-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VnMpBau4Q2mP5YX6yde5A81qPrhCxWPsy3VDAnDlGTxrWUkp+Gi7Q5mFaa1DJcfE FWTPh0JFSf2H7QbS8Ixpng== 0000024011-94-000042.txt : 19940404 0000024011-94-000042.hdr.sgml : 19940404 ACCESSION NUMBER: 0000024011-94-000042 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL CORP CENTRAL INDEX KEY: 0000024011 STANDARD INDUSTRIAL CLASSIFICATION: 6331 IRS NUMBER: 132610607 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05686 FILM NUMBER: 94519571 BUSINESS ADDRESS: STREET 1: 180 MAIDEN LN CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2124403000 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________ to __________. Commission file number 1-5686. THE CONTINENTAL CORPORATION (Exact name of registrant as specified in its charter) New York 13-2610607 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 180 Maiden Lane, New York, New York 10038 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: 212-440-3000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, par value $1.00 per share New York, Midwest and Pacific Stock Exchanges Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ...X... No ....... Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant as of March 8, 1994 was $1,320,757,812. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of March 8, 1994. 55,330,630 shares of Common Stock DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1993 Annual Report to Shareholders are incorporated by reference into Parts I and II of this Report. Portions of the registrant's Proxy Statement in connection with its 1994 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report. PART I Item 1. Business General Information The Continental Corporation ("Continental"), a New York corporation incorporated in 1968, is an insurance holding company. Its best known subsidiary, The Continental Insurance Company, was organized in 1853. The principal business of Continental is the ownership of a group of property and casualty insurance companies. Continental's other principal subsidiaries and affiliates provide investment management, claims adjusting and risk management services. In 1993, Continental sold its premium financing operations; in 1992, Continental instituted a plan to withdraw from the traditional assumed reinsurance and marine reinsurance businesses and the indigenous international and international marine insurance businesses. The results of these operations are now reported as discontinued and previously reported information has been restated accordingly. Financial Information Relating to Business Segments Continental's revenues from insurance operations accounted for approximately 97% of Continental's consolidated revenues for each of the three years ended December 31, 1993, 1992, and 1991. The following table sets forth certain information with respect to Continental's business segments for each of the last three years: Year Ended December 31 (1) (2) -------------------------------- 1993 1992 1991 --------- --------- --------- (millions) Revenues: Agency & Brokerage Commercial. . . . $ 2,121.3 $ 1,919.5 $ 2,018.1 Agency & Brokerage Personal. . . . . 861.6 777.4 795.3 Specialized Commercial . . . . . . . 1,433.2 1,201.1 1,059.1 --------- --------- --------- Total Premiums Earned. . . . . . . . 4,416.1 3,898.0 3,872.5 Net Investment Income. . . . . . . . 514.3 559.5 610.6 Realized Capital Gains . . . . . . . 110.3 222.3 115.0 --------- --------- --------- Insurance Operations . . . . . . . . 5,040.7 4,679.8 4,598.1 Corporate & Other Operations . . . . 133.0 117.2 122.9 --------- --------- --------- Total. . . . . . . . . . . . . . . $ 5,173.7 $ 4,797.0 $ 4,721.0 ========= ========= ========= Income from Continuing Operations before Income Taxes: Agency & Brokerage Commercial. . . . $ (234.8) $ (281.0) $ (354.6) Agency & Brokerage Personal. . . . . (78.1) (127.0) (66.3) Specialized Commercial . . . . . . . (92.5) (173.6) (146.9) --------- --------- --------- GAAP Underwriting Loss . . . . . . . (405.4) (581.6) (567.8) Net Investment Income. . . . . . . . 514.3 559.5 610.6 Realized Capital Gains . . . . . . . 110.1 222.3 115.0 --------- --------- --------- Insurance Operations . . . . . . . . 219.0 200.2 157.8 Corporate & Other Operations . . . . (41.1) (69.5) (62.3) --------- --------- --------- Total. . . . . . . . . . . . . . . $ 177.9 $ 130.7 $ 95.5 ========= ========= ========= Identifiable Assets: Insurance Operations . . . . . . . . $15,552.1 $15,113.5 $14,031.1 Corporate & Other Operations . . . . 583.9 149.9 283.9 --------- --------- --------- Total Assets from Continuing Operations. . . . . . 16,136.0 15,263.4 14,315.0 Net Assets of Discontinued Operations . . . . . . . . . . . 84.6 310.5 506.9 --------- --------- --------- Total Assets . . . . . . . . . . . . $16,220.6 $15,573.9 $14,821.9 ========= ========= ========= ____________________ (1) Distinct investment portfolios are not maintained for each segment; accordingly, allocation of assets, net investment income and realized capital gains to each segment is not performed. (2) Certain reclassifications, primarily for discontinued operations, have been made to the prior years' financial information to conform to the 1993 presentation.
The following table sets forth certain information with respect to Continental's domestic, Canadian, other foreign and consolidated operations for each of the last three years:
Year Ended December 31 (1)(2) -------------------------------- 1993 1992 1991 --------- ---------- ---------- (millions) United States: Revenues............................. $ 4,731.7 $ 4,379.1 $ 4,146.6 Income from Continuing Operations before Income Taxes..... 165.7 144.3 103.2 Identifiable Assets of Continuing Operations.............. 15,063.0 13,975.5 13,130.6 Canada: Revenues............................. $ 324.6 $ 340.2 $ 440.2 Loss from Continuing Operations before Income Taxes..... (5.4) (7.5) (26.0) Identifiable Assets of Continuing Operations.............. 1,024.1 926.8 801.5 Other Foreign: Revenues............................. $ 117.4 $ 77.7 $ 134.2 Income (Loss) from Continuing Operations before Income Taxes..... 17.6 (6.1) 18.3 Identifiable Assets of Continuing Operations.............. 48.9 361.1 382.9 Consolidated: Revenues............................. $ 5,173.7 $ 4,797.0 $ 4,721.0 Income from Continuing Operations before Income Taxes..... 177.9 130.7 95.5 Identifiable Assets of Continuing Operations.............. 16,136.0 15,263.4 14,315.0 ________________ (1) and (2) - See Footnotes (1) and (2), respectively, on page 1 herein.
General Information Relating to Business Segments Continental's insurance operations (the "Insurance Operations") are comprised of three segments: Agency & Brokerage Commercial, Agency & Brokerage Personal and Specialized Commercial. These operations are conducted by Continental's property and casualty insurance subsidiaries. One or more of these companies is licensed or admitted to conduct business in each state or territory of the United States and in each province or territory of Canada. Continental's other segment is Corporate & Other Operations, which principally includes investment management, claims adjusting and risk management services. Agency & Brokerage Commercial Continental's Agency & Brokerage Commercial segment focuses on the production of property and casualty insurance coverage in the United States and Canada through independent insurance agents and brokers, almost all of whom also represent other companies. The Agency & Brokerage Commercial segment includes: (1) Agency and Brokerage operations; (2) Continental Risk Management Services operations (formerly Special Risk operations); (3) Continental Canada's operations; and (4) First Insurance Company of Hawaii, Ltd., a 60%-owned Continental subsidiary ("First of Hawaii"). For the fiscal year ended December 31, 1993, the Agency & Brokerage Commercial segment produced 47.7% of Continental's consolidated written premiums. Premiums on its commercial multi-peril policies represented 59.2% of the segment's written premiums. Other principal lines written by the Agency & Brokerage Commercial segment include workers' compensation, commercial automobile, general liability, boiler and machinery, and fire & allied lines. Continental's Agency and Brokerage operations concentrate their marketing efforts on selected markets through specially designed programs and products and selected local and national producers. Agency and Brokerage operations consist of 10 regional offices containing underwriters and support personnel and a network of approximately 90 territorial offices responsible for sales and underwriting. Agency and Brokerage operations also have two automated business centers which handle underwriting and processing of personal and small commercial lines. In addition, such operations have a custom markets unit devoted specifically to developing small to mid-sized commercial business from national brokers, special programs for specific business segments, and employee accounts. Continental Risk Management Services operations market custom-tailored casualty coverages to Continental's large commercial accounts, including primary and excess coverage for workers' compensation, general liability and commercial automobile risks. Such operations also provide claims management, loss control and actuarial services for its clients. Continental Canada's operations, which are considered part of North American operations and which write commercial and personal property and casualty coverages in Canada, include: (1) The Dominion Insurance Corporation, a Continental subsidiary; (2) The Continental Insurance Company of Canada, a Continental subsidiary; and (3) branch offices of two of Continental's U.S. property and casualty companies. Together, they are one of the leading underwriters of commercial property and casualty coverages in Canada. These operations are managed by Continental Insurance Management Ltd., a Continental subsidiary. First of Hawaii is the largest property and casualty insurer in the Hawaiian Islands. The Tokio Marine and Fire Insurance Company, Ltd., a Japanese insurance company, owns the remaining 40% of the outstanding shares of First of Hawaii. The Agency & Brokerage Commercial segment's premiums earned increased $201 million from 1992. Commercial package premiums earned increased $132 million due to both price increases and acceptance of new risks. Workers' compensation premiums earned increased $20 million due to price increases substantially offset by deliberate reductions in the amount of risk accepted. In addition, the segment's 1992 premiums earned were reduced by a $39 million charge, which did not recur in 1993, to reinstate catastrophe reinsurance coverage. The segment's underwriting results improved $46 million from 1992, primarily due to a $20 million decrease in net catastrophe-related charges and growth in business written without a proportionate increase in operating expenses. Losses and loss expenses increased $102 million, primarily due to inflation in loss costs, the increase in the amount of risk accepted and a $19 million increase in net catastrophe losses. Insurance operating expenses increased $53 million, primarily due to growth in business written and a $32 million decrease in servicing carrier income, which is recorded as a reduction in commission expenses. Agency & Brokerage Personal Continental's Agency & Brokerage Personal segment also focuses on the production of property and casualty insurance coverage in the United States and Canada through independent insurance agents and brokers, almost all of whom also represent other companies. The Agency & Brokerage Personal segment includes: (1) Agency and Brokerage operations; (2) Continental Canada's operations; and (3) First of Hawaii, each of which is discussed above. For the fiscal year ended December 31, 1993, the Agency & Brokerage Personal segment produced 19.6% of Continental's consolidated written premiums. Premiums on its personal package policies represented 58.2% of the segment's written premiums. Other principal lines written by the Agency & Brokerage Personal segment include automobile, homeowners, and fire & allied lines. The Agency & Brokerage Personal segment's premiums earned increased $85 million from 1992. Personal package premiums earned increased $30 million due to price increases, despite a small reduction in the amount of risk accepted. Monoline automobile premiums earned increased $39 million due to an increase in assignments from involuntary risk pools, primarily from New Jersey. In addition, the segment's 1992 premiums earned were reduced by a $25 million charge, which did not recur in 1993, to reinstate catastrophe reinsurance coverage. The segment's underwriting results improved $49 million from 1992, primarily due to a $50 million decrease in net catastrophe-related charges. Losses and loss expenses increased $44 million, despite a $25 million decrease in net catastrophe losses, primarily due to inflation in loss costs and an increase in losses from involuntary risk pools resulting from the increase in assignments. Insurance operating expenses improved $8 million primarily resulting from cost reductions implemented in 1991. Specialized Commercial Continental's Specialized Commercial segment provides specialized commercial coverages, principally in marine and aviation, workers' compensation, fidelity & surety, excess and specialty, accident and health, medical malpractice, customized financial coverage and multinational lines. This segment accounted for 32.7% of Continental's consolidated written premiums for the 1993 fiscal year. The Specialized Commercial segment includes: (1) Marine Office of America Corporation, a Continental subsidiary ("MOAC"); (2) Associated Aviation Underwriters, a 50%-owned Continental affiliate ("AAU"); (3) Continental Excess & Select operations; (4) Casualty Insurance Company, a Continental subsidiary ("Casualty"); (5) Continental Financial Institutions operations; (6) Continental Guaranty operations; (7) Continental Credit operations; (8) Continental Insurance HealthCare operations; (9) The Continental Insurance Company of Puerto Rico ("Continental Puerto Rico"); and (10) The Continental Insurance Company (Europe) Limited, a Continental subsidiary ("Continental Insurance (Europe)"). MOAC underwrites and manages ocean and inland marine insurance coverages, automobile warranty coverages and service repair warranty coverages for technical equipment through branch offices located throughout the United States. It also concentrates on developing package policies for the transportation, distribution and manufacturing industries. MOAC supports all of these coverages with specialized claims handling, surveying, loss control and recovery services. AAU writes insurance for many segments of the aviation industry through branch offices located throughout the United States. Continental Excess & Select operations are active in the excess and specialty lines markets. Their principal types of coverage are stop-loss protection on group health insurance programs, professional liability insurance for lawyers, accountants and other classes of professionals, excess liability insurance, directors' and officers' liability insurance and industry targeted programs of liability insurance for the railroad, mining, skiing, biotechnology and pharmaceutical industries. Continental Excess & Select operations also provide support services to Continental's other excess liability and specialty lines operations. Casualty and its subsidiary, Workers' Compensation and Indemnity Company of California, write certain preselected classes of workers' compensation exposures in Illinois, Wisconsin, Indiana, Michigan and southern California. Continental Financial Institutions operations provide highly specialized coverages for financial institutions, from fidelity bonds to directors' and officers' liability and professional liability insurance, as well as a range of fidelity products for commercial businesses. Continental Guaranty operations are a major provider of surety coverages. Continental Credit operations provide credit insurance. The financial institutions, guaranty and credit operations were previously divisions of a Continental subsidiary, Continental Guaranty & Credit Corporation, which is no longer doing business as a separate corporate entity. Continental Insurance HealthCare operations primarily provide medical malpractice insurance. Such operations also provide claims and risk management services to insureds and other clients. Continental Puerto Rico writes business in Puerto Rico, primarily by way of a quota- share reinsurance agreement with an unaffiliated entity, Puerto-Rican American Insurance Company ("PRAICO"). In 1993, the quota-share participation of Continental Puerto Rico was 12.1% of the net premiums written by PRAICO. Continental Insurance (Europe) writes multinational programs in Europe. The Specialized Commercial segment's premiums earned increased $232 million from 1992 due to both price increases and acceptance of new risks. Premiums earned increased $51 million in domestic marine, $49 million in workers' compensation in selected markets, $49 million in customized financial coverages, $41 million in specialty casualty and $25 million in fidelity & surety insurance. In addition, the segment's 1992 premiums earned were reduced by an $11 million charge, which did not recur in 1993, to reinstate catastrophe reinsurance coverage. The segment's underwriting results improved $82 million from 1992, primarily due to better experience in domestic marine and specialty casualty insurance, an $18 million decrease in net catastrophe-related charges and growth in business written without a proportionate increase in operating expenses. Losses and loss expenses increased $106 million, despite better experience in certain lines and a $7 million decrease in net catastrophe losses, primarily due to inflation in loss costs and the increase in the amount of risk accepted. Insurance operating expenses increased $44 million, primarily due to growth in business written. Corporate & Other Operations The Corporate & Other Operations segment includes Continental's corporate operating expenses and the operations of Continental's non-insurance subsidiaries. Continental's non-insurance subsidiaries primarily include: (1) Continental Asset Management Corp. ("CAM"); (2) Continental Loss Adjusting Services, Inc. ("CLAS"); (3) Continental Rehabilitation Resources, Inc. ("CRR"); (4) Ctek, Inc. ("Ctek"); (5) California Central Trust Bank Corporation "CalTrust"); and (6) Settlement Options, Inc. ("Settlement Options"). CAM, a Continental subsidiary registered under the Investment Advisers Act of 1940, as amended, provides investment advisory services to Continental, its subsidiaries, its employee benefit plans, certain affiliates and unrelated parties under investment advisory agreements. CLAS provides claims services for Continental's subsidiaries and other customers. Its wholly-owned subsidiary, CRR, provides medical and vocational rehabilitation for injured employees of insureds and other clients. Ctek engages in risk evaluation and improvement activities designed to help insureds and other clients reduce or control losses to property, equipment, materials and human resources. CalTrust is a limited service bank whose activities are restricted to the acceptance of deposits, investment of depository funds and acting as trustee and/or third party administrator for employee benefit plans. The following table sets forth certain information with respect to CalTrust's deposit liabilities for each of the last three years:
1993 1992 1991 _________________ _________________ _________________ % % % Average Average Average Average Interest Average Interest Average Interest Balance Rate Balance Rate Balance Rate ------- -------- ------- -------- ------- ------- (millions, except percentages) Savings Deposits (representing Total Interest-Bearing Time and Savings Deposits)........... $ 123.1 2.8% $ 121.9 3.4% $ 117.2 5.0% ======= ==== ======= ==== ======= ====
Settlement Options is a general insurance agency which consults with property and casualty claim organizations on personal injury losses to reduce settlement costs by arranging structured claim settlements, and purchases annuities to fund these future periodic payment obligations. In 1993, Continental sold its premium financing operations as well as its computer systems subsidiary, Insurnet, Incorporated, both of which were previously included in the Corporate & Other Operations segment. The results of the premium financing operations are now reported as discontinued. (For information concerning the sale of the premium financing operations, see "Discontinued Operations" below.) Discontinued Operations In 1993, Continental completed the sale of its premium financing subsidiaries, AFCO Credit Corporation, AFCO Acceptance Corporation and CAFO Inc. (collectively, "AFCO"), to Mellon Bank Corporation ("Mellon"). Continental realized a $36 million gain from this sale, net of income taxes. In addition, the sale agreement provides for a contingent payment to Continental based on growth in AFCO's premiums financed over the next five years, for a potential maximum payment of up to $78 million. No provision has been made in Continental's Consolidated Financial Statements for any potential gain from this contingent payment from Mellon. The 1993 results and net assets of the premium financing operations, which were previously reported in the Corporate & Other Operations segment, have been classified in Continental's Consolidated Financial Statements as discontinued. Previously reported information has been restated accordingly. The following table sets forth certain information with respect to operating results of the discontinued premium financing operations for each of the last three years:
Year Ended December 31 ------------------------ 1993 1992 1991 ---- ---- ---- (millions) Total Revenues............................ $92.4 $103.0 $119.3 Total Expenses............................ 75.4 79.5 92.2 ----- ------ ------ Income before Income Taxes................ 17.0 23.5 27.1 Income Taxes ............................ 1.7 4.7 5.4 Gain on Disposal of Discontinued Premium Financing Operations, Net of Income Taxes..................... 36.0 -- -- ----- ------ ------ Net Income from Discontinued Premium Financing Operations.................... $51.3 $ 18.8 $ 21.7 ===== ====== ======
The following table sets forth certain information with respect to net assets of the discontinued premium financing operations for each of the last two years: December 31 ---------------------- 1993 1992 ---- ---- (millions) Assets: Premium Financing Loans Receivable...... $-- $1,083.3 Other Assets............................ -- 32.9 ---- -------- -- 1,116.2 ---- -------- Liabilities: Short-Term Debt......................... -- 873.5 Long-Term Debt.......................... -- 26.5 Other Liabilities....................... -- 48.9 ---- -------- -- 948.9 ---- -------- Net Assets:............................... $-- $ 167.3 ==== ======== During 1992, Continental instituted a program to withdraw from the traditional assumed reinsurance and marine reinsurance businesses as well as the indigenous international and international marine insurance businesses. These businesses had premiums earned of $339 million and $458 million and underwriting losses of $304 million and $196 million in 1992 and 1991, respectively. Continental failed to develop a sustainable competitive advantage in these businesses as evidenced by their poor operating performances. In addition, these businesses had subjected Continental to unmanageable concentrations of exposures to catastrophes. For example, $28 million of Continental's $70 million total net loss from hurricane Andrew arose from reinsurance operations. As a result, Continental withdrew from these businesses to further concentrate Insurance Operations in their areas of competitive strength. Continental has been accomplishing this withdrawal by running off the insurance reserves of certain of these operations and selling the remaining operations. The results and net assets of the aforementioned operations have been classified in Continental's Consolidated Financial Statements as discontinued. Previously reported information has been restated accordingly. Discontinued Insurance Operations include Continental's subsidiaries: Continental Reinsurance Corporation (U.K.) Limited, Lombard General Insurance Limited and Lombard Insurance Company Limited, which are either expected to be sold or dissolved. Continental's subsidiaries, Continental Reinsurance Corporation International Limited ("CRC-I") and East River Insurance Company (Bermuda) Ltd. ("ERIC"), both of which are continuing entities, are managing the assets and reserves of the discontinued operations. In 1992, substantially all of the business of Continental's reinsurance subsidiary, Continental Reinsurance Corporation, was discontinued, and substantially all of its insurance reserves, along with an equivalent amount of assets, were transferred to CRC-I and ERIC. In 1993, Continental sold Unionamerica Insurance Company, Limited for $95 million in cash and $15 million face value of redeemable preferred stock. The traditional assumed reinsurance and marine reinsurance businesses were autonomous from Continental's primary Insurance Operations. The product, customer base and distribution system also varied significantly from Continental's primary Insurance Operations. Before discontinuance, these businesses generally included proportional and non-proportional, facultative and treaty, and property and casualty insurance and reinsurance. The primary method of reinsurance distribution was through the broker market and the customer base consisted of other insurance and reinsurance companies. Indigenous international insurance was comprised of risks that are located in countries outside the United States and Canada, underwritten by companies domiciled or branches licensed outside the United States or Canada, where the insured is a person or company located outside the United States or Canada. This business was generally written and reported on a monoline basis. In contrast, Continental's United States and Canadian operations focus generally on package business, and Continental's multinational operations (now included in the Specialized Commercial segment) write monoline coverage. Continental's United States and Canadian operations and multinational operations (other than Casualty) write monoline coverages, such as workers' compensation insurance, generally as an accommodation to obtain package business or as specialized coverages like railroad and surety. Monoline personal lines coverages, such as secure home policies, were usually distributed and marketed by savings institutions as part of a mortgage package. Thus, it was only through prearranged participation, or brokered after mortgage sales that such a product was sold. For commercial risks, the distribution and marketing of indigenous international insurance was primarily on a co-insurance basis taking a participation percentage from a lead underwriter. Due to this standard overseas distribution system, the nature of selling this product was vastly different from the domestic practice of more direct links to insureds. Therefore, Continental's focus was on developing relationships with the various underwriters and brokers, rather than directly marketing to the insureds' agents. The servicing of the business was also substantially different, as the claims adjusting services were not administered directly by Continental. The international marine business was underwritten by companies domiciled or branches licensed outside the United States and Canada. The international marine business had a different class of customer and marketing structure, which relied upon the syndication procedures used by the Institute for London Underwriting ("ILU"). The distribution and servicing of such business was also unique. The international marine operations consisted of a small group of underwriters and a collection group using third-party claims services. The ILU is an underwriting center as well as a funds clearing house for claims processing and settlement. Continental acted as a participant in part of a layer of each policy, rather than as a direct underwriter and claims servicer. Thus, systems needs and direct expenses associated with the production of business are different from Continental's domestic marine business. This difference in the method of marketing and distribution for international marine insurance substantially reduces Continental's records keeping requirements. In contrast, domestic marine insurance is underwritten in a similar manner to other domestic lines of business and has similar reporting requirements. The following table sets forth certain information with respect to operating results of the discontinued insurance operations for each of the last three years:
Year Ended December 31 -------------------------- 1993 1992 1991 ------ ------ ------ (millions) Total Revenues........................... $282.2 $ 549.8 $585.1 Total Expenses........................... 285.5 740.0 654.5 ------ ------- ------ Loss before Income Taxes................. (3.3) (190.2) (69.4) Income Taxes (Benefits).................. (0.7) (9.7) 7.2 Loss on Disposal of Discontinued Insurance Operations, Net of Income Taxes.................... -- (13.0) -- ------ ------- ------ Net Loss from Discontinued Insurance Operations............................. $ (2.6) $(193.5) $(76.6) ====== ======= ======
The following table sets forth certain information with respect to net assets of the discontinued insurance operations for each of the last two years: December 31 ---------------------- 1993 1992 ---- ---- (millions) Assets: Cash and Investments........... $1,166.5 $1,461.0 Other Assets................... 528.4 924.3 -------- -------- 1,694.9 2,385.3 -------- -------- Liabilities: Outstanding Losses and Loss Expenses................ 1,346.0 2,022.2 Unearned Premiums.............. 3.0 91.1 Other Liabilities.............. 261.3 128.8 -------- -------- 1,610.3 2,242.1 -------- -------- Net Assets:...................... $ 84.6 $ 143.2 ======== ======== Of the $1,346 million in Outstanding Losses and Loss Expenses at December 31, 1993, Continental currently plans the following: (1) $36 million of Outstanding Losses and Loss Expenses are recorded by operations that Continental intends to sell (these reserves are carried at their nominal amounts, in accordance with the regulations of the country where such reserves are recorded); (2) $968 million of Outstanding Losses and Loss Expenses are recorded by ERIC and CRC-I (Continental intends to run off these insurance reserves, and to support the reserves, which are carried at economic value in accordance with Bermuda law (the jurisdiction in which such reserves are reinsured), with an equal amount of earning assets held in trust by ERIC and CRC-I); and (3) $342 million of Outstanding Losses and Loss Expenses are recorded by other operations that Continental intends to run off (these reserves are carried at their nominal amounts, in accordance with the regulations of the countries where such reserves are recorded). Additional Business Information Each of Continental's insurance segments principally provides its own claims service through internal loss-adjusting operations. Designated employees of these operations have authority to settle claims, subject to limits on authority and, in large cases, to review by senior officers. Continental's Insurance Operations purchase reinsurance on certain risks which they insure, principally to (1) reduce liability on individual risks; (2) protect against catastrophe losses; (3) enable them to write additional insurance in order to diversify risks; and (4) reduce their total liability in relation to statutory surplus. The costs of reinsurance, including catastrophe coverages, are generally increased by adverse loss experience in prior periods. (For additional information concerning Continental's reinsurance arrangements, see "Reinsurance" commencing on page 21 herein.) The industry as a whole has experienced underwriting losses for the past several years. These losses are generally attributable to price competition, which has prevented premium rate increases from keeping pace with losses and loss expenses, and to an unusually high level of catastrophe losses. According to A.M. Best Company's Review and Preview, which follows and reports on the industry's financial results, the industry's aggregate underwriting loss for 1993 was $23 billion. The underwriting profitability of property and casualty insurers is affected by many factors, including price competition; the cost and availability of reinsurance; administrative and other expenses; the incidence of natural disasters; and insurance regulators' willingness to grant increases in those rates which they control. Loss frequency and severity trends are influenced by economic factors, such as a company's business mix; inflation rates; medical cost inflation; employment levels; crime rates; general business conditions; regulatory measures; and court decisions that define and expand the risks and damages covered by insurance. The incidence of natural disasters has adversely affected the underwriting profitability primarily of multi-peril, homeowners, and fire & allied lines of business. The underwriting profitability of workers' compensation and commercial and personal automobile business is adversely affected by (1) lower price levels and higher assumed risks due to mandated participation in state involuntary programs by companies writing such business; and (2) rapidly rising medical care costs. Generally, Continental prices insurance coverages at levels management considers adequate in relation to costs, including anticipated claims liability. The Insurance Operations have attempted to control their costs by (1) implementing technological advances; (2) changing their distribution systems and marketing methods; (3) instituting policies designed to increase employees' productivity; (4) changing the mix of agency and brokerage relationships; (5) reducing writings of certain less profitable classes of risks; and (6) becoming more selective in the acceptance of risks. An indicator of underwriting profitability of property and casualty insurers is a company's "combined ratio". The combined ratio is the sum, expressed as a percentage, of (i) the ratio of incurred losses and loss expenses to premiums earned (the "loss ratio"); and (ii) the ratio of sales commissions, premium taxes, and administrative and other underwriting expenses to premiums written (the "expense ratio"). When the combined ratio is below 100%, underwriting results are generally considered profitable; when the ratio is over 100%, underwriting results are generally considered unprofitable. Because the combined ratio does not reflect net investment income, which is a significant component of an insurance company's operating results, an insurance company's operating results for a line of business may be profitable even though the combined ratio for that line of business exceeds 100%. (For information concerning net investment income, see "Investment and Finance" commencing on page 22 herein.) The following table sets forth certain information (presented in accordance with statutory accounting practices) with respect to the underwriting results of the Insurance Operations for the commercial and personal lines of insurance written by them for each of the last three years. Information as to premiums written includes premiums on insurance policies directly written and on policies assumed from other insurers, pools and associations, in each case net of premiums ceded to others in connection with reinsurance purchased.
Year Ended December 31 ---------------------------------------------------------- Line of Business 1993 1992 1991 ---------------- ----------------- ------------------ ------------------- COMMERCIAL (millions, except percentages) Multi-Peril Premiums Written (% of total) $1,277.5 (28.3%) $1,042.5 (25.8%) $1,097.4 (28.1%) Premiums Earned.............. $1,232.5 $1,023.6 $1,087.3 Loss Ratio................... 74.3% 72.3% 65.9% Expense Ratio................ 35.3% 37.4% 39.6% Combined Ratio............... 109.6% 109.7% 105.5% Workers' Compensation Premiums Written (% of total) $ 915.1 (20.2%) $ 879.0 (21.7%) $ 863.3 (22.1%) Premiums Earned.............. $ 941.1 $ 847.9 $ 848.2 Loss Ratio................... 94.7% 103.5% 107.6% Expense Ratio................ 19.2% 14.7% 14.5% Combined Ratio............... 113.9% 118.2% 122.1% General Liability Premiums Written (% of total) $ 496.1 (11.0%) $ 361.6 (8.9%) $ 259.3 (6.6%) Premiums Earned.............. $ 459.0 $ 331.3 $ 274.1 Loss Ratio................... 66.3% 69.6% 83.9% Expense Ratio................ 27.0% 29.5% 36.1% Combined Ratio............... 93.3% 99.1% 120.0% Inland/Ocean Marine Premiums Written (% of total) $ 323.1 (7.1%) $ 262.5 (6.5%) $ 239.0 (6.1%) Premiums Earned.............. $ 298.3 $ 263.3 $ 233.6 Loss Ratio................... 75.2% 68.3% 67.5% Expense Ratio................ 35.6% 46.4% 34.3% Combined Ratio............... 110.8% 114.7% 101.8% Automobile Premiums Written (% of total) $ 273.7 (6.1%) $ 297.1 (7.4%) $ 288.5 (7.4%) Premiums Earned.............. $ 270.0 $ 299.9 $ 292.8 Loss Ratio................... 71.1% 75.9% 73.3% Expense Ratio................ 32.4% 36.9% 37.3% Combined Ratio............... 103.5% 112.8% 110.6% Fidelity/Surety Premiums Written (% of total) $ 140.9 (3.1%) $ 120.3 (3.0%) $ 107.2 (2.7%) Premiums Earned.............. $ 138.7 $ 112.1 $ 108.8 Loss Ratio................... 42.8% 44.9% 27.7% Expense Ratio................ 49.9% 58.2% 64.4% Combined Ratio............... 92.7% 103.1% 92.1% Fire & Allied Lines Premiums Written (% of total) $ 77.0 (1.7%) $ 99.3 (2.5%) $ 93.8 (2.4%) Premiums Earned.............. $ 75.9 $ 101.8 $ 95.0 Loss Ratio................... 90.0% 100.0% 70.8% Expense Ratio................ 33.4% 32.6% 43.9% Combined Ratio............... 123.4% 132.6% 114.7% Other Premiums Written (% of total) $ 132.2 (2.9%) $ 165.8 (4.1%) $ 157.4 (4.0%) Premiums Earned.............. $ 124.6 $ 153.7 $ 155.6 Loss Ratio................... 73.0% 71.6% 86.1% Expense Ratio................ 46.3% 48.6% 50.0% Combined Ratio............... 119.3% 120.2% 136.1% Total Commercial Premiums Written (% of total) $3,635.6 (80.4%) $3,228.1 (79.9%) $3,105.9 (79.4%) Premiums Earned.............. $3,540.1 $3,133.6 $3,095.4 Loss Ratio................... 77.6% 80.4% 79.6% Expense Ratio................ 30.8% 32.2% 33.2% Combined Ratio............... 108.4% 112.6% 112.8%
Year Ended December 31 ---------------------------------------------------------- Line of Business 1993 1992 1991 ---------------- ----------------- ------------------ ------------------- PERSONAL (millions, except percentages) Automobile Premiums Written (% of total) $ 605.8 (13.4%) $ 556.3 (13.8%) $ 516.5 (13.2%) Premiums Earned.............. $ 586.2 $ 535.3 $ 503.6 Loss Ratio................... 75.3% 75.2% 78.5% Expense Ratio................ 33.5% 36.6% 32.9% Combined Ratio............... 108.8% 111.8% 111.4% Homeowners Premiums Written (% of total) $ 246.1 (5.5%) $ 226.6 (5.6%) $ 256.3 (6.6%) Premiums Earned.............. $ 239.9 $ 217.7 $ 247.4 Loss Ratio................... 87.9% 89.6% 71.9% Expense Ratio................ 25.8% 29.6% 33.7% Combined Ratio............... 113.7% 119.2% 105.6% Other Premiums Written (% of total) $ 32.9 (0.7%) $ 30.4 (0.7%) $ 32.2 (0.8%) Premiums Earned.............. $ 32.8 $ 29.4 $ 31.1 Loss Ratio................... 45.7% 89.5% 47.7% Expense Ratio................ 26.4% 32.2% 36.3% Combined Ratio............... 72.1% 121.7% 84.0% Total Personal Premiums Written (% of total) $ 884.8 (19.6%) $ 813.3 (20.1%) $ 805.0 (20.6%) Premiums Earned.............. $ 858.9 $ 782.4 $ 782.1 Loss Ratio................... 77.7% 79.7% 75.1% Expense Ratio................ 31.1% 34.5% 33.2% Combined Ratio............... 108.8% 114.2% 108.3% TOTAL INSURANCE OPERATIONS Premiums Written (% of total) $4,520.4 (100.0%) $4,041.4 (100.0%) $3,910.9 (100.0%) Premiums Earned.............. $4,399.0 $3,916.0 $3,877.5 Loss Ratio (1)............... 77.6% 80.2% 78.7% Expense Ratio (1)............ 30.9% 32.7% 33.2% Combined Ratio (1)........... 108.5% 112.9% 111.9% ________________ (1) The comparable GAAP loss, expense and combined ratios for the years ended December 31, 1993, 1992 and 1991 were 77.3%, 31.9% and 109.2%; 81.1%, 33.8% and 114.9%; and 79.6%, 35.0% and 114.6%, respectively.
Approximately 61.4% of direct premiums written by the Insurance Operations during 1993 were written in nine states and Canada. Canada accounted for 9.9% of those premiums; New York, 9.8%; California, 8.8%; Illinois, 8.7%; New Jersey, 5.2%; Texas, 4.7%; Pennsylvania, 4.2%; Ohio, 4.2%; Florida, 3.1%; and Hawaii, 2.8%. No other state, country or political subdivision accounted for more than 2.8% of such premiums. The percentages do not reflect premiums received or paid in connection with reinsurance transactions. During the past several years, Continental has shifted its business mix to emphasize commercial and personal package policies and speciality commercial lines, while decreasing the amount of business generated from monoline coverages, such as monoline personal automobile insurance, that have historically proven to be unprofitable to Continental. In 1993, the loss and expense ratios for the Insurance Operations decreased 2.6 percentage points from the prior year, primarily as a result of lower net catastrophe-related charges. Underwriting results for the Insurance Operations produced statutory combined ratios for their personal and commercial lines of 108.8% and 108.4%, respectively, in 1993. These percentages reflected an improvement in personal and commercial lines from the prior year of 5.4% and 4.2%, respectively. Many states require property and casualty insurers to participate in "plans", "pools" or "facilities" which provide coverages for defined risks at rates required by regulators which insurers otherwise would be unwilling to underwrite in view of the nature of the risks and the claims experience of the insureds or the insurance classes of which they are members. Continental provides for its share from its participation in these pools and associations, as well as its participation in voluntary pools and associations, based upon results reported to it by these organizations. In 1993, these involuntary writings totaled approximately $228.4 million, or more than 5.1% of Insurance Operations' total premiums written. The statutory underwriting loss on this business was $67 million during 1993, accounting for approximately 16.3% of Insurance Operations' statutory underwriting loss. In 1993, 52.3%, and 47.7% of these writings were attributable to automobile and workers' compensation businesses, respectively. (For additional information concerning such pools and associations, see "Regulation" commencing on page 13 herein.) Competition The property and casualty insurance industry is highly competitive. Continental's Insurance Operations compete with other stock companies, specialty insurance organizations, mutual insurance companies, and other underwriting organizations. As reported by the Insurance Information Institute, an educational, fact-finding and communications organization, the property and casualty industry in the United States is comprised of approximately 900 leading insurance organizations, none of which has a market share larger than 15% and the top ten of which account in the aggregate for less than 45% of the market. Companies in the United States also face competition from foreign insurance companies and from "captive" insurance companies and "risk retention" groups (i.e., entities established by insureds to provide insurance for themselves). In the future, the industry, including Continental's Insurance Operations, may face increasing insurance underwriting competition from banks and other financial institutions. Based upon the 1993 edition of Best's Aggregates and Averages for the calendar year 1992, Continental's domestic property and casualty companies collectively ranked twelfth in overall premium volume among United States property and casualty insurers. In addition, such companies are among the leading twenty in such categories as commercial multi-peril, aircraft, fidelity & surety, farmowners, homeowners, fire & allied lines, workers' compensation, ocean marine and inland marine lines, and among the leading twenty-five in commercial automobile lines. Because of the relatively large size and underwriting capacity of Continental's property and casualty companies, many opportunities are available to them that are not available to smaller companies. The competitive focus of Continental's Insurance Operations is to (1) offer combinations of superior products, services and premium rates; (2) distribute their products efficiently; and (3) market them effectively. Reliance upon these factors varies from line to line of insurance and from product to product within lines of insurance. Rates are not uniform for all insurers and vary according to the respective types of insurers and methods of operation. Continental's Insurance Operations have traditionally marketed their products principally through independent agents and brokers. This system of marketing is facing increased competition from financial institutions and other companies that market their insurance products directly to the consumer. In response to this competition, Continental has implemented several programs designed to develop a more concentrated and productive agency and brokerage force by eliminating duplication of functions, terminating producers of unprofitable business and providing added incentives and improved support to its more productive producers. Such incentives include assurances of continuing representation; expanded promotional and marketing assistance; specialized account handling; training; and, in certain cases, financial assistance in connection with agency and brokerage expansion. Consequently, Continental's Insurance Operations have, over the past several years, placed computer terminals with many of their most productive producers, which permit producers to transmit information directly to Continental's computer centers and to receive policies, endorsements and other personal lines services overnight. In response to market conditions, Continental has also developed package personal and commercial policies for customers having standard risk exposures, customized products for certain classes of business and industries, and a strong distribution network comprised largely of selected producers with professional sales skills and product knowledge in Continental's targeted markets. Regulation Continental's property and casualty companies are subject to regulation by government agencies in the states and foreign jurisdictions in which they do business. The nature and extent of such regulation vary from jurisdiction to jurisdiction, but typically involve the establishment of premium rates for many lines of insurance; standards of solvency and minimum amounts of capital and surplus which must be maintained; limitations on types of investments; restrictions on the size of risks which may be insured by a single company; licensing of insurers and their agents; deposits of securities for the benefit of policyholders; approval of policy forms; methods of accounting; mandating reserves for losses and loss expenses; and filing of annual and other reports with respect to financial condition and other matters. In addition, state regulatory examiners perform periodic examinations of insurance companies. Such regulation is generally intended for the protection of policyholders rather than security holders. Most states also require property and casualty insurers to become members of insolvency associations or guaranty funds, which generally protect policyholders against the insolvency of an insurer writing insurance in the state. Members of the associations must contribute to the payment of certain claims made against insolvent insurers. Maximum contributions required by law in any one year vary generally between 1% and 2% of annual premiums written by a member in that state. Continental's insurance subsidiaries are subject to various state statutory and regulatory restrictions, applicable generally to each insurance company in its state of incorporation, which limit the amount of dividends and other distributions that those subsidiaries may pay to Continental. The restrictions are generally based on certain levels of surplus, investment income and operating income, as determined under statutory insurance accounting practices. Some restrictions require that dividends, loans, and advances in excess of stated levels be approved by state regulatory authorities. During 1993, Continental's insurance subsidiaries paid it $120 million in dividends. Recently, several states in which these insurance subsidiaries are domiciled enacted more stringent dividend restrictions based on percentages of surplus and net income from operations. These restrictions will, under certain circumstances, significantly reduce the maximum amount of dividends and other distributions payable to Continental by its insurance subsidiaries without approval by state regulatory authorities. To the extent that its insurance subsidiaries do not generate amounts available for distribution sufficient to meet Continental's cash requirements without regulatory approval, Continental would seek approval for additional distributions. Under the restrictions currently in effect, the maximum amount available for payment of dividends to Continental by its insurance subsidiaries during the year ending December 31, 1994 without regulatory approval is estimated to be $304 million. (See Note 10 to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders.) Continental anticipates that dividends from its insurance subsidiaries, together with cash from other sources, will enable it to meet its obligations for interest and principal payments on debt, corporate expenses, declared shareholder dividends and taxes in 1994. Although the federal government does not directly regulate the business of insurance, federal initiatives often affect the insurance business in a variety of ways. Some form of universal health care may be enacted in the near future. The effect of such a system on certain of Continental's lines of business, including workers' compensation and automobile insurance, could be significant, although any such potential effect cannot presently be evaluated. Other current and proposed federal measures which may significantly affect the insurance business include federal government participation in asbestos and other product liability claims, the extension or modification of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") in 1994, pension regulation (ERISA), examination of the taxation of insurers and reinsurers, minimum levels of liability insurance for air carriers, and air carrier and automobile safety regulations. (For information concerning matters relating to environmental claims, see "Reserves for Unpaid Losses and Loss Expenses" commencing on page 15 herein.) In view of financial difficulties in the savings and loan and banking industries and recent insurance insolvencies, several congressional inquiries are considering the adequacy of existing state regulations related to the financial health of insurance companies. In addition, congressional committees are currently reviewing the McCarran-Ferguson Act of 1945, which presently provides a limited exemption from federal antitrust laws for the "business of insurance". A number of states have repealed or are reviewing their statutory exemptions for the "business of insurance" from their antitrust laws. Continental believes that some cooperative activity among insurers is essential for a sound industry and is in the public interest, but that limitation or elimination of the McCarran-Ferguson or state statutory antitrust exemptions would not have a significant effect upon Continental's financial results. The National Association of Insurance Commissioners ("NAIC") has developed several proposals to strengthen the existing state regulatory system, including uniform accreditation of state insurance regulatory systems; limitations on the payment of dividends by property and casualty insurance companies; adoption of risk-based capital standards; actuarial certification of reserves; and independent audits of insurer financial statements. Adoption of these proposals will be on a state-by-state basis. Continental favors stronger solvency standards, but recognizes that more regulation, at either the state or federal level, will increase the cost of providing insurance coverage. In the fourth quarter of 1993, the NAIC adopted a risk based capital ("RBC") standard for use by state insurance regulators. RBC is intended to be a "tool" for regulators to assess the capital adequacy of property and casualty insurers and to take action when capital under the standard is judged to be inadequate. The NAIC developed a model law which can be adopted on a state-by-state basis and may be applied, if adopted by the relevant state regulatory authorities, to Continental's 1994 statutory financial statements. Based upon the RBC standards developed by the NAIC as applied to Continental's 1993 statutory financial statements, Continental believes that its insurance subsidiaries have sufficient levels of capital for their respective operations. Insurance companies, including Continental's property and casualty companies, are also affected by a variety of state and federal legislative and regulatory measures and judicial decisions that define and extend the risks and benefits for which insurance is sought and provided. These include redefinitions of risk exposure in areas such as product liability; environmental damage; and employee benefits, including pensions, workers' compensation and disability benefits. In addition, individual state insurance departments may prevent premium rates for some classes of insureds from reflecting the level of risk assumed by the insurer for those classes. Such developments may result in short-term adverse effects on the profitability of various lines of insurance. Longer-term adverse effects on profitability can be minimized, when possible, only through repricing of coverages or limitation or cessation of the affected business. A Continental subsidiary has been involved in continuing disputes with the State of New Jersey concerning such subsidiary's ultimate share of the residual private passenger automobile insurance market during 1984-1993. The lawsuit filed by the New Jersey State Attorney General's office in 1990 against this subsidiary and thirteen other servicing carriers of the now-defunct New Jersey Joint Underwriting Association ("JUA") for recovery of alleged residual market deficits from 1984 to 1988 was settled in 1992. Also in 1992, the State commenced proceedings to recover penalties it assessed against certain carriers participating in the JUA's residual automobile market successor, the Market Transition Facility ("MTF"). Those proceedings and all of the penalty assessments were dismissed by the New Jersey Supreme Court in 1993. Also in 1993, the State announced the first statutory assessment for the deficit of the now-discontinued MTF; Continental's subsidiary's market share was approximately 2%, or approximately $10 million, of such first year deficit. As part of the 1992 JUA settlement, Continental's subsidiary paid $3.5 million; and an additional $6 million to the State with respect to such subsidiary's ultimate MTF deficit assessment. As a result, Continental's subsidiary's first year MTF deficit was reduced to approximately $4 million. That amount has been paid into court pending the resolution of an American Insurance Association legal challenge to the assessments filed on behalf of all affected New Jersey insurers. Reinsurers and international insurance companies are subject to licensing requirements and other regulation in the jurisdictions in which they do business. United States regulation of licensed reinsurers is similar to the regulation of domestic property and casualty insurers, except that regulation of reinsurers does not extend to rates, policy forms, or, generally, participation in insolvency funds. Countries outside of the United States have varying levels of regulation of insurance and reinsurance companies. Reserves for Unpaid Losses and Loss Expenses Continental's insurance subsidiaries establish reserves to cover their ultimate liability for losses and loss expenses with respect to reported and unreported claims incurred (except as noted below with respect to "environmental claims") as of the end of each accounting period, after taking into effect salvage and subrogation claims. In establishing such reserves with respect to the period then ended, loss reserves recorded in prior periods are updated to reflect improved estimates of ultimate losses and loss expenses as actual experience develops and payments are made. The losses and loss expense reserves of Continental's insurance subsidiaries are estimates of the ultimate liability determined by using both individual case-basis estimates on reported claims and statistical projections. The statistical projection models reflect changes in the volume of business written, as well as claim frequency and severity. Adjustments to these models are also made for changes in the mix of business, claims processing and other items which affect the development patterns over time. Such statistical projections of ultimate net costs are used to adjust the amount estimated for individually established case reserves, as well as to establish estimates for the amount needed for unreported claims. For more mature accident years, inflation is implicitly considered in such projections based on actual patterns of reported claims, loss payments and case-basis reserves. For relatively immature accident years, in addition to actual loss patterns, explicit assumptions are made for changes in claim severity and frequency based on the type of claims, nature of the related risks, industry trends and related cost indices. Continental's reserves for losses and loss adjustment expenses include reserves for reported "environmental claims" (as such term is described in the next succeeding paragraph). The table on page 17 sets forth information regarding the amounts of these reserves at December 31, 1993, 1992 and 1991 and payments of losses and loss expenses on such claims in each of those years. These reserves represent Continental's estimates of the probable ultimate cost to resolve such reported claims, either through settlement, litigation or alternative dispute resolution. The amounts in the table reflect gross and net undiscounted estimated liability, and do not include any reserves for unreported claims. (For information concerning reinsurance relating to environmental claims, see "Reinsurance" commencing on page 21 herein.) Such reserves incorporate factors specifically relevant to environmental claims, including the nature and scope of policy coverage; the number of claimants, defendants and co-insurers; the timing and severity of injuries or damage; and the relevant jurisdiction and case law. Continental has managed its environmental claims from its centralized Environmental Claims Department since 1981. Continental believes that its centralized approach to handling environmental claims gives Continental the best practicable ability to determine its liability. Continental employs what it believes to be a broad definition of "environmental claims" to classify those types of claims which are handled out of its centralized Environmental Claims Department. "Environmental claims" include claims or lawsuits, for which coverage is alleged, arising from exposure to hazardous substances or materials originating from a site, which is the subject of an investigation or cleanup pursuant to state or federal environmental legislation; claims or lawsuits involving allegations of bodily injury or property damage arising out of the discharge or escape of a pollutant or contaminant; and claims or lawsuits alleging bodily injury or property damage as a result of exposure over a period of time to products or substances alleged to be harmful or toxic. Claims falling under the above categories are classified into two general claim types: (1) asbestos-related and other toxic torts; and (2) environmental pollution. The nature of Continental's business that has resulted in these claim-types is addressed below. Continental has not marketed nor been in the business of providing environmental pollution coverages, with the exception of a program which was in effect from 1981 to 1985, which provided such coverage on a claims-made basis. There are currently three claims pending under policies written under this program, for which Continental has established case reserves which reflect Continental's estimate of the probable ultimate cost of these claims. The allowable reporting period under all policies written under this program has expired. The 1980 enactment of CERCLA, as well as similar state statutes, resulted in environmental pollution claims brought thereafter under standard form general liability policies. While most environmental pollution claims have arisen out of policyholders' obligations under federal and state regulatory statutes, claims have also been brought against policyholders by private third-parties, alleging pollution- related property damage and/or bodily injury. Consistent with the broad range of entities which may become subject to designation as "Potentially Responsible Parties" under state and federal environmental statutes, insureds presenting such claims for coverage under general liability policies span a broad spectrum of commercial policyholders. Most of Continental's environmental pollution claims result from general liability policies written prior to 1986. Certain provisions of Continental's, and the industry's, standard form general liability policies written prior to 1986 have been subject to wide-ranging challenges by policyholders and/or differing interpretations by courts in various jurisdictions, with inconsistent conclusions as to the applicability of coverage for environmental pollution claims. Policies written after 1986 have not been subject to such wide-ranging challenges by policyholders and/or differing interpretations by the courts. Continental has consistently maintained in coverage litigation that its general liability policies did not provide coverage for environmental pollution liability. Asbestos-related claims have generally arisen out of product liability coverage provided by Continental under general liability policies written prior to 1983. Thereafter, asbestos-product exclusions were included in general liability policies. Asbestos-related bodily injury litigation developed during the late 1970's. Initially, the majority of defendant-insureds making claims under general liability policies were involved in the mining, processing, distribution and sale of raw asbestos. By 1985, the category of defendants grew to include companies which produced a variety of products containing asbestos, including roofing materials, tile, refractory products, asbestos-containing clothing, and brake and clutch friction products. Continental had written primary general liability coverage for only two major asbestos manufacturers, and had settled all liabilities under those policies by 1989. Continental had written excess insurance coverage for several other asbestos manufacturers. In addition, Continental had written primary general liability coverage for companies which produce products containing asbestos. Claims which fall in the other toxic tort category have generally arisen out of product liability coverage under general liability policies. These claims involve a variety of allegations of bodily injury as a result of exposure over a period of time to products alleged to be harmful or toxic, such as silica, lead-based paint, pesticides, dust, acids, gases, chemicals, silicone breast implants and pharmaceutical products. Typically, the time period of coverage provided by Continental for all of the above claim-types represents a portion of the overall coverage available to a policyholder to pay these claims. Whenever appropriate, Continental actively seeks out opportunities to participate in cost-sharing agreements with other insurance carriers, stipulating to an equitable allocation of expenses and indemnity payments. Cost-sharing agreements are presently in effect with respect to a large majority of Continental's policyholders involved in asbestos and other toxic tort litigation. As of December 31, 1993, there were approximately 3,600 pending environmental pollution claims involving approximately 800 policyholders, and environmental pollution-related coverage disputes involving approximately 290 policyholders in 340 actions. Approximately 1,550 environmental pollution claims closed or settled during 1993. Continental defines a "claim" as a reserved file which represents the potential financial exposure to a policy year based on an analysis of relevant factors, and which arises out of a policyholder's potential liability at a single site or multiple sites. A three-year asbestos-related, other toxic tort and environmental pollution loss reserve activity analysis is set forth below: Asbestos-Related, Other Toxic Tort and Environmental Pollution Claims
Year Ended December 31 (1) --------------------------------- 1993 1992 1991 ---- ---- ---- (millions) Asbestos-related and Other Toxic Tort Claims: Gross Reserves as of January 1 . . . . $ 85.6 $ 76.8 $ 49.7 Gross Incurred Losses and Loss Adjustment Expenses . . . . . . 46.0 45.0 66.1 Gross Payments for Losses and Loss Adjustment Expenses. . . . . . . . . (40.3) (36.2) (39.0) ------ ------ ------ Gross Reserves as of December 31 . . . $ 91.3 $ 85.6 $ 76.8 ====== ====== ====== Environmental Pollution Claims: Gross Reserves as of January 1 . . . . $161.5 $144.9 $ 93.7 Gross Incurred Losses and Loss Adjustment Expenses. . . . . . . . . 68.7 64.2 103.2 Gross Payments for Losses and Loss Adjustment Expenses . . . . . . (58.0) (47.6) (52.0) ------ ------ ------ Gross Reserves as of December 31 . . . $172.2 $161.5 $144.9 ====== ====== ====== Gross Claims Reserves as of December 31: Asbestos-related and Other Toxic Tort . . . . . . . . . . . . . $ 91.3 $ 85.6 $ 76.8 Environmental Pollution. . . . . . . . 172.2 161.5 144.9 Less Reinsurance . . . . . . . . . . . (105.3) ( 79.5) ( 58.2) ------ ------ ------ Net Claims Reserves as of December 31. . . . . . . . . . . $158.2 $167.6 $163.5 ====== ====== ====== ___________________________ (1) Prior years' information has been restated to reflect accounting for Continental's traditional assumed reinsurance and marine reinsurance businesses and indigenous international and international marine insurance businesses as discontinued operations. See "Discontinued Operations" commencing on page 6 herein.
As of December 31, 1993, Continental's gross loss and loss adjustment expense reserves for reported asbestos-related, other toxic tort and environmental pollution claims included gross loss adjustment expense reserves of $54.4 million, or 21% of such total reserves (as of December 31, 1992, $55.0 million, or 22% of such total reserves). The amount of Continental's gross loss adjustment expense reserves for reported asbestos-related, other toxic tort and environmental pollution claims, as of December 31, 1993, constituted less than 5% of Continental's total gross loss adjustment expense reserves. Continental does not establish reserves for unreported asbestos-related, other toxic tort and environmental pollution claims because of significant uncertainties, which do not allow liabilities to be reasonably estimated. Such uncertainties include difficulties in determining the frequency and severity of such potential claims and in predicting the outcome of judicial decisions, as case law evolves regarding liability exposure, insurance coverage and interpretation of policy language. The changes in the last three years in Continental's estimates of its liability for insured events of prior years are set forth in the Components of Reserve Development table on page 21 herein. At this time, the future financial impact of unreported asbestos-related, other toxic tort and environmental pollution claims can not be reasonably estimated, and no assessment can be made with respect to the ultimate impact thereof on Continental's results of operations or financial condition in the future. The actuarial profession is addressing unquantifiable liabilities (e.g., unreported asbestos-related, other toxic tort and environmental pollution claims) and is in the initial stage of developing standards, but has not yet scheduled publication of a discussion draft. Other uncertainties may be clarified through the debate, extension or modification of CERCLA in 1994. These developments will continue to be monitored and assessed by Continental. In accordance with individual state insurance laws, certain of the property and casualty subsidiaries discount certain workers' compensation pension reserves. The rate of discount varies by jurisdiction and ranges from 3.0% to 5.0%. The statutory discount on workers' compensation reserves at December 31, 1993, 1992 and 1991 is $525 million, or 7.9% of statutory reserves; $522 million, or 8.0% of statutory reserves; and $505 million, or 7.7% of statutory reserves, respectively. The discount includes an additional discount on the reserves at December 31, 1993, 1992 and 1991 for incurred but not reported claims of $127 million, $187 million and $185 million, respectively, for losses reported to Continental through its participation in joint reinsurance pools. In addition, for the purpose of reporting on a generally accepted accounting principles basis, these subsidiaries have discounted workers' compensation pension reserves since 1984 at a rate of 7% to reflect assumed market yields. Discounting at a rate of 7% in 1993, 1992 and 1991 reduced total reserves for losses at the end of such years by $696 million, or 10.5%; $693 million, or 10.6%; and $676 million, or 10.3%, respectively. As a result of the discounting of such reserves, the ultimate net cost of the losses would, without taking other factors into account, be projected to exceed the amount of the carried reserves by the amount of the discount. The total amount of this excess will emerge as current year incurred losses develop over many years. If such excess had been reflected in the table on page 19 as development of prior year reserves, it would have added $20 million, or 0.4%; $35 million, or 0.6%; and $44 million, or 0.7%, respectively, to the 1992, 1991 and 1990 cumulative deficiencies as of December 31, 1993. However, the yields on these subsidiaries' investment portfolios have historically been greater than the discount rate, and any deficiency due to the discounting of such reserves should be more than offset by investment income. The table on page 19 shows the annual adjustment to historical reserves for each year since 1983. The reserves for unpaid losses and loss expenses are set forth on a cumulative basis for the year specified and all prior years. Although amounts paid for any year are reflected in the re-estimated ultimate net loss at the end of such year, there is no direct correlation in the development patterns between the two portions of the table because the re-estimated ultimate net loss includes adjustments for unpaid losses and loss expenses as well. Finally, an adjustment to an unpaid claim for a prior year will also be reflected in the adjustments for all subsequent years. For example, an adjustment made in 1989 for 1983 loss reserves will be reflected in the re-estimated ultimate net loss for each of the years 1984 through 1988. Ten-Year Loss Development Presented Net of Reinsurance With Supplemental Gross Data (1)(2)(3)
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- (millions) NET LIABILITY AS OF END OF YEAR..........$2,861.7 $2,946.6 $3,464.4 $4,038.9 $4,686.3 $5,339.5 $6,045.0 $5,963.1 $5,901.9 $5,806.5 $5,915.8 PAID AS OF: One Year Later..... 1,040.1 1,114.9 1,386.6 1,407.5 1,558.0 1,754.0 2,030.1 2,073.1 2,225.1 2,013.7 Two Years Later.... 1,582.3 1,813.8 2,152.1 2,295.6 2,591.6 2,876.0 3,388.2 3,381.7 3,411.3 Three Years Later.. 2,011.2 2,284.5 2,727.4 2,940.3 3,292.2 3,688.5 4,331.9 4,240.8 Four Years Later... 2,295.5 2,648.9 3,157.6 3,399.2 3,810.8 4,270.7 4,942.3 Five Years Later... 2,536.7 2,929.6 3,461.1 3,756.0 4,191.0 4,659.6 Six Years Later.... 2,734.0 3,117.9 3,709.0 4,022.3 4,429.9 Seven Years Later.. 2,876.7 3,299.6 3,907.8 4,185.4 Eight Years Later.. 3,013.2 3,449.8 4,031.4 Nine Years Later... 3,144.6 3,552.7 Ten Years Later.... 3,240.9 NET LIABILITY RE-ESTIMATED AS OF: End of Year........ 2,861.7 2,946.6 3,464.4 4,038.9 4,686.3 5,339.5 6,045.0 5,963.1 5,901.9 5,806.5 $5,915.8 One Year Later..... 2,879.9 3,149.9 3,512.2 4,080.8 4,810.5 5,444.7 6,066.6 6,059.6 6,027.2 5,807.6 Two Years Later.... 3,005.8 3,229.7 3,704.0 4,293.8 4,972.3 5,466.4 6,167.3 6,111.2 6,073.1 Three Years Later.. 3,063.4 3,395.3 3,958.1 4,499.1 5,021.4 5,584.3 6,284.8 6,171.5 Four Years Later... 3,204.5 3,551.4 4,170.9 4,558.7 5,145.4 5,649.4 6,404.6 Five Years Later... 3,289.3 3,687.4 4,263.6 4,688.2 5,182.1 5,720.2 Six Years Later.... 3,385.1 3,760.3 4,392.0 4,772.8 5,220.4 Seven Years Later.. 3,434.8 3,861.5 4,510.3 4,814.9 Eight Years Later.. 3,536.3 3,948.5 4,550.9 Nine Years Later... 3,635.4 3,975.2 Ten Years Later.... 3,685.2 NET CUMULATIVE DEFICIENCY............ 823.5 1,028.6 1,086.5 776.0 534.1 380.7 359.6 208.4 171.2 1.1 -- GROSS LIABILITY AS OF END OF YEAR........ 9,066.2 9,068.7 REINSURANCE RECEIVABLES.......... 3,259.7 3,152.9 NET LIABILITY AS OF END OF YEAR....... 5,806.5 5,915.8 GROSS RE-ESTIMATED LIABILITY - LATEST............... 8,809.6 RE-ESTIMATED RECOVERABLE - LATEST............... 3,002.0 NET RE-ESTIMATED LIABILITY - LATEST............... 5,807.6 GROSS CUMULATIVE DEFICIENCY (REDUNDANCY) (4).................. (256.6) (1) Information for each year from 1983 - 1991 has been restated to reflect accounting for Continental's traditional assumed reinsurance and marine reinsurance businesses and indigenous international marine insurance businesses as discontinued operations. See "Discontinued Operations" commencing on page 6 herein. (2) The reserves of foreign subsidiaries are translated into United States dollars at the exchange rates as of each year-end. Foreign exchange factors tend to improve or adversely affect the reserve development (ultimate loss as compared to initial estimated liability) of foreign subsidiaries depending upon the relative movement of the exchange rates. (3) Excluding title companies' reserves. (4) The gross reserves include direct written business and assumed business. In 1993, Continental commuted a reinsurance agreement, which had the effect of decreasing assumed business and reinsurance receivables by $208 million, but did not affect net reserves. This commutation pertains to certain business arising in 1992 and prior years.
Reconciliation of Net Reserves for Losses and Loss Expenses from a Statutory Accounting Principles Basis to a Generally Accepted Accounting Principles Basis for the Last Two Years With Supplemental Gross Data 1993 1992 ---- ---- (millions) Total Net Statutory Reserves.......................... $7,029.0 $7,339.0 Less: Net Reserves of Discontinued Operations......... 936.6 1,355.2 -------- -------- Net Statutory Reserves of Continuing Operations....... 6,092.4 5,983.8 Adjustments to a Generally Accepted Accounting Principles Basis, Principally Discounting of Workers' Compensation Pension Reserves.............. (176.6) (177.3) -------- -------- Net Reserves on a Generally Accepted Accounting Principles Basis......................... 5,915.8 5,806.5 Reinsurance Receivables............................... 3,152.9 3,259.7 -------- -------- Gross Reserves on a Generally Accepted Accounting Principles Basis......................... $9,068.7 $9,066.2 ======== ======== Reconciliation of Net Reserves for Losses and Loss Expenses for the Last Three Years With Supplemental Gross Data (1) 1993 1992 1991 -------- --------- -------- (millions) Net Reserves as of January 1............... $5,806.5 $5,901.9 $5,963.1 Incurred Related to: Current Year............................ 3,413.0 3,036.3 2,986.5 Prior Years............................. 1.1 125.3 96.5 -------- -------- -------- Total Incurred............................. 3,414.1 3,161.6 3,083.0 --------- -------- -------- Paid Related to: Current Year............................ 1,291.1 1,031.9 1,071.1 Prior Years............................. 2,013.7 2,225.1 2,073.1 -------- -------- -------- Total Paid................................. 3,304.8 3,257.0 3,144.2 -------- -------- -------- Net Reserves as of December 31............. 5,915.8 5,806.5 $5,901.9 ======== ======== ======== Reinsurance Receivables.................... 3,152.9 3,259.7 -------- -------- Gross Reserves............................. $9,068.7 $9,066.2 ======== ======== __________________________ (1) 1991 information has been restated to reflect accounting for Continen- tal's traditional assumed reinsurance and marine reinsurance businesses and indigenous international and international marine insurance businesses as discontinued operations. See "Discontinued Operations" commencing on page 6 herein. The following table shows the changes in the last three years in Continental's estimates of its liability for insured events of prior years, including the extent to which such changes relate to asbestos-related, other toxic tort and environmental pollution claims: Components of Reserve Development For the Last Three Years (1) Reserve Increase (Decrease) at December 31 ------------------------------ 1993 1992 1991 ------- ------ -------- (net basis, millions) Asbestos-related and Other Toxic Tort........................ $22.4 $ 33.3 $ 42.6 Environmental Pollution............. 33.5 47.6 66.4 ----- ------ ------ Subtotal............................ 55.9 80.9 109.0 All Other........................... (54.8) 44.4 (12.5) ----- ------ ------ Total............................... $ 1.1 $125.3 $ 96.5 ===== ====== ====== __________________________ (1) Prior years' information has been restated to reflect accounting for Continental's traditional assumed reinsurance and marine reinsurance businesses and indigenous international and international marine insurance businesses as discontinued operations. See "Discontinued Operations" commencing on page 6 herein. The increases in Continental's estimate of its liabilities for insured events of prior years for total asbestos-related, other toxic tort and environmental pollution claims during each of the years 1993, 1992 and 1991 was 1.6%, 2.6% and 3.5%, respectively, of Continental's net reported incurred losses and loss expenses for such years. Reinsurance In the ordinary course of business, Continental cedes business to other insurers and reinsurers. Purchasing reinsurance enables Continental to limit its exposure to catastrophic events and other concentrations of risk. However, purchasing reinsurance does not relieve Continental of its obligations to its insureds. Continental reviews the creditworthiness of its reinsurers on an ongoing basis. To minimize potential problems, Continental's policy is to purchase reinsurance only from carriers who meet its credit quality standards. It has also taken and is continuing to take steps to settle existing reinsurance arrangements with reinsurers which do not meet its credit quality standards. Continental does not believe that there is a significant solvency risk concerning these reinsurance claims. In addition, Continental regularly evaluates the adequacy of its reserves for uncollectible reinsurance. Continental believes that it makes adequate provisions for the ultimate collectibility of its reinsurance claims and therefore believes these net recoveries to be probable. (See Note 6 to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders for additional information regarding reinsurance.) Continental has in place various reinsurance arrangements with respect to its current operations. These arrangements are subject to retentions, coverage limits and other policy terms. Some of the principal treaty arrangements which are presently in effect are: (1) an excess-of-loss treaty reducing Continental's liability on individual property losses; (2) a blanket casualty program reducing Continental's liability on third party liability losses; (3) a clash casualty program reducing Continental's liability on multiple insured/single event losses; and (4) a property catastrophe program, with a net retention of $50 million in 1993, increased from $20 million in 1992, reducing its liability from catastrophic events. Continental also uses individual risk facultative and other facultative agreements to further reduce its liabilities. In 1993, Continental's gross incurred losses from catastrophic events were $166 million, and its net incurred losses from catastrophic events were $153 million. Included in both gross and net incurred catastrophe losses in 1993 is a $44 million loss from the March east coast blizzard. Continental also has in place, for future potential adverse reserve development, an aggregate excess-of-loss reinsurance contract with a full limit of $400 million. This agreement was purchased from National Indemnity Company. It covers losses and allocated loss expenses for 1991 and prior policy years. The business covered includes all lines of business written by Continental's domestic property and casualty insurance subsidiaries, with specific exclusions for nuclear exposure, war risks, business written through the Workers' Compensation Reinsurance Bureau and involuntary market pools, insolvency and guarantee fund assessments, taxes, unallocated loss adjustment expenses, and extra-contractual obligations. Continental does not maintain any reinsurance arrangements whose coverage is limited solely to asbestos-related, other toxic tort and environmental pollution claims. The amounts of reinsurance receivables and recoverables that are reflected in Continental's Consolidated Financial Statements arose under a variety of reinsurance arrangements put in place generally from 1963 through 1986, which generally are the years in which Continental's general liability policies were alleged to provide coverage for those types of claims. As most of Continental's reserves for asbestos-related, other toxic tort and environmental pollution claims have arisen out of general liability policies written prior to 1986 (after which such policies have not generally been subject to wide-ranging challenges by policyholders and/or differing interpretations by courts in various jurisdictions), a majority of reinsurance receivables and recoverables arising out of such claims in 1991, 1992 and 1993 related to reinsurance arrangements put into place prior to 1986. These reinsurance arrangements include primary casualty treaty arrangements, excess of loss and umbrella casualty treaty arrangements, property treaty arrangements and various facultative agreements. Investment and Finance Reserves and surplus balances constitute a pool of funds which are invested by insurance companies. Investment results combined with underwriting results produce operating income or losses. Continental's overall operating results in the insurance business are significantly affected by the performance of its investment portfolio. The following table sets forth the investment results of Continental and its subsidiaries for each of the past three years: Average Net Investment Current Realized Year Investments(1)(3) Income (2) (3) Yield(3) Capital Gains(3) - ---- ----------------- -------------- -------- ---------------- (millions, except percentages) 1993........ $8,817.0 $542.3 6.2% $124.5 1992........ $8,314.4 $589.9 7.1% $215.6 1991........ $8,009.7 $637.2 8.0% $111.2 ____________ (1) Average of investments at beginning and end of calendar year, excluding operating cash, but including cash equivalents. Bonds and redeemable preferred stocks are reported at market, except for those investments intended to be held to maturity, which are reported at cost. (2) Net investment income after deduction of investment expenses, but before realized capital gains and applicable income taxes. (3) Certain reclassifications, primarily for discontinued operations, have been made to the prior years' financial information to conform to the 1993 presentation. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations. It is Continental's objective to maximize real economic surplus by actively managing all investable assets to ensure a maximum after-tax "total return". The total return concept employs an integrated approach of tailoring investment strategies to ensure proper asset/liability management. An asset/liability study is performed by management to determine the ideal duration of the investment portfolio, taking into consideration the optimal risk and return preferences of management. Continental continually monitors the mix between its fixed maturities and equity securities portfolios. It is management's preference to limit equity investments to a percentage of economic surplus. This equity limit is further reduced by any current commitments to "high yield" bonds and non-dollar bonds supporting dollar-based activities. Considering risk and return parameters, common stock commitments have been limited to no more than 100% of Continental's property and casualty statutory surplus. The percentage of Continental's consolidated property and casualty statutory surplus invested in common stocks at the end of each of the past three years has ranged between 33% and 39%, and at the end of 1993, was approximately 33%. Fixed maturities are further managed to ensure maximum profitability by balancing the portfolio between taxable and tax-exempt securities. Continental also uses international investment programs to match its non-dollar business exposures and to enhance the risk and return parameters of the portfolio backing its U.S.-based business. All investments are made in accordance with applicable state investment laws; further, Continental employs strict internal guidelines limiting its investments in any particular issue and in any particular industry. Continental also maintains short-term investments and cash equivalents for the current and anticipated near-term liquidity needs of its operations. When maximizing total return, management recognizes that some capital losses are inevitable. Fixed maturities available-for-sale consist of certain bonds and redeemable preferred stocks that management may not hold until maturity and which have an average Standard & Poor's rating of AA+ (or its Moody's equivalent). Continental's fixed maturities available-for-sale had a balance sheet fair value of $6,916 million at December 31, 1993 (compared with a fair value of $6,240 million at December 31, 1992) and included mortgage-backed securities with a fair value of $1,270 million and an amortized cost of $1,255 million at December 31, 1993 (compared with a fair value of $1,338 million and an amortized cost of $1,300 million at December 31, 1992). Continental's mortgage-backed securities have an average Standard & Poor's rating of AAA (or its Moody's equivalent) and an average of life of 6.0 years. Continental has an insignificant investment in collateralized mortgage obligations which put the return of principal at risk if interest rates or prepayment patterns fluctuate. At December 31, 1993, Continental's bond portfolio classified by Moody's rating was as follows: Percentage of Bond Moody's Rating Portfolio ------------------ ------------- Aaa........................ 62.0% Aa......................... 15.7 A.......................... 11.2 Baa........................ 9.6 Below Baa.................. 1.5 ----- 100.0% At December 31, 1993, the fixed maturities portfolio included an insignificant amount of securities, the fair value of which is expected to be lower than its carrying value for more than a temporary period; such investments have been recorded in Continental's Consolidated Balance Sheets at their net realizable value. Continental also maintains an equity securities portfolio, the fair value of which was $759 million at December 31, 1993. At December 31, 1993, Continental also had a $112 million investment in privately-placed direct mortgages, which are included in "Other Long-Term Investments" in Continental's Consolidated Balance Sheets. The NAIC is currently developing an Investments of Insurers Model Act, which, if adopted by state regulatory authorities, would establish uniform limitations upon the type and amounts of investments insurers may hold. Based upon the current proposals of this Model Act, which are subject to review and change, Continental does not believe a uniform standard would significantly affect the current investment mix or operations of its insurance subsidiaries. Unrealized appreciation on investments available-for-sale increased $170 million, before income taxes, from December 31, 1992. Unrealized appreciation on fixed maturities increased $152 million. Unrealized appreciation on common stocks decreased $1 million, while unrealized appreciation on nonredeemable preferred stocks increased $11 million. Unrealized appreciation on other long-term assets increased $8 million. In addition, unrealized appreciation on investments held by discontinued operations increased $15 million, before income taxes, from December 31, 1992. In recent years, a small portion of Continental's investment funds has been committed to alternative areas of investment (i.e., other than Continental's traditional areas). Continental currently invests in alternative areas including venture capital partnerships, high-yield bonds, international diversification investments and emerging markets. As of December 31, 1993, the total investment in these areas represented less than 5% of Continental's investment portfolio. Continental, through its former participation in the Municipal Bond Insurance Association, issued guarantees of financial obligations. During 1986, this association was reorganized as a corporation named MBIA, Inc. Continental's net par value exposure at December 31, 1993 on guarantees issued before the reorganization is $1.4 billion (1992 - $1.7 billion), all of which has been reinsured by MBIA, Inc. In addition, Continental has issued financial guarantees of limited partners' obligations, municipal lease obligations, industrial development bonds and other obligations. Continental's net par value exposure on these guarantees at December 31, 1993 was $151.0 million (1992 - $173.0 million). The maturity dates of these obligations range between one and twelve years. Continental continually monitors its exposure relating to financial guarantees. Continental does not believe that its exposures relating to financial guarantees are material. Miscellaneous In 1992 and 1993, Continental sold a total of $350 million in Notes (which provided $346 million to Continental, net of offering and underwriting costs) under its shelf registration of up to $400 million of debt securities with the Securities and Exchange Commission. During 1993, Continental used $282 million of net proceeds from these sales to retire its outstanding 9 3/8% Notes due July 1, 1993 and $50 million of net proceeds from these sales to reduce corporate short-term borrowings. Continental intends to sell an additional $50 million of debt securities under its existing shelf registration and to register for the sale of up to an additional $100 million of debt securities. Continental plans to use the net proceeds from these sales to further reduce its short-term borrowings. As of December 31, 1993, Continental and its subsidiaries had approximately 12,255 employees, compared with 13,100 at December 31, 1992. Continental and its subsidiaries consider their employee relations to be satisfactory. Item 2. Properties Continental's subsidiaries lease office space in various cities throughout the United States and in other countries. The following table sets forth certain information with respect to the principal office buildings owned or leased by Continental's subsidiaries: Amount of Building Owned and Occupied or Leased by Continental's Size Subsidiaries (in square (in square Location feet) (1) feet) Principal Usage Operations - --------------------- ---------- --------- ------------------- ---------- 180 Maiden Lane, 1,091,570 572,514 Principal Executive Corporate/ New York, New York(2) Offices of Insurance Continental Operations/ Asset Management 1 Continental Drive, 490,993 490,993 Property, Casualty Insurance Cranbury, New Jersey Insurance Offices Operations 200 S. Wacker Drive, 336,390 245,466 Property, Casualty Insurance Chicago, Illinois Insurance Offices Operations 1111 E. Broad St., 197,537 197,537 Property, Casualty Insurance Columbus, Ohio Insurance Offices Operations 1100 Ward Avenue, 186,492 97,831 First Insurance Insurance Honolulu, Hawaii(2) Company of Hawaii, Operations Ltd. Headquarters 333 Glen Street, 158,700 158,700 Property, Casualty Insurance Glens Falls, New York Insurance Offices; Operations Residual Market Center 3501 State Highway 129,965 129,965 Data Processing Systems No. 66, Neptune, Facilities New Jersey - ----------------------- (1) Represents the amount of space owned and occupied by or leased to Continental's subsidiaries. To the extent not occupied by Continental's subsidiaries, such space is or is intended to be subleased to third parties. (2) Represents property owned in fee by Continental's subsidiaries and held subject to mortgages. (See Note 7 to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders.) Item 3. Legal Proceedings Continental's subsidiaries are routinely party to litigation incidental to their business, as well as other litigation of a nonmaterial nature. Management regularly evaluates the liability of Continental and its subsidiaries associated with such litigation. The status of such litigation is reviewed in consultation with Continental's in-house legal staff, Corporate Claims Department and Environmental Claims Department, and their respective outside counsel, all of whom have extensive experience in handling such matters. Based upon the foregoing evaluative process, Continental makes a determination as to the effect that such litigation may have upon its financial condition on a consolidated basis. In the opinion of Continental, no individual item of litigation, or group of related items of litigation (including asbestos-related, other toxic tort and environmental pollution matters), taken net of claims reserves established therefore and giving effect to reinsurance, is likely to result in judgments for amounts material to the financial condition of Continental and its subsidiaries on a consolidated basis. Item 4. Submission of Matters to a Vote of Security Holders During the fourth quarter of 1993, no matter was submitted to a vote of Continental's shareholders. Item 4(A). Executive Officers of the Registrant Name Title Age John P. Mascotte Director, Chairman of the Board, Chief Executive 54 Officer and President Charles A. Parker Director and Executive Vice President, 59 Investments Wayne H. Fisher Executive Vice President and President, 49 Special Operations Group Fredric G. Marziano Executive Vice President and President, 51 The Continental Insurance Companies and Agency and Brokerage Group Steven J. Smith Executive Vice President, Office of the 49 Chairman Adrian M. Tocklin Executive Vice President and President, 42 Continental Risk Management Services Bruce B. Brodie Senior Vice President and Chief 39 Information Officer J. Heath Fitzsimmons Senior Vice President and Chief 51 Financial Officer James P. Flood Senior Vice President, Corporate Claims 43 William F. Gleason, Jr. Senior Vice President, General Counsel and Secretary 57 John F. Kirby Senior Vice President 47 Arthur J. O'Connor Senior Vice President, Corporate 41 Communications and Investor Relations Sheldon Rosenberg Senior Vice President and Chief Actuary 44 Kenneth B. Zeigler Senior Vice President, Human Resources 45 Francis M. Colalucci Vice President and Treasurer 49 William A. Robbie Vice President and Chief Accounting Officer 42 All Executive Officers of Continental are elected to serve for terms to expire at the meeting of the Board of Directors following the next Annual Meeting of Shareholders and until their successors shall have been elected. John P. Mascotte has been a Director since February 1981, Chairman of the Board and Chief Executive Officer of Continental since December 1982 and President since December 1992. Charles A. Parker has been a Director since May 1989 and Executive Vice President, Investments, of Continental since May 1983. Wayne H. Fisher has been an Executive Vice President of Continental since December 1990 and has been President, Special Operations Group, since January 1988. Before that time, he was a Senior Vice President of Continental (December 1988-December 1990). Fredric G. Marziano has been an Executive Vice President and President, Agency and Brokerage Group, since January 1987 and President of The Continental Insurance Companies since November 1992. Steven J. Smith has been an Executive Vice President, Office of the Chairman, of Continental since February 1983. Adrian M. Tocklin has been Executive Vice President of Continental and President, Continental Risk Management Services, since November 1992. Before that time, she served as Senior Vice President, Corporate Claims, of Continental (July 1988 - November 1992). Bruce B. Brodie has been Senior Vice President and Chief Information Officer of Continental since October 1993. Before that time, he served as Chief Financial Officer for the Special Operations Group (April 1990 - October 1993) and Vice President, Office of the Chairman, of Continental (January 1989 - April 1990). J. Heath Fitzsimmons has been Senior Vice President and Chief Financial Officer of Continental since January 1990. Before that time, he was Vice President, Finance, of Continental (February 1989-December 1989). James P. Flood has been Senior Vice President, Corporate Claims, of Continental since November 1992. Before that time, he served as Vice President, Environmental Claims, of Continental (March 1988 - October 1992). William F. Gleason, Jr. has been Senior Vice President, General Counsel and Secretary of Continental since January 1983. John F. Kirby has been a Senior Vice President of Continental since January 1990 and a Senior Vice President of The Continental Insurance Company since March 1987. Arthur J. O'Connor has been Senior Vice President, Corporate Communications and Investor Relations, of Continental since November 1992 and served as Vice President, Corporate Communications and Investors Relations, of Continental (January 1988 - November 1992). Sheldon Rosenberg has been Senior Vice President and Chief Actuary of Continental since February 1994. Before that time, he served as Vice President and Chief Actuary of The Continental Insurance Company (April 1992 - February 1994), Vice President and Actuary of The Continental Insurance Company (April 1990-March 1992) and Vice President and Chief Financial Officer of the Special Operations Group (April 1988 - March 1990). Kenneth B. Zeigler has been Senior Vice President, Human Resources, of Continental since December 1991. Before that time, he served as Senior Vice President and President of the Marine and International Group (January 1990-November 1991). Previously, he had been President of Continental International (July 1988-December 1990). Francis M. Colalucci has been Vice President and Treasurer of Continental since May 1991. Before that time, he was Vice President and Controller of The Continental Insurance Company (November 1980-May 1991). William A. Robbie has been Vice President and Chief Accounting Officer since June 1992 and served as Vice President, Financial Reporting (June 1990 - June 1992). Before that time, he served as Vice President and Treasurer of Monarch Life Insurance Co. and Vice President and Corporate Controller of Monarch Capital Corp. (August 1988 - June 1990). PART II Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters Material appearing under the captions "Shareholder Information", "Summarized Consolidated Quarterly Financial Data (Unaudited), "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Resources and Liquidity", and Notes 9 and 10 to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders (the "Annual Report") is incorporated herein by reference. Item 6. Selected Financial Data Material appearing under the caption "Selected Consolidated Financial Data" included in the Annual Report is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Material appearing under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data Consolidated Financial Statements and related Notes, and material appearing under the captions "Independent Auditors' Report", "Report on Financial Statements" and "Summarized Consolidated Quarterly Financial Data (Unaudited)" included in the Annual Report are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Within the 24 months prior to the date of its most recent financial statements, Continental did not file a report on Form 8-K reporting a change of accountants. PART III Item 10. Directors and Executive Officers of the Registrant Information concerning Executive Officers of Continental appears under Item 4(A) of this Report. Information as to Directors of Continental appearing under the caption "Election of Directors" included in Continental's Proxy Statement in connection with its 1994 Annual Meeting of Shareholders (the "Proxy Statement") is incorporated herein by reference. Item 11. Executive Compensation Material appearing under the captions "Directors' Compensation" and "Executive Compensation" included in the Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Material appearing under the captions "Election of Directors", "Security Ownership of Directors and Executive Officers" and "Other Ownership of Continental Stock" included in the Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Material appearing under the caption "Election of Directors" included in the Proxy Statement is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this Report. (1) The following is a list of financial statements, together with schedules thereto, filed as part of this Report, all of which have been incorporated herein by reference to the material in the Annual Report as described under Item 8 of this Report. Report on Financial Statements Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 Consolidated Balance Sheets at December 31, 1993 and 1992 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements Independent Auditors' Report Selected Consolidated Financial Data Summarized Consolidated Quarterly Financial Data (Unaudited) (2) The following is a list of financial statement schedules filed with this Report. Independent Auditors' Report Consolidated: Page No. Schedule I -- Summary of Investments Other Than Investments in Related Parties at December 31, 1993..................... 34 II -- Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties for the years ended December 31, 1993, 1992 and 1991...... 35 III -- Condensed Parent Financial Statements: -- Statements of Income for the years ended December 31, 1993, 1992 and 1991..................... 36 -- Balance Sheets at December 31, 1993 and 1992.............................. 37 -- Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991..................... 38 IV -- Not Applicable........................ -- V -- Supplementary Insurance Information for the years ended December 31, 1993, 1992 and 1991............................... 39 VI -- Reinsurance Information for the years ended December 31, 1993, 1992 and 1991................................... 40 VII -- Not Applicable......................... -- VIII -- Valuation and Qualifying Accounts for the years ended December 31, 1993, 1992 and 1991............................... 41 IX -- Short-Term Borrowings for the years ended December 31, 1993, 1992 and 1991................................... 42 X -- Supplemental Information for Property- Casualty Insurance Underwriters for the years ended December 31, 1993, 1992 and 1991................................... 43 (3) The following is a list of exhibits hereto required to be filed by Item 601 of Regulation S-K of the Securities and Exchange Commission (the "SEC"). 3(a)-- Certificate of Incorporation of Continental, as amended, as filed with the Secretary of the State of New York on April 6, 1989. (b)-- By-Laws of Continental, as amended through December 17, 1992. 4(a)-- The following document filed with the SEC on March 3, 1993 as Exhibit 1 to Report on Form 8-K is incorporated herein by reference: Supplemental Indenture No. 3 dated as of March 1, 1993 from Continental to The Bank of New York, as Trustee, with respect to the issuance of $150 million of 7.25% Notes due March 1, 2003. (10)(a)-- The Long Term Incentive Plan of Continental (amended and restated as of December 1, 1993). (b)-- The Annual Management Incentive Plan of Continental (amended and restated as of January 1, 1993). (c)-- The Incentive Savings Plan of Continental (amended and restated as of January 1, 1994). (d)-- The Retirement Plan of Continental (amended and restated as of January 1, 1994). (e)-- Receivables Purchase and Sale Agreement dated as of December 14, 1993, among The Continental Insurance Company ("Continental Insurance"), Boston Old Colony Insurance Company ("Boston"), The Buckeye Union Insurance Company ("Buckeye"), Casualty Insurance Company ("Casualty"), Commercial Insurance Company of Newark, N.J. ("Commercial"), The Continental Insurance Company of New Jersey ("Continental - NJ"), Continental Lloyd's Insurance Company ("Lloyd's"), The Fidelity and Casualty Company of New York ("Fidelity"), Continental Reinsurance Corporation ("Continental Re"), Firemen's Insurance Company of Newark, New Jersey ("Firemen's"), The Glens Falls Insurance Company ("Glens Falls"), Kansas City Fire and Marine Insurance Company ("Kansas City"), The Mayflower Insurance Company, Ltd. ("Mayflower"), National-Ben Franklin Insurance Company of Illinois ("N-BF"), Niagara Fire Insurance Company ("Niagara"), Pacific Insurance Company ("Pacific") and Workers' Compensation and Indemnity Company of California ("Workers'"), collectively as Sellers, and Corporate Asset Funding Company, Inc. ("Asset Funding"), CIESCO, L.P., Falcon Asset Securitization Corporation ("Falcon"), Sheffield Receivables Corporation ("Sheffield"), Atlantic Asset Securitization Corp. and Credit Lyonnais, collectively as Purchasers, and Citicorp North America, Inc. ("Citicorp"), as Agent. (f)-- Stock Purchase Agreement dated as of June 30, 1993, among Continental, Continental Insurance, Continental Re and Mellon. (g)-- Share Purchase Agreement dated as of June 30, 1993 (the "Unionamerica Stock Purchase Agreement"), among Unionamerica Acquisition Company Ltd. ("Unionamerica"), Unionamerica Holdings Ltd. ("Unionamerica Holdings") and Continental. (h)-- Amendment dated September 1, 1993 to the Unionamerica Share Purchase Agreement, among Unionamerica, Unionamerica Holdings and Continental. (i)-- Stock Purchase Agreement dated as of July 28, 1993 (the "Alleghany Stock Purchase Agreement"), among Alleghany Corporation ("Alleghany"), Continental, Goldman, Sachs & Co. ("Goldman") and certain funds which Goldman either controls or of which it is a general partner (together, the "GS Investors"; Continental and the GS Investors together referred to as the "URHC Stockholders"), Underwriters Re Holdings Corp. ("Underwriters Holdings") and Underwriters Re Corporation ("Underwriters"). (j)-- Amendment dated October 7, 1993, to the Alleghany Stock Purchase Agreement, among Alleghany, Continental, the GS Investors, Underwriters Holdings and Underwriters. (k)-- Stock Purchase Agreement dated as of July 28, 1993 (the "GS Investors Stock Purchase Agreement"), among Continental and the GS Investors. (l)-- Letter Agreement dated October 6, 1993, among Continental and the GS Investors, relating to the GS Investors Stock Purchase Agreement. (m)-- Management Stock Purchase Agreement dated as of July 28, 1993 (the "Management Agreement"), among Continental, Underwriters Holdings, Underwriters and certain Management Stockholders, as supplemented. (n)-- Amendment dated as of October 7, 1993, to the Management Agreement, among Continental, Underwriters Holdings, Underwriters and certain Management Stockholders. The following document filed under Exhibit 10 to Continental's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 is incorporated herein by reference: Receivables Purchase and Sale Agreement dated as of December 14, 1992, among Continental Insurance, Boston, Buckeye, Casualty, Commercial, Continental-NJ, Lloyd's, Fidelity, Firemen's, Glens Falls, Kansas City, Mayflower, N-BF, Niagara, Pacific and Workers', collectively as Sellers, and Asset Funding, Falcon, Receivables Capital Corporation, Sheffield and Credit Lyonais, collectively, as Purchasers, and Citicorp, as Agent. (11) -- Continental's Statement re Computation of Per Share Earnings. (13) -- Continental's 1993 Annual Report to Shareholders (filed with the SEC only to the extent incorporated herein by reference). (21) -- Subsidiaries of Continental. (23) -- Consent of KPMG Peat Marwick. (28) -- Statutory Loss Development of Property and Casualty Insurance and Reinsurance Subsidiaries. (b) No Report on Form 8-K was filed by Continental during the last quarter of the period covered by this Report. SIGNATURES Pursuant to the Requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 17, 1994 THE CONTINENTAL CORPORATION By /s/ JOHN P. MASCOTTE (John P. Mascotte) Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date Senior Vice President /s/ J. HEATH FITZSIMMONS and Chief Financial Officer March 17, 1994 (J. Heath Fitzsimmons) Vice President /s/ WILLIAM A. ROBBIE and Chief Accounting Officer March 17, 1994 (William A. Robbie) /s/ IVAN A. BURNS Director March 17, 1994 (Ivan A. Burns) /s/ ALEC FLAMM Director March 17, 1994 (Alec Flamm) /s/ IRVINE O. HOCKADAY, JR. Director March 17, 1994 (Irvine O. Hockaday, Jr.) /s/ JOHN E. JACOB Director March 17, 1994 (John E. Jacob) /s/ JOHN P. MASCOTTE Director March 17, 1994 (John P. Mascotte) /s/ JOHN F. McGILLICUDDY Director March 17, 1994 (John F. McGillicuddy) /s/ RICHARD de J. OSBORNE Director March 17, 1994 (Richard de J. Osborne) /s/ CHARLES A. PARKER Director March 17, 1994 (Charles A. Parker) ________________________________ Director (L. Edwin Smart) /s/ JOHN W. ROWE, M.D. Director March 17, 1994 (John W. Rowe, M.D.) /s/ PATRICIA CARRY STEWART Director March 17, 1994 (Patricia Carry Stewart) ________________________________ Director (Francis T. Vincent, Jr.) ________________________________ Director (Michael Weintraub) /s/ ANNE WEXLER Director March 17, 1994 (Anne Wexler) INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders THE CONTINENTAL CORPORATION: Under date of February 10, 1994, we reported on the consolidated balance sheets of The Continental Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in Item 14(a)(2). These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 2 to the consolidated financial statements, The Continental Corporation and subsidiaries changed their methods of accounting for multiple-year retrospectively rated reinsurance contracts and for the adoption of the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," and No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1993. The Continental Corporation and subsidiaries adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes," in 1992. /s/ KPMG PEAT MARWICK KPMG Peat Marwick New York, New York February 10, 1994 SCHEDULE I THE CONTINENTAL CORPORATION SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES (1) December 31, 1993 (millions) - -------------------------------------------------------------------------- Column A Column B Column C Column D - -------------------------------------------------------------------------- Type of Investment Cost Value Balance Sheet - -------------------------------------------------------------------------- FIXED MATURITIES: BONDS: United States Government and Government Agencies . . . . . . . . . $2,832.8 $2,908.6 $2,908.6 States, Municipalities and Political Subdivisions. . . . . . . . 1,325.2 1,418.6 1,418.6 Foreign Governments . . . . . . . . . . 879.2 943.2 943.2 Public Utilities. . . . . . . . . . . . 132.0 137.8 137.8 All Other Corporate . . . . . . . . . . 1,397.8 1,456.3 1,456.3 -------- -------- -------- Total Bonds . . . . . . . . . . . . . 6,567.0 6,864.5 6,864.5 -------- -------- -------- REDEEMABLE PREFERRED STOCKS. . . . . . . . 48.9 51.9 51.9 -------- -------- -------- Total Fixed Maturities. . . . . . . . . 6,615.9 6,916.4 6,916.4 -------- -------- -------- EQUITY SECURITIES: COMMON STOCKS: Public Utilities. . . . . . . . . . . . 72.8 85.1 85.1 Banks, Trusts and Insurance Companies . 77.5 131.4 131.4 All Other Corporate . . . . . . . . . . 350.5 437.2 437.2 -------- -------- -------- Total Common Stocks . . . . . . . . . 500.8 653.7 653.7 -------- -------- -------- OTHER PREFERRED STOCKS . . . . . . . . . . 99.2 105.4 105.4 -------- -------- -------- Total Equity Securities . . . . . . . . 600.0 759.1 759.1 -------- -------- -------- OTHER LONG-TERM INVESTMENTS: Mortgages Receivable . . . . . . . . . . . 112.2 112.2 Certificates of Deposit. . . . . . . . . . 35.5 35.5 Venture Capital Investments. . . . . . . . 42.7 42.7 Investment in Minority Affiliates. . . . . 1.1 1.1 Other Notes and Participations . . . . . . 10.9 10.9 Investments in Limited Partnerships. . . . 185.5 193.5 -------- -------- Total Other Long-Term Investments. . . . . . . . . . . . . . . . 387.9 395.9 -------- -------- OTHER SHORT-TERM INVESTMENTS: Money Market Instruments . . . . . . . . . 1,071.0 1,071.0 -------- -------- Total:. . . . . . . . . . . . . . . . . $8,674.8 $9,142.4 ======== ======== _____________________ (1) All fixed maturities are carried at market. SCHEDULE II THE CONTINENTAL CORPORATION AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
- --------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - --------------------------------------------------------------------------------------------- Balance at Deductions End of Period -------------------------------------- (i) (ii) Balance at Amounts Beginning Amounts Written (i) (ii) Name of Debtor of Period Additions Collected Off Current Non-Current - --------------------------------------------------------------------------------------------- Year Ended December 31, 1993:.... -- -- -- -- -- -- Year Ended December 31, 1992: Steven H. Newman (1)........... $305,263 -- $305,263 -- -- -- Year Ended December 31, 1991: Steven H. Newman (1)........... $407,016 -- $101,753 -- $101,753 $203,510 ____________________ (1) Represents a loan at 8.95%
SCHEDULE III THE CONTINENTAL CORPORATION - PARENT STATEMENTS OF INCOME (1) (2) Year Ended December 31 (millions) 1993 1992 1991 ------- ------- ------- REVENUES: Net Investment Income . . . . . . . . . $ 15.2 $ 17.7 $ 14.2 Realized Capital Losses . . . . . . . . (3.0) (6.0) (3.0) Equity in Earnings of Subsidiaries Dividends: $120.0; 1992 - $168.0; 1991 - $140.0. . . . 177.8 221.1 124.7 Equity in Earnings (Loss) of Discontinued Operations, Net of Income Taxes (Benefits)......... . . . . . . . . 48.7 (174.7) (54.9) Other Revenues. . . . . . . . . . . . . 61.4 6.4 8.8 ----- ----- ----- Total Revenues. . . . . . . . . . . 300.1 64.5 89.8 ----- ----- ----- EXPENSES: Interest Expense. . . . . . . . . . . . 48.6 49.5 43.8 Other Expenses. . . . . . . . . . . . . 24.9 59.0 4.7 ----- ----- ----- Total Expenses. . . . . . . . . . . 73.5 108.5 48.5 ----- ----- ----- Income (Loss) before Income Taxes and Net Cumulative Effect of Changes in Accounting Principles. . 226.6 (44.0) 41.3 ----- ----- ----- Total Income Taxes (Benefits) (3) . . . 18.2 28.7 (15.1) ----- ----- ----- Income (Loss) Before Net Cumulative Effect of Changes in Accounting Principles . . . . . . . 208.4 (72.7) 56.4 Net Cumulative Effect of Changes in Accounting Principles. . . . . . 1.6 (11.0) -- ----- ----- ----- Net Income (Loss) . . . . . . . . . . . $210.0 $(83.7) $56.4 ====== ====== ===== _______________________ (1) See Notes to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders. (2) Certain reclassifications, primarily for discontinued operations, have been made to the prior years' financial information to conform to the 1993 presentation. (3) Represents Income Taxes (Benefits) for continuing operations. SCHEDULE III (Continued) THE CONTINENTAL CORPORATION - PARENT BALANCE SHEETS (1) (2) DECEMBER 31 (millions, except par values and share amounts) 1993 1992 ---- ---- ASSETS: Fixed Maturities at Market (Amortized Cost - $40.2; 1992 - $98.4) . . . . . . . . . . $ 39.8 $ 98.0 Equity Securities at Market (Cost - $15.2; 1992 - $0.2). . . . . . . . . . . 15.3 0.2 Short-Term Investments . . . . . . . . . . 9.0 107.3 Other Long-Term Investments. . . . . . . . 6.1 58.6 Investment in Stocks of Subsidiaries: Insurance Subsidiaries - Equity Basis . 2,697.7 2,126.3 Discontinued Operations - Equity Basis . 84.6 310.5 Other Subsidiaries - Equity Basis . . . 146.6 147.4 Cash and Cash Equivalents. . . . . . . . . 0.1 3.1 Other Assets . . . . . . . . . . . . . . . 19.1 6.8 -------- -------- Total Assets. . . . . . . . . . . . . . $3,018.3 $2,858.2 ======== ======== LIABILITIES: Short-Term Debt. . . . . . . . . . . . . . $ 223.5 $ 554.0 Notes Payable. . . . . . . . . . . . . . . 346.8 198.6 Intercompany Balances. . . . . . . . . . . 94.9 96.3 Other Liabilities. . . . . . . . . . . . . 170.0 78.2 ----- ---- Total Liabilities . . . . . . . . . . . 835.2 927.1 ----- ----- Commitments and Contingencies -- -- ----- ----- Series C, Redeemable Preferred Stock . . . . . -- 20.5 ----- ----- SHAREHOLDERS' EQUITY: Preferred Stock, $4 Par Value. . . . . . . 0.3 0.3 Common Stock, $1 Par Value . . . . . . . . 65.7 65.7 Authorized Shares: 100,000,000 Issued Shares: 65,720,419; 1992 - 65,717,409 Outstanding Shares: 55,331,060; 1992 - 54,925,639 Paid-in Capital. . . . . . . . . . . . . . 613.2 616.2 Retained Earnings. . . . . . . . . . . . . 1,612.5 1,461.9 Net Unrealized Appreciation of Investments. . . . . . . . . . . . . . . 322.1 202.0 Cumulative Foreign Currency Translation Adjustment . . . . . . . . . . . . . . . (61.1) (52.4) Common Stock in Treasury, at Cost (10,389,359 Shares: 1992 - 10,790,770 Shares). . . . . . . . . . . (369.6) (383.1) -------- -------- Total Shareholders' Equity. . . . . . . 2,183.1 1,910.6 -------- -------- Total Liabilities, Commitments and Contingencies, Redeemable Preferred Stocks and Shareholders' Equity. . . $3,018.3 $2,858.2 ======== ======== __________________ (1) See Notes to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders. (2) Certain reclassifications, primarily for discontinued operations, have been made to the prior years' financial information to conform to the 1993 presentation. SCHEDULE III (Continued) THE CONTINENTAL CORPORATION - PARENT STATEMENTS OF CASH FLOWS (1) (2) Year Ended December 31 (millions) 1993 1992 1991 ------ ------- ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss). . . . . . . . . . . $210.0 $(83.7) $ 56.4 Adjustments to Reconcile Net Income (Loss) to Net Cash provided from Operating Activities: Realized Capital Losses . . . . . . 3.0 6.0 3.0 Equity in Earnings of Subsidiaries. . . . . . . . . . (177.8) (221.1) (124.7) Equity in (Earnings) Loss of Discontinued Operations . . . . (48.7) 174.7 54.9 Other-Net . . . . . . . . . . . . . 74.1 78.8 (7.4) ----- ----- ----- Net Cash Provided from (Used in) Operating Activities. . . . . . . . . . . . 60.6 (45.3) (17.8) ----- ----- ----- CASH FLOWS FROM INVESTING ACTIVITIES: Cost of Investments Purchased . . . . . (72.0) (197.8) (35.5) Proceeds from Investments Sold. . . . . 111.9 94.8 37.1 Proceeds from Investments Matured . . . 0.2 3.0 0.1 Proceeds from Sales of Subsidiaries . . 330.0 -- 3.6 Investment in Subsidiaries. . . . . . . (399.3) -- -- Net Decrease (Increase) in Long-Term Investments . . . . . . . . . . . . . 0.4 2.8 (5.4) Net Decrease (Increase) in Short-Term Investments . . . . . . . . . . . . . 98.3 (103.8) 3.5 Dividends Paid by Subsidiaries. . . . . 120.0 168.0 140.0 ----- ----- ----- Net Cash Provided from (Used in) Investing Activities. . . . . . . . . . . . . 189.5 (33.0) 143.4 ----- ----- ----- CASH FLOWS FROM FINANCING ACTIVITIES: Cash Borrowings from (Repayments to) Subsidiaries. . . . . . . . . . . . (1.4) 22.3 (38.6) Decrease in Long-Term Debt. . . . . . . (1.8) (301.4) -- (Decrease) Increase in Short-Term Debt. (48.8) 275.2 51.9 Issuance of Long-Term Debt. . . . . . . 150.0 200.0 -- Retirement of Debt. . . . . . . . . . . (281.7) -- -- Sale of Treasury Shares . . . . . . . . 10.5 8.0 6.2 Dividends to Shareholders . . . . . . . (59.4) (123.1) (145.5) Redemption of Redeemable Preferred Stock. . . . . . . . . . . . . . . . (20.5) -- -- ----- ------ ----- Net Cash Provided from (Used in) Financing Activities. . . . . . . (253.1) 81.0 (126.0) ------ ------ ----- Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . (3.0) 2.7 (0.4) Cash and Cash Equivalents at Beginning of Year. . . . . . . . . . . . . . . . . 3.1 0.4 0.8 ----- ----- ----- Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . $ 0.1 $ 3.1 $ 0.4 ===== ===== ====== Supplemental Cash Flow Information: Federal, Foreign and State Taxes Paid . $ 4.5 $ 11.0 $ 5.6 ====== ======= ======= Interest Paid . . . . . . . . . . . . . $ 56.9 $ 45.6 $ 48.2 ====== ======= ======= _______________________ (1) See Notes to Consolidated Financial Statements included in Continental's 1993 Annual Report to Shareholders. (2) Certain reclassifications, primarily for discontinued operations, have been made to the prior years' financial information to conform to the 1993 presentation. SCHEDULE V THE CONTINENTAL CORPORATION SUPPLEMENTARY INSURANCE INFORMATION (millions)
- ------------------------------------------------------------------------------------------------------------------------------ Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K - ------------------------------------------------------------------------------------------------------------------------------ Outstanding Amortization Deferred Losses Other Policy Losses of Deferred Other Pre- Policy and Claims and Net and Policy Insurance miums Acquisition Loss Unearned Benefits Premiums Investment Loss Acquisition Operating Writ- Segment Costs Expenses(1) Premiums(1) Payable Earned Income(2) Expenses Costs Expenses ten - ------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1993: Agency & Brokerage Commercial. . . . . . . $237.0 $5,366.7 $1,152.6 -- $2,121.3 -- $1,663.9 $ 669.5 $22.7 $2,168.2 Agency & Brokerage Personal. . . . . . . . 119.1 837.6 578.3 -- 861.6 -- 667.5 269.1 3.2 887.5 Specialized Commercial . 137.9 2,864.4 678.8 -- 1,433.2 -- 1,082.7 431.9 11.0 1,482.1 ------ -------- -------- ----- -------- ------- --------- --------- ------ -------- Insurance Operations . . 494.0 9,068.7 2,409.7 -- 4,416.1 $ 514.3 3,414.1 1,370.5 36.9 4,537.8 Corporate & Other. . . . -- -- -- -- -- 28.0 -- -- -- -- ------ -------- -------- ----- -------- ------- -------- -------- ----- -------- Total. . . . . . . . . $494.0 $9,068.7 $2,409.7 -- $4,416.1 $ 542.3 $3,414.1 $1,370.5 $36.9 $4,537.8 ====== ======== ======== ===== ======== ======= ======== ======== ===== ======== Year Ended December 31, 1992: Agency & Brokerage Commercial . . . . . . $226.9 $5,544.1 $1,120.5 -- $1,919.5 -- $1,562.2 $ 607.9 $30.4 $1,895.5 Agency & Brokerage Personal . . . . . . . 112.8 982.6 556.7 -- 777.4 -- 623.8 280.7 (0.1) 808.3 Specialized Commercial . 127.8 2,539.5 629.0 -- 1,201.1 -- 975.6 394.1 5.0 1,315.2 ------ -------- -------- ------ -------- ------ -------- -------- ------ ------- Insurance Operations . . 467.5 9,066.2 2,306.2 -- 3,898.0 $ 559.5 3,161.6 1,282.7 35.3 4,019.0 Corporate & Other. . . . -- -- -- -- -- 30.4 -- -- -- -- ------ -------- -------- ------ -------- ------ ------- -------- ------ ------- Total. . . . . . . . . $467.5 $9,066.2 $2,306.2 -- $3,898.0 $ 589.9 $3,161.6 $1,282.7 $35.3 $4,019.0 ====== ======== ======== ======= ======== ======= ======== ======== ====== ======== Year Ended December 31, 1991: Agency & Brokerage Commercial . . . . . . $225.4 $3,725.4 $ 952.8 -- $2,018.1 -- $1,689.1 $ 629.0 $54.6 $2,015.7 Agency & Brokerage Personal . . . . . . . 106.5 674.0 450.8 -- 795.3 -- 594.4 267.2 -- 805.0 Specialized Commercial . 98.6 1,502.5 441.9 -- 1,059.1 -- 799.5 391.9 14.6 1,085.2 ------ -------- -------- ------ -------- ------- -------- -------- ----- -------- Insurance Operations . . 430.5 5,901.9 1,845.5 -- 3,872.5 $ 610.6 3,083.0 1,288.1 69.2 3,905.9 Corporate & Other. . . . -- -- -- -- -- 26.6 -- -- -- -- ------ -------- -------- ------ -------- ------- ------- -------- ----- -------- Total . . . . . . . $430.5 $5,901.9 $1,845.5 -- $3,872.5 $ 637.2 $3,083.0 $1,288.1 $69.2 $3,905.9 ====== ======== ======== ====== ======== ======= ======== ======== ===== ======== ______________________ (1) 1991 outstanding losses and loss expenses and unearned premiums are shown net of reinsurance. (2) Distinct investment portfolios are not maintained for individual insur- ance segments; accordingly, insurance segments results are shown in the aggregate.
SCHEDULE VI THE CONTINENTAL CORPORATION REINSURANCE INFORMATION (1) (millions, except percentages)
- ---------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ---------------------------------------------------------------------------------------------- Earned Premiums ------------------------ Percentage Ceded to Assumed of Amount Gross Other From Other Net Assumed Amount Companies Companies Amount to Net - ---------------------------------------------------------------------------------------------- Year Ended December 31, 1993: Premiums: Property and casualty insurance. . . . . . . . . $5,125.8 $1,213.9 $504.2 $4,416.1 11.4% -------- -------- ------ -------- ----- Total premiums . . . $5,125.8 $1,213.9 $504.2 $4,416.1 11.4% ======== ======== ====== ======== ===== Year Ended December 31, 1992: Premiums: Property and casualty insurance. . . . . . . . $4,764.3 $1,334.0 $467.7 $3,898.0 12.0% -------- -------- ------ -------- ----- Total premiums . . . $4,764.3 $1,334.0 $467.7 $3,898.0 12.0% ======== ======== ====== ======== ===== Year Ended December 31, 1991: Premiums: Property and casualty insurance. . . . . . . . $4,665.3 $1,151.6 $358.8 $3,872.5 9.3% -------- -------- ------ -------- ---- Total premiums. . . . $4,665.3 $1,151.6 $358.8 $3,872.5 9.3% ======== ======== ====== ======== ==== _____________________ (1) Certain reclassifications, primarily for discontinued operations, have been made to prior years' financial information to conform to the 1993 presentation.
SCHEDULE VIII THE CONTINENTAL CORPORATION VALUATION AND QUALIFYING ACCOUNTS (1) (millions)
- --------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - --------------------------------------------------------------------------------------------- Additions -------------------- Balance at Charged to Charged Balance at Beginning Costs and to Other Deduc- End of Description of Period Expenses Accounts tions(1) Period - --------------------------------------------------------------------------------------------- Year Ended December 31, 1993: Investment Reserve . . . . . . $35.0 $20.3 -- $28.3 $27.0 Allowance for doubtful accounts-loans and accounts receivable. . . $31.3 $30.9 -- $18.9 $43.3 Allowance against reinsurance recoverable. . . . . . . . . $41.8 $15.0 -- $30.4 $26.4 Year Ended December 31, 1992: Investment Reserve . . . . $35.0 $10.0 -- $10.0 $35.0 Allowance for doubful accounts-loans and accounts receivable. . . $26.8 $22.7 -- $18.2 $31.3 Allowance against reinsurance recoverable. . . . . . . $27.8 $41.0 -- $27.0 $41.8 Year Ended December 31, 1991: Investment Reserve . . . . . $23.0 $19.0 -- $ 7.0 $35.0 Allowance for doubtful accounts-loans and accounts receivable. . . $11.6 $42.4 -- $27.2 $26.8 Allowance against reinsurance recoverable. . . . . . . . $ 8.3 $31.4 -- $11.9 $27.8 ____________________________ (1) Represents write-offs of amounts determined to be uncollectable, net of recoveries.
SCHEDULE IX THE CONTINENTAL CORPORATION SHORT-TERM BORROWINGS (1) (millions, except percentages)
- ---------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ---------------------------------------------------------------------------------- Maximum Average Weighted Weighted Amount Amount Average Balance Average Outstanding Outstanding Interest Rate Category of Aggregate at End Interest During the During the During the Short-Term Borrowings of Period Rate (2) Period Period (3) Period (4) - ---------------------------------------------------------------------------------- Year Ended December 31, 1993: Bank (5) . . . . . $225.1 3.7% $282.3 $244.8 4.4% Year Ended December 31, 1992: Bank . . . . . . . $282.3 4.5% $311.4 $300.5 4.5% Year Ended December 31, 1991: Bank . . . . . . . $295.9 6.0% $306.4 $282.3 6.3% _____________________________ (1) Certain reclassifications, primarily for the sale of premium financing operations, have been made to prior years' financial information to conform to the 1993 presentation. (2) Rates illustrated in Column C are based on balances illustrated in Column B. (3) Average determined by dividing the total prior 13 months' aggregate at the end of each month by 13. (4) Average determined by dividing interest expense for the year by the Average Amount Outstanding During the Period (Column E). (5) Various maturities ranging from 1 to 31 days.
SCHEDULE X THE CONTINENTAL CORPORATION SUPPLEMENTAL INFORMATION (For Property-Casualty Insurance Underwriters) (1)
- -------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K - -------------------------------------------------------------------------------------------------------------------------------- Loss Expenses Amortiza- Incurred tion Dis- Related to of Defer- Out- count ---------------- Deferred red standing if any, Net (i) (ii) Policy Paid Affiliation Acqui- Losses Deduc- Pre- Invest- Cur- Acquisi- Loss Pre- with sition and Loss cted in Unearned miums ment rent Prior tion and Loss miums Registrant Costs Expenses(2) Column C Premiums(2) Earned Income(3) Year Year Costs Expenses Written - ------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31, 1993: (a) Consolidated property-casualty entities . . . . $494.0 $9,068.7 $696.0 $2,409.7 $4,416.1 $514.3 $3,413.0 $ 1.1 $1,370.5 $3,304.8 $4,537.8 Year Ended December 31, 1992: (a) Consolidated property-casualty entities . . . $467.5 $9,066.2 $692.8 $2,306.2 $3,898.0 $559.5 $3,036.3 $125.3 $1,282.7 $3,257.0 $4,019.0 Year Ended December 31, 1991: (a) Consolidated property-casualty entities . . . $430.5 $5,901.9 $675.7 $1,845.5 $3,872.5 $610.6 $2,986.5 $ 96.5 $1,288.1 $3,144.2 $3,905.9 _____________ (1) Excludes Underwriters Re Acquisition Corp., an equity investment as of 1987, whose reserves are not consolidated and which files similar information with the Securities and Exchange Commission. (2) 1991 outstanding losses and loss expenses and unearned premiums are shown net of reinsurance. (3) Distinct investment portfolios are not maintained for individual segments; accordingly, insurance segments results are shown in the aggregate.
