-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q4ETSMSllDzQnnRCk8x/X7DkgV3DQmY9+lMQMqnHDJbXcjxF9uvCNXvgclKMw8pl g3ORFuNl7Ra/gDez10ZyEg== 0000950112-95-002919.txt : 19951118 0000950112-95-002919.hdr.sgml : 19951118 ACCESSION NUMBER: 0000950112-95-002919 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19951109 SROS: NONE GROUP MEMBERS: SCOR MERGER SUB CORP GROUP MEMBERS: SCOR S.A. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SCOR US CORP CENTRAL INDEX KEY: 0000798363 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 751791342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-39126 FILM NUMBER: 95588574 BUSINESS ADDRESS: STREET 1: 110 WILLIAM ST STE 1800 STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038-3995 BUSINESS PHONE: 2129788200 MAIL ADDRESS: STREET 1: 110 WILLIAM STREET STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SCOR US CORP CENTRAL INDEX KEY: 0000798363 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 751791342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-39126 FILM NUMBER: 95588575 BUSINESS ADDRESS: STREET 1: 110 WILLIAM ST STE 1800 STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038-3995 BUSINESS PHONE: 2129788200 MAIL ADDRESS: STREET 1: 110 WILLIAM STREET STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SCOR MERGER SUB CORP CENTRAL INDEX KEY: 0001003225 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: SULLIVAN & CROMWELL STREET 2: 125 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2125583687 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SCOR MERGER SUB CORP CENTRAL INDEX KEY: 0001003225 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: SULLIVAN & CROMWELL STREET 2: 125 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2125583687 SC 14D1 1 SCOR MERGER SUB CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 and SCHEDULE 13D/A (AMENDMENT NO. 4) Under the Securities Exchange Act of 1934 SCOR U.S. Corporation (Name of Subject Company) SCOR Merger Sub Corporation SCOR S.A. (Bidders) COMMON STOCK, PAR VALUE $0.30 PER SHARE (Title of Class of Securities) 78 4027 10 4 (CUSIP Number of Class of Securities) John T. Andrews, Jr. Vice President General Counsel and Secretary SCOR U.S. Corporation Two World Trade Center New York, New York 10048-0178 (212) 390-5200 Copy to: Allan M. Chapin Esq. Sullivan & Cromwell 250 Park Avenue New York, New York 10048-0178 (212) 558-4000 (Name, Address, and Telephone Numbers of Person Authorized to Receive Notices and Communications on Behalf of Bidder) Calculation of Filing Fee Transaction Valuation*: Amount of Filing Fee**: $70,229,727 $14,046 * For purposes of calculating the filing fee only. The filing fee was calculated, pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, on the basis of 4,605,228 Common Stock (the number of Common Stock outstanding on the date hereof, including vested options to acquire Common Stock, but excluding unvested options to acquire Common Stock and excluding 14,547,756 Common Stock owned by SCOR S.A., multiplied by the proposed acquisition price U.S. $15.25 per share. ** 1/50 of 1% of Transaction Valuation. [ ] Check box if any part of the fee is offset as provided by Rule 0- 11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Filing Party: ------------ --------------- Form or Registration No.: Date Filed: ------------ --------------- Cusip No 78 4027 10 4 14D-1 and 13D Page 2 of 10 Pages - -------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SCOR S.A. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION France 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,547,756 shares 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 80% 10 TYPE OF REPORTING PERSON HC, IC, CO Cusip No 78 4027 10 4 14D-1 and 13D Page 3 of 10 Pages -------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SCOR Merger Sub Corporation 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 shares 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0% 10 TYPE OF REPORTING PERSON CO This Schedule 14D-1 and Schedule 13D/A (Amendment No. 4) (the "Schedule 14D-1 and 13D") relates to the tender offer by SCOR Merger Sub Corporation, a newly organized Delaware corporation (the "Purchaser") and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), to purchase all the outstanding shares of Common Stock, par value $0.30 per Share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), not currently directly or indirectly owned by Parent, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase") and in the related Letter of Transmittal (the "Letter of Transmittal", together with the Offer to Purchase, the "Offer"), both of which are annexed to and filed with this Schedule 14D-1 and 13D as Exhibits (a)(1) and (a)(2), respectively. This Schedule 14D-1 and 13D is being filed on behalf of the Purchaser and Parent. The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1 and Schedule 13D respectively of the Securities Exchange Act of 1934, as amended. Item 1. Security and Subject Company. ---------------------------- (a) The name of the subject company is SCOR U.S. Corporation, a Delaware corporation (the "Company"), and the address of its principal executive offices is Two World Trade Center, New York, New York 10048- 0178. (b) The information set forth in the "INTRODUCTION" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "THE OFFER - 6. Price Range of Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. Item 2. Identity and Background. ----------------------- (a)-(d); (g) This Statement is being filed by the Purchaser and Parent. The information set forth in the "INTRODUCTION", in "THE OFFER - 9. Certain Information Concerning Parent and the Purchaser" and in "SCHEDULE I - Directors and Executive Officers of Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. (e); (f) During the last five years, neither Parent, nor the Purchaser nor, to the best of their knowledge, any of the directors or executive officers of Parent or the Purchaser has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such law. Item 3. Past Contacts, Transactions or Negotiations with the Subject ------------------------------------------------------------ Company. ------- (a)-(b) The information set forth in the "INTRODUCTION", in "SPECIAL FACTORS - 5. Background of the Offer and the Merger", in "THE OFFER - 9. Certain Information Concerning Parent and the Purchaser" and in "THE OFFER - 10. Contacts with the Company" of the Offer to Purchase is incorporated herein by reference. (Page 4 of 10 Pages) Item 4. Source and Amount of Funds or Other Consideration. ------------------------------------------------- (a)-(b) The information set forth in "THE OFFER - 12. Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder. ---------------------------------------------------------------- (a)-(g) The information set forth in the "INTRODUCTION", in "SPECIAL FACTORS - 2. Reasons for the Offer and the Merger", in "SPECIAL FACTORS - 5. Background of the Offer and the Merger", in "THE OFFER - 7. Effect of the Offer on Market for the Shares, Stock Exchange Listing, and Exchange Act Registration" and in "THE OFFER - 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures" of the Offer to Purchase is incorporated herein by reference. Item 6. Interest in Securities of the Subject Company. --------------------------------------------- (a)-(b) The information set forth in the "INTRODUCTION", in "THE OFFER - 9. Certain Information Concerning Parent and the Purchaser" and in "THE OFFER - 10. Contacts with the Company" of the Offer to Purchase is incorporated herein by reference. Item 7. Contracts, Arrangements, Understandings or Relationships with ------------------------------------------------------------- Respect to the Subject Company's Securities. ------------------------------------------- The information set forth in the "INTRODUCTION", in "THE OFFER - 9. Certain Information Concerning Parent and the Purchaser", in "THE OFFER - 10. Contacts with the Company" and in "THE OFFER - 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures" of the Offer to Purchase is incorporated herein by reference. Item 8. Person Retained, Employed or to be Compensated. ---------------------------------------------- The information set forth in "SPECIAL FACTORS - 5. Background of the Offer and the Merger" and in "THE OFFER - 16. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. Item 9. Financial Statements of Certain Bidders. --------------------------------------- Not applicable. Item 10. Additional Information. ---------------------- (a) The information set forth in "SPECIAL FACTORS - 5. Background of the Offer and the Merger", in "THE OFFER - 9. Certain Information Concerning Parent and the Purchaser" and in "THE OFFER - 10. Contacts with the Company" of the Offer to Purchase is incorporated herein by reference. (b)-(c) The information set forth in "THE OFFER - 15. Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (Page 5 of 10 Pages) (d) The information set forth in "THE OFFER - 7. Effect of the Offer on Market for the Shares, Stock Exchange Listing, and Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. (e) The information set forth in "THE OFFER - 15. Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the entire Offer to Purchase and the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference in its entirety. Item 11. Material to be filed as Exhibits. -------------------------------- (a)(1) Offer to Purchase. (a)(2) Letter of Transmittal (including Guidelines for Certification Taxpayer Identification Number on Form W-9). (a)(3) Letter dated November 9, 1995, to brokers, dealers, commercial banks, trust companies and nominees. (a)(4) Letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients. (a)(5) Notice of Guaranteed Delivery. (a)(6) Press Release issued by Parent, dated September 26, 1995. (a)(7) Press Release issued by Parent and the Purchaser, dated November 3, 1995. (a)(8) Form of newspaper advertisement, dated November 9, 1995. (b) Not applicable. (c)(1) Agreement and Plan of Merger (the "Merger Agreement"), dated as of November 2, 1995, among Parent, the Purchaser and the Company. (c)(2) Letter Agreement to amend the Merger Agreement, dated as of November 8, 1995. (c)(3) SCOR Reinsurance Company 1994 Voting Trust Agreement, dated as of June 6, 1994, among SCOR Reinsurance Company, the Company and the Voting Trustees designated therein. (c)(4) Net Aggregate Excess of Loss Retrocessional Agreement, dated January 1, 1994, among Parent and SCOR Reinsurance Company. (Page 6 of 10 Pages) (c)(5) Interests and Liabilities Agreement to the Catastrophe Excess of Loss Reinsurance Contract, among SCOR Reinsurance Company and SCOR S.A., effective date January 1, 1994. (c)(6) Interests and Liabilities Agreement to the Catastrophe Excess of Loss Reinsurance Contract,among SCOR Reinsurance Company and SCOR Reassurance, effective date January 1, 1995. (c)(7) Credit Agreement U.S. $20 million, dated January 24, 1995 between Parent and the Company. (c)(8) Loan Agreement U.S. $20 million, dated October 2, 1995 between Parent and the Company. (d) Not applicable. (e) Not applicable. (f) Not applicable. (g)(1) Complaint, Howard Sands Feldman, Custodian for Jan --------------------------------------- Sharona Feldman, UGMA v. Jacques P. Blandeau [sic], -------------------------------------------------- et al, C.A. No. 14577. ----- (g)(2) Complaint, Crandon Capital Partners v. Jacques P. ------------------------ ---------- Blondeau, et al, C.A. No. 14579. --------------- (g)(3) Complaint, Daniel Bruno v. Jacques P. Blandeau [sic], ------------ ------------------------- et al, C.A. No. 14582. ----- (g)(4) Complaint, Jan Baxt v. Jacques P. Blandeau [sic], et al, -------- -------------------------------- C.A. No. 14585. (g)(5) Complaint, Kalter and Kaplan Profit Sharing Plan - ---------------------------------------- Keogh F/B/O Ivan Kalter v. Jacques P. Blondeau et al, ----------------------- ------------------------- C.A. No. 14589. (Page 7 of 10 Pages) SIGNATURE --------- After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 9, 1995 SCOR S.A. By: /s/ Jacques P. Blondeau ------------------------------------------- Name: Jacques P. Blondeau Title: Chairman and Chief Executive Officer SCOR Merger Sub Corporation By: /s/ Jacques P. Blondeau ------------------------------------------- Name: Jacques P. Blondeau Title: President and Director (Page 8 of 10 Pages) EXHIBIT INDEX ------------- Exhibit Number Exhibit Name Page Number -------------- ------------ ----------- (a)(1) Offer to Purchase. (a)(2) Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number on Form W-9). (a)(3) Letter dated November 9, 1995, to brokers, dealers, commercial banks, trust companies and nominees. (a)(4) Letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients. (a)(5) Notice of Guaranteed Delivery. (a)(6)* Press Release issued by Parent, dated September 26, 1995. (a)(7) Press Release issued by Parent and the Purchaser, dated November 3, 1995. (a)(8) Form of newspaper advertisement, dated November 9, 1995. (b) Not applicable. (c)(1)** Agreement and Plan of Merger (the "Merger Agreement"), dated November 2, 1995, among Parent, the Purchaser and the Company. (c)(2) Letter Agreement to amend the Merger Agreement, dated as of November 8, 1995. (c)(3)*** SCOR Reinsurance Company 1994 Voting Trust Agreement, dated as of June 6, 1994, among SCOR Reinsurance Company, the Company and the Voting Trustees designated therein. - --------------------- * Incorporated by reference from Parent's statement on Schedule 13D/A Amendment No. 3) dated September 26, 1995. ** Incorporated by reference from the Company's Report on Form 8-K, dated November 6, 1995. *** Incorporated by reference from the Company's Annual Report on Form 10-K for the period ending December 31, 1994. (Page 9 of 10 Pages) Exhibit Number Exhibit Name Page Number -------------- ------------ ----------- (c)(4)*** Net Aggregate Excess of Loss Retrocessional Agreement, dated January 1, 1994, among Parent and SCOR Reinsurance Company. (c)(5) Interests and Liabilities Agreement to the Catastrophe Excess of Loss Reinsurance Contract, among SCOR Reinsurance Company and SCOR S.A., effective date January 1, 1994. (c)(6) Interests and Liabilities Agreement to the Catastrophe Excess of Loss Reinsurance Contract, among SCOR Reinsurance Company and SCOR Reassurance, effective date January 1, 1995. (c)(7) Credit Agreement U.S. $20 million, dated January 24, 1995 between Parent and the Company. (c)(8) Loan Agreement U.S. $20 million, dated October 2, 1995 between Parent and the Company. (d) Not applicable. (e) Not applicable. (f) Not applicable. (g)(1) Complaint, Howard Sands Feldman, Custodian for Jan --------------------------------------- Sharona Feldman, UGMA v. Jacques P. Blandeau [sic], -------------------------------------------------- et al, C.A. No. 14577. ----- (g)(2) Complaint, Crandon Capital Partners v. Jacques P. ------------------------ ---------- Blondeau, et al, C.A. No. 14579. --------------- (g)(3) Complaint, Daniel Bruno v. Jacques P. Blandeau [sic], ------------ ------------------------- et al, C.A. No. 14582. ----- (g)(4) Complaint, Jan Baxt v. Jacques P. Blandeau [sic], et al, -------- -------------------------------- C.A. No. 14585. (g)(5) Complaint, Kalter and Kaplan Profit Sharing Plan - ---------------------------------------- Keogh F/B/O Ivan Kalter v. Jacques P. Blondeau et al, ----------------------- ------------------------- C.A. No. 14589. - -------------------- *** Incorporated by reference from the Company's Annual Report on Form 10-K for the period ending December 31, 1994. (Page 10 of 10 Pages) EX-99.(A)(1) 2 Exhibit (a)(1) OFFER TO PURCHASE FOR CASH ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF SCOR U.S. CORPORATION AT $15.25 NET PER SHARE BY SCOR MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF SCOR S.A. - -------------------------------------------------------------------------------- THE OFFER (AS DEFINED HEREIN) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES (AS DEFINED HEREIN) WHICH, TOGETHER WITH ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR INDIRECTLY BY PARENT (AS DEFINED HEREIN), WILL CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE "THE OFFER -- 1. TERMS OF THE OFFER" AND "THE OFFER -- 13. CERTAIN CONDITIONS OF THE OFFER." ------------------- THE BOARD OF DIRECTORS OF THE COMPANY AND THE SPECIAL COMMITTEE (AS DEFINED HEREIN) HAVE UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER (AS DEFINED HEREIN) ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ------------------- IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's shares of common stock (the "Shares") of the Company should either (1) complete and sign the Letter of Transmittal accompanying this Offer to Purchase (the "Letter of Transmittal"), or a facsimile thereof, in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile) or, in the case of a book-entry transfer of Shares effected pursuant to the procedure set forth in "THE OFFER -- 3. Procedure for Tendering Shares", an Agent's Message (as defined herein) in lieu of the Letter of Transmittal, and any other required documents to the Depositary (as defined herein) and either deliver the Letter of Transmittal (or such facsimile) together with the certificate(s) representing the tendered Shares or deliver such Shares pursuant to the procedure for book-entry transfer set forth in "THE OFFER -- 3. Procedure for Tendering Shares", or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender Shares so registered. A stockholder who desires to tender Shares and whose certificates for such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, or who cannot deliver all required documents to the Depositary prior to the expiration of the Offer, may tender such Shares by following the procedures for guaranteed delivery set forth in "THE OFFER -- 3. Procedure for Tendering Shares". The Purchaser makes no recommendation to any stockholder as to whether to tender or refrain from tendering Shares. Stockholders must make their own decisions whether to tender Shares and, if so, how many Shares to tender. Questions and requests for assistance may be directed to the Information Agent (as defined herein) or to the Dealer Managers (as defined herein) at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be directed to the Information Agent, the Dealer Managers or to brokers, dealers, commercial banks or trust companies, and copies will be furnished promptly at the Purchaser's expense. ------------------- THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR THE MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------- The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. ------------------- The date of this Offer to Purchase is November 9, 1995 TABLE OF CONTENTS
SECTION PAGE - --------------------------------------------------------------------------------------- ---- INTRODUCTION........................................................................... 1 SPECIAL FACTORS........................................................................ 3 1. History of Company........................................................... 3 2. Reasons for the Offer and the Merger......................................... 4 3. Fairness of the Offer and the Merger......................................... 6 4. Interests of Certain Persons in the Offer and the Merger; Potential Conflicts of Interests..................................................... 7 5. Background of the Offer and the Merger....................................... 8 6. Recommendation of the Company's Board of Directors and the Special Committee.................................................................... 19 THE OFFER.............................................................................. 24 1. Terms of the Offer........................................................... 24 2. Acceptance for Payment and Payment for Shares................................ 26 3. Procedure for Tendering Shares............................................... 27 4. Rights of Withdrawal......................................................... 30 5. Certain Federal Income Tax Consequences of the Offer and the Merger.......... 31 6. Price Range of Shares; Dividends............................................. 31 7. Effect of the Offer on Market for the Shares, Stock Exchange Listing, and Exchange Act Registration.............................................. 32 8. Certain Information Concerning the Company................................... 33 9. Certain Information Concerning Parent and the Purchaser...................... 41 10. Contacts with the Company.................................................... 42 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures............. 49 12. Source and Amount of Funds................................................... 54 13. Certain Conditions of the Offer.............................................. 54 14. Dividends and Distributions.................................................. 55 15. Certain Legal Matters........................................................ 56 16. Fees and Expenses............................................................ 58 17. Miscellaneous................................................................ 60
SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser........ I-1 SCHEDULE II -- Appraisal Rights of Dissenting Stockholders under Delaware Law...... II-1 SCHEDULE III -- Opinion of Dillon, Read & Co. Inc................................... III-1 Appendix A -- Financial Statements from the Company's Annual Report on Form 10-K for the Year Ended December 31, 1994................................ A-1 Appendix B -- Financial Results for the Quarterly Period Ended September 30, 1995 as Reported in the Company's Press Release, dated October 24, 1995................................................................ B-1
i To the Holders of Common Stock of SCOR U.S. Corporation: INTRODUCTION SCOR Merger Sub Corporation, a newly organized Delaware corporation (the "Purchaser") and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), hereby offers to purchase all of the outstanding shares of Common Stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), not currently directly or indirectly owned by Parent, at a price of $15.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the Letter of Transmittal (which together constitute the "Offer"). Tendering stockholders will not be obligated to pay brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the Purchaser. The Purchaser will pay all charges and expenses of Goldman, Sachs & Co. (in such capacity, the "Dealer Managers"), The Bank of New York, as depositary (the "Depositary"), and D.F. King & Co., Inc. (the "Information Agent"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR INDIRECTLY BY PARENT, WILL CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER (THE "MINIMUM TENDER CONDITION"). SUBJECT TO APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE PURCHASER RESERVES THE RIGHT, WHICH IT PRESENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, LESS THAN THE MINIMUM NUMBER OF SHARES NECESSARY TO SATISFY THE MINIMUM TENDER CONDITION. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE "THE OFFER -- 1. TERMS OF THE OFFER" AND "THE OFFER -- 13. CERTAIN CONDITIONS OF THE OFFER". THE BOARD OF DIRECTORS OF THE COMPANY AND THE COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY COMPRISED OF ALL DIRECTORS OF THE COMPANY WHO ARE NEITHER OFFICERS OR DIRECTORS OF THE PURCHASER OR PARENT NOR OFFICERS OF THE COMPANY (THE "SPECIAL COMMITTEE") HAVE UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. SEE "SPECIAL FACTORS--6. RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE". The Special Committee's financial advisor, Dillon, Read & Co. Inc. ("Dillon Read"), has delivered to the Special Committee its written opinion, dated as of November 2, 1995, that as of such date the $15.25 per Share cash consideration to be received by the holders of Shares (other than Parent) pursuant to the Offer and the Merger is fair to such holders from a financial point of view. A copy of the opinion of Dillon Read is set forth as Schedule III hereto and is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders together with this Offer to Purchase. See "SPECIAL FACTORS--6. Recommendation of the Company's Board of Directors and the Special Committee". The Company has advised the Purchaser and Parent that, as of November 2, 1995, there were 18,170,971 Shares outstanding. Parent owned 14,547,756 Shares, or approximately 80% of the outstanding Shares, as of such date. According to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Annual Report"), there were approximately 140 recordholders of the Shares as of March 28, 1995. The Company has also advised the Purchaser and Parent that, as of November 2, 1995, the Company had outstanding $75,950,000 aggregate principal amount of 5 1/4% Convertible Subordinated Debentures due April 1, 2000 (the "Debentures"), which were issued by the Company on March 29, 1993 at a price equal to the principal amount thereof through a private offering. The Debentures are not redeemable by the Company prior to April 3, 1996, and outstanding Debentures are currently convertible into approximately 2.99 million Shares at a conversion price of $25.375 per Share. The Company has advised the Purchaser and Parent that during 1994 the Company repurchased in the open market $3,900,000 in principal amount of the Debentures and between January 1, 1995 and June 30, 1995 the Company repurchased in the open market $6,400,000 in principal amount of the Debentures. Under the terms of the indenture pursuant to which the Debentures were issued (the "Indenture"), in the event that Parent beneficially owns, after giving effect to the purchase of Shares pursuant to the Offer or the acquisition of Shares pursuant to the Merger, in excess of 90% of the outstanding Shares (a "Repurchase Event"), the holders of the Debentures shall have the right to require the Company to repurchase the Debentures at a repurchase price equal to 100% of the principal amount thereof together with accrued and unpaid interest to the date of such repurchase, which date shall be 45 days after the date on which the Company notifies the holders of the Debentures of such Repurchase Event. The Company has advised the Purchaser and Parent that under the Company's 1986 Stock Incentive Plan for Key Executives, the Company's 1990 Stock Option Plan for Directors and the Company's 1991 Stock Option Plan for Key Employees (collectively, the "Company Stock and Option Plans") there were, as of November 2, 1995, vested options outstanding for a total of 982,013 Shares, exercisable at prices ranging from $9.00 to $17.00, and, as of November 2, 1995, unvested options outstanding for a total of 455,003 Shares. According to the 1994 Annual Report, the number of Shares available for future grant at December 31, 1994 was 552,000. Based on the foregoing, assuming that no additional Shares are issued after November 2, 1995, the Minimum Tender Condition would be satisfied if at least 1,806,118 Shares are validly tendered prior to the expiration of the Offer and not withdrawn. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 2, 1995 (the "Merger Agreement"), among Parent, the Purchaser and the Company. The Merger Agreement provides that, among other things, promptly after the purchase of Shares pursuant to the Offer and the receipt of any required approval of the Merger Agreement by the Company's stockholders and the satisfaction or waiver of certain other conditions, the Purchaser will be merged (the "Merger") into the Company. Following consummation of the Merger, the Company will continue as the surviving corporation and will become a wholly owned subsidiary of Parent. Upon consummation of the Merger (the "Effective Time"), each then outstanding Share not owned by Parent or any subsidiary of Parent (other than Shares held by stockholders of the Company who have properly exercised their appraisal rights in accordance with Section 262 of the DGCL) will be converted into the right to receive an amount in cash equal to the per Share price paid pursuant to the Offer (the "Offer Price"). Pursuant to the Merger Agreement, at the Effective Time each option to purchase Shares under the Company Stock and Option Plans, whether or not then vested, will be cancelled and each holder thereof will be thereafter entitled to receive only the difference, if positive, between the Offer Price and the exercise price of such options, multiplied by the number of Shares subject to such options. In addition, in the event the Merger is consummated, the holders of the Debentures will be entitled to convert the Debentures into the right to receive the consideration receivable upon the Merger by a holder of the number of Shares into which such Debentures could have been converted immediately prior to the Merger. The Merger Agreement is more fully described in "THE OFFER -- 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures". If the Minimum Tender Condition is satisfied, Parent will hold, directly or indirectly, 90% or more of the outstanding Shares, and Parent intends to contribute its Shares to the Purchaser and cause 2 the Purchaser to effect the Merger without a vote of the Company's stockholders pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"). The Merger Agreement provides that, if the Minimum Tender Condition is satisfied, the Company, the Purchaser and Parent will take all necessary and appropriate action, at the request of Parent or the Purchaser, to cause the Merger to become effective as soon as practicable after the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company pursuant to such short-form merger provisions of the DGCL. If the Purchaser were to waive the Minimum Tender Condition and the number of outstanding Shares validly tendered and purchased pursuant to the Offer results in Parent and the Purchaser holding less than 90% of the outstanding Shares, then the Merger, which has already been approved by the Company's Board of Directors, would have to be approved by the Company's stockholders. Under the DGCL, the vote of the holders of a majority of the outstanding Shares would be required to approve the Merger under such circumstances. Since Parent currently owns approximately 80% of the Shares outstanding, Parent would have sufficient voting power to, and intends to, cause the approval of the Merger without the affirmative vote of any other stockholders of the Company. However, it is a condition to the parties' obligation to complete the Merger that the Purchaser have purchased Shares pursuant to the Offer. Accordingly, if the Minimum Tender Condition or any other condition to the Offer is not satisfied and Parent and the Purchaser elect not to waive any such condition, none of Parent, the Purchaser or the Company will be obligated to effect the Merger. No appraisal rights are available in connection with the Offer. Stockholders will have appraisal rights in connection with the Merger, subject to compliance with the requirements of the DGCL, even if the Merger is consummated pursuant to the short-form merger provisions of the DGCL. See "THE OFFER -- 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures". By accepting the Offer through the tender of Shares and upon receipt of payment for Shares, a tendering stockholder will be (under Parent's view of applicable law) barred from thereafter attacking in any legal proceeding the fairness of the consideration received by stockholders in the Offer. For this reason, the Letter of Transmittal to be executed by tendering stockholders includes a release of any such claims, which will be effective upon receipt of payment for tendered Shares. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. SPECIAL FACTORS 1. HISTORY OF THE COMPANY. The Company is a Delaware corporation that was formed in December 1981. Prior to the offering of 4,000,000 shares to the public on September 25, 1986 at a price of $14.50 per Share, the Company was owned by Societe Commerciale de Reassurance ("SCOR Paris"), a French reinsurance company, and by Caisse Centrale de Reassurance ("CCR"), a reinsurer wholly owned by the French government which also owned approximately 30% of SCOR Paris. As a result of a corporate reorganization completed in France in November 1989, SCOR Paris became a wholly owned subsidiary of Parent. In December 1990, SCOR Paris and another subsidiary of Parent, UAP Reassurances ("UAP Re") were merged into Parent. In June 1990, Rockleigh Management Corporation ("Rockleigh"), a wholly owned subsidiary of UAP Re, was merged into the Company. Rockleigh owned 100% of both The Unity Fire and General Insurance Company ("Unity Fire") and General Security Assurance Corporation of New York ("General Security"), each of which was a professional reinsurance company. Effective January 1, 1991, all reinsurance business of Unity Fire, including related assets and liabilities as of that date, were transferred to General Security pursuant to an assumption reinsurance agreement. Subsequently, Unity Fire became a subsidiary of General Security. On January 1, 1994, General Security 3 was merged into SCOR Reinsurance Company ("SCOR Re"), the Company's principal operating subsidiary, to form a single operating entity for the Company's assumed reinsurance business. In March 1993, the Company issued $86,250,000 aggregate principal amount of 5.25% Debentures, of which $10,300,000 aggregate principal amount had, as of November 2, 1995, been repurchased by the Company in the open market. During 1994 the Company repurchased in the open market $3,900,000 in principal amount of the Debentures and between January 1, 1995 and June 30, 1995 the Company repurchased in the open market $6,400,000 in principal amount of the outstanding Debentures. The outstanding Debentures are currently convertible into approximately 2.99 million Shares at a conversion price of $25.375 per Share. As a result of the issuance of common shares of the Company to UAP Re in the Rockleigh merger, SCOR Paris' participation in the Company's stock repurchase programs and various other purchases, as well as SCOR Paris' purchase of a portion of CCR's shares of the Company, Parent owned approximately 80% of the outstanding common stock of the Company at November 2, 1995. The remaining 3,623,215 outstanding Shares are held publicly and represent approximately 20% of the outstanding Shares. The Company is a holding company, the principal operating subsidiary of which is SCOR Re. The Company also operates through SCOR Re's wholly owned subsidiaries, General Security Insurance Company ("GSIC"), Unity Fire and General Security Indemnity Company ("GSIND") (SCOR Re, GSIC, Unity Fire and GSIND are collectively referred to as the "Operating Subsidiaries"). 2. REASONS FOR THE OFFER AND THE MERGER. The purpose of the Offer is to enable the Purchaser to acquire for cash as many outstanding Shares as possible as a first step in acquiring the entire equity interest in the Company, subject to satisfaction of the Minimum Tender Condition and the other conditions of the Offer. See "THE OFFER -- 13. Certain Conditions of the Offer". If the Minimum Tender Condition is satisfied, Parent and the Purchaser will hold 90% or more of the outstanding Shares and, as soon as practicable following the consummation of the Offer, Parent intends to contribute its Shares to the Purchaser. The Merger Agreement provides that, promptly after the purchase of Shares pursuant to the Offer and subject to the satisfaction or waiver of the terms and conditions of the Merger, the Purchaser will be merged into the Company. If the Minimum Tender Condition is satisfied, such Merger would be effected without a vote of the Company's stockholders pursuant to the short-form merger provisions of the DGCL. In the Merger, each Share not owned by Parent or any subsidiary of Parent (other than Shares held by stockholders of the Company who have properly exercised their appraisal rights under Section 262 of the DGCL) at the Effective Time will be converted into the right to receive an amount in cash equal to the Offer Price. The purpose of the Merger is to enable Parent to acquire any remaining Shares not acquired pursuant to the Offer. Following consummation of the Merger, the Company will continue as the surviving corporation and will become a wholly owned subsidiary of Parent. THE BOARD OF DIRECTORS OF THE COMPANY AND THE SPECIAL COMMITTEE HAVE UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. In determining to seek the purchase of the outstanding Shares and effect the Merger at this time, Parent focused on a number of factors, including those set forth below. The primary reason for the Offer and the Merger is that the listing of the Shares on the New York Stock Exchange, Inc. ("NYSE") has not achieved the benefits hoped for by Parent in 1986 at the time of the offering of Shares to the public, and, in Parent's view, the costs associated with such listing now outweigh any resulting benefits. The Shares have attracted limited interest from 4 institutional investors and generally have low trading volumes. This illiquidity, together with the Company's financial results, have caused the Shares to trade only occasionally at or above their net book value per Share since 1993. Also, the Company's ability to utilize Shares for acquisitions or capital-raising has not been as great as had been hoped for in 1986. The present requirement to maintain the listing of the Shares on the NYSE and registration of the Shares under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), imposes on the Company significant direct and indirect compliance costs. In addition, compliance with such ongoing requirements imposes an administrative burden on the Company, resulting in the diversion of management time and resources. The Purchaser intends to seek the delisting of the Shares from the NYSE and termination of registration of the Shares under the Exchange Act as soon as possible after consummation of the Offer or the Merger, if the requirements for the delisting and termination of registration are met. The Company's businesses are complementary with Parent's businesses, and Parent intends to integrate some of the Company's operations into those of Parent in order to obtain certain operating benefits and achieve certain cost savings, as well as to incorporate the Company's strategy into Parent's worldwide strategic planning. In particular, Parent will be able to avail itself of the Company's demonstrated skills and technical expertise in evaluating and underwriting certain types of risks, and enhance its ability to achieve its global strategic plans. The increasing globalization of world economies presents opportunities for Parent to pool the resources of the group and to invest on a group-wide basis in the human and technical resources necessary to improve productivity, develop and provide a broader range of international products grounded on global expertise and to build consistent, company-wide service standards to better meet customer needs. Parent's ability to achieve the foregoing objectives under the present ownership structure is complicated by legal obligations of the Board of Directors of the Company to manage the Company in the best interests of all stockholders. Accordingly, each decision made by Parent which could affect the Company must be made with a view to its effect on the Company's minority stockholders, with the result that Parent's flexibility in dealing with its significant investment in the insurance and reinsurance industry in the United States is limited. In addition, Parent believes that the interest of the public stockholders of the Company in its near-term earnings results may sometimes be inconsistent with the Company's long-term business strategy to solidify and enhance its position in the United States' insurance and reinsurance industry. The operating results of the property and casualty insurance and reinsurance industry are subject to significant fluctuations due to competition, catastrophic events, general economic conditions, interest rates and other factors such as changes in tax laws and regulations. The operating results of the Company have been influenced by these cycles and events. Many of the factors that have contributed to the Company's volatile earnings results and reduced surplus in recent years continue, and Parent cannot predict if, when or to what extent general market conditions will improve for the insurance and reinsurance industry. Parent believes that acquiring the entire equity interest in the Company will facilitate the realization of productivity gains necessary to achieve