---------- ---------- ----------
Income (loss) from operations....... 8,675 (13,815) (8,192) 27,928 4,401
Extraordinary gain on redemption of
debentures, net of tax............ 552 -0- 351 -0- -0-
Cumulative effect of accounting
changes, net of tax............... -0- -0- -0- (2,600) 2,848
---------- ---------- ---------- ---------- ----------
Net income (loss)................... $ 9,227 $ (13,815) $ (7,841) $ 25,328 $ 7,249
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net income (loss) per fully diluted
Share............................. $ 0.50 $ (0.76) $ (0.43) $ 1.33 $ 0.40
Cash dividends declared per Share... $ 0.10 $ 0.18 $ 0.36 $ 0.32 $ 0.28
CERTAIN GAAP FINANCIAL RATIOS:
Loss ratio.......................... 66.4% 96.5% 83.8% 66.2% 83.6%
Commission ratio.................... 28.4 27.1 26.0 26.0 29.1
U/W, administration and other
expense ratio..................... 10.2 12.1 13.2 12.9 14.7
Expense ratio....................... 38.6 39.2 39.2 38.9 43.8
Combined ratio...................... 105.0 135.7 123.0 105.1 127.4
SAP COMBINED RATIO (A):............. 105.6 130.1 118.8 103.7 123.3
Ratio of Earnings to Fixed
Charges........................... 3.13x (b) (b) 4.89x 1.14x
</TABLE>
- ------------
(a) Operating subsidiaries only.
(b) Earnings were inadequate to cover fixed charges by $25,812,000 for the six
months ended June 30, 1994 and by $20,197,000 for the year ended December
31, 1994.
34
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1994 1993 1992
---------- ---------- ---------- ---------- ----------
ASSETS:
Investments................... $ 709,427 $ 660,671 $ 672,793 $ 716,654 $ 600,598
Cash.......................... 11,512 13,994 4,763 17,096 20,378
Accrued investment income..... 10,146 10,275 110,339 10,169 10,572
Premiums receivable........... 90,728 109,975 72,018 80,319 61,793
Reinsurance recoverable on
paid losses
Affiliates.................. 10,589 12,216 4,399 9,498 15,777
Other....................... 1,232 43,672 19,356 27,329 26,578
Reinsurance recoverable on
unpaid losses
Affiliates.................. 142,093 125,463 127,096 134,154 112,797
Other....................... 94,967 98,605 95,576 87,689 107,854
Prepaid reinsurance premiums
Affiliates.................. 6,629 10,407 10,504 14,578 12,903
Other....................... 4,510 12,033 8,803 11,839 13,326
Deferred policy acquisition
costs....................... 22,728 25,609 22,844 24,140 22,171
Deferred Federal income tax
benefits.................... 24,423 38,280 34,818 11,894 13,939
Investment in affiliates...... 12,555 11,048 11,532 10,789 10,111
Other assets.................. 46,089 42,455 48,874 37,963 40,424
---------- ---------- ---------- ---------- ----------
$1,187,628 $1,214,703 $1,143,715 $1,194,111 $1,069,221
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
LIABILITIES:
Losses and loss expenses...... $ 633,315 $ 622,829 $ 604,787 $ 562,209 $ 561,813
Unearned premiums............. 100,134 121,633 110,082 114,376 104,824
Funds held under reinsurance
treaties
Affiliates.................. 1,435 3,719 3,654 21,777 23,478
Other....................... 16,422 19,485 17,104 17,825 15,157
Reinsurance balances payable
Affiliates.................. 13,003 9,898 15,328 18,196 32,951
Other....................... 16,860 59,825 28,357 42,037 18,488
Convertible subordinated
debentures.................. 75,950 86,250 82,350 86,250 0
Notes payable................. 25,000 20,000 20,000 20,000 28,000
Commercial paper.............. 20,321 10,954 11,310 10,721 10,247
Other liabilities............. 12,460 13,309 11,348 10,031 8,147
---------- ---------- ---------- ---------- ----------
914,900 967,902 904,320 903,422 803,105
---------- ---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
5,000,000 shares authorized;
no shares issued............ 0 0 0 0 0
Common stock, $0.30 par value,
50,000,000 Shares
authorized; 18,356,000
Shares issued.................. 5,507 5,490 5,507 5,490 5,453
Additional paid-in capital.... 114,568 112,894 114,556 112,670 112,068
Unrealized appreciation
(depreciation) of
investments, net of deferred
tax effect................ 3,671 (10,299) (21,640) 16,634 11,416
Foreign currency translation
adjustment.................. 197 (269) (414) 12 254
Retained earnings............. 150,564 140,452 143,153 157,532 138,002
Treasury stock, at cost....... (1,774) (1,467) (1,767) (1,649) (1,077)
---------- ---------- ---------- ---------- ----------
272,733 246,801 239,395 290,689 266,116
---------- ---------- ---------- ---------- ----------
$1,187,628 $1,214,703 $1,143,715 $1,194,111 $1,069,221
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
BOOK VALUE PER SHARE........... $ 15.02 $ 13.60 $ 13.18 $ 16.05 $ 14.77
</TABLE>
35
<PAGE>
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources and is qualified in its entirety by reference thereto. Although neither
the Purchaser nor Parent has any knowledge that would indicate that any
statements contained herein based on such documents and records are untrue,
neither the Purchaser nor Parent can take responsibility for the accuracy or
completeness of the information contained in such documents and records, or for
any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to the Purchaser or Parent.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities, any material interests of such
persons in transactions with the Company and other matters is required to be
disclosed in proxy statements distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other information
should be available for inspection at the public reference facilities of the
Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located in
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and in Seven World Trade Center, Suite 1300, New York, New York.
Copies may be obtained, by mail, upon payment of the Commission's customary
charges, by writing to its principal office at Room 1024, Judiciary Plaza,
Washington, D.C. 20549. The Shares are listed on the NYSE and such material,
reports, proxy statements and other information can also be available for
inspection at the NYSE, 20 Broad Street, New York, New York.
CERTAIN PROJECTIONS. Parent and its representatives from time to time
receive projections of financial results prepared by the management of the
Company in the ordinary course of business as a part of its financial planning
process. Although the Company does not as a matter of course publicly disclose
projections as to future revenues or earnings, because they were received by
Parent, the Purchaser is making these projections available to all stockholders.
THE "SUMMARY PROJECTIONS" WERE PREPARED AS PART OF THE COMPANY'S STRATEGIC
PLANNING PROCESS AT DECEMBER 1994, MARCH 1995 AND OCTOBER 1995. NONE OF THE
PROJECTIONS SET FORTH BELOW IS TO BE REGARDED AS FACT AND SUCH PROJECTIONS
SHOULD NOT BE RELIED UPON AS ACCURATE REPRESENTATIONS OF FUTURE RESULTS. IN
ADDITION, BECAUSE THE ESTIMATES AND ASSUMPTIONS UNDERLYING THE SUMMARY
PROJECTIONS, AS TO FUTURE RESULTS, ARE BASED UPON EVENTS AND CIRCUMSTANCES THAT
HAVE NOT TAKEN PLACE AND ARE INHERENTLY SUBJECT TO SIGNIFICANT FINANCIAL,
MARKET, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES WHICH ARE
DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND ARE BEYOND PARENT'S, THE
PURCHASER'S AND THE COMPANY'S CONTROL, THEY ARE INHERENTLY IMPRECISE AND THERE
CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS CAN BE REALIZED. THEREFORE, IT IS
EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN THE ACTUAL AND PROJECTED RESULTS
AND THAT THE ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE
PROJECTED.
THE INCLUSION OF THE SUMMARY PROJECTIONS SHOULD NOT BE REGARDED AS A
REPRESENTATION BY PARENT, THE PURCHASER, OR THE COMPANY, OR ANY OF THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES, THAT THE PROJECTED RESULTS WILL BE
ACHIEVED. THE SUMMARY PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARDS PUBLIC
DISCLOSURE OR COMPLYING WITH PUBLISHED GUIDELINES OF THE COMMISSION OR
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS. NONE OF THE PURCHASER, PARENT, THE COMPANY, OR ANY OF THEIR
RESPECTIVE AFFILIATES, REPRESENTATIVES, FINANCIAL ADVISORS, INDEPENDENT AUDITORS
OR DIRECTORS OR OFFICERS, ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF THE
SUMMARY PROJECTIONS. THE SUMMARY PROJECTIONS HAVE NOT BEEN
36
<PAGE>
EXAMINED, REVIEWED OR COMPILED BY THE COMPANY'S INDEPENDENT AUDITORS, AND
ACCORDINGLY THEY HAVE NOT EXPRESSED AN OPINION OR ANY OTHER ASSURANCE ON THEM.
The Summary Projections were based on numerous global assumptions, including
the following: (i) that there will be no significant change in market
conditions; (ii) that the Company's staff levels will be adequate to implement
the Company's proposed strategies; (iii) that, in general, historical
retrocession patterns will not change; and (iv) that the Company will remain in
the brokered treaty distribution channel (although the projections are based on
the implementation of new business strategies for the brokered treaty
distribution channel).
According to representatives of the Company, the premium growth included in
The Summary Projections was based on the professional judgment of the Company
after giving careful consideration to the Company's premium growth for each line
of business and the expected impact of any underwriting changes that have been
or will be implemented. The loss ratios and combined ratios included in The
Summary Projections were also based on the professional judgment of the
management group after giving consideration to the Company's historical ratios
for each line of business and the expected impact of any underwriting changes
that have been or are projected to be implemented. The assumed payout patterns
have also been based on historical data, with adjustments for the projected
change in mix of the Company's business.
The Summary Projections were also based on numerous operational assumptions,
including the following: (i) the Company will continue to engage in transactions
with its affiliates; (ii) new products (which contribute to the projected
increase in premiums written) will be accepted in the marketplace; (iii) the
Company will incur increases in operating expenses during 1995 relating to
technological changes, offset by a reduction in operating expenses resulting
from implementation of such new technologies thereafter and (iv) the Company
will continue to maintain approximately the same number of branch operations
that it currently maintains.
The Summary Projections were also based on numerous specific assumptions and
factors relating to each of the Company's lines of business, including the
following: (i) With respect to property underwritings, incurred losses on earned
premiums are reserved at underwriting year ultimate ratios; (ii) With respect to
casualty underwritings, incurred losses on earned premiums are reserved by
underwriting year, utilizing actuarial department formulas; (iii) With respect
to net investment income, (a) the projections are based on the June 30, 1994
portfolio plus income on 50% of projected cash flow (however, 1995 is reduced by
a proposed $20 million repayment of a bank financing) and (b) new money and
reinvestment of bond maturities are invested at 8%, which is assumed to be the
yield on 7 to 10-year investment grade taxable securities; (iv) Realized gains
are assumed to be zero; (v) Other operating expenses are expected to increase by
1% per year, plus an estimated overall 1% increase adjustment for staffing
changes and increased New Treaty System amortization of $900,000 in 1995 and
thereafter; (vi) With respect to interest expense, (a) all years include $1.1
million of interest on funds held, $4.8 million of interest and amortization on
the Debentures and $450,000 of commercial paper interest and (b) 1995 includes
$1.2 million of interest for three quarters of a year until the bank financing
is repaid.
The March 1995 update to The Summary Projections reflected updated views on
market trends and a reduction of $1.5 million in annual operating expenses. The
October 1995 update of The Summary Projections assumed (i) an increase of $40
million in net invested assets in each of 1996 and 1997 at a taxable interest
rate of 6% and (ii) the refinancing, rather than repayment, of a $20 million
bank loan. The October 1995 update of The Summary Projections generally
extrapolated nine months actual results for the full year 1995 and included $1
million in expenses projected to be incurred in connection with Parent's
proposal. 1995 projections exclude the effect of a $552,000 extraordinary gain
on the repurchase of Debentures realized in the first half of 1995.
None of the assumptions or factors used is susceptible to accurate
prediction and there is no assurance that The Summary Projections will be
realized or that the Company's actual results will not be substantially less or
substantially more than those projected. The Summary Projections do not include
any benefits relating to the acquisition of the Shares by the Purchaser pursuant
to the Offer or the Merger.
37
<PAGE>
THE SUMMARY PROJECTIONS
PROJECTED STATEMENT OF OPERATIONS FOR FISCAL YEAR ENDED
DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MONTH WHEN PROJECTIONS WERE
PREPARED
--------------------------------
DECEMBER MARCH OCTOBER
1994 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Gross written premium..................................... $363,143 $332,900 $314,531
Net written premium....................................... 293,365 269,745 256,820
Net earned premium........................................ 297,602 273,167 259,304
Net investment income..................................... 43,056 42,611 42,430
Net investment gain....................................... 0 0 713
-------- -------- --------
TOTAL REVENUES:........................................... 340,658 315,778 302,447
Losses.................................................... 207,242 187,010 174,410
Commissions............................................... 79,195 74,288 69,125
Expenses.................................................. 29,542 28,004 29,004
Other..................................................... 422 (116) 617
Interest.................................................. 7,528 7,528 8,994
-------- -------- --------
TOTAL EXPENSES:........................................... 323,929 296,714 282,150
Income before taxes....................................... 16,729 19,064 20,297
Income taxes.............................................. 813 1,681 1,838
-------- -------- --------
NET INCOME:............................................... $ 15,916 $ 17,383 $ 18,459
-------- -------- --------
-------- -------- --------
Average Shares outstanding................................ 18,546 18,546 18,196
Net income per Share...................................... $ 0.86 $ 0.94 $ 1.01
Combined ratio (SAP)...................................... 105.8% 105.9% 104.8%
Average stockholders equity............................... $251,697 $250,378 $263,434
Return on equity.......................................... 6.3% 6.9% 7.0%
</TABLE>
The foregoing table sets forth the projected Statement of Operations for the
fiscal year ended December 31, 1995, which projections were prepared during the
months indicated above. Because management of the Company periodically updates
the projections, they may vary, and in fact have varied, depending on the time
such projections are made.
38
<PAGE>
THE SUMMARY PROJECTIONS
PROJECTED STATEMENTS OF OPERATIONS FOR FISCAL YEARS ENDED
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 PROJECTIONS 1997 PROJECTIONS
-------------------- --------------------
MONTH WHEN MONTH WHEN
PROJECTIONS WERE PROJECTIONS WERE
PREPARED PREPARED
-------------------- --------------------
DECEMBER OCTOBER DECEMBER OCTOBER
1994 1995 1994 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross written premium....................... $413,644 $367,680 $482,810 $430,417
Net written premium......................... 328,224 284,749 382,130 341,779
Net earned premium.......................... 325,841 279,501 372,419 329,182
Net investment income....................... 47,349 44,830 53,473 47,230
Net investment gains........................ 0 0 0 0
-------- -------- -------- --------
TOTAL REVENUES:............................. 373,190 324,331 425,892 376,412
Losses...................................... 227,879 187,708 260,208 216,777
Commissions................................. 84,329 74,087 95,459 89,509
Expenses.................................... 30,634 29,000 31,170 30,000
Other....................................... (852) (190) (1,576) (1,569)
Interest.................................... 6,328 7,912 6,328 7,912
-------- -------- -------- --------
TOTAL EXPENSES:............................. 348,318 298,517 391,589 342,629
Income before taxes......................... 24,872 25,814 34,303 33,783
Income taxes................................ 4.034 4,140 7,894 7,489
-------- -------- -------- --------
NET INCOME:................................. $ 20,838 $ 21,674 $ 26,409 $ 26,294
-------- -------- -------- --------
-------- -------- -------- --------
Average primary shares outstanding.......... 18,596 18,196 18,648 18,196
Earnings per Share.......................... $ 1.12 $ 1.19 $ 1.42 $ 1.45
Combined ratio (SAP)........................ 105.1% 103.9% 103.6% 102.0%
Average equity.............................. 263,524 286,233 280,233 304,689
Return on equity............................ 7.9% 7.6% 9.4% 8.6%
</TABLE>
The foregoing table sets forth the projected Statements of Operations for
the fiscal years ended December 31, 1996 and 1997, which projections were
prepared during the months indicated above. Because management of the Company
periodically updates the projections, they may vary, and in fact have varied,
depending on the time such projections are made.
39
<PAGE>
SHARE OWNERSHIP INFORMATION. The following table sets forth the information
provided to the Purchaser and Parent by the Company regarding the Share
ownership by directors and officers of the Company as of November 1, 1995 unless
otherwise noted. To Parent's and the Purchaser's knowledge, each of the
following listed persons currently intends to tender his Shares in the Offer.
<TABLE>
<CAPTION>
NUMBER OF OPTION NUMBER OF
NUMBER OF SHARES OPTION SHARES
REGISTERED EXERCISABLE AS UNEXERCISABLE
DIRECTORS SHARES HELD OF 11/1/95 AS OF 11/1/95
- ------------------------------------------------ ----------- ---------------- -------------
<S> <C> <C> <C>
Jacques P. Blondeau............................. 0 83,998 18,002
John R. Cox..................................... 1,000 1,500 4,500
Raymond H. Deck................................. 7,100 13,500 4,500
Michel Gudefin.................................. 18,000 13,500 4,500
Jerome Karter................................... 0 166,997 24,003
Jean Masse...................................... 0 0 6,000
Richard M. Murray............................... 3,000 13,500 4,500
Serge M.P. Osouf................................ 0 1,500 11,500
Patrick Peugeot................................. 15,900 122,809 4,500
John W. Popp.................................... 1,000 13,500 4,500
Francois Reach.................................. 0 1,500 4,500
David J. Sherwood............................... 1,100 13,500 4,500
Ellen E. Thrower................................ 0 0 3,000
<CAPTION>
NON-DIRECTOR EXECUTIVE OFFICERS
- ------------------------------------------------
<S> <C> <C> <C>
Louis Adanio.................................... 10,409 33,121 13,668
John T. Andrews, Jr. ........................... 0 129,998 23,002
Nolan E. Asch................................... 14,188 79,081 12,668
Jeffrey D. Cropsey.............................. 4,552 0 13,000
John D. Dunn, Jr. .............................. 0 4,999 20,001
Francis J. Fenwick.............................. 0 0 7,800
Howard B. Fischer............................... 4,412 25,204 10,968
Linda J. Grant.................................. 100 11,508 9,301
Dominique Lavallee.............................. 1,400 5,999 13,001
Robert D. Sawicki............................... 0 0 9,100
Total (All Directors and Executive Officers
as a group)................................... 82,161 735,714* 231,014
</TABLE>
- ------------
* Represents approximately 3.22 percent of the Shares outstanding.
40
<PAGE>
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
PARENT AND THE PURCHASER. The Purchaser is a Delaware corporation
incorporated on October 12, 1995 and organized on November 2, 1995 as a
wholly-owned subsidiary of Parent solely for the purposes of entering into the
Merger Agreement, purchasing the Shares pursuant to this Offer and effecting the
Merger. The Purchaser has conducted no business. Its registered office is CT
Corporation Service, 1209 Orange Street, Wilmington, Delaware.
Parent is organized under the laws of The French Republic and its principal
executive offices are located at Immeuble SCOR-Cedex 39, 92074 Paris La Defense,
France. Parent operates principally as a reinsurance company. Together with its
subsidiaries, it ranks as the largest professional reinsurer in France and among
the largest in the world. For the year ended December 31, 1994 and for the six
months ended June 30, 1995, Parent had consolidated net income of FRF 282
million and FRF 206 million, in each case calculated in accordance with French
generally accepted accounting principles. At December 31, 1994, Parent had total
assets of approximately FRF 34.8 billion and total shareholders equity of
approximately FRF 5.4 billion, calculated in accordance with French generally
accepted accounting principles. As of November 7, 1995, the rate of exchange of
FFr into U.S. dollars, based on the noon buying rate in New York City for cable
transactions in foreign currencies as certified for customers purposes by the
Federal Reserve Bank of New York was $4.880 FFr per U.S. dollar.
The name, citizenship, business address, present principal occupation, and
material positions held during the past five years of each of the directors and
executive officers of Parent and the Purchaser are set forth in "SCHEDULE
I -- Directors and Executive Officers of Parent and the Purchaser" to this Offer
to Purchase.
Neither Parent nor the Purchaser is subject to the information requirements
of the Exchange Act and, accordingly, neither files reports or other information
with the Commission under the Exchange Act relating to its business, financial
position, results of operations or other matters.
SHARE OWNERSHIP INFORMATION. Parent currently owns 14,547,756 Shares, or
approximately 80% of the issued and outstanding Shares. In addition, the
following table sets forth the number of Shares beneficially owned as of
November 2, 1995 by the persons listed in "SCHEDULE I -- Directors and Executive
Officers of Parent and the Purchaser" to this Offer to Purchase and any other
associate or majority-owned subsidiary of Parent or any of the persons so
listed. To Parent's and the Purchaser's knowledge only Mr. Peugeot owns Shares
other than through unexercised stock options. Mr. Peugeot has indicated that he
intends to tender such Shares into the Offer. Parent and the Purchaser do not
believe any of such persons intends to exercise options for the purpose of
tendering into the Offer.
AMOUNT
BENEFICIALLY
NAME OF INDIVIDUAL OWNED
- ------------------------------------------------------- ------------
Patrick Peugeot........................................ 138,709
Jacques Blondeau....................................... 83,998
Serge Osouf............................................ 1,500
Francois Reach......................................... 1,500
Except as elsewhere set forth in this Offer to Purchase: (i) neither Parent
nor the Purchaser nor, to the knowledge of Parent or the Purchaser, any of the
persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent and
the Purchaser" hereto nor any associate or majority-owned subsidiary of any of
the foregoing, beneficially owns or has a right to acquire any equity securities
of the Company; (ii) neither Parent nor the Purchaser nor, to the best knowledge
41
<PAGE>
of Parent or the Purchaser, any of the persons or entities referred to above,
nor any director, executive officer or subsidiary of any of the foregoing, has
effected any transaction in such equity securities during the past 60 days;
(iii) neither Parent nor the Purchaser nor, to the knowledge of Parent or the
Purchaser, any of the persons listed in "SCHEDULE I -- Directors and Executive
Officers of Parent and the Purchaser" hereto, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations; (iv) there have been no contacts,
negotiations or transactions since January 1, 1993 between Parent or the
Purchaser, or, to the knowledge of Parent or the Purchaser, any of the persons
listed in "SCHEDULE I -- Directors and Executive Officers of Parent and the
Purchaser" hereto, on the one hand, and the Company or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of asset of the Company; and (v) neither Parent
nor the Purchaser, nor, to the best knowledge of Parent or the Purchaser, any of
the persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent
and the Purchaser" hereto, has since January 1, 1992 had any transaction with
the Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the Commission applicable
to the Offer. References herein to the subsidiaries or affiliates of Parent or
the Purchaser do not include the Company and its subsidiaries.
SHARE REPURCHASES. On November 2, 1994, Parent acquired directly from
certain of the Company's executive officers, 82,000 Shares at the then
prevailing market price of $11.125 per Share, specifically: 44,000 Shares from
John T. Andrews, Jr., Senior Vice President, General Counsel and Secretary of
the Company; 9,071 Shares from Nolan E. Asch, Senior Vice President and Chief
Actuary of the Company; 3,929 Shares from R. Daniel Brooks, Senior Vice
President of the Company; and 25,000 Shares from Jerome Karter, President and
Chief Executive Officer of the Company. Each of these senior officers had, at
the request of the Company, voluntarily agreed not to sell any Shares held by
them in connection with the privately placed offering of convertible
subordinated debentures of the Company in 1993, and were prevented from selling
during certain other periods thereafter in accordance with Company policy. The
proceeds from these sales to Parent were applied exclusively to reduce
indebtedness of the sellers to the Company. In addition, on November 2, 1994,
under the Company's Stock Incentive Plan for Key Employees, the Company granted
to each of such officers options to purchase a corresponding number of Shares at
an exercise price of $11.125 per Share, which was equal to the per Share market
price on that date.
10. CONTACTS WITH THE COMPANY.
DIRECTORS OF THE COMPANY. The Board of Directors of the Company currently
consists of thirteen members, five of whom are officers and/or directors of the
Purchaser or officers of the Company. The Purchaser currently has, and following
the Offer and the Merger will continue to have, the ability to elect the entire
Board of Directors of the Company.
The members of the Company's Board of Directors are as follows:
Jacques P. Blondeau has served as Chairman of the Board of the Company since
September 30, 1994 and as a Director since 1988. Mr. Blondeau is also Chairman
of SCOR Reinsurance Company ("SCOR Re"), the Company's principal operating
subsidiary. Mr. Blondeau serves as a Trustee of the Voting Trust that holds the
stock of SCOR Re on behalf of the Company. From November, 1988 to September 30,
1994, Mr. Blondeau had been Vice Chairman and President of the Company and Vice
Chairman of the Board of SCOR Re. He also served as Chief Operating
42
<PAGE>
Officer of the Company from November, 1988 to June, 1994. From June 16, 1994 to
September 30, 1994, he served as Chief Executive Officer of the Company. He is
Chairman of the Board and Chief Executive Officer of Parent. Prior to being
elected to these positions in Parent, he served as the President and Chief
Operating Officer. Mr. Blondeau was President-Operations of SCOR Paris from 1988
until 1990, when SCOR Paris was merged into Parent. From 1984 to 1988, Mr.
Blondeau was Chairman and President of Pechiney Australia and President of
Howmet Resources, Inc. (U.S.), a subsidiary of Pechiney Corporation. From
1980-1984, he held various top-level positions with the Pechiney Corporation.
Mr. Blondeau's business address is that of Parent.
Serge M.P. Osouf has served as Vice Chairman of the Board of Directors of
the Company and SCOR Re since September 30, 1994, and has been a Director of the
Company since September, 1993, and of SCOR Re since December, 1991. Mr. Osouf
serves as the General Manager of Parent and prior to taking this position in
September, 1994, had been the President-Reinsurance Operations of Parent since
1993. He is currently Chairman of SCOR Vie and from 1987 to 1993 was General
Manager of SCOR Reassurance, two subsidiaries of Parent. Mr. Osouf's business
address is that of Parent.
Jerome Karter has served as a Director of the Company since February, 1989,
and as its President and Chief Executive Officer since September 30, 1994. Prior
to September, 1994, he had served as Executive Vice President of the Company
since December, 1989. Mr. Karter has also served as a Director, President and
Chief Executive Officer of SCOR Re since February, 1989. Prior to his employment
at SCOR, he held various management positions both in the United States and
Europe with major domestic and multinational insurance companies since 1961. He
held senior management positions for Factory Mutual International in London and
Affiliated F.M. Insurance Company in Paris from 1969 to 1978. He subsequently
served as General Manager-Europe for the Insurance Company of North America (now
CIGNA Corporation) and INA Reinsurance Company S.A. in Brussels from 1978 to
1984. Immediately prior to joining the Company, Mr. Karter was a Senior Vice
President and Manager of the International Department of Johnson & Higgins in
New York from 1984 to 1989. Mr. Karter's business address is that of the
Company.
John R. Cox has served as a Director of the Company and SCOR Re since June,
1994. Mr. Cox has also served as a Director of Firemark Global Insurance Fund
since 1993. From 1985 to 1991 he was Chairman of the Board and Chief Executive
Officer of ACE Limited ("ACE"). Until February 3, 1995, he was a Director and a
Member of the Audit Committee of ACE and its subsidiary companies. From 1990 to
1993 he was a Director of Bankers Insurance Company Limited. From 1983 to 1985,
he was Executive Vice President of American Can Company, subsequently known as
Primerica Corporation and now The Travelers Corporation, and Chairman and Chief
Executive Officer of Associated Madison Companies, Inc., its financial services
holding company subsidiary. From 1975 to 1983 Mr. Cox held various key executive
positions in CIGNA Corporation. Mr. Cox's business address is 44 Herbert
Terrace, West Orange, New Jersey.
Raymond H. Deck has served as a Director of the Company since 1986 and of
SCOR Re since 1985. He has been President of Chase Insurance Enterprises, Inc.,
a division of Chase Enterprises, a private company with investments in real
estate, communications and the insurance industry, since 1986. He has also been
a Director of Accel International Corporation since 1990. Prior to 1986, he was
a Director and Executive Vice President of the Hartford Insurance Group. Mr.
Deck's business address is that of Chase Insurance Enterprises, Inc., One
Commercial Plaza, Hartford, Connecticut 06103.
Michel J. Gudefin has served as a Director of the Company since 1989 and of
SCOR Re since June 1990 and is a Voting Trustee of SCOR Re. Mr. Gudefin is
retired. From 1988 to 1989 he was Vice Chairman of Howmet Corporation, the
principal operating subsidiary of Pechiney Corporation. From 1976 to 1988, Mr.
Gudefin was President and Chief Executive Officer of Pechiney Corporation.
43
<PAGE>
Until December 31, 1993, he was a Director of Pechiney Corporation and Howmet
Corporation. He is currently a Director of Southwire Corporation and a Vice
President and Director of Intrend Corporation. Mr. Gudefin's business address is
that of the Company.
Jean P. Masse has served as a Director of the Company and SCOR Re since
March 1995. From June 16, 1994 until March 1995, he was Director Emeritus of
SCOR Re after having served as a Director of SCOR Re from 1990 to 1994. He
served as a Director and President of The Unity Fire and General Insurance
Company from December 1982 until 1990, and during that time also served as
President and Treasurer of the Rockleigh Management Corporation, which was
merged with and into the Company in 1990. Mr. Masse's business address is Tour
Voltaire, 1 place Des Dgres, Cedex 58, 92059 Paris La Defense, France.
Richard M. Murray has served as a Director of the Company and SCOR Re since
1990. He was Chairman and executive advisor of The Nippon Management Corporation
from 1987 to 1991. Since 1990, he has been Vice Chairman of La Prov Corporation,
a wholly-owned U.S. subsidiary and liaison office of Grupo Nacional Provincial
S.A., a leading Mexican insurance company. He was a Vice President of The
Travelers Corporation from 1967 to 1987. Mr. Murray's business address is that
of La Prov Corporation, 80 Broad Street, New York, New York 10004-2203.
Patrick Peugeot has served as a Director of the Company since 1983 and of
SCOR Re since 1985. Mr. Peugeot is also a Voting Trustee of SCOR Re. He served
as Chairman of the Board of the Company from 1983 until September 30, 1994, and
as Chief Executive Officer of the Company from December 1988 until June 16,
1994. He was also Chairman of the Board of SCOR Re until September 1994. Mr.
Peugeot had served as Chairman of the Board and Chief Executive Officer of
Parent from 1989 until 1994 and of SCOR Paris from 1983 until 1990. Mr. Peugeot
was Chairman of CCR from 1983 to 1985. He is Honorary Chairman of CCR and has
served as Honorary Chairman of Parent since August 30, 1994. He is now Vice
Chairman and President of La Mondiale, a French mutual life insurance company.
He is also Vice Chairman of Partner Europe. Mr. Peugeot's business address is
that of La Mondiale, located at 22 boulevard Malesherbes 75008 Paris.
John W. Popp, has served as a Director of the Company since March 1990 and
SCOR Re since 1989. Mr. Popp also is a business consultant. He was a Partner of
Peat, Marwick, Mitchell & Co. (now KPMG Peat Marwick LLP) from 1955 to 1982. Mr.
Popp has been a Director of Old Republic International Corporation since 1993.
Mr. Popp's business address is that of the Company.
Francois Reach has served as a Director of the Company since March 1989 and
of SCOR Re since June 1994. Mr. Reach has served as Chairman and CEO of REAFIN,
the finance company subsidiary of Parent since October 1994. He was Chief
Investment Officer and Treasurer of Parent from 1983 until October, 1994, when
he became Deputy General Manager of Parent. From 1986 to 1994, he was President
of REAFIN. He is also Managing Director of Finimosa (Spain) and of Finimo Kft
(Hungary). Mr. Reach's business address is that of Parent.
David J. Sherwood has served as a Director of the Company and of SCOR Re
since 1987. He is also a Voting Trustee of SCOR Re. Mr. Sherwood has served as
Chairman of the Board of Governors of the New York Insurance Exchange since
1985. He was President of The Prudential Insurance Company of America from 1978
to 1984. Mr. Sherwood's business address is that of the New York Insurance
Exchange, c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022.
Ellen E. Thrower has served as a director of the Company since July 1995.
She has served as President and Chief Executive Officer of The College of
Insurance and Chief Executive Officer of its parent organization, The Insurance
Society of New York since 1988. She has been a director of the Insurance
Education Foundation since 1988; the New York City Council on Economic
Education,
44
<PAGE>
Inc., since 1992; the Pennsylvania National Mutual Casualty Insurance Co. since
1990; and the United Educators Insurance Risk Retention Group, Inc., since 1994.
Ms. Thrower's business address is that of The College of Insurance, 101 Murray
Street, New York, New York 10007.
CONTRACTS AND AGREEMENTS. The Company and Parent have a number of financial,
operating and other arrangements and have engaged in certain intercompany
transactions believed to be mutually beneficial. These arrangements include
those set forth below. Copies of the Agreements referred to below required to be
filed as exhibits to the Schedule 13E-3 and the Schedule 14D-1 are so filed and
are available in the same manner as that described in "SPECIAL FACTORS--5.
Background of the Offer and the Merger", and the following summaries are
qualified in their entirety by reference to the copies of such agreements.
(i) Retrocession Agreements: SCOR Re, like most reinsurance companies,
enters into retrocession arrangements for many of the same reasons primary
insurers seek reinsurance, including increasing their premium writing and risk
capacity without requiring additional capital and reducing the effect of
individual or aggregate losses. Historically, SCOR Re has retroceded risks to
retrocessionaires on both a proportional and excess of loss basis. Since a
reinsurer remains liable to a ceding company with respect to any risk subject to
a retrocession agreement, such retrocessionaires are subject to an initial
review of financial condition before final acceptability is confirmed and to
subsequent reviews on an annual basis.
From 1974 through 1986, virtually all of SCOR Re's retrocessions had been to
affiliates. Based on the increased surplus resulting from the Company's public
offering in 1986, SCOR Re significantly decreased the total amount of
reinsurance retroceded, a large portion of which continues to be retroceded to
affiliates. All reinsurance agreements with affiliates must be submitted to the
New York Insurance Department for prior review. In 1994, 11.5% of gross premiums
written by the Company were retroceded to Parent, compared with 15.6% and 14.0%
in 1993 and 1992, respectively.
Under its 1995 retrocessional program, SCOR Re retains a maximum of $2.0
million as to any one ceding company program for treaty business. SCOR Re
retains a maximum of $3.9 million and $1.0 million per risk for facultative
property and facultative casualty business, respectively. Under its 1994
retrocessional program SCOR Re retained a maximum of $2.0 million as to any one
ceding company program for treaty business and a maximum of $3.3 million and
$1.1 million per risk for facultative property and facultative casualty
business, respectively.
SCOR Re purchases coverage against the accumulation of losses resulting from
a single catastrophic event. As with most reinsurers, SCOR Re retains a share of
its catastrophe exposures. In 1995, SCOR Re has general catastrophe
retrocessional coverage, which covers property exposures only, for generally 78%
of $48 million in excess of $20 million per occurrence. The Company also has
underlying coverage for $15 million in excess of $5 million per occurrence after
a $5 million deductible. Parent participates in SCOR Re's 1995 general
catastrophe retrocessional program for a total limit of approximately $13.7
million.
Pursuant to a Net Aggregate Excess of Loss Retrocessional Agreement dated as
of July 1, 1986 ("1986 Retrocessional Agreement"), Parent reinsured SCOR Re for
adverse loss development from pre-1986 business that exceeded the total of loss
reserves established as of June 30, 1986 and premiums earned after June 30, 1986
from such pre-1986 business. The 1986 Retrocessional Agreement provided
protection to the Company for business underwritten by SCOR Re only and did not
provide coverage for pre-1986 business underwritten by any other subsidiary.
However, business underwritten by General Security and Unity Fire is protected
against adverse development by a separate net aggregate excess of loss
retrocessional agreement, as described below. The 1986 Retrocessional Agreement
terminated on December 31, 1993, at which time, Parent's
45
<PAGE>
liability to SCOR Re was $16.2 million. This amount is the actuarially
determined expected ultimate loss from the pre-1986 business in excess of the
"aggregate deductible" (which is defined as the total of net outstanding loss
and loss expense reserves, net incurred but not reported ("IBNR") loss reserves
and net unearned premium reserves established as of June 30, 1986 for the
pre-1986 business, plus all net premiums and future net premium adjustments
earned after June 30, 1986 under retrospectively rated treaties for such
business). During the first quarter of 1994, SCOR Re received $16.2 million from
Parent in settlement of its liability under this agreement.
Given the remaining uncertainty of the ultimate liability of certain
exposures underwritten in the pre-1986 SCOR Re business, SCOR Re and Parent
entered into a new Net Aggregate Excess of Loss Agreement ("the 1994
Retrocessional Agreement") effective January 1, 1994, which protects the same
business covered under the 1986 Retrocessional Agreement. Under this Agreement,
SCOR Re is responsible for any further adverse development up to $8.8 million
beyond the $16.2 million of adverse development recognized under the 1986
Retrocessional Agreement, at which point (the "attachment point") the 1994
Retrocessional Agreement attaches and provides coverage for up to $10 million of
any additional adverse development. Because the losses related to the 1986
Retrocessional Agreement settlements have not yet been paid, the Company earns
interest on the funds received. Based on the Company's assumption of the
expected payment pattern of these reserves, the Company expects that such
investment income would at least equal any adverse development below the
attachment point. SCOR Re paid a premium of $2 million for this coverage, which
expires on December 31, 2004. At December 31, 1994, no recovery was recognized
under the 1994 Retrocessional Agreement. In addition, based on the Agreement's
experience, SCOR Re is eligible to receive a contingent commission of up to
27.75% of the premium.
SCOR Re is a party to two additional retrocession agreements providing for
significant premium payments to Parent. First, pursuant to the Catastrophe
Excess of Loss Reinsurance Contract for the 1994 year, SCOR Re paid Parent a
premium for that year of $3,797,984 for the coverage specified under that
reinsurance contract in respect of losses under policies covering treaty and
facultative reinsurance assumed by SCOR Re resulting from certain property
exposures. Losses arising out of the Northridge earthquake resulted in the
reinstatement of coverage under the contract for an additional premium from SCOR
Re to Parent of approximately $3.5 million. Second, pursuant to the Catastrophe
Excess of Loss Reinsurance Contract for the 1995 year, SCOR Re is required to
pay to each of Parent and one of its affiliates, SCOR Reassurance, by way of
quarterly installments, a premium of $2,041,110 for that year for the coverage
to be provided by each of them as specified under that reinsurance contract in
respect of losses under policies covering treaty and facultative reinsurance
assumed by SCOR Re resulting from certain property exposures.
Parent entered into a Net Aggregate Excess of Loss Retrocessional Agreement
with each of Unity Fire and General Security, pursuant to which Parent agreed to
reinsure those companies to the extent that their net ultimate incurred losses
(as defined in the agreements) arising in 1989 and prior accident years exceed
an aggregate deductible. As a result of the above-described assumption by
General Security of the rights, liabilities and obligations of Unity Fire, the
Net Aggregate Excess of Loss Retrocessional Agreement with Unity Fire was
terminated and the Net Aggregate Excess of Loss Retrocessional Agreement with
General Security was amended (as so amended, the "Agreement") to include the
protection formerly provided to Unity Fire by its retrocessional agreement with
Parent. As a result of the merger of General Security into SCOR Re, the
protection under the Agreement is now for the benefit of SCOR Re. The aggregate
deductible is defined as the sum of net outstanding loss and loss expense
reserves and net IBNR loss reserves as of December 31, 1989, for 1989 and prior
accident years, as documented in the 1989 statutory financial statements of
Unity Fire and General Security. This amount has been established at a combined
46
<PAGE>
aggregate of $93.8 million. The annual premium for this protection is $210,000
through 2004. The Agreement continues in force until all covered losses are
settled. At December 31, 1994, Parent's estimated liability to SCOR Re under the
Agreement was approximately $11.7 million.
The retrocession of risks underwritten by a reinsurer does not legally
discharge it from liability for any part of the risk retroceded. Accordingly,
the Operating Subsidiaries would be required to pay the full amount of the loss
associated with the reinsured risk if for any reason Parent or any other
retrocessionaire was unable or failed to meet its reinsurance obligations.
Generally, under the New York Insurance Law, retrocessionaires which are not
licensed or otherwise authorized reinsurers in New York must provide letters of
credit or other permitted assets to secure their obligations to the ceding
reinsurer (based on the ceding reinsurer's current estimate of the ceded
liability) in order for the ceding reinsurer to take credit on its statutory
financial statements for the reinsurance ceded. This security can be applied by
the ceding reinsurer toward discharging its own liability in the event of a
default by the retrocessionaire. At December 31, 1994, the amount of estimated
liability for which retrocessionaires were liable to the Operating Subsidiaries
was approximately $265.7 million, of which approximately $215.2 million was
secured by letters of credit in favor of, or funds held by, the Operating
Subsidiaries. Additionally, an amount of $37.6 million represents the liability
on reinsurance ceded to New York licensed or authorized reinsurance companies,
which are not required to provide additional security in order for the ceding
reinsurer to take credit for the reinsurance ceded. The amounts of estimated
liability recoverable from retrocessionaires at December 31, 1993 and 1992 were
approximately $285.1 million and $289.2 million, respectively. The Operating
Subsidiaries' exposure to amounts deemed unrecoverable from retrocessionaires
has been limited and to the extent it has been exposed, paid losses, outstanding
losses and incurred but not reported losses recoverable from retrocessionaires
which are determined to be uncollectible are charged to operations.
(ii) Reinsurance: The Company's operating subsidiaries assume reinsurance
from Parent and other affiliated companies primarily on a quota share or surplus
share basis. Written premiums assumed from these companies (and the percentage
of gross written premiums) were approximately $7,845,000 (2.6%), $8,375,000
(2.5%) and $6,699,000 (2.2%) for the years ended December 31, 1994, 1993 and
1992, respectively. Of these amounts, approximately $6,959,000, $7,925,000 and
$6,278,000 for 1994, 1993 and 1992, respectively, were assumed from Parent.
The Company's operating subsidiaries also retrocede reinsurance to Parent
and other affiliated companies, primarily on a quota share or surplus share
basis.
For the years ended December 31, 1994, 1993 and 1992 the percentage of
assumed premiums written to net premiums written was 126.9%, 131.4% and 145.9%,
respectively.
Reinsurance does not discharge or diminish the primary liability to insureds
of the Company on risks reinsured; however, it does permit the Company to
recover the applicable portion of any loss from its retrocessionaires.
Retrocessionaires of the Company are subject to an initial review of financial
condition before final acceptability is confirmed and subsequent reviews on an
annual basis.
Parent provides letters of credit in favor of the Company's Operating
Subsidiaries in amounts equal to its estimated liability under its reinsurance
agreements with such companies (as re-estimated on a quarterly basis). The
amount of letters of credit provided by Parent at December 31, 1994 was
approximately $134,500,000.
(iii) SCOR Re Voting Trust: The New York Insurance Law prohibits (with
certain exceptions) the issuance of a license to a company that is owned or
financially controlled in whole or in part by a government, unless an insurer
was so owned or financially controlled prior to the effective date of
47
<PAGE>
such statute. Unity Fire was so owned or financially controlled prior to such
effective date. Because Parent, the controlling stockholder of the Company, was
indirectly partially owned by certain French insurance companies which were
majority owned by the French Government, the Company, in 1984, to permit SCOR Re
to obtain a New York insurance license, established a voting trust for its
holdings of capital stock of SCOR Re. The voting trust was irrevocable for a
period of ten years (through June 6, 1994), unless SCOR Re's New York license
was withdrawn. In 1994, in order for SCOR Re to retain its New York license and
obtain a California insurance license, the voting trust was renewed for an
additional period of three years.
The five voting trustees under the voting trust possess and are entitled to
exercise all the rights and powers of absolute owners of the capital stock of
SCOR Re, except to pass any voting right or ownership interest to others.
Decisions of the voting trustees may be made by majority vote, provided that
such majority consists of at least two voting trustees who are not officers,
directors or stockholders of the Purchasers. The voting trustees are required to
forward any dividends paid by SCOR Re to the Company as the registered holder of
the voting trust certificates evidencing beneficial ownership of SCOR Re's
stock. Transfers of voting trust certificates may only be made by the registered
holder thereof. The current voting trustees are as follows: Patrick Peugeot,
Jacques P. Blondeau, Allan M. Chapin, Michel J. Gudefin, and David J. Sherwood.
All of the voting trustees are directors of the Company with the exception of
Mr. Chapin, who is a partner of Sullivan & Cromwell, legal counsel to Parent.
Although there can be no assurances as to the actions the voting trustees
may or may not take in the future, since the establishment of the voting trust
in June 1984, the actions of the voting trustees have been limited primarily to
the election of directors of SCOR Re.
(iv) Credit Agreement: In 1995, the Company established a $20 million credit
agreement with Parent, the proceeds of which are restricted to the repurchase of
the Debentures in the market or the repayment of any debt incurred to repurchase
Debentures. In addition, Parent may provide the funds or arrange financing
necessary for the Company to satisfy its obligation to repurchase Debentures in
accordance with the terms of the Indenture
(v) Loan Agreement: In 1995, the Company has established a $20 million loan
agreement with Parent, the proceeds of which are restricted to the repayment of,
or the repayment of indebtedness incurred in respect of the repayment of a bank
financing obtained by the Company. In October 1995, the Company borrowed $20
million under this loan agreement
(vi) Software: The Company has agreed in principle with Parent for the
purchase by Parent of the Company's New Treaty System ("NTS"), at a purchase
price of $1.5 million. To date, the Company has expended approximately $10.2
million in researching, developing and implementing NTS.
In January 1992, the Company acquired 19.8% of the stock of Commercial Risk,
a Bermuda holding company for two insurance subsidiaries. The purchase price was
approximately $9.9 million. As a result of a recapitalization of Commercial Risk
in 1994, the Company currently owns approximately 12.87% of the outstanding
stock of Commercial Risk. Parent owns approximately 52.27% of the outstanding
stock of Commercial Risk.
48
<PAGE>
11. THE MERGER AGREEMENT; APPRAISAL RIGHTS; EFFECT ON THE DEBENTURES.
The Merger. The Merger Agreement provides that, promptly after the purchase
of Shares pursuant to the Offer and the receipt of any required approval of the
Merger Agreement by the Company's stockholders and the satisfaction or waiver of
certain other conditions, the Purchaser will be merged into the Company. Because
Parent currently owns a majority of the outstanding Shares, parent will have the
vote necessary under Delaware law to approve the Merger. Under Delaware law, if
the Purchaser owns at least 90% of the outstanding Shares, which would be the
case if the Minimum Tender Condition is satisfied, the Merger may be effected
without the vote of the Company's stockholders. Following consummation of the
Merger, the Company will continue as the surviving corporation in the Merger
(the "Surviving Corporation") and will become a wholly owned subsidiary of
Parent.
At the Effective Time, each Share outstanding immediately prior to the
Effective Time (other than Shares owned by Parent, the Purchaser, the Company or
any direct or indirect subsidiary of Parent or the Company or Shares
("Dissenting Shares") held by stockholders of the Company who have properly
exercised their appraisal rights in accordance with Section 262 of the DGCL)
will be converted into the right to receive, without interest, an amount in cash
(the "Merger Consideration") equal to the Offer Price.
At the Effective Time each share of common stock, par value $1.00 per share,
of Purchaser, issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of Purchaser
or the holders of such shares, be converted into one share of common stock of
the Surviving Corporation.
The Merger Agreement provides that the Dissenting Shares will not be
converted into or represent the right to receive the Merger Consideration.
Holders of such Shares will be entitled to receive payment of the "fair value"
of such Shares held by them in accordance with the provisions of Section 262 of
the DGCL, except that all Dissenting Shares held by stockholders who fail to
perfect or who effectively withdraw or lose their rights to dissent will
thereupon be deemed to have been converted into, as of the Effective Time, the
right to receive, without any interest thereon, the Merger Consideration, upon
surrender of the certificate or certificates that formerly evidenced such
Shares.
The Merger Agreement contemplates that the certificate of incorporation of
the Surviving Corporation, which will be the Restated Certificate of
Incorporation of the Company, shall be amended to provide that the authorized
capital of the Surviving Corporation shall be 1,000 shares of common stock, par
value $.01 per share.