EX-3 2 EXHIBIT 3(A) Filed State of New York April 6, 1989 CERTIFICATE OF CHANGE OF THE CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION Under Section 805A of the Business Corporation Law Pursuant to the provisions of Section 805A of the Business Corporation Law, the undersigned hereby certify: FIRST: That the name of the corporation is THE CONTINENTAL CORPORATION. SECOND: That the Certificate of Incorporation of the corporation was filed by the Department of State, Albany, New York, on the 15th day of May, 1968. THIRD: That the change to the Certificate of Incorporation effected by this Certificate is as follows: (a) To change the post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him, so that such address shall hereafter be 180 Maiden Lane, New York, New York 10038. FOURTH: That the change of the Certificate of Incorporation was authorized by the vote of a majority of directors present at a meeting of the Board on November 17, 1988, at which a quorum was present. IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalties of perjury, this 9th day of January 1989. THE CONTINENTAL CORPORATION /s/ William F. Gleason,Jr. _____________________________ Senior Vice President William F. Gleason, Jr. /s/ Roselyn C. Dlutman _______________________________ Assistant Secretary Roselyn C. Dlutman Filed State of New York July 12, 1988 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being Senior Vice President and Assistant Secretary, respectively, of The Continental Corporation, hereby certify and set forth: (1) The name of the corporation is THE CONTINENTAL CORPORATION. (2) The Certificate of Incorporation of The Continental Corporation was filed by the Department of State on the 15th day of May, 1968. (3) The Certificate of Incorporation of The Continental Corporation is hereby amended to implement provisions of the Business Corporation Law which permit limiting the personal liability of directors by adding a new Article 8 thereof to read as follows: "8. No director of the Corporation shall be liable to the Corporation or its shareholders for damages for any breach of duty in such capacity, provided that nothing contained in this Article shall limit the liability of a director (a) if a judgment or other final adjudication adverse to the director establishes that the director's acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that the director personally gained in fact a financial profit or other advantage to which the director was not legally entitled or that the director's acts violated Section 719 of the New York Business Corporation Law, or (b) for any act or omission prior to the adoption of this Article 8." (4) The amendment of the Certificate of Incorporation set forth in paragraph (3) above was authorized by vote of the holders of a majority of all outstanding voting shares of the corporation entitled to vote thereon at a meeting of shareholders held on May 26, 1988. Said authorization is subsequent to the affirmative vote of the Board of Directors. IN WITNESS WHEREOF, the undersigned have executed this certificate this 16th day of June, 1988. It is affirmed that the statements contained herein are true under the penalties of perjury. /s/ William F. Gleason, Jr. _______________________________ William F. Gleason, Jr. Senior Vice President, General Counsel and Secretary /s/ Roselyn C. Dlutman ________________________________ Roselyn C. Dlutman Assistant Secretary Filed State of New York June 30, 1983 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being Senior Vice President and Assistant Secretary, respectively, of The Continental Corporation, hereby certify and set forth: (1) The name of the corporation is THE CONTINENTAL CORPORATION. (2) The certificate of incorporation of The Continental Corporation was filed by the Department of State on the 15th day of May, 1968. (3) The certificate of incorporation of The Continental Corporation is hereby amended, pursuant to section 502 of the Business Corporation Law, by the addition of a provision stating the number, designation, relative rights, preferences and limitations of the shares of a series of Cumulative Preferred Stock, Series D (the "Series D Preferred Stock"). The Series D Preferred Stock was established by a resolution adopted by a majority vote of the board of directors of The Continental Corporation at a meeting of the board duly called and held on June 16, 1983. The text of that resolution is set forth below: RESOLVED, that pursuant to the authority conferred upon the Board of Directors by Article Five of the Certificate of Incorporation of this Corporation, as amended, there is hereby established a series of the authorized Preferred Stock, par value $4.00 per share, of this Corporation, which series shall be designated as Cumulative Preferred Stock, Series D (hereinafter called "Series D Preferred Stock"), shall consist of 40,000 shares and shall have the following relative rights, preferences and limitations: 1. Dividends. The holders of the shares of Series D Preferred Stock shall be entitled, when and as the Board of Directors shall declare any dividend out of earned surplus of the Corporation available therefor, to receive ratably, in proportion to the number of shares of Series D Preferred Stock held by them respectively, dividends cumulative at the rate of $75 per annum per share from the date of issuance to and including June 30, 1984 and thereafter at the following annual rate per share: 12 Month Period Ending June 30 Rate per Annum 1985 $ 90 1986 105 1987 115 1988 125 1989 and each year thereafter 140 which dividends shall be payable quarterly on the January 23, April 23, July 23 and October 23 after each quarter during which shares of Series D Preferred Stock shall be outstanding, provided that in the case of the first issuance of shares of Series D Preferred Stock, such dividends shall be cumulative from the date of issuance and the initial quarterly dividend on such shares shall be based on the pro rata portion of the annual dividend and shall be payable on the quarterly dividend payment date next following the calendar quarter in which such date of issuance occurs. No dividends shall be declared or paid in any year upon shares of Common Stock until and unless full cumulative dividends shall have been paid on all outstanding shares of Series D Preferred Stock for all prior quarters, or until and unless full dividends for the current quarter to the holders of outstanding shares of Series D Preferred Stock shall have been declared and shall have been either paid or set aside for payment. 2. Liquidation Preferences. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series D Preferred Stock shall be entitled to receive out of the assets of the Corporation $1,000 per share, plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, before any amount whatsoever shall be paid or assets shall be distributed to the holders of the shares of Common Stock; and, after paying $1,000 per share to the holders of the shares of Series D Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, any assets remaining, subject to the preferences of any other series of Preferred Stock at the time outstanding, shall be divided among the holders of the shares of Common Stock, in proportion to the number of shares of Common Stock held by them respectively. If the assets of the Corporation available for distribution to the holders of the shares of Series D Preferred Stock shall be insufficient to permit the payment as aforesaid of $1,000 per share to the holders of the shares of Series D Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, upon any liquidation, dissolution or winding up, then all of the assets available for distribution to the holders of such shares shall be distributed ratably among the holders of the shares of Series D Preferred Stock, in proportion to the number of shares of Series D Preferred Stock held by them respectively. A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale or transfer of substantially all of its assets as an entirety, shall not be deemed a liquidation or dissolution or winding up of the Corporation within the meaning of this paragraph 2. 3. Redemption. The Series D Preferred Stock shall be subject to redemption, at the option of the Corporation out of funds legally available therefor, on at least sixty days' prior written notice, given as herein provided, at a redemption price of $1,000 per share and in addition an amount equal to any dividends thereon in arrears and also the proportionate amount of the dividends accrued since the last preceding day for the payment of dividends to the date fixed for redemption, whether or not such dividends shall have been earned or declared, but only as follows: Number of Shares of On and after July 1, Series D Preferred Stock 1986 8,000 1987 8,000 1988 8,000 1989 8,000 1990 8,000 Such right of optional redemption shall be cumulative so that, if in any year the full amount of shares which the Corporation may so redeem (including any amount carried over from any preceding year) is not so redeemed, the number of shares not so redeemed shall be carried forward. In case less than all of the shares of Series D Preferred Stock at any time outstanding shall be called for redemption, the shares so to be redeemed shall be determined in such manner as the Board of Directors may fix. In case the Board of Directors shall elect to redeem all or any of the shares of Series D Preferred Stock then outstanding, the Board of Directors shall cause a written notice to be mailed to each holder of Series D Preferred Stock called for redemption, addressed to each such shareholder at his last known post office address as the same shall appear on the stock transfer books of the Corporation, stating that the shares of Series D Preferred Stock specified in the notice will be redeemed by the Corporation at the redemption price aforesaid on a date to be specified in such notice, which shall be at least sixty days after the date of the mailing of such notice, and requiring the holders of the shares of Series D Preferred Stock called for redemption to present the certificates representing such shares held by them respectively for redemption at the office of a bank or trust company in the Borough of Manhattan, City and State of New York, to be designated in the notice. On and after the date specified in the notice, each holder of shares of Series D Preferred Stock called for redemption, upon presenting and surrendering at the place designated in the notice the certificates representing the shares of Series D Preferred Stock held by such holder and called for redemption, properly endorsed in blank for transfer or accompanied by proper instrument of assignment or transfer in blank, and bearing all necessary transfer tax stamps thereto affixed and cancelled, shall be entitled to receive therefor the redemption price hereinabove specified. The certificates representing the shares of Series D Preferred Stock so surrendered for redemption shall be forthwith cancelled. In case the Corporation shall give such notice of the redemption of shares of Series D Preferred Stock and on or before the date specified in the notice shall deposit the amount of the aforesaid redemption price of the shares of Series D Preferred Stock called for redemption with the bank or trust company designated in the notice, all shares of Series D Preferred Stock called for redemption shall be deemed to have been redeemed on the date specified in the notice whether or not the certificates representing them shall be surrendered for redemption and cancelled, and the shares of Series D Preferred Stock called for redemption shall from and after that date cease to represent any interest whatever in the Corporation or its property and shall not have voting rights, and the holders thereof shall have no rights other than the right to receive from and out of the deposit the aforesaid redemption price, but without any dividends or interest from or after the date specified in the notice for the redemption of the shares. 5. Voting Rights. (a) Except as herein or expressly required by law, the holders of the shares of Series D Preferred Stock shall have no right or power to vote on any question or in any proceeding or to be represented at or to receive notice of any meetings of shareholders. (b) In the event at any time the Corporation shall fail to pay six (6) quarterly dividends on all outstanding shares of Series D Preferred Stock, then at the next annual meeting of shareholders for the election of directors, and until payment in full of all such dividends then in default or provision therefor has been made by the declaring and setting aside thereof, the holders of the outstanding shares of Series D Preferred Stock, voting separately as a class to the exclusion of the holders of shares of any other class or series of capital stock of the Corporation, shall be entitled to vote for and elect two members of the Board of Directors of the Corporation. Directors elected by the holders of shares of Series D Preferred Stock voting separately as a class may be removed only by the concurring vote of the holders of a majority of the outstanding shares of Series D Preferred Stock, voting separately as a class, so long as the right of the holders of shares of Series D Preferred Stock voting as a class to elect two members of the Board of Directors of the Corporation shall continue. (c) Whenever a vote of holders of shares of Series D Preferred Stock is taken, the holders of the shares of Series D Preferred Stock then issued and outstanding shall be entitled to one vote in person or by proxy for each share of Series D Preferred Stock held by them respectively. IN WITNESS WHEREOF, the undersigned have executed this certificate this 27th day of June, 1983, and affirm that the statements herein are true under penalty of perjury. /s/ William F. Gleason, Jr. ___________________________ William F. Gleason, Jr. Senior Vice President, Secretary and General Counsel /s/ Roselyn C. Dlutman ___________________________ Roselyn C. Dlutman Assistant Secretary STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) William F. Gleason, Jr., being duly sworn, deposes and says, that he is one of the persons described in and who executed the foregoing certificate, that he has read the same and knows the contents thereof, and that the statements contained therein are true. /s/ William F. Gleason, Jr. ___________________________ William F. Gleason, Jr. Sworn to before me this 27th day of June, 1983. /s/ Roselyn C. Dlutman Notary Public Filed State of New York June 30, 1983 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being Senior Vice President and Assistant Secretary, respectively, of The Continental Corporation, hereby certify and set forth: (1) The name of the corporation is THE CONTINENTAL CORPORATION. (2) The certificate of incorporation of The Continental Corporation was filed by the Department of State on the 15th day of May, 1968. (3) Article 5 of the certificate of incorporation of The Continental Corporation, relating to the rights, preferences and limitations of its shares, is hereby amended to eliminate preemptive rights of shareholders of the corporation by amending Article 5, Section (d) thereof to read as follows: "(d) No holder of any shares of any class of the Corporation, as such, shall have any preemptive right to subscribe for or purchase any shares of any class of the Corporation or any rights or options to purchase shares of any class of the Corporation or any shares of any class or other securities convertible into or carrying rights or options to purchase shares of any class of the Corporation, whether now or hereafter authorized." (4) The amendment of the Certificate of Incorporation set forth in paragraph (3) above was authorized by vote of the holders of a majority of all outstanding shares of the corporation's Common Stock, $1.00 par value, $2.50 Cumulative Convertible Preferred Stock, Series A, $4.00 par value, $2.50 Cumulative Convertible Preferred Stock, Series B, $4.00 par value, and $1.50 Cumulative Convertible Preferred Stock, Series C, $4.00 par value, each voting as a separate class at a meeting of shareholders held on May 19, 1983. IN WITNESS WHEREOF, the undersigned have executed this certificate this 27th day of June, 1983. It is affirmed that the statements contained herein are true under the penalties of perjury. /s/ William F. Gleason, Jr. ____________________________ William F. Gleason, Jr. Senior Vice President, Secretary and General Counsel /s/ Roselyn C. Dlutman _____________________________ Roselyn C. Dlutman Assistant Secretary Filed State of New York August 6, 1982 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being Vice President and Assistant Secretary, respectively, of The Continental Corporation, hereby certify and set forth: (1) The name of the corporation is THE CONTINENTAL CORPORATION. (2) The certificate of incorporation of The Continental Corporation was filed by the Department of State on the 15th day of May, 1968. (3) The certificate of incorporation of The Continental Corporation is hereby amended, pursuant to section 502 of the Business Corporation Law, by the addition of a provision stating the number, designation, relative right, preferences and limitations of the shares of a series of $150 Cumulative Convertible Preferred Stock, Series C (the "Series C Preferred Stock"). The Series C Preferred Stock was established by a resolution adopted by a majority vote of the board of directors of The Continental Corporation at a meeting of the board duly called and held on July 22, 1982. The text of that resolution is set forth below: RESOLVED, that pursuant to the authority conferred upon the Board of Directors by Article Four of the Certificate of Incorporation of this Corporation, as amended, there is hereby established a series of the authorized Preferred Stock, par value $4.00 per share, of this Corporation, which series shall be designated as $150 Cumulative Convertible Preferred Stock, Series C (hereinafter called "Series C Preferred Stock"), shall consist of 20,500 shares and shall have the following relative rights, preferences and limitations: 1. Dividends. The holders of the shares of Series C Preferred Stock shall be entitled, when and as the Board of Directors shall declare any dividend out of earned surplus of the Corporation available therefor, to receive ratably, in proportion to the number of shares of Series C Preferred Stock held by them respectively, dividends cumulative at the rate of $150 per annum, from October 1, 1982, payable at the rate of $37.50 with respect to each calendar quarter (commencing with the calendar quarter ending December 31, 1982) on the January 23, April 23, July 23, and October 23 after such quarter (commencing on January 23, 1983) before any dividends are declared or paid to the holders of shares of Common Stock. Arrears of cumulative dividends shall not bear interest. Holders of shares of Series C Preferred Stock shall not as such be entitled to any other or further dividends, but the Board of Directors may, in its discretion, declare further dividends on shares of Series C Preferred Stock out of earned surplus available therefor. No dividends shall be declared or paid in any year upon shares of Common Stock until and unless full cumulative dividends shall have been paid on all outstanding shares of Series C Preferred Stock for all prior years, or until and unless full dividends for the current year to the holders of outstanding shares of Series C Preferred Stock shall have been declared and shall have been either paid or set aside for payment. 2. Liquidation Preferences. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series C Preferred Stock shall be entitled to receive out of the assets of the Corporation $1,000 per share, plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, before any amount whatsoever shall be paid or assets shall be distributed to the holders of the shares of Common Stock; and, after paying $1,000 per share to the holders of the shares of Series C Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, any assets remaining, subject to the preferences of any other series of Preferred Stock at the time outstanding, shall be divided among the holders of the shares of Common Stock, in proportion to the number of shares of Common Stock held by them respectively. If the assets of the Corporation available for distribution to the holders of the shares of Series C Preferred Stock shall be insufficient to permit the payment as aforesaid of $1,000 per share to the holders of the shares of Series C Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, upon any liquidation, dissolution or winding up, then all of the assets available for distribution to the holders of such shares shall be distributed ratably among the holders of the shares of Series C Preferred Stock, in proportion to the number of shares of Series C Preferred Stock held by them respectively. A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale or transfer of substantially all of its assets as an entirety, shall not be deemed a liquidation or dissolution or winding up of the Corporation within the meaning of this paragraph 2. 3. Redemption. (a) At the Option of the Corporation. At any time after September 30, 1992, but not before that date, all of the Series C Preferred Stock then outstanding, or from time to time thereafter any part thereof less than all, may at the option of the Board of Directors be redeemed on at least sixty days' prior written notice, given as herein provided, at a redemption price of $1,000 per share and in addition an amount equal to any dividends thereon in arrears and also the proportionate amount of the dividends accrued since the last preceding day for the payment of dividends to the date fixed for redemption, whether or not such dividends shall have been earned or declared. In case less than all of the shares of Series C Preferred Stock at any time outstanding shall be called for redemption, the shares so to be redeemed shall be determined in such manner as the Board of Directors may fix. In case the Board of Directors shall elect to redeem all or any of the shares of Series C Preferred Stock then outstanding, the Board of Directors shall cause a written notice to be mailed to each holder of Series C Preferred Stock called for redemption, addressed to each such shareholder at his last known post office address as the same shall appear on the stock transfer books of the Corporation, stating that the shares of Series C Preferred Stock specified in the notice will be redeemed by the Corporation at the redemption price aforesaid on a date to be specified in such notice, which shall be at least sixty days after the date of the mailing of such notice, and requiring the holders of the shares of Series C Preferred Stock called for redemption to present the certificates representing such shares held by them respectively for redemption at the office of a bank or trust company in the Borough of Manhattan, City and State of New York, to be designated in the notice. On and after the date specified in the notice, each holder of shares of Series C Preferred Stock called for redemption, upon presenting and surrendering at the place designated in the notice the certificates representing the shares of Series C Preferred Stock held by such holder and called for redemption, properly endorsed in blank for transfer or accompanied by proper instrument of assignment or transfer in blank, and bearing all necessary transfer tax stamps thereto affixed and cancelled, shall be entitled to receive therefor the redemption price hereinabove specified. The certificates representing the shares of Series C Preferred Stock so surrendered for redemption shall be forthwith cancelled. In case the Corporation shall give such notice of the redemption of shares of Series C Preferred Stock and on or before the date specified in the notice shall deposit the amount of the aforesaid redemption price of the shares of Series C Preferred Stock called for redemption with the bank or trust company designated in the notice, all shares of Series C Preferred Stock called for redemption shall be deemed to have been redeemed on the date specified in the notice whether or not the certificates representing them shall be surrendered for redemption and cancelled, and the shares of Series C Preferred Stock called for redemption shall from and after that date cease to represent any interest whatever in the Corporation or its property and shall not have voting rights, and the holders thereof shall have no rights other than the right to receive from and out of the deposit the aforesaid redemption price, but without any dividends or interest from or after the date specified in the notice for the redemption of the shares. (b) At the Option of the Holder. The holder of any shares of Series C Preferred Stock may, at the option of such shareholder, require the Corporation, upon at least 60 days' prior written notice to the Board of Directors, to redeem at any time after March 31, 1990, but not before such date, all of the shares of Series C Preferred Stock then held by such shareholder, or from time to time thereafter less than all, but not fewer than 1000 shares (or such lesser amount then held by such shareholder), of the shares of Series C Preferred Stock then held by such shareholder at a redemption price of $1,000 per share and in addition, but only if and to the extent of earned surplus of the Corporation available therefor, an amount equal to any dividends thereon in arrears and also the proportionate amount of the dividends accrued since the last preceding day for the payment of dividends to the redemption date specified in the aforesaid notice, whether or not such dividends shall have been declared. Each such notice requiring redemption pursuant to this subparagraph (b) shall specify the number of shares to be redeemed and the date of such redemption. On and after the date specified in such notice, each shareholder requiring redemption pursuant to this subparagraph (b), upon presenting and surrendering (at the principal office of the Corporation or at such other place as the Corporation shall by written notice designate to such shareholder) the certificates representing the shares of Series C Preferred Stock offered for redemption, properly endorsed in blank for transfer or accompanied by proper instrument of assignment or transfer in blank, and bearing all necessary transfer tax stamps thereto affixed and cancelled, shall be entitled to receive therefor the redemption price hereinabove specified. The certificates representing the shares of Series C Preferred Stock so surrendered for redemption shall be forthwith cancelled. In case any shareholder shall give such notice of redemption and the Corporation shall, on or before the date specified in the notice, deposit the aforesaid redemption price of the shares of Series C Preferred Stock to be redeemed with a bank or trust company and notify in writing such shareholder thereof, all such shares of Series C Preferred Stock shall be deemed to have been redeemed on the date specified in such notice whether or not the certificates representing them shall be surrendered for redemption and cancelled, and such shares of Series C Preferred Stock shall from and after that date cease to represent any interest whatever in the Corporation or its property and shall not have voting rights, and the holders thereof shall have no rights other than the right to receive from and out of the deposit the aforesaid redemption price, but without any dividends or interest from and after the date specified in the notice for the redemption of the shares. 4. Conversion Rights. The holders of the shares of Series C Preferred Stock shall have the following rights to convert such shares into shares of Common Stock: (a) The shares of Series C Preferred Stock shall be convertible at the option of the respective holders thereof, at any time, at the office of the Corporation, or, if the Corporation shall have a Transfer Agent for the Series C Preferred Stock, at the office of such Transfer Agent, into fully paid and nonassessable shares of Common Stock at the price (in each case taking the Series C Preferred Stock at $1,000 per share) of $46.00 per share of Common Stock; provided, however, that in case of a call by the Corporation for redemption of any shares of Series C Preferred Stock pursuant to subparagraph (a) of paragraph 3 or in case of a shareholder demand for redemption pursuant to subparagraph (b) or paragraph 3, such right of conversion shall cease and terminate as to the shares designated for redemption at the close of business on the date fixed for such redemption or on such earlier date not more than three days prior to such redemption date as may be determined by resolution of the Board of Directors unless default shall be made in the payment of the redemption price. The price (initially $46.00 per share) at which shares of Common Stock shall be issuable upon conversion of shares of Series C Preferred Stock is hereinafter referred to as the "conversion price" of shares of Series C Preferred Stock. The conversion price shall be subject to adjustments from time to time in certain instances as hereinafter provided. Upon conversion the Corporation shall make no payment or adjustments on account of dividends accrued on the shares of Series C Preferred Stock surrendered for conversion. (b) Before any holder of shares of Series C Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates representing them at the office of the Corporation or the Transfer Agent hereinabove mentioned, and shall give written notice to the Corporation at the aforesaid office that he elects to convert the same and shall state in such notice the name or names in which he wishes the certificate or certificates representing the shares of Common Stock to be registered. The Corporation will, as soon as practicable thereafter, issue and deliver at the aforesaid office to the person for whose account such surrender of shares of Series C Preferred Stock was made, or to his nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid together with the cash payment to be made in respect of any fraction of a share as herein provided. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series C Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on that date. Unless otherwise required by law the transfer books of the Corporation for the shares of Series C Preferred Stock shall not be closed at any time so long as any of the shares of Series C Preferred Stock are outstanding but this shall not prevent the fixing of a record date. (c) If at any time the Corporation shall change, by subdivision or combination or by the paying of a share dividend, the number of shares of Common Stock then outstanding into a different number of shares (hereinafter referred to as "New Shares"), any holder of shares of Series C Preferred Stock upon conversion thereof shall be entitled to receive, in lieu of the number of shares of Common Stock to which he would have been entitled upon conversion at that date had there been no such change, the New Shares into which such number of shares of Common Stock would have been changed if the conversion of such shares of Series C Preferred Stock had been effected prior to such change into New Shares. In the event of such change, the Corporation agrees, subject to any necessary approval of shareholders, to take such action as may be required in order that the aggregate par value or stated value of the New Shares issuable on the conversion of each share of Series C Preferred Stock shall not be more than $4.00, plus any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to such New Shares, plus any surplus thereupon transferred to stated capital and allocated to such New Shares. (d) In case the Corporation shall issue any shares of Common Stock (other than shares issued upon conversion of shares of Series A Preferred Stock, or upon conversion of shares of Series B Preferred Stock, or upon conversion of shares of Series C Preferred Stock, or upon a change by subdivision or combination or by the paying of a share dividend of the number of shares of Common Stock then outstanding into a different number of shares, or upon the exercise of any options intended to qualify as restricted or qualified stock options as provided in subsubparagraph (D) of subparagraph (f) below or pursuant to any incentive compensation plan or other employee benefit plan of the Corporation or any subsidiary) for a consideration per share less than the conversion price in effect immediately prior to the issuance of such additional shares, then and thereafter successively, upon each such issuance, the conversion price in effect immediately prior to the issuance of such additional shares shall forthwith be decreased to an amount determined by dividing (A) an amount equal to (i) the total number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the conversion price in effect immediately prior to the issuance of such additional shares plus (ii) the number of shares so issued multiplied by the consideration per share received upon such issuance by (B) the total number of shares of Common Stock outstanding immediately after the issuance of such additional shares. In every such case, the Board of Directors of the Corporation shall appoint a firm of certified public accountants (which may be the firm that regularly audits the financial statements of the Corporation) which shall give its opinion as to the adjustmment, if any, of the conversion price required under the provisions hereof and the conversion price shall thereupon be adjusted in accordance with such opinion. Such adjusted conversion price shall be furnished to the Transfer Agent, if any, and, upon request, to any holders of shares of Series C Preferred Stock. In giving such opinion, such firm shall rely upon any findings of the Board of Directors of the Corporation as to values and upon the opinion of counsel (who may be counsel for the Corporation) as to any matters of law or legal conclusions. (e) The Corporation shall not be required to make any decrease in the conversion price pursuant to subparagraph (d) above if the amount of such decrease would be less than $.50, but in such case any decrease that would otherwise have been then required shall be carried forward and shall be made at the time of the next subsequent adjustment which, together with any decrease so carried forward, shall amount to not less than $.50. In the event of any decrease in the conversion price pursuant to the provisions of subparagraph (d) above, the Corporation agrees, subject to any necessary approval of shareholders, to take such action as may be required in order that the aggregate par value or stated value of the shares of Common Stock issuable on the conversion of each share of Series C Preferred Stock shall not be more than $4.00, plus any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to such New Shares, plus any surplus thereupon transferred to stated capital and allocated to such new shares. (f) For the purposes of subparagraph (d) above, the following provisions shall also be applicable: (A) In the case of the issuance of additonal shares of Common Stock for cash, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation for such shares before deducting therefrom any commissions or other expenses paid or incurred by the Corporation in any underwriting of or otherwise in connection with the issuance of such shares. (B) In case of the issuance (except as provided in subsubparagraph (C) below) of additional shares of Common Stock for a consideration other than cash or a consideration a part of which shall be other than cash, the amount of the consideration other than cash received by the Corporation for such shares shall be deemed to be the value of such consideration as determined by the Board of Directors. (C) In case of the issuance of additional shares of Common Stock upon the conversion or exchange of any obligations or of any shares of the Corporation other than shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, the amount of the consideration received by the Corporation for such shares of Common Stock shall be deemed to be the amount of the consideration received by the Corporation upon the original issuance of such obligations or shares so converted or exchanged plus the consideration, if any, other than such obligations or shares, received by the Corporation upon such conversion or exchange, except in adjustment of interest or dividends. The amount of the consideration received by the Corporation upon the original issuance of such obligations or shares so converted or exchanged, and the amount of the consideration, if any, other than such obligations or shares, received by the Corporation upon such conversion shall be determined in the manner provided in subsubparagraphs (A) and (B) above. (D) In case of the issuance or sale of additional shares of Common Stock upon the exercise of options heretofore or hereafter granted or assumed by the Corporation or a subsidiary, provided such options were intended to qualify as restricted or qualified stock options for the purposes of the Internal Revenue Code or any substantially similar provision of the Internal Revenue Code in effect at the time such options were granted, or the issuance or sale of additional shares of Common Stock pursuant to any incentive compensation plan or other employee benefit plan of the Corporation or a subsidiary, the amount of the consideration received by the Corporation for each such share of Common Stock, if less than the conversion price in effect immediately prior to the issuance or sale thereof, shall nevertheless be deemed to be conversion price. (E) The number of shares of any class at any time outstanding shall include all shares of that class then owned or held by or for the account of the Corporation. (g) In case (A) the Corporation shall declare any dividend payable in shares upon the shares of Common Stock or make any distribution (other than cash dividends) to the holders of the shares of Common Stock, or (B) the Corporation shall offer for subscription to the holders of the shares of Common Stock any additional shares of any class or grant to such holders any other rights or options, or (C) there shall be any capital reorganization or reclassification of the capital shares of the Corporation or of any consolidation or merger of the Corporation with another corporation or the sale or transfer of all or substantially all of the property of the Corporation, or (D) there shall be a liquidation, dissolution or winding up of the Corporation, then the Corporation shall cause at least fifteen days' prior notice, in the cases mentioned in subsubparagraphs (A) and (B) of this subparagraph (g), and at least thirty days' prior notice, in the cases mentioned in subsubparagraphs (C) and (D) of the subparagraph (g), to be mailed to the Transfer Agent, if any, for the shares of Series C Preferred Stock and to the holders of record of the outstanding shares of Series C Preferred Stock at the date on which a record is to be taken for such share dividend, distribution or subscription or other rights or options or on which such capital reorganization, reclassification, consolidation, merger, sale, transfer, liquidation or winding up shall become effective as the case may be. (h) Shares of Common Stock issued by the Corporation from time to time upon the conversion of any shares of Series C Preferred Stock shall be deemed fully paid and not liable to any further call or assessment thereon. (i) All shares of Series C Preferred Stock so converted shall be cancelled and shall not be reissued. (j) The Corporation shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series C Preferred Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series C Preferred Stock from time to time outstanding. The Corporation shall from time to time in accordance with the laws of the State of New York, subject to any necessary approval of shareholders, increase the authorized amount of its shares of Common Stock if at any time the number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all the shares of Series C Preferred Stock at the time outstanding. (k) No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any of the shares of Series C Preferred Stock. If any such conversion results in a fraction, an amount equal to such fraction multiplied by the last sales price of the shares of Common Stock on the stock exchange in the City of New York on which the shares of Common Stock shall from time to time be listed (or the quoted closing bid price, if there be no sales on such exchange) on the day of conversion (or if such day is not a trading day on such exchange, on the next preceding day on which such exchange was open for business) or, if the shares of Common Stock are not so listed, an amount equal to such fraction multiplied by the closing bid price on the New York over-the-counter market on the date of conversion, as reported by the National Quotation Bureau, shall be paid to such holder in cash by the Corporation. (l) The Corporation will pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of common stock on conversion of shares of Series C Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that in which the shares of Series C Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation that such tax has been paid. 5. Voting Rights. The holders of the shares of Series C Preferred Stock shall have full voting power for all purposes. Whenever a vote of shareholders is taken for any purpose, the holders of the shares of Series C Preferred Stock then issued and outstanding shall be entitled to one vote in person or by proxy for each share of Series C Preferred Stock held by them respectively. Except as otherwise provided in Section 804 of the New York Business Corporation Law, the holders of the shares of Series A Preferred Stock, the holders of the shares of Series B Preferred Stock, the holders of the shares of Series C Preferred Stock and the holders of the shares of Common Stock shall vote together and not by classes; provided, however, that so long as any shares of Series C Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of at least two-thirds of its outstanding shares of Series C Preferred Stock, amend the certificate of incorporation of the Corporation in such manner as to alter or change the preferences, special rights or powers of the shares of Series C Preferred Stock so as to affect such class adversely, or to increase of decrease the number of authorized shares of Series C Preferred Stock or to increase or decrease the par value thereof. In the event at any time the Corporation shall fail to pay six (6) quarterly dividends on all outstanding shares of Series C Preferred Stock, then at the next annual meeting of shareholders for the election of directors, and until payment in full of all such dividends then in default or provision therefor has been made by the declaring and setting aside thereof, the holders of the outstanding shares of Series C Preferred Stock, voting separately as a class to the exclusion of the holders of shares of any other class or series of capital stock of the Corporation, shall be entitled to vote for and elect two members of the Board of Directors of the Corporation. Directors elected by the holders of shares of Series C Preferred Stock voting separately as a class may be removed only by the concurring vote of the holders of a majority of the outstanding shares of Series C Preferred Stock, voting separately as a class, so long as the right of the holders of shares of Series C Preferred Stock voting as a class to elect two members of the Board of Directors of the Corporation shall continue. IN WITNESS WHEREOF, the undersigned have executed this certificate this 28th day of July, 1982. /s/ William F. Gleason, Jr. _______________________________ William F. Gleason, Jr. Vice President, Secretary and General Counsel /s/ Roselyn C. Dlutman ________________________________ Roselyn C. Dlutman Assistant Secretary STATE OF NEW YORK ) ss: COUNTY OF NEW YORK ) William F. Gleason, Jr., being duly sworn, deposes and says, that he is one of the persons described in and who executed the foregoing certificate, that he has read the same and knows the contents thereof, and that the statements contained therein are true. /s/ William F. Gleason, Jr. _______________________________ William F. Gleason, Jr. Sworn to before me this 28th day of July, 1982. /s/ Maxine Solomon Notary Public Filed in State of New York April 20, 1978 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION Under Section 805 of the Business Corporation Law We the undersigned, William F. Gleason, Jr. and Alan R. Bialeck, being respectively a Vice President and an Assistant Secretary of The Continental Corporation, hereby certify: 1. The name of the Corporation is The Continental Corporation 2. The Certificate of Incorporation of the Corporation was filed by the Department of State on May 15, 1968. 3. The Certificate of Incorporation is hereby amended to increase the number of shares of Common Stock which the Corporation shall have the authority to issue, to reduce the par value of the Common Stock which the Corporation shall have the authority to issue and to effect a 2-for-1 split of the Common Stock. 4. To effect the amendment of the Certificate of Incorporation: (a) Article 4 of the Certificate of Incorporation relating to the aggregate number and par value of shares which the Corporation shall have the authority to issue is hereby amended to read as follows: "The aggregate number of shares which the Corporation shall have the authority to issue shall be one hundred ten million (110,000,000) of which ten million (10,000,000) shall be shares of Preferred Stock of the par value of $4.00 each, and one hundred million (100,000,000) shall be shares of Common Stock of the par value of the $1.00 each." (b) Simultaneously with the foregoing amendment, each of the 27,094,844 issued shares (including treasury shares) of Common Stock, par value $2.00 per share, shall be changed into two shares of Common Stock, par value $1.00 per share. 5. The amendment of the Certificate of Incorporation set forth in paragraph 4 above was authorized by vote of the holders of a majority of all outstanding shares of Common Stock, $2.50 Cumulative Convertible Preferred Stock, Series A, and $2.50 Cumulative Convertible Preferred Stock, Series B, entitled to vote thereon, voting as a single class at a meeting of shareholders held on April 20, 1978. IN WITNESS WHEREOF, we have signed this Certificate on April 20, 1978 and affirm the statements contained herein as true under penalties of perjury. /s/ William F. Gleason, Jr. ___________________________ William F. Gleason, Jr. /s/ Alan R. Bialeck ___________________________ Alan R. Bialeck Filed in State of New York March 6, 1969 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION Under Section 805 of the Business Corporation Law of the State of New York The undersigned, J. VICTOR HERD, President and GEOFFREY DAVEY, Secretary of The Continental Corporation, hereby certify: 1. The name of the Corporation is The Continental Corporation 2. The date the certificate of incorporation was filed by the Department of State was May 15, 1968. 3. The certificate of incorporation hereby is amended, pursuant to Section 801(b)(12) of the Business Corporation Law by amending the first sentence of subdivision (iii) of Section (e) of Article 5 thereof (stating the number, designation, relative rights, preferences, and limitations of preferred shares of a series of the par value of $4.00 each, as fixed by the Board of Directors before the issuance of shares of such series, under authority contained in the certificate of incorporation, none of the shares of such series having been issued at the date hereof), so that it shall read as follows: "At any time after January 15, 1975, but not before that date, all of the Series B Preferred Stock then outstanding, or from time to time any part thereof less than all, may at the option of the Board of Directors be redeemed on at least sixty days' written notice, given as herein provided, at a price of $50 per share, and in addition an amount equal to any dividends thereon in arrears and also the proportionate amount of the dividends accrued since the last preceding day for the payment of dividends to the date fixed for redemption whether or not earned or declared." 4. The foregoing amendment was authorized by the Executive Committee of the Board of Directors, pursuant to authority delegated by the Board of Directors as provided in the by-laws and pursuant to Section 712 of the Business Corporation Law, at a meeting of the Committee duly held on March 6, 1969. IN WITNESS WHEREOF we have subscribed this certificate the 6th day of March, 1969. /s/ Victor Herd ____________________________ J. Victor Herd President /s/ Geoffrey Davey ____________________________ Geoffrey Davey Secretary STATE OF NEW YORK ) : SS: COUNTY OF NEW YORK ) GEOFFREY DAVEY, being duly sworn, deposes and says that he is the Secretary of The Continental Corporation, that he has read the foregoing certificate and knows the contents thereof, and that the statements contained therein are true. /s/ Geoffrey Davey ___________________________ Geoffrey Davey Sworn to before me this 6th day of March, 1969. /s/ Muriel L. Rowan Notary Public Filed in State of New York December 18, 1968 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION Under Section 805 of the Business Corporation Law of the State of New York The undersigned, J. VICTOR HERD, President and GEOFFREY DAVEY, Secretary of The Continental Corporation, hereby certify: 1. The name of the Corporation is: The Continental Corporation 2. The date the certificate of incorporation was filed by the Department of State was May 15, 1968. 3. The certificate of incorporation hereby is amended by adding to Article 5 thereof a provision, to be designated Section (e), stating the number, designation, relative rights, preferences, and limitations of preferred shares of a series of the par value of $4.00 each, as fixed by the Board of Directors before the issuance of such series, under authority contained in the certificate of incorporation, which shall read as follows: (e) One million ninety four thousand ninety-six (1,094,096) of the shares of Preferred Stock, none of which has been issued, shall be issued in and as a series to be designated $2.50 Cumulative Convertible Preferred Stock, Series B (hereinafter called Series B Preferred Stock), and shall have the following relative rights, preferences and limitations: (i) The holders of the shares of Series B Preferred Stock of the Corporation shall be entitled, when and as the Board of Directors shall declare any dividend out of accumulated earnings of the Corporation available therefor, to receive ratably, in proportion to the number of shares of Series B Preferred Stock held by them respectively, preferred dividends at the rate of $2.50 per annum, payable quarterly on March 15, June 15, September 15, and December 15 of each year. In the case of the first issuance of shares of Series B Preferred Stock, such dividends shall be cumulative from the date of issuance, and the initial quarterly dividend on such shares shall be based on the pro rata portion of the annual dividend and shall be payable the quarterly dividend payment date next following the date of issuance. In the case of any later issuances of other shares of Series B Preferred Stock, such dividends with respect to each such other share shall be cumulative from the quarterly dividend payment date next preceding the date of issuance of such share to which dividends have been paid on Series B Preferred Stock (or from the date of the first issuance of shares of Series B Preferred Stock of such other share is issued on or prior to the record date for the first dividend declared on Series B Preferred Stock), unless the date of issuance of such share is a dividend payment date to which dividends have been paid on Series B Preferred Stock or a date between the record date for the determination of holders of Series B Preferred Stock entitled to receive a dividend which has been declared and the date for payment thereof, in either of which events such dividends shall be cumulative from such dividend payment date, so that all holders of record of Series B Preferred Stock outstanding on any record date for the determination of holders of Series B Preferred Stock entitled to receive any dividend thereon shall have the same dividend rights per share. Arrears of cumulative dividends shall not bear interest. Holders of shares of Series B Preferred Stock shall not as such be entitled to any other or further dividends. No dividend shall be declared or paid in any year upon shares of Common Stock until and unless full cumulative dividends shall have been paid on all outstanding shares of Series B Preferred Stock for all prior quarter years, or until and unless full dividends for the current quarter year to the holders of outstanding shares of Series B Preferred Stock shall have been declared and shall have been either paid or set aside for payment. If shares of both Series A Preferred Stock and Series B Preferred Stock are outstanding, and the stated dividends are not paid in full, the shares of both series shall share ratably, share for share, in the payment of dividends, including accumulations if any. (ii) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series B Preferred Stock shall be entitled to receive out of the assets of the Corporation $50 per share, plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, before any amount whatsoever shall be paid or assets shall be distributed to the holders of the shares of Common Stock; and, after paying $50 per share to the holders of the shares of Series B Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned but without interest, any assets remaining, subject to the preferences of shares of any other series of Preferred Stock at the time outstanding shall be divided among the holders of the shares of Common Stock, in proportion to the number of shares of Common Stock held by them respectively. If the assets of the Corporation available for distribution to the holders of shares of Series B Preferred Stock shall be insufficient to permit the payment as aforesaid of $50 per share to the holders of the shares of Series B Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, upon any liquidation, dissolution or winding up, then all of the assets available for distribution to the holders of such shares shall be distributed ratably among the holders of the shares of Series B Preferred Stock, in proportion to the number of shares of Series B Preferred Stock held by them respectively. A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale or transfer of substantially all of its assets as an entirety, shall not be deemed a liquidation or dissolution or winding up of the Corporation within the meaning of this paragraph (ii). If shares of both Series A Preferred Stock and Series B Preferred Stock are outstanding and the amounts payable on liquidation are not paid in full, the shares of both series shall share ratably, share for share, in any distribution of assets other than by way of dividends. (iii) At any time after January 15, 1974, but not before that date, all of the Series B Preferred Stock then outstanding, or from time to time any part thereof less than all, may at the option of the Board of Directors be redeemed on at least sixty days' written notice, given as herein provided, at a price of $50 per share, and in addition an amount equal to any dividends thereon in arrears and also the proportionate amount of the dividends accrued since the last preceding day for the payment of dividends to the date fixed for redemption whether or not earned or declared. In case less than all of the shares of Series B Preferred Stock at any time outstanding shall be called for redemption, the shares so to be redeemed shall be determined in such manner as the Board of Directors may fix. In case the Board of Directors shall elect to redeem all or any of the shares then outstanding of Series B Preferred Stock, the Board of Directors shall cause a written notice to be mailed to each holder of Series B Preferred Stock called for redemption, addressed to each such shareholder at his last known post office address as the same shall appear on the stock transfer books of the Corporation, stating that the shares of Series B Preferred Stock specified in the notice will be redeemed by the Corporation at the redemption price aforesaid on a date to be specified in such notice, which shall be at least sixty days after the date of the mailing of such notice, and requiring the holders of the shares of Series B Preferred Stock called for redemption to present the certificates representing such shares held by them respectively for redemption at the office of a bank or trust company in the Borough of Manhattan, City and State of New York, to be designated in the notice. The Board of Directors shall cause a copy of the notice to be published in a newspaper of general circulation in the City of New York, State of New York, once a week for six successive weeks, the first publication to be at least sixty days prior to the date specified in the notice for the redemption of the shares. On and after the date specified in the notice, each holder of shares of Series B Preferred Stock called for redemption, upon presenting and surrendering at the place designated in the notice the certificates representing the shares of Series B Preferred Stock held by him and called for redemption, properly endorsed in blank for transfer or accompanied by proper instrument of assignment or transfer in blank, and bearing all necessary transfer tax stamps thereto affixed and cancelled, shall be entitled to receive therefor the redemption price hereinabove specified. The certificates representing the shares of Series B Preferred Stock so surrendered for redemption shall be forthwith cancelled. In case the Board of Directors shall give such notice of the redemption of shares of Series B Preferred Stock and on or before the date specified in the notice shall deposit the amount of the aforesaid redemption price of the shares of Series B Preferred Stock called for redemption with the bank or trust company designated in the notice, all shares of Series B Preferred Stock called for redemption shall be deemed to have been redeemed on the date specified in the notice whether or not the certificates representing them shall be surrendered for redemption and cancelled, and the shares of Series B Preferred Stock called for redemption shall from and after that date cease to represent any interest whatever in the Corporation or its property and shall not have voting rights, and the holders thereof shall have no rights other than the right to receive from and out of the deposit the aforesaid redemption price, but without any dividends or interest from or after the date specified in the notice for the redemption of the shares. (iv) The holders of the shares of Series B Preferred Stock shall have the following rights to convert such shares into shares of Common Stock: (1) the shares of Series B Preferred Stock shall be convertible at the option of the respective holders thereof, at any time, at the office of the Corporation, or, if the corporation shall have a Transfer Agent for the Series B Preferred Stock, at the office of such Transfer Agent, into fully paid and nonassessable shares of Common Stock at the price (in each case taking the Series B Preferred Stock at $50 per share) of $50 per share of Common Stock; provided, however, that in case of the call for redemption of any shares of Series B Preferred Stock such right of conversion shall cease and terminate, as to the shares designated for redemption, at the close of business on the date fixed for such redemption or on such earlier date not more than three days prior to such redemption date as may be determined by resolution of the Board of Directors unless default shall be made in the payment of the redemption price. The price (initially $50 per share) at which shares of Common Stock shall be issuable upon conversion of shares of Series B Preferred Stock is hereinafter referred to as the "conversion price" of shares of Series B Preferred Stock. The conversion price shall be subject to adjustments from time to time in certain instances as hereinafter provided. Upon conversion the Corporation shall make no payment or adjustments on account of dividends accrued on the shares of Series B Preferred Stock surrendered for conversion. (2) Before any holder of shares of Series B Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates representing them at the office of the Corporation or Transfer Agent hereinabove mentioned, and shall give written notice to the Corporation at the aforesaid office that he elects to convert the same and shall state in such notice the name or names in which he wishes the certificate or certificates for Common Shares to be registered. The Corporation will, as soon as practicable thereafter, issue and deliver at the aforesaid office to the person for whose account such surrender of shares of Series B Preferred Stock was made or to his nominee or nominees certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid together with the cash payment to be made in respect of any fraction of a share as herein provided. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on that date. Unless otherwise required by law the transfer books of the Corporation for the shares of Series B Preferred Stock shall not be closed at any time so long as any of the Shares of Series B Preferred Stock are outstanding but this shall not prevent the fixing of a record date. (3) If at any time the Corporation shall change by subdivision or combination or by the paying of a share dividend the number of shares of Common Stock then outstanding into a different number of shares (hereinafter referred to as "New Shares"), any holder of shares of Series B Preferred Stock upon conversion thereof shall be entitled to receive, in lieu of the number of shares of Common Stock to which he would have been entitled upon conversion at that date had there been no such change, the New Shares into which such number of shares of Common Stock would have been changed if the conversion of such shares of Series B Preferred Stock had been effected prior to such change into New Shares. In the event of such change, the Corporation agrees, subject to any necessary approval of shareholders, to take such action as may be required in order that the aggregate par value or stated value of the New Shares issuable on the conversion of each share of Series B Preferred Stock shall not be more than $4.00, plus any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to such New Shares, plus any surplus thereupon transferred to stated capital and allocated to such New Shares. (4) In case the Corporation shall issue any shares of Common Stock (other than shares issued upon conversion of shares of Series A Preferred Stock, or upon conversion of shares of Series B Preferred Stock, or upon a change by subdivision or combination or by the paying of a share dividend of the number of shares of Common Stock then outstanding into a different number of shares, or upon the exercise of any options intended to qualify as restricted or qualified stock options as provided in subparagraph (D) of paragraph (6) below or pursuant to any incentive compensation plan or other employee benefit plan of the Corporation or any subsidiary) for a consideration per share less than the conversion price in effect immediately prior to the issuance of such additional shares, then and thereafter successively, upon each such issuance, the conversion price in effect immediately prior to the issuance of such additional shares shall forthwith be decreased to an amount determined by dividing (A) an amount equal to (i) the total number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the conversion price in effect immediately prior to the issuance of such additional shares plus (ii) the number of shares so issued multiplied by the consideration per share received upon such issuance by (B) the total number of shares of Common Stock outstanding immediately after the issuance of such additional shares. In every such case, the Board of Directors of the Corporation shall appoint a firm of certified public accountants (which may be the firm that regularly audits the financial statements of the corporation) which shall give its opinion as to the adjustment, if any, of the conversion price required under the provisions hereof and the conversion price shall thereupon be adjusted in accordance with such opinion. Such adjusted conversion price shall be furnished to the Transfer Agent, if any, and, upon request, to any holders of shares of Series B Preferred Stock. In giving such opinion, such firm shall rely upon any findings of the Board of Directors of the Corporation as to values and upon the opinion of counsel, (who may be counsel for the Corporation) as to any matters of law or legal conclusions. (5) The Corporation shall not be required to make any decrease in the conversion price pursuant to paragraph (4) above if the amount of such decrease would be less than 50 cents, but in such case any decrease that would otherwise have been then required shall be carried forward and shall be made at the time of the next subsequent adjustment which, together with any decrease so carried forward, shall amount to not less than 50 cents. In the event of any decrease in the conversion price pursuant to the provisions of paragraph (4) above, the Corporation agrees, subject to any necessary approval of shareholders, to take such action as may be required in order that the aggregate par value or stated value of the shares of Common Stock issuable on the conversion of each share of Series B Preferred Stock shall not be more than $4.00, plus any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to such New Shares, plus any surplus thereupon transferred to stated capital and allocated to such New Shares. (6) For the purposes of paragraph (4) above, the following provisions shall also be applicable: (A) In the case of the issuance of additional shares of Common Stock for cash, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation for such shares before deducting therefrom any commissions or other expenses paid or incurred by the Corporation in any underwriting of or otherwise in connection with the issuance of such shares. (B) In case of the issuance (except as provided in subparagraph (c) below) of additional shares of Common Stock for a consideration other than cash or a consideration, a part of which shall be other than cash, the amount of the consideration other than cash received by the Corporation for such shares shall be deemed to be the value of such consideration as determined by the Board of Directors. (C) In case of the issuance of additional shares of Common Stock upon the conversion or exchange of any obligations or of any shares of the Corporation other than shares of Series B Preferred Stock, the amount of the consideration received by the Corporation for such shares of Common Stock shall be deemed to be the amount of the consideration received by the Corporation upon the original issuance of such obligations or shares so converted or exchanged plus the consideration, if any, other than such obligations or shares, received by the Corporation upon such conversion or exchange, except in adjustment of interest or dividends. The amount of the consideration received by the Corporation upon the original issuance of such obligations or shares so converted or exchanged, and the amount of the consideration, if any, other than such obligations or shares, received by the Corporation upon such conversion shall be determined in the manner provided in subparagraphs (A) and (B) above. (D) In case of the issuance or sale of additional shares of Common Stock upon the exercise of options heretofore or hereafter granted or assumed by the Corporation or a subsidiary, provided such options were intended to qualify as restricted or qualified stock options for the purposes of the Internal Revenue Code or any substantially similar provision of the Internal Revenue Code in effect at the time such options were granted, or the issuance or sale of additional shares of Common Stock pursuant to any incentive compensation plan or other employee benefit plan of the Corporation or a subsidiary, the amount of the consideration received by the Corporation for each such share of Common Stock, if less than the conversion price in effect immediately prior to the issuance or sale thereof, shall nevertheless be deemed to be such conversion price. (E) The number of shares of any class at any time outstanding shall include all shares of that class then owned or held by or for the account of the Corporation. (7) In case (A) the Corporation shall declare any dividend payable in shares upon the shares of Common Stock or make any distribution (other than cash dividends) to the holders of the shares of Common Stock, or (B) the Corporation shall offer for subscription to the holders of the shares of Common Stock any additional shares of any class or grant to such holders any other rights or options, or (C) of any capital reorganization or reclassification of the Capital shares of the Corporation or of any consolidation or merger of the Corporation with another corporation or the sale or transfer of all or substantially all of the property of the Corporation, or (D) of the liquidation, dissolution or winding up of the Corporation, then the Corporation shall cause at least fifteen days' prior notice in the cases mentioned in subparagraphs (A) and (B) above and at least thirty days' prior notice in the cases mentioned in subparagraphs (C) and (D) above to be mailed to the Transfer Agent, if any, for the shares of Series B Preferred Stock and to holders of record of the outstanding shares of Series B Preferred Stock at the date on which a record is to be taken for such share dividend, distribution or subscription or other rights or options or on which such capital reorganization, reclassification, consolidation, merger, sale, transfer, liquidation or winding up shall become effective, as the case may be. (8) Shares of Common Stock issued by the Corporation from time to time upon the conversion of any shares of Series B Preferred Stock shall be deemed fully paid and not liable to any further call or assessment thereon. (9) All shares of Series B Preferred Stock so converted shall be cancelled and shall not be reissued. (10) The Corporation shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Preferred Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series B Preferred Stock from time to time outstanding. The Corporation shall from time to time in accordance with the laws of the State of New york, subject to any necessary approval of shareholders, increase the authorized amount of its shares of Common Stock if at any time the number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all the shares of Series B Preferred Stock at the time outstanding. (11) No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any of the shares of Series B Preferred Stock. If any such conversion results in a fraction, an amount equal to such fraction multiplied by the last sales price of the shares of Common Stock on the stock exchange in the City of New York on which the shares of Common Stock shall from time to time be listed (or the quoted closing bid price, if there be no sales on such exchange) on the day of conversion (or if such day is not a trading day on such exchange, on the next preceding day on which such exchange was open for business) or, if the shares of Common Stock are not so listed, an amount equal to such fraction multiplied by the closing bid price on the New York over-the-counter market on the date of conversion, as reported by the National Quotation Bureau, shall be paid to such holder in cash by the Corporation. (12) The Corporation will pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of common stock on conversion of shares of Series B Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that in which the shares of Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation that such tax has been paid. (v) Except as hereinafter set forth, the holders of the shares of Series A Preferred Stock, the holders of the shares of Series B Preferred Stock and the holders of the shares of Common Stock shall have full voting power for all purposes; whenever a vote of shareholders is taken for any purpose, the holders of the shares of Common Stock then issued and outstanding shall be entitled to one vote in person or by proxy for each share of Common Stock held by them respectively; the holders of Series A Preferred Stock then issued and outstanding shall be entitled to one vote in person or by proxy for each share of Series A Preferred Stock held by them respectively; and the holders of the shares of Series B Preferred Stock than issued and outstanding shall be entitled to one vote in person or by proxy for each share of Series B Preferred Stock held by them respectively; and, except as otherwise provided in Section 804 of the New York Business Corporation Law, the holders of the shares of Series A Preferred Stock, the holders of the shares of Series B Preferred Stock and the holders of the shares of Common Stock shall vote together and not by classes; provided, however, that so long as any shares of Series A Preferred Stock are outstanding, the holders thereof shall have the voting rights set forth in paragraph (v) of section (b) of this Article 5; and provided, further, that so long as any shares of Series B Preferred stock are outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of at least two-thirds of its outstanding shares of Series B Preferred Stock, amend the certificate of incorporation of the Corporation in such manner as to alter or change the preferences, special rights or powers of the shares of Series B Preferred Stock so as to affect such class adversely, or to increase or decrease the par value of the shares of Series B Preferred Stock. The foregoing shall not be deemed to preclude action by the Board of Directors of the Corporation pursuant to Section 502 of the New York Business Corporation Law and to paragraph (ii) of section (c) of this Article 5, to increase or decrease the number of authorized shares of Series B Preferred Stock. In the event at any time the Corporation shall fail to pay six (6) quarterly dividends on all outstanding shares of Series B Preferred Stock, then at the next annual meeting of shareholders for the election of directors, and until payment in full of all such dividends, then in default, or provision therefor has been made by the declaring and setting aside thereof, the holders of the outstanding shares of Series B Preferred Stock voting separately as a class to the exclusion of the holders of shares of any other class or series of capital stock of the Corporation shall be entitled to vote for and elect two members of the Board of Directors of the Corporation and, subject to the rights of the holders of outstanding shares of Preferred Stock of any other series at the time authorized, the holders of shares of Common Stock voting separately as a class to the exclusion of the holders of shares of Series B Preferred Stock shall be entitled to vote for and elect the remaining members of the Board of Directors of the Corporation. Directors elected by the holders of shares of Series B Preferred Stock voting separately as a class may be removed only by the concurring vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a class, so long as the right of the holders of shares of Series B Preferred Stock voting as a class to elect two members of the Board of Directors of the Corporation shall continue. 4. The foregoing amendment was authorized by the Board of Directors at a meeting of the Board duly held on October 17, 1968. IN WITNESS WHEREOF we have subscribed this certificate this 16th day of December, 1968 /s/ J. Victor Herd __________________________ J. Victor Herd President /s/ Geoffrey Davey __________________________ Geoffrey Davey Secretary STATE OF NEW YORK ) : SS.: COUNTY OF NEW YORK ) GEOFFREY DAVEY, being duly sworn, desposes and says that he is the Secretary of The Continental Corporation, that he has read the foregoing certificate and knows the contents thereof, and that the statements contained therein are true. /s/ Geoffrey Davey ___________________________ Geoffrey Davey Sworn to before me this 16th day of December, 1968 /s/ Muriel L. Rowan Notary Public Filed in State of New York May 15, 1968 CERTIFICATE OF INCORPORATION OF THE CONTINENTAL CORPORATION Under Section 402 of the Business Corporation Law of the State of New York The undersigned, for the purpose of forming a corporation pursuant to Section 402 of the Business Corporation Law of the State of New York, certifies: 1. The name of the Corporation shall be The Continental Corporation 2. The purposes for which it is to be formed are: (a) To engage in any commercial, mercantile, industrial, manufacturing, marine, exploration, mining, agricultural, research, licensing, servicing, agency, securities or brokerage business not prohibited by law, and any, some or all of the foregoing; (b) To purchase or otherwise acquire, and to hold, sell, assign, transfer, exchange, mortgage, pledge, hypothecate, or otherwise dispose of, as principal, agent or broker, and on commission or otherwise, securities (which term includes, without limitation of the generality thereof, any shares of stock, whether common or preferred, or other evidences of ownership, bonds, debentures, notes, or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated, and any certificates, receipts, or other instruments representing rights to receive, purchase, or subscribe for the same, or representing any other rights or interest therein, or in any property or assets) created or issued by any persons, firms, associations, corporations, or governments or subdivisions thereof; to make payment therefor in any lawful manner; and to exercise, as owner or holder of any securities, any and all rights powers, and privileges in respect thereof: (c) To acquire, by purchase, lease, or otherwise, lands and interests in lands, and to own, hold, improve, develop, and manage any real estate so acquired, and to erect, or cause to be erected, on any lands owned, held or occupied by the Corporation, buildings or other structures, with their appurtenances, and to manage, operate, lease, rebuild, enlarge, alter or improve any buildings or other structures; now or hereafter erected on any lands so owned, held, or occupied, and to encumber or dispose of any lands or interests in lands, and any buildings or other structures, and any stores, shops, suites, rooms, or part of any buildings or other structures, at any time owned or held by the Corporation; (d) To acquire, by purchase, lease, manufacture or otherwise, any personal property deemed necessary or useful in the equipment, furnishing, improvement, development, or management of any property, real or personal, at any time owned, held, or occupied by the Corporation and to invest, trade, and deal in any personal property deemed beneficial to the Corporation, and to encumber or dispose of any personal property at any time owned or held by the Corporation; (e) To purchase or otherwise acquire, undertake, carry on, improve or develop, all or any of the business, good will, rights, assets, and liabilities of any person, firm, association, or corporation carrying on any kind of business of a similar nature to that which this Corporation is authorized to carry on, pursuant to the provisions of this certificate; and to hold, utilize and in any manner dispose of the rights and property so acquired; (f) To borrow money and contract debts; to make, issue, and dispose of bonds, debentures, notes, and other obligations, secured or unsecured; and to make any lawful contract of guaranty, suretyship, or of any kind whatsoever in connection with, or in aid of, any corporation or other organization any of whose securities this Corporation owns or in which this Corporation has an interest; to secure contracts, obligations, and liabilities of any thereof, in whole or in part, by mortgage, deed of trust, pledge, or other lien, upon any or all of the property of this Corporation wheresoever situated, acquired or to be acquired; (g) To cause or allow the legal title, or any estate, right, or interest in any property owned, acquired, controlled, or operated by this Corporation, to remain or to be vested in the name of any person, firm, organization, association, or corporation, as agent, trustee, or nominee of this Corporation, upon such terms or conditions which the Board of Directors may consider for the benefit of this Corporation; (h) To such extent as a corporation organized under the Business Corporation Law of the State of New York now or hereafter lawfully may do, to do each and every thing necessary, suitable, convenient, or proper for, or in connection with, or incidental to, the accomplishment of any one or more of the purposes or the exercise of any one or more of the powers herein enumerated, or designated directly or indirectly to promote the interests of the Corporation or to enhance the value of its properties; and in general to do any and all things and exercise any and all powers, rights, and privileges for which a corporation may now or hereafter be organized under the Business Corporation Law of the State of New York, or under any act amendatory thereof, supplemental thereto, or substituted therefor. 3. The city and the county within the state in which the office of the Corporation is to be located shall be the City of New York, County of New York. 4. The aggregate number of shares which the Corporation shall have the authority to issue shall be sixty million (60,000,000) of which ten million (10,000,000) shall be shares of Preferred Stock of the par value of $4.00 each, and fifty million (50,000,000) shall be shares of Common Stock of the par value of $2.00 each. 5. The relative rights, preference and limitations of the shares of each class are as follows: (a) The holders of shares of Common Stock shall be entitled to one vote per share on all matters upon which shareholders are entitled to vote and shall not be entitled to any preferences in the distribution of dividends or assets. (b) Two million seven hundred fifty thousand (2,750,000) of the shares of Preferred Stock shall be designated $2.50 Cumulative Convertible Preferred Stock, Series A (hereinafter called Series A Preferred Stock), and shall have the following relative rights, preferences and limitations: (i) The holders of the shares of Series A Preferred Stock of the Corporation shall be entitled, when and as the Board of Directors shall declare any dividend out of accumulated earnings of the Corporation available therefor, to receive ratably, in proportion to the number os shares of Series A Preferred Stock held by them respectively, dividends cumulative from June 15, 1968, payable quarterly on March 15, June 15, September 15, and December 15 of each year at the rate of $2.50 per annum, before any dividends are declared or paid to the holders of shares of Common Stock; arrears of cumulative dividends shall not bear interest. Holders of shares of Series A Preferred Stock shall not as such be entitled to any other or further dividends. No dividend shall be declared or paid in any year upon shares of Common Stock until and unless full cumulative dividends shall have been paid on all outstanding shares of Series A Preferred Stock for all prior years, or until and unless full dividends for the current year to the holders of outstanding shares of Series A Preferred Stock shall have been declared and shall have been either paid or set aside for payment. (ii) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation $50 per share, plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, before any amount whatsoever shall be paid or assets shall be distributed to the holders of the shares of Common Stock; and, after paying $50 per share to the holders of the shares of Series A Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, any assets remaining shall be divided among the holders of the shares of Common Stock, in proportion to the number of shares of Common Stock held by them respectively. If the assets of the Corporation available for distribution to the holders of shares of Series A Preferred Stock shall be insufficient to permit the payment as aforesaid of $50 per share to the holders of the shares of Series A Preferred Stock plus full cumulative dividends at the time unpaid, whether or not earned, but without interest, upon any liquidation, dissolution or winding up, then all of the assets available for distribution to the holders of such shares shall be distributed ratably among the holders of the shares of Series A Preferred Stock, in proportion to the number of shares of Series A Preferred Stock held by them respectively. A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale or transfer of substantially all of its assets as an entirety, shall not be deemed a liquidation or dissolution or winding up of the Corporation within the meaning of this paragraph (ii). (iii) At any time all of the Series A Preferred Stock then outstanding, or from time to time any part thereof less than all, may at the option of the Board of Directors be redeemed on at least sixty days' written notice, given as herein provided, at $50 per share and in addition an amount equal to any dividends thereon in arrears and also the proportionate amount of the dividends accrued since the last preceding day for the payment of dividends to the date fixed for redemption whether or not earned or declared. In case less than all of the shares of Series A Preferred Stock at any time outstanding shall be called for redemption, the shares so to be redeemed shall be determined in such manner as the Board of Directors may fix. In case the Board of Directors shall elect to redeem all or any of the shares then outstanding of Series A Preferred Stock, the Board of Directors shall cause a written notice to be mailed to each holder of Series A Preferred Stock called for redemption, addressed to each such shareholder at his last known post office address as the same shall appear on the stock transfer books of the Corporation, stating that the shares of Series A Preferred Stock specified in the notice will be redeemed by the Corporation at the redemption price aforesaid on a date to be specified in such notice, which shall be at least sixty days after the date of the mailing of such notice, and requiring the holders of the shares of Series A Preferred Stock called for redemption to present the certificates representing such shares held by them respectively for redemption at the office of a bank or trust company in the Borough of Manhattan, City and State of New York, to be designated in the notice. The Board of Directors shall cause a copy of the notice to be published in a newspaper of general circulation in the City of New York, State of New York, once a week for six successive weeks, the first publication to be at least sixty days prior to the date specified in the notice for the redemption of the shares. On and after the date specified in the notice, each holder of shares of Series A Preferred Stock called for redemption, upon presenting and surrendering at the place designated in the notice the certificates representing the shares of Series A Preferred Stock held by him and called for redemption, properly endorsed in blank for transfer or accompanied by proper instrument of assignment or transfer in blank, and bearing all necessary transfer tax stamps thereto affixed and cancelled, shall be entitled to receive therefor the redemption price hereinabove specified. The certificates representing the shares of Series A Preferred Stock so surrendered for redemption shall be forthwith cancelled. In case the Board of Directors shall give such notice of the redemption of shares of Series A Preferred Stock and on or before the date specified in the notice shall deposit the amount of the aforesaid redemption price of the shares of Series A Preferred Stock called for redemption with the bank or trust company designated in the notice, all shares of Series A Preferred Stock called for redemption shall be deemed to have been redeemed on the date specified in the notice whether or not the certificates representing them shall be surrendered for redemption and cancelled, and the shares of Series A Preferred Stock called for redemption shall from and after that date cease to represent any interest whatever in the Corporation or its property and shall not have voting rights, and the holders thereof shall have no rights other than the right to receive from and out of the deposit the aforesaid redemption price, but without any dividends or interest from or after the date specified in the notice for the redemption of the shares. (iv) The holders of the shares of Series A Preferred Stock shall have the following rights to convert such shares into shares of Common Stock: (1) The shares of Series A Preferred Stock shall be convertible at the option of the respective holders thereof, at any time, at the office of the Corporation, or, if the Corporation shall have a Transfer Agent for the Series A Preferred Stock, at the office of such Transfer Agent, into fully paid and nonassessable shares of Common Stock at the price (in each case taking the Series A Preferred Stock at $50 per share) of $50 per share of Common Stock; provided, however, that in case of the call for redemption of any shares of Series A Preferred Stock such right of conversion shall cease and terminate, as to the shares designated for redemption, at the close of business on the date fixed for such redemption or on such earlier date not more than three days prior to such redemption date as may be determined by resolution of the Board of Directors unless default shall be made in the payment of the redemption price. The price (initially $50 per share) at which shares of Common Stock shall be issuable upon conversion of shares of Series A Preferred Stock is hereinafter referred to as the "conversion price" of shares of Series A Preferred Stock. The conversion price shall be subject to adjustments from time to time in certain instances as hereinafter provided. Upon conversion the Corporation shall make no payment or adjustments on account of dividends accrued on the shares of Series A Preferred Stock surrendered for conversion. (2) Before any holder of shares of Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates representing them at the office of the Corporation or Transfer Agent hereinabove mentioned, and shall give written notice to the Corporation at the aforesaid office that he elects to convert the same and shall state in such notice the name or names in which he wishes the certificate or certificates representing the shares of Common Stock to be registered. The Corporation will, as soon as practicable thereafter, issue and deliver at the aforesaid office to the person for whose account such surrender of shares of Series A Preferred Stock was made or to his nominee or nominees certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid together with the cash payment to be made in respect of any fraction of a share as herein provided. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on that date. Unless otherwise required by law the transfer books of the Corporation for the shares of Series A Preferred Stock shall not be closed at any time so long as any of the shares of Series A Preferred Stock are outstanding but this shall not prevent the fixing of a record date. (3) If at any time the Corporation shall change by subdivision or combination or by the paying of a share dividend the number of shares of Common Stock then outstanding into a different number of shares (hereinafter referred to as "New Shares"), any holder of shares of Series A Preferred Stock upon conversion thereof shall be entitled to receive, in lieu of the number of shares of Common Stock to which he would have been entitled upon conversion at that date had there been no such change, the New Shares into which such number of shares of Common Stock would have been changed if the conversion of such shares of Series A Preferred Stock had been effected prior to such change into New Shares. In the event of such change, the Corporation agrees, subject to any necessary approval of shareholders, to take such action as may be required in order that the aggregate par value or stated value of the New Shares issuable on the conversion of each share of Series A Preferred Stock shall not be more than $4.00, plus any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to such New Shares, plus any surplus thereupon transferred to stated capital and allocated to such New Shares. (4) In case the Corporation shall issue any shares of Common Stock (other than shares issued upon conversation of shares of Series A Preferred Stock, or upon a change by subdivision or combination or by the paying of a share dividend of the number of shares of Common Stock then outstanding into a different number of shares, or upon the exercise of any options intended to qualify as restricted or qualified stock options as provided in subparagraph (D) of paragraph (6) below or pursuant to any incentive compensation plan or other employee benefit plan of the Corporation or any subsidiary) for a consideration per share less than the conversion price in effect immediately prior to the issuance of such additional shares, then and thereafter successively, upon each such issuance, the conversion price in effect immediately prior to the issuance of such additional shares shall forthwith be decreased to an amount determined by dividing (A) an amount equal to (i) the total number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the conversion price in effect immediately prior to the issuance of such additional shares plus (ii) the number of shares so issued multiplied by the consideration per share received upon such issuance by (B) the total number of shares of Common Stock outstanding immediately after the issuance of such additional shares. In every such case, the Board of Directors of the Corporation shall appoint a firm of certified public accountants (which may be the firm that regularly audits the financial statements of the Corporation) which shall give its opinion as to the adjustment, if any, of the conversion price required under the provisions hereof and the conversion price shall thereupon be adjusted in accordance with such opinion. Such adjusted conversion price shall be furnished to the Transfer Agent, if any, and, upon request, to any holders of shares of Series A Preferred Stock. In giving such opinion, such firm shall rely upon any findings of the Board of Directors of the Corporation as to values and upon the opinion of counsel (who may be counsel for the Corporation) as to any matters of law or legal conclusions. (5) The Corporation shall not be required to make any decrease in the conversion price pursuant to paragraph (4) above if the amount of such decrease would be less than 50 cents, but in such case any decrease that would otherwise have been then required shall be carried forward and shall be made at the time of the next subsequent adjustment which, together with any decrease so carried forward, shall amount to not less than 50 cents. In the event of any decrease in the conversion price pursuant to the provisions of paragraph (4) above, the Corporation agrees, subject to any necessary approval of shareholders, to take such action as may be required in order that the aggregate par value or stated value of the shares of Common Stock issuable on the conversion of each share of Series A Preferred Stock shall not be more than $4.00, plus any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to such New Shares, plus any surplus thereupon transferred to stated capital and allocated to such New Shares. (6) For the purposes of paragraph (4) above, the following provisions shall also be applicable: (A) In the case of the issuance of additional shares of Common Stock for cash, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation for such shares before deducting therefrom any commissions or other expenses paid or incurred by the Corporation in any underwriting of or otherwise in connection with the issuance of such shares. (B) In case of the issuance (except as provided in subparagraph (C) below) of additional shares of Common Stock for a consideration other than cash or a consideration, a part of which shall be other than cash, the amount of the consideration other than cash received by the Corporation for such shares shall be deemed to be the value of such consideration as determined by the Board of Directors. (C) In case of the issuance of additional shares of Common Stock upon the conversion or exchange of any obligations or of any shares of the Corporation other than shares of Series A Preferred Stock, the amount of the consideration received by the Corporation for such shares of Common Stock shall be deemed to be the amount of the consideration received by the Corporation upon the original issuance of such obligations or shares so converted or exchanged plus the consideration, if any, other than such obligations or shares, received by the Corporation upon such conversion or exchange, except in adjustment of interest or dividends. The amount of the consideration received by the Corporation upon the original issuance of such obligations or shares so converted or exchanged, and the amount of the consideration, if any, other than such obligations or shares, received by the Corporation upon such conversion shall be determined in the manner provided in subparagraphs (A) and (B) above. (D) In case of the issuance or sale of additional shares of Common Stock upon the exercise of options heretofore or hereafter granted or assumed by the Corporation or a subsidiary, provided such options were intended to qualify as restricted or qualified stock options for the purposes of the Internal Revenue Code or any substantially similar provision of the Internal Revenue Code in effect at the time such options were granted, or the issuance or sale of additional shares of Common Stock pursuant to any incentive compensation plan or other employee benefit plan of the Corporation or a subsidiary, the amount of the consideration received by the Corporation for each such share of Common Stock, if less than the conversion price in effect immediately prior to the issuance or sale thereof, shall nevertheless be deemed to be such conversion price. (E) The number of shares of any class at any time outstanding shall include all shares of that class then owned or held by or for the account of the Corporation. (7) In case (A) the Corporation shall declare any dividend payable in shares upon the shares of Common Stock or make any distribution (other than cash dividends) to the holders of the shares of Common Stock, or (B) the Corporation shall offer for subscription to the holders of the shares of Common Stock any additional shares of any class or grant to such holders any other rights or options, or (C) of any capital reorganization or reclassification of the capital shares of the Corporation or of any consolidation or merger of the Corporation with another corporation or the sale or transfer of all or substantially all of the property of the Corporation, or (D) of the liquidation, dissolution or winding up of the Corporation, then the Corporation shall cause at least fifteen days' prior notice in the cases mentioned in subparagraphs (A) and (B) above and at least thirty days' prior notice in the cases mentioned in subparagraphs (C) and (D) above to be mailed to the Transfer Agent, if any, for the shares of Series A Preferred Stock and to holders of record of the outstanding shares of Series A Preferred Stock at the date on which a record is to be taken for such share dividend, distribution or subscription or other rights or options or on which such capital reorganization, reclassification, consolidation, merger, sale, transfer, liquidation or winding up shall become effective, as the case may be. (8) Shares of Common Stock issued by the Corporation from time to time upon the conversion of any shares of Series A Preferred Stock shall be deemed fully paid and not liable to any further call or assessment thereon. (9) All shares of Series A Preferred Stock so converted shall be cancelled and shall not be reissued. (10) The Corporation shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series A Preferred Stock from time to time outstanding. The Corporation shall from time to time in accordance with the laws of the State of New York, subject to any necessary approval of shareholders, increase the authorized amount of its shares of Common Stock if at any time the number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all the shares of Series A Preferred Stock at the time outstanding. (11) No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any of the shares of Series A Preferred Stock. If any such conversion results in a fraction, an amount equal to such fraction multiplied by the last sales price of the shares of Common Stock on the stock exchange in the City of New York on which the shares of Common Stock shall from time to time be listed (or the quoted closing bid price, if there be no sales on such exchange) on the day of conversion (or if such day is not a trading day on such exchange, on the next preceding day on which such exchange was open for business) or, if the shares of Common Stock are not so listed, an amount equal to such fraction multiplied by the closing bid price on the New York over-the-counter market on the date of conversion, as reported, by the National Quotation Bureau, shall be paid to such holders in cash by the Corporation. (12) The Corporation will pay any and all issue and other taxes that may be payable in respect to any issue or delivery of shares of Common Stock on conversion of shares of Series A Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax that may be payable in respect to any transfer involved in the issue or delivery of shares of Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation, that such tax has been paid. (v) Except as hereinafter set forth, the holders of the shares of Series A Preferred Stock and the holders of the shares of Common Stock shall have full voting power for all purposes; whenever a vote of shareholders is taken for any purpose, the holders of the shares of Common Stock then issued and outstanding shall be entitled to one vote in person or by proxy for each share of Common Stock held by them respectively; and the holders of the shares of Series A Preferred Stock then issued and outstanding shall be entitled to one vote in person or by proxy for each share of Series A Preferred Stock held by them respectively; and, except as otherwise provided in Section 804 of the New York Business Corporation Law, the holders of the shares of Series A Preferred Stock and the holders of the shares of Common Stock shall vote together and not by classes; provided, however, that so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of at least two-thirds of its outstanding shares of Series A Preferred Stock amend the certificate of incorporation of the Corporation in such manner as to alter or change the preferences, special rights or powers of the shares of Series A Preferred Stock so as to affect such class adversely, or to increase or decrease the number of authorized shares of Series A Preferred Stock or to increase or decrease the par value thereof. In the event at any time the Corporation shall fail to pay six (6) quarterly dividends on all outstanding shares of Series A Preferred Stock, then at the next annual meeting of shareholders for the election of directors, and until payment in full of all such dividends then in default, or provision therefor has been made by the declaring and setting aside thereof, the holders of the outstanding shares of Series A Preferred Stock voting separately as a class to the exclusion of the holders of shares of any other class or series of capital stock of the Corporation shall be entitled to vote for and elect two members of the Board of Directors of the Corporation and, subject to the rights of the holders of outstanding shares of Preferred Stock of any other series at the time authorized, the holders of shares of Common Stock voting separately as a class to the exclusion of the holders of shares of Series A Preferred Stock shall be entitled to vote for and elect the remaining members of the Board of Directors of the Corporation. Directors elected by the holders of shares of Series A Preferred Stock voting separately as a class may be removed only by the concurring vote of the holders of a majority of the outstanding shares of Series A Preferred Stock, voting separately as a class, so long as the right of the holders of shares of Series A Preferred Stock voting as a class to elect two members of the Board of Directors of the Corporation shall continue. (c) Seven million two hundred fifty thousand (7,250,000) of the shares of Preferred Stock may be issued from time to time in series. Each share of a series shall be equal to every other share of the same series. The Board of Directors shall have authority to establish and designate series and to fix the number of shares and the relative rights, preferences and limitations as between series, subject to such limitations as may be prescribed by law. In particular, the Board of Directors may establish, designate and fix the following with respect to each series of Preferred Stock: (i) The distinctive serial designation of the shares of the series which shall distinguish those shares from the shares of all other series; (ii) The number of shares included in the series, which may be increased or decreased from time to time unless otherwise provided by the Board of Directors in creating the series; (iii) The annual dividend rate for the shares of the series and the date or dates upon which such dividend shall be payable; (iv) Whether dividends on the shares of the series shall be cumulative and, on the shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of the series shall be cumulative; (v) The amount or amounts which shall be paid out of the assets of the Corporation to the holders of the shares of the series upon the involuntary liquidation, dissolution or winding up of the Corporation and upon the voluntary liquidation, dissolution or winding up of the Corporation; (vi) The price or prices at which, the period or periods within which and the terms and conditions upon which the shares of the series may be redeemed, in whole or in part, at the option of the Corporation; (vii) The obligation, if any, of the Corporation to purchase or redeem shares of the series pursuant to a sinking fund and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of the series shall be redeemed, in whole or in part, pursuant to such sinking fund; (viii) The period or periods within which and the terms and conditions, if any, including the price or prices or the rate or rates of conversion and the terms and conditions of any adjustments thereof, upon which the shares of the series shall be convertible at the option of the holder into shares of any class of stock or into shares of any other series of Preferred Stock, except into a class of shares having rights or preferences as to dividends or distribution of assets upon liquidation which are prior or superior in rank to those of the shares being converted; (ix) The voting rights, if any, of the shares of the series in addition to those required by law, including the number of votes per share and the transaction of any business or of any specified item of business in connection with which the shares of the series shall vote as a class; and (x) Any other relative rights, preferences or limitations of the shares of the series not inconsistent herewith or with applicable law. The Corporation may make pro rata distributions of the authorized but unissued shares of any series of the Preferred Stock to holders of another class or series of its outstanding shares. (d) No holder of any shares of any class of the Corporation, as such, shall have any preemptive right to purchase any other shares or securities of any class that at any time may be sold or offered for sale by the Corporation otherwise than for cash. 6. The Secretary of State of the State of New York is designated as the agent of the Corporation upon whom process against it may be served. The post-office address to which the Secretary of State shall mail a copy of any process against the Corporation served upon him is 80 Maiden Lane, New York, New York 10038. 7. The undersigned incorporator is a natural person over the age of twenty-one years. IN WITNESS WHEREOF, the undersigned has signed this Certificate of Incorporation this 14th day of May, 1968. /s/ Samuel F. Howard, Jr. Samuel F. Howard, Jr. 350 Park Avenue New York, New York 10022 STATE OF NEW YORK ) : SS.: COUNTY OF NEW YORK ) On the 14th day of May, 1968, before me personally came Samuel F. Howard, Jr. to me known and known to me to be the person described in and who executed the foregoing Certificate of Incorporation and duly acknowledged to me that he executed the same. /s/ William S. Rubinstein Notary Public EX-3 3 EXHIBIT 3(B) THE CONTINENTAL CORPORATION BY-LAWS Adopted May 15, 1968 As Amended through December 17, 1992 ARTICLE I Shareholders Section 1. Annual Meeting. The annual meeting of shareholders of the Corporation shall be held at 10:30 A.M. Eastern Standard Time on the Thursday next following the fourteenth day of May in each year if that Thursday is not a legal holiday (and, if that Thursday is a legal holiday, then on the next succeeding Thursday not a legal holiday) for the election of Directors and the transaction of other business, or such other date and hour, as may be fixed from time to time by the Board of Directors and set forth in the notice or waiver of notice of such meeting. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such notice of meeting was mailed. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address as they appear on the Corporation's books of the shareholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the shareholder, and (d) any material interest of the shareholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1. The chairman of an annual meeting shall, if the facts warrant, determine that business was not properly brought before the meeting in accordance with the provisions of this Section 1, and if he should so determine, he shall so declare to the meeting and such business not properly before the meeting shall not be transacted. Section 2. Special Meetings. Special meetings of the shareholders may be called at any time by the Chairman of the Board or by written instrument signed by a majority of the Board of Directors (hereinafter referred to as the "Board"). At a special meeting of the shareholders no business shall be transacted and no corporate action shall be taken other than that stated in the notice of meeting. Section 3. Place of Meeting. Unless the Board provides otherwise, every annual meeting of the shareholders and every other meeting of the shareholders shall be held at the principal office of the Corporation in the City and State of New York; but the Board from time to time may provide for the holding of any annual or special meeting of the shareholders at such other place within or without the State of New York as the Board by resolution from time to time shall determine; provided, however, that any meeting of shareholders may be held at such place within or without the State of New York as may be fixed by agreement in writing among all the shareholders of the Corporation. Section 4. Notice. (a) Notice of each meeting of shareholders shall state the place, date and hour of the meeting and unless it is an annual meeting shall indicate that it is being issued by or at the direction of the person or persons calling the meeting and state the purpose or purposes for which the meeting is called. If at any meeting action is proposed to be taken which would, if taken, entitle shareholders fulfilling the requirements of Section 623 of the Business Corporation Law of the State of New York to receive payment for their shares, the notice of such meeting shall include a statement of that purpose and to that effect. Not less than ten (10) nor more than fifty (50) days before the date of the meeting, the Secretary or an Assistant Secretary shall give or cause to be given a copy of the notice, either personally or by mail, to each shareholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the Secretary a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. (b) When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. However, if after the adjournment the Board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice hereunder. Section 5. Quorum. (a) At any meeting of shareholders, the presence in person or by proxy of the holders of a majority of the shares entitled to vote at such meeting shall constitute a quorum for the transaction of any business, provided that when a specified item of business is required to be voted on by a class or series, voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum for the transaction of such specified item of business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. (b) If a quorum shall not be present in person or by proxy at any meeting of shareholders, the shareholders present may adjourn the meeting despite the absence of a quorum. Section 6. Organization. (a) The Chairman of the Board, or in his absence, the senior Vice Chairman of the Board present, or in the absence of both Vice Chairmen of the Board, the President, or in his absence, the senior Executive Vice President present, shall call every meeting of the shareholders to order, and shall act as chairman of the meeting. In the absence of the Chairman of the Board, both Vice Chairmen of the Board, the President and all Executive Vice Presidents, the holders of a majority of shares entitled to vote at such meeting shall elect a chairman. (b) The Secretary of the Corporation shall act as secretary of all meetings of the shareholders and keep the minutes; but in the absence of the Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 7. Voting. (a) Unless otherwise provided in the Certificate of Incorporation every shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders of the Corporation. A list of shareholders, as of the record date, certified by the corporate officer responsible for its preparation or by a Transfer Agent, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. (b) The Board may prescribe a date not more than fifty (50) nor less than ten (10) days prior to the date of a meeting of shareholders as the record date for the purpose of determining the shareholders entitled to notice of or to vote at such meeting or any adjournment thereof. If no record date is fixed the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made such determination shall apply to any adjournment thereof, unless the Board fixes a new record date for the adjourned meeting. (c) Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by law. (d) The vote upon any matter as to which a vote by ballot is required by law, and, upon the demand of any shareholder, the vote upon any other matter before the meeting, shall be by ballot. Except as otherwise provided by law or by the Certificate of Incorporation, all elections of directors shall be decided by a plurality of the votes cast and all other corporate action shall be decided by a majority of the votes cast at a meeting of shareholders by the holder of shares entitled to vote thereon. (e) Treasury shares and shares held by another domestic or foreign corporation of any type or kind, if a majority of the shares entitled to vote in the election of directors of such other corporations is held by the Corporation, shall not be shares entitled to vote or to be counted in determining the total number of outstanding shares. Section 8. Inspectors. (a) The Board in advance of every meeting of shareholders may appoint one or more Inspectors to act at such meeting or any adjournment thereof. If Inspectors are not so appointed, the person presiding at a shareholders' meeting may, and on the request of any shareholder entitled to vote thereat, shall appoint one or more Inspectors. If any person appointed fails to appear or act, the vacancy may be filled in advance of the meeting by appointment made by the Board or at the meeting by the person presiding thereat. (b) Each Inspector appointed to act at any meeting of the shareholders before entering upon the discharge of his duties shall take and sign an oath faithfully to execute the duties of Inspector at such meeting with strict impartiality and according to the best of his ability. The Inspectors so appointed shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. ARTICLE II Board of Directors Section 1. Number, Term of Office, Age Limitations, Nomination. (a) The business of the Corporation shall be managed by the Board of Directors, which shall consist of not less than twelve (12) nor more than sixteen (16) persons, who need not be shareholders of the Corporation, but each of whom shall be at least twenty-one years of age; the number of directors shall be fixed from time to time by resolution adopted by vote of a majority of the entire number of directors, provided that no decrease in number shall shorten the term of any incumbent director. Except as hereinafter otherwise provided for filling vacancies, the directors shall be elected at the annual meeting of shareholders to hold office until the next annual meeting, and shall hold office until the expiration of the term for which they were elected, and until their successors have been elected and qualified. No person shall be nominated for initial election as a director in a calendar year when he attains the age of 65 or more. No director shall be nominated for reelection in a calendar year following the year he attains the age of 70. No officer of the Corporation shall be nominated for reelection as a director after his retirement, resignation or removal as an officer, except that not more than one retired officer may in the discretion of the Board be nominated for reelection at the next two annual meetings of shareholders following the date of his retirement. (b) Only persons who are nominated in accordance with the procedures set forth in this Section 1(b) shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at any meeting of shareholders (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 1(b). Any such nomination by a shareholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which notice of the meeting was mailed. Such shareholder's notice shall set forth in writing (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the number of shares of stock of the Corporation which is beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in connection with the solicitation of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being named in a proxy statement as a nominee and to serving as a director if elected); and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such shareholder and (ii) the number of shares of stock of the Corporation as to which such shareholder has (or shares with another person) voting power. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these By-Laws and in that event the defective nomination shall be disregarded. Section 2. Removal, Vacancies and Additional Directors. (a) Any director may be removed, with cause, and the vacancy filled by a vote of the shareholders at any special meeting the notice of which shall state that it is called for that purpose. Any vacancy caused by such removal and not filled by the shareholders at the meeting at which such removal shall have been made, or any vacancy occurring in the Board for any other reason, and newly created directorships resulting from any increase in the number of directors, may be filled by vote of a majority of the directors then in office although less than a quorum; provided, however, that the term of office of any director so elected shall expire at the next succeeding annual meeting of shareholders, and at such annual meeting the shareholders shall elect a successor to the director filling such vacancy or newly created directorship; and provided further that no person shall be elected as a successor to fill any vacancy in the Board unless his name shall have been proposed in writing and submitted to the Board at a prior meeting thereof or by mailing to each member of the Board a notice of such proposal at least one week prior to the meeting at which such vacancy shall be filled. (b) If the entire Board shall die or resign, any shareholder shall have power to call a special meeting of shareholders on notice given in the same manner as prescribed therein for the notice of an annual meeting and directors for the unexpired term may be elected at such special meeting in the same manner as prescribed herein for an annual meeting. Section 3. Place of Meeting. Except as provided in these By-Laws, the Board and each committee of the Board may hold its meetings, regular or special, in such place or places within or without the State of New York as the Board from time to time shall determine. Section 4. Regular Meetings. Unless the Board provides otherwise, the Board shall hold a regular meeting at 10:00 A.M. on the Thursday next following the fourteenth day of each February, March, May, July, August, September, November and December (or, if that Thursday is a legal holiday, then on the next succeeding Thursday not a legal holiday). The first meeting of the Board held after each annual meeting of shareholders of the Corporation shall be the annual meeting of the Board. Each regular meeting shall be held at the principal office of the Corporation in the City and State of New York or at such other place within or without the State of New York as the Board by resolution from time to time shall determine. No notice shall be required for the regular meetings of the Board; but notice of any change in the time, date or place of a regular meeting shall be mailed to every director at least five (5) days before such meeting. Section 5. Special Meetings. (a) Special meetings of the Board shall be held whenever called by direction of the Chairman of the Board, a Vice Chairman of the Board or the President, or by direction of a majority of the directors for the time being in office. (b) The Secretary shall give or cause to be given notice of the time and place of holding each special meeting by mailing the same to each director at his residence or regular place of business at least two (2) days before the meeting or by causing the same to be transmitted personally, or by telephone, telex, telegraph, cable or radio to such residence or business address, at least three hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at any regular or special meeting. Any business may be transacted by the Board at a meeting at which every director is present, though held without notice. Section 6. Quorum. Subject to the provisions of Section 2 of this Article II, and except as otherwise expressly required by law the presence in person of a majority of the entire number of directors shall constitute a quorum for the transaction of business; provided, however, that if there are ten (10) or more directors, then the presence in person of one-third of the entire number of directors, but in any event not less than five (5) directors, shall constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting of the Board at which a quorum is present shall be the act of the Board. A majority of the directors present, whether or not a quorum is present, may adjourn the meeting from time to time without notice other than by announcement at the meeting. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called. Section 7. Organization. (a) The Chairman of the Board or in his absence the senior Vice Chairman of the Board present, or in the absence of both Vice Chairmen of the Board, the President shall call every meeting of the Board to order and shall act as Chairman of the meeting. In the absence of the Chairman of the Board, both Vice Chairmen of the Board and the President, a Chairman shall be elected from the directors present. (b) The Secretary of the Corporation shall act as secretary of all meetings of the directors and keep the minutes; but in the absence of the secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. (c) At all meetings of the Board business shall be transacted in such order as from time to time the Board may determine. Section 8. Committees. If there are ten (10) or more directors, the Board by resolution adopted by a majority of the entire Board shall designate from among its members an Executive Committee to serve at the pleasure of the Board, consisting of the Chairman of the Board and five (5) other directors who shall be appointed at the annual meeting of the Board to hold office until its next annual meeting and until their successors shall have been appointed. The presence in person of three (3) members of the Executive Committee shall constitute a quorum for the transaction of business. Subject to the provisions of Section 712 of the Business Corporation Law of the State of New York, the Executive Committee shall have all the powers of the Board when the Board is not in session. Meetings of the Executive Committee shall be held whenever called by direction of the Chairman of the Board, a Vice Chairman of the Board or the President, or by direction of a majority of the members of the Executive Committee for the time being in office. The Secretary shall give or cause to be given notice of the time and place of holding each meeting by mailing the same to each member of the Executive Committee at his residence or regular place of business at least two (2) days before the meeting or by causing the same to be transmitted personally, or by telephone, telex, telegraph, cable or radio to such residence or business address, at least three (3) hours before the meeting. Unless otherwise indicated in the notice thereof, and subject to the provisions of Section 712 of the Business Corporation Law of the State of New York, any and all business may be transacted at any meeting. Any business may be transacted by the Executive Committee at a meeting at which every member of such Committee is present, though held without notice. (b) The Board by resolution adopted by a majority of the entire Board may designate from among its members other committees, each consisting of three or more directors, and, subject to the provisions of Section 712 of the Business Corporation Law of the State of New York, define the powers and duties of such other committees as the Board from time to time may deem advisable. Section 9. Dividends. Subject to the provisions of the Certificate of Incorporation, and except when currently the Corporation is insolvent or would thereby be made insolvent, the Board shall have the power in its discretion from time to time to declare and pay dividends upon the outstanding shares of the Corporation out of surplus only, so that the net assets of the Corporation remaining after such declaration, payment or distribution shall at least equal the amount of its stated capital. Section 10. Determination of Shareholders of Record for Certain Purposes. For the purposes of determining the shareholders entitled to express consent to or dissent from any proposal without a meeting or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, a date as the record date for any such determination of shareholders may be fixed by the Board, in advance of such date, and the date so fixed shall not be more than fifty days prior to such action. If no record date is fixed the record date shall be at the close of business on the day on which the resolution of the Board relating thereto is adopted. For the purpose of determining that all shareholders entitled to vote thereon have consented to any action without a meeting, if no record date is fixed by the Board and no resolution has been adopted by the Board relating thereto, such shareholders shall be determined as of the date or time as of which such consent shall be expressed to be effective. Section 11. Compensation of Directors. The directors shall be entitled to receive such compensation for their services as directors or as members of any committee of the Board as the Board from time to time shall determine. Section 12. Action Without a Meeting; Meetings by Conference Telephone (a) Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee may be taken without a meeting, without prior notice and without a vote, if all the members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action, and such writing and resolution are filed with the minutes of the proceedings of the Board or the committee. (b) All or any one or more directors may participate in a meeting of the Board or of any committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. ARTICLE III OFFICERS Section 1. Titles and Appointment. (a) The Officers of the Corporation shall be a Chairman of the Board, two Vice Chairmen of the Board, a President, one or more Executive Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, and a Controller. The Board shall appoint officers at the annual meeting of the Board to continue in office until the next annual meeting of the Board and until their respective successors shall have been appointed and shall have qualified. The Chairman of the Board, the Vice Chairmen of the Board and the President shall be appointed from among the members of the Board. The other officers may, but need not, be directors. The same person may hold any two or more offices. (b) The Board may require any officer to give security for the faithful performance of his duties and may remove him at pleasure. The appointment of an officer shall not of itself create any contract rights and his removal without cause shall be without prejudice to his contract rights, if any. (c) In addition to the powers and duties of the officers of the Corporation set forth in these By-Laws the officers, agents and employees of the Corporation shall have such powers and perform such duties in the management of the Corporation, subject to the control of the Board, as the Board from time to time may prescribe. Section 2. Chairman of the Board. Subject to the control of the Board, the Chairman of the Board shall be the chief executive officer of the Corporation in general charge and control of its business and affairs. He shall preside at all meetings of shareholders and at all meetings of the Board, shall be a member of the Executive Committee, and shall perform such other duties as are incidental to his office or properly required of him by the Board. He may sign and execute contracts in the name and on behalf of the Corporation when the Board shall have so authorized and directed him to do either generally or in special instances. Section 3. Vice Chairman of the Board. A Vice Chairman of the Board may sign and execute contracts in the name and on behalf of the Corporation when the Board shall have so authorized and directed him to do, either generally or in special instances, and shall perform such other duties as are incidental to his office or are properly required of him by the Board or by the Chairman of the Board. In the absence of the Chairman of the Board, the senior Vice Chairman of the Board present shall preside at all meetings of the shareholders and at all meetings of the Board, shall be ex officio a member of the Executive Committee and all other committees of the Board, and shall perform all other duties and may exercise all other powers of the Chairman of the Board. If the office of Chairman of the Board is vacant, the senior Vice Chairman of the Board shall assume the powers and duties of the Chairman of the Board, except such powers and duties as the Board by resolution shall direct to be assumed by another officer or director. Section 4. President. The President may sign and execute contracts in the name and on behalf of the Corporation when the Board shall have so authorized and directed him to do, either generally or in special instances; and shall perform such other duties as are incidental to his office or properly required of him by the Board or by the Chairman of the Board. In the absence of both Vice Chairmen of the Board, the President shall perform all of the duties and may exercise all of the powers of the Vice Chairman of the Board; and in the absence of both the Chairman of the Board and the Vice Chairman of the Board the President shall perform all of the duties and may exercise all of the powers of the Chairman of the Board. If offices of both Chairman of the Board and Vice Chairman of the Board are vacant, the President shall assume the powers and duties of the Chairman of the Board, except such powers and duties as the Board by resolution shall direct to be assumed by another officer or director. Section 5. Executive Vice Presidents and Vice Presidents. Each Executive Vice President and Vice President shall perform such duties as are incidental to his office or are properly required of him by the Board or by the Chairman of the Board. In the absence of the President and Executive Vice President (or, if there are two or more Executive Vice Presidents, the Executive Vice President in office elected first at the last previous annual meeting of the Board) shall perform all of the duties and may exercise all of the powers of the President. Section 6. Secretary. Subject to the control of the Board, the Secretary shall have custody of the corporate seal of the Corporation and shall affix the same to such documents and other papers as the Board shall authorize and direct. He shall give or cause to be given notice of all meetings of the Board, of the Executive Committee and of the shareholders as provided in these By-Laws and shall act as secretary of the meetings and keep the minutes thereof. He shall prepare or cause to be prepared and keep or cause to be kept at the office of the Corporation in the State of New York, or at the office of a Transfer Agent or Registrar of the Corporation in the State of New York, a record of shareholders, containing the names and addresses of all persons who are shareholders of the Corporation, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. The Secretary shall have custody of such other records of the Corporation and shall perform such other duties as are incidental to his office or properly required of him by the Board or the Chairman of the Board. Section 7. Treasurer. Subject to the control of the Board, the Treasurer shall receive, have custody of, and, when so authorized, pay out and disburse all moneys and securities of the Corporation that may come into his hands; and shall have custody of all muniments of title and other papers and documents relating to the property of the Corporation. He may endorse in the name and on behalf of the Corporation for collection checks, notes and other instruments and shall deposit the same to the credit of the Corporation in such bank or banks as the Board may designate; and he may sign all receipts and vouchers for payments made to the Corporation. He shall prepare or cause to be prepared and shall keep at the office of the Corporation correct books of account of all its business and transactions, which may be in written form or in any other form capable of being converted into written form within a reasonable time; and shall render statements thereof, in such form and at such times as the Board shall prescribe. He shall perform such other duties as are incidental to his office or are properly required of him by the Board or the Chairman of the Board. Section 8. Controller. Subject to the control of the Board, the Controller shall be the principal officer in charge of the books of account of the Corporation, and he shall perform such other duties as are incidental to his office or are properly required of him by the Board or the Chairman of the Board. Section 9. Additional Officers. (a) The Board from time to time may appoint such other officers (who may but need not be directors), including but not limited to Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers, as the Board may deem advisable and the officers so appointed shall have such powers and perform such duties as the Board or the Chairman of the Board from time to time may prescribe. (b) The Board may from time to time by resolution delegate to any Assistant Treasurer or Treasurers any of the powers or duties herein assigned to the Treasurer; may similarly delegate to any Assistant Secretary or Secretaries any of the powers or duties herein assigned to the Secretary or to any Assistant Controller or Controllers any of the powers or duties herein assigned to the Controller. Section 10. Voting Upon Shares. Unless otherwise ordered by the Board, the Chairman of the Board shall have full power and authority in the name and on behalf of the Corporation in person or by proxy to attend and to act and vote at any meeting of shareholders of any corporation shares of which the Corporation may hold and at any such meeting shall possess and may exercise, in person or by proxy, any and all rights, powers and privileges incident to the ownership of such shares. The Board, by resolution, from time to time may confer like powers upon any other person or persons. Section 11. Compensation of Officers. The Chairman of the Board and the other officers of the Corporation shall be entitled to receive such compensation for their services as the Board of Directors from time to time may determine. Section 12. Indemnification of Directors and Officers. (a) The Corporation shall indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the Corporation to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Corporation served in any capacity at the request of the Corporation, by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation or is or was serving such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against, judgments, fines, amounts paid in settlement and expenses (including attorneys' fees) incurred in connection with any such action or proceeding, or any appeal therein, provided that no indemnification may be made to or on behalf of such person if (i) his acts were committed in bad faith or were the result of his active and deliberate dishonesty and were material to such action or proceeding or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. (b) The Corporation shall indemnify any person made, or threatened to be made, a party to an action by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation, or that he, his testator or intestate is or was a director or officer of the Corporation and is or was serving at the request of the Corporation any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against amounts paid in settlement and expenses (including attorneys' fees) incurred in connection with such action, or any appeal therein, provided that no indemnification may be made to or on behalf of such person if (i) his acts were committed in bad faith or were the result of his active and deliberate dishonesty and were material to such action or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. (c) The termination of any civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such person has not met the standard of conduct set forth herein. (d) For the purpose of this Section 12:(i) a person shall be deemed to be serving a corporation at the request of the Corporation if such corporation is a Subsidiary; (ii) a person shall be deemed to be serving an employee benefit plan at the request of the Corporation if such plan's members are employees of the Corporation or one or more of its Subsidiaries or both and if the performance by such person of his duties to the Corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; (iii) a person shall be deemed to be serving any other corporation or employee benefit plan or any partnership, joint venture, trust or other enterprise at the request of the Corporation only if specifically approved by the Corporation pursuant to procedures adopted by the Corporation for such purpose; (iv) excise taxes assessed on a person with respect to an employee benefit plan pursuant to applicable law shall be considered fines; (v) "Subsidiary" shall mean any corporation incorporated in the United States, a majority of the outstanding voting shares of which shall be owned by the Corporation or by one or more Subsidiaries or by the Corporation and one or more Subsidiaries; and (vi) references herein to one gender shall be deemed to include the other. (e) A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in paragraph (a) or (b) of this Section 12 shall be entitled to indemnification as authorized therein. Any indemnification in any other case, unless ordered by a court, shall be made by the Corporation only if authorized in the specific case: (i) by the Board of Directors acting by a quorum consisting of directors who are not parties to the action or proceeding giving rise to the indemnity claim upon a finding that the director or officer has met the standard of conduct set forth in paragraphs (a) and (b) of this Section 12; or (ii) if a quorum under the foregoing clause (i) is not obtainable or, even if obtainable, a quorum of disinterested directors so directs: (A) by the Board of Directors upon the opinion in writing of independent legal counsel (i.e., a reputable lawyer or law firm not under regular retainer from the Corporation or any subsidiary corporation) that indemnification is proper in the circumstances because the standard of conduct set forth in paragraph (a) and (b) of this Section 12 has been met by such director or officer, or (B) by the shareholders of the Corporation upon a finding that the director or officer has met such standard of conduct. (f) Expenses incurred by a director or officer in defending a civil or criminal action or proceeding shall be paid by the Corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount in case he is ultimately found, in accordance with this Section, not to be entitled to indemnification or, where indemnity is granted, to the extent the expenses so paid exceed the indemnification to which he is entitled. (g) Any Indemnification of a director or officer of the Corporation under this Section or advancement of expense shall be made promptly, and in any event within sixty (60) days, upon the written request of the director or officer. The right to indemnification or advancement of expenses granted by this Section shall be enforceable by the director or officer in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such person's expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advancement of expenses under paragraph (f) of this Section where the required undertaking has been received by the Corporation) that the claimant has not met the standard of conduct set forth in paragraphs (a) and (b) of this Section 12, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its shareholders) to have made a determination that indemnification of the claimant is proper in the circumstances, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its shareholders) that indemnification of the claimant is not proper in the circumstances, shall be a defense to the action or create a presumption that the claimant is not entitled to indemnification. (h) The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each director and officer who serves in such capacity at any time while these provisions as well as the relevant provisions of the New York Business Corporation Law are in effect, and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such director or officer. If this Section or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer of the Corporation against judgments, fines, amounts paid in settlement and expenses (including attorneys' fees) incurred in connection with any actual or threatened action or proceeding, whether civil or criminal, including any actual or threatened action by or in the right of the Corporation, or any appeal therein, to the full extent permitted by any applicable portion of this Section that shall not have been invalidated and to the full extent permitted by applicable law. The indemnification provided by this Section shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of shareholders or directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. The Corporation is hereby authorized to provide further indemnification if it deems it advisable, by resolution of shareholders or directors, by amendment of these By-Laws or by agreement. Section 13. Agents and Employees. The Chairman of the Board shall have power from time to time to appoint such agents and employees as in his judgment shall be necessary or desirable for the proper conduct of the business of the Corporation, and such agents and employees shall possess such powers, perform such duties and receive such compensation as the Chairman of the Board from time to time may direct. All such agents and employees shall hold their respective positions and continue their respective employments during the pleasure of the Chairman of the Board, unless otherwise expressly provided by contract in writing. ARTICLE IV Shares Section 1. Certificates for Shares. (a) Certificates representing shares of the Corporation shall be in such form, not inconsistent with law and with the Certificate of Incorporation, as the Board shall approve. All certificates shall be signed by the Chairman of the Board, a Vice Chairman of the Board, the President, or an Executive Vice President or Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation or a facsimile thereof, and shall not be valid unless so signed and sealed. No person shall sign a certificate for shares of the Corporation in two capacities. The signature of the officers upon a certificate may be facsimiles if the certificate is counter-signed by a transfer agent or registered by a registrar other than the Corporation itself or its employees. (b) If any officer who has signed or whose facsimile signature has been placed upon a certificate representing shares of the Corporation shall have ceased to be such officer of the Corporation before the certificate is issued by the Corporation, the certificate may nevertheless be issued by the Corporation with the same effect as if he were such officer at the date of issue. (c) All certificates representing shares of the Corporation shall be consecutively numbered as the same are issued. The name of the persons owning the shares represented thereby with the number of such shares and the date of issue thereof shall be entered on the Corporation's books. (d) Except as hereinafter provided, all certificates representing shares of the Corporation surrendered to the Corporation for transfer shall be canceled and no new certificates shall be issued until former certificates for the same number of shares have been surrendered and canceled. Section 2. Lost, Stolen or Destroyed Certificates. Whenever a person owning a certificate representing shares of the Corporation or his legal representative, alleges that it has been lost, stolen or destroyed, he shall file in the office of the Corporation an affidavit setting forth, to the best of his knowledge and belief, the time, place and circumstances of the loss, theft, or destruction, together with a bond of indemnity sufficient in the opinion of the Board to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate and with one or more sufficient sureties approved by the Board. Thereupon the Board may cause to be issued to such person or his legal representative a new certificate or a duplicate of the certificate alleged to have been lost, stolen or destroyed. Upon the stub of every new or duplicate certificate so issued shall be noted the fact of such issue and the number, date and the name of the registered owner of the lost, stolen or destroyed certificate in lieu of which the new or duplicate certificate is issued. Section 3. Transfer of Shares. Shares of the Corporation shall be transferred on the books of the Corporation by the holder thereof, in person or by his attorney thereunto duly authorized in writing, upon surrender and cancellation of certificates representing the number of shares to be transferred, except as provided in the preceding section. Section 4. Regulations. The Board shall have power and authority to make such other rules and regulations not inconsistent with the Certificate of Incorporation or with these By-Laws as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. ARTICLE V Miscellaneous Provisions Section 1. Corporate Seal. The Board shall provide a suitable seal, containing the name of the Corporation, and the Secretary shall have custody thereof. If and when so ordered by the Board, the Treasurer, or any other officer of the Corporation designated by the Board, may keep and use a duplicate corporate seal. The seal may be attested by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Section 2. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January in each year and terminate on the thirty-first day of December next following. Section 3. Checks, Notes, etc. (a) All checks, drafts, bills of exchange, acceptances, notes, or other obligations or orders for the payment of money shall be signed and countersigned by such officers of the Corporation and/or other persons as the Board by resolution from time to time shall designate. (b) Checks, drafts, bills of exchange, acceptances, notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Treasurer, or otherwise as the Board by resolution from time to time may determine. Section 4. Investments. The Chairman of the Board, a Vice Chairman of the Board or the President, or an Executive Vice President or a Vice President authorized by the Board for this purpose, shall each have the power, together with the Treasurer, Secretary or an Assistant Secretary in the name of and as the act of this Corporation, to buy, sell, lend, deposit as security, and otherwise deal in all kinds of securities, including but not by way of limitation shares of stock, bonds, debentures and mortgages, and to transfer and assign such securities standing in the name of this Corporation and to make, execute and deliver under its corporate seal any instruments in writing appropriate to effect such transfers and assignments. Section 5. Loans. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board, or as otherwise provided by these By-Laws. When authorized so to do, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidence of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, and any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances. Section 6. Waivers of Notice. Whenever under the provisions of these By-Laws the shareholders are authorized to take any action after notice to them or the Board or a Committee is authorized to take any action after notice to its members, such action may be taken without notice to any shareholder, director or Committee member if at any time before or after such action be completed such shareholder, director or Committee member submits a signed waiver of notice. The attendance in person or by proxy of any shareholder at any meeting of shareholders, or the attendance in person of a director at any meeting of the Board or a Committee member at any meeting of the Committee, without protesting prior to the meeting or at its commencement the lack of notice to him shall constitute a waiver of notice by him. ARTICLE VI Amendments These By-Laws may be amended by the Board at any regular meeting or at any special meeting, provided that these By-Laws or any amendments so adopted by the Board may be amended or repealed by the vote of the shareholders of the Corporation at any annual meeting or at any special meeting the notice of which shall have stated that amendment of the By- Laws is to be one of the purposes of the meeting. EX-10 4 EXHIBIT 10(A) THE LONG TERM INCENTIVE PLAN OF THE CONTINENTAL CORPORATI0N Amended and Restated as of December 1, 1993 Table of Contents Page ARTICLE I Purpose.................................... 1 ARTICLE II Definitions................................ 1 ARTICLE III Eligibility................................ 5 ARTICLE IV Administration.............................. 5 4.1. Authority.............................. 5 4.2. Award Approval......................... 6 4.3. Records and Reports.................... 6 ARTICLE V Scope and Duration.......................... 6 ARTICLE VI Terms and Conditions of Options............. 7 6.1. Purchase Price......................... 7 6.2. Term of Options........................ 7 6.3. Exercisability......................... 7 6.4. Acceleration of Exercisability......... 7 6.5. Payment................................ 8 6.6. Termination of Employment.............. 8 6.7. Death.................................. 8 6.8. Special Stock Appreciation Right....... 8 ARTICLE VII Terms and Conditions of Performance Shares and Performance Units...................... 9 7.1. Performance Goals...................... 9 7.2. Determination of Participants, Target Awards and Incentive Awards... 9 7.3. Vesting of Awards...................... 10 7.4. Special Vesting........................ 10 7.5. Termination of Employment.............. 11 7.6. Payment Date........................... 11 7.7. Method of Payment...................... 12 7.8. Deferral of Payment.................... 13 ARTICLE VIII Capital Adjustments......................... 13 Page ARTICLE IX Miscellaneous............................... 13 9.1. Effective Date......................... 13 9.2. Amendment or Termination............... 13 9.3. Inalienability of Interests............ 14 9.4. Facility of Payments................... 14 9.5. Excess Parachute Payments.............. 14 9.6. Written Agreements..................... 15 9.7. Withholding............................ 15 9.8. Limited Effect......................... 15 9.9. Number and Gender...................... 15 9.10.Captions............................... 15 9.11.Applicable Law......................... 15 THE LONG TERM INCENTIVE PLAN OF THE CONTINENTAL CORPORATION (Amended and Restated as of December 1, 1993) ARTICLE I Purpose The Long Term Incentive Plan of The Continental Corporation (the "Plan") is intended to foster a closer identity between the interests of key employees of The Continental Corporation (the "Corporation") and its subsidiaries and the interests of the Corporation's shareholders by encouraging and facilitating acquisition of common stock of the Corporation by key employees, to enhance the Corporation's ability to attract and retain highly competent employees essential to its future growth and success, and to provide incentives to key employees to achieve superior financial performance over the long term. In furtherance of these goals, the Compensation Committee of the Board of Directors of the Corporation (the "Committee") recommended, and the Board voted, on February 18, 1993, to amend and restate the Plan, subject to shareholder approval, in order to extend the date for making grants thereunder, to increase the maximum number of shares of common stock as to which performance shares and stock options may be granted and which may be issued in payment of performance units, to Participants (as defined below) and to make certain other changes. ARTICLE II Definitions 2.1. "Act" means the Securities Exchange Act of 1934, as amended. 2.2. "Award" means an award of Performance Units or Performance Shares. 2.3. "Board" means the Board of Directors of The Continental Corporation. 2.4. "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" of persons (as such terms are used in sections 13 and 14 of the Act), other than any employee benefit plan sponsored by the Corporation, becomes the "beneficial owner" (as such term is used in section 13 of the Act) of 30% or more of the outstanding shares of the Corporation's capital stock entitled to vote for the election of directors; or (ii) any shares of any class of the Corporation's capital stock are purchased pursuant to a tender or exchange offer (other than an offer by the Corporation or a Subsidiary); or (iii) the approval by the requisite vote of the Corporation's shareholders of any merger, consolidation, sale of assets, liquidation or reorganization as a result of which the Corporation will not survive as a publicly- owned corporation; or (iv) a change in the composition of the Board during any period of two consecutive years such that individuals who at the beginning of such period were members of the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 2.5. "Code" means the Internal Revenue Code of 1986, as amended. 2.6. "Committee" means the Compensation Committee of the Board. The Committee shall be comprised of at least three directors all of whom shall be disinterested within the meaning of Rule l6b-3 of the Securities and Exchange Commission. 2.7. "Common Stock" means common stock of the Corporation, par value $1.00 per share. 2.8. "Corporation" means The Continental Corporation and its successors and assigns and any corporation which shall acquire substantially all of its assets. 2.9. "Completion of the Audit" means, with respect to any year, the date of the report of the Corporation's independent public accountants on the consolidated financial statements of the Corporation and its Subsidiaries for such year. 2.10. "Disability" means a condition qualifying the Participant for benefits under the Long-Term Disability Plan of The Continental Corporation, whether or not such Participant participates therein. 2.11. "Fair Market Value" of Common Stock on any date means the average of the highest and lowest sales prices of the Common Stock as reported on the New York Stock Exchange Composite Tape for such date, or if there were no sales on such date, on the next preceding date on which there were sales. 2.12. "Incentive Award" means, with respect to any Participant, such Participant's Target Award for a Performance Cycle as increased or decreased in accordance with section 7.2. 2.13. "Incentive Stock Option" means a stock option that is intended to be an incentive stock option under section 422A of the Code. 2.14. "Nonqualified Option" means a stock option that is not intended to be an Incentive Stock Option. 2.15. "Option" means an Incentive Stock Option or a Nonqua1ified Option. 2.16. "Participant" means any full-time or regular part-time key employee (as determined from time to time by the Committee) of the Corporation or its Subsidiaries. 2.17. "Performance Cycle" means a period of four consecutive years, or such other number of years as the Committee or the Board may determine. 2.18. "Performance Share" means a unit awarded under the provisions of Article VII and the value of which is measured by the Fair Market Value of a share of Common Stock. 2.19. "Performance Unit" means a unit awarded under the provisions of Article VII and the value of which is fixed by the Committee or the Board. 2.20. "Plan" means The Long Term Incentive Plan of The Continental Corporation. 2.21. "Qualifying Termination" means a termination of a Participant's employment with the Corporation or any Subsidiary (under circumstances where such Participant is no longer employed by the Corporation or any Subsidiary) following a Change of Control for any reason other than (i) death, (ii) Disability, (iii) willful misconduct in the performance of such Participant's duties as an employee, (iv) Retirement, or (v) a termination by such Participant, other than for one or more of the following reasons: (x) the assignment to such Participant of any duties inconsistent, in a way significantly adverse to such Participant, with such Participant's positions, duties, responsibilities and status with the Corporation and its Subsidiaries immediately prior to such Change of Control, or a significant reduction in the duties and responsibilities held by such Participant immediately prior to such Change of Control; a change in such Participant's reporting responsibilities, titles or offices as in effect immediately prior to such Change of Control; or any removal of such Participant from or any failure to re-elect such Participant to any position with the Corporation or any Subsidiary that such Participant held immediately prior to such Change of Control except in connection with such Participant's promotion or termination of employment for any of the reasons specified in paragraphs (i) through (iv) above; or (y) a reduction by the Corporation in such Participant's base salary as in effect immediately prior to such Change of Control; the failure by the Corporation to continue in effect any employee benefit plan or compensation plan in which such Participant was participating immediately prior to such Change of Control unless such Participant is permitted to participate in other plans providing substantially comparable benefits to such Participant; or the taking of any action by the Corporation that would adversely affect such Participant's participation in or materially reduce such Participant's benefits under any such plan; or (z) the Corporation's requiring such Participant to be based anywhere other than such Participant's present location; or the Corporation's requiring such Participant to travel on the Corporation's business to an extent substantially more burdensome than such Participant's travel obligations immediately prior to such Change of Control. 2.22. "Retirement" means any retirement under the terms of The Retirement Plan of The Continental Corporation other than a retirement entitling the Participant to a Vested Retirement Allowance as defined in such Plan. 2.23. "Stock Appreciation Right" means a right granted under section 6.8. 2.24. "Subsidiary" means any corporation in which the Corporation owns, directly or indirectly, stock possessing 50% or more of the total combined voting power. 2.25. "Target Award" means, with respect to any Participant, the amount to which such Participant will be entitled in respect of an Award of Performance Units or Performance Shares if the Committee determines that the Corporation has met the performance goals established for a Performance Cycle. ARTICLE III Eligibility Participation in the Plan is limited to Participants. The granting of an Option or an Award to any person under the Plan shall neither entitle such person to, nor disqualify such person from, participation in any other incentive plan of the Corporation or any Subsidiary. No director of the Corporation shall be eligible for an Option or an Award unless such director is an employee of the Corporation or any Subsidiary. ARTICLE IV Administration 4.1. Authority. The Committee shall have the authority, subject to the terms of the Plan: (i) to determine the purchase price per share of Common Stock covered by each Option, the time or times at which Options may be granted and exercised, and the terms and provisions of stock option agreements; to designate Options as Incentive Stock Options or Nonqualified Options; with the consent of employees to whom Options have been granted, to grant in substitution for outstanding Options replacement Options, which may be at a lower purchase price (but, in the case of Incentive Stock Options, at a purchase price not less than the Fair Market Value of the Common Stock subject to the replacement Option at the time of substitution and, in the case of Nonqualified Options, not less than 75% of the Fair Market Value of the Common Stock subject to the replacement Option at the time of substitution), and to cancel replaced Options; (ii) to determine the time or times at which Awards shall be made, the number of shares or units to be covered by each Award, the Target Awards and Incentive Awards of each Participant, the length of the Performance Cycle and other conditions applicable to Awards, and the terms and provisions of the agreements by which Awards shall be evidenced; (iii) to recommend to the Board the Award or Grant of the Chief Executive Officer and to approve individual Awards or Grants for all other Participants; (iv) to interpret the Plan; to establish, amend and rescind rules and guidelines for administering the Plan; to determine the effect of all matters and questions relating to termination of employment; and to make all other determinations necessary or advisable, in its sole discretion, for the administration of the Plan. The Plan shall be administered by the Committee, provided that certain ministerial powers and functions of the Committee under the Plan, except the authority to grant Options or Awards, may be delegated to the Office of the Chairman or the senior Human Resources officer as the Committee considers appropriate, subject to the terms of the Plan. 4.2. Award Approval. The Office of the Chairman may recommend for approval by the Committee the grant of Options or Awards to Participants based on guidelines and procedures approved by the Board or Committee. 4.3. Records and Reports. The Committee or the Office of the Chairman shall arrange for the maintenance of records showing Options and Awards under the Plan and shall arrange to keep in convenient form such data as may be necessary for the effective operation of the Plan. ARTICLE V Scope and Duration Subject to adjustment as provided in Article VIII, the maximum aggregate number of shares of Common Stock (a) as to which Options and Performance Shares may be granted under the Plan and (b) which may be issued in payment of Performance Units granted under the Plan is 9,000,000 shares, which shares in whole or in part, as the Board shall from time to time determine, may be authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Corporation. If for any reason (other than by reason of the exercise of Stock Appreciation Rights) any shares of Common Stock as to which an Option has been granted cease to be subject to purchase under such Option or any Performance Shares are forfeited to the Corporation, then (unless the Plan shall have been terminated) such shares shall become available for future grants under the Plan to the same employee who received the original grant or to a different employee or employees. No grants of Options or Awards shall be made hereunder after December 31, 1998. ARTICLE VI Terms and Conditions of Options 6.1. Purchase Price. The purchase price of the Common Stock covered by each Option shall be determined by the Board or the Committee, provided that such purchase price shall be not less than the Fair Market Value of a share of Common Stock on the date of grant thereof. The date of grant of an Option under the Plan will be the date on which the Board, Committee or the Office of the Chairman acts to grant such Option, unless a later date (consistent with the Code and any rules or regulations thereunder) is specified by the Board, Committee or the Office of the Chairman. 6.2. Term of Options. Each Option shall expire on the tenth anniversary of the date of its grant, or on such earlier date as may be specified in the stock option agreement. 6.3. Exercisability. Subject to section 6.4, section 6.6 and section 6.7, each Option shall become exercisable in one or more installments on the date or dates (no earlier than six months after the date of its grant) and upon the satisfaction of such conditions as may be specified in the stock option agreement. Once an Option becomes exercisable with respect to a portion of the shares subject thereto, it shall remain exercisable with respect thereto until expiration or termination of such Option. An Option may be exercised from time to time, in whole or in part, up to the total number of shares with respect to which it is then exercisable. The aggregate Fair Market Value (determined at the date of grant as provided in section 6.1) of the portion of shares of Common Stock with respect to which any person may be granted Incentive Stock Options that are first exercisable in any one calendar year under the Plan (and any other stock option plan of the Corporation or any Subsidiary or a parent) shall not exceed $100,000 or such other amount as may be provided in the Code. 6.4. Acceleration of Exercisability. Except as provided in section 9.5, notwithstanding anything to the contrary in the Plan or in the stock option agreement evidencing an Option, in the event a Change of Control occurs, then each Option shall become exercisable, to the extent not then exercisable, during the period beginning on the date of the occurrence of such Change of Control and ending on the sixtieth day following such date, for the purchase of the full number of shares still subject to such Option, provided that no Option shall become exercisable, as a result of a Change of Control, prior to the date six months after the date of its grant. Upon the expiration of such sixty day period, such Option shall thereafter remain or become exercisable according to its original terms. 6.5. Payment. Upon exercise, the purchase price shall be paid in cash or, in the discretion of the Committee, in shares of Common Stock, or any other property acceptable to the Committee, or any combination of cash, shares of Common Stock and such property, in each case having an aggregate fair market value (as defined in section 2.11 or otherwise determined by the Committee) on the exercise date equal to such purchase price. 6.6. Termination of Employment. If the holder of an Option ceases, other than by reason of death, to be employed by the Corporation or any Subsidiary, no further installments of such Option shall become exercisable and such Option shall terminate on the earlier of (a) such Option's specified expiration date and (b) the date three months from the date of termination of such employment or, in the case of termination of employment by reason of Retirement or Disability, the first anniversary of termination of employment (or in either such case such earlier date as may be specified in the option agreement). Notwithstanding the foregoing, if an optionee's retirement date is the month following the sale of the subsidiary for which he or she worked, outstanding vested options shall remain exercisable at any time prior to the earlier of such option's specified expiration date and the first anniversary of such optionee's termination of employment. 6.7. Death. If the holder of an Option dies, such Option may be exercised, to the extent of the number of shares of Common Stock with respect to which the optionee could have exercised such Option on the date of death, by such optionee's estate, personal representative or beneficiary who acquires such Option by will or by the laws of descent and distribution at any time prior to the earlier of such Option's specified expiration date and the first anniversary of such optionee's death. On the earlier of such dates, the Option shall terminate. 6.8. Special Stock Appreciation Rights. In the event a Change of Control occurs, then any optionee who is subject to the provisions of section 16(b) of the Act shall have the right to elect (subject to any limitations expressly made applicable to rights under this section 6.8 and contained in the stock option agreement) by written notice to the Treasurer of the Corporation, during the period beginning on the date of the occurrence of such Change of Control and ending on the sixtieth day following such date, in lieu of purchasing shares of Common Stock as to which such Option shall become exercisable as a result of such Change of Control, to surrender such Option with respect to any or all of such shares and to receive a payment in cash from the Corporation in an amount equal to the amount by which (a) the Fair Market Value of a share of Common Stock on the date of such election, multiplied by the number of shares of Common Stock as to which the Optionee shall have made such election, exceeds (b) the total purchase price for such number of shares of Common Stock under such Option. Upon election by the optionee to receive a payment under this section 6.8, such Option shall thereafter remain exercisable, according to its terms, only with respect to the number of shares of Common Stock as to which it would otherwise be exercisable less the number of shares of Common Stock as to which such election shall have been made. Any shares of Common Stock as to which an election pursuant to this section 6.8 shall have been made shall not be available for further grants under this Plan. ARTICLE VII Terms and Conditions of Performance Shares and Performance Units 7.1. Performance Goals. The Committee shall prescribe, no later than six months after the commencement of each Performance Cycle, one or more financial performance measurement goals to be attained by the Corporation during such Performance Cycle. The performance goals may be based on such criteria as the Committee shall deem appropriate and in the best interests of the Corporation. The Committee may at any time adjust the performance goals in order to reflect significant, unexpected changes in circumstances. 7.2. Determination of Participants, Target Awards and Incentive Awards. No later than six months after the commencement of each Performance Cycle, the Committee shall determine those employees who shall be Participants in such Performance Cycle and the Target Award for each Participant for such Performance Cycle. In the case of a Performance Unit award, the Target Award shall be the product of the number of Performance Units awarded to such Participant and the dollar value of a Performance Unit if the performance goals for the Performance Cycle are met as fixed by the Committee. In the case of a Performance Share award, the Target Award shall be the number of Performance Shares to which such Participant will be entitled if the performance goals for the Performance Cycle are met. The Committee may also provide for an Incentive Award, which shall be a Participant's Target Award for a Performance Cycle increased or decreased to the extent considered appropriate by the Committee in order to reflect the relative level of attainment by the Corporation and the Participant of the performance goals established for such Performance Cycle. In making any increase or decrease, the Committee may take into account the recommendation of the Office of the Chairman and such other criteria as the Committee may consider pertinent. The Committee, in its sole discretion, shall determine whether to pay to Participants who have a vested Incentive Award consisting of Performance Shares an amount equal to the aggregate cash dividends which would have been paid on the number of Performance Shares for which payment is due (whether in cash or in shares of Common Stock) from the date of the grant of the Award to the date of payment had such Performance Shares been issued as shares of Common Stock on the date of grant of such Award (sometimes referred to as a "dividend equivalent"). 7.3. Vesting of Awards. At the close of business on the last day of the final year of each Performance Cycle, each Participant who shall have been continuously employed by the Corporation or a Subsidiary from the date such Participant's Target Award for such Performance Cycle was initially determined until the close of business on such day shall become irrevocably vested with the right to receive such Participant's Incentive Award for such Performance Cycle. 7.4. Special Vesting. If a Participant's employment is terminated by reason of Retirement, Disability or death, or if a Change of Control occurs, vesting will be as follows: (i) Retirement or Disability. If a Participant's employment is terminated by reason of Retirement or disability after 25% of a Performance Cycle has elapsed but before completion of that Performance Cycle, such Participant on the date of such termination of employment shall become irrevocably vested with the right to receive an amount equal to the product of (a) the Incentive Award of such Participant for each Performance Cycle that was not completed prior to termination of employment and (b) a fraction, the numerator of which is the number of full months of employment completed by such Participant during such Performance Cycle to the date of such termination and the denominator of which is the total number of months in such Performance Cycle. (ii) Death. If a Participant's employment is terminated by reason of his death after 25% of a Performance Cycle has elapsed but before completion of that Performance Cycle, such Participant's estate on the date of such termination of employment shall become irrevocably vested with the right to receive an amount equal to the product of (a) the Target Award of such Participant for each Performance Cycle that was not completed prior to his death and (b) a fraction, the numerator of which is the number of full months of employment completed by such Participant during such Performance Cycle to the date of such termination and the denominator of which is the total number of months in such Performance Cycle. (iii) Change of Control. In the event that any Participant's employment with the Corporation or any Subsidiary terminates by reason of a Qualifying Termination within two years after a Change of Control, such Participant shall become irrevocably vested with the right to receive an amount equal to the product of (a) the Target Award of such Participant for each Performance Cycle that was not completed prior to such Qualifying Termination and (b) a fraction, the numerator of which is the number of full months of employment completed by such Participant during such Performance Cycle to the date of such Qualifying Termination and the denominator of which is the total number of months in such Performance Cycle. In the event that a Change of Control takes place and a Participant's employment has not terminated as a result of a Qualifying Termination within two years of such Change of Control, the foregoing provision shall not apply to such Participant's Awards and the rights of such Participant in respect of such Awards shall be determined in accordance with the other provisions of the Plan. 7.5. Termination of Employment. Except as provided in section 7.4 or as may otherwise be determined by the Committee if a Participant's employment terminates before the close of business on the last day of the final year of a Performance Cycle, he shall forfeit his Incentive Award for such cycle. 7.6. Payment Date. (i) Normal Vesting, Retirement or Disability. Within forty-five days after Completion of the Audit for the final year of each Performance Cycle the Corporation shall on the date selected by the Committee pay to each Participant in such Performance Cycle any amount not yet paid that has theretofore vested in such Participant pursuant to section 7.3 or clause (i) of section 7.4. (ii) Change of Control. Within thirty days after a Change of Control the Corporation shall pay to each Participant the amount of such Participant's Incentive Award not yet paid for any Performance Cycle that was completed prior to the date of such Change of Control, which amount may be reasonably estimated by the Committee in the event payment is due hereunder prior to Completion of the Audit for the final year of such Performance Cycle. In the event that a Participant receives a payment of an estimated Incentive Award after a Change of Control pursuant to the preceding sentence, within forty- five days after Completion of the Audit for the final year of the Performance Cycle with respect to which such Incentive Award has then vested (x) the Corporation shall pay to such Participant the excess, if any, of such Participant's vested Incentive Award over such estimated Incentive Award payment or (y) such Participant shall pay to the Corporation the excess, if any, of such estimated Incentive Award payment over such Participant's vested Incentive Award. Within thirty days after a Qualifying Termination of a Participant's employment as described in clause (iii) of section 7.4, the Corporation shall pay to such Participant the amount that such Participant has a vested right to receive under such clause. (iii) Death. Within thirty days after a termination of a Participant's employment as described in clause (ii) of section 7.4, the Corporation shall pay to such Participant's estate in cash the amount that the estate has a vested right to receive under such clause. 7.7. Method of Payment. The Committee, in its sole discretion, may elect to pay vested Incentive Awards in cash, Common Stock or part in cash and part in Common Stock. If Performance Units are paid in shares of Common Stock, the number of such shares shall be equal to (a) the dollar value of the portion of the Award to be paid in shares divided by (b) the average Fair Market Value for a period of twenty trading days ending ten calendar days, or such smaller number of days selected by the Committee, before the date of payment. If Performance Shares are paid in cash, the amount of such cash payment shall be equal to (a) the number of Performance Shares to be paid in cash multiplied by (b) the average Fair Market Value for a period of twenty trading days ending ten calendar days, or such smaller number of days selected by the Committee, before the date of payment. Any dividend equivalent amount provided for under section 7.2 shall be paid in cash. 7.8. Deferral of Payment. A Participant may elect to defer all or any portion of a payment to which the Participant is entitled pursuant to this Article VII under The Deferred Compensation Plan of The Continental Corporation. ARTICLE VIII Capital Adjustments Except as otherwise provided in any written agreement evidencing an Option or Award, in the event of any change in the outstanding shares of Common Stock by reason of any stock dividend, stock split, combination or exchange of shares, recapitalization, reclassification, merger, consolidation, spin-off, reorganization or other similar transaction, the Board or Committee shall make appropriate adjustments in the aggregate number and class of shares that may be delivered under the Plan, the number and purchase price of shares of Common Stock covered by each Option outstanding on the date of such transaction (by means of a grant of a substitute Option or an additional Option or otherwise) and to each Award of Performance Shares outstanding on such date. Any fractional shares resulting from such adjustments shall be eliminated. ARTICLE IX Miscellaneous 9.1. Effective Date. The amendment and restatement of the Plan shall become effective as of May 20, 1993, subject to shareholder approval. 9.2. Amendment or Termination. The Board or Committee may terminate or amend the Plan in any respect at any time and the Office of the Chairman (or, in the cases of clauses (i) and (iii) below, the senior Human Resources officer) may approve in writing any amendment of the Plan when it finds that such amendment: (i) is required to conform the Plan to applicable laws or regulations; (ii) will not significantly decrease the benefits to, or rights of, any Participant in the Plan; or (iii) is intended only to implement transactions approved by the Board; provided, that, no such amendment may be made without shareholder approval if such approval is necessary to comply with any tax, regulatory or listing requirement or other applicable law, including for these purposes any approval requirement which is a prerequisite for exemptive relief under Section 16(b) of the Act. No action of the Board, the Committee, the Office of the Chairman or senior Human Resources officer, or the shareholders of the Corporation, without a Participant's consent, may (x) alter or impair a Participant's rights under any Option previously granted or to amounts in respect of Performance Units or Performance Shares already vested in him, or (y) in connection with a Change of Control, alter, impair or affect adversely the rights of any Participant in respect of an Option (including without limitation such Participant's acceleration rights under section 6.4) or in respect of Performance Units or Performance Shares with respect to any year or Performance Cycle that commenced prior to the date of such Change of Control (including without limitation such Participant's rights under section 7.4). 9.3. Inalienability of Interests. A Participant's interests under the Plan shall not be subject to alienation, assignment, garnishment, execution of levy of any kind, and any attempt to cause benefits to be so subjected shall not be recognized. Notwithstanding the foregoing, a Participant's interests may be transferred by will or by the laws of descent and distribution. During the lifetime of any optionee, only the optionee may exercise his Option. At the request of the holder of an Option, shares of Common Stock purchased upon the exercise of such Option, or received on exercise of stock appreciation rights, may be issued in or transferred into the name of such holder and another person, jointly with the right of survivorship. 9.4. Facility of Payments. In the event that the Office of the Chairman or senior Human Resources officer shall find that any person to whom any payment is due is unable to care for his affairs because of illness or accident, or otherwise, the Office of the Chairman or senior Human Resources officer may direct that any such payment shall be paid to the duly appointed legal representative of such person, or if there be no duly appointed legal representative, to the spouse, a child, a parent or other blood relative of the person or to any person deemed by the Office of the Chairman or senior Human Resources officer to have incurred expense for the benefit of such person, and any such payments so made shall be a complete discharge of the liabilities of this Plan therefor. 9.5. Excess Parachute Payments. A Participant's entitlement to payments under this Plan and the acceleration of the exercisability of Options under section 6.4 of the Plan shall be limited to the extent necessary so that no portion of such payment (or the value of such acceleration, as the case may be), when aggregated with payments or benefits (including the value of acceleration of stock options) to which the Participant is entitled under any other plan or agreement, shall be subject to the excise tax imposed by section 4999 of the Code. Any limitation under this section 9.5 of a Participant's entitlement to payments or on the acceleration of exercisability of Options shall be made in the manner and in the order directed by such Participant. 9.6. Written Agreements. Options and Awards shall be evidenced by written agreements in such form or forms and containing such restrictions, terms and conditions, not inconsistent with the Plan, as the Board or Committee may from time to time approve. 9.7. Withholding. The Corporation's obligation to deliver shares of Common Stock or to make a payment upon the exercise of any Option or Stock Appreciation Right or to make any payment in respect of an Award shall be subject to applicable federal, state and local tax withholding requirements. 9.8. Limited Effect. The Plan shall not be construed as creating any contract of employment or otherwise conferring upon any Participant any legal right to continuation of employment, nor as limiting or qualifying the right of the Corporation or a Subsidiary to discharge any Participant without regard to the effect that such discharge might have upon such Participant's rights under the Plan. 9.9. Number and Gender. Where from the context it appears appropriate, each term used in this Plan in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. 9.10. Captions. Captions of the Plan are inserted for convenience of reference only, and the Plan is not to be construed by interpretation thereof. 9.11. Applicable Law. This Plan shall be interpreted, construed and administered in accordance with the laws of the State of New York. EX-10 5 EXHIBIT 10(B) THE ANNUAL MANAGEMENT INCENTIVE PLAN OF THE CONTINENTAL CORPORATION (Amended and Restated as of January 1, 1993) (Incorporates Amendments No. 1 through 7) ARTICLE I Purpose The purpose of this Plan is to provide key employees with increased incentive, in addition to base compensation, to make significant and extraordinary contributions to the performance and growth of the Corporation and its subsidiaries; to attract key employees in the future and to encourage key employees to remain with the Corporation and its subsidiaries. ARTICLE II Definitions 2.1. Award. An amount determined by the application of participant performance and organizational modifiers to the Par Award as specified in paragraphs 2.8(a) through (e) of this Article. 2.2. Board. The Board of Directors of The Continental Corporation. 2.3. Committee. The Compensation Committee of the Board as appointed from time to time. 2.4. Corporation. The Continental Corporation and any subsidiary corporation at least 50% of whose issued and outstanding voting stock is owned directly or indirectly by The Continental Corporation. 2.5. Division. A staff department of the Corporation. 2.6. Group. An identifiable profit center within the Corporation. 2.7. Par Award. The midpoint of a Participant's salary grade multiplied by a percentage as determined from time to time by the Board or Committee. 2.8. Par Award Modifiers. (a) Participant Performance Modifier (Tier I). A factor or factors determined by the Committee to reflect the level of attainment by the Corporation of the Corporate Target Goals or attainment by a Participant of individual goals for the Plan Year which may increase or decrease a Tier I Participant's Par Award within a range from 0% to 250% of par. (b) Participant Performance Modifiers (Tier II). Percentage factors determined by the Committee to reflect the level of attainment by Participants of their respective individual performance goals for the Plan Year, as determined by individual performance ratings and modified by a formula adopted by the Committee. The Par Award for each Tier II Participant is multiplied by the factors and formula so determined to increase or decrease the Par Award, provided that participant whose individual performance rating is 2.4 or less is not eligible to receive an Award. (c) Corporate Modifiers. Percentage factors determined by the Committee, by which the Par Award for each Tier II Participant will be multiplied to reflect the level of attainment of Corporate Target Goals, as determined by the Committee. (d) Group Modifiers. Percentage factors determined by the Committee, by which the Par Award for each Tier II Participant will be multiplied to reflect the level of performance of the Group of such Participant (as determined by the Chairman and the President, who may take into account the Committee determination of the level of attainment of Corporate Target Goals); the head of each Group may further modify such Par Award to reflect the relative performance of the business unit of such Participant (as determined by such head of the Group), provided that such further modifications in the aggregate may not increase or decrease the total amount payable to all Participants in the Group. (e) Division Modifier. A percentage factor determined by an evaluation of the results for the combined property and casualty operations, as determined by the Chairman and the President. 2.9. Participants. Active full-time or regular part-time employees of the Corporation at the beginning of, or who qualify during, the Plan Year and who are employed on December 31 of the Plan Year, as follows: (a) Tier I Participant. Senior Management Employees designated by the Board or Committee. (b) Tier II Participant. Employees in positions assigned to salary grades above 46, except any Tier I Participant. 2.10. Plan. The Annual Management Incentive Plan, as amended from time to time. 2.11. Plan Year. January 1 to December 31. 2.12. Target Goals. In the case of the Corporate Target Goals, the criteria and the amounts established by the Board or Committee prior to or at the beginning of each Plan Year by which the performance of the Corporation is measured. In the case of Group Target Goals, the criteria or amounts established by the Chief Executive Officer of the Corporation which are consistent with the Corporate Target Goals. ARTICLE III Administration The Plan shall be administered by the Committee who shall report to the Board with respect to action taken pursuant to the Plan at the first meeting of the Board following such action. The Committee may delegate to the Office of the Chairman or the senior Human Resources officer such of the administrative functions and powers as the Committee considers appropriate, subject to the terms of the Plan. The Committee shall have full authority to administer the Plan, including, but not limited to, the power to determine the time of payment of Awards, to interpret the Plan, to determine for each Plan Year the Participant Performance Modifiers for Tier I and Tier II, to determine the Corporate and Group Modifiers to reflect the level of attainment of the Corporate and Group Target Goals for that Plan Year, to recommend to the Board the Award of the Chief Executive Officer, and to approve individual Awards for all Tier I Participants. The Office of the Chairman is authorized to determine all other Awards, subject to approval in the aggregate by the Committee. The Board has the discretion during or after any Plan Year to increase or decrease the amount of any Target Goal for that Plan Year to reflect (1) extraordinary, unusual or non-recurring items or events, or (2) material differences between any significant assumptions used by the Board in fixing a Target Goal and actual events or conditions experienced during the Plan Year. Decisions of the Board, Committee or Office of the Chairman with respect to the interpretation or administration of the Plan shall be final, conclusive and binding. ARTICLE IV Participation 4.1. Participants as defined in Article II are eligible to participate in the Plan under the terms and conditions thereof. 4.2. If a Participant ceases to be employed by the Corporation prior to the end of the Plan Year for any reason other than death, disability, or normal, early or postponed retirement under The Retirement Plan of The Continental Corporation, except as provided in Article 5.3., then the Participant's participation in the Plan will terminate forthwith and he will not be eligible to receive an Award for such Plan Year. 4.3. If prior to the end of a Plan Year a Participant having completed at least six months full time or regular part-time active service terminates employment by reason of death, disability, or normal, early or postponed retirement under The Retirement Plan of The Continental Corporation or if prior to the end of the Plan Year the Participant's eligibility is terminated because of a change of Salary Grade, the Participant will receive only that portion of the Award determined by multiplying the Award, if any, that the Participant otherwise would have received under the Plan for the full Plan Year by a fraction, the numerator of which is the number of calendar months of the Participant's active service during the Plan Year and the denominator of which is twelve. In the event a Participant terminates employment by reason of death, the Office of the Chairman or senior Human Resources officer for employees in Tier II may determine to pay the pro rata Award to the Participant's estate prior to or after the end of the Plan Year. 4.4. Subject to the provisions of paragraphs 4.2. and 4.3. of this Article IV, if the effective date of participation for a Participant is prior to July 1 of a Plan Year, the Participant will be entitled to receive only that portion of the Award determined by multiplying the Award, if any, that the Participant otherwise would have received under the Plan for the full Plan Year by a fraction, the numerator of which is the number of calendar months of the Participant's active service during the Plan Year and the denominator of which is twelve. No Participant whose effective date of participation is after June 30 of a Plan Year may receive an Award for such Plan Year. 4.5. In the event a Participant's Tier level changes during the Plan Year, or the participant moves from a Division, Group or Unit to another such organization within the Corporation, the Participant's Award, if any, will be determined on a pro rata basis for participation in each Tier level or organization, as the case may be, by application of fractions, the numerators of which are the numbers of calendar months of active service in each Tier level or organization and the denominators of which are twelve. 