a sustainable improvement in the Company's profitability, to achieve consistent earnings growth in all its product offerings, to enhance its credit strength and to improve its return on equity. The Company's long-term business strategy will also require significant capital investments in technology, including investment as part of Parent's worldwide systems development project, which will provide additional systems availability for the Company over the next two years. In Parent's opinion, these strategies could adversely affect the Company's near-term earnings and the trading price of the Shares. Other factors that Parent considered in determining to proceed with the Offer and the Merger at this time included a stronger French Franc/U.S. Dollar exchange rate than has existed in recent years and a cash reserve of U.S. dollars generated by Parent's group that can be used for the acquisition of Shares tendered in the Offer. In addition, Parent considered the improvement of the 5 Company's results in 1995 over its 1994 results, the fact that the additional investment that would be made by Parent to increase its percentage ownership in the Company pursuant to the Offer and the Merger would not dilute the earnings of Parent, projections as to future results of the Company (see "THE OFFER -- 8. Certain Information Concerning the Company") and the fact that the Company's stock price has generally traded below its net book value since 1993. Parent also considered certain information provided to it by its financial advisor, Goldman Sachs International ("Goldman Sachs"), including information with respect to other businesses similar in some respects to the Company and with respect to premiums paid in other acquisitions of minority interests. Such information is contained in Goldman Sachs' analyses that have been filed by Parent and Purchaser as an Exhibit to their Rule 13e-3 Transaction Statement on Schedule 13E-3 filed with the Commission in connection with the Offer (the "Schedule 13E-3") and may be examined and copied at the office of the Commission in Washington, D.C. as set forth below under "THE OFFER -- 8. Certain Information Concerning the Company". In addition, such analyses are described below in "SPECIAL FACTORS -- 5. Background of the Offer and the Merger" and are available for inspection and copying at the principal offices of the Purchaser and Parent during their respective regular business hours by any interested holder of Shares or his representative who has been so designated in writing. In making the decision to proceed with the Offer and the Merger, Parent also took into account the state of the insurance and reinsurance industry in general, including the industry's volatility over the past few years and expected future volatility. Parent believes that the industry's volatility can be better managed by the Company once the Offer and Merger are completed. The trend toward consolidation in the insurance and reinsurance industry has forced smaller companies out of the market and shifted business to larger, better capitalized reinsurers. By acquiring the Shares it does not presently own, Parent's ability to combine the capacity of Parent's group as a whole with that of the Company in the United States will be enhanced, better enabling the Company to benefit from the trend toward consolidation being experienced in the industry and to pool the group's resources to develop particular lines of business in order to capitalize opportunistically on price increases achievable in particular sectors of the industry. 3. FAIRNESS OF THE OFFER AND THE MERGER. Parent believes that the $15.25 cash consideration proposed to be paid in the Offer and pursuant to the Merger is fair to the minority stockholders of the Company. It provides a substantial premium over pre-announcement market prices to holders of the Shares and enables the Company's stockholders to receive cash for their stockholdings now at a premium per share price. The $15.25 offer price represents a premium of 73.7% over the weighted average of the market price of the Company's Common Stock during the period from January 1, 1995 to September 15, 1995, a premium of 37.1% over the market price of the Company's Common Stock as of September 25, 1995 of $11.125 per Share, a multiple of 15.9 times the latest twelve months' income for the period ended September 30, 1995 and a multiple of 17.3 times publicly forecasted earnings per Share for 1995. Based on the foregoing and in light of the Company's historical results and the fact that the Shares have since 1993 traded below the Company's net book value per Share value, which as of September 30, 1995 was $15.27 per Share, Parent believes the consideration proposed to be paid in the Offer and the Merger is fair to the minority stockholders of the Company. As a result of the Minimum Tender Condition, the tender of slightly less than a majority of the outstanding Shares not owned directly or indirectly by Parent is a condition to the obligation of the Purchaser to accept Shares for payment. Such condition, however, may be waived at the sole discretion of Parent or Purchaser. 6 None of the Purchaser, Parent or Goldman Sachs solicited other offers for the Company or its assets, and there can be no assurance that the terms of the Offer are as favorable to the public stockholders of the Company as could be obtained in a transaction, or one or more transactions, with an unaffiliated party or parties. Neither Parent nor any of its affiliates has received any firm offers or inquiries with respect to the business and assets of the Company or its investment therein from any unaffiliated party during the period from January 1, 1993 to the date of this Offer to Purchase. Goldman Sachs was not asked to render, and has not rendered, any opinion as to the fairness of the Offer or the Merger to either the Company or the public stockholders of the Company. Neither Parent nor the Purchaser has obtained any opinions as to the fairness of the Offer or the Merger to the public stockholders of the Company or any valuation or appraisal of the Company's assets from any independent party in connection with the Offer or the Merger. Representatives of Parent have had access to certain non-public information concerning the Company, including the projections which are summarized elsewhere in this Offer to Purchase. See "THE OFFER -- 8. Certain Information Concerning the Company". Following the delivery by Parent of the letter, dated September 25, 1995, described under "SPECIAL FACTORS--5. Background of the Offer and the Merger" below, the Company announced that the proposal contained in such letter was being referred to the Special Committee, which would consider the proposal. The Special Committee is composed of all of the directors of the Company who are neither officers or directors of the Purchaser or Parent nor officers of the Company. The Special Committee retained Dillon Read as its financial advisor to analyze the terms of the Offer and the Merger. Dillon Read has provided the Board of Directors with its written opinion that, as of November 2, 1995, the $15.25 cash consideration to be received by the holders of Shares (other than Parent) pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The Board of Directors of the Company and the Special Committee have unanimously determined that the Offer and the Merger are fair to and in the best interests of the Company and its stockholders, have approved the Offer and the Merger and recommend that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. See "SPECIAL FACTORS -- 6. Recommendation of the Company's Board of Directors and the Special Committee." 4. INTERESTS OF CERTAIN PERSONS IN THE OFFER; POTENTIAL CONFLICTS OF INTERESTS. Stockholders should be aware that members of the Board of Directors of the Company (collectively, the "Board" and each a "Director"), other than the members of the Special Committee, have certain interests which are referred to below, and which may present them with actual or potential conflicts of interest in connection with the Offer. Among other things, Parent already owns approximately 80% of the outstanding Shares and, after the consummation of the Offer, it is expected that the Chairman of the Board of the Company will continue to serve on the board of directors of the Company and that the President and Chief Executive Officer of the Company will continue to be employed by the Company and serve as a member of the board of directors of the Company. In addition, the Merger Agreement provides that the directors of the Company will continue as directors of the Company after consummation of the Merger. Five of the thirteen members of the Board are also members of the Board of Directors of the Parent or are officers of Parent. Allan M. Chapin, who is a voting trustee of the SCOR U.S. Voting Trust (See "THE OFFER -- 10. Contacts with the Company"), is a partner in the law firm of Sullivan & Cromwell, which has provided legal services on an on-going basis to Parent and the Company. Sullivan & Cromwell are acting as United States legal counsel to the Parent and the Purchaser in connection with the Offer, the Merger and the other transactions contemplated herein. 7 5. BACKGROUND OF THE OFFER AND THE MERGER. Parent has from time to time in recent years considered acquiring all of the Shares not owned by Parent and began such considerations again during July, 1995. During July, management of Parent began to consult with representatives of its outside United States legal counsel and financial advisors concerning the manner in which the minority interest in the Company could be acquired. In mid-September of 1995, management of Parent determined they were prepared to recommend to Parent's Board of Directors the acquisition by Parent of the minority interest in the Company and on September 21, 1995, representatives of Sullivan & Cromwell, the United States legal counsel to Parent, and Goldman Sachs, the financial advisor to Parent, met with management of Parent to discuss the legal alternatives available to effect the acquisition of the minority interest in the Company and certain financial information relevant to a determination of an appropriate price to propose for acquisition of the minority Shares. During the September 21, 1995 meeting, Goldman Sachs provided Parent with certain financial analyses. Those analyses are described below and are filed as an exhibit to the Schedule 13E-3 filed with the Commission in connection with the Offer, and such analyses shall be made available for inspection and copying at the principal executive offices of Parent and the Purchaser during their respective regular business hours by any interested holder of Shares or his representitive who has been so designated in writing. The description below is qualified by reference to text of such analyses. Goldman Sachs has not been requested to, and has not, given any opinion to Parent, the Purchaser or any other person with respect to the fairness of the consideration proposed to be paid for the Shares in the Offer and the Merger. Neither Parent nor the Purchaser has obtained any opinions as to the fairness of the Offer or the Merger to the holders of Shares or any valuation or appraisal of the Company's assets from any independent party in connection with the Offer or the Merger. During the September 21, 1995 meeting, management determined to recommend a price of $14.00 per Share to the Board of Directors of Parent. On October 24, 1995, the Company provided Goldman Sachs with updated financial information, including earnings and other financial information for the third fiscal quarter and the nine months ended September 30, 1995 that were publicly reported on October 24, 1995 and financial projections, and, subsequently, Goldman Sachs prepared and provided to Parent updates, reflecting the more current information, to certain of its analyses. These updated analyses are also filed as an exhibit to the Schedule 13E-3 and are available in the same manner as that described above for the original analyses. The description of the analyses set forth below is qualified by reference to the text of such analyses. GOLDMAN SACHS' ANALYSES. The following is a summary of certain of the financial analyses used by Goldman Sachs in connection with its discussions with the management of Parent on September 21, 1995. The presentations of Goldman Sachs containing, among other things, the financial analyses and updated financial analyses summarized below, have been filed as exhibits to the Schedule 13E-3. Historical Stock Trading Analysis. Goldman Sachs reviewed the historical trading prices and volumes for the Shares. Such review included, among other things, Goldman Sachs' analysis of the weighted average market prices of the Shares and the total volume of Shares traded as a percentage of Shares outstanding during the period from January 1, 1992 to September 15, 1995 and during the period from January 1, 1995 to September 15, 1995. Such analysis indicated a weighted average market price of $12.07 per share (based on closing prices for the Shares from January 1, 1992 to September 15, 1995) with 44.3% of the total outstanding Shares traded in such period and a weighted average market price of $8.78 per Share (based on closing prices for the Shares from January 1, 1995 to September 15, 1995) with 5.3% of the total outstanding Shares traded in such period. Such review also included Goldman Sachs' analysis of the indexed historical trading prices of the Shares during the period from December 27, 1991 to August 31, 1995 as compared to the Standard & Poor's 500 Index and a composite index comprised of seven other publicly traded corporations in the 8 reinsurance industry: General Re Corporation, American Re Corporation, Transatlantic Holdings, Inc., NAC Re Corp., National Re Corporation, Trenwick Group Inc. and Zurich Centre Re Holdings (the "Selected Companies"). Representatives of Goldman Sachs advised the management of Parent that there are no publicly traded companies directly comparable to the Company and that the analysis had to be considered in light of that qualification. The analysis of such indexed historical share trading prices indicated that the Shares underperformed both the Standard & Poor's 500 Index and the comparable composite index during that period. During such period, the Standard & Poor's 500 Index increased approximately 50%, the comparable composite index increased approximately 78%, and the value of the Shares decreased approximately 29%. Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash flow analysis based on estimated cash flow per Share, consisting of projected dividends per Share for the period from December 31, 1995 through December 31, 1999, and a projected terminal value at December 31, 1999. Goldman Sachs calculated present value per Share of such estimated cash flows using discount rates of 12.5% and 15% for three scenarios for the compound annual growth rate ("CAGR") for earnings per share ("EPS") for the Company of 5%, 10% and 15%. In each such scenario, IBES median EPS estimates for 1995-1996 were used and the scenario growth rate was applied to estimate EPS thereafter. Goldman Sachs calculated dividends per Share assuming a 34% payout ratio to EPS and calculated the Company's terminal value based on multiples of projected net income for calendar year 1999 ranging from 8x to 15x. Those calculations indicated present value per Share values based on the 5% EPS CAGR scenario ranging from $6 per Share at a 15.0% discount rate to $12 per Share at a 12.5% discount rate, implied per Share values based on the 10% EPS CAGR scenario ranging from $7 per Share at a 15.0% discount rate to $13 per Share at a 12.5% discount rate and implied per Share values based on the 15% EPS CAGR scenario ranging from $8 per Share at a 15.0% discount rate to $15 per Share at a 12.5% discount rate. Goldman Sachs' updated "Discounted Cash Flow Analysis" is discussed below. Selected Companies Analysis. Goldman Sachs reviewed and compared certain financial information relating to the Company to corresponding financial information, ratios and public market multiples for the following direct reinsurance companies: American Re Corporation, General Re Corporation and National Re Corporation (the "Direct Reinsurance Companies"), and for the following broker reinsurance companies: NAC Re Corp., Transatlantic Holdings, Inc. and Trenwick Inc. (the "Broker Reinsurance Companies"). The public market multiples of the Company were calculated using the price of $11.25 per Share, representing the closing price of the Shares on the NYSE on September 19, 1995. The multiples and ratios for the Company and for each of the Direct Reinsurance Companies and the Broker Reinsurance Companies (together, the "Analyzed Companies") were based on generally accepted accounting principles ("GAAP") financial data as of June 30, 1995, IBES median estimates as of September 7, 1995 and other recent publicly available information. Representatives of Goldman Sachs advised the management of Parent that there are no companies directly comparable to the Company and that the analysis had to be considered in light of that qualification. The review indicated that the percentage of the 52-week high trading prices ranged from 97.1% to 99.8%, compared to 93.8% at $11.25 per Share for the Company, that the current dividend yield for the Analyzed Companies ranged from 0.5% to 2.2%, with a mean of 0.8% for the Direct Reinsurance Companies and 1.1% for the Broker Reinsurance Companies, compared to 1.8% at $11.25 per Share for the Company, and that the calendar year 1994 return on equity for the Analyzed Companies ranged from 7.2% to 12.9%, with a mean of 10.8% for the Direct Reinsurance Companies and 10.9% for the Broker Reinsurance Companies, compared to negative return on equity for the Company. Goldman Sachs also considered for the Analyzed Companies: estimated calendar year 1995 and 1996 price/earnings ratios, which ranged from 12.2x to 16.4x for estimated calendar year 1995, with a mean of 14.2x for the Direct 9 Reinsurance Companies and 14.3x for the Broker Reinsurance Companies, and 10.8x to 14.7x for estimated calendar year 1996, with a mean of 12.4x for the Analyzed Companies as a group, compared to 12.8x and 11.8x at $11.25 per Share, respectively, for the Company; statutory combined ratios for calendar years 1992, 1993 and 1994, which ranged from 102.8% to 126.9% for calendar year 1992, with a mean of 104.8% for the Direct Reinsurance Companies and 117.5% for the Broker Reinsurance Companies, 99.5% to 110.9% for calendar year 1993, with a mean of 100.3% for the Direct Reinsurance Companies and 106.8% for the Broker Reinsurance Companies, and 98.4% to 105.7% for calendar year 1994, with a mean of 101.2% for the Direct Reinsurance Companies and 104.8% for the Broker Reinsurance Companies, compared to 123.3%, 103.7% and 118.8%, respectively, for the Company; and estimated EPS (based on IBES median estimates as of September 7, 1995) for calendar years 1995 and 1996, which ranged from $2.40 to $9.25 per share for estimated calendar year 1995, compared to $0.88 per Share for the Company, and ranged from $2.80 to $10.35 per share for estimated calendar year 1996, compared to $0.95 per Share for the Company. Goldman Sachs also compared for the Analyzed Companies the book value per share and the price to book value per share ratios, which book value per share ranged from $2.80 to $69.59 for the Analyzed Companies, compared to $15.02 per Share for the Company, and which price to book value per share ratios ranged from 1.51x to 2.18x for the Analyzed Companies, with a mean of 1.97x for the Direct Reinsurance Companies and 1.64x for the Broker Reinsurance Companies, compared to 0.75x per Share for the Company. Analysis at Various Prices. Goldman Sachs calculated alternative values for the aggregate consideration (including the price of the outstanding Debentures) based upon nine price per Share values ranging from $11.25 to $16.00 per Share. Those calculations yielded aggregate consideration values ranging from $117 million to $134 million for the outstanding Shares not beneficially owned directly or indirectly by Parent and the outstanding Debentures, excluding any severance obligations and transaction costs. Goldman Sachs considered the consideration per Share as a premium over the