The Merger Agreement provides that Purchaser shall make available or cause
to be made available to the paying agent appointed by Purchaser with the
Company's prior approval (the "Paying Agent") amounts sufficient in the
aggregate to provide all funds necessary for the Paying Agent to make payments
described above to holders of Shares issued and outstanding immediately prior to
the Effective Time. Promptly after the Effective Time, the Paying Agent shall,
pursuant to irrevocable instructions, make the payments provided for in the
preceding sentence out of the funds deposited with the Paying Agent for such
purpose. One hundred and eighty days following the Effective Time, the Surviving
Corporation shall be entitled to cause the Paying Agent to deliver to it any
funds (including any interest received with respect thereto) made available to
the Paying Agent which have not been disbursed to holders of certificates
formerly representing Shares outstanding at the Effective Time, and thereafter
such holders shall be entitled to look to the Surviving Corporation only as
general creditors thereof with respect to the cash payable under due surrender
of their certificates. The Surviving Corporation shall pay all charges and
expenses, including those of the Paying Agent, in connection with the exchange
of cash for Shares and Purchaser shall reimburse the Surviving Corporation for
such charges and expenses.
49
<PAGE>
Conditions to Certain Obligations. The obligations of the Company, the
Purchaser and Parent to effect the Merger are subject to the satisfaction of
certain conditions set forth in the Merger Agreement, including (i) the purchase
by the Purchaser (or one or more affiliates of the Purchaser) of Shares pursuant
to the Offer, (ii) to the extent required by applicable law, the receipt of
stockholder approval of the Merger and the Merger Agreement and (iii) there
being no statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) enacted, issued, promulgated,
enforced or entered by any governmental, regulatory or administrative authority,
agency, tribunal commission or other entity, domestic, international or foreign,
including any state insurance governmental or regulatory body and
non-governmental self-regulatory organization (a "Governmental Entity"), or any
court which is in effect and prohibits consummation of the Merger.
Termination. According to its terms, the Merger Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after any approval by the stockholders of the Company, by the mutual
consent of Parent and the Company, by action of their respective Boards and
Directors. In addition, the Merger Agreement may be terminated by action of the
Board of Directors of either Parent or the Company if (i) the Purchaser shall
have terminated the Offer without purchasing any Shares pursuant thereto;
provided, in the case of termination of the Merger Agreement by Parent, such
termination of the Offer is not in violation of the terms of the Offer or (ii)
without fault of the terminating party, the Merger shall not have been
consummated by March 31, 1996, whether or not such date is before or after any
approval by the stockholders of the Company of the Merger and the Merger
Agreement. The Merger Agreement may be terminated by Parent at any time prior to
the Effective Time, whether before or after any approval by the stockholders of
the Company, by the action of the board of directors of the Parent, if (i) the
Company shall have failed to comply in any material respect with any of the
covenants and agreements contained in the Merger Agreement to be complied with
or performed by the Company at or prior to such date of termination or (ii) the
Board of Directors of the Company or those directors of the Company who are not
officers of Parent or the Company or any affiliate of either of them (the
"Independent Directors") shall have withdrawn or modified in a manner adverse to
Parent or the Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger or the Board of Directors of the Company or the
Independent Directors, upon request by Parent, shall fail to reaffirm such
approval or recommendation, or shall have resolved to do any of the foregoing.
The Merger Agreement may be terminated at any time prior to the Effective Time,
before or after any approval by the stockholders of the Company, by action of
the Board of Directors of the Company, if Parent or the Purchaser shall (i) have
failed to comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement to be complied with or performed by Parent or
the Purchaser at or prior to such date of termination or (ii) shall have failed
to commence the Offer within the time required by the Merger Agreement.
Subject to the applicable provisions of the DGCL, the Merger Agreement may
be amended by action taken by the Company, Parent and the Purchaser at any time
prior to the Effective Time.
Certain Covenants of the Parties. The Purchaser has agreed in the Merger
Agreement that it will not, without the prior written consent of the Company,
decrease the price per Share or change the form of consideration payable in the
Offer, decrease the number of Shares sought or change the conditions to the
Offer. Also, the Purchaser shall not terminate or withdraw the Offer or extend
the Expiration Date unless at the Expiration Date the conditions set forth in
"THE OFFER -- 13. Certain Conditions of the Offer" have not been satisfied or
waived.
If the Purchaser or Parent or any direct or indirect subsidiary of Parent
shall have purchased any Shares pursuant to the Offer, the Merger Agreement
provides that the Company shall take all necessary action to enter into a
supplemental indenture prior to the Effective Time with the Trustee (as defined
in the Debentures) pursuant to the Indenture, to provide, among other things,
that on
50
<PAGE>
and after the Effective Time the Debentures will be convertible only into the
right to receive an amount of cash, without interest, equal to the Offer Price.
The Merger Agreement also provides that prior to the Effective Time, the
Company shall take such actions as may be necessary such that at the Effective
Time each stock option outstanding pursuant to the Company Stock and Option
Plans (an "Option"), whether or not then vested, shall be cancelled and only
entitle the holder thereof, upon surrender thereof, to receive an amount in cash
equal to the difference between the Offer Price and the exercise price per Share
of such Option, multiplied by the number of Shares previously subject to such
Option.
The Merger Agreement provides that for six years after the Effective Time,
the Surviving Corporation shall maintain the Company's existing directors' and
officers' liability insurance or equivalent liability insurance ("D&O
Insurance") so long as the annual premium therefor is not in excess of the last
annual premium paid prior to the date of the Merger Agreement (the "Current
Premium"); provided, however, if the existing D&O Insurance expires, is
terminated or canceled during such six-year period, the Surviving Corporation
will use its best efforts to obtain as much D&O Insurance as can be obtained for
the remainder of such period for a premium not in excess (on an annualized
basis) of 200 percent of the Current Premium. In lieu of the insurance
arrangement described above, the Company may, on or before the expiration of the
Offer, enter into alternative insurance arrangements, provided that such
arrangements are approved by the Independent Directors and Parent. The Merger
Agreement also provides that, from and after the Effective Time, Parent and the
Surviving Corporation will indemnify and hold harmless each present and former
director and/or officer of the Company, determined as of the Effective Time (the
"Indemnified Parties") that is made a party or threatened to be made a party to
any threatened, pending or completed, action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she was a director or officer of the Company or any subsidiary of the Company
prior to the Effective Time and arising out of actions or omissions of the
Indemnified Party in any such capacity occurring at or prior to the Effective
Time (a "Claim") against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, amounts paid in settlement pursuant to the provisions
of the Merger Agreement described in the next succeeding paragraph, losses,
claims, damages or liabilities (collectively, "Costs") reasonably incurred in
connection with any Claim, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that the Company would have been permitted
under Delaware law. The Merger Agreement further provides that the Surviving
Corporation and Purchaser shall also advance expenses (including attorneys'
fees), as incurred by the Indemnified Party to the fullest extent permitted
under applicable law provided such Indemnified Party provides an undertaking to
repay such advances if it is ultimately determined that such Indemnified Party
is not entitled to indemnification.
Pursuant to the Merger Agreement, upon learning of any Claim described in
the preceding paragraph, such Indemnified Party shall promptly notify the
Surviving Corporation and Parent thereof. In the event of any such Claim
(whether arising before or after the Effective Time), (i) Parent or the
Surviving Corporation shall have the right to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if Parent or the
Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that the Surviving Corporation and Parent shall be
obligated pursuant to the Merger Agreement (b) to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction unless the use of one
counsel for such Indemnified Parties would present such counsel with a conflict
of interest, (ii) the Indemnified Parties will cooperate in
51
<PAGE>
the defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent; and provided further that
the Surviving Corporation and Parent, respectively, shall not have any
obligation under the Merger Agreement to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that the
indemnification of such Indemnified Party in the manner contemplated by the
Merger Agreement is prohibited by applicable law. If such indemnity is not
available with respect to any Indemnified Party, then the Surviving Corporation
and the Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect relative faults and benefits.
The Merger Agreement further provides that if a claim for indemnification or
advancement under the Merger Agreement is not paid in full by the Surviving
Corporation or Parent within thirty days after a written claim therefor has been
received by the Surviving Corporation or Parent, the Indemnified Party may any
time thereafter bring suit against the Surviving Corporation or Purchaser to
recover the unpaid amount of the claim and, if successful in whole or in part,
the Indemnified Party shall be entitled to be paid also the expense of
prosecuting such claims. Under the terms of the Merger Agreement, neither the
failure of the Surviving Corporation or Purchaser (including their Boards of
Directors, independent legal counsel or shareholders) to have made a
determination prior to the commencement of such suit that indemnification of the
Indemnified Party is proper in the circumstances because he or she has met the
applicable standard of conduct, nor an actual determination by the Surviving
Corporation or Parent (including their boards of directors, independent legal
counsel, or shareholders) that the Indemnified Party has not met such applicable
standard of conduct, shall be a defense to the suit or create a presumption that
the Indemnified Party has not met the applicable standard of conduct.
The Merger Agreement also provides that no amendment to the Certificate of
Incorporation or By-laws of the Surviving Corporation shall reduce in any way
the elimination of personal liability of the directors of the Company contained
therein or adversely affect any then existing right of any director or officer
(or former director or officer) to be indemnified with respect to acts,
omissions or events occurring prior to the Effective Time.
In the Merger Agreement, the Company has agreed that its Board of Directors
and a majority of the Independent Directors will recommend acceptance of the
Offer to the Company's stockholders and will file with the Commission
contemporaneously with the commencement of the Offer, and mail to its
stockholders, a Solicitation/Recommendation Statement on Schedule 14D-9
containing the unanimous recommendation of the Company's Board of Directors and
the Independent Directors that the Company's stockholders accept the Offer. The
Merger Agreement also provides that if the Company's Board of Directors
determines that its fiduciary duties require it to amend or withdraw its
recommendation, such amendment or withdrawal shall not constitute a breach of
the Merger Agreement.
The Merger Agreement also contains certain other restrictions as to the
conduct of business by the Company pending the Merger, as well as
representations and warranties of each of the parties customary in transactions
of this kind.
The foregoing description of the Merger Agreement is qualified in its
entirety by reference to the text of the Merger Agreement, a copy of which has
been filed as an exhibit to the Schedule 14D-1 and to the Schedule 13E-3 and may
be obtained in the manner described in "THE OFFER -- 8. Certain Information
Concerning the Company". The foregoing description of the Merger Agreement is
qualified in its entirety by reference to that document.
If the Minimum Tender Condition is satisfied, Parent directly or indirectly
will hold 90% or more of the outstanding Shares, and Parent intends to
contribute its Shares to the Purchaser and cause the Purchaser to effect the
Merger without a vote of the Company's stockholders pursuant to the
52
<PAGE>
"short-form" merger provisions of the DGCL. As the Purchaser already owns
14,547,756 of the 18,170,971 total outstanding Shares, assuming no additional
Shares are issued after November 2, 1995, the Purchaser will need to purchase
pursuant to its Offer a minimum of 1,806,118 of the Shares in order to satisfy
the Minimum Tender Condition. However, if the Purchaser were to waive the
Minimum Tender Condition, resulting in the Purchaser and Parent holding less
than 90% of the outstanding Shares, then the Merger would have to be approved by
the Company's Board of Directors and by the Company's stockholders. Under the
DGCL, the vote of the holders of a majority of the outstanding Shares would be
required to approve the Merger under such circumstances. Since Parent currently
owns more than a majority of the outstanding Shares, Parent will have sufficient
voting power to approve the Merger without the affirmative vote of any other
stockholders of the Company, and Parent intends to do so.
APPRAISAL RIGHTS. Holders of Shares do not have appraisal rights as a result
of the Offer. After the Offer is consummated, the Purchaser anticipates that the
Shares will cease to be listed or traded on the NYSE. In connection with the
Merger, even if the Merger is consummated pursuant to the short-form merger
provisions discussed above, holders of the Shares will have certain rights under
the DGCL to dissent and demand appraisal of, and payment in cash for the fair
value of, their Shares. Such rights, if the statutory procedures are complied
with, could lead to a judicial determination of the fair value (excluding any
element of value arising from accomplishment or expectation of the Merger)
required to be paid in cash, plus a payment in cash of a fair rate of interest
from the date of consummation of the Merger, to such dissenting holders for
their Shares. Any such judicial determination of the fair value of Shares would
take into account all relevant factors and could, accordingly, be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares, asset values, earning capacity and
the investment value of the Shares. The value so determined could be more or
less than the purchase price per Share pursuant to the Offer or the
consideration per Share to be paid in the Merger. The costs of appraisal
litigation (including fees of counsel and experts retained by the parties) will
be taxed upon the parties, or either of them, in such manner as appears
equitable to the court. See "SCHEDULE II -- Appraisal Rights of Dissenting
Stockholders under Delaware Law" attached hereto for a summary of appraisal
rights under the DGCL.
The Purchaser does not intend to object, assuming the proper procedures are
followed, to the exercise by any other stockholder of such stockholder's
appraisal rights and who demands appraisal of, and payment in cash for the fair
value of, such stockholder's Shares, even if the Shares are not delisted prior
to the consummation of the Merger. However, Parent intends to cause the Company,
as the surviving corporation in the Merger, to argue in any appraisal proceeding
that, for the purposes of such a proceeding, the fair value of the Shares is
less than the price paid in the Offer and the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF DELAWARE LAW.
Effect on the Debentures. Under the terms of the Indenture, in the event of
a Repurchase Event (which would occur in the event that Parent directly or
indirectly owns, after giving effect to the purchase of Shares pursuant to the
Offer or the acquisition of Shares pursuant to the Merger, in excess of 90% of
the outstanding Shares), the holders of the Debentures shall have the right to
require the Company to repurchase the Debentures at a repurchase price equal to
100% of the principal amount thereof together with accrued and unpaid interest
to the date of such repurchase (the "Repurchase Price"), which date shall be 45
days after the date on which the Company notifies the holders of the Debentures
of such Repurchase Event. In addition, in the event the Merger is consummated,
the holders of the Debentures will be entitled to convert the Debentures
53
<PAGE>
into the right to receive the consideration receivable upon the Merger by a
holder of the number of Shares into which such Debentures could have been
converted immediately prior to the Merger. In light of the current conversion
price at which the Debentures may be converted into Shares, holders of
Debentures would receive a greater cash amount in the event they elected to
require the Company to repurchase their Debentures at the Repurchase Price than
they would if they elected to convert their Debentures into the right to receive
the merger consideration in respect of the Shares into which such Debentures
could have been converted immediately prior to the Merger. Therefore, the
Purchaser expects that substantially all of the holders of the Debentures would
elect to require the Company to repurchase their Debentures at the Repurchase
Price.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued substantially as they are currently
being conducted.
12. SOURCE AND AMOUNT OF FUNDS.
The Purchaser estimates that the total amount of funds required to purchase
100% of the outstanding Shares pursuant to the Offer and the Merger and to pay
related fees and expenses will be approximately $61,500,000. See "THE
OFFER -- 16. Fees and Expenses" for additional information as to the fees and
expenses payable by the Purchaser. The Purchaser will obtain these funds as
capital contributions from Parent's existing working capital.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser shall not be
obligated to accept for payment any Shares or, subject to any applicable rules
and regulations of the Commission, including Rule 14e-1(c) (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or payment for, any tendered Shares unless the Minimum Tender
Condition shall have been satisfied or waived or, if on or after November 2,
1995, and at or before the time of payment for any of such Shares (whether or
not any Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any of the following events shall occur:
(a) there shall be any statute, rule, regulation, judgment, injunction
or other order, enacted, promulgated, entered, enforced or deemed applicable
to the Offer or the Merger or any other action shall have been taken by any
Governmental Entity, or any other person, domestic, supranational or foreign
(i) challenging the legality of the acquisition by the Purchaser of the
Shares; (ii) restraining, delaying or prohibiting the making or consummation
of the Offer or the Merger or obtaining from the Company, Parent or the
Purchaser any damages in connection therewith; (iii) relating to assets of,
or prohibiting or limiting the ownership or operation by Parent or the
Purchaser of all or any portion of the business or assets of, the Company,
Parent or the Purchaser (including the business or assets of their
respective affiliates and subsidiaries) or imposing any limitation on the
ability of Parent or the Purchaser to conduct such business or own such
assets; (iv) imposing limitations on the ability of Parent or the Purchaser
(or any affiliate of Parent or the Purchaser) to acquire or hold or to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by them on all matters
properly presented to the stockholders of the Company or (v) having a
substantial likelihood of any of the foregoing;
(b) there shall have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on any national
securities exchange or in the over-the-counter market in the United States
or France or (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or France (whether or not
mandatory);
54
<PAGE>
(c) the Company shall have breached or failed to perform in any material
respect any of its covenants, obligations or agreements under the Merger
Agreement or any representation or warranty of the Company set forth in the
Merger Agreement shall have been inaccurate or incomplete in any material
respect when made or thereafter shall become inaccurate or incomplete in any
material respect;
(d) any change, including, without limitation, any change arising out of
or related to any natural disaster (including hurricanes and earthquakes),
shall have occurred or been threatened or become known (or any condition,
event or development shall have occurred or been threatened or become known
involving a prospective change) in the business, properties, assets,
liabilities, condition (financial or otherwise), or results of operations of
the Company or any of its subsidiaries that could reasonably be expected to
be materially adverse to the Company and its subsidiaries taken as a whole;
(e) all consents, registrations, approvals, permits, authorizations,
notices, reports or other filings required to be made or obtained by the
Company, Parent, the Purchaser or any stockholder of Parent with or from any
Governmental Entity in connection with the Offer and the Merger shall not
have been made or obtained except where the failure to make or to obtain, as
the case may be, such consents, registrations, approvals, permits,
authorizations, notices, reports or other filings could not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, business or results of
operations of the Company and its subsidiaries taken as a whole;
(f) the Special Committee shall have adversely amended or modified or
shall have withdrawn its recommendation of the Offer or the Merger, or shall
have failed to publicly reconfirm such recommendation upon request by Parent
or the Purchaser, or shall have resolved to do any of the foregoing; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms or the Purchaser shall have reached an agreement or understanding
with the Special Committee providing for termination of the Offer
which, in the reasonable judgment of the Purchaser with respect to each and
every matter referred to above, and regardless of the circumstances (including
any action or inaction by the Purchaser, Parent or any affiliate of Parent)
giving rise to any such condition, makes it inadvisable to proceed with the
Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances (including any
action or inaction by the Purchaser, Parent or any affiliate of Parent) giving
rise to any such conditions or may be waived by the Purchaser in whole or in
part at any time and from time to time in its sole discretion. The failure by
the Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
by the Purchaser concerning the events described above will be final and binding
on all holders of the Shares.
14. DIVIDENDS AND DISTRIBUTIONS.
If, on or after the date hereof, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire Shares or
otherwise cause a reduction in the number of outstanding Shares, (c) issue or
sell additional Shares (other than the issuance of Shares reserved for issuance
as of the date of this Offer to Purchase under employee stock option and
restricted stock option plans in accordance with their terms, in effect and
publicly disclosed as of the date of this Offer to Purchase), shares of any
other class of capital stock, other voting securities or any
55
<PAGE>
securities convertible into or exchangeable for, or rights, warrants or options,
conditional or otherwise, to acquire, any of the foregoing or (d) disclose that
it has taken any such action, then without prejudice to the Purchaser's rights
under the provisions of "THE OFFER -- 13. Certain Conditions of the Offer", the
Purchaser, in its sole discretion, may make such adjustments as it deems
appropriate in the Offer and Merger consideration and other terms of the Offer
and Merger, including, without limitation, the number or type of securities
offered to be purchased.
If, on or after the date hereof, the Company should declare or pay any cash
dividend on the Shares or make any other distribution on the Shares (other than
regular quarterly cash dividends on the Shares), or issue with respect to the
Shares any additional Shares, shares of any other class of capital stock, other
voting securities or any securities convertible into, or rights, warrants or
options, conditional or otherwise, to acquire, any of the foregoing, payable or
distributable to stockholders of record on a date prior to the transfer of the
Shares purchased pursuant to the Offer to the name of the Purchaser or its
nominees or transferees on the Company's stock transfer records, then, subject
to the provisions of "THE OFFER -- 13. Certain Conditions of the Offer" below,
(a) the price payable by the Purchaser pursuant to the Offer and Merger may, in
the sole discretion of the Purchaser, be reduced by the amount of any such cash
dividend or distribution and (b) the whole of any such non-cash dividend,
distribution or issuance to be received by the tendering stockholders will (i)
be received and held by the tendering stockholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution, issuance proceeds or rights and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
Cash dividends of the Company's reinsurance subsidiaries may be paid only
out of their statutory earned surplus. For the Operating Subsidiaries domiciled
in New York (which, at December 31, 1994, represented approximately 89% of the
Company's statutory surplus), the payment of dividends is subject to statutory
restrictions imposed by New York insurance law. Generally, the maximum amount of
dividends that may be paid in any twelve month period without the prior approval
of the relevant authorities is the lesser of net investment income and 10% of
statutory surplus, as such terms are defined for the purposes of New York
insurance law.
15. CERTAIN LEGAL MATTERS.
GENERAL. Except as otherwise disclosed herein, based upon an examination of
publicly available filings with respect to the Company, neither the Purchaser
nor Parent is aware of any licenses or other regulatory permits which appear to
be material to the business of the Company and which might be adversely affected
by the acquisition of Shares by the Purchaser pursuant to the Offer or by the
Merger or of any approval or other action by any governmental, administrative or
regulatory agency or authority which would be required for the acquisition or
ownership of Shares by the Purchaser pursuant to the Offer or by the Merger.
Should any such approval or other action be required, it is currently
contemplated that such approval or action would be sought or taken. There can be
no assurance that any such approval or action, if needed, would be obtained or,
if obtained, that it will be obtained without substantial conditions or that
adverse consequences might not result to the Company's, Parent's or Purchaser's
business or that certain parts of the Company's, Parent's or Purchaser's
business might not have to be disposed of in the event that such approvals were
not obtained or such other actions were not taken, any of which could cause the
Purchaser to elect to terminate the Offer without the purchase of the Shares
thereunder. The
56
<PAGE>
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See "THE OFFER -- 13. Certain Conditions of
the Offer".
STATE TAKEOVER LAWS. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. In Edgar v.
MITE Corporation, the Supreme Court of the United States held that the Illinois
Business Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS Corporation v. Dynamics Corporation of America, the
Supreme Court held that as a matter of corporate law, and in particular, those
laws concerning corporate governance, a state may constitutionally disqualify an
acquiror of "Control Shares" (ones representing ownership in excess of certain
voting power thresholds e.g. 20%, 33 1/3% or 50%) of a corporation incorporated
in its state and meeting certain other jurisdictional requirements from
exercising voting power with respect to those shares without the approval of a
majority of the disinterested stockholders.
The Purchaser has not currently complied with any state takeover laws. The
Purchaser reserves the right to challenge the applicability or validity of any
state law purportedly applicable to the Offer or the Merger and nothing in this
Offer to Purchase or any action taken in connection with the Offer or the Merger
is intended as a waiver of such right. If it is asserted that one or more state
takeover laws applies to the Offer or the Merger and it is not determined by an
appropriate court that such act or acts do not apply or are invalid as applied
to the Offer or the Merger, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchaser might be unable to accept for payment any
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer
or the Merger. In such case, the Purchaser may not be obligated to accept for
payment any Shares tendered.
INSURANCE REGULATORY REQUIREMENTS AND APPROVALS. The Company's Operating
Subsidiaries are domiciled or "commercially domiciled" for insurance regulatory
purposes in the States of New York, Maryland and California and are accordingly
subject to the insurance laws and regulations of such states. The Company also
has an indirect minority interest in a reinsurance company domiciled in the
State of Vermont (together with New York, Maryland and California, the
"Domiciliary States"). Under the insurance laws and regulations of the
Domiciliary States, transactions involving the acquisition of control of a
domestic insurer, as well as certain transactions involving an insurance holding
company such as the Company, are generally subject to the prior approval of
insurance regulators in each such state. In particular, the acquisition of
outstanding Shares of the Company sufficient to satisfy the Minimum Tender
Condition, as well as the consummation of the Merger, may be subject to such
prior approvals. In light of the fact that Parent already owns approximately 80%
of the Company's outstanding common stock and accordingly already "controls" the
Company and its insurance company Subsidiaries for purposes of applicable
insurance laws. However, Parent has sought confirmation from insurance
regulators in the Domiciliary States to the effect that no additional insurance
regulatory filings, notifications or approvals would be required in connection
with the acquisition of additional Shares or the consummation of the Merger.
Based on discussions with such regulators to date, Parent believes that no such
filings, notifications or approvals will be required, although there can be no
assurances in this regard.
CERTAIN LITIGATION. Between September 27 and October 2, 1995 the following
actions (the "Underlying Actions") were commenced in the Court of Chancery of
the State of Delaware in and for New Castle County (the "Court"):
Howard Sande Feldman, Custodian for Jan
Sharona Feldman, UGMA v. Jacques P.
Blandeau [sic], et al.,
C.A. No. 14577
57
<PAGE>
Crandon Capital Partners v. Jacques P.
Blondeau, et al.,
C.A. No. 14579
Daniel Bruno v. Scor U.S. Corporation,
et al., C.A. No. 14582
Jay Baxt v. Jacques P. Blandeau [sic],
et al.,
C.A. No. 14585
Kalter and Kaplan Profit Sharing Plan--
Keogh F/B/O Ivan Kalter v. Jacques
P. Blondeau, et al.,
C.A. No. 14589.
The complaints in the Underlying Actions alleged, among other things, (i)
Parent's proposal was the product of unfair dealing inasmuch as defendants
possess non-public information concerning the financial condition and prospects
of the Company, (ii) Parent's proposed offer price of $14.00 cash per Share to
be paid to the putative class members was inadequate and unfair, and (iii) the
conduct of defendants constituted self-dealing in violation of their fiduciary
duties to the putative class members.
On October 25, 1995, a motion was served in each of the Underlying Actions,
seeking an order (1) consolidating the Underlying Actions for all purposes, (2)
designating the complaint in action No. 14577 as the complaint in the
Consolidated Action, and (3) designating the law firms of Bernstein Litowitz
Berger & Grossmann; Wechsler Harwood Halebian & Feffer LLP; and Wolf Popper Ross
Wolf & Jones, L.L.P. as plaintiffs' co-lead counsel and the law firms of
Chimicles, Jacobsen & Tikellis and Rosenthal, Monhait, Gross & Goddess, P.A. as
plaintiffs' Delaware co-liaison counsel.
Copies of the complaints filed in the Underlying Actions are filed as
exhibits to the Schedule 14D-1 and the Schedule 13E-3, may be obtained in the
manner described in "THE OFFER -- 8. Certain Information Concerning the Company"
and are incorporated herein by reference.
The foregoing description of the action is qualified in its entirety by
reference to such exhibit.
On November 1, 1995, representatives of counsel to the plaintiffs in the
shareholder actions agreed with representatives of Parent's United States legal
counsel that they were prepared to negotiate a setlement if a price per Share of
$15.25 were offered to the Company's stockholders.
An agreement in principle has been reached with plaintiffs' counsel to
settle the litigation based on Purchaser's increase of the Offer Price to
$15.25. This settlement is subject to approval of the Court and confirmatory
discovery.
The defendants have denied, and continue to deny, that they have committed
or have threatened to commit any violation of law or breaches of duty to the
plaintiffs or the putative class. The defendants have agreed to the proposed
settlement because such settlement would eliminate the burden and expense of
further litigation and would facilitate the consummation of a transaction that
they believe to be in the best interests of the Company and its stockholders.
16. FEES AND EXPENSES.
Goldman, Sachs & Co. are acting as Dealer Managers in connection with the
Offer and Goldman Sachs has provided certain financial advisory services to
Parent in connection with the Offer and the Merger. Neither Parent nor the
Purchaser is paying the Dealer Managers a solicitation fee for acting as Dealer
Managers.
58
<PAGE>
Pursuant to a letter agreement dated September 22, 1995 (the "Engagement
Letter"), Parent engaged Goldman Sachs to act as its financial advisor in
connection with the possible acquisition of the outstanding Shares not currently
beneficially owned directly or indirectly by Parent. Pursuant to the terms of
the Engagement Letter, Parent has agreed to pay Goldman Sachs a fee of $540,000
upon execution of the Engagement Letter and, if at least 90% of the outstanding
Shares, including the Shares currently beneficially owned directly or indirectly
by Parent, are acquired by Parent in one or more transactions, a transaction fee
of $900,000, less any fees already paid pursuant to the Engagement Letter.
Parent has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorney's fees and disbursements, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
The Purchaser and Parent have agreed to reimburse the Dealer Managers for
their reasonable out-of-pocket expenses, including the fees and expenses of its
counsel, for acting as Dealer Managers, and have agreed to indemnify the Dealer
Managers against certain liabilities and expenses in connection with acting as
Dealer Managers, including liabilities under the federal securities laws.
Goldman Sachs and the Dealer Managers, as part of their investment banking
businesses, are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. In selecting Goldman Sachs as its financial advisor
(including Goldman, Sachs & Co. as Dealer Managers), Parent considered primarily
the reputation of Goldman Sachs and its affiliates as an internationally
recognized investment banking firm that has substantial experience in
transactions similar to the Merger.
In addition to acting as financial advisor to Parent in connection with the
Offer and the Merger, Goldman Sachs and the Dealer Managers have provided
certain investment banking services to the Company and Parent from time to time,
including the Dealer Managers having acted as financial advisor to the Company
in connection with its acquisition of Rockleigh in 1990, acting as dealer in the
Company's commercial paper program since 1991 and having acted as lead manager
in the placement of the Debentures in 1993, and may provide investment banking
services to the Company, the Purchaser and/or Parent in the future.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of the Company and/or Parent for its own account and for the account
of customers. As of the date hereof, Goldman Sachs holds for its own account
$90,000 in principal amount of the Debentures.
The Purchaser has also retained D.F. King & Co., Inc. to act as the
Information Agent in connection with the Offer and the Merger. The Information
Agent may contact holders of Shares by mail, telephone, telex, telegraph and
personal interviews and may request brokers, dealers and other nominee
stockholders to forward materials relating to the Offer and the Merger to
beneficial owners of Shares. The Information Agent will receive $7,000 for such
services, plus, in the event the Purchaser extends the term of the Offer, an
additional fee of $1,000 for each such extension, plus reimbursement of
out-of-pocket expenses and the Purchaser will indemnify the Information Agent
against certain liabilities and expenses in connection with the Offer and the
Merger, including liabilities under the federal securities laws.
The Purchaser will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer and the Merger, plus reimbursement
for out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. Brokers, dealers, commercial
59
<PAGE>
banks and trust companies will be reimbursed by the Purchaser for customary
mailing and handling expenses incurred by them in forwarding material to their
customers.
In addition to the fees set forth above, the Purchaser has paid, or will be
responsible for paying, the following fees and expenses: filing fees $14,000;
legal fees and expenses $250,000; and printing and miscellaneous $175,000.
17. MISCELLANEOUS.
The Offer is made solely by the Offer to Purchase and the Letter of
Transmittal and any amendments or supplements thereto. The Purchaser is not
aware of any state where the making of the Offer is prohibited by the
administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of the Shares pursuant thereto, the Purchaser will make
a good faith effort to comply with such statute. If, after such good faith
effort, the Purchaser cannot comply with such statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state.
To the extent the Purchaser becomes aware of any law that would limit the
class of offerees in the Offer, the Purchaser will amend the Offer and,
depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to holders of Shares prior to
the expiration of the Offer.
In those jurisdictions where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Purchaser by the Dealer Managers or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
The Purchaser has filed with the Commission a Schedule 14D-1, together with
exhibits, pursuant to Rule 14d-3 under the Exchange Act and a Schedule 13E-3,
together with exhibits, pursuant to Rule 13e-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such
Schedules and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the Commission in the manner set forth in "THE
OFFER -- 8. Certain Information Concerning the Company" (except that they will
not be available at the regional offices of the Commission).
SCOR Merger Sub Corporation
November 9, 1995.
60
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent and the
Purchaser. Each such person is a citizen of France, unless otherwise indicated.
Unless otherwise indicated, the address of each such person is Immeuble SCOR, 1,
Avenue du President Wilson, Puteaux, 92074 Paris La Defense Cedex, France.
PARENT
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION AND
(IF REQUIRED) FIVE YEAR EMPLOYMENT HISTORY
------------------------- ----------------------------
<S> <C>
1. DIRECTORS OF PARENT:
Jacques Blondeau............................. CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Blondeau was President and Chief
Operating Officer of Parent from 1991 through
1992. In January 1993, Mr. Blondeau became
General Manager of Parent and in September
1994, he became Chairman and Chief Executive
Officer of Parent.
Didier Pfeiffer.............................. VICE CHAIRMAN; VICE CHAIRMAN AND
9, Place Vendome PRESIDENT, UNION DES ASSURANCES DE PARIS
75001 Paris, France Mr. Pfeiffer has been Vice Chairman and
President of Union des Assurances de Paris
since 1984.
Jean-Jacques Bonnaud......................... DIRECTOR; CHAIRMAN AND CHIEF EXECUTIVE
2, rue Pillet-Will OFFICER, GROUPE DES ASSURANCES
75448 Paris Cedex 09, France NATIONALES
From 1991 to June 1994 Mr. Bonnaud was
President of Groupe des Assurances Nationales
and since July 1994 he has been Chairman and
Chief Executive Officer of Groupe des
Assurances Nationales.
Regis Bouche................................. DIRECTOR; CHAIRMAN, CAISSE CENTRALE DES
8-10 rue d'Astorg MUTUELLES AGRICOLE
75008 Paris, France From 1991 to September 12, 1994, Mr. Bouche
was Vice Chairman of Caisse Centrale des
Mutuelles Agricole and on September 12, 1994
he became Chairman of Centrale des Mutuelles
Agricole.
Louis Chodron de Courcel..................... DIRECTOR; SENIOR VICE PRESIDENT,
1-3 rue Laffitte BANQUE NATIONALE DE PARIS
75009 Paris, France From 1991 to 1993 Mr. Chodron de Courcel was
Directeur Central of Banque Nationale de
Paris and since then has been Senior Vice
President of Banque Nationale de Paris.
Pierre Florin................................ DIRECTOR; SENIOR VICE PRESIDENT,
La Grande Arche-Cedex 41 AXA FRANCE
92044 Paris La Defense, France From 1990 to 1991 Mr. Florin was a Manager at
AXA France. From 1992 to 1994 Mr. Florin was
Senior Vice President of Union Europe. Mr.
Florin became Senior Vice President of AXA
France at the beginning of 1995.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION AND
(IF REQUIRED) FIVE YEAR EMPLOYMENT HISTORY
------------------------- ----------------------------
<S> <C>
Thierry Fouquet.............................. DIRECTOR
Mr. Fouquet has occupied the position of
Executive with Parent since 1990.
Pierre Labadie............................... DIRECTOR; CHAIRMAN OF THE MANAGEMENT
Tour Voltaire-Cedex 58 BOARD, UAP INTERNATIONAL
1 Place des Degres From 1991 to September 1993 Mr. Labadie was a
92059 Paris La Defense, France Member of the Management Board of UAP
International and since October 1993 he has
been Chairman of the Management Board of UAP
International.
Jean Louis Meunier........................... DIRECTOR; CHAIRMAN OF THE MANAGEMENT
Tour Assur-Cedex 14 BOARDS OF UNION DES ASSURANCES DE PARIS
92038 Paris La Defense, France AND UAP INCENDIE ACCIDENTS ET UAP VIE
From 1991 to 1994 Mr. Meunier General Manager
in charge of life and non-life insurance at
Union dex Assurances de Paris and UAP
Incendie Accidents et UAP Vie. Since May 1994
Mr. Meunier has been Chairman of the
Management Boards of Union des Assurances de
Paris and UAP Incendie Accidents et UAP Vie.
Roger Papaz.................................. DIRECTOR; DIRECTOR, ASSURANCES GENERALES
87, rue de Richelieu DE FRANCE
75002 Paris, France Mr. Papaz has been a Director and Honorary
General Manager of Assurances Generales de
France since 1991.
Patrick Peugeot.............................. DIRECTOR; HONORARY CHAIRMAN AND
22, Boulevard Malesherbes PRESIDENT LA MONDIALE
75008 Paris, France From 1991 to August Mr. Peugeot was Chairman
and Chief Executive Officer of Parent. In
September 1994 Mr. Peugeot became Vice
Chairman and President of La Mondiale.
Luc Rouge.................................... DIRECTOR
Mr. Rouge has occupied the position of
Executive with SCOR Reassurances since 1973.
Alexis Ruset................................. DIRECTOR; CHAIRMAN AND CHIEF EXECUTIVE
31, rue de Courcelles OFFICER, CAISSE CENTRALE DE REASSURANCE
75008 Paris, France Mr. Ruset has been Chairman and Chief
Executive Officer of Caisse Centrale de
Reassurance since 1991.
Jacques Vandier.............................. DIRECTOR; CHAIRMAN, M.A.C.I.F.
2-4 rue de Pied de Fond Mr. Vandier has been Chairman of M.A.C.I.F.
79037 Niort Cedex, France since 1991.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION AND
(IF REQUIRED) FIVE YEAR EMPLOYMENT HISTORY
------------------------- ----------------------------
<S> <C>
2. EXECUTIVE OFFICERS OF PARENT:
Serge Osouf.................................. GROUP GENERAL MANAGER
From 1991 to March 1993, Mr. Osouf was
General Manager of Parent. In April 1993 Mr.
Osouf became Parent's Managing Director and
President-Reinsurance Operations and since
September 1994 he has been Group General
Manager of Parent.
Francois Reach............................... DEPUTY GROUP GENERAL MANAGER;
CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
REAFIN
From 1991 to September 1994, Mr. Reach was
President of REAFIN and in October 1994 he
became Chairman and Chief Executive Officer
of REAFIN. Since September 1994, Mr. Reach
has also occupied the position of Deputy
Group General Manager with Parent.
Pierre-Denis Champvillard.................... DEPUTY GROUP GENERAL MANAGER;
GENERAL MANAGER, SCOR REASSURANCE
From 1991 to February 1993 Mr. Champvillard
was General Manager of SCOR Vie. In March
1993 Mr. Champvillard became General Manager
of SCOR Reassurance and since September 1994
he has also occupied the position of Deputy
Group General Manager with Parent.
Michel Laparra............................... GROUP GENERAL CONTROLLER
From 1991 to 1992 Mr. Laparra was Vice
Chairman of Abeille Reassurances and from
1992 to August 1995 he was Chairman of
Abeille Reassurances. In September 1995 Mr.
Laparra became Group General Controller of
Parent.
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME FIVE YEAR EMPLOYMENT HISTORY
---- ----------------------------
<S> <C>
Jacques Blondeau............................. PRESIDENT AND DIRECTOR
Mr. Blondeau was President and Chief
Operating Officer of Parent from 1991 through
1992. In January 1993, Mr. Blondeau became
General Manager of Parent and in September
1994, he became Chairman and Chief Executive
Officer of Parent.
Serge Osouf.................................. VICE PRESIDENT--TREASURER AND DIRECTOR
From 1991 to March 1993, Mr. Osouf was
General Manager of Parent. In April 1993 Mr.
Osouf became Parent's Managing Director and
President-Reinsurance Operations and since
September 1994 he has been Group General
Manager of Parent.
Jean Alisse.................................. VICE PRESIDENT--SECRETARY AND DIRECTOR
Mr. Alisse has been Vice President and
General Counsel of Parent since 1991.
</TABLE>
I-3
<PAGE>
SCHEDULE II
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
UNDER DELAWARE LAW
In connection with the Merger, a stockholder may have the right to dissent
from the Merger and, in lieu of receiving $15.25 net in cash per Share, to seek
the "fair value" of all of such stockholder's Shares, as determined in
accordance with the applicable provisions of the Delaware General Corporation
Law ("DGCL"). In order to perfect such appraisal rights, a stock is required to
follow the procedures set forth in Section 262 of the DGCL, as summarized below.
The following discussion of the provisions of Section 262 is not intended to be
a complete statement of its provisions and is qualified in its entirety by
reference to the full text of that section. THE PROCEDURES SET FORTH IN SECTION
262 SHOULD BE STRICTLY COMPLIED WITH. FAILURE TO FOLLOW ANY SUCH PROCEDURES MAY
RESULT IN A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262.
Any stockholder of the Company may elect to dissent from the Merger with
respect to all of the Shares registered in such stockholder's name. If the
Merger is consummated pursuant to a stockholder vote, a stockholder who votes in
favor of the Merger, whether in person or by proxy, shall waive such
stockholder's appraisal rights. However, a stockholder is not required to vote
against the Merger in order to qualify to exercise appraisal rights.
If the Merger is to be consummated pursuant to a stockholder vote, the
Company, not less than 20 days prior to the meeting of stockholders, shall
notify each of its stockholders who was such on the record date for such meeting
that appraisal rights are available. Any stockholder electing to exercise the
appraisal rights must deliver to the Company, before the taking of the vote on
the proposed Merger, a written demand for appraisal of such stockholder's
Shares. Such demand must reasonably inform the Company of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such stockholder's Shares. Within ten (10) days after the effective date of such
Merger, the surviving or resulting corporation must notify each stockholder of
each constituent corporation who has complied with Section 262(d)(1) and has not
voted in favor of or consented to the Merger of the date that the Merger has
become effective.
FAILURE TO MAKE SUCH WRITTEN DEMAND SHALL CONSTITUTE A WAIVER OF THE
STOCKHOLDER'S APPRAISAL RIGHTS.
If the Merger is to be consummated pursuant to Section 228 or 253 of the
DGCL, the surviving or resulting corporation, either before the effective date
of such Merger or within ten (10) days thereafter, shall notify each of the
stockholders entitled to appraisal rights of the effective date of such Merger
and that appraisal rights are available for any or all of the Shares of the
Company. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder, at such stockholder's address
as it appears on the records of the Company. Any stockholder entitled to
appraisal rights may, within twenty (20) days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of such stockholder's Shares. Such demand must reasonably inform the
Company of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholder's Shares.
FAILURE TO MAKE SUCH WRITTEN DEMAND SHALL CONSTITUTE A WAIVER OF THE
STOCKHOLDER'S APPRAISAL RIGHTS.
The written demand for appraisal must be made by or for the holder of record
of Shares registered in such holder's name. Accordingly, such demand should be
executed by or for such
II-1
<PAGE>
stockholder of record, fully and correctly, as such stockholder's name appears
on such stockholder's stock certificates. If the stock is owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in such capacity and if the stock is owned of record
by more than one person as in a joint tenancy or tenancy in common, such demand
should be executed by or for all joint owners. An authorized agent, including
one or two or more joint owners, may execute the demand for appraisal for a
stockholder of record. However, the agent must identify the record owner or
owners and expressly disclose the fact that in executing the demand he is acting
as agent for the record owner.
Within 120 days after the day of the effective date of the Merger, any
stockholder who has satisfied the foregoing conditions and who is otherwise
entitled to appraisal rights under Section 262, may file a petition in the
Delaware court of Chancery demanding a determination of the value of the Shares
held by all stockholders entitled to appraisal rights. If no such petition is
filed, appraisal rights will be lost for all stockholders who had previously
demanded appraisal of their shares. Stockholders seeking to exercise appraisal
rights should not assume that the surviving or resulting corporation will file a
petition with respect to the appraisal of the value of their shares or that the
surviving or resulting corporation will initiate any negotiations with respect
to the "fair value" of such shares. ACCORDINGLY, STOCKHOLDERS WHO WISH TO
EXERCISE THEIR APPRAISAL RIGHTS SHOULD REGARD IT AS THEIR OBLIGATION TO TAKE ALL
STEPS NECESSARY TO PERFECT THEIR APPRAISAL RIGHTS IN THE MANNER PRESCRIBED IN
SECTION 262.
Within 120 days after the day of the effective date of the merger, any
stockholder who has complied with the provisions of Section 262 is entitled,
upon written request, to receive from the surviving or resulting corporation a
statement setting forth the aggregate number of Shares not voted in favor of the
Merger and with respect to which demands for appraisal have been received by the
surviving or resulting corporation and the aggregate number of holders of such
Shares. Such statement must be mailed to the stockholder within 10 days after
the written request therefor is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under Section 262, whichever is later.
If a stockholder files the petition for appraisal in a timely manner, the
surviving or resulting corporation must file, within 20 days of service of the
stockholders' petition, a verified list of the names and addresses of all
stockholders who have demanded appraisal for their shares and with whom the
surviving or resulting corporation has not reached an agreement regarding value.
If the surviving or resulting corporation files a petition, it must be
accompanied by a similar list. If so ordered by the Court, the Register of
Chancery is required to provide notice by registered or certified mail of the
hearing to stockholders shown on the list and to provide notice by publication.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the value of the Shares owned by
such stockholders, determining its "fair value" exclusive of any element of
value arising from the accomplishment or expectation of the Merger. The Court
will direct payment of the fair value of such shares together with a fair rate
of interest, if any, on such fair value to stockholders entitled thereto upon
surrender to the surviving or resulting corporation of share certificates. Upon
application of a stockholder, the Court may, in its discretion, order that all
or a portion of the expenses incurred by any stockholder in connection with an
appraisal proceeding, including without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all the shares entitled to appraisal.
Although the Purchaser believes that the price per Share set out in the
offer is fair, it cannot make any representation as to the outcome of the
appraisal of fair value as determined by the Delaware Court of Chancery, and
stockholders should recognize that such an appraisal could result in a
determination of a lower, higher or equivalent value.
II-2
<PAGE>
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the effective date of the Merger, be entitled to
vote such stockholder's Shares for any purpose nor be entitled to the payment of
any dividends or other distributions on such stockholder's Shares (other than
those payable to stockholders of record as of a date prior to the effective date
of the Merger).
If no petition for an appraisal is filed within the time provided, or if a
stockholder delivers to the surviving or resulting corporation a written
withdrawal of such stockholder's demand for an appraisal and an acceptance of
the Merger, either within 60 days or after the effective date of the Merger or,
with the written approval of the surviving or resulting corporation, thereafter,
then the right of such stockholder to an appraisal will cease and such
stockholder shall be entitled to receive in cash, without interest, the amount
to which he would have been entitled had he not demanded appraisal of such
stockholder's Shares. No appraisal proceeding in the Court of Chancery will be
dismissed as to any stockholder without the approval of the Court, which
approval may be conditioned on such terms as the Court deems just.
Any notice, objection, demand or other written communication required to be
given to the Company by a dissenting stockholder should be delivered to the
Secretary of such respective corporation at the address set forth in the
Schedule 13e-3 or should be delivered as otherwise permitted by law. Although
not specifically required, it is recommended that such written communications be
sent by registered or certified mail, return receipt requested.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY
STOCKHOLDER WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD CONSULT SUCH
STOCKHOLDER'S LEGAL ADVISOR.
II-3
<PAGE>
[ Dillon, Read & Co. Inc. Letterhead ]
November 2, 1995
SCOR U.S. Corporation
Two World Trade Center, 23rd Floor
New York, New York 10048-0178
Attention: Special Committee of the Board of Directors
Gentlemen:
You have advised us that SCOR S.A. ("SCOR S.A.") proposes to acquire all of the
publicly held outstanding common stock, par value $0.30 per share, (the
"Shares") of SCOR U.S. Corporation (the "Company") not currently held by SCOR
S.A. from the holders thereof (the "Selling Shareholders") at a purchase price
of $15.25 per share (the "Transaction"). You have requested our opinion as to
whether the consideration to be paid pursuant to the Transaction is fair to the
Selling Shareholders, from a financial point of view, as of the date hereof.
In arriving at our opinion, we have, among other things: (i) reviewed certain
publicly available business and financial information relating to the Company;
(ii) reviewed the reported price and trading activity for the Shares of the
Company; (iii) reviewed certain internal financial information and other data
provided to us by the Company relating to the business and prospects of the
Company, including financial projections prepared by the management of the
Company; (iv) conducted discussions with members of the senior management of
the Company; (v) reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions which we considered relevant;
(vi) reviewed publicly available financial and securities market data pertaining
to certain publicly-held companies in lines of business generally comparable
to those of the Company; and (vii) conducted such other financial studies,
analyses and investigations, and considered such other information as we deemed
necessary and appropriate.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have relied upon it being complete and accurate in all material respects.
We have not been requested to and have not made an independent evaluation
or appraisal of any assets or
<PAGE>
liabilities (contingent or otherwise) of the Company or any of its subsidiaries,
nor have we been furnished with any such evaluation or appraisal. Further, we
have assumed, with your consent, that all of the information, including the
projections provided to us by the Company's management, was prepared in good
faith and was reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the Company's management as to the future
financial performance of the Company, and was based upon the historical
performance and certain estimates and assumptions which were reasonable at the
time made. In addition we have not been asked to, and do not express any opinion
as to the after-tax consequences of the Transaction to any Selling Shareholder.