4.6. Any Participant who is eligible to participate in any other short term or sales incentive plan within the Corporation is not eligible to participate herein unless selected for a Special Award. 4.7. Special Awards may be granted to employees other than the Chairman, whom the Office of the Chairman may recommend, subject to approval of the Committee. ARTICLE V Payment of Awards 5.1. Standard Method of Payment. Subject to the terms and conditions of this Plan, the Corporation shall pay each eligible Participant an Award for each Plan Year. 5.2. Optional Methods of Payment. (a) Three Installments. A Participant may elect to receive one third of an Award on the date specified for payment and one third on the first and second anniversary dates thereafter. (b) Deferral Until Retirement. Payment of an Award may be deferred until a Participant retires under The Retirement Plan of The Continental Corporation or the first anniversary thereafter. (c) Deferral Until A Specific Date. A Participant may elect to defer payment of an Award until a specific future date. (d) Interest On Deferral Awards. Interest will accrue annually on all deferral amounts and will be paid together with payment of such amounts. The rate of interest will be determined periodically by the Chief Financial Officer of the Corporation, closely paralleling the Corporation's cost of money. (e) Upon Death Of A Participant. In the event a Participant dies prior to any deferral date(s) elected pursuant to subsections (a) through (c) above, all deferral amounts of such Participant, together with interest accrued thereon, shall be paid as directed by the Executor or Administrator of the Participant's estate. (f) Payment Upon Termination. If a Participant ceases to be employed by the Corporation, except as provided in Article 5.3., for any reason other than death, disability, or normal, early or postponed retirement under The Retirement Plan of The Continental Corporation, any deferred Award(s) and accrued interest thereon shall be computed as of the date of termination and paid thereafter within a reasonable period of time. 5.3 Change of Control (a) A "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" of persons (as such terms are used in sections 13 and 14 of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan sponsored by The Continental Corporation ("Continental") becomes the "beneficial owner" (as such term is used in section 13 of such Act) of 30% or more of the outstanding shares of Continental's capital stock entitled to vote for the election of directors; or (ii) any shares of any class of Continental's capital stock are purchased pursuant to a tender or exchange offer (other than an offer by Continental or any subsidiary thereof); (iii) or the approval by the requisite vote of Continental's shareholders of any merger, consolidation, sale of assets, liquidation or reorganization as a result of which Continental will not survive as a publicly-owned corporation; or (iv) a change in the composition of the Board during any period of two consecutive years such that individuals who at the beginning of such period were members of the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. (b) "Qualifying Termination" means a termination of a Participant's employment with the Corporation (under circumstances where such Participant is no longer employed by the Corporation) for any reason other than (i) death, (ii) Disability, (iii) willful misconduct in the performance of such Participant's duties as an employee, (iv) Retirement, or (v) a termination by such Participant, other than a termination for one or more of the following reasons: (x) the assignment to such Participant of any duties inconsistent, in a way significantly adverse to such Participant, with such Participant's positions, duties, responsibilities and status with the Corporation and its Subsidiaries immediately prior to such Change of Control, or a significant reduction in the duties and responsibilities held by such Participant immediately prior to such Change in Control; a change in such Participant's reporting responsibilities, titles or offices as in effect immediately prior to such Change of Control; or any removal of such Participant from or any failure to re-elect such Participant to any position with the Corporation that such Participant held immediately prior to such Change of Control except in connection with such Participant's promotion or termination of employment for any of the reasons specified in paragraphs (i) through (iv) above; or (y) a reduction by the Corporation in such Participant's base salary as in effect immediately prior to such Change of Control; the failure by the Corporation to continue in effect any employee benefit plan or compensation plan in which such Participant was participating immediately prior to such Change of Control unless such Participant is permitted to participate in other plans providing substantially comparable benefits to such Participant; or the taking of any action by the Corporation that which would adversely affect such Participant's participation in or materially reduce such Participant's benefits under any such plan; or (z) the Corporation's requiring such Participant to be based anywhere other than such Participant's present location; or the Corporation's requiring such Participant to travel on the Corporation's business to an extent substantially more burdensome than such Participant's travel obligations immediately prior to such Change of Control. (c) In the event that any Participant's employment with the Corporation terminates prior to the end of a Plan Year by reason of a Qualifying Termination within two years after a Change of Control, such Participant shall become irrevocably vested with the right to receive an amount equal to his Par Award for that Plan Year multiplied by a fraction, the numerator of which is the number of calendar days from January 1 of such year through the date of his termination and the denominator of which is 365. The Corporation shall pay the Participant such amount within 15 days after the date of such Qualifying Termination of his employment. ARTICLE VI Miscellaneous 6.1. Limitations on Participants' Rights. No Participant, or other person, shall have any right or claim to any Award under the Plan except in accordance with the provisions of the Plan. The Plan shall not be construed as creating any contract of employment or otherwise conferring upon any Participant any legal right to continuation of employment, nor as limiting or qualifying the right of any company included within the Corporation to discharge any of its employees without regard to the effect that such discharge might have upon such employee's rights under the Plan. 6.2. Non-Assignability of Rights. No interest, right or claim in or to any Award hereunder shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind, and the Corporation shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute or anticipate the same, except to the extent required by law. 6.3. Facility of Payments. In the event that the Office of the Chairman or senior Human Resources officer shall find that any Participant to whom an Award is payable under the Plan is unable to care for his affairs because of illness or accident, or otherwise, the Office of the Chairman or senior Human Resources officer may direct that any payment due shall be paid to the duly appointed legal representative of such person, or if there be no duly appointed legal representative, to the spouse, a child, a parent or other blood relative of the person, or to any person deemed by the Office of the Chairman or senior Human Resources officer to have incurred expense for the benefit of such person, and any such payments so made shall be a complete discharge of the liabilities of the Plan therefor. 6.4. Number and Gender. Where from the context it appears appropriate, each term used in this Plan in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. 6.5. Captions. Captions of this Plan are inserted for convenience of reference only, and the Plan is not to be construed by interpretation thereof. 6.6. Applicable Law. This Plan shall be interpreted, construed and administered in accordance with the laws of the State of New York. 6.7. Amendment or Termination. The Board or Committee may amend, suspend or terminate the Plan. The Office of the Chairman (or, in the cases of clauses (i) or (iii) below, the senior Human Resources officer) may approve in writing any amendment of the Plan when it finds that such amendment: (i) is required to conform the Plan to applicable laws or regulations, (ii) will neither increase the annual cost of the Plan by more than the greater of 5% or $1 million, nor significantly decrease the benefits to, or rights of, any participant in the Plan, or (iii) is intended only to implement transactions by the Board, provided that following, or in connection with, a Change of control (as defined in Article 5.3.) the Board, Committee or Office of the Chairman may not amend, suspend or terminate the Plan with respect to Awards for the Plan Year in which such Change of Control occurs. EX-10 6 EXHIBIT 10(C) THE INCENTIVE SAVINGS PLAN OF THE CONTINENTAL CORPORATION (Amended and Restated as of January 1, 1994) (Incorporates Amendments No. 1 through 28) To encourage and assist their employees to save regularly, The Continental Corporation and certain of its United States affiliates have established the Incentive Savings Plan of The Continental Corporation hereinafter set forth. ARTICLE I Definitions The following terms when used herein, unless the context clearly indicates otherwise, shall have the meanings set forth below: 1.1 Accounts. The Participant After-Tax Contributions Account, Participant Tax-Deferred Contributions Account, an Employee's Rollover Account and the Company Contributions Account maintained for a Participant. 1.2 Administrator. An individual appointed by the Incentive Savings Plan Committee to serve in this capacity. The Administrator is not precluded from serving as a Trustee. 1.3 Affiliated Corporation. (a) A corporation controlling, controlled by or under common control with the Company, through ownership, directly or indirectly through one or more intermediaries, of at least a majority of the voting stock of the controlled corporation; or (b) A corporation which is a member of a controlled group of corporations (within the meaning of Section 1563(a) of the Internal Revenue Code, determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C) thereof) of which any Employer is a member. 1.4 Board of Directors. The Board of Directors of the Company. 1.5 Break in Service. A period of at least twelve consecutive months beginning on a person's severance from service date (as defined in Section 1.12) and ending on the first anniversary thereof, during which a person does not perform an Hour of Service. However, for the purpose of the foregoing, in the event a person incurs a severance from service date (as defined in Section 1.12) (i) by reason of such person's pregnancy, (ii) by reason of the birth of a child of such person, (iii) by reason of the placement of a child with such person in connection with the adoption of a child by such person, or (iv) for the purpose of caring for such child for a period beginning immediately following such birth or placement, then a "Break in Service" shall mean a period of at least twenty-four consecutive months beginning on the person's severance from service date (as defined in Section 1.12) and ending on the second anniversary thereof, during which the person does not perform an Hour of Service. Additionally, the period between the first and second anniversaries of the first day of absence from work shall neither be a period of service nor a period of severance. 1.6 Company. The Continental Corporation, a New York corporation. 1.7 Company Contributions. The amounts contributed under the Plan by the Employers for the benefit of Participants. 1.8 Company Contributions Account. The assets, Investment Shares and Investment Units credited to a Participant that are attributable to Company Contributions made with respect to such Participant. 1.9 Compensation. The regular basic compensation payable to a Participant by an Employer prior to reduction for tax-deferred contributions under Section 2.4 of this Plan or reduction to reflect tax-exempt contributions or benefit payments, excluding Company contributions under this or any other employee benefit plan of an Employer, overtime pay, bonuses, commissions (except to the extent that under the rules of an Employer commissions are in lieu of base salary or wages), fees and other occasional or extraordinary payments. In no event will Compensation for any pay period exceed $200,000 in 1989, or such amount as increased by the Secretary of the Treasury for years after 1988, divided by the number of pay periods in the calendar year. In no event will Compensation for any pay period exceed $150,000 in 1994, or such amount as increased by the Secretary of the Treasury for years after 1994, divided by the number of pay periods in the calendar year. 1.10 Employee. A person employed by an Employer excluding any officer or director who is not compensated by regular salary. 1.11 Employer. The Company and those of its Affiliated Corporations it designates. 1.12 Employment. That period of time which begins on a person's employment or reemployment commencement date and ends on his severance from service date. A person's employment commencement date is the date on which he first performs an Hour of Service. A person's reemployment commencement date is the first date on which he performs an Hour of Service after a period of severance. A period of severance commences on a person's severance from service date and ends on the first date thereafter on which he performs an Hour of Service. A severance from service date is the earlier of the date on which a person quits, is discharged, retires or dies, or the first anniversary of the date on which he does not perform an Hour of Service for any other reason. 1.13 Entry Date. Any pay date. 1.14 ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time. 1.15 Hour of Service. An hour for which a person is directly or indirectly compensated (including back pay irrespective of mitigation of damages) by an Employer or an Affiliated Corporation which is not an Employer. In addition, eight Hours of Service shall be credited for each scheduled workday for which a person is on: (a) Any period of absence on leave without pay (in the granting of which, persons in similar circumstances will be treated in a uniform and nondiscriminatory manner), provided the person returns to Employment at or prior to the termination of the leave; and (b) Any period of absence in the service of the armed forces of the United States in time of war or national emergency, provided the person returns to Employment within 90 days after the termination of his service in such armed forces or within such longer period as his employment rights are protected by law. Notwithstanding the foregoing, any person who is scheduled to work for the regular workweek of an Employer or an Affiliated Corporation at the person's location (or who was scheduled to do so at the beginning of a period of absence described in clauses (a) or (b) of the preceding sentence), shall be credited with 190 Hours of Service for each calendar month for which he is entitled to be credited with at least one Hour of Service under the preceding sentence. The foregoing shall be construed so as to avoid duplication of credit for Hours of Service for a single hour. Hour of Service shall be computed and credited in accordance with paragraphs (b) and (c) of section 2530.200b-2 of the Department of Labor regulations. 1.16 (a) Investment Shares. The undivided interests in the Vanguard/Wellington Fund, Vanguard U.S. Growth Portfolio and Vanguard Index Trust-500 Portfolio of the Trust Fund provided for in Article IV of the Plan. (b) Investment Units. The undivided interests in the Continental Stock Fund and Interest Savings Fund of the Trust Fund provided for in Article IV of the Plan. 1.17 Participant. A person for whom an Account is maintained under the Plan (other than an Employee for whom only a Rollover Account is maintained). 1.18 (a) Participant After-Tax Contributions Account. The assets, Investment Shares and Investment Units credited to a Participant that are attributable to all of his own contributions made prior to January 1, 1984 and attributable to his After-Tax Contributions made after January 1, 1984. After-Tax Contributions shall mean Participant Contributions other than Tax-Deferred Contributions. (b) Participant Tax-Deferred Contributions Account. The assets, Investment Shares and Investment Units credited to a Participant that are attributable to his own Tax-Deferred Contributions made after January 1, 1984. Participant Tax-Deferred Contributions are contributions not subject to federal income tax when made in accordance with Section 401(k) of the Internal Revenue Code of 1986 as amended and applicable regulations. 1.19 Plan. This Incentive Savings Plan as herein set forth or, if hereafter amended, as so amended. 1.19A Plan Year. The Plan Year and the limitation year shall be a calendar year. 1.20 Trust Agreement. The agreement described in Article IV of the Plan. 1.21 Trustees. The trustees provided for in Article IV of the Plan or any successor trustees designated in accordance with the terms of the Trust Agreement. 1.22 Trust Fund. The cash and investments held at any one time by the Trustees. 1.23 Years of Vesting Service. One Year of Vesting Service shall be credited for each 12 months of Employment: (a) For periods prior to January 1, 1976, measured from the date a person first became eligible to elect to become a Participant; (b) For periods after December 31, 1975, including periods of no more than twelve months' duration between periods of Employment (i) which are begun by reason of quit, discharge or retirement or (ii) which are begun for any other reason but in the course of which a quit, discharge or retirement occurs. Periods during which an Employee otherwise eligible to become a Participant does not become one solely by reason of his declining to contribute to the Plan are not, however, included. Service of individuals who are leased employees or employed in noncovered employment for the Employer controlled group and affiliated service group will be counted for vesting purposes. 1.24 Incentive Savings Plan Committee (or "Committee"). A Committee whose members are the named fiduciaries (as defined by ERISA) of the Plan. Members of the Incentive Savings Plan Committee are individuals appointed by the Compensation Committee to serve in this capacity. 1.25 Compensation Committee. The Compensation Committee of the Board of Directors as appointed from time to time. ARTICLE II Participation and Participants' Contributions 2.1 Participants On January 1, 1993. Every person who is an Employee on January 1, 1993 and who was a Participant on December 31, 1992 shall continue to be a Participant on January 1, 1993. 2.2 Eligibility. (a) Every Employee shall be eligible to participate in accordance with the rules set forth in Section 2.2(b) of this plan unless he is: (i) an Employee who is compensated exclusively on a commission or fee basis (except to the extent that under the rules of an Employer commissions are in lieu of base salary or wages); (ii) an Employee covered by a collective bargaining agreement between employee representatives and one or more Employers, if such agreement does not expressly provide for coverage by this Plan and if retirement benefits were the subject of good faith bargaining between such employee representatives and such Employer or Employers; (iii) Employee employed in Canada; or (iv) an Employee employed outside the United States who is not a citizen of the United States. (b) Every Employee eligible to participate under Subsection 2.2(a) shall be eligible to elect to become a Participant on any Entry Date (provided he is then an Employee) following the close of any twelve-month period during which he completed 1,000 Hours of Service. A Participant who incurs a period of severance but returns to Employment shall again be eligible for Plan participation as of the first Entry Date coincident with or next following his reemployment commencement date, provided: (i) he is eligible to participate under Subsection 2.2(a), and (ii) he again satisfies the conditions of Section 2.3. 2.3 Election to Participate. Participation in the Plan by Employees is voluntary. An Employee who is eligible to elect to become a Participant on any Entry Date and who wishes to participate in the Plan must elect to do so by signing and filing with the Administrator at least 14 days before an Entry Date the form of election provided by the Administrator for such purpose. In the form of election to participate, the Employee shall specify the percentage of Compensation he elects to contribute under the Plan on each pay date and authorize such amounts to be taken from his Compensation, and shall agree to be bound by all the terms and provisions of the Plan. Upon filing such election he shall become a Participant, and the percentage of Compensation he elected to contribute under the Plan shall begin to be taken from his Compensation with the Entry Date elected. 2.4 (a) Amount and Allocation of Participants' Contributions. A Participant may elect to contribute under the Plan on each pay date any whole number percentage but not more than 15% of his Compensation, subject to the limitations of Section 415 of the Internal Revenue Code of 1986, as amended (after the application of Section 3.1 of this Plan). Participant Contributions may be After-Tax Contributions or Tax-Deferred Contributions. However, in no event may the Tax-Deferred Contribution for a Participant exceed $8,994 during 1993 or such amount as increased by the Secretary of the Treasury for years after 1993. In the event that the percentage of compensation a Participant elects to contribute and allocate to Tax-Deferred Contributions would result in exceeding the dollar limitation in the preceding sentence, any excess over such limitation shall automatically be reallocated to After-Tax Contributions unless the Participant elects to cease contributions for the balance of the calendar year. The percentage of Compensation that the Participant elects to contribute under the Plan and the allocation of such percentage between Tax-Deferred (subject to the dollar limitation in this paragraph) and After-Tax Contributions will continue in effect so long as he continues to participate except that effective on any Entry Date after he becomes a Participant he may increase or decrease the percentage of Compensation he will contribute on each pay date thereafter, change such allocation or he may suspend making contributions, in each case by signing and filing with the Administrator, at least 14 days before a pay date, a form provided by the Administrator for such purpose, specifying (unless he suspends making contributions) the percentage of Compensation he elects to contribute under the Plan for each pay date thereafter and authorizing such amount to be taken from his Compensation or the new allocation thereof. Upon filing such form, unless he has elected to suspend making contributions, the new percentage of Compensation he has elected to contribute under the Plan and/or the new allocation shall begin to be taken from his Compensation on the pay date elected. A Participant who has suspended making contributions may resume making contributions effective as of any Entry Date thereafter by complying with the requirements set forth above for increasing the percentage of Compensation to be contributed. (b) Contribution Limitations for Employees Residing in Puerto Rico. The provisions in Section 2.4(a) notwithstanding, if a Participant resides in Puerto Rico, the Participant's Tax-Deferred Contributions in any calendar year may not exceed 10% of compensation and shall be subject to any other limitations established by applicable laws of the Commonwealth of Puerto Rico. (c) Actual Deferral Percentage Limitation. The rules in subsection 2.4(a) notwithstanding, the following rules and limitation shall apply to a Participant's Tax Deferred Contributions. In the event that the Administrator shall at any time determine that the spread between the percentage of compensation contributed to the Plan as Tax-Deferred Contributions for (i) "highly compensated employees" (within the meaning of Section 414(q) of the Code and the regulations thereunder) of the participating Employers, and (ii) all other eligible Employees will not meet either of the following tests: (i) the actual deferral percentage for the group of "highly compensated employees" is not more than the actual deferral percentage for all other eligible employees multiplied by 1.25; or (ii) the excess of the actual deferral percentage for the group of "highly compensated employees" over that of all other eligible Employees is not more than 2 percentage points, and the actual deferral percentage for the group of "highly compensated employees" is not more than the actual deferral percentage of all other eligible Employees multiplied by 2.0, the Administrator, in his sole discretion, may unilaterally reduce, on a prospective basis, the maximum percentage of compensation which such "highly compensated employees" elected to be Tax-Deferred Contributions under the Plan. Upon written notice from the Administrator to an affected Participant, the Participant's election of Tax-Deferred Contributions shall be automatically adjusted as of the date specified by such notice, without any further action on the part of such Participant or his Employer, to conform to the new limitation imposed by the Administrator and unless such Participant otherwise instructs the Administrator in a written notice, his election of After-Tax Contributions (if any) also shall be automatically adjusted so as to increase the percentage of his compensation which shall be contributed pursuant thereto by the amount of such automatic adjustment to the Participant's Tax-Deferred Contributions. The Administrator, in his sole discretion, may at any time remove any limitation imposed by him under this Subsection 2.4(c) and, upon written notice from the Administrator to the affected Participants, any modifications to the Participant's Tax-Deferred Contributions and Participant's After-Tax Contributions resulting from such limitation shall automatically cease to be effective and such elections shall continue in effect under the terms that existed immediately prior to such modifications. If after the close of the Plan Year, the Administrator shall determine that the spread, as determined by the tests above, between the percentage of compensation contributed to the Plan by means of Tax-Deferred Contributions for (i) "highly compensated employees" of the Participating Employers, and (ii) the remaining Employees required to be considered under Section 401(k) of the Code and the regulations thereunder, for the Plan Year then ended is such that the Tax-Deferred Contributions would fail to qualify as a "qualified cash or deferred arrangement" under Section 401(k) of the Code for such Plan Year, then, to the extent necessary to so qualify and as permitted by the Internal Revenue Service, a portion of the Tax-Deferred Contributions for such Plan Year of some or all of the "highly compensated employees" automatically shall be converted into After-Tax Contributions or paid to the Participants. Such conversion will be made by converting the Tax-Deferred Contributions, to the extent permitted, of the highly compensated employee with the highest deferral percentage to After-Tax Contributions to the extent necessary to meet the applicable test, or to the extent necessary to equal the deferral percentage of the next highest deferral percentage of a highly compensated employee. This process will be repeated until the applicable test is satisfied. Affected participants will be notified of conversion within 2-1/2 months after the end of the applicable year. If payment is required, such payment shall include a pro rata share of investment earnings credited to the participant's accounts for the affected period as determined in accordance with Internal Revenue Service regulations and shall be paid to the Participants not later than 2-1/2 months after the end of the applicable calendar year. The Tax-Deferred and After-Tax Contributions Accounts of any affected Participant shall be adjusted accordingly, and the Administrator shall take, and instruct the appropriate Employers to take, such other action as shall be necessary or appropriate to effectuate such conversion or payment. The Administrator shall notify the affected Participants of the conversion or payment within 2-1/2 months after the end of the applicable calendar year. For purposes of this Section 2.4(c) and Sections 2.4(d) and 2.4(e), the term "compensation" shall mean all compensation payable by an Employer that is reportable as includable gross income of an Employee for the applicable year, plus any amounts not so included for such year that represent Tax-Deferred Contributions under Section 2.4(a) or tax-exempt contributions by an Employee that are permissible under Section 125 of the Internal Revenue Code. For purposes of this Section 2.4(c) and Sections 2.4(d) and 2.4(e), the Administrator may elect, for the purpose of determining who are "highly compensated employees", that (pursuant to the applicable regulations under Section 414(q) of the Code) the look-back year calculation for a determination year shall be on the basis of the calendar year ending with the applicable determination year. If the Administrator makes the foregoing election, then such election will also apply to any plan of the Employer or an Affiliated Corporation which is not an Employer which qualifies under Section 401(a) of the Code. (d) Actual Contribution Percentage Limitation. The rules in Subsection 2.4(a), 2.4.(b) or 2.4(c) notwithstanding, the following rules and limitations shall apply to a Participant's After-Tax Contributions. In the event that the Administrator shall at any time determine that the spread between the sum of the percentage of compensation contributed to the Plan as After-Tax Contributions and the Company Contributions for (i) "highly compensated employees" (within the meaning of Section 414(q) of the Code and the regulations thereunder) of the participating Employers, and (ii) all other eligible Employees will not meet either of the following tests: (i) the average of the sum of the percentage of compensation contributed as After-Tax Contributions plus Company Contributions calculated separately for each member of the group of "highly compensated employees" is not more than the average of such percentages for all other eligible employees multiplied by 1.25; (ii) the excess of the average of the sum of such percentages for the group of "highly compensated employees" over that of all other eligible Employees is not more than 2 percentage points, and the average of the sum of such percentages for the group of "highly compensated employees" is not more that the sum of the average of such percentages of all other eligible employees multiplied by 2.0, the Administrator, in his sole discretion, may unilaterally reduce the maximum percentage of compensation which such "highly compensated employees" elected to be After-Tax Contributions under the Plan. Upon written notice from the Administrator to an affected Participant, the Participant's election of After-Tax Contributions shall be automatically adjusted as of the date specified by such notice, without any further action on the part of such Participant or his Employer, to conform to the new limitation imposed by the Administrator, and the Participant's direct compensation shall be increased by the amount of such adjustment. The Administrator, in his sole discretion, may at any time remove any limitation imposed by him under this Subsection 2.4(d) and, upon written notice from the Administrator to the affected Participants, any modifications to the Participant's After-Tax Contribution resulting from such limitation shall automatically cease to be effective and such elections shall continue in effect under the terms that existed immediately prior to such modifications. If after the close of the Plan Year, the Administrator shall determine that the spread, as determined by the test above, between the average of the sum of the percentages of After-Tax and Company Contributions for (i) the group of "highly compensated employees" of the Participating Employers, and (ii) the remaining eligible Employees for the Plan Year then ended is such that the After-Tax and Company Contributions would fail to qualify under Section 401(m) of the Code for such Plan Year, then, to the extent necessary to so qualify, a portion of the After-Tax Contributions for such Plan Year of some or all of the "highly compensated employees" shall be reduced by payment of the excess portion of such contributions, together with a pro rata share of investment earnings for the applicable year as determined in accordance with Internal Revenue Service regulations, to the affected Participants within 2-1/2 months of the end of such Plan year. (e) Aggregate Contribution Limitation. Each year after the determination of the limits and adjustments, if any, to the contributions of highly compensated employees as required by Subsections (c) or (d) of this Section 2.4, the rules of those subsections notwithstanding, the Administrator shall make further adjustments to the Tax-Deferred Contributions or After-Tax Contributions of highly compensated employees if the aggregate contribution limit is exceeded. The aggregate contribution limit is the sum of (i) and (ii) where (i) is 125 percent of the greater of the actual deferral percentage, as determined under Section 2.4(c), of non-highly compensated employees eligible to participate in the Plan or the actual contribution percentage, as determined under Section 2.4(d) for such employees, and (ii) is two percentage points plus the lesser of the actual deferral percentage or the actual contribution percentage of the non-highly compensated employees eligible to participate in the Plan,but not more than 200 percent of the lesser of such percentages. If an adjustment is required because the aggregate contribution limit is exceeded, the Administrator shall reduce the After-Tax Contributions of the highly compensated employees who are Participants to the extent necessary to meet the aggregate contribution limit. Such reduction will be determined using the method described in Section 2.4(c) for conversions of Tax-Deferred Contributions to After-Tax Contributions. The amount of any necessary reductions will be paid, together with the pro rata share of investment earnings credited to such accounts, to the affected highly compensated Participants within 2-1/2 months after the end of the applicable year. (f) Contribution Limitations. Anything in this Section 2.4 to the contrary notwithstanding, in no event shall contributions to this Plan exceed the maximum contributions permitted under Sections 401(k) and 401(m) of the Internal Revenue Code of 1986. 2.5 Payment of Participants' Contributions to Trustees. As promptly as practicable after each pay date, the Employers will transmit the Participant's contributions to the Trustees to be held in the Trust Fund for the benefit of the respective Participants. The amount of each Participant's contributions will be credited to his Participant After-Tax Contributions Account or Tax-Deferred Contributions Account as elected in accordance with Section 2.4 and invested in accordance with Article IV of the Plan. 2.6 Rollover Contributions and Account. Subject to the approval of the Administrator, an Employee (even if not a Participant) may transfer to the Trust Fund the cash amounts and/or property accumulated for the Employee under any other qualified corporate retirement or profit sharing plan or plans, either directly or through a rollover IRA. However, the Employee must certify to the Administrator that the cash amounts and/or property being transferred qualifies as a "rollover contribution" under application law and regulations. Such rollover contribution, upon receipt by the Trustee, shall be converted into cash and deposited in the Employee's Rollover Account and shall become subject to all of the terms and conditions of this Plan and the Trust Agreement after it is transferred. The Employee shall be 100% vested at all times in his Rollover Account. No transfer subject to Code Section 401(a)(11) will be permitted. ARTICLE III Company Contributions 3.1 Amount of Company Contributions. The Employers will contribute under the Plan on each pay date, out of the current or accumulated earnings or profits of the Employers, an amount that shall match the first 6% of Compensation contributed on that pay date by Participants in accordance with the following schedule: Amount to be Contributed By Employers as a Percentage Fund to Which Participant Has of First 6%of Compensation Allocated His Contribution Contributed By Participants Continental Stock Fund 110% All Other Funds 100% Company Contributions shall be allocated among the investment funds in the same proportions as elected by the Participant for his Contributions. In addition, the Company Contributions during a Plan Year on behalf of any Participant shall not exceed the limitations of Section 415 of the Internal Revenue Code of 1986, as amended. The provisions of Code Section 415 and the Treasury Department Regulations promulgated thereunder, shall be incorporated by reference into the Plan, provided, however, that in the case of any Participant as to whom the sum of the defined benefit plan fraction and the defined contribution plan fraction for any year exceeds 1.0 (prior to the application of this paragraph and Section 2.4(a)), the projected annual retirement benefit payable under The Retirement Plan of The Continental Corporation shall be reduced to the extent required to make such sum 1.0. The Employers will also contribute, out of the current or accumulated earnings or profits of the Employers, any amounts restored for a former Participant pursuant to Section 5.8 hereof. During each year for which an Employer joins in the filing of a consolidated Federal income tax return, those Employers joining in such filing will pay the portion of the Company Contributions made during such year with respect to Participants who are in the employ of such Employers in such proportions as may be designated by the Company, provided that, if the Company has joined in such filing, all such Company Contributions will be paid by the Company. During each year for which an Employer does not join in filing a consolidated Federal income tax return, such Employer will pay the portion of the Company Contributions made during such year with respect to Participants who are in the employ of such Employer, but, if such Employer is prevented from making a contribution which it would otherwise have made under the Plan, by reason of having no current or accumulated earnings or profits or because such earnings or profits are less than the contribution which it would otherwise have made, then so much of the contribution which such Employer was so prevented from making may be made, for the benefit of the employees of such Employer, by any other Employer or Employers to the extent and in the manner permitted by Section 404(a)(3)(B) of the Internal Revenue Code as then in effect or any successor provision of the Federal income tax laws. 3.2 In the event that Company Contributions made to the Plan can not be allocated to the accounts of Participants as a result of the operation of the limitations in Sections 2.4(c), (d) or (e) or 3.1, such Company Contributions will be allocated to a suspense account and shall be used to reduce future Company Contributions required under this Plan. 3.3 Payment of Company Contributions to Trustees. Except in the case of Company Contributions made in Continental Common Stock to the Continental Stock Fund, which shall be made as promptly as practicable after each Stock Purchase Date, as defined in Section 4.2(d), as promptly as practicable after each pay date, when the Employers transmit the contributions taken from the Participant's Compensation to the Trustees, the Employers will also transmit Company Contributions to the Trustees to be held in the Trust Fund for the benefit of the Participants. When each Participant's contributions are credited to his Participant Contribution Accounts, as provided in Section 2.5 hereof, there will also be credited to the Company Contributions Account maintained for such Participant the Company Contribution with respect to such Participant, which shall be invested in accordance with Article IV of the Plan. ARTICLE IV Trust Fund 4.1 Trustees. All Participant's contribution and Company Contributions shall be paid into, and all distributions herein provided for shall be paid from, a Trust Fund maintained by agreement between the Company, on behalf of the Employers, and Trustees designated by the Compensation Committee. No part of the Trust Fund may be used for or diverted to purposes other than for the exclusive benefit of Participants. The Trust Agreement shall be in such form and contain such provisions as the Compensation Committee may deem appropriate, including, but not limited to, provisions with respect to the powers and authority of the Trust Agreement, the authority of the Board of Directors or Compensation Committee to amend the Trust Agreement, the authority of the Board of Directors or Compensation Committee to settle the accounts of the Trustees on behalf of all persons having an interest in the Trust Fund, and the authority of the Compensation Committee to remove a Trustee and appoint a successor Trustee. When entered into, the Trust Agreement shall form a part of the Plan and all rights and benefits that may accrue to any person under the Plan shall be subject to all the terms and provisions of the Trust Agreement. The Trustees shall choose brokers to effectuate transactions for all investment funds. 4.2 (a) Investment of Trust Fund. Except as set forth in Article VIII, the Trustees at the direction of the Incentive Savings Plan Committee shall invest and reinvest the Trust Fund and the income therefrom in either the Vanguard/Wellington Fund described in Section 4.2(b), the Interest Savings Fund described in Section 4.2(c), the Continental Stock Fund described in Section 4.2(d), the Vanguard U.S. Growth Portfolio described in Section 4.2(e), or the Vanguard Index Trust - 500 Portfolio described in Section 4.2(f) maintained in the Trust Fund for this purpose. Each Participant shall designate, by filing a notice with the Administrator in the manner prescribed by the Administrator, the percentage of such Participant Contributions and Company Contributions made in his behalf to be invested in each of the investment funds in multiples of 1% of such contributions. A Participant may change his election of investment funds for future Participant and Company Contributions made on his behalf daily by filing a notice with the Administrator in the manner prescribed by the Administrator for such purpose. The election by a Participant of allocations between investment funds shall be applicable to all contributions then being made in his behalf. A Participant may direct the transfer of the total value of his Accounts from one or more of the investment funds, as set forth in this Section 4.2, to any other investment funds as set forth therein. Except for transfers out of the Continental Stock Fund, a Participant may make such an election under this Section 4.2(a) daily by filing a notice with the Administrator in the manner prescribed by the Administrator. A Participant may make such an election under this Section 4.2(a) with regard to transfers out of the Continental Stock Fund by filing a notice with the Administrator, no more than twice in any calendar quarter, in the manner prescribed by the Administrator. (b) Vanguard/Wellington Fund. The Trustees shall invest and reinvest the Vanguard/Wellington Fund, and the income therefrom, without distinction between principal and income, in shares of the Vanguard/Wellington Fund, Inc., a diversified investment company which is managed by The Vanguard Group, Inc. and is a member of The Vanguard Group of Investment Companies. The Trustees shall maintain such part of the Vanguard/Wellington Fund in cash uninvested as they shall deem necessary or desirable. The Trustees shall be the owner of and have title to all the assets of the Vanguard/Wellington Fund and shall have full power to manage the same. Brokerage commissions, transfer taxes, and other charges and expenses in connection with the purchase and sale of investments of the Vanguard/Wellington Fund shall be charged to the Vanguard/Wellington Fund. (c) Interest Savings Fund. The Trustees at the direction of the Incentive Savings Plan Committee shall invest and reinvest the Interest Savings Fund, and the income therefrom, without distinction between principal and income, in short-term investments such as credit investments, commercial paper, certificates of deposit, bankers' acceptances, U.S. Government or Agency securities, repurchase agreements and demand notes, all with maturities of less than one year, and in floating rate notes that include a provision for resetting the interest rate at least once each year during the term of the note, or bonds, notes or other evidence of indebtedness which may be put back to the issuer within one year of purchase by an investor. Alternately, the Trustees are authorized to invest and reinvest the Interest Savings Fund, and the income therefrom, without distinction between principal and income, in Guaranteed Interest Contracts ("GIC") and similar financial instruments guaranteed by an insurance company, bank or an agency of the U.S. Government. However, in no event may the Trustees invest the Interest Savings Fund in any securities or debt instruments of any kind issued by an Employer or Affiliated Corporation. The Trustees at the direction of the Incentive Savings Plan Committee shall maintain such part of the Interest Savings Fund in cash uninvested as they shall deem necessary or desirable. The Trustees shall be the owner of and have title to all the assets of the Interest Savings Fund and shall have full power to manage the same at the direction of the Incentive Savings Plan Committee. Brokerage commissions, transfer taxes, and other charges and expenses in connection with the purchase and sale of investments of the Interest Savings Fund shall be charged to the Interest Savings Fund. (d) Continental Stock Fund. The Trustee at the direction of the Incentive Savings Plan Committee shall invest and reinvest the Continental Stock Fund, and the income therefrom, in the common stock of The Continental Corporation. Purchases of common stock of The Continental Corporation by the Trustee shall be made on any day but, if purchases cannot be made on such date because the stock exchanges on which such stock is traded are closed or because trading in the common stock of The Continental Corporation has been suspended or halted on such date, the purchases will be made on the next date on which such exchanges are open for trading or trading in the Common Stock of The Continental Corporation is resumed, as the case may be (the "Stock Purchase Date"). For temporary periods, until stock purchases are made, the Trustee will invest cash in short-term investments as permitted for the Interest Savings Fund and described in Section 4.2(c). Continental common stock may be purchased from the Company or from Employers or from other sources, provided that (i) if the Company issues to its shareholders warrants or rights for the purchase of Continental common stock or makes available a dividend reinvestment plan for shareholders, the Trustee in its discretion may exercise any warrants or rights the Trustee may hold or subscribe to such dividend reinvestment plan and (ii) the Company or any other Employer may, at its election contribute newly issued or Treasury shares of Continental common stock to the Trustee in lieu of the equivalent amount of cash, as provided in Section 3.2. The dollar amount of the Company Contribution shall be established as soon as practicable after each payday, however, in the event that the Company or any other Employer elects to contribute shares of Continental Common Stock in lieu of cash or if the Trustee purchases such shares from the Company or any of its subsidiaries, the purchase price of such shares so contributed or so purchased shall be the mean of the high and low prices for sales of common stock of The Continental Corporation as reported on the composite tape of the New York Stock Exchange on the next Stock Purchase Date. Brokerage commissions, transfer taxes, and other charges and expenses in connection with the purchase and sale of Continental Common Stock for the Continental Stock Fund shall be charged to the Continental Stock Fund. (e) Vanguard U.S. Growth Portfolio. The Trustees shall invest and reinvest the Vanguard U.S. Growth Portfolio, and the income therefrom, without distinction between principal and income, in shares of the Vanguard U.S. Growth Portfolio, a diversified investment company which is managed by The Vanguard Group, Inc. and is a member of The Vanguard Group of Investment Companies. The Trustees shall maintain such part of the Vanguard U.S. Growth Portfolio in cash univested as they shall deem necessary or desirable. The Trustees shall be the owner of and have title to all the assets of the Vanguard U.S. Growth Portfolio and shall have full power to manage the same. Brokerage commissions, transfer taxes, and other charges and expenses in connection with the purchase and sale of investments of the Vanguard U.S. Growth Portfolio shall be charged to the Vanguard U.S. Growth Portfolio. (f) Vanguard Index Trust - 500 Portfolio. The Trustees shall invest and reinvest the Vanguard Index Trust - 500 Portfolio, and the income therefrom, without distinction between principal and income, in shares of the Vanguard Index Trust - 500 Portfolio, a diversified investment company which is managed by The Vanguard Group, Inc. and is a member of The Vanguard Group of Investment Companies. The Trustees shall maintain such part of the Vanguard Index Trust -500 Portfolio in cash univested as they shall deem necessary or desirable. The Trustees shall be the owner of and have title to all the assets of the Vanguard Index Trust - 500 Portfolio and shall have full power to manage the same. Brokerage commissions, transfer taxes, and other charges and expenses in connection with the purchase and sale of investments of the Vanguard Index Trust - 500 Portfolio shall be charged to the Vanguard Index Trust - 500 Portfolio. 4.3 Valuation of Investment Shares and Investment Units. The value of an Investment Share or an Investment Unit shall be determined on each business day by the Trustees. 4.4 Annual Statement to Participants. As soon as practicable after the last day of each year the Administrator will furnish by mail or otherwise to each Participant a statement showing the amount of his contributions that has been credited to his Participant After-Tax Contributions Account, his Tax-Deferred Contributions Account and his Rollover Account, the amount of the Company Contributions that has been credited to his Company Contributions Account, and the value of all assets, Investment Shares and Investment Units credited to his Accounts as of the last day of such year. ARTICLE V Distribution to Participants 5.1 Termination of Employment at or After Age 60 if Employment Commenced Prior to January 1, 1988, or on Account of Disability or After 5 Years of Vesting Service. A Participant who terminates Employment at or after age 60, if employment commenced prior to January 1, 1988, or who at any age terminates Employment and is granted long-term disability benefits under the Company's Long-Term Disability Plan, or who at any age terminates Employment after 5 Years of Vesting Service, shall, unless he elects optional deferred distribution in accordance with Section 5.6, receive a distribution, equal to the value as of the date the Trustee receives the required documentation of all assets, Investment Shares and Investment Units then credited to his Accounts. Notwithstanding the foregoing, a Participant who is granted long-term disability benefits under the Company's Long-Term Disability Plan may make an irrevocable election in writing on or before the date his long-term disability benefits commence to defer the distribution from his accounts until the last day of the twelfth month after his long-term disability benefits commence. The distribution to which the Participant shall be entitled if he elects such deferral shall be equal to the value of all assets, Investment Shares and Investment Units credited to his Accounts as of the deferred distribution date. 5.2 Death of Participant. A Participant may file with the Administrator a designation of beneficiary, on a form provided by the Administrator, and at any time may change or revoke the same by filing with the Administrator a form provided by the Administrator for such purposes. However, if the Participant is married and the designated beneficiary is other than the Participant's spouse, then the foregoing form must be accompanied by the written consent of such spouse to the designation of the beneficiary. The consent of the spouse must acknowledge the effect of the designation and must either be notarized or witnessed by a plan representative. If a Participant does not file a designation of beneficiary, or there is no designated beneficiary living at the Participant's death, then the Participant's spouse, or if none, the executor of the Participant's will or the administrator of his estate shall be deemed to be his beneficiary for the purposes of the Plan. Upon the death of a Participant, his beneficiary shall receive a distribution equal to the value, as of the date the Trustee receives the required documentation, of all assets, Investment Shares and Investment Units then credited to the Participant's Account. 5.3 Termination of Participant's Employment for Other Reasons. Except as provided in Section 8.4 in case of a Change in Control, a Participant who has not yet been credited with 5 years of Vesting Service and who, if his Employment commenced prior to January 1, 1988, before age 60 terminates Employment (other than on account of a disability for which he is granted long-term disability benefits under the Company's Long Term Disability Plan) shall, unless he elects optional deferred distribution in accordance with Section 5.6, receive a distribution equal to the value, as of the date the Trustee receives the required documentation, of all assets,, Investment Shares and Investment Units then credited to his Participant Contribution Accounts and his Rollover Accounts, in which the Participant is always 100% vested, and of the percentage of the assets, Investment Shares and Investment Units then credited to his Company Contributions Account in which he is then vested according to the following table: Number of Full Years Percentage of Company of Vesting Service Contributions Account At Termination of Employment Vested in Participant Less than 1 0 1 20 2 40 3 60 4 80 5 or more 100 In addition, a Participant shall be 100% vested in all his Accounts upon attaining his Normal Retirement Age which shall be the later of (a) the date the Participant attains age 65, or (b) the fifth anniversary of the time the Participant commences participation in the Plan. 5.4 Forfeiture. When a Participant terminates Employment pursuant to Section 5.3 hereof and receives a distribution under Section 5.5 hereof, the value of any assets, Investment Shares and Investment Units credited to his Company Contributions Account in which he is not vested pursuant to Section 5.3 hereof, shall be forfeited as of the date his Employment terminates, and shall be left in the Trust Fund. However, if a Participant terminates Employment pursuant to Section 5.3 hereof and defers distribution, then the value of any assets, Investment Shares and Investment Units credited to his Company Contributions Account in which he is not vested pursuant to Section 5.3 hereof shall be forfeited as of the date in which the earlier of the following events occurs (i) his receipt of a distribution under Section 5.5 hereof, or (ii) his completion of a five year Break in Service as defined in Section 1.5 hereof. Forfeitures for any calendar year shall not increase the benefits any Participant would otherwise receive under the Plan but shall be applied to reduce the Company Contributions under the Plan for that calendar year or to pay the expenses of the Plan as set forth in Section 7.5 of the Plan. 5.5 Distributions. Subject to Sections 5.6 and 5.7 hereof, a distribution to a Participant or his beneficiary shall be made in a single payment as soon as practicable after the earlier of the death of the Participant, the termination of the Participant's Employment, or no later than the April 1 next following the December 31 of the year in which the Participant attains age 70-1/2, and may be made in cash or in kind or partly in each, as the Administrator in his sole discretion shall determine. If a Participant continues to make contributions to this Plan after the calendar year in which the Participant attains age 70-1/2, the vested balance in the Participant's accounts at the end of each calendar year shall be paid in a single payment as described in the preceding sentence. Benefits under the Plan will begin, unless the Participant otherwise elects in writing, no later than the 60th day after the latest of the Plan year in which (a) the Participant either reaches age 65 or the Plan's Normal Retirement Age, whichever comes first, (b) occurs the fifth anniversary of the year in which the Participant began participation under the Plan, or (c) the Participant terminates Service with the Employer. 5.6 Optional Deferred Distribution. If the value of his Accounts is more than $3,500 on the applicable valuation date, a Participant may elect by written notice given in advance of his termination of Employment to defer a distribution until the last day of the twelfth month after his Employment terminates if he terminates prior to age 69-1/2 or, until his 65th birthday if he terminated prior to age 65. If a Participant electing a deferred distribution has an outstanding loan under Section 6.6 at the date of deferral, such loan must be repaid by the Participant through a direct payment to the Plan or a reduction of his remaining account balances before such deferral may become effective. Notwithstanding the foregoing, any Participant who (i) is a Retained Employee (as that term is defined in Section 5.1(a) of the Stock Purchase Agreement among The Continental Corporation, The Continental Insurance Company, Continental Reinsurance Corporation and Mellon Bank Corporation, dated as of June 30, 1993), (ii) has an outstanding loan under Section 6.6 and (iii) elects to defer his distribution for a twelve-month period shall be permitted to continue to repay the outstanding loan as provided for in Section 6.6. If a Participant makes an election after December 31, 1988 to defer a distribution in accordance with this Section 5.6, the vested value of the Participant's Accounts as determined in Sections 5.1 or 5.3 shall be transferred to the Interest Savings Fund. The distribution to which the Participant shall be entitled shall be equal to the value of the Investment Units credited to such Participant's Accounts as of the last day of the twelfth month after the Participant's Employment terminates or the date of his 65th birthday, whichever is applicable. This election shall be irrevocable and shall constitute a waiver of the provisions of Article VI of the Plan, but it shall be inoperative if before his Employment terminates the Participant dies or becomes disabled. In the event a Participant returns to Employment prior to the end of his deferral period and again makes Participant Contributions, the deferral election shall be cancelled as of the Entry Date on which such Participant Contributions commence. 5.7 Distribution of Employer Securities. Any Participant or his beneficiary entitled to a distribution under this Article V of the Plan from the Continental Stock Fund may elect, by written request received by the Administrator not later than the valuation date for such distribution, to receive payment in common stock of The Continental Corporation held by the Trust Fund or cash. Any common stock of The Continental Corporation distributed subject to such election shall be in whole shares only with the value of fractional share paid in cash. 5.8 Restoration of Forfeited Amounts. If a Participant forfeits any of his Company Contributions Account pursuant to Section 5.3 hereof and reenters Employment before he has a Break in Service of at least 60 consecutive months, the dollar amount which he forfeited shall be restored as of the first Entry Date coinciding with or next following the date he reenters Employment in a separate account established for such Participant as a part of his Company Contributions Account. Section 5.3 notwithstanding, the Participant shall be vested at any time thereafter in that amount of such separate account equal to: P(AB + (R x D)) - (R x D), where P is the Participant's vested percentage determined under Section 5.3 hereof at such time; AB is the balance in the separate account at such time; D is the amount of the prior distribution from his Company Contributions Account; and R is the ratio of the balance in the separate account at such time to the Participant's balance in his Company Contributions Account immediately after the prior distribution (but prior to any forfeiture). 5.9 Payment of Distribution. Any distribution to be made pursuant to this Article V shall be made as soon as reasonably practicable after the valuation of the Participant's Accounts necessary for determining the amount of such distribution has been completed. ARTICLE VI Withdrawals and Loans 6.1 Limitation on Withdrawals. A Participant who makes a withdrawal from the Plan pursuant to Section 6.2 hereof may not make another withdrawal pursuant to such section while he remains in Employment until 12 months after the date following such earlier withdrawal. He is not, however, precluded from making a hardship withdrawal pursuant to the provisions of Section 6.4 hereof or receiving a loan pursuant to the provisions of Section 6.6 hereof. 6.2 Amount of Withdrawal. By giving notice in writing to the Administrator, any Participant may make a withdrawal from his Accounts while he remains in Employment, subject to Section 6.1 hereof. Such withdrawal may be a specific dollar amount but not less than $1,000, or the amount of his After-Tax Contributions, or the value, as of the date such notice is received by the Trustee, of all assets and Investment Units then credited to Accounts to the extent vested and available as described in Section 6.3. If the Participant wishes to withdraw less than $1,000 he must withdraw the full amount of his Vested accounts then available unless the withdrawal is limited to his After-Tax Contributions. 6.3 Order of Withdrawal From Accounts. Any withdrawal requested by a Participant shall be withdrawn from his Accounts in the following order until the amount of such withdrawal is obtained. Withdrawals shall first be made from a Participant's After-Tax Contributions Account, then if necessary from his Company Contributions Account (but not to exceed his then Vested interest therein), then from his Tax-Deferred Contributions Account and last from his Rollover Account provided that no withdrawal may be made under this Section from his Tax-Deferred Contributions Account or amounts in his Rollover Account unless the Participant has attained age 59-1/2 at the date of such withdrawal. 6.4 Hardship Withdrawal. (a) In case of a Participant's illness, unusual need, emergency, or for the purpose of acquiring or preserving a home, or of providing for the education of the Participant or his dependents, the Administrator, in his sole discretion but in accordance with uniform policies established by the Administrator providing for treatment of Participants in similar circumstances in a similar fashion, may permit such Participant to make a hardship withdrawal from his After-Tax, or Vested Company Contributions Accounts (in that order) while he remains in Employment, upon such Participant's application therefor and if such Participant, at the time such application is made, has applied for all withdrawals under Section 6.2 which he is eligible to make at such time. Such hardship withdrawal shall be in cash and shall equal an amount, as determined by the Administrator, not exceeding the value, as of the date the withdrawal becomes effective, of the assets, Investment Shares and Investment Units then credited to such Participant's Accounts to which the Participant would be entitled pursuant to Sections 5.1 or 5.3 hereof if such Participant terminated Employment (other than on account of a disability for which he is granted disability benefits under the Company's Long-Term Disability Plan) on the date the withdrawal becomes effective. The amount to be withdrawn shall first be withdrawn from his Participant After-Tax Contributions Account and to the extent the amount to be withdrawn would exceed the values of both such accounts combined, the excess shall be withdrawn from his Company Contributions Account. (b) An additional hardship withdrawal from a Participant's Tax-Deferred Contributions Account or Rollover Account may be approved by the Administrator, if such withdrawal is necessary to satisfy an immediate and heavy financial need of the Participant, and the amount of the additional hardship withdrawal does not exceed the amount necessary to satisfy such need. Whether an immediate and heavy financial need exists shall be determined based on the relevant facts and circumstances. An immediate and heavy financial need will be considered to exist for purposes of this section of the Plan if a withdrawal is requested on account of: (i) medical expenses incurred by the Participant, the Participant's spouse, or any other dependents of the Participant; (ii) purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) payment of tuition for the next semester or quarter of post-secondary education for the Participant, his or her spouse, children, or other dependents; (iv) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or (v) other financial need considered to be immediate and heavy by the Administrator, and the Participant has represented, on a form provided by the Administrator, that the financial need can not reasonably be met from other financial resources available to him, including loans under Section 6.6. However, to the extent that a hardship withdrawal is made from a Participant's Tax-Deferred Contributions Account, or Rollover Account, on or after January 1, 1989 and prior to the Participant attaining age 59-1/2, such withdrawal may be made only to the extent of the Participant's contributions to such Accounts, and may not include investment earnings credited to such Accounts on or after January 1, 1989. 6.5 Withdrawal of Less Than Full Account Value. In the event that any withdrawal is for less than the full value of an Account and such Account includes assets, Investment Shares or Investment Units in any of the investment funds such withdrawal shall be made, to the extent possible, proportionately from each investment fund under rules established by the Administrator for such purpose. 6.6 Loans. In accordance with uniform policies established by the Administrator providing for treatment of Participants in similar circumstances in a similar fashion, the Administrator may, for any reasonable purpose he approves, lend to a Participant from the Trust Fund upon such Participant's application therefor, an amount not exceeding the value, on the day the loan is made, of the assets, Investment Shares and Investment Units then credited to his Accounts, subject to the following maximum. The Participant may borrow up to 50% of the (i) value of his Participant Contributions Accounts plus his Rollover Account and (ii) vested value of his Company Contributions Account. However, in no event may the outstanding balance of all loans to any Participant exceed $50,000. The $50,000 maximum shall be reduced by the excess (if any) of the highest outstanding loan balance from the Plan to such Participant during the preceding twelve-month period over the outstanding balance of loans from the Plan on the date the loan is made. Such loan shall bear interest at such reasonable rates as the Administrator may from time to time establish, shall be adequately secured, and shall be repaid over a period not to exceed five years, or fifteen years in the case of a loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the Participant, in level payments made at least quarterly. If at the date of a distribution or withdrawal of his account balances a Participant has an outstanding loan balance, such loan balance shall reduce his account balances available for distribution or withdrawal. If at the date of termination of employment a Participant has an outstanding loan balance and elects deferred distribution under Section 5.6 of the Plan, then any loan balance shall reduce his account balances being deferred unless he has repaid such loan by direct payment to the Plan. Notwithstanding the foregoing, any Participant who (i) is a Retained Employee (as that term is defined in Section 5.6) and (ii) has an outstanding loan balance as of the date he makes an election to defer his distribution for twelve months as provided for in Section 5.6, may continue to repay his outstanding loan balance by direct payment to the Plan on the same terms and at the same rate he was repaying such loan at the date of his deferral election, except that the payments shall be made on a quarterly basis. Any remaining loan balance at the end of the twelve-month deferral period shall reduce his account balances available for distribution. All loans to a Participant shall be made pro rata from such Participant's Accounts invested in the investment funds. 6.7 Payment of Withdrawal. Payment of any withdrawal pursuant to this Article VI shall be made as soon as reasonably practicable after the valuation of a Participant's Accounts necessary for determining the amount of such withdrawal has been completed. 6.8 Determination of Vesting After A Withdrawal. Section 5.3 notwithstanding, if a Participant withdraws funds from his Company Contributions Account before he is 100% vested, then the Participant shall be vested at any time thereafter in that amount of his Company Contributions Account equal to: P(AB + D) - D, where, for purposes of this Section 6.8, P is the Participant's vested percentage determined under Section 5.3 hereof at such time; AB is the balance in his Company Contributions Account at such time; and D is the amount of the prior withdrawal from his Company Contributions Account. ARTICLE VII Administration of the Plan 7.1 Powers of the Incentive Savings Plan Committee. The Incentive Savings Plan Committee shall administer the Plan in accordance with its terms and shall have all powers and authority necessary or appropriate for carrying out their duties in that respect. Not in limitation but in amplification of the foregoing, the Incentive Savings Plan Committee, subject to the provisions of the Plan, from time to time shall adopt and establish such rules as they deem necessary or desirable for administering the Plan and shall establish a procedure for establishing and carrying out a funding policy and method consistent with the objectives of the Plan and the requirements of the law, which policy and method shall be reviewed at least annually. The Incentive Savings Plan Committee shall have full power and authority to interpret, construe and administer the Plan, and determine all questions that may arise hereunder. The Incentive Savings Plan Committee may correct any error or defect or supply any omission or reconcile any inconsistency in such manner and to such extent as they shall deem expedient to carry the Plan into effect, and they shall be the sole and final judge of such expediency. The interpretations and constructions of the Incentive Savings Plan Committee and all other acts and determinations of the Incentive Savings Plan Committee done or made in good faith, shall be final, conclusive and binding upon all parties, including each of the Affiliated Corporations, their employees, and the beneficiaries of Participants. The Incentive Savings Plan Committee may appoint in writing such persons, who need not be members of the Incentive Savings Plan Committee, as they may deem necessary or desirable for the effective exercise of the duties and responsibilities of the Incentive Savings Plan Committee, and may delegate to such persons in writing such duties and confer upon them in writing such powers, discretionary or otherwise, as the Incentive Savings Plan Committee may deemed expedient or appropriate. With respect to all or any portion of the Plan assets, the Incentive Savings Plan Committee may appoint an investment manager or managers, pursuant to Sections 402(c)(3) and 405(c)(1) of ERISA, to manage, acquire, or dispose of any assets of the Plan. Each such investment manager shall accept appointment as a fiduciary of the Plan and shall be either registered as an investment adviser under the Investment Advisers Act of 1940, a bank as defined under that Act, or an insurance company qualified under the laws of more than one state to manage, acquire, or dispose of Plan assets. 7.2 Procedure of the Trustees. Except where the Trustee is a corporate Trustee, the following provisions shall govern. Where a corporate Trustee is appointed, it may act through any one or more of its duly authorized officers or employees. The Trustees shall designate one of their number as Chairman, and shall appoint a Secretary, who may, but need not, be a Trustee. The Chairman shall preside at all meetings of the Trustees at which he is present, but in his absence any Trustee may call the meeting to order and preside. The Secretary shall duly record or cause to be recorded all acts and determinations of the Trustees, and all records shall be preserved in his custody or as the Trustees may direct. Any act or determination that the Plan authorizes or requires the Trustees to do or make may be done or made by a majority of the Trustees at the time acting hereunder, and the act or determination of such majority of the Trustees expressed at any time and from time to time by a vote at a meeting or in writing without a meeting shall constitute the act or determination of the Trustees and shall have the same effect for all purposes as if assented to by all the Trustees serving at the time. Any person dealing with the Trustees or with any agent or representative of the Trustees shall be entitled to rely upon the certificate of the Chairman or Secretary as to the fact that any act or determination is the act or determination of the Trustees. The Trustees shall have the power to adopt rules for the time and place of their meetings, the notice to be given of such meetings, and all similar matters governing the conduct of the Trustees' business. 7.3 Administrator. The Administrator shall have the duties and responsibilities set forth in this Plan and the duties and responsibilities imposed by law on the administrator of an employee benefit plan. In addition, the Administrator shall perform such other duties and responsibilities as may be delegated to him in writing by the Incentive Savings Plan Committee, and shall have such powers as may be conferred on him in writing by the Incentive Savings Plan Committee. The Administrator may appoint in writing such persons as he may deem necessary or desirable for the effective exercise of his duties and may delegate to such persons in writing such duties and responsibilities and confer upon them in writing such powers, discretionary or otherwise, as he may deem expedient or appropriate. 7.4 Advice. The Trustees, Incentive Savings Plan Committee and the Administrator (and any person or persons to whom the Trustees, Incentive Savings Plan Committee or the Administrator have delegated any duties or responsibilities) may employ one or more persons to render advice with regard to any of the duties or responsibilities of the Trustees, Incentive Savings Plan Committee or the Administrator under the Plan. 7.5 Expenses. The expenses of the Trustees, Incentive Savings Plan Committee and the Administrator in the administration of the Plan shall be paid, to the extent possible, from forfeitures in the Trust Fund. Any such expenses not paid from the Trust Fund shall be defrayed by the Company. 7.6 Exoneration. The Trustees, Incentive Savings Plan Committee and the Administrator shall be entitled to rely upon all certificates and reports made by any independent public accountant, and upon all opinions of law given by any counsel (who may be counsel to an Employer) and shall be fully protected in respect to any act done or permitted or determination made in good faith in reliance upon any such certificate, report or opinion. Neither a Trustee, Incentive Savings Plan Committee nor the Administrator shall be liable to an Employer or to any employee or to any beneficiary of an employee on account of any act done or omitted or determination made in the performance of his duties under the Plan, nor for any act done or omitted by any agent or representative of the Trustees, Incentive Savings Plan Committee or the Administrator so long as such Trustee, Incentive Savings Plan Committee or Administrator has acted with the care, skill prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Neither shall any Trustee be liable to any person for any act done or omitted by any other Trustee except to the extent prescribed by law. The Company agrees to indemnify and hold harmless the Trustees, Incentive Savings Plan Committee and the Administrator from and against any liability they may incur in the administration of the Plan, unless arising from their own negligence or willful misconduct. The provisions of this Section 7.6 shall be effective only to the extent permitted by law. 7.7 Benefit Claims Procedure. (a) In the event that any person makes a claim for benefits under this Plan and such claim is denied in whole or part, the Administrator, within a reasonable time, shall furnish to such person a written notice of such denial setting forth the specific reasons for such denial, specific references to the provisions of the Plan upon which such denial is based, a description of any additional material or information necessary for such person to provide including an explanation why such material or information is necessary, and an explanation of the review procedure under this Plan. (b) Any person whose claim for benefits is denied in whole or part may, within sixty days after receiving the foregoing notice, request in writing addressed to the Administrator a review by the Incentive Savings Plan Committee of the denial. In addition, any person who makes a claim for benefits under this Plan and does not receive any decision on such claim within a reasonable time may request a review by the Incentive Savings Plan Committee of the claim. Any person requesting a review under this Subsection 7.7(b) shall have the opportunity to review pertinent documents and to submit a written statement to the Incentive Savings Plan Committee, shall be entitled to request a hearing before the Incentive Savings Plan Committee, and shall be entitled to have representation in connection with this review procedure. (c) Upon receipt of a request for review under Subsection 7.7(b) hereof, the Incentive Savings Plan Committee, shall render a decision as promptly as possible and in any event within sixty days from such receipt, unless special circumstances, such as the need to hold a hearing, require an extension of time for processing; in which case a decision shall be rendered as soon as possible, but not later than 120 days from such receipt. The decision of the Incentive Savings Plan Committee shall be in writing and shall include the specific grounds for the decision and specific reference to the provisions of this Plan upon which the decision is based. ARTICLE VIII Voting Rights, Tender Offers and Changes in Control 8.1 In General. All rights with respect to Employer Securities in the Contiental Stock Fund shall be exercised and all directions to tender Employer Securities in the Continental Stock Fund pursuant to a tender offer shall be made in accordance with the following provisions of this Article VIII. 8.2 Notice by Company to Participants and Participants' Instructions. Within one hundred and twenty hours of the commencement of a tender offer (which shall be deemed to commence at 12:01 A.M. New York time on the day the tender offer is first published or distributed to shareholders) and in accordance with the Trust Agreement, the Company shall provide to each Participant (1) the written tender offer information provided to the shareholders of the Company, (2) a statement of the number of full and fractional shares of Employer Securities which the Participant may direct the Trustees to tender, and (3) the means established and paid for by the Company by which the Participant may expeditiously instruct the Trustees to tender or not to tender part or all of the number of shares of Employer Securities held in his account in the Continental Stock Fund. Thereafter, during the pendency of the tender offer, the Company shall promptly provide each Participant with any additional written tender offer information that is provided to shareholders of the Company; but except for directions as to how to use the forms provided for giving instructions, the Company shall not provide to Participants any information or guidance not provided to all shareholders. The Trustees shall tender or not tender (or withdraw from tender) shares in accordance with such instructions. The Trustees shall not tender shares for which no timely instructions have been received. In any event, they shall not tender any shares until a time not sooner than three hours before the last time (the "Expiration Time") shares can be tendered under the terms of the tender offer as announced prior to the time of tender, except that in the case of an offer for less than all of the Company's shares, if the pro-ration period ends before the Expiration Time, the Trustees will tender such shares not sooner than three hours before the end of the pro-ration period. If permitted to do so under the terms of the tender offer and applicable law, the Trustees will withdraw from the tender offer any shares tendered pursuant to the offer on behalf of a Participant if the Participant shall have requested the withdrawal of such shares. A Participant shall not be limited as to the number of instructions to tender or withdraw that he may give to the Trustees. All shares that have been tendered pursuant to Participant's instructions and have not been withdrawn prior to the expiration of the tender offer will be withdrawn from the Continental Stock Fund and will be sold by the Trustees in accordance with the terms of the tender offer. All proceeds of such sales, the right to receive such proceeds, and the reinvestment of such proceeds shall be held in the Participant's account in the Continental Stock Fund. Tender offer instructions received from Participants shall be held in confidence by the Trustees and shall not be divulged to the Company or to any officer or employee thereof, or to any other person other than such agents of the Trustees as they may appoint to perform their duties under this Section. In implementing the foregoing procedures, the Company will act fairly, in the best interests of each Participant, and in a manner which will not impose undue pressure on any Participant as to what tender offer instructions he or she should give to the Trustees. Specifically, the Company (a) shall assure that all written information provided to all other shareholders of the Company about the terms of the tender offer is provided to Participants on a timely basis and that clearly false or misleading information is not provided (or is corrected if it has been provided to Participants by other parties) and (b) shall not mislead Participants or exert pressure on Participants to give particular tender offer instructions. The Company shall certify to the Trustees in writing upon the Trustees' request that the Company has complied with the provisions of the previous sentence. 8.3 General. The Trustees shall have no duty to solicit directions from Participants except as specified herein and in the Trust Agreement. The Trustees shall have no liability with respect to the tender or failure to tender of any shares of Employer Securities made in accordance with the provisions of this Article VIII. Notwithstanding the above, no Participant shall have by reason of this Article VIII any right, title or interest in Employer Securities or the Continental Stock Fund. However, a Participant will have the right to instruct the Trustees with respect to such Employer Securities in the case of a tender offer as set forth in Section 8.2 of this Plan. 8.4 Change in Control. After a Change in Control, as defined below, any Participant who terminates Employment shall receive a distribution, valued as of the date his Employment terminates, of all assets, Investment Shares and Investment Units then credited to his Accounts. For purposes of this section, a "Change in Control" means the occurrence of any of the following events: (i) any "person" or "group" of persons (as such terms are used in sections 13 and 14 of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan sponsored by the Company, becomes the "beneficial owner" (as such term is used in section 13 of such Act) of 30% or more of the outstanding shares of the Company's capital stock entitled to vote for the election of directors; or (ii) any shares of any class of the Company's capital stock are purchased pursuant to a tender or exchange offer (other than an offer by the Company or a subsidiary thereof); or (iii) the approval by the requisite vote of the Company's shareholders of any merger, consolidation, sale of assets, liquidation or reorganization as a result of which the Company will not survive as a publicly-owned corporation; or (iv) a change in the composition of the Board of Directors during any period of two consecutive years such that individuals who at the beginning of such period were members of the Board Directors cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 8.5 Voting of Other Shares of Continental Stock Held in Continental Stock Fund. Any other provisions of this Article VIII notwithstanding, the Trustees shall provide each Participant who has shares of Continental Corporation common stock credited to his Accounts invested in the Continental Stock Fund, with a copy of the proxy solicitation material for each annual meeting or special meeting of the shareholders of the Corporation, together with a request for instructions as to how such shares should be voted at the meeting. Upon receipt of such instructions, the Trustees shall vote all such shares as instructed. The Trustees shall vote such shares for which they have not received instructions in proportion to those shares for which they receive instructions. ARTICLE IX Amendment, Modification or Termination 9.1 Amendment, Modification or Termination. (a) The Company, on behalf of the Employers, reserves the right, by and through the Board of Directors or the Compensation Committee, at any time to terminate the Plan, in whole or in part, and at any time and from time to time to amend or modify the Plan. The Office of the Chairman (or, in the cases of clauses (i) and (iii) below, the senior Human Resources officer) may approve in writing any amendment to the Plan when it finds that such amendment: (i) is required to conform the Plan to applicable laws or regulations, (ii) will not increase the annual cost of the Plan by more than the greater of 5% or $1 million, or (iii) is intended only to implement transactions approved by the Board. However, no amendment or modification of the Plan shall make it possible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the Plan, for any part of the corpus or income of the Trust Fund to be (within the taxable year or thereafter) used for or diverted to, purposes other than for the exclusive benefit of employees or their beneficiaries. (b) If the Board of Directors or Compensation Committee terminates the Plan, in whole or in part, then every affected Participant at the date the termination takes effect shall receive a distribution of the value as of the date of distribution of all cash and Investment Units credited to his accounts as of the date of termination. Distribution to each affected Participant shall be made in a single payment as soon after termination as practicable, and may be made in cash or in kind or partly in cash, as the Administrator in his sole discretion shall determine. In the event that the Plan is terminated, or upon complete discontinuance of Company Contributions under the Plan, with respect to all or some of the Participants, the rights of all affected Participants at the date the termination takes effect or at the date of such complete discontinuance of Company Contributions, as the case may be, to the amounts credited to their respective Accounts shall become nonforfeitable. 9.2 Merger, Consolidation and Transfer of Plan Assets. The Board of Directors or Compensation Committee may direct the Administrator to do all things necessary to effect a merger or consolidation of the Plan with, or the transfer of all or a part of the assets and liabilities of the Plan to, another plan (or plans) if and only if (a) Each trust forming a part of such plan (or plans) is a qualified trust under Section 401 of the Internal Revenue Code of 1986 and that each such trust is exempt from Federal income tax under Section 501 of the Internal Revenue Code of 1986; (b) Each Participant in the Plan would (if the Plan then terminated) received a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated); and (c) The Administrator shall have timely filed, pursuant to Section 6058 of the Internal Revenue Code of 1954, an actuarial statement of valuation evidencing compliance with (b) above. The Board of Directors, the Compensation Committee, the Trustees and the Administrator shall be entitled to rely conclusively on the certificate of any actuary stating that the condition set forth in (b) above has been met. ARTICLE X Miscellaneous 10.1 No Right to Continued Employment. The Plan confers no right on any employee to continue in employment and confers upon no person any right, claim or interest to any payment under the Plan or from the Trust Fund except as expressly provided in the Plan. 10.2 Prohibition of Assignment of Interest. No interest, right or claim in or to any part of the Trust Fund or any payment therefrom shall be assignable, transferable, or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution or levy of any kind, and the Administrator shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the same, except to the extent required by law. 10.3 Facility of Payments. In the event that the Administrator shall find that any person to whom a benefit is payable under the Plan is unable to care for his affairs because of illness or accident, or otherwise, the Administrator may direct that any benefit payments due shall be paid to the duly appointed legal representative of such person, or if there be no duly appointed legal representative, to the spouse, a child, a parent or other blood relative of the person, or to any person deemed by the Administrator to have incurred expense for the benefit of such person, and any such payments so made shall be a complete discharge of the liabilities of the Plan therefor. 10.4 Refund of Company Contributions. Once a contribution is made to the Plan by an Employer on behalf of its Employees, it is not refundable to the Employer unless the contribution: (a) was made by a mistake of fact; (b) was made conditioned upon a favorable determination by the Internal Revenue Service and such a determination is not received; or (c) was made conditioned upon the contribution being allowed as a deduction for Federal income tax purposes and such deduction is disallowed. Any refund under (a) must be made within one year from the date the contribution was made to the Plan, and any refund under (b) and (c) must be made within one year from the date of failure to receive a favorable determination, or the date of disallowance of the tax deduction, respectively. 10.5 Number and Gender. Where from the context it appears appropriate, each term used in this Plan in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. 10.6 Captions. Captions and Sections of this Plan are inserted for convenience of reference only, and the Plan is not to be construed by interpretation thereof. 10.7 Applicable Law. This Plan shall be interpreted, construed and administered in accordance with the laws of the State of New York (to the extent not preempted by ERISA), and with a view toward compliance with ERISA. ARTICLE XI Top-Heavy Plan Provisions 11.1 General Rule. For any Plan Year (calendar year) commencing on or after January 1, 1984 and in which this Plan is a "Top-Heavy Plan" as defined in Section 11.7 in accordance with Section 416 of the Code and any applicable regulations thereunder, any other provisions of this Plan to the contrary notwithstanding, this Plan shall be subject to the following provisions: (a) The vesting provisions of Section 11.2. (b) The minimum contribution provision of Section 11.3. (c) The limitation on compensation set by Section 11.4. (d) The limitation on contributions set by Section 11.5. 11.2 Vesting Provisions. Each Participant who (i) has completed an hour of service during any plan year in which the plan is top-heavy and (ii) has completed the number of years of vesting service specified in the following table shall have a nonforfeitable right to the percentage of the benefit accrued under this plan (derived from employer contributions) correspondingly specified in the following table: Percentage of Years of Nonforfeitable Vesting Service Benefit Less than 1 0 1 20 2 40 3 60 4 80 5 of more 100 (a) Vesting Service" as used in this Section 11.2 shall constitute Years of Vesting Service as defined in Section 1.23 of this Plan and used to determine the percentage of nonforfeitable benefits under Section 5.3. (b) Each Participant's nonforfeitable accrued benefit shall not be less than his nonforfeitable accrued benefit determined as of the last day of the last plan year in which the Plan was a Top-Heavy Plan. If the Plan ceases to be top-heavy, each Participant with five or more years of service, whether or not consecutive, shall have his nonforfeitable accrued benefit determined in accordance with this section and Section 5.3. Each such Participant shall have the right to elect the applicable schedule within 60 days after the day the Participant is issued written notice by the Administrator, or as otherwise provided in accordance with regulations issued under the provisions of the Internal Revenue Code of 1954, as amended, relating to change in the vesting schedule. (c) This provision shall apply without regard to contributions or benefits under Social Security or any other Federal or State Law. 11.3 Minimum Contribution Provisions. Each Employee eligible to participate in the Plan who (i) is a Non-Key Employee (as defined in Section 11.9 below) and (ii) is employed on the last day of the Plan Year shall be entitled to have Company contributions (including forfeitures) allocated to his Account of not less than three percent (the "minimum contribution percentage") of the Participant's Compensation (within the meaning of Section 415 of the Code). The minimum contribution percentage set forth above shall be reduced for any Plan Year to the percentage at which Company contributions (including forfeitures) are made (or required to be made) under the Plan for the Plan Year for the Key Employee for who such percentage is the highest for such Plan Year. For this purpose, the percentage with respect to a Key Employee (as defined in Section 11.8 below) shall be determined by dividing the contributions (including forfeitures) made for such Key Employees by so much of his Compensation for the Plan Year as does not exceed $200,000 (adjusted in the same manner as the amount set forth in Section 11.4 below). Contributions taken into account under the immediately preceeding sentence shall include contributions under this Plan and under all other defined contribution plans required to be included in an Aggregation Group (as defined in Section 11.7(c) below) but shall not include any plan required to be included in such required Aggregation Group if such plan enables a defined contribution plan required to be included in such group to meet the requirements of the Code prohibiting discrimination as to contributions or benefits in favor of employees who are officers, shareholders or the highly-compensated or prescribing the minimum participation standards. Contributions taken into account under this Section 11.3 shall not include any contributions under the Social Security Act or any other federal or state law. Participant Tax-Deferred Contributions shall be taken into account as Company contributions for purposes of this paragraph. 11.4 Limitation on Compensation. Compensation taken into account under this section and under Section 1.9 for purposes of computing contributions under this Plan shall not exceed the first $200,000, provided that such limit shall be adjusted automatically for each Plan Year to the amount prescribed by the Secretary of the Treasury or his delegate pursuant to regulations for the calendar year in which such Plan Year commences. 11.5 Limitation on Contributions. In the event that the Company also maintains a defined benefit plan the following shall apply: (a) If for the Plan Year this Plan would not be a "Top-Heavy Plan" as defined in Section 11.7 below if "90 percent" were substituted for "60 percent", then Section 11.3 shall apply for such Plan Year as if amended so that "four percent" were substituted for "three percent" therein. (b) If for the Plan Year this Plan would continue to be a "Top-Heavy Plan" as defined in Section 11.7 below if "90 percent" were substituted for "60 percent", then the denominator of both the defined contribution plan fraction and the defined benefit plan fraction shall be calculated as set forth in Section 3.1 for the Plan Year ending by substituting 1.0 for 1.25 in each place such figure appears in Sections 415(e)(2)(B) or 415(e)(3)(B) of the Code. 11.6 Coordination with Other Plans. In the event that a defined benefit plan maintained by an Employer provides contributions or benefits on behalf of Participants in this Plan, such other plan shall be treated as a part of this Plan pursuant to applicable principles (such as Rev. Rul. 81-202 or any successor ruling) in determining whether this plan satisfies the requirements of Section 11.3, thereby providing benefits at least equal to the defined benefit minimum. Such determination shall be made upon the advice of counsel by the Plan's Committee. 11.7 Top-Heavy Definition. This Plan shall be a "Top-Heavy Plan" for any Plan Year if, as of the Determination Date (as defined in Section 11.7(a) below), the aggregate value of the Accounts under the Plan for Participants (including former Participants) who are Key Employees (as defined in Section 11.8 below) exceeds 60 percent of the aggregate value of the Accounts for all Participants, or if this Plan is in a Required Aggregation Group which for such Plan Year is a Top-Heavy Group (as defined in Section 11.7(d) below). For purposes of making this determination, the present value of the aggregate of the accounts for a Participant (i) who is not a key employee but who was a key employee in a prior year or (ii) for plan years beginning after 12/31/84, who has not performed any service of the employer at any time during the 5-year period ending on the determination date, shall be disregarded. However, the Plan shall not be considered a "Top-Heavy Plan" for any Plan Year in which the Plan is a part of a Required or Permissive Aggregation Group which is not top-heavy. (a) "Determination Date" means for any Plan Year the last day of the immediately preceding Plan Year (except that for the first Plan Year of this Plan the determination date means the last day of such Plan Year). (b) The present value shall be determined as of the most recent valuation date that is within the twelve-month period ending on the determination date, and as described in the regulations under the Internal Revenue Code as of 1954, as amended. (c) "Aggregation Group" means the group of plans, if any, that includes both the group of plans that are required to be aggregated and the group of plans that are permitted to be aggregated. (A) The group of plans that are required to be aggregated (the "required aggregation group") includes: (i) Each plan (including any terminated plan) of an Employer (as defined in Section 11.10 below) in which a Key Employee is a Participant, including collectively-bargained plans, and (ii) Each other plan (including any terminated plan), including collectively-bargained plans of the Employer which enables a plan in which a Key Employee is a Participant to meet the requirements of the Code prohibiting discrimination as to contributions or benefits in favor of Employees who are officers, shareholders or the highly-compensated or prescribing the minimum participation standards. (B) The group of plans that are permitted to be aggregated (the "permissive aggregation group") includes the required Aggregation Group plus one or more plans of an Employer that is not part of the Required Aggregation Group and that the Committee certifies as constituting a plan within the permissive aggregate group. Such plan or plans may be added to the permissive aggregation group only if, after the addition, the aggregation group as a whole continues not to discriminate as to contributions or benefits in favor of officers, shareholders or the highly-compensated and to meet the minimum participation standards under the Code. (d) "Top-Heavy Group" means the Aggregation Group, if as of the applicable Determination Date, the sum of the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in the Aggregation Group plus the aggregate of the accounts of Key Employees under all defined contribution plans included in the Aggregation Group exceeds 60% of the sum of the present value of the cumulative accrued benefits for all employees, excluding former Key Employees, under all such defined benefit plans, plus the aggregate accounts for all employees, excluding former Key Employees, under such defined contribution plans. If the Aggregation Group that is a Top-Heavy Group is a required Aggregation Group, each plan in the group will be top-heavy. If the Aggregation Group that is a Top-Heavy Group is a permissive aggregation Group, only those plans that are part of the required Aggregation Group will be treated as top-heavy. If the Aggregation Group is not a Top-Heavy Group, no plan within such group will be top-heavy. (e) In determining whether this Plan constitutes a "Top-Heavy Plan", the Committee (or its agent) shall make the following adjustments in connection therewith: (A) When more than one plan is aggregated, the Committee shall determine separately for each plan as of each plan's determination date the present value of the accrued benefits or account balance. The results shall then be aggregated by adding the results of each plan as the determination dates for such plans that fall within the same calendar year. (B) In determining the present value of the cumulative accrued benefit or the amount of the account of any employee, such present value or account shall include the amount in dollar value of the aggregate distributions made to such employee under the applicable plan during the five-year period ending on the determination date, unless reflected in the value of the accrued benefit or account balance as of the most recent valuation date. Such amounts shall include distributions to employees which represented the entire amount credited to their accounts under the applicable plan. (C) Further, in making such determination, such present value or such account shall include any rollover contribution or plan-to-plan transfer, as follows: (i) If the rollover contribution or plan-to-plan transfer is initiated by the employee or made to or from a plan maintained by another Employer, the plan providing the distribution shall include such distribution in the present value or such account; the plan accepting the distribution shall not include such distribution in the present value or such account unless the plan accepted it before January 1, 1984. (ii) If the rollover contribution or plan-to plan transfer is not initiated by the employer or made to or from a plan maintained by another Employer, the plan accepting the distribution shall include such distribution in the present value or such account, whether or not the plan accepted the distribution before January 1, 1984; the plan making the distribution shall not include the distribution in the present value or such account. (D) Effective January 1, 1985, if any individual has not received any compensation from any Employer maintaining the plan (other than benefits under the plan) at any time during the 5-year period ending on the Determination Date, any accrued benefit for such individual (and the account of such individual) shall not be taken into account. 11.8 Key Employee. The term "Key Employee" means any employee or former employee under this Plan who, at any time during the Plan Year containing the Determination Date or during any of the four preceding Plan Years, is or was one of the following: (a) An officer of the Employer. However, an officer earning not more than one and one-half times the then applicable limit in Section 415(c)(1)(A) of the Code shall not be considered a Key Employee. Whether an individual is an officer shall be determined by the committee on the basis of all the facts and circumstances, such as an individual's authority, duties and term of office, not on the mere fact that the individual has the title of an officer. For any such Plan Year, there shall be treated as officers no more than the lesser of: (A) 50 employees, or (B) the greater of three employees or 10 percent of the employees. For the purpose of the preceding sentence, the highest-paid officers shall be selected first. (b) One of the ten employees owning (or considered as owning, within the meaning of the constructive ownership rules of the Code) the largest interests in the Employer. An employee who has some ownership interest is considered to be one of the top ten owners unless at least ten other employees own a greater interest than that employee. However, an employee will not be considered a top ten owner for a Plan Year if the employee does not earn more than the applicable limitation in Section 415(c)(1)(A) of the Code. (c) Any person who owns (or is considered as owning within the meaning of the constructive ownership rules of the Code) more than five percent of the outstanding stock of the Employer or stock possessing more than five percent of the combined total voting power of all stock of the Employer. (d) A person satisfying (c) above if "one percent" were substituted for "five percent" and having an annual Compensation of more than $150,000. For purposes of parts (a), (b), (c) and (d) of this Section 11.8, a beneficiary of a Key Employee shall be treated as a Key Employee. For purposes of Subclauses (b), (c) and (d), each individual Employer is treated separately in determining ownership percentages; but, in determining the amount of compensation, all Employers are taken into account. 11.9 Non-Key Employee. The term "Non-Key Employee" means any employee (and any beneficiary of an employee) who is not a Key Employee. 11.10 Employer. The term "Employer" means the definition of Company in Section 1.6 and any Affiliated Corporation as defined in Section 1.3. 11.11 Collective Bargaining Rules. The provisions of Section 11.2, 11.3 and 11.4 above do not apply with respect to any employee included in a unit of employees covered by a collective bargaining agreement if there is evidence that retirement benefits were the subject of good faith bargaining, unless the application of such subsections has been agreed upon with the collective bargaining agent. 11.12 Distributions to 5% Owners. Any other provision of this Plan to the contrary notwithstanding, distribution of a Member's interest in this Plan to each person who is or at any time has been a 5% owner shall commence no later than April 1 of the calendar year following the calendar year in which he attains age 70-1/2. ARTICLE XII Employees Subject to Securities Exchange Act 12.1 Limitation on Common Stock Transactions. The Incentive Savings Plan Committee shall establish in writing such rules so that any transaction by an Employee who is an officer of the Company (on an Affiliated Corporation) who is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall be in compliance with Rule 16b-3 of the Exchange Act with regards to any aspect of participation in the Plan which involves the investment in or disposition of shares of stock in the Continental Stock Fund for the account of such officer. 12.2 Administration. The rules established pursuant to Section 12.1 shall be enforced in a manner determined by the Incentive Savings Plan Committee. ARTICLE XIII DIRECT ROLLOVERS 13.1 Distributee's Election. This Article applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. 13.2 Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includiblein gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). 13.3 Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. 13.4 Distributee. A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. 13.5 Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. EX-10 7 EXHIBIT 10(D) THE RETIREMENT PLAN OF THE CONTINENTAL CORPORATION (Amended and Restated As of January 1, 1994) (Incorporates Amendments No. 1 Thru 35) THE CONTINENTAL CORPORATION, a New York Corporation, and certain of its affiliates have adopted the following Retirement Plan for the benefit of those of their respective employees eligible to participate therein as hereinafter provided. ARTICLE I Definitions The following terms when used herein, unless the context clearly indicates otherwise, shall have the meanings set forth below: 1.1 Active Service. A measure of time, expressed in years, used in determining the vesting of a Benefit. (a) With respect to periods prior to January 1, 1976, one year of Active Service shall be credited for each 12 months of service in the employ of an Employer or an Affiliated Corporation which is not an Employer. For the purpose of this subsection (a), service shall include: (i) any period of absence after at least 24 months of full-time Employment during which a person receives long-term disability benefits under the Company's Long Term Disability Plan; (ii) any period of absence on leave (in the granting of which, persons in similar circumstances will be treated in a uniform and nondiscriminatory manner), with or without pay, provided the person returns to full-time Employment at or prior to the termination of the leave; and (iii) any period of absence in service of the armed forces of the United States in time of war or national emergency provided the person returns to full-time Employment within 90 days after termination of his service in such armed forces, or such longer period as his employment rights are protected by law. (b) With respect to periods beginning after December 31, 1975, one year of Active Service shall be credited for each calendar year during which a person has at least 1000 Hours of Service and during any part of which such person either is a Member or is at least 22 years of age; provided, however, that if a person becomes a Member by completing 1000 Hours of Service during the 12-month period beginning on the date his Employment first began, and if such 12-month period overlaps two calendar years in neither of which such person completed 1000 Hours of Service, such person shall be credited with one year of Active Service. Service of individuals who are leased employees or employed in noncovered employment for the Employer controlled group and affiliated service group will be counted for vesting purposes. (c) With respect to an Employee who is in Employment on or after January 1, 1985, the minimum age referred to in Section 1.1(b) above shall be 18 rather than 22. 1.2 Administrator. An individual appointed by the Retirement Plan Committee to serve in this capacity. The Administrator is not precluded from serving as a Trustee. 1.3 Affiliated Corporation. A corporation during such time as it is either: (a) controlling, controlled by or under common control with the Company, through ownership, directly or indirectly through one or more intermediaries, of at least a majority of the voting stock of the controlled corporation; or (b) a member of a controlled group of corporations (within the meaning of Section 1563(a) of the Internal Revenue Code, determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C) thereof) of which any Employer is a member. Except as may be provided in Exhibit A hereto, service for a corporation shall be treated as service for an Affiliated Corporation only if performed during such time as such corporation is an Affiliated Corporation. 1.4 Beneficiary. The person designated pursuant to Section 4.2 hereof to receive payments in the event of the death of a Member. 1.5 Benefit. An amount payable under Article III hereof. 1.6 Board of Directors. The Board of Directors of the Company. 1.7 Company. The Continental Corporation, a New York corporation. 1.8 Credited Service. A measure of time, expressed in months, but not to exceed 480 months, used to determine the amount of a person's Benefit. (a) With respect to periods prior to January 1, 1976, one month of Credited Service shall be credited for each full month of service as an Employee for one or more Employers. For the purpose of this subsection (a), service shall include: (i) any period of absence after at least 24 months of full-time service for an Employer during which the Employee receives long-term disability benefits under the Company's Long Term Disability Plan; (ii) any period of absence on leave (in the granting of which, persons in similar circumstances will be treated in a uniform and nondiscriminatory manner), with or without pay, provided the Employee return to the full-time service of an Employer at or prior to the termination of the leave; and (iii) any period of absence in the service of the armed forces of the United States in time of war or national emergency, provided the Employee returns to the full-time service of an Employer within 90 days after the termination of his service in such armed forces, or such longer period as his employment rights are protected by law. (b) With respect to periods after December 31, 1975, months of Credited Service shall be credited on the basis of the number of Hours of Service as an Employee for one or more Employers completed during each calendar year, as follows: Hours of Service Months of In Calendar Year Credited Service 900-1049 6 1050-1199 7 1200-1349 8 1350-1499 9 1500-1649 10 1650-1799 11 1800 or more 12 In the event an Employee completes less than 900 Hours of Service for one or more Employers in either the calendar year in which he becomes a Member, or the calendar year in which he dies while in Employment or retires, such Employee shall be credited with one month of Credited Service for each 150 Hours of Service for one or more Employers completed during such year. (c) Notwithstanding the foregoing; any Employee (other than a Reemployed Early Retiree) who is scheduled to work for the regular workweek of an Employer at the Employee's location (or who was scheduled to do so at the beginning of a period of absence described in clauses (a), (b), (c) of Section 1.15), shall be credited with one month of Credited Service for each calendar month for which he is entitled to be credited with at least one Hour of Service under Section 1.15. (d) The foregoing shall be construed so as to avoid duplication of credit for Hours of Service for a single hour. In no event shall Credited Service be credited with respect to any person who does not become a Member until after the Effective Date for any period during which such person was not a Member. 1.9 Effective Date. January 1, 1972. 1.10 Employee. A person employed by an Employer excluding any officer or director who is not compensated by regular salary. 1.11 Employer. (a) The Company and those of its Affiliated Corporations it designates. (b) Corporations set forth in Exhibit A hereto. Except as may be provided in Exhibit A hereto, service for a corporation shall be treated as service for an Employer only if performed during such time as such corporation is an Employer. 1.12 Employment. That period of time during which a person is credited with Hours of Service. 1.13 Equivalent Actuarial Value. An equivalent value computed using the applicable factors set forth in Exhibit B, C or D to this Plan. The implementation of the foregoing Equivalent Actuarial Value Factors will not reduce the accrued benefit of any Member as of January 1, 1984. 1.14 ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time. 1.15 Hour of Service. An hour for which a person is directly or indirectly compensated (including back pay irrespective of mitigation of damages) by an Employer or an Affiliated Corporation which is not an employer. In addition, eight Hours of Service shall be credited for each scheduled workday for which a person is on: (a) Any period of absence, after at least two years of Active Service, during which such person receives long-term disability benefits under the Company's Long-Term Disability Plan; (b) Any period of absence on leave without pay (in the granting of which, persons in similar circumstances will be treated in a uniform and nondiscriminatory manner), provided the person returns to Employment at or prior to the termination of the leave; and (c) Any period of absence in the service of the armed forces of the United States in time of war or national emergency, provided the person returns to Employment within 90 days after the termination of his service in such armed forces or within such longer period as his employment rights are protected by law. Notwithstanding the foregoing, any Employee (other than a Reemployed Early Retiree) who is scheduled to work for the regular workweek of an Employer or an Affiliated Corporation at the Employee's location (or who was scheduled to do so at the beginning of a period of absence described in clauses (a), (b), or (c) of the preceding sentence), shall be credited with 190 Hours of Service for each calendar month for which he is entitled to be credited with at least one Hour of Service under the preceding sentence. The foregoing shall be construed so as to avoid duplication of credit for Hours of Service for a single hour. Hours of Service shall be computed and credited in accordance with paragraphs (b) and (c) of section 2530.200b-2 of the Department of Labor regulations. 1.16 Member. An Employee who becomes a Member as provided in Article II hereof. 1.17 Monthly Compensation. With respect to a Member terminating his Employment after December 31, 1991, the salary or wages paid or accrued by an Employer, or Affiliated Corporation which is not an Employer, to a Member during any month of Employment (prior to any reduction for tax-deferred contributions to the Incentive Savings Plan or reduction in order to reflect tax-exempt contributions or benefit payments), plus any overtime pay, shift differentials, awards under the Annual Management Incentive Plan or annual business unit incentive plans and commissions, but excluding (without limitation) fees, compensation paid or realized through the Long Term Incentive Plan, Chairman's or President's award programs, relocation plans or other special compensation (if any), amounts paid under the Long Term Disability Plan, reimbursement for expenses, and amounts paid or accrued with respect to this Plan or any other Plan of deferred compensation. Notwithstanding the foregoing, if a Member is credited with less than 150 Hours of Service in any full month of Employment subsequent to December 31, 1975, his salary or wages, as defined previously in this Section, plus overtime and shift differentials, paid or accrued during such month, shall be adjusted upward for purposes of Section 3.1 by multiplying it by a fraction, the numerator of which shall be 150, and the denominator of which shall be his Hours of Service for such month. In no event will the sum of Monthly Compensation over any consecutive 12 month period taken into account for purposes of this Plan exceed $200,000 during 1989, or such higher amount as increased by the Secretary of the Treasury for years after 1988. In no event will the sum of Monthly Compensation over any consecutive 12 month period taken into account for purposes of this Plan exceed $150,000 during 1994, or such higher amount as increased by the Secretary of the Treasury for years after 1994. For a Member terminating his Employment on or before December 31, 1991, the definition of Monthly Compensation will be that as set forth in the Plan prior to January 1, 1992. 1.18 Normal Retirement Date. The later of the first day of the month coinciding with or next following the date a Member attains age 65 or the fifth anniversary of the time the Member commences Employment. A Member will have a nonforfeitable interest in his Normal Retirement Allowance on attaining his Normal Retirement Age which is the later of the date a Member attains age 65 or the fifth anniversary of the time the Member commences Employment. 1.19 Plan. The retirement plan herein set forth or, if hereafter amended, as so amended. 1.19A Plan Year. The Plan Year and the limitation year shall be a calendar year. 1.20 Retirement Credit. The figure computed as provided in Section 3.1 hereof for measuring the amount of a Benefit payable under the Plan. 1.21 Reemployed Early Retiree. Any Employee who retires prior to his Normal Retirement Date, is reemployed, who is scheduled to work less than and completes less than 900 Hours of Service during the first twelve consecutive months of Employment or each calendar year commencing after his date of reemployment. In computing Hours of Service for purposes of this Section, the next to last paragraph of Section 1.15 shall not apply. 1.22 Trust Agreement. The agreement described in Section 5.1 hereof. 1.23 Trust Fund. The fund described in Section 5.1 hereof. 1.24 Trustees. The individual trustees appointed by the Compensation Committee as provided in Section 5.1 hereof or any successor trustees designated in accordance with the terms of the Trust Agreement. 1.25 Vesting Percentage. After December 31, 1982 the Vesting Percentage for a Member who is an Employee after December 31, 1982 is the higher of the applicable percentages determined under Tables A, B, or C below if such Member became an Employee prior to January 1, 1983: Table A Years of Sum of Age Plus Active Service Years of Active Service Percentage Less than 5 Less than 45 0 5 45 or 46 50 6 47 or 48 60 7 49 or 50 70 8 51 or 52 80 9 53 or 54 90 10 or more 55 or more 100 The applicable percentage under Table A is the lesser of the percentages corresponding to the Member's years of Active Service, or to the sum of the Member's age and years of Active Service. Table B Years of Active Service Percentage Less than 10 0 10 50 11 60 12 70 13 80 14 90 15 or more 100 The applicable percentage under Table B is percentage corresponding to the Member's years of Active Service. Table C Years of Active Service Percentage Less than 10 0 10 or more 100 For Members who first became Employees on or after January 1, 1983, the Vesting Percentage shall be determined under Table C. Table D Years of Active Service Percentage Less than 5 0 5 or more 100 Table D shall apply to all Members who are in Active Service on or after January 1, 1989. Notwithstanding the foregoing, the Vesting Percentage of a Member who has been covered under the provisions of the Plan as in effect prior to January 1, 1976, shall not be less than his Vesting Percentage would have been if the provisions of the Plan as in effect prior to January 1, 1976, had continued without change. 1.26 Retirement Plan Committee (or "Committee"). A Committee whose members are the named fiduciaries (as defined by ERISA) of the Plan. Members of the Retirement Plan Committee are individuals appointed by the Compensation Committee to serve in this capacity. 1.27 Compensation Committee. The Compensation Committee of the Board of Directors as appointed from time to time. 1.28 Covered Social Security Compensation. Covered Social Security Compensation means with respect to any Member, one-twelfth of the average of the contribution and benefit bases in effect under Section 230 of the Social Security Act for each year in the 35-year period ending with the year in which the Member attains the ending age indicated in the following table: Member's Year of Birth Ending Age Before 1938 65 After 1937 and before 1955 66 After 1954 67 ARTICLE II Participation 2.1 An Employee shall be eligible to become a Member participating in the Plan unless he is: (a) participating in any other plan qualified under Section 401(a) of the Internal Revenue Code of 1954 (except The Continental Corporation Incentive Savings Plan) to which an Employer contributes; (b) covered by a collective bargaining agreement between employee representatives and one or more Employers, if such agreement does not expressly provide for coverage by this Plan and if retirement benefits were the subject of good faith bargaining between such employee representatives and such Employer or Employers; (c) Employed in Canada; (d) employed outside the United States who is not a citizen of the United States; or (e) with respect to periods prior to January 1, 1976, any person (i) not regularly employed on a full-time basis by an Employer, (ii) whose customary employment was for not more than 20 hours in any one week or not more than five months in any calendar year, or (iii) whose compensation, hours or work, or conditions of employment were determined by a collective bargaining agreement that did not expressly provide for coverage of such person by this Plan. 2.2 Every Employee who is eligible to become a Member under Section 2.1 shall become a Member as of the later of the applicable dates on which he is an Employee as set forth in Subsection (a) and (b) below: (a) Periods prior to January 1, 1976. With respect to periods prior to January 1, 1976. (1) Every Employee on the Effective Date shall become a Member as of the Effective Date provided that at the date his employment by an Employer first began he was less than 55 years old; and (2) Any person not an Employee on the Effective Date shall become a Member on the date his Employment by an Employer first begins if on such date he is less than 55 years old. (b) Periods after December 31, 1975. With respect to periods after December 31, 1975: (1) Every person who became a Member pursuant to Section 2.2(a) hereof shall continue to be a Member: (2) Every Employee if not already a Member shall become a Member as of the later of the following dates on which he is an Employee: (A) January 1, 1976; (B) the day after he attains age 25, or if he is an Employee who is in Employment on or after January 1, 1985, the day after he attains age 21; or (C) the day following the close of the first 12-month period measured from the date he commenced Employment (or any anniversary thereof) during which he completed 1,000 Hours of Service. 2.3 Termination of Participation. A Member's participation in the Plan shall terminate, and all of his rights under the Plan (except his rights, if any, under Section 3.5 hereof) shall cease and determine, upon the termination of his Employment for any reason prior to the time when he shall have qualified for a Benefit under this Plan; provided, however, that if a Member's participation in the Plan terminates and he thereafter again commences Employment with an Employer, he shall immediately upon his reemployment be admitted to participation in the Plan, and his Benefit with respect to Employment after such reemployment shall take into account all his prior Active Service and Credited Service, but shall be adjusted to reflect the amount of any Benefit he has already received based on his prior Employment. ARTICLE III Benefits 3.1 Retirement Credit. Whenever a Member or Member's spouse becomes entitled to a Benefit as hereafter provided in this Article III, the Benefit shall be computed by reference to a Retirement Credit equal to the amount determined under the Revised Formula, described in Section 3.1(e). However, in no event will the Retirement Credit be less than the Member had accrued as of December 31, 1988, based upon Monthly Compensation and Credited Service before January 1, 1989, under whichever of the following apply: -- the Regular Formula described in Section 3.1(a), or -- in the case of an individual who was a Member prior to January 1, 1979, the greater of the amount determined under the Regular Formula or the amount determined under the Alternative Formula described in Section 3.1(b), or -- the benefit provided for in Section 3.7 or Exhibit A to this Plan. (a) the Regular Formula is one-twelfth of: (i) the product of (1) two percent of the Member's average Monthly Compensation for the highest paid 60 consecutive months of the 120 months next preceding the date as of which the Retirement Credit is computed (or, if Monthly Compensation has been paid or accrued to the Member for less than 60 consecutive months, his average Monthly Compensation for all months) multiplied by (2) the number of months of his Credited Service not in excess of 240 months; plus (ii) the products of (1) one percent of the Member's average Monthly Compensation (as determined in Section 3.1(a)(i) above), multiplied by (2) the number of months of his Credited Service in excess of 240 months; reduced by (iii) a Social Security offset in an amount equal to the product of (1) two and one-half percent of the monthly primary benefit payable to the Member under the Federal Social Security Act as in effect on the earlier of the date the Member's Employment ceases, or the date upon which he first becomes eligible for unreduced benefits by virtue of age under the Federal Social Security Act, multiplied by (2) the number of months of the Member's Credited Service not in excess of 240 months; and (b) The Alternate Formula is one-twelfth of: (i) the product of (1) one and one-half percent of the Member's average Monthly Compensation (as determined in Section 3.1(a)(i) above), multiplied by (2) the number of months of his Credited Service; reduced by (ii) a Social Security offset in an amount equal to the product of (1) one and one-half percent of the excess, if any, over $220 per month (being the approximate maximum primary insurance benefit at December 31, 1971, for any person aged 65 at December 31, 1971), of the monthly primary benefit payable to the Member under the Federal Social Security Act as in effect on the earlier of the date the Member's Employment ceases, or the date upon which he first becomes eligible for unreduced benefits by virtue of age under the Federal Social Security Act, multiplied by (2) the number of months of the Member's Credited Service after the Effective Date not in excess of 400 months. (c) If the Member is less than the age at which he first becomes eligible for unreduced benefits by virtue of age under the Federal Social Security Act at the time the Social Security offset is to be computed, then the amount of the offset is to be determined on the assumption that the Member will not thereafter receive any income that would be treated as wages for purposes of the Federal Social Security Act. (d) For purposes of this Section 3.1, the age at which a Member first becomes eligible for unreduced benefits ,by virtue of age, under the Federal Social Security Act is determined as set forth in the following table. Age at Which Eligible For Unreduced Year of Member's Birth Social Security Benefits Prior to 1938 65 1938 through 1942 65 plus 2 months for each year date of birth is after 1937 1943 through 1954 66 1955 through 1959 66 plus 2 months for each year date of birth is after 1954 1960 and later 67 (e) The Revised Formula is one-twelfth of the sum of (i) and (ii), where: (i) is the product of (1) one and fifteen one-hundredths percent of the Member's average Monthly Compensation (as determined in Section 3.1(a) (i) above), multiplied by (2) the number of months of his Credited Service not in excess of 420 months and (ii) is the product of (1) forty-three one-hundredths percent of the Member's average Monthly Compensation (as determined in Section 3.1(a) (i) above) in excess of Covered Social Security Compensation, if any, multiplied by (2) the number of months of his Credited Service not in excess of 420 months. (f) If the Member is less than his applicable ending age (as set forth in Section 1.28) at the the time the Retirement Credit is to be determined under 3.1(e) above, then the contribution and benefit base for all future years for purposes of determining the Covered Social Security Compensation shall be assumed to be the same as the contribution and benefit base for Social Security at the time such determination is made. 3.2 Normal Retirement Allowance. If a Member who is in Employment on the day prior to the later of (a) the fifth anniversary of the time he commenced Employment, or (b) the date he has attained the age of 65 retires from Employment, he thereupon shall be entitled to receive each month for the remainder of his life (beginning at his Normal Retirement Date) a Normal Retirement Allowance in an amount per month equal to his Retirement Credit; provided, however, that if his highest Early Retirement Allowance determined on any date which could constitute his Early Retirement Date is greater than such Retirement Credit determined without regard to any increase since such Early Retirement Date in the primary Benefit under the Federal Social Security Act, then his Normal Retirement Allowance shall be such Early Retirement Allowance. 3.3 Postponed Retirement Allowance. (a) A Member who continues in full-time Employment after his Normal Retirement Date shall, upon his actual retirement from Employment, but not before, be entitled to receive for the remainder of his life, beginning at the date of his actual retirement, a Postponed Retirement Allowance in an amount per month equal to his Retirement Credit computed as of the date of his actual retirement. This provision shall be administered in accordance with and subject to applicable Department of Labor Regulations on Suspension of Benefits. A Member who so continues in Employment and who dies before his actual retirement from Employment shall be deemed for the purpose of payment of his Benefit under Article IV to have retired on the day next preceding his death. A Member whose Employment is on other than a regular full-time basis at any time after his Normal Retirement Date shall be deemed to have retired at the date his Employment on a regular full-time basis ceased. For the purposes of this Section 3.3, full-time Employment or Employment on a regular full-time basis shall mean Employment which is scheduled for more than 20 hours per week for at least six months during a calendar year. (b) If a Member who, while in Employment, will have attained his Normal Retirement Date on or before February 1, 1992 and would have completed ten or more years of Active Service by December 31, 1992, and for whom the sum of age and years of Active Service equals at least 85 by such date, makes an election to retire effective February 1, 1992, and such election is made prior to January 7, 1992, then that Member's actual retirement date shall be February 1, 1992 and such Member shall receive a temporary monthly supplemental payment for each month starting with February 1992 and ending with January 1993. The amount of such monthly supplemental payment shall be 70% of the first $833.33 of the Member's average monthly compensation (as determined in Section 3.4(c)) plus 20% of the next $2,500 of such average monthly compensation. For the purposes of this Section 3.3(b), the applicable formula for determining a Member's Retirement Credit shall be applied using average monthly compensation as defined in Section 3.4(c) instead of average Monthly Compensation as determined in Section 3.1. 3.4 Early Retirement Allowance. (a) A Member who, while in Employment, has attained age 55 and has completed ten or more years of Active Service, may retire upon six months advance notice to the Administrator (or upon such shorter notice as the Administrator shall in his discretion agree to accept), and thereupon shall be entitled to receive for the remainder of his life (beginning at the date of his early retirement, which date must be the first day of a month prior to his Normal Retirement Date) an Early Retirement Allowance in an amount per month equal to his Retirement Credit computed as of the date of his early retirement, multiplied by the appropriate factor (interpolated for calendar months when partial years are involved) from the following table: Years By Which Years By Which Early Retirement Early Retirement Dates Precede Dates Precede Normal Retirement Normal Retirement Dates Factor Dates Factor 1 1.00 6 .85 2 1.00 7 .80 3 1.00 8 .75 4 .95 9 .70 5 .90 10 .65 (b) However, notwithstanding the foregoing, if a Member who, while in Employment, will have attained at least the age of 55 and completed twenty or more years of Active Service during 1982, makes an election to retire Effective May 1, 1982, and such election is made prior to April 1, 1982, then that Members' Early Retirement Date shall be May 1, 1982 and the factor in the preceding table shall be 1.0 for all years, up to eleven, by which such Early Retirement Date precedes Normal Retirement Date unless the Regular Formula described in Section 3.1(a) shall apply to the Member. If such Regular Formula shall apply, the factor shall be as set forth in the table below until such time as the Member's age precedes his Normal Retirement Date by seven years. Years By Which Early Retirement Dates Precede Normal Retirement Dates Factor 1 but not more than 7 1.00 8 .94 9 .88 10 .82 more than 10 but less than 11 actuarial reduction A Member retiring in accordance with the provisions of this paragraph shall also be entitled to receive temporary supplemental monthly payments in lieu of Social Security benefits as set forth in the table below. Supplemental Payment will Continue Up To Monthly and Including Age Last Birthday At Supplemental The Month In Which Early Retirement Date Payment The Member Attains Age 54 but less than 60 $435 62 60 but less than 65 $550 65 (c) However, notwithstanding the foregoing, if a Member who, while in Employment, would have attained at least the age of 55 and completed ten or more years of Active Service by December 31, 1992, and for whom the sum of age and years of Active Service equals at least 85 by such date, makes an election to retire effective February 1, 1992, and such election is made prior to January 7, 1992, then that Member's Early Retirement Date shall be February 1, 1992 and the factor in the table in Section 3.4(a) shall be 1.0 for all years by which such Early Retirement Date precedes his Normal Retirement Date. A Member retiring in accordance with the provisions of this Section 3.4(c) shall also be entitled to receive temporary supplemental monthly payments in lieu of Social Security benefits. The amount of such monthly payment shall be 70% of the first $833.33 of the Member's average monthly compensation plus 20% of the next $2,500 of such average monthly compensation if the birth date of the Member retiring under this Section 3.4(c) was on or before February 1, 1930, or 80% of the amount so determined if the birth date of the Member was after February 1, 1930. For the purpose of this Section 3.4(c), average monthly compensation shall mean one- sixtieth of the sum of the Member's annual rates of salary or wages as of December 31st of 1987, 1988, 1989, 1990 and November 1, 1991, plus the average Monthly Compensation, excluding any amount representing salary or wages, for the 58 consecutive month period ending on November 1, 1991. The temporary supplemental monthly payments as determined under this paragraph shall be payable for the period as set forth in the following table. Member's Date of Birth Supplemental payment will continue up to and including the later of the month of January 1993 or the month prior to the month in which the Member attains age on or before Feb. 1, 1930 65 after February 1, 1930 62 For the purposes of this Section 3.4(c), the applicable formula for determining a Member's Retirement Credit shall be applied using average monthly compensation as defined in this Section 3.4(c) instead of average Monthly Compensation as determined in Section 3.1. 3.5 Vested Retirement Allowance. A Member who terminates his Employment prior to his Normal Retirement Date, other than by death or retirement on an Early Retirement Allowance, but after the earlier of the date on which he either: (a) completes five years of Active Service and the sum of his years of Active Service and his age equals at least 45, or completes ten years of Active Service, for Members who became Employees prior to January 1, 1983, or (b) completes ten years of Active Service, for Members who became Employees on or after January 1, 1983, or (c) completes five years of Active Service, for Members who are in Active Service on or after January 1, 1989, shall be entitled to receive a Vested Retirement Allowance in an amount per month equal to his Retirement Credit multiplied by his Vesting Percentage, each computed as of the date his Employment terminates. Such Vested Retirement Allowance shall be paid beginning at the Member's Normal Retirement Date, except that, in the case of a Member who has completed ten years of Active Service at the time his Employment terminates, such Member may elect, by six months advance written notice to the Administrator, to have payment of the Vested Retirement Allowance begin at the first day of any month after he attains age 55, in which event such allowance shall be in a reduced amount of Equivalent Actuarial Value to the Vested Retirement Allowance that such Member otherwise would have been entitled to receive beginning at his Normal Retirement Date. 3.6 Surviving Spouse's Allowance. (a) If a Member dies while in Employment, after completing ten years of Active Service and either attaining age 55 or after attaining age 45 if the sum of his age and completed years of Active Service total at least 65, but before his Normal Retirement Date, and is survived by a spouse to whom he has been married throughout the 12-month period ending on the date of his death, such spouse shall be entitled to receive for the remainder of his or her life, a Surviving Spouse's Allowance in an amount equal to one-half of the Member's Retirement Credit computed as of the date of the Member's death, reduced by an amount determined by applying the appropriate factor in columns I and II of Table A below. However, in no event will the Surviving Spouse's Allowance be less than the greater of I or II in Table B below. TABLE A I II Age of Employee Reduction In Member's Reduction in Member's at Date of Death Retirement Credit Retirement Credit 55 But Less Than 65 1/3% for each full month 1/4% for each full that Member's death month by which Spouse precedes attainment of is more than 5 years age 65. younger than Member. 45 But Less Than 55 40% plus 1/4% for each 1/4% for each full full month that Member's month by which Spouse death precedes attainment is more than 5 years of age 55. younger than Member. TABLE B I. $50 per month. II. The amount to which such Spouse would be entitled had the Member's Retirement Credit as of the date of his death been converted into a fifty percent joint and survivor annuity of Equivalent Actuarial Value with payments to begin immediately and with the Spouse as the contingent annuitant, and had the Member died immediately thereafter. Payments of the Surviving Spouse's Allowance shall commence on the last day of the month in which the Member dies (or, if the Member's death occurs on the last day of a month, on the last day of the next succeeding month) and shall terminate with the date of the death of the spouse. Whenever the Member or spouse shall die on other than the last day of a month, the Surviving Spouse's Allowance otherwise payable to the spouse for such month shall be prorated to reflect the date of death. (b) If a Member (1) performs at least one Hour of Service on or after August 23, 1984, (2) dies before he begins receiving a Benefit, (3) has a Vesting Percentage which is greater than zero, and (4) is survived by a spouse to whom he has been married throughout the 12-month period ending on the date of his death and the spouse is not entitled to a Benefit under Section 3.6(a) or Article IV, then such spouse shall be entitled to receive a Surviving Spouse's Allowance computed as follows: (i) If a Member dies before attaining age 55, then the surviving spouse shall be entitled to receive for the remainder of his or her life an amount to which such spouse would be entitled had the Member terminated his Employment on the date of his death, survived until age 55, then converted his Retirement Credit (based on his Credited Service and Vesting Percentage at his date of death) into a fifty percent joint and survivor annuity of Equivalent Actuarial Value with payments to begin immediately (with the spouse as the contingent annuitant) and the Member had died on the following day. Payments to the surviving spouse shall commence on the last day of the month in which the Member would have attained age 55 (or, if such date occurs on the last day of the month, on the last day of the next succeeding month) and shall terminates with the date of the death of the spouse. (ii) If a Member dies on or after attaining age 55, then the surviving spouse shall be entitled to receive for the remainder of his or her life an amount to which such spouse would be entitled had the Member's Retirement Credit as of one day before the date of his death been converted into a fifty percent joint and survivor annuity of Equivalent Actuarial Value with payments to begin immediately (and with the spouse as the contingent annuitant) and had the Member died the following day. Payments to the surviving spouse shall commence on the last day of the month in which the Member dies (or, if the Member's death occurs on the last day of a month, on the last day of the next succeeding month) and shall terminate with the date of the death of the spouse. (iii) Whenever the member or spouse shall die on other than the last day of a month, the Surviving Spouse's Allowance otherwise payable to the spouse for such month shall be prorated to reflect the date of death. (c) Notwithstanding Section 3.6(b), if a Member (1) terminated his Employment prior to August 23, 1984 (but after December 31, 1975), (2) is not entitled to a Benefit on August 23, 1984 (and is alive on that day), (3) had completed 10 years of Active Service, and (4) is survived by a spouse to whom he has been married throughout the 12-month period ending on the date of his death and the spouse is not entitled to a Benefit under Section 3.6(a) or Article IV, then such spouse shall be entitled to receive a Surviving Spouse's Allowance computed under Section 3.6(b). 3.7 Certain Employees. Anything elsewhere in this Plan to the contrary notwithstanding, (a) every person who became a Member on the Effective Date and who immediately prior to the Effective Date participated in the Glen Falls Insurance Company Retirement Plan or the Title Insurance Company of Pennsylvania Pension Plan shall have a nonforfeitable right to a Benefit at a rate not less than those benefits he would have had a nonforfeitable right to receive pursuant to the Glens Falls Insurance Company Retirement Plan or the Title Insurance Company of Pennsylvania Pension Plan, as the case may be; (b) every person who became a Member on the Effective Date and who immediately prior to the Effective Date participated in the Pacific of New York Group Employees' Pension Plan shall have a nonforfeitable right to a Normal Retirement Allowance at a rate not less than he would have had a nonforfeitable right to receive pursuant to the terms of Group Annuity Contract No. GR-847 issued by the Travelers Insurance Company if the Group Annuity Contract had been discontinued by reason of termination of the Pacific of New York Group Employees' Pension Plan immediately prior to the Effective Date; (c) there shall be set off against and deducted from any Benefit payable under this Plan to any person who became a Member on the Effective Date and who is a former employee of Norwich Union Fire Insurance Society Ltd. or Scottish Union and National Insurance Company the amount of any annuity payable to such person under John Hancock Mutual Life Insurance Company Group Annuity Contract #342; and (d) there shall be added to any Retirement Credit determined under this Plan for any Employee who became a Member on the Effective Date and who is a former employee of Underwriters Adjusting Company an amount equal to the pension that would have been payable from Normal Retirement Date under the former Underwriters Adjusting Company Retirement Plan if it had continued in effect to the date of the Employee's retirement, multiplied by a fraction of which the numerator is the number of months the Employee was in the employ of Underwriters Adjusting Company prior to April 1, 1967, and the denominator is the sum of such numerator plus the total number of months of his Credited Service. In addition, there shall be set off against and deducted from any Benefit payable under this Plan to an Employee who was employed by William Penn Life Insurance Company of New York on September 1, 1982 the amount of any benefit payable to such person under the Retirement Plan for Salaried Employees of Penncorp Financial, Inc. and Affiliates. 3.8 Employees Retired Prior to Effective Date. Every former employee of an Employer (or beneficiary of a former employee of an Employer) who on the Effective Date had retired and was receiving a retirement benefit pursuant to the Retirement Plan of The Continental Insurance Company, the Glens Falls Insurance Company Retirement Plan or the Title Insurance Company of Pennsylvania Pension Plan shall be deemed to be a retired Member of this Plan and shall continue to receive from the Trust Fund a Benefit at the same rate and subject to the same terms and conditions as the benefit that he was then receiving. The amount of such Benefit shall not be increased or decreased by reason of the adoption of this Plan. 3.9 Increases in Benefits. (a) Benefits payable after May 31, 1974, under Sections 3.2, 3.3, 3.4, 3.6 and 3.8 hereof to any person who (or to the Beneficiary of any person who) has received a Benefit under any such Section prior to January 1, 1974, shall be increased by an amount computed by multiplying the monthly Benefit otherwise payable (but not in excess of $833.33) by 0.2 percent of the number of months such person (or his decedent) received Benefits under this Plan or its predecessor plan during the years 1970 through 1973. (b) Benefits payable after June 30, 1978 under Sections 3.2, 3.3, 3.4, 3.5, 3.6 and 3.8 hereof to any person who (or to the Beneficiary of any person who) was receiving a Benefit under any such Section on December 31, 1977 shall be increased by an amount computed by multiplying the monthly Benefit otherwise payable by the appropriate percentage from the following table: Date Benefit First Received By the Member (or his Beneficiary, if earlier) Percentage June 1974 or earlier 10.0% July 1974 through December 1974 9.0 January 1975 through June 1975 8.0 July 1975 through December 1975 7.0 January 1976 through June 1976 6.0 July 1976 through December 1976 4.5 January 1977 through June 1977 3.0 July 1977 through December 1977 1.5; provided, however, that in any event such amount not be less than $2.00 per month. (c) Benefits payable after June 30, 1982 under Sections 3.2, 3.3, 3.4, 3.6 and 3.8 hereof to any person who (or to the Beneficiary of any person who) was receiving a Benefit under any such Section on June 30, 1981, or who had reached the Normal Retirement Date on June 30, 1981, shall be increased by an amount computed by multiplying the monthly Benefit otherwise payable by the appropriate percentage from the following table: Earliest of: (1) Date Benefit First Received by Member (2) Date Benefit First Received by Member's Beneficiary, or (3) Member's Normal Retirement Date Percentage December 1978 or earlier 15% January 1979 through June 1979 13% July 1979 through December 1979 10% January 1980 through June 1980 8% July 1980 through December 1980 5% January 1981 through June 1981 3% provided, however, that (1) this adjustment will only be applicable to the first $1,250 of each monthly retirement allowance, and (2) in any event such amount will not be less than $3 per month. (d) Benefits payable after June 30, 1988 under Sections 3.2, 3.3, 3.4, 3.6(a) and 3.8 hereof to any person who (or to the Beneficiary of any person who) was receiving a Benefit under any such Section on December 31, 1986, or who had reached the Normal Retirement Date on December 31, 1986, and retired prior to January 1, 1988, shall be increased by an amount computed by multiplying the monthly Benefit otherwise payable, but not including any temporary supplemental payments in lieu of SociaL Security benefits described in Section 3.4, by the appropriate percentage from the following table: Earliest of: (1) Date Benefit First Received by Member, (2) Date Benefit First Received by Member's Beneficiary, or (3) Member's Normal Retirement Date Percentage December 1981 or earlier 8% January 1982 through December 1982 7% January 1983 through June 1983 6% July 1983 through December 1983 5% January 1984 through June 1984 4% July 1984 through June 1985 3% July 1985 through December 1986 2% provided, however, that in any event such amount will not be less than $3 month. 3.10 Maximum Benefits. (a) The total annual retirement pension payable to a Member under Section 4.1, or Section 4.2(a) Option B or Option D, as adjusted pursuant to Section 3.9, (when added to the annual retirement pension payable to such member under all other defined benefit plans of an Employer or Affiliated Corporation), shall not exceed the lesser of (i) $90,000, or (ii) 100 percent of the Member's average compensation from an Employer or an Affiliated Corporation for the three consecutive years that produced the highest average. For the purpose of the foregoing limitation, the term "compensation" shall mean earnings as reported by the Employer on Form W-2 for the applicable year. However, if the Member has not completed 10 years of service with one or more Employers or Affiliated Corporations, such maximum amount shall be reduced to an amount equal to such maximum amount multiplied by the ratio which the number of years (or part therefore) of his service bears to 10. If the pension begins before the Member's 62nd birthday, the maximum amount in (i) above shall be the greater of $75,000, (or, if the pension begins before the Member's 55th birthday, the actuarial equivalent of a $75,000 pension beginning at age 55) or the equivalent actuarial value of the maximum amount in (i) beginning at age 62. For purposes of the preceding sentence, the equivalent actuarial value shall be based on an interest rate equal to the greater of five percent per year or the interest rate otherwise used under this Plan in the determination of equivalent actuarial value. If the pension begins after the Member's 65th birthday, the maximum amount in (i) shall be of equivalent actuarial value based on an interest rate equal to the lesser of five percent per year or the interest rate otherwise used under this Plan in the determination of equivalent actuarial value, to that maximum benefit payable at age 65. In the event that a Member elects benefits under Section 4.2(a), Option D (Other), the total benefits so payable shall be subject to such maximum limitation (except that if such benefits constitute a qualified joint and survivor annuity, only the reduced pension to the Member shall be subject to such maximum limitation), and such benefit shall be adjusted to its actuarially equivalent annual straight life annuity for the purpose of determining whether such maximum limitation has been exceeded. In the event that a Member elects benefits under Section 4.2(a), Option A (120 Months Certain), the total benefit so payable shall be subject to such maximum limitation, and such benefit shall be adjusted to its actuarially equivalent annual straight life annuity for the purpose of determining whether such maximum limitation has been exceeded. For purposes of the last two sentences, the determination of actuarial equivalents shall be based on an interest rate equal to the greater of five percent per year or the interest rate otherwise used under this Plan in the determination of equivalent actuarial value. As of January 1 of each calendar year on and after January 1, 1988, the dollar limitation in (i) above will be automatically adjusted by the Commissioner of Internal Revenue. Such adjusted limitation will apply to limitation years ending on or after the date of such adjustment. As of January 1 of each calendar year the limitation in (ii) above shall, with respect to retired participants, be automatically adjusted by the Commissioner of Internal Revenue. Such adjusted limitation will apply to limitation years ending on or after the date of such adjustment. Notwithstanding the preceding paragraph, in no event shall a Member's annual pension payable under this Plan be less than the benefit which the Member had accrued under the Plan as of December 31, 1982; provided, however, that in determining such benefit, no changes in the Plan on or after July 1, 1982, shall be taken into account. Anything in this Section 3.10(a) notwithstanding, in no event shall benefits under this Plan exceed the maximum benefits permitted under Section 415(b) of the Internal Revenue Code of 1986. (b) In the case of any Member as to whom the sum of the defined benefit Plan fraction and the defined contribution Plan fraction for any year exceeds 1.0 (prior to the application of this subsection (b)), the annual retirement benefit payable under this Plan shall be reduced to the extent required to make such sum 1.0. A Member's defined benefit plan fraction for any year is a fraction the numerator of which is the sum of the Member's projected annual retirement benefit under all defined benefit plans (whether or not terminated) maintained by an Employer or an Affiliated Corporation, determined as of the close of the year, and the denominator of which is the lesser of the product of 1.25 multiplied by the dollar limitation in subsection (a)(i) above or the product of 1.4 multiplied by the amount in subsection (a)(ii) above. A Member's defined contribution plan fraction for any year is a fraction the numerator of which is the sum of the annual additions to the Member's account under all defined contribution plans maintained by an Employer or an Affiliated Corporation (whether or not terminated) for the current and all prior limitation years (determined as of the close of the year), and the denominator of which is the sum of the lesser of the following amounts determined for such year and for each such prior year of service with an Employer or an Affiliated Corporation: the product of 1.25 multiplied by the dollar limitation in effect under Internal Revenue Code section 415(c)(1)(A) for such year, or the product of 1.4 multiplied by the amount which may be taken into account under section 415(c)(1)(B) of the Internal Revenue Code of 1954. For purposes of the preceding paragraph, a Member's projected annual retirement benefit is the annual benefit to which the Member would be entitled under the terms of this Plan if the Member continued employment until normal retirement age (or current age, if later) and the Member's compensation for the limitation year and all other relevant factors used to determine such benefit remained constant until normal retirement age (or current age, if later). 3.11 Transfers from Canada. Anything in the Plan to the contrary notwithstanding, if an individual is transferred directly from service with an Employer in Canada to service with an Employer in the United States: (a) his period of service with one or more Employers in Canada shall be considered service as an Employee for the purpose of determining his Credited Service; and (b) his Retirement Credit under the Plan shall be reduced by an amount which has the Equivalent Actuarial Value of any retirement income attributable to employer contributions that is payable to him or on his behalf under any pension or retirement plan of any Employer that is registered under any Provincial Pension Benefit Act in Canada. ARTICLE IV Payment of Benefits 4.1 Standard Method of Payment. (a) In the absence of an election under Section 4.2 hereof, every Normal Retirement Allowance, Postponed Retirement Allowance, Early Retirement Allowance, and Vested Retirement Allowance shall be paid in equal monthly installments in an amount equal to the Member's Benefit, except that, if the Member has a spouse on the date he becomes entitled to received a Benefit, such Member will receive a monthly payment in an amount of Equivalent Actuarial Value to the Benefit to which otherwise he would be entitled, under which he will receive a reduced Benefit during his lifetime with the provision that, if he dies survived by such spouse, then the Benefit shall continue to be paid to such spouse during the lifetime of such spouse at a rate equal to 50 percent of the rate at which the Benefit was paid to the Member. If on or after the later of his sixty-fifth birthday or the tenth anniversary of the commencement of his participation in the Plan, but prior to his Normal Retirement Date, a Member (whose spouse is not entitled to receive a Benefit under Section 3.6) dies, shall be deemed to have become entitled to receive a Benefit on the date prior to the date of his death. If a Member dies prior to the first day of a month which next succeeds his having completed 10 years of Active Service, attained age 55, and elected by six months' advance written notice to the Administrator to have payment of his Vested Retirement Allowance begin prior to his Normal Retirement Date, he shall be deemed to have become entitled to receive such a Benefit on the date prior to the date of his death. The standard method of payment of an accrued benefit for an unmarried Member will be in the form of a straight life annuity. (b) The payment of a Member's Benefit shall commence on the last day of the month in which the Member becomes entitled to receive the Benefit, and shall terminate on the death of the Member. If payment is to be made to the Member's spouse as set forth above, payments to the spouse shall commence on the last day of the month in which the Member dies (or, if the Member dies on the last day of a month, on the last day of the following month) and shall terminate with the death of the spouse. Whenever a Member or spouse dies other than on the last day of a month, the Benefit otherwise payable to such person for such month shall be prorated to reflect the date of death. 4.2 Optional Methods of Payments. (a) In lieu of payment of a Normal Retirement Allowance, Postponed Retirement Allowance, or Early Retirement Allowance pursuant to the provisions of Section 4.1 hereof, a Member may elect to receive any of the following optional forms of payment in an amount of Equivalent Actuarial Value to the Benefit to which otherwise he would be entitled: Option A -- 120 Months Certain A reduced Benefit payable during the lifetime of the Member, with the provision that if the Member dies within the period of 120 months next following the date payment of the Benefit begins, then the Benefit shall continue to be paid at the same rate to the Member's Beneficiary until the end of the period of 120 months. Option B -- Joint-and-Survivor Annuity A reduced Benefit payable during the lifetime of the Member with the provision that, if the Member dies survived by a spouse, then the Benefit shall continue to be paid to his spouse during the lifetime of the spouse at a rate equal to 25 percent, 75 percent, or 100 percent (as the Member may elect) of the rate at which the Benefit was paid to the Member. Option C -- Straight Life Annuity A Benefit payable in equal monthly installments during the lifetime of the Member, with no further payments on his behalf after his death. (b) A Member entitled to a Vested Retirement Allowance payable under Section 3.5(b) hereof may elect, in lieu of payment pursuant to the provisions of Section 4.1 hereof, to receive the optional form of payment described in Option C. (c) No spouse of a Member entitled to receive a Surviving Spouse's Allowance and no Member entitled to a Vested Retirement Allowance payable under Section 3.5(a) hereof, may elect to receive any optional form of payment. (d) Every election of an optional form of payment shall be made in writing, signed by the Member, and, if he is married, consented to (in writing) by his spouse unless the optional form of payment is a 75 percent or 100 percent joint and survivor annuity described in Option B. The consent of the spouse must acknowledge the effect of the election and must either be notarized or witnessed by a plan representative. The election shall be delivered to the Administrator at any time during the 90 day period ending on the Member's Normal, Early or Postponed Retirement Date, whichever is applicable. The information with which a married Member must be provided respecting an election not to receive payment of a Benefit under the method provided for in Section 4.1(a), will be mailed or personally delivered to such Member in such time as is reasonable to assure that it will be received on or about the date which is nine months before the date on which he attains age 65 or such earlier date as on which he can elect to receive a Benefit. If a married Member requests additional information regarding the financial effect of being paid under the method provided for in Section 4.1(a) at any time prior to 60 days before his Normal, Early or Postponed Retirement Date, which ever is applicable, then notwithstanding the foregoing, the election period shall be extended to include the 60 calendar days immediately following the date that the requested additional information is personally delivered or mailed to the Member. An election of an optional form of payment shall take effect on the date following the expiration of the election period provided for above, and shall be inoperative unless both the Member and his beneficiary are alive at that date. An election of an optional form of payment may be revoked by the Member at any time prior to the expiration of the election period, but shall thereafter be irrevocable. Nothwithstanding any other provision of this Section the qualified election period shall be a period within the 90 day period ending on the "annuity starting date" and the annuity starting date shall mean (i) the first day of the first period for which an amount is payable as an annuity (whether by reason of retirement or disability) or (ii) in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred which entitle the Member to such benefit. (e) Each Member who elects Option A or B shall designate a Beneficiary to receive the payments provided for after the Member's death by filing with the Administrator a designation in writing in such form as the Administrator shall prescribe. In the case of Option B, the designated Beneficiary must be the Member's spouse. The Member may change the designation from time to time and at any time until the election has taken effect, or in the case of Option A after benefit payments under such Option have commenced to the Member, by filing with the Administrator a new designation. (f) Any other provision of the Plan notwithstanding, if the Beneficiary under Option A is other than the Member's spouse, benefit payments commencing under such Option shall be adjusted so that if any payment would otherwise be payable more than 5 years after the death of the Member, or the death of the Member's spouse, where benefits were being paid to such spouse, all remaining benefits will have been paid within 5 years of the death of the Member or his spouse whichever is applicable. This subsection shall not apply if the period over which benefits are payable does not exceed the Member's life expectancy at the time benefit payments commence. 4.3 Lump Sum for Small Pensions. Whenever a Benefit becomes payable at a time when such Benefit has an Equivalent Actuarial Value of not more that $3,500, such Benefit shall be paid in a lump sum amount equal to such Equivalent Actuarial Value, such payment to be made on the last day of the month in which the recipient becomes entitled to receive the Benefit. 4.4 Suspension of Payments. Except as provided in Section 3.3 with respect to Employment on other than a regular full-time basis after Normal Retirement Date, if any retired Member is restored to Employment (except as a Reemployed Early Retiree), his retirement allowance payments shall be suspended for such period as he shall remain in Employment, but not beyond the April 1 of the year following the year in which he attains age 70-1/2. However, any such suspension of benefits shall be in accordance with and subject to applicable Department of Labor Regulations. 4.5 Any rules in this Article IV notwithstanding, in no event will benefit payments to a Member or his beneficiary commence after the April 1 of the calendar year following the calendar year in which the Member attains age 70-1/2. If a Member continues in Employment after attaining age 70-1/2, his benefit will be recalculated each year in which he accrues additional benefits, and his benefit payments increased if required to meet the minimum distribution requirements of Section 401(a)(9) of the Internal Revenue Code of 1986. 4.6 Any form of Benefit which is paid pursuant to this Article IV and which involves payments to a person or persons other than the Member or the Member's spouse shall be such that the present value of the payments to be made to the Member is more than 50% of the present value of the total payments to be made to the Member and such other person or persons. ARTICLE V Administration 5.1 Trust Fund. All contributions by an Employer shall be paid into, and all payments herein provided for shall be paid from, a Trust Fund maintained by agreement between the Company and individual trustees designated by the Compensation Committee, which agreement shall be in such form and contain such provisions as the Compensation Committee may deemed appropriate, including, but not limited to, provisions with respect to the powers and authority of the Trustees, the authority of the Board of Directors or Compensation Committee to amend the Trust Agreement and to terminate the trust, and the authority of the Board of Directors or Compensation Committee to settle the accounts of the Trustees on behalf of all persons having an interest in the Trust Fund. When entered into, the Trust Agreement shall be taken to form a part of this Plan, and all rights and benefits that may accrue to any person under this Plan shall be subject all the terms and provisions of the Trust Agreement. The several Employers will make all contributions to the Trust Fund, and no contributions will be required of any Member in connection therewith. All expenses of administering the Plan and the Trust Fund shall be paid from the Trust Fund unless paid by the Company. 5.2 Retirement Plan Committee, Trustees and Administrator. (a) Retirement Plan Committee shall administer the Plan in accordance with its terms and shall have all powers and authority necessary or appropriate for carrying out their duties in that respect. Not in limitation but in amplification of the foregoing, the Retirement Plan Committee, subject to the provisions of the Plan, from time to time shall adopt and establish such rules as they deem necessary or desirable for administering the Plan, and shall adopt appropriate mortality and other tables and interest rates to be used in administering the Benefits provided under the Plan. The Retirement Plan Committee shall establish a procedure for establishing and carrying out of a funding policy and method consistent with the objectives of the Plan and the requirements of the law, which policy and method shall be reviewed at least annually. The Retirement Plan Committee shall have full power and authority to interpret, construe, and administer the Plan, and determine all questions that may arise hereunder, including, without limitation, all questions relating to the eligibility of employees of an Employer to be Members, and the amount of benefits to which any person shall be entitled under the Plan; the Retirement Plan Committee may correct any error or defect or supply any omission or reconcile any inconsistency in the Plan in such manner and to such extent as they shall deem expedient to carry the Plan into effect; and the Retirement Plan Committee shall be the sole and final judge of such expediency. The interpretations and constructions of the Retirement Plan Committee, and all other acts and determinations of the Retirement Plan Committee done or made in good faith, shall be final, conclusive, and binding upon all parties, including the several Employers, Employees, and Beneficiaries. The Retirement Plan Committee may appoint in writing such persons, who need not be members of the Retirement Plan Committee as they may deem necessary or desirable for the effective exercise of the duties and responsibilities of the Retirement Plan Committee and may delegate to such persons in writing such duties and confer upon them in writing such powers, discretionary or otherwise, as the Retirement Plan Committee may deem expedient or appropriate. With respect to all or any portion of the Plan assets, the Retirement Plan Committee may appoint an investment manager or managers, pursuant to Sections 402(c)(3) and 405(c)(1) of ERISA, to manage, acquire, or dispose of any assets of the Plan. Each such investment manager shall accept appointment as a fiduciary of the Plan and shall be either registered as an investment adviser under the Investment Advisers Act of 1940, a bank as defined under that Act, or an insurance company qualified under the laws of more than one state to manage, acquire, or dispose of Plan assets. (b) Except where the Trustee is a corporate Trustee, the following provisions shall govern. Where a corporate Trustee is appointed, it may act through any one or more of its duly authorized officers or employees. The Trustees shall designate one of their number as Chairman, and shall appoint a Secretary, who may, but need not, be a Trustee. The Chairman shall preside at all meetings of the Trustees at which he is present, but in his absence any Trustee may call the meeting to order and preside. The Secretary shall duly record or cause to be recorded all acts and determinations of the Trustees, and all records shall be preserved in his custody or as the Trustees may direct. Any act or determination that the Plan authorizes or requires the Trustees to do or make may be done or made by a majority of the Trustees at the time acting hereunder, and the act or determination of such majority of the Trustees expressed at any time and from time to time by a vote at a meeting or in writing without a meeting shall constitute the act or determination of the Trustees and shall have the same effect for all purposes as if assented to by all the Trustees serving at the time. Any person dealing with the Trustees or with any agent or representative of the Trustees shall be entitled to rely upon the certificates of the Chairman or Secretary as to the fact that any act or determination is the act or determination of the Trustees. The Trustees shall have the power to adopt rules for the time and place of their meetings, the notice to be given of such meetings, and all similar matters governing the conduct of the Trustee's business. (c) The Administrator shall have the duties and responsibilities imposed by law on the administrator of an employee benefit plan. In addition, the Administrator shall perform such other duties and responsibilities as may be delegated to him in writing by the Retirement Plan Committee, and shall have such powers as may be conferred on him in writing by the Retirement Plan Committee. The Administrator may appoint in writing such persons as he may deem necessary or desirable for the effective exercise of his duties and may delegate to such persons in writing such duties and responsibilities and confer upon them in writing such powers, discretionary or otherwise, as he may deem expedient or appropriate. (d) The Trustees, Retirement Plan Committee and the Administrator (and any person or persons to whom the Trustees, Retirement Plan Committee or the Administrator have delegated any duties or responsibilities) may employ one or more persons to render advice with regard to any of the duties or responsibilities of the Trustees, Retirement Plan Committee or the Administrator under the Plan. (e) The Company shall defray all the expenses of the Trustees, Retirement Plan Committee and the Administrator in the administration of the Plan. (f) The Trustees, Retirement Plan Committee and the Administrator shall be entitled to rely upon all tables, valuations, certificates and reports furnished by any actuary, upon all certificates and reports made by any independent public accountants; and upon all opinions of law given by any counsel (who may be counsel to an Employer) and shall be fully protected in respect of any act done or permitted or determination made in good faith in reliance upon any such table, valuation, certificate, report or opinion. Neither a Trustee, Retirement Plan Committee nor the Administrator shall be liable to an Employer or to any Employee or to any Beneficiary on account of any act done or omitted or determination made in the performance of his duties under the Plan, nor for any act done or omitted by any agent or representative of the Trustees, Retirement Plan Committee or the Administrator so long as such Trustee, Retirement Plan Committee or the Administrator has acted with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Neither shall any Trustee be liable to any person for any act done or omitted by any other Trustee except to the extent prescribed by law. The Company agrees to indemnify and hold harmless the Trustees, Retirement Plan Committee and the Administrator from and against any liability they may incur in the administration of the Plan, unless arising from their own negligence or willful misconduct. The provisions of this Section 5.2(f) shall be effective only to the extent permitted by law. 5.3 Benefit Claims Procedure (a) In the event that any person makes a claim for benefits under this Plan and such claim is denied in whole or part, the Administrator, within a reasonable time, shall furnish to such person a written notice of such denial setting forth the specific reasons for such denial, specific references to the provisions of the Plan upon which such denial is based, a description of any additional material or information necessary for such person to provide including an explanation why such material or information is necessary, and an explanation of the review procedure under this Plan. (b) Any person whose claim for benefits is denied in whole or part may, within sixty days after receiving the foregoing notice, request in writing addressed to the Administrator a review by the Retirement Plan Committee of the denial. In addition, any person who makes a claim for benefits under this Plan and does not receive any decision on such claim within a reasonable time may request a review by the Retirement Plan Committee of the claim. Any person requesting a review under this subsection 5.3(b) shall have the opportunity to review pertinent documents and to submit a written statement to the Retirement Plan Committee, shall be entitled to request a hearing before the Retirement Plan Committee, and shall be entitled to have representation in connection with this review procedure. (c) Upon receipt of a request for review under subsection 5.3(b) hereof, the Retirement Plan Committee shall render a decision as promptly as possible and in any event within sixty days from such receipt, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days from such receipt. The decision of the Retirement Plan Committee shall be in writing and shall include the specific grounds for the decision and specific reference to the provisions of this Plan upon which the decision is based. ARTICLE VI Amendment, Termination and Merger 6.1 Amendment. The Board of Directors or Compensation Committee at any time and from time to time, by written notice to the Trustees and to each Employer, may amend in whole or in part any or all of the provisions of the Plan. The Office of the Chairman of The Continental Corporation (or, in the cases of clauses (1) and (3) below, the senior Human Resources officer) may amend the Plan when it finds that such amendment (1) is required to conform the Plan to applicable laws or regulations, (2) will not increase the annual cost of the Plan by more than the greater of 5% or $1 million, or (3) is intended to implement transactions approved by the Board of Directors. However, no amendment shall authorize or permit any part of the Trust Fund to be used for or diverted to purposes other than the exclusive benefit of Members and their beneficiaries, and no amendment (except to the extent that it is made retroactive to secure a favorable determination as to the qualification of this Plan under the Internal Revenue Code) shall reduce any interest of any person existing immediately prior to such amendment. 6.2 Termination. (a) The Board of Directors or Compensation Committee, at any time, by written notice to the Trustees and to each Employer, may terminate the Plan in whole or in part. Upon a complete or partial termination, the rights of all persons affected by such termination who are then Members, to Benefits Accrued to the date of such termination (hereinafter referred to as the Termination Date), to the extent then funded, shall become nonforfeitable (subject, however, to the provisions of Section 6.3 hereof), and upon receipt of notice of such termination, the Administrator shall allocate the Trust Fund exclusively for the benefit of Members and beneficiaries of Members, by providing for payment in accordance with Section 4044 of ERISA. (b) The Administrator, in his discretion, shall apply the amounts allocated under this Section 6.2 for the benefit of Members and their beneficiaries by cash payments, by the purchase of annuity contracts from an insurance company or companies designated by the Administrator or by the continuance of the Trust Fund and payment of Benefits therefrom. (c) If, upon such termination, there is an amount remaining in the Trust Fund after satisfying all liabilities to Members and their beneficiaries, then and not otherwise, the Trustees shall pay over to the several Employers, or upon their order, their respective shares of the amount so remaining in the Trust Fund, provided that such distribution does not contravene any provision of law. (d) Notwithstanding any such termination, the provisions of Article V hereof and of the Trust Agreement shall continue in effect until the Trustees shall have completed the distribution of the Trust Fund and their final accounts have been settled. 6.3 Restrictions on Benefits in Event of Early Termination. (a) If at any time prior to the tenth anniversary of a Commencement Date (as defined in paragraph (c) of this Section) (1) the Plan shall be terminated or (2) the full current costs of the Plan shall not then have been funded, then, notwithstanding anything in the Plan to the contrary, the amount of funds under the Plan that can be used to provide benefits for any of the 25 highest paid Employees of each Employer on that Commencement Date whose anticipated Normal Retirement Allowance exceeds $125 a month shall not exceed the greater of (i) $20,000; or (ii) 20 percent of the first $50,000 of the Annual Compensation (as defined in paragraph (d) of this Section) of such Employee multiplied by the number of years between that Commencement Date and the date of termination of the Plan or the date of the failure to meet the full current costs of the Plan, whichever is earlier; or (iii) If such Employee is a substantial owner as defined in section 4022(b)(5), of ERISA, a dollar amount which equals the present value of the benefit guaranteed for such Employee under section 4022 of ERISA, or if the Plan has not terminated, the present value of the benefit that would be guaranteed if the Plan terminated on the date the benefit commences, determined in accordance with the regulations of the Pension Benefit Guarantee Corporation ("PBGC"). If such Employee is not a substantial owner as defined in section 4022(b)(5) of ERISA, a dollar amount which equals the present value of the maximum benefit described in section 4022(b)(3)(B) of ERISA (determined on the date the Plan terminates or on the date benefits commence, whichever is earlier, and determined in accordance with regulations of the PBGC) without regard to any other limitations in section 4022 of ERISA. (iv) In the case of any Commencement Date other than the Effective Date, either (1) the amount of funds under the Plan that would have been used to provide Benefits for such Employee if the Plan as in effect the day before such Commencement Date had been continued without change or (2) the sum of (A) the amount of funds under the Plan that would have been used to provide Benefits for such Employee if the Plan had been terminated on the day before such Commencement Date, plus (B) 20 percent of the first $50,000 of the Annual Compensation of such Employee multiplied by the number of years between that Commencement Date and the date of termination of the Plan or the date of the failure to meet the full current costs of the Plan, whichever is earlier. (b) The provisions of paragraph (a) of this Section shall not restrict the current payment of full Benefits called for by the Plan for any Employee who has retired while the Plan is in full effect and its current costs have been met. (c) As used in this Section 6.3, "Commencement Date" means the Effective Date of the Plan (or with respect to employees of any Affiliated Corporation that becomes an Employer after the Effective Date, the date it becomes an Employer) or the effective date of any subsequent amendment to the Plan that changes the Plan so as to increase substantially the extent of possible discrimination as to an Employer's contributions and as to Benefits actually payable in event of the subsequent termination of the Plan or the subsequent discontinuance of the Employer's contributions thereunder. (d) As used in this Section 6.3, "Annual Compensation" of an Employee means his average regular annual compensation during the five calendar years immediately preceding the earlier of (i) the date of termination of the Plan, or complete discontinuance of contributions hereunder, or (ii) the date of commencement of Benefit payments under the Plan to that Employee. 6.4 Merger, Consolidation and Transfer of Plan Assets. The Board of Directors or Compensation Committee may direct the Administrator to do all things necessary to effect a merger or consolidation of the Plan with, or the transfer of all or a part of the assets and liabilities of the Plan to, another plan (or plans) if and only if (a) Each trust forming a part of such plan (or plans) is a qualified trust under Section 401 of the Internal Revenue Code of 1986 and that each such trust is exempt from Federal Income Tax under Section 501 of the Internal Revenue Code of 1986; (b) Each Member of the Plan would (if the Plan then terminated) receive a Benefit immediately after the merger, consolidation or transfer which is equal to or greater than the Benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated); and (c) The Administrator shall have timely filed, pursuant to Section 6058 of the Internal Revenue Code of 1954, an actuarial statement of valuation of evidencing compliance with (b) above. The Board of Directors or Compensation Committee, the Trustees and the Administrator shall be entitled to rely conclusively on the certificate of an actuary stating that the condition set forth in (b) above has been met. ARTICLE VII Miscellaneous 7.1 Limitations on Employees' Rights. No Employee, Member or other person shall have any right or claim to any Benefit under the Plan except in accordance with the provisions of the Plan, and then only to the extent that there are funds available therefore in the hands of the Trustees. The establishment of the Plan shall not be construed as creating any contract of employment between any Employer and any person or otherwise conferring upon any person any legal right to continuation of employment, nor as limiting or qualifying the right of each Employer to discharge any of its employees without regard to the effect that such discharge might have upon such employee's rights under the Plan. 7.2 Non-Assignability of Rights. No interest, right or claim in or to any part of the Trust Fund or any payment therefrom shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind, and the Administrator shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the same, except to the extent required by law. If any person entitled to any Benefit under the Plan shall adjudicated bankrupt or shall attempt to assign, transfer, sell, mortgage, pledge hypothecate, commute, or anticipate the same, then the Administrator in his discretion may forthwith terminate the right of such person to such Benefit and hold or apply the amount thereof for the Benefit of such person, his spouse, children or other dependents or any of them, in such manner and in such proportion as the Administrator in his discretion shall determine. 7.3 Facility of Payments. In the event that the Administrator shall find that any person to whom a Benefit is payable under the Plan is unable to care for his affairs because of illness or accident, or otherwise, the Administrator may direct that any Benefit payments due shall be paid to the duly appointed legal representative of such person, or if there be no duly appointed legal representative, to the spouse, a child, a parent or other blood relative of the person, or to any person deemed by the Administrator to have incurred expense for the benefit of such person, and any such payments so made shall be a complete discharge of the liabilities of the Plan therefor. 7.4 Refund of Employer Contributions. Once a contribution is made to the Plan by any Employer on behalf of its Employees, it is not refundable to the Employer unless the contribution: (a) was made by a mistake of fact; (b) was made conditioned upon a favorable determination by the Internal Revenue Service and such a determination is not received; or (c) was made conditioned upon the contribution being allowed as a deduction for Federal income tax purposes and such deduction is disallowed. Any refund under (a) must be made within one year from the date the contribution was made to the Plan, and any refund under (b) and (c) must be made within one year from the date of failure to receive a favorable determination, or the date of disallowance of the tax deduction, respectively. 7.5 Number and Gender. Where from the context it appears appropriate, each term used in this Plan in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. 7.6 Captions. Captions or Sections of this Plan are inserted for convenience of reference only, and the Plan is not to be construed by interpretation thereof. 