market price quoted on the NYSE on September 19, 1995 for the Shares of $11.25, as a multiple of actual twelve months ended June 30, 1995 ("LTM") EPS of $0.75 and IBES estimates for calendar year 1995 and 1996 EPS of $0.88 and $0.95, respectively, and as a multiple of stated book value per Share of $15.01 as of June 30, 1995 and tangible book value per Share of $14.74 as of June 30, 1995. Goldman Sachs' analyses indicated consideration per Share premiums over market ranging from 0.0% to 42.2%, with a premium of 24.4% based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995; consideration per Share multiples of LTM EPS ranging from 15.0x to 21.3x, with a multiple of 18.7x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995, of estimated calendar year 1995 EPS ranging from 12.8x to 18.2x, with a multiple of 15.9x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995, and of estimated calendar year 1996 EPS ranging from 11.8x to 16.8x, with a multiple of 14.7x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995; and consideration per Share multiples of stated book value per Share ranging from 0.75x to 1.07x, with a multiple of 0.93x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995, and of tangible book value per Share ranging from 0.76x to 1.09x, with a multiple of 0.95x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995. Goldman Sachs' updated "Analysis at Various Prices" is discussed below. Selected Transactions Analysis. Goldman Sachs analyzed certain information relating to recent acquisitions of U.S. property/casualty reinsurance companies since 1987 (the "Selected Transactions"). Such analysis indicated that for the Selected Transactions: (A) based on GAAP, aggregate consideration as a multiple of (x) net written premiums for the twelve month period ending prior to announcement of each selected transaction ranged from 10 0.48x to 1.80x, with a mean and median of 1.17x, (y) net income for the twelve month period ending prior to announcement of each selected transaction ranged from 6.72x to 21.40x, with a mean of 12.88x and median of 9.91x, and (z) tangible book value ranged from 0.82x to 3.10x, with a mean of 1.37x and median of 1.17x; and (B) based on statutory accounting principles, aggregate consideration as a multiple of (x) net income for the twelve month period ended prior to the announcement of each selected transaction ranged from 7.69x to 27.90x, with a mean of 12.83x and median of 10.32x, and (y) book value ranged from 0.91x to 1.94x, with a mean of 1.26x and median of 1.13x. Selected Buyouts Analysis. Goldman Sachs analyzed certain information relating to selected buyouts by significant existing stockholders since 1989 (the "Selected Buyouts"). Such analysis indicated that for the Selected Buyouts: (A) as an average for all buyouts, (i) pre-announcement stock price as a percentage of the 52-week high closing price per share was 80.9%, (ii) the initial offer premium to the closing price one NYSE trading day prior to the public announcement of the parents' proposals was 23.4% and the discount to the 52-week high closing price was 1.6%, (iii) the increase in the offer price paid was 9.3% and (iv) the final offer price premium to the closing price one NYSE trading day prior to the public announcement of the significant existing stockholders' proposals was 35.0% and to the 52-week high closing price was 8.0%; (B) as an average for all U.S. buyouts by a European parent, (i) pre-announcement stock price as a percentage of the 52-week high closing price per share was 82.3%, (ii) the initial offer premium to the closing price one NYSE trading day prior to the public announcement of the parents' proposals was 19.1% and the discount to the 52-week high closing price was 2.6%, (iii) the increase in the offer price paid was 6.9% and (iv) the final offer price premium to the closing price one NYSE trading day prior to the public announcement of the significant existing stockholders' proposals was 26.6% and to the 52-week high closing price was 4.1%; and (C) as an average for all buyouts of an approximate 20 percent minority stake, (i) pre-announcement stock price as a percentage of the 52-week high closing price per share was 82.1%, (ii) the initial offer premium to the closing price one NYSE trading day prior to the public announcement of the significant existing stockholders' proposals was 16.9% and the discount to the 52-week high closing price was 5.1%, (iii) the increase in the offer price paid was 6.6% and (iv) the final offer price premium to the closing price one NYSE trading day prior to the public announcement of the parents' proposals was 23.2% and to the 52-week high closing price was 0.8%. As described above, Goldman Sachs has updated its "Discounted Cash Flow Analysis" and "Analysis at Various Prices" set forth in its earlier presentation to take into account the September 30,1995 updated financial information. The updated "Discounted Cash Flow Analysis" was based on management projections for 1995-1997 EPS and indicated present value per Share values for the scenario assuming 5% EPS CAGR after 1997 ranging from $9 per Share at a 15.0% discount rate to $17 per Share at a 12.5% discount rate, present value per Share values for the scenario assuming 10% EPS CAGR after 1997 ranging from $10 per Share at a 15.0% discount rate to $18 per Share at a 12.5% discount rate and present value per Share values for the scenario assuming 15% EPS CAGR after 1997 ranging from $11 per Share at a 15.0% discount rate to $20 per Share at a 12.5% discount rate. In the updated "Analysis at Various Prices", Goldman Sachs calculated alternative values for the aggregate consideration (including the price of the oustanding Debentures) based upon nine price per Share values ranging from $11.25 to $16.00, and considered the consideration per Share as a multiple of the twelve months ended September 30, 1995 EPS of $0.96 and management projections for calendar year 1995 and 1996 EPS of $1.01 and $1.19, respectively, and as a multiple of reported book value per Share of $15.10 as of September 30, 1995 and tangible book value per Share of $14.83 as of September 30, 1995. These calculations indicated consideration per Share multiples of EPS for the twelve months period ended September 30, 1995 ranging from 11.7x to 16.7x, with a multiple of 14.6x based on the consideration per Share of $14.00 initially 11 proposed by Parent on September 25, 1995, of projected calendar year 1995 EPS ranging from 11.1x to 15.8x, with a multiple of 13.9x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995, of projected calendar year 1996 EPS ranging from 9.5x to 13.4x, with a multiple of 11.8x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995, of reported book value per Share ranging from 0.74x to 1.06x, with a multiple of 0.93x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995, and of tangible book value per Share ranging from 0.76x to 1.08x, with a multiple of 0.94x based on the consideration per Share of $14.00 initially proposed by Parent on September 25, 1995. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors and events beyond the control of the parties or their respective advisors, none of Parent, the Purchaser, the Company, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast. As described above, Goldman Sachs' presentation to the management of Parent was one of many factors taken into consideration by Parent in making its determination to propose the Offer and the Merger. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs and is qualified by reference to the presentations containing Goldman Sachs' analyses filed as exhibits to the Schedule 13E-3. COMMUNICATIONS REGARDING PARENT'S PROPOSAL. On September 25, 1995, the Board of Parent met and approved making a proposal to the Company to acquire the Shares not owned by Parent at a price of $14.00 per Share and authorized the management of Parent to cause Parent to take such action as the management deemed necessary or advisable to acquire all Shares not already owned by Parent. On September 25, 1995, Parent sent the following letter to the Board of the Company: September 25, 1995 Board of Directors SCOR U.S. Corporation Two World Trade Center, 23rd Floor New York, NY 10048-0178 Dear Sirs, On behalf of SCOR S.A. ("Parent"), I am pleased to make a proposal to acquire all of the outstanding shares of common stock, par value $0.30 per share (the "Common Stock"), of SCOR U.S. Corporation (the "Company") not currently owned by Parent at a price of $14 per share in cash. As you know, Parent has owned a substantial majority of the outstanding shares of Common Stock since before the public offering by the Company of its Common Stock in 1986, and Parent currently owns approximately 80% of the Company's outstanding Common Stock. Parent believes it would be in the mutual best interest of Parent, the Company and the shareholders of the Company for Parent to acquire the shares of Common Stock that it does not already own on the terms and conditions set forth in this letter. Accordingly, Parent hereby submits for your consideration the following proposal. Parent is prepared to enter into a merger agreement pursuant to which a newly organized United States subsidiary of Parent would acquire all issued and outstanding shares of Common Stock that are not currently directly or indirectly owned by Parent at a price of $14 per share in 12 cash. The merger agreement could be in a form customary for transactions of this type. Our proposal presumes that there has been no material adverse change since June 30, 1995 in the results of operations, business or financial condition of the Company and its subsidiaries taken together. The transactions contemplated by this proposal would also give the holders of the Company's outstanding 5 1/4% Convertible Subordinated Debentures due April 1, 2000 (the "Debentures") the right to require the Company to repurchase the Debentures at a repurchase price equal to 100% of the principal amount thereof together with accrued and unpaid interest to the date of such repurchase. We believe that this proposal is fair to the minority stockholders of the Company. It provides a substantial premium to current market prices to holders of the Company's Common Stock and enables the Company's shareholders to receive cash for their shareholdings now at a premium per share price which they are unable to recognize in the market. The $14 offer price represents a premium of 59.5% over the weighted average of the market price of the Company's Common Stock during the period from January 1, 1995 to September 15, 1995, a premium of 24.4% over the market price of the Company's Common Stock as of September 19, 1995, a multiple of 18.7 times the latest twelve months' income and a multiple of 15.9 times publicly forecasted earnings per share for 1995. We are in a position to proceed on an expedited basis and urge that the Company act responsibly and, in order to minimize uncertainty, as quickly as possible, in considering our proposal. We expect that the directors of the Company who are not affiliated with Parent may wish to engage independent legal and financial advisors. If that is so, we would request that they do so quickly. We would like to make it clear that Parent's interest in the Company is not for sale and thus this proposal is not made in view of the sale of the Company to a third party. We welcome the opportunity to meet with the Directors and further outline our proposal at Director's meetings to be held on September 28 and 29. Sincerely yours, /s/ Jacques Blondeau Jacques Blondeau On September 26, 1995, Parent issued a press release announcing its proposal to the Board of a merger at a price of U.S. dollars 14.00 per Share in cash. On September 27, 1995, representatives of the United States legal counsel to Parent met with the General Counsel and other members of the legal department of the Company to discuss regulatory implications of the Company becoming a wholly-owned subsidiary of Parent. Counsel to Parent also requested that Parent's financial advisor be given the opportunity to perform a due diligence investigation on the Company. At a September 28, 1995 meeting of the members of the Board of the Directors of the Company who are neither officers of the Company nor officers or directors of the Purchaser or Parent (the "Unaffiliated Directors"), those directors determined to form the Special Committee to review Parent's proposal and its fairness to the minority stockholders of the Company and to negotiate the proposal with the Parent. The Special Committee was formed on September 28, 13 1995. The members of the Special Committee were John R. Cox, Raymond H. Deck, Michel J. Gudefin, Richard M. Murray, John W. Popp, David J. Sherwood and Ellen E. Thrower. The Special Committee was granted authority to retain legal and financial advisors to assist it in evaluating the interest expressed by Parent in acquiring the outstanding Shares. Subsequently, the Special Committee hired Davis Polk & Wardwell as its outside legal counsel and Dillon Read to act as financial advisor to the Special Committee. In a meeting with the Special Committee held on September 28, 1995, a representative of Parent discussed Parent's proposal contained in its September 26, 1995 letter and advised the Special Committee that Parent would likely commence a tender offer for the Shares in advance of entering into a Merger Agreement, but that Parent would defer commencing the tender offer to give the Special Committee time to retain legal and financial advisors and begin their review of the $14.00 proposal. The Special Committee and the representatives of Parent agreed that it was in the best interests of the Company and its stockholders to resolve promptly whether Parent would be acquiring the Shares not already owned by it and that the Special Committee would endeavor to be in a position to respond to Parent's proposal by October 26, 1995, the date of a previously scheduled meeting of the Executive Committee of the Board of Directors of the Company. On September 29, 1995, the Company issued a press release concerning Parent's September 25, 1995 proposal. On September 29 and October 3, 1995, representatives of the United States legal counsel to Parent called a representative of counsel for the Special Committee to discuss issues potentially associated with the possible commencement of a tender offer and to inquire as to the timing for retention of a financial advisor. During those calls, counsel to the Special Committee expressed concern that a tender offer might place the Special Committee under timing constraints in responding to Parent's proposal. United States legal counsel to Parent indicated that consummation of any tender offer would likely be conditioned upon prior approval of the Special Committee. During the October 3rd call, counsel to the Special Committee also indicated that Goldman Sachs would be provided with access to confidential information concerning the Company only after and to the extent that the Special Committee and its financial advisor determined that such access was appropriate. On October 10, 1995, representatives of United States legal counsel to Parent called a representative of counsel to the Special Committee to discuss again the timing of the retention by the Special Committee of its financial advisor and the possibility of a tender offer by Parent for the Shares prior to entering into a merger agreement. During the course of that telephone call, the representative of counsel to the Special Committee reiterated concerns relating to the commencement of a tender offer before the Special Committee had delivered its response to Parent's proposal contained in its September 25, 1995 letter. In response to a question raised by counsel to the Special Committee, the representatives of United States legal counsel to Parent indicated they planned to forward a draft of a Merger Agreement to counsel to the Special Committee promptly. On October 10, 1995, the Special Committee retained Dillon Read as its financial advisor to assist in its evaluation of, and negotiations with respect to, Parent's proposal. On October 10, 1995, the Company provided to Parent's United States legal advisors certain initial documents relating to the Company for review. On October 12, 1995, representatives of Parent's United States legal advisors sent a preliminary due diligence request list to the Company outlining the types of documents sought for review. On October 16, 1995, representatives of Parent's United States legal advisors spoke with representatives of the Company to schedule the due diligence process. During the period from October 16 to October 26, 1995, representatives of Parent's financial and United States legal advisors performed due diligence at the Company's 14 offices, were provided with due diligence materials relating to the Company and engaged in conversations with management of the Company. Additional due diligence materials were provided to representatives of Parent's United States legal advisors by the Company on November 2, 1995. On October 13, 1995, representatives of Goldman Sachs, Dillon Read and legal counsel to the Special Committee met with members of the senior management of the Company to discuss the Company's business, historical financial results and projected financial results. During the course of the October 13 meeting, the Company's management indicated that it then expected the Company to achieve operating earnings of no less than $.86 per share in 1995 compared to several then current Wall Street analysts' projections of earnings of $.88 per share for 1995. The Company's management indicated that the projected financial results for 1995 were based on expectations that gross underwriting premiums for 1995 will be less than previous estimates prepared by the Company, but that the net income results would not be materially different from previously forecasted results because of a reduction in the amount of anticipated losses. The Company's management indicated that it then believed the Company has avoided any material losses that might arise from most of the catastrophes that have occurred during the course of 1995. Management noted that most of the loss incurred by the Company in 1994 was the result of losses arising from the Northridge, California earthquake. The Company's management also indicated that it then expected to achieve earnings of $1.12 per share in 1996 compared to several then current Wall Street analysts' projections of earnings of $.95 per share for that year and that it then expected the Company to record earnings per share of $1.42 in 1997. The Company's management indicated that the significant assumptions used in the preparation of such projections included: (i) an assumption that the reinsurance market will not improve significantly over the next two years; (ii) the Company's exposure to property catastrophe loss will be less in the future because of increased management of aggregate exposures to losses arising out of that line of business; (iii) an anticipated reduction in the premiums that the Company will be able to charge and (iv) the possibility that the Company could become less competitive in the future because of higher capital bases for some of the Company's competitors. The Company management indicated at the October 13 meeting that they were in the process of updating the projected financial results of the Company. Certain of those updated financial projections, which were delivered to Parent's United States legal and financial advisors on October 23, 1995, are described in "THE OFFER -- 8. Certain Information Concerning the Company". In addition to the general review of the Company's business and results of operations discussed above, during the October 13 meeting, the Company's management discussed a number of specific matters relating to the Company's various lines of business. In the course of those discussions, the Company noted that Parent has provided 33-40% of the Company's catastrophe retrocession program and has been the Company's largest retrocessionaire by a significant margin. The Company's management indicated that it expects that all catastrophe retrocession will be provided by Parent by January 1, 1996. This increase is part of Parent's world-wide plan to provide all retrocession capacity for its subsidiaries' catastrophe reinsurance and then to retrocede such exposure to other companies. The Company indicated that the increase in Parent's position leading to Parent becoming the sole retrocessionaire of the Company's catastrophe program was decided upon prior to Parent's proposal to acquire the minority interest in the Company. The Company's management indicated its confidence in Parent's ability to satisfy its retrocession obligations. The Company's management also indicated that the Company's broker relationship is extremely concentrated. Forty percent of the brokered premiums written by the Company are sourced from two brokers. Such brokers account for 23% and 16.5%, respectively, of the total brokered premiums and single treaties account for 50% of each of those amounts. Such treaties have been in effect since 1992 and 1987, respectively. 