In addition, our opinion is based on economic, monetary and market conditions
existing on the date hereof.
In rendering this opinion, we are not rendering any opinion as to the value of
the Company or making any recommendation to the Selling Shareholders with
respect to the advisability of voting in favor of the Transaction.
Dillon, Read & Co. Inc. ("Dillon Read"), as part of its investment banking
business, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwriting, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations of estate, corporate and other purposes. Dillon Read
has received a fee for rendering this opinion.
This opinion is being rendered solely to the Special Committee of the Board of
Directors of the Company for its use in evaluating the Transaction and is not
for the benefit of, nor being rendered to, the Selling Shareholders or any
other person.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received in the Transaction by the Selling Shareholders is
fair to the Selling Shareholders, from a financial point of view, as of the date
hereof.
Very truly yours,
DILLON, READ & CO. INC.
/s/William P. Powell
By: William P. Powell
Managing Director
III-2
<PAGE>
APPENDIX A
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SCOR U.S. Corporation:
We have audited the consolidated balance sheets of SCOR U.S. Corporation and
subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 1994 as listed in the
accompanying index of the 1994 Annual Report on Form 10-K of SCOR U.S.
Corporation. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedules as listed
in the accompanying index. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules 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 SCOR U.S.
Corporation and subsidiaries as of December 31, 1994 and 1993 and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related 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(k) to the consolidated financial statements, in 1993
the Company adopted the provisions of the Statement of Financial Accounting
Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts," and the provisions of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities" and
also adopted the consensus opinion regarding the Financial Accounting
Standards Board's Emerging Issues Task Force regarding Issue No. 93-6,
"Accounting for Multiple-Year Retrospectively-Related Contracts by Ceding
and Assuming Enterprises". In 1992, the Company adopted the provisions of
SFAS No. 109, "Accounting for Income Taxes", and changed its method of
accounting for deferred policy acquisition costs.
New York, New York
February 2, 1995
A-1
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
Year Ended December 31,
1994 1993
<S> <C> <C> <C>
Assets Investments:
Fixed maturities:
Available for sale, at fair value
(amortized cost: $596,791 and $558,882) $ 563,656 $ 581,104
Held to maturity, at amortized cost
(fair value: $22,274 and $27,109) 22,871 24,876
Equity securities, at fair value
(cost: $1,897 and $15,581) 1,738 18,951
Short-term investments, at cost 83,303 90,642
Other long-term investments 1,225 1,081
------- -------
672,793 716,654
Cash 4,763 17,096
Accrued investment income 10,339 10,169
Premiums receivable 72,018 80,319
Reinsurance recoverable on paid losses
Affiliates 4,399 9,498
Other 19,356 27,329
Reinsurance recoverable on unpaid losses
Affiliates 127,096 134,154
Other 95,576 87,689
Prepaid reinsurance premiums
Affiliates 10,504 14,578
Other 8,803 11,839
Deferred policy acquisition costs 22,844 24,140
Deferred Federal income tax benefits 34,818 11,894
Investment in affiliates 11,532 10,789
Other assets 48,874 37,963
--------- ---------
$1,143,715 $1,194,111
========= =========
</TABLE>
See notes to consolidated financial statements.
A-2
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands).
Year Ended December 31,
1994 1993
<S> <C> <C> <C>
Liabilities Losses and loss expenses $ 604,787 $ 562,209
Unearned premiums 110,082 114,376
Funds held under reinsurance treaties
Affiliates 3,654 21,777
Other 17,104 17,825
Reinsurance balances payable
Affiliates 15,328 18,196
Other 28,357 42,037
Convertible subordinated debentures 82,350 86,250
Notes payable 20,000 20,000
Commercial paper 11,310 10,721
Other liabilities 11,348 10,031
------- -------
904,320 903,422
------- -------
Stockholders' Preferred stock, no par value, 5,000
Equity shares authorized; no shares issued -0- -0-
Common stock, $0.30 par value,
50,000 shares authorized;
18,356 and 18,299 shares issued 5,507 5,490
Additional paid-in capital 114,556 112,670
Unrealized appreciation (depreciation)
of investments, net of deferred tax effect (21,640) 16,634
Foreign currency translation adjustment (414) 12
Retained earnings 143,153 157,532
Treasury stock, at cost (192 and 190 shares) (1,767) (1,649)
------- -------
239,395 290,689
--------- ---------
$1,143,715 $1,194,111
========= =========
</TABLE>
See notes to consolidated financial statements.
A-3
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C> <C>
Revenues Net premiums earned $228,244 $236,051 $192,050
Net investment income 40,990 42,044 42,880
Net realized investment gains 984 12,930 15,048
------- ------- -------
270,218 291,025 249,978
------- ------- -------
Losses Losses and loss expenses, net 191,270 156,292 160,545
And Commissions, net 59,434 61,324 55,960
Expenses Other underwriting and
administration expenses 26,009 26,420 23,918
Other expenses 4,039 4,073 4,346
Interest expense 8,920 8,005 4,579
------- ------- -------
289,672 256,114 249,348
------- ------- -------
Income (loss) from operations before Federal
income taxes (benefit) (19,454) 34,911 630
Federal income taxes (benefit) (11,262) 6,983 (3,771)
------- ------- -------
Income (loss) from operations (8,192) 27,928 4,401
Extraordinary gain on redemption of debentures,
net of tax 351 -0- -0-
Cumulative effect of accounting changes, net of tax -0- (2,600) 2,848
------- ------- -------
Net income (loss) $(7,841) $25,328 $7,249
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
A-4
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C> <C>
Per Share Average common and common
Data equivalent shares outstanding 18,166 18,395 18,256
Primary ======= ======= =======
Income (loss) from operations $ (0.45) $ 1.52 $ 0.25
Extraordinary item 0.02 -0- -0-
Cumulative effect of accounting changes -0- (0.14) 0.15
------- ------- -------
Net income (loss) $ (0.43) $ 1.38 $ 0.40
======= ======= =======
Fully Average common and common
Diluted equivalent shares outstanding 18,166 20,916 18,256
======= ======= =======
Income (loss) from operations $ (0.45) $ 1.45 $ 0.25
Extraordinary item 0.02 -0- -0-
Cumulative effect of accounting changes -0- (0.12) 0.15
------- ------- -------
Net income (loss) $ (0.43) $ 1.33 $ 0.40
======= ======= =======
</TABLE>
A-5
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Pro- Pro-forma amounts assuming
forma retroactive application of the
change in the method of accounting
for multiple-year retrospectively rated
reinsurance contracts:
Income (loss) from operations $27,928 $1,801
======= ======
Income (loss) from operations per share
Primary $ 1.52 $ 0.10
======= ======
Fully diluted $ 1.45 $ 0.10
======= ======
Net income (loss) $27,928 $ 4,649
======= ======
Net income (loss) per share
Primary $ 1.52 $ 0.25
======= ======
Fully diluted $ 1.45 $ 0.25
======= ======
</TABLE>
See notes to consolidated financial statements.
A-6
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except per share data)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Common Stock
Balance at beginning of year $5,490 $5,453 $5,431
Issuance of common stock 17 37 22
------- ------- --------
Balance at end of year 5,507 5,490 5,453
------- ------- --------
Additional paid-in capital
Balance at beginning of year 112,670 112,068 111,361
Issuance of common stock 700 1,428 938
Change in unpaid stock options exercised
(shares of 55, 87 and 97) 1,175 (768) (346)
Deferred compensation 11 (58) 115
------- ------- --------
Balance at end of year 114,556 112,670 112,068
------- ------- --------
Unrealized appreciation (depreciation)
of investments
Balance at beginning of year 16,634 11,416 5,826
Change in unrealized appreciation (38,274) 5,218 5,590
------- ------- --------
Balance at end of year (21,640) 16,634 11,416
------- ------- --------
Foreign currency translation adjustment
Balance at beginning of year 12 254 1,646
Change in foreign currency translation adjustment (426) (242) (1,392)
------- ------- --------
Balance at end of year $ (414) $ 12 $ 254
------- ------- --------
</TABLE>
See notes to consolidated financial statements.
A-7
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except per share data)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Retained earnings
Balance at beginning of year $157,532 $138,002 $135,786
Net income (loss) (7,841) 25,328 7,249
Dividends ($.36, $.32 and $.28 per share) (6,538) (5,798) (5,033)
------- ------- -------
Balance at end of year 143,153 157,532 138,002
------- ------- -------
Treasury stock
Balance at beginning of year (1,649) (1,077) (1,305)
Net (purchases) reissuance of treasury stock (118) (572) 228
------- ------- -------
Balance at end of year (1,767) (1,649) (1,077)
------- ------- -------
Total stockholders' equity at end of year $239,395 $290,689 $266,116
======== ======== ========
Common stock shares
Balance at beginning of year 18,299 18,176 18,105
Issuance of common stock 57 123 71
------- ------- -------
Balance at end of year 18,356 18,299 18,176
======= ======= =======
Treasury stock shares
Balance at beginning of year 190 153 179
Net purchases (reissuance) of treasury stock 2 37 (26)
------- ------- -------
Balance at end of year 192 190 153
======= ======= =======
</TABLE>
A-8
See notes to consolidated financial statements.
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C> <C>
Cash flows Net income (loss) $(7,841) $25,328 $7,249
from Adjustments to reconcile net income
operating (loss) to net cash provided by (used in)
activities operating activities:
Cumulative effect of accounting
changes -0- 2,600 (2,848)
Realized investment gains (984) (12,930) (15,048)
Changes in assets and liabilities net
of effects of acquisitions:
Accrued investment income (170) 403 203
Premium balances, net (8,247) (13,732) 9,779
Prepaid reinsurance premiums 7,110 (188) (8,517)
Reinsurance recoverable on paid
losses 13,072 5,528 (23,302)
Deferred policy acquisition costs 1,296 (1,969) (5,367)
Losses and loss expenses 42,578 396 101,583
Unearned premiums (4,294) 9,552 22,010
Reinsurance recoverable on unpaid
losses (829) (1,192) (84,538)
Funds held under reinsurance
treaties (18,844) 967 7,663
Federal income taxes (11,174) 11,219 (11,769)
Other (10,403) 1,794 (5,172)
------- ------- -------
Net cash provided by (used in)
operating activities $ 1,270 $27,776 $(8,074)
------- ------- -------
</TABLE>
See notes to consolidated financial statements.
A-9
<PAGE>
<TABLE><CAPTION>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C> <C>
Cash flows Sales, maturities or redemptions of
from fixed maturities $246,868 $349,423 $464,094
investing Sales of equity securities 19,920 12,105 15,279
activities Net sales (purchases) of short-term
investments 9,899 (73,940) 15,181
Investments in fixed maturities (266,174) (375,024) (436,138)
Investments in equity securities (16,161) (6,999) (25,316)
Acquisitions, net of cash acquired -0- -0- (8,153)
Investment in affiliate -0- -0- (9,900)
Other (4,138) (9,422) (3,400)
-------- ------- -------
Net cash provided by (used in)
investing activities (9,786) (103,857) 11,647
-------- ------- -------
Cash flows Dividends paid (6,538) (5,798) (5,033)
from Proceeds from issuance of convertible
financing subordinated debentures -0- 85,172 -0-
activities Proceeds from issuance of commercial
paper - net 30 96 10,247
Repayment of notes payable -0- (8,000) -0-
Proceeds from stock options exercised 1,533 967 364
Other 1,158 362 (17)
-------- ------- -------
Net cash provided by (used in)
financing activities (3,817) 72,799 5,561
-------- ------- -------
Net increase (decrease) in cash (12,333) (3,282) 9,134
Cash at beginning of year 17,096 20,378 11,244
-------- ------- -------
Cash at end of year $ 4,763 $17,096 $20,378
======== ======= =======
</TABLE>
A-10
See notes to consolidated financial statements.
<PAGE>
SCOR U.S. CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
SCOR U.S. Corporation ("SCOR U.S.") is a Delaware corporation
that was formed in December 1981. Prior to the offering of 4,000,000
shares to the public on September 25, 1986, SCOR U.S. was owned by
Societe Commerciale de Reassurance ("SCOR Paris"), a French
reinsurance company, and by Caisse Centrale de Reassurance ("CCR"), a
reinsurer wholly owned by the French government which also owned
approximately 30% of SCOR Paris. As a result of a corporate
reorganization completed in France in November 1989, SCOR Paris became
a wholly owned subsidiary of SCOR S.A. In December 1990, SCOR Paris
and another subsidiary of SCOR S.A., UAP Reassurances ("UAP Re") were
merged into SCOR S.A.
In June 1990, Rockleigh Management Corporation ("Rockleigh"), a
wholly owned subsidiary of UAP Re, was merged into SCOR U.S.
Rockleigh owned 100% of both The Unity Fire and General Insurance
Company ("Unity Fire") and General Security Assurance Corporation of
New York ("General Security"), each of which was a professional
reinsurance company. On January 1, 1994, General Security was merged
into SCOR Reinsurance Company ("SCOR Re"), the Company's principal
operating subsidiary.
As a result of the issuance of common shares of SCOR U.S. to UAP
Re in the Rockleigh merger, SCOR Paris' participation in SCOR U.S.
stock repurchase programs and various other purchases, as well as SCOR
Paris' purchase of CCR's shares of SCOR U.S., SCOR S.A. owned
approximately 80% of the outstanding common stock of SCOR U.S. at
December 31, 1994. The remaining 20% is held publicly and represents
3,616,864 shares of the outstanding shares of SCOR U.S. common stock.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying consolidated financial statements are presented
in conformity with generally accepted accounting principles ("GAAP").
The consolidated financial statements of SCOR U.S. Corporation and
subsidiaries (the "Company") include the accounts of SCOR U.S. and its
wholly owned subsidiaries, SCOR Re, Unity Fire, General Security
Indemnity Company ("GSIND") (formerly Southwest International
Reinsurance Company), Morgard, Inc. ("Morgard"), General Security
Insurance Company ("GSIC") (formerly The International Insurance
Company of Takoma Park, Maryland ("IIC")), SCOR Services, Inc., and
BIND, Inc., and its majority owned subsidiary, California Reinsurance
Management Corporation ("Cal Re") and its equity affiliate Commercial
Risk Partners Limited ("Commercial Risk"). The Company operates
primarily in one significant industry segment; property and casualty
reinsurance. Substantially all of the Company's gross premiums
written are assumed from domestic ceding companies. All significant
intercompany transactions have been eliminated in consolidation.
A-11
<PAGE>
(b) Premium Income
Premium income is recognized as earned on a pro rata basis over
the terms of the policies. Unearned premiums are calculated primarily
on a pro rata basis on facultative business and as reported by ceding
reinsureds on treaty business.
(c) Policy Acquisition Costs
Costs applicable to the acquisition of new business, principally
commissions, are deferred when paid and expensed as the related
premiums are earned. Deferred policy acquisition costs considers
anticipated losses and loss expenses and maintenance expenses that
will be incurred as those premiums are earned. Deferred policy
acquisition costs are reviewed periodically to determine that they do
not exceed recoverable amounts after allowing for anticipated
investment income. Amortization of acquisition costs for 1994, 1993
and 1992 was $59,434,000, $61,324,000 and $55,960,000, respectively.
(d) Loss Reserves
The reserve for losses and loss expenses is based upon estimates
received from ceding reinsureds on treaty contracts, accumulation of
case estimates for losses and loss expenses on claims reported on
facultative contracts and estimates of losses and loss expenses
incurred but not reported ("IBNR") based upon the Company's
expectations of what may have been incurred. Such provisions are
necessarily based on estimates and, accordingly, there can be no
assurance that the ultimate liability will not exceed such estimates.
The reserves are reviewed continually during the year and changes in
estimates are reflected in operating results currently.
(e) Property and Equipment
Depreciation and amortization of property and equipment have been
provided principally on the straight-line method with estimated useful
lives of fifteen years for property and five to ten years for
equipment. Leasehold improvements are amortized on a straight-line
basis over the term of the corresponding lease. Depreciation and
amortization amounted to $1,651,000, $765,000 and $603,000 for the
years ended December 31, 1994, 1993 and 1992, respectively.
(f) Investments
The Company has categorized substantially all of its investments
in fixed maturities as securities "available for sale" and, in
conformity with Financial Accounting Standards Board Statement No. 115
"Accounting for Certain Investments in Debt and Equity Securities",
which was adopted December 31, 1993, carries such investments at fair
value. Fixed maturities purchased with the intent to hold to maturity
are categorized as securities "held to maturity" and are carried at
amortized cost. Equity securities are carried at fair value. Short-
term investments are carried at cost, which approximates fair value.
The Company's policy is to determine realized gains and losses on
investments sold on the specific identification method. The Company
includes unrealized gains and losses on equity securities and fixed
maturities categorized as available for sale in stockholders' equity,
A-12
<PAGE>
net of any tax effect. For cash flows statement purposes, the Company
does not consider any of its investments to be cash equivalents.
(g) Earnings per Share
Primary earnings per share data are based on the weighted average
number of common shares outstanding during the period and, if
dilutive, common shares assumed to be outstanding which are issuable
under stock option plans. Fully diluted earnings per share are based
on the additional assumption that the Debentures (as defined in Note
6) are converted into common shares, if dilutive.
(h) Reclassification of Certain Amounts
Certain amounts from prior financial statements have been
reclassified to conform with current classifications.
(i) Intangibles
(1) Goodwill
The Company has classified as goodwill the cost in excess of net
assets of companies acquired in purchase transactions. Goodwill is
amortized on a straight-line basis over a period of 10 years.
Amortization charged to operations amounted to $596,000, $542,000 and
$499,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
(2) Insurance Licenses
In conjunction with its acquisition of IIC, the Company acquired
licenses for approximately $3,200,000, which are amortized on a
straight-line basis over 10 years. Amortization charged to operations
amounted to $317,000 and $343,000 for the years ended December 31,
1994 and 1993, respectively. No amount was charged to operations for
1992.
(j) Foreign Currency Transactions
Revenues and expenses denominated in foreign currencies are
translated at the rate of exchange at the transaction date. Assets and
liabilities denominated in foreign currencies are translated at the
rate of exchange at the end of a reporting period. Gains or losses
resulting from foreign currency transactions are included in the
Company's results from operations.
Net gains (losses) resulting from foreign currency transactions
during 1994, 1993 and 1992 were $(156,000), $(929,000) and $555,000,
respectively.
(k) Accounting Changes
In the first quarter of 1993, the Company adopted Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards No. 113 "Accounting and Reporting for Reinsurance of Short-
Duration and Long-Duration Contracts" ("SFAS 113"). The adoption of
SFAS 113 did not have a material effect on the Company's financial
position or its results from operations.
A-13
<PAGE>
The FASB's Emerging Issues Task Force ("EITF") reached a
consensus on July 22, 1993 regarding Issue No. 93-6, "Accounting for
Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming
Enterprises" ("EITF 93-6"). EITF 93-6 had an impact on certain of the
Company's retrocessional agreements. As a result of the Company's
implementation of the change in accounting method, as of January 1,
1993, a charge of $2,600,000 (after an income tax benefit of
$1,400,000), or $0.14 per share, is included as a reduction to income
as a cumulative adjustment. The effect of this change, excluding the
cumulative adjustment, for the year ended December 31, 1993 was to
increase net income by $2,600,000, or $0.14 per share.
The pro-forma amounts shown in the statements of operations have
been adjusted for the effect of retroactive application of the
adoption of EITF 93-6, net of related income taxes.
Effective as of December 31, 1993, SCOR U.S. adopted Statement of
Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115
addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities. The adoption of SFAS 115 did not have
any effect on the Company's financial position or its results of
operations.
During 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"), which changes the method of accounting for income taxes under
GAAP. As a result of adopting SFAS 109, the Company recognized a
cumulative benefit of the change in accounting principle of
$2,367,000, or $0.13 per share, as of January 1, 1992. The effect of
this change, excluding the cumulative benefit, for the year ended
December 31, 1992 was to decrease net income by $480,000.
During 1992, the Company also changed its accounting method for
deferred policy acquisition costs to consider anticipated investment
income in evaluating the recoverability of such costs. This new
method is preferable because it is the prevalent method used in the
insurance industry. The newly adopted accounting method also allows
for a more appropriate matching of the income statement amounts of
commissions expense with the related earned premiums and the balance
sheet amounts of deferred policy acquisition costs with the related
unearned premiums. This change resulted in the recognition of a
cumulative benefit of the change in accounting principle of $481,000
(after reduction for income taxes of $248,000), or $0.02 per share, as
of January 1, 1992. This change had no effect on net income,
excluding the cumulative benefit, for the year ended December 31,
1992.
(3) ACQUISITIONS
(a) Purchase of Morgard
On March 10, 1992, SCOR U.S. acquired 100% of the stock of
Morgard, a developer, marketer and administrator of an insurance
product that indemnifies monthly mortgage payments after involuntary
unemployment. The purchase price was approximately $2,549,000 and the
transaction was accounted for using the purchase method of accounting
A-14
<PAGE>
and, accordingly, Morgard's purchased assets and liabilities have been
recorded at their estimated fair values at the date of acquisition.
The acquisition did not have a material pro forma impact on
operations. In March 1994, the Company issued 31,500 shares of its
common stock at an approximate market value of $360,000 as additional
consideration pursuant to the Morgard purchase agreements.
(b) Investment in Commercial Risk
During January 1992, SCOR U.S. acquired 19.8% of the stock of
Commercial Risk, a Bermuda holding company for two insurance
subsidiaries engaged in writing shared-risk products. The majority
shareholder of Commercial Risk is SCOR S.A. The purchase price was
approximately $9,900,000, which included equity and debt. As a result
of a recapitalization of Commercial Risk in 1994, all of SCOR U.S.'s
investment was converted to equity, with SCOR U.S. owning
approximately 13% of Commercial Risk. The investment in Commercial
Risk is accounted for using the equity method of accounting and,
accordingly, the accompanying consolidated financial statements
reflect the Company's proportionate share of Commercial Risk's
stockholders' equity and operating income. SCOR U.S. accounts for its
proportionate share of Commercial Risk's income in its statements of
operations under the caption "other expenses (income)". Income (loss)
from Commercial Risk amounted to $743,000, $678,000 and ($110,000) in
1994, 1993 and 1992, respectively.
(c) Purchase of The International Insurance Company of Takoma Park,
Maryland
On December 4, 1992, SCOR U.S. acquired 100% of the stock of IIC.
The purchase price was approximately $8,200,000 and the transaction
was accounted for using the purchase method of accounting and,
accordingly, IIC's purchased assets and liabilities have been recorded
at their estimated fair values at the date of acquisition. The
acquisition did not have a material pro forma impact on operations.
During 1993, IIC's name was changed to GSIC.
(4) REINSURANCE
SCOR U.S.'s operating subsidiaries assume reinsurance from SCOR
S.A. and other affiliated companies primarily on a quota share or
surplus share basis. Written premiums assumed from these companies
(and the percentage of gross written premiums) were approximately
$7,845,000 (2.6%), $8,375,000 (2.5%) and $6,699,000 (2.2%) for the
years ended December 31, 1994, 1993 and 1992, respectively. Of these
amounts, approximately $6,959,000, $7,925,000 and $6,278,000 for 1994,
1993 and 1992, respectively, were assumed from SCOR S.A.
SCOR U.S.'s operating subsidiaries also retrocede reinsurance to
SCOR S.A. and other affiliated companies, primarily on a quota share
or surplus share basis.
A-15
<PAGE>
The effects of ceded reinsurance on the Statement of Operations
for the years ended December 31, 1994, 1993 and 1992 are as follows:
<TABLE><CAPTION>
Loss
and Loss
Premiums Premiums Expenses
Written Earned Incurred
(in thousands)
December 31, 1994
<S> <C> <C> <C>
Direct $13,667 $13,927 $ 9,554
Assumed 293,125 297,159 260,073
Ceded - affiliate (35,644) (39,718) (37,651)
Ceded - other (40,088) (43,124) (40,706)
------- ------- -------
Net $231,060 $228,244 $191,270
======= ======= =======
<CAPTION>
December 31, 1993
<S> <C> <C> <C>
Direct $ 11,972 $ 8,677 $ 6,944
Assumed 322,547 316,292 206,603
Ceded - affiliate (51,453) (49,778) (37,986)
Ceded - other (37,653) (39,140) (19,269)
------- ------- -------
Net $245,413 $236,051 $156,292
======= ======= =======
<CAPTION>
December 31, 1992
<S> <C> <C> <C>
Direct $ 4,922 $ 2,682 $ 1,645
Assumed 299,906 280,136 335,954
Ceded - affiliate (43,523) (39,134) (59,473)
Ceded - other (55,762) (51,634) (117,581)
------- ------- -------
Net $205,543 $192,050 $160,545
======= ======= =======
</TABLE>
For the years ended December 31, 1994, 1993 and 1992 the
percentage of assumed premiums written to net premiums written was
126.9%, 131.4% and 145.9%, respectively.
Reinsurance does not discharge or diminish the primary liability
to insureds of the Company on risks reinsured; however, it does permit
the Company to recover the applicable portion of any loss from its
retrocessionaires. Retrocessionaires of SCOR U.S. are subject to an
initial review of financial condition before final acceptability is
confirmed and subsequent reviews on an annual basis. The Company, like
most reinsurance companies, enters into retrocession arrangements for
many of the same reasons primary insurers seek reinsurance, including
increasing their premium writing and risk capacity without requiring
additional capital and reducing the effect of individual or aggregate
losses. Historically, SCOR Re has retroceded risks to retro-
cessionaires on both a proportional and excess of loss basis. Under
its 1994 retrocessional program, SCOR Re retained a maximum of $2.0
million as to any one ceding company program for treaty business and a
A-16
<PAGE>
maximum of $3.3 million and $1.1 million per risk for facultative
property and facultative casualty business, respectively.
Paid losses, outstanding losses and IBNR recoverable from
retrocessionaires which are determined to be uncollectible are charged
to operations. There were no such amounts charged to operations for
the years ended December 31, 1994, 1993 and 1992.
Pursuant to a Net Aggregate Excess of Loss Retrocessional
Agreement dated as of July 1, 1986 ("the 1986 Retrocessional
Agreement"), SCOR S.A. reinsured SCOR Re for adverse loss development
from pre-1986 business that exceeded the total of loss reserves
established as of June 30, 1986, and premiums earned after June 30,
1986, from such pre-1986 business. The 1986 Retrocessional Agreement
provided protection to the Company for business underwritten by SCOR
Re only and did not provide coverage for pre-1986 business
underwritten by any other subsidiary. However, business underwritten
by General Security and Unity Fire is protected against adverse
development by a separate net aggregate excess of loss retrocessional
agreement, as described below. The 1986 Retrocessional Agreement
terminated on December 31, 1993, at which time SCOR S.A.'s liability
to SCOR Re was $16,224,000. This amount is the actuarially determined
expected ultimate loss from the pre-1986 business in excess of the
"aggregate deductible" (which is defined as the total of net
outstanding loss and loss expense reserves, net incurred but not
reported loss reserves and net unearned premium reserves established
as of June 30, 1986 for the pre-1986 business, plus all net premiums
and future net premium adjustments earned after June 30, 1986 under
retrospectively rated treaties for such business). During the first
quarter of 1994, SCOR Re received $16,224,000 from SCOR S.A. in
settlement of its liability under this agreement.
SCOR Re and SCOR S.A. entered into a new Net Aggregate Excess of
Loss Agreement ("the 1994 Retrocessional Agreement") effective January
1, 1994, which protects the same business covered under the 1986
Retrocessional Agreement. Under this Agreement, SCOR Re is
responsible for any further adverse development up to $8,800,000, at
which point the 1994 Retrocessional Agreement attaches and provides
coverage for up to $10,000,000 of any additional adverse development.
SCOR Re paid a premium of $2,000,000 for this coverage, which expires
on December 31, 2004. At December 31, 1994, no recovery was recog-
nized under this agreement. In addition, based on the experience of
the 1994 Retrocessional Agreement, SCOR Re is eligible to receive a
contingent commission of up to 27.75% of the premium.
SCOR S.A. entered into a Net Aggregate Excess of Loss
Retrocessional Agreement ("the 1990 Retrocessional Agreement") with
each of Unity Fire and General Security, pursuant to which SCOR S.A.
agreed to reinsure those companies to the extent that their net
ultimate incurred losses (as defined in the agreements) arising in
1989 and prior accident years exceed an aggregate deductible. As a
result of the January 1, 1991 assumption by General Security of the
rights, liabilities and obligations of Unity Fire, the Net Aggregate
Excess of Loss Retrocessional Agreement with Unity Fire was terminated
and the Net Aggregate Excess of Loss Retrocessional Agreement with
General Security was amended (as so amended, the "Agreement") to
include the protection formerly provided to Unity Fire by its
retrocessional agreement with SCOR S.A. As a result of the merger of
A-17
<PAGE>
General Security into SCOR Re, the protection under the Agreement is
now for the benefit of SCOR Re. The aggregate deductible is defined
as the sum of net outstanding loss and loss expense reserves and net
incurred but not reported loss reserves as of December 31, 1989, for
1989 and prior accident years, as documented in the 1989 statutory
financial statements of Unity Fire and General Security. This amount
has been established at a combined aggregate of $93,830,000. The
annual premium for this protection is $210,000 through 2004. The
Agreement continues in force until all covered losses are settled. At
December 31, 1994, SCOR S.A.'s estimated liability under the Agreement
was approximately $11,700,000.
SCOR S.A. provides letters of credit in amounts equal to its
estimated liability under its reinsurance agreements (as reestimated
on a quarterly basis). The amount of letters of credit provided by
SCOR S.A. at December 31, 1994 was approximately $134,500,000.
The amounts recoverable under the Net Aggregate Excess of Loss
Retrocessional Agreements are included in "Retrocessions to
Affiliates" above and have the effect of reducing the Company's net
losses and loss expenses incurred.
The Company withholds funds from retrocessionaires in accordance
with the retrocessional agreements. Under the terms of the
agreements, the Company pays interest on the principal sums of amounts
withheld at annual rates of 6% to 7.5% computed and rendered
quarterly. The Company incurred interest expense (income) of
$1,882,000, $2,191,000 and $1,755,000 in 1994, 1993 and 1992,
respectively, of which $(2,000), $1,161,000 and $1,003,000,
respectively, relates to SCOR S.A.
(5) INVESTMENTS
Net investment income of the Company, comprised primarily of
interest and dividends, was derived from the following sources:
<TABLE><CAPTION>
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Fixed maturities $38,555 $39,859 $41,736
Equity securities 776 999 1,036
Short-term investments 2,855 2,120 1,485
Other 175 428 196
------- ------- -------
42,361 43,406 44,453
Investment expense (1,371) (1,362) (1,573)
------- ------- -------
Net investment income $40,990 $42,044 $42,880
======= ======= =======
</TABLE>
A-18
<PAGE>
Net realized investment gains (losses) of the Company were
derived from the following sources:
<TABLE><CAPTION>
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Net realized investment gains (losses):
Fixed maturities $ (814) $10,921 $13,245
Equity securities 1,497 1,791 1,642
Other 301 218 161
----- ------- -------
$ 984 $12,930 $15,048
====== ======= =======
</TABLE>
Proceeds from sales of available for sale securities during 1994,
1993 and 1992 were $260,902,000, $358,168,000 and $480,864,000,
respectively. Gross gains of $7,162,000, $14,722,000 and $19,212,000,
and gross losses of $6,479,000, $2,016,000 and $4,325,000 during 1994,
1993 and 1992, respectively, were realized on those sales.
The changes in net unrealized gains (losses) on investments of
the Company (including unrealized gains and losses on fixed maturities
held to maturity that are not reflected in stockholders' equity) are
derived from the following sources:
<TABLE><CAPTION>
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Decrease during period
in difference between fair value
and cost of investments in equity
securities $(3,529) $(722) $(651)
Deferred income tax benefit 1,235 212 221
------- ------- -------
Decrease in net unrealized
losses on equity securities (2,294) (510) (430)
------- ------- -------
Increase (decrease) during period
in difference between fair value
and cost of investments in fixed
maturities (58,187) 9,758 (15,165)
Deferred income tax benefit (expense) 20,365 (3,562) 5,156
------- ------- -------
Increase (decrease) in net
unrealized gains (losses)
on fixed maturities (1) (37,822) 6,196 (10,009)
------- ------- ------
Total increase (decrease) in
net unrealized gains (losses)
on equity securities and
fixed maturities $(40,116) $ 5,686 $(10,439)
======= ======= ========
</TABLE>
(1) Includes changes in net unrealized gains (losses) of
($55,357,000), $9,017,000 and $9,118,000, and deferred tax expense
(benefit) of ($19,377,000), $3,288,000 and $3,100,000 on fixed
maturities carried at market value for 1994, 1993 and 1992,
respectively, which is reflected in stockholders' equity.
A-19
<PAGE>
At December 31, 1994 and 1993, approximately $22,871,000 and
$24,876,000, respectively, of bonds carried at amortized cost were on
deposit with various regulatory authorities as required by law.
The following table presents gross unrealized gains and losses
and the related deferred taxes on equity securities and fixed
maturities carried at fair value.
Year Ended December 31,
1994 1993
(in thousands)
Equity securities:
Gross unrealized gains $251 $3,987
Gross unrealized losses (410) (617)
------ -------
Net unrealized gains (losses) (159) 3,370
------ -------
Fixed maturities, at fair value:
Gross unrealized gains 1,112 25,937
Gross unrealized losses (34,247) (3,715)
------- -------
Net unrealized gains (losses) (33,135) 22,222
------- -------
Total net unrealized gains (losses) (33,294) 25,592
Deferred tax asset (liability) 11,654 (8,958)
------- -------
Unrealized appreciation
(depreciation) of investments $(21,640) $16,634
======== =======
The amortized cost and estimated fair values of investments by major
security type at December 31, 1994 and 1993 are as follows:
A-20
<PAGE>
Held to Maturity
<TABLE><CAPTION>
December 31, 1994
Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corpor-
ations and agencies $14,199 $53 $(824) $13,428
Debt securities issued
by foreign governments 8,672 226 (52) 8,846
Total fixed maturities
held to maturity $22,871 $279 $(876) $22,274
======= ======= ======= ========
</TABLE>
Available for Sale
<TABLE><CAPTION>
December 31, 1994
Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corpor-
ations and agencies $96,097 $272 $(4,556) $91,813
Obligations of
states and political
subdivisions 254,196 135 (12,549) 241,782
Debt securities issued
by foreign governments 5,992 77 (106) 5,963
Corporate securities 114,321 474 (6,363) 108,432
Mortgage-backed
securities 91,439 148 (7,875) 83,712
Redeemable preferred
stocks 34,746 6 (2,798) 31,954
------- ------- ------- -------
Total fixed maturities
available for sale 596,791 1,112 (34,247) 563,656
Equity securities 1,897 251 (410) 1,738
------- ------- ------- -------
Total investments
carried at fair value $598,688 $1,363 $(34,657) $565,394
======= ======= ======= ========
</TABLE>
A-21
<PAGE>
Held to Maturity
<TABLE><CAPTION>
December 31, 1993
Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corpor-
ations and agencies $15,792 $ 976 $ (6) $ 16,762
Obligations of
states and political
subdivisions 499 21 -0- 520
Debt securities issued
by foreign governments 8,459 1,242 -0- 9,701
Corporate securities 126 -0- -0- 126
-------- ------- ------------ -------
Total fixed maturities
held to maturity $ 24,876 $ 2,239 $ (6) $ 27,109
======== ======= ============ ========
</TABLE>
Available for Sale
<TABLE><CAPTION>
December 31, 1993
Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corpor-
ations and agencies $ 64,362 $ 3,780 $ (2,035) $ 66,107
Obligations of
states and political
subdivisions 265,111 12,677 (396) 277,392
Debt securities issued
by foreign governments 3,985 503 -0- 4,488
Corporate securities 132,494 7,243 (538) 139,199
Mortgage-backed
securities 59,353 1,116 (457) 60,012
Redeemable preferred
stocks 33,577 618 (289) 33,906
------- ------- -------- -------
Total fixed maturities
available for sale 558,882 25,937 (3,715) 581,104
Equity securities 15,581 3,987 (617) 18,951
------- ------- -------- -------
Total investments
carried at fair value $574,463 $ 29,924 $(4,332) $600,055
======== ======== ======== ========
</TABLE>
A-22
<PAGE>
The amortized cost and estimated fair value of fixed maturities at
December 31, 1994, by contractual maturity, are shown below (expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties):
<TABLE><CAPTION>
Available for Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
(in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $13,212 $13,126 $228 $222
Due after one year - five years 136,872 133,061 10,461 10,521
Due after five year - ten years 302,681 284,758 12,022 11,392
Due after ten years 17,841 17,045 160 139
------- ------- ------- -------
470,606 447,990 22,871 22,274
Mortgage-backed securities 91,439 83,712 -0- -0-
Redeemable preferred stocks 34,746 31,954 -0- -0-
------- ------- ------- -------
Total $596,791 $563,656 $22,871 $22,274
======== ======== ======== ========
</TABLE>
(6) NOTES PAYABLE AND CREDIT ARRANGEMENTS
On March 29, 1993, SCOR U.S. sold at par $86,250,000 of 5.25%
Convertible Subordinated Debentures due April 1, 2000 ("Debentures")
through a private offering. The Debentures are not redeemable by the
Company prior to April 3, 1996 and are convertible into approximately
3.4 million shares of SCOR U.S. common stock at a conversion price of
$25.375 per share. Expenses incurred in the offering of approximately
$1,800,000 were deferred and are being amortized over the life of the
Debentures. The Company contributed $50,000,000 of the net proceeds
to SCOR Re. Interest expense incurred on the Debentures during 1994
and 1993 was $4,465,000 and $3,484,000, respectively.
On October 1, 1990 SCOR U.S. renewed a $20,000,000 note which was
payable on that date. The new note is due and payable on October 3,
1995 and bears interest at a fixed annual rate of 9.575%. On March
12, 1993, the Company entered into an intermediate-term interest rate
swap agreement with a commercial bank related to this note. The swap
agreement has a maturity date of October 1, 1995 and provides for the
Company to make floating rate payments in exchange for fixed rate
payments due on the loan. The floating rate, which is reset every six
months and is capped at 12.375%, was 11.068% as of December 31, 1994,
and 8.693% as of December 31, 1993. In addition, SCOR U.S. had an
$8,000,000 note at market interest rates which was repaid on May 10,
1993. Interest expense incurred for these notes, including the effect
of the interest rate swap, during 1994, 1993 and 1992 was $2,072,000,
$1,953,000 and $2,261,000, respectively.
In 1990, SCOR U.S. established a commercial paper program that
allows the Company to raise up to $50,000,000. The weighted average
interest rate of commercial paper outstanding at December 31, 1994 was
6.29%. The maximum outstanding at any month end during 1994 was
A-23
<PAGE>
$11,310,000, and the average outstanding during 1994 was $10,269,000.
The weighted average interest rate during 1994 was 5.68%. Interest
expense incurred on commercial paper during 1994, 1993 and 1992 was
approximately $501,000, $378,000, $450,000, respectively.
Interest paid including interest paid on reinsurance funds
withheld, during 1994, 1993 and 1992 was $8,647,000, $6,928,000 and
$4,250,000, respectively.
(7) RETIREMENT OF DEBENTURES
During 1994 the Company repurchased in the open market $3.9
million in principal amount of the Debentures and recognized an
extraordinary gain of $351,000 (after deduction for income taxes of
$189,000), or $0.02 per share. Funding for the repurchased Debentures
which settled in January 1995, was achieved through the issuance of
the Company's commercial paper.
(8) FINANCIAL INSTRUMENTS
Off-Balance-Sheet Risk
On March 12, 1993, the Company entered into an interest rate swap
agreement to effectively convert underlying fixed-rate debt into
variable-rate debt based on LIBOR (See Note 6). The notional
principal amount of this agreement, which matures in October 1995, is
$20,000,000. The Company has entered into this agreement with a
creditworthy international financial institution and considers the
risk of nonperformance to be remote. The Company is exposed to market
risk due to the possibility of exchanging a lower interest rate for a
higher interest rate. The net interest effect of this swap
transaction is reported as an adjustment of interest income as
incurred.
Concentration of Credit Risk
At December 31, 1994 the Company did not have a material
concentration of financial instruments in any single investee,
industry or geographic location. All of the Company's investments in
fixed maturities are investment grade securities and virtually all are
rated A or better.
The Company's client base and their dispersion throughout the
United States limits the concentration of credit risk on amounts due
from clients.
At December 31, 1994, the Company had no significant
concentrations of credit risk.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company to
estimate the fair value disclosures for its assets and liabilities as
of December 31, 1994 and 1993:
Fixed maturities and equity securities: Fair values are based on
quoted market prices or dealer quotes. If a quoted market price is
A-24
<PAGE>
not available, fair value is estimated using quoted market prices for
similar securities.
Cash and short-term investments: The carrying amount is a reasonable
estimate of fair value.
Convertible subordinated debentures: Fair value is based on the
prevailing market bid.
Notes payable: Fair value is based on the discounted amount of future
cash flows using the Company's current estimated borrowing rate for a
similar liability.
Commercial paper: The carrying amount is a reasonable estimate of fair
value due to the short-term variable market rate nature of this
liability.
Interest rate swap: Fair value is based on the estimated amount that
the Company would pay or (receive) to terminate the swap agreement at
the reporting date, taking into account current interest rates and
current creditworthiness of the counterparty.
The estimated fair values of the Company's financial instruments are
as follows:
<TABLE><CAPTION>
December 31,
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands)
<S> <C> <C> <C> <C>
Assets
Fixed maturities at fair value $563,656 $563,656 $581,104 $581,104
Fixed maturities at
amortized cost 22,871 22,274 24,876 27,109
Equity securities 1,738 1,738 18,951 18,951
Short-term investments 83,303 83,303 90,642 90,642
Cash 4,763 4,763 17,096 17,096
Liabilities
Convertible subordinated
debentures 82,350 69,998 86,250 81,075
Notes payable 20,000 20,000 20,000 21,897
Commercial paper 11,310 11,310 10,721 10,721
Interest rate swap -0- 341 -0- (266)
</TABLE>
A-25
<PAGE>
(9) FEDERAL INCOME TAXES
SCOR U.S. and its subsidiaries file a consolidated Federal income
tax return.
The components of the provision for Federal income taxes
attributed to income from operations were as follows:
Year Ended December 31,
1994 1993 1992
(in thousands)
Current tax expense (benefit) $ (9,171) $7,882 $(1,853)
Deferred tax benefit (2,091) (899) (1,918)
-------- ------ -------
$(11,262) $6,983 $(3,771)
======== ====== =======
Income taxes paid $ 1,800(1) $3,546 (1) $8,001
======== ====== =======
(1) Excludes refunds received in 1994 and 1993 of $1,700,000 and
$7,782,000, respectively.
Total income tax expense (benefit) for the years ended December
31, 1994, 1993 and 1992 was allocated as follows:
Year Ended December 31,
1994 1993 1992
(in thousands)
Income (loss) from continuing
operations $(11,262) $6,983 $(3,771)
Extraordinary item 189 -0- -0-
Cummulative effect of accounting
changes -0- (1,400) 2,119
Stockholders' equity:
Unrealized appreciation (depre-
ciation) of investments (20,611) 3,077 2,877
Foreign currency translation (229) (125) (717)
------- ----- -----
$(31,913) $8,535 $508
======== ====== ====
A-26
<PAGE>
The components of the net deferred Federal income tax benefits
recognized in the Company's consolidated balance sheet at December 31,
1994 and 1993 were as follows:
Deferred Tax
Asset (Liability)
(in thousands)
1994 1993
Deferred policy acquisition costs $(7,995) $(8,449)
Unearned premium reserve 6,354 6,157
Loss reserves 25,052 23,352
Other (469) (214)
------- -------
Tax effect of temporary differences 22,942 20,846
Unrealized (appreciation) depreciation
of investments 11,653 (8,958)
Foreign currency translation 223 6
------- -------
$34,818 $ 11,894
======= =======
SFAS 109 requires the establishment of a valuation allowance for
deferred income tax benefits where it is more likely than not that
some portion of the deferred income tax benefits will not be realized.
Management believes, based on the Company's historical record of
generating taxable income and its expectations of future earnings,
that the Company's taxable income in future years will be sufficient
to realize the net deferred income tax benefits which are reflected on
its consolidated balance sheet as of December 31, 1994. In addition,
management believes certain tax planning strategies exist, including
its ability to alter the mix of its investment portfolio to taxable
investments from tax-exempt investments, which could be implemented if
necessary to ensure sufficient taxable income to realize fully its net
deferred income tax benefits. Management also believes that the
Company's net deferred income tax benefits related to unrealized
depreciation of fixed maturity investments is recoverable through its
ability to hold these investments to maturity. Accordingly, SCOR U.S.
has not established a valuation allowance with respect to its net
deferred income tax benefits.
The Omnibus Budget Reconciliation Act of 1993 (the "Act")
was signed into law in August 1993. The Act provided for an increase
in the corporate tax rate to 35% from the previous 34% rate. As a
result of the revaluation of the Company's net deferred tax assets to
reflect the change in tax rates, the Company recognized a net benefit
of $472,000, or $0.03 per share, in 1993. This benefit is included in
the provision for Federal income taxes attributable to income from
operations.
A-27
<PAGE>
A reconciliation of income tax expense (benefit) computed by
applying the United States Federal income tax rate of 35% in 1994 and
1993 and 34% in 1992 to income (loss) from operations before Federal
income taxes (benefit) to the provision for Federal income taxes
(benefit) is as follows:
Year Ended December 31,
1994 1993 1992
(in thousands)
Computed tax expense (benefit) at
U.S. Federal rate $(6,809) $12,219 $ 214
Tax-exempt interest (4,282) (4,262) (3,587)
Dividends received deduction (638) (672) (605)
Tax rate change -0- (472) -0-
Other 467 170 207
------- ------- -------
$(11,262) $6,983 $(3,771)
======= ======= =======
(10) RESERVES FOR LOSSES AND LOSS EXPENSES
Changes in the Company's reserves for losses and loss expenses
for each year in the three year period ended December 31, 1994 is
summarized as follows:
<TABLE><CAPTION>
December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Reserve for losses and loss expenses
at beginning of year, net $340,366 $341,162 $324,117
-------- -------- --------
Provision for losses and loss expenses:
Occuring in current year 193,587 160,695 165,468
Occuring in prior years (2,317) (4,403) (4,923)
-------- -------- --------
Total 191,270 156,292 160,545
-------- -------- --------
Payment for losses and loss expenses,
net of amounts recoverable
Occuring in current year 55,155 36,018 51,514
Occuring in prior years 94,366 121,070 91,986
-------- -------- --------
Total 149,521 157,088 143,500
-------- -------- --------
Reserve for losses and loss expenses
at end of year, net 382,115 340,366 341,162
Reinsurance recoverable on
unpaid losses 222,672 221,843 220,651
-------- -------- --------
Reserve for losses and loss expenses
at end of year, gross $604,787 $562,209 $561,813
======== ======== ========
</TABLE>
A-28
<PAGE>
The operating companies of SCOR U.S. have not underwritten
significant amounts of business in those classes or with those
insurers that are known to be exposed to asbestos and environmental-
related claims. During the years ended December 31, 1994, 1993 and
1992, the Company has not experienced any significant amount of net
loss reporting or development on claims related to these exposures.
In addition, the Company is significantly protected from adverse
development under the SCOR S.A. Retrocessional Agreements (see Note
4). Any recoveries under such agreements are considered to be fully
realizable. Based on the above information, the Company believes that
its exposure to asbestos and environmental-related claims is not
material to the Company's financial position or results of operations.
(11) STATUTORY REQUIREMENTS
The Insurance Department of the State of New York ("Department"),
in which SCOR Re, GSIND and Unity Fire are domiciled, and the Maryland
Insurance Administration, in which GSIC is domiciled, recognizes as
net income and surplus (stockholder's equity) those amounts determined
in conformity with statutory accounting practices prescribed or
permitted by the respective jurisdiction, which differ in certain
respects from GAAP.