7.7 Applicable Law. This Plan shall be interpreted, construed and administered in accordance with the laws of the State of New York (to the extent not preempted by ERISA), and with a view toward compliance with ERISA. ARTICLE VIII Top-Heavy Plan Provisions 8.1 General Rule. For any calendar year (hereinafter called a "Plan Year") in which this Plan is a "Top-Heavy Plan" as defined in Section 8.7 below, any other provisions of this Plan to the contrary notwithstanding, this Plan shall be subject to the following provisions: (a) the vesting provisions of Section 8.2 (b) the minimum benefit provisions of Section 8.3 (c) the limitation on compensation set by Section 8.4 (d) the limitation on benefits set by Section 8.5 8.2 Vesting Provisions. Each Member who (i) has completed an Hour of Service during any Plan Year in which the Plan is top-heavy and (ii) has completed the number of Years of Service specified in the following table shall have a nonforfeitable right to the percentage of the Retirement Credit under this Plan correspondingly shown in the following table: Nonforfeitable Years of Percentage Service Of Retirement Credit Less than 2 years 0% 2 20% 3 40% 4 60% 5 80% 6 or more years 100% "Years of Service" as used in this Paragraph 8.2 shall constitute the same years of Active Service as defined in Section 1.1 of this Plan as used to determine the Member's vesting percentage under Section 1.25 and 3.5. Each Member's nonforfeitable Retirement Credit shall not be less than his nonforfeitable Retirement Credit determined as of the last day of the last Plan Year in which the Plan was a Top-Heavy Plan. If the Plan ceases to be top-heavy, each Member with five (5) or more Years of Service, whether of not consecutive, shall have his nonforfeitable Retirement Credit determined in accordance with this Section 8.2 and Section 1.25. Each such Member shall have the right to elect the applicable schedule within 60 days after the day the Member is issued written notice by the Committee, or as otherwise provided in accordance with regulations issued under the provision of the Internal Revenue Code, relating to changes in the vesting schedule. This provision shall apply without regard to contributions or benefits under Social Security or any other Federal or State Law. 8.3 Minimum Benefit Provisions. Each Member who (i) is a Non-Key Employee (as defined in Section 8.9 below) and (ii) has completed at least 1,000 Hours of Service during the first 12 months of his Employment or a calendar year thereafter shall be entitled to a Retirement allowance in the form of an annual pension benefit (as defined in paragraph (1) below) that shall be not less than the applicable percentage (as defined in paragraph (2) below) of the Participant's average annual compensation for years in the testing period (as defined in paragraph (3) below). (1) "Annual pension benefit" mean a benefit payable annually in the form of a single life annuity (with no ancillary benefits) beginning at Normal Retirement Date or its Equivalent Actuarial Value. (2) "Applicable percentage" means the lesser of two percent multiplied by the number of Top-Heavy Plan Years of Service (as defined in paragraph (4) below) or 20 percent. (3) "Testing period" means, with respect to a Member, the period of consecutive years (not exceeding five) of employment during which the Member had the greatest aggregate compensation from the Employer. The testing period shall not include any year of employment not included as a Year of Service as defined in paragraph (4) below. The testing period shall also not include any Year of Service that ends in a Plan Year beginning before January 1, 1984 or during which the Plan was not a Top-Heavy Plan. (4) "Years of Service" means such Active Service as defined in Section 1.25 of this Plan and used to determine the Participants nonforfeitable Retirement Credit under Section 3.5. Benefits taken into account under this section shall not include any benefits payable under the Social Security Act or any other Federal or State law. 8.4 Limitation on Compensation. Annual compensation taken into account under this Section 8.4 and under the definition of Monthly Compensation as set forth in Section 1.17 and average Monthly Compensation determined in Section 3.1 for purposes of computing benefits under this Plan shall not exceed the first $200,000, provided that such limit shall be adjusted automatically for each Plan Year to the amount prescribed by the Secretary of the Treasury or his delegate pursuant to regulations for the calendar year in which such Plan Year commences. 8.5 Limitations on Benefits. In the event that an Employer should maintain a defined contribution plan providing contributions on behalf of Employees who are also Members in this Plan, one of the two following provisions shall apply: (a) If for the Plan Year this Plan would not be a "Top-Heavy Plan" as defined in Section 8.7 below if "90 percent" were substituted for "60 percent," then Section 8.3 shall apply for such Plan Year as if amended so that the "applicable percentage" means the lesser of three percent multiplied by the number of Years of Service (as defined in paragraph (4) of Section 8.3) during which the Plan would be top-heavy and the overall applicable percentage does not exceed the lesser of (i) 30% or (ii) 20% plus 1% for each year the Plan is taken into account under this Section 8.5(a). (b) If for the Plan Year this Plan would continue to be a "Top-Heavy Plan" as defined in Section 8.7 below if "90 percent" were substituted for "60 percent," then the denominator of both the defined contribution plan fraction and the defined benefit plan fraction shall be calculated as set for in Section 3.10 for the Plan by substituting "1.0" for "1.25" in each place such figure appears, except with respect to any individual for whom there are no Employer contributions, forfeitures or voluntary nondeductible contributions allocated or any accruals for such individual under the defined benefit plan. 8.6 Coordination with Other Plans. In the event that a defined contribution plan or another defined benefit plan maintained by an Employer provides contributions or benefits on behalf of Members in this Plan, such other plan shall be treated as a part of this Plan pursuant to applicable principles (such as Rev. Rul. 81-202 or any successor ruling) in determining whether this Plan satisfies the requirements of Section 8.3 of this article. Such determination shall be made upon the advice of counsel to the Committee. 8.7 Top-Heavy Plan Definition. This Plan shall be a "Top-Heavy Plan" for any Plan Years if, as of the determination date (as defined in paragraph (1) below), the present value (as determined in Paragraph (2) below) of the cumulative accrued benefits under the Plan for Members (including former Members) who are Key Employees (as defined in Section 8.8 below) exceeds 60% of the present value of the cumulative accrued benefits under the Plan for all Members, excluding former Key Employees, or if this Plan is required to be in an aggregation group (as defined in paragraph (3) below) which for such Plan Year is a Top-Heavy Group (as defined in paragraph (4) below). However, the Plan shall not be considered a "Top-Heavy Plan" for any Plan Year in which the Plan is part of a Required or Permissive Aggregation Group which is not top-heavy. For purposes of making this determination, the present value of accrued benefits for a participant (1) who is not a key employee but who was a key employee in a prior year or (2) for plan years beginning after 12/31/84, who has not performed any service for the Employer at any time during the 5-year period ending on the determination date, shall be disregarded. (1) "Determination Date" means for any Plan Year the last day of the immediately preceding Plan Year. (2) The present value shall be determined as of the most recent valuation date that is within the twelve-month period ending on the Determination Date and as described in the regulations under the Internal Revenue Code. (3) "Aggregation Group" means the group of plans, if any, that includes both the group of plans that are required to be aggregated and the group of plans that are permitted to be aggregated. (A) The group of plans that are required to be aggregated (the "required aggregation group") includes: (i) Each plan (including any terminated plan) of an Employer in which a Key Employee is a Member, including collectively bargained plans, and (ii) Each other plan (including any terminated plan), including collectively bargained plans of an Employer which enables a plan in which a Key Employee is a Member to meet the requirements of the Internal Revenue Code, prohibiting discrimination as to contributions or benefits in favor of Members who are officers, shareholders or the highly compensated or prescribing the minimum participation standards. (B) The group of plans that are permitted to be aggregated (the "permissive aggregation group:) includes the required aggregation group plus one or more plans of an Employer that is not part of the required aggregation group and that the Committee certifies as constituting a plan within the permissive aggregation group. Such plan or plans may be added to the permissive aggregation group only if, after the addition, the aggregation group as a whole continues not to discriminate as to contributions or benefits in favor of officers, shareholders or the highly compensated and to meet the minimum participation standards under the Code. (4) "Top-Heavy Group" means the aggregation group, if as of the applicable Determination Date, the sum of the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in the aggregation group plus the aggregate of the accounts of Key Employees under all defined contribution plans included in the aggregation group exceeds 60% of the sum of the present value of the cumulative accrued benefits for all Members, excluding former Key Employees, under such defined benefit plans plus the aggregate accounts for all Participants, excluding former Key Employees, under such defined contribution plans. If the aggregation group that is a Top-Heavy Group is a required aggregation group, each plan in the group will be top-heavy. If the aggregation group that is a Top-Heavy Group is a permissive aggregation group, only those plans that are part of the required aggregation group will be treated as top-heavy. If the aggregation group is not a Top-Heavy Group, no plan within such group will be top-heavy. (5) In determining whether this plan constitutes a "Top-Heavy Plan", the Committee shall make the following adjustments in connection therewith: (A) When more than one plan is aggregated, the Committee shall determine separately for each plan as of each plan's determination date the present value of the accrued benefits or account balance. The results shall then be aggregated by adding the results of each plan as of the Determination Dates for such plans that fall within the same calendar year. (B) In determining the present value of the cumulative accrued benefit or the amount of the account of any Member, such present value or account shall include the amount in dollars value of the aggregate distributions made to such Member under the applicable plan during the five-year period ending on the Determination Date, unless reflected in the value of the accrued benefit or account balance as of the most recent valuation date. Such amounts shall include distributions to Members which represented the entire amount credited to their accounts under the applicable plan. (C) Further, in making such determination, such present value or such account shall include any rollover contribution (or similar transfer), as follows: (i) If the rollover contribution (or similar transfer) is initiated by the Member or made to or from a plan maintained by another Affiliate, the plan providing the distribution shall include such distribution in the present value or such account; the plan accepting the distribution shall not include such distribution in the present value or such account unless the plan accepted it before January 1, 1984. (ii) If the rollover contribution (or similar transfer) is not initiated by the Employee or made from a plan maintained by another Employer, the plan accepting the distribution shall include such distribution in the present value or such account, whether the plan accepted the distribution before or after January 1, 1984; the plan making the distribution shall not include the distribution in the present value or such account. (D) Effective January 1, 1985, if any individual has not received any compensation from any Employer maintaining the plan (other than benefits under the plan) at any time during the 5-year period ending on the Determination Date, any accrued benefit for such individual (and the account of such individual) shall not be taken into account. 8.8 Key Employee. The term "Key Employee" means any Employee or former Employee under this Plan who, at any time during the Plan Year containing the Determination Date or during any of the four preceding Plan Years, is or was one of the following: (a) An officer of the Employer. However, an officer earning not more than one and one-half times the then applicable limit in Section 415(c)(1)(A) of the Code shall not be considered a Key Employee. Whether an individual is an officer shall be determined by the Committee on the basis of all the facts and circumstances, such as an individual's authority, duties and term of office, not on the mere fact that the individual has the title of an officer. For any such Plan Year, there shall be treated as officers no more than the lesser of: (1) 50 employees; or (2) the greater of three employees or 10 percent of the employees. For the purpose of the preceding sentence, the highest-paid officers shall be selected first. (b) One of the ten employees owning (or considered as owning, within the meaning of the constructive ownership rules of the Code) the largest interests in the Employer. An Employee who has some ownership interest is considered to be one of the top ten owners unless at least ten other employees own a greater interest that that employee. However, an Employee will not be considered a top ten owner for a Plan Year if the Employee does not earn more that than the applicable limitation in Section 415(c)(1)(A) of the Code. (c) Any person who owns (or is considered as owning within the meaning of the constructive ownership rules of the Code) more than five percent of the outstanding stock of the Employer or stock possessing more than five percent of the combined total voting power of all stock of the Employer. (d) A person satisfying (c) above if "one percent" were substituted for "five percent" and having an annual Compensation of more than $150,000. For purposes of parts (a), (b), (c) and (d) of this Section 8.8, a beneficiary of a Key Employee shall be treated as a Key Employee. For purposes of Subclauses (b), (c) and (d), each individual Employer is treated separately in determining ownership percentages; but, in determining the amount of compensation, all Employers are taken into account. 8.9 Non-Key Employee. The term "Non-Key Employee" means any Member (and any beneficiary of such Member) who is not a Key Employee. 8.10 Employer. The term "Employer" means the definition of Employer found in Section 1.11 of the Plan. 8.11 Collective Bargaining Rules. The provisions of Section 8.2, 8.3, 8.4 and 8.5 above do not apply with respect to any Member included in a unit of employees covered by a collective bargaining agreement, unless the application of such sections has been agreed upon with the collective bargaining agent. ARTICLE IX DIRECT ROLLOVERS 9.1 Distributee's Election. This Article applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. 9.2 Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). 9.3 Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. 9.4 Distributee. A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. 9.5 Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. EX-10 8 EXHIBIT 10(E) RECEIVABLES PURCHASE AND SALE AGREEMENT Dated as of December 14, 1993 Among THE CONTINENTAL INSURANCE COMPANY BOSTON OLD COLONY INSURANCE COMPANY THE BUCKEYE UNION INSURANCE COMPANY CASUALTY INSURANCE COMPANY COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J. THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY CONTINENTAL LLOYD'S INSURANCE COMPANY CONTINENTAL REINSURANCE CORPORATION THE FIDELITY AND CASUALTY COMPANY OF NEW YORK FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY THE GLENS FALLS INSURANCE COMPANY KANSAS CITY FIRE AND MARINE INSURANCE COMPANY THE MAYFLOWER INSURANCE COMPANY, LTD. NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS NIAGARA FIRE INSURANCE COMPANY PACIFIC INSURANCE COMPANY WORKERS' COMPENSATION AND INDEMNITY COMPANY OF CALIFORNIA Collectively as Seller and THE PURCHASERS NAMED HEREIN as Purchasers and CITICORP NORTH AMERICA, INC. as Agent TABLE OF CONTENTS Section Page Preliminary Statements.................. 1 ARTICLE I DEFINITIONS Section 1.01 Certain Defined Terms................... 2 Adverse Claim........................... 2 Affiliate............................... 2 Assignee................................ 3 Assignment.............................. 3 Business Day............................ 3 Cash Purchase Price..................... 3 Citibank................................ 3 Collection Agent........................ 3 Collection Agent Fee.................... 3 Collections............................. 3 Company................................. 4 Continental............................. 4 Contract................................ 4 Credit and Collection Policy............ 4 Debt.................................... 4 Default Rate............................ 4 Defaulted Receivable.................... 5 Eligible Receivable..................... 5 ERISA................................... 7 Holdback Amount......................... 7 Holdback Termination Date............... 7 Initial Purchasers...................... 7 Insured................................. 7 Intercompany Pooling Agreement.......... 7 Majority Purchasers..................... 8 Originator.............................. 8 Outstanding Balance..................... 8 Ownership Document...................... 8 Past Due................................ 8 Person.................................. 8 Purchase................................ 8 Purchased Receivables................... 8 Purchaser............................... 9 Purchaser Report........................ 9 Receivable.............................. 9 Related Security........................ 9 Section Page Seller.................................. 9 Settlement Date......................... 10 Share Percentage........................ 10 Target Amount........................... 10 UCC..................................... 10 Section 1.02 Other Terms............................. 10 Section 1.03 Computation of Time Periods............. 10 ARTICLE II AMOUNTS AND TERMS OF THE PURCHASE Section 2.01 The Purchase............................ 11 Section 2.02 Making the Purchase from the Seller..... 11 Section 2.03 Fees.................................... 12 Section 2.04 Settlement Procedures................... 12 Section 2.05 Commissions............................. 15 Section 2.06 Payments and Computations, Etc.......... 16 Section 2.07 Sharing of Payments, Etc................ 16 ARTICLE III CONDITIONS OF PURCHASE Section 3.01 Conditions Precedent to Purchase........ 17 Section 3.02 Conditions Subsequent to Purchase....... 20 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01 Representations and Warranties of Each Originator......................... 20 Section Page ARTICLE V GENERAL COVENANTS OF EACH ORIGINATOR Section 5.01 Affirmative Covenants of Each Originator.............................. 25 Section 5.02 Negative Covenants of Each Originator... 27 ARTICLE VI ADMINISTRATION AND COLLECTION Section 6.01 Designation of Collection Agent......... 28 Section 6.02 Duties of Collection Agent.............. 29 Section 6.03 Rights of the Agent..................... 31 Section 6.04 Responsibilities of the Seller.......... 32 Section 6.05 Further Action Evidencing the Purchase.......................... 33 Section 6.06 Application of Collections.............. 34 ARTICLE VII THE AGENT Section 7.01 Authorization and Action................ 34 Section 7.02 Agent's Reliance, Etc................... 35 Section 7.03 CNA and Affiliates...................... 36 Section 7.04 Purchaser's Purchase Decision........... 36 ARTICLE VIII ASSIGNMENT OF SHARE PERCENTAGE Section 8.01 Assignment.............................. 36 Section 8.02 Authorization of Agent.................. 37 Section Page Section 8.03 Payments to Agent....................... 37 Section 8.04 Assignment to Seller.................... 37 ARTICLE IX INDEMNIFICATION Section 9.01 Indemnities by the Seller and the Originators....................... 38 ARTICLE X MISCELLANEOUS Section 10.01 Amendments, Etc......................... 40 Section 10.02 Notices, Etc............................ 41 Section 10.03 No Waiver; Remedies..................... 41 Section 10.04 Binding Effect; Assignability........... 41 Section 10.05 Governing Law........................... 42 Section 10.06 Costs, Expenses and Taxes............... 42 Section 10.07 No Proceedings.......................... 43 Section 10.08 Confidentiality......................... 43 Section 10.09 Trigger Events.......................... 45 Section 10.10 Independent Decision.................... 48 Section 10.11 Execution in Counterparts............... 48 LIST OF SCHEDULES AND EXHIBITS SCHEDULE I List of Purchased Receivables SCHEDULE II Purchaser Allocations SCHEDULE III Forecasted Collections and Agents' Commissions EXHIBIT A Form of Ownership Document EXHIBIT B Form of Assignment of Purchased Receivable EXHIBIT C Form of Contracts EXHIBIT D Form of Purchaser Report EXHIBIT E Form of Opinion(s) of Counsel for Seller and Each Originator EXHIBIT E-1 Form of Opinion of Counsel for The Continental Corporation EXHIBIT E-2 Form of Opinion of Counsel for Seller and Each Originator EXHIBIT F List of Offices of Each Originator Where Records Are Kept EXHIBIT G Form of Company Agreement RECEIVABLES PURCHASE AND SALE AGREEMENT Dated as of December 14, 1993 THE CONTINENTAL INSURANCE COMPANY, a New Hampshire corporation, BOSTON OLD COLONY INSURANCE COMPANY, a Massachusetts corporation, THE BUCKEYE UNION INSURANCE COMPANY, an Ohio corporation, CASUALTY INSURANCE COMPANY, an Illinois corporation, COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J., a New Jersey corporation, THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY, a New Jersey corporation, CONTINENTAL LLOYD'S INSURANCE COMPANY, a Lloyd's organization formed under the Texas Insurance Code, CONTINENTAL REINSURANCE CORPORATION, a California corporation, THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, a New Hampshire corporation, FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, a New Jersey corporation, THE GLENS FALLS INSURANCE COMPANY, a Delaware corporation, KANSAS CITY FIRE AND MARINE INSURANCE COMPANY, a Missouri corporation, THE MAYFLOWER INSURANCE COMPANY, LTD., an Indiana corporation, NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS, an Illinois corporation, NIAGARA FIRE INSURANCE COMPANY, a Delaware corporation, PACIFIC INSURANCE COMPANY, a California corporation, and WORKERS' COMPENSATION AND INDEMNITY COMPANY OF CALIFORNIA, a California corporation (each such corporation, individually, being herein referred to as an "Originator" and, collectively, as the "Originators" or the "Seller"), the purchasers listed on the signature pages hereof (collectively with any Person that has become an Assignee hereunder pursuant to Section 8.01, being the "Purchasers" and, individually, a "Purchaser"), and CITICORP NORTH AMERICA, INC., a Delaware corporation, individually ("CNA") and as agent for the Purchasers (the "Agent"), agree as follows: PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and used throughout this Agreement (in addition to those defined above) are defined in Article I of this Agreement. (2) As of the date hereof, the Originators constitute all of the parties to that certain Intercompany Pooling Agreement effective January 1, 1984 as heretofore amended by certain addenda thereto (as so amended and as further, from time to time, amended, modified or supplemented pursuant to one or more addenda or otherwise, the "Intercompany Pooling Agreement"), pursuant to which each Originator (other than Continental, Pacific Insurance Company, Casualty Insurance Company and Workers' Compensation and Indemnity Company of California) sold, transferred and assigned, and continues to sell, transfer and assign, to Continental certain accounts receivable, including the Receivables, to the extent of such Originator's right, title and interest therein, and simultaneously therewith Continental sold, transferred and assigned, and continues to sell, transfer and assign, to each Originator (other than Continental) a percentage interest and participation in such accounts receivable and in certain of its accounts receivable, including the Receivables, to the extent of its right, title and interest therein. (3) The Seller wishes to sell and the Purchasers are prepared to purchase certain Receivables and to assume the liabilities for commission expenses related thereto. (4) CNA has been requested and is prepared to act as Agent. NOW, THEREFORE, the parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adverse Claim" means a lien, security interest, charge or encumbrance, or other right or claim of any Person other than a right or claim (i) created by this Agreement in favor of the Purchasers, (ii) as against any Contract (but not the related Purchased Receivables) for payment of a loss, asserted by a Person who is a loss payee under such Contract, (iii) as against any Contract (but not the related Purchased Receivables) for contribution for payment of a loss, asserted by any Originator by reason of reinsurance provided for in the Intercompany Pooling Agreement or (iv) asserted by any insurance agent with respect to commissions, including any lien, security interest, charge or encumbrance relating to such agent's claim, but only to the extent the rights and claims referred to in this clause (iv) do not in the aggregate exceed the amount referred to in Section 4.01(p). "Affiliate" means (i) as to any Person, any other Person that (x) directly or indirectly is in control of, is controlled by or is under common control with such Person or (y) is a director or officer of such Person or of any other Person that directly or indirectly is in control of, is controlled by or is under common control with such Person, (ii) as to CNA, shall also include Corporate Asset Funding Company, Inc., (iii) as to Atlantic Asset Securitization Corp., shall also include Credit Lyonnais, (iv) as to Falcon Asset Securitization Corporation, shall also include The First National Bank of Chicago and (v) as to Sheffield Receivables Corporation, shall also include Barclays Bank PLC. "Assignee" means any Person to which a Share Percentage of Purchased Receivables has been, or shall be, assigned by a Purchaser pursuant to Section 8.01; provided, however, that "Assignee" shall not include any Person that is engaged primarily, or is a member of a group (consisting of such Person and all of its Affiliates) which is engaged primarily, in the business of underwriting or selling insurance. "Assignment" means an assignment, in substantially the form of Exhibit B, by which any Share Percentage shall be assigned. "Business Day" means any day other than a Saturday, Sunday or public holiday or the equivalent for banks in New York City or Chicago. "Cash Purchase Price" for a Purchaser means the amount shown as the "Cash Purchase Price" for such Purchaser on Schedule II. "Citibank" means Citibank, N.A., a national banking association. "Collection Agent" means at any time the Person then authorized pursuant to Article VI to service, administer and collect on behalf of the Purchasers the Receivables. "Collection Agent Fee" has the meaning assigned to that term in Section 2.03. "Collections" means, with respect to any Purchased Receivable, all cash collections and other cash proceeds of such Purchased Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Purchased Receivable, and any Collection of such Purchased Receivable deemed to have been received pursuant to clauses (i) and (ii) of Section 2.04(c). "Company" means The Continental Corporation, a New York corporation. "Continental" means The Continental Insurance Company, a New Hampshire corporation, and any corporation which may succeed to the business and assets of such corporation by merger or consolidation or acquisition of assets. "Contract" means a policy of insurance issued by an Originator in favor of another Person, and billed by an invoice in substantially the form set forth in Exhibit C, pursuant to or under which such Originator shall provide insurance to such other Person. "Credit and Collection Policy" means those credit and collection policies and practices existing on the date hereof which are being followed by the Seller with respect to Contracts and Receivables related thereto, including those policies and practices maintained by the Seller's computer system, as modified in compliance with Section 5.02(c). "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (v) obligations under direct or indirect guaranties (other than obligations arising under insurance policies and bonds issued by any Originator in the ordinary course of its business) in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above (other than obligations arising under insurance policies and bonds issued by any Originator in the ordinary course of its business), and (vi) liabilities in respect of unfunded benefits under plans covered by Title IV of ERISA. "Default Rate" means a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to 2% per annum plus the higher of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time as Citibank's base rate; or (b) 1/2 of one percent above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent. "Defaulted Receivable" means a Receivable: (i) as to which any payment, or part thereof, is Past Due; (ii) as to which the Insured thereof or any other Person obligated thereon or owning any Related Security in respect thereof, has taken any action, or suffered any event to occur, of the type described in Section 10.09(h); (iii) which, consistent with the Credit and Collection Policy, would be written off the Seller's books as uncollectible; (iv) as to which the Insured thereof or the Seller has breached the Contract relating thereto; or (v) which the insurance agent responsible for the collection thereof has been unable to collect and an Originator has undertaken to collect directly from the Insured. "Eligible Receivable" means a Receivable: (i) the Insured of which is a United States resident and is not a government or a governmental subdivision or agency; provided that the Insured may be a government or a governmental subdivision or agency so long as the aggregate Outstanding Balance of Receivables of such Insureds purchased hereunder does not exceed 10% of the aggregate Cash Purchase Price for all Purchasers; (ii) the Insured of which is listed on Schedule I hereto; (iii) the Insured of which is not the Insured on any Contract with respect to which there is a Defaulted Receivable; (iv) which arises under a Contract currently in effect or the effective date of which will be within 30 days after the date of Purchase; (v) which, on the date of Purchase, is not a Defaulted Receivable; (vi) which, according to the Contract related thereto, is required to be paid in full by the earlier of (a) one year after the effective date of the Contract giving rise thereto or (b) one year after the date of Purchase hereunder; (vii) which arises under a Contract which has been duly authorized and which, together with such Receivable, is in full force and effect (or which will be in full force and effect within 30 days after the date of Purchase) and which is not on the date of Purchase the subject of any dispute; (viii) which does not arise under a Contract underwritten by the Marine Office of America Corporation or Associated Aviation Underwriters providing for commercial marine or commercial aviation insurance; (ix) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which Receivable the Originator is not in violation of any such law, rule or regulation in any material respect; (x) which satisfies all applicable requirements of the Credit and Collection Policy; (xi) which is an "account receivable representing all or part of the sales price of merchandise, insurance or services" within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended; (xii) which arose under a transaction which is a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; (xiii) which is an "account" or "general intangible" within the meaning of Section 9-106 of the UCC of all applicable jurisdictions; (xiv) which is denominated and payable only in United States dollars in the United States of America; (xv) as to which, at or prior to the time of Purchase hereunder, the Agent has not notified the Seller that the Agent has determined, in its sole discretion, that such Receivable (or class of Receivables) is not acceptable for purchase by a Purchaser hereunder; and (xvi) the Outstanding Balance of which, together with the Outstanding Balance of each other Purchased Receivable of the same Insured, does not exceed more than 33% of the aggregate Holdback Amount for all Purchasers. "ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time. "Holdback Amount" for a Purchaser means the amount shown as the "Holdback Amount" for such Purchaser on Schedule II. "Holdback Termination Date" has the meaning specified in Section 2.04(d). "Initial Purchasers" means the Purchasers as of the date of the Purchase. "Insured" means a Person party to a Contract in favor of whom the policy of insurance evidenced by such Contract has been issued. "Intercompany Pooling Agreement" has the meaning specified in the Preliminary Statements. "Majority Purchasers" means at any time at least two Purchasers owning in aggregate a Share Percentage of the Purchased Receivables of more than 50.00%. "Originator" has the meaning assigned to such term in the paragraph preceding the Preliminary Statements. "Outstanding Balance" means, with respect to any Receivable at any time, the then outstanding principal balance thereof without giving effect to any deductions for the payment of commissions to agents of the Originators in accordance with Section 2.05, and "Outstanding Balance" means, with respect to all Purchased Receivables at any time, the then outstanding aggregate principal balance of all Purchased Receivables without giving effect to any deductions for the payment of commissions to agents of the Originators in accordance with Section 2.05. "Ownership Document" means a document delivered by the Seller to a Purchaser, in substantially the form of Exhibit A, evidencing such Purchaser's undivided ownership interest in the Purchased Receivables. "Past Due" means, with respect to a Receivable billed directly by the Seller, 30 days past the date on which such Receivable is originally due from the Insured to the Seller under the terms of the Contract, and with respect to a Receivable billed by an insurance agent of the Seller, 45 days after the last day of the calendar month in which such Receivable was originally due to such agent by the Insured under the terms of the Contract (but in no event more than 75 days past the date such Receivable was originally due from the Insured to such agent under the terms of the Contract); for administrative convenience, February shall be deemed to have 30 days. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Purchase" means the purchase of the Purchased Receivables that are listed on Schedule I. "Purchased Receivables" means Receivables purchased from the Seller, in accordance with Section 2.02(a) and listed on Schedule I hereto. "Purchaser" shall have the meaning specified in the introductory paragraph hereof. "Purchaser Report" means a report, in substantially the form of Exhibit D and including such other information as any of the Initial Purchasers or the Agent, as applicable, may reasonably request, furnished by the Collection Agent to the Initial Purchasers or the Agent pursuant to Section 2.04(e). "Receivable" means all amounts (including premiums and advance billings for premiums but excluding service charges imposed on installment payments) from time to time payable by an Insured to an Originator under (or, in the case of advance billings, relating to) a Contract arising out of the sale of insurance. For purposes of Section 2.04(c)(i), each invoice for payment pursuant to such Contract shall be deemed, for administrative convenience, to represent a separate Receivable for purposes of this Agreement. In the case of Receivables arising from a Contract in respect of worker's compensation or other coverages subject to retrospective adjustment, the Receivable shall mean the deposit premium without adjustment for subsequent audit. "Related Security" means with respect to any Receivable: (i) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise; and (ii) all guarantees and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise. "Seller" has the meaning assigned to such term in the paragraph preceding the Preliminary Statements. The parties hereto agree that at any time and from time to time the Originators may designate a single Originator to act for and on behalf of the Seller for all purposes under this Agreement; Continental is hereby so designated (any redesignation shall be effective for purposes hereof by notice from each of the Originators to the Agent designating another Originator to act for and on behalf of the Seller hereunder). "Settlement Date" means each date set forth on Schedule III as a "Settlement Date", and in the case of any month subsequent to such dates, the 15th Business Day after the last day of each such calendar month. "Share Percentage" means (a) for each Initial Purchaser, the undivided percentage interest set forth for such Purchaser on Schedule II to this Agreement; and (b) immediately following each assignment pursuant to Article VIII by any assignor to any Assignee(s), an undivided percentage interest equal (i) in the case of the Share Percentage of such Assignee, to the product of (A) the Share Percentage of such assignor immediately prior to such assignment multiplied by (B) 100% (in the case of an assignment in full) or the fraction indicated in the related Assignment (in the case of a partial Assignment) and (ii) in the case of the Share Percentage of such assignor, to the difference between the Share Percentage of such assignor immediately prior to giving effect to such assignment and the related Share Percentage of such Assignee(s) calculated pursuant to clause (i) above. "Target Amount" for a Purchaser means the amount shown as "Target Amount" for such Purchaser on Schedule II. "UCC" means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. SECTION 1.02. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in effect in the State of New York and not specifically defined herein are used herein as defined in such Article 9. SECTION 1.03. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". ARTICLE II AMOUNTS AND TERMS OF THE PURCHASE SECTION 2.01. The Purchase. On the terms and conditions hereinafter set forth, each Purchaser may, in its sole discretion, purchase from the Seller, without recourse except for such limited recourse as is expressly provided for herein, such Purchaser's Share Percentage of the Receivables to be listed on Schedule I hereto for a purchase price set forth in Section 2.02. SECTION 2.02. Making the Purchase from the Seller. (a) The Purchase shall be made on at least two Business Days' notice (or such lesser notice as the Purchasers may accept) from the Seller to the Agent, which notice shall specify the date of the Purchase. The Agent shall promptly thereafter notify each Purchaser of the date of the Purchase, and each Purchaser shall promptly notify the Agent, which shall promptly notify the Seller, whether such Purchaser has determined to make the Purchase. If any Purchaser elects to make the Purchase, such Purchaser shall, upon satisfaction of the conditions precedent set forth in Article III, pay such Purchaser's Cash Purchase Price as provided in subsection (b) below and such Purchaser's Holdback Amount as and when provided in Section 2.04 and assume the liability for commissions as set forth in Section 2.05. If any Purchaser does not elect to purchase its Share Percentage of the Receivables on the date specified in this Section 2.02(a), the Seller may in its sole discretion elect to sell to one or more other Purchasers a modified Share Percentage of such Receivables as may be agreed between the Seller and such Purchaser or Purchasers. (b) If any Purchaser elects to make the Purchase, on the date of the Purchase such Purchaser shall, upon satisfaction of the conditions precedent set forth in Article III, make available to the Agent at its address referred to in Section 10.02 such Purchaser's Cash Purchase Price payable to the Seller, as set forth in Section 2.02(a) above, at an account maintained by the Agent with Citibank as set forth on the signature pages hereof in immediately available funds. After receipt by the Agent of such funds, the Agent will pay the same by wire transfer in same day funds to the Seller, at Chemical Bank, 270 Park Avenue, New York, New York 10017, Attention: Tony Forgione, for credit to The Continental Insurance Company (Account Number 140-0-50093). SECTION 2.03. Fees. Each Purchaser shall pay to the Collection Agent until the Holdback Termination Date for each calendar month such Purchaser's Share Percentage of a collection fee (the "Collection Agent Fee") in an amount equal to 1/4 of 1% of the amount of Collections collected during such calendar month. The Collection Agent Fee for any calendar month shall be deducted by the Collection Agent from the amount due each Purchaser on account of such Purchased Receivables for such calendar month unless the Purchasers and the Collection Agent otherwise agree that such Collection Agent Fee shall be paid monthly in arrears by each Purchaser, in an amount equal to such Purchaser's Share Percentage of the Collection Agent Fee, on the Settlement Date immediately succeeding such calendar month. SECTION 2.04. Settlement Procedures. (a) The Collection Agent shall, on each day on which Collections of Purchased Receivables are received by it with respect to any Purchased Receivable (after removing and remitting to the Originator any service charges excluded from the definition of "Receivables"), hold such amount in trust for the Purchasers to be applied as provided in Section 2.04(b) below. (b) The Collection Agent shall deposit, to the account of each Initial Purchaser, or, in the case of all other Purchasers, to the account of the Agent, such Purchaser's Share Percentage of Collections of Purchased Receivables into such account maintained with such financial institution as shall be notified from time to time in writing by the Agent to the Collection Agent (it being understood that in the case of each Initial Purchaser such account shall initially be the account set forth on the signature pages hereof and in the case of all other Purchasers such account shall initially be the Agent's account, number 4056-3772, maintained with Citibank) as follows: (i) Except as provided in (ii) below, all Collections received in accordance with Section 2.04 on or before the last day of each calendar month and not previously deposited in such accounts by the Collection Agent on a prior Settlement Date shall be so deposited on the Settlement Date occurring in the immediately succeeding month; and (ii) At any time that the Majority Purchasers are reasonably insecure as to the ability of the Collection Agent or an Originator to perform under this Agreement or are reasonably dissatisfied with the collection performance of the Purchased Receivables, and the Agent has been so advised, or if any event of a type listed in Section 10.09 (without giving effect to any grace period or required notice) shall occur and be continuing, and in each case upon three Business Days' notice from the Agent (such notice to be delivered at the request of the Majority Purchasers), the Collection Agent shall (a) segregate, as soon as possible given the practices in effect on the date hereof, and (b) deposit as soon as possible, but no less frequently than weekly, in such accounts all amounts held in trust for the Purchasers in accordance with Section 2.04 and not previously deposited in such accounts by the Collection Agent; provided, however, that if the Purchasers and the Collection Agent so agree in accordance with Section 2.03, the Collection Agent Fee shall be deducted from deposits made by the Collection Agent pursuant to this Section 2.04(b). Promptly after its receipt of any such Collections, the Agent shall make distribution thereof to each Purchaser other than an Initial Purchaser in an amount equal to such Purchaser's Share Percentage of such Collections. (c) For the purposes of this Section 2.04: (i) if on any day the Outstanding Balance of any Purchased Receivable is, or is deemed to be, reduced or adjusted or no longer payable as a result of any cancellation or deemed cancellation of a Contract, return of any premium, or failure of an insurance agent to pay over any premium due to the Seller or to the Collection Agent, or any adjustment made by the Seller of such Purchased Receivable, then (x) in the case of any return of any premium, or failure of an insurance agent to pay over any premium due to the Seller or to the Collection Agent, or any adjustment made by the Seller thereof, the Seller shall be deemed to have received on such day a Collection in respect of such Purchased Receivable in the amount of such reduction or adjustment; (y) in the case of any cancellation or deemed cancellation of a Contract, the Seller shall be deemed to have received (on the date of such cancellation or deemed cancellation) Collections in respect of Purchased Receivables relating to such Contract that are not then due, but the Seller shall not be deemed to have received Collections in respect of Purchased Receivables that on the date of the deemed cancellation are Past Due (however, Collections on such Past Due Purchased Receivables from time to time actually received shall be paid to the Purchasers in accordance with Section 2.04); provided that, for the purposes hereof, the Seller shall be deemed to have (whether or not it actually has) cancelled any Contract for which a Purchased Receivable is Past Due, such cancellation being deemed effective on the date such Receivable becomes Past Due or such lesser time period pursuant to the Seller's Credit and Collection Policy; (ii) if on any day any of the representations or warranties in Section 4.01(h) is no longer true with respect to any Purchased Receivable, the Seller shall be deemed to have received on such day a Collection of such Purchased Receivable in full; and each Purchaser shall, in accordance with Section 8.04, assign to the Seller all of such Purchaser's Share Percentage of Purchased Receivables in respect of which the Seller has been deemed under paragraph (i) or (ii) of this Section 2.04(c) to have collected in full; for purposes of determining under clause (ii) of said Section 4.01(h) whether a Receivable was an "Eligible Receivable", reference shall only be made to whether it was an "Eligible Receivable" at the time of the Purchase; (iii) except as provided in paragraph (i) or (ii) of this Section 2.04(c), or as otherwise required by law or the relevant Contract, all collections (whether or not Collections) received from an Insured of any Receivable shall be applied to the Receivables of such Insured in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Insured designates its payment for application to specific Receivables; and (iv) if and to the extent any Purchaser shall be required for any reason to pay over to an Insured any amount received on its behalf hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the Originator of such Insured's Receivable and, accordingly, such Purchaser shall have a claim for such amount, payable when and to the extent that any distribution from or on behalf of such Insured is made in respect thereof. (d) On and after the date (the "Holdback Termination Date") on which each Purchaser shall have received Collections in an aggregate amount (net of Collection Agent Fees payable pursuant to Section 2.03 and commissions payable to insurance agents pursuant to Section 2.05) equal to the sum of (x) the Cash Purchase Price of such Purchaser and (y) the Target Amount of such Purchaser, each Purchaser shall (A) pay such portion, if any, of such Purchaser's Holdback Amount that the Seller may be entitled to by remitting to the Seller an amount equal to any additional Collections received by such Purchaser and may, at its option, by notice to the Collection Agent, direct the Collection Agent to deposit with the Seller all Collections received after the date specified in such notice (in which case and notwithstanding anything to the contrary the Seller shall undertake to pay the fees of the Collection Agent and all commissions payable to the agents of the Originators out of Collections on the Purchased Receivables from such Collections), and (B) not earlier than 180 days after the invoice date of the Purchased Receivable having the latest maturity date, assign each Defaulted Receivable to the Originator thereof without recourse. (e) The Collection Agent shall prepare and forward to each Initial Purchaser, not later than two Business Days prior to each Settlement Date, a Purchaser Report based upon such Purchaser's Share Percentage of Purchased Receivables, in substantially the form of Exhibit D hereto. If there are Purchasers other than the Initial Purchasers, the Collection Agent shall prepare and forward to the Agent, for such Purchasers, not later than two Business Days prior to each Settlement Date, a Purchaser Report relating to the Purchased Receivables. SECTION 2.05. Commissions. Each Purchaser undertakes to pay its Share Percentage of all commissions payable to the agents of the Originators out of and to the extent of its Share Percentage of Collections on the Purchased Receivables hereunder, but such Purchaser shall have no liability for any such commission (i) to the extent it is in excess of the amount represented in Section 4.01(p) hereof or in any schedule or other writing delivered prior to the purchase date by the Seller or the Originators hereunder or (ii) for which there has been any failure, neglect, breach of duty or other fault of an Originator serving as Collection Agent, or a failure by any Originator to make payments to the Collection Agent of sums required to be paid hereunder. Each Purchaser authorizes the Collection Agent, out of Collections, to pay such commissions promptly when due, and directs the Collection Agent to include a report of such payments in the Purchaser Reports delivered hereunder. Each urchaser consents (i) to the withholding by the agents of the Originators of sums due to them as commissions in respect of the Purchased Receivables, pursuant to their agency contracts or practices, and (ii) to the withholding by the Originators of amounts equal to commissions on Receivables deemed collected hereunder, in each case not in excess of the amount referred to in the first sentence of this Section 2.05. Each Purchaser shall have a credit against its undertaking to pay commissions hereunder for all commissions paid out of Collections by the Collection Agent or withheld by agents or Originators pursuant to the two preceding sentences. SECTION 2.06. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Collection Agent hereunder shall be paid or deposited in accordance with the terms hereof into the accounts referred to in Section 2.04(b) no later than 11:00 A.M. (New York City time) on the day when due in lawful money of the United States of America by wire transfer in same day funds at the office of the financial institution designated by each Initial Purchaser on the signature pages hereof or, as to each other Purchaser, as designated by such Purchaser to the Agent. (b) If the Collection Agent is not an Originator, the Collection Agent shall pay all amounts due to the Seller within five Business Days after the due date, plus, on any amount not so paid by the Collection Agent, interest at the Default Rate commencing after such fifth Business Day, provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. (c) The Seller shall, to the extent permitted by applicable law, pay interest to the Agent on any amount not paid by the Seller when required to be paid by it hereunder, at an interest rate per annum equal to the Default Rate, payable on demand, provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. Such interest shall be for the account of, and shall be distributed to, each Purchaser in an amount equal to such Purchaser's Share Percentage of such interest and shall be paid by the Seller free and clear of, and without deduction for, any taxes of any kind whatsoever. (d) All computations of interest under subsection (c) above shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be stated to be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of such payment or deposit. SECTION 2.07. Sharing of Payments, Etc. If any Purchaser shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of its Share Percentage of Purchased Receivables in excess of its ratable share of payments on account of the Purchased Receivables, such Purchaser shall forthwith purchase from the other Purchasers such participations in the Share Percentages of Purchased Receivables owned by them as shall be necessary to cause such purchasing Purchaser to share the excess payment ratably according to the amounts due to each Purchaser with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Purchaser, such purchase from each other Purchaser shall be rescinded and each other Purchaser shall repay to the purchasing Purchaser the purchase price to the extent of such recovery, together with an amount equal to such Purchaser's ratable share (according to the proportion of (i) the amount of such Purchaser's required payment to (ii) the total amount so recovered from the purchasing Purchaser) of any interest or other amount paid or payable by the purchasing Purchaser in respect of the total amount so recovered. For purposes of this Section 2.07, each reference to any Purchaser or Purchasers shall be deemed to refer to each such Purchaser and each of its Affiliates that is a Purchaser hereunder. ARTICLE III CONDITIONS OF PURCHASE SECTION 3.01. Conditions Precedent to Purchase. The Purchase hereunder is subject to the conditions precedent that the Agent shall have received on or before the date of Purchase the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Agent: (a) Duly executed Ownership Documents for each Purchaser; (b) Schedules I, II and III; (c) A copy of the resolutions of the Executive Committee of the Board of Directors or the Board of Directors of each Originator (other than Continental Lloyd's Insurance Company) and a Certificate of Attorney-in-Fact from Continental Lloyd's Insurance Company authorizing this Agreement, the Ownership Documents and the other documents to be delivered by it hereunder and the transactions contemplated hereby, certified as of such date by its Secretary or Assistant Secretary or, in the case of Continental Lloyd's Insurance Company, its Attorney-in-Fact; (d) A certificate of the Secretary or Assistant Secretary of each Originator or, in the case of Continental Lloyd's Insurance Company, its Attorney-in-Fact, certifying the names and true signatures of the officers authorized on its behalf to sign this Agreement, the Ownership Documents and the other documents to be delivered by it hereunder (on which certificate the Agent and the Purchasers may conclusively rely unless and until such time as the Agent shall receive from such Originator a replacement certificate meeting the requirements of this subsection (d)); (e) From each Originator, oral confirmation from an appropriate person that proper Financing Statements (Form UCC-1) have been filed or, if available, time stamped copies of proper Financing Statements (Form UCC-1), dated a date reasonably near to the date of the Purchase, naming such Originator as the assignor of Purchased Receivables and Related Security and CNA, as Agent, as assignee, or other similar instruments or documents, as may be necessary or, in the opinion of the Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the Purchasers' ownership interests in all Purchased Receivables and Related Security; (f) From each Originator, time stamped copies of proper Financing Statements (Form UCC-3), if any, necessary to release all security interests and other rights of any person in the Purchased Receivables and Related Security previously granted by such Originator; (g) Certified copies of Requests for Information (or a similar search report certified by a party acceptable to the Agent), dated a date reasonably near to the date of the Purchase, listing all effective financing statements which name each Originator (under its present name and any previous name) as debtor and which are filed in the jurisdictions in which filings were made pursuant to subsection (e) above, together with copies of such financing statements (none of which, except for the Financing Statements referred to in Section 3.01(e) or financing statements released by the Financing Statements (Form UCC-3) referred to in Section 3.01(f), shall cover any Receivables, Related Security or Contracts); (h) A favorable opinion of counsel for each Originator and the opinion of counsel for the Company, in substantially the form of Exhibit E and Exhibit E-1, respectively, and as to such other matters as the Agent may reasonably request; (i) A favorable opinion of Shearman & Sterling, counsel for the Agent, as the Agent may reasonably request; (j) From each Originator, a certificate of its chief financial officer, controller or vice president or, in the case of Continental Lloyd's Insurance Company, its Attorney-in-Fact, that the representations and warranties contained in Section 4.01 are correct on and as of such date as though made on and as of such date; (k) From Continental, a certificate of its chief financial officer, controller or vice president that the information set forth in each document delivered by or on behalf of the Seller relating to the actual writeoffs and reserves for losses of the Seller's Receivables is true and correct, which documents shall be attached to such certificate; provided, however, that this subsection (k) shall not limit the representation and warranty set forth in Section 4.01(i); (l) An agreement of the Company, in favor of the Agent on behalf of the Purchasers, in substantially the form of Exhibit G; (m) A copy of the resolutions of the Board of Directors of the Company authorizing the agreement referred to in clause (l) above; (n) A certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers authorized on its behalf to sign the agreement referred to in clause (l) above; and (o) Such other approvals, opinions or documents as the Agent or any Purchaser may reasonably request. SECTION 3.02. Conditions Subsequent to Purchase. When available, and in any event within 45 days after the Purchase hereunder, the Seller shall deliver to the Agent (i) certified copies of Requests for Information or Copies (Form UCC-11) (or a similar search report certified by a party acceptable to the Agent), dated subsequent to the date of the filings made pursuant to Section 3.01(e), listing all effective financing statements which name each Originator (under its present name or any previous name) as debtor and which are filed in the jurisdictions in which filings were made pursuant to Section 3.01(e), together with copies of such financing statements (none of which, except for the Financing Statements referred to in Section 3.01(e), shall cover any Purchased Receivables, Related Security or Contracts) and (ii) an opinion of counsel to each Originator, who may be in-house counsel, in the form appended hereto as Exhibit E-2, confirming that the Agent, on behalf of the Purchasers, has acquired legal and equitable title to, and ownership of, the Purchased Receivables hereunder and the Related Security and Collections with respect thereto, free and clear of any Adverse Claim. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of Each Originator. Each Originator (including the Collection Agent, if an Originator) represents and warrants as follows: (a) Such Originator is a corporation duly incorporated, or, in the case of Continental Lloyd's Insurance Company, duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization and is duly qualified to do business, and is in good standing, in every jurisdiction where the failure to so qualify would materially adversely affect such Originator's condition, financial or otherwise, operations or prospects. (b) The execution, delivery and performance by suchOriginator of this Agreement, the Ownership Documents and the other instruments and documents to be delivered by it hereunder, and the transactions contemplated hereby and thereby, are within such Originator's corporate powers, have been duly authorized by all necessary corporate action, do not contravene (i) such Originator's charter, by-laws or articles of agreement, (ii) any law, rule or regulation applicable to such Originator, (iii) any contractual restriction contained in any indenture, loan or credit agreement, lease, mortgage, security agreement, bond, note, or other agreement or instrument binding on or affecting such Originator or its property or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting such Originator or its property, and do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties other than as contemplated herein; and no transaction contemplated hereby requires compliance with any bulk sales act or similar law. This Agreement has been duly executed and delivered by such Originator. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Originator of this Agreement, the Ownership Documents or any other document or instrument to be delivered hereunder except for the filing of the UCC Financing Statements referred to in Article III, all of which, at the time required in Article III, shall have been duly made and shall be in full force and effect. (d) This Agreement constitutes, and the Ownership Documents when executed and delivered hereunder shall constitute, the legal, valid and binding obligation and act of such Originator. (e) The Ownership Documents, when executed and delivered hereunder, will effect the transfer to each Initial Purchaser of legal and equitable title to, and an undivided percentage ownership, to the extent of such Purchaser's Share Percentage, of Receivables purchased or purported to be purchased pursuant to this Agreement, free and clear of any Adverse Claim. (f) The statutory balance sheet of such Originator (including the initial Collection Agent) as at December 31, 1992, and the related statutory statements of income and surplus of such Originator for the fiscal year then ended, and the statutory balance sheet for such Originator as at September 30, 1993, and the related statutory statements of income and surplus of such Originator for the nine-month period then ended, in each case certified by the controller or other appropriate officer of such Originator, copies of which have been furnished to the Agent, fairly present the financial condition of such Originator for the periods ended on such dates, all in accordance with accounting principles prescribed or permitted and authorized by the department of insurance of the state of incorporation of such Originator and consistently applied to such financial statements, and since September 30, 1993, there has been no material adverse change in such condition or operations. (g) There are no actions, suits or proceedings pending, or to the knowledge of such Originator threatened, against or affecting such Originator or any subsidiary, or the property of such Originator or of any subsidiary, in any court, or before any arbitrator of any kind, or before or by any governmental body, which may materially adversely affect either the financial condition or operations of such Originator or such Originator and its subsidiaries taken as a whole or the ability of such Originator to perform its obligations under this Agreement or the Ownership Documents delivered pursuant hereto. Neither such Originator nor any subsidiary is in default with respect to any order of any court, arbitrator or governmental body, except for defaults, if any, with respect to orders of governmental agencies which defaults do not have a material adverse effect on the business or operations of such Originator or any subsidiary. (h) Each Receivable that is purchased pursuant to this Agreement is assignable in accordance with this Agreement and shall (i) on the date of the Purchase, immediately prior to such Purchase, be owned by the Originators free and clear of any Adverse Claim, (ii) at the time of the Purchase, be an Eligible Receivable, and (iii) together with the Contract related thereto, at all times after such time be free and clear of any Adverse Claim. Upon the Purchase, each Purchaser shall acquire legal and equitable title to, and an undivided percentage ownership, to the extent of such Purchaser's Share Percentage, of each Receivable listed on Schedule I hereto and the Related Security, related Contract and Collections with respect thereto free and clear of any Adverse Claim; and no effective financing statement or other instrument similar in effect covering any such Receivable or the Related Security, related Contract or Collections with respect thereto shall at any time be on file in any recording office, or otherwise be effective, except such as may be filed in favor of the Agent in accordance with this Agreement. (i) No Purchaser Report (if prepared by Continental on behalf of such Originator, or any Person with which the Seller has subcontracted pursuant to Section 6.01, or to the extent that information contained therein is supplied by the Seller on behalf of such Originator or such other Person), information, exhibit, financial statement, document, book, record or report furnished or to be furnished by the Seller to the Agent or any Purchaser in connection with this Agreement is or shall be inaccurate in any material respect or omits or shall omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading. (j) The chief executive office of such Originator, other than Continental Lloyd's Insurance Company and Casualty Insurance Company, is located at 180 Maiden Lane, New York, New York 10038. The chief executive office of Continental Lloyd's Insurance Company is located at 600 North Pearl Street, Dallas, Texas 75201 and the chief executive office of Casualty Insurance Company is located at 321 South Clark Street, Chicago, Illinois 60610. The offices where such Originator keeps all its books, records and documents evidencing Purchased Receivables or the related Contracts are located at the addresses specified in Exhibit F (or at such other locations, notified to the Agent in accordance with Section 5.01(f), in jurisdictions where all action required by Section 6.05 has been taken and completed). (k) The transactions in which the Receivables constituting the Purchased Receivables were created and acquired by the Originators constituted "current transactions" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended. The Receivables constituting the Purchased Receivables are "notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services" within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended. (l) All of the capital stock of such Originator, other than Continental Lloyd's Insurance Company, is directly or indirectly owned beneficially and of record by the Company. All of the interests in Continental Lloyd's Insurance Company are directly or indirectly beneficially owned by the Company. (m) Each Purchased Receivable is assignable under applicable law, and is not subject to any restriction or limitation upon assignment under the Contract relating thereto. (n) The Intercompany Pooling Agreement constitutes the legal, valid and binding obligation of such Originator enforceable against such Originator in accordance with its terms. Pursuant to the Intercompany Pooling Agreement, each Originator (i) has purchased and, immediately prior to the Purchase, owns, free and clear of any Adverse Claim, a discrete participation and percentage interest in each Purchased Receivable, (ii) receives, in connection with the Purchase, an amount equal to such percentage of the aggregate Cash Purchase Price therefor, and (iii) together with each other Originator, is, immediately prior to the Purchase, the owner of such Purchased Receivable in its entirety. (o) The invoices in respect of each Purchased Receivable will be sent to the pertinent Insured in accordance with Schedule I. According to the Contracts related to the Purchased Receivables, the Outstanding Balance will be due no later than the dates shown on Schedule I. (p) Not more than 20% of the Collections of any Purchased Receivable is required to be paid to insurance agents as commissions, and the aggregate amount required to be paid to insurance agents as commissions is not more than the amount set forth in Schedule III. (q) Pursuant to the Credit and Collection Policy, such Originator is entitled to cancel any Contract on the date any Purchased Receivable under such Contract becomes Past Due. (r) Commissions with respect to each Contract are payable to any insurance agent solely from, and in all material respects proportionately to the extent of, premiums actually received from the Insured under such Contract produced by such insurance agent. ARTICLE V GENERAL COVENANTS OF EACH ORIGINATOR SECTION 5.01. Affirmative Covenants of Each Originator. Until the Holdback Termination Date, each Originator will, unless the Agent upon the direction of the Majority Purchasers shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply in all material respects with all applicable laws, rules, regulations and orders with respect to it, its business and properties and all Purchased Receivables, Related Security and related Contracts, the non-compliance with which (a) would materially adversely affect it, its business and properties or (b) would materially adversely affect, in the aggregate, any Purchaser's interest in the Purchased Receivables, Related Security or related Contracts. (b) Preservation of Corporate Existence. Preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification would materially adversely affect the interests of any Purchaser or the Agent hereunder or in the Purchased Receivables, or the ability of such Originator or the Collection Agent to perform their respective obligations under this Agreement and the Ownership Documents. (c) Audits. At any time and from time to time during regular business hours upon two Business Days' prior notification to such Originator, permit (or, if such Originator, being the Collection Agent, has subcontracted with any Person pursuant to Section 6.01, cause such Person to permit) the Agent, any Initial Purchaser, or any Purchaser holding a Share Percentage of at least 25%, or its agents or representatives, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of such Originator (or any Person with which such Originator, being the Collection Agent, has subcontracted pursuant to Section 6.01) relating to Purchased Receivables, including, without limitation, the related Contracts and Related Security, and (ii) to visit the offices and properties of such Originator (or any Person with which such Originator, being the Collection Agent, has subcontracted pursuant to Section 6.01) for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Purchased Receivables sold by it or such Originator's performance hereunder with any of the responsible officers or employees of such Originator (or any Person with which such Originator, being the Collection Agent, has subcontracted pursuant to Section 6.01) having knowledge of such matters; provided, however, that no Initial Purchaser that is also an insurance company, or is a member of a group (consisting of such Purchaser and all of its Affiliates) that is engaged primarily in the business of underwriting or selling insurance, shall be permitted to so examine the materials described in this Section 5.01(c); provided, further, that no Purchaser (other than an Initial Purchaser) that is also an insurance company or an Affiliate of an insurance company shall be permitted to so examine the materials described in this Section 5.01(c). (d) Keeping of Records and Books of Account. Maintain and implement, or cause to be maintained and implemented, administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Purchased Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain, or cause to be kept and maintained, all documents, books, records and other information reasonably necessary or advisable for the collection of all Purchased Receivables (including, without limitation, records adequate to permit the identification of each Purchased Receivable and all Collections of and adjustments to each Purchased Receivable sold by it). (e) Performance and Compliance with Receivables and Contracts. At its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Purchased Receivables. (f) Location of Records. Keep its chief executive office, and the offices where it keeps its records concerning the Purchased Receivables and all Contracts related thereto (and all original documents relating thereto), at the address(es) of such Originator (or any Person with which such Originator, if the Collection Agent, has subcontracted pursuant to Section 6.01) referred to in Section 4.01(j) or, upon 30 days' prior written notice to the Agent, at such other locations in a jurisdiction where all action required by Section 6.05 shall have been taken and completed. (g) Credit and Collection Policies. Comply in all material respects with the Credit and Collection Policy in regard to each Purchased Receivable sold by it and the related Contract. (h) Reporting. Furnish to the Agent, each Initial Purchaser, and each Purchaser holding a Share Percentage of at least 25%: (i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of such Originator, a statutory balance sheet of such Originator as of the end of such quarter, and statutory statements of income and surplus of such Originator each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the controller or other appropriate officer of such Originator; and (ii) as soon as available and in any event within 120 days after the end of each fiscal year of such Originator, a copy of the statutory balance sheet of such Originator as of the end of such year and the related statutory statements of income and surplus of such Originator for such year each reported on by the controller or other appropriate officer of such Originator. SECTION 5.02. Negative Covenants of Each Originator. Until the Holdback Termination Date, no Originator shall without the written consent of the Agent upon the direction of the Majority Purchasers: (a) Sales, Liens, Etc. Sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Purchased Receivable, Related Security, related Contract or Collections, or assign any right to receive income in respect thereof. (b) Extension or Amendment of Receivables. Extend, amend or otherwise modify the terms of any Purchased Receivable, or amend, modify or waive any term or condition of any Contract related thereto if the effect of such amendment, modification or waiver of Contract would materially adversely affect the timeliness of payment or collectibility of the Purchased Receivables. (c) Change in Business or Credit and Collection Policy. Make any change in the character of its business or in the Credit and Collection Policy, which change would, in either case, materially impair the timeliness of payment or collectibility of any Purchased Receivable. (d) Change in Payment Instructions to Insureds. Make any change in its instructions to Insureds regarding payments to be made to such Originator if the effect of such change would materially adversely affect the timeliness of payment or collectibility of the Purchased Receivables, unless the Agent and the Initial Purchasers shall have received prior written notice of such change. (e) No Actions Against Insureds. Commence or settle any legal action to enforce collection of any Purchased Receivable. ARTICLE VI ADMINISTRATION AND COLLECTION SECTION 6.01. Designation of Collection Agent. The administration and collection of the Purchased Receivables shall be conducted by such Person (the "Collection Agent") so designated from time to time in accordance with this Section 6.01. Until the Agent gives notice to the Seller of a designation of a new Collection Agent, Continental is hereby designated as, and hereby agrees to perform the duties and obligations of, the Collection Agent pursuant to the terms hereof. The Agent shall, at any time that it has been so advised by the Majority Purchasers that such Majority Purchasers are reasonably insecure as to the ability of the Collection Agent to perform hereunder or are reasonably dissatisfied with the collection performance of the Purchased Receivables or if any event of a type listed in Section 10.09 (without giving effect to any grace period or required notice) shall occur and be continuing, upon three Business Days' notice to the Seller, designate as the Collection Agent any Person (including itself), other than a Person in the business of issuing or selling insurance or any Affiliate of such Person, to succeed Continental or any successor Collection Agent, on the condition in each case that any such Person so designated agrees in writing for the benefit of the parties hereto (a) to perform the duties and obligations of the Collection Agent pursuant to the terms hereof and (b) to adhere to the provisions of Section 10.07, which agreement shall survive the termination of this Agreement or such writing. For purposes of satisfying the condition contained in the preceding sentence, the Agent hereby agrees that if and when it shall designate itself as the Collection Agent, it shall perform the duties and obligations of the Collection Agent pursuant to the terms hereof. The Collection Agent may, with the prior consent of the Agent acting at the direction of the Majority Purchasers, subcontract with any other Person for the administration and collection of such Purchased Receivables, provided that the Collection Agent shall remain liable for the performance of the duties and obligations of the Collection Agent pursuant to the terms hereof. SECTION 6.02. Duties of Collection Agent. (a) The Collection Agent shall (unless the Agent at the direction of the Majority Purchasers directs otherwise) take or cause to be taken only such actions as shall be necessary or customary to collect each Purchased Receivable, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and solely in accordance with the Credit and Collection Policy. Each of the Seller, each Purchaser and the Agent hereby appoints as its agent the Collection Agent, from time to time designated pursuant to Section 6.01, to enforce its respective rights and interests in and under the Purchased Receivables, the Related Security and the related Contracts. The Collection Agent shall not incur any expense that would result in a material increase in the Collection Agent Fee without first obtaining the consent of the Agent at the direction of all of the Purchasers. (b) The Collection Agent shall set aside for the Purchasers the Collections of Purchased Receivables in accordance with Section 2.04, but shall not be required (except to the extent set forth in Section 2.04 or requested by the Agent at the direction of the Majority Purchasers) to segregate the funds constituting such portion of such Collections prior to the remittance thereof in accordance with said Section. (c) The Collection Agent (if not an Originator) may not extend, amend or otherwise modify the terms of any Purchased Receivable, or amend, modify or waive any term or condition of any Contract related thereto, or extend, amend or otherwise modify the rights of any Originator, in each case, without such Originator's consent. The Collection Agent may not commence or settle any legal action to enforce collection of any Purchased Receivable, unless the Agent at the direction of the Majority Purchasers shall have otherwise consented in writing. (d) Each Originator shall deliver to the Collection Agent, and the Collection Agent shall hold in trust and legend appropriately for the Seller and the Agent, acting on behalf of the Purchasers, all computer tapes or disks which evidence or relate to Purchased Receivables. Upon the Agent's request at the direction of the Majority Purchasers, the Seller shall deliver to the Collection Agent, and the Collection Agent shall hold in trust and legend appropriately for the Seller and the Agent, acting on behalf of the Purchasers, all documents, instruments and other records which evidence or relate to Purchased Receivables. (e) The Collection Agent shall, as soon as practicable following receipt, turn over to the Seller the Collections of any Receivable which is not a Purchased Receivable. (f) The Collection Agent, if other than an Originator, shall as soon as practicable upon demand deliver to the Seller all documents, instruments and other records (including, without limitation, computer tapes or disks) in its possession which evidence or relate solely to Receivables other than Purchased Receivables, and copies of documents, instruments and other records in its possession which evidence or relate to Purchased Receivables. (g) The Collection Agent shall, at any time and from time to time at the request of the Agent at the direction of the Majority Purchasers, furnish to the Agent (within five Business Days after any such request) a calculation of the amounts set aside for the Purchasers pursuant to Section 2.04(b)(ii). (h) The Collection Agent shall, to the extent permitted by applicable law, pay interest to the Agent on any amount not paid by the Collection Agent when required to be paid by it hereunder, at an interest rate per annum equal to the Default Rate, payable on demand, provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. Such interest shall be for the account of, and shall be distributed to, the Purchasers and shall be paid by the Collection Agent free and clear of and without deduction for any taxes of any kind whatsoever. (i) Except as set forth in Section 2.04(d), the Collection Agent's authorization under this Agreement shall terminate on the Holdback Termination Date. SECTION 6.03. Rights of the Agent. At any time following the designation of a Collection Agent other than any Originator pursuant to Section 6.01: (a) The Agent at the direction of the Majority Purchasers may direct any or all of the Insureds of Purchased Receivables to make payment of all amounts payable under any Purchased Receivable directly to the Agent or its designee. (b) The Seller shall, at the Agent's request at the direction of the Majority Purchasers and at the Seller's expense, give notice of the ownership of the Purchased Receivables by the Purchasers to each said Insured and direct that payments be made directly to the Agent or its designee. (c) The Seller shall, at the Agent's request at the direction of the Majority Purchasers and at the Seller's expense, (i) assemble all of the documents instruments and other records (including, without limitation, computer tapes and disks), or true and correct copies thereof, which evidence or relate to the Purchased Receivables, and the related Contracts and Related Security, or which are otherwise necessary or desirable to collect such Purchased Receivables, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (ii) without limiting any other rights under this Agreement, segregate all cash, checks and other instruments received by it from time to time constituting Collections of Purchased Receivables in a manner acceptable to the Agent and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee. (d) The Seller and each Purchaser each hereby authorizes the Agent to take any and all steps in the Seller's name and on behalf of the Seller and the Purchasers necessary or desirable, in the determination of the Agent, to collect all amounts due under any and all Purchased Receivables sold by it, including, without limitation, endorsing any Originator's name on checks and other instruments representing Collections of Purchased Receivables and enforcing such Purchased Receivables and taking action or causing action to be taken with respect to any Related Security, including with respect to transferring possession of the same to the Agent or its designee. SECTION 6.04. Responsibilities of the Seller. (a) The Seller shall remain responsible and liable to perform all of its duties and obligations under the Contracts related to the Purchased Receivables, to the extent set forth therein; provided that the Seller shall have no obligation under such Contracts or otherwise with respect to commissions payable to its agents until the Holdback Termination Date. (b) The exercise by the Agent or any Purchaser of any of its rights hereunder shall not release the Seller from any of its duties or obligations with respect to any Purchased Receivables or under the Contracts related to such Purchased Receivables. (c) Neither the Agent nor any Purchaser shall have any obligation or liability (other than expressly provided in Section 2.05 herein) with respect to any Purchased Receivables or related Contracts, nor shall any of them be obligated to perform any of the obligations of the Seller or any Originator thereunder. (d) The Seller shall promptly notify the Agent and the Initial Purchasers of any claim or threatened claim probable, in the opinion of the management of the Seller, to result in any liability referred to in Article IX. (e) The Seller shall, within ten Business Days of such time as the Agent at the direction of the Majority Purchasers may request, furnish to the Agent such Purchaser Reports, and other report, information, document, book or record as the Agent at the direction of the Majority Purchasers may reasonably request relating to the Purchased Receivables. (f) The Seller shall, within ten Business Days after the end of each calendar month, or at such other times as the Collection Agent shall reasonably request, provide to the Collection Agent such information and records as are necessary for the determination of commissions required to be paid to insurance agents out of Collections. SECTION 6.05. Further Action Evidencing the Purchase. (a) The Seller agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Agent at the direction of the Majority Purchasers may reasonably request in order to perfect, protect or more fully evidence the Purchased Receivables, or to enable the Purchasers or the Agent to exercise or enforce any of their respective rights hereunder or under the Ownership Documents. Without limiting the generality of the foregoing, each Originator will create separate data processing records evidencing such Purchased Receivables and related Contracts with a legend, acceptable to the Agent, evidencing that the Purchased Receivables have been sold in accordance with this Agreement and will, upon the request of the Agent at the direction of the Majority Purchasers: (i) execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate; and (ii) mark conspicuously each invoice sent by it and use its best efforts to cause its agents to mark conspicuously each invoice sent by them evidencing each Purchased Receivable and the related Contract with a legend, acceptable to the Agent, evidencing that the Purchased Receivable has been sold in accordance with this Agreement. (b) The Seller hereby authorizes the Agent to file or cause to be filed one or more financing or continuation statements, and amendments thereto and assignments thereof, relative to all or any of the Purchased Receivables and the Related Security now existing or hereafter arising without the signature of the Seller or any Originator where permitted by law. (c) If the Seller fails to perform any of its agreements or obligations under this Agreement, the Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Agent incurred in connection therewith shall be payable by the Seller as provided in Section 10.06. SECTION 6.06. Application of Collections. Any payment made by an Insured to any Originator shall, except as otherwise specified by such Insured or otherwise required by contract or law and unless otherwise instructed by the Agent at the direction of the Majority Purchasers, be applied as a collection of any Purchased Receivable or any other Receivables of such Insured to the extent of any amounts then due and payable thereunder before being applied to any other indebtedness of such Insured. ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action. (a) Each Purchaser hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. In furtherance, and without limiting the generality, of the foregoing, each Purchaser hereby appoints the Agent as its agent to execute and deliver all further instruments and documents, and take all further action that the Agent may deem necessary or appropriate in order to protect or more fully evidence the Share Percentage of Purchased Receivables purchased by the Purchasers hereunder, or to enable any of the Purchasers to exercise or enforce any of their respective rights hereunder or under the Ownership Documents, including, without limitation, the execution by the Agent as assignee of such financing, release or termination statements, or amendments thereto or assignments thereof, relative to all or any of the Purchased Receivables and the Related Security now existing or hereafter arising, and such other instruments or notices, as may be necessary or appropriate for the purposes stated hereinabove. (b) Each Purchaser and the Seller expressly recognize and agree that the Agent may be listed as the assignee of record on the various UCC filings required to be made hereunder in order to protect or evidence the transfer of the Purchased Receivables from the Seller to the Purchasers, that the Agent shall sign UCC financing, release or termination statements and shall otherwise act as agent for the Purchasers as undivided percentage owners of all of the Purchased Receivables. In addition, such listing shall impose no duties on the Agent other than those expressly and specifically undertaken in accordance with the provisions of this Article VII. (c) The Seller shall be entitled to rely without investigation upon any notice or request received from the Agent or other action by the Agent that recites that it is appropriately authorized pursuant to the terms of this Agreement. SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to any Purchaser or Assignee for any action taken or omitted to be taken by it or them as Agent under or in connection with this Agreement (including, without limitation, any action taken or omitted to be taken by it or them if designated as the Collection Agent pursuant to Section 6.01), except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, the Agent: (i) may consult with legal counsel (including counsel for the Seller), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Purchaser and shall not be responsible to any Purchaser for any statements, warranties or representations made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Seller, any Originator or the Collection Agent or to inspect the property (including the books and records) of any Originator or the Collection Agent; (iv) shall not be responsible to any Purchaser for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the Ownership Documents or any other instrument or document furnished pursuant hereto; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. CNA and Affiliates. With respect to any Share Percentage which may be held by CNA, CNA shall have the same rights and powers under this Agreement as would any other Purchaser and may exercise the same as though it were not the Agent. CNA and its Affiliates may generally engage in any kind of business with the Seller or any Insured, any of their respective Affiliates and any Person who may do business with or own securities of the Seller or any Insured or any of their respective Affiliates, all as if CNA were not the Agent and without any duty to account therefor to any Purchaser. SECTION 7.04. Purchaser's Purchase Decision. Each Purchaser acknowledges that it has, independently and without reliance upon the Agent or any of its Affiliates and based on such documents and information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement and, if it so determines, to purchase Eligible Receivables hereunder. Each Purchaser also acknowledges that it will, independently and without reliance upon the Agent or any of its Affiliates and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement. ARTICLE VIII ASSIGNMENT OF SHARE PERCENTAGE SECTION 8.01. Assignment. Each Purchaser may assign to any Assignee, and any such Assignee may assign to any other Assignee, such Purchaser's Share Percentage of any Purchased Receivable owned by it, in whole or in part, and, upon any such assignment, the Assignee shall become the Purchaser of such Share Percentage of Purchased Receivables. Such assignments shall be upon such terms and conditions as the assignor and the Assignee of such Share Percentage of Purchased Receivables may mutually agree. The assignor of any Share Percentage of Purchased Receivables shall deliver to the Assignee an Assignment, duly executed by such assignor, assigning such Share Percentage of Purchased Receivables, in whole or in part, to the Assignee (indicating, in each case whether such assignment is in whole or in part and the fraction of Share Percentage being assigned), and such assignor shall promptly execute and deliver all further instruments and documents, and take all further action, that the Assignee may reasonably request, in order to perfect, protect or more fully evidence the Assignee's right, title and interest in and to such Share Percentage of Purchased Receivables, and to enable the Assignee to exercise or enforce any rights hereunder or under the Ownership Documents relating to such Share Percentage of Purchased Receivables. The Assignee shall promptly execute and deliver a written undertaking agreeing to the terms of Section 10.07, which agreement shall survive the termination of this Agreement or such undertaking. Upon the assignment of any Share Percentage of Purchased Receivables as described above, the Assignee thereof shall have all of the rights and obligations of a Purchaser hereunder with respect to such Share Percentage of Purchased Receivables. An assignor of a Share Percentage of Purchased Receivables shall provide notice to the Agent and the Seller of any assignment of a Share Percentage of Purchased Receivables by such assignor hereunder, which notice shall state the Share Percentage of the Assignee's interest and the remaining Share Percentage, if any, of the assignor's interest. The Agent and the Seller are entitled to rely conclusively upon such notice or the absence thereof and shall not be required to treat an Assignee as a Purchaser in the absence of such notice. SECTION 8.02. Authorization of Agent. Each of the Purchasers authorizes the Agent to, and the Agent agrees that it shall, endorse the applicable Ownership Document to reflect any assignments made pursuant to Section 8.01 or otherwise. SECTION 8.03. Payments to Agent. Notwithstanding any assignment pursuant to Section 8.01, the Collection Agent may pay the Agent for the account of each Purchaser, other than the Initial Purchasers, all amounts owing to such Purchaser, and neither the Collection Agent nor the Seller shall have any duty or obligation with respect to the Agent's application of such amount. SECTION 8.04. Assignment to Seller. The Purchasers shall assign to the Seller by execution of an Assignment, in addition to any assignments required pursuant to Section 2.04(d), such Purchaser's Share Percentage of all Purchased Receivables that have been deemed to have been collected in full under Section 2.04(c), or which are the subject of indemnification under Section 9.01, and such indemnification has been made. ARTICLE IX INDEMNIFICATION SECTION 9.01. Indemnities by the Seller and the Originators. Without limiting any other rights that the Agent, the Purchasers or their Affiliates may have hereunder or under applicable law, the Seller and each Originator hereby agree to indemnify such Persons and their Affiliates from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements, awarded against or incurred by any of them arising out of or as a result of: (i) any Receivable, at the time of the Purchase, not being an Eligible Receivable; (ii) its reliance on any representation or warranty made or deemed made by any Originator or the Seller (or any of its officers) under or in connection with this Agreement, any Purchaser Report or any other information or report delivered by such Originator or the Seller pursuant hereto, which shall have been false or incorrect in any material respect when made or deemed made; (iii) the failure by any Originator or the Seller to comply with any applicable law, rule or regulation with respect to any Purchased Receivable, Related Security or the related Contract, or the nonconformity of any Purchased Receivable, Related Security or the related Contract with any such applicable law, rule or regulation; (iv) the failure to vest in any Purchaser, or to transfer to any Purchaser, legal and equitable title to, and ownership of, to the extent of such Purchaser's Share Percentage, each Purchased Receivable, free and clear of any and all Adverse Claims and keep the same vested free and clear of any and all Adverse Claims; (v) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Purchased Receivable, any Contract or Related Security whether at the time of any Purchase or at any subsequent time; (vi) any dispute or claim resulting from the sale of the insurance related to such Purchased Receivable or the furnishing or failure to furnish such insurance; (vii) any failure of any Originator, as Collection Agent or otherwise, to perform its duties or obligations including, without limitation, sending invoices to the pertinent Insured in accordance with Schedule I and the turnover of amounts pursuant to Section 2.04, in accordance with the provisions of Article VI; (viii) the commingling of Collections of Purchased Receivables at any time with other funds; (ix) any dispute or offset or Adverse Claim against or with respect to Purchased Receivables, or any sale, pledge, or assignment (by operation of law or otherwise) or other disposition of Collections of Purchased Receivables by the Seller or any Originator, as Collection Agent or otherwise; (x) any action or omission by any Originator or any Affiliate of such Originator, whether as Collection Agent or otherwise, reducing or impairing the rights of any Purchaser with respect to any Purchased Receivable or the value of any Purchased Receivable, including, but not limited to, the cancellation, extension, amendment, modification, compromise or settlement of any Purchased Receivable or any term thereof, the extension, amendment, modification or waiver of any term or condition of any Contract related thereto, the sale, pledge or assignment of, or grant of security interest in, any Purchased Receivable, any change in the character of its business or in the Credit and Collection Policy, the commencement or settlement of any legal action to enforce collection of any Purchased Receivable, the failure to send the invoice in respect of a Purchased Receivable to the pertinent Insured in accordance with Schedule I, the failure to comply with any material provision, covenant or other promise required to be observed by such Originator under any Contract related to any Purchased Receivable, the failure to comply with the Credit and Collection Policy, or the withdrawal, cancellation or other termination for any reason of any insurance policy related to any Purchased Receivable or the failure of any insurance policy or Contract related to any Purchased Receivable to be issued or to become effective; (xi) any failure by an insurance agent to pay to any Originator, the Seller or the Collection Agent the amount of any insurance premium or other Collections received from any Insured; (xii) any investigation, litigation, or proceeding related to any use of the proceeds of the Purchase or related to any acquisition or proposed acquisition by any Originator, or by any subsidiary of such Originator, of all or any portion of the stock or substantially all the assets of any person whether or not the Agent, any Purchaser or any of their Affiliates is a party thereto; or (xiii) failure of a Contract to become effective within 30 days after Purchase. ARTICLE X MISCELLANEOUS SECTION 10.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by any Originator or the Seller therefrom shall in any event be effective unless the same shall be in writing and signed by the Seller, the Agent and the Majority Purchasers, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the Seller, the Agent and all the Purchasers, do any of the following: (a) waive any of the conditions specified in Section 3.01 or 3.02, (b) change the Share Percentage of any Purchaser or subject the Purchasers to any additional obligations, (c) change the definition of "Eligible Receivable", "Defaulted Receivable", "Share Percentage" or "Majority Purchasers", (d) postpone any Settlement Date, (e) change the Purchasers' Share Percentage of Receivables which shall be required for the Purchasers or any of them to take any action hereunder, (f) amend Section 2.04(c), (g) amend this Section 10.01, (h) amend or release any provision of the Agreement of the Company in favor of the Agent on behalf of the Purchasers provided pursuant to Section 3.01(l) herein, or (i) increase the Collection Agent Fee; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Seller and the Purchasers required above to take such action, affect the rights or duties of the Agent under this Agreement. This Agreement contains a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings. SECTION 10.02. Notices, Etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex communication) and mailed or telexed or delivered, as to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto; provided, however, that any such notice or communication to the Seller or any Originator shall be mailed or delivered to Continental. All such notices and communications shall be effective, in the case of written notice, when deposited in the mails, and, in the case of notice by telex, when telexed against receipt of answer back, in each case addressed as aforesaid, except that notices and communications pursuant to Article II shall not be effective until received. All amounts deposited by the Collection Agent into such accounts referred to in Section 2.04 shall be deposited at the offices of such financial institutions designated by each Initial Purchaser on the signature pages hereof or as notified to the Agent, or as to each other Purchaser, as designated by such Purchaser to the Agent. SECTION 10.03. No Waiver; Remedies. No failure on the part of the Agent or any Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 10.04. Binding Effect; Assignability. (a) This Agreement shall be binding upon and inure to the benefit of the Seller, each Originator, the Agent, each Purchaser and their respective successors and assigns; provided, however, that neither the Seller nor any Originator shall assign its rights or obligations hereunder or any interest herein (other than pursuant to the Intercompany Pooling Agreement, as may be amended) without the prior written consent of the Agent and all the Purchasers and provided further that the Agent shall not assign its rights and obligations hereunder and no other Person shall be appointed in substitution of the Agent named herein, except in each case such Person that is (i) an Affiliate (other than an Affiliate that is a natural person) of an Initial Purchaser or (ii) a commercial bank organized or licensed in the United States with a combined capital and surplus of at least $500,000,000 and is approved by the Seller, which approval shall not be unreasonably withheld. (b) The following shall be continuing and shall survive any termination of this Agreement: (i) the rights of any Purchaser to collect the Outstanding Balance of all Purchased Receivables, (ii) the rights and remedies of any Purchaser with respect to any breach of any representation and warranty made by any Originator pursuant to Article IV or Section 3.01, (iii) the indemnification provisions of Article IX and Section 10.06, (iv) the rights of the Agent and the Collection Agent to be paid the fees, costs and expenses provided for hereunder, (v) the agreement set forth in Section 10.07, (vi) the right of the Seller to collect the Holdback Amount from any Purchaser (or such portion thereof, if any, that the Seller may be entitled to), (vii) the obligations of the Agent under Section 2.05 and (viii) the obligations under Section 10.08. SECTION 10.05. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, except to the extent that the perfection of the interests of any Purchaser in the Receivables, the Related Security and the Collections, or remedies hereunder in respect thereof, are governed by the laws of a jurisdiction other than the State of New York. SECTION 10.06. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Article IX hereof, the Seller hereby agrees to pay on demand (i) all costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing) of this Agreement, the Ownership Documents and other documents in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent and the Purchasers as to their respective rights and remedies under this Agreement, and (ii) all costs and expenses, if any (including reasonable counsel fees and expenses), incurred by any Purchaser in connection with the enforcement of this Agreement, the Ownership Documents and other documents in connection herewith; provided that nothing in this Section 10.06(a) shall obligate the Seller or any Originator to pay any Collection Agent Fees, other costs of collecting the Purchased Receivables or commissions of the insurance agents of any Originator or costs with respect to any assignment of the Purchased Receivables by any Purchaser. (b) In addition, the Seller hereby agrees to pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing, recording or enforcement of this Agreement, the Ownership Documents or the other documents to be delivered hereunder (except with respect to any assignment of Purchased Receivables delivered hereunder), and agrees to save each Purchaser and the Agent harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees; provided that each Purchaser will pay (or reimburse the Seller or such Originator for) all property, excise, sales or similar taxes imposed on Purchased Receivables (except to the extent such taxes are imposed because of the initial assignment by the Seller of Purchased Receivables). SECTION 10.07. No Proceedings. The Seller, each Originator, each Purchaser and the Agent each hereby agrees that it will not institute against any Purchaser that is a Purchaser which primarily engages in the business of purchasing or accepting assignments or transfers of, or making secured loans in respect of, accounts receivable, chattel paper or general intangibles or interests therein or, in the case of each Purchaser, any other such Purchaser, any proceeding of the type referred to in clause (i) of Section 10.09(h) so long as any commercial paper issued by such Purchaser shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such commercial paper shall have been outstanding. Any provision in this Agreement notwithstanding, no Purchaser shall have any obligation to make any payments under this Agreement otherwise than by deducting such amounts from Collections. SECTION 10.08. Confidentiality. (a) Unless otherwise required by applicable law, the Seller and each Originator agrees to maintain the confidentiality of this Agreement (and all drafts thereof) in communications with third parties and otherwise; provided, however, that this Agreement may be disclosed to third parties to the extent such disclosure is (i) required in connection with a sale of securities of such Originator, (ii) made solely to persons who are legal counsel for the purchaser or underwriter of such securities, (iii) limited in scope to the provisions of Articles V and VI, and, to the extent defined terms are used in Articles V and VI, such terms defined in Article I of this Agreement and (iv) made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent; provided further, however, that the Agreement may be disclosed to the Seller's accountants and legal counsel retained in connection with the negotiation, execution and delivery of this Agreement; and provided further, however, that the Seller shall have no obligation of confidentiality in respect of any information which may be generally available to the public or become available to the public through no fault of the Seller. (b) Each Purchaser, the Agent and the Collection Agent, if other than an Originator, each hereby acknowledges that in connection with this Agreement each Originator will be required (i) to disclose to the Agent, the Collection Agent, if other than the Originator, and their respective agents and representatives certain confidential and proprietary information relating to such Originator's business activities, including, without limitation, certain books, lists, records and documents (including computer tapes and disks) in the possession or under the control of such Originator relating to the Purchased Receivables, including, without limitation, the related Contracts and Related Security, (ii) to allow the Agent or its agents and representatives to visit the offices of such Originator for the purpose of examining the materials described in clause (i) above, and (iii) to allow the Agent or its agents or representatives to discuss matters relating to Purchased Receivables sold by such Originator or such Originator's performance hereunder with any of the responsible officers or employees of such Originator having knowledge of such matters. Each Purchaser, the Agent and the Collection Agent, if other than an Originator, each hereby agrees that (i) it will not disclose and will not permit any of such agents or representatives to disclose (other than to its employees, auditors or counsel) any information with respect to any Originator which is furnished or delivered pursuant to Section 5.01(c), (ii) it will refrain from using and will not permit any of such agents or representatives to use any such information except as permitted by the terms of this Agreement, and (iii) it will maintain the confidentiality of this Agreement (and all drafts thereof); provided, however, that each Purchaser, the Agent or the Collection Agent, if other than an Originator, and such agents or representatives, may make such disclosure (A) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over it, (B) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (C) as may be required by or in order to comply with any law, order, regulation or ruling (D) as may be required or appropriate to any Assignee or to any prospective Assignee, (E) as may be required or appropriate to any rating agency that rates or may rate the securities of any Purchaser or (F) as may be required or appropriate to any Person providing credit or liquidity support to a Purchaser, provided that such a Person providing liquidity support is not also an insurance company or a member of a group (consisting of such agency or Person and all of its Affiliates) that is engaged primarily in the business of underwriting or selling insurance other than financial guarantors and provided, further, in the case of any disclosure permitted by clause (D), (E) or (F) hereof, that any such Assignee, prospective Assignee, rating agency or Person providing credit or liquidity support agrees to treat such disclosure confidentially; provided further, however, that there shall be no obligation of confidentiality in respect of any information which may be generally available to the public or become available to the public through no fault of such Purchaser, the Agent or the Collection Agent, if other than an Originator, as the case may be. SECTION 10.09. Trigger Events. If any of the following events shall occur and be continuing: (a) The Collection Agent (if other than the Agent or its designee) (i) shall fail to perform or observe any term, covenant or agreement hereunder (other than as referred to in clause (ii) of this subsection (a)) and such failure shall remain unremedied for three Business Days or (ii) shall fail to make any payment or deposit to be made by it hereunder when due; or (b) Any Originator shall fail (i) to transfer to the Agent when requested by the Agent any rights pursuant to this Agreement which it has as Collection Agent, (ii) to make any payment required under Section 9.01 or (iii) to turn over to the Collection Agent the amounts referred to in Sections 2.04(c)(i) and (ii); or (c) Any representation or warranty made or deemed made by any Originator or the Seller (or any of its officers) under or in connection with this Agreement, any Purchaser Report or any other information or report delivered pursuant hereto shall prove to have been incorrect in any material respect when made or deemed made; or (d) The Seller or any Originator shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Seller by the Agent at the direction of the Majority Purchasers; or (e) Any Originator or any of its subsidiaries shall fail to pay any principal of or premium or interest on any Debt which is outstanding in a principal amount of at least $5,000,000 in the aggregate of such Originator or such subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (f) An event of default as defined in any agreement, mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced any Debt of the Company whether such Debt now exists or shall hereafter be created, in a principal amount then outstanding of $25,000,000 or more, shall occur and shall result in such Debt of the Company becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, and such acceleration shall not be rescinded or annulled; or (g) The Purchase of Purchased Receivables pursuant hereto shall for any reason, except to the extent permitted by the terms hereof, cease to create legal and equitable title to, and ownership of, each Purchased Receivable and the Related Security and Collections with respect thereto; or any Ownership Document delivered hereunder shall for any reason cease to evidence the transfer to the owner thereof of legal and equitable title to, and ownership of, Purchased Receivables and Related Security to the extent of the Receivable purchased (or purported to be purchased) thereunder; or (h) (i) Any Originator, any of its subsidiaries or the Company shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Originator or any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, if instituted against any Originator or any of its subsidiaries, either such proceeding shall not be stayed or dismissed for 45 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur; or any person or entity having authority over such Originator shall commence any delinquency proceeding or initiate any action or enter any order asserting or seeking to assert powers of supervision, rehabilitation or liquidation with respect to such Originator pursuant to applicable laws; or (ii) any Originator or any of its subsidiaries shall take any corporate action to authorize any of the actions set forth in clause (i) above in this subsection (h); or (i) There shall have been any material adverse change in the financial condition or operations of any Originator or the Company since September 30, 1993; or there shall have occurred any event which may materially adversely affect the ability of the Seller to perform its obligations under this Agreement and the Ownership Documents; or (j) The agreement referred to in Section 3.01(l) shall no longer be in full force and effect; or (k) The Company shall not maintain a long-term senior debt rating of at least BBB- by Standard & Poor's Corporation and at least Baa3 by Moody's Investors Service, Inc; then, and in any such event, (i) the Agent and each Purchaser shall have, in addition to the rights and remedies which they may have under this Agreement or at law, including, without limitation, the right to require the Collection Agent to segregate and deposit in each Purchaser's account all amounts held in trust and the right to replace the Collection Agent, all other rights and remedies provided under the UCC of the applicable jurisdiction or jurisdictions and other applicable laws, which rights shall be cumulative, and (ii) the Seller shall pay each Purchaser an amount equal to .25% of the then Outstanding Balance of each Purchaser's Share Percentage of Purchased Receivables. SECTION 10.10. Independent Decision. The Seller and each Originator acknowledges that it has, independently and without reliance upon any Purchaser, the Agent, CNA, any financial institution designated by any Initial Purchaser on the signature page hereof or any Affiliate thereof and based upon such documents and information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement. SECTION 10.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SELLER: THE CONTINENTAL INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President 180 Maiden Lane, 12th Floor New York, New York 10038 Attention: Martin D. Haber, Esq. General Counsel Telecopy No.: (212) 440-7982 with a copy to: The Continental Insurance Companies One Continental Drive Cranbury, New Jersey 08570 Attention: Mr. Francis M. Colalucci Vice President Telecopy No.: (609) 395-5957 BOSTON OLD COLONY INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President THE BUCKEYE UNION INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President CASUALTY INSURANCE COMPANY By /s/Charles Parker Vice President COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J. By /s/J. Heath Fitzsimmons Senior Vice President THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY By /s/J. Heath Fitzsimmons Senior Vice President CONTINENTAL LLOYD'S INSURANCE COMPANY By /s/J. Heath Fitzsimmons Attorney-in-Fact CONTINENTAL REINSURANCE CORPORATION By /s/J. Heath Fitzsimmons Senior Vice President THE FIDELITY AND CASUALTY COMPANY OF NEW YORK By /s/J. Heath Fitzsimmons Senior Vice President FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY By /s/J. Heath Fitzsimmons Senior Vice President THE GLENS FALLS INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President KANSAS CITY FIRE AND MARINE INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President THE MAYFLOWER INSURANCE COMPANY, LTD. By /s/J. Heath Fitzsimmons Senior Vice President NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS By /s/J. Heath Fitzsimmons Senior Vice President NIAGARA FIRE INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President PACIFIC INSURANCE COMPANY By /s/J. Heath Fitzsimmons Senior Vice President WORKERS' COMPENSATION AND INDEMNITY COMPANY OF CALIFORNIA By /s/Charles Parker Vice President AGENT: CITICORP NORTH AMERICA, INC., Individually and as Agent By /s/Robin M. Beckett Vice President 450 Mamaroneck Avenue Harrison, New York 10528 Attention: Corporate Asset Funding Department Telex No.: TWX 510 600 5528 Answerback: CIC CAF UD Telecopy No.: (914) 899-7890 PURCHASERS: CORPORATE ASSET FUNDING COMPANY, INC. By CITICORP NORTH AMERICA, INC., its Managing Agent By /s/Robin M. Beckett Vice President 450 Mamaroneck Avenue Harrison, New York 10528 Attention: Corporate Asset Funding Department Telex No.: TWX 510 600 5528 Answerback: CIC CAF UD Telecopy No.: (914) 899-7890 Account for Deposits: Bank: Citibank, N.A. 399 Park Avenue New York, New York 10043 Account Name: Citicorp North America, Inc., as managing agent for Corporate Asset Funding Company, Inc. Account Number: 4056-3414 FALCON ASSET SECURITIZATION CORPORATION By /s/Sheila Stamps Authorized Signor One First National Plaza Suite 0596, 21st Floor Chicago, Illinois 60670 Attention: The Asset-Backed Markets Division Telecopy No.: (312) 732-4487 Account for Deposits: Bank: The First National Bank of Chicago One First National Plaza Chicago, Illinois 60670 Account Name: Falcon Asset Securitization Corporation Account Number: 58-14810 ATLANTIC ASSET SECURITIZATION CORP. Credit Lyonnais New York Branch as Attorney-in-fact for Atlantic Asset Securitization Corp. By /s/Barbara Kellc Authorized Signor 1301 Avenue of the Americas 18th Floor New York, NY 10019 Facsimile No.: (212) 459-3258 Attention: Merchant Banking Barbara Kellc Account for Deposits: Bank: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Account Name: Atlantic Asset Securitization Corp. Account Number: 1-25680-0001-00 ABA Number: 0260-0807-3 SHEFFIELD RECEIVABLES CORPORATION By /s/James F. Moore Authorized Signor 222 Broadway New York, New York 10038 Account for Deposits: Bank: Barclays Bank PLC 75 Wall Street New York, New York 10065 Account Name: Sheffield Receivables Corporation Account No.: 050-786393 ABA Number: 026002574 EX-10 9 EXHIBIT 10(F) STOCK PURCHASE AGREEMENT among THE CONTINENTAL CORPORATION, THE CONTINENTAL INSURANCE COMPANY, CONTINENTAL REINSURANCE CORPORATION and MELLON BANK CORPORATION AFCO CREDIT CORPORATION CAFO INC. Dated as of June 30, 1993 TABLE OF CONTENTS Section Page ARTICLE I SALE AND PURCHASE 1.1 Sale and Purchase of the Shares 1 1.2 Closing 1 1.3 Certain Contingent Payments 2 1.4 Allocation of Purchase Price 6 1.5 Canadian Tax Matters 6 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS 2.1 Corporate Status and Authority 7 2.2 No Conflicts, etc. 8 2.3 Corporate Status of the Companies 8 2.4 The Shares 8 2.5 Subsidiaries 9 2.6 Financial Statements 9 2.7 Absence of Undisclosed Liabilities 10 2.8 Properties, etc. 10 2.9 Contracts 11 2.10 Employee Benefits 11 2.10.1 Employment Agreements and Plan 11 2.10.2 Liabilities, Encumbrances and Tax Treatment 12 2.10.3 Compliance with Plan Provisions and Applicable Laws 12 2.10.4 Retiree Welfare Benefits 12 2.10.5 Severance Pay; Accelerated Benefits 12 2.10.6 Plan Amendment or Termination 13 2.10.7 Labor Matters 13 2.10.8 Nonqualified Arrangements 13 2.10.9 CAFO Plans 13 2.11 Insurance 13 2.12 Governmental Authorizations; Compliance with Laws 13 2.13 Litigation 14 2.14 Tax Matters 14 2.15 Absence of Changes 16 2.16 Brokers 16 2.17 Environmental Matters 17 2.18 Accurate and Complete Disclosure 17 2.19 Intellectual Property 17 ARTICLE IIA REPRESENTATIONS AND WARRANTIES OF CONTINENTAL 2.20 Corporate Status and Authority 18 2.21 No Conflicts, etc. 18 2.22 Litigation 18 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 3.1 Corporate Status and Authority 19 3.2 No Conflicts 19 3.3 Litigation 20 3.4 Purchase for Investment 20 3.5 Brokers 20 ARTICLE IV CERTAIN COVENANTS 4.1 Obligations of the Parties 20 4.2 Conduct of Business, etc. 20 4.3 Access and Information 21 4.4 Payment of Certain Taxes; Filing of Certain Tax Returns 21 4.5 Solicitation of Employees 21 4.6 Tax Sharing Agreements; Tax Attributes 22 4.6.1 Termination of Existing Agreements 22 4.6.2 Tax Attributes 22 4.7 Taxes 23 4.7.1 Payment of Tax Liabilities 23 4.7.2 Filing of Tax Returns 23 4.7.3 Bridge Period 23 4.7.4 Audits and Other Proceedings 24 4.7.5 Conduct of Business, Section 338 Election 25 4.7.6 Tax Refunds 26 4.7.7 Cooperation 27 4.8 Certain Pre-Closing Transactions 27 4.8.1 Pre-Closing Dividend 27 4.8.2 Intercompany Indebtedness 28 4.8.3 Resignation of Directors 28 4.8.4 Credit Support Arrangements 28 4.8.5 Transfer of Certain Property 28 4.9 Publicity 28 4.10 Covenant not to Compete 29 4.11 Transitional Matters 29 ARTICLE V EMPLOYEE MATTERS 5.1 Employee Matters 29 5.2 Retirement Plan 30 5.3 Savings Plan 31 5.4 Welfare Plans 31 5.5 Executive Compensation and Benefits 34 5.6 Cessation of Participation 34 ARTICLE VI CONDITIONS PRECEDENT 6.1 Preamble 34 6.2 Conditions to Obligations of both Parties 35 6.2.1 Consents and Approvals 35 6.2.2 No Injunction 35 6.3 Conditions to Obligations of the Sellers 35 6.3.1 Representations and Warranties of the Purchaser 35 6.3.2 Officer's Certificate 36 6.3.3 Opinion of Counsel 36 6.3.4 Release From Credit Support and Other Arrangements 36 6.3.5 Third Party Consents 36 6.3.6 Real Property Transfer Tax Filings 36 6.4 Conditions to Obligations of the Purchaser 36 6.4.1 Representations and Warranties of the Sellers 36 6.4.2 Officer's Certificate 36 6.4.3 Opinion of Counsel 37 6.4.4 Third Party Consents 37 6.4.5 Real Property Transfer Tax Filings 37 6.4.6 Combined Shareholders' Equity 37 ARTICLE VII INDEMNIFICATION 7.1 Survival of Representations and Warranties 37 7.2 Indemnification 37 7.2.1 By the Sellers 37 7.2.2 By the Purchaser 38 7.2.3 Indemnification Procedures 39 7.3 Continental Guaranty 40 ARTICLE VIII DISPUTE RESOLUTION 41 ARTICLE IX DEFINITIONS 42 ARTICLE X GENERAL PROVISIONS 10.1 Modification; Waiver 46 10.2 Entire Agreement 46 10.3 Termination 46 10.4 Expenses 46 10.5 Further Actions 46 10.6 Post-Closing Access 46 10.7 Notices 47 10.8 Assignment 48 10.9 Counterparts 48 10.10 Headings 48 10.11 Governing Law 49 Exhibit A Form of Opinion of the Purchaser's Counsel Exhibit B Form of Opinion of the Sellers' U.S. Counsel Exhibit C Form of Opinion of the Sellers' General Counsel Exhibit D Form of Opinion of Sellers' Canadian Counsel STOCK PURCHASE AGREEMENT, dated as of June 30, 1993, among THE CONTINENTAL CORPORATION, a New York corporation ("Continental"), THE CONTINENTAL INSURANCE COMPANY, a New Hampshire insurance corporation ("Continental Insurance"), CONTINENTAL REINSURANCE CORPORATION, a California insurance corporation ("Continental Reinsurance", and together with Continental Insurance, the "Sellers"), and MELLON BANK CORPORATION, a Pennsylvania corporation (the "Purchaser"). Capitalized terms not otherwise defined are defined in Article IX hereof. ARTICLE I Sale and Purchase Section 1.1. Sale and Purchase of the Shares. Subject to the terms and conditions of this Agreement and in reliance upon the representations, warranties and covenants contained herein, at the Closing, (i) Continental Insurance will sell, transfer and deliver to the Purchaser or its nominee all the outstanding capital stock (the "AFCO Shares") of AFCO Credit Corporation, a New York corporation ("AFCO"), and (ii) Continental Reinsurance will sell, transfer and deliver to the Purchaser or its nominee all the outstanding capital stock (the "CAFO Shares", and together with the AFCO Shares, the "Shares") of CAFO Inc., a corporation incorporated under the federal laws of Canada ("CAFO", and together with AFCO, the "Companies"), and the Purchaser will deliver to the Sellers the Closing Date Purchase Price in accordance with the provisions of Section 1.2. Section 1.2. Closing. The closing of the purchase and sale of the Shares (the "Closing") will take place at the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022 at 10:00 a.m., New York time on the first business day of the month following satisfaction of all conditions set forth in Section 6.2.1 hereof, or at such other date and time as the parties shall have agreed to in writing (the "Closing Date"). At the Closing: (a) each of Continental Insurance and Continental Reinsurance will deliver to the Purchaser or its nominee(s) the AFCO Shares and the CAFO Shares, respectively, free and clear of all liens, charges, pledges or encumbrances, by delivering the certificates representing such Shares, endorsed or accompanied by stock powers in favor of the Purchaser or its nominee(s); and (b) the Purchaser will pay $100 million (the "Closing Date Purchase Price") in cash in the amount of (i) $5 million to Continental Insurance in respect of the covenant not to compete set forth in Section 4.10 hereof, (ii) the book value of the CAFO Shares as of the Closing Date to Continental Reinsurance in respect of the CAFO Shares, and (iii) the remainder to Continental Insurance in respect of the AFCO Shares, by, at each Seller's option, (x) a bank check drawn on the Federal Reserve Bank of New York, or (y) a wire transfer of immediately available funds to a bank account designated by such Seller. Section 1.3. Certain Contingent Payments. In addition to the Closing Date Purchase Price, the Purchaser shall be obligated to make contingent cash payments to Continental Insurance or such affiliates of Continental Insurance as Continental Insurance shall designate (the "Continental Payee") subject to and in accordance with the following provisions: (a) In respect of each twelve month period immediately preceding the first five anniversaries of the Closing Date (each a "Term Year"), the Purchaser shall calculate a notional amount (the "Notional Amount") in accordance with the following formula: Pn = [O - (V x 1.05n)] x 1.20% where: Pn = the Notional Amount for the Term Year in respect of which such Notional Amount is being calculated; O = the Origination Volume for the Term Year in respect of which such Notional Amount is being calculated; V = the Origination Volume for the twelve month period ending on the last day of the month immediately preceding the month in which the Closing Date occurs; and n = the number of Term Years elapsed since the Closing Date. (b) The Purchaser will pay to the Continental Payee cash in an amount equal to the sum of the Notional Amounts for each of the five Term Years following the Closing Date (the "Final Payment") in accordance with the provisions of paragraphs (g) and (h) of this Section 1.3; provided that, notwithstanding anything herein to the contrary, the Final Payment shall not be less than zero or more than $78 million. (c) Within 10 days of each of the first two anniversaries of the Closing Date, the Purchaser will pay to the Continental Payee cash in an amount equal to $2.1 million (each such payment a "Provisional Interest Payment"). (d) Within 10 days of the third anniversary of the Closing Date, the Purchaser will pay to the Continental Payee cash in an amount equal to the excess of (i) the product of (x) 6%, times (y) the Projected Present Value of the Notional Amounts, times (z) three (the "Interim Interest Amount"), over (ii) the aggregate amount of payments made to any Continental Payee pursuant to subsection (c) above (the "Provisional Payment Amount"); provided, that if the Interim Interest Amount shall be less than the Provisional Payment Amount, the Continental Payee shall pay to the Purchaser cash in an amount equal to the difference between the Provisional Payment Amount and the Interim Interest Amount. (e) Within 10 days of the fourth anniversary of the Closing Date, the Purchaser will pay to the Continental Payee cash in an amount equal to 6% of the Projected Present Value of the Notional Amounts. (f) The Purchaser will pay to the Continental Payee cash in an amount equal to the excess of (i) the product of (x) 6%, times (y) the Present Value of the Notional Amounts, times (z) five (the "Final Interest Amount"), over (ii) the aggregate amount of payments made to any Continental Payee pursuant to subsections (c), (d) and (e) above (the "Adjusted Payment Amount") in accordance with the provisions of paragraphs (g) and (h) of this Section 1.3; provided, that if the Final Interest Amount shall be less than the Adjusted Payment Amount, the Continental Payee shall pay to the Purchaser cash in an amount equal to the difference between the Adjusted Payment Amount and the Final Interest Amount. (g) Within 30 days of the end of each of the first four Term Years, the Purchaser will deliver to Continental Insurance a written notice (an "Interim Notice") setting forth the Purchaser's calculation of the Notional Amount for such Term Year. Within 30 days of the end of the Term Year expiring on the fifth anniversary of the Closing Date, the Purchaser will deliver to Continental Insurance a written notice (the "Final Notice") setting forth the Purchaser's calculations of the Notional Amount for such Term Year, the Final Payment, the Present Value of the Notional Amounts, the Final Interest Amount and the amount payable by or to the Purchaser pursuant to the provisions of this Section 1.3. Such Interim Notices and the Final Notice shall include such financial statements, workpapers and other supporting documentation as Continental Insurance shall reasonably request. Continental Insurance and its representatives shall have the right to review all workpapers and procedures used to prepare the Interim Notices and Final Notices and shall have the right to perform any other reasonable procedures to verify the accuracy thereof. In addition, and without limiting the foregoing, Continental Insurance shall have the right to request an audit by its independent public accountants of Purchaser's calculations set forth in the Interim and Final Notices; provided, that Continental Insurance shall not have the right to request an audit in respect of any Interim Notice unless, in its reasonable discretion, it determines that there is a reasonable basis therefor. In such event, the Purchaser shall provide to Continental Insurance's independent public accountants such access to the Purchaser's and its affiliates' (including the Companies and their Subsidiaries) books, records and personnel as shall be reasonably required in order for such independent public accountants to verify the calculations made by the Purchaser pursuant to this Section 1.3. The costs of any such audit shall be borne equally by the Purchaser and Continental Insurance. (h) Continental Insurance may, within 30 days after receipt of the Final Notice (the "Review Period"), give the Purchaser either (i) written notice (an "Acceptance Notice") that it accepts the calculations set forth in the Final Notice, or (ii) written notice (an "Objection Notice") that it objects to the calculations set forth in the Final Notice and specifying the reasons therefor. The Final Notice shall become final and binding on the parties for purposes of this Agreement upon, and the Purchaser or the Continental Payee, as the case may be, shall pay to the other party the amount set forth in the Final Notice within seven days of, the earlier of (x) delivery by Continental Insurance of an Acceptance Notice, or (y) the expiration of the Review Period without delivery of an Objection Notice by Continental Insurance. If the Purchaser and Continental Insurance are unable to resolve any matter or matters in dispute within 30 days after an Objection Notice has been given, the dispute shall be submitted to a nationally recognized public accounting firm mutually agreed upon by the Purchaser and Continental Insurance. Continental Insurance and the Purchaser shall, and shall cause the Companies and the Subsidiaries to, provide full cooperation to such accounting firm. Such accounting firm shall make a final and binding determination as to the matter or matters in dispute within 45 days of the submission of the matter or matters in dispute to such accounting firm. The fees and expenses of such accounting firm shall be borne equally by the Purchaser and Continental Insurance. The Purchaser and Continental Insurance agree to cooperate with each other and with each other's authorized representatives in order to resolve such dispute as soon as practicable. Any amounts owing by Purchaser or the Continental Payee, as the case may be, shall be paid to the other party within seven days of the resolution of such dispute. Any payments made by the parties pursuant to this Section 1.3 shall be made in cash at the payee's option by certified or bank check or by wire transfer in immediately available funds to a bank account designated by the payee. (i) The Purchaser's obligations to make the contingent cash payments set forth in this Section 1.3 may be assigned to and assumed by another person in connection with any subsequent sale of all or a substantial portion of the Business to such person; provided that prior to fulfillment of the Purchaser's obligations under this Section 1.3, the Purchaser shall consult with Continental Insurance on a confidential basis with respect to the identity of any potential purchaser or list of potential purchasers of the Business; and provided, further, that any such assignment and assumption shall be subject to Continental Insurance's prior written consent, which consent shall not be unreasonably withheld. (j) If prior to the fulfillment of the Purchaser's obligations under this Section 1.3 the Business or a substantial portion of the Business is discontinued or sold by the Purchaser to an unaffiliated third party without Continental Insurance's prior written consent to the assignment and assumption of the Purchaser's obligations under this Section 1.3 to such person, Continental Insurance may, at its option, notify the Purchaser in writing that it wishes to accelerate the payment of the Final Payment (the date of such notice being hereafter referred to as the "Acceleration Date"). Within 30 days of receipt of such notice, the Purchaser shall deliver to Continental Insurance a written notice setting forth the information required to be provided by the Purchaser to Continental Insurance pursuant to the second sentence of paragraph (g) above; provided, that for purposes of calculating the Present Value of the Notional Amounts and the Final Payment, the Notional Amount for the Term Year in which such notice is given and for the remaining Term Years prior to the fifth anniversary of the Closing Date shall be calculated based on the assumption that Origination Volume grew over each such Term Year at a rate equal to the greater of (x) the average rate of growth in the Origination Volume for each of the Term Years ending prior to the date of such acceleration, or (y) 6.0%; and provided, further, that the Final Interest Amount shall be equal to (A) 6%, times (B) the Present Value of the Notional Amounts (calculated in accordance with the foregoing proviso), times (C) the number of whole or partial Term Years elapsed from the Closing Date to the Acceleration Date (including such portion of the current Term Year, expressed in decimal form, as shall be applicable). Upon delivery of such notice, the provisions of the third through seventh sentences of paragraph (g) and paragraph (h) shall thereafter apply as if the Final Payment made pursuant to this paragraph (j) were the Final Payment made pursuant to paragraph (b). (k) In the event that the Purchaser or any of its affiliates shall, at any time prior to the fulfillment of the Purchaser's obligations under this Section 1.3: (i) acquire any business entity or assets engaged in the premium finance business; (ii) engage in the premium finance business through any affiliate other than the Companies or the Subsidiaries; or (iii) withdraw or materially curtail the amount of financing available to the Companies and their subsidiaries as a result of a material deterioration in the credit standing of the Purchaser; and such event results in a Material Change to the Business (as such term is defined below), then, at either party's election by delivery of a written notice to the other party (an "Adjustment Notice"), the Purchaser and Continental Insurance shall negotiate in good faith an equitable adjustment to the calculation of Origination Volume to account for any direct or indirect loss or gain in the business opportunities available to the Companies and the Subsidiaries resulting therefrom; provided, that if the parties are unable to reach agreement on such an equitable adjustment within 45 days of the delivery of an Adjustment Notice, either party may elect at any time thereafter to submit such matter to binding arbitration in accordance with the provisions of Article VIII hereof, and provided, further, that in no event shall any such adjustment increase the amount of the Final Payment to more than $78 million or decrease the amount of the Final Payment to less than zero. For purposes of this Section 1.3(k), a "Material Change to the Business" shall mean a change in the Business that causes a material change in the growth rate of the Origination Volume of the Business from the growth rate in effect immediately prior to the event which causes such material change. (l) Within 45 days of the end of each fiscal quarter and 60 days of the end of each fiscal year, the Purchaser shall deliver to Continental Insurance copies of unaudited consolidated interim and annual financial statements, as the case may be, for each of the Companies, which financial statements shall include a balance sheet, statement of income and retained earnings and a statement of cash flows, all prepared in accordance with generally accepted accounting principles applied on a consistent basis; provided, however, that the Purchaser's obligation to deliver such financial statements shall immediately terminate if at any time Continental or any of its affiliates directly or indirectly engages, or has any ownership interest in any firm, corporation, partnership or other business entity (except as a passive investor holding a less than 5% equity interest in such business entity) that engages, in the activities constituting the Business at such time in the United States and Canada (other than as permitted in Section 4.10 hereof). Section 1.4. Allocation of Purchase Price. The Purchaser and the Sellers agree to allocate (i) the fixed consideration under Section 1.2 hereof in accordance with the payments made pursuant to Section 1.2(b) and (ii) the contingent consideration under Section 1.3 hereof to the AFCO Shares. The Purchaser and the Sellers each agree to file all Tax Returns in accordance with such allocations and will not, without the consent of the others, take any contrary position with any government or taxing authority. Section 1.5. Canadian Tax Matters. (a) If a certificate issued by the Minister of Revenue Canada pursuant to Section 116(2) of the Income Tax Act (Canada) is not delivered to the Purchaser by Continental Reinsurance at or before the Closing Date, the Purchaser shall be entitled to withhold from the portion of the Closing Date Purchase Price payable in respect of the CAFO Shares the amount required to be withheld pursuant to section 116 of the Income Tax Act (Canada) with respect to the Closing Date Purchase Price (the "Withheld Amount"). (b) If Continental Reinsurance delivers to the Purchaser prior to the 30th day after the end of the month in which the Closing Date occurs, a certificate issued by the Minister of National Revenue under Section 116(4) of the Income Tax Act (Canada), the Purchaser shall promptly pay to Continental Reinsurance the Withheld Amount. (c) If Continental Reinsurance does not deliver to the Purchaser within the specified time a certificate described in paragraph (a) or (b) above and the Purchaser has withheld the Withheld Amount, the Purchaser shall (i) remit to the Receiver General the amount required to be remitted pursuant to section 116 of the Income Tax Act (Canada) and the amount so remitted shall be credited to the Purchaser as a payment to the Purchaser on account of the Closing Date, and (ii) pay the remaining portion of the Withheld Amount, if any, to Continental Reinsurance. (d) All references in this Agreement to the Income Tax Act (Canada) and to amounts to be withheld pursuant thereto shall be deemed to be made to the Income Tax Act (Canada), as now enacted or as it may from time to time be amended, reenacted or replaced, and in the case of any such amendment, reenactment or replacement, any references herein to the Income Tax Act (Canada) and to amounts to be withheld pursuant thereto shall be read as referring to such amended, reenacted or replaced provisions. ARTICLE II Representations and Warranties of the Sellers Each of the Sellers represents and warrants to the Purchaser as follows: Section 2.1. Corporate Status and Authority. Continental Insurance is an insurance corporation duly incorporated and validly existing under the laws of the State of New Hampshire and has the corporate power to own the AFCO Shares, and Continental Reinsurance is an insurance corporation duly incorporated and validly existing under the laws of the State of California and has the corporate power to own the CAFO Shares. Each of the Sellers has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by each Seller have been duly authorized by its Board of Directors, which constitutes all necessary corporate action on the part of such Seller for such authorization. This Agreement constitutes the valid and legally binding obligation of each Seller, enforceable against such Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and to general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law. Section 2.2. No Conflicts, etc. (a) Except as otherwise set forth in this Agreement or in the Sellers' Disclosure Schedule, the execution, delivery and performance of this Agreement by the Sellers will not result in (i) any conflict with the charter documents or by-laws of any of the Sellers, the Companies or the Subsidiaries, (ii) any material breach or violation of or default under any statute, regulation, judgment, order or any mortgage, agreement, deed of trust, indenture or any other instrument to which any of the Sellers, the Companies or the Subsidiaries is a party or by which any of them or any of their respective properties or assets are bound, except for such breaches, violations or defaults which would not, individually or in the aggregate, have a Material Adverse Effect, or (iii) the creation or imposition of any lien, charge or encumbrance thereon, except for such liens, charges, pledges or encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect. (b) No consent, approval or authorization of or filing with any governmental authority is required on the part of any of the Sellers, the Companies or the Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except (i) filings required with respect to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (ii) as otherwise set forth in the Sellers' Disclosure Schedule, and (iii) filings, consents or approvals, which, if not made or obtained would not, individually or in the aggregate, have a Material Adverse Effect. Section 2.3. Corporate Status of the Companies. AFCO is a corporation duly incorporated and validly existing under the laws of the State of New York; and CAFO is a corporation existing and not dissolved under the federal laws of Canada. Each of the Companies has full corporate power and authority to conduct its business and to own or lease its properties, as now conducted, owned or leased. Each of the Companies is duly qualified to transact business in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect. Section 2.4. The Shares. (a) The authorized capital stock of AFCO consists of 2000 shares of common stock, no par value, all of which are issued and outstanding and owned by Continental Insurance, free and clear of any liens, charges or encumbrances. The authorized capital stock of CAFO consists of an unlimited number of shares of common stock, no par value, 2000 of which are issued and outstanding and owned by Continental Reinsurance, free and clear of any liens, charges or encumbrances. Subject to any Canadian governmental approvals or consents that must be obtained by the Purchaser in connection with the transfer of the CAFO Shares pursuant hereto, upon consummation of the transactions contemplated hereby, the Purchaser or its nominee(s) will acquire good title to the Shares, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims, options or rights of others of whatever nature. (b) All the Shares have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in the Sellers' Disclosure Schedule, there are no outstanding options, warrants, conversion or other rights or other agreements of any kind (other than this Agreement) for the purchase or acquisition from, or the sale or issuance by, any of the Sellers or the Companies of any shares of capital stock of any of the Companies, and no authorization therefor has been given. Section 2.5. Subsidiaries. (a) The Sellers' Disclosure Schedule lists all of the subsidiaries of the Companies (each a "Subsidiary" and collectively the "Subsidiaries") and shows for each: its name; the jurisdiction of its incorporation; its authorized and outstanding shares of capital stock of each class; the shareholders thereof; and the total number of shares owned by each shareholder. Except as otherwise set forth in the Sellers' Disclosure Schedule, all of such outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, are owned by the shareholder or shareholders indicated in the Sellers' Disclosure Schedule, and are owned free and clear of any liens, charges or encumbrances. Except as set forth in the Sellers' Disclosure Schedule, there are no outstanding options, warrants, conversion or other rights or other agreements of any kind (other than this Agreement or any shareholders' preemptive rights, if any) for the purchase or acquisition from, or the sale or issuance by, any of the Sellers, the Companies or the Subsidiaries of any shares of capital stock of any Subsidiary, and no authorization therefor has been given. (b) Each Subsidiary is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation, with full corporate power and authority to conduct its business and to own or lease its properties as now conducted, owned or leased. Each Subsidiary is duly qualified to do business in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect. Section 2.6. Financial Statements. There have been delivered to the Purchaser the Companies' Financial Statements. Except as otherwise set forth in the Sellers' Disclosure Schedule, the AFCO Financial Statements and the CAFO Financial Statements each present fairly the financial condition and results of operations of AFCO and CAFO, respectively, as of the dates and for the periods indicated (subject in the case of the Companies' Interim Statements to normal year-end adjustments consistent with those made in the AFCO Financial Statements and the CAFO Financial Statements, respectively) and have been prepared in accordance with generally accepted accounting principles, except as noted therein. Section 2.7. Absence of Undisclosed Liabilities. Except for liabilities reflected or reserved against in the Companies' Financial Statements, or reflected in the Sellers' Disclosure Schedule, and except with respect to Taxes (which are provided for in Section 2.14), the Companies and the Subsidiaries have no liabilities or obligations, except for liabilities incurred in the ordinary course of business. Section 2.8. Properties, etc. The Sellers' Disclosure Schedule lists all items of real property owned or leased by any of the Companies or the Subsidiaries. Except as otherwise set forth in the Sellers' Disclosure Schedule, a Company or a Subsidiary has (a) good and valid title to the real property listed in the Sellers' Disclosure Schedule as owned by it, (b) valid and subsisting leasehold estates in the real property listed in the Sellers' Disclosure Schedule as leased by it, and (c) good and valid title to all of its tangible personal property (except for properties disposed of since the date hereof in the ordinary course of business), in each case subject to no mortgage, lien, charge, easement or encumbrance, except (i) mortgages, liens, charges, easements and other encumbrances reflected in the Companies' Finan- cial Statements, (ii) liens for taxes and assessments not due and payable or which are being contested in good faith by appropriate proceedings, (iii) as shown in title reports or other writings which have been made available to the Purchaser for review and (iv) charges, easements and other encumbrances which do not materially interfere with the current use of the properties affected thereby. Section 2.9. Contracts. The Sellers' Disclosure Schedule lists all agreements, contracts and commitments of the following types to which any of the Companies or the Subsidiaries is a party or by which any of the Companies or the Subsidiaries or any of their respective properties is bound as of the date hereof (other than real property leases and labor or employment-related agreements, which are provided for in Sections 2.8 and 2.10, respectively, or agreements with respect to Taxes which are provided for in Section 2.14): (a) joint venture, general and limited partnership agreements, (b) mortgages, indentures, loan or credit agreements, security agreements and other agreements and instruments relating to the borrowing of money or extension of credit in any case in excess of $500,000, (c) contracts containing any covenant not to compete or any covenant relating to the disclosure by the Company or the Subsidiaries of proprietary information, (d) contracts relating to the acquisition or disposition of assets (other than in the ordinary course of business), (e) material contracts or other arrangements with brokers and agents, (f) contracts with respect to services provided by the Sellers or any affiliate of the Sellers to the Companies or any Subsidiary, and (g) other agreements, contracts and commitments which in any case require payment by a Company or any Subsidiary within any fiscal year ending after the date hereof of more than $500,000. Complete and correct copies of all such agreements have been made available to the Purchaser for review. Section 2.10. Employee Benefits. 2.10.1. Employment Agreements and Plans. The Sellers' Disclosure Schedule lists all agreements, contracts and commitments of the following types which are maintained by any of the Sellers, the Companies or the Subsidiaries or to which any of the Sellers, Companies or the Subsidiaries is a party and which provides benefits or compensation to employees of the Companies or the Subsidiaries: (a) employment and consulting agreements (excluding any employment or consulting agreement pursuant to which less than $100,000 or CDN $127,000 was paid in 1992 or to which less than $100,000 or CDN $127,000 is payable in 1993 or in any year thereafter), (b) collective bargaining agreements, (c) profit- sharing, pension, retirement, deferred compensation, or other plans, including each "employee pension benefit plan" within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the "Pension Plans"), and (d) bonus, incentive compensation, stock option, severance, vacation, tuition assistance or reimbursement, legal services, salary continuation, medical insurance or benefits, life insurance or death benefits, travel or accident insurance or benefits, disability insurance or benefits, unemployment benefits, or other plans, including each "employee welfare benefit plan" within the meaning of Section 3(3) of ERISA. The agreements, contracts and commitments referenced in (a) through (d) are sometimes hereinafter collectively referred to as the "Plans". None of the Plans is a "multiemployer pension plan" within the meaning of Section 3(37) of ERISA or a "multiple employer plan" within the meaning of Section 413(c) of the Code. The Seller has provided the Purchaser true and complete copies of all written Plans; descriptions of all unwritten Plans; all related trust agreements or other funding arrangements; all summary plan descriptions, employee handbooks and material employee communications; the most recent actuarial and trust reports prepared for any such Plan; the most recent schedules attached thereto; and the most recent determination letter issued in respect of each such Plan. 2.10.2. Liabilities, Encumbrances and Tax Treatment. No event has occurred with respect to any of the Companies or the Subsidiaries, and there exists no condition or set of circumstances with respect to the Companies or the Subsidiaries, in connection with which the Companies or the Subsidiaries are directly or indirectly, through any other trade or business (whether or not incorporated) which together with the Companies or the Subsidiaries would be deemed to be part of a "controlled group" within the meaning of Section 4001 of ERISA (an "ERISA Affiliate"), subject to any liability, lien or encumbrance or loss of tax deduction with respect to any Plan (other than any Plan described in Section 2.10.9) under ERISA or the Code, or any other law, regulation or governmental order including, without limitation, ERISA Sections 409, 502(i), 502(l), Part 6 of Title I, 4062 or 4069 or Code Sections 401(a)(29), 4971, 4972, 4975, 4976, 4977, 4978, 4978B, 4979, 4980 or 4980B or under any agreement, instrument, statute, rule of law or regulation pursuant to or under which any of the Companies or the Subsidiaries has indemnified or is required to indemnify any person against any such liability which would have a Material Adverse Effect. No material liability (other than annual premiums, all of which premiums due to date have been paid) to the Pension Benefit Guaranty Corporation has been incurred by the Companies or the Subsidiaries with respect to any Pension Plan subject to Title IV of ERISA. 2.10.3. Compliance With Plan Provisions and Applicable Laws. With respect to each Plan (other than any Plan described in Section 2.10.9 hereof): (a) Each of the Companies and the Subsidiaries, as the case may be, have made and/or accrued all payments due from them with respect to periods ending on or prior to the date hereof; (b) no such Plan which is subject to Part 3 of Subtitle B of Title I of ERISA has incurred any "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code, whether or not waived; (c) each such Plan is in material compliance with all applicable laws and regulations, including, but not limited to ERISA and the Code; (d) each such Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter and nothing has occurred since the date of such letter that would adversely affect such qualification; and (e) there is no contract or arrangement with respect to which any of the Companies or the Subsidiaries is directly or indirectly liable that would result in the payment of any amount that would not, by operation of Code Section 280G, be deductible. 2.10.4. Retiree Welfare Benefits. No employee welfare benefit plan (as defined in Section 3(1) of ERISA) maintained or sponsored by the Companies or the Subsidiaries provides medical or death benefits (whether or not insured) with respect to Retained Employees beyond their date of retirement or other termination of service (other than coverage mandated by Section 601 of ERISA, the cost of which is fully paid by the Retained Employee or his or her dependents). 2.10.5. Severance Pay; Accelerated Benefits. The consummation of the transactions contemplated by this Agreement will not obligate any of the Companies or the Subsidiaries to provide any Retained Employees (other than Canadian Retained Employees) with severance pay, unemployment compensation or any similar payment, nor accelerate the time of payment or vesting, or increase any compensation due to any such Retained Employee under any Plan. 2.10.6. Plan Amendment or Termination. None of the Sellers, the Companies or any Subsidiary has taken any action which would commit any of the Companies or any Subsidiary to continue any Plan for any Retained Employees, nor have the Sellers, any Company or any Subsidiary taken any action which would prevent any Company or any Subsidiary from changing or terminating the Plans at any time. 2.10.7. Labor Matters. No Company or any Subsidiary has experienced any work stoppage or other material labor difficulty, and none is presently pending or threatened against any Company or any Subsidiary which Sellers reasonably believe will have a Material Adverse Effect. No Company or Subsidiary is represented by a labor organization or collective bargaining agent and no activities by any such organization or agent to organize or represent any Company or any Subsidiary are pending or threatened. 2.10.8. Nonqualified Arrangements. Other than Michael M. Nisbet, no Retained Employee, as of the date hereof, participates in any Plan which is an excess benefit plan as defined in Section 3(36) of ERISA, supplemental pension or retirement plan or similar pension, retirement or deferred compensation arrangement. 2.10.9. CAFO Plans. (a) All of the Plans established, maintained or contributed to by CAFO (the "CAFO Plans") are duly registered where required by, and are in good standing under, all applicable Canadian legislation, (b) all required contributions by CAFO have been made to the CAFO Plans, (c) the CAFO Plans are funded in accordance with the rules under applicable Canadian legislation and (d) as of the date of the last required actuarial valuation, no actuarial unfunded liability or solvency deficit exists under the CAFO Plans. No employees of CAFO are covered by any Plans other than the CAFO Plans and the Long-Term Incentive Plan and the Annual Management Incentive Plan of the Continental Corporation. Section 2.11. Insurance. The Sellers' Disclosure Schedule lists all insurance policies owned by any of the Companies or the Subsidiaries and, except as indicated therein, all premiums have been paid on such policies, no notice of termination or threatened termination of any of such policies has been received by any of the Sellers, the Companies or the Subsidiaries, and, to the best knowledge of the Sellers, such policies are in full force and effect. Section 2.12. Governmental Authorizations; Compliance with Laws. Except as otherwise set forth in the Sellers' Disclosure Schedule, the Companies and the Subsidiaries hold all licenses, permits and other governmental authorizations material to the Business as presently conducted and none of the Companies and the Subsidiaries is in violation of any statute, rule, regulation, judgment, order, decree, permit, concession, franchise or other governmental authorization or approval applicable to it or to any of its properties, except for violations which, individually or in the aggregate, would not have a Material Adverse Effect. Section 2.13. Litigation. Except as otherwise set forth in the Sellers' Disclosure Schedule, there are no judicial or administrative actions, proceedings or investigations (including without limitation examinations by federal, foreign, state and local taxing authorities) pending or, to the best knowledge of the Sellers, threatened against the Sellers, the Companies or the Subsidiaries, which might reasonably be expected to have a Material Adverse Effect, or which question the validity or enforceability of this Agreement or any action taken or to be taken by the Sellers or the Companies in connection herewith. Section 2.14. Tax Matters. (a) Except as otherwise set forth in the Sellers' Disclosure Schedule, or as reflected or reserved against in the Companies' Financial Statements, (i) the Sellers, the Companies and the Subsidiaries and all affiliated, combined, consolidated or unitary tax group of which any of the Companies or the Subsidiaries is or has been a member have filed all material federal, foreign, state and local Tax returns, reports and declarations which are required to include any Tax items relating to the Business having a filing date (including extensions) prior to the date hereof, (ii) all Taxes shown as due thereon have been paid, and (iii) no material claim for the assessment and collection of Taxes is being asserted in writing against any of the Sellers, the Companies or the Subsidiaries in respect of the Business, other than assessments for Taxes neither due nor in default. (b) Subject to Section 1.5, the Purchaser shall not be required to deduct and withhold any amount with respect to Taxes upon the transfer of the Shares to the Purchaser. (c) The Companies and the Subsidiaries have complied in all material respects with all applicable laws, rules and regulations relating to the reporting, payment and withholding of Taxes in connection with amounts paid to their employees, creditors, independent contractors or other third parties and have within the time and in the manner prescribed by law, withheld from such amounts and timely paid over to the proper governmental authorities all amounts required to be so withheld and paid over under all applicable laws. (d) The periods for the assessment of federal Taxes of the Companies and the Subsidiaries and any affiliated, combined, consolidated or unitary tax group of which any of the Companies or the Subsidiaries is or has been a member are closed either by agreement with the Internal Revenue Service or by operation of the applicable statute of limitations for all taxable periods to and including 1984. Except as set forth in the Sellers' Disclosure Schedule, no agreement or other document waiving the statute of limitation in respect of any Tax or extension of time with respect to a Tax assessment or deficiency has been executed or filed with any taxing authority by or on behalf of the Companies or any of the Subsidiaries. No power of attorney has been granted by or on behalf of any of the Companies and the Subsidiaries. (e) No claim has been made in writing by an authority in a jurisdiction where any of the Companies or the Subsidiaries does not file Tax Returns that such Companies or Subsidiaries are or may be subject to taxation by that jurisdiction nor, to the best of the Sellers' knowledge, does such a valid claim exist. (f) The Companies or, in the case of CAFO, its public accountants, possess, or will possess at the Closing Date, all previously filed Tax Returns and related workpapers (federal income Tax Returns will be pro forma Forms 1120 containing the separate return information for the Companies and the Subsidiaries only) and workpapers for all Tax Years beginning with 1982 including a schedule showing all adjustments made in consolidation or combination of the Companies, the Subsidiaries and the Sellers. (g) None of the Companies or the Subsidiaries, or any predecessor corporation with respect to any of them, has filed or had filed on its behalf a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a Section 341(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by any of them. None of the Companies or the Subsidiaries is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that will not be deductible under Code Section 280G. The Sellers' Disclosure Schedule sets forth all statements under Code Section 6662 or its predecessor that have been filed with respect to such Companies and Subsidiaries by the consolidated federal income tax group of which any of the Companies and the Subsidiaries are members. The Sellers' Disclosure Schedule sets forth all federal income tax elections under the Code, and all elections or agreements under state tax laws that will be binding upon any of the Companies or the Subsidiaries after the Closing Date. There are no deferred intercompany transactions under Reg. 1.1502-13 or 13T, nor deferred losses under Code Section 267, between any of the Companies or the Subsidiaries and any other affiliates of the Sellers which would cause a deferred tax asset on the financial statements to become unrecognizable for Tax purposes or would impose liability for Taxes on any of the Companies or the Subsidiaries after the Closing Date. None of the Companies or the Subsidiaries has adopted a method of tax accounting pursuant to which items of income received prior to the Closing Date will be recognized for Tax purposes later than they will be recognized for financial accounting purposes nor will any of the Companies or the Subsidiaries change or request permission to change any method of accounting for Taxable Years preceding the Closing Date that would increase the income or decrease the deductions or credits of any of the Companies or the Subsidiaries for Taxable Years ending after the Closing Date. No property of any of the Companies or the Subsidiaries is or will be required to be treated as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Code (as in effect prior to amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within the meaning of Section 168 of the Code. Section 2.15. Absence of Changes. Since December 31, 1992, except as otherwise set forth in this Agreement or reflected in the Sellers' Disclosure Schedule delivered to the Purchaser on the date hereof or the Companies' Financial Statements, the Business has been conducted in substantially the same manner in which it previously has been conducted, and none of the Companies or the Subsidiaries has: (a) purchased or redeemed any shares of their capital stock or, in the case of the Companies, declared or made any dividend or other distribution in respect of its capital stock, except as contemplated by Section 4.9.1 of this Agreement; (b) incurred any material liabilities or obligations, except current liabilities and obligations incurred in the ordinary course of business and advances from affiliates consistent in all respects, including inter alia, amount and purpose, with past practice; (c) mortgaged any of its properties or assets; (d) pledged or subjected to any lien or security interest any of its properties or assets except in the ordinary course of business; (e) increased the compensation of any officer or employee, except as consistent with past practice or custom; (f) disposed or agreed to dispose of any of its properties or assets, except in the ordinary course of business; (g) cancelled or forgiven any material debts or claims; (h) entered into any transaction other than in the ordinary course of business; or (i) suffered any material adverse change in its business, condition (financial or otherwise) or operations. Section 2.16. Brokers. All negotiations relating to this Agreement and the transactions contemplated hereby have been carried out without the intervention of any person acting on behalf of the Sellers or the Companies in such manner as to give rise to any valid claim against the Purchasers, the Sellers or the Companies for any brokerage or finder's commission, fee or similar compensation, except for Lazard Freres & Co. whose fees in respect hereof shall be paid by Continental. Section 2.17. Environmental Matters. Except as set forth in the Sellers' Disclosure Schedule, there are no claims pending or, to the knowledge of the Sellers, threatened, and neither the Sellers, nor, to the knowledge of the Sellers, any of the Companies or the Subsidiaries has received notice, that any of the Companies or the Subsidiaries is in violation of or noncompliance with any applicable pollution or environmental control laws, orders or regulations, including, without limitation, laws, orders or regulations as to effluent disposal, ambient air quality or solid waste which are reasonably likely, as to any violation or series of violations or noncompliance, to have a Material Adverse Effect. Section 2.18. Accurate and Complete Disclosure. All information contained in the Sellers' Disclosure Schedule is true and accurate in all material respects as of the date hereof and does not omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. Section 2.19. Intellectual Property. Except as set forth in the Sellers' Disclosure Schedule, no patents, patent applications, trademarks (whether registered or unregistered), trademark applications, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases or other rights (collectively "Intellectual Property"), are owned by or licensed to the Companies or any Subsidiary or are presently being used by the Companies or any Subsidiary in the providing or marketing of any products or services in connection with the Business, except for such Intellectual Property the absence of which would not have a Material Adverse Effect. Except as disclosed in the Sellers' Disclosure Schedule, the Business is not dependent to any material extent on any Intellectual Property or assignment thereof. The Companies and the Subsidiaries have the right to use, and after the consummation of the transactions contemplated hereby will have the right to use, free and clear of any claims of others, all Intellectual Property necessary to own and operate its properties and to carry on the Business as currently conducted, except where such failure to have such rights or such claims of others would not have a Material Adverse Effect. ARTICLE IIA Representations and Warranties of Continental Continental represents and warrants to the Purchaser as follows: Section 2.20. Corporate Status and Authority. Continental is a corporation duly incorporated and validly existing under the laws of the State of New York. Continental has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by Continental has been duly authorized by its Board of Directors, which constitutes all necessary corporate action on the part of Continental for such authorization. This Agreement constitutes the valid and legally binding obligation of Continental, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and to general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law. Section 2.21. No Conflicts, etc. (a) Except as otherwise set forth in this Agreement or in the Sellers' Disclosure Schedule, the execution, delivery and performance of this Agreement by Continental will not result in (i) any conflict with the charter documents or by-laws of Continental, (ii) any material breach or violation of or default under any statute, regulation, judgment, order or any mortgage, agreement, deed of trust, indenture or any other instrument to which Continental is a party or by which it or any of its properties or assets are bound, except for such breaches, violations or defaults which would not, individually or in the aggregate, have a material adverse effect on the business, condition (financial or otherwise), or operations of Continental and its subsidiaries taken as a whole, or (iii) the creation or imposition of any lien, charge or encumbrance thereon, except for such liens, charges, pledges or encumbrances which would not, individually or in the aggregate, have a material adverse effect on the business, condition (financial or otherwise), or operations of Continental and its subsidiaries taken as a whole. (b) No consent, approval or authorization of or filing with any governmental authority is required on the part of Continental in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby except filings required with respect to the HSR Act and as otherwise set forth in the Sellers' Disclosure Schedule. Section 2.22. Litigation. Except as otherwise set forth in the Sellers' Disclosure Schedule, there are no judicial or administrative actions, proceedings or investigations pending or, to the best knowledge of Continental, threatened, against Continental which question the validity or enforceability of this Agreement or any action taken or to be taken by Continental in connection herewith. ARTICLE III Representations and Warranties of the Purchaser The Purchaser represents and warrants to each of the Sellers as follows: Section 3.1. Corporate Status and Authority. The Purchaser is a corporation duly incorporated and validly existing under the laws of the Commonwealth of Pennsylvania, with the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Purchaser has heretofore delivered to the Sellers complete and correct copies of its articles of incorporation and bylaws (or other similar documents) as currently in effect. The execution, delivery and performance of this Agreement have been duly authorized by the Purchaser's Board of Directors, which constitutes all necessary corporate action on the part of the Purchaser for such authorization. This Agreement constitutes the valid and legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and to general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law. Section 3.2. No Conflicts. (a) Except as otherwise set forth in this Agreement or in the Purchaser's Disclosure Schedule, the execution, delivery and performance of this Agreement by the Purchaser will not result in (i) any conflict with the articles of incorporation or by-laws of the Purchaser, (ii) any material breach or violation of or default under any statute, regulation, judgment, order or decree or any mortgage, agreement, deed of trust, indenture or any other instrument by which the Purchaser or any of its properties or assets are bound, or (iii) the creation or imposition of any lien, charge, pledge or encumbrance thereon, except in the case of clauses (ii) and (iii) for such breaches, violations or defaults and such liens, charges, pledges or encumbrances which would not, individually or in the aggregate, have a material adverse effect on the business, condition (financial or otherwise) or operations of the Purchaser and its subsidiaries taken as a whole. (b) No consent, approval or authorization of or filing with any governmental authority is required on the part of the Purchaser in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except filings required with respect to the HSR Act, the Bank Act (Canada) in respect of the acquisition of the CAFO Shares by the Purchaser and as otherwise set forth in the Purchaser's Disclosure Schedule. Section 3.3. Litigation. There are no judicial or administrative actions, proceedings or investigations (including without limitation examinations by federal, foreign, state and local taxing authorities) pending or, to the best knowledge of the Purchaser, threatened, against the Purchaser which question the validity or enforceability of this Agreement or any action taken or to be taken by the Purchaser in connection herewith. Section 3.4. Purchase for Investment. The Purchaser is acquiring the Shares for investment and not with a view toward any distribution thereof except in compliance with the Securities Act of 1933, as amended. Section 3.5. Brokers. All negotiations relating to this Agreement and the transactions contemplated hereby have been carried out without the intervention of any person acting on behalf of the Purchaser in such manner as to give rise to any valid claim against the Purchaser, the Sellers or the Companies for any brokerage or finder's commission, fee or similar compensation, except for The First Boston Corporation whose fees in respect hereof shall be paid by the Purchaser. ARTICLE IV Certain Covenants Section 4.1. Obligations of the Parties. The parties shall apply for and diligently prosecute all applications for, and shall use their reasonable efforts promptly to obtain, such consents, approvals and authorizations from such governmental authorities and other persons as shall be necessary to permit the consummation of the transactions contemplated by this Agreement, and shall use their reasonable efforts to bring about the satisfaction as soon as practicable of all the conditions contained in Article VI and to effect the consummation of the transactions contemplated by this Agreement. Section 4.2. Conduct of Business, etc. From the date hereof until the Closing, except as permitted by this Agreement or as otherwise consented to by the Purchaser in writing, such consent not to be unreasonably withheld or delayed, the Sellers shall cause each Company and each Subsidiary to: (a) carry on its business only in the ordinary course, in substantially the same manner in which it previously has been conducted and, to the extent consistent with such business, use reasonable efforts to preserve intact its present business organization and to preserve its relationships with brokers, agents, customers, suppliers and others having business dealings with it; and (b) maintain its books of account and records in its usual, regular and ordinary manner, consistent with its past practice and in accordance with generally accepted accounting principles. Section 4.3. Access and Information. The Sellers shall cause the Companies to give to the Purchaser and its representatives full access at all reasonable times to the books and records of the Companies and the Subsidiaries and to furnish such information and documents in their possession relating to the Companies and the Subsidiaries as the Purchaser may reasonably request. All such information and documents obtained by the Purchaser pursuant to this Section shall be subject to the terms of the Confidentiality Agreement. Section 4.4. Payment of Certain Taxes; Filing of Certain Tax Returns. (a) Except as provided below, all excise, sales, use and transfer Taxes that are payable or that arise as a result of this Agreement or the consummation of the purchase and sale contemplated by this Agreement shall be shared equally by the Sellers and the Purchaser. Any realty transfer tax or realty gain tax imposed as a result of this Agreement or the transactions contemplated by this Agreement shall be borne by the Sellers. Realty or real estate Taxes shall be governed by Section 4.7 of this Agreement. (b) On or prior to the Closing Date and no later than the date due for filing, Continental Insurance shall (i) (A) along with the Purchaser, jointly complete Form TP-584, New York State Combined Real Property Transfer Gains Tax Affidavit, Real Estate Transfer Tax Return, and Credit Line Mortgage Certificate with respect to the transactions contemplated hereby, as required pursuant to the New York State Real Estate Transfer Tax and the New York State Real Property Transfer Gains Tax, (B) along with the Purchaser, jointly complete Form NYC-RPT, New York City Real Property Transfer Tax Return with respect to the transactions contemplated hereby, as required pursuant to section 11-2105 of Title 11, Chapter 21 of the New York City Administrative Code, and (C) complete any other required Tax Returns in connection with the Taxes referred to in subclauses (A) and (B) above; (ii) file any such completed Tax Return, together with all supporting materials required to be filed therewith; and (iii) pay all Taxes due as shown on any such Tax Return. Section 4.5. Solicitation of Employees. Neither Continental nor any of its affiliates shall at any time from the Closing until the third anniversary of the Closing Date solicit the employment of or otherwise negotiate in respect of the employment of, or provision of any services by, any employee of the Companies or the Subsidiaries at any time such person is employed by the Companies or the Subsidiaries. Section 4.6. Tax Sharing Agreements; Tax Attributes. 4.6.1. Termination of Existing Agreements. Any Tax allocation or sharing agreement or arrangement which, prior to the Closing Date, may have been entered into between any of the Companies or the Subsidiaries on the one hand, and any of the Sellers or any affiliate of the Sellers (other than the Companies and the Subsidiaries), on the other hand, shall terminate with respect to the Companies and the Subsidiaries as of the end of the day immediately preceding the Closing Date. Except as provided in this Section 4.6 and Sections 4.7 and 7.2, the Companies and the Subsidiaries shall have no claim against any of the Sellers or any affiliate of the Sellers, and the Sellers and any affiliates of the Sellers shall have no claim against any of the Companies or the Subsidiaries, for any amount that might be payable to or by, as the case may be, any of the Companies and the Subsidiaries with respect to Taxes. 4.6.2. Tax Attributes. On or before June 15, 1994, Continental will provide to the Purchaser a tentative schedule of the amount, if any, of the allocable portion of any Tax carryforwards of losses, Tax credits or other Tax benefits of the consolidated federal income tax group of which Continental is the common parent (the "Sellers' Group") that will be available to the Companies and the Subsidiaries for tax periods beginning after the Closing Date. On or before August 15, 1994, Continental will provide to the Purchaser a final schedule of Tax attributes. Such schedule will be for information purposes and no warranty as to the existence or availability of such carryforwards shall be given or implied. Continental will promptly inform the Purchaser in writing of any adjustments to such carryforwards determined in connection with the filing of the Sellers' Group's consolidated United States federal income tax return, which may result from any Internal Revenue Service audit or other proceeding with respect to Sellers' Group; or which may be required as a result of a change in law or regulations. The Sellers shall, and the Purchaser will cause the Companies, the Subsidiaries, and any consolidated group of which any of the Companies or Subsidiaries is a member after the Closing to, file their United States federal income tax returns in a manner consistent with such schedule, adjusted as described above. If in any period beginning after the Closing Date, any of the Companies, the Subsidiaries or any consolidated group of which any Company or Subsidiary is a member, utilizes such carryforwards, the Purchaser shall pay to Continental an amount equal to any reduction of the Tax liability of such Company, Subsidiary or group that is attributable to the use of such carryforwards. Any payment to Continental under this Section 4.6.2 will be made 30 days after the filing of the Tax Return which gives rise to the payment; provided that if such reduction in Tax liability requires the Internal Revenue Service to pay a Tax refund to such Company, Subsidiary or group, the payment to Continental under this Section 4.6.2 attributable to such refund shall be paid within 10 days after receipt of such refund from the Internal Revenue Service. Thereafter, if, as a result of any adjustment resulting from any audit, the Tax liability of such Company, Subsidiary or group is adjusted so as to affect the availability or utilization of any Tax benefit carryforward which resulted in a payment under this Section 4.6.2., Continental will pay to the Purchaser or the Purchaser will pay to Continental, as the case may be, within 30 days after the making of such adjustment, such amount as is necessary to reflect such adjustment in the computation under this Section 4.6.2, including (i) any interest actually received by such Company, Subsidiary or group from the U.S. government in connection with such adjustment and (ii) to the extent that such adjustment is directly attributable to a determination that such Tax benefit carryforward was not available as a carryforward from Sellers' Group, the amount of interest and penalties imposed on such Company, Subsidiary or group as a result of such adjustment. With respect to each period following the Closing Date to which any such carryforward may be carried, the Purchaser will provide to Continental a true and complete schedule of the utilization of such carryforwards. Section 4.7. Taxes. Section 4.7.1. Payment of Tax Liabilities. Continental shall pay or cause to be paid all Taxes on or measured by net income, and all franchise and capital stock Taxes imposed in lieu of Taxes on or measured by net income, that are payable by or with respect to the Companies and the Subsidiaries for all periods ending on or prior to the Closing Date. The Purchaser shall pay or cause to be paid all other Taxes payable by or with respect to any of the Companies or the Subsidiaries. Section 4.7.2. Filing of Tax Returns. Continental and the Purchaser shall cause the Companies and the Subsidiaries, to the extent permitted by law, to join, for all taxable periods ending on or prior to the Closing Date, in the consolidated federal income Tax Return of the Sellers' Group. Continental shall file, or cause to be filed, all other Tax Returns relating to the Business required to be filed by any of the Companies or the Subsidiaries on or before the Closing Date and shall prepare for filing by the Purchaser all other Tax Returns relating to the Business for periods ending on or before the Closing Date. Continental shall forward such prepared Returns to the Purchaser at least 30 days prior to the due date of such Returns including any extensions thereof. The Purchaser shall timely file or cause to be timely filed any Tax Return of the Companies or the Subsidiaries (including any amendments thereto) due after the Closing Date. For purposes of preparing all income Tax Returns for periods including the Closing Date, the income, deductions and credits of the Companies and the Subsidiaries shall be allocated in a manner consistent with the method provided in Section 4.7.3. 4.7.3. Bridge Period. If, for any state, local or foreign tax purpose, a taxable year or taxable period of any of the Companies or any Subsidiary which begins before the Closing Date and ends after the Closing Date (a "Bridge Period") does not terminate on the Closing Date, the parties hereto will, to the extent permitted by applicable law, elect with the relevant taxing authority to treat the portion of the Bridge Period on or before the Closing Date ("Seller Period") for all purposes as a short taxable period ending as of the close of the Closing Date and such short taxable period shall be treated as a Pre- Closing Period for purposes of this Agreement. In any case where applicable law does not permit such an election to be made, for purposes of (i) calculating the amount of Taxes to be paid by Continental pursuant to Section 4.7.1 and (ii) determining under Section 7.2 whether the representation in Section 2.6 has been satisfied, Taxes for the Bridge Period shall be allocated between the Seller Period and the portion of the Bridge Period after the Closing Date using an interim-closing of the books method assuming that the Sellers' taxable period ended at the end of the Closing Date, except that (i) exemptions, allowances or deductions that are calculated on an annual basis (such as the deduction for depreciation) shall be apportioned on a per diem basis, (ii) real property taxes shall be allocated in accordance with Section 164(d) of the Code and (iii) personal property taxes that are calculated on annual basis shall be apportioned on a per diem basis. 4.7.4. Audits and Other Proceedings. Following the Closing Date, Continental shall, and shall be furnished by the Purchaser, a Company or a Subsidiary, as the case may be, with powers of attorney, or any other document or authorization necessary or appropriate to enable it to, control the conduct of all stages of any audit or other administrative or judicial proceeding with respect to Taxes for which Continental is liable pursuant to Section 4.7.1 and the Purchaser shall control the conduct of all other audits or administrative or judicial proceedings with respect to the Tax liability of the Companies and the Subsidiaries for any tax period or portion thereof. (i) With respect to any audit or other proceeding that it controls, Continental (x) shall give prompt notice to the Purchaser of any Tax adjustment proposed in writing pursuant to any audit or other proceeding controlled by Continental with respect to the assets or activities of any of the Companies or the Subsidiaries, (y) upon the Purchaser's reasonable request shall discuss with the Purchaser and the Purchaser's counsel the position that Continental intends to take regarding any issue concerning such assets or activities, and (z) shall not, and shall not permit any of its affiliates to, enter into any settlement or agreement in compromise of any proposed adjustment which purports to bind the Purchaser, the Companies or any Subsidiary with respect to any Tax period ending after the Closing Date without the express written consent of the Purchaser, which consent shall not be unreasonably withheld, and (ii) The Purchaser (x) shall give prompt notice to Continental of the commencement of any audit or other proceeding which could give rise to a claim for payment against Continental under this Agreement; (y) with respect to any audit or proceeding controlled by the Purchaser, afford Continental and its counsel a reasonable opportunity to participate in the conduct of any administrative or judicial proceeding regarding a proposed adjustment described in clause (x) above including, without limitation, the right to participate in conferences with tax authorities and submit pertinent material in support of Continental's position, and (z) shall not, and shall not permit any of its affiliates to, accept any proposed adjustment or enter into any settlement or agreement in compromise which would result in a claim for indemnification against Continental pursuant to this Agreement without Continental's express written consent, which consent shall not be unreasonably withheld. Section 4.7.5. Conduct of Business, Section 338 Election. (a) Notwithstanding any other provision of this Agreement, the Purchaser shall be responsible for and neither Continental nor any of the Sellers shall bear, (i) any Taxes that arise due to the failure, following the Closing, of the Purchaser to cause the Companies and the Subsidiaries to carry on their business on the Closing Date only in the ordinary course and in substantially the same manner as heretofore conducted, and (ii) except as provided in paragraph (b) below, any Taxes that relate to any actual or deemed election pursuant to section 338 of the Code or the regulations thereunder or any comparable provision of state or local law. (b) Continental and the Purchaser shall cooperate in good faith to determine the Tax Benefit to the Purchaser and its affiliates and the Tax Cost to Continental and its affiliates of making a joint election under section 338(h)(10) of the Code and any comparable provision of state law in respect of the purchase and sale of the Shares (a "Section 338(h)(10) Election"). Such determination shall (i) take into account the Tax consequences to the Purchaser and its affiliates and to the Sellers and their affiliates of any payments pursuant to this Section 4.7.5(b) and (ii) be made as if the Closing Date Purchase Price was $103 million, of which $5 million is allocated to the covenant described in Section 4.10 hereof. If, based on such determination, Continental and the Purchaser agree to make a Section 338(h)(10) Election, the Sellers shall receive the following additional consideration: (1) an amount equal to the Tax Cost incurred by the Sellers and their affiliates as a result of the Section 338(h)(10) Election and (2) an amount equal to 50% of the excess of the Tax Benefit to the Purchaser and its affiliates over the Tax Cost to Continental and its affiliates of the Section 338(h)(10) Election, in each case computed as described in the previous sentence. Any additional payments under this Section 4.7.5(b) shall be made at such time and in such manner as shall be agreed upon by the parties prior to the filing of the Section 338(h)(10) Election; provided that the time and manner of making such payments shall take into account the timing of the Tax Benefits and Tax Costs realized by the parties and their affiliates. 4.7.6. Tax Refunds. The Sellers shall be entitled to retain, or receive immediate payment from the Purchaser of, any refunds of Taxes (other than refunds reflected in Companies' Combined Shareholder's Equity), that were paid by or with respect to any of the Companies or the Subsidiaries for a period ending on or before the Closing Date and any Sellers' Period (including, without limitation, refunds arising by reason of amended returns filed after the Closing Date and amounts allowable as a credit against Tax liability, including refunds of overpayments of estimated Taxes) relating to any of the Companies or the Subsidiaries, plus any interest thereon actually received from the applicable taxing authority, except that, to the extent that a refund of Taxes paid during a pre-Closing Date period relates to the carryback of a loss, credit, deduction, or other item attributable to a post-Closing Date period, the Purchaser shall be entitled to the Tax Benefit of such Refund; provided, that the Purchaser shall elect, or cause the relevant party to elect, to forego any such carryback to a consolidated federal income Tax Return of the Sellers' affiliated group unless (i) such election is prohibited by law or (ii) as a result of making such election, the affiliated federal income tax group of which the Company or Subsidiary is a member following the Closing Date would be required to forego a carryback to the Purchaser's own consolidated return year that is more than 150% of the amount that would be carried back to the Tax Return of the Sellers' affiliated group. The Purchaser shall cooperate, and shall cause the Companies and the Subsidiaries to cooperate, with the Sellers with respect to claiming any refund referred to in this Section 4.7.6, including notifying Continental of the existence of any state of facts that would constitute a reasonable basis for claiming such a refund, providing all relevant information available to Continental with respect to any such claim, filing and diligently pursuing such claim (including by litigation, if appropriate), paying over to Continental any amount received by the Purchaser, the Companies or the Subsidiaries with respect to such claim, and consulting with Continental prior to agreement to any disposition of such claim. The Purchaser shall be entitled to the Tax Benefit of any refund or credit of federal, state, local, or foreign Taxes (plus any interest thereon received from the applicable taxing authority) relating to the Companies or the Subsidiaries that were paid with respect to a period beginning after the Closing Date and to which the Sellers are not otherwise entitled under this Section. To the extent that one party is to enjoy the economic benefit of a refund under this Section 4.7.6, that party shall bear the expenses of the other party reasonably incurred in respect of such refund and shall repay the amount of such refund as may be required to be repaid to any taxing authority as a result of any adjustment on audit, together with applicable interest and penalties. 