15 During the course of the October 13 meetings with Goldman Sachs and Dillon Read, the Company's management discussed the historical price of the Company's stock. Management pointed out that the stock has in recent years traded at levels that are below the Company's net asset value. Reasons given by the Company's management for the price level of the Company's stock included: (i) low liquidity and trading volumes, (ii) depressed earnings history and return on equity and (iii) the "overhang" in the market caused by Parent's 80% ownership of the common stock. On October 19, 1995, United States legal counsel to Parent forwarded a draft of a Merger Agreement to the Special Committee's legal counsel. On October 20 and 23, 1995, the Special Committee met with its legal and financial advisors to discuss the proposal and the draft of the Merger Agreement. During such period, the Special Committee's legal and financial advisors continued their due diligence investigation of the Company. On October 24, 1995, the Company announced its financial results for the third fiscal quarter of 1995 and for the nine months ended September 30, 1995. The text of the press release announcing such results (excluding the financial statements, which are attached hereto as Appendix B) is set forth below: SCOR U.S. REPORTS THIRD QUARTER AND NINE MONTH RESULTS New York, N.Y., October 24, 1995--SCOR U.S. Corporation (NYSE:SUR) reported today that income from operations for the three months ended September 30, 1995, excluding net realized investment gains, was $4.7 million, or $.26 per share. This compares with $2.2 million or $.12 per share, for the third quarter of 1994. During the 1995 third quarter, the Company experienced $230,000, or less than $.01 per share after-tax, of net favorable development on pre-1995 property catastrophe events. The Company's 1994 third quarter results include pretax charges for catastrophes of $2.1 million, or $.08 per share after-tax. Net income for the three months ended September 30, 1995 was $4.8 million, or $.26 per share, including after-tax realized investment gains of $79,000, or less than $.01 per share. In the year earlier period, the Company reported net income of $2.4 million, or $.13 per share, including after-tax realized investment gains of $210,000, or $.01 per share. For the 1995 nine month period, excluding net realized investment gains, the Company reported income from operations of $13.0 million, or $.71 per share, compared with an operating loss of $12.1 million, or $.67 per share, for the nine month period of 1994. The Company's 1995 year to date results include pretax charges for pre-1995 catastrophe events of $4.3 million, or $.15 per share after tax, of which $3.4 million relates to the Northridge earthquake. Results for the 1994 nine month period include pretax charges of $38.7 million, or $1.39 per share on an after-tax basis, for catastrophe events, principally related to the Northridge earthquake. Net income for the 1995 nine month period was $14.1 million, or $.77 per share, including after-tax realized investment gains of $463,000, or $.03 per share, and an extraordinary gain of $552,000, or $.03 per share, resulting from the Company's repurchase of its debentures. Comparatively, the Company reported a net loss of $11.4 million, or $.63 per share, in the year earlier period, including after-tax realized investment gains of $688,000, or $.04 per share. 16 In the 1995 third quarter, net premiums written were $54.6 million, compared with $55.8 million for the 1994 third quarter. For the 1995 nine month period, net premiums written were $181.6 million, compared with $184.7 million for the corresponding 1994 period. The Company's 1995 third quarter and nine month statutory combined ratios were 100.7% and 104.2%, respectively, compared with 107.2% and 122.8%, respectively, for the third quarter and nine months of 1994. Net investment income for the 1995 nine month period increased to $31.8 million from $30.4 million in the corresponding 1994 period. Net cash provided by operating activities for the nine months ended September 30, 1995 was $3.0 million, compared with cash used in operations of $8.5 million for the corresponding 1994 period. At September 30, 1995, the statutory capital and surplus of the Company's operating subsidiaries stood at an estimated $256.8 million. Based upon preliminary available information concerning the recent hurricane activity, the Company does not expect any material adverse impact from losses arising out of those hurricanes. As previously announced, the Company's Board of Directors has received a proposal from its majority shareholder, SCOR S.A., to repurchase the Company's outstanding publicly held shares. A committee consisting of all independent directors is evaluating that proposal. SCOR U.S. Corporation, a holding company, provides property and casualty insurance and reinsurance in the treaty and facultative markets through its operating subsidiaries. All of the SCOR U.S. Corporation's operating insurance and reinsurance subsidiaries are rated "A" (excellent) by A.M. Best Company. On October 24, 1995, representatives of Dillon Read telephoned representatives of Goldman Sachs and informed Goldman Sachs that the Special Committee would recommend an offer at a price of $18.00 per Share. Representatives of Goldman Sachs then informed Dillon Read that Goldman Sachs would communicate that information to Parent. On the same day and shortly thereafter, Goldman Sachs communicated to Parent that representatives of Dillon Read had stated that the Special Committee would recommend a proposed offer by Parent at $18.00 per Share. Management of Parent then indicated to Goldman Sachs that Parent would not proceed at an $18.00 per Share price and requested Goldman Sachs to communicate that fact to Dillon Read. On the same day and shortly after the telephone call with Parent's management, representatives of Goldman Sachs telephoned Dillon Read and informed its representatives that Parent believed the $18.00 price was unsupportable and that Parent continued to believe $14.00 was an appropriate and fair price for the Shares. On October 26, 1995, representatives of Parent met with representatives of the Special Committee and informed them that Parent was not willing to pay the $18.00 per Share that had been requested by the Special Committee and that Parent would be willing to pay a maximum of $15.00 per Share. Representatives of the Special Committee then indicated that they believed they could obtain Special Committee support for a transaction at $16.00 per Share. Representatives of the Special Committee and Parent were unable to narrow further their disagreement over the appropriate price for a transaction and ended discussions on that day by agreeing to have their respective financial advisors discuss their views on the per Share consideration proposed to be paid. 17 On October 27, 1995, representatives of the financial advisors to the Special Committee telephoned financial advisors to Parent to discuss their views on the per Share consideration proposed to be paid. During the course of that meeting, representatives of Goldman Sachs discussed with representatives of Dillon Read Parent's reasons for having made an offer to purchase the Shares that it did not already own at a price of $14.00 per Share, including certain of the Goldman Sachs analyses contained in Goldman Sachs' presentation to management of Parent on September 21, 1995. In response to that discussion by representatives of Goldman Sachs, the representatives of Dillon Read indicated that the Special Committee would not accept a price per Share that did not represent a moderate premium over the book value. Although a net book value, of $15.10 per Share had been publicly announced by the Company, Dillon Read's representatives indicated to representatives of Goldman Sachs that Dillon Read believed the net book value of the Company to be in the range of $15.05 to $15.50 per Share based on information that had been made available to Dillon Read. On October 30, 1995, the legal counsel to the Special Committee communicated to legal counsel to Parent that the Special Committee would not support a transaction at $15.00 but would likely consider a price that represented a premium over the book value. On October 31, 1995, legal counsel to Parent responded to legal counsel to the Special Committee that Parent would agree to a transaction at $15.25 if such transaction were supported by the Special Committee, was the subject of a favorable fairness opinion of the financial advisor to the Special Committee, was approved by counsel for the various plaintiffs in pending shareholder claims made following Parent's initial proposal, and was effected pursuant to a mutually agreeable merger agreement. Legal counsel to the Special Committee confirmed that a price per Share of $15.25 would satisfy the criteria of the Special Committee and would likely be considered favorably by the Special Committee. See "THE OFFER -- 15. Certain Legal Matters". Also on October 31, 1995, representatives of the Special Committee's legal advisors forwarded to representatives of Parent's United States legal counsel their and the Special Committee's comments on the draft of the Merger Agreement. On November 1, 1995, representatives of Parent's United States legal counsel discussed with the Special Committee's legal advisors and Arter & Hadden, special counsel to the Special Committee for directors' and officers' liability and insurance matters, various provisions of the draft of the Merger Agreement and the comments of the Special Committee and the Special Committee's legal advisors on the draft of the Merger Agreement. On November 2, 1995, representatives of the Special Committee's legal counsel sought to narrow the representations and warranties and conditions to the Offer proposed by Parent in the draft Merger Agreement, and Arter & Hadden sought to modify the obligation of the Company and Parent to purchase directors and officers' liability insurance. On November 2, 1995, representatives of Parent's and the Special Committee's legal advisors again discussed various provisions of the Merger Agreement. After that conversation, the remaining unresolved issues were whether, as requested by Parent, the tender offer would be subject to the Minimum Tender Condition and the timing of the purchase by the Company of directors' and officers' liability insurance and the amount of such insurance that would be purchased by the Company. On November 1, 1995, representatives of counsel to the plaintiffs in the shareholder actions agreed with representatives of Parent's United States legal counsel that they were prepared to negotiate a settlement if a price per Share of $15.25 were offered to the Company's stockholders. See "THE OFFER -- 15. Certain Legal Matters". On the afternoon of November 2, 1995, the Special Committee and its legal and financial advisors met to discuss the Offer and the Merger. At that meeting, the Special Committee agreed to resolve the remaining outstanding issues on the draft Merger Agreement in the manner reflected in the Merger Agreement. A copy of the Merger Agreement has been filed as an exhibit to the 18 Schedule 14D-1 and the Schedule 13E-3, and the Merger Agreement is summarized in "THE OFFER -- 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures". The Special Committee unanimously approved each of the Merger Agreement, the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interest of, the stockholders of the Company and recommended that the stockholders of the Company tender their Shares and that the Board of Directors of the Company approve the same. At that meeting of the Special Committee, Dillon Read orally advised the Special Committee that it was Dillon Read's opinion that the consideration to be received by the holders of Shares (other than Parent) is fair to such holders from a financial point of view as of such date. See "SPECIAL FACTORS -- 6. Recommendation of the Company's Board of Directors and the Special Committee". After the meeting of the Special Committee referred to in the preceding sentence, the Board of Directors of the Company met. After receiving a report from the Special Committee on its deliberations and a recommendation from the Special Committee that the Board of Directors approve the Merger Agreement, the Offer and the Merger, the Board of Directors unanimously approved the Merger Agreement, the Offer and the Merger, determined that the Offer and the Merger are fair to, and in the best interest of, the stockholders of the Company and recommended that all stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer. The Merger Agreement was executed and delivered by the parties thereto on November 2, 1995, and the transaction was announced on the morning of November 3, 1995. On November 8, 1995, the Purchaser and the Company agreed to modify the Minimum Tender Condition to the form set forth herein. The modification eliminated all options from the denominator for purposes of calculating whether Parent beneficially owns, directly or indirectly, 90% of the Shares. 6. RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE. At the November 2, 1995 meeting of the Board of Directors of the Company, the Board of Directors of the Company, including those members of the Board of Directors of the Company constituting the Special Committee, acting upon the unanimous recommendation of the Special Committee, unanimously approved the Merger Agreement, the Offer and the Merger, determined that the terms of the Offer and the Merger are fair to, and in the best interest of, the stockholders of the Company and recommended that all stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer. Reasons for Recommendation. See "SPECIAL FACTORS -- Background of the Offer and the Merger" for a description of certain events preceding the Board of Director's consideration of the Offer and the Merger. The Special Committee received presentations from, and reviewed the Offer and the Merger with, senior management of the Company as well as the Special Committee's financial advisor, Dillon Read. The Special Committee, in determining whether to recommend the approval of the Merger Agreement and the transactions contemplated thereby to the full Board of Directors, considered a number of factors, including, but not limited to, the following: (i) The belief, based on its familiarity with the Company's business, its current financial condition and results of operations and its future prospects, and the current and anticipated developments in the Company's industry, that the consideration to be received by the Company's stockholders in the Offer and Merger fairly reflects the Company's intrinsic value. (ii) The oral and written presentations made by the Company's management and Dillon Read at a meeting held on October 20, 1995 as to various financial and other considerations deemed relevant to the evaluation of the Offer and the Merger, including, but not limited to, a review of (A) the business prospects and financial condition of the Company, (B) historical 19 business information and financial results of the Company, (C) nonpublic financial and operating results of the Company, (D) financial projections and budgets prepared by the Company's management, (E) information obtained from meetings with senior management of the Company, (F) the trading range and volume history of the Shares, (G) public financial information of comparable companies and (H) public information of comparable acquisitions. (iii) The opinion of Dillon Read that the consideration to be received by the Company's stockholders pursuant to the Merger Agreement is fair to such stockholders (other than Purchaser) from a financial point of view. In considering Dillon Read's opinion, the Board was aware that Dillon Read is entitled to a fee in accordance with the terms of its engagement described below. (iv) The relationship between the consideration to be received by stockholders as a result of the Offer and the Merger and the historical market prices and recent trading activity of the Shares. (v) The recognition that, following consummation of the Offer and the Merger, the current Stockholders of the Company will no longer be able to participate in any increases or decreases in the value of the Company's business and properties. The Board and the Special Committee concluded, however, that this consideration did not justify foregoing the opportunity for stockholders to receive an immediate and substantial cash purchase price for their Shares. (vi) The fact that the terms of the Offer, and the increase in the consideration offered to the public stockholders from $14.00 per Share to $15.25 per Share, were determined through arm's-length negotiations with Parent by the Special Committee and its financial and legal advisors, all of whom are unaffiliated with Parent, and the judgment of the Special Committee and Dillon Read that, based upon the negotiations that transpired, a price higher than $15.25 per Share could not likely be obtained and that further negotiations with Parent could cause Parent to abandon the Offer, with the resulting possibility that the market price for the Shares could fall substantially below $15.25, and possibly $14.00, per Share, or to commence a tender offer without the involvement of the Special Committee at a price less than $15.25 per Share. (vii) Parent's ownership of approximately 80% of the currently outstanding Shares and the effects of such ownership on the alternatives available to the Company and the fact that, as a practical matter, no strategic alternative could be effected without the support of Parent; and the consequences of continuing to operate the Company as a majority-owned subsidiary of Parent. (viii) The terms and conditions of the Merger Agreement, the fact that there are no unusual requirements or conditions to the Offer and the Merger, and the fact that Parent has the financial resources to consummate the Offer and the Merger expeditiously. (ix) The fact that the consideration to be paid to the Company's public stockholders in the Offer and the Merger is all cash. (x) The fact that the Offer and the Merger have been structured to include a first-step cash tender offer for any and all outstanding Shares, thereby enabling stockholders who tender their Shares to promptly receive $15.25 per Share in cash, and the fact that any public stockholders who do not tender their Shares or properly exercise appraisal rights will receive the same price per Share in the subsequent Merger. (xi) The possible conflicts of interest of certain directors and members of management of both the Company and Parent discussed in "Item 3(b) -- Interests of Certain Persons" of the Company's Schedule 14D-9. 