Reconciliations of statutory surplus and net income, as
determined using statutory accounting principles, to the amounts
included in the accompanying financial statements are as follows:
December 31,
1994 1993
(in thousands)
Statutory surplus
of insurance subsidiaries $243,416 $271,895
Deferred policy acquisition costs 22,844 24,140
Unauthorized reinsurance 12,931 7,076
Non-admitted assets 4,589 3,052
Unrealized appreciation (depreciation)
on fixed maturities carried
at fair value (33,135) 22,222
Deferred Federal income taxes 34,818 11,894
Parent company and non-insurance
subsidiaries' net assets 56,282 56,660
Long-term debt (102,350) (106,250)
--------- --------
GAAP stockholders' equity $239,395 $290,689
======== ========
A-29
<PAGE>
Year Ended December 31,
1994 1993 1992
(in thousands)
Statutory net income (loss) of
insurance subsidiaries $(1,109) $ 34,735 $ 5,164
Deferred policy acquisition costs (1,296) 1,969 5,367
Deferred Federal income taxes 2,091 899 1,918
Cumulative effect of
accounting changes -0- -0- 2,848
Parent company operations (5,018) (8,128) (7,377)
Non-insurance subsidiary
operations (2,509) (4,147) (671)
------- ------- -------
GAAP net income (loss) $(7,841) $25,328 $7,249
======= ======= =======
Cash dividends of the Company's reinsurance subsidiaries may be
paid only out of their statutory earned surplus. For the operating
subsidiaries domiciled in New York (which represents approximately 89%
of the Company's statutory surplus), the payment of dividends is
subject to statutory restrictions imposed by New York insurance law.
Generally the maximum amount of dividends that may be paid in any
twelve-month period without the prior approval of the Department is
the lesser of net investment income or 10% of statutory surplus, as
such terms are defined in the New York insurance law. During the year
ending December 31, 1994, $11,900,000 of dividends were declared and
paid to SCOR U.S.
Based on 1994 year-end statutory surplus, the maximum dividend
distribution that may be made by the Company's reinsurance
subsidiaries during 1995 without prior approval is approximately
$24,342,000. The amount of the Company's reinsurance subsidiaries'
net assets (stockholders' equity) restricted from payment of dividends
to SCOR U.S. without prior approval is approximately $219,074,000,
which is 92% of total consolidated net assets.
SCOR Re Voting Trust
As a result of New York Insurance Department licensing
requirements regarding government financial control and ownership of
insurers, all of the capital stock of SCOR Re is held in an
irrevocable voting trust. The voting trust, which was to expire
during 1994, was renewed for an additional three years. The five
voting trustees, four of whom are directors of SCOR U.S., are entitled
to exercise all of the rights and powers of absolute owners of the
capital stock of SCOR Re, subject to certain limitations specified in
the voting trust agreement.
General Security Voting Trust
The Insurance Laws of the State of California generally prohibit
the issuance or renewal of a license to a company owned, operated or
controlled, in whole or in part, by a government. In connection with
A-30
<PAGE>
the continuation of General Security's California license, on
February 1, 1993, with the approval of the New York Insurance
Department, a voting trust was established by SCOR U.S. for its
holdings of capital stock in General Security. This voting trust was
terminated upon the merger of General Security into SCOR Re, effective
January 1, 1994.
(12) EMPLOYEE BENEFITS
Pension Plans:
SCOR U.S. has a qualified defined benefit pension plan ("SCOR
U.S. Group Pension Plan") covering substantially all employees of SCOR
U.S. and its affiliates. Benefits under the SCOR U.S. Group Pension
Plan are based on an employee's years of service and compensation.
SCOR U.S.'s funding policy is to contribute at least the minimum
amount required by ERISA but not more than the maximum amount that can
be deducted for Federal income tax purposes. The SCOR U.S. Group
Pension Plan excludes expatriates who are temporarily assigned to the U.S.
and covered by other plans sponsored or funded by the Company or a member
of the SCOR S.A. Group. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be
earned in the future. In 1994, 1993 and 1992, there were no contributions
required.
The following table sets forth the SCOR U.S. Group Pension Plan funded
status and amounts recognized in the SCOR U.S. consolidated balance sheet
at December 31, 1994 and 1993 (in thousands):
1994 1993
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$2,892 and $2,391 in 1994 and 1993,
respectively $(3,295) $(3,312)
======= =======
Projected benefit obligation for service
rendered to date $(4,678) $(5,656)
Plan assets at fair value 5,912 5,560
------- -------
Plan assets in excess of projected benefit 1,234 (96)
obligation
Unrecognized transition asset (885) (1,033)
Unrecognized net loss from past experience 184 1,495
Unrecognized prior service costs (293) 150
------- -------
Prepaid pension cost included in other assets $ 240 $ 516
======= =======
A-31
<PAGE>
Net pension expense for 1994, 1993 and 1992 included the following
components (in thousands):
1994 1993 1992
Service cost-benefits earned during the period $534 $592 $406
Interest cost on projected benefit obligation 325 333 230
Actual return on plan assets (413) (412) (250)
Net amortization and deferral (170) (100) (279)
----- ----- ------
Net pension expense $276 $413 $107
==== ===== ======
The weighted-average discount rate and the average rate of
compensation increase used in determining the actuarial present value
of the projected benefit obligation were 8% and 5.5% in 1994, 7.5% and
6.0% in 1993, 8.0% and 6.0% in 1992, respectively. The expected long-
term rate of return on assets was 7.5% in 1994 and 8% in 1993.
Savings Plans:
The SCOR U.S. Group Savings Plan ("SCOR U.S. Savings Plan") is
qualified under Sections 401 (a) and 401 (k) of the United States
Internal Revenue Code of 1986 as amended. Substantially all employees
of SCOR U.S. and affiliates are eligible to participate in the savings
plan. The SCOR U.S. Savings Plan excludes expatriates who are
temporarily assigned to the U.S. and covered by other plans sponsored
or funded by the Company or a member of the SCOR S.A. Group.
Contributions to the savings plan are determined by the Board of
Directors and are made from the net profits of the current taxable
year or the accumulated net profits of SCOR U.S. Contributions for
the years ended December 31, 1994, 1993 and 1992 were $575,000,
$585,000 and $556,000, respectively.
The pension and savings plans may be terminated at any time by
the Board of Directors of SCOR U.S.
Supplemental Retirement Plan:
SCOR U.S. also sponsors the SCOR U.S. Group Supplemental
Retirement Plan ("Supplemental Retirement Plan"), an unfunded
nonqualified plan established in 1989 which covers a select group of
management employees. This plan enables participants in the pension
plan and savings plan to earn pension benefits and tax-deferred
savings benefits on the same percentage of pay basis without regard to
current IRS restrictions. The Supplemental Retirement Plan incurred
expenses of approximately $226,000, $133,000 and $143,000 for the
years ended 1994, 1993 and 1992, respectively.
Employment Contracts:
The Company has entered into employment contracts that provide
minimum pension benefits to four executives. The benefits under these
contracts are unfunded, and expenses of approximately $70,000, $53,000
and $45,000 were accrued in 1994, 1993 and 1992, respectively.
A-32
<PAGE>
(13) INCENTIVE AND STOCK OPTION PLANS
In July 1986, the Company adopted a Stock Incentive Plan for Key
Executives ("Incentive Plan"), pursuant to which 786,000 shares of the
common stock were reserved for issuance through options for all key
executives of the Company, defined to include officers and employees
of the Company and those employees of SCOR S.A. who serve on the
Executive Committee of the Board of Directors of SCOR U.S. In March
1994, the number of shares available for issuance under the Incentive
Plan was increased to 856,740. Nonqualified stock options, incentive
stock options, stock appreciation rights, restricted stock awards and
stock bonus awards were available under the Incentive Plan. Certain
of these awards may result in future compensation expense to the
Company. Incentive stock options were available to be granted at not
less than fair market value of the Company's common stock on the date
of grant. Non-qualified options were available to be granted at not
less than 85% of fair market value of the Company's common stock on
the date of grant. Options become exercisable as specified at the
date of grant and expire ten years and one month from the date of
grant.
On September 19, 1990 the shareholders of SCOR U.S. approved a
Stock Option Plan for Directors. Under this plan 220,000 shares of
the common stock of SCOR U.S. have been reserved for issuance. Grants
of options to purchase 3,000 shares will be made to each Director,
except Directors employed by the Company, three business days
following each SCOR U.S. Annual Meeting. Each option granted becomes
exercisable with respect to one-half the shares of SCOR U.S. common
stock covered thereby on the first anniversary of the date upon which
it was granted and with respect to the balance of the shares on the
second anniversary thereof.
Under the Stock Option Plan for Key Employees ("SOP") approved by
the shareholders of SCOR U.S. at the Annual Meeting in June 1991,
1,426,000 shares of common stock have been reserved for issuance
through options for all key employees of SCOR U.S. Corporation and its
subsidiaries. In March 1994, the number of shares available for
issuance under the SOP was increased to 1,554,340. The per share
option price shall never be less than 100% of the fair market value of
the shares at the time of the grant. Unless otherwise provided by the
Board of Directors, each option granted would become exercisable to
the extent of one-third of the total number of the shares of common
stock subject to the option on each anniversary of the grant and
expire ten years from the date the option is granted.
A-33
<PAGE>
Information regarding the above option plans is summarized below:
Number of Option Price
Shares Per Share Range
--------- ---------------
Outstanding at December 31, 1991 1,045,605 $ 8.00 -- $15.50
Options granted 21,000 $16.75 -- $16.75
Options exercised (71,296) $ 8.00 -- $14.25
Options cancelled (19,535) $12.25 -- $14.25
--------- ---------------
Outstanding at December 31, 1992 975,774 $ 8.00 -- $16.75
Options granted 552,693 $15.50 -- $17.00
Options exercised (123,418) $ 8.00 -- $14.25
Options cancelled (30,284) $14.25 -- $17.00
--------- ---------------
Outstanding at December 31, 1993 1,374,765 $ 8.00 -- $17.00
Options granted 458,175 $ 9.00 -- $11.125
Options exercised (57,100) $ 8.00 -- $ 9.99
Options cancelled (198,889) $ 9.00 -- $17.00
--------- ---------------
Outstanding at December 31, 1994 1,576,951 $ 8.00 -- $17.00
========= ===============
The number of options exercisable at December 31, 1994 was
856,000. The number of shares available for future grant at
December 31, 1994 was 552,000.
As indicated above, the Incentive Plan allows for the granting of
restricted stock awards. The following table summarizes information
regarding stock awards, for each year in the three-year period ended
December 31, 1994.
1994 1993 1992
Non vested restricted stock grants
at the beginning of the year 4,552 -0- 19,263
Restricted stock awards granted -0- 4,552 -0-
Restricted stock awards vested -0- -0- (19,263)
----- ----- ------
Non-vested restricted stock awards
at the end of the year 4,552 4,552 -0-
===== ===== ======
The Company recognized compensation expense of $11,000, $-0- and
$115,000 in 1994, 1993 and 1992, respectively, in connection with
these awards. At December 31, 1994, the amount of deferred
compensation relating to these grants which will be recognized over
the remaining vesting period is $47,000 which is included in
additional paid-in capital.
During 1993 and 1992 the Company issued 44,000 shares and 40,000
shares of its common stock in exchange for notes receivable from
various officers of $523,000 and $358,000, respectively. These shares
were issued as a result of stock options exercised under the Company's
stock option plans. The balance of unpaid stock options exercised at
A-34
<PAGE>
December 31, 1994 and 1993 was $27,000 and $1,202,000, respectively,
and is recorded as a reduction to additional paid-in capital. The
Company has outstanding loans with various officers related to stock
options exercised and restricted stock grants. These loans bear
interest at rates ranging from 4% to 10%. The aggregate unpaid
principal balance at December 31, 1994 and 1993 was $27,000 and
$1,202,000, respectively.
(14) COMMITMENTS
The Company conducts its operations in leased premises. The
Company also leases data processing equipment and automobiles. Total
rental expense for the years ended December 31, 1994, 1993 and 1992,
amounted to $2,412,000, $2,438,000 and $2,088,000, respectively.
At December 31, 1994, future minimum rental commitments are as follows
(in thousands):
Year Ending December 31,
1995 $2,246
1996 1,437
1997 848
1998 776
1999 526
Thereafter 68
------
$5,901
======
(15) CONTINGENCIES
SCOR Re, GSIC, GSIND and Unity Fire are each party to various
lawsuits arising in the normal course of their business. SCOR U.S.
does not believe that any of the litigation to which SCOR Re, General
Security, GSIC, GSIND or Unity Fire is currently a party will have a
material adverse effect on the operating results or financial
condition of SCOR U.S. and its subsidiaries.
At December 31, 1994 and 1993, the Company's reinsurance
subsidiaries had letters of credit outstanding aggregating
approximately $1,731,000 and $16,352,000, respectively, in favor of
certain insurance companies under terms of reinsurance agreements.
The Company guarantees to a commercial bank payment when due of
three mortgage loans, with original principal amounts aggregating
approximately $2.8 million, issued to former excecutive officers of
the Company. The guarantees are secured by the residential premises.
(16) FOREIGN OPERATIONS
The Company conducts reinsurance business in Canada through
branches established for that purpose. The functional currency of
such branches is the Canadian dollar. The assets and liabilities of
such branches included herein have been translated into United States
dollars at exchange rates in effect at the balance sheet dates, and
A-35
<PAGE>
operations at average exchange rates in effect during the relevant
periods.
Foreign currency translation adjustments have been recorded as
follows:
Translation Income
Adjustment Taxes Net
----------- ------ ----
(in thousands)
Balance, December 31, 1991 $2,494 $ 848 $1,646
Change during the year (2,109) (717) (1,392)
------- ------ -------
Balance, December 31, 1992 385 131 254
Change during the year (367) (125) (242)
------- ------ -------
Balance, December 31, 1993 18 6 12
Change during the year (655) (229) (426)
------- ------ -------
Balance, December 31, 1994 $(637) $(223) $ (414)
======= ====== =======
A-36
<PAGE>
(17) QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended,
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net premiums earned $62,685 $54,983 $55,542 $55,034
Net investment income 9,998 10,208 10,157 10,627
Net realized investment gains (losses) 323 413 323 (75)
Total revenues 73,006 65,604 66,022 65,586
Total expenses 97,570 66,593 64,047 61,462
Income (loss) from operations (14,418) 603 2,447 3,176
Extraordinary gain on redemption of
debentures -0- -0- -0- 351
Net income (loss) $(14,418) $ 603 $2,447 $ 3,527
========== ========== ========== ==========
Per share data:
Primary
Average common and common
equivalent shares outstanding 18,221 18,191 18,212 18,214
========== ========== ========== ==========
Income (loss) from operations $(0.79) $0.03 $0.13 $0.17
Extraordinary item -0- -0- -0- 0.02
---------- ---------- ---------- ----------
Net income (loss) $(0.79) $0.03 $0.13 $0.19
========== ========== ========== ==========
Fully diluted
Average common and common
equivalent shares outstanding 18,221 18,191 18,212 18,214
========== ========== ========== ==========
Income (loss) from operations $(0.79) $0.03 $ 0.13 $ 0.17
Extraordinary item -0- -0- -0- 0.02
---------- ---------- ---------- ----------
Net income (loss) $(0.79) $ 0.03 $ 0.13 $ 0.19
========== ========== ========== ==========
Dividends declared $ 0.09 $ 0.09 $ 0.09 $ 0.09
========== ========== ========== ==========
Stock prices (a)
High $ 13 $12 1/4 $12 1/4 $11 3/8
Low 10 1/4 10 1/8 11 7 1/2
Close 10 3/8 11 11 1/4 8 3/8
</TABLE>
A-37
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended,
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net premiums earned 53,760 $ 56,722 $ 59,847 $ 65,722
Net investment income 10,032 10,866 10,893 10,253
Net realized investment gains 3,328 2,029 2,068 5,505
Total revenues 67,120 69,617 72,808 81,480
Total expenses 55,516 62,452 66,428 71,718
Income from operations 8,773 5,873 5,808 7,474
Cumulative effect of accounting changes (2,600) -0- -0- -0-
Net income $ 6,173 $ 5,873 $ 5,808 $ 7,474
========== ========== ========== ==========
Per share data:
Primary
Average common and common
equivalent shares outstanding 18,494 18,472 18,425 18,309
========== ========== ========== ==========
Income from operations $ 0.47 $ 0.32 $ 0.32 $ 0.41
Cumulative effect of accounting changes (0.14) -0- -0- -0-
---------- ---------- ---------- ----------
Net income $ 0.33 $ 0.32 $ 0.32 $ 0.41
========== ========== ========== ==========
Fully diluted
Average common and common
equivalent shares outstanding 18,494 18,472 21,819 21,679
========== ========== ========== ==========
Income from operations $ 0.47 $ 0.32 $ 0.30 $ 0.38
Cumulative effect of accounting changes (0.14) -0- -0- -0-
---------- ---------- ---------- ----------
Net income $ 0.33 $ 0.32 $ 0.30 $ 0.38
========== ========== ========== ==========
Dividends declared $ 0.08 $ 0.08 $ 0.08 $ 0.08
========== ========== ========== ==========
Stock prices (a)
High $20 3/4 $19 3/4 $16 7/8 $16 3/4
Low 17 16 1/8 14 7/8 12 3/8
Close 19 3/4 16 3/4 16 3/4 13
</TABLE>
(a) High, low and closing sales price per share per NYSE composite tape.
A-38
<PAGE>
(18) SUBSEQUENT EVENTS
The Company believes that its potential for losses from January
17, 1995 Nambu-Jishin earthquake in Kobe, Japan is limited since
foreign writings represent an insignificant portion of its portfolio.
On March 3, 1995 the Company entered into a lease for office
space for its New York headquarters. The term of the lease is
approximately 16 years with aggregate minimum rental payments of
approximately $30 million.
A-39
<PAGE>
SCOR U.S. CORPORATION
FINANCIAL HIGHLIGHTS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------------------
1995 1994 1995 1994
------- ------- ------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS
Gross premiums written..................... $69,001 $75,325 $ 281,988 $ 239,266
Net premiums written....................... 54,574 55,791 181,599 184,593
Net premiums earned........................ 53,536 55,542 182,340 175,210
Net investment income...................... 10,579 10,157 31,751 30,363
Revenues................................... 64,336 66,022 214,804 204,632
Income (loss) from operations excluding
net realized investment gains............ $ 4,748 $ 2,237 $ 13,038 $ (12,056)
After-tax realized investment gains 78 210 463 688
Extraordinary gain on redemption of
debentures, net of tax -0- -0- 552 -0-
------- ------- ------------- ------------
NET INCOME (LOSS) $ 4,826 $ 2,447 $ 14,053 $ (11,368)
------- ------- ------------- ------------
------- ------- ------------- ------------
PER SHARE DATA--PRIMARY
Average common shares outstanding.......... 18,372 18,212 18,255 18,146
Income (loss) from operations excluding
net realized investment gains............ $ 0.26 $ 0.12 $ 0.71 $ (0.67)
After-tax realized investment gains........ -0- 0.01 0.03 0.04
Extraordinary gain on redemption of
debentures, net of tax................... -0- -0- 0.03 -0-
------- ------- ------------- ------------
NET INCOME (LOSS).......................... $ 0.25 $ 0.13 $ 0.77 $ (0.63)
------- ------- ------------- ------------
------- ------- ------------- ------------
GAAP RATIOS
Loss ratio 68.1% 70.3% 66.9% 88.1%
Expense ratio.............................. 35.4% 40.6% 37.7% 39.7%
Combined ratio............................. 103.5% 110.9% 104.6% 127.8%
STATUTORY RATIOS
Loss ratio................................. 68.2% 70.8% 67.2% 87.3%
Expense ratio.............................. 32.5% 36.4% 37.0% 35.0%
Combined ratio............................. 100.7% 107.2% 104.2% 122.8%
Net premiums written to surplus (1)........ .85:1 .93:1 .94:1 1.05:1
Loss reserves to capital and surplus (2)... 1.6:1 1.6:1 1.6:1 1.6:1
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
FINANCIAL POSITION
Cash and investments....................... $ 723,360 $ 677,556
Total assets............................... 1,181,172 1,143,715
Combined statutory capital and surplus
of operating subsidiaries (3)............ 256,823 243,416
GAAP stockholders' equity.................. 277,386 239,395
Book value per share....................... $ 15.27 $ 13.18
</TABLE>
- ------------
(1) Annualized net premiums written for the period divided by ending capital and
surplus.
(2) Statutory basis.
(3) Estimated at September 30, 1995.
B-1
<PAGE>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Premiums written, gross......................... $ 69,001 $ 75,325 $231,988 $239,266
Premiums ceded.................................. (14,427) (19,534) (50,389) (54,573)
-------- -------- -------- --------
Premiums written, net........................... 54,574 55,791 181,599 184,693
Charge in unearned premiums..................... (1,038) (249) 741 (11,483)
-------- -------- -------- --------
Net premiums earned............................. 53,536 55,542 182,340 173,210
Net investment income........................... 10,679 10,157 31,751 30,363
Net realized investment gains................... 121 323 713 1,059
-------- -------- -------- --------
64,336 66,022 214,804 204,632
-------- -------- -------- --------
LOSSES AND EXPENSES
Losses and loss expenses, gross................. 45,276 44,787 172,151 213,468
Reinsurance recoverable......................... (8,824) (5,727) (50,199) (60,910)
-------- -------- -------- --------
Losses and loss expenses, net................... 36,452 39,060 121,952 152,558
Commissions, net................................ 10,345 14,144 46,896 46,019
Other underwriting and administration expenses.. 7,616 6,799 20,783 19,586
Other expenses.................................. 1,016 1,590 1,040 3,065
Interest expense................................ 2,596 2,454 6,906 6,982
-------- -------- -------- --------
58,025 64,047 197,577 228,210
-------- -------- -------- --------
Income (loss) from operations before Federal
income taxes (benefit).......................... 6,311 1,975 17,227 (23,578)
Federal income taxes (benefit).................. 1,485 (472) 3,726 (12,210)
-------- -------- -------- --------
Income (loss) from operations................... 4,826 2,447 13,501 (11,368)
Extraordinary gain on redemption of debentures,
net of tax.................................... -- -- 552 --
-------- -------- -------- --------
Net income (loss)............................... $ 4,826 $ 2,447 $ 14,053 $(11,368)
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE DATA PRIMARY
Average common and common equivalent shares
outstanding................................... 18,372 18,212 18,255 18,146
-------- -------- -------- --------
-------- -------- -------- --------
Income (loss) from operations................... $ 0.26 $ 0.13 $ 0.74 $ (0.63)
Extraordinary item.............................. -- -- 0.03 --
-------- -------- -------- --------
Net income (loss)............................... $ 0.26 $ 0.13 $ 0.77 $ (0.63)
-------- -------- -------- --------
-------- -------- -------- --------
FULLY DILUTED
Average common and common equivalent shares
outstanding................................... 21,513 18,212 21,317 18,146
-------- -------- -------- --------
Income (loss) from operations................... $ 0.26 $ 0.13 $ 0.73 $ (0.63)
Extraordinary item.............................. -- -- 0.03 --
-------- -------- -------- --------
Net income (loss)............................... $ 0.26 $ 0.13 $ 0.76 $ (0.63)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
B-2
<PAGE>
SCOR U.S. CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at fair value (amortized cost:
$556,300 and $596,791)................................... $ 563,515 $ 563,656
Hold to maturity, at amortized cost (net value: $22,609
and $22,274)............................................. 22,155 22,871
Equity securities, at fair value (cost: $108 and $1,897)...... 204 1,738
Short-term investments, at cost............................... 122,794 83,303
Other long-term investments................................... 1,374 1,225
------------- ------------
710,042 672,793
Cash............................................................ 13,318 4,763
Accrued investment income....................................... 9,608 10,339
Premiums receivable............................................. 80,996 72,018
Reinsurance recoverable on paid losses.......................... 19,939 23,755
Reinsurance recoverable on unpaid losses........................ 226,544 222,672
Prepaid reinsurance premiums.................................... 9,921 19,307
Deferred policy acquisition costs............................... 22,471 22,844
Deferred Federal income tax benefits............................ 22,542 34,818
Investment in affiliate......................................... 12,360 11,232
Other assets.................................................... 53,431 49,174
------------- ------------
$ 1,181,172 $1,143,715
------------- ------------
------------- ------------
LIABILITIES
Losses and loss expenses........................................ $ 618,738 $ 604,787
Unearned premiums............................................... 99,955 110,082
Funds held under reinsurance treaties........................... 18,571 20,758
Reinsurance balances payable.................................... 27,000 43,685
Convertible subordinated debentures............................. 75,950 82,350
Notes payable................................................... 25,000 20,000
Commercial paper................................................ 20,639 11,310
Other liabilities............................................... 17,933 11,348
------------- ------------
903,786 904,320
------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000 shares authorized;
no shares issued.............................................. -- --
Common stock, $.30 par value, 50,000 shares authorized;
18,364 and 18,356 shares issued............................... 5,509 5,507
Additional paid-in capital...................................... 114,669 114,556
Unrealized appreciation (depreciation) of investments, net of
deferred tax effect........................................... 4,752 (21,640)
Foreign currency translation adjustment......................... (252) (414)
Retained earnings............................................... 154,482 143,153
Treasury stock, at cost (193 and 192 shares).................... (1,774) (1,767)
------------- ------------
277,386 239,395
------------- ------------
$ 1,181,172 $1,143,715
------------- ------------
------------- ------------
</TABLE>
B-3
<PAGE>
SCOR U.S. CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1995 1994 1995 1994
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................. $ 4,826 $ 2,447 $ 14,053 $ (11,368)
Adjustments to reconcile net income (loss) to
net cash provided by (owed to) operating
activities:
Extraordinary gain on redemption of
debentures................................ -0- -0- (522) -0-
Realized investment gains................... (121) (321) (713) (1,059)
Changes in assets and liabilities:
Accrued investment gains.................. 538 (154) 731 (260)
Premium balances, net..................... 6,869 29,185 (25,665) 9,019
Prepaid issuance premiums................. 1,218 797 9,336 4,774
Reinsurance recoverable on paid losses.... (8,118) (10,827) 8,816 (29,881)
Deferred policy acquisition costs......... 257 (36) 379 (1,905)
Losses and loss expenses.................. (14,577) (15,879) 13,051 44,741
Unearned premiums......................... (179) (348) (10,127) 6,709
Reinsurance recoverable on unpaid losses.. 10,516 7,052 (3,872) 4,827
Funds held under reinsurance treaties..... 714 (321) (2,187) (16,719)
Federal income taxes...................... (4,715) (472) (3,475) (14,010)
Other..................................... 7,477 (3,967) 9,270 (3,766)
-------- -------- --------- ---------
Net cash provided by (used in) operating
activities.................................. 4,705 6,961 2,999 (2,496)
-------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities or redemptions of fixed
maturities.................................. 44,922 54,168 140,362 192,056
Sales of equity securities.................... (38) 207 1,157 4,723
Net sales (purchases) of short-term
investments................................. (2,070) 1,792 (35,105) 38,526
Investment in fixed maturities................ (42,971) (66,279) (102,762) (225,947)
Investments in equity securities.............. -0- (1,685) -0- (3,500)
Other......................................... (4,935) (381) (5,430) (3,361)
-------- -------- --------- ---------
Net cash provided by (used in) investing
activities.................................. (3,112) (12,178) (1,778) 2,997
-------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES..........
Dividends paid................................ (906) (1,638) (2,724) (4,908)
Redemption of convertible subordinated
debentures.................................. -0- -0- (8,907) -0-
Proceeds of notes payable..................... -0- -0- 5,000 -0-
Proceeds from issuance of commercial paper--
net......................................... (461) 3 3,473 30
Proceeds from stock options exercised......... 12 565 19 610
Other......................................... 3,570 1,372 5,479 1,747
-------- -------- --------- ---------
-------- -------- --------- ---------
Net cash provided by (used in) financing
activities.................................. 2,213 302 7,340 (2,516)
-------- -------- --------- ---------
Net increase (decrease) in cash............... 1,806 (4,915) 8,555 (8,017)
Cash at beginning of period................... 11,512 13,994 4,763 17,096
-------- -------- --------- ---------
Cash at end of period......................... $ 13,318 $ 9,079 $ 13,318 $ 9,079
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
B-4
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for the Shares and any other required documents
should be sent by each stockholder of the Company or such stockholder's
broker-dealer, commercial bank, trust company or other nominee to the Depositary
as follows:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission By Hand or Overnight Delivery:
(for Eligible Institutions
Tender & Exchange Department only): Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 Confirm by telephone: New York, New York 10286
(800) 507-9357
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Managers at their respective telephone numbers and locations
listed below. Requests for additional copies of the Offer to Purchase, the
Letter of Transmittal and the other tender offer materials may be directed to
the Information Agent, the Dealer Managers or to brokers, dealers, commercial
banks or trust companies or other nominees, and copies will be furnished
promptly at the Purchaser's Expense.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
United States Europe
77 Water Street Royex House, Aldermonbury Square
New York, New York 10005 London, England ECZV7H
CALL TOLL-FREE: 1-800-714-3313 (44) 171-600-5005 (collect)
THE DEALER MANAGERS FOR THE OFFER ARE:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(800) 323-5678 (Toll Free)
Exhibit (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
SCOR U.S. CORPORATION
Pursuant to the Offer to Purchase dated November 9, 1995 by
SCOR MERGER SUB CORPORATION
A Wholly Owned Subsidiary of
SCOR S.A.
-------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED.
-------------------------------------------------------------------------------
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
By Facsimile Transmission
By Mail: (for Eligible Institutions only): By Hand or Overnight Courier:
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Confirm by telephone: Receive and Deliver Window
New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
</TABLE>
-------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders
("Stockholders") if certificates for Shares (as defined below) are to be
forwarded herewith or if tenders of Shares are to be made by book-entry transfer
to the account maintained by the Depositary at The Depository Trust Company,
Midwest Securities Trust Company or Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures
set forth in the section of the Offer to Purchase entitled "THE OFFER--3.
Procedure for Tendering Shares". Stockholders who tender Shares by book-entry
transfer are referred to herein as "Book-Entry Stockholders" and other
Stockholders are referred to herein as "Certificate Stockholders." Stockholders
whose certificates are not immediately available, or who cannot comply with the
book-entry transfer procedures on a timely basis or who cannot deliver their
certificates and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase), may
nevertheless tender their Shares according to the guaranteed delivery procedure
set forth in the section of the Offer to Purchase entitled "THE OFFER--3.
Procedure for Tendering Shares". See Instruction 2. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY FOR
THIS OFFER (AS DEFINED HEREIN).
Stockholders who wish to tender their Shares must, at a minimum, complete
columns (1) through (3) (other than Book-Entry Stockholders, who are not
required to complete columns (2) and (3)) in the "Description of Shares
Tendered" table below. If only those columns are completed, a Stockholder will
be deemed to have tendered all of its Shares listed in the table. If a
Certificate Stockholder wishes to tender with respect to less than all of its
Shares, column (4) must also be completed, and such Certificate Stockholder
should refer to Instruction 4.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
<PAGE>
Name of Tendering Institution ______________________________________________
Check One:
/ / The Depository Trust Company / / Midwest Securities Trust Company
/ / Philadelphia Depository Trust
Company
Account Number _______________________________________________________________
Transaction Code Number ______________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Stockholder(s) _______________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution that Guaranteed Delivery _______________________________
If Delivery by Book-Entry Transfer:
Name of Tendering Institution ________________________________________________
Check One:
/ / The Depository Trust Company / / Midwest Securities Trust Company
/ / Philadelphia Depository Trust
Company
Account Number _______________________________________________________________
Transaction Code Number ______________________________________________________
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
STOCKHOLDER(S)
(PLEASE FILL IN BLANK EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON THE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
- ----------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
CERTIFICATE REPRESENTED BY NUMBER
NUMBER(S)* CERTIFICATE(S)* OF SHARES TENDERED**
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
TOTAL SHARES
- ----------------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders.
** Unless a Certificate Stockholder otherwise indicates, it will be assumed that all Shares evidenced by any
certificate(s) delivered to the Depositary are being tendered. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to SCOR Merger Sub Corporation, a newly
organized Delaware corporation (the "Purchaser"), and a wholly owned subsidiary
of SCOR S.A., a societe anonyme organized under the laws of The French Republic
("Parent"), the above-described shares of Common Stock, par value $0.30 per
share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the
"Company"), pursuant to the Purchaser's Offer to Purchase all of the outstanding
Shares not currently beneficially owned directly or indirectly by Parent at a
price of $15.25 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated November 9, 1995 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (together with the Offer to
Purchase, the "Offer"). The undersigned understands that the Purchaser reserves
the right to transfer or assign, from time to time, in whole or in part, to one
or more of its affiliates, the right to purchase the Shares tendered herewith.
Upon the terms and subject to the conditions of the Offer, and effective
upon acceptance for payment of the Shares tendered herewith in accordance with
the terms of the Offer, including if the Offer is extended or amended, the terms
or conditions of any such extension or amendment, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Purchaser, all right, title
and interest in and to all of the Shares that are being tendered hereby, and any
and all cash dividends, distributions, rights, other Shares and other securities
issued or issuable in respect thereof on or after the date of the Offer to
Purchase (collectively, "Distributions"), and irrevocably appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares (and all such Distributions), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and all
such other shares or securities) or transfer ownership of such Shares (and all
such Distributions) on the account books maintained by a Book-Entry Transfer
Facility, together in any such case with all accompanying evidences of transfer
and authenticity, to or upon the order of the Purchaser, (b) present such Shares
(and all such Distributions) for transfer on the books of the Company and (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares (and all such Distributions), all in accordance with the terms
and the conditions of the Offer.
<PAGE>
The undersigned hereby irrevocably appoints the designees of the Purchaser,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or any substitute thereof shall deem proper in the sole discretion of
such attorney-in-fact and proxy or such substitute, and otherwise act (including
pursuant to written consent) with respect to all of the Shares tendered hereby
(and any associated Distributions) which have been accepted for payment by the
Purchaser, without further action, prior to the time of such vote or action,
which the undersigned is entitled to vote at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned meeting), by
written consent or otherwise. Such appointment shall be effective when, and only
to the extent that, the Purchaser deposits the payment for such Shares (and any
associated Distributions) with the Depository. This proxy and power of attorney
shall be irrevocable and coupled with an interest in the Shares. Upon the
effectiveness of such appointment, without further action, all prior proxies
with respect to the Shares (and any associated Distributions) at any time given
by the undersigned will be revoked, and no subsequent proxies will be given nor
subsequent written consents executed (or, if given or executed, will not be
deemed effective) with respect thereto by the undersigned. The undersigned
understands that in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's acceptance of such Shares for payment, the Purchaser or its
designees must be able to exercise full voting rights with respect to such
Shares (and any associated Distributions).
By accepting the Offer through the tender of Shares pursuant to the Offer,
the undersigned hereby agrees to release, and hereby releases, all claims with
respect to and in respect of the Shares other than the right to receive payment
for such tendered shares and that, upon payment for the Shares, the undersigned
waives any right to attack, and will be barred from thereafter attacking, in any
legal proceeding the fairness of the consideration paid in the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares (and any
associated Distributions) tendered hereby and that when the same are accepted
for payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment, and transfer of the Shares (and any associated
Distributions) tendered hereby. In addition, the undersigned shall promptly
remit and transfer to the Depositary for the account of the Purchaser any and
all Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer; and, pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights and
privileges as owner of any such Distributions and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Subject to
the withdrawal rights set forth in the section of the Offer to Purchase entitled
"THE OFFER--4. Rights of Withdrawal", the tender of Shares hereby made is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the section of the Offer to Purchase entitled "THE
OFFER--3. Procedure for Tendering Shares" and in the Instructions hereto will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or not accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered". Similarly, unless
otherwise indicated under "Special Delivery Instructions", please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
not accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered". In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or issue any certificates for Shares not so tendered or
accepted for payment in the name of, and deliver said check and/or return such
certificates to, the person or persons so indicated. The undersigned recognizes
that Purchaser has no obligation, pursuant to the Special Payment Instructions,
to transfer any Shares from the name of the registered holder thereof if the
Purchaser does not accept for payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be issued in the name of someone other than the undersigned.
Issue check and/or certificate(s) to:
Name: ____________________________________
PLEASE TYPE OR PRINT
__________________________________________
Address: __________________________________
__________________________________________
(INCLUDE ZIP CODE)
__________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Mail check and/or certificate(s) to:
Name: ____________________________________
PLEASE TYPE OR PRINT
__________________________________________
Address: __________________________________
__________________________________________
(INCLUDE ZIP CODE)
__________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
<PAGE>
IMPORTANT
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
Signature(s) of Stockholders(s)_______________________________________________
________________________________________________________________________________
Dated: ____________, 1995
(Must be signed by registered Stockholder(s) exactly as name(s) appear(s) on
the certificate(s) for the Shares or on a security position listing or by
person(s) authorized to become registered holder(s) by certificate(s) and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
following information and see Instruction 5.)
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (Full Title)___________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number__________________________________________________
Tax Identification or Social Security No._______________________________________
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature____________________________________________________________
Name and Title__________________________________________________________________
(Please Type or Print)
Name of Firm____________________________________________________________________
Address_________________________________________________________________________
(Include Zip Code)
Dated: ____________, 1995
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal
is signed by the registered holder(s) of the Shares (which term, for purposes of
this document, shall include any participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as the owner of
Shares) tendered herewith and such holder(s) have not completed the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on this Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. See Instruction 5 of this Letter of
Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS; LOST CERTIFICATES. This Letter of Transmittal is to be used
either (i) if certificates are to be forwarded herewith or (ii) unless an
Agent's Message (as defined in the Offer to Purchase) is used in lieu of this
Letter of Transmittal, if delivery of Shares is to be made pursuant to the
procedures for book-entry transfer set forth in the section of the Offer to
Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Certificates
for all physically delivered Shares, or confirmation of any book-entry transfer
into the Depositary's account at one of the Book-Entry Transfer Facilities of
Shares tendered by book-entry transfer, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in the case of book-entry transfer, an Agent's Message
in lieu of this Letter of Transmittal), and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in the
Offer to Purchase).
Stockholders whose certificates are not immediately available, or who cannot
complete the procedures for book-entry transfer on a timely basis or who cannot
deliver their certificates and all other required documents to the Depositary on
or prior to the Expiration Date, may nevertheless tender their Shares by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth in the section of the
Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares".
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must be
received by the Depositary on or prior to the Expiration Date; and (iii)
certificates for physically delivered Shares (or a Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to such Shares), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of book-entry
transfer, an Agent's Message in lieu of this Letter of Transmittal) and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within three New York Stock Exchange, Inc. trading days after the
date of execution of such Notice of Guaranteed Delivery.
If any certificate(s) for the Shares tendered hereby have been lost or
destroyed, that fact should be indicated on the face of this Letter of
Transmittal. In such event, the Depositary will forward additional information
and documentation necessary to be completed in order to effectively deliver such
lost or destroyed certificate(s).
IF SHARE CERTIFICATES ARE DELIVERED SEPARATELY TO THE DEPOSITARY, A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL MUST ACCOMPANY EACH SUCH
DELIVERY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF SUCH DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or facsimile thereof), a Stockholder waives any right to receive any notice of
the acceptance of the Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
<PAGE>
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered by
a Certificate Stockholder, fill in the number of Shares which are to be tendered
in the box entitled "Number of Shares Tendered". In such cases, new
certificate(s) for the remainder of the Shares that were evidenced by your old
certificate(s) will be sent to you, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the Expiration
Date. All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holders of the Shares
tendered hereby, the signature must correspond with the names as written on the
face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or purchased are to be issued in the name
of, a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear on the
certificates(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay or cause to be paid any
stock transfer taxes with respect to the transfer and sale of Shares to it or
its order pursuant to the Offer. If, however, payment of the purchase price is
to be made to, or (in the circumstances permitted hereby) if certificates for
Shares not tendered or accepted for payment are to be registered in the name of,
any person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable on account of the transfer to
such person will be deducted from the purchase price if satisfactory evidence of
the payment of such taxes, or exemption therefrom, is not submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be mailed to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender
offer materials may be obtained from, the Information Agent (as defined in the
Offer to Purchase) or the Dealer Managers (as defined in the Offer to Purchase)
at their respective addresses set forth below or from your broker, dealer,
commercial bank or trust company.
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
Substitute Form W-9 below. Failure to provide the information on the form may
subject the tendering stockholder to 31% federal income tax withholding on the
payment of the purchase price. The box in Part 3 of the form may be checked if
the tendering stockholder has not been issued a TIN and has applied for a number
or intends to apply for a number in the near future. If the box in Part 3 is
checked and the Depositary is not provided with a TIN within 60 days, the
Depositary will withhold 31% of all payments of the purchase price thereafter
until a TIN is provided to the Depositary.
10. WAIVER OF CONDITIONS. Subject to the terms of the Offer, the Purchaser
reserves the right to waive any of the specified conditions to the Offer, in
whole or in part, in the case of any Shares tendered.
<PAGE>
IMPORTANT: EITHER THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF),
PROPERLY COMPLETED AND DULY EXECUTED, OR, IN THE CASE OF BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL (TOGETHER WITH
CERTIFICATES FOR PHYSICALLY DELIVERED SHARES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER) AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED
DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for purchase is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is his or her social security number. If a
stockholder fails to provide a TIN to the Depositary, such stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder or payee. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or of
the last transferee appearing on the transfers attached to, or endorsed on, the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
<PAGE>
SUBSTITUTE TO BE COMPLETED BY ALL STOCKHOLDERS
(SEE INSTRUCTION 9)
FORM W-9
PAYER'S NAME: THE BANK OF NEW YORK
PART 1--PLEASE PROVIDE YOUR TIN IN THE _______________
BOX AT RIGHT AND CERTIFY BY SIGNING SOCIAL SECURITY
AND DATING BELOW NUMBER
OR__________________________
EMPLOYER IDENTIFICATION
NUMBER
PART 2--CERTIFICATES--UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me); and
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE
SERVICE
(2) I am not subject to backup withholding because
(i) I am exempt from backup withholding
(ii) I have not been notified by the
Internal Revenue Service (the "IRS") that I am
subject to backup withholding as a result of a
failure to report all interest or dividends,
or (iii) the IRS has notified me that I am no
longer subject to backup withholding.
Certification Instructions--You must
cross out item (2) in Part 2
above if you have been notified by the
IRS that you are subject to backup
withholding because of under-reporting
interest or dividends on your
tax return. However, if after being
notified by the IRS that you were
subject to backup withholding you
received another notification from the
IRS stating that you are no longer
subject to backup withholding, do not
cross out item(2).
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
PART 3
SIGNATURE ___________________ DATE ____________
AWAITING
NAME (PLEASE PRINT)______________________________
TIN / /
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(ii) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
- ------------------------------------------ -------------
Signature Date
- ------------------------------------------
Name (Please Print)
<PAGE>
The Information Agent for the Offer is:
D.F. KING & CO., INC.
UNITED STATES EUROPE
77 Water Street Royex House, Aldermarbury Square
New York, New York 10005 London, England EC2V 7HR
CALL TOLL-FREE: 1-800-714-3313 (44) 171-600-5005 (COLLECT)
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(Toll Free) 800-323-5678
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens; i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
- ------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, the first
individual on the
account(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner(4)
account
- ------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------
9. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
- ------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the
payer's trade or business and you have not provided your correct taxpayer
identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file a tax return. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
Unless otherwise noted herein, all references to section numbers or
regulations are references to the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
Exhibit (a)(3)
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York, 10004
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SCOR U.S. CORPORATION
AT
$15.25 NET PER SHARE
BY
SCOR MERGER SUB CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCOR S.A.
- --------------------------------------------------------------------------------
THE OFFER AS DEFINED BELOW AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT
NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
November 9, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by SCOR Merger Sub Corporation, a newly organized
Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of SCOR
S.A., a societe anonyme organized under the laws of The French Republic
("Parent"), to act as dealer managers (the "Dealer Managers") in connection with
the Purchaser's offer to purchase all of the outstanding shares of Common Stock,
par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware
corporation (the "Company"), not currently beneficially owned directly or
indirectly by Parent, at a price of $15.25 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Purchaser's Offer to Purchase dated November 9, 1995 (the "Offer to
Purchase") and the related Letter of Transmittal (the "Letter of Transmittal",
and together with the Offer to Purchase, the "Offer"), copies of which are
enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR
INDIRECTLY BY PARENT, WILL CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES
OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE
OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE
OFFER TO PURCHASE.
<PAGE>
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase;
2. Letter of Transmittal (together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing
information relating to backup federal income tax withholding);
3. Letter to Stockholders of the Company from the Chairman and Chief
Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter which may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with
regard to the Offer; and
5. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available, if time will
not permit all required documents to reach The Bank of New York, as
depositary (the "Depositary"), prior to the Expiration Date (as
defined in the Offer to Purchase) or if the procedure for book-entry
transfer cannot be completed on a timely basis.
The Board of Directors of the Company and the Special Committee (as defined
in the Offer to Purchase) have unanimously determined that the Offer and the
Merger (as defined in the Offer to Purchase) are fair to and in the best
interests of the Company and its stockholders, have approved the Offer and the
Merger and recommend that the Company's stockholders accept the Offer and tender
their Shares pursuant to the Offer.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995,
UNLESS THE OFFER IS EXTENDED.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all outstanding
Shares validly tendered prior to the Expiration Date and not theretofore
properly withdrawn. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates evidencing such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depositary Trust
Company, Midwest Securities Trust Company or Philadelphia Depository Trust
Company), a Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in
lieu of the Letter of Transmittal) and any other required documents. See the
section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering
Shares".
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedure described in the section of the Offer to Purchase entitled "THE
OFFER--3. Procedure for Tendering Shares".
<PAGE>
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other persons (other than the fees of the Dealer Managers and Information
Agent (as defined in the Offer to Purchase)) in connection with the solicitation
of tenders of Shares pursuant to the Offer. You will be reimbursed for customary
mailing and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Purchaser will pay or cause to be paid any stock
transfer taxes payable on the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
PLEASE NOTE THAT THE OFFER EXPIRES AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained by contacting,
the Information Agent or the Dealer Managers, at their addresses and telephone
number set forth on the back cover of the Offer to Purchase.
Very truly yours,
GOLDMAN, SACHS & CO.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL APPOINT YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEALER MANAGERS, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR
MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER
THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
Exhibit (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SCOR U.S. CORPORATION
AT
$15.25 NET PER SHARE
BY
SCOR MERGER SUB CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCOR S.A.
- --------------------------------------------------------------------------------
THE OFFER (AS DEFINED BELOW) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
November 9, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated November 9,
1995 (the "Offer to Purchase") and the related Letter of Transmittal (the
"Letter of Transmittal", and, together with the Offer to Purchase, the "Offer")
pertaining to the offer by SCOR Merger Sub Corporation (the "Purchaser"), a
newly organized Delaware corporation and a wholly owned subsidiary of SCOR S.A.,
a societe anonyme organized under the laws of The French Republic ("Parent"), to
purchase all outstanding shares of Common Stock, par value $0.30 per share (the
"Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), not
currently beneficially owned directly or indirectly by Parent at a price of
$15.25 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer. This material is
being forwarded to you as the beneficial owner of Shares carried by us in your
account but not registered in your name.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Please note the following:
1. The tender offer price is $15.25 per Share, net to you in cash,
without interest thereon.
2. The Offer is being made for all of the outstanding Shares not
currently owned directly or indirectly by Parent.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, December 8, 1995, unless the Offer is
extended.
<PAGE>
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which, together with any Shares currently
beneficially owned directly or indirectly by Parent, will constitute
at least 90% of the total Shares outstanding as of the date the Shares
are accepted for payment pursuant to the Offer. The Offer is also
subject to other terms and conditions contained in the Offer to
Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant
to the Offer.
6. The Board of Directors of the Company and the Special Committee (as
defined in the Offer to Purchase) have unanimously determined that the
Offer and the Merger (as defined in the Offer to Purchase) are fair to
and in the best interests of the Company and its stockholders, have
approved the Offer and the Merger and recommend that the Company's
stockholders accept the Offer and tender their Shares pursuant to the
Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope in which to return your instructions to us
is enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. Please forward
your instructions to us as soon as possible to allow us ample time to tender
Shares on your behalf prior to the expiration of the Offer.
The Offer is made solely by the Offer to Purchase and the Letter of
Transmittal and any amendments or supplements thereto. The Purchaser is not
aware of any state where the making of the Offer is prohibited by the
administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of the Shares pursuant thereto, the Purchaser will make
a good faith effort to comply with such statute. If, after such good faith
effort, the Purchaser cannot comply with such statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In those jurisdictions where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by Goldman, Sachs &
Co. or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SCOR U.S. CORPORATION
AT
$15.25 NET PER SHARE
BY
SCOR MERGER SUB CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCOR S.A.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated November 9, 1995 (the "Offer to Purchase") and the related Letter
of Transmittal (the "Letter of Transmittal", and, together with the Offer to
Purchase, the "Offer") relating to the offer by SCOR Merger Sub Corporation, a
newly organized Delaware corporation and a wholly owned subsidiary of SCOR S.A.,
a societe anonyme organized under the laws of The French Republic ("Parent"), to
purchase all of the outstanding shares of Common Stock, par value $0.30 per
share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation, not
currently beneficially owned directly or indirectly by Parent.