4.7.7. Cooperation. The Purchaser and the Sellers shall cooperate, and the Purchaser shall cause the Companies and the Subsidiaries to cooperate with the Sellers with respect to the preparation and filing of any Tax Return or the conduct of any Tax audit or other proceeding for which the other is responsible pursuant to this Section 4.7. Such cooperation shall include, without limitation, making its employees available for consultation and making workpapers and other records available during regular business hours, provided that each shall pay any out-of-pocket costs incurred by the other in connection with such cooperation. Such cooperation shall also include Continental's provision to the Purchaser of a calculation prepared by Continental for its own use of the Companies' and the Subsidiaries' earnings and profits as of the Closing Date for federal income tax purposes. All Tax Returns for which the Purchaser is responsible shall, insofar as they relate to items for periods that include days on or before the Closing Date and to the extent permitted by applicable Tax law, be on a basis consistent with the last previous such Tax Returns filed in respect of the Companies and Subsidiaries. After the Closing Date each Tax Return filed by a Company, any Subsidiary or by the Purchaser with respect to any Company or Subsidiary which relates to any period that includes days on or before the Closing Date (including, without limitation, all Tax Returns prepared by Continental for filing by or with respect to any Company or any Subsidiary pursuant to Section 4.7.2) shall be subject to pre- filing approval by Continental and, in the event of any disagreement between Continental and the Purchaser, a Company or a Subsidiary, as the case may be, such disagreement shall be resolved by a firm of public accountants of recognized standing selected by the Purchaser and Continental, and any such determination by such accountants shall be final. The fees and expenses of such accountants shall be borne equally by the Purchaser and Continental. Unless otherwise agreed to by the parties, Tax Returns subject to such pre-filing approval shall be submitted by the Purchaser, the Companies or the Subsidiaries to Continental at least 45 days prior to the due date (including extensions) of such Tax Returns and Continental shall either approve or provide written comments on such Tax Returns within 15 days of receipt of such Tax Returns. Section 4.8. Certain Pre-Closing Transactions. 4.8.1. Pre-Closing Dividend. Immediately prior to the Closing, the Sellers shall cause the Companies to declare and pay cash dividends to the Sellers in an aggregate amount equal to the excess of (a) the Companies' Combined Shareholders' Equity as of the last day of the month immediately preceding the month in which the Closing Date falls, over (b) $46.3 million. 4.8.2. Intercompany Indebtedness. Immediately prior to the Closing, any intercompany accounts between any of the Companies or the Subsidiaries, on the one hand, and any of the Sellers (which term shall include, for purposes of this Section 4.8, the Sellers' subsidiaries and affiliates other than the Companies and the Subsidiaries), on the other hand, as at Closing shall be cancelled as follows: (a) to the extent that a Company or a Subsidiary is indebted to a Seller, Continental or any affiliate of Continental, such debt shall be cancelled and the amount of the debt so cancelled (other than any write-off by Continental of any indebtedness due from the Companies or their Subsidiaries in respect of overhead or other corporate charges for services provided by Continental to the Companies or the Subsidiaries) shall be deemed a capital contribution by such party to such Company, provided, that any debt of CAFO to Continental Reinsurance shall be paid by set-off against amounts owed by Continental Reinsurance to CAFO to the extent of the amount thereof and any excess shall be paid by the issuance of common shares of CAFO having stated capital and fair market value equal to such excess, and (b) to the extent a Seller, Continental or any affiliate of Continental, is indebted to a Company or a Subsidiary after any set- off described in clause (a) above, such debt shall be cancelled and the amount of the debt so cancelled shall be deemed a dividend from such Company to such party. 4.8.3. Resignation of Directors. Prior to, but effective as of, the Closing Date, the Sellers shall procure and deliver to the Purchaser the resignations of each director of any of the Companies or the Subsidiaries. 4.8.4. Credit Support Arrangements. Prior to, but effective as of the Closing Date, the Sellers shall cause all guarantees, credit support and other arrangements in respect of the Business by which any of the Sellers or their affiliates (other than the Companies and the Subsidiaries) is bound to be terminated or otherwise provided for in a manner reasonably satisfactory to the parties hereto. The Purchaser shall use its reasonable efforts to assist the Sellers in connection with the assumption by the Purchaser of Continental's guaranty obligations in respect of AFCO's medium term notes on terms reasonably satisfactory to the parties hereto. 4.8.5. Transfer of Certain Property. Prior to the Closing, the Sellers shall cause AFCO to transfer to Continental or its nominee all its right, title and interest in and to the trust holding title to certain property located in Houlton, Maine. In connection therewith, AFCO shall assign, and Continental or its nominee shall assume, any and all liabilities and obligations of AFCO with respect thereto. Section 4.9. Publicity. All press releases, filings and other publicity concerning the transactions contemplated hereby will be subject to review and approval by both Continental and the Purchaser, such approval not to be unreasonably withheld. Such approval shall not be required if the person issuing such publicity reasonably believes, upon written advice of counsel, that such disclosure is necessary to comply with law; provided that the party issuing such publicity gives the other party as much advance notice of such publicity (including the content thereof) as practicable. Section 4.10. Covenant not to Compete. Neither the Sellers nor any of their subsidiaries shall at any time from the Closing until the third anniversary of the Closing Date, directly or indirectly, engage, or have any ownership interest in any firm, corporation, partnership or other business entity (except as a passive investor holding a less than 5% equity interest in such business entity) that engages, in the activities constituting the Business on the Closing Date in the United States or Canada; provided that, notwithstanding anything herein to the contrary, neither the Sellers nor any of their subsidiaries shall be prohibited from financing premiums payable with respect to insurance policies written by Continental or any of its affiliates. Section 4.11. Transitional Matters. The Sellers shall cooperate with the Purchaser in connection with joint calls on key brokers and agents and shall use their reasonable efforts to assist in the orderly transition of the Business. The Purchaser and the Sellers shall use reasonable efforts to cause the Companies to retain their senior management officers prior to the Closing. Prior to the Closing Date, the Purchaser and Continental or its affiliates shall use reasonable efforts to enter into an Operating Services Agreement on mutually satisfactory terms, in respect of certain administrative services to be provided by Continental or its affiliates after the Closing Date. ARTICLE V Employee Matters Section 5.1. Employee Matters. (a) For purposes of this Agreement, the term "Retained Employee" shall mean (i) any employee of any of the Companies or the Subsidiaries who is (1) actively employed on the Closing Date or (2) on inactive status receiving short or long term disability benefits, worker's compensation, or other authorized leave of absence benefits and who returns to active status prior to the expiration of the 90 day period commencing on the Closing Date, (ii) any employee of the Sellers and/or their affiliates who performs substantially all of his services for the Companies or the Subsidiaries and who is listed on the Sellers' Disclosure Schedule and who does not retire pursuant to Section 5.1(a)(iii) below; and (iii) any individual employed by the Companies or the Subsidiaries or any individual described in Section 5.1(a)(ii) who retires under the early retirement provisions of The Retirement Plan of The Continental Corporation on or after the date hereof and before the Closing Date. The term "Canadian Retained Employee" shall mean any Retained Employee of CAFO. (b) The Purchaser shall cause each Company and Subsidiary to continue the employment on and after the Closing Date of all Retained Employees described in Section 5.1(a)(i) and to offer employment on the Closing Date to Retained Employees described in Section 5.1(a)(ii) and (iii) in accordance with the provisions of this Article V. Notwithstanding anything in this subsection (b) to the contrary, any such continued employment or offer of employment shall not be construed to limit the ability of the Purchaser to terminate Retained Employees at any time for any reason, or to change their terms and conditions of employment, including, but not limited to, the levels of compensation and employee benefits in effect on the Closing Date and any pension, welfare and/or fringe benefit made available to such Retained Employees as of the Closing Date. Section 5.2. Retirement Plan. (a) Effective on the Closing Date, each participant in The Retirement Plan of the Continental Corporation or the Retirement Plan of Continental Insurance Management Ltd. (collectively, the "Sellers' Retirement Plan") who is a Retained Employee shall cease to be an active participant under such plan. Effective on the Closing Date, Retained Employees, other than Canadian Retained Employees, shall commence participation in the Mellon Bank Retirement Plan (the "Purchaser's Retirement Plan"). The Purchaser's Retirement Plan shall recognize the service and earnings of each such Retained Employee described in Section 5.1(a)(i) and 5.1(a)(ii) with the Companies, the Subsidiaries and any ERISA Affiliate prior to the Closing Date for all purposes, to the extent credited under the terms of the Sellers' Retirement Plan. As soon as practicable after the Closing Date, the Sellers will transfer, or cause to be transferred, to the Purchaser's Retirement Plan all liabilities for benefits accrued by Retained Employees, other than Canadian Retained Employees, under the Sellers' Retirement Plan plus an amount (the "Transferred Amount"), calculated as of the Closing Date, in cash equal to the actuarial present value of such accrued benefits, calculated on a projected benefit obligation ("PBO") basis, as defined in the Statement of Financial Accounting Standards No. 87, reduced by the amount of distributions, if any, to such Retained Employees made in accordance with the terms of the Sellers' Retirement Plan between the Closing Date and the date of transfer (the "Transfer Date") and increased by interest on the Transferred Amount between the date which is 37 days after the date of receipt by the Sellers from the Purchaser of a notice containing the Purchaser's calculation of the Transferred Amount and the Transfer Date at the average federal funds rate in effect between such dates; provided that the Transferred Amount shall be calculated using the methods and applicable assumptions employed by the Purchaser's actuary as of January 1, 1993 and set forth in the Sellers' Disclosure Schedule. Such transfer shall be effected as soon as practicable after the later of (i) the expiration of a 30-day period following the date of filing of any required notices with the Internal Revenue Service by both the Purchaser and the Sellers, including an actuarial statement of valuation in accordance with the provisions of section 6058(b) of the Code and notification of the transfer on Form 5310-A with the Internal Revenue Service and (ii) the receipt by the Sellers of an opinion of the Purchaser's counsel that the terms of the Purchaser's Retirement Plan meet the requirements of section 401(a) of the Code. Notwithstanding any contrary provision in Section 5.2, in no event shall the Transferred Amount be less than the amount Sellers' actuary certifies as the minimum amount required to comply with Section 414(1) of the Code. Retained Employees described in Section 5.1(a)(iii) shall not receive credit for service with the Companies, the Subsidiaries or any ERISA Affiliate, except as otherwise required under ERISA or the Code. (b) None of the Companies, the Subsidiaries or the Purchaser shall become responsible for, and the Sellers and the Sellers' Retirement Plan shall retain, any pension benefit liabilities or obligations with respect to Canadian Retained Employees under the Sellers' Retirement Plan or any other pension or retirement plan maintained or contributed to by the Sellers or CAFO prior to the Closing Date in respect of service up to and including the Closing Date. Effective as of the Closing Date, Canadian Retained Employees shall commence participation in The R-M Trust Company Pension Plan (or in another pension plan that provides the same pension benefits as that pension plan) and service of a Canadian Retained Employee that was recognized at the Closing Date for the purposes of the Sellers' Retirement Plan shall be recognized for the purposes of determining eligibility and vesting of any such pension benefits (but shall not be so recognized for any future accrual or pension benefits except as may be required by any applicable laws). Section 5.3. Savings Plan. Effective on the Closing Date, each participant in The Incentive Savings Plan of the Continental Corporation or The Continental Insurance Management Ltd. Employee Savings Plan (collectively, the "Sellers' Savings Plan") who is a Retained Employee shall cease to be an active participant under such plan. Retained Employees, other than Canadian Retained Employees, shall immediately become eligible to participate in the Mellon Bank Corporation Retirement Savings Plan and Canadian Retained Employees shall immediately become eligible to participate in, or in a plan that is substantially the same as, The R-M Trust Group Registered Retirement Savings Plan (collectively, the "Purchaser's Savings Plan"). Sellers' Savings Plan shall retain responsibility for all account balances under the Sellers' Savings Plan with respect to all employees and former employees of any of the Companies or Subsidiaries without regard to whether they become Retained Employees and none of the Companies, the Subsidiaries, the Purchaser or the Purchaser's Savings Plan shall have any liability under the Sellers' Savings Plan. No account balances shall be transferred from the Sellers' Savings Plan to any plan, fund or program established or maintained by the Purchaser as a result of the transactions contemplated by this Agreement. The account balances of Retained Employees under the Sellers' Savings Plan shall become payable to Retained Employees in accordance with the terms of the Sellers' Savings Plan. Section 5.4. Welfare Plans. (a) Subject to Section 5.4(b) and 5.4(c)(iv) below, effective on the Closing Date, the Purchaser shall, or shall cause the Companies and the Subsidiaries to, assume and be responsible for, and shall indemnify and hold harmless the Sellers from and against, any and all direct and indirect damages, costs, liabilities or other obligations including, without limitation, any claims, interest, penalties and reasonable attorney's fees, imposed upon or incurred by Sellers (collectively, the "Losses") in respect of any Retained Employees, including Canadian Retained Employees, their beneficiaries and spouses under any welfare benefit plan within the meaning of Section 3(1) of ERISA and any insurance or other CAFO Plan similar thereto described on the Sellers' Disclosure Schedule (the "Welfare Plans"), to the extent such Losses relate to events, transactions or occurrences occurring on or after the Closing Date or the date on which the individual became a Retained Employee, if later. The Sellers shall be responsible for any and all expenses incurred by any Retained Employee, including any Canadian Retained Employee, dependent or spouse under the Welfare Plans prior to the Closing Date or the date on which the individual became a Retained Employee, if later. (b) For a period commencing on the Closing Date and ending on December 31, 1993 (the "Transition Period"), the Sellers agree to continue to make available coverage (including COBRA continuation coverage required under Section 601 of ERISA) and claims processing services in respect of the Retained Employees, including Canadian Retained Employees, under the Welfare Plans identified on the Sellers' Disclosure Schedule and which provide for medical, dental and employee and family life insurance coverage, AD&D coverage, and travel accident insurance; provided that the Purchaser shall, or shall cause the Companies or the Subsidiaries to, reimburse the Sellers for the actual cost of providing such coverages during the Transition Period plus an administrative fee equal to 2% of such actual cost within 45 days after the Sellers submit written proof of such cost to the Purchaser, the Companies or the Subsidiaries except that the Sellers shall be responsible for, and shall not receive reimbursement from, the Purchaser, the Companies or the Subsidiaries for any Losses under any Welfare Plan, without regard to whether it is identified on the Sellers' Disclosure Schedule, in respect of any inactive employee who becomes a Retained Employee after the Closing Date, incurred or accrued prior to the date the inactive employee described in Section 5.1(a)(i)(2) becomes actively employed by the Purchaser, the Companies or the Subsidiaries. Notwithstanding anything in this Section 5.4(b) to the contrary, in no event shall Purchaser be required to honor any such request for reimbursement presented after August 31, 1994 or such later date as agreed to by the Sellers and the Purchasers. (c) Subject to Sections 5.2 and 5.3, from and after January 1, 1994, Retained Employees shall be eligible to participate in the total program of pension, welfare and/or fringe benefits which are available to similarly situated employees of the Purchaser or, in the case of Canadian Retained Employees, of the Purchaser's Canadian subsidiary, The R-M Trust Company ("Purchaser's Benefits") on the same basis as such benefits are otherwise made available to similarly situated employees of the Purchaser (or, in the case of Canadian Retained Employees, of the Purchaser's Canadian subsidiary, The R-M Trust Company). Notwithstanding anything in this Section 5.4 to the contrary, (i) at any time of reference, the weeks of vacation provided by the Purchaser to a Retained Employee with less than 25 years of service with the Companies and Subsidiaries shall equal the greater of (A) the weeks of vacation (not in excess of 4) provided to the employees by the Companies or any Subsidiary on the day before the Closing Date, and (B) the maximum vacation which may be earned by similarly situated employees of the Purchaser; (ii) a Retained Employee with 25 or more years of service with the Companies and the Subsidiaries shall be entitled to the weeks of vacation to which they were entitled on the day before the Closing; with such entitlement continuing through December 31, 1994; (iii) on or after January 1, 1995, a Retained Employee will be entitled to the vacation which may be earned by similarly situated employees of the Purchaser; provided that, except as required by applicable laws, in no event shall Purchaser be required to compensate Retained Employees for unused weeks of vacation to which they were entitled on the day before the Closing Date; and (iv) all preexisting illnesses, injuries and pregnancies of Retained Employees that would have been covered under Purchaser's Benefits but for their occurrence prior to the Closing Date, or the date on which the individual became a Retained Employee, if later, will be covered under the comparable plans of the Purchaser from and after the Closing Date or the date on which the individual became a Retained Employee, if later. (d) Sellers shall indemnify and hold harmless the Purchaser and, from and after the Closing Date, the Companies and the Subsidiaries, from and against any and all Losses with respect to any former employee of the Companies or the Subsidiaries who was a former employee on the Closing Date and any and all losses with respect to any Retained Employee described in Section 5.1(a)(iii) under any Welfare Plan providing retiree medical or life insurance benefits. (e) Purchaser shall, and shall cause the Companies and the Subsidiaries to, assume and be responsible for, and shall indemnify and hold harmless the Sellers from and against, any and all claims for severance pay, unemployment benefits or any other liabilities, claims, interest, penalties and reasonable attorney's fees, asserted against, resulting to, imposed upon or incurred by the Seller, arising from or relating to claims by any Retained Employee, including any Canadian Retained Employee, for claims for actual or constructive termination on or after the Closing Date. For purposes of this Section 5.4(e), constructive termination shall mean (i) a material decrease in a Retained Employee's base pay or salary; (ii) a job transfer of a Retained Employee to a lesser position, or comparable action, or (iii) a transfer of the Retained Employee's principal workplace to a location more than 50 miles from the Retained Employee's workplace on the Closing Date or (iv) a material change in the type or amount of benefits provided to the Retained Employees under the Sellers' Plans immediately prior to the Closing Date. (f) Effective as of the Closing Date, and subject to the other provisions of this Section 5.4, Retained Employees who are participants in the Welfare Plans shall cease to be active participants in such Plans and no further benefits shall accrue under the Welfare Plans with respect to such Retained Employees. Section 5.5. Executive Compensation and Benefits. The Sellers shall retain responsibility for, and shall indemnify and hold harmless the Purchaser, and from and after the Closing Date, the Companies and the Subsidiaries, from and against any and all Damages in respect of any Retained Employee arising from or relating in any way to the Long-Term Incentive Plan of the Continental Corporation and any and all Damages in respect of any Retained Employee attributable to performance periods occurring prior to the Closing Date arising from or relating in any way to The Annual Management Incentive Plan of the Continental Corporation (the "Incentive Plan") and the Sellers may pay the Retained Employees a bonus under the Incentive Plan for the 1993 performance period occurring prior to the Closing Date in an amount determined in a manner consistent with the Incentive Plan provisions. Effective on the Closing Date, the Purchaser shall, or shall cause the Companies and the Subsidiaries to, assume and be solely responsible for, and shall indemnify and hold harmless the Sellers from and against any and all Damages in respect of any Retained Employee attributable to performance periods occurring on or after the Closing Date, arising from or relating in any way to the Incentive Plan and, in the event the Sellers determine in accordance with the terms of the Incentive Plan that a bonus is payable to Retained Employees under the Incentive Plan for the 1993 performance period, the Purchaser shall, or shall cause the Companies or the Subsidiaries to, pay the Retained Employees that portion of such bonus attributable to the 1993 performance period occurring on and after the Closing Date. Section 5.6. Cessation of Participation. Except as otherwise provided in this Article V, effective as of the Closing Date, each Canadian Retained Employee who is a participant in any CAFO Plan shall cease to be an active participant in such CAFO Plan and no further benefits shall accrue under the CAFO Plan with respect to such Canadian Retained Employee. ARTICLE VI Conditions Precedent Section 6.1. Preamble. The respective obligations set forth herein of the Sellers and the Purchaser to consummate the sale and purchase of the Shares and the transactions to be consummated at the Closing hereunder shall be subject to the fulfillment, on or before the Closing Date, in the case of the Sellers, of the conditions set forth in Section 6.2 and 6.3, and in the case of the Purchaser, of the conditions set forth in Sections 6.2 and 6.4; provided, that the Purchaser shall be precluded from asserting that a condition set forth in this Article VI has not been satisfied by reason of any matter, fact, failure or circumstance reflected in the Sellers' Disclosure Schedule, as amended from time to time, except that this proviso shall not preclude the Purchaser from asserting that the condition set forth in Section 6.4.1 has not been satisfied due to a breach of the representation and warranty set forth in Section 2.15 by reason of any item added to, or amended in, the Sellers' Disclosure Schedule by the Sellers between the date hereof and the Closing Date. Section 6.2. Conditions to Obligations of both Parties. 6.2.1. Consents and Approvals. The waiting period under the HSR Act shall have been terminated or expired, any filing requirements under the Bank Act (Canada) in connection with the acquisition of the CAFO Shares by the Purchaser or its nominee shall have been satisfied, and each of the other governmental consents, approvals, authorizations or filings set forth in Schedule 2.2 of the Sellers' Disclosure Schedule and Schedule 3.2 of the Purchaser's Disclosure Schedule required to be made or obtained prior to Closing shall have been obtained or made (which may include, for this purpose, the expiration of any waiting or other time period required to pass before governmental consent or acquiescence may be assumed or relied upon). 6.2.2. No Injunction. No court order shall have been entered that enjoins, restrains or prohibits consummation of the transactions contemplated by this Agreement or questions the validity of this Agreement, and there shall not be pending or threatened any litigation, proceeding or investigation that restrains, prohibits or prevents or, in the reasonable opinion of the Purchaser's or Continental's counsel, presents a significant risk of restraining, prohibiting or preventing, or changing the terms of or obtaining damages in connection with, the transactions contemplated by this Agreement or which otherwise would have a Material Adverse Effect. Section 6.3. Conditions to Obligations of the Sellers. 6.3.1. Representations and Warranties of the Purchaser. The representations and warranties in Article III shall be true and correct when made and at and as of the Closing with the same effect as though made at and as of such time, with such exceptions to the representations and warranties not qualified by a materiality standard as are not, individually or in the aggregate, material to the business, condition (financial or otherwise) or operations of the Purchaser and its subsidiaries taken as a whole. The Purchaser shall have duly performed and complied in all material respects with all agreements contained herein required to be performed or complied with by it at or before the Closing. 6.3.2. Officer's Certificate. The Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date and signed by its Chairman, President or a Vice President, as to the fulfillment of the conditions set forth in Section 6.3.1. 6.3.3. Opinion of Counsel. The Sellers shall have received from Reed Smith Shaw & McClay, counsel for the Purchaser, an opinion in form and substance substantially the same as Exhibit A-1 and from General Counsel to the Purchaser, an opinion in form and substance substantially the same as Exhibit A-2. 6.3.4 Release From Credit Support and Other Arrangements. The Purchaser shall have (i) provided funds, from borrowings by the Companies secured by the assets of the Companies or otherwise, which, together with interest resulting from the investment thereof in appropriate governmental obligations, are sufficient to provide for the payment when due of the principal amount of the obligations of the Companies secured by any guarantees or credit support of Continental or its affiliates (other than the Companies and the Subsidiaries) plus interest thereon accruing after the Closing Date and until maturity or (ii) in the case of the medium term notes of AFCO outstanding on the date hereof, assumed the obligations of Continental with respect thereto, as contemplated by Section 4.8.4 hereof. 6.3.5. Third Party Consents. The Sellers shall have received all such third party approvals, consents, authorizations and waivers set forth in the Sellers' Disclosure Schedule as may be required to consummate the transactions contemplated hereby. 6.3.6. Real Property Transfer Tax Filings. The Purchaser shall have satisfied its obligations under Section 4.4(b) required to be satisfied on or prior to the Closing Date. Section 6.4. Conditions to Obligations of the Purchaser. 6.4.1. Representations and Warranties of the Sellers. The representations and warranties in Article II shall be true and correct when made and at and as of the Closing with the same effect as though made at and as of such time, with such exceptions to the representations and warranties not qualified by a materiality standard as shall not, individually or in the aggregate, have a Material Adverse Effect. The Sellers shall have duly performed and complied in all material respects with all agreements contained herein required to be performed or complied with by it at or before the Closing. 6.4.2. Officer's Certificates. The Sellers shall have delivered to the Purchaser certificates, dated the Closing Date and signed by a President or a Vice President of each Seller, as to the fulfillment of the conditions set forth in Section 6.4.1. 6.4.3. Opinion of Counsel. The Purchaser shall have received from Debevoise & Plimpton, counsel for the Sellers, from the General Counsel of Continental, and from Stikeman, Elliott, Canadian counsel for the Sellers, opinions in form and substance substantially the same as Exhibits B, C and D, respectively. 6.4.4. Third Party Consents. The Purchaser shall have received all such third party approvals, consents, authorizations and waivers set forth in the Purchaser's Disclosure Schedule as may be required to consummate the transactions contemplated hereby. 6.4.5. Real Property Transfer Tax Filings. Continental Insurance shall have satisfied its obligations under Section 4.4(b) required to be satisfied on or prior to the Closing Date. 6.4.6. Combined Shareholders' Equity. The Companies' Combined Shareholders' Equity shall be not less than $46.3 million. ARTICLE VII Indemnification Section 7.1. Survival of Representations and Warranties. The representations and warranties contained in Articles II and III of this Agreement shall survive until the second anniversary of the Closing Date, except for the provisions of Section 2.14, which shall survive until the expiration of the applicable statutes of limitations, including any waivers or extensions thereof. No action for indemnification under this Article VII may be brought with respect to such representations and warranties after the dates indicated in the preceding sentence unless, prior to the date such representations and warranties expire, the party seeking indemnification has notified in reasonable detail the party from whom indemnification is sought of a claim for indemnity hereunder. Section 7.2. Indemnification. 7.2.1. By the Sellers. Subject to Section 7.1, from and after the Closing, the Sellers jointly and severally agree to indemnify the Purchaser and hold the Purchaser harmless from and against any out-of-pocket loss, liability or damage (including reasonable attorneys' fees and other costs and expenses) (collectively, "Damages") incurred or sustained by the Purchaser as a result of the nonfulfillment of any agreement (including, without limitation, Section 4.7) or the breach of any representation or warranty on the part of the Sellers under this Agreement; provided that there shall not be any duplicative payments or indemnities by any of the Sellers. The Purchaser's right to indemnity under this Section 7.2.1 shall include, by example and without limitation, any out-of- pocket loss, liability or damage (including reasonable attorney's fees and others costs and expenses) incurred or sustained by the Purchaser with respect to the property described in Section 4.8.5 hereof. The Purchaser's rights to indemnification under this Article VII shall be limited as follows: (a) The amount of any Damages incurred by the Purchaser shall be reduced by the net amount of the Tax Benefits actually realized by the Purchaser or the Companies by reason of such loss, liability or damage. (b) The amount of any Damages incurred by the Purchaser shall be reduced by the net amount the Purchaser or any of the Companies or the Subsidiaries recover (after deducting all attorneys' fees, expenses, and other costs of recovery) from any insurer or other party liable for such Damages, and the Purchaser shall use reasonable efforts to effect any such recovery. (c) Except for any liability or obligation with respect to federal, state, local and foreign income Taxes which relate to periods ending on or prior to the Closing Date, the Purchaser shall be entitled to indemnification only to the extent that the aggregate amount of such Damages exceeds an amount equal to (i) $3,500,000 less (ii) amounts up to $3,500,000 actually paid by the Purchaser, a Company or any Subsidiary in respect of any matter reflected in any amendment made to the Sellers' Disclosure Schedule after the date hereof, and then only to the extent the aggregate amount of such Damages exceeds such amount. (d) The Sellers' liability under this Section 7.2.1 shall not exceed $100 million. 7.2.2. By the Purchaser. Subject to Section 7.1, from and after the Closing, the Purchaser agrees to, and agrees to cause the Companies to, indemnify the Sellers and hold them harmless from and against any Damages incurred or sustained by any of the Sellers as a result of the nonfulfillment of any agreement (including, without limitation, Section 4.7) or the breach of any representation or warranty on the part of the Purchaser under this Agreement; provided that there shall not be any duplicative payments or indemnities by the Purchaser. The Sellers' rights to indemnification under this Article VII shall be limited as follows: (a) The amount of any Damages incurred by the Sellers shall be reduced by the net amount of the tax benefits actually realized by the Sellers by reason of such loss, liability or damage. (b) The amount of any Damages incurred by the Sellers shall be reduced by the net amount the Sellers recover (after deducting all attorneys' fees, expenses, and other costs of recovery) from any insurer or other party liable for such loss, liability or damage, and the Sellers shall use reasonable efforts to effect any such recovery. (c) The Sellers shall be entitled to indemnification under this Section 7.2.2 only to the extent that the aggregate amount of such Damages exceeds $3,500,000, and then only to the extent the aggregate amount of such Damages exceeds $3,500,000. (d) The Purchaser's liability under this Section 7.2.2 shall not exceed $100 million. 7.2.3. Indemnification Procedures. A party entitled to indemnification hereunder shall herein be referred to as an "Indemnitee." A party obligated to indemnify an Indemnitee hereunder shall herein be referred to as an "Indemnitor." Promptly after receipt by an Indemnitee of notice of any claim or the commencement of any action, or upon discovery of any facts which an Indemnitee believes may give rise to a claim for indemnification from an Indemnitor hereunder, such Indemnitee shall, if a claim in respect thereof is to be made against an Indemnitor under this Article VII, notify such Indemnitor in writing of the claim or the commencement of such action. If any such claim shall be brought against such Indemnitee, it shall notify such Indemnitor thereof, the Indemnitor shall be entitled to participate therein, and to assume the defense thereof with counsel reasonably satisfactory to the Indemnitee, and to settle or compromise any such claim or action; provided that if the Indemnitee has elected to be represented by separate counsel pursuant to the proviso to the following sentence, such settlement or compromise shall be effected only with the consent of the Indemnitee, which consent shall not be unreasonably withheld. After notice to the Indemnitee of the Indemnitor's election to assume the defense of such claim or action, the Indemnitor shall not be liable to the Indemnitee under this Article VII for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof other than reasonable costs of investigation, provided that the Indemnitee shall have the right to employ counsel to represent it if, in the Indemnitee's reasonable judgment, it is advisable for the Indemnitee to be represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Indemnitee. If the Indemnitor does not elect to assume the defense of such claim or action, the Indemnitee shall act reasonably and in accordance with its good faith business judgment with respect thereto, and shall not settle or compromise any such claim or action without the consent of the Indemnitor which consent shall not be unreasonably withheld. The parties hereto agree to render to each other such assistance as may reasonably be requested in order in insure the proper and adequate defense of any such claim or proceeding. This Section 7.2.3 shall not apply with respect to audits and other proceedings with respect to Taxes, which shall be governed by Section 4.7. 7.3. Continental Guaranty. (a) Continental hereby guarantees to the Purchaser the prompt payment in full when due of all payment obligations of the Sellers to the Purchaser under Sections 1.3, 4.4, 4.6, 4.7, 5.2, 5.4, 5.5, 5.6 and 7.2 of this Agreement (the payment obligations guaranteed hereunder being herein collectively called the "Guaranteed Obligations" and individually a "Guaranteed Obligation"), in accordance with the terms of this Agreement. Subject to the proviso set forth in paragraph (b) below, Continental hereby further agrees that if the Sellers shall fail to pay in full when due any of the Guaranteed Obligations, Continental will pay the same, without demand or notice whatsoever. (b) Continental's obligations under this Agreement are absolute, unconditional and irrevocable, irrespective of (i) any modification, amendment or variation in or addition to the terms of any of the Guaranteed Obligations made in accordance with the terms of this Agreement, (ii) any extension of time for performance or waiver of performance of any Guaranteed Obligation, or any failure or omission to enforce any right with regard to, any of the Guaranteed Obligations, (iii) any exchange, surrender, release of any other guaranty of or security for any of the Guaranteed Obligations or (iv) any other circumstance with regard to any of the Guaranteed Obligations that may or may not in any manner constitute a legal or equitable discharge or defense of a surety or a guarantor, it being the intent hereof that the obligations of Continental shall be absolute and unconditional under any and all circumstances; provided, that Continental's obligation shall be subject to, and Continental shall have the right to raise, any defenses available to the Sellers other than any such defenses available under any bankruptcy, insolvency, rehabilitation, conservation, reorganization or other similar laws applicable to any Seller. (c) Continental hereby expressly waives diligence, presentment, demand, protest and all notices whatsoever with regard to any of the Guaranteed Obligations, any requirement that the Purchaser exhaust any right, power or remedy or proceed against either Seller or, subject to Section 7.2.1(b), any other person under this Agreement and any and all other events and circumstances, whether similar or dissimilar to any of the above, which might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety or which might otherwise limit recourse against Continental, excepting only full, strict and indefeasible payment of the Guaranteed Obligations. (d) The guaranty of Continental hereunder shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Sellers is rescinded or must be otherwise restored by the Purchaser, whether as a result of any proceedings in bankruptcy, reorganization or otherwise. (e) This guaranty shall continue in full force and effect and be binding upon Continental and its successors notwithstanding the liquidation, dissolution, bankruptcy of, or any like event with respect to, any other party liable upon or in respect of any Guaranteed Obligation. ARTICLE VIII Dispute Resolution Any controversy or claim arising out of or relating to this Agreement or any breach thereof shall be settled by arbitration. The arbitration shall be held in New York, New York and, except to the extent inconsistent with this Article VIII, shall be conducted in accordance with the rules of the American Arbitration Association in effect at the time of the arbitration. The arbitration proceedings, all documents and all testimony, written or oral, produced in connection therewith, and the arbitration award shall be confidential. The arbitration panel shall consist of three arbitrators. The party initiating arbitration (the "Claimant") shall appoint its arbitrator in its demand (the "Demand"). The other party (the "Respondent") shall appoint its arbitrator within 30 days of receipt of the Demand and shall notify the Claimant of such appointment in writing. If the Respondent fails to appoint an arbitrator within such 30-day period, the arbitrator named in the Demand shall decide the controversy or claim as a sole arbitrator. Otherwise, the two arbitrators appointed by the parties shall appoint a third arbitrator within 45 days after the Respondent has notified Claimant of the appointment of the Respondent's arbitrator. When the arbitrators appointed by the Claimant and Respondent have appointed a third arbitrator and the third arbitrator has accepted the appointment, the two arbitrators shall promptly notify the parties of the appointment of the third arbitrator. If the two arbitrators appointed by the parties fail or are unable so to appoint a third arbitrator or so to notify the parties, either party may request the then President of the American Arbitration Association to appoint the third arbitrator. The President of the American Arbitration Association shall appoint the third arbitrator within 30 days after such request and shall notify the parties of the appointment. The third arbitrator shall act as chairman of the tribunal. The arbitral award may grant any relief deemed by the arbitrators to be just and equitable, including, without limitation, specific performance; provided that in no event shall an award for monetary damages, together with all other awards or payments made hereunder or under Article VII by the Sellers or the Purchaser exceed $100 million. The arbitral award shall state the reasons for the award and relief granted, shall be final and binding on the parties to the arbitration, and may include an award of costs, including reasonable attorneys' fees and disbursements. Any award rendered may be confirmed, judgment upon any award rendered may be entered, and such award of the judgment thereon may be enforced in any court of any state or country having jurisdiction over the parties and/or their assets. Both parties shall continue to perform their obligations under this Agreement during the pendency of any arbitration provided for by this Section. ARTICLE IX Definitions Certain defined terms used herein are defined in the text of the sections of this Agreement set forth below: Defined Term Section "Adjusted Payment Amount" 1.3(f) "AFCO" 1.1 "AFCO Shares" 1.1 "Bridge Period" 4.7.3 "CAFO" 1.1 "CAFO Shares" 1.1 "Claimant" Article VIII "Closing" 1.2 "Closing Date" 1.2 "Closing Date Purchase Price" 1.2(b) "Companies" 1.1 "Continental" Preamble "Continental Insurance" Preamble "Continental Payee" 1.3 "Continental Reinsurance" Preamble "Damages" 7.2.1 "Demand" Art. VIII "ERISA" 2.10.1 "ERISA Affiliate" 2.10.2 "Final Interest Amount" 1.3(f) "Final Payment" 1.3(b) "Final Notice" 1.3(g) "HSR Act" 2.2(b) "Indemnitee" 7.2.3 "Interim Interest Amount" 1.3(d) "Interim Notice" 1.3(g) "Notional Amount" 1.3(a) "Objection Notice" 1.3(h) "Pension Plans" 2.10.1 "Plans" 2.10.1 "Provisional Interest Payment" 1.3(c) "Provisional Payment Amount" 1.3(d) "Purchaser" Preamble "Respondent" Article VIII "Retained Employee" 5.1 "Review Period" 1.3(h) "Sellers" Preamble "Sellers' Period" 4.7.3 "Shares" 1.1 "Subsidiary" 2.5(a) "Term Year" 1.3(a) "Welfare Plans" 5.4(a) In addition, as used herein, the following terms have the following meanings: "AFCO Financial Statements" shall mean the audited financial statements of AFCO as of December 31, 1991 and 1992 and for the years then ended, including consolidated balance sheets, consolidated statements of income and retained earnings, and consolidated statements of cash flows, together with the notes to such financial statements and the report thereon of KPMG Peat Marwick, and the AFCO Interim Statements. "AFCO Interim Statements" shall mean the unaudited consolidated balance sheet, consolidated statement of income and retained earnings and consolidated statement of cash flows of AFCO as of March 31, 1993 and for the comparable periods for 1992. "Business" shall mean the business, activities, interests, assets and properties of the Companies and the Subsidiaries taken as a whole. "CAFO Financial Statements" shall mean the audited financial statements of CAFO as of December 31, 1991 and 1992 and for the years then ended, including a balance sheet, a statement of earnings and retained earnings, and a statement of changes in financial position, together with the notes to such financial statements and the report thereon of Peat Marwick Thorne, and the CAFO Interim Statements. "CAFO Interim Statements" shall mean the unaudited balance sheet, statement of earnings and retained earnings and statement of changes in financial position of CAFO as of March 31, 1993 and for the comparable periods for 1992. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Companies' Combined Shareholder's Equity" shall mean, as of any date of determination, the aggregate combined shareholder's equity of AFCO and CAFO, after eliminating (i) all intercompany transactions among the Companies, and (ii) all liabilities and reserves for Taxes that are required to be borne by Continental pursuant to Section 4.7.1; provided that the Companies' Combined Shareholders' Equity shall not be increased by the amount of any write-off by Continental of receivables or other indebtedness due from the Companies or their Subsidiaries in respect of overhead and other corporate charges for services provided by Continental to the Companies or the Subsidiaries. For purposes of computing Companies' Combined Shareholder's Equity, the Companies' liability for Taxes with respect to any Sellers' Period that are not required to be borne by Continental pursuant to Section 4.7.1, shall be determined using the method provided in Section 4.7.3. "Companies' Financial Statements" shall mean the AFCO Financial Statements and the CAFO Financial Statements. "Companies' Interim Statements" shall mean the AFCO Interim Statements and the CAFO Interim Statements. "Confidential Memorandum" shall mean the Confidential Memorandum prepared by Lazard, Freres & Co. with respect to the Companies. "Confidentiality Agreement" shall mean the letter agreement, dated February 17, 1993, between Mellon Bank Corporation and Continental with respect to the confidentiality of the Confidential Memorandum and certain other information. "Material Adverse Effect" shall mean a material adverse effect on the business, condition (financial or otherwise) or operations of the Companies and their Subsidiaries, taken as a whole. "Origination Volume" shall mean, for any period of determination, the gross amount of insurance premiums payable under all insurance policies financed by the Companies and the Subsidiaries during such period of determination. For purposes of performing this calculation, any premiums payable in Canadian dollars or other foreign currency shall be converted into U.S. dollars at an exchange rate equal to an average of the applicable exchange rates quoted in The Wall Street Journal on the last business day of each calendar month occurring during such period of determination. "Present Value of the Notional Amounts" shall mean the net present value, discounted at an annual rate of 12% and calculated as of the Closing Date, of a revenue stream consisting of the Notional Amounts for each of the five Term Years following the Closing Date. "Projected Present Value of the Notional Amounts" shall mean the net present value, discounted at an annual rate of 12% and calculated as of the Closing Date, of a hypothetical revenue stream consisting of the Notional Amounts for each of the five Term Years following the Closing Date, assuming growth rates in Origination Volume for each of the Term Years equal to the arithmetical mean of the actual growth rates in Origination Volume experienced over the first three Term Years. "Purchaser's Disclosure Schedule" shall mean the Disclosure Schedule delivered by the Purchaser on the date hereof. Section numbers in the Purchaser's Disclosure Schedule refer to the corresponding section numbers in this Agreement. Matters set forth in one section of the Purchaser's Disclosure Schedule need not be set forth in any other section thereof. "Sellers' Disclosure Schedule" shall mean the Disclosure Schedule delivered by the Sellers, as amended from time to time in accordance with Section 6.1 hereof. Section numbers in the Sellers' Disclosure Schedule refer to the corresponding section numbers in this Agreement. Matters set forth in one section of the Sellers' Disclosure Schedule need not be set forth in any other section thereof. "Short Taxable Year" shall mean a Taxable Year or taxable period of any of the Companies or any Subsidiary which begins before the Closing Date and ends on the Closing Date as a result of the transactions contemplated in this Agreement. "Taxes" shall mean all taxes, however denominated, including any interest, penalties or additions to tax that may become payable in respect thereof, imposed by any federal, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income taxes, payroll and employee withholding taxes, backup withholding taxes, unemployment insurance taxes, social security taxes, sale and use taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and personal property taxes, stamp taxes, transfer taxes, workers' compensation taxes, capital stock taxes, taxes on services, and other obligations of the same or of a similar nature, whether arising before, on or after the Closing Date. "Tax Benefit" or "Tax Cost" shall mean the amount of Tax savings or cost realized as a result of an item by the Companies or the Subsidiaries, the Purchaser, the Sellers, or any of their affiliates as the case may be, equal to the difference between (i) the actual Taxes of such taxpayer without giving effect to the item at issue and (ii) the actual Tax liability of such taxpayer after giving full effect to such Adjustment. A Tax Benefit shall be deemed to be realized at the earlier of (i) the time that either a refund or a credit for refund is received as a result of such Tax Benefit or (ii) the Tax liability of the taxpayer is offset or otherwise reduced and a Tax Return reflecting such Tax Benefit is filed. A Tax Cost shall be deemed paid at the earlier of (1) the time that additional taxes are actually paid as a result of such Tax Cost or (2) the time of the filing of any Tax Return that reflects such Tax Cost. "Tax Return" shall mean any return, report, filing, estimate, declaration, or information statement related to, or required to be filed in connection with, any Tax pursuant to statutes, rules and regulations of any federal, state, local or foreign government taxing authority. "Taxable Year" shall mean any taxable year or other period which is treated as a taxable year (including any Short Taxable Year) with respect to which any Tax may be imposed under any applicable statute, rule or regulation. ARTICLE X General Provisions Section 10.1. Modification; Waiver. This Agreement may be modified only by a written instrument executed by the parties hereto. Any of the terms and conditions of this Agreement may be waived in writing at any time on or prior to the Closing Date by the party entitled to the benefits thereof. Section 10.2. Entire Agreement. This Agreement supersedes all other prior agreements, understandings, representations and warranties, oral or written, between the parties hereto in respect of the subject matter hereof (including, without limitation, the Confidential Memorandum), except that this Agreement does not supersede the Confidentiality Agreement, the terms and conditions of which the parties hereto expressly reaffirm. Section 10.3. Termination. This Agreement may be terminated: (a)at any time prior to the Closing Date by mutual consent of the Purchaser, Continental and the Sellers; or (b) by the Purchaser, Continental or the Sellers, if the Closing shall not have taken place on or before December 31, 1993 or such later date as the parties shall have agreed to in writing, provided that the non- occurrence of the Closing is not attributable to a breach of the terms hereof by the party seeking termination. Section 10.4. Expenses. Except as expressly provided herein, whether or not the transactions contemplated herein shall be consummated, each party shall pay its own expenses incident to the preparation and performance of this Agreement. Section 10.5. Further Actions. Each party shall execute and deliver such certificates, agreements and other documents and take such other actions as may reasonably be requested by the other party in order to consummate or implement the transactions contemplated hereby. Section 10.6. Post-Closing Access. In connection with any matter relating to any period prior to, or any period ending on, the Closing, the Purchaser shall, upon the request and at the expense of the Sellers, permit the Sellers and their representatives full access at all reasonable times to the books and records of the Companies and the Subsidiaries which shall have been transferred to the Purchaser and the Purchaser shall execute (and shall cause the Companies and the Subsidiaries to execute) such documents as the Sellers may reasonably request to enable the Sellers to file any required reports relating to the Company. The Purchaser shall not dispose of such books and records during the seven-year period beginning with the Closing Date without Continental's prior written consent, which shall not be unreasonably withheld. Following the expiration of such seven-year period, the Purchaser may dispose of such books and records at any time upon giving 60 days prior written notice to Continental, unless Continental agrees to take possession of such books and records within 60 days at no expense to the Purchaser. Section 10.7. Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, registered mail, first-class postage paid, return receipt requested, or any other delivery service with proof of delivery; if to the Sellers: The Continental Corporation 180 Maiden Lane New York, NY 10038 Attention: General Counsel with a copy to: The Continental Corporation 180 Maiden Lane New York, NY 10038 Attention: Wayne H. Fisher if to the Purchaser: Mellon Bank Corporation One Mellon Bank Center Pittsburgh, PA 15258 Attention: Martin G. McGuinn with copies to: Mellon Bank Corporation One Mellon Bank Center Pittsburgh, PA 15258 Attention: Assistant General Counsel and Mellon Bank Corporation One Mellon Bank Center Pittsburgh, PA 15258 Attention: Chief Financial Officer or to such other address or to such other person as either party hereto shall have last designated by notice to the other party. Section 10.8. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but shall not be assignable, by operation of law or otherwise, by Continental, any of the Sellers or by the Purchaser, without the prior written consent of the Purchaser or Continental and the Sellers, respectively; provided, that no such consent shall be required in connection with an assignment by the Purchaser to any affiliate thereof if in connection with such assignment the Purchaser agrees, on terms reasonably satisfactory to the Sellers, to guaranty or otherwise remain liable for such affiliate's obligations hereunder. Section 10.9. Counterparts. This Agreement may be executed in counterparts, both of which shall constitute one and the same instrument. Section 10.10. Headings. The article and section headings in this Agreement are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provision hereof. Section 10.11. Governing Law. This Agreement shall be construed, performed and enforced in accordance with the laws of the State of New York, without giving effect to the conflict of laws rules thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. THE CONTINENTAL CORPORATION By /s/ Wayne H. Fisher Title: Executive Vice President THE CONTINENTAL INSURANCE COMPANY By /s/ Wayne H. Fisher Title: Senior Vice President CONTINENTAL REINSURANCE CORPORATION By /s/ Wayne H. Fisher Title: Senior Vice President MELLON BANK CORPORATION By /s/ Martin G. McGuinn Title: Vice Chairman EX-10 10 EXHIBIT 10(G) SHARE PURCHASE AGREEMENT dated as of June 30, 1993 among UNIONAMERICA ACQUISITION COMPANY LTD., an English private company limited by shares, UNIONAMERICA HOLDINGS LTD., an English private company limited by shares, and THE CONTINENTAL CORPORATION, a New York corporation TABLE OF CONTENTS Page ARTICLE I PURCHASE AND SALE OF SHARES; EXCHANGE OF BUYER SHARES SECTION 1.1. Purchase and Sale of Shares . . 1 SECTION 1.2. Exchange of Buyer Shares for A Senior Preference Shares. . . . . . . 2 ARTICLE II CLOSING SECTION 2.1. Closing . . . . . . . . . . . . 3 SECTION 2.2. Documents to be Delivered . . . 3 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER SECTION 3.1. Corporate Existence . . . . . . 8 SECTION 3.2. Authorization; Enforcement. . . 8 SECTION 3.3. Consents and Approvals. . . . . 9 SECTION 3.4. No Conflicts. . . . . . . . . . 9 SECTION 3.5. Capital Structure . . . . . . . 10 SECTION 3.6. Subsidiaries. . . . . . . . . . 10 SECTION 3.7. Company Documents . . . . . . . 10 SECTION 3.8. Financial Statements. . . . . . 11 SECTION 3.9. Annual Statements . . . . . . . 12 SECTION 3.10. Absence of Certain Changes or Events. . . . . . . . . . . . . . . . 13 SECTION 3.11. Contracts . . . . . . . . . . . 14 SECTION 3.12. Litigation. . . . . . . . . . . 17 SECTION 3.13. Liabilities and Reserves. . . . 17 SECTION 3.14. Taxation. . . . . . . . . . . . 18 SECTION 3.15. Assets. . . . . . . . . . . 27 SECTION 3.16. Compliance with Laws, etc. . 28 SECTION 3.17. Insurance for Company's Operations . . . . . . . . . 28 SECTION 3.18. Insurance Business . . . . . 29 SECTION 3.19. Reinsurance. . . . . . . . . 29 SECTION 3.20. Service Marks, Trademarks, Intellectual Property, etc.. . . . . . . . 30 SECTION 3.21. Employee Benefit Plans . . . 31 SECTION 3.22. Directors, Officers and Employees . . . . . . . . . . . . . . 33 SECTION 3.23. Banks, Brokerage Accounts and Powers of Attorney . . . . . . . 33 SECTION 3.24. Brokers and Finders, etc.. . . 34 SECTION 3.25. Securities . . . . . . . . . . 34 SECTION 3.26. Contribution . . . . . . . . . 34 SECTION 3.27. Unionamerica Reorganization . 34 SECTION 3.28. Termination of Certain Affiliate Contracts. . . . . . . . . . . . 34 SECTION 3.29. Full Disclosure. . . . . . . . 34 SECTION 3.30. No Representation as to Insurance or Reinsurance Reserves. . . 34 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT SECTION 4.1. Corporate Existence. . . . . 35 SECTION 4.2. Authorization; Enforcement . . 35 SECTION 4.3. Consents and Approvals . . . . 35 SECTION 4.4. No Conflicts . . . . . . . . . 36 SECTION 4.5. Capital Structure . . . . . . . 36 SECTION 4.6. Brokers and Finders, etc. . . . 37 SECTION 4.7. Available Funds . . . . . . . . 37 SECTION 4.8. Securities. . . . . . . . . . . 37 SECTION 4.9. Full Disclosure . . . . . . . . 37 ARTICLE V COVENANTS SECTION 5.1. Operations in the Ordinary Course. . . . . . . . . . . . . . . . 37 SECTION 5.2. Restrictions. . . . . . . . . . 38 SECTION 5.3. Related Matters. . . . . . . . 40 SECTION 5.4. Access to Information. . . . . 41 SECTION 5.5. Termination of Certain Affiliate Agreements . . . . . . . . . . 42 SECTION 5.6. No Solicitation . . . . . . . . 42 SECTION 5.7. Financing . . . . . . . . . . . 43 SECTION 5.8. Filings and Authorizations. . . 43 ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Conditions to Buyer's and Parent's Obligations. . . . . . . . . 43 SECTION 6.2. Conditions to Seller's Obligations . . . . . . . . . . . . . 45 ARTICLE VII FURTHER AGREEMENTS SECTION 7.1. Pension Agreement . . . . . . . 45 SECTION 7.2. Non-Competition . . . . . . . . 50 SECTION 7.3. Public Announcements . . . . . 50 SECTION 7.4. Expenses. . . . . . . . . . . . 51 SECTION 7.5. D & O Insurance.. . . . . . . . 51 SECTION 7.6. Seller's Covenants Regarding Senior Preference Shares.. . . . . . 52 SECTION 7.7. Use of Certain Names. . . . . . 52 SECTION 7.8. Further Assurances. . . . . . . 53 SECTION 7.9. Books and Records . . . . . . . 53 SECTION 7.10. Amendments of Schedules . . . . 53 ARTICLE VIII INDEMNIFICATION SECTION 8.1. Survival of Representations, etc. . . . . . . . . . . . 54 SECTION 8.2. Indemnification . . . . . . . . 54 SECTION 8.3. Indemnification Procedures. . . 58 SECTION 8.4. LUC Indemnification . . . . . . 60 SECTION 8.5. Indemnification Payments. . . . 69 ARTICLE IX MISCELLANEOUS SECTION 9.1. Termination . . . . . . . . . . 70 SECTION 9.2. Effect of Termination . . . . . 70 SECTION 9.3. Consent to Jurisdiction and Service of Process . . . . . . . . . . 71 SECTION 9.4. Notices . . . . . . . . . . . . 71 SECTION 9.5. Entire Agreement; No Third Party Beneficiaries. . . . . . . . . 73 SECTION 9.6. Waivers and Amendments; Non- Contractual Remedies; Preservation of Remedies . . . . . . . . . . . . . 74 SECTION 9.7. Payments and Currency . . . . . 74 SECTION 9.8. Binding Effect; No Assignment . 75 SECTION 9.9. Severability. . . . . . . . . . 75 SECTION 9.10. Counterparts. . . . . . . . . . 75 SECTION 9.11. Interpretation. . . . . . . . . 75 SECTION 9.12. Governing Law . . . . . . . . . 76 SECTION 9.13. Waiver of Jury Trial. . . . . 76 Exhibit A Form of Contingent Payment Agreement between Parent and Seller Exhibit B Terms of Senior Preference Shares Exhibit C Form of Tax Indemnification Agreement between Seller and Buyer Exhibit D Form of Senior Preference Share Support Agreement between Parent and Seller Exhibit E Form of Run-Off and Accounting Services Agreement between CRC(UK) and the Company Exhibit F Form of Assignment of Trademarks between Seller and the Company Exhibit G Form of Greenwich View Transfer Documents between Company and Lombard Exhibit H Form of 77 Gracechurch Street Agreement between CIH (Europe) and the Company Exhibit I Form of 85 Gracechurch Street License between UA Management and the Company Exhibit J Form of 85 Gracechurch Street Agreement between UA Management and the Company Exhibit K Form of Information Technology Services Agreement between UA Management and the Company Exhibit L Form of Opinion of Debevoise & Plimpton Exhibit M Form of Opinion of Lovell White Durrant Exhibit N Form of Opinion of Freshfields Exhibit O Form of Opinion of LeBoeuf, Lamb, Leiby & MacRae SCHEDULES Schedule 2.2 Resigning Directors and Officers Schedule 3.6 Subsidiaries, Joint Ventures, etc. Schedule 3.8(b) Financial Statements Schedule 3.8(c) Changes in Investment Portfolio Schedule 3.9 Annual Statements Schedule 3.10 Certain Changes or Events Since the Balance Sheet Date Schedule 3.11 Contracts Schedule 3.12 Litigation Schedule 3.13(a) Balance Sheet - Additional Matters Schedule 3.13(d) KPMG Report Information Schedule 3.14 Tax Matters Schedule 3.15(a)(1) Investments Schedule 3.15(a)(2) Transactions Affecting Company's Investment Portfolio Schedule 3.15(c) Other Property Schedule 3.16 Compliance with Laws Schedule 3.17 Insurance Schedule 3.19 Reinsurance Schedule 3.20(a)(1) Service Marks, Trademarks, Intellectual Property Schedule 3.20(a)(2) Software Matters Schedule 3.21 Employee Benefit Plans Schedule 3.22 Key Employees Schedule 3.23 Banks, Brokerage Accounts and Powers of Attorney Schedule 3.24 Brokers and Finders Schedule 5.5 Terminating Affiliate Contracts Schedule 7.1 Actuary's Letter Schedule 7.8(b) Accounting Treatment DEFINITIONS Defined Term Section No. 1992 Company Financials 3.14(b)(1) 77 Gracechurch Street Agreement 2.2(e)(8) 85 Gracechurch Street Agreement 2.2(e)(10) 85 Gracechurch Street License 2.2(e)(9) A Senior Preference Shares 1.2 Accommodation 8.4(a)(1)(B) Accord 3.11(a)(8) Actuary's Letter 7.1(a)(2) Affiliate 2.2(e)(16) Agency Contracts 3.11(a)(12) Annual Statements 3.9(a) Assignment of Trademarks 2.2(e)(6) B Senior Preference Shares 4.5 Balance Sheet Date 3.8(a)(1) Business Days 1.1(b)(1) Buyer Preamble Buyer Shares 1.1(b)(2) Buyer's Actuary 7.1(a)(5) Buyer's Scheme 7.1(a)(6) Buyer Tax Benefit 8.2(b)(1) Cash Consideration 1.1(b)(1) CIH (Europe) 2.2(e)(8) Closing 2.1 Closing Date 2.1 Commitment Date 5.7 Company Preamble Company Balance Sheet 3.8(a)(1) Company Financials 3.8(a)(1) Companies Act 3.7(a) Confidential Information 5.4 Confidentiality Agreement 5.4 Consents 3.3 Contingent Payment Agreement 1.1(d) Contract 3.11(a) CRC(UK) 2.2(e)(5) Damages 8.2(a) Development Agreement 8.4(a)(2)(A)(i)(I) Employee 3.10(c) Employee Benefit Plans 3.10(c) Event 3.14(a)(1) Exchange Act 2.2(e)(15) Excess Space 8.4(a)(2)(A)(ii)(II) Governmental Authority 3.3 Greenwich View Transfer Documents 2.2(e)(7) Group Relief 3.14(a)(2) IRC 3.14(b)(6) IT Services Agreement 2.2(e)(10) Indemnified Person 8.3(a) Indemnifying Person 8.3(a) Information 8.4(e)(1) Initial Due Diligence Period 5.4 Insurance Arrangements 3.4(b) Insurance Companies Act 3.9(a) Intellectual Property Right 3.20(a) Interest 7.1(a)(3) Interim Period 7.1(a)(7) Intervening Event 7.10(a) Investment Policies 3.8(c) Investment Proposal 5.6 Investments 3.15(a)(1) Key Employee 3.22(a) KPMG Report 3.13(d) Liens 1.1(a) Litigation 3.12(a) Lombard 2.2(e)(7) LUC 8.4(a)(1)(B) LUC Benefits 8.4(a)(1) LUC Liabilities 8.4(a)(2) Material Adverse Effect 3.4(b) Material Properties 3.15(c) MBL 8.4(a)(1)(A) Parent Preamble Payment Date 7.1(a)(4) Pension Transfer Date 7.1(a)(7) Permit 3.18 Person 3.5 Purchase Price 1.1(b) Reinsurance Agreement 3.19 Reinsurance Provider 8.2(a)(4) Relevant Employees 7.1(a)(8) Relief 3.14(a)(3) Return 3.14(b)(3) Run-Off Agreement 2.2(e)(5) Scheduled Contract 3.11(a) Scheduled Investments 3.15(a)(1) Securities Act 3.25 Seller Preamble Seller's Actuary 7.1(a)(11) Seller Tax Benefit 8.2(d)(1) Senior Preference Shares 4.5 Shareholders Agreement 8.4(a)(2)(A)(ii)(I) Shares Preamble State 3.3 Support Agreement 2.2(e)(4) Tax 3.14(a)(4) Tax Authority 3.14(a)(5) Tax Clearance 3.14(b)(4) Tax Indemnification Agreement 2.2(e)(3) Taxes Act 3.14(a)(6) this Agreement Preamble to the knowledge of Seller 9.11 Transaction Documents 2.2(h) Transfer Amount 7.1(a)(1) Transferring Employees 7.1(a)(9) UA Management 2.2(e)(9) UK Accounting Standards 3.13(a) Unaudited Financials 3.8(a)(2) Unionamerica Business 7.2 Unionamerica Reorganization 3.27 Unionamerica Scheme 7.1(a)(10) VAT 3.14(a)(7) VAT Legislation 3.14(a)(8) SHARE PURCHASE AGREEMENT, dated as of June 30, 1993 ("this Agreement"), among UNIONAMERICA ACQUISITION COMPANY LTD., an English private company limited by shares ("Buyer"), UNIONAMERICA HOLDINGS LTD., an English private company limited by shares ("Parent"), and THE CONTINENTAL CORPORATION, a New York corporation ("Seller"). W I T N E S S E T H: WHEREAS, Seller owns beneficially 40,700,000 ordinary shares of US $1 each of UNIONAMERICA INSURANCE COMPANY LIMITED, an English private company limited by shares (the "Company"), constituting all of the issued or allotted share capital of the Company (the "Shares"), which Shares are represented by share warrants to bearer of the Company; WHEREAS, Seller desires to sell the Shares to Buyer, and Buyer desires to purchase the Shares from Seller, on the terms and subject to the conditions set forth herein; and WHEREAS, Parent owns beneficially all of the issued share capital of Buyer and desires that Buyer purchase the Shares from Seller, on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and representations, warranties and agreements herein contained, the parties agree as follows: ARTICLE I PURCHASE AND SALE OF SHARES; EXCHANGE OF BUYER SHARES SECTION 1.1. Purchase and Sale of Shares. (a) On the terms and subject to the conditions set forth herein, Seller agrees to sell and transfer, and Buyer agrees to purchase, at the Closing, the Shares (represented by share warrants to bearer), free from all liens, pledges, mortgages, security interests, leases, charges, options, rights of first refusal, easements, servitudes, encumbrances, equities, claims or other third party rights (including rights of pre-emption), restrictions or limitations, in each case of any nature whatsoever (collectively, "Liens"), together with all rights which now are, or at any time hereafter may become, attached to the Shares (including the right to receive all dividends and other distributions declared, made or paid after the date hereof). (b) As consideration for the purchase of the Shares and for Seller's agreements set forth in Section 7.2, at the Closing, Buyer shall pay to Seller an aggregate purchase price of One Hundred Ten Million United States Dollars (US $110,000,000), subject to adjustment as provided in Section 1.1(c) (as so adjusted, the "Purchase Price"), consisting of cash and securities as follows: (1) cash in the amount of Ninety-Five Million United States Dollars (US $95,000,000), subject to adjustment as provided in Section 1.1(c) (as so adjusted, the "Cash Consideration"), payable by wire transfer in immediately available funds to an account that Seller shall designate in writing to Buyer no less than five (5) "Business Days" (which, for purposes of this Agreement, means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or London, England are required or authorized by law to be closed) prior to the Closing Date; and (2) 15,000,000 ordinary shares of US $1 each of Buyer (the "Buyer Shares") (represented by share warrants to bearer), free from all Liens (other than Liens which may be required by lenders to Buyer or Parent in connection with financing for this transaction), together with all rights which now are, or at any time hereafter may become, attached to the Buyer Shares (including the right to receive all dividends and other distributions declared, made or paid after the date hereof). (c) The Purchase Price shall be subject to adjustment as provided in this paragraph (c): (1) if the Closing occurs before August 31, 1993, then the amount of cash payable pursuant to Section 1.1(b)(1) shall be reduced by an amount equal to the product of (A) US $110,000,000 multiplied by (B) a fraction, the numerator of which is the number of calendar days from (but excluding) the Closing Date to (and including) August 31, 1993 and the denominator of which is 365, multiplied by (C) 6.75%; (2) if the Closing occurs after August 31, 1993, then the amount of cash payable pursuant to Section 1.1(b)(1) shall be increased by an amount equal to the product of (A) US $110,000,000 multiplied by (B) a fraction, the numerator of which is the number of calendar days from (but excluding) August 31, 1993 to (and including) the Closing Date and the denominator of which is 365, multiplied by (C) 6.75%; and (3) if the Closing occurs on August 31, 1993, then the Purchase Price shall not be adjusted. (d) In addition to the Purchase Price, following the Closing, Parent shall pay to Seller the payment(s) (if any) to the extent required by, and on the terms and subject to the conditions set forth in, the Contingent Payment Agreement between Parent and Seller, substantially in the form of Exhibit A (the "Contingent Payment Agreement"). SECTION 1.2. Exchange of Buyer Shares for A Senior Preference Shares. On the terms and subject to the conditions contained herein, at the Closing, Parent agrees to allot and issue to Seller (or its nominee) 15,000,000 A Senior Preference Shares of US $1 each of Parent, having the terms set forth in Exhibit B (the "A Senior Preference Shares") (and deliver to Seller (or its nominee) the relative share certificate(s) in the name of Seller (or its nominee)), free from all Liens, together with all rights which now are, or at any time hereafter may become, attached to such A Senior Preference Shares (including the right to receive all dividends and other distributions declared, made or paid after the Closing Date), in exchange for all of the Buyer Shares allotted and issued to Seller (as represented by share warrants to bearer) pursuant to Section 1.1(b)(2); and Seller agrees to exchange immediately the Buyer Shares (as represented by share warrants to bearer), free from all Liens (except as provided in Section 1.1(b)) and together with all rights which now are, or at any time hereafter may become, attached to the Buyer Shares (including the right to receive all dividends and other distributions declared, made or paid after the date hereof) for the A Senior Preference Shares. ARTICLE II CLOSING SECTION 2.1. Closing. The Closing of the transactions contemplated herein shall take place at 10:00 a.m., local time, on the date that is five (5) Business Days after the satisfaction of the conditions set forth in Article VI (or waiver thereof, to the extent permitted by the terms of this Agreement), at the offices of Freshfields, 65 Fleet Street, London EC4Y 1HS, England, or at such other time and place as the parties may mutually determine in writing (the "Closing"). The actual date on which the Closing shall occur is referred to herein as the "Closing Date". SECTION 2.2. Documents to be Delivered. To effect the transactions referred to in Article I, Buyer, Parent and Seller shall, at the Closing, deliver the following: (a) The Shares. Seller shall deliver to Buyer the share warrants to bearer in respect of all the Shares. (b) The Cash Consideration. Buyer shall deliver to Seller the Cash Consideration pursuant to Section 1.1. (c) The Buyer Shares. Buyer shall allot and issue to Seller the Buyer Shares (and deliver to Seller the share warrants to bearer in respect thereof), for immediate exchange pursuant to Section 1.2. (d) The A Senior Preference Shares. In exchange for the sale and transfer to it by Seller of all of the Buyer Shares, Parent shall allot and issue to Seller (or its nominee) the A Senior Preference Shares (and deliver to Seller (or its nominee) the relative share certificate(s) in the name of Seller (or its nominee)) pursuant to Section 1.2. (e) Seller's Documents. Seller shall deliver or cause to be delivered to Buyer (or to any Person (as defined in Section 3.5) whom Buyer may designate): (1) confirmation and/or evidence, in a form reasonably satisfactory to Buyer, of the fulfillment of the conditions specified in Section 6.1; (2) a counterpart original of the Contingent Payment Agreement, duly executed by Seller; (3) a counterpart original of the Tax Indemnification Agreement, substantially in the form of Exhibit C (the "Tax Indemnification Agreement"), duly executed by Seller; (4) a counterpart original of the Senior Preference Share Support Agreement, substantially in the form of Exhibit D (the "Support Agreement"), duly executed by Seller; (5) a counterpart original of the Run-Off and Accounting Services Agreement, substantially in the form of Exhibit E (the "Run-Off Agreement"), duly executed by Continental Reinsurance Corporation (UK) Limited ("CRC(UK)") and the Company; (6) a counterpart original of the Assignment of Trademarks, substantially in the form of Exhibit F (the "Assignment of Trademarks"), duly executed by Seller and the Company; (7) a counterpart original of (i) the transfer, (ii) the assignment of certain contractual rights and (iii) the covenant by Lombard Continental Insurance plc ("Lombard") with the property's management company, in each case relating to the transfer to Lombard (or its designee) of the Greenwich View Place property, substantially in the form of Exhibit G (the "Greenwich View Transfer Documents"), duly executed by Lombard and the Company; (8) a counterpart original of the agreement for lease relating to the office space currently occupied by the Company located at 77 Gracechurch Street, London, England, substantially in the form of Exhibit H (the "77 Gracechurch Street Agreement"), duly executed by The Continental Insurance Holdings (Europe) Limited ("CIH (Europe)") as lessor, and the Company, as lessee; (9) a counterpart original of the license relating to the office space currently occupied by the Company located at 85 Gracechurch Street, London, England, substantially in the form of Exhibit I (the "85 Gracechurch Street License"), duly executed by Unionamerica Management Company Limited ("UA Management"), as licensor, and the Company, as licensee; (10) a counterpart original of the agreement for the sale and purchase of the basement premises of 85 Gracechurch, London, England, substantially in the form of Exhibit J (the "85 Gracechurch Street Agreement"), duly executed by UA Management and the Company; (11) a counterpart original of the Information Technology Services Agreement, substantially in the form of Exhibit K (the "IT Services Agreement"), duly executed by UA Management and the Company; (12) the Certificate of Incorporation, a true, complete and correct copy of the Memorandum and Articles of Association, the Common Seal, all minute books, Share Registers and Share Certificate Books (with any unissued share certificates) and other statutory books (which shall be written-up to (but not including) the Closing Date) of the Company; (13) all such documents (including any powers of attorney under which any document required to be delivered under this Section 2.2 has been executed and any necessary waivers or consents of Seller and/or any of its Affiliates (as defined below)) as may be reasonably required (if any) to enable Buyer and/or its nominee to be the holder(s) of the Shares (as represented by the share warrants to bearer) and to permit each of Seller and/or such Affiliates to consummate the transactions contemplated by this Agreement; (14) a letter of resignation in the form of the agreed draft, duly executed as a Deed, by each of the directors and officers of the Company listed on Schedule 2.2; (15) copies of the minutes (certified by a duly appointed officer to be true, complete and correct) of meetings of the Boards of Directors of: (A) the Company, authorizing the execution and delivery of, and the performance by the Company of its obligations under, the Run-Off Agreement, the Assignment of Trademarks, the Greenwich View Transfer Documents, the 77 Gracechurch Street Agreement, the 85 Gracechurch Street License, the 85 Gracechurch Street Agreement, and the IT Services Agreement; (B) Seller, authorizing the execution and delivery of, and the performance by Seller of its obligations under, this Agreement, the Contingent Payment Agreement, the Tax Indemnification Agreement, the Support Agreement, the Assignment of Trademarks and the Greenwich View Transfer Documents; (C) CRC(UK), authorizing the execution and delivery of, and the performance by CRC(UK) of its obligations under, the Run- Off Agreement; (D) Lombard, authorizing the execution and delivery of, and the performance by Lombard of its obligations under, the Greenwich View Transfer Documents; (E) CIH (Europe), authorizing the execution and delivery of, and the performance by CIH (Europe) of its obligations under, the 77 Gracechurch Street Agreement; and (F) UA Management, authorizing the execution and delivery of, and the performance by UA Management of its obligations under, the 85 Gracechurch Street License, the 85 Gracechurch Street Agreement, and the IT Services Agreement; and (16) all documentation, duly executed by Seller and/or its applicable Affiliates and in form and substance reasonably satisfactory to Buyer, evidencing the termination of the Contracts (as defined in Section 3.11(a)) listed on Schedule 5.5. As used in this Agreement, "Affiliate" has the meaning ascribed to such term in Rule 12b-2 under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"). (f) Buyer's Documents. Buyer shall deliver or cause to be delivered to Seller (or to any Person whom Seller may designate): (1) confirmation and/or evidence, in a form reasonably satisfactory to Seller, of the fulfillment of the conditions specified in Section 6.2; (2) a counterpart original of the Contingent Payment Agreement, duly executed by Parent; (3) a counterpart original of the Tax Indemnification Agreement, duly executed by Buyer; (4) a counterpart original of the Support Agreement, duly executed by Parent; (5) copies of the minutes (certified by a duly appointed officer to be true, complete and correct) of meetings of the Boards of Directors of: (A) Buyer, authorizing (i) the execution and delivery of, and the performance by Buyer of its obligations under, this Agreement and the Tax Indemnification Agreement and (ii) the issuance of the Buyer Shares; and (B) Parent, authorizing (i) the execution and delivery of, and the performance by Parent of its obligations under, this Agreement, the Contingent Payment Agreement and the Support Agreement and (ii) the issuance of the Senior Preference Shares (as defined in Section 4.5); (6) a certificate, dated the Closing Date, of the Secretary of Buyer attaching a true, complete and correct copy of the Memorandum and Articles of Association of Buyer; (7) a certificate, dated the Closing Date, of the Secretary of Parent attaching a true, complete and correct copy of the Memorandum and Articles of Association of Parent (containing the terms of the A Senior Preference Shares and the B Senior Preference Shares (as defined in Section 4.5) set forth in Exhibit B); and (8) all such documents (including any powers of attorney under which any document required to be delivered under this Section 2.2 has been executed and any necessary waivers or consents of Buyer and/or Parent) as may be reasonably required (if any) to enable Seller (or its nominee) to be the holder of the Buyer Shares and the A Senior Preference Shares and to permit each of Buyer and Parent to consummate the transactions contemplated by this Agreement. (g) Closing Documents. Seller, Buyer and Parent shall each deliver all documents required to be delivered pursuant to Sections 6.1 and 6.2. (h) Satisfaction with Documents. All Transaction Documents executed and delivered by Buyer and/or Parent shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to Seller. All Transaction Documents executed and delivered by Seller and/or its Affiliates, shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to Buyer and Parent. As used in this Agreement, "Transaction Documents" means this Agreement, the Contingent Payment Agreement, the Tax Indemnification Agreement, the Support Agreement, the Run-Off Agreement, the Assignment of Trademarks, the Greenwich View Transfer Documents, the 77 Gracechurch Street Agreement, the 85 Gracechurch Street License, the 85 Gracechurch Street Agreement, and the IT Services Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer and Parent as follows: SECTION 3.1. Corporate Existence. (a) Seller's Existence. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York and has full power and authority and possesses all rights, licenses, authorizations and approvals, governmental or otherwise, necessary to entitle it to own the Shares and to perform its obligations under the Transaction Documents to which it is a party. (b) Company's Existence. The Company is a private company limited by shares, incorporated in England and registered in England with registered no. 1022903. No order has been made or resolution passed for the winding up of the Company, nor has any liquidator, receiver, administrative receiver or administrator been appointed in respect of the Company or any of its assets or business. The Company has full power and authority and possesses all rights, licenses, authorizations and approvals, governmental or otherwise, necessary to entitle it: (1) to enter into and perform its obligations under the Transaction Documents to which it is a party; (2) to own, lease or otherwise hold its properties and assets and to carry on its business as currently conducted; and (3) subject to Section 3.20, to use the "Unionamerica" name. SECTION 3.2. Authorization; Enforcement. Each of Seller and its Affiliates has all necessary corporate power and authority to execute and deliver the Transaction Documents to which it is a party, and to perform its obligations under such Transaction Documents in accordance with the terms of such Transaction Documents. Each of Seller and its Affiliates has taken all necessary corporate action to duly and validly authorize the execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated by such Transaction Documents including, in the case of Seller, all corporate action necessary to conclusively and irrevocably effect the contribution in the amount of US $44,928,493 made on June 17, 1993 from Seller to the Company. This Agreement has been duly executed and delivered by Seller and constitutes a valid and legally binding obligation of Seller, enforceable against Seller in accordance with its terms. On or before the Closing Date, each of the other Transaction Documents to which Seller or any of its Affiliates is a party will be duly executed and delivered by Seller or such Affiliate, as the case may be, and when executed and delivered by Seller or such Affiliate, as the case may be, will constitute a valid and legally binding obligation of Seller or such Affiliate, as the case may be, enforceable against Seller or such Affiliate, as the case may be, in accordance with its terms. SECTION 3.3. Consents and Approvals. No consent, approval, authorization, license or order of, or registration or filing with, or notice to, any United Kingdom, United States Federal, "State" (which for purposes of this Agreement shall mean any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico or any possession or territory of the United States), local, foreign or other court, administrative agency or commission, insurance or securities regulatory authority or other governmental authority or instrumentality or regulatory or self-regulatory body or securities or commodities exchange (each, a "Governmental Authority") (such consents, approvals, authorizations, licenses, orders, registrations, filings and notices being herein called, collectively, "Consents") is required to be obtained, made or given by or with respect to Seller or any of its Affiliates in connection with the execution and delivery by Seller or any of its Affiliates of any of the Transaction Documents to which Seller or such Affiliate is a party, the performance by Seller or such Affiliate of its obligations under any of such Transaction Documents or the consummation of the transactions contemplated by such Transaction Documents, other than as described in Sections 6.1(e) and 6.1(f). SECTION 3.4. No Conflicts. Neither the execution or the delivery by Seller or any of its Affiliates of the Transaction Documents to which Seller or such Affiliate is a party, nor the performance by Seller or any such Affiliate of such Transaction Documents, or the consummation of the transactions contemplated by such Transaction Documents, will: (a) conflict with or result in a breach of any provision of the Certificate of Incorporation, By-Laws, Memorandum and Articles of Association or other charter or organizational documents of Seller or such Affiliate; or (b) result in any conflict with, breach or violation of, or default (or event which, with notice or lapse of time or both, would constitute a default) under, require any consent or approval which has not been obtained with respect to, give rise to any right of termination, cancellation or acceleration of any obligations or loss of any benefit under, or result in the imposition of any Liens on any of the properties or assets of Seller or such Affiliate under: (1) any Contract (as defined in Section 3.11(a)) (other than insurance or reinsurance Contracts and related letters of credit, trust arrangements, custodial arrangements and structured settlements entered into by the Company in the ordinary course of business consistent with past practice (collectively, the "Insurance Arrangements") and other than as provided in Section 8.4(e) hereof) or permit, concession, franchise or license to which Seller or such Affiliate is a party or by which it or any of its properties or assets is bound or (2) any order, decree, injunction, law, rule or regulation applicable to Seller or such Affiliate or any of its properties or assets, which conflict, breach, violation or default, or failure to obtain consent or approval, or right of termination, cancellation or acceleration or loss of benefit or imposition of any Lien would have, in any case or in the aggregate, a material adverse effect on the Company's business, operations, assets, liabilities or financial condition (a "Material Adverse Effect") or which would interfere in any material way with the ability of Seller or such Affiliate to consummate the transactions contemplated by such Transaction Documents. SECTION 3.5. Capital Structure. The authorized share capital of the Company consists of 45,000,000 ordinary shares of US $1 each, of which 40,700,000 shares are issued and constitute the Shares. No other shares of any class in the capital of the Company are authorized, allotted or issued. All of the Shares have been duly authorized and validly issued, are fully paid and are represented by share warrants to bearer. Seller owns beneficially all of the Shares, free and clear of all Liens. There are no warrants, options, Contracts, convertible or exchangeable securities or other preferential rights, arrangements or commitments pursuant to which the Company is or may become obligated to allot, issue, sell, purchase or redeem any shares in its capital or other equity ownership interests or securities, other than as contemplated by this Agreement. There are no standstill, voting or similar agreements or Contracts nor any rights of first offer or first refusal to which Seller or any of its Affiliates is a party that currently or in the future will limit the ability of any individual, corporation, partnership, firm, joint venture, unincorporated organization, governmental or regulatory authority or other entity (each, a "Person") to acquire, vote, sell, hold or otherwise deal with the Shares or any interest therein or right in respect thereof. Upon consummation of the transactions contemplated by this Agreement, Buyer will acquire from Seller beneficial ownership of the Shares, free and clear of all Liens, together with all rights which now are, or at any time hereafter may become, attached to them, including the right to receive all dividends and other distributions declared, made or paid after the date hereof. SECTION 3.6. Subsidiaries. Except as set forth on Schedule 3.6, the Company does not own, or have any interest of any nature whatsoever in, directly or indirectly, more than five percent (5%) of the outstanding equity securities of, or otherwise possess, directly or indirectly, the power to direct or cause the direction of the management and policies of any Person nor is the Company a party to any joint venture, consortium, partnership or other profit (or loss) sharing agreement or Contract, other than Insurance Arrangements. SECTION 3.7. Company Documents. (a) Seller has delivered to Buyer and/or Parent prior to the date of this Agreement: (1) true, complete and correct copies of the Memorandum and Articles of Association of the Company, with all amendments thereof, having attached thereto all of the resolutions required by the Companies Act 1985, as amended by the Companies Act 1989 (as so amended, the "Companies Act"), to be so attached; and (2) all of the forms, filings and information supplied to the Registrar of Companies under the Companies Act since May 1, 1987, which are all of the forms, filings and information required by the Companies Act to be so supplied since such date. (b) Seller has made available for inspection by Buyer and Parent copies of the minutes of all meetings and written resolutions in lieu of meetings of the Board of Directors of the Company and of its shareholders since May 1, 1987. The books of account of the Company have been properly completed in all material respects and the statutory books and other records of the Company (other than the books of account) have been properly and accurately completed in all material respects. The books of account, statutory books and other records of the Company contain all material information required to be recorded in them, have been maintained in all material respects in accordance with all applicable laws and generally accepted accounting practices on a proper and consistent basis, and are in its possession or under its control. SECTION 3.8. Financial Statements. (a) Seller has delivered to Buyer and Parent the following financial statements (which term, as used in this Agreement, includes all footnotes and schedules, if any, thereto): (1) the audited balance sheet of the Company (the "Company Balance Sheet") as at December 31, 1992 (the "Balance Sheet Date"), December 31, 1991 and December 31, 1990, and the related underwriting revenue accounts and profit and loss accounts for each of the three fiscal years ended December 31, 1992, December 31, 1991 and December 31, 1990, including the reports of KPMG Peat Marwick thereon (collectively, the "Company Financials"); and (2) the unaudited balance sheet of the Company as at March 31, 1993 and the related underwriting revenue accounts and profit and loss accounts (collectively, the "Unaudited Financials"). (b) Except as set forth on Schedule 3.8(b), the Company Financials are based on the books and records of the Company, fairly present the financial position and results of operations of the Company, as at the dates and for the periods indicated therein, and have been prepared (except as otherwise noted therein) on a consistent basis and in all material respects in accordance with the provisions of the Companies Act applicable to insurance companies and the Statement of Recommended Practice on Accounting for Insurance Business issued by the Association of the British Insurers in May 1990. The Company Financials have been audited by KPMG Peat Marwick, whose audit opinion states that the Company Financials have been properly prepared and comply with the requirements of the Companies Act applicable to insurance companies. The Unaudited Financials are derived from the books and records of the Company, fairly present the financial position and results of operations of the Company as at the date thereof and for the period indicated therein, and have been prepared in order to accommodate the consolidated financial reporting requirements of Seller and its subsidiaries under United States generally accepted accounting principles. While certain classification differences exist between the Unaudited Financials and the Company Financials, reserving practices (as indicated by unearned premiums (net of deferred acquisition costs)) and outstanding claims (including claims incurred but not reported) in the Unaudited Financials and the Company Financials are consistent in all material respects, and shareholders' funds in the Unaudited Financials and the Company Financials are computed on a consistent basis in all material respects, except for unrealized appreciation of investments, which are reported at amortized cost in the Unaudited Financials and at market value in the Company Financials. (c) Except as set forth on Schedule 3.8(c) or otherwise indicated in the Company Financials, since the Balance Sheet Date, there has not been any material change by the Company in its Investment Policies (as defined below) or financial, tax or accounting methods, principles or practices (including any material change with respect to the establishment of reserves for unearned premiums, reserves for losses (including incurred but not reported losses) and loss adjustment expenses, or any material change in depreciation or amortization policies or rates). As used in this Agreement, "Investment Policies" means the overall investment policies used in the management of the Company's investment portfolio, including the Company's policies with respect to duration, liquidity, currency, asset allocation and asset quality. SECTION 3.9. Annual Statements. (a) Seller has delivered to Buyer and Parent true, complete and correct copies of the returns of the Company for the years ended December 31, 1992, December 31, 1991 and December 31, 1990, together with all exhibits and schedules thereto (the "Annual Statements"), as furnished to the Department of Trade and Industry pursuant to the Insurance Companies Act 1982 (the "Insurance Companies Act"). Except as set forth on Schedule 3.9, the information concerning the Company contained in the Annual Statements was, at the time each such Annual Statement was filed, true, complete and correct in all material respects. (b) The Annual Statements (and all exhibits and schedules thereto) have been audited and prepared and reported upon in all material respects in accordance with accounting practices prescribed or permitted for general insurance companies in the United Kingdom, and such accounting practices have been applied on a consistent basis throughout the periods involved, except as expressly set forth or disclosed in the notes, exhibits or schedules thereto or in the Company Financials. (c) All information in the Annual Statements was prepared in compliance in all material respects with all requirements of the Insurance Companies Act and the regulations having effect for purposes of that Act. Except as set forth on Schedule 3.9, all of the assets and liabilities of the Company were reflected in the Annual Statements to the extent permitted by, and were valued in accordance with, Parts V and VI of the Insurance Companies Regulations 1981. Since the Balance Sheet Date, no event has occurred or circumstance has arisen such that the method or basis of valuation of any of the Company's assets shown on the Annual Statement for the year ended December 31, 1992 would be required to be materially changed from the method or basis adopted for the purposes of such Annual Statement. SECTION 3.10. Absence of Certain Changes or Events. Except as set forth on Schedules 3.10 or 3.14 or as otherwise specifically contemplated by Sections 3.26 and 5.5, since the Balance Sheet Date, the Company has conducted its business only in the ordinary course consistent with past practices, and there has not been: (a) any damage, destruction or loss to any of the properties of the Company, whether covered by insurance or reinsurance or not, that has had a Material Adverse Effect; (b) any declaration or payment or making of any dividend or other distribution (whether in cash, securities or other property or any combination thereof) in respect of the capital of the Company, or any repurchase, redemption or other acquisition by the Company of any of its capital, or any proposal by the Company to effect any of the foregoing; (c) any entry into any Contract with, or the making of any assurance or undertaking to, any past or present director, officer or employee of the Company or any other Key Employee (as defined in Section 3.22) (each, an "Employee") providing for his/her employment, any material increase in salary or other regularly paid remuneration or any increase in severance or termination benefits payable or to become payable by the Company to any Employee, any general increase in salaries of all or a substantial portion of the Employees, or the exercise of any power or discretion to materially augment or introduce benefits under any pension scheme in respect of any present Employee (and any past Employee, if the Company has any remaining obligations thereunder) or the introduction of, or any material increase in benefits under, any collective bargaining agreement or similar Contract or in benefits under any bonus, pension, profit sharing, deferred compensation, incentive compensation, share ownership, share purchase, share option, profit sharing, phantom stock, retirement, vacation, severance, disability, death benefit, medical/health, insurance or other plan or arrangement or understanding providing benefits to any present Employee (and any past Employee, if the Company has any remaining obligations thereunder) (collectively, "Employee Benefit Plans"); (d) any loan or advance to any Employee, or any Contract therefor, other than advances for travel and other expenses in the ordinary course of business consistent with past practice; (e) any entry into any Contract or transaction (including any borrowing, capital expenditure or capital financing) by the Company material to the business, operations, assets, liabilities or financial condition of the Company, except Contracts or transactions in the ordinary course of business consistent with past practice; (f) any payments, distributions, management fees or other compensation made to any Person (including Seller and its Affiliates) under or in connection with any Contracts (other than employment Contracts) relating to the management or operation of the insurance and reinsurance business of the Company (including the Underwriting Management Agreement between the Company and UA Management dated 6 February 1987); or (g) any change in the business, operations, assets, liabilities or financial condition of the Company, other than seasonal changes in the business of the Company and matters of a general economic nature that, in any case or in the aggregate, would have a Material Adverse Effect. SECTION 3.11. Contracts. (a) As used in this Agreement, "Contract" means any in-force contract, agreement, instrument, commitment or other arrangement, written or unwritten, including any deed, loan or credit agreement, note, bond, mortgage, indenture or lease to which the Company is a party or by which any of its material assets or properties is bound. Schedule 3.11 contains a true, complete and correct list of the following Contracts (each, a "Scheduled Contract") (true, complete and correct copies (or, if none exist, written descriptions) of which have been made available to Buyer and/or Parent prior to the date of this Agreement): (1) Contracts relating to the borrowing of money, guarantees, security agreements, factoring agreements and deferred purchase or hire purchase Contracts, including obligations for reimbursement under letters of credit or reimbursement agreements therefor (other than letters of credit or reimbursement agreements therefor that are (A) fully secured or collateralized and (B) related to reinsurance Contracts entered into by the Company in the ordinary course of business consistent with past practice) in any case representing future liabilities in excess of US $100,000; (2) Contracts (other than Insurance Arrangements) which permit a financial institution or other Person to block or otherwise restrict the Company's immediate access to deposits or other monies held thereby, in any case involving amounts in excess of US $100,000; (3) Contracts with any Employee pursuant to which the Company owes any monetary obligation (other than those Contracts involving annual payments in any case of less than US $50,000 or which are cancelable by the Company on not more than ninety (90) days' notice without cause or penalty); (4) Contracts with insurance agents and agencies, managing general agents with binding authority, brokers, third party administrators and consultants (other than those Contracts which are cancelable by the Company on not more than thirty (30) days' notice without cause or penalty), provided that with respect to such Contracts with managing general agents, Schedule 3.11 shall also set forth (A) a brief description of each managing general agent, including its jurisdiction of domicile, its address of record and (where reasonably available) information regarding the ultimate beneficial ownership thereof, and (B) the aggregate amount of insurance which such managing general agent has written and is authorized to write on behalf of the Company; (5) Contracts containing any provision or covenant limiting the ability of the Company to engage in any line of business or compete with any Person (other than Contracts with insurance agents and agencies or managing general agents with binding authority entered into by the Company in the ordinary course of business consistent with past practice); (6) leases, subleases, rental or use Contracts to which the Company is a party involving a single annual payment in any case in excess of US $50,000 or aggregate annual payments in excess of US $250,000; (7) Contracts with any trade union or staff association or other body representing (or, to the knowledge of Seller, purporting to represent) any present Employee; (8) Contracts between the Company and its Affiliates (including in any event any reinsurance Contracts with Accord Re Limited ("Accord") and the 50% quota share reinsurance Contract relating to the so-called LMX business, but excluding other Insurance Arrangements entered into by the Company with any of its Affiliates); (9) Contracts in which any Employee has any monetary or other interest in any case in excess of US $50,000; (10) Contracts (other than Insurance Arrangements) involving the sale, transfer, assignment or other disposition of the Company's assets or liabilities having a value in any case in excess of US $100,000 pursuant to which the Company has given representations and/or indemnities which continue to be in effect or pursuant to which liability could reasonably be expected to arise; (11) investment management agreements, investment custody agreements and similar Contracts (other than Insurance Arrangements pursuant to which the Company has (A) deposited funds with Governmental Authorities in order to qualify as an approved or eligible excess and surplus lines insurer or (B) pledged funds to secure obligations under reinsurance Contracts); (12) Contracts (other than Insurance Arrangements) with each insurance agent (including each managing general agent) or agency (the "Agency Contracts") that individually produced US $250,000 or more of gross written premiums for the Company during the year ended December 31, 1992 or is reasonably expected by the Company individually to produce US $250,000 or more of gross written premiums for the Company during the year ended December 31, 1993 which are subject to termination upon the occurrence of a change of ownership or control of the Company; (13) Contracts (other than the Scheduled Contracts referred to in Section 3.11(a)(4), Agency Contracts and Insurance Arrangements) representing future liabilities in any case in excess of US $250,000 individually that are subject to termination upon the occurrence of a change of ownership or control of the Company, provided, that the aggregate future liabilities for all Contracts (other than the Scheduled Contracts referred to in Section 3.11(a)(4), Agency Contracts and Insurance Arrangements) representing future liabilities in any case of less than US $250,000 that are subject to termination upon the occurrence of a change of ownership or control of the Company and not listed on Schedule 3.11 does not exceed US $1,000,000; (14) Contracts pursuant to which the Company has agreed to grant or has granted an option or similar right to another Person affecting any asset of the Company (other than assets held by the Company in its investment portfolio); and (15) all other Contracts (other than Insurance Arrangements) material to the business, operations, assets, liabilities or financial condition of the Company in any case representing future liabilities (to the extent reasonably ascertainable) in excess of US $50,000 individually (other than those Contracts which are cancelable by the Company on not more than ninety (90) days' notice without cause or penalty) and which are not listed on any other Schedule hereto. (b) Except as set forth on Schedule 3.11, each of the Scheduled Contracts is in full force and effect and is binding upon and enforceable against the parties thereto in accordance with their respective terms. The Company is not in, or, to the knowledge of Seller, claimed to be in, breach or default in any respect under any of the Scheduled Contracts and there does not exist under any of the Scheduled Contracts any event which, with the giving of notice or lapse of time, would constitute a material breach or default by the Company. To the knowledge of Seller, no other party to any of the Scheduled Contracts is in or has claimed to be in breach or default in any material respect thereunder. SECTION 3.12. Litigation. (a) Except as set forth on Schedule 3.12, there is no claim, action, proceeding, arbitration, investigation, inquiry, charge or complaint (excluding claims, actions, proceedings, arbitrations, investigations, inquiries, charges and complaints in the ordinary course of business under insurance or reinsurance Contracts where the damage alleged or remedy requested in any case is less than US $50,000) before or by any Governmental Authority or any private arbitration tribunal (collectively, "Litigation") now pending, or to the knowledge of Seller threatened, against or relating to the Company or any director or officer of the Company (in his/her capacity as such) or the assets, properties or business of the Company, or the transactions contemplated by the Transaction Documents or which questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken by Seller or any of its Affiliates in connection with the Transaction Documents. To the knowledge of Seller, there is no fact or circumstance (including any act or omission) which is reasonably likely to give rise to such a claim. (b) Except as set forth on Schedule 3.12, neither the Company nor any of its directors or officers (in his/her capacity as such) is subject to any permanent, preliminary or temporary injunction or prohibitive order, judgment or decree of any Governmental Authority (including any action taken by the Secretary of State for Trade and Industry under sections 38 to 45 of the Insurance Companies Act). SECTION 3.13. Liabilities and Reserves. (a) Except as set forth on Schedule 3.13(a), the balance sheet included in the Unaudited Financials reflects full provision (on an undiscounted basis) for all obligations and liabilities of the Company at March 31, 1993 on a basis consistent with the Company Financials and in accordance with the requirements of all relevant statements of standard accounting practice and/or financial reporting standards issued or adopted by the Accounting Standards Board ("UK Accounting Standards"). Except to the extent specifically disclosed, reflected or reserved against in such balance sheet and the notes thereto, the Company does not have any material obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise, and whether or not due, or arising out of transactions entered into, or any state of facts existing, prior to such date), other than liabilities incurred since March 31, 1993 in the ordinary course of business consistent with past practice. (b) By reference to the facts now existing, the directors of the Company could now properly give a certificate in the form prescribed by Schedule 6, Part I of the Insurance Companies (Accounts and Statements) Regulations 1983 without qualification, amplification or explanation, and without the exclusions provided for in paragraph 8 of Part I of such regulations. (c) The reserving and valuation bases adopted by the Company in preparing the Company Financials, the Unaudited Financials and the Annual Statements apply levels of prudence which are not less than those generally accepted for similar companies carrying on insurance business in the United Kingdom. (d) Prior to the date of this Agreement, Seller has furnished Buyer and Parent true, complete and authentic copies of (1) the "Report by KPMG Actuarial Service dated (30 September 1992) in respect of Company's Loss Reserves at 30 June 1992" (the "KPMG Report") and (2) the information described on Schedule 3.13(d), which information constitutes all of the information provided to KPMG Actuarial Service by Seller and/or its Affiliates in connection with the preparation of the KPMG Report. No other external study of the Company's loss reserves or loss adjustment expense reserves has been prepared during the five (5) year period immediately preceding the date of this Agreement other than in connection with the preparation of the audited financial statements of the Company. Buyer and Parent acknowledge that the Seller is making no representation or warranty with respect to the contents of the KPMG Report and Seller expressly disclaims the contents of such report. Buyer and Parent represent and warrant that they are not relying on the KPMG Report in any respect. SECTION 3.14. Taxation. The representations and warranties contained in this Section 3.14 are given subject to the matters disclosed in Schedule 3.14 and to any relevant provisions of the Tax Indemnification Agreement. (a) Definitions. The following terms shall have the following meanings for purposes of this Agreement and Schedule 3.14: (1) "Event" means the winding up or dissolution of any Person, and any act, transaction or omission whatsoever, and any reference to an event occurring on or before a particular date shall include events which for Tax purposes are deemed to have, or are treated or regarded as having, occurred on or before that date. (2) "Group Relief" means: (A) Relief surrendered or claimed pursuant to Chapter IV of Part X of the Taxes Act; (B) advance corporation tax surrendered or claimed pursuant to section 240 of the Taxes Act; and (C) any Tax refund surrendered or claimed pursuant to section 102 of the Finance Act of 1989 of the United Kingdom. (3) "Relief" means, unless the context otherwise requires, any allowance, credit, deduction, exemption or set-off in respect of any Tax or relevant to the computation of any income, profits or gains for the purposes of any Tax; and (A) any reference to the "use" or "set off" of Relief shall be construed accordingly and shall include use or set off in part; and (B) any reference to the "loss" of a Relief shall include the absence or non-existence of any such Relief, or to such Relief being available only in a reduced amount. (4) "Tax" means corporation tax, advance corporation tax, income tax (including income tax or amounts on account of income tax required to be deducted or withheld from or accounted for in respect of any payment), capital gains tax, development land tax, inheritance tax, VAT, national insurance contributions, capital duty, stamp duty, stamp duty reserve tax, duties of customs and excise, petroleum revenue tax, local authority rates and charges, all taxes, duties or charges replaced by or replacing any of them, and all other taxes or similar impost on gross or net income, profits or gains, distributions, receipts, sales, use, occupation, franchise, value added and personal property, taxes on premiums (whether calculated on the gross or net amount thereof), and all levies, imposts, duties, charges or withholdings of any nature whatsoever chargeable by any Tax Authority, and any payment whatsoever which the Company may be or become bound to make to any Person as a result of the discharge by that Person of any Tax which the Company has failed to discharge, together with all penalties, charges and interest relating to any of the foregoing or to any late or incorrect return (or failure to file such return or other form or statement) in respect of any of them, and regardless of whether any such taxes, levies, duties, imposts, charges, withholdings, penalties and interest are chargeable directly or primarily against or attributable directly or primarily to the Company or any other Person and of whether any amount in respect of any of them is recoverable from any other Person. (5) "Tax Authority" means any taxing or other authority (whether within or outside the United Kingdom, including the United States or any State) competent to impose any Tax liability. (6) "Taxes Act" means the Income and Corporation Taxes Act 1988. (7) "VAT" means value added tax, being the Tax created and administered by and according to the VAT Legislation. (8) "VAT Legislation" shall include the Value Added Tax Act 1983, the Finance Act 1985 and all other enactments in relation to VAT and all notices, provisions and conditions made or issued thereunder, including the terms of any agreement reached with HM Customs & Excise or any concession disclosed to Buyer and Parent in writing prior to the date of this Agreement. (9) Any reference to income, profits or gains "earned", "accrued" or "received" on or before a particular date or in respect of a particular period shall include income, profits or gains which for Tax purposes are deemed to have been or are treated or regarded as earned, accrued or received on or before that date or in respect of that period. (10) Any reference to something occurring (including a Tax liability arising) "in the ordinary course of business" shall, without prejudice to the generality thereof, be deemed not to include: (A) anything which results in the Company receiving a valid Tax claim in respect of any liability to Tax of, or properly attributable to, another Person (other than the Company); (B) anything which relates to or involves the acquisition or disposal of an asset or the supply of services (including the lending of money, or the hiring or licensing of tangible or intangible property) in a transaction which is not entered into on arm's length terms; (C) anything which relates to or involves the making of a distribution for Tax purposes, the creation, cancellation or reorganization of share or loan capital, the creation, cancellation or repayment of any intra- group debt or any company becoming or ceasing or being treated as ceasing to be a member of a group of companies or as becoming or ceasing to be associated or connected with any other company for any Tax purposes; or (D) anything which relates to a transaction or arrangement which includes, or a series of transactions or arrangements which includes, any step or steps having no commercial or business purpose apart from the reduction, avoidance or deferral of a Tax liability. (11) Persons shall be treated as "connected" for the purposes of this Section 3.14 if they are connected within the meaning of section 839 of the Taxes Act. (12) References to any provision of an enactment include any provision re-enacted by such provision. (b) General/Compliance. (1) All material liabilities, whether actual, deferred, contingent or disputed, of the Company for Tax measured by reference to income, profits or gains earned, accrued or received (or premiums earned, accrued or received) on or before the Balance Sheet Date, or arising in respect of an Event occurring or deemed to occur on or before the Balance Sheet Date, are provided for or (as appropriate) disclosed in the Company Financials for the year ended December 31, 1992 (the "1992 Company Financials") in accordance with UK Accounting Standards and the accounting policies set out in the 1992 Company Financials. All other warranties relating to specific Tax matters set out in this Section 3.14 are made without prejudice to the generality of the foregoing. (2) Since the Balance Sheet Date: (A) the Company has not been involved in any transaction which has given or may give rise to a liability to Tax on the Company (or would have given or might give rise to such a liability but for the availability of any Relief) other than Tax in respect of transactions entered into by it in the ordinary course of business; (B) no accounting period (as defined in section 12 of the Taxes Act) of the Company has ended as referred to in section 12(3) of the Taxes Act; and (C) the Company has not been a party to, nor has it or any of its assets or properties been subject to, any tax sharing agreement or arrangement with any Person effective for any tax year subsequent to the financial year ended December 31, 1992; and since the Balance Sheet Date, the Company has not made, nor is it liable for, any payments or other compensation for any such tax sharing agreement or arrangement, other than payments to be made to Affiliates pursuant to this Agreement or the Tax Indemnification Agreement. (3) The Company has duly, and within any appropriate time limits, made all returns, given all notices and supplied all other forms, statements and information (each, a "Return") required to be supplied to all relevant Tax Authorities. All such Returns were and remain, to the knowledge of Seller, true, complete and correct in all material respects and were made on a proper basis and do not, and to the knowledge of Seller are not likely to, reveal any transactions which may be the subject of any dispute with any Tax Authority. The Company is neither involved in any current dispute with any Tax Authority nor is it (nor has it in the last seven (7) years been) the subject of any investigation, audit or non-routine visit by any Tax Authority. The Company has not been informed of any planned investigation, audit or non-routine visit by any Tax Authority and, to the knowledge of Seller, there are no facts which are likely to cause such an investigation, audit or non-routine visit to be instituted in respect of the Company. Within the past seven (7) years, neither the Company nor, to the knowledge of Seller, any director or officer of the Company (in his/her capacity as such) has paid or become liable to pay, and to the knowledge of Seller there are no circumstances by reason of which it or they may become liable to pay, to any Tax Authority, any penalty, fine, surcharge or interest in respect of any Tax (including in respect of any failure to make, give or supply any Return to any relevant Tax Authority, or any failure to pay Tax on the due date for payment). (4) No transaction in respect of which any ruling, consent or clearance (each, a "Tax Clearance") was required or sought from any Tax Authority has been entered into or carried out by the Company without a Tax Clearance having first been properly obtained, and all information supplied to any Tax Authority or other appropriate authority in connection with any such Tax Clearance fully and accurately disclosed all facts and circumstances material to the giving of the Tax Clearance. Any transaction for which a Tax Clearance was obtained has been carried out only in accordance with the terms of such Tax Clearance and the application on which the Tax Clearance was based and at a time when the Tax Clearance was valid and effective. To the knowledge of Seller, no facts or circumstances have arisen since any such Tax Clearance was obtained which would cause the Tax Clearance to become invalid or ineffective. (5) No Tax Authority has operated or agreed to operate any special arrangement (being an arrangement which departs from any relevant legislation or any published practice or concession) in relation to the Company's affairs. (6) The Company has not made, nor is there in effect with respect to the Company, an election pursuant to sections 953(c)(3)(C) or 953(d) of the United States Internal Revenue Code of 1986, as amended (the "IRC"). The Company has not been, and has no reason to believe that it will be, characterized as a "passive foreign investment corporation" (as defined in Section 1291 et seq. of the IRC). (7) Prior to the date of this Agreement, Seller has disclosed to Buyer and Parent full details of the rights of the Company to make any claim for Relief or any election for a basis or method of Tax or type of Relief and any rights to make an appeal against an assessment or an application for postponement of any Tax, which have not been exercised or which have been notified to a Tax Authority but where the Company's claim or notification has not been finally accepted and which (in each case) were taken into account in preparing the provisions for Tax or deferred Tax in the 1992 Company Financials. To the knowledge of Seller, the Company is not, nor will it become, liable to pay, or make reimbursement or indemnity in respect of, any Tax in consequence of the failure by any other Person to discharge that Tax within any specified period or otherwise, where such Tax relates to income, profits or gains, earned, accrued or received (or premiums earned, accrued or received), or to any Event or circumstance occurring or arising or deemed to occur or arise (whether wholly or partly) prior to the Closing. No Relief has been claimed by and/or given to the Company and/or taken into account in determining or eliminating any provision for Tax or deferred Tax in the 1992 Company Financials, which, to the knowledge of Seller, is not validly available to the Company and Seller is not aware of (or, if it is aware of, has fully disclosed to Buyer) any challenge made by, or grounds for a challenge available to, a Tax Authority in relation thereto. (8) To the knowledge of Seller, the Company has made all deductions and retentions of or on account of Tax as it was or is obliged or entitled to make, and all such payments of or on account of Tax as should have been made to any Tax Authority in respect of such deductions or retentions. (c) Employees/Pensions. All United Kingdom National Insurance contributions and sums payable to the Inland Revenue under P.A.Y.E. system and any amounts of a corresponding nature payable to any foreign Tax Authority due and payable by the Company up to the date hereof have been paid, and, to the knowledge of Seller, the Company has made all such deductions and retentions as should have been made under section 203 of the Taxes Act and all regulations made thereunder or under any comparable laws or regulations of any relevant foreign jurisdiction, including United States Federal and State wage withholding, Social Security and other similar systems. The Company has not adopted and does not operate, and is not part of, any scheme approved, or for which approval has been or is to be sought, under section 202 of the Taxes Act (charities: payroll deduction scheme) or Chapter III of Part V of the Taxes Act (profit related pay). Since the Balance Sheet Date, no payment has been made to the Company to which section 601 of the Taxes Act applies (pension scheme surpluses: payments to employers). (d) Capital Gains and Other Realization Proceeds. If the Company had disposed of the investments referred to in Note (6) to the 1992 Company Financials for their market value as taken into account for the said Note (6), the liability to Tax which would arise thereby (leaving out of account any Reliefs etc. available to the Company) would not exceed the provision for deferred Tax arising on unrealized gains on investments (US $2,294,000) contained in the 1992 Company Financials. Upon the Closing or the execution and delivery of this Agreement or otherwise as a result of any matter contemplated by this Agreement, the Company will not incur any liability pursuant to section 178 or 179 of the Taxation of Chargeable Gains Act 1992 of the United Kingdom. (e) Group Relief. (1) Seller has disclosed to Buyer and Parent in writing prior to the date of this Agreement full, accurate and complete details of all arrangements or agreements to which the Company is a party or which in any way affect the Company and which relate to Group Relief and of any such arrangements or agreements under which any claim could be made by any Person either for the surrender to it by or by it to the Company of Group Relief or for the making or repayment of any payment in relation to Group Relief. Seller also has disclosed full details of all claims made (whether agreed with the Inland Revenue or not) for the surrender by or to the Company of Group Relief and of any such claims intended to be so made or which were taken into account or assumed in preparing the Company Financials and of the terms of any arrangements or agreements pursuant to which such surrenders were or are to be or were assumed to be made. (2) The Company is not a dual resident investing company within the meaning of section 404 of the Taxes Act. The Company is not, and at no time within the seven (7) years immediately preceding the date of this Agreement has been, a close company as defined in section 414 of the Taxes Act. (f) Distributions, etc. The Company has not on or after April 6, 1965: (1) made any distribution or deemed distribution within the meanings of section 209, 210 or 418 of the Taxes Act (distributions and deemed distributions) except as provided for in its audited accounts; (2) repaid, redeemed or purchased or agreed to repay, redeem or purchase any of its share capital; or (3) capitalized or agreed to capitalize in the form of shares or debentures any profits or reserves of any class or description, or otherwise issued or agreed to issue share capital otherwise than for new consideration (as defined in section 254 of the Taxes Act). The Company has not been concerned in any exempt distribution within section 213 of the Taxes Act within the seven (7) years immediately preceding the date of this Agreement (demergers: exempt distributions). The Company has not issued any share capital which is of a relevant class as defined in section 249(2) of the Taxes Act. The Company has not issued any security (as defined in section 254(1) of the Taxes Act) outstanding on Closing in circumstances such that any interest or other payment payable in respect of it may be treated as a distribution under section 209 of the Taxes Act, and has not agreed to issue any such security. (g) Controlled Foreign Companies. The Company has not received any notice of the making of a direction under section 747 of the Taxes Act and no circumstances exist which would entitle the Inland Revenue to make such a direction and to apportion to the Company any profits of a controlled foreign company pursuant to section 752 of the Taxes Act. (h) Company Residence, Treasury Consents and Migration. The Company is and has at all times in the seven (7) years immediately preceding the date of this Agreement been accepted by the UK Inland Revenue as resident in the United Kingdom for Tax purposes and is not and has not been treated for the purposes of any double taxation arrangements having effect by virtue of section 788 of the Taxes Act or for any other Tax purpose as resident in any other jurisdiction (including the conduct of the affairs of the Company so as to be engaged in a United States trade or business through a permanent establishment within the meaning of Article 5 of the Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains), nor is the Company nor has it been directly subject to Tax in any other jurisdiction, except for United States Federal excise taxes imposed under section 4371 et seq. of the IRC in the circumstances described in Schedule 3.14. The Company has not carried out or caused or permitted to be carried out any of the transactions specified at the relevant time in section 765(1) of the Taxes Act otherwise than with the prior consent of HM Treasury (and, in the case of a special consent, full particulars of which have been disclosed to Buyer and Parent in writing prior to the date hereof; and any conditions subject to which such consent was given have been complied with in full) or specified at the relevant time in section 765A of the Taxes Act without having duly provided the required information to the Inland Revenue. (i) Value Added Tax. (1) This Section 3.14(i) shall apply, with appropriate modifications, to any equivalent sales or turnover tax in any jurisdiction other than the United Kingdom to which the Company is subject. (2) The Company: (A) is registered for the purposes of VAT, has been so registered at all times that it has been required to be registered by VAT Legislation, and such registration is not subject to any conditions imposed by or agreed with HM Customs & Excise; and has complied fully with and observed in all material respects the terms of VAT Legislation; (B) has maintained and obtained all the records, invoices and other documents (as the case may be) required by the VAT Legislation and has preserved such records, invoices and other documents in such form and for such periods as are required by VAT Legislation; (C) has disclosed to Buyer in writing (i) full details of any method approved or directed for use by the Company by the Commissioners of Customs & Excise under regulation 31 of the Value Added Tax (General) Regulations 1985 (SI 1985/886 as amended) or under regulation 30(5) of such Regulations as in force before the substitution effected by the Value Added Tax (General) (Amendment) Regulations 1992 (SI 1992/645) and which continues in force and effect whether by specific agreement with such Commissioners or otherwise and (ii) the average percentage input tax recovery obtained by the Company in the last eight (8) prescribed accounting periods ending before the date of this Agreement (prescribed accounting period having the meaning ascribed to that expression by regulation 58 of the said Regulations of 1985); (D) is a member of a group for VAT purposes but is not the representative member of that group; (E) is not required to make payments on account of VAT for which it may become liable in a prescribed accounting period (pursuant to The Value Added Tax (Payments on Account) Regulations 1992); and (F) is not and has not been subject under VAT Legislation to any penalty liability notice, written warning of failure to comply, surcharge liability notice or requirement to give security as a condition of making taxable supplies. (3) In respect of each of the assets of the Company (if any) which is a capital item for the purpose of Part VA of the Value Added Tax (General) Regulations 1985, Seller has disclosed to Buyer and Parent in writing, prior to the date of this Agreement, full details of the capital item affected, the amount of the total input tax (within the meaning of such Regulations) which is subject to adjustment, the percentage of the total input tax which was reclaimable on the capital item in the first interval applicable to it and any adjustments made or to be made having regard to Events occurred up to the date of this Agreement, the date of acquisition of the capital item and the number of intervals in the adjustment period remaining from the date of this Agreement, and full details of all matters to date relevant in determining any adjustments. (j) Stamp Duties. All documents in the possession or under the control of the Company or to the production of which the Company is entitled which establish or are necessary to establish the title of the Company to any asset have been duly stamped and any applicable stamp duties or charges in respect of such documents have been duly accounted for and paid, and no such documents which are outside the United Kingdom would attract stamp duty if they were brought into the United Kingdom. SECTION 3.15. Assets. (a) Investments. (1) Schedule 3.15(a)(1) sets forth a true, complete and correct list of all securities, mortgages and other investments, including those held by Accord under its reinsurance Contracts with the Company (collectively, the "Investments"), owned by the Company on June 30, 1993, together with the date of purchase, cost basis and book value thereof as of June 30, 1993. Except as set forth on Schedule 3.15(a)(1), the Company has good and marketable title to all the Investments listed on Schedule 3.15(a)(1) or acquired in the ordinary course of business since June 30, 1993 (in each case, other than with respect to those Investments disposed of in the ordinary course of business consistent with past practice since June 30, 1993) (collectively, the "Scheduled Investments"). As of June 30, 1993, none of the Scheduled Investments is in default in the payment of principal or interest and, except as disclosed on Schedule 3.15(a)(1), the ratings assigned to each of the Scheduled Investments that are rated by a rating agency have not been lowered or downgraded since March 31, 1993. There are no Liens on any of the Scheduled Investments, except as set forth on Schedule 3.15(a)(1). (2) Schedule 3.15(a)(2) sets forth a true, complete and correct list, as of June 30, 1993, of all sales, purchases, exchanges or other transactions in or affecting the Company's investment portfolio since the Balance Sheet Date. (b) Real Property. Other than the Greenwich View Place property (all of the rights and interests in which will be transferred out of the Company as a result of the execution and delivery of the Greenwich View Transfer Documents), the Company does not own any right or interest in any land or buildings. Other than the agreement for lease and the license for the Company's current office space located at 77 Gracechurch Street and 85 Gracechurch Street, respectively, the Company is not actually or contingently liable as an original contracting party to, or as guarantor of any party to, or otherwise contractually liable in respect of, any lease or leasehold property or license connected therewith. (c) Other Property. Except as otherwise set forth on Schedule 3.15(c), the Company has good and marketable title to or valid leasehold or license interests in all property and other assets (including all tangible personal property and assets but excluding Investments and real property, because they are covered by Sections 3.15(a) and 3.15(b), respectively) reflected in the Company Balance Sheet and all other properties or assets (including the assets acquired by the Company in the Unionamerica Reorganization (as defined in Section 3.27) which, individually or in the aggregate, are material to the operation of the Company (other than that disposed of in the ordinary course of business consistent with past practice prior to the date hereof) (all such properties and assets being referred to collectively as the "Material Properties"). Except as otherwise set forth on Schedule 3.15(c), the Company owns each of the Material Properties free and clear of all Liens other than (A) Liens reflected in the Company Financials, (B) Liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceedings (for which provisions or reserves have been made by the Company to the extent required by UK Accounting Standards) and (C) Liens which do not materially impair the value or interfere with the use of the properties affected thereby. SECTION 3.16. Compliance with Laws, etc. (a) Except as set forth on Schedule 3.16, the Company is in compliance with all United Kingdom, United States Federal, State, local or foreign judgments, orders, injunctions, laws, statutes, regulations and ordinances, and all licenses, approvals and permits issued by any Governmental Authority, applicable to it or any of its properties, assets, operations or business, except where the failure of the Company to be so in compliance would not in any case or in the aggregate have a Material Adverse Effect. Without prejudice to the generality of the foregoing, the Company and its directors and officers (in their capacities as such) have complied in all material respects with all their respective obligations under the Insurance Companies Act and there are no matters arising from such compliance which are the subject of any dispute with the Department of Trade and Industry. (b) The Company has filed or otherwise provided all material reports, data, statements, documents, applications, registrations, filings or submissions required to be filed with or otherwise provided to any Governmental Authority with jurisdiction over the Company or its business or operations. All such filings complied with applicable laws and regulations in all material respects. The Company has not received written notice of any material deficiencies asserted by any Governmental Authority with respect to any such filings which have not been cured or otherwise resolved to the satisfaction of such Governmental Authority and, except as otherwise disclosed on Schedule 3.16, there have been no material disputes or controversies with, or investigations undertaken by, any such Governmental Authority with respect to the Company or its business or operations. SECTION 3.17. Insurance for Company's Operations. Schedule 3.17 contains a true, complete and correct list of all liability, property and casualty, employee liability, directors and officers liability, surety bonds, key man life insurance and other similar insurance Contracts that insure the business, properties, operations or affairs of the Company or affect or relate to the ownership, use or operations of the Company's assets or properties and the amount of coverage under each such insurance Contract. All premiums due on all such insurance Contracts have been paid, no notice of termination of any such insurance Contract has been received and, to the knowledge of Seller, all such insurance Contracts are in full force and effect. SECTION 3.18. Insurance Business. The Company possesses all licenses, certificates of authority, excess and surplus lines eligibilities, permits, orders, approvals or other authorizations (each, a "Permit") required to transact or accept insurance or reinsurance in or from all jurisdictions in or from which the Company now transacts or accepts insurance or reinsurance (including jurisdictions in which CRC(UK) transacted or accepted insurance or reinsurance which has been assumed by the Company), except where the failure to possess a Permit would not in any case or in the aggregate have a Material Adverse Effect. All such Permits are in full force and effect, except where the failure of any of the Permits to be in full force and effect would not in any case or in the aggregate have a Material Adverse Effect. Neither the Company nor any of its Affiliates has received any notice of any event, inquiry, investigation or proceeding that could reasonably be expected to result in the suspension, revocation, non-renewal or limitation of any such Permit or the imposition of any restrictions or requirements with respect thereto and, to the knowledge of Seller, there is no sustainable basis that could reasonably be expected to result in any such suspension, revocation, non-renewal or limitation or the imposition of any restrictions or requirements with respect thereto, except where the suspension, revocation, non-renewal or limitation of a Permit or the imposition of any restrictions or requirements with respect thereto would not in any case or in the aggregate have a Material Adverse Effect. SECTION 3.19. Reinsurance. Schedule 3.19 contains a true, complete and correct list of all Contracts pursuant to which the Company has ceded insurance or reinsurance of more than US $15,000 of liabilities in any single case or more than US $50,000 of liabilities in the aggregate to any single reinsurer or retrocessionaire (each a "Reinsurance Agreement"). Schedule 3.19 sets forth, with respect to each such reinsurer and retrocessionaire: (a) where reasonably available to the Company, the name and jurisdiction of domicile of such reinsurer or retrocessionaire; (b) the amounts due in respect of such reinsurer's or retrocessionaire's Reinsurance Agreements; (c) whether the Company or, to the knowledge of Seller, such reinsurer and retrocessionaire is in default under any such Reinsurance Agreements; and (d) any funds withheld or letters of credit or other security provided pursuant to or in connection with such Reinsurance Agreement. To the knowledge of Seller and except as set forth on Schedule 3.12, each of the Reinsurance Agreements is valid and binding in all material respects in accordance with its terms; provided, however, that, notwithstanding anything contained in any of the Transaction Documents, Seller makes no further representation as to the collectibility of any amounts due under any of the Reinsurance Agreements. Schedule 3.19 also sets forth a true, correct and complete copy of the Company's most recent aged reinsurance balances receivables report prior to the date of this Agreement, which discloses all receivables overdue under the terms of the Reinsurance Agreements as of the date of such report. Except as set forth on Schedule 3.19, none of the Reinsurance Agreements contains any provision providing that the other party thereto may terminate such Reinsurance Agreement by reason of the transactions contemplated by this Agreement. The Company is entitled to take full credit (without any requirement to provide against future payments of premium) in its statutory financial statements for reinsurance, coinsurance or excess insurance ceded pursuant to such Reinsurance Agreements under applicable insurance laws. SECTION 3.20. Service Marks, Trademarks, Intellectual Property, etc. (a) Schedules 3.20(a)(1) and 3.20(a)(2) set forth true, complete and correct lists (including the current status of any registrations) of all foreign and domestic patents, trademarks, service marks, trade names, corporate and assumed names, design rights, copyrights (excluding rights in computer software other than those items of computer software set forth in Schedule 3.20(a)(2)), copyright registrations and applications therefor, rights in know-how and other intangible and intellectual property rights of any kind that are material to the business or operation of the Company, in each case whether registered or unregistered and including applications for the grant of any of the foregoing and all rights or forms of protection having equivalent or similar effect to any of the foregoing which may subsist anywhere in the world (each, an "Intellectual Property Right"), in each case held or beneficially owned by, licensed to or registered in the Company or used in its business. At the Closing, pursuant to the Assignment of Trademarks or otherwise, the Company will have vested in it all right and title to use the word "Unionamerica" in respect of the business of the Company to the extent that Seller and its Affiliates (including the Company) have such rights as of the date of this Agreement. No registrations have been sought or obtained with respect to the word "Unionamerica" in any countries in the world other than those set out in the Assignment of Trademarks. Except as set forth on Schedule 3.20(a)(1), (1) the Company is the sole owner, or has a valid and effective license or otherwise has the right to use, all of the Intellectual Property Rights and (2) the Company has the right to use, free and clear of any royalty or other payment obligations, claims of infringement or Liens, all Intellectual Property Rights that are material to the conduct of its business. With respect to the software set forth on Schedule 3.20(a)(2), and except as otherwise set forth on such Schedule, either UA Management or the Company or one of its Affiliates is the sole owner, or has a valid and effective license or otherwise has the right to use (free and clear of any royalty or other payment obligations, claims of infringement or Liens), all of such software. The Company has made all material payments and performed all of its other material obligations and covenants in connection therewith and the representations and warranties of the Company to the licensors and sublicensors thereof were materially true and correct when made. (b) Except as set forth on Schedule 3.20(a)(1), (1) the Company has not been charged and has not received any claim or charge (written or, to the knowledge of Seller, oral), and to the knowledge of Seller there is no basis for any such claim or charge, with respect to the infringement (whether in the past or as an ongoing matter) of any unexpired patent, trademark, trade name, service mark or design, copyright, copyright registration or other proprietary right of any Person (including Seller and its Affiliates) and (2) to the knowledge of Seller, the Company has not made unlicensed use of confidential information. No act has been done or omitted to be done, and no event has occurred or to the knowledge of Seller is reasonably likely to occur, which may render any of the Intellectual Property Rights subject to revocation, compulsory license, cancellation or amendment or may prevent the grant or registration of a valid intellectual property right pursuant to a pending application. To the knowledge of Seller, no Person other than the Company (and other Affiliates of Seller to the extent set forth on Schedule 3.20(a)(1)) uses any of the service marks listed on Schedule 3.20(a)(1) and no Person has disputed the right of the Company to use without restriction any such service marks. No Intellectual Property Rights owned or used by the Company and no use by or license for use granted to the Company will be lost, or rendered liable to any right of termination by any Persons, by reason of the transactions contemplated by this Agreement. (c) All the records and systems (including computer systems) and all data and information of the Company are recorded, stored, maintained or operated or otherwise held by the Company (or by Seller or its Affiliates for the benefit of the Company), free from any Lien. SECTION 3.21. Employee Benefit Plans. (a) Except as otherwise disclosed on Schedule 3.21, none of the Employees is a member or proposing to become a member of, and the Company is not a party to, any share incentive scheme, share option scheme or profit sharing, bonus or other such incentive scheme. (b) Except with respect to the Unionamerica Scheme (as defined below) (and except as otherwise disclosed in Schedule 3.21), Seller has no obligation (whether contractual or otherwise) or intention to pay or provide for any "relevant benefits" within the meaning of Section 612 of the Taxes Act or any disability insurance or permanent health insurance. (c) No changes in or augmentation of the benefits currently provided under the Unionamerica Scheme have been announced by any Person or are being considered by Seller or the Company or the trustees of the Unionamerica Scheme or the principal company of the Unionamerica Scheme. (d) True, complete and correct information regarding the Unionamerica Scheme (as in effect on June 30, 1993) has been disclosed to Buyer and are set out in Schedule 3.21 and no changes have been made to the Unionamerica Scheme since such date. (e) The Company participates in the Unionamerica Scheme. All companies participating in the Unionamerica Scheme have been properly admitted to participate therein and participate therein on the same terms as apply to all other participating employers. (f) True, complete and correct copies of the Trust Deed and Rules and other documents containing the provisions currently governing the Unionamerica Scheme, along with true, complete and correct information regarding the benefits and entitlements thereunder, have been delivered to Buyer as well as a current membership list, and the Company (except as otherwise disclosed on Schedule 3.21) has no liability (including any liability connected with the making of transfer payments by the Unionamerica Scheme) to any Person in respect of or connected with the membership or former membership in the Unionamerica Scheme of any Person other than as revealed in such documents and information. The information which has been made available to Buyer is true, complete and correct and fairly presented; and to the extent that it related to the assets or membership data of the Unionamerica Scheme at a particular date, there has been no material adverse change in the Unionamerica Scheme, except as disclosed to Buyer's Actuary. (g) True, complete and correct copies of the latest actuarial valuation report and of the latest accounts to the Unionamerica Scheme have been delivered to Buyer. (h) The Unionamerica Scheme is an "exempt approved scheme" (within the meaning of Chapter I of the Part XIV of ICTA 1988) and has at all times complied with and been administered in accordance with all applicable laws, regulations and requirements, including the requirements of the Inland Revenue for continued approval as an exempt approved scheme and of trust law; and there is not and never has been an appropriate contracting-out certificate (within the meaning of Section 3 of the Social Security Pensions Act 1975) in force in respect of the Unionamerica Scheme. There is no reason why approval of the Unionamerica Scheme by the Board of Inland Revenue should be withdrawn or cease to apply. (i) To the knowledge of Seller, there is no dispute with regard to the benefits payable under the Unionamerica Scheme and no legal proceedings by or against the trustees of the Unionamerica Scheme in their capacity as such are pending, threatened or expected, and to the knowledge of Seller there is no fact or circumstance likely to give rise to any such proceedings. (j) No refund of assets or monies to any employer participating in the Unionamerica Scheme has been or is proposed to be made. (k) The Company, the trustees and the administrator of the Unionamerica Scheme have each duly complied with all their obligations and duties (including statutory obligations) under and in respect of the Unionamerica Scheme; all amounts due to the trustees of the Unionamerica Scheme and to any insurance company in connection with the Unionamerica Scheme have been paid; and there are no material actions, suits or claims pending or threatened in respect of the Unionamerica Scheme (other than routine claims for benefits). (l) The Company (except as otherwise disclosed on Schedule 3.21) has no obligation or liability (actual or contingent, present or future) to contribute to any personal pension scheme (as defined in section 630 of the Taxes Act) in respect of any of its Employees. SECTION 3.22. Directors, Officers and Employees. (a) Schedule 3.22 contains a true, complete and correct list of certain individuals who are employed by the Company or who, as of the Closing, will be employed by the Company (each, a "Key Employee"), including, with respect to each such Key Employee, the annual salary or compensation of such Key Employee and any bonuses or incentive awards or other benefits paid or to which such Key Employee was or is entitled in 1992 and 1993. None of the Key Employees has served notice of termination of his/her employment with the Company. To the knowledge of Seller, there is not in existence any Contract of employment with any Employee (or any Contract for services with any individual) which, if terminated or purported to be terminated by three (3) months' notice or less, would give rise to a claim for material damages or compensation (in addition to any right to a claim for a statutory redundancy payment or statutory compensation for unfair dismissal). (b) No material dispute has arisen within the two (2) years immediately preceding the date of this Agreement between the Company and a material number or category of the Employees (or any trade union or other body representing all or any of the Employees) and, to the knowledge of Seller, there are no present circumstances which are likely to give rise to any such dispute. No material liability has been incurred by the Company for breach of any Contract of service or for services, for redundancy payments, protective awards or for compensation for wrongful dismissal or for failure to comply with any order for the reinstatement or re-engagement of any Employee for any other material liability accruing from the termination of employment or services. SECTION 3.23. Banks, Brokerage Accounts and Powers of Attorney. Schedule 3.23 contains a true, complete and correct list of: (a) the name of each bank, trust company, securities or other broker or other financial institution with which the Company has an account, credit line or safe deposit box or vault, or otherwise maintains business relations; (b) the name of each Person authorized by the Company to draw thereon or to have access to any safe deposit box or vault; and (c) the names of all Persons authorized by powers of attorney, proxies or other instruments to act on behalf of the Company (other than those Persons who are managing general agents and set forth on Schedule 3.11). SECTION 3.24. Brokers and Finders, etc. Neither Seller nor the Company, nor any of their respective officers, directors or employees, nor any of their Affiliates, has employed any broker, agent or finder, or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement, other than fees to the Persons listed on Schedule 3.24, which fees are obligations solely of Seller and will be duly paid by Seller. SECTION 3.25. Securities. Seller is acquiring the Buyer Shares and the Senior Preference Shares solely for its own account and not with a view to any distribution of the Buyer Shares or the Senior Preference Shares or any part thereof, or interest therein, except in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"). SECTION 3.26. Contribution. The cash contribution of US $44,928,493.00 made on June 17, 1993 by Seller to the Company, is properly characterized as profits available for distribution (distributable reserves) in accordance with section 263(3) of the Companies Act and in accordance with applicable UK Accounting Standards. SECTION 3.27. Unionamerica Reorganization. Prior to the date of this Agreement, Seller has made available to Buyer true, complete and correct copies of those certain agreements between the Company and certain of its Affiliates pursuant to which the Company acquired the assets set forth in those agreements (the "Unionamerica Reorganization"). SECTION 3.28. Termination of Certain Affiliate Contracts. As of the Closing, the Company shall have no liabilities or obligations (whether actual or contingent) under any of the Contracts set forth on Schedule 5.5. SECTION 3.29. Full Disclosure. No representation or warranty of Seller herein contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made not misleading. SECTION 3.30. No Representation as to Insurance or Reinsurance Reserves. Notwithstanding anything contained in any of the Transaction Documents, including, without limitation, any of the representations and warranties contained in this Article III, Seller makes no representation or warranty with respect to the adequacy of the Company's reserves for losses (including losses incurred but not reported) or loss adjustment expenses. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT Buyer and Parent represent and warrant as follows: SECTION 4.1. Corporate Existence. Each of Buyer and Parent is a private company limited by shares, incorporated in England, and has full power and authority and possesses all rights, licenses, authorizations and approvals, governmental or otherwise, necessary to entitle it to use its name, to own, lease or otherwise hold its properties and assets, to carry on its business as currently conducted and to perform its obligations under the Transaction Documents to which it is a party. Neither Buyer nor Parent has conducted any business other than in connection with the transactions contemplated by the Transaction Documents. SECTION 4.2. Authorization; Enforcement. Each of Buyer and Parent has all necessary corporate power and authority to execute and deliver the Transaction Documents to which it is a party, and to perform its obligations under the Transaction Documents to which it is a party in accordance with the terms of such Transaction Documents. Each of Buyer and Parent has taken all necessary corporate action to duly and validly authorize its execution and delivery of this Agreement and the consummation of the transactions contemplated thereby. As of the Closing, each of Buyer and Parent will have taken all necessary corporate action to duly and validly authorize its execution and delivery of the Transaction Documents (other than this Agreement) to which it is a party and the consummation of the transactions contemplated by such Transaction Documents. This Agreement has been duly executed and delivered by each of Buyer and Parent and constitutes a valid and legally binding obligation of each of Buyer and Parent, enforceable against each of them in accordance with its terms. On or before the Closing Date, each of the other Transaction Documents to which Buyer or Parent is a party will be duly executed and delivered by Buyer or Parent, as the case may be, and when executed and delivered by Buyer and Parent, as the case may be, will constitute a valid and legally binding obligation of Buyer or Parent, as the case may be, enforceable against Buyer or Parent, as the case may be, in accordance with its terms. SECTION 4.3. Consents and Approvals. No Consent is required to be obtained, made or given by or with respect to Buyer or Parent in connection with the execution and delivery by Buyer or Parent of any of the Transaction Documents to which Buyer or Parent, as the case may be, is a party, the performance by Buyer or Parent of its obligations under any of such Transaction Documents or the consummation of the transactions contemplated by the Transaction Documents, other than as described in Sections 6.1(e) and 6.1(f). SECTION 4.4. No Conflicts. Neither (i) the execution or the delivery by Buyer or Parent of this Agreement, or the performance by Buyer or Parent of this Agreement, or the consummation of the transactions contemplated by this Agreement, nor (ii) the execution or the delivery by Buyer or Parent of the Transaction Documents (other than this Agreement) to which Buyer or Parent is a party, or the performance by Buyer or Parent of such Transaction Documents, or the consummation of the transactions contemplated by such Transaction Documents, will at the time of such execution, delivery, performance or consummation (as the case may be): (a) conflict with or result in a breach of any provision of the Memorandum and Articles of Association of Buyer or Parent; (b) result in any conflict with, breach or violation of, or default (or event which, with the giving of notice or lapse of time or both, would constitute a default) under, require any consent or approval which has not been obtained with respect to, give rise to any right of termination, cancellation or acceleration of any obligations or loss of any benefit under, or result in the imposition of any Liens on any of the properties or assets of Buyer or Parent under: (1) any Contract or permit, concession, franchise or license to which Buyer or Parent is a party or by which it or any of its properties or assets is bound or (2) any order, decree, injunction, law, rule or regulation applicable to Buyer or Parent or any of its properties or assets, which conflict, breach, violation or default, or failure to obtain consent or approval, or right of termination, cancellation or acceleration, or loss of benefit or imposition of any Lien, would have, in any case or in the aggregate, a material adverse effect on Buyer's or Parent's business, operations, assets, liabilities or financial condition or which would interfere in any material way with the ability of Buyer or Parent to consummate the transactions contemplated by such Transaction Documents. SECTION 4.5. Capital Structure. As of the Closing, the Buyer Shares will have been duly authorized and, immediately prior to delivery of the relative share warrants to bearer in respect thereof in the manner described herein, will be validly issued and fully paid. Upon the exchange of the Buyer Shares for the A Senior Preference Shares pursuant to Section 1.2, the A Senior Preference Shares will have been duly authorized, will have the benefit of the applicable rights and covenants set forth in Exhibit B, and will rank senior in priority above any and all other classes of authorized share capital of Parent (other than the B Senior Preference Shares). Upon the exchange of the Buyer Shares for the A Senior Preference Shares pursuant to Section 1.2, the B Senior Preference Shares of US $1 each of Parent (the "B Senior Preference Shares" and, together with the A Senior Preference Shares, the "Senior Preference Shares") will have been duly authorized, and, upon issue, will have the benefit of the applicable rights and covenants set forth in Exhibit B and will rank senior in priority above any and all other classes of authorized share capital of Parent (other than the A Senior Preference Shares). Upon allotment and delivery of the relative share certificate(s) in respect of the A Senior Preference Shares in the manner described herein, the A Senior Preference Shares will be validly issued and fully paid. There are no standstill, voting or similar agreements or Contracts nor rights of first offer or first refusal to which Buyer, Parent or any of their respective Affiliates is a party that currently or in the future will limit the ability of any Person to acquire, vote, sell, hold or otherwise deal with the Buyer Shares (other than Liens which may be required by lenders to Buyer or Parent in connection with financing for this transaction) or the Senior Preference Shares. Upon the consummation of the transactions contemplated by this Agreement, Seller will acquire from Parent beneficial ownership of the A Senior Preference Shares, free and clear of all Liens, together with all rights which now are, or at any time hereafter may become, attached to them, including the right to receive all dividends and other distributions declared, made or paid after the Closing Date. SECTION 4.6. Brokers and Finders, etc. Neither Buyer nor Parent nor any of their respective directors, officers or employees, nor any of their Affiliates, has employed any broker, agent or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement. SECTION 4.7. Available Funds. Subject only to the satisfaction of the condition set forth in Section 6.1(h), Buyer will have sufficient funds at the Closing to purchase the Shares pursuant to this Agreement. SECTION 4.8. Securities. Buyer is acquiring the Shares solely for its own account and not with a view to any distribution or other disposition of the Shares or any part thereof, or interest therein, except in accordance with the Securities Act. SECTION 4.9. Full Disclosure. No representation or warranty of Buyer or Parent contained in this Agreement contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made not misleading. ARTICLE V COVENANTS SECTION 5.1. Operations in the Ordinary Course. Except as otherwise contemplated by this Agreement or consented to in writing by Buyer, from the date of this Agreement through the Closing Date, Seller will cause the Company to conduct its business only in the usual, regular and ordinary course consistent with past practices. Without limiting the generality of the foregoing, Seller will cause the Company to: (a) use reasonable efforts to maintain insurance coverages on the assets and properties of the Company on a basis consistent with past practice; (b) maintain its books, accounts and records on a basis consistent with past practice; (c) comply in all material respects with all applicable judgments, orders, injunctions, laws, statutes, regulations, ordinances and Permits of Governmental Authorities and preserve in full force and effect all Permits material to the Company's business and operations; (d) maintain and keep its material properties and equipment in good repair, working order and condition, subject to reasonable and normal wear and tear; (e) perform in all material respects its obligations under all Scheduled Contracts and under all insurance and reinsurance Contracts to which the Company is a party (in each case, on a basis consistent with past practice); and (f) use its reasonable efforts to maintain and preserve its business organization, retain the services of the Key Employees, and maintain its relationships with its agents, policyholders, suppliers and customers. SECTION 5.2. Restrictions. Except as otherwise contemplated by this Agreement or the Tax Indemnification Agreement or consented to in writing by Buyer, from the date of this Agreement through the Closing Date, Seller will not permit the Company to: (a) incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities of the Company or guarantee any debt securities of other Persons other than in the ordinary course of business consistent with past practice; (b) grant or create any Lien on any of its assets other than Liens in the ordinary course of business consistent with past practice; (c) make any material changes in its Investment Policies or make any material change in its financial, tax or accounting methods, principles or practices (including any material change with respect to the establishment of reserves for unearned premiums, losses (including incurred but not reported losses) and loss adjustment expenses or any change in depreciation or amortization policies or rates adopted by it), except as may be required by law or applicable UK Accounting Standards; (d) grant to any Employee any increase in salary or other regularly paid remuneration which would constitute a material increase in the salary or other remuneration of such Employee, or grant to any Employee any increase in severance or termination pay; grant or approve any general increase in salaries of all or a substantial portion of the Employees; pay or award any bonus, incentive compensation, service award or other like benefit for or to the credit of any Employee; enter into any employment Contract with any Employee except as may be required under any employment Contract set forth on Schedule 3.11; or adopt or amend in any material respect any Employee Benefit Plan; (e) authorize, allot, issue, deliver or sell any shares in the capital of the Company or obligations or securities convertible into or exchangeable for, or warrants, options or other rights in respect of, any such shares; (f) amend its Memorandum or Articles of Association; (g) declare, pay or make any dividends or other distributions (whether in cash, securities or other property or any combination thereof) or reduce, repurchase, redeem or otherwise acquire any of its share capital; (h) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any Person or otherwise acquire any assets or properties that are material, individually or in the aggregate, to the Company; (i) sell, lease or otherwise dispose of any of its assets or properties that are material, individually or in the aggregate, to the Company (other than transactions involving securities in its investment portfolio in the ordinary course of business consistent with past practice, except as set forth in paragraph (p) of this Section 5.2); (j) make any capital expenditure or execute any lease or incur any commitment or liability therefor not contained in a written budget prepared by the management of the Company on or before the date of this Agreement involving annual payments in excess of 15,000 pounds individually or 50,000 pounds in the aggregate (other than expenditures, leases, commitments or liabilities arising from the purchase or lease of automobiles owned by the Company for use in its business, if such automobiles are purchased or leased to replace an existing Company automobile and the purchase price or lease price for such new automobile is not materially greater than that for the automobile being so replaced); (k) enter into any Contract that would meet any criterion for inclusion on Schedule 3.11, or terminate, amend or modify any Scheduled Contract involving future liabilities in excess of 100,000 pounds in any case; (l) commute any reinsurance Contract with any of Seller's Affiliates; (m) cancel any indebtedness involving liabilities in excess of 10,000 pounds in any case; (n) waive or compromise any rights having an economic value to the Company in excess of 20,000 pounds in any case (other than commutations of insurance or reinsurance Contracts (other than those referred to in Section 5.2(l)) and settlements of insurance and reinsurance claims in the ordinary course of business consistent with past practice); (o) settle pending or threatened Litigation (other than insurance or reinsurance Litigation in the ordinary course of business consistent with past practice) in an amount exceeding 25,000 pounds in the aggregate; (p) take any capital gains (or realize any investment profit) in excess of US $500,000 in the aggregate or decrease the level of its technical reserves (other than the payment of claims under Insurance Arrangements in the ordinary course of business consistent with past practice); (q) purchase or otherwise invest in any interest in (1) real property (including any extension of credit secured by a mortgage or deed of trust), (2) common or ordinary shares or (3) bonds, notes, debentures or other evidence of indebtedness rated lower than "Aa" by Moody's Investors Service, Inc. or "AA" by Standard & Poor's Corporation at the time of purchase; (r) make any payments to its Affiliates (other than pursuant to the terms of the Scheduled Contracts described in Section 3.11(a)(8) and Insurance Arrangements); (s) take any action, or omit to take any action, that would result in, (1) any of the representations and warranties of Seller that are qualified as to materiality becoming untrue or any of such representations or warranties that are not so qualified becoming untrue in any material respect or (2) any of the conditions to the Closing not being satisfied; or (t) authorize any of, or commit or agree to take any of, the foregoing actions. SECTION 5.3. Related Matters. (a) Seller shall promptly report to Buyer the termination of employment of, or a written threat to terminate employment made by, any of the Key Employees. (b) Seller shall promptly notify Buyer in writing of any event, condition, change or effect having, or which, insofar as reasonably can be foreseen, would have, a Material Adverse Effect. (c) Seller shall promptly notify Buyer in writing of any matter or change that affects or, insofar as reasonably can be foreseen, would affect the accuracy or completeness of any representation or warranty made by Seller in this Agreement. If such representation or warranty is of a nature that can be made accurate, Seller shall use its reasonable efforts to promptly effect appropriate curative action and shall provide Buyer with evidence thereof reasonably satisfactory to Buyer. (d) Seller shall promptly notify Buyer in writing if it fails to perform or observe any covenant or agreement to be performed or observed by it under this Agreement and shall use its reasonable efforts to promptly effect appropriate curative action and shall provide Buyer with evidence thereof reasonably satisfactory to Buyer. SECTION 5.4. Access to Information. Seller shall cause the Company to afford to Buyer, and to Buyer's accountants, counsel, financial advisers and other representatives, at reasonable times (during normal business hours) during the twenty (20) Business Days following the execution of this Agreement (subject to extension by written agreement of Buyer and Seller) (the "Initial Due Diligence Period") and thereafter until the Closing Date, access to all of its books, records, Contracts, facilities and personnel, including management and Employees, so that Buyer may investigate the Company (including its financial statements, accounting methods, assets, liabilities, insurance and reinsurance Contracts and other arrangements, client lists, administrative procedures, operations and business plans and prospects); and Seller shall cause the Company to furnish promptly to Buyer from the date hereof until the Closing: (a) a copy of each material document filed by it or provided during such period pursuant to the requirements of any United Kingdom, State or other applicable insurance law or regulation; (b) updated financial statements comparable to those described in Section 3.8(a) promptly after such financial statements have been prepared by the Company in accordance with past practice, in the case of each quarterly financial statement, certified by the Finance Director of the Company and, in the case of each annual financial statement, signed by the directors and audited by KPMG Peat Marwick; (c) after the end of each month, its management financial reports (together with all accompanying documents), underwriting revenue accounts and profits and loss accounts, in each case prepared with respect to such month in accordance with past practice; (d) each written report or examination of financial condition or market conduct (whether in draft or final form) of the Company issued by any Governmental Authority that has been received by the Company; (e) after the end of each month, status reports of the Scheduled Investments and any other Investments in the Company's investment portfolio after the date hereof, showing the composition and valuation of the investment portfolio as of the end of such month (provided that during the month immediately preceding the anticipated Closing Date, Seller shall cause Buyer to be furnished with such investment portfolio status reports at the end of each week); (f) all auditors' working papers (to the extent reasonably obtainable) and internal work papers utilized or referred to in the preparation of the Company Financials; (g) all material correspondence with any Governmental Authority or Tax Authority; (h) all correspondence, internal memoranda and filings relating to any material Litigation or claims against the Company (other than in connection with Insurance Arrangements) solely to the extent that furnishing such documents would not, in the reasonable judgment of counsel to Seller, breach any attorney-client privilege; and (i) all other information and documents concerning the Company's business, properties and personnel as Buyer may reasonably request. All nonpublic information received pursuant to this Section 5.4 shall be deemed by the parties hereto to be "Confidential Information" for purposes of the Confidentiality Agreement dated October 12, 1992 between Lazard Brothers & Co., Limited and International Insurance Advisors, Inc. (the "Confidentiality Agreement") and shall be subject to the Confidentiality Agreement. SECTION 5.5. Termination of Certain Affiliate Agreements. Seller shall cause each of the Contracts between the Company and its Affiliates listed on Schedule 5.5 to be terminated prior to the Closing with settlement values not to exceed amounts actually accrued under such Contracts and in no event to include compensation for early termination (except in the case of the inwards reinsurance agreement with The Continental Insurance Company which will be cancelled in exchange for a payment by the Company not exceeding the Company's net reserves recorded in its books as at the date of cancellation in respect of its net retention under that agreement and the outwards reinsurance contract with Bayside Reinsurance Company, which will be cancelled without compensation). SECTION 5.6. No Solicitation. Seller shall not, nor shall it permit any of its Affiliates to, nor shall it authorize or permit any director, officer or employee (or any investment banker, attorney or other advisor or representative) of Seller or any of its Affiliates to, directly or indirectly, (a) solicit, initiate or encourage the submission of any Investment Proposal (as defined below), (b) enter into any Contract with respect to any Investment Proposal, (c) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Investment Proposal. Without limiting the generality of the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any director, officer or employee (or any investment banker, attorney or other advisor or representative) of Seller or any of its Affiliates, with the knowledge of Seller but whether or not such Person is purporting to act on behalf of Seller or otherwise, shall be deemed to be a breach of this covenant by Seller. For the purposes of this Agreement, "Investment Proposal" means any proposal or offer (other than an offer by Buyer or any of its Affiliates) for a merger, consolidation or other business combination involving the Company or any proposal or offer (other than a proposal or offer by Buyer or any of its Affiliates) to acquire in any manner, directly or indirectly, an equity interest in any voting securities of or a substantial portion of the assets of the Company. SECTION 5.7. Financing. Buyer shall use its best efforts to obtain within ten (10) Business Days following the expiration of the Initial Due Diligence Period (the "Commitment Date"), one or more commitment letters between Buyer and lenders which, subject to the satisfaction or waiver of certain conditions, commit such lenders to make available to Buyer an aggregate of not less than US $80,000,000. SECTION 5.8. Filings and Authorizations. Each of Buyer, Parent and Seller shall, as promptly as practicable, file or supply, or cause to be filed or supplied, all applications, notifications and information required to be filed or supplied by it pursuant to applicable law in connection with the transactions contemplated by this Agreement, including such documentation and information as may be requested by the Secretary of State (as referred to in the Insurance Companies Act) in order to obtain the approval described in Section 6.1(e). Each of Buyer, Parent and Seller, as promptly as practicable, shall (a) make, or cause to be made, all such filings and submissions under laws, rules and regulations applicable to it, or to its Affiliates, and give such reasonable undertakings, as may be required for it to consummate the transactions contemplated by this Agreement, (b) use its reasonable efforts to obtain or cause to be obtained, all authorizations, approvals, consents and waivers from all Persons and Governmental Authorities necessary to be obtained by it, or its Affiliates, in order for it so to consummate such transactions and (c) use its reasonable efforts to take, or cause to be taken, all other actions necessary, proper or advisable in order for it to fulfill its obligations hereunder. Buyer, Parent and Seller will coordinate and cooperate with one another in exchanging such information and supplying such reasonable assistance as may be reasonably requested by each in connection with the foregoing. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Conditions to Buyer's and Parent's Obligations. The obligations of Buyer and Parent to consummate the Closing are subject to the delivery of all documents required to be delivered by Seller pursuant to Section 2.2 and to the satisfaction in full, prior to or at the Closing, of each of the following conditions precedent (any one or more of which may be waived by Buyer and Parent): (a) Representations and Warranties. All representations and warranties of Seller contained in Article III qualified as to materiality shall be true, complete and correct, and those not so qualified shall be true, complete and correct in all material respects, at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, except as affected by actions taken after the date of this Agreement in compliance with the terms hereof. (b) Compliance with Agreements and Conditions. Seller shall have performed and complied in all material respects with all covenants, agreements, obligations and conditions required by this Agreement to be performed or complied with by it at or before the Closing Date. (c) Seller's Certificates. Seller shall have delivered to Buyer and Parent: (1) a certificate, dated the Closing Date, signed on behalf of Seller by two (2) of its officers who shall be executive vice presidents and/or senior vice presidents, to the effect that the conditions set forth in Sections 6.1(a) and 6.1(b) have been satisfied; and (2) a certificate, dated the Closing Date, signed on behalf of Seller by its chief financial officer, to the effect that the contribution of US $44,928,493 contributed to the Company by Seller as described in Section 3.26 is properly characterized as profits available for distribution (distributable reserves) in accordance with section 263(3) of the Companies Act and in accordance with applicable UK Accounting Standards as of the Closing Date. (d) Litigation. The consummation of the Closing shall not have been prohibited or restrained by any order, injunction, decree or judgment of any Governmental Authority. (e) Insurance Companies Act Approval. Either (1) Buyer shall have received from the Secretary of State, before the expiration of the three (3) month period from the date of service on him of the notice of intention of each of Buyer, Parent and certain of their Affiliates to become a controller of the Company and comply with section 61 of the Insurance Companies Act, a written notice stating that the Secretary of State has no objection to each such Person becoming a controller of the Company, or (2) such three (3) month period shall have elapsed without the Secretary of State having served a written notice of objection in respect of any such Person becoming a controller. (f) Monopolies and Mergers Approval. Buyer shall have received, in form and substance reasonably satisfactory to it, confirmation from the Secretary of State for Trade and Industry that the proposed acquisition and any matters arising therefrom will not be referred to the Monopolies and Mergers Commission. (g) Opinions. Buyer shall have received the opinions dated the Closing Date, addressed to Buyer, of (1) Debevoise & Plimpton, United States counsel to Seller, substantially in the form of Exhibit L; and (2) Lovell White Durrant, English solicitors to Seller and the Company, substantially in the form of Exhibit M. (h) Financing. Buyer shall have obtained proceeds from financing sources in an aggregate amount of not less than US $80,000,000 on substantially the terms and conditions set forth in the letters described in Section 5.7 to enable it to consummate the transactions contemplated hereby. SECTION 6.2. Conditions to Seller's Obligations. Seller's obligations to consummate the Closing are subject to the delivery of all documents required to be delivered by Buyer or Parent pursuant to Section 2.2 and to the satisfaction in full, prior to or at the Closing, of each of the following conditions precedent (any one or more of which may be waived by Seller): (a) Representations and Warranties. All representations and warranties of Buyer and Parent contained in Article IV qualified as to materiality shall be true, complete and correct, and those not so qualified shall be true, complete and correct in all material respects, at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, except as affected by actions taken after the date of this Agreement in compliance with the terms hereof. (b) Compliance with Agreements and Conditions. Buyer and Parent shall have performed and complied in all material respects with all covenants, agreements, obligations and conditions required by this Agreement to be performed or complied with by them at or before the Closing Date. (c) Buyer's Certificates. Buyer and Parent shall have delivered to Seller certificates, dated the Closing Date, signed on behalf of Buyer by two (2) of its directors, and on behalf of Parent by two (2) of its directors, to the effect that the conditions set forth in Sections 6.2(a) and 6.2(b), respectively, have been satisfied. (d) Litigation. The consummation of the Closing shall not have been prohibited or restrained by any order, injunction, decree or judgment of any Governmental Authority. (e) Consents. The Consents described in Sections 6.1(e) and 6.1(f) shall have been duly obtained, made or given and shall be in full force and effect at the Closing. (f) Opinions. Seller shall have received the opinion dated the Closing Date, addressed to Seller, of (1) Freshfields, English solicitors to Buyer and Parent, substantially in the form of Exhibit N, and (2) LeBoeuf, Lamb, Leiby & MacRae, United States counsel to Buyer and Parent, substantially in the form of Exhibit O. ARTICLE VII FURTHER AGREEMENTS SECTION 7.1. Pension Agreement. (a) Definitions. In this Section 7.1, unless the context otherwise requires, expressions shall have the following meanings: (1) "Transfer Amount" means the transfer amount calculated in accordance with the Actuary's Letter. (2) "Actuary's Letter" means the letter from Seller's Actuary to Buyer's Actuary, a copy of which is attached in the agreed form as Schedule 7.1. (3) "Interest" means, in relation to any amount, the increase in the value of a unit in the Scottish Widows Pension Management (SWF) Limited Managed Fund between one day before the Payment Date and one day before the date of actual payment. (4) "Payment Date" means such date as shall be agreed in writing by Seller and Buyer falling on or after the Pension Transfer Date or, in default of agreement, seven (7) days after the later of the following dates: (A) The date the Transfer Amount is agreed upon by Buyer's Actuary in accordance with Section 7.1(d) or the date of final determination of the Transfer Amount in accordance with Section 7.1(g) (as the case may be), or (B) The date the Inland Revenue approves the transfer from the Unionamerica Scheme to Buyer's Scheme (if such approval is necessary). (5) "Buyer's Actuary" means Mr. Ian Boonin of Coopers & Lybrand or such other Actuary as Buyer may from time to time appoint for the purposes of this Section 7.1. (6) "Buyer's Scheme" means a scheme or schemes to be nominated in accordance with Section 7.1(c), and where the context requires, means the trustees of Buyer's Scheme. (7) "Pension Transfer Date" means Closing or where Buyer so requests a period of continued participation by the Company as an Employer under the Unionamerica Scheme (such period being an "Interim Period") a date not later than December 31, 1993 or such prior date falling between Closing and December 31, 1993 as Buyer shall on written notice to Seller select. Any participation during an Interim Period shall be upon such terms and conditions as Seller and Buyer shall agree but subject always to the terms and conditions for participation by an Employer set out in the Unionamerica Scheme at the date of this Agreement. (8) "Relevant Employees" means those Key Employees who are active members of the Unionamerica Scheme at Closing. (9) "Transferring Employees" means those of the Relevant Employees who continue to be employed by the Company after Closing and who become members of Buyer's Scheme with effect from the Pension Transfer Date pursuant to the offer of membership referred to in Section 7.1(c) and who consent to a payment or transfer from the Unionamerica Scheme to Buyer's Scheme in respect of the benefits accrued up to the Pension Transfer Date under the Unionamerica Scheme for and in respect of them. (10) "Unionamerica Scheme" means the Unionamerica Pension Scheme (formerly known as the Continental Reinsurance London Pension Scheme and prior to that and from its inception known as the Unionamerica Management Co. Ltd. Retirement and Death Benefits Scheme) established by a declaration of trust dated December 13, 1972 and now governed by a Trust Deed and Rules dated August 22, 1991. (11) "Seller's Actuary" means Mr. Christopher Carr of The Alexander Consulting Group or such other Actuary as Seller may from time to time appoint for the purposes of this Section 7.1. (b) Period between Exchange of Contracts and Closing/Payment Date. It is hereby agreed that: (1) Seller shall procure that the Unionamerica Scheme shall be maintained in full force and effect until the Payment Date and shall use its best efforts to procure that the Unionamerica Scheme retains approval as an exempt approved scheme under Chapter 1 of Part XIV of the Taxes Act. (2) Seller shall procure that, with the exception of such amendments as may be necessary to enable the Unionamerica Scheme to comply with any statutory provision or regulation or any direction from or requirement of the Inland Revenue, no amendment to the Unionamerica Scheme will be made prior to the Payment Date if such amendment would affect the Transfer Amount or the amount to be received by Buyer's Scheme pursuant to this Section 7.1. (3) Seller shall use its best efforts to procure that, except with Buyer's prior written consent, no act or omission shall occur before the Pension Transfer Date which causes or would cause: (A) The transfer of all or any part of the Transfer Amount to Buyer's Scheme to be unreasonably delayed or prevented; or (B) An enhancement or change before the Payment Date of any benefits payable or contingently payable under the Unionamerica Scheme to any Relevant Employee. (4) Until the Pension Transfer Date all benefits payable under the Unionamerica Scheme on the death of a Relevant Employee before normal pension age while in employment will be fully insured under a policy with an insurance company of good repute authorized to issue such insurance. (c) Buyer's Scheme. Subject to Seller complying with Section 7.1(b) above in all material respects, Buyer shall use all reasonable efforts to procure before Closing and shall in any event procure that before the Payment Date and with effect from a date no later than the Pension Transfer Date, Buyer will have nominated or established (or become a party to) a retirement benefits scheme which is approved or capable of approval under Chapter I of Part XIV of the Taxes Act and to which the trustees of the Unionamerica Scheme can make a transfer of cash and/or assets without prejudicing the approval of the Unionamerica Scheme as an exempt approved scheme. Buyer shall procure that each of the Relevant Employees who remain employed by the Company and who have not attained the normal pension age under either Buyer's Scheme or the Unionamerica Scheme at the Pension Transfer Date will be offered membership of Buyer's Scheme with effect from the Pension Transfer Date. Subject to receipt by Buyer's Scheme of the Transfer Amount together with Interest, if any, Buyer shall procure that Buyer's Scheme shall credit the Transferring Employees in respect of their pensionable service in the Unionamerica Scheme before the Pension Transfer Date with benefits on the terms of Buyer's Scheme which are, agreed by Seller's Actuary and Buyer's Actuary, as being no less favorable overall in value to those benefits which apply to the Transferring Employees at the date of this Agreement. (d) Determination of Transfer Amount. (1) As soon as reasonably practicable after the date of this Agreement, Seller shall instruct Seller's Actuary to prepare prior to Closing such calculations as may reasonably be required by Buyer's Actuary for the purpose of verifying the Transfer Amount and to make available such calculations promptly to Buyer's Actuary. (2) As soon as reasonably practicable after Closing, Seller shall instruct Seller's Actuary to calculate the Transfer Amount and to submit his findings to Buyer's Actuary for verification and agreement by him. If Buyer's Actuary agrees that such computation is in accordance with this Section 7.1, he shall notify in writing, within thirty (30) days after receipt of Seller's Actuary's findings, Seller's Actuary and Buyer of such agreement. If Buyer's Actuary does not agree as aforesaid, Seller's Actuary and Buyer's Actuary will then seek within thirty (30) days to negotiate a satisfactory agreement. If Seller's Actuary and Buyer's Actuary remain unable to agree upon the Transfer Amount after such period, the matter shall be referred to an Independent Actuary pursuant to Section 7.1(g). (3) Seller shall use its best efforts to procure that all such information as Buyer's Actuary may reasonably require for the purpose of verifying and agreeing the Transfer Amount shall be made promptly available to Buyer's Actuary and that all such information shall be true and complete. (4) Seller and Buyer shall use their best efforts to expedite the calculation and agreement of the Transfer Amount. (e) Payment of Transfer Amount. Seller hereby (subject to Buyer complying in all material respects with its obligations under Section 7.1(c) above) consents to the trustees of the Unionamerica Scheme making a payment in cash (or such other assets of mid-market value as Buyer may agree or a combination of both) equal to the Transfer Amount on the Payment Date together with Interest, if any, from the Payment Date to the date of actual payment. Seller shall procure that with effect from the Pension Transfer Date the Company is released and discharged from all liabilities under or in connection with the Unionamerica Scheme or to the trustees of the Unionamerica Scheme. To the extent that the amount received on or before the Payment Date by Buyer's Scheme from the Unionamerica Scheme falls short of that which would have been paid (or if no amount is paid) but is payable had the Transfer Amount in respect of Transferring Employees been calculated in accordance with the Actuary's Letter and this Section 7.1 (the amount of such difference being referred to in this paragraph as the "shortfall"), Seller then shall pay forthwith to Buyer within seven (7) days of the Payment Date an amount equal to the shortfall together with Interest. Buyer shall cause an amount equal to the shortfall to be paid to the trustees of Buyer's Scheme as soon as reasonably practicable and in any event no later than one month after receipt of the shortfall by Buyer. (f) Additional Voluntary Contributions. Any money purchase benefits (as defined in Section 66(1) of the Social Security Pension Act of 1975) attributable to additional voluntary contributions made (or deemed to have been made) by the Transferring Employees to the Unionamerica Scheme together with the accrued investment return thereon shall be disregarded for the purpose of determining the Transfer Amount. Seller shall use its best efforts to procure that on the Payment Date, where a Transferring Employee so requests and subject to applicable legislative and regulatory requirements, the trustees of the Unionamerica Scheme shall pay or transfer to the trustees of Buyer's Scheme, in addition to the Transfer Amount together with Interest, if any, all sums or policies which Seller's Actuary determines and Buyer's Actuary agrees to relate to the additional voluntary contributions paid by the Transferring Employees to the Unionamerica Scheme. (g) Disputes. Any dispute between Seller and Buyer or Seller's Actuary and Buyer's Actuary concerning the calculation of the Transfer Amount in accordance with the Actuary's Letter or any other matter of an actuarial nature, in the absence of agreement between them, shall be referred to an independent actuary agreed by Seller and Buyer or, failing such agreement within fourteen (14) days of one party calling upon the other in writing so to agree, appointed by the President for the time being of the Institute of Actuaries of England and Wales. Any such independent actuary shall reach his decision on the basis of the provisions of this Section 7.1 and the Actuary's Letter and shall be final and binding upon Seller and Buyer. The charges and expenses of the independent actuary in respect of any such reference shall be borne equally by Seller and Buyer. SECTION 7.2. Non-Competition. From the date of this Agreement to the Closing Date, and for a period of two (2) years after the Closing Date, Seller covenants that except in connection with the transactions contemplated by this Agreement, it shall not, and it shall cause its Affiliates not to, individually or jointly with others, directly or indirectly, whether for its own account or for that of any other Person, own or hold any ownership or other participating interest in, or manage, operate, control or otherwise participate as such in, or act as a partner, principal or proprietor of any Person engaged primarily in the traditional assumed treaty and assumed facultative reinsurance business (exclusive of co- insurance and business reinsured under cedents' marine accounts) originated in the London Market and serviced from within the United Kingdom (the "Unionamerica Business"); provided, however, that it shall not be a violation of this Section 7.2 for Seller and its Affiliates to (a) own or hold a passive investment as part of its investment portfolio in any Person which engages in the Unionamerica Business, so long as any such investment that is an equity investment does not exceed five percent (5%) of the aggregate outstanding capital stock (or other equity ownership interest) of such Person, (b) acquire a Person no more than five percent (5%) of the consolidated revenues of which for each of the three (3) fiscal years of such Person ended prior to the acquisition of such Person by Seller or any of its Affiliates were derived from the Unionamerica Business, or (c) underwrite insurance and/or reinsurance and/or provide insurance and/or reinsurance related services to existing and successor insureds, insurers, reinsurers, retrocessionaires and other clients of Seller and its Affiliates (other than the Company and CRC(UK) to the extent of the Unionamerica Business) in continuance of arrangements and contracts existing with Seller and its Affiliates (other than the Company and CRC(UK) to the extent of the Unionamerica Business) on the date of this Agreement (including all renewals or extensions thereof). SECTION 7.3. Public Announcements. Buyer, Parent and Seller will consult with each other before issuing any press release or otherwise making any public statements regarding the transactions contemplated by the Transaction Documents, and will not issue any such release or make any such statement, prior to such consultation or, after such consultation, if any party is not reasonably satisfied with the substance of such release or statement. Notwithstanding the foregoing, any party hereto may make any disclosure required to be made by it under applicable law (including United States Federal securities law), stock exchange regulations or order of a court of competent jurisdiction if it determines in good faith, upon advice of counsel, that it is necessary to do so and gives prior notice to the other parties hereto, using its best efforts (given any time constraints) to contact the other parties hereto and discuss such disclosure with such other party(s). SECTION 7.4. Expenses. (a) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated pursuant to Section 9.1, except as provided in Section 7.4(b), all fees and expenses incurred in connection with the Transaction Documents and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses. (b) If this Agreement is terminated by Buyer pursuant to (1) Section 9.1(c), as a result of a breach that has or can reasonably be expected to have a financial consequence to the Company of US $3,000,000 or more or materially impairs the ability of any party to consummate the transactions contemplated by this Agreement, or (2) Section 9.1(d), as a result of Buyer's rejection (pursuant to Section 7.10) of Seller's proposed amendment of a Schedule to this Agreement, which proposed amendment was required to reflect changes resulting from an act or omission of Seller or any of its Affiliates, then, in each such case, Seller shall pay to Buyer, in next day funds, an amount equal to 66-2/3% of the reasonable out-of-pocket fees and expenses incurred or paid by or on behalf of Buyer and its Affiliates in connection with the Transaction Documents (including Buyer's due diligence investigation, negotiations and the letter of intent preceding this Agreement) or the consummation of any transactions contemplated by the Transaction Documents, including all reasonable fees and expenses of counsel, investment bankers, accountants, actuaries, lenders, experts and consultants to Buyer and its Affiliates; provided, however, that Seller's aggregate liability for such fees and expenses shall not exceed US $1,000,000; and, provided, further, that Buyer shall provide Seller with reasonable documentation of the fees and expenses for which Buyer seeks payment hereunder. SECTION 7.5. D & O Insurance. On and after the Closing Date, Seller shall provide (a) insurance coverage for M.A.J. Hayden covering the matters described in Section 8.2(a)(5) regardless of when claims arose or are made, without any coverage limitations, and (b) insurance coverage for all present and former directors and officers of the Company covering claims made after the Closing Date in respect of acts or omissions occurring prior to the Closing Date, subject to coverage limitations similar to those set forth in the directors and officers insurance coverage that the Company has obtained for its directors and officers as of the date the claim is made but in any event with a coverage limit of 5,000,000 pounds in the aggregate per annum, provided, however, that such coverage shall not extend to any such director or officer who does not cooperate in a reasonable manner with Seller in the defense of any such claim. Parent and Buyer shall (and shall cause the Company to) use reasonable commercial efforts to obtain the cooperation of such directors and officers in the defense of any claims, actions and proceedings covered by such insurance. SECTION 7.6. Seller's Covenants Regarding Senior Preference Shares. In connection with any sale, transfer or other disposition of all or any part of the Senior Preference Shares under an exemption from registration under the Securities Act, if requested by Parent, Seller will deliver to Parent an opinion of counsel experienced in Securities Act matters (which may be the General Counsel of Seller), reasonably satisfactory in form and substance to Parent, that such exemption is available. Seller hereby agrees and acknowledges that upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Senior Preference Shares (and all securities issued in exchange therefor or substitution thereof) shall bear, until such restrictions are no longer applicable, the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE STATE BLUE SKY LAWS OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH PROVISIONS." SECTION 7.7. Use of Certain Names. Immediately following the Closing, Seller shall, and shall cause all of its Affiliates to, cease conducting business under the name "Unionamerica" or any variant thereof, whether alone or in combination, and shall promptly cause any Affiliate whose corporate name contains such words to change its name to a name that does not contain such words (it being understood that the licenses referred to in Schedule 3.20(a)(1) with respect to the Unionamerica service mark will be terminated at or immediately prior to the Closing). At or immediately prior to the Closing, Seller shall assign to the Company all of its right, title and interest in and to the service marks set forth on Schedule 3.20, free from any material Liens, pursuant to the Assignment of Trademarks. Seller shall cause a duly executed assignment to the Company to be recorded at each relevant national trademark registry (or similar Governmental Authority), the reasonable costs incurred in such recordings to be borne by Buyer. Except as may be necessary in connection with the performance of their obligations under the Run-Off Agreement, Buyer, Parent and their Affiliates shall be prohibited from using the name "Continental" or any variant thereof, whether alone or in combination. SECTION 7.8. Further Assurances. (a) On and after the Closing Date, Buyer, Parent and Seller will take all appropriate actions and execute all documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the provisions hereof, including those in order to put Buyer in possession and operating control of the business of the Company. (b) The parties shall cause the accounting treatment of the contribution in the amount of US $44,928,493 (referred to in Section 3.26) in the accounts of the Company (including the accounts of the Company to be prepared and audited in respect of the year ending December 31, 1993 for the purpose of the Companies Act) to be as set forth in Schedule 7.8(b). SECTION 7.9. Books and Records. Buyer and Seller agree that with respect to any books, records and files relating to the business, properties, assets or operations of the Company, prior to the Closing Date in the possession of Buyer and its Affiliates, on the one hand, or Seller and its Affiliates, on the other hand, each party (at its expense) shall have the right, to the extent reasonably requested by such party, to inspect and to make copies of the same at any time during normal business hours for any proper purpose. Seller further agrees that, to the extent any such books, records and files have not otherwise been delivered to the Company or Buyer, Seller will not, and will not permit any of its Affiliates to, destroy or dispose of any such books, records or files without first offering to provide such books, records or files to Buyer at no expense to Seller or any of its Affiliates. Buyer further agrees that it will not, and will not permit any of its Affiliates to, destroy or dispose of any such books, records or files without first offering to provide such books, records or files to Seller at no expense to Buyer or any of its Affiliates. SECTION 7.10. Amendments of Schedules. (a) Seller shall be permitted to amend the Schedules to this Agreement only to the extent necessary to reflect changes resulting from events occurring after the date of this Agreement (each, an "Intervening Event"). Notwithstanding anything contained in this Section 7.10, Seller shall not be permitted to amend any of the Schedules for any other reason, including to correct or complete Schedules that did not provide accurate disclosure of facts and circumstances existing as of the date of this Agreement. (b) If Seller proposes to amend a Schedule prior to the Closing Date, Seller shall provide Buyer a copy of the proposed amendment of such Schedule, together with a certificate, duly executed by an executive officer of Seller, setting forth a description of the Intervening Event (including the date on which such Intervening Event occurred) requiring such proposed amendment. Buyer shall in good faith review such proposed amendment and certificate and shall promptly notify Seller in writing whether it accepts or rejects such proposed amendment; provided, however, that Buyer may not reject any such proposed amendment unless Buyer determines, in its good faith reasonable judgment, that without such proposed amendment, the applicable representation and warranty would not be true, complete and correct (if such representation and warranty is qualified as to materiality) or would not be true, complete and correct in all material respects (if such representation and warranty is not qualified as to materiality). If Buyer accepts such proposed amendment, then the applicable Schedule and the related representation and warranty shall be amended to reflect such proposed amendment, effective as of the date of Buyer's acceptance. If Buyer rejects such proposed amendment, then Buyer may, by written notice to Seller, terminate this Agreement pursuant to Section 9.1(d). Any notice of rejection provided by Buyer hereunder must be accompanied by a certificate, duly executed by a director of Buyer, setting forth the basis for such rejection. ARTICLE VIII INDEMNIFICATION SECTION 8.1. Survival of Representations, etc. All representations and warranties contained in Articles III and IV or made pursuant thereto shall not be affected by any right of investigation by the parties or any knowledge of facts determined in accordance therewith, and shall survive the Closing until the date that is the first anniversary of the Closing Date except that (a) the representations and warranties in Sections 3.8, 3.9, 3.10, 3.13, 3.15, 3.19, 3.21, and 3.27 shall survive the Closing until May 31, 1995 and (b) the representations and warranties in Section 3.14 shall survive the Closing until the expiration of the applicable statutes of limitation and (c) the representations and warranties in Sections 3.5, 3.26 and 4.5 shall survive the Closing and continue indefinitely. No action for indemnification under this Article VIII may be brought with respect to such representations and warranties after the expiration dates indicated in the preceding sentence unless, prior to the date such representations and warranties expire, the party seeking indemnification has notified in reasonable detail the party from whom indemnification is sought of a claim for indemnity hereunder. SECTION 8.2. Indemnification. (a) Subject to Sections 3.30, 8.1 and 8.2(b) and further subject (without limitation) to Section 6.2 of the Tax Indemnification Agreement, and as limited by Sections 8.2(a)(4) and 8.2(a)(5), from and after the Closing, Seller agrees to indemnify Buyer, Parent and the Company against, and hold Buyer, Parent and the Company harmless from, any damage (including punitive damages and treble damages), claim, liability or expense, including interest, fines, penalties and reasonable attorneys' fees, in each case whether incurred in connection with a final judgment, award or disposition of the matter or settlement (collectively "Damages"), arising out of: (1) the breach of any representation or warranty of Seller that survives the Closing for such period of survival as provided in Section 8.1 and the breach of any covenant or agreement of Seller contained in this Agreement, provided, that in no event shall Seller have any liability with respect to the conversion of the Shares into warrants to bearer; (2) the contribution by Seller to the Company (more fully described in Section 3.26); (3) the Company's ownership or leasehold interest in any real property, including any Damages relating to pollution, human health and safety or protection of the environment; (4) those lawsuits consolidated by order of the Judicial Panel on Multidistrict Litigation and known as the Insurance Antitrust Litigation, brought against the Company by any State attorneys general or private plaintiffs alleging violations by the Company of United States Federal or State antitrust laws during the period prior to the Closing Date, provided, that Seller's indemnification obligation for such matters shall be limited to money Damages (including cash required of the Company in order to fund any reinsurance entity separate from the Company established under any settlement or final award or adjudication or other final disposition (a "Reinsurance Provider")) and all fees and expenses incurred by plaintiffs' counsel to the extent the Company is liable therefor but in no event shall include any loss of business or consequential damages or damages resulting from any change in the manner in which the business of the Company is operated as a result of such settlement, final award, adjudication or other final disposition, and, provided, further, that Seller shall, at its option, either (A) acquire any shares or other ownership interest in any Reinsurance Provider that the Company or any of its Affiliates would otherwise be required to acquire in connection with any such settlement, final award, adjudication or other final disposition or (B) indemnify the Company for any Damages arising out of the Company's acquisition of such ownership interests, provided that in the case of clause (B) above, Seller shall receive all benefits associated with any such ownership interests; and (5) any judgment after final adjudication or settlement, with specific damages awarded or agreed to against M.A.J. Hayden under the first, second, and fifth counts of the complaints of New England Reinsurance Corporation in the pending lawsuits captioned New England Reinsurance Corporation v. Palange & Associates, Inc. et al. (Commonwealth of Massachusetts Superior Court, Suffolk, Docket Nos. 90-4383 and 90-1926) and in any subsequent actions brought against M.A.J. Hayden by private plaintiffs, arising out of the same facts and only for the same allegations; it being understood that to the extent that the Company has indemnified M.A.J. Hayden for such liability, and/or to the extent of any judgment after final adjudication or settlement, with specific damages awarded or agreed to against the Company under the aforesaid counts or allegations solely for its vicarious liability for the alleged actions of M.A.J. Hayden, the Seller shall indemnify the Company. Reasonable attorneys' fees for joint counsel and defense costs and expenses in connection with the above counts or allegations shall be apportioned to the Seller on the same basis that the specific damages finally awarded or agreed to against M.A.J. Hayden and/or the Company for such vicarious liability on those counts or allegations bear to the specific damages finally awarded or agreed to against the Company for its direct liability under such counts or allegations and under all other counts or allegations. Parent and Buyer shall (and shall cause the Company to) use reasonable commercial efforts to obtain the cooperation of M.A.J. Hayden in the defense of such lawsuits. (b) In addition to the limitations set forth in Section 8.2(a), Seller's indemnification obligation shall be limited as follows: (1) the amount of any Damages to be indemnified by Seller under this Section 8.2 or Sections 7.1 or 8.4 shall be reduced by an amount (the "Buyer Tax Benefit") equal to the excess of (A) the amount of Taxes that would have been payable in a taxable year by Buyer, Parent or the Company, as the case may be, if Buyer, Parent or the Company had not incurred the Damages over (B) the Taxes actually payable by Buyer, Parent or the Company, as the case may be, in such taxable year, provided, that the Buyer Tax Benefit shall include any refund or reduction of Taxes actually received or realized from the incurrence of the Damages; (2) the amount of any Damages to be indemnified by Seller under this Section 8.2 or Sections 7.1 or 8.4 shall be reduced by the net amount that Buyer, Parent or the Company, as the case may be, recovers (after deducting all attorneys' fees, expenses and other costs of recovery) from any insurer or third party liable for such Damages provided, that Buyer, Parent, or the Company, as the case may be, shall not be obligated to request, pursue or obtain such insurance or third party proceeds prior to receiving indemnification proceeds from Seller, and provided, further, that to the extent that Seller makes any indemnification payment to Buyer, Parent or the Company, Seller shall be subrogated to the rights of Buyer, Parent or the Company, as the case may be, to obtain such insurance or third party proceeds, and, upon its receipt of the full amount of the indemnification payment owing hereunder with respect to such matter, Buyer, Parent or the Company, as the case may be, shall assign all such rights to Seller (it being understood that if such rights are not assignable, then Buyer, Parent or the Company, as the case may be, will cooperate with Seller to the extent reasonably requested in order to pursue such subrogated rights); (3) Buyer, Parent and the Company shall be entitled to indemnification for Damages under this Section 8.2 only when the aggregate of all such Damages exceeds US $1,000,000 (in which event Buyer, Parent and the Company shall be entitled to indemnification for such Damages in excess of US $500,000), provided, that the limitations set forth in this subparagraph (b)(3) shall not (subject to subparagraph (b)(5) below) limit any claim for indemnification under the Tax Indemnification Agreement (which is made in accordance with the terms thereof) even though the matter that resulted in such claim also resulted in a breach of Section 3.14; (4) Seller's aggregate liability under this Section 8.2 shall not exceed US $50,000,000, provided, that the limitations or indemnification for Damages set forth in this subparagraph (b)(4) shall not (subject to subparagraph (b)(5) below) limit any claim for indemnification under the Tax Indemnification Agreement (which is made in accordance with the terms thereof) even though the matter that resulted in such claim also resulted in a breach of Section 3.14; and (5) Seller shall not be liable for duplicative indemnification payments under the Transaction Documents. In the event that Buyer could proceed against Seller either in relation to any of the matters contained in Section 3.14 hereof or under the Tax Indemnification Agreement in respect of the same matter and chooses to proceed under Section 3.14, Buyer shall not be entitled to any greater recovery than it would have been entitled to if it had proceeded under the Tax Indemnification Agreement. (c) Subject to Section 8.2(d), from and after the Closing, Buyer and Parent (jointly and severally) agree to indemnify Seller and its Affiliates and to cause the Company to indemnify Seller and its Affiliates against and hold Seller and its Affiliates harmless, from any Damages (1) arising out of the breach of any representation or warranty of Buyer or Parent that survives the Closing for such period of survival as provided in Section 8.1, and the breach of any covenant or agreement of Buyer or Parent contained in this Agreement, and (2) any liability (other than liability relating to Taxes) arising solely from the events and occurrences described in Section 3.10 of the Tax Indemnification Agreement. (d) In addition to the limitations set forth in Section 8.2(c), the Buyer's and Parent's indemnification obligations shall be limited as follows: (1) the amount of any Damages to be indemnified by Buyer and Parent under this Section 8.2 shall be reduced by an amount (the "Seller Tax Benefit") equal to the excess of (A) the amount of Taxes that would have been payable in a taxable year by Seller if Seller had not incurred the Damages over (B) the Taxes actually payable by Seller in such taxable year, provided, that the Seller Tax Benefit shall include any refund or reduction of Taxes actually received or realized from the incurrence of the Damages; (2) the amount of any Damages to be indemnified under this Section 8.2 shall be reduced by the net amount that Seller or its Affiliates recovers (after deducting all attorneys' fees, expenses, and other costs of recovery) from any insurer or third party liable for such Damages, provided, that Seller or its Affiliates shall not be obligated to request, pursue or obtain such insurance or third party proceeds prior to enforcing or receiving indemnification proceeds from Buyer and/or Parent, and provided, further, that to the extent that Buyer makes any indemnification payment to Seller or its Affiliates, Buyer or Parent shall be subrogated to the rights of Seller or its Affiliates, as the case may be, to obtain such insurance or third party proceeds and, upon its receipt of the full amount of the indemnification payment owing hereunder, with respect to such matter, Seller or its Affiliates, as the case shall be, shall assign all such rights to Buyer or Parent (it being understood that if such rights are not assignable, then Seller or its Affiliates, as the case may be, will cooperate with Buyer and Parent to the extent reasonably requested in order to pursue such subrogated rights); (3) Seller shall be entitled to indemnification for Damages under this Section 8.2 only when the aggregate of all such Damages exceeds US $1,000,000 (in which event Seller shall be entitled to indemnification for such Damages in excess of US $500,000); (4) the aggregate liability of Buyer and Parent under this Section 8.2 shall not exceed US $50,000,000; and (5) Buyer and Parent shall not be liable for duplicative indemnification payments under the Transaction Documents. SECTION 8.3. Indemnification Procedures. (a) This Section 8.3 shall not apply to claims relating to Tax matters (Section 3.14) or to LUC Indemnification (Section 8.4) or to claims under the Tax Indemnification Agreement, the procedures relating to such issues being set forth in the respective Section of this Agreement or in the Tax Indemnification Agreement, as the case may be. Upon any Person entitled to be indemnified under Section 8.2 (the "Indemnified Person") receiving notice of any claim or the commencement of any action, or otherwise becoming aware of a fact, condition or event for which indemnification is provided under Section 8.2, the Indemnified Person will reasonably promptly notify the Person from whom indemnification is sought (the "Indemnifying Person") in writing of such fact, condition or event, but in any event within ten (10) days after such Indemnified Person has actual knowledge of the facts constituting the basis for indemnification; provided, however, that the failure to provide such notice shall not relieve the Indemnifying Person of its indemnification obligations hereunder unless such failure materially prejudices the ability of such Indemnifying Person to contest such Damages. If such fact, condition or event is the assertion of a claim or the bringing of any action or proceeding by a third party, then the Indemnifying Person will be entitled to participate in or take charge of the defense or investigation of such claim, action or proceeding (or that part of any claim, action or proceeding for which indemnification is being provided) with counsel reasonably satisfactory to the Indemnified Person; provided, however, that the Indemnifying Person and its counsel shall proceed with diligence and in good faith with respect thereto. If such fact, condition or event involves a dispute or review by any Governmental Authority or Tax Authority or could affect the Indemnified Person's relationship with any Governmental Authority or Tax Authority, then the Indemnifying Person shall regularly consult with the Indemnified Person regarding the Indemnifying Person's course of action. After notice to the Indemnified Person of the Indemnifying Person's election to assume the defense or investigation of any such claim, action or proceeding or part thereof (as the case may be), the Indemnifying Person shall not be liable to the Indemnified Person under this Article VIII for any legal or other expenses in connection with the defense thereof other than reasonable costs of investigation, provided that the Indemnified Person shall have the right to employ separate counsel and to participate in the defense or investigation of such claim, action or proceeding or part thereof (as the case may be) if (1) the Indemnified Person has reasonably concluded that use of counsel of the Indemnifying Person's choice could reasonably be expected to give rise to a conflict of interest (in which event the Indemnifying Person shall bear one-half (.5) of the expenses of such separate counsel) or (2) the Indemnifying Person shall not have employed counsel to represent the Indemnified Person within a reasonable time after notice of the assertion of any such claim or institution of any such action or proceeding (in which event the Indemnifying Person shall bear all the reasonable expenses of such separate counsel). In the event that an Indemnifying Person elects not to assume the defense of a claim, action or proceeding or part thereof (as the case may be), the Indemnified Person and its counsel shall proceed with diligence and in good faith with respect thereto and the Indemnifying Person will not be obligated to pay the fees and expenses of more than one counsel for all Indemnified Persons with respect to such claim, action or proceeding unless the Indemnified Person has reasonably concluded that use of one counsel would reasonably be expected to give rise to a conflict of interest between such Indemnified Person and any other of such Indemnified Persons with respect to such claim or part thereof (as the case may be) in which event the Indemnifying Person shall bear one-half (.5) of the expenses of such additional counsel. The parties hereto agree to render to each other such assistance as may be reasonably requested in order to insure the proper and adequate defense of any such claim, action or proceeding. (b) If the Indemnifying Person has elected to assume the defense or investigation of any claim, action or proceeding or part thereof pursuant to Section 8.3(a), the Indemnifying Person shall be entitled to settle or compromise such claim, action or proceeding or part thereof; provided, however, that any such settlement or compromise involving the imposition of equitable remedies or involving the imposition of any material obligations on the Indemnified Person other than financial obligations for which such Indemnified Person shall be indemnified hereunder shall require the prior written consent of the Indemnified Person (which consent shall not be unreasonably withheld). If the Indemnifying Person elects not to assume the defense of a claim, action or proceeding or part thereof (as the case may be) pursuant to Section 8.3(a), the Indemnified Person shall be entitled to settle or compromise such claim, action or proceeding or part thereof (as the case may be) only with the consent of the Indemnifying Person (which consent shall not be unreasonably withheld). If the Indemnified Person is represented by separate counsel pursuant to Section 8.3(a), such settlement or compromise shall be effected only with the prior written consent of the Indemnified Person (which consent shall not be unreasonably withheld). No Indemnifying Person shall be required to consent to entry of any judgment or enter into any settlement or compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Person of a release from all liability in respect to such claim or litigation. Whenever the Indemnified Person or the Indemnifying Person either receives or makes a firm offer to settle a claim for which indemnification is sought under Section 8.2, it shall promptly notify the other of such offer. If the Indemnifying Person refuses to accept such offer within ten (10) Business Days after receipt of such offer (or of notice thereof), such claim shall continue to be contested and, if such claim is within the scope of the Indemnifying Person's indemnity contained in Section 8.2, the Indemnified Person shall be indemnified pursuant to the terms hereof. If the Indemnifying Person notifies the Indemnified Person in writing that the Indemnifying Person desires to accept such offer, but the Indemnified Person refuses to accept such offer within ten (10) Business Days after receipt of such notice, the Indemnified Person may continue to contest such claim and, in such event, the total maximum liability of the Indemnifying Person to indemnify or otherwise reimburse the Indemnified Person hereunder with respect to such claim shall be limited to, and shall not exceed, the amount of such offer, plus reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees and disbursements) to the date of notice that the Indemnifying Person desires to accept such offer; provided, however, that this sentence shall not apply to any settlement of any claim involving the imposition of equitable remedies or to any settlement imposing any material obligations on such Indemnified Person other than financial obligations for which such Indemnified Person will be indemnified hereunder. SECTION 8.4. LUC Indemnification. (a) As used in this Agreement: (1) "LUC Benefits" means the aggregate value, net of all Taxes thereon, of all amounts or benefits in money or money's worth for the time being received by the Company: (A) under or by virtue of the Shareholders Agreement (as defined in Section 8.4(a)(2)(A)(ii)(I)) or any documents entered into by the Company pursuant thereto or the membership of or the holding by the Company of any shares or securities in Market Building Limited ("MBL") other than any such shares or securities voluntarily acquired by the Company after the date hereof; and (B) by virtue of the Company securing one or more underleases of accommodation in Number 3 Minster Court London EC3 (also known as the London Underwriting Centre ("LUC")) ("Accommodation") on rental or other terms more favorable to the Company (by virtue of its status as a shareholder in MBL or its participation in the Shareholders Agreement) than would have been available in the open market to a non-shareholder in MBL in respect of a similar underlease of similar accommodation space granted at the same time as the relevant underlease (it being acknowledged that the terms currently proposed by MBL on which the Company is proposing to take an underlease of Suite 1/2 in the LUC are no more favorable to the Company than those available in the open market to a non- shareholder in MBL) unless at the time of the grant of the relevant underlease the only shares in MBL held by the Company are shares voluntarily acquired by the Company after the date hereof; and (C) being the net proceeds of sale arising from a disposal of (i) the shares in MBL which are owned by the Company as at the date hereof less their value as of the date of this Agreement which is agreed at UK 10,000 and (ii) any other shares in MBL acquired by the Company other than any voluntarily acquired by the Company after the date hereof; and (D) amounts received by the Company under any sub-underlease of Excess Space (as defined below); provided, however, that in the case of any benefit not comprising the receipt by the Company of cash the value of such benefit shall not be treated as having been received by the Company until such benefit shall have been realized by the Company and the value of such benefit shall be the value realized by the Company in respect thereof; but does not include: (E) any amounts or benefits with a value or aggregate value for any calendar year of less than UK 10,000; and (F) the repayment by MBL of any loan made by the Company to MBL prior to the date hereof and interest paid by MBL on such loan; and (G) any amounts or benefits arising under or by virtue of any shares or securities in MBL or the ownership thereof which have been voluntarily acquired by the Company after the date hereof or any benefits received by the Company under or by virtue of the Shareholders Agreement at a time when the only shares in MBL owned by the Company are shares voluntarily acquired after the date hereof. (2) "LUC Liabilities" means: (A) all sums paid by the Company by virtue of the obligations undertaken or incurred by the Company pursuant to: (i) any guarantee or similar assurance given by the Company, or required to be given by the Company, pursuant to the Shareholders Agreement or otherwise, in relation to or in connection with the LUC or the construction or fitting out thereof or the supply of goods thereto including: (I) the guarantee by the Company of the obligations of MBL and/or The London Underwriting Centre Limited contained in the Agreement relating to the development and leasing of the LUC dated 27 February 1990 (the "Development Agreement"); and (II) the guarantee by the Company of the Equipment Lease Agreement dated 28 September 1990; and (III) the guarantee of the Company to be contained in the Lease of the LUC to be granted to MBL pursuant to the Development Agreement; and (IV) any liability of the Company as tenant or otherwise in the event of the Company or any other guarantor of the said Lease of the LUC (whether alone or with others) being required to accept and take up a new Lease by virtue of its obligations to be contained in the guarantee referred to in sub- paragraph (III) of this Section 8.4(a)(2)(A)(i); and (V) any guarantee or assurance to be given in any sublease of part of the LUC (excluding any such guarantees or assurances given by the Company in relation to any underlease of Accommodation for the use and enjoyment of the Company or any Affiliate and any related or supplemental documentation required to be entered into pursuant to or in conjunction with the grant of such underlease of Accommodation); (ii) (I) the Shareholders Agreement dated 13 June 1989 relating to MBL as varied and supplemented by a Supplemental Shareholders Agreement dated 27 February 1990 and a Second Supplemental Shareholders Agreement dated 13 November 1990 (together "the Shareholders Agreement") (save and except for any sublease of Accommodation required to be entered into pursuant to Clause 10 thereof and except for Clauses 11.2 and 12 thereof) (including any documents or liabilities the Company may be required to enter into or undertake pursuant to the Shareholders Agreement) or the membership of or the holding by the Company of any shares or securities in MBL (other than any voluntarily acquired by the Company after the date of this Agreement) or any nominee of the Company being a director thereof; and (II) any sublease of Accommodation (and all liabilities and outgoings associated therewith) required to be entered into pursuant to Clause 10 of the Shareholders Agreement (other than the initial underlease of Suite 1/2 in the LUC which the Company is proposing to accept even if a requirement to accept the same shall be made under the said Clause 10); provided, however, that if the Company or any of its Affiliates shall occupy such Accommodation or any part thereof the liabilities and outgoings associated with such Accommodation or the relevant part thereof (duly apportioned pro rata to the net lettable area occupied compared to the total net lettable area thereof) shall be excluded from the LUC Liabilities (any such Accommodation in excess of the requirements of the Company or its Affiliates being herein referred as "Excess Space"); and the references to the documents and agreements referred to above in this Section 8.4(a)(2)(A) shall be deemed to include references to the same as varied, supplemented or replaced from time to time whether before or after the date hereof; (B) any unrecovered costs, expenses and liabilities incurred by the Company pursuant to Section 8.4(d) and in connection with performing its obligations under Section 8.4(d)(4) and in enforcing any sub-underlease of Excess Space; and (C) any liability of the Company for breach of Clause 11.2 of the Shareholders Agreement by virtue of compliance by the Company with the provisions of Section 8.4(e) or Section 8.4(f)(2) or in respect of the Company's agreement herein to take actions which will or may breach the said Clause 11.2 unless such liability arises by virtue of a breach by the Company of Section 8.4(e)(2)(B)(ii); provided, however, that there shall be excluded from the LUC Liabilities any amount of Tax to the extent that the Company is able to reclaim the same or claim a credit against any other liability to Tax in its dealings with the relevant Tax Authority. (b) (1) Notwithstanding and without regard to the application of Section 8.1, Seller hereby covenants with Buyer to indemnify the Company against any and all Damages which the Company has incurred but not yet discharged or which the Company incurs in the future under or in connection with the LUC Liabilities; (2) Buyer hereby covenants with Seller to procure the Company to pay to Seller a sum or sums equivalent to the LUC Benefits which the Company receives; (3) (A) Payments under paragraphs (1) and (2) above shall be accounted for as set out in Section 8.4(c) below. (B) In respect of amounts or benefits the aggregate of which for the relevant calendar year is initially less than UK 10,000 but which subsequently exceeds that amount in the relevant calendar year and fall within the definition of LUC Benefits, the full amount of the same then received in the relevant calendar year shall be treated as an LUC Benefit received by the Company in the fiscal quarter in which the Company receives the amount as a result of which the said aggregate exceeds UK 10,000, and subsequent receipts in that calendar year of amounts or benefits in excess of the initial UK 10,000 shall be accounted for as received without reference to the said figure of UK 10,000. (c)(1) At the end of each fiscal quarter, the LUC Liabilities incurred by the Company in that quarter and the LUC Benefits received by the Company in that quarter shall be calculated and: (A) if the LUC Liabilities incurred by the Company in that quarter are greater than the LUC Benefits received by the Company in that quarter then Seller shall pay the difference to the Company. (B) if the LUC Benefits received by the Company in that quarter are greater than the LUC Liabilities incurred by the Company in that quarter, then the Company shall pay the difference to Seller. (C) if the LUC Liabilities incurred by the Company in that quarter equal the LUC Benefits received by the Company in that quarter then no payment under this Section 8.4(c) shall be payable in respect of the relevant fiscal quarter. (2) The calculations at the end of each fiscal quarter required by Section 8.4(c)(1) shall be produced by the Company and shall be subject to the review of Seller. (d) Throughout the duration of the indemnity contained in this Section 8.4, Buyer will procure that the Company will use commercially reasonable efforts to keep to the minimum the amount of the LUC Liabilities and to maximize the LUC Benefits so far as it is reasonably able to do so and that in that connection the Company shall: (1) as often as Seller reasonably requests and so far as it may then be commercially practicable to cause the release of the Company from obligations which may give rise to any future LUC Liabilities and the sale of the Company's shareholding in MBL and any securities of whatever nature issued by MBL to the Company whether as security for any loan made by the Company to MBL or otherwise (excluding any shares or securities voluntarily acquired by the Company after the date of this Agreement), provided that the Company's obligations under this Section 8.4(d)(1) are subject to the terms of the sale being such that the Company receives at least UK 10,000 for the Company's shares in MBL which are held as of the date of this Agreement and a sum equivalent to the amount of any loan and interest payable to the Company as referred to in Section 8.4(a)(1)(F) (or, in the event that and to the extent that such amounts are not paid, Seller shall make good the difference to the Company); (2) take reasonable steps to pursue every right of contribution, insurance, claim, right of indemnity, right of set-off or counterclaim and every other right enjoyed by the Company as far as is commercially reasonable which would have the effect of minimizing or reducing the amount of the LUC Liabilities or maximizing or increasing the LUC Benefits; (3) accept an underlease of Suites 1/2 in the LUC on the terms offered to other shareholders in MBL for the proposed initial term of approximately five and one-half (5.5) years (and if the Company shall not do so, the liabilities of Seller under this Section 8.4 shall not exceed those which would have arisen had the Company done so); provided that for this purpose the Company shall not be required to accept any underlease for any further terms or occupy any space in the LUC; and (4) use reasonable efforts to obtain all necessary consents to allow any Excess Space to be sub- underlet and to sub-underlet such Excess Space to Seller or as Seller may reasonably require on arms length open market terms and thereafter to enforce the terms of any relevant sub-underlease of Excess Space. (e) (1) Buyer will procure that the Company shall so far as the Company is reasonably able to do so provide Seller upon request with copies of all documents, correspondence, information, accounts, bills or other records relating to the subject matter of this Section 8.4 which are in the possession, custody or power of the Company or to which it may have access (collectively, "Information") and provide Seller with reasonable facilities to inspect the originals of such copies. (2) (A) The Company's obligations to provide Information as referred to in Section 8.4(e)(1) above and under Section 8.4(f) are subject to the Company's confidentiality obligations under the Shareholders Agreement. (B) (i) Seller shall keep confidential all Information supplied by the Company pursuant to this Section 8.4 except insofar as such information is in the public domain (otherwise than by virtue of a breach by Seller of its confidentiality obligations). (ii) The parties hereto shall (without prejudice to any other confidentiality provision herein contained) keep confidential the existence of the provisions of this Section 8.4(e) and Section 8.4(f) and the fact of disclosure of any Information pursuant to this Section 8.4(e) or Section 8.4(f). (C) If the Company and Seller so agree (but not otherwise) Buyer will procure that the Company shall use all reasonable efforts to procure that the parties to the Shareholders Agreement agree that the Information may be provided to Seller and for that purpose Seller shall enter into such undertakings as to confidentiality as may be reasonably required. (D) (i) In the event that the Company is prevented by process of law from disclosing in whole or in part any Information (and for this purpose the threat of proceedings by any party to the Shareholders Agreement shall be treated as prevention by process of law), Buyer will procure that the Company shall using utmost good faith certify to Seller in writing the amount of any relevant LUC Liabilities and of any LUC Benefits received and shall provide such Information in connection therewith as the Company may lawfully do. (ii) In the event that any error or misstatement shall be found in any certificate provided pursuant to Section 8.4(e)(2)(D)(i) there shall forthwith be made such adjustments of accounts between the parties as shall be found to be necessary. (E) Seller hereby covenants with Buyer to indemnify the Company on demand against all Damages arising by virtue of (i) any breach of Clause 11.2 of the Shareholders Agreement caused by the disclosure to Seller of any Information pursuant to this Agreement or any matter pursuant to Section 8.4(f) or (ii) its agreement herein to do so. (f)(1) If the Company is requested or makes a proposal to assume any obligation or liability under or by virtue of the Shareholders Agreement or otherwise which would increase the LUC Liabilities by more than UK 10,000 and the Company is not then obliged to assume the same or has voting rights as to whether or not the same shall be assumed, then any additional obligation or liability which the Company assumes pursuant to that request or proposal and which would not otherwise have been incurred shall not form part of the LUC Liabilities unless: (A) the Company did not vote in favor of assuming the same, or (B) the Company did vote in favor of assuming the same and either; (i) Seller had agreed or subsequently agrees to the Company so voting or assuming the same; or (ii) the Company would have been obliged to assume the same even if the Company had not voted in favor of assuming the same. (2) Notwithstanding the provisions of Section 8.4(e)(1) and without prejudice to the remainder of Section 8.4(e), Buyer will procure that the Company shall disclose to Seller any fact, information, or circumstance known to the Company which is likely to lead to a material increase in the LUC Liabilities. (g) If Seller shall request the Company to sell its shares and/or other securities in MBL to Seller or any third party who is ready, willing and able (subject to any pre- emption provision in the Shareholders Agreement or pursuant to the Articles of Association of MBL) to buy the same, Seller shall fully set out in writing the terms on which Seller or the third party is proposing to acquire the same, and the Company may by notice in writing to Seller within twenty-eight (28) days of receipt of the full terms decline to proceed with the sale, in which event: (1) Buyer will procure that the Company shall on the date of giving the Company's notice pay to Seller the price agreed to be paid by Seller or the third party for the shares or other securities (to the extent that, in the case of the shares in MBL held by the Company as at the date hereof, the price or value exceeds UK 10,000 and, in the case of other securities, the amounts secured thereby (or the payment thereof) form part of the LUC Benefits) and, if Seller had agreed to pay any amount to the third party, Seller shall on that date pay such amount to the Company, and any amount so paid by Seller shall not be treated as part of the LUC Benefits; and (2) Buyer's obligation to procure the Company to seek to sell the same pursuant to Section 8.4(d)(1) shall cease; and (3) any amounts or benefits subsequently received by the Company under or by virtue of such shares and/or securities or ownership thereof and any proceeds of disposal thereof shall not form part of the LUC Benefits and may be retained by the Company for its own account; and (4) Seller's obligations under this Section 8.4 shall thenceforth be construed as if any sums paid under any liabilities arising after the date of the Company's notice under or by virtue of the relevant shares and/or securities or ownership thereof were excluded from the LUC Liabilities; and (5) (A) if it was a term of the sale that Seller would procure the release in whole or in part of the Company from any liability and amounts paid by the Company by virtue of that liability would form part of the LUC Liabilities, then any amounts paid by the Company under or by virtue of any such liability, to the extent the same was intended to have been released and which arises after the date of the Company's notice, shall be excluded from the LUC Liabilities. (B) if it was a term of the sale that the third party would counter-indemnify Seller against its liability to indemnify the Company against LUC Liabilities under this Section 8.4 or any of them, then in relation to LUC Liabilities arising after the date of the Company's notice or the relevant ones thereof which were to be the subject of the counter- indemnity the indemnity contained in this Section 8.4 shall terminate. (6) any shares or securities which the Company shall decline to sell under this Clause 8.4(g) shall be treated for all purposes of this Section 8.4 as shares or securities voluntarily acquired by the Company on the date of the giving of the Company's notice. (7) to the extent that any LUC Benefits derive from or are attributable to either: (A) shares or securities retained by the Company pursuant to this Clause 8.4(g) or (B) any obligations of the Company, sums paid in relation to which would but for the operation of this Clause 8.4(g) have formed part of the LUC Liabilities or been the subject of Seller's indemnity Buyer's obligations to procure the Company to account for such LUC Benefits shall cease. SECTION 8.5. Indemnification Payments. Notwithstanding any other provisions of this Agreement to the contrary, all payments due from Seller in respect of Seller's indemnification obligations under this Agreement or any of the Transaction Documents shall be paid to Buyer. Such payments shall be treated by Seller and Buyer as a reduction in the purchase price payable under this Agreement. ARTICLE IX MISCELLANEOUS SECTION 9.1. Termination. This Agreement may be terminated at any time prior to the Closing Date: (a) by mutual agreement in writing of Buyer, Parent and Seller; (b) by either Buyer or Seller upon written notice to the other parties (1) if the Closing shall not have occurred by September 30, 1993 or such later date as the parties shall have agreed to in writing, provided that the non- occurrence of the Closing is not attributable to a breach of the terms hereof by the party seeking termination, or (2) if any Governmental Authority shall have issued an injunction, decree or order or taken any other action permanently enjoining, restraining or otherwise prohibiting the Closing; (c) by Buyer if there has been a breach by Seller of any representation, warranty, covenant or agreement set forth in this Agreement that is qualified as to materiality or a material breach by Seller of any representation, warranty, covenant or agreement that is not so qualified, and such breach shall not have been corrected or cured to the reasonable satisfaction of Buyer within ten (10) Business Days after Buyer has provided written notice thereof to Seller; (d) by Buyer if it rejects a proposed amendment of a Schedule pursuant to Section 7.10; (e) by Seller if there has been a breach by Buyer or Parent of any representation, warranty, covenant or agreement set forth in this Agreement that is qualified as to materiality or a material breach of any representation, warranty, covenant or agreement that is not so qualified and such breach shall not have been corrected or cured to the reasonable satisfaction of Seller within ten (10) Business Days after Buyer or Parent has provided written notice thereof to Seller; (f) by Buyer not later than the first Business Day following the Initial Due Diligence Period if Buyer is not satisfied, in its sole discretion, with its due diligence investigation of the Company pursuant to Section 5.4; and (g) by either Buyer or Seller if Buyer fails to obtain the letters described in Section 5.7 by the Commitment Date. SECTION 9.2. Effect of Termination. In the event of the termination of this Agreement by Buyer, Parent or Seller as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Buyer, Parent or Seller or their respective directors, officers or Affiliates; provided, however, that, notwithstanding a termination of this Agreement, the provisions of Section 5.4 (relating to the obligation of Buyer and Parent to keep confidential and not to use certain information and data obtained by them from the Company), and Sections 7.3 and 7.4, shall continue in full force and effect. SECTION 9.3. Consent to Jurisdiction and Service of Process. Any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby may be instituted in any United States Federal court located in the Southern District of New York, State of New York, and each party hereto agrees not to assert as a defense in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that the action, suit or proceeding is brought in an inconvenient forum, that the venue of the action, suit or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. Each party further irrevocably submits to the jurisdiction of such court in any such action, suit or proceeding. Buyer and Parent hereby appoint LeBoeuf, Lamb, Leiby & MacRae, Attention: Alexander M. Dye, at its offices at 125 West 55th Street, New York, New York 10019, or its offices at such other address in New York, New York, as it hereafter furnishes to the parties to this Agreement, as their authorized agent to accept and acknowledge on such parties' behalf service of any and all process that may be served in any such action, suit or proceeding. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given properly pursuant to the United States Federal Rules of Civil Procedure or other applicable rules. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any jurisdiction other than New York. SECTION 9.4. Notices. Unless otherwise provided herein, any notice or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) when received, if delivered personally or telecopied on a Business Day during normal business hours (at the place of receipt) (with confirmation of receipt thereof immediately thereafter) at the address or telecopy number designated below or (b) on the second Business Day following the date of delivery to an internationally recognized overnight courier, if so delivered and marked for overnight (or the most expediently available) delivery and fully prepaid, in each case, addressed as follows: if to Buyer: Unionamerica Acquisition Company Ltd. 77 Gracechurch Street London EC3V 0DA England Telephone: 071-548-5987 Telecopy: 071-621-1105 Attention: Peter J. Cooper if to Parent: Unionamerica Holdings Ltd. 77 Gracechurch Street London EC3V 0DA England Telephone: 071-548-5987 Telecopy: 071-621-1105 Attention: Peter J. Cooper in either case with copies to: International Insurance Advisors, Inc. 33 Whitehall Street - 27th Floor New York, New York 10004 U.S.A. Telephone: (212) 487-3647 Telecopy: (212) 487-3894 Attention: Paul H. Warren Oak Hill Partners Park Avenue Tower 65 East 55th Street New York, New York 10022 U.S.A. Telephone: (212) 326-1500 Telecopy: (212) 754-5685 Attention: Jeffrey H. Freed LeBoeuf, Lamb, Leiby & MacRae 125 West 55th Street New York, New York 10019-5389 U.S.A. Telephone: (212) 424-8000 Telecopy: (212) 424-8500 Attention: Alexander M. Dye, Esq. if to Seller: The Continental Corporation 180 Maiden Lane - 40th Floor New York, New York 10038 U.S.A. Telephone: (212) 440-3000 Telecopy: (212) 440-7982 Attention: Chief Financial Officer with copies to: The Continental Corporation 180 Maiden Lane - 40th Floor New York, New York 10038 U.S.A. Telephone: (212) 440-3000 Telecopy: (212) 440-7982 Attention: General Counsel Debevoise & Plimpton 875 Third Avenue New York, New York 10022 U.S.A. Telephone: (212) 909-6000 Telecopy: (212) 909-6836 Attention: Deborah F. Stiles, Esq. Lovell White Durrant 65 Holborn Viaduct London EC1A 2DY England Telephone: 071-236-0066 Telecopy: 071-248-4212 Attention: John T. Young, Esq. Any party may, from time to time, by five (5) days' notice given in accordance with this Section 9.4 to the other parties, designate another address or person for receipt of notices hereunder. SECTION 9.5. Entire Agreement; No Third Party Beneficiaries. This Agreement (together with the exhibits and schedules hereto, the other Transaction Documents, and the Confidentiality Agreement) (a) contains the entire agreement among the parties with respect to the subject matter hereof, and supersedes all prior agreements, written or oral, with respect thereto, and (b) except as set forth in Section 7.5 or as otherwise expressly specified herein, is not intended to confer upon any person other than the parties any rights or remedies hereunder. SECTION 9.6. Waivers and Amendments; Non- Contractual Remedies; Preservation of Remedies. This Agreement may be amended, modified or supplemented, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement contained in this Agreement (or in any other Contract between the parties) as to which there is no inaccuracy or breach. SECTION 9.7. Payments and Currency. (a) Any and all amounts payable hereunder, whether at the Closing or otherwise, shall be paid to the appropriate party in United States dollars. No payment obligation hereunder shall be discharged by amounts paid in another currency. (b) If (1) any monies owing under or pursuant to this Agreement are received or recovered by one party hereunder from any other party hereunder in a currency other than United States dollars or (2) any judgment, settlement or final adjudication of amounts owing under or pursuant to this Agreement by one party hereunder to any other party hereunder is denominated in a currency other than United States dollars, then such monies, judgment, settlement or final adjudication shall be converted into United States dollars at the New York foreign exchange selling rate applicable to trading among banks in amounts of US $1,000,000 or more (as quoted at 3:00 p.m. Eastern time) as set forth in The Wall Street Journal (Eastern Edition) with respect to the date on which such monies are received or recovered or the date on which payment pursuant to such judgment, settlement or final adjudication is due and owing. (c) If any of the monetary amounts specified in Articles III, IV or V of this Agreement must be converted from United States dollars to pounds sterling (or vice versa), then such amounts shall be converted at the New York foreign exchange selling rate applicable to trading among banks in amounts of US $1,000,000 or more (as quoted at 3:00 p.m. Eastern time) as set forth in the July 1, 1993 edition of The Wall Street Journal (Eastern Edition) with respect to June 30, 1993. SECTION 9.8. Binding Effect; No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives. This Agreement shall not be assigned, in whole or in part, by any party hereto. SECTION 9.9. Severability. If at any time any provision of this Agreement is or becomes illegal, invalid, void or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity, or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby, the remainder of the provisions of this Agreement shall remain in full force and effect. The parties shall endeavor in good faith negotiations to replace any invalid, illegal, void or unenforceable provision with a valid, legal and enforceable provision, the economic effect of which comes as close as possible to the invalid, illegal, void or unenforceable provision. SECTION 9.10. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto. SECTION 9.11. Interpretation. The Exhibits and Schedules are a part of this Agreement as if fully set forth herein. All references herein to Sections, clauses, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context otherwise requires. The table of contents and headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. The phrase "to the knowledge of Seller" or any similar phrase shall be deemed to refer to the knowledge of any of the senior officers of Seller or the Company, in each case, who were involved in the negotiation of this Agreement or the preparation of any of the Schedules, with such officers being deemed to have made reasonable inquiry of the appropriate personnel of Seller, the Company and other relevant Affiliates of Seller with respect to the matter in question. The definitions of terms in this Agreement shall be applicable to both the singular and the plural forms of the terms defined where either such form is used in this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The word "herein," "hereof" and "hereunder," and other words of similar import, refer to this Agreement as a whole and not to any particular Section or clause. The adoption of the various monetary amounts as de minimis or maximum levels (such as in Sections 5.1 and 5.2) or as a criterion resulting in certain occurrences (such as in Section 7.4) is not intended by the parties to be, and should not be construed as, an indication of immateriality or materiality for purposes of any of the Transaction Documents. SECTION 9.12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. SECTION 9.13. Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with any of the Transaction Documents. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties have been induced to enter into the Transaction Documents by, among other things, the mutual waivers and certifications in this Section 9.13. IN WITNESS WHEREOF, Buyer, Parent and Seller have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. UNIONAMERICA ACQUISITION COMPANY LTD. By: /s/Paul H. Warren Name: Title: Director UNIONAMERICA HOLDINGS LTD. By: /s/Paul H. Warren Name: Title: Director THE CONTINENTAL CORPORATION By: /s/John F. Kirby Name: Title: Senior Vice President EX-10 11 EXHIBIT 10(H) AMENDMENT TO SHARE PURCHASE AGREEMENT AMENDMENT TO SHARE PURCHASE AGREEMENT, dated as of September 1, 1993 (this Amendment), among UNIONAMERICA ACQUISITION COMPANY LTD., an English private company limited by shares (Buyer), UNIONAMERICA HOLDINGS LTD., an English private company limited by shares (Parent), and THE CONTINENTAL CORPORATION, a New York corporation (Seller). WITNESSETH: WHEREAS, Buyer, Parent and Seller have entered into that certain Share Purchase Agreement, dated as of June 30, 1993 (the Share Purchase Agreement); WHEREAS, Buyer, Parent and Seller have agreed to amend the Share Purchase Agreement as set forth herein; and WHEREAS, all capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Share Purchase Agreement. NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. AMENDMENT TO SECTION 1 Section 1 of the Share Purchase Agreement is amended by the addition of a new Section 1.3 which reads in its entirety as follows: "SECTION 1.3 New Holding Company (a) Seller undertakes to Parent that it will forthwith after receiving notice that the board of directors of Parent (the Board) has resolved that all the members of Parent (the Shareholders) should be required to effect an exchange of shares as provided in this clause: (1) if so requested by the Board, take (in its capacity as a Shareholder) all such actions (including but not limited to the exercise of voting rights) and execute all such documentation as the Board shall reasonably determine to be necessary to convert all shares then held by Seller in Parent to share warrants to bearer; and/or (2) take (in its capacity as a Shareholder) all such actions (including but not limited to the exercise of voting rights) as the Board shall reasonably determine to be necessary to transfer the whole of its legal and beneficial interest in all shares then held by it in Parent to a newly incorporated public company (Newco) in consideration for the issue by Newco to it of, in respect of each share so transferred, one share of the same nominal amount and same class in the capital of Newco and having the same rights and being subject to the same restrictions, mutatis mutandis, in each case as its shares in Parent prior to such transfer, so that immediately after the completion of such transfer the issued share capital of Newco comprises (apart from not more than two initial subscribers' shares of a nominal value of not more that $1 or 1 pound each) the same number of shares with the same nominal amount and of the same classes as the issued share capital of Parent immediately prior to such transfer. (b) The obligations of Seller in Section 1.3(a) are subject to the satisfaction in full, prior to or simultaneously with the performance of such obligations, of each of the following conditions precedent (any one or more of which may be waived by Seller): (1) Seller shall in its sole discretion be satisfied that it will suffer no immediate or delayed adverse tax consequence as a direct or indirect result of the performance of its obligations or shall have received a written indemnity from Newco in terms reasonably satisfactory to it against any such liability that may occur. (2) All Shareholders shall take steps identical, mutatis mutandis, to those taken by Seller pursuant to this clause in relation to the shares held by them in Parent such that Parent becomes immediately after such steps have been taken a wholly owned subsidiary of Newco. (3) All representations and warranties of Buyer and Parent contained in Article IV shall be true, complete and accurate as of the time of the performance of the obligations set out in Section 1.3(a) as if reference therein to Buyer or Parent were to Newco (save that the reference in Section 4.1 to a "private company" shall be replaced by a reference to a "public company" and the references to licenses and authorizations shall be deemed to exclude the necessary certificate under Section 117 of the Companies Act 1985 which certificate will be obtained forthwith after the completion of the steps to be taken by the Shareholders and the Seller as referred to above); as if references to the Transaction Documents or to the Agreement were to the documents necessary to perform the obligations set out in this Section; as if references to the Closing were to the performance in full of the obligations set out in Section 1.3(a) and references to the Closing Date were to the date of such performance; as if reference to the Buyer Shares were to the shares to be transferred by Seller pursuant to this Section; and as if references to the A Senior Preference Shares and the B Senior Preference Shares and the Senior Preference Shares were, respectively, to the shares to be issued by Newco pursuant to this Section 1.3 in exchange for those shares. (c) Contemporaneously with and as conditions precedent to the performance by Seller of its obligations pursuant to Section 1.3(a): (1) Parent shall procure that Newco shall deliver to Seller, and Newco shall have delivered to Seller, a legally binding document containing in terms reasonably satisfactory to Seller warranties and indemnities in the terms described in Section 1.3(b)(3), and containing in favor of Seller indemnification provisions identical, mutatis mutandis, to those set out in Sections 8.1, 8.2(c) and (d) and 8.3 and subject to limitations only as set out therein. (2) Seller shall enter into and Parent shall procure that Newco shall enter into agreements having the same effect, mutatis mutandis, as the Contingent Payment Agreement and the Senior Preference Share Support Agreement (the Replacement Agreements) on the basis that the Replacement Agreements shall be read and construed as if they had been entered into on the Closing Date and as if the acts and omissions of Seller and Parent respectively in relation to or in connection with the Contingent Payment Agreement and the Senior Preference Share Support Agreement were and had been the acts and omissions of Seller and Newco in relation to the Replacement Agreements or in connection therewith and so that without prejudice to the generality of the foregoing Newco will assume all liability under the Replacement Agreements which Parent would have had in relation to or arising out of or in connection with the Contingent Payment Agreement and the Senior Preference Share Support Agreement and so that all references in the Replacement Agreements replacing the Senior Preference Share Support Agreement to the Company or Buyer shall refer also to Parent; and with effect from the entry into of the Replacement Agreements Seller and Parent shall mutually release each other from all obligations and liabilities, actual, contingent or otherwise, under the Contingent Payment Agreement and Senior Preference Share Support Agreement." SECTION 2. AMENDMENT TO SECTION 9.8 Section 9.8 of the Share Purchase Agreement is amended to read in its entirety as follows: "SECTION 9.8. Binding Effect; Assignment This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that (a) Parent may assign, in its sole discretion, any or all of its rights and interests hereunder to Buyer and (b) Buyer and Parent may assign, in their sole discretion, any or all of their respective rights and interests hereunder to, and grant a security interest with respect thereto for the benefit of, any and all Persons providing the financing referred to in Section 6.1(h) and any and all Persons providing subsequent refinancings, if any, of such financing." SECTION 3. EFFECT UPON SHARE PURCHASE AGREEMENT AND TRANSACTION DOCUMENTS (a) On and after the date hereof, each reference in the Share Purchase Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import, and each reference to the Share Purchase Agreement in any other Transaction Document or any other document, shall mean and be a reference to the Share Purchase Agreement as amended hereby. (b) Except as specifically amended in Sections 1 and 2, the Share Purchase Agreement shall remain in full force and effect and all of its terms and conditions are hereby ratified and confirmed. (c) The execution and delivery of this Amendment by the parties hereto shall not, except as expressly provide herein, operate as a waiver of any right, power or remedy of any party under the Share Purchase Agreement, any Transaction Document or any related document, or constitute a waiver of any provision thereunder. SECTION 4. EXECUTION IN COUNTERPARTS This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all of the parties hereto. SECTION 5. GOVERNING LAW THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized officers as of the date first above written. UNIONAMERICA ACQUISITION COMPANY LTD. By: /s/Paul H. Warren Name: Paul H. Warren Title: Director UNIONAMERICA HOLDINGS LTD. By: /s/Paul H. Warren Name: Paul H. Warren Title: Director THE CONTINENTAL CORPORATION By: /s/J. Heath Fitzsimmons Name: J. Heath Fitzsimmons Title: Senior Vice President and Chief Financial Officer EX-10 12 EXHIBIT 10(I) STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (the "Agreement") dated as of July 28, 1993, among ALLEGHANY CORPORATION, a Delaware corporation ("Alleghany"), THE CONTINENTAL CORPORATION, a New York corporation ("Continental"), GOLDMAN, SACHS & CO. and certain funds which Goldman, Sachs & Co. either control or of which they are general partner (together, the "GS Investors") (Continental and the GS Investors together referred to as the "URHC Stockholders"), UNDERWRITERS RE HOLDINGS CORP., a Delaware corporation ("URHC"), and UNDERWRITERS RE CORPORATION, a Delaware corporation ("URC"). W I T N E S S E T H: WHEREAS, the URHC Stockholders hold approximately 90 percent of the issued and outstanding capital stock of URHC; URHC is the owner of all of the issued and outstanding capital stock of URC; URC is the owner of all of the issued and outstanding capital stock of Underwriters Reinsurance Company, a New Hampshire insurance company ("Underwriters Reinsurance"), and URC Risk Managers, Inc., a Delaware corporation ("Risk Managers"); and Underwriters Reinsurance is the owner of all of the issued and outstanding capital stock of Commercial Underwriters Insurance Company, a California insurance company ("Commercial Underwriters"); WHEREAS, prior to the Closing Date (as defined below), a new wholly owned subsidiary ("NHC") of URC will be organized in the State of Delaware and, as of the Closing Date, NHC will hold all of the issued and outstanding capital stock of Underwriters Reinsurance and Risk Managers (NHC, Underwriters Reinsurance, Risk Managers and Commercial Underwriters are together referred to as the "Companies"); WHEREAS, contemporaneous with the execution hereof, Continental has entered into a Management Stock Purchase Agreement with the management stockholders of URHC in the form annexed hereto as Exhibit A (the "Management Stock Purchase Agreement"), pursuant to which such management stockholders will acquire prior to the Closing Date (as defined below) at least 633,758 shares of capital stock of NHC, which number of shares will constitute about 7 percent of the outstanding shares of capital stock of NHC, in exchange for the shares of capital stock of URHC currently owned by them and to be owned by them upon exercise of all outstanding stock options; WHEREAS, Alleghany desires to purchase and URC desires to sell all of the issued and outstanding capital stock of NHC to be held by URC after the closing under the Management Stock Purchase Agreement (the "Shares"), which will be 8,648,372 shares of capital stock of NHC, which number of shares will constitute about 93 percent of the outstanding capital stock of NHC, subject to adjustment to decrease such number of shares by up to 22,162 in respect of shares of NHC to be sold to any one or more of Stephen C. Kolakowski, Mark A. Bennett, Theodore A. Blundell, Denise A. Coleman, Pamela Falzone, Todd J. Hess, Michael J. Kruse, Judy Mann and Nancy Moore, such number being the number set forth on Schedule 5, as supplemented, to the Stock Purchase Related Agreement, which Schedule shall be supplemented not later than August 12, 1993; and WHEREAS, contemporaneous with the execution hereof, Alleghany has entered into a Stock Purchase Related Agreement with the management stockholders of URHC in the form annexed hereto as Exhibit B (the "Stock Purchase Related Agreement"); NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions contained herein, the parties hereto agree as follows: 1. PURCHASE OF SHARES AND CLOSING. 1.1. Purchase of Shares. Subject to the terms and conditions set forth in this Agreement, at the Closing (as defined below), URC agrees to sell, convey, assign, transfer and deliver the Shares to Alleghany, or a subsidiary of Alleghany designated by Alleghany pursuant to Section 13.6 hereof, and Alleghany, or such subsidiary, shall acquire the Shares from URC. 1.2. Consideration. At the Closing (as defined below), Alleghany shall pay by wire transfer to URC an amount in immediately available funds equal to Two Hundred Million, Seven Hundred Fifteen Thousand, Nine Hundred Thirty-Five Dollars ($200,715,935), subject to adjustment as hereinafter provided (the "Cash Consideration"). The Cash Consideration shall be increased by an amount equal to the product of (x) $23.50, and (y) the difference between (a) 22,162 shares and (b) that number of shares of common stock of NHC, not exceeding 22,162 shares, which are sold to any one or more of Stephen C. Kolakowski, Mark A. Bennett, Theodore A. Blundell, Denise A. Coleman, Pamela Falzone, Todd J. Hess, Michael J. Kruse, Judy Mann and Nancy Moore, such number being the number set forth on Schedule 5, as supplemented, to the Stock Purchase Related Agreement, which Schedule shall be supplemented not later than August 12, 1993. 1.3. Closing. The purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall take place at such time of day and place agreed to by the parties as soon as reasonably practicable but not on the first or second business day of a week and no later than five (5) business days after satisfaction or waiver of the conditions precedent set forth herein (the "Closing Date"), or on such other date as the parties hereto agree in writing. At the Closing, (i) URC shall deliver to Alleghany a certificate or certificates representing the Shares, duly endorsed in blank or with appropriate stock powers attached, free and clear of all liens, security interests, pledges, agreements, claims, charges, options or encumbrances of any nature whatsoever (collectively, "Liens"), and (ii) Alleghany shall make payment to URC of the Cash Consideration by wire transfer to such account or accounts as designated to Alleghany by URC in the manner specified herein for delivery of notices not less than two (2) business days prior to the Closing Date. 2. REPRESENTATIONS AND WARRANTIES OF URHC AND URC. Each of URHC and URC, jointly and severally, represents and warrants to Alleghany as follows: 2.1. Title to Shares. As of the date of the organization of NHC and the issuance of shares of its capital stock to URC as provided herein (the "Organization Date"), URC will own beneficially and of record all of the issued and outstanding shares of capital stock of NHC, free and clear of all Liens except for this Agreement, the Management Stock Purchase Agreement, the Shareholders Agreement dated as of December 29, 1987, and amended as of July 6, 1988, May 29, 1991 and May 1, 1993, among URHC and the shareholders listed therein (the "Shareholders Agreement"), and the Credit Agreement dated as of November 16, 1992, among URC, the lenders named therein and First National Bank of Chicago, as agent (the "Credit Agreement"). As of the Closing Date, URC will own, beneficially and of record all of the Shares, free and clear of all Liens (subject to the granting of the Sellers Approvals, as defined below). Upon delivery of the Cash Consideration as herein provided, URC will convey good title to the Shares, free and clear of all Liens. 2.2. Organization and Standing. Each of URHC and URC is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 2.3. Consents and Approvals. The execution and delivery by each of URHC and URC of this Agreement, the performance by each of URHC and URC of its obligations hereunder, and the consummation by each of URHC and URC of the transactions contemplated hereby do not require either URHC or URC to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority except (a) as set forth on Schedule 2.3 hereto; (b) such filings made with governmental agencies such as the Securities and Exchange Commission which are (i) part of the regular disclosure obligations of URHC and URC and (ii) available as public documents; or (c) such consents, approvals, authorizations, actions, filings or notices of which the failure to obtain, make or give would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole or interfere in any material way with the ability of either URHC or URC to consummate the transactions contemplated hereby. The consents, approvals, authorizations, actions, filings and notices set forth on Schedules 2.3, 3.1 and 8.4 hereto are together referred to as the "Sellers Approvals." 2.4. Authority. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of each of URHC and URC. This Agreement constitutes a legal, valid and binding obligation of each of URHC and URC, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Neither the execution nor the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in a breach or violation of any of the terms, conditions or provisions of the charter or by- laws of URHC or URC; (ii) subject to the granting of the Sellers Approvals, conflict with or result in a breach or violation of, or default or loss of a material benefit under, or permit the acceleration of any obligation under any provision of any agreement, indenture, mortgage, lien, lease or other instrument or restriction of any kind to which either URHC or URC is a party or by which any of its assets or properties is otherwise bound, which conflict, breach, violation, default, loss or acceleration, individually or in the aggregate, would interfere in any material way with the ability of either URHC or URC to consummate the transactions contemplated by this Agreement; or (iii) subject to the granting of the Sellers Approvals, require URHC or URC to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to either URHC or URC or any of its assets or properties, the failure to make, obtain or give or the effect of which violation, individually or in the aggregate, would interfere in any material way with the ability of either URHC or URC to consummate the transactions contemplated by this Agreement. 2.5. Organization and Standing of NHC. As of the Organization Date and the Closing Date, NHC will be a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and will have all requisite corporate power and authority to own its properties and to carry on its business as being conducted at such dates; and NHC will be duly qualified and licensed to do business and will be in good standing in each jurisdiction where the nature of the property owned or business conducted requires such qualification or licensing. Schedule 2.5 hereto will set forth a true and complete list as of the Closing Date of NHC and all of the entities in which NHC will have directly or indirectly at least a fifty percent equity interest (the "Subsidiaries"), their jurisdictions of incorporation and the jurisdictions in which they are qualified to do business as a foreign corporation. 2.6. Charter and By-Laws. The forms of charter and by-laws that will be used for the organization of NHC are set forth on Schedule 2.6(a) hereto. Schedule 2.6(b) hereto is a true and complete list of the officers and directors of NHC who will be in office at the Organization Date and the Closing Date, which Schedule may be updated as of such dates subject to Section 8.15 hereof. 2.7. Capital Stock. As of the Organization Date and the Closing Date, the authorized capital stock of NHC will consist of Ten Million (10,000,000) shares of common stock, par value $0.01 per share ("Common Stock"), 9,282,130 shares of which will be issued and outstanding, and all of the issued and outstanding shares of Common Stock of NHC will be duly authorized, validly issued, fully paid and nonassessable. As of the Organization Date, all of the issued and outstanding shares of Common Stock of NHC will be owned by URC free and clear of all Liens except for this Agreement, the Management Stock Purchase Agreement, the Shareholders Agreement and the Credit Agreement. As of the Closing Date, all of the Shares will be owned by URC free and clear of all Liens (subject to the granting of the Sellers Approvals), and all of the remaining issued and outstanding shares of Common Stock of NHC will be owned only by the Management Stockholders as provided in the Management Stock Purchase Agreement. All of the issued and outstanding shares of the capital stock of Underwriters Reinsurance and Risk Managers are held by URC as of the date hereof, and will be held by NHC as of the Closing Date, and all of the issued and outstanding shares of the capital stock of Commercial Underwriters are held by Underwriters Reinsurance and, except as set forth on Schedule 2.7 hereto, to the knowledge of URHC or URC such shares are so held free and clear of all Liens (subject to the granting of the Sellers Approvals). No shares of capital stock of any of the Companies are held in treasury. To the knowledge of URHC or URC, all of the issued and outstanding shares of capital stock of the Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth on Schedule 2.7 hereto, to the knowledge of URHC or URC none of the Companies is bound by, has granted, issued or made or agreed to grant, issue or make any warrants, options, subscription rights or any other commitments of any character relating to the issued or unissued shares of capital stock of any of the Companies, nor is there any agreement providing for the amendment of the charters of any of the Companies so as to increase the amount of authorized capital stock of such corporation. Except as set forth on Schedule 2.7 hereto, to the knowledge of URHC or URC none of the Companies is a party to any voting trust or other agreement or understanding with respect to the voting of the capital stock of any of the Companies. 2.8. Rights, Assets and Liabilities. Immediately prior to the Closing, URHC and URC shall transfer to the Companies such rights, assets and liabilities possessed by URHC and URC as are necessary so that the Companies shall own at the Closing all of the rights, assets and liabilities owned by URHC, URC and the Companies immediately prior to such transfer, provided that the rights, assets and liabilities listed on Schedule 10.2(b)(i) hereto shall not be so transferred and the rights, assets and liabilities so transferred shall include without limitation those set forth on Schedule 10.2(b)(ii) hereto. Such transfers shall cause no diminution or impairment whatsoever of any such rights, assets or liabilities. 2.9. Registration Statement. On or prior to the Closing Date, application will be made to the Securities and Exchange Commission for the withdrawal of the Registration Statement on Form S-1, as amended by Amendment No. 1 to Form S-1, filed with the Securities and Exchange Commission on June 15, 1993 by URHC under the Securities Act of 1933 (the "Registration Statement"). 3. REPRESENTATIONS AND WARRANTIES OF THE URHC STOCKHOLDERS. Each URHC Stockholder, severally and not jointly, represents and warrants to Alleghany as follows: 3.1. Consents and Approvals. The execution and delivery by such URHC Stockholder of this Agreement, the performance by such URHC Stockholder of its obligations hereunder, and the consummation by such URHC Stockholder of the transactions contemplated hereby do not require such URHC Stockholder to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority except (a) as set forth on Schedule 3.1 hereto; (b) such filings made with governmental agencies such as the Securities and Exchange Commission which are (i) part of the regular disclosure obligations of such URHC Stockholder and (ii) available as public documents; or (c) such consents, approvals, authorizations, actions, filings or notices of which the failure to obtain, make or give would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole or interfere in any material way with the ability of such URHC Stockholder to consummate the transactions contemplated hereby. 3.2. Transactions with URHC Stockholders. Schedule 3.2 hereto is a true and correct list of transactions, contracts and other obligations since December 31, 1991 between any of the Companies and (i) Continental or any entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Continental, or (ii) any of the GS Investors or any of the entities in which The Goldman Group, L.P. directly or indirectly owns an equity interest of 50 percent or more (the "Goldman Subsidiaries"), (except in each case for broker, dealer or investment transactions occurring in the ordinary course of business with Goldman, Sachs & Co. or Continental Asset Management Corp. ("Ordinary Course Broker, Dealer or Investment Transactions"), market making activities by Goldman, Sachs & Co. with respect to the 15% Senior Notes Due 1997 of URC (the "Notes") and sales by Goldman, Sachs & Co. of the Notes to URC (together, the "Note Transactions")), including all such transactions involving, in each case, $60,000 or more. As of the Closing Date, none of the Companies shall have any obligations involving $60,000 or more to such URHC Stockholder or such entity, except (x) for Ordinary Course Broker, Dealer or Investment Transactions, (y) as reflected on Schedule 3.2 hereto or (z) pursuant to this Agreement, the Tax Sharing Agreement, the Loan Agreement or the Stock Purchase Related Agreement. 3.3. Brokers. Except as set forth on Schedule 3.3 hereto, no agent, broker, investment banker, person or firm acting on behalf of such URHC Stockholder or under authority of such URHC Stockholder is or will be entitled to any broker's, finder's or investment banker's fee or any other commission or similar fee directly or indirectly from Alleghany or any of the Companies in connection with the negotiation of any of the transactions contemplated hereby. 4. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL. Continental represents and warrants to Alleghany as follows: 4.1. Organization and Standing. Continental is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 4.2. Authority. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Continental. This Agreement constitutes a legal, valid and binding obligation of Continental, enforceable against Continental in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Neither the execution nor the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in a breach or violation of any of the terms, conditions or provisions of the charter or by- laws of Continental; (ii) subject to the granting of the Sellers Approvals, conflict with or result in a breach or violation of, or default or loss of a material benefit under, or permit the acceleration of any obligation under any provision of any agreement, indenture, mortgage, lien, lease or other instrument or restriction of any kind to which Continental is a party or by which any of its assets or properties is otherwise bound, which conflict, breach, violation, default, loss or acceleration, individually or in the aggregate, would interfere in any material way with the ability of Continental to consummate the transactions contemplated by this Agreement; or (iii) subject to the granting of the Sellers Approvals, require Continental to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to Continental or any of its assets or properties, the failure to make, obtain or give or the effect of which violation, individually or in the aggregate, would interfere in any material way with the ability of Continental to consummate the transactions contemplated by this Agreement. 4.3. Reinsurance Agreements with Continental. Each of (i) the Aggregate Excess of Loss Reinsurance Agreement dated as of January 1, 1988 between Continental Reinsurance Corporation International Limited and Underwriters Reinsurance, reinsuring losses attributable to pre-1987 business of Underwriters Reinsurance subject to an absolute limit of liability of $168,600,000, (ii) the Aggregate Excess of Loss Reinsurance Agreement dated as of January 1, 1988 between Continental Reinsurance Corporation International Limited and Underwriters Reinsurance, reinsuring losses attributable to pre-1987 business of Underwriters Reinsurance subject to an absolute limit of liability of $31,400,000 (the agreements referred to in (i) and (ii), hereinafter the "Continental Reinsurance Agreements"), (iii) the Reinsurance Guaranty dated as of January 1, 1988 between Continental and Underwriters Reinsurance, and (iv) the Trust Agreement dated as of January 1, 1988 among Continental Reinsurance Corporation International Limited, as Grantor, Underwriters Reinsurance, as Beneficiary, and Morgan Guaranty Trust Company of New York as Trustee, as amended by the First Amendment to Trust Agreement dated September 6, 1991, is in full force and effect and constitutes a legal, valid and binding obligation of Continental or its affiliates, as the case may be, enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Continental Reinsurance Corporation International Limited has, as of the date hereof, provided for letters of credit totalling approximately $92 million, and a trust fund with Chemical Bank (formerly known as Manufacturers Hanover Trust Company), with a fair market value of not less than $108 million as of June 30, 1993, under the Continental Reinsurance Agreements and the Trust Agreement. None of Continental or its affiliates, as the case may be, and to Continental's knowledge no other party, is in material breach or violation of, or default under, any of the Continental Reinsurance Agreements, the Reinsurance Guaranty or the Trust Agreement, and no event has occurred which, solely with the giving of notice or the passage of time or both, would constitute a material breach, violation or default by any of Continental or its affiliates, as the case may be, or to Continental's knowledge any other party thereto, of any of the foregoing agreements. 5. REPRESENTATIONS AND WARRANTIES OF THE GS INVESTORS. Each GS Investor, severally and not jointly, represents and warrants to Alleghany as follows: 5.1. Organization and Standing. Such GS Investor is duly organized and validly existing under the laws of its state of organization, and has all requisite partnership power and authority to enter into this Agreement and to perform its obligations hereunder. 5.2. Authority. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary partnership action on the part of such GS Investor. This Agreement constitutes a legal, valid and binding obligation of such GS Investor, enforceable against such GS Investor in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Neither the execution nor the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in a breach or violation of any of the terms, conditions or provisions of the partnership agreements of such GS Investor; (ii) subject to the granting of the Sellers Approvals, conflict with or result in a breach or violation of, or default or loss of a material benefit under, or permit the acceleration of any obligation under any provision of any agreement, indenture, mortgage, lien, lease or other instrument or restriction of any kind to which such GS Investor is a party or by which any of its assets or properties is otherwise bound, which conflict, breach, violation, default, loss or acceleration, individually or in the aggregate, would interfere in any material way with the ability of such GS Investor to consummate the transactions contemplated by this Agreement; or (iii) subject to the granting of the Sellers Approvals, require such GS Investor to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to such GS Investor or any of its assets or properties, the failure to make, obtain or give or the effect of which violation, individually or in the aggregate, would interfere in any material way with the ability of such GS Investor to consummate the transactions contemplated by this Agreement. 6. REPRESENTATIONS AND WARRANTIES OF ALLEGHANY. Alleghany represents and warrants to each of URHC, URC and the URHC Stockholders as follows: 6.1. Organization and Standing. Alleghany is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 6.2. Certificate of Incorporation and By-Laws. The copies of the Restated Certificate of Incorporation and By-Laws of Alleghany which have heretofore been delivered to each of the URHC Stockholders are true, accurate and complete and reflect all amendments or changes in effect. 6.3. Authority. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Alleghany and this Agreement constitutes a legal, valid and binding obligation of Alleghany enforceable against Alleghany in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Neither the execution nor the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in a breach or violation of any of the terms, conditions or provisions of the Certificate of Incorporation or By-Laws of Alleghany; or (ii) subject to the granting of the qualifications, approvals and consents of third parties and regulatory authorities set forth on Schedule 6.3 hereto (the "Alleghany Approvals"), conflict with or result in a breach or violation of, or default or loss of a material benefit under, or permit the acceleration of any obligation under any provision of any agreement, indenture, mortgage, lien, lease or other instrument or restriction of any kind to which Alleghany is a party or by which its assets or properties is otherwise bound, which conflict, breach, violation, default, loss or acceleration, individually or in the aggregate, would interfere in any material way with the ability of Alleghany to consummate the transactions contemplated by this Agreement; or (iii) subject to the granting of the Alleghany Approvals, require Alleghany to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority or violate any order, writ, injunction, decree, statutes, rule or regulation applicable to Alleghany or its assets or properties, the failure to make, obtain or give or the effect of which violation, individually or in the aggregate, would interfere in any material way with the ability of Alleghany to consummate the transactions contemplated by this Agreement. 6.4. Brokers. No agent, broker, investment banker, person or firm acting on behalf of Alleghany or under authority of Alleghany is or will be entitled to any broker's, finder's or investment banker's fee or any other commission or similar fee directly or indirectly from any of the URHC Stockholders in connection with the negotiation of any of the transactions contemplated hereby. 7. CONDITIONS TO OBLIGATIONS OF ALLEGHANY. The obligations of Alleghany under this Agreement are subject to the satisfaction, on or before the Closing Date, of each of the following conditions: 7.1. Compliance with Agreement. Each of URHC, URC and the URHC Stockholders shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by each of them on or before the Closing Date, and Alleghany shall have received from each of URHC, URC and the URHC Stockholders at the Closing a certificate, dated the Closing Date, to that effect. Attached to such certificate shall be a certified copy of the resolutions of the Board of Directors of Continental, URHC and URC or a certified copy of the written consent of the GS Investors, as the case may be, in each case authorizing this Agreement and the transactions contemplated hereby. 7.2. Representations and Warranties. The repre- sentations and warranties made by each of URHC, URC and the URHC Stockholders in Sections 2, 3, 4 and 5 of this Agreement shall be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at and as of such time (except for any representation and warranty made or given as of a specified date, which shall have been true and correct in all material respects as of such specified date, and except for any changes permitted by the terms hereof or consented to by Alleghany). Alleghany shall have received from each of URHC, URC and the URHC Stockholders at the Closing a certificate, dated the Closing Date, to that effect, which certificate shall specify in reasonable detail any matters to be excepted in accordance with this Section 7.2. Delivery of such certificate shall constitute a representation and warranty by each of URHC, URC and the URHC Stockholders as to the matters stated therein, but this shall not alter the provision for survival of representations and warranties set forth in Section 12.1 hereof. 7.3. Opinion of Counsel for URHC, URC and the URHC Stockholders. Alleghany shall have received an opinion from each of (a) Debevoise & Plimpton, special counsel for Continental, (b) the Senior Vice President, General Counsel and Secretary of Continental, (c) Sullivan & Cromwell, counsel for the GS Investors, (d) the General Counsel or an Associate General Counsel or Assistant General Counsel of Goldman, Sachs & Co., (e) Arnold & Porter, counsel for URHC and URC, (f) Buchalter, Nemer, Fields & Younger, special California counsel for URHC and URC, and (g) Roussos, Hage & Hodes, special New Hampshire counsel for URHC and URC, in each case dated the Closing Date and substantially to the effect set forth in Exhibits C, D, E, F, G, H and I hereto, respectively. 7.4. Approvals. All Alleghany Approvals and all Sellers Approvals shall have been obtained and be in full force and effect on the Closing Date. Without limiting the generality of the foregoing, Alleghany shall have received the requisite approvals of the consummation of the purchase and sale of the Shares, and the transactions contemplated hereby, from the relevant state insurance regulatory authorities, and such approvals shall be in full force and effect, and no such approvals shall impose upon Alleghany or any of the Companies any conditions which materially adversely impair the ability of any of the Companies to conduct their business in substantially the same manner as such business is presently being conducted. 7.5. Absence of Certain Litigation. On the Closing Date (i) there shall be no injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided or compels or would compel Alleghany to dispose of or discontinue a significant portion of the business conducted by Alleghany and its subsidiaries or of the business conducted by the Companies as a result of the consummation of the transactions contemplated hereby; and (ii) there shall be no suit, action or other proceeding by the United States (or any agency thereof) or by any state (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated hereby or asserts the illegality of any material transaction contemplated hereby. 7.6. Transfer Taxes. Each of URHC and URC shall have paid, or caused to be paid, all stock transfer and other transfer taxes required to be paid in connection with the sale and delivery to Alleghany of the Shares, and shall have caused all appropriate stock transfer tax stamps to be affixed to the certificate or certificates representing the Shares so sold and delivered. Each URHC Stockholder shall have paid, or caused to be paid, all stock transfer and other transfer taxes required to be paid by it in connection with the transactions contemplated by this Agreement. 7.7. Shareholders Agreement. The Shareholders Agreement shall have been terminated in accordance with its terms, with no further force and effect upon the management stockholders who are parties to the Management Stock Purchase Agreement. 7.8. Arrangements with Management Stockholders. The closing under the Management Stock Purchase Agreement and the closing under the Stock Purchase Related Agreement shall have occurred, and there shall have been no modification of the Management Stock Purchase Agreement other than pursuant to Section 10.2 thereof without the consent of Alleghany, and there shall be no modification of the Stock Purchase Related Agreement other than pursuant to Section 33 thereof without the consent of Continental; provided, however, that the failure of the persons listed in Section 1.2 hereof to purchase not more than one-half of the shares of Common Stock of NHC that they were obligated to purchase in the aggregate pursuant to the Management Stock Purchase Agreement shall not be deemed to be a failure of the foregoing condition. 7.9. Tax Sharing Agreement. On or prior to the Closing Date, Continental, URHC, URC, NHC, Risk Managers, Underwriters Reinsurance and Commercial Underwriters shall have entered into a Tax Sharing Agreement, substantially in the form annexed hereto as Exhibit J (the "Tax Sharing Agreement"). The Tax Sharing Agreement shall be in full force and effect on the Closing Date and there shall have been no modification of the Tax Sharing Agreement without the consent of Alleghany. 7.10. Loan Agreement. On or prior to the Closing Date, Continental or an affiliate of Continental and NHC shall have entered into a Loan Agreement, substantially in the form annexed hereto as Exhibit K (the "Loan Agreement"). 7.11. California Tax Election. On or prior to the Closing Date, Alleghany and URC shall have executed and delivered to URC six copies of IRS Form 8023 (marked to indicate that it applies for California tax purposes only) for filing with the Franchise Tax Board of California pursuant to the California Bank and Corporation Tax Law Sections 24451 and 23051.5(g) to treat the sale of the stock of NHC as a sale of NHC's assets, as described in Section 338(h)(10) of the Code, for California tax purposes only. 8. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ALLEGHANY. In addition, the obligations of Alleghany under this Agreement are subject to the condition that all of the following representations and warranties of NHC (which shall have been given by NHC on the Closing Date) (a) which speak as of the date hereof shall be true and correct in all material respects as of the date hereof as if the defined term "Companies" includes URHC and URC and does not include NHC, and (b) which speak as of the Organization Date or the Closing Date shall be true and correct in all material respects as of the Organization Date or the Closing Date, as the case may be (except in each case for any representation and warranty which speaks as of any other date, which shall be true and correct in all material respects as of such date, and except for any changes permitted by the terms hereof or consented to by Alleghany), and Alleghany shall have received from the President and Chief Financial Officer of NHC a certificate, on behalf of NHC, dated the Closing Date, to the foregoing effect: 8.1. Organization and Standing of the Companies. As of the date hereof (or as of the Organization Date with respect to NHC) and as of the Closing Date, each of the Companies is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to own its properties and to carry on its business as now being conducted; and each of the Companies is duly qualified and licensed to do business and is in good standing in each jurisdiction where the nature of the property owned or business conducted requires such qualification or licensing, except for such failures to be so qualified, licensed or in good standing as would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. As of the date hereof (or as of the Organization Date with respect to NHC) and as of the Closing Date, Schedule 8.1 hereto sets forth a true and complete list of the Companies and all of the entities in which any of the Companies has directly or indirectly at least a fifty percent equity interest (the "Subsidiaries"), their jurisdictions of incorporation and the jurisdictions in which they are qualified to do business as a foreign corporation. 8.2. Charter and By-Laws. As of the date hereof (or as of the Organization Date with respect to NHC) and as of the Closing Date, the copies of the charter and by-laws of each of the Companies which have heretofore been delivered to Alleghany or Alleghany's counsel are true, accurate and complete and reflect all amendments or changes in effect. As of the date hereof (or as of the Organization Date with respect to NHC) and as of the Closing Date, Schedule 8.2 hereto is a true and complete list of the officers and directors of each of the Companies, which Schedule may be updated as of the Closing Date subject to Section 8.15 hereof. 8.3. Capital Stock. As of the Organization Date and the Closing Date, the authorized capital stock of NHC will consist of Ten Million (10,000,000) shares of Common Stock, 9,282,130 shares of which will be issued and outstanding, and all of the issued and outstanding shares of Common Stock of NHC will be duly authorized, validly issued, fully paid and nonassessable. As of the Organization Date, all of the issued and outstanding shares of Common Stock of NHC will be owned by URC free and clear of all Liens except for this Agreement, the Management Stock Purchase Agreement, the Shareholders Agreement and the Credit Agreement. As of the Closing Date, all of the Shares will be owned by URC free and clear of all Liens (subject to the granting of the Sellers Approvals). All of the issued and outstanding shares of the capital stock of Underwriters Reinsurance and Risk Managers are held by URC as of the date hereof, and will be held by NHC as of the Closing Date, and all of the issued and outstanding shares of the capital stock of Commercial Underwriters are held by Underwriters Reinsurance, in each case, except as set forth on Schedule 2.7 hereto, free and clear of all Liens (subject to the granting of the Sellers Approvals). No shares of capital stock of any of the Companies are held in treasury. All of the issued and outstanding shares of capital stock of the Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth on Schedule 2.7 hereto, none of the Companies is bound by, has granted, issued or made or agreed to grant, issue or make any warrants, options, subscription rights or any other commit- ments of any character relating to the issued or unissued shares of capital stock of any of the Companies, nor is there any agreement providing for the amendment of the charters of any of the Companies so as to increase the amount of authorized capital stock of such corporation. Except as set forth on Schedule 2.7 hereto, none of the Companies is a party to any voting trust or other agreement or understanding with respect to the voting of the capital stock of any of the Companies. 8.4. Authority. Neither the execution nor the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in a breach or violation of any of the terms, conditions or provisions of the charters or by-laws of the Companies; (ii) subject to the granting of the Sellers Approvals, conflict with or result in a breach or violation of, or default or loss of a material benefit under, or permit the acceleration of any obligation under any provision of any agreement, indenture, mortgage, lien, lease or other instru- ment or restriction of any kind to which any of the Companies is a party or by which any of their respective assets or properties is otherwise bound, which conflict, breach, violation, default, loss or acceleration, individually or in the aggregate, would have a material adverse effect upon the business, financial condition or results of operations of the Companies taken as a whole or interfere in any material way with the ability of any of URHC, URC or Continental to consummate the transactions contemplated by this Agreement; or (iii) subject to the granting of the Sellers Approvals, require any of the Companies to obtain any consent, approval, authorization or action of, or make any filing with or give any notice to, any third party, or any public, governmental or judicial authority (such consents, approvals, authorizations, actions, filings and notices required on the part of the Companies are set forth on Schedule 8.4 hereto), or violate any order, writ, injunction, decree, statute, rule or regulation applicable to any of URHC, URC or the Companies or any of their assets or properties, the failure to make, obtain or give or the effect of which violation, individually or in the aggregate, would have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole or interfere in any material way with the ability of any of URHC, URC or Continental to consummate the transactions contemplated by this Agreement. 8.5. Compliance. Except as set forth on Schedule 8.5 hereto, (a) none of the Companies is in violation of any applicable order, judgment, injunction, award or decree, the violation of which would have a material adverse effect upon the business, financial condition or results of operations of the Companies taken as a whole, and (b) none of the Companies has received written notice that any such violation is being alleged. Except as set forth on Schedule 8.5 hereto, none of the Companies is in violation of any federal, state and local laws, regulations, ordinances and governmental requirements applicable to the operation of its business, the violation of which would have a material adverse effect upon the business, financial condition or results of operations of the Companies taken as a whole, and none of the Companies has received written notice that any such violation is being alleged. Schedule 8.5 hereto is a true and complete list of the jurisdictions in which each of the Companies is licensed and authorized to engage in insurance and reinsurance or other business and the lines of insurance or types of business it is licensed to write or engage in in each such jurisdiction, which Schedule may be updated as of the Closing Date provided that the number of jurisdictions listed for each of the Companies in the updated Schedule is not materially fewer than listed in the Schedule as of the date hereof. Except as set forth on Schedule 8.5 hereto, all such licenses are valid and in full force and effect, except for such failures to be valid or in full force and effect which would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. Each of the Companies conducts no insurance or reinsurance or other business in any other jurisdiction nor writes any line of insurance or engages in any type of business other than those for which it is currently licensed in any jurisdiction, except where the failure to be so licensed would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. Schedule 8.5 hereto is a true and complete list of all the jurisdictions in which each of the Companies, within the last five years, had its license or other qualification to conduct an insurance business revoked, restricted or suspended (voluntarily or involuntarily) or, to the knowledge of NHC received any threat of action to revoke, restrict or suspend such license or qualification. Also set forth on Schedule 8.5 are the jurisdictions in which each of the Companies within the last five years has been involved in a proceeding to revoke, restrict or suspend its license or other qualification, or in which there is any proceeding pending to revoke, restrict or suspend such license or qualification. A copy of the report relating to the last completed insurance regulatory examination and audit of Underwriters Reinsurance and Commercial Underwriters, if any, has heretofore been delivered to Alleghany or Alleghany's counsel. Except for generally applicable legal requirements and as set forth on Schedules 2.3, 3.1, 8.4 and 8.5 hereto, there are no agree- ments or understandings between any of the URHC Stockholders or any of the Companies and any regulatory authority concerning the payment of dividends by the Companies or the maintenance of any reserves. 8.6. Financial Statements. (a) GAAP Financial Statements. (i) The audited consolidated balance sheet of URHC and its subsidiaries as of December 31, 1992 and 1991 and the related audited consolidated statements of income, stockholders' equity and cash flows for each of the years then ended (the "Annual Financial Statements"), which heretofore have been delivered to Alleghany or Alleghany's counsel, present fairly the consolidated financial position and results of the operations of URHC and its subsidiaries as of the dates and for the periods indicated therein in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as may otherwise be specifically indicated in such financial statements. (ii) The unaudited consolidated balance sheet of URHC and its subsidiaries as of March 31, 1993 and the related unaudited consolidated statements of income, stockholders' equity and cash flows for the respective three months then ended (the "March Financial Statements"), which heretofore have been delivered to Alleghany or Alleghany's counsel, present fairly (subject to normal, recurring year- end adjustments) the consolidated financial position and results of operations of URHC and its subsidiaries as of the dates and for the periods indicated therein in accordance with generally accepted accounting principles applied on a basis consistent with the Annual Financial Statements (except as may otherwise be specifically indicated in the notes thereto, and except that footnote presentation is as permitted by Form 10-Q of the Securities and Exchange Commission). (iii) The unaudited consolidated balance sheet of URHC and its subsidiaries as of June 30, 1993 and the related consolidated unaudited statements of income, stockholders' equity and cash flows for the respective six months then ended, which will be prepared and delivered to Alleghany or Alleghany's counsel prior to the Closing Date, will present fairly (subject to normal, recurring year-end adjustments) the financial position and results of operations of URHC and its subsidiaries as of the dates and for the periods indicated therein in accordance with generally accepted accounting principles applied on a basis consistent with the Annual Financial Statements (except as may otherwise be specifically indicated in the notes thereto, and except that footnote presentation is as permitted by Form 10-Q of the Securities and Exchange Commission). (b) Statutory Financial Statements. (i) All Annual Convention Statements required to be filed since December 31, 1987 and the Quarterly Convention Statements required to be filed during the period January 1, 1993 to the date hereof with any insurance regulatory agencies by Underwriters Reinsurance and Commercial Underwriters have been duly filed. Such Annual Convention Statements for the fiscal years ended December 31, 1992 and 1991 and such Quarterly Convention Statements for the period ending March 31, 1993 (including the financial statements on a statutory basis and the accompanying exhibits and schedules), which have heretofore been delivered to Alleghany or Alleghany's counsel, were prepared in accordance with accounting practices prescribed or permitted for insurance companies by state regulatory authorities, applied on a consistent basis throughout such period except as otherwise stated therein, and present fairly, in accordance with such practices, the statutory financial position as at the date of, and the result of its operations for the period covered by, such Annual or Quarterly Convention Statements. Other than as may be reflected in the Quarterly Convention Statements for the three months ending March 31, 1993, there has not been any material adverse change in the statutory condition of Underwriters Reinsurance and Commercial Underwriters taken as a whole since the date of the Annual Convention Statements for the fiscal year ended December 31, 1992. (ii) As soon as reasonably practicable after they become available, URC shall have caused Underwriters Reinsurance to furnish to Alleghany the Quarterly Convention Statements of Underwriters Reinsurance and Commercial Underwriters for all interim quarterly periods subsequent to March 31, 1993 and prior to the Closing Date. The Quarterly Convention Statements referred to above required to be filed with any insurance regulatory agencies shall have been duly filed. Such Quarterly Convention Statements (including the financial statements on a statutory basis and the accompanying exhibits and schedules) will have been prepared in accordance with accounting practices prescribed or permitted for insurance companies by state regulatory authorities, applied on a consistent basis throughout such period except as otherwise stated therein, and will have presented fairly in accordance with such practices the statutory financial position of Underwriters Reinsurance and Commercial Underwriters as at the date of, and the result of its operations for the period covered by, such Quarterly Convention Statements. 8.7. Investments and Other Assets. (a) Schedule 8.7 hereto is a true and complete list of all investments in (and the custodial location of) bonds, stocks and other securities ("Investments") owned by any of the Companies, other than shares of capital stock of any of the Companies held by any of the other Companies, as of the last day of the month immediately preceding the month hereof, all of which Investments comply in all material respects with applicable insurance laws and regulations, which Schedule may be updated as of the Closing Date to reflect transactions consistent with the Investment Objectives set forth on Schedule 8.7 hereto. All Investments of each of Underwriters Reinsurance and Commercial Underwriters are admitted assets under applicable insurance laws and regulations and statutory accounting practices, except to the extent that failure to be admitted assets would not have a material adverse effect on the business, financial condition or results of operations of Underwriters Reinsurance and Commercial Underwriters taken as a whole. Except as disclosed on Schedule 8.7 hereto, each of the Companies has good and marketable title to all its Investments listed on Schedule 8.7 hereto or acquired in the ordinary course of business since the last day of the month immediately preceding the month hereof other than with respect to those Investments which have been disposed of in the ordinary course of business since such date, free and clear of all Liens except for Liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for which reserves have been provided in accordance with generally accepted accounting principles. (b) None of the Companies has received written notice that any of the Investments listed on Schedule 8.7 hereto or acquired in the ordinary course of business since the last day of the month immediately preceding the month hereof is currently in default in the payment of principal or interest. (c) Except as set forth on Schedule 8.7 hereto, since March 31, 1993, except as required by agreements in effect on March 31, 1993 and other than workouts, extensions or enforcement of security interests on Investments owned on March 31, 1993, none of the Companies has (i) purchased or otherwise invested in or committed to purchase or otherwise invest in any interest in real property (including without limitation any extension of credit secured by a mortgage or deed of trust on real property, but excluding instruments of a type commonly known as mortgage-backed securities), (ii) purchased or otherwise invested in or committed to purchase or otherwise invest in bonds, notes, debentures or other evidence of indebtedness rated lower than "Aa" by Moody's Investors Service Inc. or "AA" by Standard & Poor's Corporation at the time of purchase or the equivalent commercial paper ratings by such rating agencies, (iii) entered into any agreement or commitment with respect to the purchase or other acquisition, sale or other disposition or allocation of any Investment with any Affiliate (as defined in Section 8.18 hereof) or (iv) entered into any agreement or commitment with respect to any foreign investments. None of the Companies owns any real property which is material to the business of any of the Companies. (d) Schedule 8.7 hereto sets forth a true and complete list of all of the assets of the Companies that are material to the business of the Companies taken as a whole other than the Investments, the shares of capital stock of any of the Companies held by any of the other Companies and rights of the Companies under the contracts set forth on Schedule 8.9 hereto. All such assets, and all of the rights of the Companies under the contracts set forth on Schedule 8.9 hereto, are owned free and clear of all Liens except those Liens that do not materially adversely affect the value of the assets or rights of the Companies taken as a whole. All reinsurance letters of credit and trust funds listed on Schedule F-Part 2A-Section 1 of the Annual Convention Statements for the fiscal year ended December 31, 1992 of each of Underwriters Reinsurance and Commercial Underwriters are in full force and effect and comply with requirements set by state insurance regulatory authorities to obtain reinsurance credit therefor, except for such failures to be in full force and effect or to comply which would not have a material adverse effect on the business, financial condition or results of operations of Underwriters Reinsurance and Commercial Underwriters taken as a whole. 8.8. Intangible Property. The Companies own, have registered or have valid rights to use such trademarks, service marks, trade names and copyrights as are material to the business of the Companies taken as a whole. None of the Companies has received written notice that any of them is infringing any such trademarks, service marks, trade names, copyright or any application pending therefor. Each of the Companies has valid rights, title to or interest in the trade secrets and other proprietary rights that are material to the businesses of the Companies taken as a whole. 8.9. Contracts and Commitments. Except as set forth on Schedule 8.9 hereto, none of the Companies is a party to any written or oral: (a) contracts or commitments (including, without limitation, reinsurance and retrocession agreements and treaties with any person and agreements with, and undertakings or commitments to, any governmental or regulatory authority) materially affecting the business of the Companies taken as a whole; (b) retrocession agreements for business ceded by any of the Companies that do not qualify as risk transfer in the Annual Financial Statements or the statutory financial statements set forth in the Annual Convention Statements; i.e., surplus relief contracts or treaties, or assumption reinsurance agreements which provide for the transfer and novation of contracts of insurance; (c) contracts or agreements containing covenants limiting the freedom of any of the Companies in any material respect to engage in any line of business in any geographic area or to compete with any person; (d) employment contracts, including without limitation contracts to employ executive officers and other contracts with officers or directors of any of the Companies, which cannot be terminated by any of the Companies upon notice of sixty days or less without penalty or premium and involve annual salary in excess of $50,000 individually; or (e) leases which are material to the Companies taken as a whole. None of the Companies is (and to the knowledge of NHC no other party is) in breach or violation of, or default under, any of such contracts, commitments or agreements and no event has occurred which, with the giving of notice or the passage of time or both, would constitute a breach, violation or default by any of the Companies (or to the knowledge of NHC of any other party thereto) of any of such contracts, commitments or agreements, except for such breaches, violations, defaults and events which would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. 8.10. Accounting Practices. Except as set forth on Schedule 8.10 hereto and except for changes disclosed in Quarterly Convention Statements or the March Financial Statements, since December 31, 1992, none of the Companies has made any change in its accounting policies or any material change in accounting methods or practices, including, without limitation, the establishment of reserves for unearned premiums, losses (including incurred but not reported losses) and loss adjustment expenses, or made any change in depreciation or amortization policies or rates adopted by it, except as required by law, generally accepted accounting principles or statutory accounting practices prescribed or permitted by state regulatory authorities. 8.11. Litigation. As of the date hereof, except as set forth on Schedule 8.11 hereto, there are no actions, suits, proceedings, claims, investigations or examinations pending or to the knowledge of NHC threatened against any of the Companies or any of their respective businesses, properties, assets, or securities, at law or in equity, before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, having jurisdiction or before any private arbitration panel (the "Actions") which, if adversely determined, would result in a judgment of more than $500,000 or which would have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. As of the Closing Date, except as set forth on Schedule 8.11 hereto, there are no Actions which in the reasonable judgment of outside counsel for Alleghany (which shall be in writing and delivered to the parties hereto) are likely to be adversely determined and, if adversely determined, would result in a judgment of more than Five Million Dollars ($5,000,000) liability to the Company or which would have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. 8.12. Tax Matters. (a) Except as disclosed on Schedule 8.12(a) hereto, the Companies have duly and timely filed (either separately or on a consolidated or combined basis) with the appropriate government agencies, all material returns, declarations, reports, information returns, statements or extensions relating to Taxes (as hereinafter defined), including any schedule or attachment thereto or any amendment thereof (the "Tax Returns"), and the Tax Returns are true, correct and complete in all material respects. The term "Taxes", as used in this Agreement, shall mean any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, real property transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty or addition thereto. (b) Except as disclosed on Schedule 8.12(b) hereto, all material Taxes of the Companies for all periods ending on the Closing Date have been (i) properly and fully paid to the extent due and payable, and (ii) withheld and paid over or deposited in the case of any Taxes required to be withheld and paid in connection with amounts paid or owing to any employee, independent contractor, stockholder, claimant, creditor or other party. Except as disclosed on Schedule 8.12(b) hereto, there are no Liens on any of the assets of the Companies that arose in connection with any failure (or alleged failure) to pay any Taxes except for Liens which would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. Except as disclosed on Schedule 8.12(b) hereto, none of the Companies has requested any extension of time within which to pay any material Taxes or file any material Tax Returns except to the extent that such Taxes will have been paid or such Tax Returns will have been filed by the Closing Date. Except as disclosed on Schedule 8.12(b) hereto, there is no agreement, waiver or consent providing for an extension of time with respect to the assessment of any material Tax deficiency against the Companies. Except as disclosed on Schedule 8.12(b) hereto, there is no action, suit, proceeding, investigation, audit or claim now pending against, or with respect to any of the Companies with regard to any Taxes, nor is any claim for additional Taxes or assessment of Taxes threatened or asserted in writing by any tax authority, except, in each case, for such actions, suits, proceedings, investigations, audits or claims that could not result in payment of an amount of Taxes that would have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. All applicable limitation periods for the assessment of any Taxes against the Companies or against any corporation or other entity included in a federal, state or local consolidated or combined income tax return filed by or otherwise including any of the Companies for all taxable periods ending on or before December 31, 1986, have closed or expired. (c) The federal and state income and premium Tax Returns of, or which include, the Companies have not been examined by the Internal Revenue Service or other taxing au- thority having the responsibility for auditing such Tax Returns for all periods beginning after the Companies' taxable year ending December 31, 1987. Alleghany has been provided with true and complete copies of all federal, state and local income tax returns constituting part of the Tax Returns which relate to the conduct of the businesses of the Companies, as well as any correspondence and agreements with the Internal Revenue Service or such other similar taxing authority having the responsibility for auditing any such income tax returns for the jurisdictions in which such returns are filed for all periods for which assessments are not barred by operation of the relevant statute of limitations. The representations and warranties contained in this paragraph (c) and all but the second sentence of paragraph (b) of this Section 8.12 shall not apply with respect to the federal income Taxes and the federal income Tax Returns of any consolidated group of which any of the Companies was a member prior to December 31, 1987. (d) Except as set forth on Schedule 8.12(d) hereto, (i) each of the Companies has disclosed on its federal income Tax Returns all positions required to be disclosed by it under Section 6662 of the Internal Revenue Code of 1986, as amended (the "Code"), except for such positions that, if successfully challenged by the Internal Revenue Service, could not result in payment of an amount of Taxes that would have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole; and (ii) none of the Companies has any liability for the Taxes of any other person (other than another of the Companies) under Section 1.1502-6 of the Treasury Regulations, any similar provision of state, local or foreign law. 8.13. Employee Benefit Plans. (a) Schedule 8.13 hereto sets forth a true and complete list of all employee benefit plans, agreements, arrangements, funds, and programs (including, without limitation, all "employee benefit plans" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (i) which are sponsored, maintained or contributed to by any of the Companies for the benefit of current or former employees or directors of any of the Companies or (ii) with respect to which any of the Companies has any liability, whether direct or indirect, actual or contingent (individually, a "Benefit Plan" and collectively, the "Benefit Plans"). Except as set forth on Schedule 8.13 hereto, no other employee benefit plan, agreement, arrangement, fund or program sponsored or maintained by any entity currently or formerly affiliated under Section 414 of the Code or Section 4001 of ERISA with any of the Companies provides benefits to current or former employees or directors of any of the Companies. (b) With respect to each Benefit Plan, the Companies have delivered to Alleghany copies of (i) all Benefit Plan documents, including summary plan descriptions and material employee communications; (ii) the two most recent annual reports (Form 5500 series, including all schedules and attachments); (iii) the two most recent annual and periodic accountings of plan assets, if applicable; (iv) the two most recent actuarial valuations, if applicable; and (v) the most recent determination letter received from the Internal Revenue Service. (c) With respect to each Benefit Plan, (i) such Benefit Plan has been administered in compliance in all material respects with its terms and all applicable laws; (ii) no material actions, suits or claims are pending or threatened in respect thereof; (iii) if such Benefit Plan is intended to qualify under Section 401(a) or 403(a) of the Code, (A) such Benefit Plan so qualifies, (B) such Benefit Plan has received from the Internal Revenue Service a favorable determination letter covering the Benefit Plan as originally adopted, and as amended by certain amendments thereto; and (C) such Benefit Plan's qualified status is protected with respect to subsequent amendments thereto that are not covered by the determination letter because such amendments may be (and will be) corrected or augmented, as necessary, within the remedial amendment period under Section 401(b) of the Code, which period extends beyond the Closing Date; (iv) no fiduciary breaches or prohibited transactions have occurred which would subject the Companies to material liability under Title I of ERISA or Section 4975 of the Code; (v) all contributions thereto have been timely made or reflected on the consolidated financial statements of the Companies; (vi) all unpaid liabilities with respect thereto have been fully reflected on the consolidated financial statements of Underwriters Re and its subsidiaries; and (vii) the assets of such Benefit Plan, if a "pension plan" within the meaning of Section 3(2) of ERISA, are not currently invested in any insurance or annuity contract issued by an insurance company that is not rated "A++(Superior)" in claims paying ability by A.M. Best Company, Inc. (d) Each Benefit Plan which is subject to Section 302 of ERISA or Section 412 of the Code (i) has no "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived; (ii) uses a funding method permissible under ERISA and the actuarial assumptions used in connection therewith are permissible and reasonable, both individually and in the aggregate; and (iii) as of the last day of the most recent plan year ended prior to the date hereof, based on such assumptions, had assets the fair market value of which were at least equal to the present value of all benefit liabilities within the meaning of Section 4001(a)(16) of ERISA. (e) With respect to each Benefit Plan which is an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA): (i) the trust relating thereto, if any, satisfies the requirements of Section 501(c)(9) of the Code; (ii) such Benefit Plan has been administered in compliance in all material respects with all requirements imposed under Section 4980B of the Code and Sections 601-608 of ERISA; and (iii) except as set forth on Schedule 8.13 hereto, no such Benefit Plan provides health or death benefits to any individual beyond his retirement or other termination of employment (other than statutorily mandated continuation coverage or conversion rights to individual coverage). (f) No Benefit Plan is a "multiemployer plan" as defined in Section 3(37) or 4001 of ERISA or a "multiple employer plan" within the meaning of Section 413(c) of the Code or Section 4064 of ERISA and none of the Companies has any liability or obligation, whether actual or contingent, with respect to such a multiemployer plan or a multiple employer plan. (g) Other than as permitted under the Management Stock Purchase Agreement and other than the acceleration of the vesting and the payment of the stock appreciation rights granted under the Five Year Stock Equivalent Plan of UHRC, the consummation of the transactions contemplated herein shall not entitle any current or former employee of any of the Companies to severance pay, or accelerate the time of payment or vesting, or increase the amount of any compensation due to any such employee or former employee. No payment under any Benefit Plan would fail to be deductible because of Section 280G of the Code. 8.14. Agencies, Powers of Attorney, etc. (i) Schedule 8.14 hereto is a true and complete list as of a current date of the names and addresses of each agency of any of the Companies that has any authority to bind any of them to issue an insurance policy, with a general description of the type of agency or binding authority granted, which Schedule may be updated as of the Closing Date provided that any changes in the updated Schedule will not have a material adverse effect on the ability of Commercial Underwriters to conduct its business as now being conducted. (ii) The Companies have made available to Alleghany copies of all forms of agreements or other instruments granting any powers of attorney, agency or binding authority, including all current form agency contracts, of each of the Companies. 8.15. Employees. Schedule 8.15 hereto is a true and complete list of all employees of each of the Companies whose annual salary exceeds $50,000, the current salary of each such employee (which information may be updated as of the Closing Date subject to the other provisions of this Section 8.15), the salaries, incentive awards, bonuses and other compensation paid to each such employee for the year ended December 31, 1992 (shown separately), and whether any such employee has a written employment agreement with any of the Companies. All such employment agreements will continue in full force and effect after the Closing, except for the modifications set forth on Schedule 10.1(b)(i) hereto, without triggering any severance payments or other penalties. The employees of the Companies listed on Schedule 8.15(a) hereto are actively employed by the Companies and have not given notice of termination or resignation. Except as set forth on Schedule 8.15 hereto (which information may be updated as of the Closing Date subject to the other provisions of this Section 8.15), since December 31, 1992, none of the Companies has terminated or experienced the resignation of any employee whose annual salary exceeded $50,000. There are no collective bargaining agreements relating to any employees of any of the Companies. Within the last two years none of the Companies has experienced any material work stoppage or union recognition efforts, or has been the subject of any collective bargaining or a party to any collective bargaining agreement. 8.16. Insurance. Schedule 8.16 hereto sets forth a true and complete list of all policies of insurance (excluding retrocession agreements and similar agreements) maintained by each of the Companies with respect to their respective properties and the conduct of their respective businesses, showing the subject matter, the beneficiary and the amount of coverage for each policy, which Schedule may be updated as of the Closing Date provided that coverage and premiums continue to be substantially similar to those reflected in the Schedule as of the date hereof. Other than life insurance policies, the insurance coverage provided by such policies of insurance in force is reasonably adequate for the conduct of the business conducted by each of the Companies in accordance with sound business practices. 8.17. Brokers. Except as set forth on Schedule 8.17 hereto, no agent, broker, investment banker, person or firm acting on behalf of any of the Companies or under authority of any of them is or will be entitled to any broker's, finder's or investment banker's fee or any other commission or similar fee directly or indirectly from any of the parties hereto in connection with the negotiation of any of the transactions contemplated hereby. 8.18. Transactions with Affiliates. Schedule 8.18 hereto is a true and correct list of transactions, contracts and other obligations (other than payments of salary, bonus, employee benefits and other employee-related expense reimbursements paid to employees of any of the Companies) since December 31, 1991 between any one of the Companies and (i) any stockholders, directors, officers, employees or agents of any of the Companies; (ii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, any of the persons listed in clause (i) hereof (except, with respect to the GS Investors, this clause (ii) shall apply only to the Goldman Subsidiaries); or (iii) any member of the immediate family (as defined in Rule 16a-1(e) of the Securities and Exchange Commission) of any of the persons listed in clause (i) hereof (the persons referred to in clauses (ii) and (iii) hereof are together referred to as the "Affiliates"), (except in each case for Ordinary Course Broker, Dealer or Investment Transactions and the Note Transactions), including all such transactions involving, in each case, $60,000 or more. As of the Closing Date, none of the Companies shall have any obligations involving $60,000 or more to URHC, URC, any of the stockholders, directors, officers, employees or agents of either URHC or URC, or any of their respective Affiliates, except (x) for Ordinary Course Broker, Dealer or Investment Transactions, (y) as reflected on Schedule 8.18 hereto or (z) pursuant to this Agreement, the Tax Sharing Agreement, the Loan Agreement or the Stock Purchase Related Agreement. 8.19. Regulatory Filings. Except with respect to Taxes and Benefit Plans, which are subject to the provisions of Sections 8.12 and 8.13, respectively, each of the Companies has filed all reports, statements, documents, registrations, filings or submissions required to be filed by it with any governmental or regulatory agency, except where failure to so file would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole, and except (i) those with respect to which the imposition, levy or collection of all fines, penalties, assessments, taxes, forfeitures, money judgments or sanctions of any type are barred by statute of limitations, and (ii) as otherwise agreed to in writing by the applicable governmental or regulatory agency. Except as indicated on Schedule 8.19 hereto, (x) all such registrations, filings and submissions were in compliance with applicable law when filed, and (y) no deficiencies have been asserted by any such governmental or regulatory agency with respect to such registrations, filings or submissions that have not been satisfied, except for such failure to comply and deficiencies which would not have a material adverse effect on the business, financial condition or results of operations of the Companies taken as a whole. 8.20. Registration Statement. A copy of the Registration Statement has been furnished to Alleghany. As of its filing date, the Registration Statement did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made with respect to the matters set forth on Schedule 8.20 hereto to the extent such matters were not described in the Registration Statement, or with respect to the accounting treatment for funded covers as reflected in the Registration Statement to the extent that such treatment is inconsistent with the accounting treatment therefor referred to in Note 1 to the Annual Financial Statements and reflected in the Annual Financial Statements. 8.21. Reserves. Except for any action taken pursuant to Section 10.1(j) hereof, the insurance reserving practices and policies of any of the Companies have not changed in any material respect since December 31, 1992, and the results of the application of such practices and policies are reflected in the Convention Statements, it being understood that for this purpose any change in reserves resulting from the change in accounting policy described in Note 1 to the Annual Financial Statements shall not be deemed a change in reserving practices or policies. All information in the possession of any of the Companies and requested by Alleghany with reasonable specificity that is material to an evaluation of the adequacy of the loss reserves (including, without limitation, incurred but not reported reserves), loss adjustment expense reserves and unearned premium reserves of the Companies as of December 31, 1992 has been made available to Alleghany. 8.22. Absence of Bank or Savings and Loan Status. None of the Companies (a) is an "insured bank" or is eligible for federal deposit insurance within the meaning of the Federal Deposit Insurance Act, as amended; (b) is a "savings association" for purposes of the Regulations for Savings and Loan Holding Companies, 12 CFR Section 583-584 and the Regulations for the Acquisition of Control of Savings Associations, 12 CFR Section 574; (c) accepts deposits within the meaning of 12 U.S.C. Section 378; (d) is a "bank" or a "bank holding company"; (e) owns or "controls" 5 percent or more of the voting securities of a "bank" or "bank holding company," as such terms are defined in the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder; (f) is regulated as a bank under the laws or regulations of its jurisdiction of incorporation; (g) is a "savings and loan holding company"; (h) "controls" any "savings association," as such terms are defined in 12 CFR Section 574 and 583; (i) has acquired by purchase or otherwise, or retains, more than 5 percent of the voting stock or shares of a "savings association" or "savings and loan holding company," as such terms are defined in 12 CFR Section 583; or (j) is regulated as a savings and loan institution under the laws or regulations of its jurisdiction of incorporation. 8.23. No Material Adverse Change. Since December 31, 1992, there has not been any material adverse change in the business, financial condition or results of operations of the Companies taken as a whole as reflected in the Annual Financial Statements as of December 31, 1992, whether or not arising from transactions in the ordinary course of business. 8.24. No Dividends. Except as set forth in the Registration Statement or on Schedule 8.24 hereto, and except as permitted by Section 10.1(b)(iv) hereof, since December 31, 1992, there has not been any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of any of the Companies or any direct or indirect redemption, purchase or other acquisition by any of the Companies of any such stock; or except as required pursuant to Section 10.2(b) hereof, since December 31, 1992, there has not been any sale, assignment, transfer or other disposition of any Investment other than in the ordinary course of business and consistent with the Investment Objectives set forth on Schedule 8.7 hereto, or any amendment, termination or waiver of any right of substantial value belonging to or held by any of the Companies. 9. CONDITIONS TO OBLIGATIONS OF URHC, URC AND THE URHC STOCKHOLDERS. The obligations of URHC, URC and the URHC Stockholders under this Agreement are subject to the satisfaction, on or before the Closing Date, of each of the following conditions: 9.1. Compliance with Agreement. Alleghany shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by it on or before the Closing Date, and each of URHC, URC and the URHC Stockholders shall have received from Alleghany at the Closing a certificate, dated the Closing Date, to that effect. Attached to such certificate shall be a certified copy of the resolutions of the Board of Directors of Alleghany authorizing this Agreement and the transactions contemplated hereby. 9.2. Representations and Warranties. The repre- sentations and warranties made by Alleghany in Section 6 of this Agreement shall be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at and as of such time (except for any representation and warranty made or given as of a specified date, which shall have been true and correct in all material respects as of such specified date, and except for any changes permitted by the terms hereof or consented to by each of URHC, URC and the URHC Stockholders). Each of the URHC Stockholders shall have received from Alleghany at the Closing a certificate, dated the Closing Date, to that effect, which certificate shall specify in reasonable detail any matters to be excepted in accordance with this Section 9.2. Delivery of such certificate shall constitute a representation and warranty by Alleghany as to the matters stated therein, but this shall not alter the provision for survival of representations and warranties set forth in Section 12.1 hereof. 9.3. Opinion of Counsel for Alleghany. Each of URHC, URC and the URHC Stockholders shall have received an opinion from Messrs. Donovan Leisure Newton & Irvine, counsel for Alleghany, dated the Closing Date substantially to the effect set forth in Exhibit L hereto. 9.4. Approvals. All Alleghany Approvals and Sellers Approvals shall have been obtained and be in full force and effect on the Closing Date. 9.5. Absence of Certain Litigation. On the Closing Date (i) there shall be no injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided or compels or would compel Alleghany to dispose of or discontinue a significant portion of the business conducted by Alleghany and its subsidiaries or of the business conducted by the Companies as a result of the consummation of the transactions contemplated hereby; and (ii) there shall be no suit, action or other proceeding by the United States (or any agency thereof) or by any state (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated hereby or asserts the illegality of any material transaction contemplated hereby. 9.6. Transfer Taxes. Alleghany shall have filed, independently or jointly with each of URHC, URC and the URHC Stockholder, as the law requires, all real property and other transfer tax filings required to be filed by or with the cooperation of Alleghany in connection with the sale and delivery to Alleghany of the Shares. 9.7. Arrangements with Management Stockholders. The closing under the Management Stock Purchase Agreement and the closing under the Stock Purchase Related Agreement shall have occurred, and there shall have been no modification of the Management Stock Purchase Agreement other than pursuant to Section 10.2 thereof without the consent of Alleghany, and there shall be no modification of the Stock Purchase Related Agreement other than pursuant to Section 33 thereof without the consent of Continental; provided, however, that the failure of the persons listed in Section 1.2 hereof to purchase not more than one-half of the shares of Common Stock of NHC that they were obligated to purchase in the aggregate pursuant to the Management Stock Purchase Agreement shall not be deemed to be a failure of the foregoing condition. 9.8. Tax Sharing Agreement. On or prior to the Closing Date, Continental, URHC, URC, NHC, Risk Managers, Underwriters Reinsurance and Commercial Underwriters shall have entered into the Tax Sharing Agreement. The Tax Sharing Agreement shall be in full force and effect on the Closing Date and there shall have been no modification of the Tax Sharing Agreement without the consent of Alleghany. 9.9. California Tax Election. On or prior to the Closing Date, Alleghany and URC shall have executed and delivered to URC six copies of IRS Form 8023 (marked to indicate that it applies for California tax purposes only) for filing with the Franchise Tax Board of California pursuant to the California Bank and Corporation Tax Law Sections 24451 and 23051.5(g) to treat the sale of the stock of NHC as a sale of NHC's assets, as described in Section 338(h)(10) of the Code, for California tax purposes only. 10. COVENANTS. 10.1. Covenants Pending the Closing. From and after the date hereof and until the Closing Date each of the parties hereto agrees that, for purposes of this Section 10.1 the defined term "Companies" includes URHC and URC until but only until the actions to be taken pursuant to Section 10.2(b) have been taken, and each of URHC and URC agrees that: (a) Access to Properties, Books and Records. Each of URHC and URC shall use its reasonable efforts to cause to be afforded upon reasonable notice to the officers, attorneys, accountants and other authorized representatives of Alleghany, free and full access during normal business hours to the Companies and to the employees, properties, books and records of each of the foregoing in order to afford Alleghany the opportunity to make such investigations of the affairs of the Companies as they deem desirable. Each of URHC and URC shall use reasonable efforts to cause the Companies to furnish to Alleghany such information relating to their respective businesses and affairs (and which is reasonably available to the Companies) as Alleghany shall from time to time reasonably request. Alleghany will treat all information obtained as a result of its investigation as confidential in accordance with the provisions of the letter agreement dated June 4, 1993 between URHC and Alleghany. The parties agree that such letter agreement shall remain in full force and effect in accordance with its terms until the Closing, and that nothing contained herein shall limit Alleghany's covenants and agreements therein. In the event that the Closing shall not take place for any reason, Alleghany shall return or destroy all materials furnished and shall destroy all copies of such materials made by Alleghany, and agrees not to disclose to any third party any information contained therein or derived therefrom and not to use such information to the competitive disadvantage of URHC and its subsidiaries. (b) Carry On in Regular Course. Each of URHC and URC shall use its reasonable efforts to cause each of the Companies to carry on its business in the ordinary course in substantially the same manner as heretofore conducted, and consistent with the representations and warranties set forth in Section 8 hereof. Each of URHC and URC shall use its reasonable efforts to cause each of the Companies not to, without the prior written consent of Alleghany, (i) enter into any written employment agreements or any other employment agreements which cannot be terminated by any of the Companies upon notice of sixty days or less without penalty or premium, or grant any bonuses to any of its employees or alter or increase the present compensation of its employees other than in the ordinary course of business consistent with past practice or in any way amend the current terms of the employee benefit plans applicable to its employees, except in each case (A) as required by law; (B) as provided on Schedule 10.1(b)(i) hereto; (C) as permitted under the Management Stock Purchase Agreement; (D) not later than two (2) business days before the Closing Date, the vesting of the stock appreciation rights under the Five Year Stock Equivalent Plan of UHRC may be accelerated and a liability for payment thereof may be accrued, pursuant to Section 10.2(f) hereof; (E) prior to December 1993, URHC may make employer matching contributions under the Incentive Savings Plan and the Supplemental Incentive Savings Plan for the 1993 plan year in an aggregate amount not to exceed $550,000, and URHC may accrue liabilities on its financial statements relating to the profit-sharing component of the Incentive Savings Plan and the Supplemental Incentive Savings Plan for the 1993 plan year in an aggregate amount of between $802,000 and $1,337,000; (F) prior to December 1993, URHC may determine and pay bonus awards under the Annual Management Incentive Plan to certain employees for 1993 based upon the applicable individual performance ratings for 1992; (G) prior to December 1993, URHC may terminate the Defined Benefit Retirement Plan and provide for the allocation and distribution of the vested benefits thereunder, and may amend the Supplemental Retirement Plan to provide for new payment options; and (H) URHC may make the payments to Steven H. Newman, Peter A. Bengelsdorf and Russell T. John required pursuant to letter agreements dated July 28, 1993 between URHC and each of such persons pursuant to Section 10.2(h) hereof; (ii) incur or contract for any capital expenditures in excess of $400,000 in the aggregate; (iii) except for actions pursuant to Section 10.1(j) hereof, make any material change in accounting methods or practices (including without limitation any change with respect to establishment of reserves for unearned premiums, losses (including without limitation incurred but not reported losses) and loss adjustment expenses, or any change in depreciation or amortization policies or rates adopted by it), except as required by law, generally accepted accounting principles or statutory accounting practices prescribed or permitted for insurance companies by state regulatory authorities; (iv) declare, set aside or pay any dividend or other distribution in respect of the capital stock of any of the Companies except as set forth on Schedule 10.1(b)(iv) hereto, or directly or indirectly redeem, purchase or otherwise acquire any of such stock except as permitted by this Agreement and the Management Stock Purchase Agreement; provided, however, that, except as may be required by the Shareholders Agreement with respect to a maximum of 22,162 shares of common stock of URHC owned by the persons in Section 1.2 hereof, URHC shall not declare, set aside or pay any dividend or other distribution in respect of its capital stock, and shall not directly or indirectly redeem, purchase or otherwise acquire any of its capital stock; or (v) do any other act which would render NHC unable to provide the certificate required by Section 8 hereof, or cause any representation or warranty of URHC, URC or any URHC Stockholder in this Agreement to be or become untrue in any material respect as of the date made or given or to be made or to be given. (c) Preservation of Organization. Each of URHC and URC shall use its reasonable efforts to cause each of the Companies to maintain its corporate existence and powers and its qualifications as a foreign corporation in any jurisdiction where it is so qualified and to maintain its books, accounts and records on a basis consistent with that of its prior periods and in a manner which permits presentation of information in accordance with generally accepted accounting principles. Each of URHC and URC shall use its reasonable efforts to cause each of the Companies to (i) preserve intact its business organization, (ii) keep available to Alleghany its present key officers and employees, (iii) maintain all of its properties (except for obsolete property) in customary repair, order and condition, (iv) take all steps reasonably necessary to maintain its intangible assets, and (v) preserve for Alleghany its relationships with its clients, suppliers and others having business relations with it. (d) No Mergers, Consolidations, Sale of Stock, Etc. URHC and URC will not and will not cause any of the Companies to, directly or indirectly, solicit any inquiries or proposals or enter into or continue any discussions, negotiations or agreements relating to the sale or exchange of any Shares, the merger of any of the Companies with, or, except as permitted by this Agreement, the direct or indirect disposition of a significant amount of any of the Companies' assets or business to, any person other than Alleghany or provide any assistance or any information to or otherwise cooperate with any person in connection with any such inquiry, proposal or transaction. In the event that URHC, URC or any URHC Stockholder receives a solicited or unsolicited offer for such a transaction or obtains information that such an offer is likely to be made, it will provide or will cause to be provided to Alleghany notice thereof as soon as practical after receipt thereof, including the identity of the prospective purchaser or soliciting party. (e) Reinsurance Agreements. URHC and URC shall use its reasonable efforts to cause the Companies not to, without the prior written approval of Alleghany, and except pursuant to commitments existing on the date hereof, (i) enter into or commit to enter into any commutation, loss portfolio transfer or other similar transaction, agreement or arrangement or series of related transactions, agreements or arrangements involving any assumed or ceded reinsurance of any of the Companies that involves payments to or from any of the Companies in an amount in excess of $2.5 million or (ii) enter into or commit to enter into any reinsurance or retrocession contract, treaty or other arrangement or series of contracts, treaties or other arrangements that create any liability in excess of $2.5 million. (f) Consent of Alleghany. Consents which may be given or withheld by Alleghany regarding the conduct of the business of the Companies prior to the Closing shall not constitute an undertaking, commitment or representation by Alleghany nor give rise to any obligation or liability of Alleghany with respect to the subject matter of such consent; provided, however, that nothing shall relieve Alleghany of any obligation to act reasonably in connection with withholding its consent. (g) Filings and Approvals. URHC, URC, the URHC Stockholders and Alleghany shall duly make all regulatory filings required to be made by each in respect of this Agreement or the transactions contemplated hereby. Alleghany shall use its reasonable efforts to obtain, and each of URHC, URC, the URHC Stockholders and the Companies shall use its reasonable efforts to assist Alleghany in obtaining, all Alleghany Approvals. (h) Reasonable Efforts. Each of the parties hereto agrees to use its reasonable efforts to take such reasonable action as may be necessary or appropriate in order to effectuate the transactions contemplated hereby as promptly as reasonably practicable. Subject to the satisfaction or waiver of the conditions precedent set forth herein, each of the parties hereto agrees to use its reasonable efforts to effectuate the Closing not later than one (1) day after the sale of shares of common stock of URHC by the GS Investors to Continental. (i) Publicity. Except as required by law, the parties agree to notify each other prior to issuing any press release or making any public statement regarding the transactions contemplated hereby, and will attempt to obtain the reasonable approval of the other parties prior to making such release or statement, and the parties hereto shall issue a mutually acceptable press release as soon as practicable after the execution of this Agreement and after the Closing Date. (j) Reserves. Alleghany may cause NHC to make such additional provisions to reserves immediately prior to the Closing as Alleghany and the President and Chief Executive Officer of NHC may by mutual agreement determine; provided, however, that any such additional provisions to reserves shall not be made until the satisfaction or waiver of the conditions precedent set forth herein and, provided further, that the making of any such additional provisions to reserves shall not be deemed to be a material adverse change in the business, financial condition or results of operations of the Companies taken as a whole as reflected in the Annual Financial Statements as at December 31, 1992. 10.2. Covenants on or Prior to the Closing Date. (a) Organization and Capitalization of NHC. Prior to the Closing Date, URHC and URC shall cause NHC to be organized by filing the form of charter for NHC set forth on Schedule 2.6(a) hereto with the Secretary of State of the State of Delaware, and shall cause NHC to issue to URC 9,282,130 shares of Common Stock of NHC, all in a manner consistent with the representations and warranties in this Agreement. (b) Rights, Assets and Liabilities. Immediately prior to the Closing, URHC and URC shall transfer to the Companies such rights, assets and liabilities possessed by URHC and URC as are necessary so that the Companies shall own at the Closing all of the rights, assets and liabilities owned by URHC, URC and the Companies immediately prior to such transfer, provided that the rights, assets and liabilities listed on Schedule 10.2(b)(i) hereto shall not be so transferred and the rights, assets and liabilities so transferred shall include without limitation those set forth on Schedule 10.2(b)(ii) hereto. Such transfers shall cause no diminution or impairment whatsoever of any such rights, assets or liabilities. (c) FIRPTA. On or prior to the Closing Date, each of URHC, URC and the URHC Stockholders shall provide Alleghany with a certificate of its non-foreign status that meets the requirements of Section 1.1445-2(b)(2)(i) of the Treasury Regulations. (d) Credit Agreement. Alleghany agrees that it will enter into appropriate arrangements with URC and the lenders under the Credit Agreement (which may include refinancing provided directly by Alleghany) to release URC from all obligations under the Credit Agreement on or prior to the Closing Date. Each of Continental, URHC and URC agrees to cooperate with Alleghany to take such reasonable action as may be necessary or appropriate on or prior to the Closing Date in order to replace the Credit Agreement with substantially comparable arrangements. (e) Certain Expenses. Alleghany agrees that the Companies shall be liable for the reasonable expenses incurred by URHC, URC or any of the Companies in connection with the Registration Statement as set forth on Schedule 10.2(e) hereto, and the reasonable out-of-pocket expenses, including fees and disbursements of counsel, incurred by Goldman, Sachs & Co. as financial advisor to URHC and URC, not in excess of Two Million Dollars ($2,000,000) in the aggregate. Payment of such reasonable expenses identified on Schedule 10.2(e) hereto and such reasonable out-of-pocket expenses incurred by Goldman, Sachs & Co. shall be against documentation thereof which is reasonably acceptable to Alleghany. (f) SARs. URHC shall (i) terminate the Five Year Stock Equivalent Plan of URHC (the "SAR Plan") not later than two (2) business days before the Closing Date (the "SAR Termination Date"), (ii) cause all rights of all participants which are then outstanding under the SAR Plan (the "SAR Rights") to become fully vested and nonforfeitable, (iii) cause the amount payable to each participant in the SAR Plan with respect to the SAR Rights held by such participant to become fixed, due and payable as of the SAR Termination Date (the "Fixed SAR Amount"), (iv) deem all such SAR Rights to be exercised as of the SAR Termination Date, and (v) cancel the SAR Rights of each participant under the SAR Plan as of the SAR Termination Date (subject only to the requirement that such participant receive payment of the applicable Fixed SAR Amount as soon as practicable after such SAR Termination Date). (g) Stock Options. URHC shall cause all stock options held by the Management Stockholders (as defined in the Management Stock Purchase Agreement) granted under the Underwriters Re 1987 Stock Option Plan (the "Option Plan") that are not currently exercisable to become exercisable not later than two (2) business days before the Closing Date and shall cause each of the Management Stockholders to exercise any and all of the stock options granted to such Management Stockholder under the Option Plan that are then outstanding not later than two (2) business days before the Closing Date in accordance with the terms of any applicable Nonstatutory Stock Option Agreement entered into between URHC and a Management Stockholder. (h) On or before the Closing Date, Continental shall contribute to URHC an amount in cash equal to the aggregate amount payable by URHC pursuant to letter agreements dated July 28, 1993 between URHC and each of Steven H. Newman, Peter A. Bengelsdorf and Russell T. John. 10.3. Additional Covenants. (a) Further Assurances. Each of URHC, URC and the URHC Stockholders agrees, severally and not jointly, that it will from time to time at and subsequent to the Closing Date, at the request of Alleghany and without further consideration, execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as Alleghany may reasonably request in order more effectively to convey, assign, transfer to and vest in Alleghany, or any of Alleghany's wholly owned subsidiaries designated hereunder, (i) the Shares and the right to operate the businesses of the Companies, and (ii) all of the rights, assets and liabilities of URHC and URC which are to be transferred to the Companies as provided in this Agreement. (b) Non-Solicitation. Each of Continental, URHC and URC agrees that, for a period of three years after the Closing Date, it will not participate or engage, directly or indirectly, in the solicitation for employment with an employer other than the Companies of any of the current employees of URHC, URC or any of the Companies and, except as set forth on Schedule 10.3(b) hereto, Goldman, Sachs & Co. agrees that, for a period of three years after the Closing Date, neither the Principal Investment Area nor the Investment Banking Division of Goldman, Sachs & Co. will participate or engage, directly or indirectly, in the solicitation for employment with an employer other than the Companies of any of the employees of URHC, URC or any of the Companies listed on Schedule 8.15 hereto; provided, however, that such solicitation may be made by those entities that are subject to the foregoing prohibitions with respect to employees covered by the foregoing prohibitions who (i) are terminated by any of the Companies but not earlier than fifteen (15) months after such termination, or (ii) resign from such employ but not earlier than two years after such resignation. (c) California Tax Election. URC and Alleghany agree to (i) cooperate in the preparation of revisions to Form 8023 (as described in Sections 7.11 and 9.9) to make any necessary corrections, amendments or supplements thereto which are mutually acceptable to URC and Alleghany and (ii) file jointly such Form with the Franchise Tax Board of California on or before the fifteenth day of the ninth month beginning after the Closing Date. (d) Change of Name. Each of URHC and URC agrees to change its name immediately after the Closing Date to a name that does not use the word "Underwriters," and agrees not to use the word "Underwriters" in its name thereafter. 11. TERMINATION, AMENDMENT, WAIVERS. 11.1. Termination. At any time prior to the Closing Date, this Agreement may be terminated: (i) by mutual written consent of the parties hereto; (ii) by Alleghany at any time after December 31, 1993, if any of the conditions set forth in Articles 7 and 8 hereof have not been met and have not been waived in writing by Alleghany; or (iii) by URHC, URC or any of the URHC Stockholders at any time after December 31, 1993, if any of the conditions set forth in Article 9 hereof have not been met and have not been waived in writing by each of URHC, URC or the URHC Stockholders. In the event of any termination pursuant to this Section 11.1, this Agreement shall thereupon become void and of no further force or effect (other than the obligations of Alleghany pursuant to Section 10.1(a) hereof, the agreement of Continental pursuant to Section 13.2 hereof, and the obligations of all parties hereto pursuant to Sections 12.2 and 12.3 hereof, which shall in each case continue in full force and effect) and there shall be no liability for breach of any representation, warranty, covenant or agreement contained herein or for indemnification under Sections 12.2(a), 12.2(b), 12.2(c), 12.2(d) or 12.3 hereof on account of any breach of any representation, warranty, covenant or agreement contained herein, on the part of any party hereto or their respective officers, directors or partners in respect thereof, except for any breach of the agreement of Continental set forth in Section 13.2 hereof and except for a willful breach by such party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement which results in such termination. 11.2. Amendment. This Agreement may be amended, modified, superseded or supplemented only by an instrument in writing executed and delivered on behalf of each of the parties hereto. 11.3. Waivers. The representations, warranties, covenants or conditions of this Agreement may be waived only by a written instrument executed by the party so waiving. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver by any party of any condition, or breach of any term, covenant, agreement, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of any other condition or of the breach of any other term, covenant, agreement, representation or warranty contained in this Agreement. 12. INDEMNIFICATION. 12.1. Survival of Representations, Etc. The representations and warranties, covenants and obligations of each of URHC, URC, the URHC Stockholders and Alleghany contained herein shall not survive the Closing Date, except that the representations and warranties contained in Section 2.1 (Title to Shares), Section 2.7 (Capital Stock), Section 2.8 (Rights, Assets and Liabilities), Section 3.2 (Transactions with URHC Stockholders) and Section 4.3 (Reinsurance Agreements with Continental), the covenants contained in Section 10.3 and the agreement of Continental contained in Section 13.2, shall survive the Closing Date, without regard to any investigation made by the parties hereto (provided that Section 10.3(b) shall survive only for a period of four years after the Closing Date). Notwithstanding the foregoing, the provisions of this Section 12 shall survive the Closing. 12.2. Indemnification. (a) Each URHC Stockholder shall, severally and not jointly, indemnify Alleghany and each of the Companies and their affiliates for any damage, claim, liability or expense, including without limitation, interest, penalties and reasonable attorneys' fees, but excluding lost profit and consequential damages (collectively "Damages"), arising out of (i) in the event of a Closing, the breach of any representation, warranty or covenant of such URHC Stockholder contained in this Agreement which survives the Closing, and (ii) in the event that a Closing does not take place, the willful breach of any representation, warranty, covenant or agreement of such URHC Stockholder contained in this Agreement. (b) Continental shall indemnify Alleghany and each of the Companies and their affiliates for any Damages arising out of (i) in the event of a Closing, the breach of any representation, warranty or covenant of URHC or URC contained in this Agreement which survives the Closing, and (ii) in the event that a Closing does not take place, the willful breach of any representation, warranty, covenant or agreement of URHC or URC contained in this Agreement. (c) Each of URHC and URC shall indemnify Alleghany and each of the Companies and their affiliates for any Damages arising out of (i) in the event of a Closing, the breach of any representation, warranty or covenant of URHC or URC contained in this Agreement which survives the Closing, and (ii) in the event that a Closing does not take place, the willful breach of any representation, warranty, covenant or agreement of URHC or URC contained in this Agreement. (d) Alleghany shall indemnify each of URHC, URC and the URHC Stockholders for any Damages arising out of the willful breach of any representation, warranty, covenant or agreement of Alleghany contained in this Agreement in the event that a Closing does not take place. (e) Other than with respect to such tax matters as are provided for in the Tax Sharing Agreement, Continental shall indemnify Alleghany and each of the Companies for any Damages or diminution or impairment of any rights or assets of URHC, URC or the Companies, or any benefits possessed by URHC, URC or the Companies, immediately prior to the transfer, arising out of (i) Alleghany's purchase of the Shares that Alleghany or any of the Companies would not have incurred or suffered if Alleghany had acquired about 93 percent of the outstanding capital stock of URHC at the Closing (which percentage includes the stock of URHC to have been acquired from the management stockholders), and no changes had occurred in the ownership of URHC capital stock prior to the Closing, and (ii) the Companies having been majority-owned subsidiaries of Continental prior to the Closing, including without limitation liabilities of Continental and its affiliates arising under Section 414 of the Code or Section 4001 of ERISA. 12.3. Indemnification Procedures. (a) Any party hereto entitled to indemnification pursuant to Section 12.2 (the "Indemnitee") shall promptly notify the party or parties responsible for such indemnification (the "Indemnitor") if the Indemnitee becomes aware of any Damages with respect to which indemnity may be asserted; and the failure to give such notice promptly shall not relieve the Indemnitor of its obligations hereunder except to the extent the Indemnitor is prejudiced thereby. Promptly after (x) the receipt by an Indemnitee of notice under Section 12.2 of any third party claim or (y) the commencement of any action or proceeding, the Indemnitee will, if a claim with respect thereto is to be made against the Indemnitor, give the Indemnitor written notice in reasonable detail of such claim or the commencement of such action or proceeding and shall permit the Indemnitor to assume the defense of any such claim or any litigation resulting from such claim. Failure by the Indemnitor to notify the Indemnitee of its election to defend any such action within a reasonable time, but in no event more than thirty days after notice thereof shall have been given to the Indemnitor, shall be deemed a waiver by the Indemnitor of its right to defend such action. (b) If the Indemnitor assumes the defense of any such claim or litigation resulting therefrom, the obligations of the Indemnitor as to such claim shall be limited to taking all steps necessary in the defense or settlement of such claim or litigation resulting therefrom and to holding Indemnitee harmless from and against any and all losses, damages and liabilities caused by, arising out of or relating to any settlement approved by the Indemnitor or any judgment in connection with such claim or litigation resulting therefrom. The Indemnitee may participate, at its expense, in the defense of such claim or litigation provided that the Indemnitor shall direct and control the defense of such claim or litigation. The Indemnitor shall not, in the defense of such claim or any litigation resulting therefrom, consent to entry of any judgment or enter into any settlement other than a judgment or settlement involving only the payment of money, except with the written consent of Indemnitee, which consent shall not be unreasonably withheld. (c) If the Indemnitor shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against such claim or litigation in such manner as it may deem appropriate. The Indemnitee shall not enter into any settlement of such claim or litigation without the written consent of the Indemnitor, which consent shall not be unreasonably withheld. The Indemnitor shall promptly reimburse the Indemnitee for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnitee in connection with the defense against or settlement of such claims or litigation. If no settlement of such claim or litigation is made, the Indemnitor shall promptly reimburse the Indemnitee for the amount of any judgment rendered with respect to such claim or in such litigation and of all reasonable expenses, legal or otherwise, incurred by the Indemnitee in the defense of such claim or litigation. (d) No indemnification amount shall be payable by any Indemnitor to an Indemnitee pursuant to Section 12 until such time that the aggregate Damages subject to indemnification hereunder by such Indemnitor exceeds $500,000, but then in an amount of the aggregate Damages including such $500,000; provided, however, that the foregoing threshold amount shall not apply in respect of Damages arising out of the breach of Sections 2.8 and 10.3(a) hereof or amounts claimed under Section 12.2(e) hereof, and such Damages shall not be considered in determining whether the foregoing threshold amount has been met. For purposes of the immediately preceding sentence (but not for purposes of any other provision of Section 12), the GS Investors shall be considered one Indemnitor or one Indemnitee, as applicable, and Continental, URHC and URC shall be considered one Indemnitor or one Indemnitee, as applicable. No indemnification amount shall be payable by (i) any of the GS Investors pursuant to Section 12 in an amount in excess of the amount received for the URHC Shares currently held by the GS Investors; or (ii) all of URHC, URC and Continental pursuant to Section 12 in an amount in excess of the Cash Consideration; provided, however, that there shall be no limit on any indemnification amount payable by Continental pursuant to Section 12.2(e)(ii). No indemnification amount shall be payable to all of URHC, URC and the URHC Stockholders pursuant to Section 12 in an amount in excess of the Cash Consideration. 13. MISCELLANEOUS PROVISIONS. 13.1. No Implied Representations, Etc. None of URHC, URC or any URHC Stockholder has made or shall be deemed to have made any representation, warranty, covenant or agreement with respect to the Companies or the transactions contemplated hereby or otherwise in connection herewith (including, without limitation, any warranty of merchantability or fitness for a particular purpose) except as expressly set forth herein, and no such representation, warranty, covenant or agreement shall be implied in any provision of this Agreement or otherwise. No representation, warranty, covenant or agreement has been made or shall be deemed to be made by URHC, URC or any URHC Stockholder or implied with respect to any oral or written statement made, document delivered or instrument executed by any of them, any of the Companies or any other person except for such representations, warranties, covenants and agreements made by it and expressly set forth as such in this Agreement. Without limiting the generality of the foregoing, none of URHC, URC or any URHC Stockholder makes any representation or warranty as to whether the statements set forth in Section 8 hereof are or will be true or whether the conditions set forth in Sections 7 and 8 hereof, or any of them, are or will be satisfied. Nothing in this Section 13.1 shall relieve any of URHC, URC or any URHC Stockholder from any liability it would otherwise have under the federal securities laws for, or in respect of, any untrue statement of a material fact, or failure to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading in connection with the transactions contemplated by this Agreement. 13.2. Expenses. Whether or not the Closing takes place and regardless of whether this Agreement is terminated, each party hereto shall pay all of the costs and expenses incurred by it in connection with this Agreement or in consummating the transactions contemplated hereby (including, without limitation, disbursements and expenses of its attorneys, accountants and advisors); provided, however, that Continental agrees to pay all reasonable out-of-pocket expenses incurred by each of Alleghany and the Companies on or prior to the Closing Date relating to the purchase of the Shares that would not have been incurred if Alleghany had acquired about 93 percent of the outstanding capital stock of URHC at the Closing (which percentage includes the stock of URHC to have been acquired from the management stockholders), and no changes had occurred in the ownership of URHC capital stock prior to the Closing, as reasonably determined by Alleghany. Schedule 13.2 sets forth firms engaged by Alleghany that Alleghany believes have provided services for which payment by Continental will be required pursuant to this Section 13.2. Payment of such reasonable expenses shall be against documentation thereof which is reasonably acceptable to Continental. 13.3. Notices. All notices or other communications required or permitted under this Agreement shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery personally, by facsimile transmission, or by registered, certified or express mail, postage prepaid, addressed as follows: If to Alleghany, to Theodore E. Somerville, Esq. Vice President and General Counsel Alleghany Corporation Park Avenue Plaza New York, New York 10055 Facsimile: (212) 759-8149 with a copy to Robert M. Hart, Esq. Donovan Leisure Newton & Irvine 30 Rockefeller Plaza New York, New York 10112 Facsimile: (212) 632-3315 If to Continental, to William F. Gleason, Esq. Senior Vice President, General Counsel and Secretary The Continental Corporation 180 Maiden Lane New York, New York 10038 Facsimile: (212) 440-7982 with a copy to Deborah F. Stiles, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Facsimile: (212) 909-6836 If to the GS Investors, to Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Attention: General Counsel Facsimile: (212) 902-3876 with a copy to Frank H. Golay, Jr., Esq. Sullivan & Cromwell 444 South Flower Street Los Angeles, California 90071 Facsimile: (213) 683-0457 If to URHC or URC, to Mr. Steven H. Newman Underwriters Re Holdings Corp. 22801 Ventura Boulevard Woodland Hills, California 91364 Facsimile: (818) 225-8915 with copies to Continental, the GS Investors, Debevoise & Plimpton and Sullivan & Cromwell at the addresses set forth above, and to John A. Willett, Esq. Arnold & Porter 399 Park Avenue New York, New York 10022 Facsimile: (212) 715-1399 Any party may change the person and addresses to which notices or other communications are to be sent to it by giving written notice of any such change in the manner provided herein for giving notice. 13.4. Entire Agreement. Except as otherwise provided herein, this Agreement, together with the exhibits and schedules hereto, sets forth the entire agreement and understanding of the parties hereto in respect of the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof. 13.5. No Third Party Beneficiaries. Nothing in this Agreement is intended or shall be construed to give any person, other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 13.6. No Assignment. This Agreement shall inure to the benefit of, and be binding upon, the respective successors and assigns of the parties hereto; provided, however, that no assignment of any rights or delegation of any obligations provided for herein shall be made by any party hereto without the express prior written consent of the other party, except that Alleghany shall be permitted, without such consent, to assign any of its rights hereunder (but not to delegate any of its obligations hereunder) to any of its wholly owned domestic subsidiaries (provided that Alleghany may not, following such assignment to such a subsidiary, transfer or dispose of such subsidiary, or any equity interest therein, to any third party without the express prior written consent of each of URHC, URC and the URHC Stockholders). 13.7. Goldman, Sachs & Co. Advisory Fee. Immediately prior to the Closing, NHC or Underwriters Reinsurance shall pay to Goldman, Sachs & Co. an advisory fee in an amount equal to 1.25 percent of the Cash Consideration, in respect of the transactions contemplated by this Agreement. 13.8. Liability Only for Willful Breach. In the event that a Closing does not take place, there shall be no liability hereunder for breach of any representation, warranty, covenant or agreement contained herein, on the part of any party hereto or their respective officers, directors or partners in respect thereof, except for any breach of the agreement of Continental set forth in Section 13.2 hereof and except for a willful breach by such party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement. 13.9. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within such State, except (a) matters related to the validity of corporate or partnership action, which shall be governed by the laws of the state or other jurisdiction of organization of the relevant corporation or partnership and (b) matters related to compliance of the transactions contemplated hereby with applicable insurance regulatory statutes, which shall be governed by the laws of the state or other jurisdiction the insurance regulatory statutes of which apply. 13.10. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 13.11. Headings. The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed on the date first above written. ALLEGHANY CORPORATION By /s/David B. Cuming Attest: By /s/John E. Conway Secretary THE CONTINENTAL CORPORATION By /s/Wayne Fisher Attest: By /s/Deborah B. LaCivita Asst. Secretary STONE STREET FUND 1986 BY: Stone Street Advisors Corp., General Partner By /s/Richard A. Friedman Vice President Attest: By /s/Carla Skodinski STONE STREET FUND 1987 BY: Stone Street Capital Corp., General Partner By /s/Richard A. Friedman Vice President Attest: By /s/Carla Skodinski BROAD STREET INVESTMENT FUND I, L.P. BY: Goldman, Sachs & Co., General Partner By /s/Richard A. Friedman Partner Attest: By /s/Carla Skodinski BRIDGE STREET FUND 1986 BY: Stone Street Advisors Corp., Managing General Partner By /s/Richard A. Friedman Vice President Attest: By /s/Carla Skodinski BRIDGE STREET FUND 1987 BY: Stone Street Capital Corp., Managing General Partner By /s/Richard A. Friedman Vice President Attest: By /s/Carla Skodinski GOLDMAN, SACHS & CO. By /s/Richard A. Friedman General Partner Attest: By /s/Carla Skodinski UNDERWRITERS RE HOLDINGS CORP. By /s/Peter A. Bergelsdorf Attest: By /s/Pamela Falzone Secretary UNDERWRITERS RE CORPORATION By /s/Peter A. Bengelsdorf Attest: By /s/Pamela Falzone Secretary LISTS OF EXHIBITS Exhibit Description A Management Stock Purchase Agreement B Stock Purchase Related Agreement C Debevoise & Plimpton Opinion D Continental Opinion E Sullivan & Cromwell Opinion F Goldman, Sachs & Co. Opinion G Arnold & Porter Opinion H Buchalter, Nemer, Fields & Younger Opinion I Roussos, Hage & Hodes Opinion J Tax Sharing Agreement K Loan Agreement L Donovan Leisure Newton & Irvine Opinion LIST OF SCHEDULES Schedule Description 2.3 URHC and URC Consents and Approvals 2.5 NHC Subsidiaries 2.6(a) Form of Charter and By-laws of NHC 2.6(b) Officers and Directors of NHC 2.7 Capital Stock 3.1 URHC Stockholder Consents and Approvals 3.2 Transactions with URHC Stockholders 3.3 URHC Stockholder Brokers 6.3 Alleghany Approvals 8.1 The Companies 8.2 Officers and Directors of the Companies 8.4 Companies Consents and Approvals 8.5 Compliance and Licenses 8.7 Investments and Other Assets 8.9 Material Contracts 8.10 Accounting Practices 8.11 Litigation 8.12(a) Tax Filings 8.12(b) Payment of Taxes 8.12(d) Undisclosed Tax Positions 8.13 Employee Benefit Plans 8.14 Agencies 8.15 Employees 8.15(a) Active Employees 8.16 Insurance Policies 8.17 Companies Brokers 8.18 Transactions with Affiliates 8.19 Regulatory Filings 8.20 Changes to the Registration Statement 8.24 Dividends 10.1(b)(i) Permitted Modifications to Employment Agreements 10.1(b)(iv) Dividends between the Date of the Agreement and Closing 10.2(b)(i) Rights, Assets and Liabilities Not to be Held by the Companies on the Closing Date 10.2(b)(ii) Certain of the Rights, Assets and Liabilities to be Held by the Companies on the Closing Date 10.2(e) Registration Statement Expenses and Goldman, Sachs Co. Expenses 10.3(b) Non-Solicitation 13.2 Alleghany Firms EX-10 13 EXHIBIT 10(J) AMENDMENT TO STOCK PURCHASE AGREEMENT This Amendment to Stock Purchase Agreement is made on October 7, 1993 by and among ALLEGHANY CORPORATION, a Delaware corporation, THE CONTINENTAL CORPORATION, a New York corporation, GOLDMAN, SACHS & CO. and certain funds which Goldman, Sachs & Co. either control or of which they are general partner, UNDERWRITERS RE HOLDINGS CORP., a Delaware corporation, and UNDERWRITERS RE CORPORATION, a Delaware corporation. All capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Stock Purchase Agreement, as defined below. W I T N E S S E T H : WHEREAS, the parties hereto have entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of July 28, 1993; and WHEREAS, the parties hereto desire to amend the Stock Purchase Agreement to accurately reflect the number of shares of Common Stock of NHC to be issued and outstanding as of the Closing Date; NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions contained herein, the parties hereto agree as follows: 1. Amendment. It is understood and agreed that all references in the Stock Purchase Agreement to the number "9,282,130" as it relates to the number of shares of Common Stock of NHC to be issued and outstanding as of the Closing Date be and hereby are amended to be "9,282,129". It is further understood and agreed that any breach or default that would have occurred absent this Amendment to Stock Purchase Agreement be and hereby is waived. 2. Effectiveness. This Amendment to Stock Purchase Agreement shall be deemed to be effective, upon execution of the parties below, as of July 28, 1993. 3. Governing Law. This Amendment to Stock Purchase Agreement shall be governed by and construed in accordance with the laws and in the manner contemplated by the Stock Purchase Agreement. IN WITNESS WHEREOF, each party hereto has caused this Amendment to Stock Purchase Agreement to be duly executed on the date first above written. ALLEGHANY CORPORATION By: /s/David B. Cuming Title: Senior Vice President THE CONTINENTAL CORPORATION By: /s/Wayne H. Fisher Title: Executive Vice President STONE STREET FUND 1986 BY: Stone Street Advisors Corp., General Partner By: /s/Carla Skodinski Title: Vice President STONE STREET FUND 1987 BY: Stone Street Capital Corp., General Partner By: /s/Carla Skodinski Title: Vice President BROAD STREET INVESTMENT FUND I, L.P. BY: Goldman, Sachs & Co., General Partner By: /s/Richard A. Friedmen Title: Partner BRIDGE STREET FUND 1986 BY: Stone Street Advisors Corp., Managing General Partner By: /s/Carla Skodinski Title: Vice President BRIDGE STREET FUND 1987 BY: Stone Street Capital Corp., Managing General Partner By: /s/Carla Skodinski Title: Vice President GOLDMAN, SACHS & CO. By: Richard A. Friedman Title: General Partner UNDERWRITERS RE HOLDINGS CORP. By: /s/Peter A. Bengelsdorf Title: Chief Financial Officer UNDERWRITERS RE CORPORATION By: /s/Peter A. Bengelsdorf Title: Chief Financial Officer EX-10 14 EXHIBIT 10(K) STOCK PURCHASE AGREEMENT between THE CONTINENTAL CORPORATION and THE SELLING STOCKHOLDERS NAMED HEREIN Dated as of July 28, 1993 STOCK PURCHASE AGREEMENT TABLE OF CONTENTS Section Page 1. PURCHASE OF SHARES AND CLOSING 1.1. Purchase of Shares. . . . . . . . . . . . . . 2 1.2. Consideration . . . . . . . . . . . . . . . . 2 1.3. Closing . . . . . . . . . . . . . . . . . . . 2 2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS 2.1. Title to Shares . . . . . . . . . . . . . . . 3 2.2. Organization and Standing . . . . . . . . . . 3 2.3. Authority . . . . . . . . . . . . . . . . . . 3 2.4. Other Representations and Warranties. . . . . 4 3. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL 3.1. Organization and Standing . . . . . . . . . . 4 3.2. Authority . . . . . . . . . . . . . . . . . . 4 3.3. Other Representations and Warranties. . . . . 5 4. CONDITIONS TO OBLIGATIONS OF CONTINENTAL 4.1. Compliance with Agreement . . . . . . . . . . 5 4.2. Representations and Warranties. . . . . . . . 5 4.3. Opinion of Counsel for the Selling Stockholders. . . . . . . . . . . . 5 4.4. Approvals . . . . . . . . . . . . . . . . . . 6 4.5. Absence of Certain Litigation . . . . . . . . 6 4.6. Transfer Taxes. . . . . . . . . . . . . . . . 6 4.7. Other Conditions. . . . . . . . . . . . . . . 6 5. CONDITIONS TO OBLIGATIONS OF THE SELLING STOCKHOLDERS 5.1. Compliance with Agreement . . . . . . . . . . 7 5.2. Representations and Warranties. . . . . . . . 7 5.3. Opinion of Counsel for Continental. . . . . . 7 5.4. Approvals . . . . . . . . . . . . . . . . . . 7 5.5. Absence of Certain Litigation . . . . . . . . 7 5.6. Transfer Taxes. . . . . . . . . . . . . . . . 8 5.7. Other Conditions. . . . . . . . . . . . . . . 8 6. COVENANTS 6.1. Covenants Pending the Closing . . . . . . . . 8 (a) Filings and Approvals. . . . . . . . . . 8 (b) Reasonable Efforts . . . . . . . . . . . 8 (c) Publicity. . . . . . . . . . . . . . . . 9 (d) FIRPTA . . . . . . . . . . . . . . . . . 9 6.2. Additional Covenants. . . . . . . . . . . . . 9 (a) Further Assurances . . . . . . . . . . . 9 (b) Performance of Agreement . . . . . . . . 9 (c) Closing of Agreements. . . . . . . . . . 9 7. TERMINATION, AMENDMENT, WAIVERS 7.1. Termination . . . . . . . . . . . . . . . . . 10 7.2. Amendment . . . . . . . . . . . . . . . . . . 10 7.3. Waivers . . . . . . . . . . . . . . . . . . . 11 8. INDEMNIFICATION 8.1. Survival of Representations, Etc. . . . . . . 11 8.2. Indemnification . . . . . . . . . . . . . . . 11 8.3. Indemnification Procedures. . . . . . . . . . 12 8.4. Tax Indemnification . . . . . . . . . . . . . 14 9. OPTION 9.1. Exercise of Option. . . . . . . . . . . . . . 17 9.2. Option Closing. . . . . . . . . . . . . . . . 17 9.3. Conditions to Option Closing. . . . . . . . . 18 9.4. Further Assurances. . . . . . . . . . . . . . 19 9.5. Effect of Exercise. . . . . . . . . . . . . . 19 9.6. Termination of Option . . . . . . . . . . . . 20 10. MISCELLANEOUS PROVISIONS 10.1. Expenses . . . . . . . . . . . . . . . . . . 20 10.2. Notices. . . . . . . . . . . . . . . . . . . 20 10.3. Entire Agreement . . . . . . . . . . . . . . 21 10.4. No Third Party Beneficiaries . . . . . . . . 21 10.5. No Assignment. . . . . . . . . . . . . . . . 21 10.6. Governing Law. . . . . . . . . . . . . . . . 22 10.7. Counterparts . . . . . . . . . . . . . . . . 22 10.8. Headings . . . . . . . . . . . . . . . . . . 22 EXHIBIT A - [Reserved] EXHIBIT B - Opinion of Sullivan & Cromwell EXHIBIT C - Opinion of Debevoise & Plimpton EXHIBIT D - Officer's Certificate SCHEDULE 1.2 - Selling Stockholders SCHEDULE 2.1 - Liens on Shares STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (the "Agreement") dated as of July 28, 1993, among THE CONTINENTAL CORPORATION, a New York corporation ("Continental"), and GOLDMAN, SACHS & CO. and certain funds which Goldman, Sachs & Co. either control or of which they are general partner (together, the "Selling Stockholders"). W I T N E S S E T H: WHEREAS, Continental and the Selling Stockholders together hold approximately 90% of the issued and outstanding capital stock of Underwriters Re Holdings Corporation, a Delaware corporation ("Underwriters Re"); Underwriters Re is the owner of all of the issued and outstanding capital stock of Underwriters Re Corporation, a Delaware corporation ("Underwriters Re Corporation"); Underwriters Re Corporation is the owner of all of the issued and outstanding capital stock of Underwriters Reinsurance Company, a New Hampshire insurance company ("Underwriters Reinsurance"), and URC Risk Managers, Inc., a Delaware corporation ("URC"); and Underwriters Reinsurance is the owner of all of the issued and outstanding capital stock of Commercial Underwriters Insurance Company, a California insurance company ("Commercial Underwriters") (Underwriters Re, Underwriters Re Corporation, Underwriters Reinsurance, URC and Commercial Underwriters, together referred to as the "Companies"); WHEREAS, Continental, the Selling Stockholders, Underwriters Re and Underwriters Re Corporation are entering into a Stock Purchase Agreement, dated as of July 28, 1993, with Alleghany Corporation, a Delaware corporation ("Alleghany"), providing for the purchase by Alleghany of all of the issued and outstanding capital stock of New Holding Corporation, a Delaware corporation ("NHC") to be formed to hold all of the issued and outstanding capital stock of Underwriters Reinsurance (in the form executed by the parties today, the "Alleghany Stock Purchase Agreement"); WHEREAS, Underwriters Re has a total of 8,877,772 issued and outstanding shares of common stock, par value $.01 per share (the "Common Stock"); WHEREAS, Continental presently holds 3,991,228 shares of Common Stock; WHEREAS, Continental is entering into a management stock purchase agreement with the management stockholders of Underwriters Re, providing for the purchase by Continental or a subsidiary of Continental designated by Continental at or prior to the closing under the Alleghany Stock Purchase Agreement (the "Alleghany Closing") of the shares of Common Stock currently owned by such stockholders and to be owned by them upon exercise of all outstanding stock options held by them; and WHEREAS, Continental desires to purchase from the Selling Stockholders and the Selling Stockholders desire to sell to Continental 3,991,228 shares of Common Stock, which are held by the Selling Stockholders (the "Shares"); NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions contained herein, the parties hereto agree as follows: 1. PURCHASE OF SHARES AND CLOSING. 1.1. Purchase of Shares. Subject to the terms and conditions set forth in this Agreement, at the Closing (as defined below), each Selling Stockholder, severally and not jointly, agrees to sell, convey, assign, transfer and deliver such Selling Stockholder's Shares to Continental, or a subsidiary of Continental designated by Continental, and Continental, or such subsidiary, shall acquire from each Selling Stockholder such Selling Stockholder's Shares. 1.2. Consideration. At the Closing, Continental shall pay to each of the Selling Stockholders an amount equal to $23.50 per Share multiplied by the number of Shares set forth opposite the name of such Selling Stockholder on Schedule 1.2, for an aggregate consideration for all the Shares of Ninety-three Million Seven Hundred Ninety-three Thousand Eight Hundred Fifty-eight Dollars ($93,793,858) (the "Consideration"). 1.3. Closing. The purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall take place one business day prior to such time and at such place as is set for the Alleghany Closing and after satisfaction or waiver of the conditions precedent therefor (the "Closing Date"), or on such other date as the parties hereto agree in writing; provided, that both the Closing and the Option Closing (as defined below) must occur (i) on or before November 26, 1993 or (ii) after such date and on or before December 31, 1993. At the Closing, (i) each Selling Stockholder shall deliver to Continental a certificate or certificates representing the Shares owned by such Selling Stockholder, duly endorsed in blank or with appropriate stock powers attached, free and clear of all liens, security interests, pledges, agreements, claims, charges, options or encumbrances of any nature whatsoever (collectively, "Liens"), and (ii) Continental shall make payment to each Selling Stockholder of such Selling Stockholder's portion of the Consideration by certified or official bank check or checks, payable to the order of such Selling Stockholder in New York Clearing House (next day) funds as is set forth on Schedule 1.2 opposite the name of such Selling Stockholder. 2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each Selling Stockholder, severally and not jointly, represents and warrants to Continental as follows: 2.1. Title to Shares. Such Selling Stockholder owns beneficially and of record, free and clear of all Liens, or owns of record and has full power and authority to convey free and clear of all Liens, in each case except for Liens set forth in Schedule 2.1, all of the Shares owned by such Selling Stockholder as set forth in Schedule 2.1. Upon delivery of the Consideration as herein provided, such Selling Stockholder will convey good title thereto, free and clear of all Liens. 2.2. Organization and Standing. Such Selling Stockholder is duly organized, validly existing and in good standing under the laws of its state of organization, and has all requisite partnership power and authority to enter into this Agreement and to perform its obligations hereunder. 2.3. Authority. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary partnership action on the part of such Selling Stockholder. This Agreement constitutes a legal, valid and binding obligation of such Selling Stockholder, enforceable against such Selling Stockholder in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 2.4. Other Representations and Warranties. The representations and warranties of such Selling Stockholder in Section 3.1 (Consents and Approvals) and the third sentence of Section 5.2 (Authority) of the Alleghany Stock Purchase Agreement are hereby incorporated by reference, including the schedules relating thereto, and such Selling Stockholder represents and warrants the same to Continental (subject to the exceptions and qualifications set forth in such representations and warranties and schedules, mutatis mutandis), as if set out herein at length save that identical terms defined both therein and herein shall be deemed to have the respective meanings ascribed thereto in this Agreement and all uses therein of the word "hereby" shall refer to this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL. Continental represents and warrants to each of the Selling Stockholders as follows: 3.1. Organization and Standing. Continental is a corporation, duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 3.2. Authority. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Continental. This Agreement constitutes a legal, valid and binding obligation of Continental, enforceable against Continental in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 3.3. Other Representations and Warranties. The representations and warranties of Continental in Section 3.1 (Consents and Approvals) and the third sentence of Section 4.2 (Authority) of the Alleghany Stock Purchase Agreement are hereby incorporated by reference, including the schedules relating thereto, and Continental represents and warrants the same to each of the Selling Stockholders (subject to the exceptions and qualifications set forth in such representations and warranties and schedules, mutatis mutandis), as if set out herein at length save that identical terms defined both therein and herein shall be deemed to have the respective meanings ascribed thereto in this Agreement and all uses therein of the word "hereby" shall refer to this Agreement. 4. CONDITIONS TO OBLIGATIONS OF CONTINENTAL. The obligations of Continental under this Agreement are subject to the satisfaction, on or before the Closing Date, of each of the following conditions: 4.1. Compliance with Agreement. Each of the Selling Stockholders shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by each of them on or before the Closing Date, and Continental shall have received from each of the Selling Stockholders at the Closing a certificate, dated the Closing Date, to that effect. Attached to such certificate shall be a certified copy of the determination of a general partner of each of the Selling Stockholders, in each case authorizing this Agreement and the transactions contemplated hereby. 4.2. Representations and Warranties. The representations and warranties made by each of the Selling Stockholders in Section 2 of this Agreement shall be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at and as of such time. Continental shall have received from each of the Selling Stockholders at the Closing a certificate, dated the Closing Date, to that effect. 4.3. Opinion of Counsel for the Selling Stockholders. Continental shall have received an opinion from Sullivan & Cromwell, counsel for the Selling Stockholders, dated the Closing Date and substantially to the effect set forth in Exhibit B hereto. 4.4. Approvals. All Alleghany Approvals and all Sellers Approvals (as such terms are defined in the Alleghany Stock Purchase Agreement) shall have been obtained and be in full force and effect on the Closing Date. Without limiting the generality of the foregoing, Continental shall have received the requisite approvals of the consummation of the purchase and sale of the Shares, and the transactions contemplated hereby, from the relevant state insurance regulatory authorities, and such approvals shall be in full force and effect, and no such approvals shall impose upon Continental or any of the Companies any conditions which materially adversely impair the ability of the Companies to conduct their business in substantially the same manner as such business is presently being conducted. 4.5. Absence of Certain Litigation. On the Closing Date (i) there shall be no injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided or compels or would compel Continental to dispose of or discontinue a significant portion of the business conducted by Continental and its subsidiaries or of the business conducted by the Companies as a result of the consummation of the transactions contemplated hereby; and (ii) there shall be no suit, action or other proceeding by the United States (or any agency thereof) or by any state (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated hereby or asserts the illegality of any material transaction contemplated hereby. 4.6. Transfer Taxes. Each of the Selling Stockholders shall have paid, or caused to be paid, all stock transfer and other transfer taxes required to be paid in connection with the sale and delivery to Continental of the Shares owned by such Selling Stockholder, and shall have caused all appropriate stock transfer tax stamps to be affixed to the certificate or certificates representing the Shares so sold and delivered by such Selling Stockholder. 4.7. Other Conditions. All conditions to the obligations of Alleghany in Sections 7 and 8 of the Alleghany Stock Purchase Agreement (other than the condition in Section 7.8 thereof) shall have been satisfied or waived. 5. CONDITIONS TO OBLIGATIONS OF THE SELLING STOCKHOLDERS. The obligations of the Selling Stockholders under this Agreement are subject to the satisfaction, on or before the Closing Date, of each of the following conditions: 5.1. Compliance with Agreement. Continental shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by it on or before the Closing Date, and each Selling Stockholder shall have received from Continental at the Closing a certificate, dated the Closing Date, to that effect. Attached to such certificate shall be a certified copy of the resolutions of the Board of Directors of Continental authorizing this Agreement and the transactions contemplated hereby. 5.2. Representations and Warranties. The representations and warranties made by Continental in Section 3 of this Agreement shall be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at and as of such time. The Selling Stockholders shall have received from Continental at the Closing a certificate, dated the Closing Date, to that effect. 5.3. Opinion of Counsel for Continental. The Selling Stockholders shall have received an opinion from Debevoise & Plimpton, special counsel for Continental, dated the Closing Date and substantially to the effect set forth in Exhibit C hereto. 5.4. Approvals. All Alleghany Approvals and all Sellers Approvals (as such terms are defined in the Alleghany Stock Purchase Agreement) shall have been obtained and be in full force and effect on the Closing Date. 5.5. Absence of Certain Litigation. On the Closing Date (i) there shall be no injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided or compels or would compel Continental to dispose of or discontinue a significant portion of the business conducted by Continental and its subsidiaries or of the business conducted by the Companies as a result of the consummation of the transactions contemplated hereby; and (ii) there shall be no suit, action or other proceeding by the United States (or any agency thereof) or by any state (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated hereby or asserts the illegality of any material transaction contemplated hereby. 5.6. Transfer Taxes. Continental shall have filed, independently or jointly with each Selling Stockholder, as the law requires, all real property and other transfer tax filings required to be filed by or with the cooperation of Continental in connection with the sale and delivery to Continental of the Shares. 5.7. Other Conditions. All conditions to the obligations of Continental and the Selling Stockholders in Section 9 of the Alleghany Stock Purchase Agreement (other than the condition in Section 9.7 thereof) shall have been satisfied or waived. 6. COVENANTS. 6.1. Covenants Pending the Closing. From and after the date hereof and until the Closing Date Continental and each of the Selling Stockholders agrees, severally and not jointly, that: (a) Filings and Approvals. The Selling Stockholders and Continental shall duly make all regulatory filings required to be made by each in respect of this Agreement or the transactions contemplated hereby and shall use their reasonable efforts to assist Alleghany in obtaining, all Alleghany Approvals. (b) Reasonable Efforts. Each of Continental and the Selling Stockholders agrees to use its reasonable efforts to take such reasonable action as may be necessary or appropriate in order to effectuate the transactions contemplated hereby as promptly as reasonably practicable. (c) Publicity. Except as required by law, the parties agree to notify each other prior to issuing any press release or making any public statement regarding the transactions contemplated hereby, and will attempt to obtain the reasonable approval of the other parties hereto prior to making such release or statement. (d) FIRPTA. On or prior to the Closing Date, each of the Selling Stockholders shall provide Continental with a certificate of its non-foreign status that meets the requirements of Section 1.1445- 2(b)(2)(i) of the Internal Revenue Service treasury regulations. 6.2. Additional Covenants. (a) Further Assurances. Each of the Selling Stockholders agrees that it will from time to time at and subsequent to the Closing Date, at the request of Continental and without further consideration, execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as Continental may reasonably request in order more effectively to convey, assign, transfer to and vest in Continental, or any of Continental's wholly owned subsidiaries designated hereunder, the Shares and the right to operate the businesses of the Companies. (b) Performance of Agreement. From and after the Closing Date, each of Continental and the Selling Stockholders agrees to use its reasonable efforts to perform its obligations under the Alleghany Stock Purchase Agreement and to cause the actions specified in Sections 10.2(f) and 10.2(g) of the Alleghany Stock Purchase Agreement to occur not more than two business days before the Alleghany Closing. (c) Closing of Agreements. From and after the Closing Date, Continental agrees to use its reasonable efforts to cause (i) the closing under the Management Stock Purchase Agreement to occur on the date of, and immediately prior to, the closing under the Stock Purchase Related Agreement and (ii) the closing under the Stock Purchase Related Agreement to occur on the date of, and immediately prior to or simultaneously with, the closing under the Alleghany Stock Purchase Agreement (each such capitalized term having the meaning ascribed thereto in the Alleghany Stock Purchase Agreement). 7. TERMINATION, AMENDMENT, WAIVERS. 7.1. Termination. At any time prior to the Closing Date, this Agreement may be terminated: (i) by mutual written consent of the parties hereto; (ii) by Continental at any time after December 31, 1993, if any of the conditions set forth in Section 4 hereof have not been met and have not been waived in writing by Continental; or (iii) by any of the Selling Stockholders at any time after December 31, 1993, if any of the conditions set forth in Section 5 hereof have not been met and have not been waived in writing by each of the Selling Stockholders. In the event of any termination pursuant to this Section 7.1 this Agreement shall thereupon become void and of no further force or effect and there shall be no liability or obligation on the part of any party hereto or their respective officers, directors and partners in respect hereof or of any representation, warranty, covenant or agreement contained herein except for the last sentence of Section 8.2(c), which shall survive such termination, and except to the extent that such termination results from the willful breach by a party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement, in which case the aggrieved party may recover from the breaching party or parties its out-of- pocket expenses (including reasonable fees and disbursements of counsel, but excluding lost profit and consequential damages) reasonably and actually incurred by such party in connection with this Agreement and the transactions contemplated hereby. 7.2. Amendment. This Agreement may be amended, modified, superseded or supplemented only by an instrument in writing executed and delivered on behalf of each of the parties hereto. 7.3. Waivers. The representations, warranties, covenants or conditions of this Agreement may be waived only by a written instrument executed by the party so waiving. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver by any party of any condition, or breach of any term, covenant, agreement, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of any other condition or of the breach of any other term, covenant, agreement, representation or warranty contained in this Agreement. 8. INDEMNIFICATION. 8.1. Survival of Representations, Etc. The representations and warranties, covenants and obligations of each of the Selling Stockholders and Continental contained herein shall not survive the Closing Date, except that the representations and warranties contained in Section 2.2 (Title to Shares) and the covenants contained in Section 6.2 shall survive the Closing Date, without regard to any investigation made by the parties hereto. 8.2. Indemnification. (a) Each Selling Stockholder shall, severally and not jointly, indemnify Continental and each of the Companies and their affiliates for any damage, claim, liability or expense, including without limitation, interest, penalties and reasonable attorneys' fees, but excluding lost profit and consequential damages (collectively "Damages"), arising out of the breach by such Selling Stockholder of any warranty, representation, covenant or agreement contained in this Agreement which survives the Closing. Continental shall indemnify each of the Selling Stockholders for any Damages arising out of the breach of any representation, warranty, covenant or agreement of Continental contained in this Agreement which survives the Closing. (b) Continental shall indemnify each Selling Stockholder for any Damages arising out of Alleghany's purchase of the outstanding capital stock of NHC that any such Selling Stockholder would not have incurred if Alleghany had acquired approximately 93% of the outstanding capital stock of Underwriters Re at the closing pursuant to the Alleghany Stock Purchase Agreement (which percentage includes the stock of Underwriters Re to have been acquired from the management stockholders of Underwriters Re), and no changes had occurred in the ownership of Underwriters Re capital stock prior to such closing. (c) Continental shall indemnify each Selling Stockholder for any Damages or diminution or impairment of any rights, assets or benefits possessed by such Selling Stockholder in respect of such Selling Stockholder's Shares immediately prior to the Closing (except with respect to taxes that are provided for in Section 8.4 of this Agreement) arising out of (i) the Companies having been majority-owned subsidiaries of Continental prior to the Option Closing (as defined below), including without limitation liabilities of Continental and its affiliates arising under the Internal Revenue Code of 1986, as amended (the "Code"), or the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), by application of the aggregation rules of Section 414 of the Code or Section 4001 of ERISA or (ii) Continental's purchase of such Selling Stockholder's Shares at the Closing and such Selling Stockholders' repurchase thereof at the Option Closing, that such Selling Stockholder would not have incurred if the Closing and the Option Closing had not occurred. Continental shall indemnify each Selling Stockholder for any Damages or diminution or impairment of any rights, assets or benefits possessed by such Selling Stockholder in respect of such Selling Stockholder's Shares immediately prior to the time any action is taken that is required to be taken pursuant to Sections 10.2(f) and 10.2(g) of Alleghany Stock Purchase Agreement arising out of the taking of such action in the event that (i) the Closing does not occur or (ii) the Closing and the Option Closing both occur. 8.3. Indemnification Procedures. (a) Any party hereto entitled to indemnification pursuant to Section 8.2 hereof (the "Indemnitee") shall promptly notify the party or parties responsible for such indemnification (the "Indemnitor") if the Indemnitee becomes aware of any Damages with respect to which indemnity may be asserted; and the failure to give such notice promptly shall not relieve the Indemnitor of its obligations hereunder except to the extent the Indemnitor is prejudiced thereby. Promptly after (x) the receipt by an Indemnitee of notice under Section 8.2 hereof of any third party claim or (y) the commencement of any action or proceeding the Indemnitee will, if a claim with respect thereto is to be made against the Indemnitor, give the Indemnitor written notice in reasonable detail of such claim or the commencement of such action or proceeding and shall permit the Indemnitor to assume the defense of any such claim or any litigation resulting from such claim. Failure by the Indemnitor to notify the Indemnitee of its election to defend any such action within a reasonable time, but in no event more than thirty days after notice thereof shall have been given to the Indemnitor, shall be deemed a waiver by the Indemnitor of its right to defend such action. (b) If the Indemnitor assumes the defense of any such claim or litigation resulting therefrom, the obligations of the Indemnitor as to such claim shall be limited to taking all steps necessary in the defense or settlement of such claim or litigation resulting therefrom and to holding Indemnitee harmless from and against any and all losses, damages and liabilities caused by, arising out of or relating to any settlement approved by the Indemnitor or any judgment in connection with such claim or litigation resulting therefrom. The Indemnitee may participate, at its expense, in the defense of such claim or litigation provided that the Indemnitor shall direct and control the defense of such claim or litigation. The Indemnitor shall not, in the defense of such claim or any litigation resulting therefrom, consent to entry of any judgment or enter into any settlement other than a judgment or settlement involving only the payment of money, except with the written consent of Indemnitee, which consent shall not be unreasonably withheld. (c) If the Indemnitor shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against such claim or litigation in such manner as it may deem appropriate. The Indemnitee shall not enter into any settlement of such claim or litigation without the written consent of the Indemnitor, which consent shall not be unreasonably withheld. The Indemnitor shall promptly reimburse the Indemnitee for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnitee in connection with the defense against or settlement of such claims or litigation. If no settlement of such claim or litigation is made, the Indemnitor shall promptly reimburse the Indemnitee for the amount of any judgment rendered with respect to such claim or in such litigation and of all reasonable expenses, legal or otherwise, incurred by the Indemnitee in the defense of such claim or litigation. (d) No indemnification amount shall be payable to or by any Selling Stockholder pursuant to this Section 8 in an amount in excess of the portion of the Consideration payable to such Selling Stockholder hereunder. 8.4. Tax Indemnification. (a) If the Option Closing occurs, Continental shall indemnify and hold harmless each of the Selling Stockholders on an after-tax basis from and against any taxes, including interest and penalties, imposed on such Selling Stockholder or any partner (as defined in Section 6231(a)(2) of the Code) of such Selling Stockholder (hereinafter a "Partner") that would not have been imposed but for the sale of the Shares by such Selling Stockholder at the Closing and the repurchase thereof at the Option Closing; provided, that if such Selling Stockholder or such Partner subsequently realizes any reduction in taxes (on a sale of such Shares, or of any property the basis of which is determined by reference to such Shares, or otherwise) that would not have been realized but for such sale of the Shares at the Closing, or if such Selling Stockholder or such Partner shall receive a refund or credit with respect to any taxes for which Continental has made a payment pursuant to this Section 8.4, then such Selling Stockholder shall pay to Continental the amount of such reduction in taxes, refund or credit, plus the reduction in taxes realized by such Selling Stockholder or such Partner as a result of such Selling Stockholder's payment to Continental; and provided, further, that such Selling Stockholder shall not be required to pay to Continental pursuant to the previous proviso amounts in excess of the amounts received by such Selling Stockholder from Continental pursuant to this Section 8.4. (b) Continental shall be obligated to make payments to a Selling Stockholder pursuant to Section 8.4(a) only if and to the extent that: (i) such Selling Stockholder and Partners of such Selling Stockholder (to the extent of such Partners' interests in such Selling Stockholder) report the transactions contemplated by this Agreement on all federal, state and local tax returns and reports (including reports to Partners) in a manner that does not show liability for taxes for which Continental is responsible pursuant to this Section 8.4; provided, that this clause (i) shall not apply with respect to a return or report if and to the extent that such Selling Stockholder or such Partner provides to Continental, at least 30 days before the filing of such return or report, an opinion of independent tax counsel to the effect that (x) in the case of federal income tax returns and all other returns and reports on which the transactions contemplated by this Agreement may be reported in accordance with their Federal income tax treatment, there is no substantial authority (within the meaning of Section 6662 of the Code) for reporting in accordance with this clause (i) because of a change in law that became effective after the date hereof, and (y) in the case of all other returns and reports, there is no substantial authority (within the meaning of Section 6662 of the Code) for reporting in accordance with this clause (i); and (ii) (x) such Selling Stockholder or any affected Partner of such Selling Stockholder, as the case may be, provides Continental with prompt notice of the commencement of any audit or other administrative or judicial proceeding which could give rise to a claim for payment against Continental pursuant to this Section 8.4, (y) such Selling Stockholder and each Partner of such Selling Stockholder (to the extent relevant) consults with Continental and provides such cooperation and information as Continental reasonably requests in connection with the conduct of such audit or other proceeding, considers in good faith Continental's opinions and requests with respect thereto, and takes such actions to contest any proposed adjustment as it would with respect to any other item of equal magnitude for which such Selling Stockholder or such Partner (to the extent relevant) would be responsible without the possibility of indemnification; provided, that such Selling Stockholder or such Partner (to the extent relevant) shall control such audit or other proceeding, including the choice of counsel and forum. (c) For purposes of this Section 8.4, in calculating the amount of any income taxes imposed on a Partner and the amount of any reduction in taxes realized by such Partner for purposes of this Section 8.4, it shall be assumed that such Partner, (i) if it is a Partner in BROAD STREET INVESTMENT FUND I, L.P. or is Goldman, Sachs & Co., pays tax at the highest marginal federal, New York State and New York City tax rates applicable to corporations on the type of income affected, and (ii) if it is a Partner in STONE STREET FUND 1986, STONE STREET FUND 1987, BRIDGE STREET FUND 1986 or BRIDGE STREET FUND 1987, pays tax at the highest marginal federal, New York State and New York City tax rates applicable to individuals on the type of income affected, in each case taking into account the deductibility of New York State and New York City income taxes for federal income tax purposes and the deductibility of New York City income taxes for New York State corporate income tax purposes. (d) Any payment required to be made by Continental pursuant to this Section 8.4 shall be made no later than 5 business days prior to the time that the payment of taxes to which such payment relates is required to be made. If such taxes are contested without the prior payment of any amounts to the relevant taxing authority, the payment pursuant to this Section 8.4 with respect to such taxes shall not be required to be made until 10 business days after a final determination of the amount of such tax is made. Any payment required to be made by any Selling Stockholder to Continental pursuant to this Section 8.4 shall be made no later than (x) in the case of a reduction of taxes, the due date (not including extensions) for the filing of the return reflecting the reduction of taxes to which such payment relates, and (y) in the case of a refund or credit, the date such refund is received from or credit is made by the relevant taxing authority. (e) All payments made to a Selling Stockholder with respect to taxes of a Partner of such Selling Stockholder shall discharge Continental's obligation to such Partner with respect to such taxes. 9. OPTION. 9.1. Exercise of Option. If the Alleghany Closing shall not have occurred within seven business days following the Closing hereunder (the "Option Period"), except if the failure of the Alleghany Closing to occur within the Option Period results solely from the breach by Continental of any representation, warranty, covenant or agreement of Continental contained in the Alleghany Stock Purchase Agreement, Continental shall have the right (the "Option") to require all, but not less than all, of the Selling Stockholders to purchase, and upon the exercise of such right each Selling Stockholder shall purchase, subject to the terms and conditions set forth in this Section 9 and having the effect set forth in Section 9.5, from Continental, all, but not less than all, of the Shares Continental purchased from such Selling Stockholder at the Closing (the "Option Shares") at a price equal to the Consideration paid to such Selling Stockholder at the Closing (the "Option Price"). To exercise the Option, Continental shall deliver to each Selling Stockholder an irrevocable written notice to such effect no later than the last day of the Option Period (the "Option Notice"). 9.2. Option Closing. If Continental exercises the Option, the closing of the purchase of the Option Shares shall, subject to the terms and conditions set forth in this Section 9, take place at such time and place as is indicated in the Option Notice (but in no event later than five business days after the delivery of the Option Notice) or as Continental and the Selling Stockholders may agree (the "Option Closing"), provided that the timing of the Option Closing must comply with the proviso to Section 1.3. At the Option Closing, Continental shall sell, convey, transfer and deliver to each Selling Stockholder full right, title and interest in and to all of the Option Shares to be sold to such Selling Stockholder, free and clear of all Liens, and shall deliver a certificate or certificates representing such Option Shares duly endorsed for transfer or accompanied by appropriate stock powers duly endorsed for transfer. The cost of any stock transfer tax stamps or any other transfer tax payable, if any, in connection with the purchase of Option Shares by the Selling Stockholder purchasing the same shall be borne by, and the right to receive any refund in respect thereof shall inure to the benefit of, such Selling Stockholder. At the Option Closing, each Selling Stockholder shall pay to Continental by wire transfer in immediately available funds to such account or accounts as was designated to such Selling Stockholder by Continental in the Option Notice an amount equal to the Option Price of the Option Shares being purchased by such Selling Stockholder. 9.3. Conditions to Option Closing. The obligations of the Selling Stockholders under this Section 9 are subject to the satisfaction, on or before the date of the Option Closing (the "Option Closing Date"), of each of the following conditions: (a) Compliance with Agreement. Each Selling Stockholder shall have received from Continental at the Option Closing a certificate, dated the Option Closing Date and executed by an executive officer of Continental, substantially in the form of Exhibit D hereto (the "Officer's Certificate"), to the effect that Continental shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by it on or before the Option Closing Date. (b) Representations and Warranties. The Officer's Certificate shall be to the effect that the representations and warranties made by Continental in Section 3 hereof shall be true and correct in all material respects as of the Option Closing Date. (c) Absence of Certain Litigation. On the Option Closing Date (i) there shall be no injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided or compels or would compel the Companies to dispose of or discontinue a significant portion of the business conducted by the Companies as a result of the consummation of the transactions contemplated hereby; and (ii) there shall be no suit, action or other proceeding by the United States (or any agency thereof) or by any state (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated hereby or asserts the illegality of any material transaction contemplated hereby. (d) Transfer Taxes. Continental shall have paid, or caused to be paid, all stock transfer and other transfer taxes required to be paid in connection with the sale and delivery to the Selling Stockholders of the Shares, and shall have caused all appropriate stock transfer tax stamps to be affixed to the certificate or certificates representing the Shares so sold and delivered. 9.4. Further Assurances. Continental agrees that it will from time to time at and subsequent to the Option Closing Date, at the request of any Selling Stockholder and without further consideration, execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as such Selling Stockholder may reasonably request in order more effectively to convey, assign, transfer to and vest in such Selling Stockholder the Shares purchased by such Selling Stockholder at the Option Closing. 9.5. Effect of Exercise. If Continental exercises the Option, upon the conclusion of the Option Closing this Agreement shall terminate and have no further force or effect and there shall be no liability or obligation on the part of either Continental or any of the Selling Stockholders in respect of any covenant, condition or agreement contained herein and the purchase and sale of the Shares pursuant to Section 1.1 hereof shall be rescinded, and each party shall be restored to the condition existing prior to such purchase and sale, except that (a) the representations and warranties contained in Paragraphs 1 and 2 of the Officer's Certificate, (b) the covenants of Continental contained in Section 9.4 hereof and (c) the obligations of Continental contained in Sections 8.2(c) (including the procedures with respect thereto set forth in Section 8.3 hereof) and 8.4 hereof shall survive the Option Closing, without regard to any investigation made by the parties hereto. In such event, each party hereto agrees, at its own expense, to execute, deliver, file and record any instrument, document, agreement or other paper and take any other action that the other party may reasonably request from time to time or that the other party shall become aware may be necessary or desirable, in order to effect the foregoing. If between the Closing and the Option Closing Continental shall receive any dividends or other distributions (whether in the form of cash, securities or other property) from Underwriters Re in respect of the Shares acquired by Continental at the Closing, Continental shall at the Option Closing pay such dividends or other distributions over to the Selling Stockholders, pro rata, in proportion to their respective interests in such Shares. 9.6. Termination of Option. If the Alleghany Closing shall have occurred at any time during the Option Period or if Continental shall not have delivered an Option Notice pursuant to the terms of this Section 9 during the Option Period, then the Option shall terminate and have no further force or effect. 10. MISCELLANEOUS PROVISIONS. 10.1. Expenses. Whether or not the Closing takes place and regardless of whether this Agreement is terminated, each party hereto shall pay all of the costs and expenses incurred by it in connection with this Agreement or in consummating the transactions contemplated hereby (including, without limitation, disbursements and expenses of its attorneys, accountants and advisors). 10.2. Notices. All notices or other communications require or permitted under this Agreement shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by personal delivery, by facsimile transmission, or by registered, certified or express mail, postage prepaid, addressed as follows: If to Continental, to William F. Gleason, Jr., Esq. Senior Vice President, General Counsel and Secretary The Continental Corporation 180 Maiden Lane New York, New York 10038 Telecopy: (212) 440-7982 with a copy to Deborah F. Stiles, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telecopy: (212) 909-6836 If to the Selling Stockholders, to Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Attention: General Counsel Telecopy: (212) 902-3000 with a copy to Frank H. Golay, Jr., Esq. Sullivan & Cromwell 444 South Flower Street Los Angeles, California 90071 Telecopy: (212) 683-0457 Any party may change the person and addresses to which notices or other communications are to be sent to it by giving written notice of any such change in the manner provided herein for giving notice. 10.3. Entire Agreement. Except as otherwise provided herein, this Agreement, together with the exhibits and schedules hereto, sets forth the entire agreement and understanding of the parties hereto in respect of the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof. 10.4. No Third Party Beneficiaries. Nothing in this Agreement is intended or shall be construed to give any person, other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 10.5. No Assignment. This Agreement shall inure to the benefit of, and be binding upon, the respective successors and assigns of the parties hereto; provided, however, that no assignment of any rights or delegation of any obligations provided for herein shall be made by any party hereto without the express prior written consent of the other party, except that Continental shall be permitted, without such consent, to assign any of its rights hereunder (but not to delegate any of its obligations hereunder) to any of its wholly owned subsidiaries (provided that Continental may not, following such assignment to such a subsidiary, transfer or dispose of such subsidiary, or any equity interest therein, to any third party without the express prior written consent of each Selling Stockholder). 10.6. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within such State, except (a) matters related to the validity of corporate or partnership action, which shall be governed by the laws of the state or other jurisdiction of incorporation or organization of the relevant corporation or partnership, as the case may be, and (b) matters related to compliance of the transactions contemplated hereby with applicable insurance regulatory statutes, which shall be governed by the laws of the state or other jurisdiction the insurance regulatory statutes of which apply. 10.7. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 10.8. Headings. The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed on the date first above written. THE CONTINENTAL CORPORATION By /s/Wayne H. Fisher STONE STREET FUND 1986 BRIDGE STREET FUND 1986 BY: Stone Street Advisors Corp., BY: Stone Street Advisors Corp., General Partner Managing General Partner BY: /s/Richard A. Friedman BY: /s/Richard A. Friedman Vice President Vice President STONE STREET FUND 1987 BRIDGE STREET FUND 1987 BY: Stone Street Capital Corp., BY: Stone Street Capital Corp., General Partner Managing General Partner BY: Richard A. Friedman BY: Richard A. Friedman Vice President Vice President BROAD STREET INVESTMENT FUND I, LP. BY: Goldman, Sachs & Co., General Partner BY: /s/Richard A. Friedman Partner GOLDMAN, SACHS & CO. BY: /s/Richard A. Friedman General Partner Schedule 1.2 Selling Stockholder Number of Shares Goldman, Sachs & Co. 293,498 Stone Street Fund 1986 100,000 Stone Street Fund 1987 166,666 Broad Street Investment 3,297,730 Fund I, L.P Bridge Street Fund 1986 66,667 Bridge Street Fund 1987 66,667 Schedule 2.1 The Shares are held subject to the Shareholders' Agreement dated as of December 29, 1987, as amended on July 6, 1988, May 29, 1991 and May 1, 1993, among Continental, the Selling Stockholders and certain management stockholders named therein. EX-10 15 EXHIBIT 10(L) THE CONTINENTAL CORPORATION 180 Maiden Lane New York, New York 10038 October 6, 1993 Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Broad Street Investment Fund I, L.P. 85 Broad Street New York, New York 10004 Stone Street Fund 1986 85 Broad Street New York, New York 10004 Stone Street Fund 1987 85 Broad Street New York, New York 10004 Bridge Street Fund 1986 85 Broad Street New York, New York 10004 Bridge Street Fund 1987 85 Broad Street New York, New York 10004 Dear Sirs: In connection with the Stock Purchase Agreement, dated July 28, 1993 (the "Agreement"), among The Continental Corporation ("Continental") and Goldman, Sachs & Co. and certain funds which Goldman, Sachs & Co. either control or of which they are general partner (collectively, the "Selling Stockholders"), this is to confirm our agreement that, notwithstanding the Agreement, payment for the shares to be sold by each Selling Stockholder under the Agreement shall, subject to the terms and conditions thereof, be made by certified or official bank check or checks, payable to the order of such Selling Stockholder in immediately available funds. If the foregoing is in accordance with your understanding, please sign where indicated below. Very truly yours, THE CONTINENTAL CORPORATION By: /s/William F. Gleason Senior Vice President General Counsel and Secretary Accepted as of the date hereof: GLDMAN, SACHS & CO. BROAD STREET INVESTMENT FUND I, L.P. By: Goldman, Sachs & Co., By: /s/Richard A. Friedman General Partner General Partner By: /s/Richard A. Friedman Partner STONE STREET FUND 1986 BRIDGE STREET FUND 1986 By: Stone Street Advisors Corp., By: Stone Street Advisors Corp., General Partner Managing General Partner By: /s/Carla Skodinski By: /s/Carla Skodinski Vice President Vice President STONE STREET FUND 1987 BRIDGE STREET FUND 1987 By: Stone Street Capital Corp., By: Stone Street Capital Corp., General Partner Managing General Partner By: /s/Carla Skodinski By: /s/Carla Skodinski Vice President Vice President EX-10 16 EXHIBIT 10(M) MANAGEMENT STOCK PURCHASE AGREEMENT MANAGEMENT STOCK PURCHASE AGREEMENT (the "Agreement") dated as of July 28, 1993, among THE CONTINENTAL CORPORATION, a New York corporation ("Continental"), UNDERWRITERS RE HOLDINGS CORP., a Delaware corporation ("Underwriters Re"), UNDERWRITERS RE CORPORATION, a Delaware corporation ("Underwriters Re Corporation") and each of the individuals listed on the signature pages hereof (the "Management Stockholders"). W I T N E S S E T H: WHEREAS, Underwriters Re is the owner of all of the issued and outstanding capital stock of Underwriters Re Corporation; and Underwriters Re Corporation is the owner of all of the issued and outstanding capital stock of Underwriters Reinsurance Company, a New Hampshire insurance company ("Underwriters Reinsurance"); WHEREAS, Continental, Underwriters Re and Underwriters Re Corporation have entered into a Stock Purchase Agreement, dated as of July 28, 1993, with Alleghany Corporation, a Delaware corporation ("Alleghany"), providing for the purchase by Alleghany of a portion of the issued and outstanding capital stock of New Holding Corporation, a Delaware Corporation ("NHC") to be formed to hold all of the issued and outstanding capital stock of Underwriters Reinsurance (the "Alleghany Stock Purchase Agreement"); and WHEREAS, Continental and Underwriters Re Corporation desire to purchase from the Management Stockholders and the Management Stockholders desire to sell to Continental and Underwriters Re Corporation the shares of common stock, par value $.01 per share (the "Common Stock"), of Underwriters Re described in Section 1 below; NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions contained herein, the parties hereto agree as follows: 1. EXERCISE OF OPTIONS, PURCHASE OF SHARES AND CLOSING. 1.1. Outstanding Options. Underwriters Re shall cause all stock options held by the Management Stockholders granted under the Underwriters Re 1987 Stock Option Plan (the "Option Plan") that are not currently exercisable to become exercisable not later than two business days before the Closing Date. Each of the Management Stockholders shall exercise any and all of the stock options granted to such Management Stockholder under the Option Plan that are then outstanding not later than two business days before the Closing Date in accordance with the terms of any applicable Nonstatutory Stock Option Agreement entered into between Underwriters Re and a Management Stockholder (the "Option Agreements"). Notwithstanding anything contained in this Agreement or the Option Agreements to the contrary, each Management Shareholder shall be entitled (i) to pay the exercise price for stock options using Common Stock owned prior to such exercise and (ii) to satisfy any applicable tax withholding requirements using Common Stock owned prior to such exercise or issuable upon the exercise of such stock options, in each case using $23.50 per share as the fair market value of such Common Stock. 1.2. Purchase of Shares. Subject to the terms and conditions set forth in this Agreement, at the Closing (as defined below), each Management Stockholder agrees to sell, convey, assign, transfer and deliver the remainder of (i) the shares of Common Stock owned on the date hereof and the shares of Common Stock acquired in conjunction with the exercise of stock options as contemplated in Section 1.1 less (ii) any shares of Common Stock used to exercise any stock options or pay such Management Stockholder's withholding obligations in accordance with Section 1.1 (such net amount of Common Stock hereinafter referred to as the "Shares") to Continental or a subsidiary of Continental designated by Continental (the "Continental Purchaser") and Underwriters Re Corporation (hereafter collectively referred to as the "Companies"), and the Continental Purchaser and Underwriters Re Corporation shall acquire the Shares from the Management Stockholder in the manner described below. 1.3. Consideration. At the Closing, as consideration for the sale of Shares, (i) the Continental Purchaser will deliver to each Management Stockholder cash in an aggregate amount equal to the product of $23.50 and the number of Shares that such Management Stockholder has identified as to be purchased for cash and (ii) Underwriters Re Corporation shall deliver to the Management Stockholder that number of shares of the capital stock of NHC owned by it which represents the same proportionate ownership interest in NHC as the number of Shares less the number of Shares sold to the Continental Purchaser pursuant to clause (i) represented in Underwriters Re immediately prior to the Closing Date. The Shares held by the Management Stockholders listed on Schedule 1.3 which are to purchased for cash shall be those identified on such schedule. The Shares held by the Management Stockholders not listed on Schedule 1.3 which are to purchased for cash shall be identified to Continental in writing not later than two business days prior to the Closing Date. Any property delivered to a Management Stockholder pursuant to this Sec- tion 1.3 shall be free and clear of all liens, security interests, pledges, agreements, claims, charges, options or encumbrances of any nature whatsoever (collectively "Liens"). 1.4. Closing. The purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall take place after satisfaction or waiver of the conditions precedent set forth herein at the place specified for, and on the same date as (but prior to), the closing under Alleghany Stock Purchase Agreement (the "Closing Date"), or on such other date as the parties hereto agree in writing. At the Closing, (i) each Management Stockholder shall deliver to the Continental Purchaser and Underwriters Re Corporation a certificate or certificates representing the Shares owned by such Management Stockholder, duly endorsed in blank or with appropriate stock powers attached, free and clear of all Liens and (ii) the Continental Purchaser and Underwriters Re Corporation shall deliver to each Management Stockholder the consideration payable to such Management Stockholder in accordance with Section 1.3. 2. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT STOCKHOLDERS. Each of the Management Stockholders, severally but not jointly, represents and warrants to the Companies as follows: 2.1. Title to Shares. Each Management Stockholder owns beneficially and of record, free and clear of all Liens, or owns of record and has full power and authority to convey free and clear of all Liens, in each case except for Liens set forth in Schedule 2.1, all of such Management Stockholder's Shares. Upon delivery of the Consideration as herein provided, such Management Stockholder will convey good title thereto, free and clear of all Liens. 2.2. Authority. This Agreement constitutes a legal, valid and binding obligation of each Management Stockholder, enforceable against such Management Stockholder in accordance with its terms, subject to bankruptcy, insolvency, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 3. REPRESENTATIONS AND WARRANTIES OF UNDERWRITERS RE CORPORATION. Underwriters Re Corporation represents and warrants to each Management Stockholder as follows: 3.1. Organization and Standing. Underwriters Re Corporation is a corporation, duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 3.2. Authority. The execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary corporate action on the part of Underwriters Re Corporation. This Agreement constitutes a legal, valid and binding obligation of Underwriters Re Corporation, enforceable against Underwriters Re Corporation in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 3.3. Other Representations and Warranties. The representations and warranties of Underwriters Re Corporation in Section 2.3 (Consents and Approvals) and the third sentence of Section 2.4 (Authority) of the Alleghany Stock Purchase Agreement are hereby incorporated by reference, and Underwriters Re Corporation represents and warrants the same to each of the Management Stockholders (subject to the exceptions and qualifications set forth therein, mutatis mutandis), as if set out herein at length save that identical terms defined both therein and herein shall be deemed to have the respective meanings ascribed thereto in this Agreement and all uses therein of the word "hereby" shall refer to this Agreement. 4. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL. Continental represents and warrants to each Management Stockholder as follows: 4.1. Organization and Standing. Continental is a corporation, duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 4.2. Authority. The execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary corporate action on the part of Continental. This Agreement constitutes a legal, valid and binding obligation of Continental, enforceable against Continental accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 4.3. Other Representations and Warranties. The representations and warranties of Continental in Section 3.1 (Consents and Approvals) and the third sentence of Section 4.2 (Authority) of the Alleghany Stock Purchase Agreement are hereby incorporated by reference, and Continental represents and warrants the same to each of the Management Stockholders (subject to the exceptions and qualifications set forth therein, mutatis mutandis), as if set out herein at length save that identical terms defined both therein and herein shall be deemed to have the respective meanings ascribed thereto in this Agreement and all uses therein of the word "hereby" shall refer to this Agreement. 5. REPRESENTATIONS AND WARRANTIES AND COVENANTS. Underwriters Re represents and warrants to each Management Stockholder as follows: 5.1. Organization and Standing. Underwriters Re is a corporation, duly organized, validly existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 5.2. Authority. The execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary corporate action on the part of Underwriters Re. This Agreement constitutes a legal, valid and binding obligation of Underwriters Re, enforceable against Underwriters Re in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. 6. CONDITIONS TO OBLIGATIONS OF THE COMPANIES AND UNDERWRITERS RE. The obligations of the Companies and Underwriters Re under this Agreement are subject to the satisfaction, on or before the Closing Date and separately as to each Management Stockholder, of each of the following conditions: 6.1. Compliance with Agreement. Each Management Stockholder shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by such Management Stockholder on or before the Closing Date. 6.2. Representations and Warranties. The representations and warranties made by each Management Stockholder in Section 2 of this Agreement shall be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at and as of such time. 6.3. Approvals. All Alleghany Approvals and all Sellers Approvals (as such terms are defined in the Alleghany Stock Purchase Agreement) shall have been obtained and be in full force and effect on the Closing Date. Without limiting the generality of the foregoing, Continental shall have received the requisite approvals of the consummation of the purchase and sale of the Shares, and the transactions contemplated hereby, from the relevant state insurance regulatory authorities, and such approvals shall be in full force and effect, and no such approvals shall impose upon Continental, Underwriters Re or Underwriters Re Corporation or any of its direct or indirect subsidiaries any conditions which materially adversely impair the ability of such entities to conduct their business in substantially the same manner as such business is presently being conducted. 6.4. Absence of Certain Litigation. On the Clos- ing Date (i) there shall be no injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided or compels or would compel Continental to dispose of or discontinue a significant por- tion of the business conducted by the Underwriter Re, Underwriters Re Corporation or any of the subsidiaries of Underwriters Re Corporation as a result of the consummation of the transactions contemplated hereby; and (ii) there shall be no suit, action or other proceeding by the United States (or any agency thereof) or by any state (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated hereby or asserts the illegality of any material transaction contemplated hereby. 6.5. Transfer Taxes. Each of the Management Stockholders shall have paid, or caused to be paid, all stock transfer taxes required to be paid in connection with the sale and delivery to the Companies of the Shares owned by such Management Stockholder, and shall have caused all appropriate stock transfer tax stamps to be affixed to the certificate or certificates representing the Shares so sold and delivered by such Management Stockholder. 6.6. Other Conditions. All conditions to the obligations of the parties to the Alleghany Stock Purchase Agreement (other than the conditions set forth in Sections 7.8 and 9.7 thereof) shall have been satisfied or waived. 7. CONDITIONS TO OBLIGATIONS OF THE MANAGEMENT STOCKHOLDERS. The obligations of each Management Stockholder under this Agreement are subject to the satisfaction, on or before the Closing Date, of each of the following conditions: 7.1. Compliance with Agreement. The Companies shall have performed and complied in all material respects with all the obligations required by this Agreement to be performed or complied with by them on or before the Closing Date. 7.2. Representations and Warranties. The representations and warranties made by Underwriters Re Corporation in Section 3 of this Agreement, by Continental in Section 4 of this Agreement and by Underwriters Re in Section 5 of this Agreement shall be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at and as of such time. 7.3. Approvals. All Alleghany Approvals and all Sellers Approvals (as such terms are defined in the Alleghany Stock Purchase Agreement) shall have been obtained and be in full force and effect on the Closing Date. 7.4. Other Conditions. All conditions to the obligations of the parties to the Alleghany Stock Purchase Agreement (other than the conditions set forth in Sections 7.8 and 9.7 thereof) shall have been satisfied or waived. 8. COVENANTS. 8.1. Covenants Pending the Closing. From and after the date hereof and until the Closing Date, each of the Companies and each of the Management Stockholders agrees to use reasonable efforts to take such reasonable action as may be necessary or appropriate in order to effectuate the transactions contemplated hereby as promptly as reasonably practicable. 8.2. Further Assurances. Each Management Stockholder agrees from time to time at and subsequent to the Closing Date, at the request of either of the Companies and without further consideration, to execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as either of the Companies may reasonably request in order more effectively to convey, assign, transfer to and vest in the Companies, the Shares. 9. TERMINATION, AMENDMENT, WAIVERS. 9.1. Termination. At any time prior to the Closing Date, this Agreement may be terminated as to any of the Management Stockholders: (i) by mutual written consent of the affected parties hereto; (ii) by either of the Companies at any time after December 31, 1993, if any of the conditions set forth in Section 6 hereof with respect to such Management Stockholder have not been met and have not been waived in writing by both of the Companies; or (iii) by such Management Stockholder at any time after December 31, 1993, if any of the conditions set forth in Section 7 hereof have not been met and have not been waived in writing by such Management Stock- holder. In the event of any termination pursuant to this Section 8.1 this Agreement shall thereupon become void and of no further force or effect and there shall be no liability or obligation on the part of any party hereto or their respective agents in respect hereof or of any representation, warranty, covenant or agreement contained herein except to the extent that such termination results from the willful breach by a party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement, in which case the aggrieved party may recover its out-of-pocket expenses (including reasonable fees, but excluding lost profit and consequential damages) reasonably and actually incurred by such party by virtue of such breach. 9.2. Unwinding. Notwithstanding anything to the contrary contained herein, if the closing under the Alleghany Stock Purchase Agreement shall not occur pursuant to the terms thereof by December 31, 1993, this Agreement shall thereupon terminate and have no further force or effect. The respective obligations of the Companies, Underwriters Re and the Management Stockholders hereunder shall thereupon cease and there shall be no liability or obligation on the part of any of the Companies, Underwriters Re or the Management Stockholders in respect of any covenant, condition or agreement contained herein, and the Companies, Underwriters Re and the Management Stockholders shall be placed in the same position with respect to each other as they would have been but for their execution of the Alleghany Stock Purchase Agreement and this Agreement. 9.3. Amendment. This Agreement may be amended, modified, superseded or supplemented only by an instrument in writing executed and delivered on behalf of each of the parties hereto. 9.4. Waivers. The representations, warranties, covenants or conditions of this Agreement may be waived only by a written instrument executed by the party so waiving. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver by any party of any condition, or breach of any term, covenant, agreement, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of any other condition or of the breach of any other term, covenant, agreement, representation or warranty contained in this Agreement. 10. MISCELLANEOUS PROVISIONS. 10.1. Survival of Representations, Etc. The representations and warranties, covenants and obligations of the Management Stockholders, Continental, Underwriters Re Corporation and Underwriters Re contained herein shall not survive the Closing Date, except that the representations and warranties contained in Section 2.1 (Title to Shares) and 2.2 (Organization and Standing) and the covenants contained in Section 7.2 (Further Assurances) shall survive the Closing Date, without regard to any investigation made by the parties hereto. 10.2. Counterparts and Supplements. This Agreement may be executed in one or more counterparts, all of which shall constitute one and the same instrument. On or before August 12, 1993, any one or more of Stephen C. Kolakowski, Mark A. Bennett, Theodore A. Blundell, Denise A. Coleman, Pamela Falzone, Todd J. Hess, Michael J. Kruse, Judy Mann and Nancy Moore may become a party hereto, and a Stockholder hereunder, by executing a counterpart hereof with attached supplemented Schedules providing all of the information called for by this Agreement in respect of such additional Stockholders. The Agreement, as so supplemented, shall constitute the Agreement for all purposes hereof. 10.3. Expenses. Whether or not the Closing takes place and regardless of whether this Agreement is terminated, each party hereto shall pay all of the costs and expenses incurred by it in connection with this Agreement or in consummating the transactions contemplated hereby (including, without limitation, disbursements and expenses of its attorneys, accountants and advisors). 10.4. Notices. All notices or other communications require or permitted under this Agreement shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by personal delivery, by facsimile transmission, or by registered, certified or express mail, postage prepaid, addressed as follows: If to Continental to: Thomas A. Eff, Esq. Vice President and Associate General Counsel The Continental Corporation 180 Maiden Lane New York, New York 10038 Telecopy: (212) 440-7982 and with a copy to: Deborah F. Stiles, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telecopy: (212) 909-6836 If to either of the Companies: to the Secretary of each of the Companies at their principal business offices with a copy to each of: Thomas A. Eff, Esq. Vice President and Associate General Counsel The Continental Corporation 180 Maiden Lane New York, New York 10038 Telecopy: (212) 440-7982 and Deborah F. Stiles, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telecopy: (212) 909-6836 If to any Management Stockholder: to the address of such Management Stockholder listed on the records of Underwriters Re Any party may change the person and addresses to which notices or other communications are to be sent to it by giving written notice of any such change in the manner pro- vided herein for giving notice. 10.5. Entire Agreement. Except as otherwise provided herein, this Agreement, together with the exhibits and schedules hereto, sets forth the entire agreement and understanding of the parties hereto in respect of the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof. 10.6. No Third Party Beneficiaries. Nothing in this Agreement is intended or shall be construed to give any person, other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 10.7. No Assignment. This Agreement shall inure to the benefit of, and be binding upon, the respective successors and assigns of the parties hereto; provided, however, that no assignment of any rights or delegation of any obligations provided for herein shall be made by any party hereto without the express prior written consent of the other party, except that the Companies shall be permitted, without such consent, to assign any of its rights hereunder (but not to delegate any of its obligations hereunder) to any of its wholly owned subsidiaries (provided that the Companies may not, following such assignment to such a subsidiary, transfer or dispose of such subsidiary, or any equity interest therein, to any third party without the express prior written consent of the Management Stockholders). 10.8. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within such State, except (a) matters related to the validity of corporate action, which shall be governed by the laws of the state or other jurisdiction of incorporation the relevant corporation, and (b) matters related to compliance of the transactions contemplated hereby with applicable insurance regulatory statutes, which shall be governed by the laws of the state or other jurisdiction the insurance regulatory statutes of which apply. 10.9. Counterparts. This Agreement may be execu- ted in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 10.10. Headings. The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed on the date first above written. THE CONTINENTAL CORPORATION By /s/ Wayne H. Fisher Attest: By /s/ Deborah B. Lacivita Secretary UNDERWRITERS RE HOLDING CORPORATION By /s/ Steven H. Newman Attest: By /s/ Pamela Falzone Secretary UNDERWRITERS RE CORPORATION By /s/ Steven H. Newman Attest: By /s/ Pamela Falzone Secretary MANAGEMENT STOCKHOLDERS /s/ Dennis E. Arnold /s/ Peter A. Bengelsdorf /s/ Mark A. Bennett /s/ Theodore A. Blundell /s/ Denise A. Coleman /s/ Pamela Falzone /s/ Todd J. Hess /s/ F. Paul Japp /s/ Russell T. John /s/ Stephen C. Kolakowski /s/ Michael J. Kruse /s/ Judy Mann /s/ Nancy Moore /s/ Steven H. Newman /s/ M. Bernard Puckett /s/ James P. Rapp /s/ Edwin Seaman EX-10 17 EXHIBIT 10(N) AMENDMENT TO MANAGEMENT STOCK PURCHASE AGREEMENT This Amendment (this "Amendment") to Management Stock Purchase Agreement dated as of July 28, 1993, among The Continental Corporation, a New York corporation ("Continental"), Underwriters Re Holdings Corp., a Delaware corporation ("Underwriters Re"), Underwriters Re Corporation, a Delaware corporation ("Underwriters Re Corporation") and each of the individuals listed on the signature pages thereof (the "Management Stockholders"), as supplemented by the August 12, 1993 Supplement to Management Stock Purchase Agreement (as supplemented, the "Management Stock Purchase Agreement") is made as of the 7th day of October, 1993 by the parties hereto. All capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Management Stock Purchase Agreement. W I T N E S S E T H : WHEREAS, the parties hereto desire to amend the Management Stock Purchase Agreement to accurately reflect the ownership of Shares by Management Stockholders; NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions contained herein, the parties hereto agree as follows: 1. Amendments. (a) The phrase, "or owns of record and has full power and authority to convey free and clear of all Liens" contained in Section 2.1 of the Management Stock Purchase Agreement, be and hereby is amended to read as follows: "or owns beneficially through a trust or similar entity has full power and authority to convey free and clear of all Liens." (b) The number appearing opposite Steven H. Newman's name on Schedule 1.3 to the Management Stock Purchase Agreement is hereby amended to read "341,522." (c) The numbers appearing opposite the names of each of Pamela Falzone and Judy Mann on the Supplement to Schedule 1.3 to the Management Stock Purchase Agreement are hereby amended, in each case, to read "666." 2. It is understood that of the Shares appearing opposite Steven H. Newman's name on Schedule 1.3 to the Management Stock Purchase Agreement, 31,000 Shares are held by Chemical Bank as custodian for Steven H. Newman - IRA, that the Shares appearing opposite Peter A. Bengelsdorf's name are held by The Bengelsdorf Family Trust, and that of the Shares appearing opposite Russell T. John's name on Schedule 1.3 to the Management Stock Purchase Agreement, 5,466 Shares are held by the Russell and Eileen John Irrevocable Trust. 3. Effectiveness. This Amendment shall be deemed to be effective upon execution of the parties below, as of July 28, 1993. 4. Governing Law. This Amendment shall be governed by and construed in accordance with the laws and in the manner contemplated by the Management Stock Purchase Agreement. IN WITNESS WHEREOF, each party hereto has caused this Amendment to be duly executed on the date referenced above. THE CONTINENTAL CORPORATION By: /s/Wayne Fisher UNDERWRITERS RE HOLDINGS CORP. By: /s/Peter A. Bengelsdorf Name: Peter A. Bengelsdorf Title: Chief Financial Officer UNDERWRITERS RE CORPORATION By: /s/Peter A. Bengelsdorf Name: Peter A. Bengelsdorf Title: Chief Financial Officer MANAGEMENT STOCKHOLDERS /s/Dennis E. Arnold /s/Peter A. Bengelsdorf /s/Mark A. Bennett /s/Theodore A. Blundell /s/Denise A. Coleman /s/Pamela Falzone /s/Todd J. Hess /s/F. Paul Japp /s/Russell T. John /s/Stephen C. Kolakowski /s/Michael J. Kruse /s/Judy Mann /s/Nancy Moore /s/Steven H. Newman /s/M. Bernard Puckett /s/James P. Rapp /s/Edwin Seaman EX-11 18 EXHIBIT 11 THE CONTINENTAL CORPORATION EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS (millions, except share and per share amounts) Column A Column B Column C Column D Preferred Per Common Share Earnings dividends Fully Description (loss) for primary Primary(1) Diluted(2) Year Ended December 31, 1993: Income from Continuing Operations $ 159.7 $ 3.2 $ 2.83 $ 2.86 Income from Discontinued Operations, Net of Income Taxes $ 48.7 $ - $ .88 $ .87 Income before Net Cumulative Effect of Changes in Accounting Principles $ 208.4 $ 3.2 $ 3.71 $ 3.73 Net Cumulative Effect of Changes in Accounting Principles $ 1.6 $ - $ .03 $ .03 Net Income $ 210.0 $ 3.2 $ 3.74 $ 3.76 Weighted Average Shares of Common Stock Outstanding Primary - 55,306,330 Fully Diluted - 55,846,590 Year Ended December 31, 1992: Income from Continuing Operations $ 102.0 $ 3.2 $ 1.80 $ 1.84 Loss from Discontinued Operations, Net of Income Taxe s $ (174.7) $ - $ (3.18) $ (3.15) Loss before Net Cumulative Effect of Changes in Accounting Principles$ (72.7) $ 3.2 $ (1.38) $ (1.31) Net Cumulative Effect of Changes in Accounting Principles $ (11.0) $ - $ (0.20) $ (0.20) Net Loss $ (83.7) $ 3.2 $ (1.58) $ (1.51) Weighted Average Shares of Common Stock Outstanding Primary - 54,898,736 Fully Diluted - 55,486,242 Year Ended December 31, 1991: Income from Continuing Operations $ 110.6 $ 3.2 $ 1.97 $ 2.00 Loss from Discontinued Operations, Net of Income Taxes $ (54.9) $ - $ (1.01) $ (0.99) Income before Extraordinary Item $ 55.7 $ 3.2 $ 0.96 $ 1.01 Net Income $ 56.4 $ 3.2 $ 0.98 $ 1.03 Weighted Average Shares of Common Stock Outstanding Primary - 54,556,987 Fully Diluted - 55,150,556 (1) Per share amounts are computed on the weighted average number of common equivalent shares outstanding during the period. Common equivalent shares in- clude the dilutive effect of stock options and shares which would become iss- uable pursuant to performance awards (See Note 12 of Notes to Consolidated Financial Statements in the 1993 Annual Report to Shareholders). Dividend re- quirements on all preferred shares are deducted from earnings to derive common earnings, upon which primary per share earnings are based. (2) Fully diluted per share amounts are computed on the weighted average number of common equivalent shares outstanding during the period, increased by the as- sumed conversion of all convertible securities as of the beginning of each period. Fully diluted earnings amounts are based on earnings after deduction of preferred dividends on shares which are not convertible, but before deduction of dividends on convertible preferred shares. EX-13 19 EXHIBIT 13 Management's Discussion and Analysis of Financial Condition and Results of Operations Business Operations: Continental's principal business is property and casualty insurance. These Insurance Operations are comprised of three segments: Agency & Brokerage Commercial, Agency & Brokerage Personal and Specialized Commercial. The results of Continental's non-insurance operations, including investment management, claims adjusting and risk management, are reported in the Corporate & Other Operations segment. Insurance Operations generated 97% of 1993 revenues, including 85% from premiums earned and 12% from investment activities (net investment income and realized capital gains). In 1993, Continental sold its premium financing operations; in 1992, Continental instituted a plan to withdraw from the traditional assumed reinsurance and marine reinsurance businesses and the indigenous international and international marine insurance businesses. The results of these operations are now reported as discontinued, and previously reported information has been restated accordingly. Results of Operations - 1993 compared with 1992 Summary: Net income for 1993 included $160 million of income from continuing operations, $48 million of income from discontinued operations and $2 million of income from the cumulative effect of changes in accounting principles. The net result for 1992 included $102 million of income from continuing operations, a $175 million loss from discontinued operations and an $11 million charge for the cumulative effect of changes in accounting principles. Insurance Operations: Insurance Operations contributed 1993 income before income taxes of $219 million, an increase of $19 million from the previous year. Underwriting results improved $177 million while investment results decreased $158 million, including a $112 million decrease in realized capital gains and a $46 million decrease in net investment income. Premiums earned increased $518 million, primarily due to growth in commercial and personal package business and certain specialty commercial lines resulting from both price increases and acceptance of new risks. In addition, 1992 premiums earned were reduced by a $75 million charge, which did not recur in 1993, to reinstate Continental's catastrophe reinsurance coverage following hurricanes Andrew and Iniki. Underwriting results improved $177 million from 1992, primarily due to an $88 million decrease in net catastrophe-related charges and growth in business written without a proportionate increase in operating expenses. Losses and loss expenses increased $252 million, despite a $13 million decrease in net catastrophe losses, primarily due to inflation in loss costs and the increase in the amount of risk accepted. Insurance operating expenses increased $89 million, primarily due to growth in business written and a $32 million decrease in servicing carrier income, which is recorded as a reduction in commission expenses. Underwriting results included pretax net catastrophe-related charges of $153 million, compared with $241 million in 1992. The 1993 net charges included a $44 million loss from the March East Coast blizzard; the 1992 charges included losses of $42 million from Hurricane Andrew, $54 million from Hurricane Iniki and $23 million from the December Northeast storm, together with the $75 million charge to reinstate catastrophe reinsurance coverage. The insurance segments' premiums earned and underwriting results for the past two years ended December 31 were as follows: (millions) Premiums Earned Underwriting Results INSURANCE SEGMENT* 1993 1992 1993 1992 Agency & Brokerage Commercial $2,121 $1,920 $ (235) $ (281) Agency & Brokerage Personal 862 777 (78) (127) Specialized Commercial 1,433 1,201 (92) (174) Total Insurance Operations $4,416 $3,898 $(405) $(582) * Distinct investment portfolios are not maintained for individual insurance segments; accordingly, Insurance Operations' investment results are explained in aggregate on the following page. The Agency & Brokerage Commercial segment's premiums earned increased $201 million from 1992. Commercial package premiums earned increased $132 million due to both price increases and acceptance of new risks. Workers' compensation premiums earned increased $20 million due to price increases substantially offset by deliberate reductions in the amount of risk accepted. In addition, the segment's 1992 premiums earned were reduced by a $39 million charge, which did not recur in 1993, to reinstate catastrophere insurance coverage. The segment's underwriting results improved $46 million from 1992, primarily due to a $20 million decrease in net catastrophe-related charges and growth in business written without a proportionate increase in operating expenses. Losses and loss expenses increased $102 million, primarily due to inflation in loss costs, the increase in the amount of risk accepted and a $19 million increase in net catastrophe losses. Insurance operating expenses increased $53 million, primarily due to growth in business written and a $32 million decrease in servicing carrier income. The Agency & Brokerage Personal segment's premiums earned increased $85 million from 1992. Personal package premiums earned increased $30 million due to price increases, despite a small reduction in the amount of risk accepted. Monoline automobile premiums earned increased $39 million due to an increase in assignments from involuntary risk pools, primarily from New Jersey. In addition, the segment's 1992 premiums earned were reduced by a $25 million charge, which did not recur in 1993, to reinstate catastrophe reinsurance coverage. The segment's underwriting results improved $49 million from 1992, primarily due to a $50 million decrease in net catastrophe-related charges. Losses and loss expenses increased $44 million, despite a $25 million decrease in net catastrophe losses, primarily due to inflation in loss costs and an increase in losses from involuntary risk pools resulting from the increase in assignments. Insurance operating expenses improved $8 million, primarily resulting from cost reductions implemented in 1991. The Specialized Commercial segment's premiums earned increased $232 million from 1992 due to both price increases and acceptance of new risks. Premiums earned increased $51 million in domestic marine, $49 million in workers' compensation in selected markets, $49 million in customized financial coverages, $41 million in specialty casualty and $25 million in fidelity and surety insurance. In addition, the segment's 1992 premiums earned were reduced by an $11 million charge, which did not recur in 1993, to reinstate catastrophe reinsurance coverage. The segment's underwriting results improved $82 million from 1992, primarily due to better experience in domestic marine and specialty casualty insurance, an $18 million decrease in net catastrophe-related charges and growth in business written without a proportionate increase in operating expenses. Losses and loss expenses increased $106 million, despite better experience in certain lines and a $7 million decrease in net catastrophe losses, primarily due to inflation in loss costs and the increase in the amount of risk accepted. Insurance operating expenses increased $44 million, primarily due to growth in business written. Net investment income for Insurance Operations was $514 million, down $46 million from 1992. The decrease was primarily due to the reinvestment of proceeds from sales, redemptions and maturities of fixed income securities (short-term investments, fixed maturities investments and nonredeemable preferred stock), which comprise over 88% of Continental's investments, into lower available short-term and intermediate-term yields. Realized capital gains for Insurance Operations were $110 million, compared with $222 million in 1992. In 1992, Continental sold fixed income securities to improve statutory capital after sustaining losses from hurricanes Andrew and Iniki. These sales produced net realized capital gains of $146 million. Other sales of appreciated securities in the fixed income portfolio produced $53 million of net realized capital gains, compared with $43 million in 1992. Sales of appreciated securities in the common stock portfolio produced $57 million of net realized capital gains, compared with $33 million in 1992. Corporate & Other Operations: Corporate & Other Operations generated a $41 million loss before income taxes for 1993, an improvement of $28 million from the previous year, primarily due to higher corporate realized capital gains. Income Taxes: In 1993, Continental recorded federal, foreign, and state and other income tax expenses of $13 million, $4 million and $1 million, respectively. In 1992, Continental recorded federal and state and other income tax expenses of $28 million and $1 million, respectively, but virtually no foreign income tax expense or benefit. The decrease in the federal income tax expense is primarily due to a decrease in the valuation reserve caused by a reversal of temporary differences between reported and tax return income and expense amounts partially offset by increased income (see Income Taxes on page 15). Discontinued Operations: Discontinued premium financing operations had income, net of income taxes, of $51 million, an increase of $33 million from 1992, primarily due to a $36 million after-tax gain on the 1993 sale of these operations. Discontinued insurance operations produced a loss, net of income taxes, of $3 million, an improvement of $191 million from 1992, which included a $133 million after-tax charge in connection with Continental's announced withdrawal from the traditional assumed reinsurance and marine reinsurance businesses, as well as the indigenous international and international marine insurance businesses, all of which had been performing poorly. Results of Operations - 1992 compared with 1991 Summary: The net result for 1992 included $102 million of income from continuing operations, a $175 million loss from discontinued operations and an $11 million charge for the cumulative effect of changes in accounting principles. Net income for 1991 included $111 million of income from continuing operations, a $55 million loss from discontinued operations and $1 million of income from the utilization of net operating loss carryforwards, which was recorded as an extraordinary item. Insurance Operations: Insurance Operations contributed 1992 income before income taxes of $200 million, an increase of $42 million from the previous year. Underwriting results deteriorated $14 million while investment results increased $56 million, including a $107 million increase in realized capital gains and a $51 million decrease in net investment income. Premiums earned increased $26 million, primarily due to growth in certain specialty commercial lines resulting from both price increases and acceptance of new risks. This growth was limited by a $75 million charge to 1992 premiums earned to reinstate Continental's catastrophe reinsurance coverage following hurricanes Andrew and Iniki. Underwriting results deteriorated $14 million from 1991, primarily due to a $146 million increase in net catastrophe-related charges substantially offset by better experience in commercial lines due to reductions in the amount of risk accepted over the past four years. Losses and loss expenses increased $78 million, primarily due to a $71 million increase in net catastrophe losses. Insurance operating expenses decreased $39 million, primarily due to a $17 million increase in servicing carrier income and cost reductions implemented in 1991. The insurance segments' premiums earned and underwriting results for the past two years ended December 31 were as follows: (millions) Premiums Earned Underwriting Results INSURANCE SEGMENT* 1992 1991 1992 1991 Agency & Brokerage Commercial $1,920 $2,018 $(281) $(355) Agency & Brokerage Personal 777 795 (127) (66) Specialized Commercial 1,201 1,059 (174) (147) Total Insurance Operations $3,898 $3,872 $(582) $(568) * Distinct investment portfolios are not maintained for individual insurance segments; accordingly, Insurance Operations' investment results are explained in aggregate below. The Agency & Brokerage Commercial segment's premiums earned decreased $98 million from 1991. The decrease was primarily due to a reduction in the amount of risk accepted and a $39 million charge to reinstate catastrophe reinsurance coverage. The segment's underwriting results improved $74 million from 1991, despite a $73 million increase in net catastrophe-related charges, due to better experience as a result of reductions in the amount of risk accepted over the past four years. Losses and loss expenses improved $127 million, despite a $34 million increase in net catastrophe losses, due to the aforementioned reductions in the amount of risk accepted. Insurance operating expenses decreased $45 million, primarily due to a decrease in business written and a $17 million increase in servicing carrier income. The Agency & Brokerage Personal segment's premiums earned decreased $18 million from 1991. Monoline, or single coverage, premiums earned decreased $19 million due to a reduction in the amount of risk accepted partially offset by price increases, while personal package premiums earned increased $24 million due to price increases. In addition, the segment's 1992 premiums earned were reduced by a $25 million charge to reinstate catastrophe reinsurance coverage. The segment's underwriting results deteriorated $61 million from 1991, primarily due to a $44 million increase in net catastrophe-related charges and poor monoline experience. Losses and loss expenses increased $29 million, primarily due to a $19 million increase in net catastrophe losses. The Specialized Commercial segment's premiums earned increased $142 million from 1991, despite an $11 million charge to reinstate catastrophe reinsurance coverage, due to both price increases and acceptance of new risks. Premiums earned increased $74 million in customized financial coverages, $25 million in domestic marine, $18 million in specialty casualty and $11 million in workers' compensation insurance in selected markets. The segment's underwriting results deteriorated $27 million from 1991, primarily due to a $29 million increase in net catastrophe-related charges. Losses and loss expenses increased $176 million, primarily due to inflation in loss costs, the increase in the amount of risk accepted and an $18 million increase in net catastrophe losses. Insurance operating expenses improved $7 million, primarily due to cost reductions implemented in 1991. Net investment income for Insurance Operations was $560 million, down $51 million from 1991. The decrease was primarily due to the reinvestment of proceeds from sales, redemptions and maturities of fixed income securities into lower available short-term and intermediate-term yields. Realized capital gains for Insurance Operations were $222 million, compared with $115 million in 1991. In 1992, Continental sold fixed income securities to improve statutory capital after sustaining losses from hurricanes Andrew and Iniki. These sales produced net realized capital gains of $146 million. Other sales of appreciated securities in the fixed income portfolio produced $43 million of net realized capital gains, compared with $85 million in 1991. Sales of appreciated securities in the common stock portfolio produced $33 million of net realized capital gains, compared with $30 million in 1991. Corporate & Other Operations: Corporate & Other Operations generated a $69 million loss before income taxes for 1992, an increase of $6 million from the previous year, primarily due to higher interest expenses resulting from an increase in corporate borrowings. Income Taxes: In 1992, Continental recorded federal and state and other income tax expenses of $28 million and $1 million, respectively, but virtually no foreign income tax expense or benefit. In 1991, Continental recorded a federal income tax benefit of $2 million, a foreign income tax benefit of $14 million and state and other income tax expenses of $1 million. The $30 million increase in federal income tax expense is primarily due to the January 1, 1992 adoption of Statement of Financial Accounting Standards (SFAS) No. 109. Under SFAS No. 109, deferred income taxes are calculated under a balance sheet, rather than an income statement, method. Deferred income taxes are based on temporary differences between reported and tax return income and expense amounts and are established according to the tax laws and rates in effect when the taxes become payable rather than those in effect in the current year. The adoption of SFAS No. 109 resulted in a $26 million increase in income tax expense net of a $20 million deferred tax benefit for Alternative Minimum Tax (AMT). No valuation allowance was established against this benefit primarily because Continental had the ability to elect Section 847 of the Internal Revenue Code. Section 847 allows a current tax deduction to reduce current income subject to the AMT, provided a Special Estimated Tax Payment is made and taxable income in a future designated year is recognized. This future taxable income can be offset by future deductions which gave rise to a deferred tax asset and eliminate the need for a valuation allowance against that asset. This would result in a potential recovery of the Special Estimated Tax Payment. The adoption of SFAS No. 109 provided a $178 million cumulative benefit to the 1992 results. The cumulative benefit consists of $704 million of gross deferred tax assets reduced by $386 million of gross deferred tax liabilities and a $140 million valuation allowance as of January 1, 1992. The valuation allowance increased to $159 million at December 31, 1992 due to an increase in the net deferred tax asset not fully realizable. The valuation allowance is based on an estimate of future taxable income derived from historical taxable income for a base five-year period adjusted for nonrecurring items such as the sale of subsidiaries. Based on this estimate, Continental concluded that more likely than not, it will not fully realize the benefit of all temporary differences. The $14 million decrease in foreign tax benefits is primarily due to the utilization of Canadian tax loss carrybacks associated with 1991 losses from Canadian operations. During 1991, Continental increased its net income by $1 million through the utilization of net operating loss carryforwards, which is shown as an extraordinary item in the accompanying Consolidated Statements of Income. Under SFAS No. 109, net operating loss carryforwards are included in the provision for income tax expenses rather than reported as an extraordinary item. Discontinued Operations: Discontinued premium financing operations had income, net of income taxes, of $19 million, a decrease of $3 million from 1991. Discontinued insurance operations produced a loss, net of income taxes, of $194 million, an increase of $117 million from 1991. The increased loss was primarily due to a $133 million after-tax charge in connection with Continental's announced withdrawal from the traditional assumed reinsurance and marine reinsurance businesses, as well as the indigenous international and international marine insurance businesses, all of which had been performing poorly. Other Developments: Economic Issues: Price levels in the property and casualty insurance markets are cyclical and materially affect Continental's underwriting results. Continental's strategy is to write business in those areas in which management believes Continental has a competitive advantage. However, Continental's willingness to write this business is limited by management's belief that prices continue to be inadequate relative to loss costs in some commercial and specialty lines. The property and casualty industry's apparent capacity to provide insurance coverage, at present, substantially exceeds demand for that coverage. The strength in the domestic stock and bond markets over the current pricing cycle is exacerbating the perception of overcapacity by increasing the value of the industry's investments. It is not possible to determine when the insurance markets will permit more adequate pricing or whether current market conditions will continue. Continental will continue its efforts to obtain adequate prices and increase writings in its strategic lines. Premiums, net income and cash flow will improve to the degree that Continental successfully implements its strategy. Inflation generally increases the cost of losses covered by insurance contracts. However, the effect of inflation varies by line of business. Since the overall rate of inflation has been relatively constant and historically normal in recent years, such effects have been less significant than in previous years, except in medical care costs. The medical cost inflation rate, while now generally decreasing in anticipation of enactment of a comprehensive health care reform program, is still higher than the overall inflation rate. Lines of insurance involving medical care costs, such as automobile, workers' compensation and medical malpractice, comprised 42% of Continental's 1993 premiums earned. The method used by Continental to estimate individual case reserves and reserves for unreported claims implicitly considers the effect of inflation in the projection of ultimate costs. Inflation is also an important consideration in the management of Continental's investment portfolio, as changes in interest rates, which reflect expectations of changes in the rate of inflation, are inversely correlated with changes in market prices of fixed maturities investments. In order to mitigate the impact of changes in the rate of inflation on overall results, Continental practices asset/liability management. Accordingly, Continental sets the duration of its fixed maturities portfolio after taking into account the expected duration of its insurance liabilities. Asbestos-Related, Other Toxic Tort and Environmental Pollution Claims: Included in Continental's liability for outstanding losses and loss expenses are gross undiscounted reserves for asbestos-related, other toxic tort and environmental pollution claims of $264 million at December 31, 1993 ($247 million at December 31, 1992). Included in Continental's reinsurance assets are amounts due for asbestos-related, other toxic tort and environmental pollution claims of $105 million at December 31, 1993 ($80 million at December 31, 1992) (see "Reinsurance" discussion on page 20). Included in net losses and loss expenses are charges for asbestos-related, other toxic tort and environmental pollution claims of $56 million, $81 million and $109 million for the years ended December 31, 1993, 1992 and 1991, respectively. Most of Continental's environmental pollution claims result from general liability policies written prior to 1986. Certain provisions of these policies have been subject to wide-ranging challenges by policyholders and/or differing interpretations by courts in various jurisdictions, with inconsistent conclusions as to the applicability of coverage for environmental pollution claims. Asbestos-related claims have generally arisen out of product liability coverage provided by Continental under general liability policies written prior to 1983. Thereafter, asbestos-product exclusions were included in general liability policies. Other toxic tort claims have also generally arisen out of product liability coverage under general liability policies. These claims involve a variety of allegations of bodily injury arising from exposure over a period of time to products alleged to be harmful or toxic. Continental does not establish reserves for unreported asbestos-related, other toxic tort and environmental pollution claims because of significant uncertainties, which do not allow liabilities to be reasonably estimated. Such uncertainties include difficulties in determining the frequency and severity of such potential claims and in predicting the outcome of judicial decisions, as case law evolves regarding liability exposure, insurance coverage and interpretation of policy language. At this time, the future financial impact of unreported asbestos-related, other toxic tort and environmental pollution claims cannot be reasonably estimated, and no assessment can be made with respect to the ultimate impact thereof on Continental's results of operations or financial condition in the future. The actuarial profession is addressing unquantifiable liabilities (e.g., unreported asbestos-related, other toxic tort and environmental pollution claims) and is in the initial stage of developing standards, but has not yet scheduled publication of a discussion draft. Other uncertainties may be clarified through the debate, extension or modification of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 1994. These developments will continue to be monitored and assessed by Continental. Discontinued Operations: In 1993, Continental completed the sale of its premium financing operations, AFCO Credit Corporation, AFCO Acceptance Corporation and Canadian affiliate CAFO Inc., to Mellon Bank Corporation ("Mellon"). Continental realized a $36 million gain from this sale, net of income taxes. In addition, the sale agreement provides for a contingent payment to Continental based on growth in AFCO's premiums financed over the next five years, for a potential maximum payment of up to $78 million. No provision has been made in the accompanying Consolidated Financial Statements for any potential gain from this contingent payment from Mellon. The 1993 results and net assets of these premium financing operations, which were previously reported in the Corporate & Other Operations segment, have been classified in the accompanying Consolidated Financial Statements as discontinued. Previously reported information has been restated accordingly. In 1992, Continental instituted a program to withdraw from the traditional assumed reinsurance and marine reinsurance businesses, as well as the indigenous international and international marine insurance businesses. These businesses had premiums earned of $339 million and $458 million and underwriting losses of $304 million and $196 million in 1992 and 1991, respectively. Continental failed to develop a sustainable competitive advantage in these businesses as evidenced by their poor operating performances. In addition, these businesses had subjected Continental to unmanageable concentrations of exposures to catastrophes. For example, $28 million of Continental's $70 million total net loss from Hurricane Andrew arose from reinsurance operations. As a result, Continental withdrew from these businesses to further concentrate Insurance Operations in their areas of competitive strength. Continental has been accomplishing this withdrawal by running off the insurance reserves of certain of these operations and selling the remaining operations, including Unionamerica Insurance Company, Limited, which was sold in 1993. The results and net assets of the aforementioned operations have been classified in the accompanying Consolidated Financial Statements as discontinued. Previously reported information has been restated accordingly. New Accounting Pronouncements: Effective January 1, 1993, Continental adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires it to accrue for certain postemployment benefits such as salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits, job training and continuation of health care and life insurance coverage. The cumulative change to Continental's results from this adoption was a net charge of $4 million. Effective January 1, 1993, Continental also adopted Emerging Issues Task Force issue No. 93-6, "Accounting for Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises," which requires that charges or benefits from retrospective rating provisions under multi-year contracts be accrued in the period that they are incurred or paid. The cumulative change to Continental's results from this adoption was a net benefit of $6 million. In addition, effective January 1, 1993, Continental adopted SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," which requires that reinsurance receivables and prepaid reinsurance premiums be reported as assets rather than being netted against outstanding losses and loss expenses and unearned premiums on the Consolidated Balance Sheets. SFAS No. 113 also requires that contracts with reinsurers which do not involve a transfer of risk be classified as deposits rather than reinsurance and that funds associated with these contracts be recorded as deposit liabilities rather than as premiums earned. Its adoption did not have a material effect on Continental's financial results. Effective December 31, 1993, Continental adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires debt securities that management intends and has the ability to hold until maturity be reported at amortized cost, debt and equity securities bought principally for the purpose of short-term trading be reported at fair trade value with unrealized gains and losses included in earnings and all other debt and equity securities be reported at fair value with unrealized gains and losses reported as a separate component of shareholders' equity. This SFAS did not change the way Continental accounts for investments or have a material impact on its financial results. Effective January 1, 1992, Continental adopted SFAS No. 109, "Accounting for Income Taxes," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The cumulative change to Continental's results from these adoptions was a net charge of $11 million (see Note 2 of Notes to Consolidated Financial Statements). Financial Resources and Liquidity Cash Flow Analysis: Operating activities for 1993 provided $335 million in cash and cash equivalents, whereas operating activities for 1992 used cash and cash equivalents of $68 million. The principal causes for the increase in cash provided by operations were a $373 million increase in premiums collected and a $74 million decrease in losses and loss expenses paid, partially offset by a $16 million increase in underwriting expenses paid and a $12 million decrease in investment income received. Investing activities for 1993 used $408 million in cash and cash equivalents, whereas investing activities for 1992 used $58 million in cash and cash equivalents. Increases in investments are reported as uses of cash and cash equivalents, and proceeds from sales, redemptions and maturities of investments are reported as provisions of cash and cash equivalents. The increase in cash used by investing activities is primarily due to higher 1993 net purchases of securities as a result of increased cash provided by operating activities. Financing activities for 1993 used $264 million in cash and cash equivalents, whereas financing activities for 1992 provided cash and cash equivalents of $48 million. Increases in borrowings are reported as provisions of cash and cash equivalents, while decreases in borrowings and payments of dividends are reported as uses of cash and cash equivalents. The increase in cash used by financing activities is primarily due to the retirement in July 1993 of $282 million of 93/8% Notes which were due July 1, 1993, and a $50 million reduction in corporate short-term borrowings during 1993. These uses of cash were partially offset by the March 1993 issuance of $150 million of 7.25% Notes due March 1, 2003, which provided $148 million in cash net of offering and underwriting costs. In addition, dividends paid to shareholders amounted to $59 million in 1993, a decrease of $64 million from 1992. As a result of the operating, investing and financing activities described above, cash and cash equivalents used in continuing operations increased $259 million from December 31, 1992. In addition, discontinued operations provided $284 million in cash and cash equivalents for 1993, an increase of $262 million from 1992, primarily due to the sales of the premium financing operations and Unionamerica Insurance Company, Limited. Liquidity: To meet its cash obligations, including claims payments, operating expenses, interest and principal payments on debt, declared shareholder dividends and taxes, Continental holds cash reserves, short-term money market instruments and other fixed income securities with maturities of less than one year. In 1992 and 1993, Continental sold a total of $350 million of Notes (which provided $346 million in cash, net of offering and underwriting costs) under its shelf registration of up to $400 million of debt securities with the Securities and Exchange Commission. During 1993, Continental used $282 million of net proceeds from these sales to retire its outstanding 93/8% Notes due July 1, 1993 and $50 million of net proceeds from these sales to reduce corporate short-term borrowings. Continental intends to sell an additional $50 million of debt securities under its existing shelf registration and to register for the sale of up to an additional $100 million of debt securities. It plans to use the net proceeds from these sales to further reduce its short-term borrowings. During 1993, Continental's insurance subsidiaries paid it $120 million in dividends. Recently, several states in which these insurance subsidiaries are domiciled enacted more stringent dividend restrictions based on percentages of surplus and net income from operations. These restrictions will, under certain circumstances, significantly reduce the maximum amount of dividends and other distributions payable to Continental by its subsidiaries without approval by state regulatory authorities. To the extent that its insurance subsidiaries do not generate amounts available for distribution sufficient to meet Continental's cash requirements without regulatory approval, Continental would seek approval for additional distributions. Under the restrictions currently in effect, the maximum amount available for payment of dividends to Continental by its insurance subsidiaries during the year ending December 31, 1994 without regulatory approval is estimated to be $304 million (see Note 10 of Notes to Consolidated Financial Statements). Continental anticipates that dividends from its insurance subsidiaries, together with cash from other sources, will enable it to meet its obligations for interest and principal payments on debt, corporate expenses, declared shareholder dividends and taxes in 1994. The National Association of Insurance Commissioners (NAIC), which is not itself a regulatory authority but makes recommendations to and takes other actions affecting state regulatory authorities, adopted a Risk-Based Capital (RBC) standard in the fourth quarter of 1993 for use by state insurance regulators. RBC is intended to be a "tool" for regulators to assess the capital adequacy of property and casualty insurers and to take action when capital under the standard is judged to be inadequate. The NAIC developed a model law which can be adopted on a state-by-state basis and may be applied, if adopted by the relevant state regulatory authorities, to Continental's 1994 statutory financial statements. Based upon the RBC standards developed by the NAIC as applied to its 1993 statutory financial statements,Continental believes that its insurance subsidiaries have sufficient levels of capital for their respective operations. In 1993, Continental entered into a revolving credit facility, providing for borrowings of up to $150 million from a syndicate of banks. Funds borrowed through the facility may be used for general corporate purposes, but Continental intends to use the facility primarily as an alternative to existing sources of short-term borrowings. At December 31, 1993,Continental had not borrowed any funds through the facility. Commitment fees associated with this facility are not significant, nor does this facility require compensating balance arrangements with the lenders. Investments: Fixed maturities available-for-sale consist of certain bonds and redeemable preferred stocks that management may not hold until maturity and which have an average Standard & Poor's rating of AA+ (or its Moody's equivalent). Continental's fixed maturities available for sale had a balance sheet fair value of $6,916 million at December 31, 1993 (compared with a fair value of $6,240 million at December 31, 1992) and included mortgage-backed securities with a fair value of $1,270 million and an amortized cost of $1,255 million at December 31, 1993 (compared with a fair value of $1,338 million and an amortized cost of $1,300 million at December 31, 1992). Continental's mortgage-backed securities have an average Standard & Poor's rating of AAA (or its Moody's equivalent) and an average life of 6.0 years. Continental has an insignificant investment in collateralized mortgage obligations which put the return of principal at risk if interest rates or prepayment patterns fluctuate. At December 31, 1993, the fixed maturities portfolio included an insignificant amount of securities, the fair value of which is expected to be lower than their carrying value for more than a temporary period; such investments have been recorded in the accompanying Consolidated Balance Sheets at their net realizable value. Continental also maintains an equity securities portfolio, the fair value of which was $759 million at December 31, 1993. At December 31, 1993, Continental also had a $112 million investment in privately placed direct mortgages, which are included in the balance sheet caption "Other Long-Term Investments." The NAIC is currently developing an Investments of Insurers Model Act, which would, if adopted by state regulatory authorities, establish uniform limitations upon the type and amounts of investments insurers may hold. Based upon the current proposals of this Model Act, which are subject to review and change, Continental does not believe a uniform standard would significantly affect the current investment mix or operations of its insurance subsidiaries. Unrealized appreciation on investments available-for-sale increased $170 million, before income taxes, from December 31, 1992. Unrealized appreciation on fixed maturities increased $152 million. Unrealized appreciation on common stocks decreased $1 million, while unrealized appreciation on nonredeemable preferred stocks increased $11 million. Unrealized appreciation on other long-term assets increased $8 million. In addition, unrealized appreciation on investments held by discontinued operations increased $15 million, before income taxes, from December 31, 1992. Continental's book value per share at December 31, 1993 was $39.40, compared with $34.73 at year-end 1992. Reinsurance: In the ordinary course of business, Continental cedes business to other insurers and reinsurers. Purchasing reinsurance enables Continental to limit its exposure to catastrophic events and other concentrations of risk. However, purchasing reinsurance does not relieve Continental of its obligations to its insureds. Continental reviews the creditworthiness of its reinsurers on an ongoing basis. To minimize potential problems, Continental's policy is to purchase reinsurance only from carriers who meet its credit quality standards. It has also taken and is continuing to take steps to settle existing reinsurance arrangements with reinsurers who do not meet its credit quality standards. Continental does not believe that there is a significant solvency risk concerning its reinsurance claims. In addition, Continental regularly evaluates the adequacy of its reserves for uncollectible reinsurance. Continental believes that it makes adequate provisions for the ultimate collectibility of its reinsurance claims and therefore believes these net recoveries to be probable. Continental has in place various reinsurance arrangements with respect to its current operations. These arrangements are subject to retentions, coverage limits and other policy terms. Some of the principal treaty arrangements which are presently in effect are an excess of loss treaty reducing Continental's liability on individual property losses, a blanket casualty program reducing Continental's liability on third party liability losses, a clash casualty program reducing Continental's liability on multiple insured/single event losses, and a property catastrophe program, with a net retention of $50 million in 1993, increased from $20 million in 1992, reducing its liability from catastrophic events. Continental also uses individual risk facultative and other facultative agreements to further reduce its liabilities. Continental also has in place, for future potential adverse reserve development, an aggregate excess of loss reinsurance contract with a full limit of $400 million, which covers substantially all domestic losses and loss expenses for 1991 and prior policy years. Sale of Premiums Receivable: In December 1993, Continental sold $513 million of premiums receivable balances. Cash received from this sale is net of transaction costs. As a result, the balance sheet caption "Premiums Receivable" is lower by $513 million at December 31, 1993 than it otherwise would have been. This sale accelerated the cash flow from the sold receivables, increasing cash provided by operations in 1993 by $491 million, whereas a similar sale in 1992 reduced 1993 cash provided by operations by $528 million. The 1993 sale of receivables will decrease cash provided by operations in 1994. In the event that the receivables are not collected, Continental's credit risk will be limited to the amount that the purchasers of these receivables hold as a deposit ($15 million at December 31, 1993). Subsequent Events: Losses from the snow and ice storms occurring in the East and Midwest during January are estimated to be about $43 million pretax. Continental also estimates its pretax losses from the California earthquake at about $30 million. These losses are net of reinsurance and will be included in Continental's first quarter results. Report on Financial Statements The accompanying Consolidated Financial Statements were prepared by Continental, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles, appropriate in the circumstances, and necessarily include some amounts that are based on Continental's best estimates and judgments. The financial information contained elsewhere in the Annual Report is consistent with that in the Consolidated Financial Statements. Continental maintains an effective system of internal accounting controls through established policies and procedures including a code of conduct. Such controls are designed to provide reasonable assurance that assets are safeguarded against loss or unauthorized use and that the processes of accumulating and developing financial records are reliable for use in preparing financial statements and maintaining accountability of assets. The concept of reasonable assurance is based on the recognition that the cost of a system of internal control must not exceed the related benefits and that the possibility of human error or circumvention or override of controls exists. The system is continuously reviewed through an extensive program undertaken by a team of internal auditors. Continental's Consolidated Financial Statements have been audited by KPMG Peat Marwick, independent auditors, whose audits were made in accordance with generally accepted auditing standards and included a consideration of the internal accounting controls to the extent necessary to opine on the fairness of the Consolidated Financial Statements. The Audit Committee of the Board of Directors, comprised solely of directors from outside Continental, meets regularly with financial management, the independent auditors and the internal auditors to review the work and procedures of each. The independent auditors and the internal auditors have free access to the Audit Committee, without the presence of management, to discuss the results of their work and their consideration of Continental's internal accounting controls and the quality of Continental's financial reporting. The Board of Directors, upon the recommendation of the Audit Committee, appoints the independent auditors, subject to shareholder approval. /s/ John P. Mascotte Chairman and Chief Executive Officer /s/ J. Heath Fitzsimmons Senior Vice President and Chief Financial Officer February 10, 1994 Consolidated Statements of Income Year Ended December 31 (millions, except share and per share amounts) Revenues: 1993 1992 1991 Premiums $4,416.1 $ 3,898.0 $3,872.5 Net Investment Income 542.3 589.9 637.2 Realized Capital Gains 124.5 215.6 111.2 Other Revenues 90.8 93.5 100.1 Total Revenues 5,173.7 4,797.0 4,721.0 Expenses: Losses and Loss Expenses 3,414.1 3,161.6 3,083.0 Insurance Operating Expenses 1,407.4 1,318.0 1,357.1 Other Expenses 125.7 137.2 141.6 Interest on Corporate Borrowings 48.6 49.5 43.8 Total Expenses 4,995.8 4,666.3 4,625.5 Income from Continuing Operations before Income Taxes 177.9 130.7 95.5 Income Taxes (Benefits): Current 20.6 50.6 (16.4) Deferred (2.4) (21.9) 1.3 Total Income Taxes (Benefits) 18.2 28.7 (15.1) Income from Continuing Operations 159.7 102.0 110.6 Income (Loss) from Discontinued Operations, Net of Income Taxes 12.7 (161.7) (54.9) Gain (Loss) on Disposal of Discontinued Operations, Net of Income Taxes 36.0 (13.0) - Total Income (Loss) from Discontinued Operations, Net of Income Taxes 48.7 (174.7) (54.9) Income (Loss) before Extraordinary Item and Net Cumulative Effect of Changes in Accounting Principles 208.4 (72.7) 55.7 Extraordinary Item - Utilization of Net Operating Loss Carryforwards - - 0.7 Net Cumulative Effect of Changes in Accounting Principles 1.6 (11.0) - Net Income (Loss) $210.0 $(83.7) $56.4 Net Income (Loss) Available to Common Shareholders $206.8 $(86.9) $53.2 Per Common Share: Income from Continuing Operations $2.83 $ 1.80 $1.97 Income (Loss) from Discontinued Operations, Net of Income Taxes 0.23 (2.94) (1.01) Gain (Loss) on Disposal of Discontinued Operations, Net of Income Taxes 0.65 (0.24) - Total Income (Loss) from Discontinued Operations, Net of Income Taxes 0.88 (3.18) (1.01) Income (Loss) before Extraordinary Item and Net Cumulative Effect of Changes in Accounting Principles 3.71 (1.38) 0.96 Net Cumulative Effect of Changes in Accounting Principles 0.03 (0.20) - Net Income (Loss) $ 3.74 $(1.58) $0.98 Weighted Average Shares of Common Stock Outstanding 55,306,330 54,898,736 54,556,987 See Notes to Consolidated Financial Statements. Consolidated Balance Sheets December 31 (Millions, except par values and share amounts) 1993 1992 ASSETS: Fixed Maturities Held-to-Maturity at Amortized Cost (Market $0.0; 1992 - $383.7) $ - $354.5 Fixed Maturities Available-for-Sale at Fair Value (Amortized Cost $6,615.9;1992 - $6,091.9) 6,916.4 6,240.1 Equity Securities Available-for-Sale at Fair Value (Cost $600.0; 1992 - $759.7) 759.1 908.8 Other Long-Term Investments at Fair Value (Cost $387.9; 1992 - $340.2) 395.9 340.2 Other Short-Term Investments 1,071.0 647.9 Total Investments 9,142.4 8,491.5 Cash and Cash Equivalents 58.5 111.5 Premiums Receivable 1,021.0 947.0 Accrued Interest and Dividends 160.7 124.6 Reinsurance Receivables 3,152.9 3,259.7 Prepaid Reinsurance Premiums 321.5 339.8 Reinsurance Recoverable 329.0 387.1 Deferred Policy Acquisition Costs 494.0 467.5 Property and Equipment, Net 463.5 450.2 Deferred Tax Asset 41.7 98.9 Other Assets 950.8 585.6 Net Assets of Discontinued Operations 84.6 310.5 Total Assets $16,220.6 $15,573.9 LIABILITIES: Outstanding Losses and Loss Expenses $9,068.7 $9,066.2 Unearned Premiums 2,409.7 2,306.2 Short-Term Debt 229.1 567.7 Long-Term Debt 774.4 624.1 Accounts Payable and Accrued Expenses 107.9 96.4 Accrued Employee Benefits 308.3 280.9 Other Liabilities 1,139.4 701.3 Total Liabilities 14,037.5 13,642.8 Commitments and Contingencies - - Redeemable Preferred Stocks at Redemption Value - 20.5 SHAREHOLDERS' EQUITY: Preferred Stock - $4 Par Value 0.3 0.3 Common Stock - $1 Par Value 65.7 65.7 Authorized Shares: 100,000,000 Issued Shares: 65,720,419; 1992 - 65,716,409 Outstanding Shares: 55,331,060; 1992 - 54,925,639 Paid-in Capital 613.2 616.2 Retained Earnings 1,612.5 1,461.9 Net Unrealized Appreciation of Investments 322.1 202.0 Cumulative Foreign Currency Translation Adjustment (61.1) (52.4) Common Stock in Treasury at Cost (10,389,359 shares;1992 - 10,790,770 shares) (369.6) (383.1) Total Shareholders' Equity 2,183.1 1,910.6 Total Liabilities, Commitments and Contingencies, Redeemable Preferred Stocks and Shareholders' Equity $16,220.6 $15,573.9 See Notes to Consolidated Financial Statements. Consolidated Statements of Cash Flows Year Ended December 31 (millions) 1993 1992 1991 Cash Flows from Operating Activities: Income from Continuing Operations $ 159.7 $ 102.0 $ 110.6 Adjustments to Reconcile Net Income to Net Cash Provided from (Used in) Continuing Operating Activities: Realized Capital Gains (124.5) (215.6) (111.2) Outstanding Losses and Loss Expenses 2.5 331.3 907.1 Unearned Premiums 103.5 144.4 85.5 Premiums Receivable (74.0) 72.4 94.6 Reinsurance Receivables 106.8 (426.7) (968.3) Prepaid Reinsurance Premiums 18.3 (23.5) (50.5) Reinsurance Recoverable 58.1 (63.5) 38.8 Depreciation and Amortization 38.8 38.0 46.5 Other - Net 45.9 (26.7) (27.9) Net Cash Provided from (Used in) Continuing Operating Activities 335.1 (67.9) 125.2 Net Cash Provided from (Used in) Discontinued Operations 284.0 21.6 (28.8) 619.1 (46.3) 96.4 Cash Flows from Investing Activities: Net Purchase of Property and Equipment (52.1) (2.9) (28.6) Cost of Investments Purchased (6,126.2)(7,168.5)(7,054.3) Proceeds from Investments Sold 5,430.9 6,751.6 6,784.9 Proceeds from Investments Matured 838.6 607.6 453.5 Net Increase in Long-Term Investments (76.3) (10.9) (34.2) Net Increase in Short-Term Investments (423.1) (257.3) (132.0) Decrease in Net Receivable on Sale of Securities - 22.2 11.7 Net Cash Provided from (Used in) Continuing Investing Activities (408.2) (58.2) 1.0 Cash Flows from Financing Activities: Proceeds from Treasury Shares Sold 10.5 8.0 6.2 Redemption of Redeemable Preferred Stocks (20.5) - - Dividends to Shareholders (59.4) (123.1) (145.5) Increase (Decrease) in Short-Term Debt (56.9) 268.1 60.5 Issuance of Long-Term Debt 150.0 200.0 - Retirement of Debt (281.7) - - Other Decrease in Long-Term Debt (5.9) (304.8) (1.8) Net Cash Provided from (Used in) Continuing Financing Activities (263.9) 48.2 (80.6) Net Increase (Decrease) in Cash and Cash Equivalents (53.0) (56.3) 16.8 Cash and Cash Equivalents at Beginning of Year 111.5 167.8 151.0 Cash and Cash Equivalents at End of Year $ 58.5 $ 111.5 $ 167.8 Supplemental Cash Flow Information: Federal, Foreign and State Taxes Paid (Recovered) $ (0.6) $ 2.7 $ 4.7 Interest Paid $ 105.4 $ 100.6 $ 101.4 See Notes to Consolidated Financial Statements. Consolidated Statements of Shareholders' Equity
Net Cumulative Unrealized Foreign Appreciation Currency Common Total Preferred Common Paid-in Retained of Translation Stock in Shareholders' (Millions) Stock Stock Capital Earnings Investments Adjustment Treasury Equity Balance at December 31, 1990 $ 0.3 $ 65.7 $ 616.1 $1,757.8 $ 49.6 $ (31.4) $(397.2) $ 2,060.9 Net Income 56.4 56.4 Increase in Net Unrealized Appreciation of Investments 110.6 110.6 Increase in Foreign Currency Translation Adjustment 10.4 10.4 Dividends: Preferred (3.2) (3.2) Common (142.3) (142.3) Treasury Stock Sold 0.1 6.1 6.2 Balance at December 31, 1991 $ 0.3 $ 65.7 $ 616.2 $1,668.7 $160.2 $ (21.0) $(391.1) $ 2,099.0 Net Loss (83.7) (83.7) Increase in Net Unrealized Appreciation of Investments 41.8 41.8 Decrease in Foreign Currency Translation Adjustment (31.4) (31.4) Dividends: Preferred (3.2) (3.2) Common (119.9) (119.9) Treasury Stock Sold 8.0 8.0 Balance at December 31, 1992 $ 0.3 $ 65.7 $ 616.2 $1,461.9 $202.0 $ (52.4) $(383.1) $ 1,910.6 Net Income 210.0 210.0 Increase in Net Unrealized Appreciation of Investments 120.1 120.1 Decrease in Foreign Currency Translation Adjustment (8.7) (8.7) Dividends: Preferred (3.2) (3.2) Common (56.2) (56.2) Treasury Stock Sold (3.0) 13.5 10.5 Balance at December 31, 1993 $ 0.3 $ 65.7 $ 613.2 $1,612.5 $322.1 $ (61.1) $(369.6) $ 2,183.1 See Notes to Consolidated Financial Statements. Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Principles of Consolidation: The Consolidated Financial Statements are presented in accordance with generally accepted accounting principles and include the accounts of The Continental Corporation and its majority-owned subsidiaries (collectively, "Continental"). Certain reclassifications, primarily for discontinued operations and the adoption of new accounting pronouncements, have been made to the prior years' financial information to conform to the 1993 presentation. Investments: Fixed maturities held-to-maturity consist of certain bonds presented at amortized cost that management intends and has the ability to hold until maturity. Fixed maturities available-for-sale consist of certain bonds and redeemable preferred stocks, presented at fair value, that management may not hold until maturity. Equity securities available-for-sale are comprised of common stocks and nonredeemable preferred stocks which are reported at fair values. Other investments are comprised of money market instruments, mortgages receivable and certificates of deposit, which are reported at amortized cost; notes receivable, time deposits, federal funds sold and securities purchased under resale agreements, which are reported at cost; venture capital investments, which are reported at lower of cost or fair value; investments in minority affiliates, which are reported under the equity method of accounting; and investments in limited partnerships, which are reported at fair value. These other investments are classified as short term if their maturity date is within one year of the balance sheet date. All investment transactions are recorded on the settlement date. Realized capital gains and losses on the sales of investments are included as a component of revenues, based upon the specific identification method. Provisions for other than temporary impairment of investment carrying values are included in realized capital losses. Unrealized gains and losses on investments reported at fair value, net of related deferred taxes, are reflected in shareholders' equity. At December 31, 1993, Continental did not invest in the securities of any issuer, except securities issued/backed by U.S. or Canadian government agencies, in excess of 10% of total shareholders' equity. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and certain money market funds and other debt issues that have an original maturity of ninety days or less and that are designated as necessary for use by operations. Insurance: Direct, assumed and ceded premiums are reflected as revenues on a pro rata basis over the terms of the policies and include estimates for audit and retrospectively rated policies. Outstanding losses and loss expenses are reported gross of reinsurance and net of estimated amounts recoverable for salvage and subrogation. Outstanding losses and loss expenses are necessarily based upon estimates for all reported claims and all unreported claims incurred except "environmental type" claims (see Note 14). Workers' compensation pension reserves are discounted to present value using an assumed market yield of 7% which is higher than the assumptions used for statutory purposes; the use of this discount rate did not impact income before income taxes in 1993, 1992 and 1991, respectively. Premium Receivable: In December 1993, Continental sold $513.4 million of premiums receivable balances due within the next twelve months ($527.8 million were sold in December 1992). These sales accelerated the cash flow associated with the premiums receivable, increasing cash in the year of the sale and reducing it during the following year, when such receivables would otherwise have been collected. These receivables are sold on a nonrecourse basis by Continental. In the event of nonpayment, Continental's credit risk is limited to the amount that the purchaser of the receivables holds as a deposit ($15.0 million in 1993 and $15.2 million in 1992). Deferred Policy Acquisition Costs: Variable costs that are directly related to the production of business, such as commissions and premium taxes, are deferred and amortized over the period in which the related premiums are earned. Deferred policy acquisition costs are limited to their net realizable value after consideration of investment income on the related premiums. Policy acquisition costs deferred during the year amounted to $1,397.0 million (1992 - $1,319.7 million; 1991 - $1,299.9 million). Deferred policy acquisition costs amortized to income during the year amounted to $1,370.5 million (1992 - $1,282.7 million; 1991 - $1,288.1 million). Property and Equipment: Property and equipment are reported at depreciated cost using the straight-line method over the estimated useful lives of the assets. Property and equipment are recorded net of accumulated depreciation of $218.5 million and $186.5 million at December 31, 1993 and 1992, respectively. Depreciation expense charged to operations amounted to $38.8 million for the year ended December 31, 1993 (1992 - $38.0 million; 1991 - $46.5 million). Income Taxes: Continental adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," retroactive to January 1, 1992. SFAS No. 109 requires a company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company's financial statements or tax returns. Under this method, deferred tax assets and liabilities and the related expenses and benefits are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Foreign subsidiaries are taxed under applicable foreign regulations. In addition, Continental provides for deferred taxes on the net unrealized appreciation of investments that are reported at market value. Earnings per Common Share: Earnings per common share are computed using net income less preferred dividends declared ($3.2 million in 1993, 1992 and 1991, respectively) divided by the weighted average number of common shares and common share equivalents outstanding. Shares issuable under Continental's Long-Term Incentive Plan are considered as common share equivalents in computing earnings per share. There is no significant difference between earnings per share on a primary or fully diluted basis. Note 2: Changes in Accounting Principles Effective January 1, 1993, Continental adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," which affects accounting for certain postemployment benefits such as salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits, job training and continuation of health care and life insurance. Effective January 1, 1993, Continental adopted the Financial Accounting Standards Board's Emerging Issues Task Force Issue No. 93-6, "Accounting for Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises," (EITF 93-6) which affects accounting for certain nontraditional reinsurance contracts, primarily funded cover reinsurance. Effective January 1, 1993, Continental adopted SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," which requires reinsurance receivables and prepaid reinsurance premiums to be reported as assets rather than being netted against outstanding losses and loss expenses and unearned premiums on the accompanying Consolidated Balance Sheets. Outstanding losses and unearned premiums have been reclassified to reflect a gross presentation and are higher than previously presented by $3,152.9 million and $321.5 million, respectively in 1993, and by $3,259.7 million and $339.8 million, respectively in 1992. These increased liabilities were offset by a corresponding increase in the asset captions "Reinsurance Receivables" and "Prepaid Reinsurance Premiums." SFAS No. 113 also requires that contracts with reinsurers which do not involve a transfer of risk be classified as deposits rather than reinsurance and that funds associated with these contracts be recorded as deposit liabilities rather than premiums earned. Effective December 31, 1993, Continental adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This SFAS requires debt securities that management intends and has the ability to hold until maturity be reported at amortized cost, debt and equity securities bought principally for the purpose of short-term trading be reported at fair value with unrealized gains and losses included in earnings and all other debt and equity securities be reported at fair value with unrealized gains and losses reported as a separate component of shareholders' equity. The adoption of SFAS No. 112, EITF 93-6, SFAS No. 113 and SFAS No. 115 did not have a significant impact on the 1993 income before income taxes. Effective January 1, 1992, Continental adopted SFAS No. 109, "Accounting for Income Taxes," and SFAS No.106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The net cumulative effect of changes in accounting principles is comprised of the following: (millions, Except Per Share Amounts) 1993 1992 Net Cumulative Effect of the Change in Accounting for Postemployment Benefits $(3.6) $ _ Net Cumulative Effect of the Change in Accounting for Retrospectively Rated Reinsurance Contracts 5.2 _ Net Cumulative Effect of the Change in Accounting for Income Taxes _ 185.4 Net Cumulative Effect of the Change in Accounting for Postretirement Benefits Other Than Pensions _ (196.4) Net Cumulative Effect of Changes in Accounting Principles $ 1.6 $ (11.0) Per Common Share: 1993 1992 Net Cumulative Effect of the Change in Accounting for Postemployment Benefits $(0.06) $ _ Net Cumulative Effect of the Change in Accounting for Retrospectively Rated Reinsurance Contracts 0.09 _ Net Cumulative Effect of the Change in Accounting for Income Taxes _ 3.37 Net Cumulative Effect of the Change in Accounting for Postretirement Benefits Other Than Pensions _ (3.57) Net Cumulative Effect of Changes in Accounting Principles $ 0.03 $ (0.20) Note 3: Discontinued Operations In 1993, Continental sold its premium financing operations, AFCO Credit Corporation, AFCO Acceptance Corporation and Canadian affiliate CAFO Inc., to Mellon Bank Corporation ("Mellon"). Continental realized a fourth quarter pretax gain from the sale of approximately $45.0 million. Proceeds from the sale approximated $220.0 million, comprised of a $120.0 million dividend from AFCO to Continentaland $100.0 million in cash from Mellon. In addition, the sale agreement provides for a contingent payment to Continental based on AFCO's premium finance growth for the next five years, for a potential maximum payment of up to $78.0 million. No provision has been made in the accompanying Consolidated Financial Statements for any potential gain from this contingent payment from Mellon. In 1992, Continental's management instituted a program to withdraw from traditional assumed reinsurance and marine reinsurance businesses, as well as indigenous international and international marine insurance businesses. Continental has been accomplishing this withdrawal by running off the insurance reserves of certain of these discontinued operations and by selling the remaining operations which included the 1993 sale of Unionamerica Insurance Company, Limited, a United Kingdom insurance subsidiary for $95.0 million in cash and $15.0 million face value of redeemable preferred stock. The results and net assets of these operations are now reported as discontinued. The financial statements reflect the operating results and balance sheet items of the discontinued insurance and premium financing operations separately from continuing operations. Operating results of the discontinued insurance operations were as follows: (MILLIONS) 1993 1992 1991 Total Revenues $ 282.2 $ 549.8 $ 585.1 Total Expenses 285.5 740.0 654.5 Loss before Income Taxes (3.3) (190.2) (69.4) Income Taxes (Benefits) (.7) (9.7) 7.2 Loss on Disposal of Discontinued Insurance Operations, Net of Income Taxes _ (13.0) _ Net Loss from Discontinued Insurance Operations $ (2.6) $(193.5) $ (76.6) Operating results of the discontinued premium financing operations were as follows: (MILLIONS) 1993 1992 1991 Total Revenues $ 92.4 $ 103.0 $ 119.3 Total Expenses 75.4 79.5 92.2 Income before Income Taxes 17.0 23.5 27.1 Income Taxes 1.7 4.7 5.4 Gain on Disposal of Discontinued Premium Financing Operations, Net of Income Taxes 36.0 _ _ Net Income from Discontinued Premium Financing Operations $ 51.3 $ 18.8 $ 21.7 Net assets of discontinued insurance operations at December 31 were as follows: (millions) 1993 1992 Assets Cash and Investments $1,166.5 $1,461.0 Other Assets 528.4 924.3 1,694.9 2,385.3 Liabilities Outstanding Losses and Loss Expenses 1,346.0 2,022.2 Unearned Premiums 3.0 91.1 Other Liabilities 261.3 128.8 1,610.3 2,242.1 Net Assets $ 84.6 $143.2 Net assets of discontinued premium financing operations at December 31 were as follows: (millions) 1993 1992 Assets Premium Financing Loans Receivable $ - $1,083.3 Other Assets - 32.9 - 1,116.2 Liabilities Short-Term Debt - 873.5 Long-Term Debt - 26.5 Other Liabilities - 48.9 - 948.9 Net Assets $ - $ 167.3 Note 4: Investments Fixed Maturities Held-to-Maturity: The amortized cost and estimated market values of the fixed maturities held-to-maturity portfolio at December 31, 1992 are as follows: 1992 Gross Gross Amortized Unrealized Unrealized Market (millions) Cost Appreciation Depreciation Value Tax-Exempt Securities $ 354.5 $ 30.6 $ 1.4 $ 383.7 In 1993, Continental reclassified the balance of fixed maturities held-to-maturity to fixed maturities available-for-sale because management may not hold these securities until maturity. Proceeds from sales (1992 and 1991 only), calls and maturities of investments from fixed maturities held-to-maturity during 1993 were $72.9 million (1992 - $3,582.4 million, 1991 - $3,861.2 million). Gross gains of $4.6 million (1992 - $138.4 million, 1991 - $73.5 million) and gross losses of $0.2 million (1992 - $22 1991 - $11.6 million) were realized on those transactions. The amortized cost and estimated market value of the fixed maturities available-for-sale at December 31, 1993, by contractual maturity date are shown in the following table. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Market (millions) Cost Value Due in One Year or Less $ 449.1 $ 449.3 Due after One Year through Five Years 2,401.9 2,499.1 Due after Five Years through Ten Years 1,104.9 1,192.7 Due after Ten Years 2,660.0 2,775.3 $ 6,615.9 $6,916.4 Fixed Maturities Available-for-Sale and Equity Securities Available-for-Sale: The amortized cost and estimated market values of the fixed maturities available-for-sale and equity securities available-for-sale portfolios at December 31 are as follows: 1993 GROSS GROSS NET AMORTIZED UNREALIZED UNREALIZED UNREALIZED MARKET (MILLIONS) COST APPRECIATION DEPRECIATION APPRECIATION VALUE Fixed Maturities Available-for-Sale: U.S. Treasury Securities $ 1,647.9 $ 63.7 $ 5.1 $ 58.6 $ 1,706.5 U.S. Agency Securities 25.3 2.0 0.2 1.8 27.1 Tax-Exempt Securities 1,325.2 95.1 1.7 93.4 1,418.6 Canadian Government, Provincial and Municipal Securities 518.0 41.2 0.2 41.0 559.0 Other International Securities 646.8 44.4 1.3 43.1 689.9 Corporate Securities 1,148.7 53.5 9.1 44.4 1,193.1 Mortgage-Backed Securities 1,255.1 21.6 6.4 15.2 1,270.3 Redeemable Preferred Stocks 48.9 3.0 _ 3.0 51.9 6,615.9 324.5 24.0 300.5 6,916.4 Equity Securities Available-for-Sale: Common Stocks 500.8 166.1 13.2 152.9 653.7 Nonredeemable Preferred Stocks 99.2 6.6 0.4 6.2 105.4 $ 600.0 $ 172.7 $13.6 $ 159.1 $ 759.1 Unrealized Appreciation on Fixed Maturities and Equity Securities Available-for-Sale 459.6 Unrealized Appreciation on Other Long-Term Investments 8.0 Unrealized Appreciation 467.6 Less: Deferred Taxes (Net of $4.5 Million in Tax Rate Change) (160.6) Discontinued Operations (Net of $8.1 Million Deferred Taxes) 15.1 Net Unrealized Appreciation of Investments $ 322.1 1992 GROSS GROSS NET AMORTIZED UNREALIZED UNREALIZED UNREALIZED MARKET (MILLIONS) COST APPRECIATION DEPRECIATION APPRECIATION VALUE Fixed Maturities Available-for-Sale: U.S. Treasury Securities $1,432.6 $ 28.0 $ 7.3 $ 20.7 $1,453.3 U.S. Agency Securities 46.0 1.1 0.4 0.7 46.7 Tax-Exempt Securities 724.8 40.1 1.3 38.8 763.6 Canadian Government, Provincial and Municipal Securities 476.7 12.9 2.4 10.5 487.2 Other International Securities 743.5 31.1 7.1 24.0 767.5 Corporate Securities 1,313.0 32.3 18.6 13.7 1,326.7 Mortgage-Backed Securities 1,299.7 41.1 3.3 37.8 1,337.5 Redeemable Preferred Stocks 55.6 2.1 0.1 2.0 57.6 6,091.9 188.7 40.5 148.2 6,240.1 Equity Securities Available-for-Sale: Common Stocks 583.6 167.6 13.3 154.3 737.9 Nonredeemable Preferred Stocks 176.1 11.5 16.7 (5.2) 170.9 $ 759.7 $179.1 $30.0 $149.1 908.8 Unrealized Appreciation 297.3 Less: Deferred Taxes (101.0) Discontinued Operations (Net of $2.8 Million Deferred Taxes) 5.7 Net Unrealized Appreciation of Investments $202.0 Financial instruments with off-balance-sheet risk and their associated contractor notional amounts as of December 31, 1993 and 1992 are foreign currency exchange contracts of $0.0 million and $48.1 million, interest rate swaps of $208.0 million and $31.2 million, currency-linked medium-term notes of $5.0 million and $58.2 million, and futures contracts of $123.0 million and $0.0 million, respectively. Continental does not participate in these types of financial instruments as an intermediary and, therefore, believes it limits its credit risk of nonperformance by any counterparty to an insignificant amount. Continental has established a securities lending program. At December 31, 1993 and 1992 the estimated fair value of securities on loan was $275.8 million and $314.1 million, respectively. The company requires in return for the securities a minimum collateral of 105% of the fair value of loaned securities. Continental manages its investments to limit credit risk by diversifying its portfolio among various security types and industry sectors. The credit risk of financial instruments is controlled through credit approvals, limits and monitoring procedures. Management believes that significant concentrations of credit risk do not exist. Included in other liabilities at December 31, 1993 are obligations under reverse repurchase and dollar reverse repurchase agreements aggregating $188.1 million ($39.7 million in 1992). Note 5: Net Investment Income and Realized Capital Gains (Losses) Net investment income by source for the year ended December 31 is as follows: (MILLIONS) 1993 1992 1991 Fixed Maturities Held-to-Maturity $ 17.2 $ 326.1 $ 440.1 Fixed Maturities Available-for-Sale 465.5 202.9 118.3 Equity Securities Available-for-Sale: Common Stocks 17.5 18.4 23.2 Nonredeemable Preferred Stocks 10.0 16.4 20.3 Minority Affiliates* 10.1 11.7 11.9 Other Long-Term Investments 22.6 20.6 24.2 Other Short-Term Investments 34.5 26.8 49.6 Investment Income 577.4 622.9 687.6 Less: Applicable Expenses 35.1 33.0 50.4 Net Investment Income $ 542.3 $ 589.9 $ 637.2 *Earnings in minority affiliates are shown net of taxes accrued by such affiliates. Dividends paid by minority affiliates aggregated $0.0 million in 1993 (1992 - $1.0 million; 1991 - $0.6 million). Set forth below are summaries of realized capital gains (losses) for the year ended December 31: (MILLIONS) 1993 1992 1991 Fixed Maturities Held-to-Maturity $ 4.4 $ 115.6 $ 61.9 Fixed Maturities Available-for-Sale 87.8 69.6 31.0 Equity Securities Available-for-Sale 59.9 34.5 47.9 Gains on Sales of Subsidiaries 1.0 _ 0.4 Other (28.6) (4.1) (30.0) Realized Capital Gains $ 124.5 $ 215.6 $ 111.2 Note 6: Reinsurance In the ordinary course of business, Continental cedes business to other insurers and reinsurers. Purchasing reinsurance enables Continental to limit its exposure to catastrophic events and other concentrations of risk. However, purchasing reinsurance does not relieve Continental of its obligations to its insureds. Continental assumes business from other reinsurance organizations, primarily through its participation in voluntary and involuntary risk-sharing pools. Premiums written, premiums earned and losses and loss expenses information by direct, assumed and ceded for the year ended December 31 is as follows: Premiums Written (MILLIONS) 1993 1992 1991 Direct Business $ 5,199.7 $ 4,774.7 $ 4,595.2 Reinsurance Assumed 533.7 601.8 547.8 Reinsurance Ceded 1,195.6 1,357.5 1,237.1 Premiums Written $ 4,537.8 $ 4,019.0 $ 3,905.9 Premiums (MILLIONS) 1993 1992 1991 Direct Business $ 5,125.8 $ 4,764.3 $ 4,665.3 Reinsurance Assumed 504.2 467.7 358.8 Reinsurance Ceded 1,213.9 1,334.0 1,151.6 Premiums Earned $ 4,416.1 $ 3,898.0 $ 3,872.5 Losses and Loss Expenses (MILLIONS) 1993 1992 1991 Direct Business $ 3,590.8 $ 3,924.7 $ 3,839.2 Reinsurance Assumed 686.1 899.4 426.8 Reinsurance Ceded 862.8 1,662.5 1,183.0 Losses and Loss Expenses $ 3,414.1 $ 3,161.6 $ 3,083.0 Continental conducts systematic reviews of the financial condition of its reinsurers because a critical element of reinsurance is their financial stability. As a result of these reviews, Continental reevaluates its position with these companies with respect to both existing and future reinsurance. During 1993, Continental charged $15.0 million to earnings for uncollectible reinsurance ($41.0 million in 1992; $31.4 million in 1991). Continental has in place various reinsurance arrangements with respect to its current operations. These arrangements are subject to retentions, coverage limits and other policy terms. Some of the principal treaty arrangements which are presently in effect are an excess of loss treaty reducing Continental's liability on individual property losses, a blanket casualty program reducing Continental's liability on third party liability losses, a clash casualty program reducing Continental's liability on multiple insured/single event losses and a property catastrophe program with a net retention of $50.0 million in 1993, increased from $20.0 million in 1992, reducing its liability from catastrophic events. Continental also uses individual risk facultative and other facultative agreements to further reduce its liabilities. Continental also has in place, for future potential adverse reserve development, an aggregate excess of loss reinsurance contract with a full limit of $400.0 million. This contract was purchased from National Indemnity Insurance Company. It covers losses and allocated loss expenses for 1991 and prior policy years. The business covered includes all lines of business written by Continental's domestic property and casualty insurance subsidiaries with specific exclusions for nuclear exposure, war risks and business written through the Workers' Compensation Reinsurance Bureau and involuntary market pools, insolvency and guarantee fund assessments, taxes, unallocated loss adjustment expenses and extra contractual obligations. Note 7: Debt Short-term and long-term debt consisted of the following at December 31: At Book Value At Market Value (MILLIONS) 1993 1992 1993 1992 Short-Term Notes Payable $ 225.1 $ 282.3 $ 225.1 $ 282.3 Current Portion of Long-Term Debt 4.0 285.4 4.0 285.4 Total Short-Term Debt $ 229.1 $ 567.7 $ 229.1 $ 567.7 Long-Term Secured Debt: Mortgage Notes Payable, 11.0%, Final Installment Due 6/2013 $ 373.4 $ 367.1 $ 415.7 $ 432.0 Capitalized Leases, Rates Ranging from 8.0% to 13.7%, Due through 12/2011 48.2 48.7 65.1 66.8 Total Secured Debt 421.6 415.8 480.8 498.8 Unsecured Debt: 8.25% Notes Due 4/15/1999 100.0 100.0 108.5 107.3 7.25% Notes Due 3/1/2003 150.0 _ 154.7 _ 83/8% Notes Due 8/15/2012 100.0 100.0 113.4 104.0 Other 2.8 8.3 2.8 8.3 Total Unsecured Debt 352.8 208.3 379.4 219.6 Total Long-Term Debt $ 774.4 $ 624.1 $ 860.2 $ 718.4 Short-term notes payable represent unsecured borrowings, with an average interest rate of 3.68%, which are due through January 31, 1994. Mortgage notes are payable in monthly installments of $3.1 million through June 1998, $4.4 million from July 1998 to June 2004 and $5.2 million from July 2004 until June 2013, at which time the mortgages will be completely amortized. The effective interest rate for the mortgage notes is 11.0%. The mortgages are secured by buildings and land with a carrying value of $299.3 million at December 31, 1993. Obligations pursuant to capital leases are payable in installments through the year 2011 at imputed interest rates ranging from 8.0% to 13.7%, and are secured by assets (primarily occupied buildings) with a carrying value of $49.2 million at December 31, 1993. The payment schedule is as follows: (MILLIONS) Payment 1994 $ 6.6 1995 6.6 1996 6.6 1997 6.6 1998 6.5 Thereafter 84.1 Total Payments 117.0 Less: Amount Representing Interest 67.8 Obligations under Capital Leases Included in Current Portion of Long-Term Debt 1.0 Obligations under Capital Leases $ 48.2 In 1993, Continental completed a public offering of $150.0 million of 7.25% Notes due March 1, 2003. In 1992, Continental completed public offerings of $100.0 million of 8.25% Notes due April 15, 1999 and $100.0 million of 83/8% Notes due August 15, 2012. These notes (which provided $346.0 million to Continental, net of offering and underwriting costs) were sold under Continental's shelf registration of up to $400.0 million of debt securities with the Securities and Exchange Commission. Continental may sell an additional $50.0 million in debt securities (with varying maturities, interest rates and other terms) under the shelf registration from time to time as market conditions warrant. During 1993, Continental used $281.7 million of net proceeds to retire its outstanding 93/8% Notes and $50.0 million of net proceeds to reduce corporate short-term borrowings. Continental plans to use the net proceeds from any subsequent sales to reduce its short-term borrowings. Continental intends to register for the sale of up to an additional $100.0 million of debt securities. Maturities of capitalized lease obligations and other long-term debt for each of the next five years are as follows: 1994 - $4.0 million; 1995 - $3.9 million; 1996 - $2.8 million; 1997 - $2.1 million; 1998 - $2.0 million. In December 1993, Continental entered into a revolving credit facility, providing for borrowings of up to $150.0 million from a syndicate of banks. At December 31, 1993, Continental had not borrowed any funds through the facility. Interest expense is reported in the following lines in the accompanying Consolidated Statements of Income: Insurance Interest on Operating Other Corporate (MILLIONS) Expenses Expenses Borrowings Total 1993 $ 47.6 4.1 48.6 $ 100.3 1992 $ 47.1 4.1 49.5 $ 100.7 1991 $ 46.6 5.9 43.8 96.3 Note 8: Income Taxes Continental files consolidated federal income tax returns with its eligible subsidiaries. Under the tax reform act of 1986 (the"Act"), deductibility of unearned premium and loss reserves and exclusions of income that were tax-exempt under prior law have been limited. The adjustment associated with the initial recomputation (discounting) of reserves as of January 1, 1987 was not taxed ("fresh start"). Under the Act, Continental must pay the higher of the regular tax on taxable income or an Alternative Minimum Tax (AMT) which, in the event it is applicable, creates a credit which can be carried forward indefinitely. The Omnibus Budget Reconciliation Act of 1990 requires an accrual for discounted estimates of salvage. The 1990 Act further provides a "fresh start" for 87% of the January 1, 1990 discounted salvage accrual. The Omnibus Budget Reconciliation Act of 1993 increased the corporate tax rate from 34% to 35%, resulting in an increase in Continental's net deferred tax asset before valuation allowance of $4.7 million. Continental files foreign tax returns in those jurisdictions where it is required. Provision has not been made for foreign taxes on undistributed earnings of foreign subsidiaries or for additional U.S. tax on pre-January 1, 1993 undistributed earnings of Continental's domestic subsidiaries which are less than 80% owned. These earnings could become subject to additional tax if they were remitted as dividends, or if Continental should sell its stock in a subsidiary. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings; however, Continental believes that U.S. foreign tax credits would largely eliminate any U.S. tax. Continental adopted the provisions of SFAS No. 109 retroactive to January 1,1992. SFAS No. 109 requires a company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company's financial statements or tax returns. Under this method, deferred tax assets and liabilities and the related expenses and benefits are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The provision for income taxes from continuing operations was as follows for the year ended December 31: (MILLIONS) 1993 1992 1991 Current Taxes (Benefits) U.S. Federal $ 14.8 $ 50.6 $ (0.8) State and Local 0.6 1.0 0.6 Foreign 5.2 (1.0) (16.2) Total Current Taxes (Benefits) 20.6 50.6 (16.4) Deferred Taxes (Benefits) U.S. Federal (1.0) (22.7) (1.2) State and Local (0.1) _ _ Foreign (1.3) 0.8 2.5 Total Deferred Taxes (Benefits) (2.4) (21.9) 1.3 Total Income Taxes (Benefits) $ 18.2 $ 28.7 $ (15.1) Set forth below are the significant differences between the U.S. federal income tax rate (1993 - 35%; 1992 and 1991 - 34%) and the effective tax rates as reflected in the accompanying Consolidated Statements of Income for the year ended December 31: 1993 1992 1991 % of Pretax % of Pretax % of Pretax (Millions, Except Percentages) Amount Income Amount Income Amount Income Income from Continuing Operations before Income Taxes $177.9 $130.7 $ 95.5 Statutory Federal Corporate Tax 62.3 35% 44.4 34% 32.5 34% Increases ( Deductions) in Taxes Resulting from: Tax-Exempt Interest (23.1) (13) (20.0) (15) (19.9) (21) Dividends Received Deduction (5.5) (3) (7.1) (6) (9.8) (10) Foreign Income at Higher Rates (2.5) (1) (4.9) (4) (16.1) (17) Prior Year Tax Adjustment (2.9) (2) _ _ (4.8) (5) Booked Alternative Minimum Tax (AMT) in Excess of Regular Tax _ _ _ _ 3.5 4 Change in Valuation Allowance (26.4) (15) 19.2 15 _ _ Effect of Rate Change on Unrealized Appreciation of Investments 4.5 3 _ _ _ _ Effect of Rate Change on Deferred Tax Assets and Liabilities (5.4) (3) _ _ _ _ Benefits Used against Discontinued Operations 18.5 10 _ _ _ _ Other Items, Net (1.3) (1) (2.9) (2) (0.5) (1) Total Income Taxes (Benefits) $ 18.2 10% $28.7 22% $(15.1) (16)% Income taxes currently payable for 1993 were reduced by $1.0 million through the utilization of tax credit carry- forwards. The extraordinary item of $0.7 million for the year ended December 31, 1991 was the result of a reduction of federal income taxes arising from the carryforward of prior years' operating losses. Unused domestic net operating loss carryforwards at December 31, 1993, available for use in future years on a tax return basis, amount to $220.6 million for regular tax and expire at various stages through the year 2006. There are no operating loss carryforwards available for use in future years with respect to AMT. Continental also has a foreign tax credit, general business credit and AMT credit carryforwards of $30.9 million, $9.7 million and $21.4 million, respectively; the foreign tax and general business credits expire at various stages through the year 2000. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 and 1992, and the provision for deferred income taxes under SFAS No. 109 for the years ended December 31, 1993 and 1992 are as follows: 1992 1993 Deferred Deferred Balance Tax Balance Tax Balance January 1, (Expense) December (Expense) December 1992 Benefit 31, 1992 Benefit 31, 1993 (Millions) Deferred Tax Assets: Unearned Premium Reserve $ 105.3 $ 7.0 $ 112.3 $ 14.3 $ 126.6 Loss Reserve Discounting 289.9 (20.7) 269.2 (23.8) 245.4 Adoption of SFAS No. 106 66.3 2.1 68.4 2.0 70.4 Net Operating Loss Carryforwards 73.0 (73.0) _ _ _ Tax Credit Carryforwards 51.9 24.4 76.3 (3.8) 72.5 Real Estate Basis Differences 52.2 (2.2) 50.0 (3.3) 46.7 Allowance for Bad Debts 12.1 9.5 21.6 (5.5) 16.1 Capital Leases 14.9 _ 14.9 0.2 15.1 Provision for Early Retirement 14.8 (1.2) 13.6 1.2 14.8 Other Items 23.5 11.2 34.7 (6.7) 28.0 Total Gross Deferred Tax Assets 703.9 (42.9) 661.0 (25.4) 635.6 Valuation Allowance (139.5) (19.2) (158.7) 22.7 (136.0) Net Deferred Tax Assets 564.4 (62.1) 502.3 (2.7) 499.6 Deferred Tax Liabilities: Deferred Acquisition Costs 128.8 (11.0) 139.8 (14.0) 153.8 Accrual for Retrospectively Rated Premiums 71.6 58.5 13.1 _ 13.1 Audit Premiums 42.1 _ 42.1 (1.2) 43.3 Installment Receivables 14.9 _ 14.9 (3.2) 18.1 Other Items 129.0 36.5 92.5 28.0 64.5 Total Gross Deferred Tax Liabilities 386.4 84.0 302.4 9.6 292.8 Net Deferred Tax Asset before Unrealized Appreciation 178.0 $ 21.9 199.9 6.9 206.8 Deferred Taxes on Unrealized Appreciation (80.2) (101.0) (4.5) (165.1) Net Deferred Tax Asset $ 97.8 $ 98.9 $ 2.4 $ 41.7 Continental has provided a valuation allowance because it believes that more likely than not some portion of the deferred tax asset will not be realized. Prior to the adoption of SFAS No. 109, the sources of timing differences and the related provision for deferred income tax benefits for the year ended December 31, 1991 are as follows: (Millions) 1991 Deferred Acquisition Costs $ 3.8 Loss Reserve Discounting for Tax Return (23.6) Capital Losses (4.2) Acceleration of Earned Premiums for Tax Return (17.1) Utilization of Net Operating Loss Carryforwards 44.8 Doubtful Reinsurance Recoverable (10.7) Foreign Income 2.5 Other Items, Net 5.8 Total Deferred Income Taxes $ 1.3 Note 9: Common, Preferred and Redeemable Preferred Stock Common Stock: Continental has authorized a total of 100,000,000 shares of $1 par value common stock. At December 31, 1993, 55,331,060 shares were outstanding. These common shares paid dividends of $1.00 per share in 1993, $2.20 per share in 1992 and $2.60 per share in 1991. Aggregate annual dividends paid on common shares were $56.2 million in 1993 (1992 - $119.9 million; 1991 - $142.3 million). Preferred Stock: Continental has issued two series of preferred stock: Series A and B. Series A (2,750,000 shares authorized and issued) and Series B (1,094,096 shares authorized and issued) are $4 par value $2.50 cumulative, convertible preferred stock. These preferred shares are convertible into common shares at the rate of 2.2 shares of common stock for each share of preferred stock. In the event of liquidation or redemption by Continental, the holders of these preferred shares are entitled to receive $50 per share plus accrued dividends. The aggregate liquidation value of Series A and B preferred shares outstanding at December 31, 1993, amounted to $2.8 million. These preferred shares paid dividends of $2.50 per share in each of the years in the three-year period ended December 31, 1993. Aggregate annual dividends paid on these preferred shares were $0.1 million in 1993, 1992 and 1991, respectively. Redeemable Preferred Stock: The Series C (20,500 shares authorized and issued) is $4 par value redeemable, cumulative, convertible preferred stock. Due to the redemption feature of this issue, it is not classified as Shareholders' Equity in the accompanying Consolidated Balance Sheets. These preferred shares were redeemed in 1993 for $1,000 per share plus accrued dividends. These preferred shares paid dividends of $150 per share in each of the years in the three-year period ended December 31, 1993. Aggregate annual dividends paid on these preferred shares were $3.1 million in 1993, 1992 and 1991, respectively. A summary of common and preferred share activity is set forth below: Common Stock Outstanding Preferred Stock, Series Issued In Treasury A B C Balance at December 31, 1990 65,699,233 11,311,546 35,749 28,967 20,500 Conversion of Shares 6,041 (2,267) (489) Treasury Stock Sold (258,916) Balance at December 31, 1991 65,705,274 11,052,630 33,482 28,478 20,500 Conversion of Shares 11,135 (2,648) (2,420) Treasury Stock Sold (261,860) Balance at December 31, 1992 65,716,409 10,790,770 30,834 26,058 20,500 Conversion of Shares 4,010 (1,509) (278) Treasury Stock Sold (401,411) Redemption of Shares 20,500 Balance at December 31, 1993 65,720,419 10,389,359 29,325 25,780 - Note 10: Dividend Restrictions Continental's insurance subsidiaries are subject to various state statutory and regulatory restrictions, applicable generally to each insurance company in its state of incorporation, which limit the amounts of dividends and other distributions that those subsidiaries may pay to Continental. The restrictions are generally based on certain levels of surplus, investment income and operating income, as determined under statutory insurance accounting practices. Recently, several states in which Continental's insurance subsidiaries are domiciled enacted more stringent dividend restrictions based on percentages of surplus and net income from operations. These restrictions will, under certain circumstances, significantly reduce the maximum amount of dividends and other distributions payable to Continental by its subsidiaries without approval by state regulatory authorities. To the extent that its insurance subsidiaries do not generate amounts available for distributions sufficient to meet Continental's cash requirements without regulatory approval, Continental would seek approval for additional distributions. Under the restrictions currently in effect, the maximum amount available for payment of dividends to Continental by its insurance subsidiaries during the year ending December 31, 1994 without regulatory approval is estimated to be $303.6 million as of December 31, 1993. The statutory surplus at December 31, 1993, for the insurance subsidiaries was $1,952.1 million (1992 - $1,882.7 million; 1991 - $1,936.0 million). The insurance subsidiaries' statutory net income (loss), including realized capital gains for 1993, was $283.8 million (1992 - $(52.2) million; 1991 - $3.5 million). Note 11: Financial Guarantees Continental, through its former participation in the Municipal Bond Insurance Association, issued guarantees of financial obligations. During 1986, this association was reorganized as a corporation named MBIA, Inc. Continental's net par value exposure at December 31, 1993 on guarantees issued before the reorganization is $1.4 billion (1992 - $1.7 billion) all of which has been reinsured by MBIA, Inc. In addition, Continental has issued financial guarantees of limited partners' obligations, municipal lease obligations, industrial development bonds and other obligations. Continental's net par value exposure on these guarantees at December 31, 1993 was $151.0 million (1992 - $173.0 million). The maturity dates of these obligations range between 1 and 12 years. Note 12: Employee Benefit Plans Pension Plans: Continental has a defined benefit retirement plan that covers substantially all its United States employees. Benefits are based on an employee's years of service and average compensation for the highest paid 60 consecutive months of the last 120 months of credited service. Continental's funding policy is to provide, on a systematic basis, amounts sufficient to provide expected benefits to participants as of their retirement dates. Plan assets consist principally of equity and fixed-income securities, of which $23.0 million (at market value) at December 31, 1993 is invested in the common stock of The Continental Corporation. Continental has a separate defined benefit plan covering substantially all Canadian employees. The provisions of the plan are similar to those of the United States plan. In addition, Continental's other foreign subsidiaries provide retirement benefits for their employees consistent with local practices. Pension costs for the United States and Canadian plans include the following: (Millions, Except Percentages) 1993 1992 1991 Service Cost: Benefits Earned During the Period $ 19.3 $ 16.5 $ 14.8 Interest Cost on Projected Benefit Obligation 51.4 51.2 44.8 Actual Return on Assets (44.9) (32.9) (69.6) Net Amortization and Deferral 3.7 (12.6) 25.6 Voluntary Special Retirement Program _ _ 14.0 Net Pension Cost $ 29.5 $ 22.2 $ 29.6 Assumptions Used for U.S. Plan:* Discount Rate for Obligations 7.50% 8.00% 9.00% Rate of Compensation Increase 5.75 6.00 7.00 Long-Term Rate of Return on Assets 8.25 8.00 9.00 *Pension costs are determined using the assumptions as of the prior year. The financial status of the retirement plans at December 31 follows: 1993 1992 (Millions) Underfunded Overfunded Underfunded Overfunded Actuarial Present Value of: Vested Benefit Obligation $ (499.0) $ (33.7) $ (477.2) $(28.5) Accumulated Benefit Obligation (516.1) (33.7) (492.2) (28.5) Projected Benefit Obligation (PBO)(630.4) (43.6) (607.6) (36.2) Plan Assets at Fair Value 480.5 51.5 457.7 52.5 PBO (in Excess of) Less Than Plan Assets (149.9) 7.9 (149.9) 16.3 Unrecognized Net Loss (Gain) 72.6 (8.8) 81.2 (9.8) Unrecognized Prior Service Cost 21.3 1.1 23.8 1.2 Unrecognized Net Asset (Liability) at Date of Initial Obligation (18.7) 11.3 (22.6) 3.3 Prepaid Pension Asset (Pension Liability) $ (74.7) $ 11.5 $ (67.5) $ 11.0 Health Care and Postretirement Benefits: Comprehensive health care and dental care benefits are provided by Continental to enrolled domestic employees and their families if they elect such coverage. Benefits are funded through employer and employee contributions to a trust fund. Funding levels are set on the basis of current benefit payments. Canadian employees and certain retirees are covered by government-sponsored health care plans that are generally funded through company contributions. Continental additionally offers to these employees extended health care coverage and dental care benefits. In Canada, the costs are shared equally between Continental and the employees. Group term life insurance is provided by Continental to full-time United States and Canadian employees. For the United States plan, amounts of insurance are subject to reduction upon retirement. For the United States and Canadian plans, employer and employee contributions are used to pay premiums for such insurance. In addition to pension benefits, Continental provides certain health care and life insurance benefits to substantially all of its retired domestic employees and retired employees at certain foreign locations. Prior to 1992, the cost of retiree health care and life insurance benefits was recognized as an expense as claims were paid. Continental's cost for postretirement health care benefits was approximately $10.9 million in 1991. The cost for postretirement group life insurance benefits was $0.5 million in 1991. Effective January 1, 1992, Continental adopted SFAS No. 106. This statement requires accrual, during the years that an employee renders service to Continental, of the expected cost of providing postretirement benefits other than pensions to an employee and the employee's beneficiaries. Prior years' Consolidated Financial Statements have not been restated to reflect the adoption of SFAS No. 106. The components of Continental's cost for postretirement benefits in 1993 and 1992 (excluding the cumulative effect of the change in accounting principle) and the accumulated postretirement benefit obligation at December 31, 1993 and 1992 were as follows: (Millions) 1993 1992 Net Periodic Cost Service Cost - Benefits Earned during the Period: $ 2.1 $ 2.1 Interest Cost on Accumulated Benefits 14.8 15.4 Net Cost $ 16.9 $ 17.5 Accumulated Postretirement Benefit Obligation: Retirees $ 165.8 $ 168.8 Fully Eligible Active Plan Participants 1.4 1.3 Other Active Plan Participants 36.5 31.7 Unrecognized Net (Gains) Losses, Including Effects of Assumption Changes 2.3 - Total $ 206.0 $ 201.8 The major assumptions used to compute the accumulated postretirement benefit as of December 31, 1993, are as follows: a discount rate for obligations of 7.5%, a rate of compensation increase of 6% and an ultimate rate of health and dental care inflation of 6% by utilizing an initial inflation rate of 15% grading down to 6% over 10 years (8%, 6% and 6%, respectively at January 1, 1992). The effect of a one percentage point increase in health and dental care inflation for each future year would increase the net periodic cost for the year ended December 31, 1993 and the accumulated postretirement benefit obligation at December 31, 1993 by $0.8 million and $9.8 million, respectively. Long-Term Incentive Plans: Continental has a long-term incentive plan under which it issues stock options and grants performance awards to key employees. Continental has granted both incentive stock options and nonqualified stock options under the plan. Nine million shares of common stock, the maximum number of shares that may be issued under the plan, have been reserved for issuance. No employee stock options have been granted below the market price of Continental's common stock at the time of grant. Stock options become exercisable beginning one year after the day of grant. Generally, 50% can be exercised at that time, and the remaining 50% become exercisable the following year. All options expire on the tenth anniversary of the day of grant.Stock option activity during 1992 and 1993 was as follows: Weighted Average Exercise Options For Price Common Shares Per Share 1991 Outstanding at Year-End 4,373,878 $31.49 1992 Granted 902,450 25.52 Exercised 144,750 26.90 Canceled 339,435 32.28 Outstanding at Year-End 4,792,143 30.45 1993 Granted 780,950 26.90 Exercised 308,800 25.42 Canceled 582,800 33.73 Outstanding at Year-End 4,681,493 29.78 Options exercisable and weighted average exercise price per share at year-end 1993 and 1992 were 3,532,518 ($30.88 per share) and 3,502,593 ($32.39 per share), respectively. Performance awards are payable in either cash or shares of The Continental Corporation's common stock in amounts determined on the basis of review, by the Compensation Committee of the Board of Directors, of Continental's performance for four-year award cycles. As of December 31, 1993, there were 481,458 common shares reserved for possible payment of such awards. Continental offers a 401(k) Incentive Savings Plan, where eligible employees may voluntarily contribute a percentage of compensation of up to 15%. In addition, Continental matches contributions of up to 6% of compensation. Employer costs for the Incentive Savings Plan for December 31, 1993, 1992 and 1991 were $20.8 million, $20.5 million and $20.4 million, respectively. Note 13: Segment Reporting Continental's principal business is property and casualty insurance. This business (Insurance Segments) is comprised of three segments: Agency & Brokerage Commercial, Agency & Brokerage Personal, and Specialized Commercial. The customized financial coverages that were previously included in the former International & Reinsurance segment are now included in the Specialized Commercial segment. The internal reinsurance operations that comprised the remainder of the former International & Reinsurance segment are now included in the segments of the primary operations they cover. Previously reported segment information has been adjusted accordingly. Continental's other segment is Corporate & Other Operations, which includes investment management, claims adjusting and risk management services. The insurance segments are the primary sources of Continental's foreign business, which is conducted primarily in Canada. Multinational accounts are written in European Market countries, Latin America and the Pacific Basin. Identifiable assets by business segment - December 31: (millions) 1993 1992 1991 Insurance Segments* $ 15,552.1 $ 15,113.5 $ 14,031.1 Corporate & Other Operations 583.9 149.9 283.9 Total Assets from Continuing Operations 16,136.0 15,263.4 14,315.0 Net Assets of Discontinued Operations 84.6 310.5 506.9 Total Assets $ 16,220.6 $ 15,573.9 $ 14,821.9 *Distinct investment portfolios are not maintained for each segment, and accordingly, allocation of assets to each segment is not performed. Operational information by business segment for the year ended December 31: Revenues (Millions) 1993 1992 1991 Agency & Brokerage Commercial $ 2,121.3 $1,919.5 $ 2,018.1 Agency & Brokerage Personal 861.6 777.4 795.3 Specialized Commercial 1,433.2 1,201.1 1,059.1 Total Premiums Earned 4,416.1 3,898.0 3,872.5 Net Investment Income* 514.3 559.5 610.6 Realized Capital Gains* 110.3 222.3 115.0 Insurance Segments 5,040.7 4,679.8 4,598.1 Corporate & Other Operations 133.0 117.2 122.9 Total $ 5,173.7 $4,797.0 $ 4,721.0 Income before Income Taxes (millions) 1993 1992 1991 Agency & Brokerage Commercial $ (234.8) $(281.0) $ (354.6) Agency & Brokerage Personal (78.1) (127.0) (66.3) Specialized Commercial (92.5) (173.6) (146.9) GAAP Underwriting Loss (405.4) (581.6) (567.8) Net Investment Income* 514.3 559.5 610.6 Realized Capital Gains* 110.1 222.3 115.0 Insurance Segments 219.0 200.2 157.8 Corporate & Other Operations (41.1) (69.5) (62.3) Total $ 177.9 $ 130.7 $ 95.5 *Distinct investment portfolios are not maintained for each segment, and accordingly, allocation of net investment income and realized capital gains to each segment is not performed. Information by geographic area - December 31: Income (Loss) From Continuing Operations Assets of before Continuing (millions) Revenues Income Taxes Operations United States 1993 $4,731.7 $165.7 $15,063.0 1992 4,379.1 144.3 13,975.5 1991 4,146.6 103.2 13,130.6 Canada 1993 324.6 (5.4) 1,024.1 1992 340.2 (7.5) 926.8 1991 440.2 (26.0) 801.5 Other Foreign 1993 117.4 17.6 48.9 1992 77.7 (6.1) 361.1 1991 134.2 18.3 382.9 Consolidated 1993 $5,173.7 $177.9 $16,136.0 1992 4,797.0 130.7 15,263.4 1991 4,721.0 95.5 14,315.0 Note 14: Commitments and Contingencies Operating Lease Commitments: Continental leases certain office facilities and operating equipment under cancelable and noncancelable agreements. Total rental expense under these agreements amounted to $90.7 million in 1993 (1992 - $100.5 million; 1991 - $107.4 million). At December 31, 1993, the minimum aggregate rental commitment under all noncancelable leases (net of subleases) is as follows: (millions) 1994 $ 85.5 1995 74.3 1996 61.8 1997 52.9 1998 39.6 Thereafter 169.5 Total $ 483.6 Certain of these leases provide for additional charges based on increases in property taxes or other negotiated items, and certain of these leases require the payment of property taxes directly by the lessee. Outstanding Losses and Loss Expenses: Included in Continental's liability for outstanding loss and loss expenses are reserves for asbestos-related, other toxic tort and environmental pollution claims of $263.5 million at December 31, 1993 ($247.2 million at December 31, 1992). Included in Continental's reinsurance assets are amounts due for asbestos-related, other toxic tort and environmental pollution claims of $105.3 million at December 31, 1993 ($79.7 million at December 31, 1992). Included in net losses and loss expenses are charges for asbestos-related, other toxic tort and environmental pollution claims of $55.9 million, $80.9 million and $109.0 million for the years ended December 31, 1993, 1992 and 1991, respectively. Most of Continental's environmental pollution claims result from general liability policies written prior to 1986. Certain provisions of these policies have been subject to wide-ranging challenges by policyholders and/or differing interpretations by courts in various jurisdictions, with inconsistent conclusions as to the applicability of coverage for environmental pollution claims. Asbestos-related claims have generally arisen out of product liability coverage provided by Continental under general liability policies written prior to 1983. Thereafter, asbestos product exclusions were included in general liability policies. Other toxic tort claims have also generally arisen out of product liability coverage under general liability policies. These claims involve a variety of allegations of bodily injury arising from exposure over a period of time to products alleged to be harmful or toxic. Continental does not establish reserves for unreported asbestos-related, other toxic tort and environmental pollution claims because of significant uncertainties, which do not allow liabilities to be reasonably estimated. Such uncertainties include difficulties in determining the frequency and severity of such potential claims and in predicting the outcome of judicial decisions, as case law evolves regarding liability exposure, insurance coverage and interpretation of policy language. At this time, the future financial impact of unreported asbestos-related, other toxic tort and environmental pollution claims cannot be reasonably estimated, and no assessment can be made with respect to the ultimate impact thereof on Continental's results of operations or financial condition in the future. The actuarial profession is addressing unquantifiable liabilities (e.g., unreported asbestos-related, other toxic tort and environmental pollution claims) and is in the initial stage of developing standards, but has not yet scheduled publication of a discussion draft. Other uncertainties may be clarified through the debate, extension or modification of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 1994. These developments will continue to be monitored and assessed by Continental. Sale of Discontinued Premium Finance Operations: The agreement for the sale of AFCO Credit Corporation, AFCO Acceptance Corporation and Canadian affiliate CAFO Inc. to Mellon Bank Corporation provides for a contingent payment to Continental based on growth in AFCO's premiums financed over the next five years, for a potential maximum payment of up to $78.0 million. No provision has been made in the accompanying Consolidated Financial Statements for any potential gain from this contingent payment from Mellon. Legal Proceedings: Continental and its subsidiaries are defendants in various lawsuits generally incidental to their business. Management does not expect the ultimate disposition of these lawsuits to have a material effect on Continental's financial condition. Independent Auditor's Report The Board of Directors and Shareholders The Continental Corporation: We have audited the accompanying consolidated balance sheets of The Continental Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Continental Corporation and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, The Continental Corporation and subsidiaries changed their methods of accounting for multiple-year retrospectively rated reinsurance contracts and for the adoption of the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," and No. 115, "Accounting For Certain Investments in Debt and Equity Securities," in 1993. The Continental Corporation and subsidiaries adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes," in 1992. /s/ KPMG Peat Marwick New York, New York February 10, 1994 Selected Consolidated Financial Data Year ended December 31 (millions, except per share amounts) 1993 1992 1991 1990 1989 Revenues: Premiums $ 4,416.1 $ 3,898.0 $ 3,872.5 $ 4,112.8 $ 4,415.0 Investment Results 666.8 805.5 748.4 781.2 854.3 Other Revenues 90.8 93.5 100.1 98.0 87.3 Total Revenues 5,173.7 4,797.0 4,721.0 4,992.0 5,356.6 Expenses: Losses and Loss Expenses 3,414.1 3,161.6 3,083.0 3,203.8 3,453.7 Insurance Operating Expenses 1,407.4 1,318.0 1,357.1 1,391.8 1,496.0 Other Expenses (Including Interest on Corporate Borrowings) 174.3 186.7 185.4 199.9 214.8 Total Expenses 4,995.8 4,666.3 4,625.5 4,795.5 5,164.5 Income from Continuing Operations before Income Taxes 177.9 130.7 95.5 196.5 192.1 Total Income Taxes (Benefits) 18.2 28.7 (15.1) 25.2 23.1 Income from Continuing Operations 159.7 102.0 110.6 171.3 169.0 Total Income (Loss) from Discontinued Operations, Net of Income Taxes 48.7 (174.7) (54.9) (30.2) (15.9) Income (Loss) before Extraordinary Item and Net Cumulative Effect of Changes in Accounting Principles 208.4 (72.7) 55.7 141.1 153.1 Extraordinary Item - Utilization of Net Operating Loss Carryforwards - - 0.7 - - Net Cumulative Effect of Changes in Accounting Principles 1.6 (11.0) - - - Net Income (Loss) $ 210.0 $ (83.7) $ 56.4 $ 141.1 $ 153.1 Total Assets $16,220.6 $15,573.9 $14,821.9 $13,767.6 $14,211.7 Long-Term Debt 774.4 624.1 723.6 731.4 730.9 Redeemable Preferred Stocks at Redemption Value - 20.5 20.5 20.5 28.5 Shareholders' Equity 2,183.1 1,910.6 2,099.0 2,060.9 2,287.1 Per Common Share: Income from Continuing Operations $ 2.83 $ 1.80 $ 1.97 $ 3.09 $ 3.03 Total Income (Loss) from Discontinued Operations, Net of Income Taxes 0.88 (3.18) (1.01) (0.56) (0.29) Income (Loss) before Extraordinary Item and Net Cumulative Effect of Changes in Accounting Principles 3.71 (1.38) 0.96 2.53 2.74 Net Cumulative Effect of Changes in Accounting Principles 0.03 (0.20) - - - Net Income (Loss) 3.74 (1.58) 0.98 2.53 2.74 Book Value 39.40 34.73 38.35 37.83 42.24 Book Value (Securities at Market) 39.40 35.08 42.38 38.29 43.22 Market Price at Year-End 27.63 26.88 27.63 24.88 31.13 Dividends Declared 1.00 2.20 2.60 2.60 2.60 Shareholders of Record at Year-End 14,197 16,202 18,274 18,956 20,100 See Notes to Consolidated Financial Statements.
Summarized Consolidated Quarterly Financial Data (Unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter (Millions, except per share amounts) 1993 1992 1993 1992 1993 1992 1993 1992 Revenues: Premiums $1,049.2 $ 977.5 $1,082.1 $ 953.3 $1,175.3 $ 910.8 $1,109.5 $1,056.4 Investment Results 162.1 192.6 193.0 178.6 158.9 310.2 152.8 124.1 Other Revenues 22.2 23.6 28.5 24.6 21.3 19.7 18.8 25.6 Total Revenues 1,233.5 1,193.7 1,303.6 1,156.5 1,355.5 1,240.7 1,281.1 1,206.1 Expenses: Losses and Loss Expenses 823.5 741.5 822.8 749.8 920.8 856.4 847.0 813.9 Insurance Operating Expenses 338.0 335.5 347.8 309.0 352.5 338.0 369.1 335.5 Other Expenses (Including Interest on Corporate Borrowings) 45.8 39.8 50.3 49.5 34.4 44.0 43.8 53.4 Total Expenses 1,207.3 1,116.8 1,220.9 1,108.3 1,307.7 1,238.4 1,259.9 1,202.8 Income from Continuing Operations before Income Taxes 26.2 76.9 82.7 48.2 47.8 2.3 21.2 3.3 Total Income Taxes (Benefits) 7.3 15.9 14.9 8.6 3.4 (7.3) (7.4) 11.5 Income (Loss) from Continuing Operations 18.9 61.0 67.8 39.6 44.4 9.6 28.6 (8.2) Total Income (Loss) from Discontinued Operations, Net of Income Taxes 3.7 (17.7) 4.0 (7.6) 0.6 (151.7) 40.4 2.3 Income (Loss) before Net Cumulative Effect of Changes in Accounting Principles 22.6 43.3 71.8 32.0 45.0 (142.1) 69.0 (5.9) Net Cumulative Effect of Changes in Accounting Principles 1.6 (11.0) - - - - - - Net Income (Loss) $ 24.2 $ 32.3 $ 71.8 $ 32.0 $ 45.0 $ (142.1) $ 69.0 $ (5.9) Net Income (Loss) Available to Common Shareholders $ 23.4 $ 31.5 $ 71.0 $ 31.2 $ 44.2 $ (142.9) $ 68.2 $ (6.7)
Summarized Consolidated Quarterly Financial Data (Unaudited) (cont.)
First Quarter Second Quarter Third Quarter Fourth Quarter (Millions, except per share amounts) 1993 1992 1993 1992 1993 1992 1993 1992 Per Common Share: Income (Loss) from Continuing Operations $ 0.33 $ 1.10 $ 1.22 $ 0.71 $ 0.79 $ 0.16 $ 0.50 $ (0.16) Income (Loss) from Discontinued Operations, Net of Income Taxes 0.07 (0.32) 0.07 (0.14) 0.01 (2.76) 0.73 0.04 Income (Loss) before Net Cumulative Effect of Changes in Accounting Principles 0.40 0.78 1.29 0.57 0.80 (2.60) 1.23 (0.12) Net Cumulative Effect of Changes in Accounting Principles 0.03 (0.20) - - - - - - Net Income (Loss) $ 0.43 $ 0.58 $ 1.29 $ 0.57 $ 0.80 $ (2.60) $ 1.23 $ (0.12) Common Stock data: Dividends Declared $ 0.25 $ 0.65 $ 0.25 $ 0.65 $ 0.25 $ 0.65 $ 0.25 $ 0.25 High Stock Price 29.50 29.50 31.25 29.63 34.63 34.75 33.00 28.00 Low Stock Price 24.75 26.38 24.38 25.38 30.38 22.00 27.50 23.88
EX-21 20 EXHIBIT 21 Exhibit 21 THE CONTINENTAL CORPORATION SUBSIDIARIES OF THE CONTINENTAL CORPORATION