20 (xii) The fact that, while no appraisal rights are available to stockholders as a result of the Offer, stockholders who do not tender pursuant to the Offer will have the right to dissent from the Merger and to demand appraisal of the fair value of their Shares under the DGCL. See "THE OFFER -- 11. The Merger Agreement; Appraisal Rights; Effect on the Debentures." The Special Committee considered each of the factors listed above during the course of its deliberations prior to recommending that the Company enter into the Merger Agreement. In light of its knowledge of the business and operations of the Company and its business judgment, the Special Committee believed that each of these factors supported its respective conclusions. In view of the wide variety of factors considered, the Special Committee did not find it practicable to, and did not, quantify the specific factors considered in making its determination, although the Special Committee did place a special emphasis on the opinion and analysis of Dillon Read which in turn did place a special emphasis on a valuation range determined using an analysis of trading values of comparable companies and an economic book value analysis as described below under "Opinion of Financial Advisor". The Board of Directors of the Company, a majority of the members of which were members of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby after receiving a report from the Special Committee on its deliberations and recommendation. In reaching this decision, the Board of Directors principally considered the recommendation of the Special Committee and its familiarity with the Company's business, its current financial condition and results of operations and future prospects, and current and anticipated developments in the Company's industry. Opinion of Financial Advisor On November 2, 1995, Dillon Read delivered its opinion to the Special Committee to the effect that the consideration to be paid to the holders of Shares and certain of the Company's stock options pursuant to the Merger Agreement is fair to such holders (other than Parent) from a financial point of view as of the date thereof. A copy of Dillon Read's opinion is attached as Schedule III hereto. The summary of the opinion set forth herein is qualified in its entirety by such Schedule III which is incorporated herein by reference. Stockholders are urged to read the opinion in its entirety for a description of the assumptions made, matters considered and procedures followed by Dillon Read. The consideration to be paid pursuant to the Offer and Merger was determined by negotiations on behalf of the Company and Parent and was not determined by Dillon Read. In arriving at its opinion, Dillon Read, among other things, (1) reviewed certain publicly available business and financial information relating to the Company; (2) reviewed the reported price and trading activity for the Shares; (3) reviewed certain internal financial information and other data provided to Dillon Reed by the Company relating to the business and prospects of the Company, including financial projections prepared by the management; (4) conducted discussions with members of the senior management of the Company; (5) reviewed the financial terms, to the extent publicly available, of certain acquisition transactions which Dillon Read considered relevant; (6) reviewed publicly available financial and securities market data pertaining to certain publicly-held companies in lines of business generally comparable to those of the Company; and (7) conducted such other financial studies, analyses and investigations, and considered such other information as Dillon Read deemed necessary and appropriate. In reaching its opinion and conducting its analysis, Dillon Read did not assume any responsibility for independent verification of any of the foregoing information and relied upon it being complete and accurate in all material respects. Dillon Read was not requested to and did not make an independent evaluation or appraisal of any assets or liabilities (contingent or otherwise) of the Company or any of its subsidiaries, nor were they furnished with any such evaluation or appraisal. Dillon Read also assumed that all of the information, including the projections, provided to Dillon Read by the Company's management was prepared on a basis reflecting the best currently available estimates and judgments of the Company's management as to the future of the financial performance of the 21 Company and was based upon the historical performance and certain estimates and assumptions which were reasonable at the time made. In addition, Dillon Read was not asked to and did not express any opinion as to the after-tax consequences of the sale of such Shares by the stockholders. Dillon Read's opinion is based on economic, monetary and market conditions existing on the date thereof. In rendering their opinion, Dillon Read did not render any opinion as to the value of the Company and did not make any recommendation to the shareholders with respect to the advisability of voting in favor of the transaction. No limitations were imposed by the Special Committee, the Company or Parent upon Dillon Read with respect to the investigations made or the procedures followed by Dillon Read in rendering its opinion, and the Company and the members of its management cooperated fully with Dillon Read in connection with its investigation. In delivering its opinion and making its presentation to the Board and the Special Committee, Dillon Read discussed certain financial and comparative analyses and other matters it deemed relevant. Among the various financial analyses that Dillon Read discussed were: (i) Comparable Trading Analysis. Dillon Read undertook a comparable public company analysis. In conducting this analysis, Dillon Read reviewed certain financial results of seven companies in the reinsurance industry which Dillon Read believed to be comparable to the Company. Dillon Read calculated trading multiples of (1) 1996 expected earnings per share (based on median estimates supplied by Institutional Brokers Estimate System database), (2) book value as of June 30, 1995 and (3) surplus as of June 30, 1995. Such multiples ranged between 11.0x and 15.0x, 1.0x and 1.3x, and 1.1x and 1.4x, respectively. Based on such multiples, Dillon Read estimated a reference range of $14.49 to $18.98 per Share. (ii) Comparable Acquisition Analysis. Dillon Read reviewed 32 acquisitions of property/ casualty reinsurance companies in the United States and Europe, which had occurred between 1987 and 1995 and summarized financial ratios and statistics for the nine most comparable transactions in the United States. The values of certain multiples (i.e., net income, book value, net premiums and market value) for all nine transactions were derived, as available. Such multiples ranged between 8.9x and 24.6x, 0.8x and 1.8x, 0.6x and 1.7x, and 1.3x and 1.6x, respectively. The multiples were then applied (1) to the Company's Net Premiums for the twelve month period ending September 30, 1995 and (2) to the Company's book value as of September 30, 1995. On this basis, Dillon Read estimated an average reference range of between $14.70 to $20.32 per Share. (iii) Economic Book Value Analysis. Dillon Read calculated the economic book value of the Company as of September 30, 1995. In calculating the economic book value of the Company, Dillon Read took into consideration the following factors, among others: (1) good will of the Company, (2) mark-to-market of the investment portfolio, (3) adjustments for the market value of the electronic data processing system and leasehold improvements, (4) adjustments for the valuation of the deferred income tax benefits and publicly traded debt, (5) ranges of differences between the stated amounts and net present value of the prepaid reinsurance, loss reserves and unearned premiums and (6) a range of value for any reserve deficiency. On this basis, Dillon Read calculated a reference range of the Company between $15.24 and $17.08. (iv) Discounted Cash Flow Analysis. Dillon Read calculated the present value of future cash flows that the Company could be expected to generate over the next five years (the "Discounted Cash Flow Analysis"). In preparing the Discounted Cash Flow Analysis, Dillon Read took into consideration the following: (1) the Company's recent operating and financial performance including, (a) management's business plan for fiscal year 1995 and (b) the historical operating results for the three most recently completed fiscal years, (2) management's business plan for fiscal 1996 and 1997 and (3) projections, reports and other materials prepared by the Company and its management or representatives that were provided to Dillon 22 Read. In addition, representatives of Dillon Read met with representatives of the Company's management to discuss the Company's current and projected operations. In developing its Discounted Cash Flow Analysis for each case, Dillon Read took the "free cash flow" that the Company was expected to generate from fiscal year 1995 to 2000 and discounted these cash flows to present values. Dillon Read applied discount rates ranging from 11% to 13% determined as the most appropriate range for the Company. Dillon Read arrived at this range of appropriate discount rates by determining the weighted average cost of capital for publicly traded companies in businesses similar to the Company. To approximate the residual value of the Company after this five-year period, Dillon Read applied multiples of operating income ranging from 10.5x to 12.5x. Dillon Read's determination of the most appropriate range of multiples was based on an assessment of the multiples of operating income which have been paid in recent publicly announced acquisitions of similar businesses. These residual value estimates were then discounted to present value using each of the above range discount rates. Dillon Read summed the discounted cash flows and residual value for each multiple of operating income described above, which indicated a matrix of present values for the Company of $14.48 to $19.05 per Share. (v) Premium Analysis. Dillon Read reviewed 29 transactions involving the close-out of minority shareholder positions, which had occurred between 1990 and 1995. Dillon Read considered only those transactions in which between 10% and 45% of all outstanding shares of a target corporation were acquired in the close-out transaction and in which the acquiring company owned approximately 100% of the target corporation stock upon completion of the transaction. For each company, Dillon Read calculated for each target corporation the premium paid for each share over the trading value of such share (A) one day prior to the transaction, (B) one week prior to the transaction and (C) four weeks prior to the transaction. Dillon Read then calculated the average of all premiums paid over the target corporation's trading price at each valuation date (calculated as a percentage of such share price). Applying such average premiums to the Company's trading value at each such valuation date, Dillon Read calculated a reference range of the Company between $14.37 and $15.63. The summary set forth above does not purport to be a complete description of either Dillon Read's analyses or presentations to the Special Committee. Dillon Read believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all factors and analyses, could create an incomplete view of the processes underlying its opinion. The preparation of a fairness opinion is a complex process and not necessarily susceptible to partial analyses or summary description. In its analyses, Dillon Read made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the Company's control. Any estimates contained therein are not necessarily indicative of actual values, which may be significantly more or less favorable than as set forth therein. Estimates of value of companies do not purport to be appraisals or necessarily reflect the prices at which companies may actually be sold. Because such estimates are inherently subject to uncertainty, none of the Company, Parent, the Purchaser, Dillon Read and any other person assumes responsibility for their accuracy. The Company has retained Dillon Read as the Special Committee's financial advisor in connection with the Merger, the Offer and other matters arising in connection therewith pursuant to an engagement letter dated October 10, 1995 (the "Engagement Letter") between the Company and Dillon Read. The Engagement Letter provides, among other things, that the Company will pay to Dillon Read a fee equal to $500,000. In addition, the Company has agreed to reimburse Dillon Read for its reasonable out-of-pocket expenses, including reasonable legal expenses, and to indemnify Dillon Read against certain liabilities. The Special Committee selected Dillon Read as its financial advisor because Dillon Read is an internationally recognized investment banking firm and regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions. 23 THE OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions set forth in the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the Purchaser will accept for payment, and pay for, all Shares validly tendered on or prior to the Expiration Date (as herein defined) and not withdrawn as permitted by "THE OFFER -- 4. Rights of Withdrawal". The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, December 8, 1995, unless and until the Purchaser shall, in its sole discretion, have extended the period for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Offer, as so extended by the Purchaser, shall expire. This Offer is subject to various terms and conditions described herein. See "THE OFFER -- 13. Certain Conditions of the Offer". Subject to the applicable rules and regulations of the Commission, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in "THE OFFER -- 13. Certain Conditions of the Offer" shall have occurred or shall have been determined by the Purchaser to have occurred, to (i) extend the period of time during which the Offer is open, and thereby delay acceptance for payment of, regardless of whether such Shares were theretofore accepted for payment, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer in any other respect by giving oral or written notice of such amendment. The Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares, whether or not the Purchaser exercises its right to extend the Offer. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's right to terminate the Offer pursuant to the provisions of "THE OFFER -- 13. Certain Conditions of the Offer". If by the Expiration Date, any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), in its sole discretion subject to the applicable rules and regulations of the Commission, to (i) terminate the Offer and not accept for payment any Shares and return all tendered Shares, (ii) waive all the unsatisfied conditions and, subject to the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended, or (iv) amend the Offer in any respect by giving oral and written notice of such termination, waiver, extension, delay or amendment to the Depositary or by making public announcement thereof. There can be no assurance that the Purchaser will exercise its right to extend the Offer. See "THE OFFER -- 13. Certain Conditions to the Offer". Any extension, delay, amendment, waiver or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-1(d) under the Exchange Act requires that the announcement be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcements, the Purchaser will not have any obligations to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. 24 If the Purchaser extends the Offer or if the Purchaser (whether before or after its acceptance for payment of the tendered Shares) is delayed in its acceptance for payment of or payment for the Shares or if the Purchaser is unable to accept for payment or pay for the Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal right as described in "THE OFFER -- 4. Rights of Withdrawal". However, the ability of the Purchaser to delay the payment for the Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. Consummation of the Offer is conditioned upon satisfaction of the Minimum Tender Condition and the other conditions set forth in "THE OFFER -- 13. Certain Conditions of the Offer". The Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions and to waive the Minimum Tender Condition and to accept for payment pursuant to the Offer less than the minimum number of Shares necessary to satisfy the Minimum Tender Condition, to the extent permitted under applicable law. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including a waiver or reduction of the Minimum Tender Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, or a change in the dealer's advisory fee, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In the Commission's view, an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders, and, if material changes are made with respect to information that approaches the significance of price and share levels, a minimum of ten business days may be required to allow for adequate dissemination and investor response. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or a change in a dealer's solicitation fee, a minimum period of ten business days from the date of such change is generally required under the applicable rules and regulations of the Commission to allow for adequate dissemination to stockholders and investor response. Accordingly, if prior to the Expiration Date, the Purchaser should decrease the number of Shares being sought, or increase or decrease the consideration offered pursuant to the Offer, or change the dealer's solicitation fee, and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that notice of such change is first published, sent or given to holders of Shares, the Offer will be extended at least until the expiration of such ten-business day period. As used herein, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through midnight, New York City time. The Company has provided to the Purchaser the Company's stockholder list and security position lists for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the Letter of Transmittal and other relevant materials will be mailed to recordholders of the Shares whose names appear on the Company's stockholder list and will be mailed to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on such stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 25 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, Shares validly tendered on or prior to the Expiration Date and not properly withdrawn in accordance with "THE OFFER -- 4. Rights of Withdrawal" as promptly as practicable after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the terms and conditions set forth in "THE OFFER -- 13. Certain Conditions of the Offer". Any determination concerning the satisfaction or waiver of the terms and conditions will be within the sole discretion of the Purchaser, and such determination will be final and binding on all holders of Shares. See "THE OFFER -- 1. Terms of the Offer" and "THE OFFER - -- 13. Certain Conditions of the Offer". The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law. Any such delays will be effected in compliance with the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer. If, prior to the Expiration Date, the Purchaser increases the consideration offered to the holders of Shares pursuant to the Offer, the Purchaser will pay such increased consideration for all Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in the consideration. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered to the Purchaser and not withdrawn if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which shall act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to the tendering stockholders whose shares have been received for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER ON THE PURCHASE PRICE OF THE SHARES TENDERED PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN ACCEPTING FOR PAYMENT OR MAKING SUCH PAYMENT. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or timely Book-Entry Confirmation (as defined herein) of the book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined herein) pursuant to the procedures set forth in "THE OFFER -- 3. Procedure for Tendering Shares"), (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined herein) in lieu of the Letter of Transmittal) and (iii) any other documents required by such Letter of Transmittal. If the Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to the Purchaser's obligations under Rule 14e-1(c) under the Exchange Act to pay for or return the Shares promptly after the termination or withdrawal of the Offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in "THE OFFER -- 4. Rights of Withdrawal". If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, certificates for any such Shares will be returned, without expense, to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the 26 Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in "THE OFFER -- 3. Procedure for Tendering Shares", such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration, termination or withdrawal of the Offer. The Purchaser reserves the right to transfer or assign in whole or in part from time to time to one or more direct or indirect subsidiaries of the Purchaser the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. By accepting the benefits of the Offer through the tender of Shares and the receipt of payment for Shares, a tendering stockholder is (under the Purchaser's view of applicable law) barred from thereafter attacking in any legal proceeding the fairness of the consideration received by stockholders in the Offer. For this reason, the Letter of Transmittal to be executed by tendering stockholders includes a release of any such claims, which will be effective upon receipt of payment for tendered shares. 