You are instructed to tender the number of Shares indicated below (or, if no
number is indicated below, all Shares) that are held by you for the account of
the undersigned, upon the terms and subject to the conditions set forth in the
Offer.
- --------------------------------------------------------------------------------
Number of Shares to be Tendered*:
/ / Shares: shares
/ / All Shares
- --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s) ___________________________________________________________________
Name(s) ________________________________________________________________________
(please print or type)
Address(es) ____________________________________________________________________
________________________________________________________________________________
(zip code)
Area Code(s) and Telephone No(s). (_______) ____________________________________
Tax Identification or
Social Security No(s). _________________________________________________________
Dated: _________________________________________________________________________
Exhibit (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SCOR U.S. CORPORATION
This form or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for shares of Common Stock, par value
$0.30 per share ("Shares"), of SCOR U.S. Corporation, a Delaware corporation
(the "Company"), are not immediately available, or if the procedure for
book-entry transfer cannot be completed on a timely basis or if the certificates
and all other required documents cannot be delivered to the Depositary prior to
the Expiration Date (as defined in the Offer to Purchase). Such form may be
delivered by hand or transmitted by telegram, facsimile transmission or mail to
the Depositary, and must include a guarantee by an Eligible Institution (as
defined in the Offer to Purchase). See the section of the Offer to Purchase
entitled "THE OFFER--3. Procedure for Tendering Shares".
The Depositary:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission By Hand or Overnight Courier:
Tenders & Exchange Department (for Eligible Institutions Tender & Exchange Department
P.O. Box 11248 only): 101 Barclay Street
Church Street Station (212) 815-6213 Receive and Deliver Window
New York, New York 10286- 1248 Confirm by Telephone: New York, New York 10286
(800) 507-9357
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SCOR Merger Sub Corporation, a newly
organized Delaware corporation, and a wholly owned subsidiary of SCOR S.A., a
societe anonyme organized under the laws of The French Republic, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated November
9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (the
"Letter of Transmittal", and, together with the Offer to Purchase, the "Offer"),
receipt of which is hereby acknowledged, the number of Shares shown below
pursuant to the guaranteed delivery procedures set forth in the section of the
Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares".
Number of Shares _______________ Name(s) of Record Holder(s):
___________________________________________
CHECK ONE BOX IF SHARES WILL
BE TENDERED BY BOOK-ENTRY ___________________________________________
TRANSFER: (Please Type or Print)
Address(es):
/ / The Depository Trust
Company ___________________________________________
/ / Midwest Securities Trust
Company ___________________________________________
(Zip Code)
/ / Philadelphia Depository Area Code and Tel. No(s).
Trust Company
___________________________________________
Account Number: __________________ Signature(s):
___________________________________________
Date: ___________________________
___________________________________________
THE GUARANTEE BELOW MUST BE COMPLETED.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution which is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program, guarantees
(a) that the above named person(s) has (have) a "net long position" in the
Shares tendered hereby within the meaning of Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, and (b) to deliver to the Depositary, at one
of its addresses set forth above, certificates representing the Shares tendered
hereby, in proper form for transfer, or confirmation of book-entry transfer of
such Shares into the Depositary's accounts at The Depository Trust Company,
Midwest Securities Trust Company or Philadelphia Depository Trust Company, with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile copy thereof) with any required signature guarantee (or, in the case
of a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase) in lieu of the Letter of Transmittal) and any other documents required
by the Letter of Transmittal, within three New York Stock Exchange, Inc. trading
days of the date hereof.
Name of Firm: __________________ Title: _________________________________
Address: _______________________ Name: __________________________________
________________________________ __________________________________
(Zip Code) (Please type or print)
Area Code and Telephone Date: _____________________________, 1995
Number: ______________________
______________________________
(Authorized Signature)
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
Exhibit (a)(7)
LOGO
NEWS RELEASE
FOR IMMEDIATE RELEASE
Contact: John T. Andrews, Jr. Jean Alisse
General Counsel General Counsel
SCOR U.S. Corporation SCOR S.A.
(212) 390-5224 (33-1) 46-98-73-63
SCOR U.S. BOARD AGREES TO SCOR S.A. $15.25 PER SHARE OFFER
New York, N.Y./Paris, France, November 3, 1995--SCOR U.S. Corporation
(NYSE:SUR) ("SCOR U.S.") and SCOR S.A. announced today that they have
entered into a definitive agreement (the "Merger Agreement") providing for
the merger (the "Merger") of SCOR Merger Sub Corporation ("Merger Sub"), a
newly organized Delaware corporation and a wholly owned subsidiary of SCOR
S.A., into SCOR U.S. upon the terms and subject to the conditions contained
in the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub has
agreed to commence a tender offer (the "Offer") for all of the outstanding
shares of common stock, par value $0.30 per share, of SCOR U.S. at a price
of $15.25 per share, net to the seller in cash, without interest thereon,
subject to terms and conditions set forth in the Merger Agreement and to be
set forth in the tender offer documents. If the Offer is successfully
completed, holders of the 5-1/4% Convertible Subordinated Debentures due
April 1, 2000 of SCOR U.S. would have the right to require SCOR U.S. to
repurchase such Convertible Debentures at a price equal to 100% of the
principal amount thereof, together with accrued and unpaid interest to the
repurchase date.
The Board of Directors, and Special Committee of the Board of
Directors, of SCOR U.S. have unanimously approved the Merger Agreement, the
Offer and the Merger
- more-
<PAGE>
and determined that the terms of the Offer and the Merger are fair to, and
in the best interest of, the stockholders of SCOR U.S. The Board of
Directors has recommended that all stockholders of SCOR U.S. accept the
Offer and tender their shares. Dillon, Read & Co. Inc. has acted as
financial advisor to the Special Committee of the Board of Directors of
SCOR U.S. and has advised the Special Committee that the consideration to
be received by the stockholders of SCOR U.S. is fair to the stockholders
(other than SCOR S.A.) from a financial point of view as of the date
hereof.
SCOR S.A. currently owns approximately 80% of the outstanding shares
of common stock of SCOR U.S. Approximately 3.6 million shares of SCOR U.S.
common stock are owned by the public.
SCOR U.S. Corporation, a holding company, provides property and
casualty insurance and reinsurance in the treaty and facultative market
through its operating subsidiaries. All of SCOR U.S. Corporation's
operating insurance and reinsurance subsidiaries are rated "A" (excellent)
by A.M. Best Company.
SCOR S.A., a French company, operates principally as a reinsurance
company. Together with its subsidiaries, it ranks as the largest
professional reinsurer in France and among the largest in the world.
Goldman, Sachs & Co. are acting as dealer managers for the Offer and
Goldman Sachs International has acted as financial advisor to SCOR S.A.
Exhibit (a)(8)
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell the Shares (as defined below).
The Offer ( as defined below) is made solely by the Offer to
Purchase dated November 9, 1995 (the "Offer to Purchase") and the
related Letter of Transmittal and is being made to all holders of
Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance
thereof would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities, blue sky
or other laws require the Offer to be made by a licensed broker
or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Goldman, Sachs & Co. or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
SCOR U.S. Corporation
at
$15.25 Net Per Share
by
SCOR Merger Sub Corporation
A Wholly Owned Subsidiary of
SCOR S.A.
SCOR Merger Sub Corporation, a newly organized Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of
SCOR S.A., a societe anonyme organized under the laws of The
French Republic ("Parent"), hereby offers to purchase all of the
outstanding shares of common stock, par value $0.30 per share (the
"Shares"), of SCOR U.S. Corporation, a Delaware corporation (the
"Company"), not currently beneficially owned directly or
indirectly by Parent at a price of $15.25 per Share, net to the
seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase and
in the related Letter of Transmittal (together with the Offer to
Purchase, the "Offer"). Parent currently beneficially owns
approximately 80% of the outstanding Shares. Following the Offer,
Parent intends to cause the Purchaser to effect the Merger (as
defined below).
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE
OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION
OF THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH
ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR
INDIRECTLY BY PARENT, WILL CONSTITUTE AT LEAST 90% OF THE TOTAL
SHARES OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR
PAYMENT PURSUANT TO THE OFFER (THE "MINIMUM TENDER CONDITION").
THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED
IN THE OFFER TO PURCHASE. SEE INTRODUCTION AND SECTION 13 OF THE
OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY AND THE SPECIAL
COMMITTEE (AS DEFINED IN THE OFFER TO PURCHASE) HAVE
UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS,
HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan
of Merger, dated as of November 2, 1995 (the "Merger
Agreement"), among Parent, the Purchaser and the Company.
The Merger Agreement provides that, among other things, promptly
after the purchase of Shares pursuant to the Offer and the receipt
of any required approval of the Merger Agreement by the Company's
stockholders and the satisfaction or waiver of certain other
conditions, the Purchaser will be merged (the "Merger") into the
Company. Following consummation of the Merger, the Company will
continue as the surviving corporation and will become a wholly
owned subsidiary of Parent. Upon consummation of the Merger (the
"Effective Time"), each then outstanding Share not owned by Parent
or any subsidiary of Parent (other than Shares held by
stockholders of the Company who have properly exercised their
appraisal rights in accordance with Section 262 of the Delaware
General Corporation Law) will be converted into the right to
receive an amount in cash equal to the per Share price paid
pursuant to the Offer (the "Offer Price"). Pursuant to the Merger
Agreement, at the Effective Time each outstanding option to
purchase Shares, whether or not then vested, will be cancelled and
each holder thereof will be thereafter entitled to receive only
the difference, if positive, between the Offer Price and the
exercise price of such options, multiplied by the number of Shares
subject to such options.
<PAGE>
Under the terms of the indenture pursuant to which the
Company's 5 1/4% Convertible Subordinated Debentures
(the "Debentures") were issued, in the event that
Parent directly or indirectly owns, after giving effect to the
purchase of Shares pursuant to the Offer, in excess of 90% of the
outstanding Shares, the holders of the Debentures shall have the
right to require the Company to repurchase the Debentures at a
repurchase price equal to 100% of the principal amount thereof
together with accrued and unpaid interest to the date of such
repurchase (the "Repurchase Price"). In addition, in the event the
Merger is consummated, the holders of the Debentures will be
entitled to convert the Debentures into the right to receive the
consideration receivable upon the Merger by a holder of the number
of Shares into which such Debentures could have been converted
immediately prior to the Merger. Holders of Debentures would
receive a greater cash amount in the event they elect to require
the Company to repurchase their Debentures at the Repurchase Price
than they would if they elect to convert their Debentures into the
right to receive the consideration receivable upon the Merger.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly
tendered and not withdrawn if and when the Purchaser gives oral or
written notice to The Bank of New York, as depositary (the
"Depositary"), of the Purchaser's acceptance of such Shares for
payment. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the
Offer will be made by deposit of the purchase price therefor with
the Depositary, which shall act as agent for tendering
stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to the tendering stockholders
whose Shares have been accepted for payment. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE BE PAID,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN ACCEPTING
FOR PAYMENT OR MAKING SUCH PAYMENT. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase) pursuant
to the procedures set forth in the Offer to Purchase, (ii) a
properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message (as defined
in the Offer to Purchase) in lieu of the Letter of Transmittal)
and (iii) any other documents required by the Letter of
Transmittal.
The Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time to extend for
any reason (including the occurrence of any condition specified in
the Offer to Purchase) the period of time during which the Offer
is open by giving oral or written notice of such extension to the
Depositary. Any such extension will also be publicly announced by
a press release issued no later than 9:00 a.m. New York City time,
on the next business day after the previously scheduled expiration
date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of tendering stockholders to withdraw
their Shares.
Tenders of Shares made pursuant to the Offer are irrevocable,
except that Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date (as defined
in the Offer to Purchase) and, unless theretofore accepted for
payment, may also be withdrawn at any time after January 8, 1996.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on
the back cover of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder if different from the name of
the person who tendered such Shares. If certificates for Shares to
be withdrawn have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such
certificates, the name of the registered holder and the serial
numbers shown on such certificates must be submitted to the
Depositary and, unless such Shares have been tendered for the
account of any Eligible Institution (as defined in the Offer to
Purchase), the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set
forth in the Offer to Purchase, any notice of withdrawal must
specify the name and number of the account at the Book-Entry
Transfer Facility (as defined in the Offer to Purchase) to be
credited with the withdrawn Shares and otherwise comply with such
Book-Entry Transfer Facility's procedures for such withdrawal, in
<PAGE>
which case a notice of withdrawal will be effective if delivered
to the Depositary by any method of delivery described in the
second sentence of this paragraph. Withdrawals of tenders may not
be rescinded, and any Share properly withdrawn will thereafter be
deemed not validly tendered for the purpose of the Offer. However,
withdrawn Shares may be retendeed by again following one of the
procedures described in the Offer to Purchase at any time on or
prior to the Expiration Date.
All questions as to the form and validity (including time of
receipt) of a notice of withdrawal will be determined
by the Purchaser, in its sole discretion, and
its determination shall be final and binding on all parties. None
of the Purchaser, Parent, the Dealer Managers, the Depositary, the
Information Agent, or any other person will be under any duty to
give notification of any defects or irregularities in any notice
of withdrawal or incur any liability for a failure to give such
notification.
The information required to be disclosed by Paragraph (e)(1)(vii)
of Rule 14d-6 of the General Rules and Regulations under the
Securities Exchange Act, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Company has provided to the Purchaser its stockholder
list and security position lists for the purpose of
disseminating the Offer to holders of Shares. The Offer to
Purchase, the related Letter of Transmittal and other related
materials are being mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be mailed to
brokers, dealers, commercial brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of
whose nominees, appear on the Company's stockholder lists or, if
applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to
the Information Agent or the Dealer Managers as set forth below.
Requests for additional copies of the Offer to Purchase, the
Letter of Transmittal and the other tender offer materials may be
directed to the Information Agent, the Dealer Managers or to
brokers, dealers, commercial banks or trust companies, and copies
will be furnished promptly at the Purchaser's expense. No fees or
commissions will be payable to brokers, dealers or other persons
(other than the Information Agent and the Dealer Managers) for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
United States Europe
------------- ------
77 Water Street Royex House, Aldermanbury Square
New York, New York 10005 London, England EC2V 7HR
1-800-714-3313 (Toll Free) (44) 171-600-5005 (Collect)
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(Toll Free) (800) 323-5678
November 9, 1995
Exhibit (c)(2)
November 8, 1995
SCOR U.S. Corporation
Two World Trade Center
New York, New York 10177
Dear Sirs:
By this letter agreement, each of the undersigned hereby confirms that,
notwithstanding the introductory language contained in Annex A to the Agreement
and Plan of Merger, dated as of November 2, 1995 (the "Merger Agreement"), by
and among SCOR U.S. Corporation, SCOR S.A. and SCOR Merger Sub Corporation, the
Minimum Tender Condition shall be satisfied if there shall have been validly
tendered and not withdrawn prior to the expiration date of the Offer a number
of Shares that, together with any Shares currently beneficially owned directly
or indirectly by Purchaser, constitutes at least 90% of the total Shares
outstanding as of the date the Shares are accepted for payment pursuant to the
Offer.
Terms used but not defined in this letter agreement shall have the meanings
given such terms in the Merger Agreement.
Except as expressly set forth in this letter agreement, the Merger
Agreement, as originally executed, shall remain in full force and effect.
This letter agreement may be executed in any number of counterparts, each
such counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
<PAGE>
Please confirm your agreement to the provisions of this letter agreement
by signing in the space provided below.
Very truly yours,
SCOR S.A.
By:/s/ Jacques Blondeau
--------------------------
Name : Jacques Blondeau
Title: Chairman and Chief
Executive Officer
SCOR Merger Sub Corporation
By:/s/ Jacques Blondeau
---------------------
Name : Jacques Blondeau
Title: President
Agreed and confirmed:
SCOR U.S. Corporation
By: /s/ Jerome Karter
--------------------------
Name : Jerome Karter
Title: President and Chief
Executive Officer
Exhibit (c)(5)
INTERESTS AND LIABILITIES AGREEMENT
to the
CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
No. 000000015
No. 000000016
No. 000000017
No. 000000018
between
SCOR REINSURANCE COMPANY
and its Quota Share Retrocessionaire
(Dai Tokyo Fire and Marine Insurance Company Ltd.)
(all hereinafter referred to as "Company")
and
SCOR SA
Paris, France
(hereinafter referred to as "Subscribing Retrocessionaire")
It is hereby mutually agreed by and between the Company on the one part and
the Subscribing Retrocessionaire on the other part that the Subscribing
Retrocessionaire's share in the Interests and Liabilities of the
Retrocessionaires as set forth in the Exhibits attached to and forming an
integral part of the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT shall
be for
95.00% of Exhibit A
30.21% of Exhibit B
25.00% of Exhibit C
51.46% of Exhibit D
The share of the Subscribing Retrocessionaire in the Interests and
Liabilities of the Retrocessionaires in respect of the said Contract shall
be separate and apart from the shares of the other Subscribing
Retrocessionaires to the said Contract, and the Interests and Liabilities
of the Subscribing Retrocessionaire shall not be joint with those of the
other Subscribing Retrocessionaires and in no event shall the Subscribing
Retrocessionaire participate in the Interests and Liabilities of the other
Subscribing Retrocessionaires.
This Interests and Liabilities Agreement shall take effect at 12:01 a.m.,
Eastern Standard Time, January 1, 1994 and shall remain in force until
12:01 a.m., Eastern Standard Time, January 1, 1995 but may be terminated in
accordance with the provisions of the paragraph of ARTICLE
<PAGE>
3, COMMENCEMENT AND TERMINATION, of the Catastrophe Excess of Loss
Reinsurance Contract attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed, in duplicate, by their duly authorized representatives this
day of 1995.
For and on behalf of:
SCOR REINSURANCE COMPANY
and its Quota Share Retrocessionaire
(Dai-Tokio Fire and Marine Insurance Company Ltd.)
----------------------------------------------------------
Sr. Vice President Assistant Vice President
And on this day of , 1995.
For and on behalf of:
SCOR S.A.
Paris, France
----------------------------------------------------------
<PAGE>
CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
TABLE OF CONTENTS
-----------------
Article Page
------- ----
1 Business Covered 1
2 Exclusions 1
3 Commencement and Termination 5
4 Extended Expiration 5
5 Insuring Clause 5
6 Premium 5
7 Reinstatement 5
8 Definition of "Loss Occurrence" 6
9 Extra Contractual Obligations Clause 6
10 Ultimate Net Loss 6
11 Warranty 7
12 Excess of Original Policy Limits 7
13 Net Retained Lines 8
14 War Inclusion Clause (Ocean Marine Only) 8
15 Notice of Loss and Loss Settlements 9
16 Loss Reserves 9
17 Reinsurance Tax 11
Federal Excise Tax 11
18 Currency 11
19 Access to Records 12
20 Service of Suit Clause 12
21 Indemnification and Errors and Omission 13
22 Insolvency 13
23 Arbitration 14
Exhibits: A1-A2, B1-B2, C1-C2 and D1-D2.
Attachments: Pools, Associations and Syndicates Exclusion Clause;
Nuclear Energy Risks Exclusion Clause (Reinsurance) (1984)
(Worldwide Excluding U.S.A. & Canada);
Nuclear Incident Exclusion Clause - Liability - Reinsurance
- U.S.A. and Canada;
Nuclear Incident Exclusion Clause - Physical Damage and
Liability (Boiler and Machinery Policies) - Reinsurance;
- U.S.A. and Canada;
Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance - U.S.A. and Canada;
Insolvency Funds Exclusion Clause.
<PAGE>
CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
(hereinafter referred to as "Contract")
In consideration of the mutual covenants hereinafter contained and subject to
all the terms and conditions hereinafter set forth
VARIOUS INSURANCE AND/OR REINSURANCE COMPANIES
AND/OR UNDERWRITING MEMBERS OF LLOYD'S
(hereinafter collectively referred to as "Retrocessionaires")
do hereby indemnify, as herein provided and specified, the
SCOR REINSURANCE COMPANY
and its Quota Share Retrocessionaire
(Dai-Tokio Fire and Marine Insurance Company Ltd.)
(all hereinafter referred to as "Company")
ARTICLE 1
---------
BUSINESS COVERED
- ----------------
This Contract shall indemnify the Company as set forth in the attached
Exhibit(s) in respect of the excess liability which may accrue to the Company
under all policies, bonds, binders and contracts, oral or written, (hereinafter
referred to as "policy" or "policies" and/or "contract" or "contracts") covering
all Treaty and Facultative reinsurance assumed by the Company including but not
limited to the following classes of business: Fire, Extended coverage, other
Allied Lines, Homeowners or Farmowners Multiple Peril, Commercial Multiple
Peril, Earthquake, Boiler & Machinery, Automobile Physical Damage (excluding
Collision), Inland Marine business (including pleasure watercraft classified as
Inland Marine), Ocean Marine, and Workers Compensation and/or Employers
Liability arising out of the Company's Property/Multi-line portfolio, subject to
the exclusions set forth in ARTICLE 2, EXCLUSIONS and the other terms and
conditions of this agreement as set forth herein.
ARTICLE 2
---------
EXCLUSIONS
- ----------
This Contract does not apply to and excludes from coverage hereunder:
1. Business written on behalf of, or as a member or direct reinsurer of
any pools, syndicates and associations as per the "Pools Exclusions
Clause". This exclusion
1
<PAGE>
shall not, however, apply as respects the Company's interest in the
following:
a) Allendale Mutual Insurance Company and its subsidiary companies;
b) Arkwright Mutual Insurance Company and Arkwright Insurance
Company;
c) Improved Risk Mutuals;
d) Industrial Risk Insurers;
e) Protection Mutual Insurance Company;
f) Starr Technical Risks Agency, Inc.;
g) California Reinsurance Management Corporation;
It is, however, understood and agreed that the amount of the
Retrocessionaires' liability hereunder shall not be increased by
reason of the failure of any other participant in any of the above-
named pools, syndicates, or associations to meet its liability, not
shall any such liability be included in the Company's net retained
liability for purposes of claim hereunder.
2. Nuclear Energy risks Exclusion Clause (Worldwide Excluding U.S.A. &
Canada), N.M.A. 1975
Nuclear Incident Exclusion Clause - Liability - Reinsurance
Nuclear Incident Exclusion Clause - Physical Damage and Liability
(Boiler and Machinery Policies) - Reinsurance
Nuclear Incident Exclusion Clause - Physical Damage -Reinsurance
Nuclear Incident Exclusion Clause - Physical Damage -Reinsurance -
Canada
Nuclear Incident Exclusion Clause - Physical Damage and Liability
(Boiler and Machinery Policies) - Reinsurance - Canada
Nuclear Incident Exclusion Clause - Liability - Reinsurance -Canada
(as per clauses attached).
3. Business written under policies, contracts, and binders of reinsurance
which the Company elects to exclude hereunder, provided, however, that
the Company shall properly identify each such policy, contract, and
binder or reinsurance on its
2
<PAGE>
records at the time it is written (this Exclusion applies primarily to
Banking and Funding Plans);
4. Loss or damage occasioned by war, invasion, hostilities, acts of
foreign enemies, civil war, rebellion, insurrection, military or
usurped power, martial law or confiscation by order of any government
or public authority, but the foregoing shall not apply to:
(1) Workers' Compensation, Employers' Liability, Registered Mail or
any other classes of business which are traditionally written
without a War Exclusion Clause.
(2) Ocean Marine business when war is an included peril, subject to
the war inclusion clause of 1977 per ARTICLE 14, WAR INCLUSION
CLAUSE IN RESPECT OCEAN MARINE.
(3) Original Reinsurance Contracts or Original Policies containing a
standard War Exclusion Clause.
5. Life Business.
6. Aviation business (including satellites). This exclusion shall not,
however, exclude aviation business when assumed by the Company as an
incidental portion of a multiple-line reinsurance contract that is
otherwise covered hereunder;
7. Business classified as Surety, Financial Guarantee, Insolvency and
Credit.
8. The Company's interest either direct or by way of reinsurance in loss
arising from another party or parties.
Notwithstanding the foregoing, this Contract shall not exclude:
(a) Workers' Compensation and/or Employers' Liability arising from
the following perils:
Fire, Lightning, Explosion, Structural Collapse, Windstorm, Hail,
Flood, Falling Objects, Seismic Activity, Volcanic Eruption,
Collision, Riot, Strikes, Civil Commotion, Malicious Damage.
(b) Any Physical Damage and/or Consequential Loss coverage contingent
thereon effected by an insured on behalf of another party (this
applies principally to care, custody and control exposures under
bailee coverages).
9. Crop Hail business.
3
<PAGE>
10. Losses arising, by contract, operation of law, or otherwise, whether
voluntary or involuntary, under any insolvency fund. "Insolvency Fund"
includes any insolvency fund, guaranty fund, plan, pool, association,
or other arrangement, howsoever denominated, established or governed,
which provides for any assessment of or payment or assumption by the
Company of part or all of any claim, debt, charge, fee, or other
obligation of an insurer, or its successors or assigns, which has been
declared by any competent authority to be insolvent, or which is
otherwise deemed unable to meet any claim, debt, charge, fee or other
obligation in whole or in part.
11. LMX and reinsurance assumed business.
12. All losses which may be sustained by the Company howsoever and
wheresoever arising including all Business Interruption, Consequential
Loss and/or other contingent losses proximately caused by a peril
insured in respect of the Company's exposures from:
a. All marine business when written as such, howsoever not to
exclude such exposures if they emanate from a multiline insurance
contract and/or policy.
b. All Offshore exposures arising from business of any description
connected with the oil and/or gas and/or sulphur and/or uranium
exploration and production industries in all their phases and
including all associated support and/or service industries.
"Offshore" shall be defined as:
(1) That area encompassing locations covered by oceans or seas in
which the water ebbs and flows
and/or
(2) Other navigable waters or waterways which shall mean any water
which is in fact navigable by ships or vessels, whether or not
the tide ebbs and flows there, and whether or not there is a
public right of navigation in that water.
13. Losses from overhead transmission and distribution lines on a new
and renewal basis.
14. All business of reassureds domiciled outside the United States,
Canada and Bermuda and their possessions. However, not to exclude
reassureds domiciled outside of these areas where the exposures
are predominantly derived from the United States, Canada and
Bermuda and their territories and possessions.
4
<PAGE>
ARTICLE 3
---------
COMMENCEMENT AND TERMINATION
- ----------------------------
The term of this Contract shall be from 12:01 a.m., Eastern Standard Time,
January 1, 1994 to 12:01 a.m., Eastern Standard Time, January 1, 1995.
In respect to all business covered hereunder except as provided for in the
following paragraphs of this Article and except as provided for in Section I,
Insuring Clause of the Exhibit(s), this Contract shall apply to all loss
occurrences taking place during the term of this Contract.
In the case of a missing vessel or aircraft the date of the loss occurrence
shall be deemed to be the date on which the vessel or aircraft is posted as
missing at Lloyd's or, in the case of a missing vessel or aircraft not so
posted, the last known safe date.
If any law or regulation of the federal, state or local government of any
jurisdiction in which the Company is doing business shall render illegal the
arrangements made in this Contract, this Contract can be terminated immediately,
insofar as it applies to such jurisdiction, by the Company giving notice to the
Retrocessionaires to such effect.
ARTICLE 4
---------
EXTENDED EXPIRATION
- -------------------
If this Contract terminates while a loss covered hereunder is in progress, it is
agreed that, subject to the other conditions of this Contract, the
Retrocessionaires shall indemnify the Company as if the entire loss had occurred
during the term of this Contract.
ARTICLE 5
---------
INSURING CLAUSE
- ---------------
See Section I of the Exhibit(s) attached hereto.
ARTICLE 6
---------
PREMIUM
- -------
See Section II of the Exhibit(s) attached hereto.
ARTICLE 7
---------
REINSTATEMENT
- -------------
See Section III of the Exhibit(s) attached hereto.
5
<PAGE>
ARTICLE 8
---------
DEFINITION OF "LOSS OCCURRENCE"
- -------------------------------
The term "loss occurrence" as used herein shall mean any one accident, casualty,
disaster or occurrence, or series of accidents, casualties, disasters or
occurrences arising out of or caused by one event regardless of the number of
interests reinsured or the number of policies or contracts involved or the
number or kinds of perils involved, subject to the warranties set forth in
ARTICLE 11, WARRANTY. Furthermore, all losses arising out of or resulting from
the same occurrence or disaster shall be considered one occurrence or one
disaster.
ARTICLE 9
-------------
EXTRA CONTRACTUAL OBLIGATIONS CLAUSE
- ------------------------------------
This Contract shall protect the Company within the limits hereof, where the
ultimate net loss includes any extra contractual obligations. The term "extra
contractual obligations" is defined as those liabilities not covered under any
other provision of this Contract and which arise from the handling of any claim
on business covered hereunder, such liabilities arising because of, but not
limited to, the following: failure by the Company to settle within the policy
limit, or by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action. In no event shall coverage
be provided to the extent that such coverage is not permitted under New York
State Insurance Law.
The date on which any extra contractual obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original disaster
and/or casualty.
However, this Article shall not apply where the loss has been incurred due to
fraud of a member of the Board of Directors or a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation of any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
ARTICLE 10
----------
ULTIMATE NET LOSS
- -----------------
The term "ultimate net loss" shall be understood to mean the actual loss or
losses paid or payable by the Company under its contracts of reinsurance, and
80% of extra contractual obligations as defined in ARTICLE 9, EXTRA CONTRACTUAL
OBLIGATIONS CLAUSE, and 100% of excess of policy limits losses as defined in
ARTICLE 12, EXCESS OF ORIGINAL POLICY LIMITS CLAUSE, such loss or losses to
include the Company's expenses of litigation
6
<PAGE>
if any, and all other loss expenses covered under the Company's original
policies, (including a pro rata share of salaries and expenses of the Company's
field employees according to the time occupied in adjusting such loss and
expenses of the Company's officials incurred in connection with the loss but
salaries of officials and any office expenses of the Company shall not be
included) less proper deductions for all recoveries (including amounts
recoverable under other reinsurance except as stated in the following
paragraph). All salvages, recoveries, and payments recovered or received
subsequent to a loss settlement under this Contract shall be applied as if
recovered or received prior to the said settlement and all necessary adjustments
shall be made by the parties hereto.
Notwithstanding the preceding paragraph, recoveries from Reinsurance afforded
under the Company's Contingency Excess of Loss Cover and/or Per Risk Excess of
Loss Cover shall be deducted when arriving at the ultimate net loss hereunder.
Recoveries afforded from Aggregate or Stop Loss reinsurances, if any, as well as
underlying catastrophe excess of loss covers, if any, shall be disregarded when
arriving at the ultimate net loss hereunder.
Whenever the Company or its ceding companies issue a lost instrument bond or a
loss instrument letter of indemnity for salvage purposes or in lieu of loss
payment under its policy, Retrocessionaires agree to accept liability under such
bond or letter of indemnity in accordance with the terms of this Contract.
ARTICLE 11
----------
WARRANTY
- --------
It is warranted that Retrocessionaires shall not be liable under this Contract
unless two or more original risks are involved in the same loss occurrence.
It is warranted that as respects Property Facultative business assumed by the
Company, the maximum net line will be $3,800,000 any one original risk or so
deemed. As respects Treaty business assumed by the Company, the maximum net line
will be $2,000,000 any one program or so deemed.
The Company will be the sole judge as to what constitutes one risk and/or
program.
It is further warranted that the Company will retain net for its own account and
unreinsured not less that 5% of the ultimate net loss covered hereunder, not
including the Company's first loss retention hereunder.
ARTICLE 12
--------------
EXCESS OF ORIGINAL POLICY LIMITS
- --------------------------------
This Contract shall protect the Company, within the limits hereof, in connection
with ultimate net loss in excess of the limit of its original policy, such loss
in excess of the limit having been incurred because of failure by it to settle
within the policy limit or by reason of alleged or actual
7
<PAGE>
negligence, fraud or bad faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against its insured or
reinsured or in the preparation or prosecution of an appeal consequent upon such
action. In no event shall coverage be provided to the extent that such coverage
is not permitted under New York State Insurance Law.
However, this Article shall not apply where the loss has been incurred due to
fraud by a member of the Board of Directors or a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
For the purposes of this Article, the word "loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original policy.
ARTICLE 13
----------
NET RETAINED LINES
- ------------------
This Contract applies only to that portion of any reinsurance which the Company
retains net for its own account and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in excess of which this
Contract attaches, only loss or losses in respect of that portion of any
reinsurance which the Company retains net for its own account shall be included.
The amount of Retrocessionaires' liability hereunder in respect of any loss or
losses shall not be increased by reason of the inability of the Company to
collect from any other Retrocessionaires whether specific or general, any
amounts which may have become due from them whether such inability arises from
the insolvency of such other Retrocessionaires or otherwise.
ARTICLE 14
----------
WAR INCLUSION CLAUSE IN RESPECT OF OCEAN MARINE ONLY
- ----------------------------------------------------
This Contract includes loss, damage, liability or expense caused by or resulting
from the risks of War as covered in the original policy(ies) provided that such
loss, damage, liability or expense would be recoverable under the terms and
conditions of the Institute War Clauses in current use at the inception of this
Contract or at the time when the War risks cover would have commenced under the
original insurance within the terms of these clauses, whichever is the earlier;
except that if the risks of War are covered in the original policy(ies) under
clauses approved by the London Hull War Risks Joint Sub-Committee, or in respect
of Cargo interests, under the Standard War Risk Clause of any country which
complies with the limitations of the United Kingdom Waterborne Agreement, the
foregoing provision shall not apply.
In the event of loss or losses occurring under War Inclusion Clause the
indemnity under this Contract shall be automatically reinstated to its full
amount from the time of such loss or losses
8
<PAGE>
until the next succeeding of the Contract Anniversary in accordance with the
general reinstatement conditions (if any) of the Contract. Nevertheless, and
irrespective of any other reinstatement conditions of the Contract, the
Retrocessionaires shall never be liable for more than the indemnity provided
hereunder in respect of any one loss occurring and in respect of all losses
occurring during the term of this Contract.
ARTICLE 15
----------
NOTICE OF LOSS AND LOSS SETTLEMENTS
- -----------------------------------
In the event of a loss occurrence which either results in or appears to be of
serious enough nature as probably to result in a loss involving this Contract,
the Company shall give notice as soon as reasonably practicable to
Retrocessionaires.
Subject to all the terms and conditions of this Contract, the Retrocessionaires
agree to abide by the loss settlements of the Company, including any award
resulting from an arbitration between the Company and its ceding companies under
the terms of any underlying policies or contracts, such settlements to be
considered as satisfactory proofs of loss, and amounts falling to the share of
the Retrocessionaires shall be immediately payable to the Company by them upon
reasonable evidence of the amount paid or payable by the Company being presented
to Retrocessionaires.
ARTICLE 16
----------
LOSS RESERVES
- -------------
(This clause applies to those Retrocessionaires who do not qualify for credit by
any state or any other governmental authority having jurisdiction over the
Company's loss reserves.)
A: Where a Letter of Credit Trust Agreement is used, the following clause
shall apply:
It is agreed that when the Company files with the Insurance Department or
establishes reserves for claims covered hereunder, as required by law, the
Company will forward to the Retrocessionaires a statement showing the
proportion of such loss reserves which is applicable to Retrocessionaires.
The Retrocessionaires hereby agree to apply for and secure delivery to the
Company of a clean, irrevocable and unconditional Letter of Credit, with a
minimum term of one year, issued by Citibank, N.A., in a format acceptable
to the governmental authority having jurisdiction over the Company's loss
reserves in an amount equal to the Retrocessionaires' proportion of said
loss reserves. Under no circumstances shall any amount relating to reserves
in respect of incurred but not reported losses be funded in the amount of
the Letter of Credit. The foregoing shall not affect the Company's
authority to draw upon the Letter of Credit to cover all obligations due or
which become due to the Company under this Contract, including losses
incurred but not reported, in the event that a nonrenewal or nonextension
notice is received from the issuing bank.
9
<PAGE>
The Company and the Retrocessionaires agree that such Letter of Credit will
be subject to the terms of a separate Letter of Credit Trust Agreement, and
that said trust agreement shall be in a form acceptable to the governmental
authority having jurisdiction over the Company's loss reserves.
Citibank, N.A., shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Company or the disposition of
funds withdrawn, except to see that withdrawals are made only upon the
order of properly authorized representatives of the Company.
B: Where a Letter of Credit Trust Agreement is not used, the following clause
shall apply:
It is agreed that when the Company files with the Insurance Department or
establishes reserves for claims covered under this Contract, as required by
law, the Company will forward to the Retrocessionaires a statement showing
the proportion of such loss reserves which is applicable to
Retrocessionaires. The Retrocessionaires hereby agree to apply for and
secure delivery to the Company of a clean, irrevocable and unconditional
Letter of Credit, with a minimum term of one year, issued by Citibank,
N.A., in a format acceptable to the governmental authority having
jurisdiction over the Company's loss reserves in an amount equal to the
Retrocessionaires' proportion of said loss reserves. Under no circumstances
shall any amount relating to reserves in respect of incurred but not
reported losses be funded in the amount of the Letter of Credit. The
foregoing shall not affect the Company's authority to draw upon the Letter
of Credit to cover all obligations due or which become due to the Company
under this Contract, including losses incurred but not reported, in the
event that a nonrenewal or nonextension notice is received from the issuing
bank.
The Company and the Retrocessionaires agree that the Letter of Credit
provided by the Retrocessionaires under this provision may be drawn upon at
any time, notwithstanding any other provisions in this Contract, and be
utilized by the Company or any successor by operation of law of the
Company, including, without limitation, any liquidator, rehabilitator,
receiver or conservator of such insurer for the following purposes:
(a) to reimburse the Company for the Retrocessionaires' share of
surrenders and benefits or losses paid by the Company under the terms
and provisions of the policies reinsured under this Contract,
(b) to fund an account with the Company in an amount at least equal to
the deduction, for reinsurance ceded, from the Company's liabilities
for policies ceded under this Contract. Such amount shall include,
but not be limited to, amounts for policy reserves, reserves for
claims and losses incurred (including losses incurred but not
reported), and loss adjustment expenses,
(c) to pay any other amounts the Company claims are due under this
Contract,
10
<PAGE>
(d) to return any amounts drawn down on Letters of Credit in excess of
the actual amounts required for (a) and (b) above, or in case of (c)
above, any amounts which are subsequently determined not to be due.
All of the foregoing should be applied without diminution because of
insolvency on the part of the Company or Retrocessionaires.
Citibank, N.A., shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Company or the disposition of
funds withdrawn, except to see that withdrawals are made only upon the
order of properly authorized representatives of the Company.
ARTICLE 17
----------
REINSURANCE TAX
- ---------------
In consideration of the terms under which this Contract is issued, the Company
undertakes not to claim any deduction of the premium hereon when making Canadian
tax returns or when making tax returns, other than Income or Profits Tax
returns, to any State or Territory of the United States of America or to the
District of Columbia.
FEDERAL EXCISE TAX
- ------------------
(This clause applies only to those Retrocessionaires, domiciled outside the
United States of America who are not exempt from the Federal Excise Tax.)
The Retrocessionaires have agreed to allow for the purpose of paying the Federal
Excise Tax the percentage specified by United States law of the premium payable
hereon to the extent such premium is subject to Federal Excise Tax.
In the event of any return of premium becoming due hereunder, the
Retrocessionaires will deduct the percentage specified by United States law from
the amount of the return and the Company or its agent should take steps to
recover the Tax from the United States Government.
ARTICLE 18
----------
CURRENCY
- --------
Wherever the word "Dollars" or the sign "$" appear in this Contract they shall
be construed to mean United States Dollars.
For purposes of this Contract, where the Company receives premiums or pays
losses in currencies other than United States currency, such premiums and losses
shall be converted into United States Dollars at the actual rates of exchange at
which these premiums and losses are entered in the Company's books.
11
<PAGE>
ARTICLE 19
----------
ACCESS TO RECORDS
- -----------------
The Retrocessionaires or their duly designated representative shall have access
to the books and records of the Company at all reasonable times for the purpose
of obtaining information concerning this Contract or the subject matter thereof.
ARTICLE 20
----------
SERVICE OF SUIT CLAUSE
- ----------------------
(This clause applies only to those Retrocessionaires not domiciled in the United
States of America, and/or not authorized in any state, territory and/or district
of the United States where authorization is required by insurance regulatory
authorities.)
It is agreed that in the event of the failure of the Retrocessionaires to pay
any amount claimed to be due under this Contract, the Retrocessionaires, at the
request of the Company, will submit to the jurisdiction of any court of
competent jurisdiction within the United States of America and will comply with
all requirements necessary to give such court jurisdiction; and all matters
arising hereunder shall be determined in accordance with the law and practice of
such court. Nothing in this Clause constitutes or should be understood to
constitute a waiver of Retrocessionaires' rights to commence an action in any
court of competent jurisdiction in the United States, to remove an action to a
United States District Court, or to seek a transfer of a case to another court
as permitted by the laws of the United States or of any state in the United
States.
Service of process in such suit may be made upon Messrs. Mendes and Mount, 750
Seventh Avenue, New York, New York 10019 (hereinafter, "agent for service of
process") and in any suit instituted against any Retrocessionaire(s) upon this
Contract, Retrocessionaire(s) will abide by the final decision of such court or
of any appellate court in the event of an appeal.
The above named are authorized and directed to accept service of process on
behalf of Retrocessionaires in any such suit and/or upon the request of the
Company to give a written undertaking to the Company that the agent for service
of process will enter a general appearance on behalf of Retrocessionaires in the
event such a suit shall be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States of America which makes provision therefore, the Retrocessionaires
hereby designate the Superintendent, Commissioner or Director of Insurance or
other officer specified for that purpose in the statute, or his successor or
successors in office, as their true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Contract and
hereby designate the agent for service of process as the firm to whom the said
officer is authorized to mail such process or a true copy thereof.
12
<PAGE>
ARTICLE 21
----------
INDEMNIFICATION AND ERRORS AND OMISSIONS
- ----------------------------------------
Any recitals in this Contract of the terms and provisions of the original policy
or policies are merely descriptive and the Retrocessionaires are reinsuring, to
the amounts herein provided, the obligations of the Company under the original
policy or policies. The Company shall be the sole judge as to what shall
constitute a claim or loss covered under its policy or policies and as to its
liability thereunder and as to amount or amounts which it shall be proper for
the Company to pay thereunder and the Retrocessionaires shall be bound by the
judgment of the Company as to the liability and obligation of the Company under
its policy or policies.
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, provided such delay, omission or
error is rectified immediately upon discovery.
ARTICLE 22
----------
INSOLVENCY
- ----------
In the event of the insolvency of the Company, this reinsurance shall be payable
directly to the Company, or to its liquidator, receiver, conservator or
statutory successor on the basis of the liability of the Company without
diminution because of the insolvency of the Company or because the liquidator,
receiver, conservator or statutory successor of the Company has failed to pay
all or a portion of any claim. It is agreed, however, that the liquidator,
receiver, conservator or statutory successor of the Company shall give written
notice to the Retrocessionaires of the pendency of a claim against the Company
indicating the policy or bond reinsured, which claim would involve a possible
liability on the part of the Retrocessionaires within a reasonable time after
such claim is flied in the conservation or liquidation proceeding or in the
receivership, and that during the pendency of such claim, the Retrocessionaires
may investigate such claim and interpose, at their own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses that
they may deem available to the Company or its liquidator, receiver, conservator
or statutory successor. The expense thus incurred by the Retrocessionaires shall
be chargeable, subject to the approval of the court, against the Company as part
of the expense of conservation or liquidation to the extent of a pro rata share
of the benefit which may accrue to the Company solely as a result of the defense
undertaken by the Retrocessionaires.
Where two or more Retrocessionaires are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense shall
be apportioned in accordance with the terms of the reinsurance Contract as
though such expense had been incurred by the Company.
As to all reinsurance made, ceded, renewed or otherwise becoming effective under
this Contract, the reinsurance shall be payable as set forth above by the
Retrocessionaires to the Company or to its liquidator, receiver, conservator or
statutory successor, except as provided by Sections
13
<PAGE>
4118(a)(1)(A) and 1114(c) of the New York Insurance Law or except (1) where the
Contract specifically provides another payee in the event of the insolvency of
the Company, and (2) where the Retrocessionaires, with the consent of the direct
insured or insureds, have assumed such policy obligations of the Company as
direct obligations of the Retrocessionaires to the payees under such policies
and in substitution for the obligations of the Company to such payees. Then, and
in that event only, the Company, with the prior approval of the certificate of
assumption on New York risks by the Superintendent of Insurance of the State of
New York, is entirely released from its obligation and the Retrocessionaires pay
any loss directly to payees under such policy.
ARTICLE 23
----------
ARBITRATION
- -----------
As a precedent to any right of action hereunder, if any dispute shall arise
between the parties to this Contract with reference to the interpretation of
this Contract or their rights with respect to any transaction involved, whether
such dispute arises before or after termination of this Contract, such dispute,
upon the written request of either party, shall be submitted to three
arbitrators, one to be chosen by each party, and the third by the two so chosen.
If either party refuses or neglects to appoint an arbitrator within thirty days
after the receipt of written notice from the other party requesting it to do so,
the requesting party may appoint two arbitrators. If the two arbitrators fail to
agree in the selection of a third arbitrator within thirty days of their
appointment, each of them shall name two, of whom the other shall decline one
and the decision shall be made by drawing lots. All arbitrators shall be
executive officers of insurance or reinsurance companies or Underwriters at
Lloyd's, London or their appointed representatives not under the control of
either party to this Contract.
The arbitrators shall interpret this Contract as an honorable engagement and not
as merely a legal obligation; they are relieved of all judicial formalities and
may abstain from following the strict rules of law, and they shall make their
award with a view to effecting the general purpose of this Contract in a
reasonable manner rather than in accordance with a literal interpretation of the
language. Each party shall submit its case to its arbitrator within thirty days
of the appointment of the third arbitrator.
The decision in writing of any two arbitrators, when filed with the parties
hereto, shall be final and binding on both parties. Judgment may be entered upon
the final decision of the arbitrators in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly and equally
bear with the other party the expense of the third arbitrator and of the
arbitration. Said arbitration shall take place in the city in which the
Company's Head Office is located unless some other place is mutually agreed upon
by the parties to this Contract.
14
<PAGE>
EXHIBIT A
---------
FIRST CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each loss
occurrence covered hereunder on which the Company has paid or advanced, or
agreed to pay or advance, or becomes liable to pay to or on behalf of its
reinsured an amount in excess of $24,000,000 ultimate net loss, the
Retrocessionaires shall pay to the Company the amount the excess of
$24,000,000 ultimate net loss in respect of each loss occurrence but the
amount recoverable hereunder shall not exceed $2,000,000 in respect of
each such loss occurrence; and the Retrocessionaires' liability shall be
further subject to the limitations set forth in Section III-
Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also include
all losses under aggregate and/or stop loss contracts assumed by the
Company irrespective of the time of loss or losses occurring under such
contracts providing that all or a portion of said losses occur during the
time of this Contract is in force. The proportion of such loss or losses
that form a part of the Company's ultimate net loss under this Contract
shall be the proportion of the whole aggregate recovery that the original
ceding Reinsured's individual catastrophe loss bears to its total losses
used in arriving at aggregate loss recoveries.
3. The Company shall have the option to extract from one or more aggregate
policies or contracts the amount of loss sustained by the Company arising
from one occurrence or series of occurrences arising out of one event in
order that such loss can be added to the Company's losses from accidents
or series of accidents arising from the same event on other policies or
contracts provided the loss occurs during the term of this Contract and
subject to the terms of paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting from
one occurrence or series of occurrences arising out of one event or cause
on an aggregate policy or contract shall be deemed to be that percentage
of the aggregate loss to the Company on the original policy or contract
that the total loss from the particular accident bears to the total
aggregate losses to the original insured or reinsured on the business
protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $650,000 shall be paid to the
Retrocessionaires in quarterly installments of $162,500 each payable at January
1, April 1, July 1, and October 1, 1994 adjustable at a rate of .05% of the
Company's 1994 calendar year Gross Net Earned
A1
<PAGE>
Premium Income for Non-Standard Auto plus rate of 0.667% of 1994 calendar year
Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted for
during the reinsurance period net after all original deductions and after
deduction of the cost of reinsurance which inures to the benefit of reinsurers
hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned Premium
Income shall be composed of the premium of all classes underwritten by the
Company except for premiums attributable to casualty business and as per
Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is
nevertheless agreed that such exclusion of casualty premiums shall in no way
limit the coverage as respects Workers' Compensation as afforded under this
program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this Contract by
the amount paid. Any amount so exhausted shall be automatically reinstated from
the time of occurrence of the loss and for each amount so reinstated the Company
agrees to pay an additional premium calculated at pro rata of the annual premium
as respects the fraction of indemnity exhausted and 100% of the annual premium
as respect the unexpired term of this Contract, regardless of the time of loss,
to be paid simultaneously with the payment of loss by the Retrocessionaires.