State or Other Jurisdiction Name of Subsidiary of Incorporation Afco Agent Service Corporation Delaware Boston Old Colony Insurance Company Massachusetts The Buckeye Union Insurance Company Ohio California Central Trust Bank Corporation California Casualty Insurance Company Illinois Commercial Insurance Company of Newark, N.J. New Jersey Continental Asset Management Corp. New York Continental Center Associates New York Continental Guaranty & Credit Corporation New York The Continental Insurance Company New Hampshire The Continental Insurance Company of Canada Canada The Continental Insurance Company of New Jersey New Jersey The Continental Insurance Company (Europe) Limited United Kingdom The Continental Insurance Company of Puerto Rico Puerto Rico The Continental Insurance Holdings (Europe) Limited United Kingdom Continental International Insurance, Limited Puerto Rico Continental Loss Adjusting Services, Inc. Illinois Continental Reinsurance Corporation California Continental Reinsurance Corporation International Limited Bermuda Continental Reinsurance Corporation (UK) Limited United Kingdom The CPI Group Incorporated Delaware CPI Pension Services, Inc. California Ctek, Inc. New Jersey The Dominion Insurance Corporation Canada East River Insurance Company, Ltd. Barbados East River Insurance Company (Bermuda) Ltd. Bermuda The Fidelity and Casualty Company of New York New Hampshire Firemen's Insurance Company of Newark, New Jersey New Jersey First Fire and Casualty Insurance of Hawaii, Inc. Hawaii First Indemnity Insurance of Hawaii, Ltd. Hawaii First Insurance Company of Hawaii, Inc. Hawaii The Glens Falls Insurance Company Delaware The HongKong Fire Insurance Company Limited Hong Kong Kansas City Fire and Marine Insurance Company Missouri Lombard Continental Insurance PLC United Kingdom The Maiden Lane Syndicate Inc. New York The Mayflower Insurance Company, Ltd. Indiana National-Ben Franklin Insurance Company of Illinois Illinois Niagara Fire Insurance Company Delaware Pacific Insurance Company California The South Place Syndicate Inc. New York TCC Acquisition Corp. Delaware TCC Properties Inc. New York UAM Limited United Kingdom Workers' Compensation and Indemnity Company California of California
EX-23 21 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Shareholders The Continental Corporation: We consent to incorporation by reference in the registration statement No. 33-43824 on Form S-3 of The Continental Corporation and the registration statement No. 2-97474 on Form S-8 of The Continental Corporation of our report dated February 10, 1994, relating to the consolidated balance sheets of The Continental Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993, which report appears in the December 31, 1993 annual report on Form 10-K of The Continental Corporation. Our reports refer to The Continental Corporation and subsidiaries' change in methods of accounting for multiple-year retrospectively rated reinsurance contracts and for the adoption of the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," and No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1993. The Continental Corporation and subsidiaries adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes," in 1992. /s/ KPMG Peat Marwick KPMG Peat Marwick New York, New York March 25, 1994 EX-28 22 EXHIBIT 28 The Continental Corporation The following is a reconciliation of reserves for losses and loss expenses reflected in the Combined Schedule P included herein, and the aggregate property and casualty statutory reserves. Reconciliation of Reserves for Loss 1993 and Loss Expenses (Millions) Schedule P - Part 1 - Summary Net Loss Unpaid $4,954.0 Net Loss Expenses Unpaid 751.1 Total Schedule P Losses and Loss Expenses Unpaid 5,705.1 Plus: Foriegn Subsidiaries (1) 387.3 ---------- Total Net Statutory Reserves of Continuing Operations $6,092.4 ========== ========== (1) Not required to file Schedule P with insurance requlatory authorities. CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - ANALYSIS OF LOSSES AND LOSS EXPENSES Notes to Schedule P (1) The Parts of Schedule P: Part 1 - detailed information on losses and loss expenses. Part 2 - history of incurred losses and allocated expenses. Part 3 - history of loss and allocated expense payments. Part 4 - history of bulk and incurred-but-not reported reserves. Schedule P Interrogatories (2) Lines of business A through M and R are groupings of the lines of business used on Page 14, the state page. (3) Reinsurance A, B, C, and D (lines N to Q) are: Reinsurance A = nonproportional property (1988 and subsequent) Reinsurance B = nonproportional liability (1988 and subsequent) Reinsurance C = financial lines (1988 and subsequent) Reinsurance D = old Schedule O line 30 (1987 and prior) (4) The Instructions to Schedule P contain directions necessary for filling out Schedule P. SCHEDULE P - PART 1 - SUMMARY (000 omitted) ----------------------------------------------------------------------- | | Premiums Earned | | 1 |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 113,728 | | 2. 1984.....| 3,126,993 | 675,910 | 2,451,083 | 2,465,627 | | 3. 1985.....| 3,685,789 | 808,413 | 2,877,376 | 2,934,980 | | 4. 1986.....| 4,673,896 | 1,074,379 | 3,599,517 | 2,489,914 | | 5. 1987.....| 5,150,610 | 1,100,758 | 4,049,852 | 2,800,589 | | 6. 1988.....| 5,661,236 | 1,494,084 | 4,167,152 | 3,204,567 | | 7. 1989.....| 5,523,905 | 1,441,672 | 4,082,233 | 4,200,872 | | 8. 1990.....| 5,255,258 | 1,427,260 | 3,827,998 | 2,799,192 | | 9. 1991.....| 4,961,965 | 1,352,090 | 3,609,875 | 2,464,592 | |10. 1992.....| 5,164,534 | 1,573,011 | 3,591,523 | 2,751,802 | |11. 1993.....| 5,357,315 | 1,336,721 | 4,020,594 | 1,323,143 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 27,549,006 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ---------------------------------------------------------------------------- | | Loss and Loss Expense Payments | |-------------------------------------------------------------- | | Loss Payments | Allocated Loss | 9 | | | | Expense Payments | | | |----------------|-----------------------------| Salvage | | | 6 | 7 | 8 | and | | | | Direct | | Subrogation | | | Ceded | and Assumed | Ceded | Received | |-------------|----------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 66,107 | 50,754 | (175)| 1,343 | | 2. 1984.....| 500,615 | 305,646 | 46,884 | 57,113 | | 3. 1985.....| 715,077 | 309,968 | 38,836 | 58,862 | | 4. 1986.....| 480,775 | 289,810 | 34,589 | 57,210 | | 5. 1987.....| 586,963 | 300,447 | 28,608 | 53,808 | | 6. 1988.....| 810,407 | 342,648 | 39,478 | 55,859 | | 7. 1989.....| 1,730,785 | 355,172 | 73,584 | 51,141 | | 8. 1990.....| 797,951 | 272,505 | 34,451 | 46,025 | | 9. 1991.....| 621,770 | 222,982 | 23,565 | 38,251 | |10. 1992.....| 1,225,078 | 185,191 | 28,995 | 26,513 | |11. 1993.....| 441,359 | 123,836 | 2,315 | 16,043 | |-------------|----------------|--------------|--------------|--------------| |12. Totals ..| 7,976,887 | 2,758,959 | 351,130 | 462,168 | ---------------------------------------------------------------------------- -------------|-------------------------------------------- | |Loss and Loss Expense Payment| | | |-----------------------------| 12 | | | 10 | 11 | | | | | | Number of | | | Unallocated | Total | Claims | | | Loss | Net Paid | Reported - | | | Expense | (5 - 6 + 7 | Direct and | | | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 2,784 | 101,334 | X X X X | | 2. 1984.....| 43,687 | 2,267,461 | X X X X | | 3. 1985.....| 45,817 | 2,536,852 | X X X X | | 4. 1986.....| 44,286 | 2,308,646 | X X X X | | 5. 1987.....| 49,885 | 2,535,350 | X X X X | | 6. 1988.....| 58,586 | 2,755,916 | X X X X | | 7. 1989.....| 69,021 | 2,820,696 | X X X X | | 8. 1990.....| 64,968 | 2,304,263 | X X X X | | 9. 1991.....| 58,936 | 2,101,175 | X X X X | |10. 1992.....| 57,258 | 1,740,178 | X X X X | |11. 1993.....| 56,425 | 1,059,730 | X X X X | |-------------|--------------|--------------|--------------| |12. Total ...| 551,653 | 22,531,601 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 770,828 | 393,415 | 21,601 | 5,231 | | 2. 1984.....| 104,860 | 44,438 | 12,188 | 4,255 | | 3. 1985.....| 153,472 | 74,814 | 12,658 | 5,467 | | 4. 1986.....| 118,455 | 46,015 | 16,513 | 7,388 | | 5. 1987.....| 168,674 | 60,745 | 42,234 | 18,730 | | 6. 1988.....| 291,320 | 101,142 | 58,266 | 29,147 | | 7. 1989.....| 416,511 | 151,632 | 96,394 | 43,604 | | 8. 1990.....| 519,389 | 187,495 | 161,066 | 65,101 | | 9. 1991.....| 617,642 | 154,189 | 262,115 | 151,735 | |10. 1992.....| 975,861 | 358,068 | 612,930 | 326,057 | |11. 1993.....| 1,015,040 | 166,168 | 1,469,488 | 568,672 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 5,152,052 | 1,738,121 | 2,765,453 | 1,225,387 | ----------------------------------------------------------------------- ----------------------------------------------------------- | | Allocated Loss Expenses Unpaid | |--------------------------------------------- | | Case Basis | Bulk + IBNR | |-----------------------------|--------------- | | 17 | 18 | 19 | | | Direct | | Direct | | | and Assumed | Ceded | and Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 0 | 0 | 26,091 | | 2. 1984.....| 0 | 0 | 7,663 | | 3. 1985.....| 0 | 0 | 10,069 | | 4. 1986.....| 0 | 0 | 12,189 | | 5. 1987.....| 0 | 0 | 21,236 | | 6. 1988.....| 0 | 0 | 38,967 | | 7. 1989.....| 0 | 0 | 52,342 | | 8. 1990.....| 0 | 0 | 81,385 | | 9. 1991.....| 0 | 0 | 121,057 | |10. 1992.....| 0 | 0 | 231,352 | |11. 1993.....| 0 | 0 | 301,146 | |-------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 903,497 | ----------------------------------------------------------- ----------------------------------------------------------------------- | | | | | | | |-------------| 21 | 22 | 23 | | | Bulk + IBNR | | | | | |-------------| Salvage | Unallocated | Total | | | 20 | and | Loss | Net Losses | | | | Subrogation | Expenses | and Expenses | | | Ceded | Anticipated | Unpaid | Unpaid | | ------------|-------------|-------------|--------------|--------------| | | | | | | | 1. Prior ...| 3,851 | 1,030 | 1,103 | 417,126 | | 2. 1984.....| 1,221 | 612 | 463 | 75,260 | | 3. 1985.....| 1,648 | 1,201 | 593 | 94,863 | | 4. 1986.....| 3,068 | 1,924 | 811 | 91,497 | | 5. 1987.....| 6,559 | 3,491 | 1,148 | 147,258 | | 6. 1988.....| 10,896 | 7,328 | 2,332 | 249,700 | | 7. 1989.....| 16,395 | 13,063 | 3,542 | 357,158 | | 8. 1990.....| 22,157 | 14,644 | 6,050 | 493,137 | | 9. 1991.....| 24,042 | 19,127 | 12,366 | 683,214 | |10. 1992.....| 75,122 | 26,311 | 18,037 | 1,078,933 | |11. 1993.....| 61,589 | 46,164 | 27,696 | 2,016,941 | |-------------|-------------|-------------|--------------|--------------| |12. Totals ..| 226,548 | 134,895 | 74,141 | 5,705,087 | ----------------------------------------------------------------------- --------------------------- ------------------------------------------- | | 24 | Total Losses and | | | Number of | Loss Expenses Incurred | | | Claims |------------------------------------------| | |Outstanding -| 25 | 26 | 27 | | | Direct | Direct | | | | | and Assumed | and Assumed | Ceded | Net * | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | | X X X X | X X X X | | 2. 1984.....| X X X X | 2,940,134 | 597,413 | 2,342,721 | | 3. 1985.....| X X X X | 3,467,557 | 835,842 | 2,631,715 | | 4. 1986.....| X X X X | 2,971,978 | 571,835 | 2,400,143 | | 5. 1987.....| X X X X | 3,384,213 | 701,605 | 2,682,608 | | 6. 1988.....| X X X X | 3,996,686 | 991,070 | 3,005,616 | | 7. 1989.....| X X X X | 5,193,854 | 2,016,000 | 3,177,854 | | 8. 1990.....| X X X X | 3,904,555 | 1,107,155 | 2,797,400 | | 9. 1991.....| X X X X | 3,759,690 | 975,301 | 2,784,389 | |10. 1992.....| X X X X | 4,832,431 | 2,013,320 | 2,819,111 | |11. 1993.....| X X X X | 4,316,812 | 1,240,141 | 3,076,671 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ----------------------------------------------------------- | | Loss and Loss Expense Percentage | | | (Incurred/Premiums Earned) | | |--------------------------------------------| | | 28 | 29 | 30 | | | Direct | | | | | and Assumed | Ceded | Net | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | | 2. 1984.....| 94.0 | 88.4 | 95.6 | | 3. 1985.....| 94.1 | 103.4 | 91.5 | | 4. 1986.....| 63.6 | 53.2 | 66.7 | | 5. 1987.....| 65.7 | 63.7 | 66.2 | | 6. 1988.....| 70.6 | 66.3 | 72.1 | | 7. 1989.....| 94.0 | 139.8 | 77.8 | | 8. 1990.....| 74.3 | 77.6 | 73.1 | | 9. 1991.....| 75.8 | 72.1 | 77.1 | |10. 1992.....| 93.6 | 128.0 | 78.5 | |11. 1993.....| 80.6 | 92.8 | 76.5 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | ----------------------------------------------------------- ----------------------------------------------------------- | | Discount for Time | | | | Value of Money | 33 | | |-----------------------------|Inter-Company | | | 31 | 32 | Pooling | | | | Loss |Participation | | | Loss | Expense | Percentage | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 0 | 0 | X X X X | | 2. 1984.....| 0 | 0 | 100.0 | | 3. 1985.....| 0 | 0 | 100.0 | | 4. 1986.....| 0 | 0 | 100.0 | | 5. 1987.....| 0 | 0 | 100.0 | | 6. 1988.....| 0 | 0 | 100.0 | | 7. 1989.....| 0 | 0 | 100.0 | | 8. 1990.....| 0 | 0 | 100.0 | | 9. 1991.....| 0 | 0 | 100.0 | |10. 1992.....| 0 | 0 | 100.0 | |11. 1993.....| 0 | 0 | 100.0 | |-------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | X X X X | ----------------------------------------------------------- ------------------------------------------ | | Net Balance Sheet Reserves| | | After Discount | | |----------------------------| | | 34 | 35 | | | Losses |Loss Expenses| | | Unpaid | Unpaid | |-------------|--------------|-------------| | | | | | 1. Prior ...| 393,783 | 23,343 | | 2. 1984.....| 68,355 | 6,905 | | 3. 1985.....| 85,849 | 9,014 | | 4. 1986.....| 81,565 | 9,932 | | 5. 1987.....| 131,433 | 15,825 | | 6. 1988.....| 219,297 | 30,403 | | 7. 1989.....| 317,669 | 39,489 | | 8. 1990.....| 427,859 | 65,278 | | 9. 1991.....| 573,833 | 109,381 | |10. 1992.....| 904,666 | 174,267 | |11. 1993.....| 1,749,688 | 267,253 | |-------------|--------------|-------------| |12. Totals ..| 4,953,997 | 751,090 | ------------------------------------------ CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 2 - SUMMARY (000 omitted) ---------------------------------------------------------------- | | Incurred Losses and Allocated Expenses | 1 | Reported At Year End (000 omitted) | Years in Which |-------------------------------------------- | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | |-------------------|---------------|-------------|-------------| | | | | | | | | | | | 1. Prior ......| 1,747,702 * | 1,891,639 | 1,927,528 | | 2. 1984........| 1,951,369 | 2,072,850 | 2,109,125 | | 3. 1985........| X X X X | 2,266,866 | 2,269,931 | | 4. 1986........| X X X X | X X X X | 2,600,948 | | 5. 1987........| X X X X | X X X X | X X X X | | 6. 1988........| X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | |---------------------------------------------------------------- | 12. Totals ................................................. ---------------------------------------------------------------- *Reported reserves only. Subsequent development relates only to subsequent payments and reserves. **Current year less first or second prior year, showing (redundant) or adverse. -------------------------------------------------------------- | | Incurred Losses and Allocated Expense | 1 | Reported At Year End (000 omitted) | Years in Which |------------------------------------------ | Losses Were | 5 | 6 | 7 | | Incurred | 1987 | 1988 | 1989 | |-------------------|-------------|-------------|-------------| | | | | | | | | | | | 1. Prior ......| 2,054,681 | 2,156,767 | 2,283,221 | | 2. 1984........| 2,152,705 | 2,195,743 | 2,254,545 | | 3. 1985........| 2,321,010 | 2,411,134 | 2,487,602 | | 4. 1986........| 2,457,402 | 2,427,011 | 2,385,452 | | 5. 1987........| 2,797,606 | 2,714,719 | 2,679,047 | | 6. 1988........| X X X X | 2,933,669 | 2,887,861 | | 7. 1989........| X X X X | X X X X | 3,068,278 | | 8. 1990........| X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | |-------------------------------------------------------------- | 12. Totals ............................................... -------------------------------------------------------------- -------------------------------------------------------------- | | Incurred Losses and Allocated Expense | 1 | Reported At Year End (000 omitted) | Years in Which |------------------------------------------ | Losses Were | 8 | 9 | 10 | | Incurred | 1990 | 1991 | 1992 | |-------------------|-------------|-------------|-------------| | | | | | | | | | | | 1. Prior ......| 2,350,928 | 2,457,490 | 2,577,463 | | 2. 1984........| 2,271,250 | 2,290,755 | 2,293,739 | | 3. 1985........| 2,521,188 | 2,549,178 | 2,574,806 | | 4. 1986........| 2,369,109 | 2,368,950 | 2,352,555 | | 5. 1987........| 2,673,536 | 2,672,468 | 2,630,671 | | 6. 1988........| 2,887,231 | 2,877,014 | 2,914,024 | | 7. 1989........| 3,074,108 | 3,045,344 | 3,096,107 | | 8. 1990........| 2,787,639 | 2,759,614 | 2,724,188 | | 9. 1991........| X X X X | 2,709,812 | 2,718,467 | | 10. 1992........| X X X X | X X X X | 2,790,082 | | 11. 1993........| X X X X | X X X X | X X X X | |-------------------------------------------------------------- | 12. Totals ............................................... -------------------------------------------------------------- ------------------------------------------------------------- | 1 | | Development** | | Years in Which |-------------|---------------------------| | Losses Were | 11 | 12 | 13 | | Incurred | 1993 | One Year | Two Year | |-------------------|-------------|-------------|-------------| | | | | | | | | | | | 1. Prior ......| 2,628,236 | 50,773 | 170,746 | | 2. 1984........| 2,298,571 | 4,832 | 7,816 | | 3. 1985........| 2,585,305 | 10,499 | 36,127 | | 4. 1986........| 2,355,046 | 2,491 | (13,904)| | 5. 1987........| 2,631,575 | 904 | (40,893)| | 6. 1988........| 2,944,698 | 30,674 | 67,684 | | 7. 1989........| 3,105,291 | 9,184 | 59,947 | | 8. 1990........| 2,726,382 | 2,194 | (33,232)| | 9. 1991........| 2,713,087 | (5,380)| 3,275 | | 10. 1992........| 2,743,816 | (46,266)| X X X X | | 11. 1993........| 2,992,550 | X X X X | X X X X | |---------------------------------|-------------|-------------| | 12. Totals ..................| 59,905 | 257,566 | ------------------------------------------------------------- SCHEDULE P - PART 3 - SUMMARY ---------------------------------------------------------------- | | Cumulative Paid in Losses and Allocated | 1 | Expenses At Year End (000 omitted) | Years in Which |-------------------------------------------- | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-------------------|---------------|-------------|-------------| | | | | | | 1. Prior ......| 000 | 513,253 | 933,844 | | 2. 1984........| 838,668 | 1,378,759 | 1,660,734 | | 3. 1985........| X X X X | 891,344 | 1,537,733 | | 4. 1986........| X X X X | X X X X | 812,557 | | 5. 1987........| X X X X | X X X X | X X X X | | 6. 1988........| X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | ---------------------------------------------------------------- Note: Net of salvage and subrogation received. -------------------------------------------------------------- | | | 1 | | Years in Which |------------------------------------------ | Losses Were | 5 | 6 | 7 | | Incurred | 1987 | 1988 | 1989 | | | | | | |-------------------|-------------|-------------|-------------| | | | | | | 1. Prior ......| 1,204,549 | 1,443,213 | 1,640,802 | | 2. 1984........| 1,854,464 | 1,979,750 | 2,068,842 | | 3. 1985........| 1,845,251 | 2,060,441 | 2,215,265 | | 4. 1986........| 1,370,763 | 1,676,563 | 1,888,323 | | 5. 1987........| 855,804 | 1,477,035 | 1,886,289 | | 6. 1988........| X X X X | 918,107 | 1,626,830 | | 7. 1989........| X X X X | X X X X | 929,122 | | 8. 1990........| X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | -------------------------------------------------------------- -------------------------------------------------------------- | | | 1 | | Years in Which |------------------------------------------ | Losses Were | 8 | 9 | 10 | | Incurred | 1990 | 1991 | 1992 | | | | | | |-------------------|-------------|-------------|-------------| | | | | | | 1. Prior ......| 1,793,830 | 1,935,097 | 2,113,663 | | 2. 1984........| 2,124,483 | 2,175,059 | 2,212,357 | | 3. 1985........| 2,333,530 | 2,401,220 | 2,469,356 | | 4. 1986........| 2,035,363 | 2,136,220 | 2,221,293 | | 5. 1987........| 2,123,358 | 2,286,723 | 2,413,472 | | 6. 1988........| 2,057,209 | 2,348,676 | 2,547,211 | | 7. 1989........| 1,752,683 | 2,186,823 | 2,539,595 | | 8. 1990........| 837,137 | 1,559,605 | 1,983,924 | | 9. 1991........| X X X X | 899,804 | 1,690,358 | | 10. 1992........| X X X X | X X X X | 1,004,238 | | 11. 1993........| X X X X | X X X X | X X X X | -------------------------------------------------------------- ------------------------------------------------------------- | | | 12 | 13 | | 1 | | Number of | Number of | | Years in Which |-------------| Claims | Claims | | Losses Were | 11 | Closed With | Closed | | Incurred | 1993 | Loss |Without Loss | | | | Payment | Payment | |-------------------|-------------|-------------|-------------| | | | | | | 1. Prior ......| 2,212,213 | X X X X | X X X X | | 2. 1984........| 2,223,774 | X X X X | X X X X | | 3. 1985........| 2,491,035 | X X X X | X X X X | | 4. 1986........| 2,264,360 | X X X X | X X X X | | 5. 1987........| 2,485,465 | X X X X | X X X X | | 6. 1988........| 2,697,330 | X X X X | X X X X | | 7. 1989........| 2,751,675 | X X X X | X X X X | | 8. 1990........| 2,239,295 | X X X X | X X X X | | 9. 1991........| 2,042,239 | X X X X | X X X X | | 10. 1992........| 1,682,920 | X X X X | X X X X | | 11. 1993........| 1,003,305 | X X X X | X X X X | ------------------------------------------------------------- SCHEDULE P - PART 4 - SUMMARY --------------------------------------------------------------- | | Bulk and Incurred But Not Reported Reserves | 1 | on Losses and Allocated at Year End (000 omitted) | Years in Which | ------------------------------------------ | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | |-------------------|--------------|-------------|-------------| | | | | | | 1. Prior .....| 370,082 | 274,073 | 135,754 | | 2. 1984.......| 510,488 | 151,223 | 66,421 | | 3. 1985.......| X X X X | 659,220 | 191,556 | | 4. 1986.......| X X X X | X X X X | 995,450 | | 5. 1987.......| X X X X | X X X X | X X X X | | 6. 1988.......| X X X X | X X X X | X X X X | | 7. 1989.......| X X X X | X X X X | X X X X | | 8. 1990.......| X X X X | X X X X | X X X X | | 9. 1991.......| X X X X | X X X X | X X X X | | 10. 1992.......| X X X X | X X X X | X X X X | | 11. 1993.......| X X X X | X X X X | X X X X | --------------------------------------------------------------- --------------------------------------------------------------- | 1 | | Years in Which | ------------------------------------------ | Losses Were | 5 | 6 | 7 | | Incurred | 1987 | 1988 | 1989 | |-------------------|--------------|-------------|-------------| | | | | | | 1. Prior .....| 130,798 | 109,891 | 103,074 | | 2. 1984.......| 50,471 | 41,116 | 41,268 | | 3. 1985.......| 111,575 | 74,480 | 61,799 | | 4. 1986.......| 375,423 | 206,066 | 164,322 | | 5. 1987.......| 1,077,609 | 479,183 | 311,285 | | 6. 1988.......| X X X X | 1,162,184 | 510,267 | | 7. 1989.......| X X X X | X X X X | 1,156,304 | | 8. 1990.......| X X X X | X X X X | X X X X | | 9. 1991.......| X X X X | X X X X | X X X X | | 10. 1992.......| X X X X | X X X X | X X X X | | 11. 1993.......| X X X X | X X X X | X X X X | --------------------------------------------------------------- --------------------------------------------------------------- | 1 | | Years in Which | ------------------------------------------ | Losses Were | 8 | 9 | 10 | | Incurred | 1990 | 1991 | 1992 | |-------------------|--------------|-------------|-------------| | | | | | | 1. Prior .....| 67,180 | 53,297 | 50,274 | | 2. 1984.......| 31,629 | 21,352 | 17,120 | | 3. 1985.......| 43,232 | 32,679 | 17,346 | | 4. 1986.......| 107,154 | 67,062 | 36,666 | | 5. 1987.......| 227,358 | 140,942 | 79,198 | | 6. 1988.......| 318,898 | 203,943 | 120,761 | | 7. 1989.......| 563,711 | 318,039 | 180,909 | | 8. 1990.......| 1,059,916 | 489,987 | 286,981 | | 9. 1991.......| X X X X | 967,827 | 420,180 | | 10. 1992.......| X X X X | X X X X | 939,369 | | 11. 1993.......| X X X X | X X X X | X X X X | --------------------------------------------------------------- ---------------------------------- | 1 | | | Years in Which | -------------| | Losses Were | 11 | | Incurred | 1993 | |-------------------|--------------| | | | | 1. Prior .....| 38,610 | | 2. 1984.......| 14,375 | | 3. 1985.......| 15,612 | | 4. 1986.......| 18,246 | | 5. 1987.......| 38,181 | | 6. 1988.......| 57,190 | | 7. 1989.......| 88,737 | | 8. 1990.......| 155,193 | | 9. 1991.......| 207,395 | | 10. 1992.......| 443,103 | | 11. 1993.......| 1,140,373 | ---------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS (000 omitted) ---------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|-------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 217 | | 2. 1984.....| 345,361 | 48,105 | 297,256 | 211,992 | | 3. 1985.....| 381,544 | 71,535 | 310,009 | 272,949 | | 4. 1986.....| 358,516 | 56,746 | 301,770 | 204,791 | | 5. 1987.....| 328,588 | 48,143 | 280,445 | 168,262 | | 6. 1988.....| 303,786 | 53,252 | 250,534 | 180,342 | | 7. 1989.....| 287,732 | 64,623 | 223,109 | 397,572 | | 8. 1990.....| 266,259 | 48,634 | 217,625 | 157,584 | | 9. 1991.....| 254,040 | 17,986 | 236,054 | 183,653 | |10. 1992.....| 257,413 | 40,681 | 216,732 | 371,813 | |11. 1993.....| 271,693 | 40,594 | 231,099 | 131,945 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 2,281,120 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ----------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |--------------------------------------------- | Years | | Allocated Loss | | in Which | | Expense Payments | |Premiums Were|--------------|-----------------------------| | Earned and | 6 | 7 | 8 | | Losses Were | | Direct | | | Incurred | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 1,685 | (893)| 651 | | 2. 1984.....| 11,091 | 24,013 | 790 | | 3. 1985.....| 40,030 | 24,357 | 3,630 | | 4. 1986.....| 25,064 | 20,354 | 1,318 | | 5. 1987.....| 14,986 | 20,516 | 1,144 | | 6. 1988.....| 17,116 | 19,199 | 2,082 | | 7. 1989.....| 258,744 | 24,994 | 4,584 | | 8. 1990.....| 21,579 | 16,451 | 517 | | 9. 1991.....| 15,728 | 14,891 | 535 | |10. 1992.....| 204,659 | 15,094 | 2,007 | |11. 1993.....| 11,036 | 14,723 | (32)| |-------------|--------------|--------------|--------------| |12. Totals ..| 621,718 | 193,699 | 17,226 | ----------------------------------------------------------- ----------------------------------------------------------- | 1 | | | |--------------------------------------------| | Years | 9 | 10 | 11 | | in Which | | | | |Premiums Were| Salvage | Unallocated | Total | | Earned and | and | Loss | Net Paid | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | | Incurred | Received | Payments | - 8 + 10) | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 23 | (23)| (3,035)| | 2. 1984.....| 2,062 | 2,294 | 226,418 | | 3. 1985.....| 1,802 | 2,408 | 256,054 | | 4. 1986.....| 2,009 | 1,921 | 200,684 | | 5. 1987.....| 1,001 | 2,292 | 174,940 | | 6. 1988.....| 1,995 | 2,446 | 182,789 | | 7. 1989.....| 1,583 | 2,950 | 162,188 | | 8. 1990.....| 1,260 | 3,886 | 155,825 | | 9. 1991.....| 916 | 3,827 | 186,108 | |10. 1992.....| 1,208 | 4,595 | 184,836 | |11. 1993.....| 216 | 4,233 | 139,897 | |-------------|--------------|--------------|--------------| |12. Totals ..| 14,075 | 30,829 | 1,866,704 | ----------------------------------------------------------- ----------------------------------------------------------------------- | | | Losses Unpaid | | 12 |------------------------------------------ | | Number of | Case Basis | Bulk & IBNR | | Claims |---------------------------|-------------- | | Reported - | 13 | 14 | 15 | | | Direct and | Direct | | Direct | | | Assumed | and Assumed | Ceded | and Assumed | |-------------|--------------|-------------|-------------|-------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | 1,317 | 253 | 1 | | 2. 1984.....| 128,346 | 306 | 7 | 0 | | 3. 1985.....| 121,212 | 1,136 | 538 | 0 | | 4. 1986.....| 94,879 | 1,139 | 131 | 0 | | 5. 1987.....| 81,825 | 877 | 3 | 0 | | 6. 1988.....| 72,248 | 1,214 | 86 | 0 | | 7. 1989.....| 27,063 | 3,909 | 547 | 164 | | 8. 1990.....| 67,055 | 4,687 | 573 | 427 | | 9. 1991.....| 76,077 | 9,798 | 470 | 1,109 | |10. 1992.....| 71,096 | 10,008 | (2,110)| 2,301 | |11. 1993.....| 58,230 | 25,159 | (1,032)| 12,713 | |-------------|--------------|-------------|-------------|-------------| |12. Totals ..| X X X X | 59,550 | (534)| 16,715 | ---------------------------- ------------------------------------------ ----------------------------------------------------------- | | | Allocated Loss Expenses Unpaid | |--------------|------------------------------ | | | Case Basis | | |--------------|-----------------------------| | | 16 | 17 | 18 | | | | Direct | | | | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 0 | | 6. 1988.....| 0 | 0 | 0 | | 7. 1989.....| 0 | 0 | 0 | | 8. 1990.....| 9 | 0 | 0 | | 9. 1991.....| 87 | 0 | 0 | |10. 1992.....| 479 | 0 | 0 | |11. 1993.....| 2,889 | 0 | 0 | |-------------|--------------|--------------|--------------| |12. Totals ..| 3,464 | 0 | 0 | ----------------------------------------------------------- ----------------------------------------------------------- | | | | | |-----------------------------| 21 | | | Bulk + IBNR | | | |-----------------------------| Salvage | | | 19 | 20 | and | | | Direct | | Subrogation | | | and Assumed | Ceded | Anticipated | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 145 | 2 | 6 | | 2. 1984.....| 28 | 2 | 8 | | 3. 1985.....| 144 | 0 | 6 | | 4. 1986.....| 141 | 7 | 9 | | 5. 1987.....| 154 | 2 | 13 | | 6. 1988.....| 175 | 0 | 83 | | 7. 1989.....| 410 | 5 | 171 | | 8. 1990.....| 760 | 27 | 264 | | 9. 1991.....| 1,316 | 20 | 213 | |10. 1992.....| 2,103 | 70 | 328 | |11. 1993.....| 8,395 | 538 | 919 | |-------------|--------------|--------------|--------------| |12. Totals ..| 13,771 | 673 | 2,020 | ----------------------------------------------------------- --------------------------------------------------------- | | | | | | | 22 | 23 | 24 | | | | | Number of | | | Unallocated | Total | Claims | | | Loss | Net Losses |Outstanding -| | | Expenses | and Expenses | Direct and | | | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|-------------| | | | | | | | | | | | 1. Prior ...| 4 | 1,212 | 105 | | 2. 1984.....| 1 | 326 | 39 | | 3. 1985.....| 4 | 746 | 44 | | 4. 1986.....| 4 | 1,146 | 34 | | 5. 1987.....| 4 | 1,030 | 54 | | 6. 1988.....| 6 | 1,309 | 71 | | 7. 1989.....| 15 | 3,946 | 125 | | 8. 1990.....| 54 | 5,319 | 218 | | 9. 1991.....| 57 | 11,703 | 402 | |10. 1992.....| 99 | 16,072 | 783 | |11. 1993.....| 318 | 44,190 | 4,483 | |-------------|--------------|--------------|-------------| |12. Totals ..| 566 | 86,999 | 6,358 | --------------------------------------------------------- ----------------------------------------------------------------------- | | |Loss and Loss | | Total Losses and |Expense Percentage | | Loss Expenses Incurred |(Incurred/Premium | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 238,634 | 11,890 | 226,744 | 69.1 | | 3. 1985.....| 300,998 | 44,198 | 256,800 | 78.9 | | 4. 1986.....| 228,350 | 26,520 | 201,830 | 63.7 | | 5. 1987.....| 192,105 | 16,135 | 175,970 | 58.5 | | 6. 1988.....| 203,382 | 19,284 | 184,098 | 66.9 | | 7. 1989.....| 430,014 | 263,880 | 166,134 | 149.4 | | 8. 1990.....| 183,849 | 22,705 | 161,144 | 69.0 | | 9. 1991.....| 214,651 | 16,840 | 197,811 | 84.5 | |10. 1992.....| 406,013 | 205,105 | 200,908 | 157.7 | |11. 1993.....| 197,486 | 13,399 | 184,087 | 72.7 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- ----------------------------------------------------------- | | | Discount for Time | | | Value of Money | |-----------------------------|--------------- | | 29 | 30 | 31 | | | | | | | | | | | | | Ceded | Net | Loss | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | | 2. 1984.....| 24.7 | 76.3 | 0 | | 3. 1985.....| 61.8 | 82.8 | 0 | | 4. 1986.....| 46.7 | 66.9 | 0 | | 5. 1987.....| 33.5 | 62.7 | 0 | | 6. 1988.....| 36.2 | 73.5 | 0 | | 7. 1989.....| 408.3 | 74.5 | 0 | | 8. 1990.....| 46.7 | 74.0 | 0 | | 9. 1991.....| 93.6 | 83.8 | 0 | |10. 1992.....| 504.2 | 92.7 | 0 | |11. 1993.....| 33.0 | 79.7 | 0 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | ----------------------------------------------------------- ----------------------------------------------------------- | | | | Net Balance Sheet Reserves | | | 33 | After Discount | |--------------| |--------------- | | 32 |Inter-Company | 34 | | | | Pooling | | | | Loss |Participation | Losses | | | Expense | Percentage | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 0 | X X X X | 1,065 | | 2. 1984.....| 0 | 100.0 | 299 | | 3. 1985.....| 0 | 100.0 | 598 | | 4. 1986.....| 0 | 100.0 | 1,008 | | 5. 1987.....| 0 | 100.0 | 874 | | 6. 1988.....| 0 | 100.0 | 1,128 | | 7. 1989.....| 0 | 100.0 | 3,526 | | 8. 1990.....| 0 | 100.0 | 4,532 | | 9. 1991.....| 0 | 100.0 | 10,350 | |10. 1992.....| 0 | 100.0 | 13,940 | |11. 1993.....| 0 | 100.0 | 36,015 | |-------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 73,335 | ----------------------------------------------------------- ---------------------------- | | | | | | | |--------------| | | 35 | | | Loss | | | Expenses | | | Unpaid | |-------------|--------------| | | | | | | | 1. Prior ...| 147 | | 2. 1984.....| 27 | | 3. 1985.....| 148 | | 4. 1986.....| 138 | | 5. 1987.....| 156 | | 6. 1988.....| 181 | | 7. 1989.....| 420 | | 8. 1990.....| 787 | | 9. 1991.....| 1,353 | |10. 1992.....| 2,132 | |11. 1993.....| 8,175 | |-------------|--------------| |12. Totals ..| 13,664 | ---------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 2,234 | | 2. 1984.....| 364,107 | 5,776 | 358,331 | 327,189 | | 3. 1985.....| 373,878 | 6,696 | 367,182 | 350,542 | | 4. 1986.....| 389,236 | 7,119 | 382,117 | 346,377 | | 5. 1987.....| 386,054 | 8,193 | 377,861 | 320,315 | | 6. 1988.....| 361,601 | 15,393 | 346,208 | 296,785 | | 7. 1989.....| 334,346 | 14,273 | 320,073 | 284,844 | | 8. 1990.....| 351,594 | 60,195 | 291,399 | 239,146 | | 9. 1991.....| 310,130 | 45,565 | 264,565 | 197,984 | |10. 1992.....| 321,898 | 44,583 | 277,315 | 150,280 | |11. 1993.....| 353,246 | 9,579 | 343,667 | 73,426 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 2,589,122 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ----------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |--------------------------------------------- | Years | | Allocated Loss | | in Which | | Expense Payments | |Premiums Were|--------------|-----------------------------| | Earned and | 6 | 7 | 8 | | Losses Were | | Direct | | | Incurred | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 939 | 82 | (23)| | 2. 1984.....| 3,168 | 41,493 | 573 | | 3. 1985.....| 8,769 | 40,431 | 782 | | 4. 1986.....| 7,723 | 38,324 | 1,100 | | 5. 1987.....| 12,321 | 38,630 | 1,138 | | 6. 1988.....| 18,139 | 33,262 | 1,623 | | 7. 1989.....| 30,886 | 26,897 | 2,939 | | 8. 1990.....| 36,007 | 25,699 | 1,607 | | 9. 1991.....| 13,350 | 19,549 | 558 | |10. 1992.....| 8,848 | 15,883 | 109 | |11. 1993.....| 2,096 | 14,389 | 18 | |-------------|--------------|--------------|--------------| |12. Totals ..| 142,246 | 294,639 | 10,424 | ----------------------------------------------------------- ------------------------------------------------------------------------- | 1 | | | | |--------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 19 | 20 | 1,420 | X X X X | | 2. 1984.....| 2,893 | 4,607 | 369,548 | 150,574 | | 3. 1985.....| 3,193 | 5,215 | 386,637 | 144,685 | | 4. 1986.....| 3,048 | 5,078 | 380,956 | 127,684 | | 5. 1987.....| 2,573 | 5,324 | 350,810 | 102,701 | | 6. 1988.....| 2,177 | 5,437 | 315,722 | 90,446 | | 7. 1989.....| 2,401 | 5,728 | 283,644 | 86,364 | | 8. 1990.....| 1,924 | 6,973 | 234,204 | 79,722 | | 9. 1991.....| 1,672 | 5,909 | 209,534 | 81,438 | |10. 1992.....| 1,390 | 5,685 | 162,891 | 73,134 | |11. 1993.....| 728 | 4,910 | 90,611 | 59,596 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 22,018 | 54,886 | 2,785,977 | X X X X | ------------------------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 10,812 | 10,494 | 90 | 0 | | 2. 1984.....| 3,755 | 1,010 | 131 | 0 | | 3. 1985.....| 4,908 | 1,657 | 154 | 0 | | 4. 1986.....| 3,691 | 541 | 164 | 35 | | 5. 1987.....| 4,900 | 971 | 476 | 216 | | 6. 1988.....| 10,451 | 5,044 | 1,027 | 349 | | 7. 1989.....| 14,897 | 5,885 | 873 | 654 | | 8. 1990.....| 20,956 | 3,506 | 3,046 | 800 | | 9. 1991.....| 44,265 | 2,121 | 1,883 | 1,074 | |10. 1992.....| 70,146 | 2,378 | 23,255 | 13,015 | |11. 1993.....| 125,331 | 3,914 | 107,863 | 12,891 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 314,112 | 37,521 | 138,962 | 29,034 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 278 | 2 | | 2. 1984.....| 0 | 0 | 139 | 0 | | 3. 1985.....| 0 | 0 | 182 | 0 | | 4. 1986.....| 0 | 0 | 379 | 0 | | 5. 1987.....| 0 | 0 | 770 | 11 | | 6. 1988.....| 0 | 0 | 1,174 | 16 | | 7. 1989.....| 0 | 0 | 2,818 | 11 | | 8. 1990.....| 0 | 0 | 3,852 | 106 | | 9. 1991.....| 0 | 0 | 4,395 | 509 | |10. 1992.....| 0 | 0 | 13,177 | 1,871 | |11. 1993.....| 0 | 0 | 20,546 | 4,519 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 47,710 | 7,045 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 11 | 17 | 701 | 449 | | 2. 1984.....| 18 | 11 | 3,026 | 116 | | 3. 1985.....| 26 | 22 | 3,609 | 155 | | 4. 1986.....| 36 | 34 | 3,692 | 167 | | 5. 1987.....| 91 | 45 | 4,993 | 237 | | 6. 1988.....| 121 | 92 | 7,335 | 426 | | 7. 1989.....| 170 | 188 | 12,226 | 670 | | 8. 1990.....| 261 | 453 | 23,895 | 1,085 | | 9. 1991.....| 543 | 891 | 47,730 | 1,956 | |10. 1992.....| 842 | 1,523 | 90,837 | 4,898 | |11. 1993.....| 1,555 | 2,682 | 235,098 | 19,051 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 3,674 | 5,958 | 433,142 | 29,210 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premium | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 377,325 | 4,751 | 372,574 | 103.6 | | 3. 1985.....| 401,454 | 11,208 | 390,246 | 107.4 | | 4. 1986.....| 394,047 | 9,399 | 384,648 | 101.2 | | 5. 1987.....| 370,460 | 14,657 | 355,803 | 96.0 | | 6. 1988.....| 348,228 | 25,171 | 323,057 | 96.3 | | 7. 1989.....| 336,245 | 40,375 | 295,870 | 100.6 | | 8. 1990.....| 300,125 | 42,026 | 258,099 | 85.4 | | 9. 1991.....| 274,876 | 17,612 | 257,264 | 88.6 | |10. 1992.....| 279,949 | 26,221 | 253,728 | 87.0 | |11. 1993.....| 349,147 | 23,438 | 325,709 | 98.8 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 82.3 | 104.0 | 0 | 0 | | 3. 1985.....| 167.4 | 106.3 | 0 | 0 | | 4. 1986.....| 132.0 | 100.7 | 0 | 0 | | 5. 1987.....| 178.9 | 94.2 | 0 | 0 | | 6. 1988.....| 163.5 | 93.3 | 0 | 0 | | 7. 1989.....| 282.9 | 92.4 | 0 | 0 | | 8. 1990.....| 69.8 | 88.6 | 0 | 0 | | 9. 1991.....| 38.7 | 97.2 | 0 | 0 | |10. 1992.....| 58.8 | 91.5 | 0 | 0 | |11. 1993.....| 244.7 | 94.8 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 408 | 293 | | 2. 1984.....| 100.0 | 2,876 | 150 | | 3. 1985.....| 100.0 | 3,405 | 204 | | 4. 1986.....| 100.0 | 3,279 | 413 | | 5. 1987.....| 100.0 | 4,189 | 804 | | 6. 1988.....| 100.0 | 6,085 | 1,250 | | 7. 1989.....| 100.0 | 9,231 | 2,995 | | 8. 1990.....| 100.0 | 19,696 | 4,199 | | 9. 1991.....| 100.0 | 42,953 | 4,777 | |10. 1992.....| 100.0 | 78,008 | 12,829 | |11. 1993.....| 100.0 | 216,389 | 18,709 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 386,519 | 46,623 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 2,481 | | 2. 1984.....| 149,038 | 20,571 | 128,467 | 157,026 | | 3. 1985.....| 193,393 | 28,567 | 164,826 | 190,124 | | 4. 1986.....| 253,295 | 31,617 | 221,678 | 182,660 | | 5. 1987.....| 271,150 | 31,190 | 239,960 | 178,058 | | 6. 1988.....| 274,764 | 29,725 | 245,039 | 192,494 | | 7. 1989.....| 250,096 | 30,219 | 219,877 | 164,357 | | 8. 1990.....| 222,033 | 26,054 | 195,979 | 114,588 | | 9. 1991.....| 197,209 | 19,730 | 177,479 | 91,974 | |10. 1992.....| 201,821 | 23,312 | 178,509 | 51,815 | |11. 1993.....| 199,697 | 21,005 | 178,692 | 20,751 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 1,346,328 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 1,503 | 570 | 258 | (17)| | 2. 1984.....| 14,940 | 18,225 | 1,234 | 858 | | 3. 1985.....| 19,491 | 23,436 | 2,937 | 887 | | 4. 1986.....| 18,943 | 20,746 | 1,267 | 661 | | 5. 1987.....| 12,802 | 20,051 | 1,269 | 702 | | 6. 1988.....| 15,102 | 19,259 | 1,227 | 836 | | 7. 1989.....| 10,523 | 17,790 | 931 | 651 | | 8. 1990.....| 9,130 | 11,985 | 820 | 757 | | 9. 1991.....| 7,689 | 10,157 | 610 | 532 | |10. 1992.....| 6,688 | 8,560 | 197 | 330 | |11. 1993.....| 719 | 6,508 | 42 | 186 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 117,530 | 157,287 | 10,792 | 6,383 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 8 | 1,298 | X X X X | | 2. 1984.....| 2,634 | 161,711 | 39,017 | | 3. 1985.....| 2,930 | 194,062 | 36,717 | | 4. 1986.....| 2,981 | 186,177 | 37,802 | | 5. 1987.....| 3,280 | 187,318 | 37,244 | | 6. 1988.....| 3,801 | 199,225 | 37,181 | | 7. 1989.....| 3,599 | 174,292 | 34,813 | | 8. 1990.....| 3,398 | 120,021 | 29,179 | | 9. 1991.....| 3,107 | 96,939 | 24,182 | |10. 1992.....| 3,008 | 56,498 | 22,628 | |11. 1993.....| 2,281 | 28,779 | 18,829 | |-------------|--------------|--------------|--------------| |12. Totals ..| 31,027 | 1,406,320 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 6,646 | 761 | 18 | 0 | | 2. 1984.....| 1,242 | 521 | 33 | 0 | | 3. 1985.....| 2,318 | 337 | 52 | 0 | | 4. 1986.....| 3,379 | 82 | 97 | 0 | | 5. 1987.....| 7,322 | 2,415 | 340 | 68 | | 6. 1988.....| 10,628 | 64 | 443 | 300 | | 7. 1989.....| 21,729 | 2,071 | 691 | 134 | | 8. 1990.....| 20,812 | 1,407 | 743 | 207 | | 9. 1991.....| 28,885 | 3,001 | 3,709 | 407 | |10. 1992.....| 46,363 | 2,647 | 14,058 | 1,733 | |11. 1993.....| 48,363 | (273)| 65,493 | 10,004 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 197,687 | 13,033 | 85,677 | 12,853 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 159 | 2 | | 2. 1984.....| 0 | 0 | 61 | 0 | | 3. 1985.....| 0 | 0 | 149 | 0 | | 4. 1986.....| 0 | 0 | 434 | 1 | | 5. 1987.....| 0 | 0 | 624 | 11 | | 6. 1988.....| 0 | 0 | 677 | 16 | | 7. 1989.....| 0 | 0 | 1,442 | 19 | | 8. 1990.....| 0 | 0 | 2,186 | 9 | | 9. 1991.....| 0 | 0 | 4,897 | 9 | |10. 1992.....| 0 | 0 | 7,090 | 1,017 | |11. 1993.....| 0 | 0 | 9,536 | 2,010 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 27,255 | 3,094 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 5 | 39 | 6,099 | 481 | | 2. 1984.....| 13 | 13 | 828 | 181 | | 3. 1985.....| 20 | 19 | 2,201 | 228 | | 4. 1986.....| 17 | 54 | 3,881 | 266 | | 5. 1987.....| 61 | 77 | 5,869 | 517 | | 6. 1988.....| 61 | 142 | 11,510 | 508 | | 7. 1989.....| 144 | 192 | 21,830 | 605 | | 8. 1990.....| 232 | 367 | 22,485 | 817 | | 9. 1991.....| 361 | 637 | 34,711 | 1,391 | |10. 1992.....| 561 | 1,170 | 63,284 | 2,804 | |11. 1993.....| 1,044 | 1,742 | 113,393 | 5,862 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 2,519 | 4,452 | 286,091 | 13,660 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 179,234 | 16,695 | 162,539 | 120.3 | | 3. 1985.....| 219,028 | 22,765 | 196,263 | 113.3 | | 4. 1986.....| 210,351 | 20,293 | 190,058 | 83.0 | | 5. 1987.....| 209,752 | 16,565 | 193,187 | 77.4 | | 6. 1988.....| 227,444 | 16,709 | 210,735 | 82.8 | | 7. 1989.....| 209,800 | 13,678 | 196,122 | 83.9 | | 8. 1990.....| 154,079 | 11,573 | 142,506 | 69.4 | | 9. 1991.....| 143,366 | 11,716 | 131,650 | 72.7 | |10. 1992.....| 132,064 | 12,282 | 119,782 | 65.4 | |11. 1993.....| 154,674 | 12,502 | 142,172 | 77.5 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 81.2 | 126.5 | 0 | 0 | | 3. 1985.....| 79.7 | 119.1 | 0 | 0 | | 4. 1986.....| 64.2 | 85.7 | 0 | 0 | | 5. 1987.....| 53.1 | 80.5 | 0 | 0 | | 6. 1988.....| 56.2 | 86.0 | 0 | 0 | | 7. 1989.....| 45.3 | 89.2 | 0 | 0 | | 8. 1990.....| 44.4 | 72.7 | 0 | 0 | | 9. 1991.....| 59.4 | 74.2 | 0 | 0 | |10. 1992.....| 52.7 | 67.1 | 0 | 0 | |11. 1993.....| 59.5 | 79.6 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 5,903 | 196 | | 2. 1984.....| 100.0 | 754 | 74 | | 3. 1985.....| 100.0 | 2,033 | 168 | | 4. 1986.....| 100.0 | 3,394 | 487 | | 5. 1987.....| 100.0 | 5,179 | 690 | | 6. 1988.....| 100.0 | 10,707 | 803 | | 7. 1989.....| 100.0 | 20,215 | 1,615 | | 8. 1990.....| 100.0 | 19,941 | 2,544 | | 9. 1991.....| 100.0 | 29,186 | 5,525 | |10. 1992.....| 100.0 | 56,041 | 7,243 | |11. 1993.....| 100.0 | 104,125 | 9,268 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 257,478 | 28,613 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1D - WORKERS' COMPENSATION (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 27,891 | | 2. 1984.....| 353,354 | 39,214 | 314,140 | 325,746 | | 3. 1985.....| 511,954 | 109,858 | 402,096 | 472,059 | | 4. 1986.....| 695,318 | 166,599 | 528,719 | 568,264 | | 5. 1987.....| 886,240 | 251,154 | 635,086 | 715,757 | | 6. 1988.....| 1,113,903 | 325,033 | 788,870 | 838,551 | | 7. 1989.....| 1,218,623 | 360,007 | 858,616 | 919,063 | | 8. 1990.....| 1,283,788 | 405,735 | 878,053 | 849,769 | | 9. 1991.....| 1,331,954 | 468,720 | 863,234 | 666,993 | |10. 1992.....| 1,319,019 | 464,572 | 854,447 | 479,765 | |11. 1993.....| 1,321,759 | 383,806 | 937,953 | 396,442 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 6,260,300 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 12,866 | 1,884 | 159 | 263 | | 2. 1984.....| 48,928 | 34,571 | 2,629 | 5,742 | | 3. 1985.....| 86,521 | 43,662 | 3,414 | 6,237 | | 4. 1986.....| 148,746 | 52,989 | 4,084 | 6,760 | | 5. 1987.....| 197,269 | 62,499 | 5,768 | 6,425 | | 6. 1988.....| 237,711 | 72,752 | 7,281 | 7,292 | | 7. 1989.....| 278,815 | 73,006 | 9,010 | 7,989 | | 8. 1990.....| 275,425 | 74,379 | 6,219 | 5,322 | | 9. 1991.....| 224,740 | 61,002 | 4,294 | 3,439 | |10. 1992.....| 169,103 | 42,247 | 2,290 | 1,727 | |11. 1993.....| 268,332 | 24,032 | 385 | 392 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 1,948,456 | 543,023 | 45,533 | 51,588 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 194 | 16,944 | X X X X | | 2. 1984.....| 6,721 | 315,481 | 163,909 | | 3. 1985.....| 6,710 | 432,496 | 210,247 | | 4. 1986.....| 7,643 | 476,066 | 214,925 | | 5. 1987.....| 9,690 | 584,909 | 204,781 | | 6. 1988.....| 11,434 | 677,745 | 260,753 | | 7. 1989.....| 16,342 | 720,586 | 276,348 | | 8. 1990.....| 13,589 | 656,093 | 247,967 | | 9. 1991.....| 13,517 | 512,478 | 191,393 | |10. 1992.....| 12,346 | 362,965 | 175,667 | |11. 1993.....| 9,503 | 161,260 | 145,821 | |-------------|--------------|--------------|--------------| |12. Totals ..| 107,689 | 4,917,023 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 349,114 | 120,784 | 8,817 | 3,765 | | 2. 1984.....| 44,902 | 13,320 | 2,341 | 1,131 | | 3. 1985.....| 79,324 | 43,335 | 1,971 | 1,227 | | 4. 1986.....| 73,822 | 33,121 | 2,192 | 1,197 | | 5. 1987.....| 90,371 | 40,809 | 2,311 | 1,215 | | 6. 1988.....| 133,662 | 57,082 | 4,588 | 2,383 | | 7. 1989.....| 183,805 | 66,445 | 6,882 | 2,908 | | 8. 1990.....| 230,098 | 85,383 | 14,159 | 5,479 | | 9. 1991.....| 276,249 | 92,861 | 75,608 | 37,681 | |10. 1992.....| 342,274 | 113,394 | 183,716 | 52,304 | |11. 1993.....| 296,037 | 34,678 | 316,715 | 24,599 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 2,099,658 | 701,212 | 619,300 | 133,889 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 20,097 | 447 | | 2. 1984.....| 0 | 0 | 4,396 | 253 | | 3. 1985.....| 0 | 0 | 4,879 | 288 | | 4. 1986.....| 0 | 0 | 4,700 | 354 | | 5. 1987.....| 0 | 0 | 6,793 | 430 | | 6. 1988.....| 0 | 0 | 8,576 | 643 | | 7. 1989.....| 0 | 0 | 8,185 | 772 | | 8. 1990.....| 0 | 0 | 16,917 | 1,094 | | 9. 1991.....| 0 | 0 | 24,048 | 1,761 | |10. 1992.....| 0 | 0 | 32,122 | 4,476 | |11. 1993.....| 0 | 0 | 50,863 | 6,855 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 181,576 | 17,373 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 821 | 336 | 253,368 | 5,909 | | 2. 1984.....| 421 | 147 | 37,082 | 748 | | 3. 1985.....| 807 | 200 | 41,524 | 1,433 | | 4. 1986.....| 1,432 | 235 | 46,277 | 1,574 | | 5. 1987.....| 2,623 | 267 | 57,288 | 2,329 | | 6. 1988.....| 5,044 | 411 | 87,129 | 3,529 | | 7. 1989.....| 8,718 | 836 | 129,583 | 5,618 | | 8. 1990.....| 9,267 | 1,424 | 170,642 | 8,782 | | 9. 1991.....| 12,635 | 2,609 | 246,211 | 13,237 | |10. 1992.....| 13,326 | 6,600 | 394,538 | 19,422 | |11. 1993.....| 13,842 | 12,351 | 609,834 | 42,692 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 68,936 | 25,416 | 2,073,476 | 105,273 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 418,824 | 66,261 | 352,563 | 118.5 | | 3. 1985.....| 608,805 | 134,785 | 474,020 | 118.9 | | 4. 1986.....| 709,845 | 187,502 | 522,343 | 102.1 | | 5. 1987.....| 887,688 | 245,491 | 642,197 | 100.2 | | 6. 1988.....| 1,069,974 | 305,100 | 764,874 | 96.1 | | 7. 1989.....| 1,208,119 | 357,950 | 850,169 | 99.1 | | 8. 1990.....| 1,200,335 | 373,600 | 826,735 | 93.5 | | 9. 1991.....| 1,120,026 | 361,337 | 758,689 | 84.1 | |10. 1992.....| 1,099,070 | 341,567 | 757,503 | 83.3 | |11. 1993.....| 1,105,943 | 334,849 | 771,094 | 83.7 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 169.0 | 112.2 | 0 | 0 | | 3. 1985.....| 122.7 | 117.9 | 0 | 0 | | 4. 1986.....| 112.5 | 98.8 | 0 | 0 | | 5. 1987.....| 97.7 | 101.1 | 0 | 0 | | 6. 1988.....| 93.9 | 97.0 | 0 | 0 | | 7. 1989.....| 99.4 | 99.0 | 0 | 0 | | 8. 1990.....| 92.1 | 94.2 | 0 | 0 | | 9. 1991.....| 77.1 | 87.9 | 0 | 0 | |10. 1992.....| 73.5 | 88.7 | 0 | 0 | |11. 1993.....| 87.2 | 82.2 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 233,382 | 19,986 | | 2. 1984.....| 100.0 | 32,792 | 4,290 | | 3. 1985.....| 100.0 | 36,733 | 4,791 | | 4. 1986.....| 100.0 | 41,696 | 4,581 | | 5. 1987.....| 100.0 | 50,658 | 6,630 | | 6. 1988.....| 100.0 | 78,785 | 8,344 | | 7. 1989.....| 100.0 | 121,334 | 8,249 | | 8. 1990.....| 100.0 | 153,395 | 17,247 | | 9. 1991.....| 100.0 | 221,315 | 24,896 | |10. 1992.....| 100.0 | 360,292 | 34,246 | |11. 1993.....| 100.0 | 553,475 | 56,359 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 1,883,857 | 189,619 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss P | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 5,336 | | 2. 1984.....| 338,616 | 62,413 | 276,203 | 280,469 | | 3. 1985.....| 517,170 | 80,670 | 436,500 | 357,434 | | 4. 1986.....| 800,815 | 109,286 | 691,529 | 301,975 | | 5. 1987.....| 979,830 | 120,699 | 859,131 | 326,035 | | 6. 1988.....| 1,075,410 | 102,440 | 972,970 | 423,472 | | 7. 1989.....| 990,307 | 100,633 | 889,674 | 673,457 | | 8. 1990.....| 978,631 | 86,509 | 892,122 | 386,034 | | 9. 1991.....| 972,713 | 100,341 | 872,372 | 311,717 | |10. 1992.....| 988,913 | 127,562 | 861,351 | 600,171 | |11. 1993.....| 1,090,983 | 106,697 | 984,286 | 200,916 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 3,867,016 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 1,820 | 10,195 | 239 | 18 | | 2. 1984.....| 58,198 | 50,828 | 2,921 | 12,685 | | 3. 1985.....| 73,238 | 54,889 | 2,462 | 5,608 | | 4. 1986.....| 20,179 | 53,653 | 779 | 5,667 | | 5. 1987.....| 12,669 | 58,389 | 682 | 5,103 | | 6. 1988.....| 39,720 | 74,376 | 3,392 | 7,771 | | 7. 1989.....| 275,199 | 75,856 | 4,870 | 8,032 | | 8. 1990.....| 25,159 | 60,372 | 2,320 | 5,719 | | 9. 1991.....| 12,191 | 52,986 | 1,565 | 5,203 | |10. 1992.....| 338,224 | 52,849 | 9,853 | 4,566 | |11. 1993.....| 6,551 | 32,642 | 249 | 2,958 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 863,148 | 577,035 | 29,332 | 63,330 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 109 | 13,581 | X X X X | | 2. 1984.....| 4,939 | 275,117 | 76,571 | | 3. 1985.....| 5,294 | 341,917 | 82,882 | | 4. 1986.....| 6,414 | 341,084 | 71,705 | | 5. 1987.....| 8,070 | 379,143 | 79,629 | | 6. 1988.....| 10,593 | 465,329 | 91,380 | | 7. 1989.....| 13,619 | 482,863 | 100,837 | | 8. 1990.....| 14,545 | 433,472 | 100,162 | | 9. 1991.....| 16,816 | 367,763 | 101,936 | |10. 1992.....| 17,274 | 322,217 | 104,548 | |11. 1993.....| 18,076 | 244,834 | 94,253 | |-------------|--------------|--------------|--------------| |12. Totals ..| 115,749 | 3,667,320 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 25,985 | 3,649 | 132 | 0 | | 2. 1984.....| 6,139 | 2,725 | 197 | 4 | | 3. 1985.....| 4,905 | 207 | 285 | 4 | | 4. 1986.....| 6,851 | 10 | 415 | 5 | | 5. 1987.....| 17,283 | 28 | 1,225 | 49 | | 6. 1988.....| 28,320 | 358 | 3,282 | 61 | | 7. 1989.....| 56,229 | 1,464 | 8,901 | 1,272 | | 8. 1990.....| 76,845 | 2,038 | 13,874 | 5,096 | | 9. 1991.....| 123,456 | 7,709 | 16,628 | 9,048 | |10. 1992.....| 190,774 | 36,279 | 73,300 | 23,985 | |11. 1993.....| 196,364 | 211 | 198,508 | 46,486 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 733,151 | 54,678 | 316,747 | 86,010 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 9 | 2 | | 2. 1984.....| 0 | 0 | 86 | 1 | | 3. 1985.....| 0 | 0 | 117 | 1 | | 4. 1986.....| 0 | 0 | 178 | 1 | | 5. 1987.....| 0 | 0 | 570 | 47 | | 6. 1988.....| 0 | 0 | 3,157 | 49 | | 7. 1989.....| 0 | 0 | 5,793 | 516 | | 8. 1990.....| 0 | 0 | 11,433 | 1,288 | | 9. 1991.....| 0 | 0 | 25,964 | 2,169 | |10. 1992.....| 0 | 0 | 52,199 | 2,741 | |11. 1993.....| 0 | 0 | 51,107 | 5,966 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 150,613 | 12,781 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 51 | 57 | 22,532 | 1,257 | | 2. 1984.....| 45 | 15 | 3,707 | 227 | | 3. 1985.....| 93 | 28 | 5,123 | 228 | | 4. 1986.....| 156 | 31 | 7,459 | 284 | | 5. 1987.....| 187 | 55 | 19,009 | 518 | | 6. 1988.....| 888 | 84 | 34,375 | 789 | | 7. 1989.....| 1,030 | 175 | 67,846 | 1,584 | | 8. 1990.....| 1,226 | 295 | 94,025 | 2,193 | | 9. 1991.....| 1,804 | 535 | 147,657 | 3,737 | |10. 1992.....| 3,738 | 895 | 254,163 | 7,751 | |11. 1993.....| 11,186 | 1,466 | 394,782 | 19,092 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 20,404 | 3,636 | 1,050,678 | 37,660 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 342,673 | 63,849 | 278,824 | 101.2 | | 3. 1985.....| 422,952 | 75,912 | 347,040 | 81.8 | | 4. 1986.....| 369,517 | 20,974 | 348,543 | 46.1 | | 5. 1987.....| 411,627 | 13,475 | 398,152 | 42.0 | | 6. 1988.....| 543,284 | 43,580 | 499,704 | 50.5 | | 7. 1989.....| 834,030 | 283,321 | 550,709 | 84.2 | | 8. 1990.....| 563,398 | 35,901 | 527,497 | 57.6 | | 9. 1991.....| 548,102 | 32,682 | 515,420 | 56.3 | |10. 1992.....| 987,462 | 411,082 | 576,380 | 99.9 | |11. 1993.....| 699,079 | 59,463 | 639,616 | 64.1 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 102.3 | 100.9 | 0 | 0 | | 3. 1985.....| 94.1 | 79.5 | 0 | 0 | | 4. 1986.....| 19.2 | 50.4 | 0 | 0 | | 5. 1987.....| 11.2 | 46.3 | 0 | 0 | | 6. 1988.....| 42.5 | 51.4 | 0 | 0 | | 7. 1989.....| 281.5 | 61.9 | 0 | 0 | | 8. 1990.....| 41.5 | 59.1 | 0 | 0 | | 9. 1991.....| 32.6 | 59.1 | 0 | 0 | |10. 1992.....| 322.3 | 66.9 | 0 | 0 | |11. 1993.....| 55.7 | 65.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 22,468 | 64 | | 2. 1984.....| 100.0 | 3,607 | 100 | | 3. 1985.....| 100.0 | 4,979 | 144 | | 4. 1986.....| 100.0 | 7,251 | 208 | | 5. 1987.....| 100.0 | 18,431 | 578 | | 6. 1988.....| 100.0 | 31,183 | 3,192 | | 7. 1989.....| 100.0 | 62,394 | 5,452 | | 8. 1990.....| 100.0 | 83,585 | 10,440 | | 9. 1991.....| 100.0 | 123,327 | 24,330 | |10. 1992.....| 100.0 | 203,810 | 50,353 | |11. 1993.....| 100.0 | 348,175 | 46,607 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 909,210 | 141,468 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 4,422 | | 2. 1984.....| 3,982 | 537 | 3,445 | 4,452 | | 3. 1985.....| 9,980 | 2,351 | 7,629 | 7,549 | | 4. 1986.....| 17,369 | 4,311 | 13,058 | 4,141 | | 5. 1987.....| 3,296 | 739 | 2,557 | 10,891 | | 6. 1988.....| 4,542 | 790 | 3,752 | 14,205 | | 7. 1989.....| 5,875 | 1,426 | 4,449 | 13,078 | | 8. 1990.....| 4,250 | 748 | 3,502 | 7,509 | | 9. 1991.....| 10,018 | 2,918 | 7,100 | 640 | |10. 1992.....| 3,098 | 801 | 2,297 | 297 | |11. 1993.....| 12,139 | 12,014 | 125 | 30 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 67,214 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 1,486 | 711 | (9)| 0 | | 2. 1984.....| 476 | 1,802 | 75 | 0 | | 3. 1985.....| 1,208 | 2,486 | 161 | 17 | | 4. 1986.....| 673 | 2,011 | (1)| 10 | | 5. 1987.....| 3,217 | 3,588 | 114 | 0 | | 6. 1988.....| 3,744 | 4,766 | 642 | 0 | | 7. 1989.....| 8,085 | 5,315 | 3,083 | 0 | | 8. 1990.....| 8,735 | 2,649 | 2,856 | 0 | | 9. 1991.....| 152 | 216 | 94 | 0 | |10. 1992.....| 8 | 155 | 6 | 0 | |11. 1993.....| 0 | 41 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 27,784 | 23,740 | 7,021 | 27 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 451 | 4,107 | X X X X | | 2. 1984.....| 491 | 6,194 | 219 | | 3. 1985.....| 443 | 9,109 | 327 | | 4. 1986.....| 341 | 5,821 | 201 | | 5. 1987.....| 398 | 11,546 | 334 | | 6. 1988.....| 622 | 15,207 | 417 | | 7. 1989.....| 646 | 7,871 | 722 | | 8. 1990.....| 111 | (1,322)| 145 | | 9. 1991.....| 123 | 733 | (513)| |10. 1992.....| 276 | 714 | (390)| |11. 1993.....| 29 | 100 | 41 | |-------------|--------------|--------------|--------------| |12. Totals ..| 3,931 | 60,080 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 4,756 | 626 | 1,443 | 494 | | 2. 1984.....| 798 | 422 | 679 | 13 | | 3. 1985.....| 15 | 0 | 203 | 70 | | 4. 1986.....| 0 | 0 | 88 | 87 | | 5. 1987.....| 105 | (105)| 256 | 161 | | 6. 1988.....| 209 | 13 | 194 | 168 | | 7. 1989.....| (2,544)| (2,760)| 206 | 184 | | 8. 1990.....| (4,145)| (4,397)| 2,371 | 342 | | 9. 1991.....| 715 | 17 | 2,525 | 1,077 | |10. 1992.....| 1,326 | 31 | 5,076 | 3,041 | |11. 1993.....| 888 | 1 | 5,178 | 5,018 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 2,123 | (6,152)| 18,219 | 10,655 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 594 | 89 | | 2. 1984.....| 0 | 0 | 204 | 11 | | 3. 1985.....| 0 | 0 | 64 | 24 | | 4. 1986.....| 0 | 0 | 38 | 38 | | 5. 1987.....| 0 | 0 | 76 | 49 | | 6. 1988.....| 0 | 0 | 68 | 67 | | 7. 1989.....| 0 | 0 | 93 | 92 | | 8. 1990.....| 0 | 0 | 148 | 143 | | 9. 1991.....| 0 | 0 | 284 | 233 | |10. 1992.....| 0 | 0 | 810 | 491 | |11. 1993.....| 0 | 0 | 1,046 | 934 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 3,425 | 2,171 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 6 | 5,590 | 427 | | 2. 1984.....| 0 | 30 | 1,265 | 7 | | 3. 1985.....| 0 | 7 | 195 | 1 | | 4. 1986.....| 0 | 0 | 1 | 0 | | 5. 1987.....| 0 | 15 | 347 | 7 | | 6. 1988.....| 0 | 6 | 229 | 15 | | 7. 1989.....| 0 | 5 | 244 | 26 | | 8. 1990.....| 0 | 8 | 2,294 | 9 | | 9. 1991.....| 0 | 6 | 2,203 | 9 | |10. 1992.....| 0 | 25 | 3,674 | 10 | |11. 1993.....| 0 | 2 | 1,161 | 14 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 0 | 110 | 17,203 | 525 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 8,456 | 997 | 7,459 | 212.4 | | 3. 1985.....| 10,767 | 1,463 | 9,304 | 107.9 | | 4. 1986.....| 6,619 | 797 | 5,822 | 38.1 | | 5. 1987.....| 15,329 | 3,436 | 11,893 | 465.1 | | 6. 1988.....| 20,070 | 4,634 | 15,436 | 441.9 | | 7. 1989.....| 16,799 | 8,684 | 8,115 | 285.9 | | 8. 1990.....| 8,651 | 7,679 | 972 | 203.6 | | 9. 1991.....| 4,509 | 1,573 | 2,936 | 45.0 | |10. 1992.....| 7,965 | 3,577 | 4,388 | 257.1 | |11. 1993.....| 7,214 | 5,953 | 1,261 | 59.4 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 185.7 | 216.5 | 0 | 0 | | 3. 1985.....| 62.2 | 122.0 | 0 | 0 | | 4. 1986.....| 18.5 | 44.6 | 0 | 0 | | 5. 1987.....| 465.0 | 465.1 | 0 | 0 | | 6. 1988.....| 586.6 | 411.4 | 0 | 0 | | 7. 1989.....| 609.0 | 182.4 | 0 | 0 | | 8. 1990.....| 1,026.6 | 27.8 | 0 | 0 | | 9. 1991.....| 53.9 | 41.4 | 0 | 0 | |10. 1992.....| 446.6 | 191.0 | 0 | 0 | |11. 1993.....| 49.6 | 1,008.8 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 5,079 | 511 | | 2. 1984.....| 100.0 | 1,042 | 223 | | 3. 1985.....| 100.0 | 148 | 47 | | 4. 1986.....| 100.0 | 1 | 0 | | 5. 1987.....| 100.0 | 305 | 42 | | 6. 1988.....| 100.0 | 222 | 7 | | 7. 1989.....| 100.0 | 238 | 6 | | 8. 1990.....| 100.0 | 2,281 | 13 | | 9. 1991.....| 100.0 | 2,146 | 57 | |10. 1992.....| 100.0 | 3,330 | 344 | |11. 1993.....| 100.0 | 1,047 | 114 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 15,839 | 1,364 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 62 | | 2. 1984.....| 0 | 0 | 0 | (50)| | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 3 | | 5. 1987.....| 27,911 | 6,365 | 21,546 | 7,290 | | 6. 1988.....| 39,164 | 6,905 | 32,259 | 3,554 | | 7. 1989.....| 54,247 | 13,160 | 41,087 | 9,683 | | 8. 1990.....| 52,096 | 9,224 | 42,872 | 10,882 | | 9. 1991.....| 58,487 | 17,044 | 41,443 | 29,610 | |10. 1992.....| 63,423 | 16,422 | 47,001 | (39,518)| |11. 1993.....| 89,603 | 23,267 | 66,336 | 3,189 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 24,705 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 30 | 0 | 0 | 0 | | 2. 1984.....| (24)| 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 2 | 0 | 0 | 0 | | 5. 1987.....| 3,239 | 763 | 23 | 0 | | 6. 1988.....| 824 | 1,847 | 52 | 0 | | 7. 1989.....| 1,673 | 5,912 | 444 | 0 | | 8. 1990.....| 2,016 | 4,149 | 660 | 0 | | 9. 1991.....| 4,928 | 7,544 | 132 | 0 | |10. 1992.....| (44,300)| 2,344 | 25 | 0 | |11. 1993.....| 2,962 | 72 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| (28,650)| 22,631 | 1,336 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 0 | 32 | X X X X | | 2. 1984.....| 0 | (26)| 2 | | 3. 1985.....| 0 | 0 | 6 | | 4. 1986.....| 0 | 1 | 30 | | 5. 1987.....| 209 | 5,000 | 83 | | 6. 1988.....| 255 | 4,780 | 363 | | 7. 1989.....| 794 | 14,272 | 2,018 | | 8. 1990.....| 680 | 13,035 | 1,934 | | 9. 1991.....| 1,349 | 33,443 | 1,968 | |10. 1992.....| 447 | 7,548 | 2,300 | |11. 1993.....| 1,005 | 1,304 | 384 | |-------------|--------------|--------------|--------------| |12. Totals ..| 4,739 | 79,389 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 55 | 18 | 0 | 0 | | 2. 1984.....| (44)| (14)| 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 2 | 0 | 0 | 0 | | 5. 1987.....| 6,811 | 1,978 | 9,513 | 8,116 | | 6. 1988.....| 5,958 | 628 | 2,247 | 1,644 | | 7. 1989.....| 12,021 | 2,969 | 2,919 | 2,139 | | 8. 1990.....| 16,291 | 4,718 | 4,759 | 3,457 | | 9. 1991.....| 22,716 | 2,254 | 14,980 | 10,888 | |10. 1992.....| 91,781 | 75,810 | 32,563 | 27,366 | |11. 1993.....| 21,836 | 15,159 | 73,132 | 50,742 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 177,427 | 103,520 | 140,113 | 104,352 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 2,777 | 2,083 | | 6. 1988.....| 0 | 0 | 758 | 655 | | 7. 1989.....| 0 | 0 | 1,073 | 1,010 | | 8. 1990.....| 0 | 0 | 1,637 | 1,441 | | 9. 1991.....| 0 | 0 | 3,346 | 2,357 | |10. 1992.....| 0 | 0 | 5,820 | 2,967 | |11. 1993.....| 0 | 0 | 16,604 | 6,442 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 32,015 | 16,955 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 37 | 11 | | 2. 1984.....| 0 | 0 | (30)| 1 | | 3. 1985.....| 0 | 0 | 0 | 4 | | 4. 1986.....| 0 | 0 | 2 | 19 | | 5. 1987.....| 0 | 216 | 7,140 | 26 | | 6. 1988.....| 0 | 148 | 6,184 | 86 | | 7. 1989.....| 0 | 256 | 10,151 | 136 | | 8. 1990.....| 0 | 341 | 13,412 | 235 | | 9. 1991.....| 0 | 182 | 25,725 | 491 | |10. 1992.....| 0 | 222 | 24,243 | 525 | |11. 1993.....| 0 | 230 | 39,459 | 317 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 0 | 1,595 | 126,323 | 1,851 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| (94)| (38)| (56)| 0.0 | | 3. 1985.....| 0 | 0 | 0 | 0.0 | | 4. 1986.....| 5 | 2 | 3 | 0.0 | | 5. 1987.....| 27,579 | 15,439 | 12,140 | 98.8 | | 6. 1988.....| 14,767 | 3,803 | 10,964 | 37.7 | | 7. 1989.....| 32,658 | 8,235 | 24,423 | 60.2 | | 8. 1990.....| 38,739 | 12,292 | 26,447 | 74.4 | | 9. 1991.....| 79,727 | 20,559 | 59,168 | 136.3 | |10. 1992.....| 93,659 | 61,868 | 31,791 | 147.7 | |11. 1993.....| 116,068 | 75,305 | 40,763 | 129.5 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 0.0 | 0.0 | 0 | 0 | | 3. 1985.....| 0.0 | 0.0 | 0 | 0 | | 4. 1986.....| 0.0 | 0.0 | 0 | 0 | | 5. 1987.....| 242.6 | 56.3 | 0 | 0 | | 6. 1988.....| 55.1 | 34.0 | 0 | 0 | | 7. 1989.....| 62.6 | 59.4 | 0 | 0 | | 8. 1990.....| 133.3 | 61.7 | 0 | 0 | | 9. 1991.....| 120.6 | 142.8 | 0 | 0 | |10. 1992.....| 376.7 | 67.6 | 0 | 0 | |11. 1993.....| 323.7 | 61.4 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 37 | 0 | | 2. 1984.....| 100.0 | (30)| 0 | | 3. 1985.....| 100.0 | 0 | 0 | | 4. 1986.....| 100.0 | 2 | 0 | | 5. 1987.....| 100.0 | 6,230 | 910 | | 6. 1988.....| 100.0 | 5,933 | 251 | | 7. 1989.....| 100.0 | 9,832 | 319 | | 8. 1990.....| 100.0 | 12,875 | 537 | | 9. 1991.....| 100.0 | 24,554 | 1,171 | |10. 1992.....| 100.0 | 21,168 | 3,075 | |11. 1993.....| 100.0 | 29,067 | 10,392 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 109,668 | 16,655 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 6,435 | | 2. 1984.....| 308,846 | 104,367 | 204,479 | 236,072 | | 3. 1985.....| 323,837 | 176,515 | 147,322 | 188,397 | | 4. 1986.....| 330,056 | 167,189 | 162,867 | 130,543 | | 5. 1987.....| 383,438 | 149,011 | 234,427 | 271,871 | | 6. 1988.....| 430,300 | 220,732 | 209,568 | 312,575 | | 7. 1989.....| 392,484 | 191,061 | 201,423 | 343,113 | | 8. 1990.....| 321,738 | 151,662 | 170,076 | 231,411 | | 9. 1991.....| 320,139 | 156,382 | 163,757 | 207,823 | |10. 1992.....| 357,369 | 224,689 | 132,680 | 142,905 | |11. 1993.....| 372,075 | 175,209 | 196,866 | 85,230 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 2,156,375 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| (4,232)| 1,352 | 1,006 | 160 | | 2. 1984.....| 86,341 | 10,694 | 2,829 | 4,632 | | 3. 1985.....| 58,245 | 12,263 | 3,677 | 3,796 | | 4. 1986.....| 36,172 | 10,712 | 5,203 | 5,255 | | 5. 1987.....| 98,263 | 14,422 | 7,601 | 4,480 | | 6. 1988.....| 129,576 | 17,797 | 10,264 | 4,809 | | 7. 1989.....| 177,928 | 15,668 | 10,263 | 1,712 | | 8. 1990.....| 92,101 | 9,817 | 5,041 | 1,936 | | 9. 1991.....| 100,043 | 12,273 | 6,703 | 574 | |10. 1992.....| 68,772 | 7,046 | 2,607 | (2,065)| |11. 1993.....| 29,007 | 3,500 | 387 | 753 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 872,216 | 115,544 | 55,581 | 26,042 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 4 | 11,017 | X X X X | | 2. 1984.....| 4,542 | 162,138 | 0 | | 3. 1985.....| 4,394 | 143,132 | 0 | | 4. 1986.....| 4,173 | 104,053 | 0 | | 5. 1987.....| 4,977 | 185,406 | 0 | | 6. 1988.....| 5,093 | 195,625 | 0 | | 7. 1989.....| 4,107 | 174,697 | 0 | | 8. 1990.....| 2,844 | 146,930 | 0 | | 9. 1991.....| 181 | 113,531 | 0 | |10. 1992.....| 153 | 78,725 | 0 | |11. 1993.....| 98 | 59,434 | 0 | |-------------|--------------|--------------|--------------| |12. Totals ..| 30,566 | 1,374,688 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 44,515 | 31,854 | 4,258 | 67 | | 2. 1984.....| 2,651 | 865 | 2,293 | 68 | | 3. 1985.....| 9,797 | 3,842 | 2,292 | 68 | | 4. 1986.....| 7,566 | 5,760 | 2,308 | 95 | | 5. 1987.....| 10,816 | 9,257 | 2,634 | 311 | | 6. 1988.....| 47,189 | 43,146 | 2,725 | 1,369 | | 7. 1989.....| 34,310 | 28,788 | 3,586 | 2,117 | | 8. 1990.....| 34,732 | 37,575 | 15,221 | 4,298 | | 9. 1991.....| 30,310 | 25,130 | 52,384 | 29,436 | |10. 1992.....| 73,617 | 51,551 | 106,361 | 84,612 | |11. 1993.....| 66,377 | 17,118 | 163,970 | 93,511 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 361,880 | 254,886 | 358,032 | 215,952 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 13 | 7 | | 2. 1984.....| 0 | 0 | 12 | 9 | | 3. 1985.....| 0 | 0 | 12 | 9 | | 4. 1986.....| 0 | 0 | 17 | 13 | | 5. 1987.....| 0 | 0 | 55 | 42 | | 6. 1988.....| 0 | 0 | 3,254 | 3,176 | | 7. 1989.....| 0 | 0 | 3,401 | 3,291 | | 8. 1990.....| 0 | 0 | 4,813 | 4,575 | | 9. 1991.....| 0 | 0 | 5,174 | 1,938 | |10. 1992.....| 0 | 0 | 14,736 | 9,320 | |11. 1993.....| 0 | 0 | 24,591 | 13,239 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 56,078 | 35,619 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 25 | 0 | 16,858 | 7,599 | | 2. 1984.....| 25 | 2 | 4,016 | 369 | | 3. 1985.....| 50 | 2 | 8,184 | 304 | | 4. 1986.....| 50 | 2 | 4,025 | 261 | | 5. 1987.....| 150 | 4 | 3,899 | 311 | | 6. 1988.....| 175 | 40 | 5,517 | 343 | | 7. 1989.....| 475 | 51 | 7,152 | 377 | | 8. 1990.....| 900 | 117 | 8,435 | 394 | | 9. 1991.....| 1,050 | 261 | 31,625 | 497 | |10. 1992.....| 2,700 | 794 | 50,025 | 611 | |11. 1993.....| 4,225 | 2,111 | 133,181 | 1,573 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 9,825 | 3,384 | 272,917 | 12,639 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 256,266 | 90,112 | 166,154 | 83.0 | | 3. 1985.....| 217,157 | 65,841 | 151,316 | 67.1 | | 4. 1986.....| 155,321 | 47,243 | 108,078 | 47.1 | | 5. 1987.....| 304,779 | 115,474 | 189,305 | 79.5 | | 6. 1988.....| 388,673 | 187,531 | 201,142 | 90.3 | | 7. 1989.....| 404,236 | 222,387 | 181,849 | 103.0 | | 8. 1990.....| 298,955 | 143,590 | 155,365 | 92.9 | | 9. 1991.....| 308,406 | 163,250 | 145,156 | 96.3 | |10. 1992.....| 345,612 | 216,862 | 128,750 | 96.7 | |11. 1993.....| 345,877 | 153,262 | 192,615 | 93.0 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 86.3 | 81.3 | 0 | 0 | | 3. 1985.....| 37.3 | 102.7 | 0 | 0 | | 4. 1986.....| 28.3 | 66.4 | 0 | 0 | | 5. 1987.....| 77.5 | 80.8 | 0 | 0 | | 6. 1988.....| 85.0 | 96.0 | 0 | 0 | | 7. 1989.....| 116.4 | 90.3 | 0 | 0 | | 8. 1990.....| 94.7 | 91.4 | 0 | 0 | | 9. 1991.....| 104.4 | 88.6 | 0 | 0 | |10. 1992.....| 96.5 | 97.0 | 0 | 0 | |11. 1993.....| 87.5 | 97.8 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 16,852 | 6 | | 2. 1984.....| 100.0 | 4,011 | 5 | | 3. 1985.....| 100.0 | 8,179 | 5 | | 4. 1986.....| 100.0 | 4,019 | 6 | | 5. 1987.....| 100.0 | 3,882 | 17 | | 6. 1988.....| 100.0 | 5,399 | 118 | | 7. 1989.....| 100.0 | 6,991 | 161 | | 8. 1990.....| 100.0 | 8,080 | 355 | | 9. 1991.....| 100.0 | 28,128 | 3,497 | |10. 1992.....| 100.0 | 43,815 | 6,210 | |11. 1993.....| 100.0 | 119,718 | 13,463 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 249,074 | 23,843 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 27,695 | | 2. 1984.....| 159,778 | 50,894 | 108,884 | 235,626 | | 3. 1985.....| 252,680 | 72,762 | 179,918 | 307,589 | | 4. 1986.....| 412,116 | 146,511 | 265,605 | 188,222 | | 5. 1987.....| 519,927 | 151,804 | 368,123 | 135,923 | | 6. 1988.....| 600,049 | 199,659 | 400,390 | 213,822 | | 7. 1989.....| 595,214 | 173,319 | 421,895 | 207,875 | | 8. 1990.....| 439,444 | 142,629 | 296,815 | 85,410 | | 9. 1991.....| 213,910 | 86,005 | 127,905 | 40,883 | |10. 1992.....| 271,116 | 104,922 | 166,194 | 129,227 | |11. 1993.....| 286,391 | 73,491 | 212,900 | 40,668 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 1,612,940 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 31,435 | 18,882 | 8,277 | 539 | | 2. 1984.....| 105,331 | 50,352 | 17,219 | 165 | | 3. 1985.....| 135,750 | 41,287 | 6,935 | (1,117)| | 4. 1986.....| 65,415 | 39,505 | 8,698 | 547 | | 5. 1987.....| 19,796 | 25,948 | 2,239 | 213 | | 6. 1988.....| 58,387 | 43,777 | 2,490 | 479 | | 7. 1989.....| 54,908 | 41,399 | 3,947 | 180 | | 8. 1990.....| 41,022 | 19,357 | 2,469 | 76 | | 9. 1991.....| 8,876 | 8,242 | 831 | 101 | |10. 1992.....| 72,148 | 5,627 | 5,146 | 101 | |11. 1993.....| 3,895 | 3,331 | 120 | 28 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 596,963 | 297,707 | 58,371 | 1,312 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| (123)| 6,742 | X X X X | | 2. 1984.....| 6,835 | 170,263 | 17,885 | | 3. 1985.....| 8,478 | 214,669 | 15,373 | | 4. 1986.....| 7,578 | 161,192 | 26,210 | | 5. 1987.....| 6,806 | 146,642 | 14,024 | | 6. 1988.....| 8,640 | 205,362 | 28,439 | | 7. 1989.....| 10,773 | 201,192 | 22,052 | | 8. 1990.....| 7,052 | 68,328 | 19,180 | | 9. 1991.....| 5,326 | 44,744 | 15,298 | |10. 1992.....| 5,366 | 62,926 | 12,170 | |11. 1993.....| 6,058 | 46,042 | 9,088 | |-------------|--------------|--------------|--------------| |12. Totals ..| 72,789 | 1,328,102 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 234,403 | 175,191 | 4,946 | 500 | | 2. 1984.....| 40,997 | 21,745 | 5,797 | 2,708 | | 3. 1985.....| 40,806 | 19,305 | 6,543 | 3,800 | | 4. 1986.....| 14,708 | 2,158 | 8,655 | 5,096 | | 5. 1987.....| 16,428 | (3,192)| 20,234 | 6,628 | | 6. 1988.....| 40,207 | (14,270)| 36,035 | 20,272 | | 7. 1989.....| 62,985 | 14,597 | 63,530 | 30,881 | | 8. 1990.....| 58,661 | 25,895 | 98,143 | 41,741 | | 9. 1991.....| 31,039 | (6,517)| 59,111 | 44,285 | |10. 1992.....| 28,329 | 4,198 | 85,388 | 63,801 | |11. 1993.....| 48,606 | 12,336 | 136,996 | 75,688 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 617,169 | 251,446 | 525,378 | 295,400 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 4,128 | 3,004 | | 2. 1984.....| 0 | 0 | 2,210 | 901 | | 3. 1985.....| 0 | 0 | 3,653 | 1,213 | | 4. 1986.....| 0 | 0 | 5,115 | 2,395 | | 5. 1987.....| 0 | 0 | 7,961 | 3,562 | | 6. 1988.....| 0 | 0 | 18,941 | 5,645 | | 7. 1989.....| 0 | 0 | 26,525 | 9,706 | | 8. 1990.....| 0 | 0 | 33,624 | 11,838 | | 9. 1991.....| 0 | 0 | 33,822 | 7,664 | |10. 1992.....| 0 | 0 | 36,222 | 8,195 | |11. 1993.....| 0 | 0 | 47,663 | 9,103 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 219,864 | 63,226 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 37 | 126 | 64,908 | 3,333 | | 2. 1984.....| 0 | 149 | 23,799 | 433 | | 3. 1985.....| 22 | 141 | 26,825 | 523 | | 4. 1986.....| (1)| 313 | 19,142 | 314 | | 5. 1987.....| 1 | 301 | 37,926 | 460 | | 6. 1988.....| (1)| 1,190 | 84,726 | 977 | | 7. 1989.....| 0 | 1,622 | 99,478 | 1,332 | | 8. 1990.....| 2 | 2,476 | 113,430 | 1,370 | | 9. 1991.....| 15 | 3,888 | 82,428 | 1,553 | |10. 1992.....| 15 | 2,996 | 76,741 | 2,274 | |11. 1993.....| 33 | 4,131 | 140,269 | 4,434 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 123 | 17,333 | 769,672 | 17,003 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 341,966 | 147,904 | 194,062 | 214.0 | | 3. 1985.....| 408,497 | 167,003 | 241,494 | 161.7 | | 4. 1986.....| 264,096 | 83,762 | 180,334 | 64.1 | | 5. 1987.....| 213,601 | 29,033 | 184,568 | 41.1 | | 6. 1988.....| 362,612 | 72,524 | 290,088 | 60.4 | | 7. 1989.....| 414,709 | 114,039 | 300,670 | 69.7 | | 8. 1990.....| 304,723 | 122,965 | 181,758 | 69.3 | | 9. 1991.....| 182,311 | 55,139 | 127,172 | 85.2 | |10. 1992.....| 293,155 | 153,488 | 139,667 | 108.1 | |11. 1993.....| 287,453 | 101,142 | 186,311 | 100.4 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 290.6 | 178.2 | 0 | 0 | | 3. 1985.....| 229.5 | 134.2 | 0 | 0 | | 4. 1986.....| 57.2 | 67.9 | 0 | 0 | | 5. 1987.....| 19.1 | 50.1 | 0 | 0 | | 6. 1988.....| 36.3 | 72.5 | 0 | 0 | | 7. 1989.....| 65.8 | 71.3 | 0 | 0 | | 8. 1990.....| 86.2 | 61.2 | 0 | 0 | | 9. 1991.....| 64.1 | 99.4 | 0 | 0 | |10. 1992.....| 146.3 | 84.0 | 0 | 0 | |11. 1993.....| 137.6 | 87.5 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 63,658 | 1,250 | | 2. 1984.....| 100.0 | 22,341 | 1,458 | | 3. 1985.....| 100.0 | 24,244 | 2,581 | | 4. 1986.....| 100.0 | 16,109 | 3,033 | | 5. 1987.....| 100.0 | 33,226 | 4,700 | | 6. 1988.....| 100.0 | 70,240 | 14,486 | | 7. 1989.....| 100.0 | 81,037 | 18,441 | | 8. 1990.....| 100.0 | 89,168 | 24,262 | | 9. 1991.....| 100.0 | 52,382 | 30,046 | |10. 1992.....| 100.0 | 45,718 | 31,023 | |11. 1993.....| 100.0 | 97,578 | 42,691 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 595,701 | 173,971 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 72 | | 2. 1984.....| 0 | 0 | 0 | (37)| | 3. 1985.....| 0 | 0 | 0 | 5 | | 4. 1986.....| 0 | 0 | 0 | 3 | | 5. 1987.....| 0 | 0 | 0 | 30 | | 6. 1988.....| 0 | 0 | 0 | 49 | | 7. 1989.....| 0 | 0 | 0 | (122)| | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 120,760 | 48,999 | 71,761 | 33,070 | |10. 1992.....| 134,611 | 51,702 | 82,909 | 15,107 | |11. 1993.....| 185,852 | 39,961 | 145,891 | 425 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 48,602 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 68 | 3 | 15 | 0 | | 2. 1984.....| (41)| 2 | (3)| 0 | | 3. 1985.....| 0 | 0 | 1 | 0 | | 4. 1986.....| (1)| 1 | 1 | 0 | | 5. 1987.....| 9 | 0 | 0 | 0 | | 6. 1988.....| 3 | 2 | 3 | 0 | | 7. 1989.....| (38)| (8)| (17)| 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 7,986 | 753 | 90 | 0 | |10. 1992.....| 9 | 687 | 0 | 4 | |11. 1993.....| 0 | 286 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 7,995 | 1,726 | 90 | 4 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 0 | (8)| X X X X | | 2. 1984.....| 0 | 9 | 23 | | 3. 1985.....| 0 | 4 | 19 | | 4. 1986.....| 0 | 4 | 61 | | 5. 1987.....| 0 | 21 | 43 | | 6. 1988.....| 0 | 45 | 83 | | 7. 1989.....| 0 | (75)| 190 | | 8. 1990.....| 0 | 0 | 336 | | 9. 1991.....| 517 | 26,264 | 2,999 | |10. 1992.....| 189 | 15,974 | 2,265 | |11. 1993.....| 51 | 762 | 953 | |-------------|--------------|--------------|--------------| |12. Totals ..| 757 | 43,000 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 543 | 312 | 0 | 0 | | 2. 1984.....| (399)| (229)| 0 | 0 | | 3. 1985.....| 33 | 12 | 0 | 0 | | 4. 1986.....| 9 | 4 | 0 | 0 | | 5. 1987.....| 10 | 3 | 0 | 0 | | 6. 1988.....| 87 | 81 | 0 | 0 | | 7. 1989.....| (283)| (183)| 0 | 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 9,147 | 1,772 | 21,006 | 11,593 | |10. 1992.....| 26,174 | 7,398 | 29,738 | 15,376 | |11. 1993.....| 35,971 | 23,571 | 57,230 | 8,751 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 71,292 | 32,741 | 107,974 | 35,720 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 0 | 0 | | 6. 1988.....| 0 | 0 | 0 | 0 | | 7. 1989.....| 0 | 0 | 0 | 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 0 | 0 | 4,489 | 1,816 | |10. 1992.....| 0 | 0 | 12,982 | 1,844 | |11. 1993.....| 0 | 0 | 37,623 | 2,289 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 55,094 | 5,949 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 231 | 33 | | 2. 1984.....| 0 | 0 | (170)| 12 | | 3. 1985.....| 0 | 0 | 21 | 11 | | 4. 1986.....| 0 | 0 | 5 | 36 | | 5. 1987.....| 0 | 0 | 7 | 28 | | 6. 1988.....| 0 | 0 | 6 | 46 | | 7. 1989.....| 0 | 0 | (100)| 126 | | 8. 1990.....| 0 | 0 | 0 | 198 | | 9. 1991.....| 0 | 2,836 | 22,297 | 301 | |10. 1992.....| 0 | 2,101 | 46,377 | 446 | |11. 1993.....| 0 | 1,248 | 97,461 | 576 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 0 | 6,185 | 166,135 | 1,813 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| (434)| (273)| (161)| 0.0 | | 3. 1985.....| 38 | 13 | 25 | 0.0 | | 4. 1986.....| 13 | 4 | 9 | 0.0 | | 5. 1987.....| 40 | 12 | 28 | 0.0 | | 6. 1988.....| 138 | 87 | 51 | 0.0 | | 7. 1989.....| (413)| (238)| (175)| 0.0 | | 8. 1990.....| 0 | 0 | 0 | 0.0 | | 9. 1991.....| 71,818 | 23,257 | 48,561 | 59.5 | |10. 1992.....| 86,978 | 24,627 | 62,351 | 64.6 | |11. 1993.....| 132,834 | 34,611 | 98,223 | 71.5 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 0.0 | 0.0 | 0 | 0 | | 3. 1985.....| 0.0 | 0.0 | 0 | 0 | | 4. 1986.....| 0.0 | 0.0 | 0 | 0 | | 5. 1987.....| 0.0 | 0.0 | 0 | 0 | | 6. 1988.....| 0.0 | 0.0 | 0 | 0 | | 7. 1989.....| 0.0 | 0.0 | 0 | 0 | | 8. 1990.....| 0.0 | 0.0 | 0 | 0 | | 9. 1991.....| 47.5 | 67.7 | 0 | 0 | |10. 1992.....| 47.6 | 75.2 | 0 | 0 | |11. 1993.....| 86.6 | 67.3 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves| | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | Loss | | |Participation | Losses | Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | 231 | 0 | | 2. 1984.....| 100.0 | (170)| 0 | | 3. 1985.....| 100.0 | 21 | 0 | | 4. 1986.....| 100.0 | 5 | 0 | | 5. 1987.....| 100.0 | 7 | 0 | | 6. 1988.....| 100.0 | 6 | 0 | | 7. 1989.....| 100.0 | (100)| 0 | | 8. 1990.....| 100.0 | 0 | 0 | | 9. 1991.....| 100.0 | 16,788 | 5,509 | |10. 1992.....| 100.0 | 33,138 | 13,239 | |11. 1993.....| 100.0 | 60,879 | 36,582 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 110,805 | 55,330 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT) (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 56,732 | | 2. 1992.....| 564,283 | 269,460 | 294,823 | 570,780 | | 3. 1993.....| 559,178 | 298,998 | 260,180 | 203,531 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 831,043 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 41,725 | 6,453 | 2,705 | 6,206 | | 2. 1992.....| 373,099 | 15,195 | 4,592 | 4,446 | | 3. 1993.....| 101,372 | 4,675 | 871 | 1,999 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 516,196 | 26,323 | 8,168 | 12,651 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 90 | 18,845 | X X X X | | 2. 1992.....| 2,065 | 210,349 | X X X X | | 3. 1993.....| 1,676 | 107,639 | X X X X | |-------------|--------------|--------------|--------------| | 4. Totals ..| 3,831 | 336,833 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 91,684 | 83,171 | 63 | 12 | | 2. 1992.....| 69,994 | 46,673 | 15,074 | 13,360 | | 3. 1993.....| 91,334 | 47,689 | 206,595 | 166,561 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| 253,012 | 177,533 | 221,732 | 179,933 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 3,174 | 2,998 | | 2. 1992.....| 0 | 0 | 38,450 | 36,724 | | 3. 1993.....| 0 | 0 | 8,944 | 1,152 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | 0 | 50,568 | 40,874 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 1,265 | 10 | 8,750 | 3,103 | | 2. 1992.....| 948 | 180 | 26,941 | 1,702 | | 3. 1993.....| 1,921 | 405 | 91,876 | 6,043 | |-------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 4,134 | 595 | 127,567 | 10,848 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1992.....| 711,738 | 474,448 | 237,290 | 126.1 | | 3. 1993.....| 517,160 | 317,645 | 199,515 | 92.5 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1992.....| 176.1 | 80.5 | 0 | 0 | | 3. 1993.....| 106.2 | 76.7 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | 8,564 | 186 | | 2. 1992.....| 100.0 | 25,035 | 1,906 | | 3. 1993.....| 100.0 | 83,679 | 8,197 | |-------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | 117,278 | 10,289 | ---------------------------------------------------------- SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 3,091 | | 2. 1992.....| 241,372 | 24,712 | 216,660 | 117,825 | | 3. 1993.....| 259,172 | 16,175 | 242,997 | 112,460 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 233,376 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 518 | 1,111 | 236 | 1,397 | | 2. 1992.....| 8,113 | 15,172 | 444 | 14,035 | | 3. 1993.....| 3,132 | 18,021 | 80 | 7,688 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 11,763 | 34,304 | 760 | 23,120 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 48 | 3,496 | X X X X | | 2. 1992.....| 4,193 | 128,633 | 146,435 | | 3. 1993.....| 4,934 | 132,203 | 102,682 | |-------------|--------------|--------------|--------------| | 4. Totals ..| 9,175 | 264,332 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 4,892 | 3,911 | 411 | 193 | | 2. 1992.....| 997 | (437)| 2,909 | 1,537 | | 3. 1993.....| 6,281 | 245 | 5,509 | 2,513 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| 12,170 | 3,719 | 8,829 | 4,243 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 605 | 151 | | 2. 1992.....| 0 | 0 | 938 | 184 | | 3. 1993.....| 0 | 0 | 3,081 | 543 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | 0 | 4,624 | 878 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 1,739 | 0 | 1,653 | 1,965 | | 2. 1992.....| 1,901 | 139 | 3,699 | 748 | | 3. 1993.....| 9,233 | 249 | 11,819 | 5,236 | |-------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 12,873 | 388 | 17,171 | 7,949 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1992.....| 142,173 | 9,841 | 132,332 | 58.9 | | 3. 1993.....| 150,535 | 6,513 | 144,022 | 58.1 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1992.....| 39.8 | 61.1 | 0 | 0 | | 3. 1993.....| 40.3 | 59.3 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | 1,199 | 454 | | 2. 1992.....| 100.0 | 2,806 | 893 | | 3. 1993.....| 100.0 | 9,032 | 2,787 | |-------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | 13,037 | 4,134 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 7,558 | | 2. 1992.....| 128,726 | 36,572 | 92,154 | 38,376 | | 3. 1993.....| 141,181 | 6,056 | 135,125 | 23,257 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 69,191 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| (3,451)| 1,682 | (331)| 3,920 | | 2. 1992.....| 23,461 | 1,725 | 121 | 631 | | 3. 1993.....| 40 | 1,155 | (1)| 993 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 20,050 | 4,562 | (211)| 5,544 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 114 | 13,136 | X X X X | | 2. 1992.....| 479 | 16,998 | X X X X | | 3. 1993.....| 607 | 24,980 | X X X X | |-------------|--------------|--------------|--------------| | 4. Totals ..| 1,200 | 55,114 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 38,264 | 14,180 | 2,938 | 941 | | 2. 1992.....| 5,315 | 7,626 | 11,194 | 3,264 | | 3. 1993.....| 27,358 | 3,997 | 45,649 | 24,291 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| 70,937 | 25,803 | 59,781 | 28,496 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 2,420 | 402 | | 2. 1992.....| 0 | 0 | 5,341 | 1,948 | | 3. 1993.....| 0 | 0 | 7,801 | 3,612 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | 0 | 15,562 | 5,962 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 5,271 | 62 | 28,161 | 1,072 | | 2. 1992.....| 1,692 | 39 | 9,051 | 214 | | 3. 1993.....| 1,053 | 139 | 49,047 | 658 | |-------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 8,016 | 240 | 86,259 | 1,944 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1992.....| 62,469 | 36,420 | 26,049 | 48.5 | | 3. 1993.....| 105,966 | 31,939 | 74,027 | 75.1 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1992.....| 99.6 | 28.3 | 0 | 0 | | 3. 1993.....| 527.4 | 54.8 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | 26,081 | 2,080 | | 2. 1992.....| 100.0 | 5,619 | 3,432 | | 3. 1993.....| 100.0 | 44,719 | 4,328 | |-------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | 76,419 | 9,840 | ---------------------------------------------------------- SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH) (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 6,074 | | 2. 1992.....| 141,347 | 54,796 | 86,551 | 89,856 | | 3. 1993.....| 111,012 | 69,964 | 41,048 | 27,019 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 122,949 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 6,284 | 354 | 73 | 1,453 | | 2. 1992.....| 38,679 | 844 | 389 | 256 | | 3. 1993.....| 11,213 | 131 | 47 | 59 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 56,176 | 1,329 | 509 | 1,768 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 1 | 72 | X X X X | | 2. 1992.....| 123 | 51,755 | X X X X | | 3. 1993.....| 70 | 15,960 | X X X X | |-------------|--------------|--------------|--------------| | 4. Totals ..| 194 | 67,787 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 4,519 | 4,133 | 7 | (1)| | 2. 1992.....| 4,859 | 2,760 | 1,042 | 815 | | 3. 1993.....| 20,843 | 7,195 | 19,166 | 13,841 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| 30,221 | 14,088 | 20,215 | 14,655 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 913 | 889 | | 2. 1992.....| 0 | 0 | 965 | 732 | | 3. 1993.....| 0 | 0 | 4,623 | 1,453 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | 0 | 6,501 | 3,074 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 950 | 0 | 418 | 263 | | 2. 1992.....| 259 | 828 | 3,387 | 1,214 | | 3. 1993.....| 1,150 | 92 | 22,235 | 944 | |-------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 2,359 | 920 | 26,040 | 2,421 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1992.....| 98,517 | 43,375 | 55,142 | 69.7 | | 3. 1993.....| 71,944 | 33,749 | 38,195 | 64.8 | |-------------|-------------|-------------|-------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1992.....| 79.2 | 63.7 | 0 | 0 | | 3. 1993.....| 48.2 | 93.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | 394 | 24 | | 2. 1992.....| 100.0 | 2,326 | 1,061 | | 3. 1993.....| 100.0 | 18,973 | 3,262 | |-------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | 21,693 | 4,347 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1M - INTERNATIONAL (000 omitted) ----------------------------------------------------------------------- | | Premiums Earned | | 1 |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ..| X X X X | X X X X | X X X X | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 0 | 0 | (8,905)| | 9. 1991....| 16,182 | 0 | 16,182 | 6,146 | |10. 1992....| 14,670 | 0 | 14,670 | 5,687 | |11. 1993....| 12,377 | 0 | 12,377 | 2,622 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 5,550 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | | | 1 |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ..| 0 | 0 | 0 | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 2,210 | 0 | 307 | | 9. 1991....| 0 | 528 | 0 | 66 | |10. 1992....| 0 | 373 | 0 | 39 | |11. 1993....| 0 | 109 | 0 | 43 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 3,220 | 0 | 455 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | | | 1 |-----------------------------| 12 | | Years | 10 | 11 | | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ..| 0 | 0 | X X X X | | 2. 1984....| 0 | 0 | X X X X | | 3. 1985....| 0 | 0 | X X X X | | 4. 1986....| 0 | 0 | X X X X | | 5. 1987....| 0 | 0 | X X X X | | 6. 1988....| 0 | 0 | X X X X | | 7. 1989....| 0 | 0 | X X X X | | 8. 1990....| 0 | (6,695)| X X X X | | 9. 1991....| 0 | 6,674 | X X X X | |10. 1992....| 0 | 6,060 | X X X X | |11. 1993....| 0 | 2,731 | X X X X | |-------------|--------------|--------------|--------------| |12. Totals ..| 0 | 8,770 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ..| 2 | 2 | 0 | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | | 8. 1990....| 4,405 | 0 | 2,076 | 0 | | 9. 1991....| 1,600 | 0 | 1,655 | 0 | |10. 1992....| 1,566 | 0 | 1,831 | 0 | |11. 1993....| 2,096 | 0 | 4,122 | 1 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 9,669 | 2 | 9,684 | 1 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ..| 0 | 0 | 0 | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 0 | 619 | 0 | | 9. 1991....| 0 | 0 | 498 | 0 | |10. 1992....| 0 | 0 | 547 | 0 | |11. 1993....| 0 | 0 | 641 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 2,305 | 0 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct | | | Anticipated | Unpaid | Unpaid | and Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ..| 0 | 0 | 0 | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 94 | 7,194 | 0 | | 9. 1991....| 0 | 46 | 3,799 | 0 | |10. 1992....| 0 | 46 | 3,990 | 0 | |11. 1993....| 0 | 70 | 6,928 | 0 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 0 | 256 | 21,911 | 0 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ..| X X X X | X X X X | X X X X | X X X X | | 2. 1984....| 0 | 0 | 0 | 0.0 | | 3. 1985....| 0 | 0 | 0 | 0.0 | | 4. 1986....| 0 | 0 | 0 | 0.0 | | 5. 1987....| 0 | 0 | 0 | 0.0 | | 6. 1988....| 0 | 0 | 0 | 0.0 | | 7. 1989....| 0 | 0 | 0 | 0.0 | | 8. 1990....| 499 | 0 | 499 | 0.0 | | 9. 1991....| 10,473 | 0 | 10,473 | 64.7 | |10. 1992....| 10,050 | 0 | 10,050 | 68.5 | |11. 1993....| 9,660 | 1 | 9,659 | 78.0 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ..| X X X X | X X X X | 0 | 0 | | 2. 1984....| 0.0 | 0.0 | 0 | 0 | | 3. 1985....| 0.0 | 0.0 | 0 | 0 | | 4. 1986....| 0.0 | 0.0 | 0 | 0 | | 5. 1987....| 0.0 | 0.0 | 0 | 0 | | 6. 1988....| 0.0 | 0.0 | 0 | 0 | | 7. 1989....| 0.0 | 0.0 | 0 | 0 | | 8. 1990....| 0.0 | 0.0 | 0 | 0 | | 9. 1991....| 0.0 | 64.7 | 0 | 0 | |10. 1992....| 0.0 | 68.5 | 0 | 0 | |11. 1993....| 0.0 | 78.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | |Inter-Company |-----------------------------| | | Pooling | 34 | 35 | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ..| X X X X | 0 | 0 | | 2. 1984....| 100.0 | 0 | 0 | | 3. 1985....| 100.0 | 0 | 0 | | 4. 1986....| 100.0 | 0 | 0 | | 5. 1987....| 100.0 | 0 | 0 | | 6. 1988....| 100.0 | 0 | 0 | | 7. 1989....| 100.0 | 0 | 0 | | 8. 1990....| 100.0 | 6,481 | 713 | | 9. 1991....| 100.0 | 3,255 | 544 | |10. 1992....| 100.0 | 3,397 | 593 | |11. 1993....| 100.0 | 6,217 | 711 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 19,350 | 2,561 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1N - REINSURANCE A (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 21,526 | 0 | 21,526 | 16,695 | | 2. 1989.....| 43,987 | 13,766 | 30,221 | 101,162 | | 3. 1990.....| 48,212 | 21,768 | 26,444 | 56,202 | | 4. 1991.....| 48,327 | 23,187 | 25,140 | 39,457 | | 5. 1992.....| 93,382 | 57,234 | 36,148 | 20,922 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | 234,438 | ----------------------------------------------------------------------- NOTE: Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 13,558 | 0 | 0 | 53 | | 2. 1989.....| 56,592 | 0 | 0 | 126 | | 3. 1990.....| 16,129 | 0 | 0 | 5 | | 4. 1991.....| 8,826 | 0 | 0 | 14 | | 5. 1992.....| (33,788)| 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 61,317 | 0 | 0 | 198 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. 1988.....| 0 | 3,137 | X X X X | | 2. 1989.....| 0 | 44,570 | X X X X | | 3. 1990.....| 0 | 40,073 | X X X X | | 4. 1991.....| 0 | 30,631 | X X X X | | 5. 1992.....| 0 | 54,710 | X X X X | | 6. 1993.....| 0 | 0 | X X X X | |-------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 173,121 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | 0 | | 2. 1989.....| 0 | 0 | 0 | 0 | | 3. 1990.....| 0 | 0 | 0 | 0 | | 4. 1991.....| 0 | 0 | 0 | 0 | | 5. 1992.....| 0 | 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| 0 | 0 | 0 | 0 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | 0 | | 2. 1989.....| 0 | 0 | 0 | 0 | | 3. 1990.....| 0 | 0 | 0 | 0 | | 4. 1991.....| 0 | 0 | 0 | 0 | | 5. 1992.....| 0 | 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 0 | 0 | 0 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | X X X X | | 2. 1989.....| 0 | 0 | 0 | X X X X | | 3. 1990.....| 0 | 0 | 0 | X X X X | | 4. 1991.....| 0 | 0 | 0 | X X X X | | 5. 1992.....| 0 | 0 | 0 | X X X X | | 6. 1993.....| 0 | 0 | 0 | X X X X | |-------------|--------------|--------------|--------------|-------------| | 7. Totals ..| 0 | 0 | 0 | X X X X | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 16,695 | 13,558 | 3,137 | 77.6 | | 2. 1989.....| 101,162 | 56,592 | 44,570 | 230.0 | | 3. 1990.....| 56,202 | 16,129 | 40,073 | 116.6 | | 4. 1991.....| 39,457 | 8,826 | 30,631 | 81.6 | | 5. 1992.....| 20,922 | (33,788)| 54,710 | 22.4 | | 6. 1993.....| 0 | 0 | 0 | 0.0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 0.0 | 14.6 | 0 | 0 | | 2. 1989.....| 411.1 | 147.5 | 0 | 0 | | 3. 1990.....| 74.1 | 151.5 | 0 | 0 | | 4. 1991.....| 38.1 | 121.8 | 0 | 0 | | 5. 1992.....| (59.0)| 151.4 | 0 | 0 | | 6. 1993.....| 0.0 | 0.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. 1988.....| 100.0 | 0 | 0 | | 2. 1989.....| 100.0 | 0 | 0 | | 3. 1990.....| 100.0 | 0 | 0 | | 4. 1991.....| 100.0 | 0 | 0 | | 5. 1992.....| 100.0 | 0 | 0 | | 6. 1993.....| 100.0 | 0 | 0 | |-------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | 0 | 0 | ---------------------------------------------------------- SCHEDULE P - PART 1O - REINSURANCE B (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 16,456 | 15,794 | 662 | 20,557 | | 2. 1989.....| 61,546 | 4,037 | 57,509 | 54,685 | | 3. 1990.....| 38,232 | 2,339 | 35,893 | 15,026 | | 4. 1991.....| 17,169 | 591 | 16,578 | 884 | | 5. 1992.....| 20,645 | 2,920 | 17,725 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | 91,152 | ----------------------------------------------------------------------- NOTE: Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 28,426 | 0 | 0 | 1 | | 2. 1989.....| (3,595)| 0 | 0 | 7 | | 3. 1990.....| (11,328)| 0 | 0 | 143 | | 4. 1991.....| (13,756)| 0 | 0 | 105 | | 5. 1992.....| (13,212)| 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| (13,465)| 0 | 0 | 256 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. 1988.....| 0 | (7,869)| X X X X | | 2. 1989.....| 0 | 58,280 | X X X X | | 3. 1990.....| 0 | 26,354 | X X X X | | 4. 1991.....| 0 | 14,640 | X X X X | | 5. 1992.....| 0 | 13,212 | X X X X | | 6. 1993.....| 0 | 0 | X X X X | |-------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 104,617 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | 0 | | 2. 1989.....| 0 | 0 | 0 | 0 | | 3. 1990.....| 0 | 0 | 0 | 0 | | 4. 1991.....| 0 | 0 | 0 | 0 | | 5. 1992.....| 0 | 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| 0 | 0 | 0 | 0 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | 0 | | 2. 1989.....| 0 | 0 | 0 | 0 | | 3. 1990.....| 0 | 0 | 0 | 0 | | 4. 1991.....| 0 | 0 | 0 | 0 | | 5. 1992.....| 0 | 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 0 | 0 | 0 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | X X X X | | 2. 1989.....| 0 | 0 | 0 | X X X X | | 3. 1990.....| 0 | 0 | 0 | X X X X | | 4. 1991.....| 0 | 0 | 0 | X X X X | | 5. 1992.....| 0 | 0 | 0 | X X X X | | 6. 1993.....| 0 | 0 | 0 | X X X X | |-------------|--------------|--------------|--------------|-------------| | 7. Totals ..| 0 | 0 | 0 | X X X X | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 20,557 | 28,426 | (7,869)| 124.9 | | 2. 1989.....| 54,685 | (3,595)| 58,280 | 88.9 | | 3. 1990.....| 15,026 | (11,328)| 26,354 | 39.3 | | 4. 1991.....| 884 | (13,756)| 14,640 | 5.1 | | 5. 1992.....| 0 | (13,212)| 13,212 | 0.0 | | 6. 1993.....| 0 | 0 | 0 | 0.0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 180.0 | (1,188.7)| 0 | 0 | | 2. 1989.....| (89.1)| 101.3 | 0 | 0 | | 3. 1990.....| (484.3)| 73.4 | 0 | 0 | | 4. 1991.....| (2,327.6)| 88.3 | 0 | 0 | | 5. 1992.....| (452.5)| 74.5 | 0 | 0 | | 6. 1993.....| 0.0 | 0.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. 1988.....| 100.0 | 0 | 0 | | 2. 1989.....| 100.0 | 0 | 0 | | 3. 1990.....| 100.0 | 0 | 0 | | 4. 1991.....| 100.0 | 0 | 0 | | 5. 1992.....| 100.0 | 0 | 0 | | 6. 1993.....| 100.0 | 0 | 0 | |-------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | 0 | 0 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1P - REINSURANCE C (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 588 | 0 | 588 | 541 | | 2. 1989.....| 364 | 40 | 324 | 23 | | 3. 1990.....| 293 | 137 | 156 | (154)| | 4. 1991.....| 20 | 9 | 11 | 1 | | 5. 1992.....| 96 | 76 | 20 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | 411 | ----------------------------------------------------------------------- NOTE: Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| (51)| 0 | 0 | 0 | | 2. 1989.....| (34)| 0 | 0 | 0 | | 3. 1990.....| (41)| 0 | 0 | 0 | | 4. 1991.....| (3)| 0 | 0 | 0 | | 5. 1992.....| (16)| 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| (145)| 0 | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. 1988.....| 0 | 592 | X X X X | | 2. 1989.....| 0 | 57 | X X X X | | 3. 1990.....| 0 | (113)| X X X X | | 4. 1991.....| 0 | 4 | X X X X | | 5. 1992.....| 0 | 16 | X X X X | | 6. 1993.....| 0 | 0 | X X X X | |-------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 556 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | 0 | | 2. 1989.....| 0 | 0 | 0 | 0 | | 3. 1990.....| 0 | 0 | 0 | 0 | | 4. 1991.....| 0 | 0 | 0 | 0 | | 5. 1992.....| 0 | 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| 0 | 0 | 0 | 0 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | 0 | | 2. 1989.....| 0 | 0 | 0 | 0 | | 3. 1990.....| 0 | 0 | 0 | 0 | | 4. 1991.....| 0 | 0 | 0 | 0 | | 5. 1992.....| 0 | 0 | 0 | 0 | | 6. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 0 | 0 | 0 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. 1988.....| 0 | 0 | 0 | X X X X | | 2. 1989.....| 0 | 0 | 0 | X X X X | | 3. 1990.....| 0 | 0 | 0 | X X X X | | 4. 1991.....| 0 | 0 | 0 | X X X X | | 5. 1992.....| 0 | 0 | 0 | X X X X | | 6. 1993.....| 0 | 0 | 0 | X X X X | |-------------|--------------|--------------|--------------|-------------| | 7. Totals ..| 0 | 0 | 0 | X X X X | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. 1988.....| 541 | (51)| 592 | 92.0 | | 2. 1989.....| 23 | (34)| 57 | 6.3 | | 3. 1990.....| (154)| (41)| (113)| (52.6)| | 4. 1991.....| 1 | (3)| 4 | 5.0 | | 5. 1992.....| 0 | (16)| 16 | 0.0 | | 6. 1993.....| 0 | 0 | 0 | 0.0 | |-------------|-------------|-------------|-------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. 1988.....| 0.0 | 100.7 | 0 | 0 | | 2. 1989.....| (85.0)| 17.6 | 0 | 0 | | 3. 1990.....| (29.9)| (72.4)| 0 | 0 | | 4. 1991.....| (33.3)| 36.4 | 0 | 0 | | 5. 1992.....| (21.1)| 80.0 | 0 | 0 | | 6. 1993.....| 0.0 | 0.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. 1988.....| 100.0 | 0 | 0 | | 2. 1989.....| 100.0 | 0 | 0 | | 3. 1990.....| 100.0 | 0 | 0 | | 4. 1991.....| 100.0 | 0 | 0 | | 5. 1992.....| 100.0 | 0 | 0 | | 6. 1993.....| 100.0 | 0 | 0 | |-------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | 0 | 0 | ---------------------------------------------------------- SCHEDULE P - PART 1Q - REINSURANCE D (000 omitted) ----------------------------------------------------------------------- | 1 | Premiums Earned | | |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 156 | | 2. 1984.....| 3,948 | 2,238 | 1,710 | 10,957 | | 3. 1985.....| 4,119 | 3,827 | 292 | 45,422 | | 4. 1986.....| 2,823 | 166 | 2,657 | 1,261 | | 5. 1987.....| 4,249 | 2,551 | 1,698 | 41,946 | |-------------|-------------|-------------|-------------|--------------| | 6. Totals ..| X X X X | X X X X | X X X X | 99,742 | ----------------------------------------------------------------------- NOTE: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | 1 | Loss and Loss Expense Payments | |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 257 | 0 | (1)| 0 | | 2. 1984.....| 7,494 | (1)| 0 | 0 | | 3. 1985.....| 43,966 | 0 | 0 | 0 | | 4. 1986.....| 2,705 | 0 | 0 | 0 | | 5. 1987.....| 42,852 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 6. Totals ..| 97,274 | (1)| (1)| 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | 1 | | | | |-----------------------------| | | Years | 10 | 11 | 12 | | Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 0 | (100)| X X X X | | 2. 1984.....| 0 | 3,462 | X X X X | | 3. 1985.....| 0 | 1,456 | X X X X | | 4. 1986.....| 0 | (1,444)| X X X X | | 5. 1987.....| 0 | (906)| X X X X | |-------------|--------------|--------------|--------------| | 6. Totals ..| 0 | 2,468 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 363 | 366 | 177 | 177 | | 2. 1984.....| 6 | 4 | 2 | 2 | | 3. 1985.....| 2 | 1 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------| | 6. Totals ..| 371 | 371 | 179 | 179 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 6. Totals ..| 0 | 0 | 0 | 0 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expense | and Expenses | Direct and | | | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 0 | 0 | (3)| X X X X | | 2. 1984.....| 0 | 0 | 2 | X X X X | | 3. 1985.....| 0 | 0 | 1 | X X X X | | 4. 1986.....| 0 | 0 | 0 | X X X X | | 5. 1987.....| 0 | 0 | 0 | X X X X | |-------------|--------------|--------------|--------------|-------------| | 6. Totals ..| 0 | 0 | 0 | X X X X | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | | | | | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 10,964 | 7,500 | 3,464 | 277.7 | | 3. 1985.....| 45,424 | 43,967 | 1,457 | 1,102.8 | | 4. 1986.....| 1,261 | 2,705 | (1,444)| 44.7 | | 5. 1987.....| 41,946 | 42,852 | (906)| 987.2 | |-------------|-------------|-------------|-------------|--------------| | 6. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 335.1 | 202.6 | 0 | 0 | | 3. 1985.....| 1,148.9 | 499.0 | 0 | 0 | | 4. 1986.....| 1,629.5 | (54.3)| 0 | 0 | | 5. 1987.....| 1,679.8 | (53.4)| 0 | 0 | |-------------|--------------|--------------|--------------|--------------| | 6. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | | |-----------------------------| | |Inter-Company | 34 | 35 | | | Pooling | | | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 0.0 | (3)| 0 | | 2. 1984.....| 100.0 | 2 | 0 | | 3. 1985.....| 100.0 | 1 | 0 | | 4. 1986.....| 100.0 | 0 | 0 | | 5. 1987.....| 100.0 | 0 | 0 | |-------------|--------------|--------------|--------------| | 6. Totals ..| X X X X | 0 | 0 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE (000 omitted) ----------------------------------------------------------------------- | | Premiums Earned | | 1 |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 27,333 | | 2. 1984.....| 42,202 | 17,140 | 25,062 | 31,513 | | 3. 1985.....| 72,460 | 28,965 | 43,495 | 34,615 | | 4. 1986.....| 136,542 | 52,582 | 83,960 | 22,060 | | 5. 1987.....| 137,211 | 59,259 | 77,952 | 15,041 | | 6. 1988.....| 73,500 | 31,421 | 42,079 | 16,262 | | 7. 1989.....| 56,106 | 24,872 | 31,234 | 28,671 | | 8. 1990.....| 38,733 | 17,641 | 21,092 | 17,067 | | 9. 1991.....| 45,308 | 28,404 | 16,904 | 16,168 | |10. 1992.....| 40,975 | 27,855 | 13,120 | 6,492 | |11. 1993.....| 89,201 | 59,905 | 29,296 | 1,220 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 216,442 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | | | 1 |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 8,523 | 17,812 | (10,491)| 7 | | 2. 1984.....| 15,613 | 22,690 | 12,604 | (19)| | 3. 1985.....| 24,631 | 19,261 | 9,730 | 46 | | 4. 1986.....| 13,418 | 12,363 | 6,370 | 71 | | 5. 1987.....| 4,238 | 12,756 | 2,713 | (22)| | 6. 1988.....| (3,980)| 15,752 | 3,558 | 8 | | 7. 1989.....| 24,115 | 11,339 | 6,613 | 41 | | 8. 1990.....| 10,774 | 6,972 | 4,952 | (2)| | 9. 1991.....| 13,481 | 2,907 | 2,626 | (24)| |10. 1992.....| 4,581 | 1,390 | 1,209 | (155)| |11. 1993.....| 1,004 | 221 | 149 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 116,398 | 123,463 | 40,033 | (49)| -------------------------------------------------------------------------- ---------------------------------------------------------- | | | | | 1 |-----------------------------| 12 | | Years | 10 | 11 | | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 2,109 | 49,222 | X X X X | | 2. 1984.....| 1,338 | 27,324 | 3,703 | | 3. 1985.....| 597 | 20,112 | 3,610 | | 4. 1986.....| 979 | 15,614 | 3,945 | | 5. 1987.....| 1,003 | 21,849 | 1,675 | | 6. 1988.....| 2,159 | 34,595 | 1,362 | | 7. 1989.....| 454 | 9,736 | 573 | | 8. 1990.....| 1,235 | 9,548 | 440 | | 9. 1991.....| 1,940 | 4,908 | 455 | |10. 1992.....| 1,059 | 3,151 | 263 | |11. 1993.....| 2,856 | 3,144 | 8 | |-------------|--------------|--------------|--------------| |12. Totals ..| 15,729 | 199,203 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 69,296 | 25,973 | 1,672 | 228 | | 2. 1984.....| 2,654 | 1,890 | 715 | 329 | | 3. 1985.....| 2,734 | 2,470 | 1,158 | 298 | | 4. 1986.....| 2,766 | 2,141 | 2,594 | 868 | | 5. 1987.....| 6,202 | 3,141 | 5,245 | 1,966 | | 6. 1988.....| 5,232 | 2,125 | 7,725 | 2,601 | | 7. 1989.....| 10,901 | 7,100 | 8,642 | 3,315 | | 8. 1990.....| 13,989 | 8,742 | 6,247 | 3,672 | | 9. 1991.....| 13,315 | 9,440 | 8,145 | 5,019 | |10. 1992.....| 12,338 | 9,870 | 25,124 | 21,369 | |11. 1993.....| 2,087 | 1,358 | 49,615 | 30,888 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 141,514 | 74,250 | 116,882 | 70,553 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 661 | 296 | | 2. 1984.....| 0 | 0 | 527 | 44 | | 3. 1985.....| 0 | 0 | 869 | 113 | | 4. 1986.....| 0 | 0 | 1,187 | 259 | | 5. 1987.....| 0 | 0 | 1,456 | 322 | | 6. 1988.....| 0 | 0 | 2,187 | 629 | | 7. 1989.....| 0 | 0 | 2,602 | 973 | | 8. 1990.....| 0 | 0 | 5,396 | 1,636 | | 9. 1991.....| 0 | 0 | 5,719 | 1,126 | |10. 1992.....| 0 | 0 | 7,850 | 2,542 | |11. 1993.....| 0 | 0 | 7,242 | 2,934 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 35,696 | 10,874 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct | | | Anticipated | Unpaid | Unpaid | and Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 5 | 519 | 45,651 | 3,282 | | 2. 1984.....| 0 | 95 | 1,728 | 175 | | 3. 1985.....| 3 | 170 | 2,050 | 128 | | 4. 1986.....| 0 | 138 | 3,417 | 64 | | 5. 1987.....| 0 | 164 | 7,638 | 58 | | 6. 1988.....| 0 | 213 | 10,002 | 56 | | 7. 1989.....| 0 | 202 | 10,959 | 69 | | 8. 1990.....| (1)| 421 | 12,003 | 52 | | 9. 1991.....| 1 | 345 | 11,939 | 84 | |10. 1992.....| 1 | 380 | 11,911 | 51 | |11. 1993.....| 3 | 384 | 24,148 | 30 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 12 | 3,031 | 141,446 | 4,049 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 59,532 | 30,480 | 29,052 | 141.1 | | 3. 1985.....| 59,404 | 37,242 | 22,162 | 82.0 | | 4. 1986.....| 42,087 | 23,056 | 19,031 | 30.8 | | 5. 1987.....| 41,867 | 12,380 | 29,487 | 30.5 | | 6. 1988.....| 49,530 | 4,933 | 44,597 | 67.4 | | 7. 1989.....| 62,811 | 42,116 | 20,695 | 112.0 | | 8. 1990.....| 51,327 | 29,776 | 21,551 | 132.5 | | 9. 1991.....| 48,539 | 31,692 | 16,847 | 107.1 | |10. 1992.....| 54,633 | 39,571 | 15,062 | 133.3 | |11. 1993.....| 63,625 | 36,333 | 27,292 | 71.3 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 177.8 | 115.9 | 0 | 0 | | 3. 1985.....| 128.6 | 51.0 | 0 | 0 | | 4. 1986.....| 43.8 | 22.7 | 0 | 0 | | 5. 1987.....| 20.9 | 37.8 | 0 | 0 | | 6. 1988.....| 15.7 | 106.0 | 0 | 0 | | 7. 1989.....| 169.3 | 66.3 | 0 | 0 | | 8. 1990.....| 168.8 | 102.2 | 0 | 0 | | 9. 1991.....| 111.6 | 99.7 | 0 | 0 | |10. 1992.....| 142.1 | 114.8 | 0 | 0 | |11. 1993.....| 60.7 | 93.2 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | |Inter-Company |-----------------------------| | | Pooling | 34 | 35 | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | 44,767 | 884 | | 2. 1984.....| 100.0 | 1,150 | 578 | | 3. 1985.....| 100.0 | 1,124 | 926 | | 4. 1986.....| 100.0 | 2,351 | 1,066 | | 5. 1987.....| 100.0 | 6,340 | 1,298 | | 6. 1988.....| 100.0 | 8,231 | 1,771 | | 7. 1989.....| 100.0 | 9,128 | 1,831 | | 8. 1990.....| 100.0 | 7,822 | 4,181 | | 9. 1991.....| 100.0 | 7,001 | 4,938 | |10. 1992.....| 100.0 | 6,223 | 5,688 | |11. 1993.....| 100.0 | 19,456 | 4,692 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 113,593 | 27,853 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 1R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE (000 omitted) ----------------------------------------------------------------------- | | Premiums Earned | | 1 |-----------------------------------------|--------------- | Years | 2 | 3 | 4 | Loss Payments | in Which | | | | |Premiums Were| | | |--------------- | Earned and | Direct | | Net | 5 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Incurred | Assumed | | | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 0 | 0 | | 6. 1988.....| 0 | 0 | 0 | 0 | | 7. 1989.....| 0 | 0 | 0 | 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 0 | 0 | 0 | 0 | |10. 1992.....| 0 | 0 | 0 | 0 | |11. 1993.....| 1,756 | 0 | 1,756 | 12 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 12 | ----------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. -------------------------------------------------------------------------- | | | 1 |------------------------------------------------------------ | Years | | Allocated Loss | 9 | | in Which | | Expense Payments | | |Premiums Were|--------------|-----------------------------| Salvage | | Earned and | 6 | 7 | 8 | and | | Losses Were | | Direct | | Subrogation | | Incurred | Ceded | and Assumed | Ceded | Received | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| (30)| 0 | 0 | 0 | | 2. 1984.....| 24 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 1 | 0 | 0 | | 6. 1988.....| (8)| 0 | 0 | 0 | | 7. 1989.....| 14 | (1)| 0 | 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 0 | 0 | 0 | 0 | |10. 1992.....| 0 | 0 | 0 | 0 | |11. 1993.....| 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | | | 1 |-----------------------------| 12 | | Years | 10 | 11 | | | in Which | | | Number of | |Premiums Were| Unallocated | Total | Claims | | Earned and | Loss | Net Paid | Reported - | | Losses Were | Expense | (5 - 6 + 7 | Direct and | | Incurred | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| 0 | 30 | X X X X | | 2. 1984.....| 0 | (24)| 0 | | 3. 1985.....| 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | | 5. 1987.....| 6 | 7 | 0 | | 6. 1988.....| 10 | 18 | 0 | | 7. 1989.....| (13)| (28)| 0 | | 8. 1990.....| 0 | 0 | 0 | | 9. 1991.....| 0 | 0 | 0 | |10. 1992.....| 0 | 0 | 0 | |11. 1993.....| 38 | 50 | 0 | |-------------|--------------|--------------|--------------| |12. Totals ..| 41 | 53 | X X X X | ---------------------------------------------------------- ----------------------------------------------------------------------- | | Losses Unpaid | | |--------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |---------------------------|----------------------------| | | 13 | 14 | 15 | 16 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 4 | 3 | 0 | 0 | | 6. 1988.....| 0 | 0 | 0 | 0 | | 7. 1989.....| (4)| 0 | 0 | 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 0 | 0 | 0 | 0 | |10. 1992.....| 0 | 0 | 0 | 0 | |11. 1993.....| 108 | 0 | 1,036 | 0 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| 108 | 3 | 1,036 | 0 | ----------------------------------------------------------------------- -------------------------------------------------------------------------- | | Allocated Loss Expenses Unpaid | | |-----------------------------------------------------------| | | Case Basis | Bulk + IBNR | | |-----------------------------|-----------------------------| | | 17 | 18 | 19 | 20 | | | Direct | | Direct | | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 0 | 0 | 0 | 0 | | 6. 1988.....| 0 | 0 | 0 | 0 | | 7. 1989.....| 0 | 0 | 0 | 0 | | 8. 1990.....| 0 | 0 | 0 | 0 | | 9. 1991.....| 0 | 0 | 0 | 0 | |10. 1992.....| 0 | 0 | 0 | 0 | |11. 1993.....| 0 | 0 | 840 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 840 | 0 | -------------------------------------------------------------------------- ------------------------------------------------------------------------ | | | | | | | | 21 | 22 | 23 | 24 | | | | | | Number of | | | Salvage | Unallocated | Total | Claims | | | and | Loss | Net Losses |Outstanding -| | | Subrogation | Expenses | and Expenses | Direct | | | Anticipated | Unpaid | Unpaid | and Assumed | |-------------|--------------|--------------|--------------|-------------| | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 1 | | 5. 1987.....| 0 | 0 | 1 | 2 | | 6. 1988.....| 0 | 0 | 0 | 1 | | 7. 1989.....| 0 | 0 | (4)| 8 | | 8. 1990.....| 0 | 0 | 0 | 1 | | 9. 1991.....| 0 | 0 | 0 | 2 | |10. 1992.....| 0 | 0 | 0 | 5 | |11. 1993.....| 0 | 76 | 2,060 | 17 | |-------------|--------------|--------------|--------------|-------------| |12. Totals ..| 0 | 76 | 2,057 | 37 | ------------------------------------------------------------------------ ----------------------------------------------------------------------- | | | Loss and Loss | | Total Losses and | Expense Percentage | | Loss Expenses Incurred | (Incurred/Premiums | | | Earned) | |-----------------------------------------|--------------- | | 25 | 26 | 27 | 28 | | | Direct | | | Direct | | | and Assumed | Ceded | Net * | and Assumed | |-------------|-------------|-------------|-------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | | 2. 1984.....| 0 | 24 | (24)| 0.0 | | 3. 1985.....| 0 | 0 | 0 | 0.0 | | 4. 1986.....| 0 | 0 | 0 | 0.0 | | 5. 1987.....| 11 | 3 | 8 | 0.0 | | 6. 1988.....| 10 | (8)| 18 | 0.0 | | 7. 1989.....| (18)| 14 | (32)| 0.0 | | 8. 1990.....| 0 | 0 | 0 | 0.0 | | 9. 1991.....| 0 | 0 | 0 | 0.0 | |10. 1992.....| 0 | 0 | 0 | 0.0 | |11. 1993.....| 2,110 | 0 | 2,110 | 120.2 | |-------------|-------------|-------------|-------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) -------------------------------------------------------------------------- | | | Discount for Time | | | | Value of Money | | |-----------------------------|-----------------------------| | | 29 | 30 | 31 | 32 | | | | | | Loss | | | Ceded | Net | Loss | Expense | |-------------|--------------|--------------|--------------|--------------| | | | | | | | 1. Prior ...| X X X X | X X X X | 0 | 0 | | 2. 1984.....| 0.0 | 0.0 | 0 | 0 | | 3. 1985.....| 0.0 | 0.0 | 0 | 0 | | 4. 1986.....| 0.0 | 0.0 | 0 | 0 | | 5. 1987.....| 0.0 | 0.0 | 0 | 0 | | 6. 1988.....| 0.0 | 0.0 | 0 | 0 | | 7. 1989.....| 0.0 | 0.0 | 0 | 0 | | 8. 1990.....| 0.0 | 0.0 | 0 | 0 | | 9. 1991.....| 0.0 | 0.0 | 0 | 0 | |10. 1992.....| 0.0 | 0.0 | 0 | 0 | |11. 1993.....| 0.0 | 120.2 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | 0 | 0 | -------------------------------------------------------------------------- ---------------------------------------------------------- | | | Net Balance Sheet Reserves | | | 33 | After Discount | | |Inter-Company |-----------------------------| | | Pooling | 34 | 35 | | |Participation | Losses |Loss Expenses | | | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------| | | | | | | 1. Prior ...| X X X X | 0 | 0 | | 2. 1984.....| 100.0 | 0 | 0 | | 3. 1985.....| 100.0 | 0 | 0 | | 4. 1986.....| 100.0 | 0 | 0 | | 5. 1987.....| 100.0 | 1 | 0 | | 6. 1988.....| 100.0 | 0 | 0 | | 7. 1989.....| 100.0 | (4)| 0 | | 8. 1990.....| 100.0 | 0 | 0 | | 9. 1991.....| 100.0 | 0 | 0 | |10. 1992.....| 100.0 | 0 | 0 | |11. 1993.....| 100.0 | 1,144 | 916 | |-------------|--------------|--------------|--------------| |12. Totals ..| X X X X | 1,141 | 916 | ---------------------------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 2A - HOMEOWNERS/FARMOWNERS ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | | | | | | | 1. Prior ......| 49,994 * | 51,087 | 53,981 | 56,473 | | 2. 1984........| 219,097 | 222,547 | 225,733 | 224,964 | | 3. 1985........| X X X X | 254,121 | 258,964 | 254,416 | | 4. 1986........| X X X X | X X X X | 219,477 | 212,292 | | 5. 1987........| X X X X | X X X X | X X X X | 189,534 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 56,707 | 56,754 | 56,309 | 56,566 | 59,882 | 224,433 | 226,069 | 225,982 | 226,075 | 225,708 | 253,875 | 254,678 | 254,796 | 254,558 | 254,180 | 204,570 | 202,853 | 199,953 | 199,603 | 199,275 | 186,110 | 177,742 | 175,058 | 175,031 | 174,761 | 190,120 | 187,692 | 185,309 | 179,440 | 178,980 | X X X X | 165,386 | 162,781 | 163,403 | 162,172 | X X X X | X X X X | 149,717 | 155,297 | 157,516 | X X X X | X X X X | X X X X | 184,083 | 192,187 | X X X X | X X X X | X X X X | X X X X | 192,517 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| | | | 56,408 | (3,475)| (159)| 224,449 | (1,259)| (1,626)| 254,388 | 208 | (170)| 199,905 | 630 | 302 | 173,674 | (1,087)| (1,357)| 181,646 | 2,666 | 2,206 | 163,169 | 997 | (234)| 157,204 | (312)| 1,907 | 193,927 | 1,740 | 9,844 | 196,214 | 3,697 | X X X X | 179,536 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 3,805 | 10,713 | --------------------------- SCHEDULE P - PART 2B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 212,523 * | 242,360 | 238,627 | 241,673 | | 2. 1984........| 312,001 | 356,158 | 356,276 | 356,282 | | 3. 1985........| X X X X | 369,386 | 356,025 | 361,261 | | 4. 1986........| X X X X | X X X X | 410,836 | 396,107 | | 5. 1987........| X X X X | X X X X | X X X X | 388,120 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 240,447 | 249,363 | 249,456 | 253,056 | 254,994 | 358,615 | 366,233 | 365,709 | 365,404 | 365,518 | 374,966 | 385,193 | 386,098 | 385,790 | 382,940 | 392,858 | 386,952 | 383,912 | 379,429 | 377,023 | 382,497 | 357,959 | 357,046 | 355,300 | 348,444 | 332,162 | 321,176 | 318,623 | 317,335 | 315,302 | X X X X | 293,194 | 292,183 | 286,763 | 283,770 | X X X X | X X X X | 253,512 | 252,095 | 250,005 | X X X X | X X X X | X X X X | 222,993 | 243,331 | X X X X | X X X X | X X X X | X X X X | 247,326 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 251,611 | (3,383)| (1,445)| 367,956 | 2,438 | 2,552 | 385,009 | 2,069 | (781)| 379,536 | 2,513 | 107 | 350,434 | 1,990 | (4,866)| 317,528 | 2,226 | 193 | 289,954 | 6,184 | 3,191 | 250,673 | 668 | (1,422)| 250,464 | 7,133 | 27,471 | 246,520 | (806)| X X X X | 318,117 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 21,032 | 25,000 | --------------------------- SCHEDULE P - PART 2C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 128,238 * | 151,303 | 158,200 | 164,942 | | 2. 1984........| 115,329 | 131,966 | 140,449 | 148,601 | | 3. 1985........| X X X X | 122,724 | 139,955 | 145,427 | | 4. 1986........| X X X X | X X X X | 147,117 | 157,213 | | 5. 1987........| X X X X | X X X X | X X X X | 162,309 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 166,212 | 162,044 | 168,216 | 164,858 | 165,025 | 151,246 | 157,203 | 158,961 | 158,985 | 160,039 | 157,861 | 175,805 | 181,856 | 187,398 | 190,738 | 155,809 | 165,894 | 172,330 | 178,571 | 184,306 | 158,569 | 161,385 | 170,118 | 173,373 | 183,948 | 176,480 | 173,389 | 179,671 | 183,610 | 195,509 | X X X X | 165,842 | 162,494 | 159,220 | 181,013 | X X X X | X X X X | 146,850 | 145,582 | 134,536 | X X X X | X X X X | X X X X | 129,929 | 121,633 | X X X X | X X X X | X X X X | X X X X | 122,008 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 169,664 | 4,639 | 4,806 | 159,892 | (147)| 907 | 193,314 | 2,576 | 5,916 | 187,023 | 2,717 | 8,452 | 189,830 | 5,882 | 16,457 | 206,792 | 11,283 | 23,182 | 192,331 | 11,318 | 33,111 | 138,741 | 4,205 | (6,841)| 127,906 | 6,273 | (2,023)| 115,604 | (6,404)| X X X X | 138,149 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 42,342 | 83,967 | --------------------------- SCHEDULE P - PART 2D - WORKERS' COMPENSATION ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 569,802 * | 571,966 | 579,783 | 594,480 | | 2. 1984........| 257,767 | 302,199 | 315,934 | 328,998 | | 3. 1985........| X X X X | 363,260 | 373,847 | 380,559 | | 4. 1986........| X X X X | X X X X | 478,137 | 477,061 | | 5. 1987........| X X X X | X X X X | X X X X | 562,000 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 611,432 | 625,561 | 631,427 | 645,931 | 674,118 | 335,328 | 337,963 | 340,330 | 344,038 | 343,799 | 413,441 | 435,823 | 443,604 | 453,448 | 465,043 | 472,576 | 482,185 | 483,505 | 498,753 | 516,220 | 563,012 | 580,798 | 585,372 | 602,634 | 629,881 | 675,143 | 704,615 | 716,215 | 725,393 | 753,077 | X X X X | 758,045 | 774,893 | 789,110 | 799,679 | X X X X | X X X X | 782,395 | 799,824 | 807,084 | X X X X | X X X X | X X X X | 809,256 | 783,207 | X X X X | X X X X | X X X X | X X X X | 761,487 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 694,498 | 20,380 | 48,567 | 345,695 | 1,896 | 1,657 | 467,110 | 2,067 | 13,662 | 514,465 | (1,755)| 15,712 | 632,240 | 2,359 | 29,606 | 753,028 | (49)| 27,636 | 832,991 | 33,312 | 43,881 | 811,722 | 4,638 | 11,898 | 742,563 | (40,644)| (66,693)| 738,557 | (22,930)| X X X X | 749,240 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | (726)| 125,926 | --------------------------- SCHEDULE P - PART 2E - COMMERCIAL MULTIPLE PERIL ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 208,712 * | 260,419 | 261,266 | 279,454 | | 2. 1984........| 238,837 | 236,764 | 236,820 | 234,617 | | 3. 1985........| X X X X | 310,403 | 310,461 | 302,719 | | 4. 1986........| X X X X | X X X X | 407,517 | 371,931 | | 5. 1987........| X X X X | X X X X | X X X X | 450,439 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ *Reported reserves only. Subsequent development relates only to subsequent payments and reserves. **Current year less first or second prior year, showing (redundant) or adverse. - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 296,115 | 309,190 | 311,909 | 321,134 | 341,909 | 248,679 | 262,233 | 268,478 | 275,950 | 276,203 | 317,067 | 333,146 | 338,962 | 341,878 | 340,928 | 359,554 | 347,551 | 343,996 | 341,844 | 340,678 | 430,394 | 407,486 | 400,356 | 391,547 | 388,928 | 522,018 | 499,787 | 503,431 | 495,055 | 489,478 | X X X X | 544,785 | 547,815 | 540,682 | 533,009 | X X X X | X X X X | 509,105 | 509,862 | 508,479 | X X X X | X X X X | X X X X | 519,500 | 494,239 | X X X X | X X X X | X X X X | X X X X | 583,308 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 349,344 | 7,435 | 28,210 | 273,870 | (2,333)| (2,080)| 341,718 | 790 | (160)| 342,098 | 1,420 | 254 | 390,027 | 1,099 | (1,520)| 489,027 | (451)| (6,028)| 536,915 | 3,906 | (3,767)| 512,657 | 4,178 | 2,795 | 498,069 | 3,830 | (21,431)| 558,211 | (25,097)| X X X X | 620,074 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | (5,223)| (3,727)| --------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 2F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | | | | | | | 1. Prior ......| 42,020 * | 50,951 | 49,882 | 49,924 | | 2. 1984........| 1,704 | 4,670 | 5,039 | 5,955 | | 3. 1985........| X X X X | 6,173 | 5,919 | 7,086 | | 4. 1986........| X X X X | X X X X | 9,025 | 6,847 | | 5. 1987........| X X X X | X X X X | X X X X | 10,457 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 48,777 | 50,300 | 49,693 | 49,592 | 48,674 | 5,926 | 6,321 | 6,436 | 6,858 | 6,650 | 9,130 | 9,165 | 9,209 | 9,102 | 9,564 | 6,386 | 7,050 | 6,773 | 6,340 | 6,564 | 11,184 | 11,889 | 11,936 | 12,661 | 13,243 | 10,357 | 12,265 | 15,505 | 11,585 | 16,783 | X X X X | 8,878 | 6,351 | 8,022 | 10,385 | X X X X | X X X X | 1,177 | 6,658 | 2,452 | X X X X | X X X X | X X X X | 1,193 | 3,003 | X X X X | X X X X | X X X X | X X X X | 1,968 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| | | | 50,815 | 2,141 | 1,223 | 6,938 | 288 | 80 | 8,854 | (710)| (248)| 5,481 | (1,083)| (859)| 11,480 | (1,763)| (1,181)| 14,808 | (1,975)| 3,223 | 7,473 | (2,921)| (558)| 853 | (1,599)| (5,805)| 2,807 | (196)| 1,614 | 4,087 | 2,119 | X X X X | 1,230 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | (5,699)| (2,511)| --------------------------- SCHEDULE P - PART 2F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 0 * | 0 | 0 | 0 | | 2. 1984........| 0 | 0 | 0 | 0 | | 3. 1985........| X X X X | 0 | 0 | 0 | | 4. 1986........| X X X X | X X X X | 0 | 0 | | 5. 1987........| X X X X | X X X X | X X X X | 7,919 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 5,386 | 3,679 | 3,682 | 3,226 | 1,607 | 18,686 | 12,717 | 8,030 | 5,847 | 4,733 | X X X X | 25,958 | 37,947 | 17,476 | 12,504 | X X X X | X X X X | 26,973 | 20,199 | 17,891 | X X X X | X X X X | X X X X | 61,958 | 65,410 | X X X X | X X X X | X X X X | X X X X | 50,145 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 69 | 69 | 69 | (56)| (56)| (56)| 0 | 0 | 0 | 3 | 3 | 3 | 11,715 | 10,108 | 8,489 | 10,561 | 5,828 | 4,714 | 23,373 | 10,869 | 5,897 | 25,426 | 7,535 | 5,227 | 57,637 | (7,773)| (4,321)| 31,122 | (19,023)| X X X X | 39,528 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 7,560 | 20,022 | --------------------------- SCHEDULE P - PART 2G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 86,609 * | 72,756 | 68,111 | 75,306 | | 2. 1984........| 143,588 | 142,438 | 142,169 | 152,006 | | 3. 1985........| X X X X | 119,021 | 112,659 | 128,003 | | 4. 1986........| X X X X | X X X X | 109,079 | 96,657 | | 5. 1987........| X X X X | X X X X | X X X X | 147,612 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 77,036 | 81,870 | 77,391 | 80,716 | 96,943 | 155,877 | 157,067 | 157,475 | 158,659 | 160,788 | 138,729 | 139,679 | 137,569 | 139,459 | 142,820 | 96,366 | 97,146 | 95,419 | 97,792 | 101,032 | 147,685 | 160,557 | 165,232 | 170,071 | 175,572 | 152,058 | 151,628 | 158,295 | 175,538 | 190,504 | X X X X | 133,068 | 138,956 | 139,754 | 161,398 | X X X X | X X X X | 137,842 | 133,723 | 141,333 | X X X X | X X X X | X X X X | 117,227 | 114,716 | X X X X | X X X X | X X X X | X X X X | 97,177 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 106,386 | 9,443 | 25,670 | 161,610 | 822 | 2,951 | 146,920 | 4,100 | 7,461 | 103,903 | 2,871 | 6,111 | 184,324 | 8,752 | 14,253 | 196,009 | 5,505 | 20,471 | 177,691 | 16,293 | 37,937 | 152,404 | 11,071 | 18,681 | 144,714 | 29,998 | 27,487 | 127,803 | 30,626 | X X X X | 190,406 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 119,481 | 161,022 | --------------------------- SCHEDULE P - PART 2H - SECTION 1 - OTHER LIABILITY - OCCURRENCE ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 243,006 * | 259,033 | 275,660 | 334,805 | | 2. 1984........| 113,840 | 119,154 | 121,588 | 132,953 | | 3. 1985........| X X X X | 164,402 | 164,880 | 172,254 | | 4. 1986........| X X X X | X X X X | 259,316 | 256,094 | | 5. 1987........| X X X X | X X X X | X X X X | 295,805 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 385,666 | 439,821 | 477,617 | 521,474 | 566,758 | 149,982 | 163,554 | 169,204 | 175,661 | 183,282 | 188,675 | 194,994 | 203,647 | 213,508 | 233,160 | 249,989 | 231,532 | 222,130 | 209,537 | 178,102 | 303,656 | 294,768 | 287,552 | 273,009 | 205,621 | 312,816 | 313,861 | 313,798 | 298,664 | 285,256 | X X X X | 360,786 | 358,984 | 349,228 | 342,921 | X X X X | X X X X | 246,681 | 238,784 | 218,474 | X X X X | X X X X | X X X X | 117,072 | 122,731 | X X X X | X X X X | X X X X | X X X X | 192,666 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 542,377 | (24,381)| 20,903 | 187,078 | 3,796 | 11,417 | 232,875 | (285)| 19,367 | 172,443 | (5,659)| (37,094)| 177,461 | (28,160)| (95,548)| 280,258 | (4,998)| (18,406)| 288,275 | (54,646)| (60,953)| 172,230 | (46,244)| (66,554)| 117,958 | (4,773)| 886 | 131,305 | (61,361)| X X X X | 176,122 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | (226,711)| (225,982)| --------------------------- SCHEDULE P - PART 2H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE ------------------------------------------------------------------------------ | 1 | Incurred Losses and Allocated Expenses Reported at | | Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | |-------------------|---------------|-------------|-------------|-------------| | 1. Prior ......| 0 * | 0 | 0 | 0 | | 2. 1984........| 0 | 0 | 0 | 0 | | 3. 1985........| X X X X | 0 | 0 | 0 | | 4. 1986........| X X X X | X X X X | 0 | 0 | | 5. 1987........| X X X X | X X X X | X X X X | 0 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ *Reported reserves only. Subsequent development relates only to subsequent payments and reserves. **Current year less first or second prior year, showing (redundant) or adverse. - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 0 | 0 | 0 | 0 | X X X X | X X X X | 0 | 0 | 0 | X X X X | X X X X | X X X X | 52,840 | 39,844 | X X X X | X X X X | X X X X | X X X X | 25,661 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | - -------------|-------------|-------------| 223 | 223 | 223 | (161)| (161)| (161)| 25 | 25 | 25 | 9 | 9 | 9 | 28 | 28 | 28 | 51 | 51 | 51 | (175)| (175)| (175)| 0 | 0 | 0 | 45,208 | 5,364 | (7,632)| 60,061 | 34,400 | X X X X | 96,924 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 39,764 | (7,632)| --------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 2I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT) -------------------------------------------------------------- | | Incurred Losses and Allocated Expenses | 1 | Reported at Year End (000 omitted) | |-------------------------------------------- | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | |-----------------|---------------|-------------|-------------| | | | | | | 1. Prior .....| X X X X | X X X X | X X X X | | 2. 1992.......| X X X X | X X X X | X X X X | | 3. 1993.......| X X X X | X X X X | X X X X | -------------------------------------------------------------- ------------------------------------------------------------------------ 5 | 6 | 7 | 8 | 9 | 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | -------------|-------------|-------------|-------------|---------------| | | | | | X X X X | X X X X | X X X X | X X X X | 121,259 * | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------ ------------------------------------------------------- | Development** | ---------------------------|---------------------------| 10 | 11 | 12 | 13 | 1992 | 1993 | One Year | Two Year | | | | | | | | | -------------|-------------|-------------|-------------| | | | | 170,125 | 163,647 | (6,478)| 42,388 | 198,285 | 235,045 | 36,760 | X X X X | X X X X | 197,434 | X X X X | X X X X | ---------------------------|-------------|-------------| 4. Totals | 30,282 | 42,388 | --------------------------- SCHEDULE P - PART 2J - AUTO PHYSICAL DAMAGE -------------------------------------------------------------- | | Incurred Losses and Allocated Expenses | 1 | Reported at Year End (000 omitted) | |-------------------------------------------- | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | |-----------------|---------------|-------------|-------------| | | | | | | 1. Prior .....| X X X X | X X X X | X X X X | | 2. 1992.......| X X X X | X X X X | X X X X | | 3. 1993.......| X X X X | X X X X | X X X X | -------------------------------------------------------------- ------------------------------------------------------------------------ 5 | 6 | 7 | 8 | 9 | 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | -------------|-------------|-------------|-------------|---------------| | | | | | X X X X | X X X X | X X X X | X X X X | 16,183 * | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------ ------------------------------------------------------- | Development** | ---------------------------|---------------------------| 10 | 11 | 12 | 13 | 1992 | 1993 | One Year | Two Year | | | | | | | | | -------------|-------------|-------------|-------------| | | | | 25,597 | 24,602 | (995)| 8,419 | 125,198 | 128,000 | 2,802 | X X X X | X X X X | 138,839 | X X X X | X X X X | ---------------------------|-------------|-------------| 4. Totals | 1,807 | 8,419 | --------------------------- SCHEDULE P - PART 2K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY -------------------------------------------------------------- | | Incurred Losses and Allocated Expenses | 1 | Reported at Year End (000 omitted) | |-------------------------------------------- | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | |-----------------|---------------|-------------|-------------| | | | | | | 1. Prior .....| X X X X | X X X X | X X X X | | 2. 1992.......| X X X X | X X X X | X X X X | | 3. 1993.......| X X X X | X X X X | X X X X | -------------------------------------------------------------- ------------------------------------------------------------------------ 5 | 6 | 7 | 8 | 9 | 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | -------------|-------------|-------------|-------------|---------------| | | | | | X X X X | X X X X | X X X X | X X X X | 80,783 * | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------ ------------------------------------------------------- | Development** | ---------------------------|---------------------------| 10 | 11 | 12 | 13 | 1992 | 1993 | One Year | Two Year | | | | | | | | | -------------|-------------|-------------|-------------| | | | | 57,561 | 64,421 | 6,860 | (16,362)| 58,169 | 25,531 | (32,638)| X X X X | X X X X | 73,281 | X X X X | X X X X | ---------------------------|-------------|-------------| 4. Totals | (25,778)| (16,362)| --------------------------- SCHEDULE P - PART 2L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH) -------------------------------------------------------------- | | Incurred Losses and Allocated Expenses | 1 | Reported at Year End (000 omitted) | |-------------------------------------------- | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | |-----------------|---------------|-------------|-------------| | | | | | | 1. Prior .....| X X X X | X X X X | X X X X | | 2. 1992.......| X X X X | X X X X | X X X X | | 3. 1993.......| X X X X | X X X X | X X X X | -------------------------------------------------------------- ------------------------------------------------------------------------ 5 | 6 | 7 | 8 | 9 | 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | -------------|-------------|-------------|-------------|---------------| | | | | | X X X X | X X X X | X X X X | X X X X | 40,023 * | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------ ------------------------------------------------------- | Development** | ---------------------------|---------------------------| 10 | 11 | 12 | 13 | 1992 | 1993 | One Year | Two Year | | | | | | | | | -------------|-------------|-------------|-------------| | | | | 58,592 | 50,738 | (7,854)| 10,715 | 38,992 | 54,191 | 15,199 | X X X X | X X X X | 38,033 | X X X X | X X X X | ---------------------------|-------------|-------------| 4. Totals | 7,345 | 10,715 | --------------------------- SCHEDULE P - PART 2M - INTERNATIONAL -------------------------------------------------------------- | | Incurred Losses and Allocated Expenses | 1 | Reported at Year End (000 omitted) | |-------------------------------------------- | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | |-----------------|---------------|-------------|-------------| | | | | | | 1. Prior .....| 0 * | 0 | 0 | | 2. 1984.......| 0 | 0 | 0 | | 3. 1985.......| X X X X | 0 | 0 | | 4. 1986.......| X X X X | X X X X | 0 | | 5. 1987.......| X X X X | X X X X | X X X X | | 6. 1988.......| X X X X | X X X X | X X X X | | 7. 1989.......| X X X X | X X X X | X X X X | | 8. 1990.......| X X X X | X X X X | X X X X | | 9. 1991.......| X X X X | X X X X | X X X X | | 10. 1992.......| X X X X | X X X X | X X X X | | 11. 1993.......| X X X X | X X X X | X X X X | -------------------------------------------------------------- *Reported reserves only. Subsequent development relates only to subsequent payments and reserves. **Current year less first or second prior year, showing (redundant) or adverse. ------------------------------------------------------------------------ 5 | 6 | 7 | 8 | 9 | 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | -------------|-------------|-------------|-------------|---------------| | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 0 | 0 | 0 | 0 | X X X X | X X X X | 0 | 0 | 0 | X X X X | X X X X | X X X X | 0 | 61 | X X X X | X X X X | X X X X | X X X X | 10,948 | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | ------------------------------------------------------------------------ ------------------------------------------------------- | Development** | ---------------------------|---------------------------| 10 | 11 | 12 | 13 | 1992 | 1993 | One Year | Two Year | | | | | | | | | -------------|-------------|-------------|-------------| | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (1,961)| 405 | 2,366 | 344 | 9,438 | 10,427 | 989 | (521)| 8,372 | 10,004 | 1,632 | X X X X | X X X X | 9,589 | X X X X | X X X X | ---------------------------|-------------|-------------| 12. Totals | 4,987 | (177)| --------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 2N - REINSURANCE A ---------------------------------------------------------------------------- | | Incurred Losses and Allocated Expenses Reported at | 1 | at Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |-----------------|---------------|-------------|-------------|-------------| | 1. 1988.......| X X X X | X X X X | X X X X | X X X X | | 2. 1989.......| X X X X | X X X X | X X X X | X X X X | | 3. 1990.......| X X X X | X X X X | X X X X | X X X X | | 4. 1991.......| X X X X | X X X X | X X X X | X X X X | | 5. 1992.......| X X X X | X X X X | X X X X | X X X X | | 6. 1993.......| X X X X | X X X X | X X X X | X X X X | ---------------------------------------------------------------------------- - ------------------------------------------------------------------------ 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|---------------|-------------| 10,042 | 8,768 | 3,162 | 996 | 3,137 | X X X X | 35,851 | 38,479 | 41,796 | 44,570 | X X X X | X X X X | 35,297 | 40,884 | 40,073 | X X X X | X X X X | X X X X | 30,666 | 30,631 | X X X X | X X X X | X X X X | X X X X | 61,557 | X X X X | X X X X | X X X X | X X X X | X X X X | - ------------------------------------------------------------------------ - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | | | | - -------------|-------------|-------------| 3,137 | 0 | 2,141 | 44,570 | 0 | 2,774 | 40,073 | 0 | (811)| 30,631 | 0 | (35)| 54,710 | (6,847)| X X X X | 0 | X X X X | X X X X | - -------------|-------------|-------------| 7. Totals | (6,847)| 4,069 | --------------------------- SCHEDULE P - PART 2O - REINSURANCE B ---------------------------------------------------------------------------- | | Incurred Losses and Allocated Expenses Reported at | 1 | at Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |-----------------|---------------|-------------|-------------|-------------| | | | | | | | 1. 1988.......| X X X X | X X X X | X X X X | X X X X | | 2. 1989.......| X X X X | X X X X | X X X X | X X X X | | 3. 1990.......| X X X X | X X X X | X X X X | X X X X | | 4. 1991.......| X X X X | X X X X | X X X X | X X X X | | 5. 1992.......| X X X X | X X X X | X X X X | X X X X | | 6. 1993.......| X X X X | X X X X | X X X X | X X X X | ---------------------------------------------------------------------------- - ------------------------------------------------------------------------ 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|---------------|-------------| | | | | | 11,497 | 8,156 | (203)| (2,100) | (7,869)| X X X X | 57,399 | 56,670 | 57,457 | 58,280 | X X X X | X X X X | 29,696 | 24,884 | 26,354 | X X X X | X X X X | X X X X | 14,095 | 14,640 | X X X X | X X X X | X X X X | X X X X | 14,317 | X X X X | X X X X | X X X X | X X X X | X X X X | - ------------------------------------------------------------------------ - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | | | | - -------------|-------------|-------------| | | | (7,869)| 0 | (5,769)| 58,280 | 0 | 823 | 26,354 | 0 | 1,470 | 14,640 | 0 | 545 | 13,212 | (1,105)| X X X X | 0 | X X X X | X X X X | - -------------|-------------|-------------| 7. Totals | (1,105)| (2,931)| --------------------------- SCHEDULE P - PART 2P - REINSURANCE C ---------------------------------------------------------------------------- | | Incurred Losses and Allocated Expenses Reported at | 1 | at Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |-----------------|---------------|-------------|-------------|-------------| | | | | | | | 1. 1988.......| X X X X | X X X X | X X X X | X X X X | | 2. 1989.......| X X X X | X X X X | X X X X | X X X X | | 3. 1990.......| X X X X | X X X X | X X X X | X X X X | | 4. 1991.......| X X X X | X X X X | X X X X | X X X X | | 5. 1992.......| X X X X | X X X X | X X X X | X X X X | | 6. 1993.......| X X X X | X X X X | X X X X | X X X X | ---------------------------------------------------------------------------- - ------------------------------------------------------------------------ 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|---------------|-------------| | | | | | 62 | 38 | 61 | 95 | 592 | X X X X | 159 | 137 | 72 | 57 | X X X X | X X X X | 115 | 66 | (113)| X X X X | X X X X | X X X X | 12 | 4 | X X X X | X X X X | X X X X | X X X X | 16 | X X X X | X X X X | X X X X | X X X X | X X X X | - ------------------------------------------------------------------------ - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | | | | - -------------|-------------|-------------| | | | 592 | 0 | 497 | 57 | 0 | (15)| (113)| 0 | (179)| 4 | 0 | (8)| 16 | 0 | X X X X | 0 | X X X X | X X X X | - -------------|-------------|-------------| 7. Totals | 0 | 295 | --------------------------- SCHEDULE P - PART 2Q - REINSURANCE D ---------------------------------------------------------------------------- | | Incurred Losses and Allocated Expenses Reported at | 1 | at Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |-----------------|---------------|-------------|-------------|-------------| | | | | | | | 1. Prior .....| 281 | 211 | 39 | 61 | | 2. 1984.......| 1,288 | 922 | 505 | 1,086 | | 3. 1985.......| X X X X | 0 | 0 | 0 | | 4. 1986.......| X X X X | X X X X | (253)| (730)| | 5. 1987.......| X X X X | X X X X | X X X X | 968 | ---------------------------------------------------------------------------- - ------------------------------------------------------------------------ 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|---------------|-------------| | | | | | 62 | 26 | 84 | 142 | 719 | 2,114 | 2,545 | 2,985 | 3,091 | 3,462 | 19 | 32 | 147 | 679 | 1,466 | (730)| (730)| (730)| (664) | (1,444)| 968 | 968 | 969 | 185 | (906)| - ------------------------------------------------------------------------ - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | | | | - -------------|-------------|-------------| | | | 601 | (118)| 459 | 3,464 | 2 | 373 | 1,457 | (9)| 778 | (1,444)| 0 | (780)| (906)| 0 | (1,091)| - -------------|-------------|-------------| 6. Totals | (125)| (261)| --------------------------- SCHEDULE P - PART 2R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE ---------------------------------------------------------------------------- | | Incurred Losses and Allocated Expenses Reported at | 1 | at Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |-----------------|---------------|-------------|-------------|-------------| | | | | | | | 1. Prior .....| 111,575 * | 138,610 | 149,607 | 168,740 | | 2. 1984.......| 21,582 | 27,501 | 29,789 | 31,256 | | 3. 1985.......| X X X X | 26,285 | 25,650 | 25,751 | | 4. 1986.......| X X X X | X X X X | 47,156 | 37,327 | | 5. 1987.......| X X X X | X X X X | X X X X | 43,887 | | 6. 1988.......| X X X X | X X X X | X X X X | X X X X | | 7. 1989.......| X X X X | X X X X | X X X X | X X X X | | 8. 1990.......| X X X X | X X X X | X X X X | X X X X | | 9. 1991.......| X X X X | X X X X | X X X X | X X X X | | 10. 1992.......| X X X X | X X X X | X X X X | X X X X | | 11. 1993.......| X X X X | X X X X | X X X X | X X X X | ---------------------------------------------------------------------------- - ------------------------------------------------------------------------ 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|---------------|-------------| | | | | | 187,624 | 212,648 | 232,972 | 262,124 | 270,701 | 31,021 | 32,810 | 33,096 | 34,689 | 28,085 | 27,033 | 27,660 | 29,725 | 26,656 | 21,731 | 37,214 | 36,728 | 34,437 | 30,087 | 21,014 | 45,474 | 43,528 | 38,650 | 35,969 | 29,554 | 42,818 | 39,900 | 37,838 | 34,348 | 30,407 | X X X X | 27,211 | 27,644 | 27,935 | 19,491 | X X X X | X X X X | 16,649 | 19,172 | 19,950 | X X X X | X X X X | X X X X | 12,736 | 12,233 | X X X X | X X X X | X X X X | X X X X | 10,913 | X X X X | X X X X | X X X X | X X X X | X X X X | - ------------------------------------------------------------------------ - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | | | | - -------------|-------------|-------------| | | | 312,194 | 41,493 | 50,070 | 27,619 | (466)| (7,070)| 21,395 | (336)| (5,261)| 17,914 | (3,100)| (12,173)| 28,320 | (1,234)| (7,649)| 42,225 | 11,818 | 7,877 | 20,039 | 548 | (7,896)| 19,895 | (55)| 723 | 14,562 | 2,329 | 1,826 | 13,623 | 2,710 | X X X X | 24,052 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | 53,707 | 20,447 | --------------------------- SCHEDULE P - PART 2R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE ---------------------------------------------------------------------------- | | Incurred Losses and Allocated Expenses Reported at | 1 | at Year End (000 omitted) | |---------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |-----------------|---------------|-------------|-------------|-------------| | | | | | | | 1. Prior .....| 0 * | 0 | 0 | 0 | | 2. 1984.......| 0 | 0 | 0 | 0 | | 3. 1985.......| X X X X | 0 | 0 | 0 | | 4. 1986.......| X X X X | X X X X | 0 | 0 | | 5. 1987.......| X X X X | X X X X | X X X X | 0 | | 6. 1988.......| X X X X | X X X X | X X X X | X X X X | | 7. 1989.......| X X X X | X X X X | X X X X | X X X X | | 8. 1990.......| X X X X | X X X X | X X X X | X X X X | | 9. 1991.......| X X X X | X X X X | X X X X | X X X X | | 10. 1992.......| X X X X | X X X X | X X X X | X X X X | | 11. 1993.......| X X X X | X X X X | X X X X | X X X X | ---------------------------------------------------------------------------- *Reported reserves only. Subsequent development relates only to subsequent payments and reserves. **Current year less first or second prior year, showing (redundant) or adverse. - ------------------------------------------------------------------------ 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|---------------|-------------| | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 0 | 0 | 0 | 0 | X X X X | X X X X | 0 | 0 | 0 | X X X X | X X X X | X X X X | 0 | 0 | X X X X | X X X X | X X X X | X X X X | 0 | X X X X | X X X X | X X X X | X X X X | X X X X | - ------------------------------------------------------------------------ - ----------------------------------------- | Development** | - -------------|---------------------------| 11 | 12 | 13 | 1993 | One Year | Two Year | | | | | | | - -------------|-------------|-------------| | | | 30 | 30 | 30 | (24)| (24)| (24)| 0 | 0 | 0 | 0 | 0 | 0 | 2 | 2 | 2 | 8 | 8 | 8 | (19)| (19)| (19)| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 1,996 | X X X X | X X X X | - -------------|-------------|-------------| 12. Totals | (3)| (3)| --------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 3A - HOMEOWNERS/FARMOWNERS ----------------------------------------------------------------------------- | 1 | Cumulative Paid Losses and Allocated Expenses at | | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 18,452 | 33,108 | 44,024 | | 2. 1984.........| 144,708 | 198,979 | 209,177 | 217,705 | | 3. 1985.........| X X X X | 172,863 | 234,296 | 243,489 | | 4. 1986.........| X X X X | X X X X | 138,456 | 180,026 | | 5. 1987.........| X X X X | X X X X | X X X X | 118,359 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 49,808 | 52,138 | 53,442 | 54,302 | 58,211 | 220,838 | 222,316 | 223,111 | 223,613 | 224,398 | 248,341 | 250,549 | 252,525 | 252,608 | 252,970 | 188,276 | 193,000 | 195,625 | 196,930 | 197,889 | 155,390 | 163,776 | 168,599 | 171,573 | 173,127 | 119,538 | 157,056 | 167,784 | 171,953 | 175,480 | X X X X | 97,570 | 140,505 | 149,605 | 154,652 | X X X X | X X X X | 101,685 | 140,060 | 148,688 | X X X X | X X X X | X X X X | 135,038 | 176,215 | X X X X | X X X X | X X X X | X X X X | 138,676 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss | Without | | Payment |Loss Payment | - -------------|-------------|-------------| | | | 55,199 | 3 | 2 | 224,124 | 2 | 2 | 253,646 | 5 | 8 | 198,763 | 9 | 4 | 172,648 | 11 | 26 | 180,343 | 18 | 31 | 159,238 | 24,259 | 2,674 | 151,939 | 59,547 | 7,290 | 182,281 | 67,566 | 8,109 | 180,241 | 62,503 | 7,810 | 135,664 | 48,100 | 5,647 | - ----------------------------------------- SCHEDULE P - PART 3B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL ----------------------------------------------------------------------------- | 1 | Cumulative Paid Losses and Allocated Expenses at | | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 107,102 | 166,778 | 198,864 | | 2. 1984.........| 101,284 | 212,382 | 288,394 | 325,695 | | 3. 1985.........| X X X X | 109,917 | 231,700 | 304,814 | | 4. 1986.........| X X X X | X X X X | 114,171 | 236,693 | | 5. 1987.........| X X X X | X X X X | X X X X | 106,647 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 216,708 | 234,139 | 239,597 | 244,183 | 249,527 | 345,830 | 355,180 | 359,565 | 361,512 | 363,575 | 343,340 | 364,887 | 375,290 | 379,519 | 380,029 | 303,120 | 340,019 | 359,483 | 367,828 | 372,287 | 210,903 | 280,051 | 315,981 | 335,955 | 340,554 | 96,134 | 191,476 | 250,602 | 283,351 | 299,045 | X X X X | 82,735 | 177,779 | 229,842 | 257,095 | X X X X | X X X X | 77,350 | 158,644 | 207,161 | X X X X | X X X X | X X X X | 67,249 | 153,242 | X X X X | X X X X | X X X X | X X X X | 73,216 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss | Without | | Payment |Loss Payment | - -------------|-------------|-------------| | | | 250,927 | 62 | 16 | 364,941 | 17 | 3 | 381,422 | 31 | 6 | 375,878 | 65 | 22 | 345,486 | 93 | 37 | 310,285 | 173 | 87 | 277,916 | 66,002 | 19,688 | 227,231 | 60,946 | 17,691 | 203,625 | 63,148 | 16,334 | 157,206 | 55,148 | 13,088 | 85,701 | 32,690 | 7,855 | - ----------------------------------------- SCHEDULE P - PART 3C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL ----------------------------------------------------------------------------- | 1 | Cumulative Paid Losses and Allocated Expenses at | | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 67,322 | 110,265 | 132,153 | | 2. 1984.........| 36,034 | 70,559 | 103,472 | 126,142 | | 3. 1985.........| X X X X | 30,417 | 74,840 | 110,928 | | 4. 1986.........| X X X X | X X X X | 29,223 | 69,332 | | 5. 1987.........| X X X X | X X X X | X X X X | 30,101 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 147,475 | 147,961 | 154,414 | 157,869 | 162,314 | 142,883 | 149,340 | 152,212 | 155,475 | 158,588 | 143,044 | 161,157 | 173,582 | 181,209 | 188,465 | 107,530 | 139,655 | 158,836 | 170,723 | 179,735 | 68,540 | 110,949 | 139,217 | 158,072 | 177,462 | 32,438 | 80,371 | 129,560 | 163,244 | 185,138 | X X X X | 26,991 | 71,844 | 113,322 | 147,916 | X X X X | X X X X | 25,174 | 64,456 | 94,579 | X X X X | X X X X | X X X X | 20,115 | 66,512 | X X X X | X X X X | X X X X | X X X X | 25,299 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss | Without | | Payment |Loss Payment | - -------------|-------------|-------------| | | | 163,604 | 21 | 4 | 159,077 | 6 | 0 | 191,132 | 10 | 4 | 183,196 | 26 | 16 | 184,038 | 37 | 61 | 195,424 | 94 | 114 | 170,693 | 24,588 | 9,587 | 116,623 | 20,595 | 7,767 | 93,832 | 16,434 | 6,357 | 53,490 | 14,787 | 5,037 | 26,498 | 9,871 | 3,096 | - ----------------------------------------- SCHEDULE P - PART 3D - WORKERS' COMPENSATION ----------------------------------------------------------------------------- | 1 | Cumulative Paid Losses and Allocated Expenses at | | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 82,151 | 172,382 | 229,362 | | 2. 1984.........| 63,034 | 150,953 | 203,181 | 236,237 | | 3. 1985.........| X X X X | 87,694 | 206,862 | 270,859 | | 4. 1986.........| X X X X | X X X X | 99,342 | 232,204 | | 5. 1987.........| X X X X | X X X X | X X X X | 124,662 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 284,656 | 325,484 | 361,573 | 392,709 | 424,716 | 259,875 | 276,325 | 288,394 | 298,449 | 305,071 | 318,116 | 355,089 | 379,213 | 397,138 | 417,901 | 311,434 | 367,252 | 404,700 | 431,101 | 455,053 | 289,152 | 416,831 | 481,625 | 526,659 | 557,061 | 160,218 | 357,615 | 484,438 | 568,687 | 631,295 | X X X X | 158,068 | 394,025 | 536,559 | 638,453 | X X X X | X X X X | 170,441 | 396,089 | 550,561 | X X X X | X X X X | X X X X | 160,391 | 371,676 | X X X X | X X X X | X X X X | X X X X | 152,267 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss | Without | | Payment |Loss Payment | - -------------|-------------|-------------| | | | 441,466 | 231 | 57 | 308,760 | 63 | 19 | 425,786 | 68 | 6 | 468,423 | 120 | 26 | 575,219 | 218 | 45 | 666,310 | 371 | 69 | 704,244 | 246,442 | 24,266 | 642,504 | 218,517 | 20,668 | 498,961 | 164,070 | 14,086 | 350,619 | 144,029 | 12,216 | 151,757 | 93,668 | 9,461 | - ----------------------------------------- SCHEDULE P - PART 3E - COMMERCIAL MULTIPLE PERIL ----------------------------------------------------------------------------- | 1 | Cumulative Paid Losses and Allocated Expenses at | | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 74,686 | 142,246 | 187,525 | | 2. 1984.........| 79,864 | 135,093 | 168,970 | 200,958 | | 3. 1985.........| X X X X | 113,406 | 190,856 | 229,730 | | 4. 1986.........| X X X X | X X X X | 113,802 | 188,036 | | 5. 1987.........| X X X X | X X X X | X X X X | 118,421 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- Note: Net of salvage and subrogation received. - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 225,385 | 260,082 | 270,867 | 292,460 | 313,397 | 225,179 | 242,113 | 254,278 | 264,808 | 268,126 | 270,425 | 298,087 | 316,912 | 325,299 | 332,411 | 234,630 | 269,564 | 299,471 | 315,984 | 328,265 | 209,092 | 264,243 | 306,436 | 336,317 | 356,266 | 165,406 | 272,733 | 341,170 | 391,047 | 425,566 | X X X X | 171,235 | 306,152 | 376,189 | 430,034 | X X X X | X X X X | 162,381 | 288,198 | 358,059 | X X X X | X X X X | X X X X | 169,879 | 281,223 | X X X X | X X X X | X X X X | X X X X | 225,443 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss | Without | | Payment |Loss Payment | - -------------|-------------|-------------| | | | 326,869 | 1 | 5 | 270,178 | 8 | 20 | 336,623 | 4 | 17 | 334,670 | 7 | 38 | 371,073 | 21 | 64 | 454,736 | 53 | 114 | 469,244 | 71,599 | 27,649 | 418,927 | 70,253 | 27,716 | 350,947 | 69,958 | 28,241 | 304,943 | 69,307 | 27,490 | 226,758 | 56,408 | 18,753 | - ----------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 3F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 4,529 | 11,962 | 18,712 | | 2. 1984.........| (265)| 58 | 1,084 | 2,268 | | 3. 1985.........| X X X X | 124 | 1,128 | 2,720 | | 4. 1986.........| X X X X | X X X X | 275 | 1,052 | | 5. 1987.........| X X X X | X X X X | X X X X | 958 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 25,004 | 29,928 | 34,843 | 39,168 | 41,575 | 3,241 | 4,176 | 5,247 | 5,376 | 5,432 | 4,706 | 6,242 | 7,484 | 8,001 | 8,545 | 2,370 | 3,381 | 4,471 | 4,958 | 5,430 | 3,231 | 5,544 | 7,795 | 10,150 | 11,202 | 679 | 4,560 | 9,488 | 12,629 | 14,597 | X X X X | 1,113 | 3,307 | 5,400 | 7,326 | X X X X | X X X X | 30 | 288 | 1,015 | X X X X | X X X X | X X X X | 20 | 66 | X X X X | X X X X | X X X X | X X X X | 144 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 45,231 | 0 | 0 | 5,703 | 0 | 0 | 8,666 | 0 | 0 | 5,480 | 0 | 0 | 11,148 | 0 | 0 | 14,585 | 0 | 0 | 7,234 | 217 | 579 | (1,433)| 68 | 287 | 610 | 16 | 24 | 438 | 16 | 43 | 71 | 3 | 24 | - ----------------------------------------- SCHEDULE P - PART 3F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 0 | 0 | 0 | | 2. 1984.........| 0 | 0 | 0 | 0 | | 3. 1985.........| X X X X | 0 | 0 | 0 | | 4. 1986.........| X X X X | X X X X | 0 | 0 | | 5. 1987.........| X X X X | X X X X | X X X X | 33 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 140 | 281 | 261 | 309 | 877 | 162 | 591 | 1,299 | 1,760 | 2,121 | X X X X | 428 | 1,518 | 4,589 | 5,721 | X X X X | X X X X | 934 | 2,882 | 5,415 | X X X X | X X X X | X X X X | 10,449 | 22,751 | X X X X | X X X X | X X X X | X X X X | 3,276 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 32 | 0 | 0 | (26)| 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 4,791 | 0 | 0 | 4,525 | 0 | 0 | 13,478 | 62 | 452 | 12,355 | 81 | 783 | 32,094 | 209 | 624 | 7,101 | 103 | 609 | 299 | 17 | 50 | - ----------------------------------------- SCHEDULE P - PART 3G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 19,688 | 35,539 | 34,285 | | 2. 1984.........| 71,612 | 104,884 | 120,401 | 132,118 | | 3. 1985.........| X X X X | 42,456 | 85,674 | 102,399 | | 4. 1986.........| X X X X | X X X X | 31,851 | 45,609 | | 5. 1987.........| X X X X | X X X X | X X X X | 38,519 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 46,268 | 51,516 | 55,261 | 59,914 | 78,515 | 141,267 | 148,347 | 151,271 | 154,642 | 160,119 | 115,520 | 125,286 | 131,387 | 135,035 | 140,891 | 65,275 | 79,969 | 85,800 | 92,477 | 98,961 | 88,600 | 129,596 | 151,393 | 162,427 | 173,031 | 42,329 | 95,876 | 138,663 | 162,758 | 183,186 | X X X X | 34,205 | 82,336 | 116,307 | 148,306 | X X X X | X X X X | 31,802 | 82,168 | 121,173 | X X X X | X X X X | X X X X | 42,931 | 94,283 | X X X X | X X X X | X X X X | X X X X | 37,744 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 89,528 | X X X X | X X X X | 157,596 | X X X X | X X X X | 138,738 | X X X X | X X X X | 99,880 | X X X X | X X X X | 180,429 | X X X X | X X X X | 190,532 | X X X X | X X X X | 170,590 | X X X X | X X X X | 144,086 | X X X X | X X X X | 113,350 | X X X X | X X X X | 78,572 | X X X X | X X X X | 59,336 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3H - SECTION 1 - OTHER LIABILITY - OCCURRENCE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 51,941 | 136,557 | 197,235 | | 2. 1984.........| 20,284 | 36,491 | 62,495 | 85,158 | | 3. 1985.........| X X X X | 11,025 | 47,289 | 71,205 | | 4. 1986.........| X X X X | X X X X | 6,104 | 27,018 | | 5. 1987.........| X X X X | X X X X | X X X X | 15,965 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 256,178 | 313,958 | 357,854 | 399,334 | 470,730 | 99,297 | 116,457 | 128,041 | 142,396 | 158,174 | 99,065 | 128,004 | 153,780 | 176,593 | 199,412 | 47,872 | 72,398 | 95,700 | 115,971 | 144,443 | 36,287 | 60,614 | 81,092 | 100,727 | 130,099 | 15,160 | 43,035 | 86,045 | 126,154 | 161,974 | X X X X | 25,451 | 63,015 | 108,281 | 161,844 | X X X X | X X X X | 9,261 | 32,905 | 51,464 | X X X X | X X X X | X X X X | 9,995 | 31,591 | X X X X | X X X X | X X X X | X X X X | 13,869 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 477,595 | 1,406 | 905 | 163,466 | 376 | 276 | 206,190 | 631 | 641 | 153,620 | 458 | 480 | 139,826 | 506 | 502 | 196,727 | 365 | 361 | 190,427 | 9,782 | 10,959 | 61,235 | 9,031 | 8,822 | 39,465 | 7,228 | 6,567 | 57,560 | 5,726 | 4,205 | 39,984 | 2,401 | 2,253 | - ----------------------------------------- SCHEDULE P - PART 3H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 0 | 0 | 0 | | 2. 1984.........| 0 | 0 | 0 | 0 | | 3. 1985.........| X X X X | 0 | 0 | 0 | | 4. 1986.........| X X X X | X X X X | 0 | 0 | | 5. 1987.........| X X X X | X X X X | X X X X | 0 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- Note: Net of salvage and subrogation received. - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 0 | 0 | 0 | 0 | X X X X | X X X X | 0 | 0 | 0 | X X X X | X X X X | X X X X | 3,040 | 11,088 | X X X X | X X X X | X X X X | X X X X | 6,552 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ------------------------------------------ | 12 | 13 | - -------------| Number of | Number of | | Claims | Claims | 11 | Closed | Closed | 1993 | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | (8)| 0 | 0 | 9 | 0 | 0 | 4 | 0 | 0 | 4 | 0 | 0 | 21 | 0 | 0 | 45 | 0 | 0 | (75)| 18 | 46 | 0 | 30 | 108 | 25,747 | 141 | 357 | 15,785 | 63 | 192 | 711 | 279 | 98 | - ----------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 3I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT) ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| X X X X | X X X X | X X X X | X X X X | | 2. 1992.........| X X X X | X X X X | X X X X | X X X X | | 3. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | X X X X | X X X X | X X X X | 000 | 136,152 | X X X X | X X X X | X X X X | X X X X | 113,230 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | | Claims |Claims Closed| 11 | Closed With | Without | 1993 |Loss Payment |Loss Payment | | | | - -------------|-------------|-------------| | | | 154,907 | X X X X | X X X X | 208,284 | X X X X | X X X X | 105,963 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3J - AUTO PHYSICAL DAMAGE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| X X X X | X X X X | X X X X | X X X X | | 2. 1992.........| X X X X | X X X X | X X X X | X X X X | | 3. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | X X X X | X X X X | X X X X | 000 | 19,501 | X X X X | X X X X | X X X X | X X X X | 110,499 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | | Claims |Claims Closed| 11 | Closed With | Without | 1993 |Loss Payment |Loss Payment | | | | - -------------|-------------|-------------| | | | 22,949 | 191,563 | 21,735 | 124,440 | 133,625 | 12,062 | 127,269 | 89,629 | 7,817 | - ----------------------------------------- SCHEDULE P - PART 3K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| X X X X | X X X X | X X X X | X X X X | | 2. 1992.........| X X X X | X X X X | X X X X | X X X X | | 3. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | X X X X | X X X X | X X X X | 000 | 23,300 | X X X X | X X X X | X X X X | X X X X | 13,951 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | | Claims |Claims Closed| 11 | Closed With | Without | 1993 |Loss Payment |Loss Payment | | | | - -------------|-------------|-------------| | | | 36,322 | X X X X | X X X X | 16,519 | X X X X | X X X X | 24,373 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH) ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| X X X X | X X X X | X X X X | X X X X | | 2. 1992.........| X X X X | X X X X | X X X X | X X X X | | 3. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | X X X X | X X X X | X X X X | 000 | 50,249 | X X X X | X X X X | X X X X | X X X X | 17,734 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | | Claims |Claims Closed| 11 | Closed With | Without | 1993 |Loss Payment |Loss Payment | | | | - -------------|-------------|-------------| | | | 50,320 | X X X X | X X X X | 51,632 | X X X X | X X X X | 15,890 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3M - INTERNATIONAL ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | | | | | | Losses Were | 2 | 3 | 4 | 5 | | Incurred | 1984 | 1985 | 1986 | 1987 | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 0 | 0 | 0 | | 2. 1984.........| 0 | 0 | 0 | 0 | | 3. 1985.........| X X X X | 0 | 0 | 0 | | 4. 1986.........| X X X X | X X X X | 0 | 0 | | 5. 1987.........| X X X X | X X X X | X X X X | 0 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- Note: Net of salvage and subrogation received. - ---------------------------------------------------------------------- | | | | | 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 0 | 0 | 0 | 0 | X X X X | X X X X | (25,938)| (18,824)| (11,144)| X X X X | X X X X | X X X X | 3,151 | 5,755 | X X X X | X X X X | X X X X | X X X X | 4,100 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | | Claims |Claims Closed| 11 | Closed With | Without | 1993 |Loss Payment |Loss Payment | | | | - -------------|-------------|-------------| | | | 0 | X X X X | X X X X | 0 | X X X X | X X X X | 0 | X X X X | X X X X | 0 | X X X X | X X X X | 0 | X X X X | X X X X | 0 | X X X X | X X X X | 0 | X X X X | X X X X | (6,695)| X X X X | X X X X | 6,674 | X X X X | X X X X | 6,060 | X X X X | X X X X | 2,731 | X X X X | X X X X | - ----------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 3N - REINSURANCE A ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | 1. 1988.........| X X X X | X X X X | X X X X | X X X X | | 2. 1989.........| X X X X | X X X X | X X X X | X X X X | | 3. 1990.........| X X X X | X X X X | X X X X | X X X X | | 4. 1991.........| X X X X | X X X X | X X X X | X X X X | | 5. 1992.........| X X X X | X X X X | X X X X | X X X X | | 6. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|-------------|-------------| 1,190 | 5,328 | (37)| (1,400)| 3,137 | X X X X | 16,100 | 32,169 | 35,293 | 44,570 | X X X X | X X X X | 17,223 | 29,974 | 40,073 | X X X X | X X X X | X X X X | 12,762 | 30,631 | X X X X | X X X X | X X X X | X X X X | 54,710 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | 11 | Claims | Claims | 1993 | Closed | Closed | | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| 3,137 | X X X X | X X X X | 44,570 | X X X X | X X X X | 40,073 | X X X X | X X X X | 30,631 | X X X X | X X X X | 54,710 | X X X X | X X X X | 0 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3O - REINSURANCE B ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. 1988.........| X X X X | X X X X | X X X X | X X X X | | 2. 1989.........| X X X X | X X X X | X X X X | X X X X | | 3. 1990.........| X X X X | X X X X | X X X X | X X X X | | 4. 1991.........| X X X X | X X X X | X X X X | X X X X | | 5. 1992.........| X X X X | X X X X | X X X X | X X X X | | 6. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 668 | 2,828 | 4,472 | 5,250 | (7,869)| X X X X | 42,287 | 43,729 | 44,323 | 58,280 | X X X X | X X X X | 11,335 | 13,303 | 26,354 | X X X X | X X X X | X X X X | 121 | 14,640 | X X X X | X X X X | X X X X | X X X X | 13,212 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | 11 | Claims | Claims | 1993 | Closed | Closed | | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | (7,869)| X X X X | X X X X | 58,280 | X X X X | X X X X | 26,354 | X X X X | X X X X | 14,640 | X X X X | X X X X | 13,212 | X X X X | X X X X | 0 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3P - REINSURANCE C ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. 1988.........| X X X X | X X X X | X X X X | X X X X | | 2. 1989.........| X X X X | X X X X | X X X X | X X X X | | 3. 1990.........| X X X X | X X X X | X X X X | X X X X | | 4. 1991.........| X X X X | X X X X | X X X X | X X X X | | 5. 1992.........| X X X X | X X X X | X X X X | X X X X | | 6. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 0 | 0 | 38 | 38 | 592 | X X X X | 0 | 1 | (2)| 57 | X X X X | X X X X | 7 | 12 | (113)| X X X X | X X X X | X X X X | 1 | 4 | X X X X | X X X X | X X X X | X X X X | 16 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | 11 | Claims | Claims | 1993 | Closed | Closed | | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 592 | X X X X | X X X X | 57 | X X X X | X X X X | (113)| X X X X | X X X X | 4 | X X X X | X X X X | 16 | X X X X | X X X X | 0 | X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3Q - REINSURANCE D ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 0 | 2 | 4 | | 2. 1984.........| 0 | 0 | 199 | 795 | | 3. 1985.........| X X X X | 0 | 0 | 0 | | 4. 1986.........| X X X X | X X X X | (332)| (730)| | 5. 1987.........| X X X X | X X X X | X X X X | 968 | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 5 | 25 | 26 | 141 | 704 | 1,783 | 2,272 | 2,817 | 2,934 | 3,462 | 0 | 13 | 80 | 668 | 1,466 | (730)| (730)| (730)| (664)| (1,444)| 968 | 968 | 968 | 184 | (906)| - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | 11 | Claims | Claims | 1993 | Closed | Closed | | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 604 | X X X X | X X X X | 3,462 | X X X X | X X X X | 1,456 | X X X X | X X X X | (1,444)| X X X X | X X X X | (906)| X X X X | X X X X | - ----------------------------------------- SCHEDULE P - PART 3R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 50,055 | 65,703 | 92,912 | | 2. 1984.........| 793 | 2,527 | 5,708 | 10,178 | | 3. 1985.........| X X X X | 453 | 2,283 | 7,533 | | 4. 1986.........| X X X X | X X X X | 506 | 1,752 | | 5. 1987.........| X X X X | X X X X | X X X X | 2,243 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 118,963 | 146,073 | 179,709 | 207,775 | 219,949 | 14,439 | 18,821 | 23,479 | 28,109 | 24,860 | 10,517 | 13,243 | 17,889 | 18,188 | 17,484 | 4,574 | 7,385 | 13,145 | 17,785 | 13,737 | 3,550 | 8,479 | 9,543 | 15,142 | 18,458 | 2,206 | 5,319 | 8,812 | 14,440 | 18,922 | X X X X | 972 | 2,518 | 5,121 | 7,923 | X X X X | X X X X | 571 | 2,207 | 3,701 | X X X X | X X X X | X X X X | 564 | 1,013 | X X X X | X X X X | X X X X | X X X X | 300 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | 11 | Claims | Claims | 1993 | Closed | Closed | | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 267,062 | 0 | 0 | 25,986 | 0 | 0 | 19,515 | 0 | 1 | 14,635 | 0 | 0 | 20,846 | 0 | 0 | 32,436 | 2 | 5 | 9,282 | 152 | 278 | 8,313 | 71 | 101 | 2,968 | 118 | 113 | 2,092 | 193 | 60 | 288 | 23 | 20 | - ----------------------------------------- SCHEDULE P - PART 3R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE ----------------------------------------------------------------------------- | | Cumulative Paid Losses and Allocated Expenses at | 1 | Year End (000 omitted) | |-------------------------------------------------------- | Years in Which | 2 | 3 | 4 | 5 | | Losses Were | 1984 | 1985 | 1986 | 1987 | | Incurred | | | | | | | | | | | |--------------------|-------------|-------------|-------------|-------------| | | | | | | | 1. Prior .......| 000 | 0 | 0 | 0 | | 2. 1984.........| 0 | 0 | 0 | 0 | | 3. 1985.........| X X X X | 0 | 0 | 0 | | 4. 1986.........| X X X X | X X X X | 0 | 0 | | 5. 1987.........| X X X X | X X X X | X X X X | 0 | | 6. 1988.........| X X X X | X X X X | X X X X | X X X X | | 7. 1989.........| X X X X | X X X X | X X X X | X X X X | | 8. 1990.........| X X X X | X X X X | X X X X | X X X X | | 9. 1991.........| X X X X | X X X X | X X X X | X X X X | | 10. 1992.........| X X X X | X X X X | X X X X | X X X X | | 11. 1993.........| X X X X | X X X X | X X X X | X X X X | ----------------------------------------------------------------------------- Note: Net of salvage and subrogation received. - ---------------------------------------------------------------------- 6 | 7 | 8 | 9 | 10 | 1988 | 1989 | 1990 | 1991 | 1992 | | | | | | | | | | | - -------------|-------------|-------------|-------------|-------------| | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | X X X X | 0 | 0 | 0 | 0 | X X X X | X X X X | 0 | 0 | 0 | X X X X | X X X X | X X X X | 0 | 0 | X X X X | X X X X | X X X X | X X X X | 0 | X X X X | X X X X | X X X X | X X X X | X X X X | - ---------------------------------------------------------------------- - ----------------------------------------- | 12 | 13 | - -------------| Number of | Number of | 11 | Claims | Claims | 1993 | Closed | Closed | | With Loss |Without Loss | | Payment | Payment | - -------------|-------------|-------------| | | | 30 | 0 | 0 | (24)| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 8 | 0 | 0 | (15)| 0 | 1 | 0 | 0 | 3 | 0 | 0 | 2 | 0 | 0 | 2 | 12 | 1 | 6 | - ----------------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 4A - HOMEOWNERS/FARMOWNERS ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 13,513 | 6,394 | 2,832 | | 2. 1984................| 37,320 | 5,226 | 1,817 | | 3. 1985................| X X X X | 37,436 | 5,210 | | 4. 1986................| X X X X | X X X X | 39,849 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 1,301 | 997 | 574 | 409 | 521 922 | 537 | 306 | 169 | 238 1,455 | 883 | 448 | 346 | 229 11,836 | 4,805 | 2,377 | 557 | 421 38,365 | 15,331 | 5,892 | 1,510 | 792 X X X X | 37,737 | 16,221 | 3,104 | 1,958 X X X X | X X X X | 44,160 | 7,270 | 4,203 X X X X | X X X X | X X X X | 24,259 | 4,113 X X X X | X X X X | X X X X | X X X X | 21,598 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 163 | 144 | | 138 | 26 | | 129 | 144 | | 145 | 134 | | 167 | 152 | | 548 | 175 | | 1,153 | 569 | | 2,342 | 1,151 | | 3,949 | 2,318 | | 16,882 | 3,855 | | X X X X | 17,681 | - -------------------------------- SCHEDULE P - PART 4B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 36,824 | 29,668 | 10,548 | | 2. 1984................| 90,374 | 26,698 | 10,106 | | 3. 1985................| X X X X | 118,405 | 28,156 | | 4. 1986................| X X X X | X X X X | 126,670 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 4,379 | 2,253 | 1,920 | 811 | 876 3,498 | 1,433 | 2,411 | 1,437 | 496 8,765 | 3,463 | 4,566 | 2,678 | 1,197 38,940 | 12,271 | 12,189 | 7,260 | 1,839 117,022 | 40,823 | 17,752 | 10,810 | 4,590 X X X X | 102,749 | 35,576 | 15,353 | 6,458 X X X X | X X X X | 69,984 | 42,316 | 14,129 X X X X | X X X X | X X X X | 79,424 | 28,302 X X X X | X X X X | X X X X | X X X X | 56,067 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 615 | 366 | | 324 | 270 | | 489 | 336 | | 887 | 508 | | 1,561 | 1,019 | | 3,226 | 1,836 | | 3,861 | 3,026 | | 8,467 | 5,992 | | 15,123 | 4,695 | | 78,568 | 21,546 | | X X X X | 110,999 | - -------------------------------- SCHEDULE P - PART 4C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 15,394 | 10,494 | 4,833 | | 2. 1984................| 32,895 | 9,579 | 4,493 | | 3. 1985................| X X X X | 35,315 | 12,230 | | 4. 1986................| X X X X | X X X X | 57,020 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 2,276 | 1,511 | 1,868 | 1,082 | 551 1,879 | 966 | 1,899 | 1,541 | 522 4,890 | 2,722 | 1,964 | 2,312 | 1,722 22,557 | 10,128 | 6,742 | 4,322 | 2,823 62,981 | 28,411 | 12,734 | 7,996 | 4,967 X X X X | 64,751 | 31,248 | 9,070 | 5,101 X X X X | X X X X | 64,923 | 22,574 | 8,198 X X X X | X X X X | X X X X | 53,460 | 19,140 X X X X | X X X X | X X X X | X X X X | 40,050 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 258 | 175 | | 193 | 94 | | 510 | 201 | | 830 | 530 | | 714 | 885 | | 1,634 | 804 | | 2,645 | 1,980 | | 8,040 | 2,713 | | 13,152 | 8,190 | | 56,235 | 18,398 | | X X X X | 63,015 | - -------------------------------- SCHEDULE P - PART 4D - WORKERS' COMPENSATION ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 54,785 | 53,276 | 27,301 | | 2. 1984................| 46,541 | 16,385 | 8,181 | | 3. 1985................| X X X X | 75,532 | 17,474 | | 4. 1986................| X X X X | X X X X | 129,077 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 29,244 | 25,294 | 20,861 | 14,942 | 11,162 9,417 | 7,863 | 6,212 | 5,390 | 5,593 12,816 | 10,234 | 9,523 | 6,033 | 5,393 35,801 | 16,289 | 18,237 | 7,155 | 6,196 141,569 | 51,553 | 26,472 | 13,861 | 7,375 X X X X | 194,846 | 63,338 | 27,378 | 13,555 X X X X | X X X X | 235,722 | 92,241 | 30,029 X X X X | X X X X | X X X X | 285,795 | 106,508 X X X X | X X X X | X X X X | X X X X | 348,314 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 28,885 | 24,702 | | 5,061 | 5,353 | | 5,052 | 5,335 | | 7,060 | 5,341 | | 10,297 | 7,459 | | 15,189 | 10,138 | | 21,826 | 11,387 | | 64,073 | 24,503 | | 176,962 | 60,214 | | 347,087 | 159,058 | | X X X X | 336,124 | - -------------------------------- SCHEDULE P - PART 4E - COMMERCIAL MULTIPLE PERIL ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 46,430 | 33,236 | 16,304 | | 2. 1984................| 95,550 | 23,652 | 10,538 | | 3. 1985................| X X X X | 115,328 | 28,581 | | 4. 1986................| X X X X | X X X X | 191,308 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 10,671 | 8,361 | 7,139 | 3,940 | 2,599 6,576 | 3,953 | 3,299 | 2,897 | 1,406 10,921 | 8,376 | 6,514 | 4,839 | 2,664 67,069 | 30,488 | 18,778 | 9,631 | 5,512 211,701 | 93,417 | 48,496 | 28,843 | 14,136 X X X X | 229,445 | 87,053 | 58,683 | 32,407 X X X X | X X X X | 223,514 | 98,912 | 55,530 X X X X | X X X X | X X X X | 210,464 | 92,933 X X X X | X X X X | X X X X | X X X X | 209,325 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 405 | 139 | | 387 | 278 | | 567 | 397 | | 1,597 | 587 | | 8,009 | 1,699 | | 15,564 | 6,329 | | 22,204 | 12,906 | | 46,794 | 18,923 | | 73,804 | 31,375 | | 204,500 | 98,773 | | X X X X | 197,163 | - -------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 4F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 25,442 | 26,260 | 19,239 | | 2. 1984................| 1,179 | 1,160 | 831 | | 3. 1985................| X X X X | 4,266 | 1,149 | | 4. 1986................| X X X X | X X X X | 6,207 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 14,866 | 12,587 | 10,354 | 8,952 | 7,755 1,258 | 1,196 | 1,012 | 870 | 986 322 | 532 | 852 | 747 | 713 2,683 | 2,172 | 994 | 593 | 615 5,452 | 3,143 | 1,933 | 1,302 | 540 X X X X | 4,374 | 2,520 | 957 | 667 X X X X | X X X X | 4,726 | 2,549 | 879 X X X X | X X X X | X X X X | 3,283 | 1,208 X X X X | X X X X | X X X X | X X X X | 4,780 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 3,104 | 1,454 | | 976 | 859 | | 854 | 173 | | 465 | 1 | | 495 | 122 | | 227 | 27 | | 300 | 23 | | 1,182 | 2,034 | | 1,964 | 1,499 | | 1,211 | 2,354 | | X X X X | 272 | - -------------------------------- SCHEDULE P - PART 4F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 0 | 0 | 0 | | 2. 1984................| 0 | 0 | 0 | | 3. 1985................| X X X X | 0 | 0 | | 4. 1986................| X X X X | X X X X | 0 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 6,890 | 3,744 | 2,280 | 2,099 | 1,591 X X X X | 13,223 | 8,138 | 4,130 | 2,228 X X X X | X X X X | 17,137 | 22,369 | 7,034 X X X X | X X X X | X X X X | 15,988 | 9,449 X X X X | X X X X | X X X X | X X X X | 28,106 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 329 | 2,091 | | 1,175 | 706 | | 3,062 | 843 | | 5,626 | 1,498 | | 19,238 | 5,081 | | 21,136 | 8,050 | | X X X X | 32,552 | - -------------------------------- SCHEDULE P - PART 4G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 11,930 | 6,808 | 3,075 | | 2. 1984................| 27,413 | 5,373 | 2,516 | | 3. 1985................| X X X X | 34,291 | 4,409 | | 4. 1986................| X X X X | X X X X | 43,756 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 1,880 | 1,589 | 1,503 | 267 | 593 1,433 | 863 | 1,050 | 561 | 163 2,369 | 1,297 | 1,212 | 910 | 182 22,215 | 9,305 | 1,919 | 885 | 687 66,365 | 29,375 | 5,744 | 1,681 | 1,226 X X X X | 66,032 | 25,110 | 4,867 | 1,616 X X X X | X X X X | 59,265 | 8,833 | 3,372 X X X X | X X X X | X X X X | 52,466 | 12,094 X X X X | X X X X | X X X X | X X X X | 25,708 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 416 | 4,197 | | 221 | 2,228 | | 211 | 2,227 | | 326 | 2,217 | | 419 | 2,336 | | 579 | 1,434 | | 1,135 | 1,579 | | 5,989 | 11,161 | | 6,895 | 26,184 | | 25,682 | 27,163 | | X X X X | 81,792 | - -------------------------------- SCHEDULE P - PART 4H - SECTION 1 - OTHER LIABILITY - OCCURRENCE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 101,282 | 69,191 | 27,755 | | 2. 1984................| 62,112 | 35,872 | 17,151 | | 3. 1985................| X X X X | 110,599 | 63,829 | | 4. 1986................| X X X X | X X X X | 218,317 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 42,967 | 35,099 | 37,069 | 25,546 | 23,378 16,471 | 17,036 | 17,924 | 13,180 | 9,747 53,998 | 33,355 | 23,934 | 18,626 | 14,627 132,263 | 94,338 | 79,528 | 60,046 | 39,126 236,463 | 167,895 | 154,407 | 134,272 | 91,910 X X X X | 269,216 | 183,396 | 160,726 | 117,061 X X X X | X X X X | 272,255 | 216,739 | 165,622 X X X X | X X X X | X X X X | 204,740 | 163,654 X X X X | X X X X | X X X X | X X X X | 93,861 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 13,803 | 5,570 | | 8,239 | 4,398 | | 6,887 | 5,183 | | 20,458 | 6,279 | | 50,365 | 18,005 | | 75,020 | 29,059 | | 117,792 | 49,468 | | 127,446 | 78,188 | | 59,290 | 40,984 | | 99,255 | 49,614 | | X X X X | 99,868 | - -------------------------------- SCHEDULE P - PART 4H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | 1 | (000 omitted) | |------------------------------------------------ | Years in Which | | | | | Losses Were | 2 | 3 | 4 | | Incurred | 1984 | 1985 | 1986 | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 0 | 0 | 0 | | 2. 1984................| 0 | 0 | 0 | | 3. 1985................| X X X X | 0 | 0 | | 4. 1986................| X X X X | X X X X | 0 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 X X X X | 0 | 0 | 0 | 0 X X X X | X X X X | 0 | 0 | 0 X X X X | X X X X | X X X X | 0 | 0 X X X X | X X X X | X X X X | X X X X | 37,342 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 18,504 | 12,086 | | 12,296 | 25,500 | | X X X X | 83,813 | - -------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 4I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT) ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | | | | | Incurred | 1984 | 1985 | 1986 | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| X X X X | X X X X | X X X X | | 2 1992................| X X X X | X X X X | X X X X | | 3. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 | | | | 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | X X X X | X X X X | X X X X | X X X X | 25,160 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | | | | 1992 | 1993 | | | | | | | |---------------|---------------| | | | | 3,529 | 227 | | 14,163 | 3,440 | | X X X X | 47,826 | - -------------------------------- SCHEDULE P - PART 4J - AUTO PHYSICAL DAMAGE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | | | | | Incurred | 1984 | 1985 | 1986 | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| X X X X | X X X X | X X X X | | 2 1992................| X X X X | X X X X | X X X X | | 3. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | X X X X | X X X X | X X X X | X X X X | 11,156 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | | | | 1992 | 1993 | | | | | | | |---------------|---------------| | | | | 3,197 | 663 | | 9,143 | 2,097 | | X X X X | 5,380 | - -------------------------------- SCHEDULE P - PART 4K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | | | | | Incurred | 1984 | 1985 | 1986 | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| X X X X | X X X X | X X X X | | 2 1992................| X X X X | X X X X | X X X X | | 3. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | X X X X | X X X X | X X X X | X X X X | 40,619 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | | | | 1992 | 1993 | | | | | | | |---------------|---------------| | | | | 14,895 | 4,015 | | 29,992 | 11,323 | | X X X X | 25,547 | - -------------------------------- SCHEDULE P - PART 4L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | | | | | Incurred | 1984 | 1985 | 1986 | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| X X X X | X X X X | X X X X | | 2 1992................| X X X X | X X X X | X X X X | | 3. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | X X X X | X X X X | X X X X | X X X X | 7,086 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | | | | 1992 | 1993 | | | | | | | |---------------|---------------| | | | | 438 | 32 | | 6,370 | 460 | | X X X X | 8,495 | - -------------------------------- SCHEDULE P - PART 4M - INTERNATIONAL ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | | | | | Incurred | 1984 | 1985 | 1986 | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 0 | 0 | 0 | | 2. 1984................| 0 | 0 | 0 | | 3. 1985................| X X X X | 0 | 0 | | 4. 1986................| X X X X | X X X X | 0 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 X X X X | 0 | 0 | 0 | 0 X X X X | X X X X | 0 | 0 | 0 X X X X | X X X X | X X X X | 9,301 | 8,397 X X X X | X X X X | X X X X | X X X X | 4,739 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | | | | 1992 | 1993 | | | | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 2,518 | 2,695 | | 1,707 | 2,153 | | 2,069 | 2,378 | | X X X X | 4,762 | - -------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P - PART 4N - REINSURANCE A ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | 1. 1988................| X X X X | X X X X | X X X X | | 2. 1989................| X X X X | X X X X | X X X X | | 3. 1990................| X X X X | X X X X | X X X X | | 4. 1991................| X X X X | X X X X | X X X X | | 5. 1992................| X X X X | X X X X | X X X X | | 6. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- X X X X | 6,436 | 2,783 | 1,089 | 915 X X X X | X X X X | 7,933 | 3,195 | 1,795 X X X X | X X X X | X X X X | 8,079 | 4,093 X X X X | X X X X | X X X X | X X X X | 8,464 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | | | | | | | |---------------|---------------| | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 4,798 | 0 | | X X X X | 0 | - -------------------------------- SCHEDULE P - PART 4O - REINSURANCE B ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. 1988................| X X X X | X X X X | X X X X | | 2. 1989................| X X X X | X X X X | X X X X | | 3. 1990................| X X X X | X X X X | X X X X | | 4. 1991................| X X X X | X X X X | X X X X | | 5. 1992................| X X X X | X X X X | X X X X | | 6. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | X X X X | 9,202 | 9,052 | 6,300 | 5,133 X X X X | X X X X | 13,994 | 11,719 | 9,407 X X X X | X X X X | X X X X | 16,487 | 10,163 X X X X | X X X X | X X X X | X X X X | 13,319 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | | | | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 1,105 | 0 | | X X X X | 0 | - -------------------------------- SCHEDULE P - PART 4P - REINSURANCE C ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. 1988................| X X X X | X X X X | X X X X | | 2. 1989................| X X X X | X X X X | X X X X | | 3. 1990................| X X X X | X X X X | X X X X | | 4. 1991................| X X X X | X X X X | X X X X | | 5. 1992................| X X X X | X X X X | X X X X | | 6. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | X X X X | 59 | 36 | 22 | 19 X X X X | X X X X | 110 | 104 | 69 X X X X | X X X X | X X X X | 89 | 45 X X X X | X X X X | X X X X | X X X X | 6 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | | | | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | X X X X | 0 | - -------------------------------- SCHEDULE P - PART 4Q - REINSURANCE D ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 0 | 0 | 0 | | 2. 1984................| 1,267 | 1,118 | 0 | | 3. 1985................| X X X X | 0 | 0 | | 4. 1986................| X X X X | X X X X | 0 | | 5. 1987................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | | | | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | - -------------------------------- SCHEDULE P - PART 4R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 43,692 | 33,697 | 21,706 | | 2. 1984................| 18,257 | 11,891 | 7,157 | | 3. 1985................| X X X X | 22,289 | 16,241 | | 4. 1986................| X X X X | X X X X | 41,667 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 22,406 | 19,694 | 20,298 | 10,541 | 3,462 7,384 | 5,328 | 5,723 | 3,750 | 2,243 11,578 | 10,802 | 9,958 | 5,159 | 3,912 25,595 | 24,140 | 21,482 | 15,592 | 8,759 37,070 | 30,194 | 25,657 | 21,101 | 10,181 X X X X | 36,261 | 24,875 | 21,484 | 15,345 X X X X | X X X X | 22,754 | 17,664 | 14,109 X X X X | X X X X | X X X X | 13,994 | 11,541 X X X X | X X X X | X X X X | X X X X | 10,179 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | | | | | | | |---------------|---------------| | | | | 2,593 | 1,809 | | 1,553 | 869 | | 2,558 | 1,616 | | 4,769 | 2,654 | | 6,294 | 4,413 | | 6,664 | 6,682 | | 5,901 | 6,956 | | 7,223 | 6,335 | | 8,525 | 7,719 | | 8,877 | 9,063 | | X X X X | 23,035 | - -------------------------------- SCHEDULE P - PART 4R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE ------------------------------------------------------------------------------ | | BULK AND INCURRED BUT NOT REPORTED ON LOSSES | | AND ALLOCATED EXPENSES AT YEAR END | | (000 omitted) | 1 |------------------------------------------------ | | | | | | Years in Which | 2 | 3 | 4 | | Losses Were | 1984 | 1985 | 1986 | | Incurred | | | | | | | | | | | | | | |-----------------------------|---------------|---------------|---------------| | | | | | | 1. Prior ..............| 0 | 0 | 0 | | 2. 1984................| 0 | 0 | 0 | | 3. 1985................| X X X X | 0 | 0 | | 4. 1986................| X X X X | X X X X | 0 | | 5. 1987................| X X X X | X X X X | X X X X | | 6. 1988................| X X X X | X X X X | X X X X | | 7. 1989................| X X X X | X X X X | X X X X | | 8. 1990................| X X X X | X X X X | X X X X | | 9. 1991................| X X X X | X X X X | X X X X | | 10. 1992................| X X X X | X X X X | X X X X | | 11. 1993................| X X X X | X X X X | X X X X | ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- | | | | 5 | 6 | 7 | 8 | 9 1987 | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | | - ---------------|---------------|---------------|---------------|--------------- | | | | 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 0 | 0 | 0 | 0 | 0 X X X X | 0 | 0 | 0 | 0 X X X X | X X X X | 0 | 0 | 0 X X X X | X X X X | X X X X | 0 | 0 X X X X | X X X X | X X X X | X X X X | 0 X X X X | X X X X | X X X X | X X X X | X X X X X X X X | X X X X | X X X X | X X X X | X X X X - ------------------------------------------------------------------------------- - --------------------------------| | | | | 10 | 11 | | 1992 | 1993 | | | | | | | | | | |---------------|---------------| | | | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | 0 | 0 | | X X X X | 1,876 | - -------------------------------- CONSOLIDATED ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CORPORATION COMBINED SCHEDULE P FOR INSURANCE SEGMENTS .................................................................. (Name) SCHEDULE P INTERROGATORIES ----------------------------------------------------------------------------- | | | | | 1. Computation of excess statutory reserves over statement reserves. | | See Instructions for explanation and formulas. | | | | (a) Auto Liability (private passenger and commercial) | | | | 1993 $0 ( 75.0%) 1992 $0 ( 75.0%) | | ---------------------- ---------------------- | | 1991 $0 ( 75.0%) Total $0 | | ---------------------- ----------------------- | | | | (b) Other Liability and Products Liability | | | | 1993 $0 ( 60.0%) 1992 $0 ( 60.0%) | | ---------------------- ---------------------- | | 1991 $0 ( 60.0%) Total $0 | | ---------------------- ----------------------- | | | | (c) Medical Malpractice | | | | 1993 $0 ( 60.0%) 1992 $0 ( 60.0%) | | ----------------------- ---------------------- | | 1991 $0 ( 60.0%) Total $0 | | ----------------------- ----------------------- | | | | (d) Workers' Compensation | | | | 1993 $0 ( 75.0%) 1992 $0 ( 75.0%) | | ------------------------ ---------------------- | | 1991 $0 ( 75.0%) Total $0 | | ------------------------ ----------------------- | | | | (e) Credit Total $0 | | ----------------------- | | | | (f) All Lines Total (Report here and Page 3) | | Total $0 | | ------------------------ | | 2. What is the extended loss and expense reserve - direct and assumed | | - for the following classes? An example of an extended | | expense reserve is the actuarial reserve for the free-tail co | | arising upon death, disability or retirement in most medical | | policies. Such a liability is to be reported here even if it was | | not reported elsewhere in Schedule P, but otherwise reported as a | | liability item on page 3. Show the full reserve amount | | the change during the current year. | | | | | | ---------------------------------------------------------------- | | | Year in which premiums | 1 | 2 | 3 | | | | were earned and losses | Medical | Other | Products | | | | were incurred | Malpractice | Liability | Liability | | | |--------------------------|-------------|-----------|-----------| | | | (a) 1987 | | | | | | | (b) 1988 | | | | | | | (c) 1989 | 50,000 | | | | | | (d) 1990 | 150,000 | | | | | | (e) 1991 | 300,000 | | | | | | (f) 1992 | 400,000 | | | | | | (g) 1993 | 500,000 | | | | | |--------------------------|-------------|-----------|-----------| | | | (h) Totals | 1,500,000 | 0 | 0 | | | ---------------------------------------------------------------- | | | | 3. The term "Loss expense" includes all payments for legal expenses, | | including attorney's and witness fees and court costs, salaries and | | expenses of investigators, adjustors and field men, rents, | | stationery, telegraph and telephone charges, postage, salaries and | | expenses of office employees, home office expense and all other | | payments under or on account of such injuries, whether the payments | | are allocated to specfic claims or are unallocated. Are they so | | reported in this statement? | | Answer: Yes[ X ] No[ ] | | | | 4. The unallocated loss expense payments paid during the most recent | | calendar year should be distributed to the various years in which | | losses were incurred as follows: (1) 45% to the most recent year, | | (2) 5% to the next most recent year, and (3) the balance to all | | years, including the most recent, in proportion to the amount of | | loss payments paid for each year during the most recent calendar | | year. If the distribution in (1) or (2) produces an accumlated | | distribution to such year in excess of 10% of the premiums | | earned for such year, disregarding all distributions made under | | (3), such accumulated distribution should be limited to 10% of | | premiums earned and the balance distributed in accordance with (3). | | Are they so reported in this Statement? | | Answer: Yes[ X ] No[ ] | | | | 5. Do any lines in Schedule P include reserves which are reported | | gross of any discount to present value of future payments, but are | | reported net of such discounts on page 10? | | Answer: Yes[ ] No[ X ] | | | | If yes, proper reporting must be made in the Notes to Financial | | Statements, as specified in the Instructions. Also, the discount | | must be reported in Schedule P - Part 1, Columns 31 and 32. | | | | Schedule P must be completed gross of non-tabular discounting. Work | | papers relating to discount calculations must be available for | | examination upon request. | | | | Discounting is allowed only if expressly permitted by the state | | insurance department to which this Annual Statment is being filed. | | | | 6. What were the net premiums in force at the end of the year for: | | (in thousands of dollars) | | (a) Fidelity $35,573 | | (b) Surety $110,878 | | | | 7. Claim count information is reported (check one) | | If not the same in all years, explain in Question 8. | | (a) per claim _____ | | (b) per claimant __X__ | | | | 8. The information provided in Schedule P will be used by many persons | | to estimate the adequacy of the current loss and expense reserves, | | amoung other things. Are there any especially significant events, | | coverage, retention or accounting changes which have occurred which | | must be considered when making such analyses (An extended | | statement may be attached)? The group commuted a portion of its | | total reinsurance with the Workers Compensation Reinsurance Bureau | | (WCB) in December 1993 for the calendar years 1980 through 1992. | | Outlined below are the results of this transaction: | | ASSUMED CEDED NET | | Losses Unpaid - Case Basis $ (97,000,000) $ (97,000,000) $ 0 | | Losses Unpaid - IBNR Basis (103,000,000) (111,000,000) 8,000,000 | | Losses Paid (200,000,000) (200,000,000) 0 | | Losses Incurred $ 0 $ (8,000,000) $ 8,000,000 | | | ---------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----