3. PROCEDURE FOR TENDERING SHARES. Valid Tender. To tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) certificates for the Shares to be tendered must be received by the Depositary at one of such addresses or (ii) Shares must be delivered pursuant to the procedures for book-entry transfer described below (and a confirmation of such delivery received by the Depositary, including an Agent's Message if the tendering stockholder has not delivered a Letter of Transmittal), in each case by the Expiration Date, or (b) the guaranteed delivery procedure described below must be complied with. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to and received by the Depositary and forming a part of a book-entry confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares at The Depository Trust Company, Midwest Securities Trust Company and Philadelphia Depository Trust Company (collectively referred to as the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares in the Depositary's account in accordance with the procedures of such Book-Entry Transfer Facility. However, although delivery of Shares may be effected through book-entry transfer, either the Letter of Transmittal (or facsimile thereof) properly completed and duly executed together with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal), and any other required documents must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase by the Expiration Date, or the guaranteed delivery procedure described below must be complied with. The confirmation of a book-entry transfer of Shares into the Depositary's account at a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation". DELIVERY OF THE LETTER OF 27 TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantee. Except as otherwise provided below, all signatures on a Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program (an "Eligible Institution"). Signatures on a Letter of Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith and such holder has not completed the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the certificates are registered in the name of a person other than the signer of the Letter of Transmittal or if payment is to be made or certificates for Shares not accepted for payment or not tendered are to be returned to a person other than the registered holder, then the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appears on the certificates, with the signatures on the certificates or stock power guaranteed as described above. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and cannot deliver such Shares and all other required documents to the Depositary by the Expiration Date, or such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered if all of the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser is received by the Depositary (as provided below) prior to the Expiration Date; and (iii) the certificates for such tendered Shares (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee (or, in the case of book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal), and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days on the NYSE after the date of execution of the Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. Other Requirements. Notwithstanding any other provision hereof, in all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely Book-Entry Confirmation with respect to such Shares), properly completed and duly executed Letter(s) of Transmittal (or facsimile(s) thereof) for such Shares together with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal), and any other 28 required documents. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations of such Shares and such other documents are actually received by the Depositary. Under no circumstances will interest be paid by the Purchaser on the purchase price of the Shares to any tendering stockholders, regardless of any extension of the Offer or any delay in accepting for payment or making such payment. Tender Constitutes an Agreement. The tender of Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Appointment of Proxy After Acceptance for Payment. By executing a Letter of Transmittal as set forth above, the tendering stockholder irrevocably appoints the designees of the Purchaser, and each of them, the attorneys-in-fact and proxies of such stockholder, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all cash dividends, distributions, rights, other Shares and other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase ("Distributions"). Such appointment is effective when, and only to the extent that, the Purchaser deposits the payment for such Shares with the Depositary. All such proxies and powers of attorney shall be irrevocable and coupled with an interest in the tendered Shares. Upon the effectiveness of such appointment, without further action, all prior proxies with respect to the Shares (and any associated Distributions) given by such stockholder will be revoked, and no subsequent proxies may be given nor subsequent written consents executed (and, if given or executed, will not be deemed to be effective) with respect thereto by the Stockholder. The Purchaser's designees will, with respect to the Shares (and any associated Distributions) for which the appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the stockholders of the Company, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares (and any associated Distributions) (including voting at any meeting then scheduled or actions by written consent). See "THE OFFER -- 6. Price Range of Shares; Dividends." Release of Claims. By accepting the Offer through the tender of Shares pursuant to the Offer, the tendering stockholder agrees to release, and releases, all claims with respect to or in respect of the Shares other than the right to receive payment for the tendered Shares expressly provided herein and that, upon payment for the Shares, to waive any right to attack (and agrees to be barred from thereafter attacking) in any legal proceeding the fairness of the consideration paid in the Offer. Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. Neither the Purchaser, the Depositary, the Information Agent or the Dealer Managers nor any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and Instructions thereto) will be final and binding. 29 Backup Withholding. In order to avoid backup withholding of federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, under federal income tax laws, the Depositary will be required to withhold 31% of the amount of any payment made to certain stockholders pursuant to the Offer. All stockholders tendering Shares pursuant to the Offer should complete and sign the main signature form and Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is provided in a manner satisfactory to the Purchaser and the Depositary). Non-corporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 10 to the Letter of Transmittal. 4. RIGHTS OF WITHDRAWAL. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable except that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after January 8, 1996. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the name of the registered holder and the serial numbers shown on such certificates must also be submitted to the Depositary and, unless such Shares have been tendered for the account of any Eligible Institution, the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry tender as set forth in "THE OFFER -- 3. Procedure for Tendering Shares", any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures for such withdrawal, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. Withdrawals of tenders of Shares may not be rescinded, and any Share properly withdrawn will thereafter be deemed not validly tendered for the purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described above in "THE OFFER -- 3. Procedure for Tendering Shares" at any time on or prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding. None of the Purchaser, Parent, the Dealer Managers, the Depositary, the Information Agent, or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give such notification. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares, or is unable to accept for payment Shares pursuant to the Offer, for any reason, then, without prejudice 30 to the Purchaser's rights under this Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as set forth in this Section 4. Under no circumstances will interest be paid by the Purchaser on the purchase price of the Shares tendered pursuant to the Offer, regardless of any extension of the Offer or any delay in making payment. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER. Sales of Shares pursuant to the Offer will be taxable transactions for Federal income tax purposes and may also be taxable under applicable state, local and other tax laws. For Federal income tax purposes, a stockholder whose Shares are purchased pursuant to the Offer, or who receives cash as a result of the Merger, will realize gain or loss equal to the difference between the adjusted basis of the Shares sold or exchanged and the amount of cash received therefor. Such gain or loss will be capital gain or loss if the Shares are held as capital assets by the stockholder. Under current Federal income tax law, net capital gain of an individual or other non-corporate taxpayer may be subject to tax at a preferential tax rate. In addition, a taxpayer's ability to deduct capital losses may be limited. THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed on the NYSE under the symbol "SUR". The following table sets forth, for the calendar quarters indicated, the high and low sales prices for the Shares on the NYSE Composite Tape and the amount of cash dividends paid per Share, based upon public sources:
SHARES ----------------------------------------------------- CASH DIVIDENDS CALENDAR YEAR HIGH LOW PAID - --------------------------------------------------------- ----------------- -------------- -------------- 1993: First Quarter........................................ $ 20 3/4 $ 17 $ .08 Second Quarter....................................... 19 3/4 16 1/8 .08 Third Quarter........................................ 16 7/8 14 7/8 .08 Fourth Quarter....................................... 16 3/4 12 3/8 .08 1994: First Quarter........................................ $ 13 $ 10 1/4 $ .09 Second Quarter....................................... 12 1/4 10 1/8 .09 Third Quarter........................................ 12 1/4 11 .09 Fourth Quarter....................................... 11 3/8 7 1/2 .09 1995: First Quarter........................................ $ 8 3/4 $ 7 3/4 $ .05 Second Quarter....................................... 9 1/4 7 1/2 .05 Third Quarter........................................ 15 1/2 9 .05 Fourth Quarter (through November 8, 1995)............ 15 3/4 15 N/A
On September 25, 1995, the last full trading day prior to the public announcement of Parent's intention to seek to cause the Company to become a wholly-owned subsidiary of Parent in a transaction in which holders of Shares would receive $14.00 in cash per share, the reported 31 closing price on the NYSE Composite Tape was $11 1/8 per Share. On November 2, 1995, the last full NYSE trading day prior to the public announcement of execution of the Merger Agreement and the Purchaser's agreement to commence the Offer, the reported closing price on the NYSE Composite Tape was $15 1/4 per Share. Stockholders are urged to obtain a current market quotation for the Shares. At its regular December meetings, the Board of Directors of the Company historically has declared a regularly quarterly dividend payable on or about December 31 of each year to stockholders of record on approximately the twelfth day preceding such dividend payment date. Declarations of dividends are within the discretion of the Board of Directors of the Company, and there can be no assurance that the Board of Directors will declare a dividend payable in December 1995. 7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, STOCK EXCHANGE LISTING, AND EXCHANGE ACT REGISTRATION. The purchase of Shares by the Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and would reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. The Shares are currently listed on the NYSE. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of holders of at least 100 Shares (exclusive of NYSE "Excluded Holdings") should fall below 1,200, the number of publicly held Shares (exclusive of holdings of officers and directors of the Company and their immediate families and other concentrated holdings of 10% or more) should fall below 600,000, or the aggregate market value of the publicly held Shares (exclusive of NYSE "Excluded Holdings") should fall below $5,000,000. According to the 1994 Annual Report, there were approximately 140 holders of record of Shares on March 28, 1995, and the Company has advised the Purchaser and Parent that, as of November 2, 1995, there were 18,170,971 Shares outstanding. Parent owned 14,547,756 Shares as of such date. If such exchange were to delist the Shares, the market therefor could be adversely affected. It is possible that the Shares would be traded on other securities exchanges or in the over-the-counter market, and that price quotations would be reported by such exchanges, or through the National Association of Securities Dealers Automated Quotation System, Inc. ("NASDAQ") or other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of stockholders and/or the aggregate market value of the Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act and other factors. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade, or the termination of registration of outstanding Shares under the Exchange Act, would have an adverse effect on the market price for or the marketability of Shares. The Shares are currently registered under the Exchange Act. Such registration may be terminated by the Company upon application to the Commission if the outstanding Shares are not listed on a national securities exchange and if there are fewer than 300 holders of record of Shares. Termination of registration of the Shares under the Exchange Act would reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a), the related requirement of furnishing annual and 32 transition reports to stockholders pursuant to Section 15(d) of the Exchange Act and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable with respect to the Shares. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 under the Securities Act of 1933, as amended, may be impaired or eliminated. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be eligible for NYSE reporting. The Purchaser intends to seek delisting of the Shares from the NYSE and termination of registration of the Shares as soon as possible after consummation of the Offer or the Merger if, and as soon as, the requirements for delisting and termination of registration are met. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying or trading in securities ("Purpose Loans"). Depending upon factors similar to those described above regarding the continued listing, public trading and market quotations of the Shares, it is possible that, following the purchase of the shares pursuant to the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for Purpose Loans made by brokers. In addition, if registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for NYSE reporting. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Delaware corporation with its principal executive offices located at Two World Trade Center, New York, New York 10048-0178. The following description of the Company's business has been taken from the 1994 Annual Report at page I-3: The Company, through its subsidiaries, provides property and casualty insurance and reinsurance. Reinsurance is provided to primary insurance companies on both a treaty and facultative basis. SCOR Re specializes in underwriting treaties covering non-standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. SCOR Re writes treaty business almost exclusively through reinsurance intermediaries and writes facultative business directly with primary insurance companies and through reinsurance intermediaries. GSIC and Unity Fire provide commercial property and casualty insurance on both a primary and excess basis and underwrite alternative risk market coverages. GSIND provides commercial property and casualty coverages on a surplus lines basis. FINANCIAL INFORMATION. Set forth below is certain summary consolidated financial information for the Company's last three fiscal years as contained in the 1994 Annual Report and for the six months ended June 30, 1995 and June 30, 1994 as contained in the Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1995 and June 30, 1994. More comprehensive financial information is included in such reports (including management's discussion and analysis of financial condition and results of operation) and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information and notes contained therein. Copies of such reports and other documents may be examined at or obtained from the Commission or from the NYSE in the manner set forth below. Copies of the financial statements (and the notes thereto) of the Company contained in the 1994 Annual Report and copies of the financial results for the three and nine months ended September 30, 1995, as set forth in the Company's October 24, 1995 press release, are attached to this Offer to Purchase as Appendices A and B, respectively. The book value per Share set forth in Appendix B has been revised since the October 24, 1995 press release (which reported a $15.10 per Share book value), and the revised book value per Share as of September 30, 1995 has been set forth in Appendix B. 33 SCOR U.S. CORPORATION SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA) (UNAUDITED) ------------------- CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------------------ -------------------------------------- 1995 1994 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- OPERATING DATA: Net premiums earned................. $ 128,804 $ 117,668 $ 228,244 $ 236,051 $ 192,050 Net investment income............... 21,072 20,206 40,990 42,044 42,880 Net realized investment gains....... 592 736 984 12,930 15,048 ---------- ---------- ---------- ---------- ---------- Total revenue....................... 150,468 138,610 270,218 291,025 249,978 Losses and expenses, net............ 85,500 113,498 191,270 156,292 160,545 Commissions, net.................... 36,551 31,875 59,434 61,324 55,960 Other underwriting and administration expenses........... 13,167 12,787 26,009 26,420 23,918 Other expenses...................... 24 1,475 4,039 4,073 4,346 Interest expense.................... 4,310 4,528 8,920 8,005 4,579 ---------- ---------- ---------- ---------- ---------- Total expenses...................... 139,552 164,163 289,672 256,114 249,348 Income (loss) from operations before income taxes...................... 10,916 (25,553) (19,454) 34,911 630 Income taxes (benefit).............. 2,241 (11,738) (11,262) 6,983 (3,771) ---------- ---------- ---------- ---------- ---------- Income (loss) from operations....... 8,675 (13,815) (8,192) 27,928 4,401 Extraordinary gain on redemption of debentures, net of tax............ 552 -0- 351 -0- -0- Cumulative effect of accounting changes, net of tax............... -0- -0- -0- (2,600) 2,848 ---------- ---------- ---------- ---------- ---------- Net income (loss)................... $ 9,227 $ (13,815) $ (7,841) $ 25,328 $ 7,249 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) per fully diluted Share............................. $ 0.50 $ (0.76) $ (0.43) $ 1.33 $ 0.40 Cash dividends declared per Share... $ 0.10 $ 0.18 $ 0.36 $ 0.32 $ 0.28 CERTAIN GAAP FINANCIAL RATIOS: Loss ratio.......................... 66.4% 96.5% 83.8% 66.2% 83.6% Commission ratio.................... 28.4 27.1 26.0 26.0 29.1 U/W, administration and other expense ratio..................... 10.2 12.1 13.2 12.9 14.7 Expense ratio....................... 38.6 39.2 39.2 38.9 43.8 Combined ratio...................... 105.0 135.7 123.0 105.1 127.4 SAP COMBINED RATIO (A):............. 105.6 130.1 118.8 103.7 123.3 Ratio of Earnings to Fixed Charges........................... 3.13x (b) (b) 4.89x 1.14x