Nevertheless, Retrocessionaires' liability shall not exceed $2,000,000 with
respect to any one loss occurrence and shall not exceed $4,000,000 with respect
to all losses arising during the term of the Contract.
A2
<PAGE>
EXHIBIT B
---------
SECOND CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each loss
occurrence covered hereunder on which the Company has paid or advanced, or
agreed to pay or advance, or becomes liable to pay to or on behalf of its
reinsured an amount in excess of $26,000,000 ultimate net loss, the
Retrocessionaires shall pay to the Company the amount the excess of
$26,000,000 ultimate net loss in respect of each loss occurrence but the
amount recoverable hereunder shall not exceed $12,000,000 in respect of
each such loss occurrence; and the Retrocessionaires' liability shall be
further subject to the limitations set forth in Section III -
Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also include
all losses under aggregate and/or stop loss contracts assumed by the
Company irrespective of the time of loss or losses occurring under such
contracts providing that all or a portion of said losses occur during the
time of this Contract is in force. The proportion of such loss or losses
that form a part of the Company's ultimate net loss under this Contract
shall be the proportion of the whole aggregate recovery that the original
ceding Reinsured's individual catastrophe loss bears to its total losses
used in arriving at aggregate loss recoveries.
3. The Company shall have the option to extract from one or more aggregate
policies or contracts the amount of loss sustained by the Company arising
from one occurrence or series of occurrences arising out of one event in
order that such loss can be added to the Company's losses from accidents or
series of accidents arising from the same event on other policies or
contracts provided the loss occurs during the term of this Contract and
subject to the terms of paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting from one
occurrence or series of occurrences arising out of one event or cause on an
aggregate policy or contract shall be deemed to be that percentage of the
aggregate loss to the Company on the original policy or contract that the
total loss from the particular accident bears to the total aggregate losses
to the original insured or reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $3,900,000 shall be paid to the
Retrocessionaires in quarterly installments of $975,000 each payable at January
1, April 1, July 1 and October 1, 1994 adjustable at a rate of .30% of the
Company's 1994 calendar year Gross Net
B1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 4.0% of 1994
calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted for
during the reinsurance period net after all original deductions and after
deduction of the cost of reinsurance which inures to the benefit of reinsurers
hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned Premium
Income shall be composed of the premium of all classes underwritten by the
Company except for premiums attributable to casualty business and as per
Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is
nevertheless agreed that such exclusion of casualty premiums shall in no way
limit the coverage as respects Workers' Compensation as afforded under this
program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this Contract by
the amount paid. Any amount so exhausted shall be automatically reinstated from
the time of occurrence of the loss and for each amount so reinstated the Company
agrees to pay an additional premium calculated at pro rata of the annual premium
as respects the fraction of indemnity exhausted and 100% of the annual premium
as respects the unexpired term of this Contract, regardless of the time of loss,
to be paid simultaneously with the payment of loss by the Retrocessionaires.
Nevertheless, Retrocessionaires' liability shall not exceed $12,000,000 with
respect to any one loss occurrence and shall not exceed $24,000,000 with respect
to all losses arising during the term of the Contract.
B2
<PAGE>
EXHIBIT C
---------
THIRD CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each loss
occurrence covered hereunder on which the Company has paid or advanced, or
agreed to pay or advance, or becomes liable to pay to or on behalf of its
reinsured an amount in excess of $38,000,000 ultimate net loss, the
Retrocessionaires shall pay to the Company the amount the excess of
$38,000,000 ultimate net loss in respect of each loss occurrence but the
amount recoverable hereunder shall not exceed $10,000,000 in respect of
each such loss occurrence; and the Retrocessionaires' liability shall be
further subject to the limitations set forth in Section III- Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also include
all losses under aggregate and/or stop loss contracts assumed by the
Company irrespective of the time of loss or losses occurring under such
contracts providing that all or a portion of said losses occur during the
time of this Contract is in force. The proportion of such loss or losses
that form a part of the Company's ultimate net loss under this Contract
shall be the proportion of the whole aggregate recovery that the original
ceding Reinsured's individual catastrophe loss bears to its total losses
used in arriving at aggregate loss recoveries.
3. The Company shall have the option to extract from one or more aggregate
policies or contracts the amount of loss sustained by the Company arising
from one occurrence or series of occurrences arising out of one event in
order that such loss can be added to the Company's losses from accidents or
series of accidents arising from the same event on other policies or
contracts provided the loss occurs during the term of this Contract and
subject to the terms of paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting from one
occurrence or series of occurrences arising out of one event or cause on an
aggregate policy or contract shall be deemed to be that percentage of the
aggregate loss to the Company on the original policy or contract that the
total loss from the particular accident bears to the total aggregate losses
to the original insured or reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $2,575,000 shall be paid to the
Retrocessionaires in quarterly installments of $643,750 each payable at January
1, April 1, July 1 and October 1, 1994, adjustable at a rate of .20% of the
Company's 1994 calendar year Gross Net
C1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 2.63 % of 1994
calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted for
during the reinsurance period net after all original deductions and after
deduction of the cost of reinsurance which inures to the benefit of reinsurers
hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned Premium
Income shall be composed of the premium of all classes underwritten by the
Company except for premiums attributable to casualty business and as per
Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is
nevertheless agreed that such exclusion of casualty premiums shall in no way
limit the coverage as respects Workers' Compensation as afforded under this
program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this Contract by
the amount paid. Any amount so exhausted shall be automatically reinstated from
the time of occurrence of the loss and for each amount so reinstated the Company
agrees to pay an additional premium calculated at pro rata of the annual premium
as respects the fraction of indemnity exhausted and 100% of the annual premium
as respects the unexpired term of this Contract, regardless of the time of loss,
to be paid simultaneously with the payment of loss by the Retrocessionaires.
Nevertheless, Retrocessionaires' liability shall not exceed $10,000,000 with
respect to any one loss occurrence and shall not exceed $20,000,000 with respect
to all losses arising during the term of the Contract.
C2
<PAGE>
EXHIBIT D
---------
FOURTH CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each loss
occurrence covered hereunder on which the Company has paid or advanced, or
agreed to pay or advance, or becomes liable to pay to or on behalf of its
reinsured an amount in excess of $48,000,000 ultimate net loss, the
Retrocessionaires shall pay to the Company the amount the excess of
$48,000,000 ultimate net loss in respect of each loss occurrence but the
amount recoverable hereunder shall not exceed $12,000,000 in respect of
each such loss occurrence; and the Retrocessionaires' liability shall be
further subject to the limitations set forth in Section III-Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also include
all losses under aggregate and/or stop loss contracts assumed by the
Company irrespective of the time of loss or losses occurring under such
contracts providing that all or a portion of said losses occur during the
time of this Contract is in force. The proportion of such loss or losses
that form a part of the Company's ultimate net loss under this Contract
shall be the proportion of the whole aggregate recovery that the original
ceding Reinsured's individual catastrophe loss bears to its total losses
used in arriving at aggregate loss recoveries.
3. The Company shall have the option to extract from one or more aggregate
policies or contracts the amount of loss sustained by the Company arising
from one occurrence or series of occurrences arising out of one event in
order that such loss can be added to the Company's losses from accidents or
series of accidents arising from the same event on other policies or
contracts provided the loss occurs during the term of this Contract and
subject to the terms of paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting from one
occurrence or series of occurrences arising out of one event or cause on an
aggregate policy or contract shall be deemed to be that percentage of the
aggregate loss to the Company on the original policy or contract that the
total loss from the particular accident bears to the total aggregate losses
to the original insured or reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $2,640,000 shall be paid to the
Retrocessionaires in quarterly installments of $660,000 each payable at January
1, April 1, July 1 and October 1, 1994, adjustable at a rate of .20% of the
Company's 1994 calendar year Gross Net
D1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 2.70% of 1994
calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted for
during the reinsurance period net after all original deductions and after
deduction of the cost of reinsurance which inures to the benefit of reinsurers
hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned Premium
Income shall be composed of the premium of all classes underwritten by the
Company except for premiums attributable to casualty business and as per
Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is
nevertheless agreed that such exclusion of casualty premiums shall in no way
limit the coverage as respects Workers' Compensation as afforded under this
program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this Contract by
the amount paid. Any amount so exhausted shall be automatically reinstated from
the time of occurrence of the loss and for each amount so reinstated the Company
agrees to pay an additional premium calculated at pro rata of the annual premium
as respects the fraction of indemnity exhausted and 100% of the annual premium
as respects the unexpired term of this Contract, regardless of the time of loss,
to be paid simultaneously with the payment of loss by the Retrocessionaires.
Nevertheless, Retrocessionaires' liability shall not exceed $12,000,000 with
respect to any one loss occurrence and shall not exceed $24,000,000 with respect
to all losses arising during the term of the Contract.
D2
<PAGE>
INTERESTS AND LIABILITIES AGREEMENT
to the
CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
between
SCOR REINSURANCE COMPANY
(hereinafter referred to as "Company")
and
SCOR SA
Paris, France
(hereinafter referred to as "Subscribing Retrocessionaire")
It is hereby mutually agreed by and between the Company on the one part and the
Subscribing Retrocessionaire on the other part that the Subscribing
Retrocessionaire's share in the Interests and Liabilities of the
Retrocessionaires as set forth in the Exhibits attached to and forming an
integral part of the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT shall be
for
12.50% of Exhibit A
19.16% of Exhibit B
7.50 % of Exhibit C
15.00% of Exhibit D
25.00% of Exhibit E
The share of the Subscribing Retrocessionaire in the Interests and Liabilities
of the Retrocessionaires in respect of the said Contract shall be separate and
apart from the shares of the other Subscribing Retrocessionaires to the said
Contract, and the Interests and Liabilities of the Subscribing Retrocessionaire
shall not be joint with those of the other Subscribing Retrocessionaires and in
no event shall the Subscribing Retrocessionaire participate in the Interests and
Liabilities of the other Subscribing Retrocessionaires.
This Interests and Liabilities Agreement shall take effect at 12:01 a.m.,
Eastern Standard Time, January 1, 1995 and shall remain in force until 12:01
a.m., Eastern Standard Time, January 1, 1996 but may be terminated in accordance
with the provisions of the paragraph of ARTICLE 3, COMMENCEMENT AND TERMINATION,
of the Catastrophe Excess of Loss Reinsurance Contract attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed, in duplicate, by their duly authorized representatives
this day of 1995.
For and on behalf of:
SCOR REINSURANCE COMPANY
------------------------------------------------------------
Sr. Vice President Assistant Vice President
And on this day of , 1995.
For and on behalf of:
SCOR S.A.
Paris, France
------------------------------------------------------------
Exhibit (c)(6)
INTERESTS AND LIABILITIES AGREEMENT
to the
CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
between
SCOR REINSURANCE COMPANY
(hereinafter referred to as "Company")
and
SCOR Reassurance
Paris, France
(hereinafter referred to as "Subscribing Retrocessionaire")
It is hereby mutually agreed by and between the Company on the one part and
the Subscribing Retrocessionaire on the other part that the Subscribing
Retrocessionaire's share in the Interests and Liabilities of the
Retrocessionaires as set forth in the Exhibits attached to and forming an
integral part of the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT shall
be for
12.50% of Exhibit A
19.16% of Exhibit B
7.50% of Exhibit C
15.00% of Exhibit D
25.00% of Exhibit E
The share of the Subscribing Retrocessionaire in the Interests and
Liabilities of the Retrocessionaires in respect of the said Contract shall
be separate and apart from the shares of the other Subscribing
Retrocessionaires to the said Contract, and the Interests and Liabilities
of the Subscribing Retrocessionaire shall not be joint with those of the
other Subscribing Retrocessionaires and in no event shall the Subscribing
Retrocessionaire participate in the Interests and Liabilities of the other
Subscribing Retrocessionaires.
This Interests and Liabilities Agreement shall take effect at 12:01 a.m.,
Eastern Standard Time, January 1, 1995 and shall remain in force until
12:01 a.m., Eastern Standard Time, January 1, 1996 but may be terminated in
accordance with the provisions of the paragraph of ARTICLE 3, COMMENCEMENT
AND TERMINATION, of the Catastrophe Excess of Loss Reinsurance Contract
attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed, in duplicate, by their duly authorized representatives this
day of 1995.
For and on behalf of:
SCOR REINSURANCE COMPANY
----------------------------------------------------------------
Sr. Vice President Assistant Vice President
And on this day of , 1995.
For and on behalf of:
SCOR Reassurance
Paris, France
----------------------------------------------------------------
<PAGE>
CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
TABLE OF CONTENTS
-----------------
Article Page
------- ----
1 Business Covered 1
2 Exclusions 1
3 Commencement and Termination 5
4 Extended Expiration 5
5 Insuring Clause 5
6 Premium 5
7 Reinstatement 5
8 Definition of "Loss Occurrence" 6
9 Extra Contractual Obligations Clause 6
10 Ultimate Net Loss 6
11 Warranty 7
12 Excess of Original Policy Limits 8
13 Net Retained Lines 8
14 War Inclusion Clause (Ocean Marine Only) 8
15 Notice of Loss and Loss Settlements 9
16 Loss Reserves 9
17 Reinsurance Tax 11
Federal Excise Tax 11
18 Currency 12
19 Access to Records 12
20 Service of Suit Clause 12
21 Indemnification and Errors and Omission 13
22 Insolvency 13
23 Arbitration 14
Exhibits: A1-A2, B1-B2, C1-C2, D1-D2 and El-E2.
Attachments: Pools, Associations and Syndicates Exclusion Clause;
Nuclear Energy Risks Exclusion Clause (Reinsurance) (1984)
(Worldwide Excluding U.S.A. & Canada);
Nuclear Incident Exclusion Clause - Liability - Reinsurance
- U.S.A. and Canada;
Nuclear Incident Exclusion Clause - Physical Damage and
Liability (Boiler and Machinery Policies) - Reinsurance;
- U.S.A. and Canada;
Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance - U.S.A. and Canada;
Insolvency Funds Exclusion Clause.
Several Liability Notice.
<PAGE>
CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(hereinafter referred to as "Contract")
In consideration of the mutual covenants hereinafter contained and subject
to all the terms and conditions hereinafter set forth
VARIOUS INSURANCE AND/OR REINSURANCE COMPANIES
AND/OR UNDERWRITING MEMBERS OF LLOYD'S
(hereinafter collectively referred to as "Retrocessionaires")
do hereby indemnify, as herein provided and specified, the
SCOR REINSURANCE COMPANY
(hereinafter referred to as "Company")
ARTICLE 1
---------
BUSINESS COVERED
- ----------------
This Contract shall indemnify the Company as set forth in the attached
Exhibit(s) in respect of the excess liability which may accrue to the
Company under all policies, bonds, binders and contracts, oral or written,
(hereinafter referred to as "policy" or "policies" and/or "contract" or
"contracts") covering all Treaty and Facultative reinsurance assumed by the
Company including but not limited to the following classes of business:
Fire, Extended coverage, other Allied Lines, Homeowners or Farmowners
Multiple Peril, Commercial Multiple Peril, Earthquake, Boiler & Machinery,
Automobile Physical Damage (excluding Collision), Inland Marine business
(including pleasure watercraft classified as Inland Marine), Ocean Marine,
and Workers Compensation and/or Employers Liability arising out of the
Company's Property/Multi-line portfolio, subject to the exclusions set
forth in ARTICLE 2, EXCLUSIONS and the other terms and conditions of this
agreement as set forth herein.
ARTICLE 2
---------
EXCLUSIONS
- ----------
This Contract does not apply to and excludes from coverage hereunder:
1. Business written on behalf of, or as a member or direct reinsurer
of any pools, syndicates and associations as per the "Pools
Exclusions Clause". This exclusion shall not, however, apply as
respects the Company's interest in the following:
<PAGE>
a) Allendale Mutual Insurance Company and its subsidiary
companies;
b) Arkwright Mutual Insurance Company and Arkwright Insurance
Company;
c) Improved Risk Mutuals;
d) Industrial Risk Insurers;
e) Protection Mutual Insurance Company;
f) Starr Technical Risks Agency, Inc.;
g) California Reinsurance Management Corporation;
It is, however, understood and agreed that the amount of the
Retrocessionaires' liability hereunder shall not be increased by
reason of the failure of any other participant in any of the
above-named pools, syndicates, or associations to meet its
liability, nor shall any such liability be included in the
Company's net retained liability for purposes of claim hereunder.
2. Nuclear Energy risks Exclusion Clause (Worldwide Excluding U.S.A.
& Canada), N.M.A. 1975
Nuclear Incident Exclusion Clause - Liability - Reinsurance
Nuclear Incident Exclusion Clause - Physical Damage and Liability
(Boiler and Machinery Policies) - Reinsurance
Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance
Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
Canada
Nuclear Incident Exclusion Clause - Physical Damage and Liability
(Boiler and Machinery Policies) - Reinsurance - Canada
Nuclear Incident Exclusion Clause - Liability - Reinsurance -
Canada
(as per clauses attached).
3. Business written under policies, contracts, and binders of
reinsurance which the Company elects to exclude hereunder,
provided, however, that the Company shall properly identify each
such policy, contract, and binder or reinsurance on its records
at the time it is written (this Exclusion applies primarily to
Banking and Funding Plans);
2
<PAGE>
4. Loss or damage occasioned by war, invasion, hostilities, acts of
foreign enemies, civil war, rebellion, insurrection, military or
usurped power, martial law or confiscation by order of any
government or public authority, but the foregoing shall not apply
to:
(1) Workers' Compensation, Employers' Liability, Registered Mail
or any other classes of business which are traditionally
written without a War Exclusion Clause.
(2) Ocean Marine business when war is an included peril, subject
to the war inclusion clause of 1977 per ARTICLE 14, WAR
INCLUSION CLAUSE IN RESPECT OCEAN MARINE.
(3) Original Reinsurance Contracts or Original Policies
containing a standard War Exclusion Clause.
5. Life Business.
6. Aviation business (including satellites). This exclusion shall
not, however, exclude aviation business when assumed by the
Company as an incidental portion of a multiple-line reinsurance
contract that is otherwise covered hereunder;
7. Business classified as Surety, Financial Guarantee, Insolvency
and Credit.
8. The Company's interest either direct or by way of reinsurance in
loss arising from another party or parties.
Notwithstanding the foregoing, this Contract shall not exclude:
(a) Workers' Compensation and/or Employers' Liability arising
from the following perils:
Fire, Lightning, Explosion, Structural Collapse, Windstorm,
Hail, Flood, Falling Objects, Seismic Activity, Volcanic
Eruption, Collision, Riot, Strikes, Civil Commotion,
Malicious Damage.
(b) Any Physical Damage and/or Consequential Loss coverage
contingent thereon effected by an insured on behalf of
another party (this applies principally to care, custody and
control exposures under bailee coverages).
9. Crop Hail business.
10. Losses arising, by contract, operation of law, or otherwise,
whether voluntary or involuntary, under any insolvency fund.
"Insolvency Fund" includes any
3
<PAGE>
insolvency fund, guaranty fund, plan, pool, association, or other
arrangement, howsoever denominated, established or governed,
which provides for any assessment of or payment or assumption by
the Company of part or all of any claim, debt, charge, fee, or
other obligation of an insurer, or its successors or assigns,
which has been declared by any competent authority to be
insolvent, or which is otherwise deemed unable to meet any claim,
debt, charge, fee or other obligation in whole or in part.
11. LMX and reinsurance assumed business.
12. All losses which may be sustained by the Company howsoever and
wheresoever arising including all Business Interruption,
Consequential Loss and/or other contingent losses proximately
caused by a peril insured in respect of the Company's exposures
from:
a. All marine business when written as such, howsoever not to
exclude such exposures if they emanate from a multiline
insurance contract and/or policy.
b. All Offshore exposures arising from business of any
description connected with the oil and/or gas and/or sulphur
and/or uranium exploration and production industries in all
their phases and including all associated support and/or
service industries.
"Offshore" shall be defined as:
(1) That area encompassing locations covered by oceans or seas
in which the water ebbs and flows
and/or
(2) Other navigable waters or waterways which shall mean any
water which is in fact navigable by ships or vessels,
whether or not the tide ebbs and flows there, and whether or
not there is a public right of navigation in that water.
13. Losses from overhead transmission and distribution lines on a new
and renewal basis.
14. All business of reassureds domiciled outside the United States,
Canada and Bermuda and their possessions. However, not to exclude
reassureds domiciled outside of these areas where the exposures
are predominantly derived from the United States, Canada and
Bermuda and their territories and possessions.
4
<PAGE>
ARTICLE 3
---------
COMMENCEMENT AND TERMINATION
- ----------------------------
The term of this Contract shall be from 12:01 a.m., Eastern Standard Time,
January 1, 1995 to 12:01 a.m., Eastern Standard Time, January 1, 1996.
In respect to all business covered hereunder except as provided for in the
following paragraphs of this Article and except as provided for in Section
I, Insuring Clause of the Exhibit(s), this Contract shall apply to all loss
occurrences taking place during the term of this Contract.
In the case of a missing vessel or aircraft the date of the loss occurrence
shall be deemed to be the date on which the vessel or aircraft is posted as
missing at Lloyd's or, in the case of a missing vessel or aircraft not so
posted, the last known safe date.
If any law or regulation of the federal, state or local government of any
jurisdiction in which the Company is doing business shall render illegal
the arrangements made in this Contract, this Contract can be terminated
immediately, insofar as it applies to such jurisdiction, by the Company
giving notice to the Retrocessionaires to such effect.
ARTICLE 4
---------
EXTENDED EXPIRATION
- -------------------
If this Contract terminates while a loss covered hereunder is in progress,
it is agreed that, subject to the other conditions of this Contract, the
Retrocessionaires shall indemnify the Company as if the entire loss had
occurred during the term of this Contract.
ARTICLE 5
---------
INSURING CLAUSE
- ---------------
See Section I of the Exhibit(s) attached hereto.
ARTICLE 6
---------
PREMIUM
- -------
See Section II of the Exhibit(s) attached hereto.
ARTICLE 7
---------
REINSTATEMENT
- -------------
See Section III of the Exhibit(s) attached hereto.
5
<PAGE>
ARTICLE 8
---------
DEFINITION OF "LOSS OCCURRENCE"
- -------------------------------
The term "loss occurrence" as used herein shall mean any one accident,
casualty, disaster or occurrence, or series of accidents, casualties,
disasters or occurrences arising out of or caused by one event regardless
of the number of interests reinsured or the number of policies or contracts
involved or the number or kinds of perils involved, subject to the
warranties set forth in ARTICLE 11, WARRANTY. Furthermore, all losses
arising out of or resulting from the same occurrence or disaster shall be
considered one occurrence or one disaster.
ARTICLE 9
---------
EXTRA CONTRACTUAL OBLIGATIONS CLAUSE
- ------------------------------------
This Contract shall protect the Company within the limits hereof, where the
ultimate net loss includes any extra contractual obligations. The term
"extra contractual obligations" is defined as those liabilities not covered
under any other provision of this Contract and which arise from the
handling of any claim on business covered hereunder, such liabilities
arising because of, but not limited to, the following: failure by the
Company to settle within the policy limit, or by reason of alleged or
actual negligence, fraud or bad faith in rejecting an offer of settlement
or in the preparation of the defense or in the trial of any action against
its insured or reinsured or in the preparation or prosecution of an appeal
consequent upon such action. In no event shall coverage be provided to the
extent that such coverage is not permitted under New York State Insurance
Law.
The date on which any extra contractual obligation is incurred by the
Company shall be deemed, in all circumstances, to be the date of the
original disaster and/or casualty.
However, this Article shall not apply where the loss has been incurred due
to fraud of a member of the Board of Directors or a corporate officer of
the Company acting individually or collectively or in collusion with any
individual or corporation of any other organization or party involved in
the presentation, defense or settlement of any claim covered hereunder.
ARTICLE 10
----------
ULTIMATE NET LOSS
- -----------------
The term "ultimate net loss" shall be understood to mean the actual loss or
losses paid or payable by the Company under its contracts of reinsurance,
and 80% of extra contractual obligations as defined in ARTICLE 9, EXTRA
CONTRACTUAL OBLIGATIONS CLAUSE, and 100% of excess of policy limits losses
as defined in ARTICLE 12, EXCESS OF ORIGINAL POLICY LIMITS CLAUSE, such
loss or losses to include the Company's expenses of litigation
6
<PAGE>
if any, and all other loss expenses covered under the Company's original
policies, (including a pro rata share of salaries and expenses of the
Company's field employees according to the time occupied in adjusting such
loss and expenses of the Company's officials incurred in connection with
the loss but salaries of officials and any office expenses of the Company
shall not be included) less proper deductions for all recoveries (including
amounts recoverable under other reinsurance except as stated in the
following paragraph). All salvages, recoveries, and payments recovered or
received subsequent to a loss settlement under this Contract shall be
applied as if recovered or received prior to the said settlement and all
necessary adjustments shall be made by the parties hereto.
Notwithstanding the preceding paragraph, recoveries from Reinsurance
afforded under the Company's Contingency Excess of Loss Cover and/or Per
Risk Excess of Loss Cover shall be deducted when arriving at the ultimate
net loss hereunder. Recoveries afforded from Aggregate or Stop Loss
reinsurances, if any, as well as underlying catastrophe excess of loss
covers, if any, shall be disregarded when arriving at the ultimate net loss
hereunder.
Whenever the Company or its ceding companies issue a lost instrument bond
or a loss instrument letter of indemnity for salvage purposes or in lieu of
loss payment under its policy, Retrocessionaires agree to accept liability
under such bond or letter of indemnity in accordance with the terms of this
Contract.
ARTICLE 11
----------
WARRANTY
- --------
It is warranted that Retrocessionaires shall not be liable under this
Contract unless two or more original risks are involved in the same loss
occurrence.
It is warranted that as respects Treaty business assumed by the Company,
the maximum net line will be $2,000,000 any one program or so deemed.
It is warranted the maximum amount of loss any one occurrence to be
included in the Ultimate Net Loss hereon as respects each individual
proportional treaty participation is limited to 2.5 times the premium
income for each individual proportional treaty participation, or so deemed.
The Company will be the sole judge as to what constitutes one risk and/or
program.
It is further warranted that the Company will retain net for its own
account and unreinsured not less that 5% of the ultimate net loss covered
hereunder, not including the Company's first loss retention hereunder.
7
<PAGE>
ARTICLE 12
----------
EXCESS OF ORIGINAL POLICY LIMITS
- --------------------------------
This Contract shall protect the Company, within the limits hereof, in
connection with ultimate net loss in excess of the limit of its original
policy, such loss in excess of the limit having been incurred because of
failure by it to settle within the policy limit or by reason of alleged or
actual negligence, fraud or bad faith in rejecting an offer of settlement
or in the preparation of the defense or in the trial of any action against
its insured or reinsured or in the preparation or prosecution of an appeal
consequent upon such action. In no event shall coverage be provided to the
extent that such coverage is not permitted under New York State Insurance
Law.
However, this Article shall not apply where the loss has been incurred due
to fraud by a member of the Board of Directors or a corporate officer of
the Company acting individually or collectively or in collusion with any
individual or corporation or any other organization or party involved in
the presentation, defense or settlement of any claim covered hereunder.
For the purposes of this Article, the word "loss" shall mean any amounts
for which the Company would have been contractually liable to pay had it
not been for the limit of the original policy.
ARTICLE 13
----------
NET RETAINED LINES
- ------------------
This Contract applies only to that portion of any reinsurance which the
Company retains net for its own account and in calculating the amount of
any loss hereunder and also in computing the amount or amounts in excess of
which this Contract attaches, only loss or losses in respect of that
portion of any reinsurance which the Company retains net for its own
account shall be included.
The amount of Retrocessionaires' liability hereunder in respect of any loss
or losses shall not be increased by reason of the inability of the Company
to collect from any other Retrocessionaires whether specific or general,
any amounts which may have become due from them whether such inability
arises from the insolvency of such other Retrocessionaires or otherwise.
ARTICLE 14
----------
WAR INCLUSION CLAUSE IN RESPECT OF OCEAN MARINE ONLY
- ----------------------------------------------------
This Contract includes loss, damage, liability or expense caused by or
resulting from the risks of War as covered in the original policy(ies)
provided that such loss, damage, liability or expense would be recoverable
under the terms and conditions of the Institute War Clauses in current use
at the inception of this Contract or at the time when the War risks cover
would have commenced under the original insurance within the terms of these
clauses, whichever is the
8
<PAGE>
earlier; except that if the risks of War are covered in the original
policy(ies) under clauses approved by the London Hull War Risks Joint Sub-
Committee, or in respect of Cargo interests, under the Standard War Risk
Clause of any country which complies with the limitations of the United
Kingdom Waterborne Agreement, the foregoing provision shall not apply.
In the event of loss or losses occurring under War Inclusion Clause the
indemnity under this Contract shall be automatically reinstated to its full
amount from the time of such loss or losses until the next succeeding of
the Contract Anniversary in accordance with the general reinstatement
conditions (if any) of the Contract. Nevertheless, and irrespective of any
other reinstatement conditions of the Contract, the Retrocessionaires shall
never be liable for more than the indemnity provided hereunder in respect
of any one loss occurring and in respect of all losses occurring during the
term of this Contract.
ARTICLE 15
----------
NOTICE OF LOSS AND LOSS SETTLEMENTS
- -----------------------------------
In the event of a loss occurrence which either results in or appears to be
of serious enough nature as probably to result in a loss involving this
Contract, the Company shall give notice as soon as reasonably practicable
to Retrocessionaires.
Subject to all the terms and conditions of this Contract, the
Retrocessionaires agree to abide by the loss settlements of the Company,
including any award resulting from an arbitration between the Company and
its ceding companies under the terms of any underlying policies or
contracts, such settlements to be considered as satisfactory proofs of
loss, and amounts falling to the share of the Retrocessionaires shall be
immediately payable to the Company by them upon reasonable evidence of the
amount paid or payable by the Company being presented to Retrocessionaires.
ARTICLE 16
----------
LOSS RESERVES
- -------------
(This clause applies to those Retrocessionaires who do not qualify for
credit by any state or any other governmental authority having jurisdiction
over the Company's loss reserves.)
A: Where a Letter of Credit Trust Agreement is used, the following clause
shall apply:
It is agreed that when the Company files with the Insurance Department
or establishes reserves for claims covered hereunder, as required by
law, the Company will forward to the Retrocessionaires a statement
showing the proportion of such loss reserves which is applicable to
Retrocessionaires. The Retrocessionaires hereby agree to apply for and
secure delivery to the Company of a clean, irrevocable and
unconditional Letter of Credit, with a minimum term of one year,
issued by Citibank, N.A., in a format acceptable to the governmental
authority having jurisdiction over the Company's loss reserves in an
amount equal to the Retrocessionaires' proportion of said loss
reserves.
9
<PAGE>
Under no circumstances shall any amount relating to reserves in respect of
incurred but not reported losses be funded in the amount of the Letter of
Credit. The foregoing shall not affect the Company's authority to draw upon
the Letter of Credit to cover all obligations due or which become due to
the Company under this Contract, including losses incurred but not
reported, in the event that a nonrenewal or nonextension notice is received
from the issuing bank.
The Company and the Retrocessionaires agree that such Letter of Credit will
be subject to the terms of a separate Letter of Credit Trust Agreement, and
that said trust agreement shall be in a form acceptable to the governmental
authority having jurisdiction over the Company's loss reserves.
Citibank, N.A., shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Company or the disposition of
funds withdrawn, except to see that withdrawals are made only upon the
order of properly authorized representatives of the Company.
B: Where a Letter of Credit Trust Agreement is not used, the following
clause shall apply:
It is agreed that when the Company files with the Insurance Department
or establishes reserves for claims covered under this Contract, as
required by law, the Company will forward to the Retrocessionaires a
statement showing the proportion of such loss reserves which is
applicable to Retrocessionaires. The Retrocessionaires hereby agree to
apply for and secure delivery to the Company of a clean, irrevocable
and unconditional Letter of Credit, with a minimum term of one year,
issued by Citibank, N.A., in a format acceptable to the governmental
authority having jurisdiction over the Company's loss reserves in an
amount equal to the Retrocessionaires' proportion of said loss
reserves. Under no circumstances shall any amount relating to reserves
in respect of incurred but not reported losses be funded in the amount
of the Letter of Credit. The foregoing shall not affect the Company's
authority to draw upon the Letter of Credit to cover all obligations
due or which become due to the Company under this Contract, including
losses incurred but not reported, in the event that a nonrenewal or
nonextension notice is received from the issuing bank.
The Company and the Retrocessionaires agree that the Letter of Credit
provided by the Retrocessionaires under this provision may be drawn
upon at any time, notwithstanding any other provisions in this
Contract, and be utilized by the Company or any successor by operation
of law of the Company, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of such insurer for the
following purposes:
(a) to reimburse the Company for the Retrocessionaires' share of
surrenders and benefits or losses paid by the Company under the
terms and provisions of the policies reinsured under this
Contract,
(b) to fund an account with the Company in an amount at least equal
to the
10
<PAGE>
deduction, for reinsurance ceded, from the Company's liabilities
for policies ceded under this Contract. Such amount shall
include, but not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including losses
incurred but not reported), and loss adjustment expenses,
(c) to pay any other amounts the Company claims are due under this
Contract,
(d) to return any amounts drawn down on Letters of Credit in excess
of the actual amounts required for (a) and (b) above, or in case
of (c) above, any amounts which are subsequently determined not
to be due.
All of the foregoing should be applied without diminution because of
insolvency on the part of the Company or Retrocessionaires.
Citibank, N.A., shall have no responsibility whatsoever in connection
with the propriety of withdrawals made by the Company or the
disposition of funds withdrawn, except to see that withdrawals are
made only upon the order of properly authorized representatives of the
Company.
ARTICLE 17
----------
REINSURANCE TAX
- ---------------
In consideration of the terms under which this Contract is issued, the
Company undertakes not to claim any deduction of the premium hereon when
making Canadian tax returns or when making tax returns, other than Income
or Profits Tax returns, to any State or Territory of the United States of
America or to the District of Columbia.
FEDERAL EXCISE TAX
- ------------------
(This clause applies only to those Retrocessionaires, domiciled outside the
United States of America who are not exempt from the Federal Excise Tax.)
The Retrocessionaires have agreed to allow for the purpose of paying the
Federal Excise Tax the percentage specified by United States law of the
premium payable hereon to the extent such premium is subject to Federal
Excise Tax.
In the event of any return of premium becoming due hereunder, the
Retrocessionaires will deduct the percentage specified by United States law
from the amount of the return and the Company or its agent should take
steps to recover the Tax from the United States Government.
11
<PAGE>
ARTICLE 18
----------
CURRENCY
- --------
Wherever the word "Dollars" or the sign "$" appear in this Contract they
shall be construed to mean United States Dollars.
For purposes of this Contract, where the Company receives premiums or pays
losses in currencies other than United States currency, such premiums and
losses shall be converted into United States Dollars at the actual rates of
exchange at which these premiums and losses are entered in the Company's
books.
ARTICLE 19
----------
ACCESS TO RECORDS
- -----------------
The Retrocessionaires or their duly designated representative shall have
access to the books and records of the Company at all reasonable times for
the purpose of obtaining information concerning this Contract or the
subject matter thereof.
ARTICLE 20
----------
SERVICE OF SUIT CLAUSE
- ----------------------
(This clause applies only to those Retrocessionaires not domiciled in the
United States of America, and/or not authorized in any state, territory
and/or district of the United States where authorization is required by
insurance regulatory authorities.)
It is agreed that in the event of the failure of the Retrocessionaires to
pay any amount claimed to be due under this Contract, the
Retrocessionaires, at the request of the Company, will submit to the
jurisdiction of any court of competent jurisdiction within the United
States of America and will comply with all requirements necessary to give
such court jurisdiction; and all matters arising hereunder shall be
determined in accordance with the law and practice of such court. Nothing
in this Clause constitutes or should be understood to constitute a waiver
of Retrocessionaires' rights to commence an action in any court of
competent jurisdiction in the United States, to remove an action to a
United States District Court, or to seek a transfer of a case to another
court as permitted by the laws of the United States or of any state in the
United States.
Service of process in such suit may be made upon Messrs. Mendes and Mount,
750 Seventh Avenue, New York, New York 10019 (hereinafter, "agent for
service of process") and in any suit instituted against any
Retrocessionaire(s) upon this Contract, Retrocessionaire(s) will abide by
the final decision of such court or of any appellate court in the event of
an appeal.
The above named are authorized and directed to accept service of process on
behalf of Retrocessionaires in any such suit and/or upon the request of the
Company to give a written
12
<PAGE>
undertaking to the Company that the agent for service of process will enter
a general appearance on behalf of Retrocessionaires in the event such a
suit shall be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States of America which makes provision therefor, the
Retrocessionaires hereby designate the Superintendent, Commissioner or
Director of Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as their true and lawful
attorney upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Contract and hereby designate the agent for
service of process as the firm to whom the said officer is authorized to
mail such process or a true copy thereof.
ARTICLE 21
----------
INDEMNIFICATION AND ERRORS AND OMISSIONS
- ----------------------------------------
Any recitals in this Contract of the terms and provisions of the original
policy or policies are merely descriptive and the Retrocessionaires are
reinsuring, to the amounts herein provided, the obligations of the Company
under the original policy or policies. The Company shall be the sole judge
as to what shall constitute a claim or loss covered under its policy or
policies and as to its liability thereunder and as to amount or amounts
which it shall be proper for the Company to pay thereunder and the
Retrocessionaires shall be bound by the judgment of the Company as to the
liability and obligation of the Company under its policy or policies.
Any inadvertent delay, omission or error shall not be held to relieve
either party hereto from any liability which would attach to it hereunder
if such delay, omission or error had not been made, provided such delay,
omission or error is rectified immediately upon discovery.
ARTICLE 22
----------
INSOLVENCY
- ----------
In the event of the insolvency of the Company, this reinsurance shall be
payable directly to the Company, or to its liquidator, receiver,
conservator or statutory successor on the basis of the liability of the
Company without diminution because of the insolvency of the Company or
because the liquidator, receiver, conservator or statutory successor of the
Company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor
of the Company shall give written notice to the Retrocessionaires of the
pendency of a claim against the Company indicating the policy or bond
reinsured, which claim would involve a possible liability on the part of
the Retrocessionaires within a reasonable time after such claim is filed in
the conservation or liquidation proceeding or in the receivership, and that
during the pendency of such claim, the Retrocessionaires may investigate
such claim and interpose, at their own expense, in the proceeding where
such claim is to be adjudicated any defense or defenses that they may deem
available to the Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the
13
<PAGE>
Retrocessionaires shall be chargeable, subject to the approval of the
court, against the Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by the
Retrocessionaires.
Where two or more Retrocessionaires are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense
shall be apportioned in accordance with the terms of the reinsurance
Contract as though such expense had been incurred by the Company.
As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Contract, the reinsurance shall be payable as set forth above by
the Retrocessionaires to the Company or to its liquidator, receiver,
conservator or statutory successor, except as provided by Sections
4118(a)(1)(A) and 1114(c) of the New York Insurance Law or except (1) where
the Contract specifically provides another payee in the event of the
insolvency of the Company, and (2) where the Retrocessionaires, with the
consent of the direct insured or insureds, have assumed such policy
obligations of the Company as direct obligations of the Retrocessionaires
to the payees under such policies and in substitution for the obligations
of the Company to such payees. Then, and in that event only, the Company,
with the prior approval of the certificate of assumption on New York risks
by the Superintendent of Insurance of the State of New York, is entirely
released from its obligation and the Retrocessionaires pay any loss
directly to payees under such policy.
ARTICLE 23
----------
ARBITRATION
- -----------
As a precedent to any right of action hereunder, if any dispute shall arise
between the parties to this Contract with reference to the interpretation
of this Contract or their rights with respect to any transaction involved,
whether such dispute arises before or after termination of this Contract,
such dispute, upon the written request of either party, shall be submitted
to three arbitrators, one to be chosen by each party, and the third by the
two so chosen. If either party refuses or neglects to appoint an arbitrator
within thirty days after the receipt of written notice from the other party
requesting it to do so, the requesting party may appoint two arbitrators.
If the two arbitrators fail to agree in the selection of a third arbitrator
within thirty days of their appointment, each of them shall name two, of
whom the other shall decline one and the decision shall be made by drawing
lots. All arbitrators shall be executive officers of insurance or
reinsurance companies or Underwriters at Lloyd's, London or their appointed
representatives not under the control of either party to this Contract.
The arbitrators shall interpret this Contract as an honorable engagement
and not as merely a legal obligation; they are relieved of all judicial
formalities and may abstain from following the strict rules of law, and
they shall make their award with a view to effecting the general purpose of
this Contract in a reasonable manner rather than in accordance with a
literal interpretation of the language. Each party shall submit its case to
its arbitrator within thirty days of the appointment of the third
arbitrator.
14
<PAGE>
The decision in writing of any two arbitrators, when filed with the parties
hereto, shall be final and binding on both parties. Judgment may be entered
upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator and
shall jointly and equally bear with the other party the expense of the
third arbitrator and of the arbitration. Said arbitration shall take place
in the city in which the Company's Head Office is located unless some other
place is mutually agreed upon by the parties to this Contract.
15
<PAGE>
EXHIBIT A
---------
FIRST CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each
loss occurrence covered hereunder on which the Company has paid or
advanced, or agreed to pay or advance, or becomes liable to pay to or
on behalf of its reinsured an amount in excess of $20,000,000
ultimate net loss, the Retrocessionaires shall pay to the Company the
amount the excess of $20,000,000 ultimate net loss in respect of each
loss occurrence but the amount recoverable hereunder shall not exceed
$6,000,000 in respect of each such loss occurrence; and the
Retrocessionaires' liability shall be further subject to the
limitations set forth in Section III - Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also
include all losses under aggregate and/or stop loss contracts assumed
by the Company irrespective of the time of loss or losses occurring
under such contracts providing that all or a portion of said losses
occur during the time of this Contract is in force. The proportion of
such loss or losses that form a part of the Company's ultimate net
loss under this Contract shall be the proportion of the whole
aggregate recovery that the original ceding Reinsured's individual
catastrophe loss bears to its total losses used in arriving at
aggregate loss recoveries.
3. The Company shall have the option to extract from one or more
aggregate policies or contracts the amount of loss sustained by the
Company arising from one occurrence or series of occurrences arising
out of one event in order that such loss can be added to the
Company's losses from accidents or series of accidents arising from
the same event on other policies or contracts provided the loss
occurs during the term of this Contract and subject to the terms of
paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting
from one occurrence or series of occurrences arising out of one event
or cause on an aggregate policy or contract shall be deemed to be
that percentage of the aggregate loss to the Company on the original
policy or contract that the total loss from the particular accident
bears to the total aggregate losses to the original insured or
reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $2,400,000 shall be paid to the
Retrocessionaires in quarterly installments of $600,000 each payable at
January 1, April 1, July 1, and October 1, 1994 adjustable at a rate of
.425 % of the Company's 1995 calendar year Gross Net Earned
A1
<PAGE>
Premium Income for Non-Standard Auto plus rate of 3.20% of 1995 calendar
year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted
for during the reinsurance period net after all original deductions and
after deduction of the cost of reinsurance which inures to the benefit of
reinsurers hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned
Premium Income shall be composed of the premium of all classes underwritten
by the Company except for premiums attributable to casualty business and as
per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto.
It is nevertheless agreed that such exclusion of casualty premiums shall in
no way limit the coverage as respects Workers' Compensation as afforded
under this program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this
Contract by the amount paid. Any amount so exhausted shall be automatically
reinstated from the time of occurrence of the loss and for each amount so
reinstated the Company agrees to pay an additional premium calculated at
pro rata of the annual premium as respects the fraction of indemnity
exhausted and 100% of the annual premium as respect the unexpired term of
this Contract, regardless of the time of loss, to be paid simultaneously
with the payment of loss by the Retrocessionaires. Nevertheless,
Retrocessionaires' liability shall not exceed $6,000,000 with respect to
any one loss occurrence and shall not exceed $12,000,000 with respect to
all losses arising during the term of the Contract.
A2
<PAGE>
EXHIBIT B
---------
SECOND CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each
loss occurrence covered hereunder on which the Company has paid or
advanced, or agreed to pay or advance, or becomes liable to pay to or
on behalf of its reinsured an amount in excess of $26,000,000
ultimate net loss, the Retrocessionaires shall pay to the Company the
amount the excess of $26,000,000 ultimate net loss in respect of each
loss occurrence but the amount recoverable hereunder shall not exceed
$6,000,000 in respect of each such loss occurrence; and the
Retrocessionaires' liability shall be further subject to the
limitations set forth in Section III - Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also
include all losses under aggregate and/or stop loss contracts assumed
by the Company irrespective of the time of loss or losses occurring
under such contracts providing that all or a portion of said losses
occur during the time of this Contract is in force. The proportion of
such loss or losses that form a part of the Company's ultimate net
loss under this Contract shall be the proportion of the whole
aggregate recovery that the original ceding Reinsured's individual
catastrophe loss bears to its total losses used in arriving at
aggregate loss recoveries.
3. The Company shall have the option to extract from one or more
aggregate policies or contracts the amount of loss sustained by the
Company arising from one occurrence or series of occurrences arising
out of one event in order that such loss can be added to the
Company's losses from accidents or series of accidents arising from
the same event on other policies or contracts provided the loss
occurs during the term of this Contract and subject to the terms of
paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting
from one occurrence or series of occurrences arising out of one event
or cause on an aggregate policy or contract shall be deemed to be
that percentage of the aggregate loss to the Company on the
original policy or contract that the total loss from the particular
accident bears to the total aggregate losses to the original insured
or reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $2,100,000 shall be paid to the
Retrocessionaires in quarterly installments of $525,000 each payable at
January 1, April 1, July 1 and October 1, 1995 adjustable at a rate of
.40% of the Company's 1995 calendar year Gross Net
B1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 2.8 % of
1995 calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted
for during the reinsurance period net after all original deductions and
after deduction of the cost of reinsurance which inures to the benefit of
reinsurers hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned
Premium Income shall be composed of the premium of all classes underwritten
by the Company except for premiums attributable to casualty business and as
per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto.
It is nevertheless agreed that such exclusion of casualty premiums shall in
no way limit the coverage as respects Workers' Compensation as afforded
under this program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this
Contract by the amount paid. Any amount so exhausted shall be automatically
reinstated from the time of occurrence of the loss and for each amount so
reinstated the Company agrees to pay an additional premium calculated at
pro rata of the annual premium as respects the fraction of indemnity
exhausted and 100% of the annual premium as respects the unexpired term of
this Contract, regardless of the time of loss, to be paid simultaneously
with the payment of loss by the Retrocessionaires. Nevertheless,
Retrocessionaires' liability shall not exceed $6,000,000 with respect to
any one loss occurrence and shall not exceed $12,000,000 with respect to
all losses arising during the term of the Contract.
B2
<PAGE>
EXHIBIT C
---------
THIRD CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each
loss occurrence covered hereunder on which the Company has paid or
advanced, or agreed to pay or advance, or becomes liable to pay to or
on behalf of its reinsured an amount in excess of $32,000,000
ultimate net loss, the Retrocessionaires shall pay to the Company the
amount the excess of $32,000,000 ultimate net loss in respect of each
loss occurrence but the amount recoverable hereunder shall not exceed
$6,000,000 in respect of each such loss occurrence; and the
Retrocessionaires' liability shall be further subject to the
limitations set forth in Section III - Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also
include all losses under aggregate and/or stop loss contracts assumed
by the Company irrespective of the time of loss or losses occurring
under such contracts providing that all or a portion of said losses
occur during the time of this Contract is in force. The proportion of
such loss or losses that form a part of the Company's ultimate net
loss under this Contract shall be the proportion of the whole
aggregate recovery that the original ceding Reinsured's individual
catastrophe loss bears to its total losses used in arriving at
aggregate loss recoveries.
3. The Company shall have the option to extract from one or more
aggregate policies or contracts the amount of loss sustained by the
Company arising from one occurrence or series of occurrences arising
out of one event in order that such loss can be added to the
Company's losses from accidents or series of accidents arising from
the same event on other policies or contracts provided the loss
occurs during the term of this Contract and subject to the terms of
paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting
from one occurrence or series of occurrences arising out of one event
or cause on an aggregate policy or contract shall be deemed to be
that percentage of the aggregate loss to the Company on the original
policy or contract that the total loss from the particular accident
bears to the total aggregate losses to the original insured or
reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $1,950,000 shall be paid to the
Retrocessionaires in quarterly installments of $487,500 each payable at
January 1, April 1, July 1 and October 1, 1995, adjustable at a rate of
.35% of the Company's 1995 calendar year Gross Net
C1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 2.60% of
1995 calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted
for during the reinsurance period net after all original deductions and
after deduction of the cost of reinsurance which inures to the benefit of
reinsurers hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned
Premium Income shall be composed of the premium of all classes underwritten
by the Company except for premiums attributable to casualty business and as
per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto.
It is nevertheless agreed that such exclusion of casualty premiums shall in
no way limit the coverage as respects Workers' Compensation as afforded
under this program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this
Contract by the amount paid. Any amount so exhausted shall be automatically
reinstated from the time of occurrence of the loss and for each amount so
reinstated the Company agrees to pay an additional premium calculated at
pro rata of the annual premium as respects the fraction of indemnity
exhausted and 100% of the annual premium as respects the unexpired term of
this Contract, regardless of the time of loss, to be paid simultaneously
with the payment of loss by the Retrocessionaires. Nevertheless,
Retrocessionaires' liability shall not exceed $6,000,000 with respect to
any one loss occurrence and shall not exceed $12,000,000 with respect to
all losses arising during the term of the Contract.
C2
<PAGE>
EXHIBIT D
---------
FOURTH CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each
loss occurrence covered hereunder on which the Company has paid or
advanced, or agreed to pay or advance, or becomes liable to pay to or
on behalf of its reinsured an amount in excess of $38,000,000
ultimate net loss, the Retrocessionaires shall pay to the Company the
amount the excess of $38,000,000 ultimate net loss in respect of each
loss occurrence but the amount recoverable hereunder shall not exceed
$10,000,000 in respect of each such loss occurrence; and the
Retrocessionaires' liability shall be further subject to the
limitations set forth in Section III - Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also
include all losses under aggregate and/or stop loss contracts assumed
by the Company irrespective of the time of loss or losses occurring
under such contracts providing that all or a portion of said losses
occur during the time of this Contract is in force. The proportion of
such loss or losses that form a part of the Company's ultimate net
loss under this Contract shall be the proportion of the whole
aggregate recovery that the original ceding Reinsured's individual
catastrophe loss bears to its total losses used in arriving at
aggregate loss recoveries.
3. The Company shall have the option to extract from one or more
aggregate policies or contracts the amount of loss sustained by the
Company arising from one occurrence or series of occurrences arising
out of one event in order that such loss can be added to the
Company's losses from accidents or series of accidents arising from
the same event on other policies or contracts provided the loss
occurs during the term of this Contract and subject to the terms of
paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting
from one occurrence or series of occurrences arising out of one event
or cause on an aggregate policy or contract shall be deemed to be
that percentage of the aggregate loss to the Company on the original
policy or contract that the total loss from the particular accident
bears to the total aggregate losses to the original insured or
reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $2,950,000 shall be paid to the
Retrocessionaires in quarterly installments of $737,500 each payable at
January 1, April 1, July 1 and October 1, 1994, adjustable at a rate of
.55% of the Company's 1995 calendar year Gross Net
D1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 3.93% of
1995 calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted
for during the reinsurance period net after all original deductions and
after deduction of the cost of reinsurance which inures to the benefit of
reinsurers hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned
Premium Income shall be composed of the premium of all classes underwritten
by the Company except for premiums attributable to casualty business and as
per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto.
It is nevertheless agreed that such exclusion of casualty premiums shall in
no way limit the coverage as respects Workers' Compensation as afforded
under this program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this
Contract by the amount paid. Any amount so exhausted shall be automatically
reinstated from the time of occurrence of the loss and for each amount so
reinstated the Company agrees to pay an additional premium calculated at
pro rata of the annual premium as respects the fraction of indemnity
exhausted and 100% of the annual premium as respects the unexpired term of
this Contract, regardless of the time of loss, to be paid simultaneously
with the payment of loss by the Retrocessionaires. Nevertheless,
Retrocessionaires' liability shall not exceed $10,000,000 with respect to
any one loss occurrence and shall not exceed $20,000,000 with respect to
all losses arising during the term of the Contract.
D2
<PAGE>
EXHIBIT E
---------
FOURTH CATASTROPHE
EXCESS OF LOSS COVER
--------------------
SECTION I - INSURING CLAUSE
---------------------------
1. As respects the ultimate net loss of the Company arising out of each
loss occurrence covered hereunder on which the Company has paid or
advanced, or agreed to pay or advance, or becomes liable to pay to or
on behalf of its reinsured an amount in excess of $48,000,000
ultimate net loss, the Retrocessionaires shall pay to the Company the
amount the excess of $48,000,000 ultimate net loss in respect of each
loss occurrence but the amount recoverable hereunder shall not exceed
$12,000,000 in respect of each such loss occurrence; and the
Retrocessionaires' liability shall be further subject to the
limitations set forth in Section III - Reinstatement.
2. It is further agreed, the term "each loss occurrence" shall also
include all losses under aggregate and/or stop loss contracts assumed
by the Company irrespective of the time of loss or losses occurring
under such contracts providing that all or a portion of said losses
occur during the time of this Contract is in force. The proportion of
such loss or losses that form a part of the Company's ultimate net
loss under this Contract shall be the proportion of the whole
aggregate recovery that the original ceding Reinsured's individual
catastrophe loss bears to its total losses used in arriving at
aggregate loss recoveries.
3. The Company shall have the option to extract from one or more
aggregate policies or contracts the amount of loss sustained by the
Company arising from one occurrence or series of occurrences arising
out of one event in order that such loss can be added to the
Company's losses from accidents or series of accidents arising from
the same event on other policies or contracts provided the loss
occurs during the term of this Contract and subject to the terms of
paragraph 4 below.
4. For the purpose of paragraph 3 above, the amount of loss resulting
from one occurrence or series of occurrences arising out of one event
or cause on an aggregate policy or contract shall be deemed to be
that percentage of the aggregate loss to the Company on the original
policy or contract that the total loss from the particular accident
bears to the total aggregate losses to the original insured or
reinsured on the business protected.
SECTION II - PREMIUM
--------------------
An annual minimum and deposit premium of $3,000,000 shall be paid to the
Retrocessionaires in quarterly installments of $750,000 each payable at
January 1, April 1, July 1 and October 1, 1994, adjustable at a rate of
.55% of the Company's 1995 calendar year Gross Net
E1
<PAGE>
Earned Premium Income for Non-Standard Auto business plus rate of 4.00% of
1995 calendar year Gross Net Earned Premium Income for all other business.
For the purpose of adjusting the premium for each layer of this catastrophe
program, the Net Earned Premium Income shall be the premium as accounted
for during the reinsurance period net after all original deductions and
after deduction of the cost of reinsurance which inures to the benefit of
reinsurers hereunder.
It is furthermore agreed that for the purpose of adjustment, the Earned
Premium Income shall be composed of the premium of all classes underwritten
by the Company except for premiums attributable to casualty business and as
per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto.
It is nevertheless agreed that such exclusion of casualty premiums shall in
no way limit the coverage as respects Workers' Compensation as afforded
under this program.
SECTION III - REINSTATEMENT
---------------------------
Each loss hereon reduces the amount of indemnity provided under this
Contract by the amount paid. Any amount so exhausted shall be automatically
reinstated from the time of occurrence of the loss and for each amount so
reinstated the Company agrees to pay an additional premium calculated at
pro rata of the annual premium as respects the fraction of indemnity
exhausted and 100% of the annual premium as respects the unexpired term of
this Contract, regardless of the time of loss, to be paid simultaneously
with the payment of loss by the Retrocessionaires. Nevertheless,
Retrocessionaires' liability shall not exceed $12,000,000 with respect to
any one loss occurrence and shall not exceed $24,000,000 with respect to
all losses arising during the term of the Contract.
E2
Exhibit (c)(7)
CREDIT AGREEMENT
US $20,000,000
SCOR U.S. CORPORATION
Borrower
SCOR S.A.
Lender
January 24, 1995
<PAGE>
This Credit AGREEMENT, dated January 24, 1995, between SCOR U.S.
Corporation, a Delaware Corporation, with its principal office at 110
William Street, New York, NY, (the "Borrower"), and SCOR S.A. a
company incorporated in France with its head office in PUTEAUX - Hauts
de Seine- France, Avenue du President Wilson, (the "Lender"), sets
forth the binding Agreement of the parties.
SECTION 1. INTERPRETATIONS AND DEFINITIONS
-------------------------------
1.01 Definitions
-----------
The following terms, as used herein, shall have the following
respective meanings:
"Commitment" means the obligation of the Lender to lend the
amount set forth in Section 2.1 hereof.
"Convertible Subordinated Debentures" means the 5-1/4% convertible
subordinated debentures due April 1, 2000 issued by Borrower.
"Control" (including, with its correlative meanings, "controlled
by" and "under common control with") means, with respect to any
Person, the possession, directly or indirectly, of power to direct or
cause the direction of the management or policies of such Person.
"Debt" means at any date, without duplication, (i) all
obligations for borrowed money, including, without limitation,
reimbursement obligations related to letters of credit, and (ii) all
obligations evidenced by bonds, debentures, notes or other similar
instruments.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time, or
both, would unless cured or waived become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United States
of America.
"Business Day" means any day, except a Saturday or Sunday or
other day on which commercial banks in New York City are open.
"Interest Period" means: with respect to each Loan, the period
commencing on the date of such Loan and ending 3 months thereafter,
with a new Interest Period commencing at the end of each such 3 month
period and each succeeding 3 month period thereafter.
2
<PAGE>
"London Interbank Offered Rate" has the meaning set forth in
Section 2.04 hereof.
"Note" means the promissory note of the Borrower, substantially
in the form of Exhibit A hereto, evidencing the obligation of the
Borrower to repay the Loans.
"Notice" shall mean notice delivered by a party to this Agreement
to the other party hereto in the manner provided in Section 7.06.
"Repayment Date" shall mean the earlier of the period ending 5
years from the date of each Loan, or the end of the applicable
Interest Period immediately preceding December 31, 2000.
"Revolving Credit Period" means the period from and including the
date of the execution of this Agreement to and including the
Termination Date.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Borrower.
"Termination Date" means the earlier of December 31, 2000, or
termination of the Commitment pursuant to Section 2.06 or 2.07 hereof.
SECTION 2. THE LOAN
--------
2.01 Agreement to Lend
-----------------
During the Revolving Credit Period the Lender agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the
Borrower from time to time in amounts not exceeding in the aggregate
at any one time outstanding $20,000,000 (the "Commitment"). The
initial Loan under this Section 2.01 shall be in the minimum principal
amount of $5,000,000 and each Loan thereafter shall be in the minimum
principal amount of $2,000,000 or any $1,000,000 multiple in excess
thereof (except that any such Loan may be in the amount of the unused
Commitment). During such Period and within the foregoing limits, the
Borrower may borrow under this Section 2.01, repay or, to the extent
permitted by Section 2.05 hereof, prepay Loans and reborrow under this
Section 2.01.
2.02 Method of Borrowing
-------------------
(a) With respect to each Loan made pursuant to Section 2.01
hereof, the borrower shall give the Lender written notice not later
than 10:00 a.m. (New York City time) five (5) Business Days before
each Loan, specifying: (i) the date of such Loan, which shall be a
Business Day; and (ii) the principal amount of such Loan.
3
<PAGE>
(b) On the date of each Loan the Lender will make the proceeds
thereof available to the Borrower by depositing the proceeds of such
Loan in the account of the Borrower, at the Bank designated by the
Borrower from time to time, by the time requested by the Borrower;
provided, however, that such time is not earlier than 9:00 a.m. (New
- --------
York City time).
2.03 The Note
--------
The Loans shall be evidenced by a single Note in the form of
Exhibit A hereto, payable to the order of the Lender. Such Note shall
be dated on or before the date of the first Loan and shall set forth
the Commitment as the maximum principal amount thereof.
2.04 Interest
--------
Each Loan shall bear interest on the principal amount thereof,
for each day from the date such Loan is made to the date on which it
becomes due. Interest for each Loan during the applicable Interest
Period shall be at a rate equal to the sum of the Margin plus the
applicable three (3) month London Interbank Offered Rate. Such
interest shall be payable for each Interest Period on the last day
thereof; provided, however, if not less than two (2) days prior to the
-------- -------
end of such Interest Period, Borrower has given Lender notice of its
intent to include such interest in the outstanding principal balance
of the applicable Loan, then any interest on any Loan shall be added
to the outstanding principal balance and shall bear interest at the
rate of interest applicable to such Loan.
The "Margin" means 1/2 of 1%.
The "London Interbank Offered Rate" applicable to any Interest
Period means the rate at which 3 month deposits in Dollars are offered
in the London Interbank market based on quotations at five major banks
at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period.
2.05 Optional Prepayments
--------------------
The Borrower may, at the end of an Interest Period and upon at
least two (2) Business Day's notice to the Lender, prepay any Loan
without premium or penalty in whole or in part in amounts aggregating
$1,000,000 or any multiple thereof by paying the principal amount
being prepaid together with accrued interest thereon to the date of
prepayment.
2.06 Mandatory Termination
---------------------
The Commitment shall terminate on the Termination Date and any
Loans then outstanding (together with accrued interest thereon) shall
be due and payable on such date.
4
<PAGE>
2.07 Optional Termination or Reduction of Commitment
-----------------------------------------------
During the Revolving Credit Period the Borrower may, upon at
least three Business Days' notice to the Lender terminate the
Commitment at any time, if no Loans are outstanding at such time; or
may reduce the Commitment to an amount not less than the aggregate
amount of Loans outstanding.
2.08 General Provisions as to Payments
---------------------------------
Except as permitted by Section 2.05 hereof payment of principal
of, and interest on, the Loans shall be due on the Repayment Date.
The Borrower shall make each payment of principal of, and
interest on, the Loans hereunder not later than 11:00 a.m. (New York
City time) on the date when due by depositing the funds in the account
of Lender at the New York City branch of a bank designated by Lender.
Whenever any payment of principal of, or interest on, the Loans shall
be due on a day which is not a Business Day, the date for payment
thereof shall be extended to the next succeeding Business Day unless
as a result thereof it would fall in the next calendar month, in which
case it shall be advanced to the next preceding Business Day. If the
date for any payment of principal is extended by operation of law or
otherwise, interest shall be payable for such extended time.
SECTION 3. CONDITIONS
----------
3.01 Initial Loan
------------
The obligation of the Lender to make the initial Loan hereunder
shall be subject to the satisfaction by the Borrower of the following
conditions:
(a) receipt by the Lender of counterparts hereof signed by the
Borrower;
(b) receipt by the Lender of a duly executed Note dated on or
before the date of the initial Loan complying with the provisions of
Section 2.03 hereof.
3.02 All Loans
---------
The obligation of the Lender to make a Loan on the occasion of
any borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Lender of the notice from the Borrower
required by Section 2.02 hereof; and
5
<PAGE>
(b) the fact that, immediately after such Loan, no Default shall
have occurred and be continuing.
SECTION 4. PURPOSES OF LOANS
-----------------
4.01 Use of Proceeds
---------------
The Borrower will not use the proceeds of any Loans for any
purposes other than:
(a) the redemption of Convertible Subordinated Debentures issued
by the Borrower; or
(b) to refund any Debt incurred by Borrower, including but not
limited to a Loan, for such redemption.
SECTION 5. EVENTS OF DEFAULT
-----------------
5.01 Events of Default
-----------------
Each of the following events and occurrences shall constitute an
Event of Default under this Agreement:
(a) Payment Default. The Borrower fails for any reason
---------------
whatsoever to make payment of any amount under this Agreement on the
date on which such amount is due and payable whether by the terms
hereof or by acceleration and continuance of such failure for five
business days. Acceptance of partial payment shall not constitute a
waiver of the failure to make payment in full.
(b) Representation Default. If any one or more of the following
----------------------
events ("Events of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement other than that
covered by Section 5.01(a) for 30 days after written notice thereof
has been given to the Borrower by the Lender; or
(ii) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make case or other
proceeding commenced against it, or
6
<PAGE>
shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing; or
(iii) an involuntary case or other proceeding shall be
commenced against the Borrower seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be
entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect.
5.02 Consequences of Default
-----------------------
If an Event of Default shall occur and be continuing beyond any
grace period permitted therefor, the Lender may, by Notice to the
Borrower, declare the outstanding amount of the Commitment together
with accrued interest and other sums payable hereunder to be
immediately due and payable without presentment, demand or notice of
any kind other than the Notice specifically required by this Section,
all other notice being expressly waived by the Borrower. If an Event
of Default shall occur, such default may be waived by Notice from the
Lender.
SECTION 6. LOAN ADMINISTRATION
-------------------
6.01 Term
----
The term of this Agreement shall commence on January 24, 1995 and
shall end upon payment in full of all principal, interest and other
sums payable by the Borrower in respect of this Agreement which
payment in full shall occur at the latest on December 31, 2000.
SECTION 7. MISCELLANEOUS
-------------
7.01 Legal Action and Governmental and Corporate Approvals
-----------------------------------------------------
Borrower and Lender each represent and warrant that they have
taken all necessary legal and corporate action to authorize the
execution and delivery of this Agreement, and there are no
governmental approvals required on the part of either in connection
therewith or for the performance by the Borrower or Lender of its
obligations under this Agreement. This Agreement constitutes a valid
and binding agreement of the parties.
7
<PAGE>
7.02 Entire Agreement and Amendment
------------------------------
This Agreement, together with the Note of even date constitute
the entire agreement of the parties with respect to the subject matter
hereof and supersedes any prior expressions of intent or understanding
with respect to this transaction. This Agreement may be amended, or
the benefit of any provisions hereof may be waived, only by an
instrument in writing executed by both parties hereto.
7.03 Cumulative Rights and Waiver
----------------------------
The failure or delay of the Lender to require performance by the
Borrower or to enforce its rights under any provision of this
Agreement shall not affect its right to require performance and to
enforce its rights with respect to such provision unless and until
such performance has been waived in writing by the Lender. Any waiver
of an Event of Default shall be effective only in accordance with its
terms and may be restricted or conditioned in any way. No waiver of
any event of Default shall constitute a waiver of continuance or
reoccurrence of such Event of Default or of any other Event of Default
except as provided in such waiver. The rights granted to the Lender
hereunder or under any other document or instrument delivered
hereunder and any rights available to it at law or in equity shall be
cumulative and may be exercised in part or in whole from time to time.
7.04 Assignment
----------
This Agreement and the Note shall be binding upon and shall be
enforceable by the Borrower and the Lender and their respective
successors, except that neither party has any right to assign or
transfer its rights or obligations hereunder.
7.05 Governing Law
-------------
This Agreement shall be governed by and interpreted in accordance
with the Laws of the Republic of France.
The Borrower irrevocably submits to the non-exclusive
jurisdiction of the Tribunal de Commerce of Nanterre (Hauts de Seine)
over any suit, action or proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby, and waives, to
the fullest extent it may effectively do so under applicable law, any
objection which it may have or hereafter have to the laying of the
venue of any such suit, action, proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any
such court has been brought in any inconvenient forum. The Borrower
agrees, to the fullest extent it may effectively do so under
applicable law, that a final judgment in any such suit, action or
proceeding may be enforced in the above courts and any other court of
the jurisdiction of which the Borrower is or may be subject by a suit
upon such judgment, provided that service of process is effected on
the Borrower in the manner specified below or as otherwise permitted
by law.
8
<PAGE>
The Borrower consents to process being served in any suit, action
or proceeding of the nature referred to above by the mailing of a copy
thereof by registered or certified airmail postage prepaid, return
receipt requested, to its address, set forth in Section 7.06, or to
any other address of which the Borrower shall have given written
notice to the Lender. Nothing herein shall affect the right of the
Lender to serve process in any other manner permitted by law, or limit
the right of the Lender to bring proceedings against the Borrower in
the court of any other jurisdiction.
7.06 Notices
-------
(a) Any Notice required or permitted to be given hereunder shall
be in writing and shall be (i) personally delivered, (ii) transmitted
by postage prepaid mail (airmail if international), or
(iii) transmitted by telex or telefax to the parties as follows, as
elected by the party giving such Notice:
To the Borrower:
SCOR U.S. Corporation
110 William Street
New York, New York 10038
Attn: Treasurer
To the Lender:
SCOR S.A. - Immeuble SCOR
One Avenue du President Wilson
Cedex 39
92074 Paris La Defense 8, France
Attn: Francois Reach
(b) All Notices and other communications shall be effective on
(i) the date of receipt if delivered personally, (ii) the date of
receipt if transmitted by telex or telefax, whichever shall first
occur. Any party may change its address for purposes hereof by Notice
to the other party.
9
<PAGE>
7.07 Headings
--------
The section and subsection headings used herein have been
inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their respective duly authorized
signatories in New York on the date first written above.
BORROWER: SCOR U.S. CORPORATION
By:
-------------------------------
Name: Jeffrey D. Cropsey
Title: Senior VP & Chief
Financial Officer
LENDER: SCOR S.A.
By:
-------------------------------
Name: Francois Reach
Title: Deputy General Manager
10
<PAGE>
Exhibit A
NOTE
U.S. $20,000,000 January 24, 1995
New York, New York
FOR VALUE RECEIVED, SCOR U.S. CORPORATION, a Delaware corporation
(the "Borrower"), hereby unconditionally promises to pay to the order
of SCOR S.A. (the "Lender"), the unpaid principal amount of each Loan
made by the Lender to the Borrower pursuant to the Credit Agreement
referred to below on the Repayment Date relating to such Loan. The
Borrower promises to pay interest on the unpaid principal amount of
each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement.
All such payments of principal and interest shall be made in
lawful money of the United States of America in Federal or other
immediately available funds at One Avenue du President Wilson, Cedex
39, 92074 Paris La Defense 8, France or such other place as may be
designated in writing from time to time by Lender.
All Loans made by the Lender, the respective maturities thereof
and all of the principal thereof shall be recorded by the Lender and,
with respect to each such Loan then outstanding shall be endorsed by
the Lender on the schedule attached hereto and made a part hereof;
provided that the failure of the Lender to make any such recordation
- --------
or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is the Note referred to in the Credit Agreement dated
as of January 24, 1995, between the Borrower and the Lender (as the
same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions
for the prepayment hereof and the acceleration of the maturity hereof.
SCOR U.S, CORPORATION
By:
-------------------------------
Title: Senior V.P. and Chief
Financial Officer
11
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Amount Amount of
of Principal Maturity Notation
Date Loan Repaid Date Made by
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit (c)(8)
LOAN AGREEMENT
U.S.$20,000,000
SCOR U.S. CORPORATION
Borrower
SCOR S.A.
Lender
October 2, 1995
<PAGE>
This Loan AGREEMENT, dated October 2, 1995, between SCOR U.S. Corporation,
a Delaware Corporation, with its principal office at 2 World Trade Center, New
York, NY, (the "Borrower"), and SCOR S.A. a company incorporated in France
with its head office in PUTEAUX - Hauts de Seine - France, Avenue du President
Wilson, (the "Lender"), sets forth the binding Agreement of the parties.
SECTION 1. INTERPRETATIONS AND DEFINITIONS
-------------------------------
1.01 Definitions
-----------
The following terms, as used herein, shall have the following respective
meanings:
"Borrower" means Scor U.S. Corporation.
"Business Day" means any day, except a Saturday or Sunday or other day on
which commercial banks in New York City are not open.
"Control" (including, with its correlative meanings, "controlled by" and
"under common control with") means, with respect to any Person, the possession,
directly or indirectly, of power to direct or cause the direction of the
management or policies of such Person.
"Debt" means at any date, without duplication, (i) all obligations for
borrowed money, including, without limitation, reimbursement obligations
related to letters of credit, and (ii) all obligations evidenced by bonds,
debentures, notes or other similar instruments.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time, or both, would
unless cured or waived become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Interest Period" means the period commencing on the date of this
Agreement and ending 3 months thereafter, with a new Interest Period commencing
at the end of each such 3 month period and each succeeding 3 month period
thereafter until the principal is repaid.
"Lender" means Scor S.A.
"Loan" shall mean the aggregate principal amount advanced by the Lender as
a loan to the Borrower hereunder or, where the context so requires, the amount
thereof then outstanding.
"London Interbank Offered Rate" has the meaning set forth in Section 2.04
hereof.
"Note" means the promissory note of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loan.
2
<PAGE>
"Notice" shall mean notice delivered by a party to this Agreement to the
other party hereto in the manner provided in Section 7.06.
"Original Period" means the period commencing October 2, 1995 and ending
October 2, 1996.
"Renewal Period" means the one (1) year period commencing October 2nd
1996 and ending October 2, 1997.
"Repayment Date" shall mean October 2, 1996 or October 2, 1997.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Borrower.
SECTION 2. THE LOAN
--------
2.01 Agreement to Lend
-----------------
The Lender hereby agrees, on the terms and conditions set forth in
this Agreement, to lend to the Borrower and Borrower hereby agrees to
borrow, the principal sum of $20,000,000 ( the "Loan").
2.02 Method of Borrowing
-------------------
On the date of this Agreement the Lender will make the proceeds of the
Loan available to the Borrower by depositing the proceeds of such Loan in
the account of the Borrower, at the Bank designated by the Borrower as of
the date hereof by the time requested by the Borrower; provided, however,
--------
that such time is not earlier than 2:00 p.m. (New York City time).
2.03 The Note
--------
The Loan shall be evidenced by a single Note in the form of Exhibit A
hereto, payable to the order of the Lender. Such Note shall be dated as of
the date hereof.
2.04 Interest
--------
The Loan shall bear interest on the outstanding principal amount for
each day from the date the Loan is made to the date on which it is repaid
in full. Interest for the Loan during the applicable Interest Period shall
be at a rate equal to the sum of the Margin plus the applicable three (3)
month London Interbank Offered Rate. Such interest shall be payable for
each Interest Period on the last day thereof; provided, however, if not
less than two (2) days prior to the end of such Interest Period, Borrower
has given Lender notice of its intent to include such interest in the
outstanding principal balance of the Loan, then any interest on the Loan
shall be added to the outstanding principal balance and shall bear interest
at the applicable rate of interest.
3
<PAGE>
The "Margin" means 2/10 of 1%.
The "London Interbank Offered Rate" applicable to any Interest Period
means the rate at which 3 month deposits in Dollars are offered in the
London Interbank market based on quotations at five major banks at
approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period.
2.05 Repayment of the Loan
---------------------
The Borrower shall repay the Loan (together with accrued interest
thereon) on the Repayment Date.
2.06 Optional Prepayments
---------------------
The Borrower may, at the end of an Interest Period and upon at least
thirty (30) day's notice to the Lender, prepay the Loan without premium or
penalty in whole or in part in amounts aggregating $1,000,000 or any
multiple thereof by paying the principal amount being prepaid together with
accrued interest thereon to the date of prepayment.
2.07 Loan Termination and Renewal
----------------------------
The term of the Loan shall be a period of one (1) year commencing
October 2, 1995 and ending October 2, 1996, subject to renewal for an
additional term of one (1) year upon not less than sixty (60) days written
notice prior to the expiration of the Original Period from Borrower to
Lender of its intention to renew the Loan. In the event such notice is not
given the Loan shall terminate.
Upon termination of the Loan Borrower shall repay the Loan in
accordance with Sections 2.05 and 2.08 hereof
2.08 General Provisions as to Payments
---------------------------------
Except as permitted by Section 2.06 hereof payment of principal of,
and interest on, the Loan shall be due on the Repayment Date.
The Borrower shall make payments of principal of, and interest on,
the Loan not later than 11:00 a.m. (New York City time) on the date when
due by depositing the funds in the account of Lender at the New York
City branch of a bank designated by Lender. Whenever any payment of
principal of, or interest on, the Loan shall be due on a day which is
not a Business Day, the date for payment thereof shall be extended to
the next succeeding Business Day unless as a result thereof it would
fall in the next calendar month, in which case it shall be advanced to
the next preceding Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest shall
be payable for such extended time.
4
<PAGE>
SECTION 3. CONDITIONS
--------
3.01 Initial Loan.
-------------
The obligation of the Lender to make the Loan hereunder shall be subject to
the satisfation by the Borrower of the following conditions:
(a) receipt by the Lender of counterparts hereof signed by the Borrower:
(b) receipt by the Lender of a duly executed Note dated on or before
the date of the initial Loan complying with the provisions of Section 2.03
hereof.
SECTION 4. PURPOSES OF LOAN
----------------
4.01 Use of Proceeds
---------------
The Borrower will not use the Loan proceeds for any purposes other than
repayment of its Debt to Banque Worms under an agreement dated October 4,
1990.
SECTION 5. EVENTS OF DEFAULT
-----------------
5.01 Events of Default
-----------------
Each of the following events and occurrences shall constitute an Event
of Default under this Agreement:
(a) Payment Default. The Borrower fails for any reason whatsoever to
-----------------
make payment of any amount under this Agreement on the date on which such
amount is due and payable whether by the terms hereof or by acceleration
and continuance of such failure for five business days. Acceptance of
partial payment shall not constitute a waiver of the failure to make
payment in full.
(b) Representation Default. If any one or more of the following events
-----------------------
("Events of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement other than that covered by Section
5.01(a) for 30 days after written notice thereof has been given to the
Borrower by the Lender; or
(ii) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
5
<PAGE>
(iii) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the Borrower or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect.
SECTION 6.CONSEQUENCES OF DEFAULT
-----------------------
6.01 Consequences of Default
-----------------------
If an Event of Default shall occur and be continuing beyond any grace
period permitted therefor, the Lender may, by Notice to the Borrower,
declare the outstanding amount of the Commitment together with accrued
interest and other sums payable hereunder to be immediately due and payable
without presentment, demand or notice of any kind other than the Notice
specifically required by this Section, all other notice being expressly
waived by the Borrower. If an Event of Default shall occur, such default
may be waived by Notice from the Lender.
SECTION 7.LOAN ADMINISTRATION
-------------------
7.01 Term of Agreement
------------------
The term of this Agreement shall commence on October 2, 1995 and shall
end upon payment in full of all principal, interest and other sums payable
by the Borrower in respect of this Agreement, but in no event later than
October 2, 1997.
SECTION 7.MISCELLANEOUS
-------------
7.01 Legal Action and Governmental and Corporate Approvals
-----------------------------------------------------
Borrower and Lender each represent and warrant that they have taken all
necessary legal and corporate action to authorize the execution and delivery
of this Agreement, and there are no governmental approvals required on the
part of either in connection therewith or for the performance by the
Borrower or Lender of its obligations under this Agreement. This Agreement
constitutes a valid and binding agreement of the parties.
7.02 Entire Agreement and Amendment
------------------------------
This Agreement, together with the Note of even date constitute the
entire agreement of the parties with respect to the subject matter hereof
and supersedes any prior expressions of intent or understanding with
respect to this transaction. This Agreement may be amended, or the benefit
of any provisions hereof may be waived, only by an instrument in writing
executed by both parties hereto.
6
<PAGE>
7.03 Cumulative Rights and Waiver
----------------------------
The failure or delay of the Lender to require performance by the
Borrower or to enforce its rights under any provision of this
Agreement shall not affect its right to require performance and to
enforce its rights with respect to such provision unless and until
such performance has been waived in writing by the Lender. Any waiver
of an Event of Default shall be effective only in accordance with its
terms and may be restricted or conditioned in any way. No waiver of any
Event of Default shall constitute a waiver of continuance or
reoccurrence of such Event of Default or of any other Event of Default
except as provided in such waiver. The rights granted to the Lender
hereunder or under any other document or instrument delivered
hereunder and any rights available to it at law or in equity shall be
cumulative and may be exercised in part or in whole from time to time.
7.04 Assignment
----------
This Agreement and the Note shall be binding upon and shall be
enforceable by the Borrower and the Lender and their respective
successors, except that neither party has any right to assign or
transfer its rights or obligations hereunder.
7.05 Governing Law
-------------
This Agreement shall be governed by and interpreted in accordance
with the Laws of the Republic of France.
The Borrower irrevocably submits to the non-exclusive jurisdiction of
the Tribunal de Commerce of Nanterre (Hauts de Seine) over any suit, action
or proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby, and waives, to the fullest extent it may
effectively do so under applicable law, any objection which it may have or
hereafter have to the laying of the venue of any such suit, action,
proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in any
inconvenient forum. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that a final judgment in any such
suit, action or proceeding may be enforced in the above courts and any
other court of the jurisdiction of which the Borrower is or may be subject
by a suit upon such judgment, provided that service of process is effected
on the Borrower in the manner specified below or as otherwise permitted by
law.
The Borrower consents to process being served in any suit, action or
proceeding of the nature referred to above by the mailing of a copy thereof
by registered or certified airmail postage prepaid, return receipt
requested, to its address, set forth in Section 7.06, or to any other
address of which the Borrower shall have given written notice to the
Lender. Nothing herein shall affect the right of the Lender to serve
process in any other manner permitted by law, or limit the right of the
Lender to bring proceedings against the Borrower in the court of any other
jurisdiction.
7.06 Notices
-------
7
<PAGE>
(a) Any Notice required or permitted to be given hereunder shall be in
writing and shall be (i) personally delivered,(ii) transmitted by postage
prepaid mail (airmail if international), or (iii) transmitted by telex or
telefax to the parties as follows, as elected by the party giving such
Notice:
To the Borrower:
SCOR U.S. Corporation
2 World Trade Center
New York, New York 10045
Attn: Treasurer
To the Lender:
SCOR S.A. - Immeuble SCOR
One Avenue du President Wilson
Cedex 39
92074 Paris La Defense 8, France
Attn: Francois Reach
(b) All Notices and other communications shall be effective on (i) the
date of receipt if delivered personally, (ii) the date of receipt if
transmitted by telex or telefax, whichever shall first occur. Any party may
change its address for purposes hereof by Notice to the other party.
7.07 Headings
--------
The section and subsection headings used herein have been inserted for
convenience of reference only and do not constitute matters to be considered
in interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized signatories in New
York on the date first written above.
BORROWER: SCOR U.S. CORPORATION
By: /s/ Jeffrey D. Cropsey
-------------------------------------------
Name: Jeffrey D. Cropsey
Title:Senior V.P. & Chief Financial Officer
LENDER: SCOR S.A.
By: /s/ Francois Reach
-------------------------------------------
Name: Francois Reach
Title: Deputy General Manager
8
<PAGE>
Exhibit A
NOTE
U.S. $20,000,000 October 2, 1995
New York, New York
FOR VALUE RECEIVED, SCOR U.S. CORPORATION, a Delaware corporation (the
"Borrower"), hereby unconditionally promises to pay to the order of SCOR
S.A. (the "Lender"), the unpaid principal amount of the Loan made by the
Lender to the Borrower pursuant to the Loan Agreement referred to below on
the Repayment Date. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Loan Agreement.
All such payments of principal and interest shall be made in lawful
money of the United States of America in Federal or other immediately
available funds at One Avenue du President Wilson, Cedex 39, 92074 Paris La
Defense 8, France or such other place as may be designated in writing from
time to time by Lender.
This note is the Note referred to in the Loan Agreement dated as of
October 2, 1995, between the Borrower and the Lender (as the same may be
amended from time to time, the "Loan Agreement"). Terms defined in the Loan
Agreement are used herein with the same meanings. Reference is made to the
Loan Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
SCOR U.S. CORPORATION
By: /s/ Jeffrey D. Cropsey
------------------------------------------
Title:Senior V.P. and Chief Financial Officer
9
Exhibit (g)(1)
SUMMONS
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
HOWARD SANDE FELDMAN, CUSTODIAN FOR CIVIL ACTION NO. 14577
JAN SHARONA FELDMAN, UGMA,
Plaintiff. SUMMONS
v
JACQUES P. BLANDEAU, SERGE M. P.
OSOUF, JEROME KARTER, JOHN R. COX,
RAYMOND H. DECK, MICHEL J. GUDEFIN,
JEAN P. MASSE, RICHARD M. MURRAY,
PATRICK PEUGOT, JOHN W. POPP,
FRANCOIS REACH, DAVID J. SHERWOOD,
SCOR SA AND SCOR U.S. CORPORATION,
Defendants.
THE STATE OF DELAWARE
TO THE SPECIAL PROCESS SERVER
YOU ARE COMMANDED:
To Summon the above named defendants so that, within 20 days after
service hereof upon defendants, exclusive of the day of service,
defendants shall serve upon Joseph A. Rosenthal, Esquire, plaintiff's
attorney whose address is First Federal Plaza, PO Box 1070, Wilmington, DE
19899 an answer to the complaint.
To serve upon defendants a copy hereof and of the complaint.
Dated September 29, 1995 /s/ Priscilla B. Rabestraw
----------------------------
Register in Chancery
TO THE ABOVE NAMED DEFENDANTS:
In case of your failure, within 20 days after service hereof upon
you, exclusive of the day of service, to serve on plaintiff's attorney
named above an answer to the complaint, judgement by default will be
rendered against you for the relief demanded in the complaint.
/s/ Priscilla B. Rabestraw
-----------------------------
Register in Chancery
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------x
HOWARD SANDE FELDMAN, CUSTODIAN FOR :
JAN SHARONA FELDMAN, UGMA, :
:
Plaintiff, : Civil Action No.14577
:
- against - :
:
JACQUES P. BLONDEAU; SERGE M.P. OSOUF; : CLASS ACTION COMPLAINT
JEROME KARTER; JOHN R. COX; RAYMOND H. : ----------------------
DECK; MICHEL J. GUDEFIN; JEAN P. MASSE; :
RICHARD M. MURRAY; PATRICK PEUGOT; :
JOHN W. POPP; FRANCOIS REACH; DAVID :
J. SHERWOOD; SCOR SA and SCOR U. S. :
CORPORATION, :
:
Defendants. :
:
- ----------------------------------------x
Plaintiff, Howard Sande Feldman, Custodian for Jan Sharona
Feldman, UGMA, individually and on behalf of all others similarly
situated, by his attorneys, alleges the following upon information and
belief based upon the investigation of his counsel, which included, among
other things, a review of various public filings by the corporate
defendants with the Securities and Exchange Commission ("S.E.C.") and
various public articles detailed herein (except for those allegations
which pertain to plaintiff, which allegations are based upon personal
knowledge):
1. This action arises out of an unlawful scheme and plan to acquire
the remaining approximately 20% ownership of Scor U. S. Corporation ("Scor
U.S." or the "Company") in a going-private transaction by its parent, Scor
SA, a French Company ("Scor SA") for grossly inadequate consideration and
in breach of
<PAGE>
defendants' fiduciary duties. Plaintiff alleges that he and the other
public stockholders of Scor U.S. common stock are entitled to enjoin the
proposed transaction, or alternatively, recover damages in the event the
transaction is consummated.
THE PARTIES
-----------
2. Plaintiff Howard Sande Feldman, Custodian for Jan Sharona
Feldman, UGMA is and at all relevant times was the owner of 200 shares of
common stock of Scor U.S.
3. Defendant Scor U.S. is a corporation organized and existing
under the laws of the State of Delaware with its principal executive
offices located at 110 William Street, Suite 1800, New York, New York
10038. It is a subsidiary of defendant Scor SA. Scor U.S., through its
subsidiaries, provides property and casualty insurance and reinsurance.
Reinsurance is provided to primary insurance companies on both a treaty
and facultative basis. Scor U.S.' subsidiary Scor Reinsurance Company
specializes in underwriting treaties covering standard and non-standard
automobile, commercial and technical risks and provides property, casualty
and special risk coverages on a facultative basis.
4. Defendant Scor SA is a corporation organized and existing under
the laws of France with its principal executive offices located at 1
avenue du President Wilson, 92800 Puteaux, France. Scor SA is the largest
shareholder of Scor U.S. It owns approximately 80% of the Company's common
stock. As such, Scor SA has effective control over the Company.
2
<PAGE>
5. Defendant Jacques P. Blondeau ("Blondeau") is Chairman of the
Board of Directors of Scor U.S. Blondeau is also Chairman of the Board and
Chief Executive Officer of defendant Scor SA.
6. Defendant Serge M.P. Osouf ("Osouf") is a Vice Chairman of the
Board of Directors of Scor U.S. Osouf is also the General Manager of
defendant Scor SA.
7. Defendant Patrick Peugeot ( "Peugeot" ) is a director of Scor
U.S. Peugeot is Honorary Chairman and the former Chairman of the Board and
Chief Executive Officer of defendant Scor SA.
8. Defendant Francois Reach ("Reach") is a director of Scor U.S.
Reach is Deputy General Manager and the former Chief Investment Officer
and Treasurer of defendant Scor SA.
9. Defendant David J. Sherwood ("Sherwood") is a director of Scor
U.S.
10. Defendant John W. Popp ("Popp") is a director of Scor U. S.
11. Defendant Jerome Karter ("Karter") is a director of Scor U. S.
12. Defendant John R. Cox. ("Cox") is a director of Scor U. S.
13. Defendant Raymond H. Deck ("Deck") is a director of Scor U. S.
14. Defendant Michel J. Gudefin ("Gudefin") is a director of Scor
U.S.
3
<PAGE>
15. Defendant Jean P. Masse ("Masse") is a director of Scor U.S.
16. Defendant Richard M. Murray ("Murray") is a director of Scor
U.S.
17. The above-named individual defendants (collectively the
"Individual Defendants") as officers and/or directors of the Company
and/or as significant shareholders of the Company, owe fiduciary duties of
good faith, loyalty, fair dealing, due care, and candor to plaintiff and
the other members of the Class (as defined below).
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings this action pursuant to Rule 23 of the Rules of
this Court, on behalf of himself and all other stockholders of the Company
as of September 26, 1995 (the "Class"). Excluded from the Class are the
defendants herein, members of their immediate families, and any
subsidiary, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants and their successors in interest,
who are or will be threatened with injury arising from defendants'
actions.
19. This action is properly maintainable as a class action for the
following reasons:
(a) the Class is so numerous that joinder of all members is
impracticable. While the exact number of class members is unknown to
plaintiff at this time and can only be ascertained through appropriate
discovery, there are more than
4
<PAGE>
three million shares of Scort U.S. common stock outstanding held by
hundreds of shareholders of record. The holders of these shares are
believed to be geographically dispersed throughout the United States. Scor
U.S. common stock is listed and actively traded on the New York Stock
Exchange;
(b) there are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting
only individual members. The common questions include, inter alia, the
----------
following:
(i) whether defendants have engaged and are continuing to
engage in a plan and scheme to benefit themselves at the expense of the
members of the Class;
(ii) whether the Individual Defendants, as directors and/or
officers of the Company and/or as significant shareholders of the Company,
have breached their fiduciary duties owed to plaintiff and the other
members of the Class, including their duties of entire fairness, loyalty,
due care, and candor;
(iii) whether defendants have disclosed all material facts
in connection with the challenged transaction; and
(iv) whether plaintiff and the other members of the Class
would be irreparably damaged were defendants not enjoined from the conduct
described herein;
(c) the claims of plaintiff are typical of the claims of the
other members of the Class and plaintiff has no interest that are adverse
or antagonistic to the interests of the Class;
5
<PAGE>
(d) the plaintiff is committed to prosecuting this action and
has retained counsel competent and experienced in litigation of this
nature. Plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class;
(e) plaintiff anticipates that there will be no difficulty in
the management of this litigation; and
(f) a class action is superior to other available methods for
adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
-----------------------
20. On September 26, 1995, the Dow Jones News Wire announced that
Scor SA would acquire the remaining shares of Scor U.S. that it does not
already own. Pursuant to the proposed transaction, each of Scor U.S.'
minority owned common shares will be converted into the right to receive
$14 in cash (the "Buyout Transaction").
21. The purpose of the Buyout Transaction is to enable Scor SA to
acquire one hundred (100%) percent equity ownership of Scor U.S. and its
valuable assets for its own benefit and the benefit of Scor SA, at the
expense of Scor U.S.' public stockholders who will be deprived of their
equity investment and the benefits thereof including, among other things,
the expected growth in the Company's profitability. Indeed, as disclosed
on the Bloomberg Newswire on September 26, 1995, after it purchased the
remaining 20% of Scor U.S., Scor SA intends to merge with
6
<PAGE>
Holding Company Scor, which controls Scor SA, thus increasing the value of
Scor U.S.
22. The Buyout Transaction is the product of unfair dealing, and the
price of $14 cash per share to be paid to class members is unconscionable
and unfair and so grossly inadequate as to constitute a gross breach of
trust committed by defendants against the public stockholders because,
among other things:
(a) the announcement of the proposed Buyout Transaction was
made when the Company was poised for significant future growth and
earnings as illustrated, inter alia, in the jump in the Company's net
----------
income to $4.8 million or $.27 per share, on a primary basis, in the
second quarter of 1995 from $600,000, or $.03 per share on a primary
basis, for the second quarter of 1994 and earnings estimates compiled by
Nelsons estimate earnings per share of $.90 for fiscal 1995 and $.97 for
fiscal 1996 up from the actual loss of $.43 per share in fiscal 1994;
(b) the proposed Buyout Transaction comes at a time when
according to analysts, the reinsurance industry is recovering from a
series of natural catastrophes including Hurricane Andrew in 1992 and the
Northridge earthquake in Los Angeles, California. As noted by Derek Elias,
an analyst at Paribas Capital markets, "[w]e're seeing the effect of fewer
natural catastrophes as well as pricing increases throughout the sector";
7
<PAGE>
(c) defendants undervalued Scor U.S.' common stock by ignoring
the full value of its assets and future prospects. The Buyout Transaction
does not reflect that Scor U.S.' financial condition is positive and will
continue to improve as the national economy recovers.
(d) because Scor SA controls an overwhelming majority of the
Company's common stock, no third party will bid for Scor U.S. Thus,
defendants will be able to proceed with the Buyout Transaction without an
auction or other type of market check to maximize value for Scor U.S.'
public shareholders.
(e) defendants timed the announcement of the Buyout Transaction
to place an artificial lid or cap on the market price for Scor U.S.' stock
to enable Scor SA to acquire the minority stock at the lowest possible
price. The agreed to merger price of $14 cash per Scor U.S. share
represents an approximate 28% premium over the closing price prior to the
announcement, but is below the closing market price of 15 on September 26,
1995, and the trading price of 15 1/4 on September 27, 1995.
23. By reason of their positions with Scor U.S. and the controlling
ownership of the Company, defendants are in possession of non-public
information concerning the financial condition and prospects of Scor U.S.,
and especially the true value and expected increased future value of Scor
U.S. and its assets, which they have not disclosed to Scor U.S.' public
stockholders. Such concealed information is of critical
8
<PAGE>
importance to class members in determining whether or not to seek the
appraised value of their stock pursuant to the General Corporation Law of
Delaware.
24. Scor SA is intent on paying the lowest buyout price to class
members, whereas it and the Individual Defendants are duty-bound to
maximize shareholder value. The defendant fiduciaries have clear and
material conflicts of interest and are acting to better the interests of
Scor SA at the expense of the Scor U.S. public shareholders.
25. The proposed Buyout Transaction is wrongful, unfair and harmful
to Scor U.S.' minority public stockholders, and represents an effort by
Scor SA to aggrandize its own financial position and interests at the
expense of and to the detriment of class members. The Buyout Transaction
is an attempt to deny plaintiff and the other members of the Class their
right to share proportionately in the true value of Scor U.S.' valuable
assets, future growth in profits, earnings and dividends, while usurping
the same for the benefit of Scor SA on unfair and inadequate terms.
26. Defendants, in failing to disclose the material non-public
information in their possession as to the value of Scor U.S.' assets, the
full extent of the future earnings potential of Scor SA and its expected
increase in profitability, are engaging in self-dealing, are not acting in
good faith toward plaintiff and the other members of the Class, and have
breached
9
<PAGE>
and are breaching their fiduciary duties to the members of the Class.
27. As a result of defendants' unlawful actions, plaintiff and the
other members of the Class will be damaged in that they will not receive
their fair portion of the value of Scor U.S.' assets and business and will
be prevented from obtaining the real value of their equity ownership of
the Company. Unless the proposed Buyout Transaction is enjoined by the
Court, defendants will continue to breach their fiduciary duties owed to
the plaintiff and the members of the Class, will not engage in arm's-
length negotiations on the merger terms, and will consummate and close the
proposed merger complained of and succeed in their plan described above,
all to the irreparable harm of the members of the Class.
28. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action and certifying
plaintiff as the representative of the Class;
(b) ordering defendants to carry out their fiduciary duties to
plaintiff and the other members of the Class, including those duties of
care, loyalty, and candor;
(c) granting preliminary and permanent injunctive relief against the
consummation of the Buyout Transaction as described herein;
10
<PAGE>
(d) in the event the Buyout Transaction is consummated, rescinding
the Buyout Transaction and/or awarding rescissory damages to the Class;
(e) ordering defendants, jointly and severally, to account to
plaintiff and other members of the Class all damages suffered and to be
suffered by them as the result of the acts and transactions alleged
herein;
(f) awarding plaintiff the costs and disbursements of the action
including allowances for plaintiff's reasonable attorneys and experts
fees; and
(g) granting such other and further relief as the Court may deem
just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ J. Monhait
----------------------------
First Federal Plaza
P.O. Box 1070
Wilmington, DE 19899
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER ROSS WOLF & JONES, L.L.P.
845 Third Avenue
New York, New York 10022
(212) 759-4600
11
Exhibit (g)(2)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE.
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------X
)
CRANDON CAPITAL PARTNERS, )
a Florida Partnership, )
)
Plaintiff, ) C.A. No. 14579
)
- against - ) CLASS ACTION
) COMPLAINT
JACQUES P. BLONDEAU, JEROME ) ------------
KARTER, SERGE M. P. OSOUF, )
JOHN R. COX,' RAYMOND H. DECK, )
MICHEL J. GUDEFIN, JEAN MASSE, )
RICHARD M. MURRAY, JOHN W. POPP, )
FRANCOIS REACH SHERWOOD, )
ELLEN E. THROWER and )
SCOR U. S. CORPORATION, )
)
Defendants. )
)
)
- ------------------------------------------X
Plaintiff, Crandon Capital Partners ("Crandon"), by its
undersigned attorneys, for its complaint against defendants,
alleges upon information and belief, except as to paragraph 2 which
is alleged upon knowledge, as follows:
NATURE OF THE ACTION
--------------------
1. Plaintiff brings this action individually and as a
class action on behalf of all persons, other than defendants, who
own the securities of SCOR U.S. Corporation ("SCOR U.S." or the
"Company") and who are similarly situated, for injunctive and other
appropriate relief. Plaintiff seeks the injunctive relief herein,
inter alia, to enjoin the consummation of an acquisition offer (the
- ----- ----
"Offer") announced on September 26, 1995 by SCOR SA, the 80% parent
<PAGE>
of SCOR U.S., pursuant to which SCOR SA will pay $14.00 for each of
the outstanding shares of the Company's common stock it does not
own, totalling about $50.6 million in the aggregate. Alternatively,
in the event that the Offer is consummated, plaintiff seeks to
recover damages caused by the breach of fiduciary duties owed by
the director defendants (as defined below) and by the majority
shareholder, SCOR SA. The proposed transaction and the acts of
SCOR SA and the Company's director defendants, as more particularly
alleged herein, constitute a breach of the defendants' fiduciary
duties to the plaintiff and the class and a violation of applicable
legal standards governing the defendants' conduct.
PARTIES
-------
2. Plaintiff is and has been an owner of shares of SCOR
U.S. common stock at all relevant times described herein.
3. SCOR U.S. is a corporation duly organized and
existing under the laws of the State of Delaware, with its
principal offices located at Two World Trade Center, New York, N.Y,
10048-0178. As of August 11, 1995, the Company had approximately
18.16 million shares of common stock outstanding. SCOR U.S.'s
principal business is as a holding company with subsidiaries which
provide property and casualty insurance and reinsurance to primary
insurance companies on both a treaty and facultative basis.
4. Defendant SCOR SA, a French corporation, owns and at
all times owned, directly or indirectly, 80 percent of the
Company's outstanding shares.
2
<PAGE>
5. Defendant Jacques P. Blondeau ("B1ondeau") at all
times material hereto has been the Chairman of the Board of
Directors of SCOR U.S. Defendant Blondeau is also Chairman of the
Board and Chief Executive Officer of SCOR SA.
6. Defendant Jerome Karter ("Karter") at all times
material hereto has been President, Chief Executive Officer, and a
director of SCOR U.S.
7. Defendant Serge M. P. Osouf ("Osouf") at all times
material hereto has been Vice Chairman of the Board. Defendant
Osouf is also General Manager of SCOR SA.
8. Defendants John R. Cox ("Cox"), Raymond H. Deck
("Deck"), Michel J. Gudefin ("Gudefin"), Jean Masse ("Masse"),
Richard M. Murray ("Murray"), John W. Popp ("Popp"), Francois Reach
Sherwood ("Sherwood") and Ellen E. Thrower ("Thrower") at all times
material hereto have been directors of the Company.
9. The defendants named in paragraphs 5 through 8 above
are hereinafter referred to as the "Individual Defendants".
10. The Individual Defendants, by reason of their
corporate directorship and/or executive positions, are fiduciaries
to and for the Company's shareholders, which fiduciary relationship
requires them to exercise their best judgment, and to act in a
prudent manner and in the best interests of the Company's
shareholders.
11. By virtue of its stock ownership and control of SCOR
U.S., SCOR SA is in a fiduciary relationship with plaintiff and the
other public stockholders of SCOR U.S., and owes them the highest
3
<PAGE>
obligations of good faith, fair dealing, due care, loyalty and full
and candid disclosure.
12. Each defendant herein is sued individually as a
conspirator and aider and abettor, as well as in his/her/its
capacity as an officer and/or director of the Company or
controlling shareholder, and the liability of each arises from the
fact that he, she or it has engaged in all or part of the unlawful
acts, plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
------------------------
13. Plaintiff brings this action individually on its own
behalf and as a class action, on behalf of all stockholders of the
Company (except the defendants ~herein and any person, firm, trust,
corporation, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will
be threatened with injury arising from defendants' actions as more
fully described herein (the "Class").
14. This action is properly maintainable as a class
action.
15. The Class is so numerous that joinder of all members
is impracticable. There are at least 140 record shareholders and
many more beneficial holders who hold the approximately 3.6 million
shares of SCOR U.S. common stock outstanding which are not held by
SCOR SA.
16. There is a well-defined community of interest in the
questions of law and fact involved affecting the members of the
Class. Among the questions of law and fact which are common to the
4
<PAGE>
Class, which predominate over questions affecting any individual
class member are, inter alia, the following:
----- ----
(a) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the public
stockholders of SCOR U.S.;
(b) whether defendants are engaging in self-dealing
to benefit SCOR SA and are effectuating the proposed transaction at
a grossly unfair price;
(c) whether defendants have breached or aided and
abetted the breach of the fiduciary and other common law duties
owed by them to plaintiff and the members of the Class; and
(d) whether plaintiff and the other members of the
Class would be irreparably damaged were the transaction complained
of herein consummated.
17. Plaintiff is a member of the Class and is committed
to prosecuting this action. Plaintiff has retained competent
counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of other members of the Class,
and plaintiff has the same interests as the other members of the
Class. Plaintiff does not have interests antagonistic to or in
conflict with those he seeks to represent. Plaintiff is an
adequate representative of the Class.
18. The likelihood of individual class members
prosecuting separate individual actions is remote due to the
relatively small loss suffered by each Class member as compared to
the burden and expense of prosecuting litigation of this nature and
5
<PAGE>
magnitude. Absent a class action, defendants are likely to avoid
liability for their wrongdoing, and Class members are unlikely to
obtain redress for the wrongs alleged herein.
SUBSTANTIVE ALLEGATIONS
-----------------------
19. In the September 18, 1995 issue of Business
--------
Insurance, defendant Blondeau, speaking as Chairman of SCOR SA (he
- ---------
is also Chairman of SCOR U.S.), reported that SCOR SA would not
attempt any acquisitions in the United States. According to that
published report, defendant Blondeau stated instead that:
"We will grow by ourselves .... We will
not buy anything in the U.S., (though) there
are still opportunities in Europe."
Thus, according to defendant Blondeau, as of September 18, 1995,
SCOR SA would pursue possible "opportunities in Europe," not in the
United States.
20. Barely less than a week later, however, on September
26, 1995, Reuters reported that SCOR SA had offered to pay $14 per
share cash for the remaining 20 percent of the Company that it did
not already own in order to acquire 100% ownership of the Company.
The proposed transaction is valued in excess of $50.6 million.
21. In response to this offer, shares of the Company
rose from a close of $11 1/8 per share on September 25, 1995 to $15
per share at the close of business on September 26, 1995 on the New
York Stock Exchange.
22. The consideration to be paid to the SCOR U.S.
shareholders in the merger is grossly unfair, inadequate, and
6
<PAGE>
substantially below the fair or inherent value of the Company. The
$14.00 per share offering price is approximately $1.00 per share
less than the present trading price of the Company's shares. The
intrinsic value of the equity of SCOR U.S. is materially greater
than the consideration of the Offer, taking into account SCOR
U.S.'s asset value, its expected growth, and the strength of its
business.
23. The proposed transaction price was not the result
of arm's-length negotiations, but was fixed arbitrarily by SCOR SA
as part of its unlawful plan and scheme to take advantage of its
control over the Company by obtaining 100% ownership of SCOR U.S.
at the lowest possible price. These facts have not been disclosed
by defendants.
24. Given the dominance and control of SCOR SA over the
Company and its entire Board, the purported independence of the
directors of the Company is open to serious question and there is
substantial reason to doubt that the board will evaluate the
proposed Offer with the requisite independence.
25. The proposed transaction is wrongful, unfair, and
harmful to SCOR U.S. stockholders, and represents an attempt by
SCOR SA to aggrandize itself at the expense and to the detriment of
the public stockholders of the Company. The proposed transaction
will deny class members their right to share proportionately in the
true value of SCOR U.S.'s valuable assets, profitable business, and
future growth in profits and earnings, while usurping the same for
the benefit of SCOR SA at an unfair and inadequate price.
7
<PAGE>
26. Because SCOR SA and the Individual Defendants are in
possession of corporate information concerning the Company's future
financial prospects, the degree of knowledge and economic power
between defendants and the Class members is unequal, making it
grossly and inherently unfair for SCOR SA to obtain ownership of
the Company's assets from the public stockholders as the unfair and
inadequate price which defendants have set.
27. By reason of all of the foregoing, defendants herein
have willfully participated in unfair dealing toward thc plaintiff
and the other members of the Class and have engaged in and
substantially assisted and aided and abetted each other in breach
of the fiduciary duties owed by them to the Class.
28. Defendants have violated fiduciary and other common
law duties owed to the plaintiff and the other members of the Class
in that they have not and are not exercising independent business
judgment, have acted and are acting to the detriment of the Class
to usurp for SCOR SA the true value of the Company's shares at an
unfair price, and for which the Company's public shareholders are
entitled to receive fair value.
29. As a result of the action of defendants, plaintiff
and the Class have been and will be damaged in that they have been
deceived, are the victims of unfair dealing, and are not receiving
the fair value of SCOR U.S.'s assets and businesses.
30. Unless enjoined by this Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and the
Class, and will succeed in their plan to enrich SCOR SA by
8
<PAGE>
excluding the Class from its fair proportionate share of SCOR
U.S.'s valuable assets and businesses, all to the irreparable harm
of the Class.
31. The plaintiff and the Class have no adequate remedy
at law.
WHEREFORE, plaintiff prays for judgment and relief as
follows:
(a) declaring that this lawsuit is properly
maintainable as a class action and certifying the plaintiff as
proper representative of the Class;
(b) declaring that the defendants and each of them
have committed or aided and abetted a gross abuse of trust and have
breached their fiduciary duties to the plaintiff and the other
members of the Class;
(c) preliminarily and permanently enjoining
defendants and their counsel, agents, employees, and all persons
acting under, in concert with, or for them, from proceeding with,
consummating or closing the Offer;
(d) in the event the Offer is consummated,
rescinding it and setting it aside;
(e) awarding rescissory and/or compensatory damages
against defendants, jointly and severally, in an amount to be
determined at trial, together with prejudgment interest at the
maximum rate allowable by law;
9
<PAGE>
(f) awarding plaintiff and the Class their costs
and disbursements and reasonable allowances for plaintiff's
counsel and experts' fees and expenses; and
(g) granting such other and further relief as may
be just and proper.
Dated: September 27, 1995
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Joseph A. Rosenthal
------------------------------
Joseph A. Rosenthal
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, Delaware 19899
Attorneys for Plaintiff
Of Counsel:
WECHSLERR SKIRNICK HARWOOD
HALEBIAN & FEFFER LLP
805 Third Avenue
New York, New York 10022
(212) 935-7400
10
Exhibit (g)(3)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------------X
)
DANIEL BRUNO, )
)
Plaintiff, ) CIVIL ACTION NO.
) 14582
v. )
)
SCOR U.S. CORPORATION, SCOR S.A., )
JACQUES P. BLANDEAU, SERGE M.P. OSOUF, )
JOHN R. COX, RAYMOND H. DECK, )
MICHEL J. GUDEFIN, JEROME KARTER, )
JEAN MASSE, RICHARD M. MURRAY, )
PATRICK PEUGEOT, JOHN W. POPP, )
FRANCOIS REACH and DAVID J. SHERWOOD, )
)
Defendants. )
- ----------------------------------------------X
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, for his Complaint alleges, upon
information and belief, except as to the allegations contained in
paragraph 2, which plaintiff alleges upon knowledge, as follows:
NATURE OF ACTION
----------------
1. Plaintiff brings this class action on behalf of
himself and all other public shareholders of defendant SCOR U.S.
Corporation ("SCOR U.S." or the "Company") similarly situated (the
"Class") to enjoin defendants from effectuating an unfair cash-out
acquisition by SCOR S.A. ("SCOR S.A."), designed to force the sale
of minority shareholders' equity interest in SCOR U.S. at a grossly
inadequate and unfair price of $14 per share. As set forth below,
pursuant to the proposed acquisition, SCOR S.A., which now controls
approximately 80% of the Company's total common stock outstanding,
will acquire the remaining 20% of the Company's common stock. The
proposed transaction is manifestly unfair as it is substantially
<PAGE>
below the true value of the Company and, as the $14.00 per share
acquisition price represents a discount of $1.00 per share below
the Company's common stock closing price on the day that the
proposal transaction was announced.
PARTIES
-------
2. Plaintiff Daniel Bruno, at all times relevant thereto,
owned shares of SCOR U.S. common stock.
3. Defendant SCOR U.S. is a Delaware corporation with
principal executive offices located at Two World Trade Center, New
York, New York 10048. SCOR U.S. is a holding company that provides
property and casualty insurance and reinsurance in the treaty and
facultative markets through its operating subsidiaries. As of
March 28, 1995, the Company had 18,164,620 shares of common stock
outstanding.
4. At all relevant times herein, defendant Jacques P.
Blondeau ("Blondeau") was Chairman of the Board of Directors of
SCOR U.S. ("Board"), and a member of the Board's Executive
Committee and Finance Committee. He is also Chairman of the Board
and Chief Executive Officer of SCOR S.A. For the fiscal year ended
December 31, 1994, Blondeau received cash compensation from SCOR
U.S. totalling $175,000.
5. At all relevant times herein, the following Individual
Defendants were also members of the Board of SCOR U.S.:
(a) Defendant Jerome Karter ("Karter") is Chief
Executive Officer, a member of the Board as well as a member
of its Executive Committee.
2
<PAGE>
(b) Defendant Serge M.P. Osouf ("Osouf") is Vice
Chairman of the Board as well as a member of its Executive and
Finance Committees. He is also the General Manager of SCOR S.A.
(c) Defendant John R. Cox ("Cox") is a member of the
Board, as well as a member of its Executive and Audit
Committees.
(d) Defendant Raymond H. Deck ("Deck") is a member of
the Board, as well as a member of its Executive, Finance,
Audit and Compensation Committees.
(e) Defendant Michel J. Gudefin ("Gudefin") is a member
of the Board, as well as a member of its Audit and
Compensation Committees.
(f) Defendant Jean Masse ("Masse") is a member of the
Board, as well as a member of its Finance Committee.
(g) Defendant Richard M. Murray ("Murray") is a member
of the Board, as well as a member of its Audit Committee.
(h) Defendant Patrick Peugeot ("Peugeot") is a member of
the Board, as well as a member of its Finance Committee.
(i) Defendant John W. Popp ("Popp") is a member of the
Board, as well as a member of its Audit and Compensation
Committees.
(j) Defendant Francois Reach ("Reach") is a member of
the Board, as well as a member of its Finance Committee. He
is also the Chairman and Chief Executive Officer of Reafin,
the finance company subsidiary of SCOR S.A.
3
<PAGE>
(k) Defendant David J. Sherwood ("Sherwood") is a member
of the Board, as well as its Executive, Audit and Compensation
Committees.
6. By virtue of their positions as directors and/or senior
executive officers of SCOR U.S. and their exercise of control over
its business and corporate affairs, defendants Blondeau, Osouf,
Cox, Deck, Gudefin, Karter, Masse, Murray, Peugeot, Popp, Reach and
Sherwood (collectively the "Individual Defendants") had, at all
relevant times, the power to control and influence, and did control
and influence, SCOR U.S. Each Individual Defendant owes SCOR U.S.
and its public stockholders fiduciary obligations and is required
to: use his ability to control and manage SCOR U.S. in a fair, just
and equitable manner; maximize shareholder value; act in
furtherance of the best interests of SCOR U.S. and its public
stockholders; govern SCOR U.S. in such a manner as to heed the
expressed views of its public shareholders; refrain from abusing
his position of control; provide full disclosure to the public
shareholders; and not favor his own or any other party's interests
at the expense of SCOR U.S. and its public shareholders.
7. At all relevant times herein, defendant SCOR S.A. owned
and/or controlled approximately 80 percent of the outstanding
shares of SCOR U.S. common stock. Defendant SCOR S.A. dominates
and controls the affairs of SCOR U.S., including the Company's
Board. As a result of this domination and control, said defendant
has determined unfairly to acquire the remaining outstanding shares
4
<PAGE>
of SCOR U.S. at a grossly inadequate price to the detriment of the
minority public shareholders, in breach of its fiduciary duties.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this action pursuant to Rule 23 of the
Rules of the Court of Chancery, for declaratory, injunctive and
other relief on his own behalf and as a class action, on behalf of
all public stockholders of SCOR U.S. (except defendants herein and
any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) and their successors in
interest.
9. This action is properly maintainable as a class action
for the following reasons:
(a) The class of stockholders for whose benefit this
action is brought is so numerous that joinder of all class
members is impracticable. As of March 28, 1995, SCOR U.S. had
approximately 18,164,620 shares of common stock duly issued
and outstanding, which traded on the New York Stock Exchange,
and were owned by 140 shareholders of record. Members of the
Class are scattered throughout the United States.
(b) There are questions of law and fact that are
common to the members of the Class and that predominate over
any questions affecting any individual members. The common
questions include, inter alia, the following:
----- ----
(i) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the
public stockholders of SCOR U.S.;
5
<PAGE>
(ii) whether the acquisition proposal by SCOR S.A.
of $14 per share is unfair to the public stockholders of
SCOR U.S. because it does not constitute a fair price for
the shares of the Company; and
(iii) whether the defendants have breached
fiduciary and common law duties owed by them to plaintiff
and the other members of the Class.
(c) The claims of plaintiff are typical of the claims of
the other members of the Class, and plaintiff has no interests
that are adverse or antagonistic to the interests of the
Class.
(d) Plaintiff is committed to the vigorous prosecution
of this action and has retained competent counsel experienced
in litigation of this nature. Accordingly, plaintiff is an
adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual
members of the Class would create a risk of inconsistent or
varying adjudications with respect to individual members of
the Class, and would establish incompatible standards of
conduct for the party opposing the Class.
(f) Defendants have acted, and are about to act, on
grounds generally applicable to the Class, thereby making
appropriate final injunctive or corresponding declaratory
relief with respect to the Class as a whole.
6
<PAGE>
(g) Plaintiff anticipates that there will be no
difficulty in the management of this litigation. A class
action is superior to other available methods for the fair and
efficient adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
-----------------------
10. SCOR U.S. is one of the largest domestic insurance
holding companies, which provides, through its subsidiaries,
property and casualty insurance and reinsurance on both a treaty
and facultative basis. Its operating subsidiaries have emphasized
the development of long-term relationships with medium-size
regional and specialty companies. The Company is based in New York
and has recently embarked on a growth plan to focus on writings of
business in certain targeted areas that the Company believes hold
greater profit potential.
11. The Company has also recently reduced costs, strengthened
its balance sheet and developed an investment strategy that
emphasizes quality and liquidity. For the first two quarters of
fiscal-year 1995, ended June 30, 1995, the Company reported
revenues of $150.5 million, which represented an increase of 9.2%
when compared to the same period for the prior fiscal year.
12. On April 3, 1995, the Company received an "A"
(Excellent) rating from A.M. Best Co. A.M. Best Co. stated that
SCOR U.S.'s "Excellent" rating "reflects its solid capital position
and strong majority owner, good long-term performance and
recognized leadership position."
7
<PAGE>
13. On September 26, 1995, SCOR S.A. announced that it
intended to commence an offer to acquire the 20% of SCOR U.S. it
does not own for $14 per share, or about $50.4 million. The offer
price represents a discount of approximately 6.6% below SCOR U.S.'s
closing price of $15 per share on the day the announcement was
made.
14. Given SCOR S.A.'s domination and control of SCOR U.S.,
the SCOR U.S. Board cannot be expected independently to act and
advocate the best interests of SCOR U.S.'s public shareholders.
Moreover, by virtue of its control and domination of SCOR U.S.,
SCOR S.A. has unique knowledge of the Company and has access to
information denied or unavailable to the public.
15. Given the domination and control of SCOR S.A., the
Individual Defendants cannot be expected to negotiate for the best
and highest price for SCOR U.S.'s public shareholders.
16. In view of defendant SCOR S.A.'s control of SCOR U.S., it
is unfair and in violation of defendants' fiduciary duties to
consummate the transaction without first obtaining a recommendation
and input by a truly independent representative of the public
stockholders or obtaining the majority approval of the public
stockholders.
17. By virtue of the acts and conduct alleged herein, the
defendants are carrying out a preconceived plan whereby SCOR S.A.
will acquire the minority public shares of SCOR U.S. pursuant to a
price that is grossly inadequate and intrinsically unfair to SCOR
U.S. public stockholders, is substantially below true value and is
8
<PAGE>
a product of defendants' conflicts of interest. As a result, the
public common stockholders of SCOR U.S. will be wrongfully deprived
of their valuable investment in the Company and all of its present
and continuing profitability and growth and will receive, in return
for their investment, grossly inadequate consideration.
18. The proposed acquisition constitutes an improper and
unlawful attempt by the defendants unfairly to cash-out the
minority shareholders of SCOR U.S.
19. Unless enjoined by this Court, defendants will continue
to breach fiduciary duties owed to plaintiff and the other members
of the Class, and will succeed in consummating an unfair
transaction by virtue of the unfair dealing complained of herein,
all to the irreparable harm of the Class.
20. Plaintiff and the other members of the Class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment and relief in his favor
and in favor of the Class and against defendants, as follows:
A. Declaring that this action be certified as a proper class
action and certifying plaintiff as class representative;
B. Declaring that the defendants and each of them have
committed a gross abuse of trust and have breached their fiduciary
duties to plaintiff and other members of the Class;
C. Preliminarily and permanently enjoining defendants and
their counsel, agents, employees and all persons acting under, in
concert with, or for them, from proceeding with, consummating or
9
<PAGE>
closing the proposed transaction which will irreparably harm
plaintiff and the Class;
D. In the event the acquisition proposal is consummated,
rescinding it and setting it aside and/or granting rescissory
damages;
E. Awarding compensatory damages in an amount to be
determined upon the proof submitted to the court;
F. Awarding the costs and disbursements of this action;
G. Awarding plaintiff counsel fees; and
H. Awarding such other and further relief which the Court
may deem just and proper.
Dated: September 28, 1995
CHIMICLES, JACOBSEN & TIKELLIS
/s/ Pamela S. Tikellis
----------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
(302) 686-2500
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LITOWITZ BERGER
& GROSSMANN
Vincent R. Cappucci
1285 Avenue of the Americas
New York, New York 10019
(212) 554-1400
10
Exhibit (g)(4)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------------------x
JAY BAXT, :
:
Plaintiff, :
: Civil Action No. 14585
- against - :
:
JACQUES P. BLANDEAU; SERGE M.P. OSOUF; : CLASS ACTION COMPLAINT
JEROME KARTER; JOHN R. COX; RAYMOND H. : ----------------------
DECK; MICHEL J. GUDEFIN; JEAN P. MASSE; :
RICHARD M. MURRAY; PATRICK PEUGOT; :
JOHN W. POPP; FRANCOIS REACH; DAVID :
J. SHERWOOD; SCOR SA and SCOR U.S. :
CORPORATION, :
:
Defendants. :
:
- ---------------------------------------------x
Plaintiff, individually and on behalf of all others
similarly situated, by his attorneys, alleges the following upon
information and belief based upon the investigation of his
counsel, which included, among other things, a review of various
public filings by the corporate defendants with the Securities
and Exchange Commission ("S.E.C.") and various public articles
detailed herein (except for those allegations which pertain to
plaintiff, which allegations are based upon personal knowledge):
1. This action arises out of an unlawful scheme and
plan to acquire the remaining approximately 20% ownership of Scor
U. S. Corporation ("Scor U.S." or the "Company") in a going-
private transaction by its parent, Scor SA, a French Company
("Scor SA") for grossly inadequate consideration and in breach of
defendants' fiduciary duties. Plaintiff alleges that he and the
other public stockholders of Scor U.S. common stock are entitled
<PAGE>
to enjoin the proposed transaction, or alternatively, recover
damages in the event the transaction is consummated.
THE PARTIES
-----------
2. Plaintiff is and at all relevant times was the
owner of shares of common stock of Scor U.S.
3. Defendant Scor U.S. is a corporation organized and
existing under the laws of the State of Delaware with its
principal executive offices located at 110 William Street, Suite
1800, New York, New York 10038. It is a subsidiary of defendant
Scor SA. Scor U.S., through its subsidiaries, provides property
and casualty insurance and reinsurance. Reinsurance is provided
to primary insurance companies on both a treaty and facultative
basis. Scor U.S.' subsidiary Scor Reinsurance Company
specializes in underwriting treaties covering standard and non-
standard automobile, commercial and technical risks and provides
property, casualty and special risk coverages on a facultative
basis.
4. Defendant Scor SA is a corporation organized and
existing under the laws of France with its principal executive
offices located at 1 avenue du President Wilson, 92800 Puteaux,
France. Scor SA is the largest shareholder of Scor U.S. It owns
approximately 80% of the Company's common stock. As such, Scor
SA has effective control over the Company.
5. Defendant Jacques P. Blondeau ("Blondeau") is
Chairman of the Board of Directors of Scor U.S. Blondeau is also
2
<PAGE>
Chairman of the Board and Chief Executive Officer of defendant
Scor SA.
6. Defendant Serge M.P. Osouf ("Osouf") is a Vice
Chairman of the Board of Directors of Scor U.S. Osouf is also
the General Manager of defendant Scor SA.
7. Defendant Patrick Peugeot ("Peugeot") is a
director of Scor U.S. Peugeot is Honorary Chairman and the
former Chairman of the Board and Chief Executive Officer of
defendant Scor SA.
8. Defendant Francois Reach ("Reach") is a director
of Scor U.S. Reach is Deputy General Manager and the former
Chief Investment Officer and Treasurer of defendant Scor SA.
9. Defendant David J. Sherwood ("Sherwood") is a
director of Scor U.S.
10. Defendant John W. Popp ("Popp") is a director of
Scor U.S.
11. Defendant Jerome Karter ("Karter"} is a director
of Scor U.S.
12. Defendant John R. Cox ("Cox") is a director of
Scor U.S.
13. Defendant Raymond H. Deck ("Deck") is a director
of Scor U.S.
14. Defendant Michel J. Gudefin ("Gudefin") is a
director of Scor U.S.
15. Defendant Jean P. Masse ("Masse") is a director
of Scor U.S.
3
<PAGE>
16. Defendant Richard M. Murray ("Murray") is a
director of Scor U.S.
17. The above-named individual defendants
(collectively the "Individual Defendants") as officers and/or
directors of the Company and/or as significant shareholders of
the Company, owe fiduciary duties of good faith, loyalty, fair
dealing, due care, and candor to plaintiff and the other members
of the Class (as defined below).
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of himself and all other
stockholders of the Company as of September 26, 1995 (the
"Class"). Excluded from the Class are the defendants herein,
members of their immediate families, and any subsidiary, firm,
trust, corporation, or other entity related to or affiliated with
any of the defendants and their successors in interest, who are
or will be threatened with injury arising from defendants'
actions.
19. This action is properly maintainable as a class
action for the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. While the exact number of class
members is unknown to plaintiff at this time and can only be
ascertained through appropriate discovery, there are more than
three million shares of Scor U.S. common stock outstanding held
by hundreds of shareholders of record. The holders of these
4
<PAGE>
shares are believed to be geographically dispersed throughout the
United States. Scor U.S. common stock is listed and actively
traded on the New York Stock Exchange;
(b) there are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common
questions include, inter alia, the following:
----- ----
(i) whether defendants have engaged and are
continuing to engage in a plan and scheme to benefit themselves
at the expense of the members of the Class;
(ii) whether the Individual Defendants, as
directors and/or officers of the Company and/or as significant
shareholders of the Company, have breached their fiduciary duties
owed to plaintiff and the other members of the Class, including
their duties of entire fairness, loyalty, due care, and candor;
(iii) whether defendants have disclosed all
material facts in connection with the challenged transaction; and
(iv) whether plaintiff and the other members
of the Class would be irreparably damaged were defendants not
enjoined from the conduct described herein;
(c) the claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interest that are adverse or antagonistic to the interests of the
Class;
(d) the plaintiff is committed to prosecuting this
action and has retained counsel competent and experienced in
5
<PAGE>
litigation of this nature. Plaintiff is an adequate
representative of the Class and will fairly and adequately
protect the interests of the Class;
(e) plaintiff anticipates that there will be no
difficulty in the management of this litigation; and
(f) a class action is superior to other available
methods for adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
-----------------------
20. On September 26, 1995, the Dow Jones News Wire
announced that Scor SA would acquire the remaining shares of Scor
U.S. that it does not already own. Pursuant to the proposed
transaction, each of Scor U.S.' minority owned common shares will
be converted into the right to receive $14 in cash (the "Buyout
Transaction").
21. The purpose of the Buyout Transaction is to enable
Scor SA to acquire one hundred (100%) percent equity ownership of
Scor U.S. and its valuable assets for its own benefit and the
benefit of Scor SA, at the expense of Scor U.S.' public
stockholders who will be deprived of their equity investment and
the benefits thereof including, among other things, the expected
growth in the Company's profitability. Indeed, as disclosed on
the Bloomberg Newswire on September 26, 1995, after it purchased
the remaining 20% of Scor U.S., Scor SA intends to merge with
Holding Company Scor, which controls Scor SA, thus increasing the
value of Scor U.S.
6
<PAGE>
22. The Buyout Transaction is the product of unfair
dealing, and the price of $14 cash per share to be paid to class
members is unconscionable and unfair and so grossly inadequate as
to constitute a gross breach of trust committed by defendants
against the public stockholders because, among other things:
(a) the announcement of the proposed Buyout
Transaction was made when the Company was poised for significant
future growth and earnings as illustrated, inter alia, in the
----- ----
jump in the Company's net income to $4.8 million or $.27 per
share, on a primary basis, in the second quarter of 1995 from
$600,000, or $.03 per share on a primary basis, for the second
quarter of 1994 and earnings estimates compiled by Nelsons
estimate earnings per share of $.90 for fiscal 1995 and $.97 for
fiscal 1996 up from the actual loss of $.43 per share in fiscal
1994;
(b) the proposed Buyout Transaction comes at a
time when according to analysts, the reinsurance industry is
recovering from a series of natural catastrophes including
Hurricane Andrew in 1992 and the Northridge earthquake in Los
Angeles, California. As noted by Derek Elias, an analyst at
Paribas Capital markets, "[w]e're seeing the effect of fewer
natural catastrophes as well as pricing increases throughout the
sector";
(c) defendants undervalued Scor U.S.' common stock
by ignoring the full value of its assets and future prospects.
The Buyout Transaction does not reflect that Scor U.S.' financial
7
<PAGE>
condition is positive and will continue to improve as the
national economy recovers.
(d) because Scor SA controls an overwhelmingly
majority of the Company's common stock, no third party will bid
for Scor U.S. Thus, defendants will be able to proceed with the
Buyout Transaction without an auction or other type of market
check to maximize value for Scor U.S.' public shareholders.
(e) defendants timed the announcement of the
Buyout Transaction to place an artificial lid or cap on the
market price for Scor U.S.' stock to enable Scor SA to acquire
the minority stock at the lowest possible price. The agreed to
merger price of $14 cash per Scor U.S. share represents an
approximate 28% premium over the closing price prior to the
announcement, but is below the closing market price of 15 on
September 26, 1995, and the trading price of 15 1/4 on September
27, 1995.
23. By reason of their positions with Scor U.S. and
the controlling ownership of the Company, defendants are in
possession of non-public information concerning the financial
condition and prospects of Scor U.S., and especially the true
value and expected increased future value of Scor U.S. and its
assets, which they have not disclosed to Scor U.S.' public
stockholders. Such concealed information is of critical
importance to class members in determining whether or not to seek
the appraised value of their stock pursuant to the General
Corporation Law of Delaware.
8
<PAGE>
24. Scor SA is intent on paying the lowest buyout
price to class members, whereas it and the Individual Defendants
are duty-bound to maximize shareholder value. The defendant
fiduciaries have clear and material conflicts of interest and are
acting to better the interests of Scor SA at the expense of the
Scor U.S. public shareholders.
25. The proposed Buyout Transaction is wrongful,
unfair and harmful to Scor U.S.' minority public stockholders,
and represents an effort by Scor SA to aggrandize its own
financial position and interests at the expense of and to the
detriment of class members. The Buyout Transaction is an attempt
to deny plaintiff and the other members of the Class their right
to share proportionately in the true value of Scor U.S.' valuable
assets, future growth in profits, earnings and dividends, while
usurping the same for the benefit of Scor SA on unfair and
inadequate terms.
26. Defendants, in failing to disclose the material
non-public information in their possession as to the value of
Scor U.S.' assets, the full extent of the future earnings
potential of Scor SA and its expected increase in profitability,
are engaging in self-dealing, are not acting in good faith toward
plaintiff and the other members of the Class, and have breached
and are breaching their fiduciary duties to the members of the
Class.
27. As a result of defendants' unlawful actions,
plaintiff and the other members of the Class will be damaged in
9
<PAGE>
that they will not receive their fair portion of the value of
Scor U.S.' assets and business and will be prevented from
obtaining the real value of their equity ownership of the
Company. Unless the proposed Buyout Transaction is enjoined by
the Court, defendants will continue to breach their fiduciary
duties owed to the plaintiff and the members of the Class, will
not engage in arm's-length negotiations on the merger terms, and
will consummate and close the proposed merger complained of and
succeed in their plan described above, all to the irreparable
harm of the members of the Class.
28. Plaintiff and the other members of the Class have
no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action
and certifying plaintiff as the representative of the Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, including
those duties of care, loyalty, and candor;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as
described herein;
(d) in the event the Buyout Transaction is consummated,
rescinding the Buyout Transaction and/or awarding rescissory
damages to the class;
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class all damages
10
<PAGE>
suffered and to be suffered by them as the result of the acts and
transactions alleged herein;
(f) awarding plaintiff the costs and disbursements of
the action including allowances for plaintiff's reasonable
attorneys and experts fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Joseph A. Rosenthal
-----------------------
First Federal Plaza
P.O. Box 1070
Wilmington, Delaware 19899
Attorneys for Plaintiff
OF COUNSEL:
BLUMENTHAL & OSTROFF
Norm Blumenthal
1420 Kettner Blvd.
7th Floor
San Diego, CA 92101
SULLIVAN, HILL, LEWIN
& MARKHAM
David R. Markham
550 West C Street
Suite 1500
San Diego, CA 92101
11
Exhibit (g)(5)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------x
KALTER AND KAPLAN PROFIT SHARING PLAN - :
Keogh F/B/O IVAN KALTER, :
:
Plaintiff, :
: Civil Action No.14589
- against - :
:
:
:
JACQUES P. BLONDEAU; SERGE M.P. OSOUF; : CLASS ACTION COMPLAINT
JEROME KARTER; JOHN R. COX; RAYMOND H. : ----------------------
DECK; MICHAEL J. GUDEFIN; JEAN P. MASSE; :
RICHARD M. MURRAY; PATRICK PEUGEOT; :
JOHN W. POPP; FRANCOIS REACH; DAVID :
J. SHERWOOD; SCOR SA and SCOR U. S. :
CORPORATION, :
:
Defendants. :
:
- ------------------------------------------x
Plaintiff, by its attorneys, alleges the following upon
information and belief based upon the investigation of its
counsel, which included, among other things, a review of various
public filings by the corporate defendants with the Securities
and Exchange Commission ("S.E.C.") and various public articles
detailed herein (except for those allegations which pertain to
plaintiff, which allegations are based upon personal knowledge):
1. This action arises out of an unlawful scheme and
plan to acquire the remaining approximately 20% ownership of Scor
U. S. Corporation ("Scor U.S." or the "Company") in a going-
private transaction by its parent, Scor SA, a French Company
("Scor SA") for grossly inadequate consideration and in breach of
defendants' fiduciary duties. Plaintiff alleges that it and the
other public stockholders of Scor U.S. common stock are entitled
<PAGE>
to enjoin the proposed transaction, or alternatively, recover
damages in the event the transaction is consummated.
THE PARTIES
-----------
2. Plaintiff is and at all relevant times was the
owner of 400 shares of common stock of Scor U.S.
3. Defendant Scor U.S. is a corporation organized and
existing under the laws of the State of Delaware with its
principal executive offices located at 110 William Street, Suite
1800, New York, New York 10038. It is a subsidiary of defendant
Scor SA. Scor U.S., through its subsidiaries, provides property
and casualty insurance and reinsurance. Reinsurance is provided
to primary insurance companies on both a treaty and facultative
basis. Scor U.S.' subsidiary Scor Reinsurance Company
specializes in underwriting treaties covering standard and non-
standard automobile, commercial and technical risks and provides
property, casualty and special risk coverages on a facultative
basis.
4. Defendant Scor SA is a corporation organized and
existing under the laws of France with its principal executive
offices located at 1 Avenue du President Wilson, 92800 Puteaux,
France. Scor SA is the largest shareholder of Scor U.S. It owns
approximately 80% of the Company's common stock. As such, Scor
SA has effective control over the Company.
5. Defendant Jacques P. Blondeau ("Blondeau") is
Chairman of the Board of Directors of Scor U.S. Blondeau is also
2
<PAGE>
Chairman of the Board and Chief Executive Officer of defendant
Scor S.A.
6. Defendant Serge M.P. Osouf ("Osouf") is a Vice
Chairman of the Board of Directors of Scor U.S. Osouf is also
the General Manager of defendant Scor SA.
7. Defendant Patrick Peugeot ("Peugeot") is a
director of Scor U.S. Peugeot is Honorary Chairman and the
former Chairman of the Board and Chief Executive Officer of
defendant Scor SA.
8. Defendant Francois Reach ("Reach") is a director
of Scor U.S. Reach is Deputy General Manager and the former
Chief Investment Officer and Treasurer of defendant Scor SA.
9. Defendant David J. Sherwood ("Sherwood") is a
director of Scor U.S.
10. Defendant John W. Popp ("Popp") is a director of
Scor U.S.
11. Defendant Jerome Karter ("Karter") is a director
of Scor U.S.
12. Defendant John R. Cox ("Cox") is a director of
Scor U.S.
13. Defendant Raymond H. Deck ("Deck") is a director
of Scor U.S.
14. Defendant Michel J. Gudefin ("Gudefin") is a
director of Scor U.S.
15. Defendant Jean P. Masse ("Masse") is a director of
Scor U.S.
3
<PAGE>
16. Defendant Richard M. Murray ("Murray") is a
director of Scor U.S.
17. The above-named individual defendants
(collectively the "individual Defendants") as officers and/or
directors of the Company and/or as significant shareholders of
the Company, owe fiduciary duties of good faith, loyalty, fair
dealing, due care, and candor to plaintiff and the other members
of the Class (as defined below).
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of itself and all other
stockholders of the Company as of September 26, 1995 (the
"Class"). Excluded from the Class are the defendants herein,
members of their immediate families, and any subsidiary, firm,
trust, corporation, or other entity related to or affiliated with
any of the defendants and their successors in interest, who are
or will be threatened with injury arising from defendants'
actions.
19. This action is properly maintainable as a class
action for the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. While the exact number of class
members is unknown to plaintiff at this time and can only be
ascertained through appropriate discovery, there are more than
three million shares of Scor U.S. common stock outstanding held
by hundreds of shareholders of record. The holders of these
4
<PAGE>
shares are believed to be geographically dispersed throughout the
United States. Scor U.S. common stock is listed and actively
traded on the New York Stock Exchange;
(b) there are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common
questions include, inter alia the following:
----- ----
(i) whether defendants have engaged and are
continuing to engage in a plan and scheme to benefit themselves
at the expense of the members of the Class;
(ii) whether the Individual Defendants, as
directors and/or officers of the Company and/or as significant
shareholders of the Company, have breached their fiduciary duties
owed to plaintiff and the other members of the Class, including
their duties of entire fairness, loyalty, due care, and candor;
(iii) whether defendants have disclosed all
material facts in connection with the challenged transaction; and
(iv) whether plaintiff and the other members
of the Class would be irreparably damaged were defendants not
enjoined from the conduct described herein;
(c) the claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interest that is adverse or antagonistic to the interests of the
Class;
(d) the plaintiff is committed to prosecuting this
action and has retained counsel competent and experienced in
5
<PAGE>
litigation of this nature. Plaintiff is an adequate
representative of the Class and will fairly and adequately
protect the interests of the Class;
(e) plaintiff anticipates that there will be no
difficulty in the management of this litigation; and
(f) a class action is superior to other available
methods for adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
-----------------------
20. On September 26, 1995, the Dow Jones News Wire
announced that Scor SA would acquire the remaining shares of Scor
U.S. that it does not already own. Pursuant to the proposed
transaction, each of Scor U.S.' minority owned common shares will
be converted into the right to receive $14 in cash (the "Buyout
Transaction").
21. The purpose of the Buyout Transaction is to enable
Scor SA to acquire one hundred (100%) percent equity ownership of
Scor U.S. and its valuable assets for its own benefit and the
benefit of Scor SA, at the expense of Scor U.S.' public
stockholders who will be deprived of their equity investment and
the benefits thereof including, among other things, the expected
growth in the Company's profitability. Indeed, as disclosed on
the Bloomberg Newswire on September 26, 1995, after it purchased
the remaining 20% of Scor U.S., Scor SA intends to merge with
Holding Company Scor, which controls Scor SA, thus increasing the
value of Scor U.S.
6
<PAGE>
22. The Buyout Transaction is the product of unfair
dealing, and the price of $14 cash per share to be paid to class
members is unconscionable and unfair and so grossly inadequate as
to constitute a gross breach of trust committed by defendants
against the public stockholders because, among other things:
(a) the announcement of the proposed Buyout
Transaction was made when the Company was poised for significant
future growth and earnings as illustrated, inter alia, in the
----- ----
jump in the Company's net income to $4.8 million or $.27 per
share, on a primary basis, in the second quarter of 1995 from
$600,000, or $.03 per share on a primary basis, for the second
quarter of 1994 and earnings estimates compiled by Nelsons
estimate earnings per share of $.90 for fiscal 1995 and $.97 for
fiscal 1996 up from the actual loss of $.43 per share in fiscal
1994;
(b) the proposed Buyout Transaction comes at a
time when according to analysts, the reinsurance industry is
recovering from a series of natural catastrophes including
Hurricane Andrew in 1992 and the Northridge earthquake in Los
Angeles, California. As noted by Derek Elias, an analyst at
Paribas Capital markets, "[w]e're seeing the effect of fewer
natural catastrophes as well as pricing increases throughout the
sector";
(c) defendants undervalued Scor U.S.' common stock
by ignoring the full value of its assets and future prospects.
The Buyout Transaction does not reflect that Scor U.S.' financial
7
<PAGE>
condition is positive and will continue to improve as the
national economy recovers.
(d) because Scor SA controls an overwhelming
majority of the Company's common stock, no third party will bid
for Scor U.S. Thus, defendants will be able to proceed with the
Buyout Transaction without an auction or other type of market
check to maximize value for Scor U.S.' public shareholders.
(e) defendants timed the announcement of the
Buyout Transaction to place an artificial lid or cap on the
market price for Scor U.S.' stock to enable Scor SA to acquire
the minority stock at the lowest possible price. The agreed to
merger price of $14 cash per Scor U.S. share represents an
approximate 28% premium over the closing price prior to the
announcement, but is below the closing market price of 15 on
September 26, 1995, and the trading price of 15 1/4 on September
27, 1995.
23. By reason of their positions with Scor U.S. and
the controlling ownership of the Company, defendants are in
possession of non-public information concerning the financial
condition and prospects of Scor U.S., and especially the true
value and expected increased future value of Scor U.S. and its
assets, which they have not disclosed to Scor U.S.' public
stockholders. Such concealed information is of critical
importance to class members in determining whether or not to seek
the appraised value of their stock pursuant to the General
Corporation Law of Delaware.
8
<PAGE>
24. Scor SA is intent on paying the lowest buyout
price to class members, whereas it and the Individual Defendants
are duty-bound to maximize shareholder value. The defendant
fiduciaries have clear and material conflicts of interest and are
acting to better thc interests of Scor SA at the expense of the
Scor U.S. public shareholders.
25. The proposed Buyout Transaction is wrongful,
unfair and harmful to Scor U.S.' minority public stockholders,
and represents an effort by Scor SA to aggrandize its own
financial position and interests at the expense of and to the
detriment of class members. The Buyout Transaction is an attempt
to deny plaintiff and the other members of the Class their right
to share proportionately in the true value of Scor U.S.' valuable
assets, future growth in profits, earnings and dividends, while
usurping the same for the benefit of Scor SA on unfair and
inadequate terms.
26. Defendants, in failing to disclose the material
non-public information in their possession as to the value of
Scor U.S.' assets, the full extent of the future earnings
potential of Scor SA and its expected increase in profitability,
are engaging in self-dealing, are not acting in good faith toward
plaintiff and the other members of the Class, and have breached
and are breaching their fiduciary duties to the members of the
Class.
27. As a result of defendants' unlawful actions,
plaintiff and the other members of the Class will be damaged in
9
<PAGE>
that they will not receive their fair portion of the value of
Scor U.S.' assets and business and will be prevented from
obtaining the real value of their equity ownership of the
Company. Unless the proposed Buyout Transaction is enjoined by
the Court, defendants will continue to breach their fiduciary
duties owed to the plaintiff and the members of the Class, will
not engage in arm's-length negotiations on the merger terms, and
will consummate and close the proposed merger complained of and
succeed in their plan described above, all to the irreparable
harm of the members of the Class.
28. Plaintiff and the other members of the Class have
no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper classs action
and certifying plaintiff as the representative of the Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, including
those duties of care, loyalty, and candor;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as
described herein;
(d) in the event the Buyout Transaction is consummated,
rescinding the Buyout Transaction and/or awarding rescissory
damages to the Class;
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class for all
10
<PAGE>
damages suffered and to be suffered by them as the result of the
acts and transactions alleged herein;
(f) awarding plaintiff the costs and disbursements of
the action including allowances for plaintiff's reasonable
attorneys and experts fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Joseph A. Rosenthal
----------------------------------
First Federal Plaza
P.O Box 1070
Wilmington, DE 19899
Attorneys for Plaintiff
OF COUNSEL:
ZWERLING, SCHACHTER, ZWERLING
& KOPPELL, LLP
767 Third Avenue
New York, NY 10017-2023
11