- ------------ (a) Operating subsidiaries only. (b) Earnings were inadequate to cover fixed charges by $25,812,000 for the six months ended June 30, 1994 and by $20,197,000 for the year ended December 31, 1994. 34 CONSOLIDATED BALANCE SHEETS
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------------------ -------------------------------------- 1995 1994 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- ASSETS: Investments................... $ 709,427 $ 660,671 $ 672,793 $ 716,654 $ 600,598 Cash.......................... 11,512 13,994 4,763 17,096 20,378 Accrued investment income..... 10,146 10,275 110,339 10,169 10,572 Premiums receivable........... 90,728 109,975 72,018 80,319 61,793 Reinsurance recoverable on paid losses Affiliates.................. 10,589 12,216 4,399 9,498 15,777 Other....................... 1,232 43,672 19,356 27,329 26,578 Reinsurance recoverable on unpaid losses Affiliates.................. 142,093 125,463 127,096 134,154 112,797 Other....................... 94,967 98,605 95,576 87,689 107,854 Prepaid reinsurance premiums Affiliates.................. 6,629 10,407 10,504 14,578 12,903 Other....................... 4,510 12,033 8,803 11,839 13,326 Deferred policy acquisition costs....................... 22,728 25,609 22,844 24,140 22,171 Deferred Federal income tax benefits.................... 24,423 38,280 34,818 11,894 13,939 Investment in affiliates...... 12,555 11,048 11,532 10,789 10,111 Other assets.................. 46,089 42,455 48,874 37,963 40,424 ---------- ---------- ---------- ---------- ---------- $1,187,628 $1,214,703 $1,143,715 $1,194,111 $1,069,221 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- LIABILITIES: Losses and loss expenses...... $ 633,315 $ 622,829 $ 604,787 $ 562,209 $ 561,813 Unearned premiums............. 100,134 121,633 110,082 114,376 104,824 Funds held under reinsurance treaties Affiliates.................. 1,435 3,719 3,654 21,777 23,478 Other....................... 16,422 19,485 17,104 17,825 15,157 Reinsurance balances payable Affiliates.................. 13,003 9,898 15,328 18,196 32,951 Other....................... 16,860 59,825 28,357 42,037 18,488 Convertible subordinated debentures.................. 75,950 86,250 82,350 86,250 0 Notes payable................. 25,000 20,000 20,000 20,000 28,000 Commercial paper.............. 20,321 10,954 11,310 10,721 10,247 Other liabilities............. 12,460 13,309 11,348 10,031 8,147 ---------- ---------- ---------- ---------- ---------- 914,900 967,902 904,320 903,422 803,105 ---------- ---------- ---------- ---------- ---------- STOCKHOLDERS' EQUITY: Preferred stock, no par value, 5,000,000 shares authorized; no shares issued............ 0 0 0 0 0 Common stock, $0.30 par value, 50,000,000 Shares authorized; 18,356,000 Shares issued.................. 5,507 5,490 5,507 5,490 5,453 Additional paid-in capital.... 114,568 112,894 114,556 112,670 112,068 Unrealized appreciation (depreciation) of investments, net of deferred tax effect................ 3,671 (10,299) (21,640) 16,634 11,416 Foreign currency translation adjustment.................. 197 (269) (414) 12 254 Retained earnings............. 150,564 140,452 143,153 157,532 138,002 Treasury stock, at cost....... (1,774) (1,467) (1,767) (1,649) (1,077) ---------- ---------- ---------- ---------- ---------- 272,733 246,801 239,395 290,689 266,116 ---------- ---------- ---------- ---------- ---------- $1,187,628 $1,214,703 $1,143,715 $1,194,111 $1,069,221 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- BOOK VALUE PER SHARE........... $ 15.02 $ 13.60 $ 13.18 $ 16.05 $ 14.77
35 Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase has been taken from or based upon publicly available documents and records on file with the Commission and other public sources and is qualified in its entirety by reference thereto. Although neither the Purchaser nor Parent has any knowledge that would indicate that any statements contained herein based on such documents and records are untrue, neither the Purchaser nor Parent can take responsibility for the accuracy or completeness of the information contained in such documents and records, or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to the Purchaser or Parent. The Company is subject to the information and reporting requirements of the Exchange Act and in accordance therewith is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and in Seven World Trade Center, Suite 1300, New York, New York. Copies may be obtained, by mail, upon payment of the Commission's customary charges, by writing to its principal office at Room 1024, Judiciary Plaza, Washington, D.C. 20549. The Shares are listed on the NYSE and such material, reports, proxy statements and other information can also be available for inspection at the NYSE, 20 Broad Street, New York, New York. CERTAIN PROJECTIONS. Parent and its representatives from time to time receive projections of financial results prepared by the management of the Company in the ordinary course of business as a part of its financial planning process. Although the Company does not as a matter of course publicly disclose projections as to future revenues or earnings, because they were received by Parent, the Purchaser is making these projections available to all stockholders. THE "SUMMARY PROJECTIONS" WERE PREPARED AS PART OF THE COMPANY'S STRATEGIC PLANNING PROCESS AT DECEMBER 1994, MARCH 1995 AND OCTOBER 1995. NONE OF THE PROJECTIONS SET FORTH BELOW IS TO BE REGARDED AS FACT AND SUCH PROJECTIONS SHOULD NOT BE RELIED UPON AS ACCURATE REPRESENTATIONS OF FUTURE RESULTS. IN ADDITION, BECAUSE THE ESTIMATES AND ASSUMPTIONS UNDERLYING THE SUMMARY PROJECTIONS, AS TO FUTURE RESULTS, ARE BASED UPON EVENTS AND CIRCUMSTANCES THAT HAVE NOT TAKEN PLACE AND ARE INHERENTLY SUBJECT TO SIGNIFICANT FINANCIAL, MARKET, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND ARE BEYOND PARENT'S, THE PURCHASER'S AND THE COMPANY'S CONTROL, THEY ARE INHERENTLY IMPRECISE AND THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS CAN BE REALIZED. THEREFORE, IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN THE ACTUAL AND PROJECTED RESULTS AND THAT THE ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED. THE INCLUSION OF THE SUMMARY PROJECTIONS SHOULD NOT BE REGARDED AS A REPRESENTATION BY PARENT, THE PURCHASER, OR THE COMPANY, OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES, THAT THE PROJECTED RESULTS WILL BE ACHIEVED. THE SUMMARY PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARDS PUBLIC DISCLOSURE OR COMPLYING WITH PUBLISHED GUIDELINES OF THE COMMISSION OR GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. NONE OF THE PURCHASER, PARENT, THE COMPANY, OR ANY OF THEIR RESPECTIVE AFFILIATES, REPRESENTATIVES, FINANCIAL ADVISORS, INDEPENDENT AUDITORS OR DIRECTORS OR OFFICERS, ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF THE SUMMARY PROJECTIONS. THE SUMMARY PROJECTIONS HAVE NOT BEEN 36 EXAMINED, REVIEWED OR COMPILED BY THE COMPANY'S INDEPENDENT AUDITORS, AND ACCORDINGLY THEY HAVE NOT EXPRESSED AN OPINION OR ANY OTHER ASSURANCE ON THEM. The Summary Projections were based on numerous global assumptions, including the following: (i) that there will be no significant change in market conditions; (ii) that the Company's staff levels will be adequate to implement the Company's proposed strategies; (iii) that, in general, historical retrocession patterns will not change; and (iv) that the Company will remain in the brokered treaty distribution channel (although the projections are based on the implementation of new business strategies for the brokered treaty distribution channel). According to representatives of the Company, the premium growth included in The Summary Projections was based on the professional judgment of the Company after giving careful consideration to the Company's premium growth for each line of business and the expected impact of any underwriting changes that have been or will be implemented. The loss ratios and combined ratios included in The Summary Projections were also based on the professional judgment of the management group after giving consideration to the Company's historical ratios for each line of business and the expected impact of any underwriting changes that have been or are projected to be implemented. The assumed payout patterns have also been based on historical data, with adjustments for the projected change in mix of the Company's business. The Summary Projections were also based on numerous operational assumptions, including the following: (i) the Company will continue to engage in transactions with its affiliates; (ii) new products (which contribute to the projected increase in premiums written) will be accepted in the marketplace; (iii) the Company will incur increases in operating expenses during 1995 relating to technological changes, offset by a reduction in operating expenses resulting from implementation of such new technologies thereafter and (iv) the Company will continue to maintain approximately the same number of branch operations that it currently maintains. The Summary Projections were also based on numerous specific assumptions and factors relating to each of the Company's lines of business, including the following: (i) With respect to property underwritings, incurred losses on earned premiums are reserved at underwriting year ultimate ratios; (ii) With respect to casualty underwritings, incurred losses on earned premiums are reserved by underwriting year, utilizing actuarial department formulas; (iii) With respect to net investment income, (a) the projections are based on the June 30, 1994 portfolio plus income on 50% of projected cash flow (however, 1995 is reduced by a proposed $20 million repayment of a bank financing) and (b) new money and reinvestment of bond maturities are invested at 8%, which is assumed to be the yield on 7 to 10-year investment grade taxable securities; (iv) Realized gains are assumed to be zero; (v) Other operating expenses are expected to increase by 1% per year, plus an estimated overall 1% increase adjustment for staffing changes and increased New Treaty System amortization of $900,000 in 1995 and thereafter; (vi) With respect to interest expense, (a) all years include $1.1 million of interest on funds held, $4.8 million of interest and amortization on the Debentures and $450,000 of commercial paper interest and (b) 1995 includes $1.2 million of interest for three quarters of a year until the bank financing is repaid. The March 1995 update to The Summary Projections reflected updated views on market trends and a reduction of $1.5 million in annual operating expenses. The October 1995 update of The Summary Projections assumed (i) an increase of $40 million in net invested assets in each of 1996 and 1997 at a taxable interest rate of 6% and (ii) the refinancing, rather than repayment, of a $20 million bank loan. The October 1995 update of The Summary Projections generally extrapolated nine months actual results for the full year 1995 and included $1 million in expenses projected to be incurred in connection with Parent's proposal. 1995 projections exclude the effect of a $552,000 extraordinary gain on the repurchase of Debentures realized in the first half of 1995. None of the assumptions or factors used is susceptible to accurate prediction and there is no assurance that The Summary Projections will be realized or that the Company's actual results will not be substantially less or substantially more than those projected. The Summary Projections do not include any benefits relating to the acquisition of the Shares by the Purchaser pursuant to the Offer or the Merger. 37 THE SUMMARY PROJECTIONS PROJECTED STATEMENT OF OPERATIONS FOR FISCAL YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA) (UNAUDITED)
MONTH WHEN PROJECTIONS WERE PREPARED -------------------------------- DECEMBER MARCH OCTOBER 1994 1995 1995 -------- -------- -------- Gross written premium..................................... $363,143 $332,900 $314,531 Net written premium....................................... 293,365 269,745 256,820 Net earned premium........................................ 297,602 273,167 259,304 Net investment income..................................... 43,056 42,611 42,430 Net investment gain....................................... 0 0 713 -------- -------- -------- TOTAL REVENUES:........................................... 340,658 315,778 302,447 Losses.................................................... 207,242 187,010 174,410 Commissions............................................... 79,195 74,288 69,125 Expenses.................................................. 29,542 28,004 29,004 Other..................................................... 422 (116) 617 Interest.................................................. 7,528 7,528 8,994 -------- -------- -------- TOTAL EXPENSES:........................................... 323,929 296,714 282,150 Income before taxes....................................... 16,729 19,064 20,297 Income taxes.............................................. 813 1,681 1,838 -------- -------- -------- NET INCOME:............................................... $ 15,916 $ 17,383 $ 18,459 -------- -------- -------- -------- -------- -------- Average Shares outstanding................................ 18,546 18,546 18,196 Net income per Share...................................... $ 0.86 $ 0.94 $ 1.01 Combined ratio (SAP)...................................... 105.8% 105.9% 104.8% Average stockholders equity............................... $251,697 $250,378 $263,434 Return on equity.......................................... 6.3% 6.9% 7.0%
The foregoing table sets forth the projected Statement of Operations for the fiscal year ended December 31, 1995, which projections were prepared during the months indicated above. Because management of the Company periodically updates the projections, they may vary, and in fact have varied, depending on the time such projections are made. 38 THE SUMMARY PROJECTIONS PROJECTED STATEMENTS OF OPERATIONS FOR FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1997 (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA) (UNAUDITED)
1996 PROJECTIONS 1997 PROJECTIONS -------------------- -------------------- MONTH WHEN MONTH WHEN PROJECTIONS WERE PROJECTIONS WERE PREPARED PREPARED -------------------- -------------------- DECEMBER OCTOBER DECEMBER OCTOBER 1994 1995 1994 1995 -------- -------- -------- -------- Gross written premium....................... $413,644 $367,680 $482,810 $430,417 Net written premium......................... 328,224 284,749 382,130 341,779 Net earned premium.......................... 325,841 279,501 372,419 329,182 Net investment income....................... 47,349 44,830 53,473 47,230 Net investment gains........................ 0 0 0 0 -------- -------- -------- -------- TOTAL REVENUES:............................. 373,190 324,331 425,892 376,412 Losses...................................... 227,879 187,708 260,208 216,777 Commissions................................. 84,329 74,087 95,459 89,509 Expenses.................................... 30,634 29,000 31,170 30,000 Other....................................... (852) (190) (1,576) (1,569) Interest.................................... 6,328 7,912 6,328 7,912 -------- -------- -------- -------- TOTAL EXPENSES:............................. 348,318 298,517 391,589 342,629 Income before taxes......................... 24,872 25,814 34,303 33,783 Income taxes................................ 4.034 4,140 7,894 7,489 -------- -------- -------- -------- NET INCOME:................................. $ 20,838 $ 21,674 $ 26,409 $ 26,294 -------- -------- -------- -------- -------- -------- -------- -------- Average primary shares outstanding.......... 18,596 18,196 18,648 18,196 Earnings per Share.......................... $ 1.12 $ 1.19 $ 1.42 $ 1.45 Combined ratio (SAP)........................ 105.1% 103.9% 103.6% 102.0% Average equity.............................. 263,524 286,233 280,233 304,689 Return on equity............................ 7.9% 7.6% 9.4% 8.6%
The foregoing table sets forth the projected Statements of Operations for the fiscal years ended December 31, 1996 and 1997, which projections were prepared during the months indicated above. Because management of the Company periodically updates the projections, they may vary, and in fact have varied, depending on the time such projections are made. 39 SHARE OWNERSHIP INFORMATION. The following table sets forth the information provided to the Purchaser and Parent by the Company regarding the Share ownership by directors and officers of the Company as of November 1, 1995 unless otherwise noted. To Parent's and the Purchaser's knowledge, each of the following listed persons currently intends to tender his Shares in the Offer.
NUMBER OF OPTION NUMBER OF NUMBER OF SHARES OPTION SHARES REGISTERED EXERCISABLE AS UNEXERCISABLE DIRECTORS SHARES HELD OF 11/1/95 AS OF 11/1/95 - ------------------------------------------------ ----------- ---------------- ------------- Jacques P. Blondeau............................. 0 83,998 18,002 John R. Cox..................................... 1,000 1,500 4,500 Raymond H. Deck................................. 7,100 13,500 4,500 Michel Gudefin.................................. 18,000 13,500 4,500 Jerome Karter................................... 0 166,997 24,003 Jean Masse...................................... 0 0 6,000 Richard M. Murray............................... 3,000 13,500 4,500 Serge M.P. Osouf................................ 0 1,500 11,500 Patrick Peugeot................................. 15,900 122,809 4,500 John W. Popp.................................... 1,000 13,500 4,500 Francois Reach.................................. 0 1,500 4,500 David J. Sherwood............................... 1,100 13,500 4,500 Ellen E. Thrower................................ 0 0 3,000 NON-DIRECTOR EXECUTIVE OFFICERS - ------------------------------------------------ Louis Adanio.................................... 10,409 33,121 13,668 John T. Andrews, Jr. ........................... 0 129,998 23,002 Nolan E. Asch................................... 14,188 79,081 12,668 Jeffrey D. Cropsey.............................. 4,552 0 13,000 John D. Dunn, Jr. .............................. 0 4,999 20,001 Francis J. Fenwick.............................. 0 0 7,800 Howard B. Fischer............................... 4,412 25,204 10,968 Linda J. Grant.................................. 100 11,508 9,301 Dominique Lavallee.............................. 1,400 5,999 13,001 Robert D. Sawicki............................... 0 0 9,100 Total (All Directors and Executive Officers as a group)................................... 82,161 735,714* 231,014
- ------------ * Represents approximately 3.22 percent of the Shares outstanding. 40 9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER. PARENT AND THE PURCHASER. The Purchaser is a Delaware corporation incorporated on October 12, 1995 and organized on November 2, 1995 as a wholly-owned subsidiary of Parent solely for the purposes of entering into the Merger Agreement, purchasing the Shares pursuant to this Offer and effecting the Merger. The Purchaser has conducted no business. Its registered office is CT Corporation Service, 1209 Orange Street, Wilmington, Delaware. Parent is organized under the laws of The French Republic and its principal executive offices are located at Immeuble SCOR-Cedex 39, 92074 Paris La Defense, France. Parent operates principally as a reinsurance company. Together with its subsidiaries, it ranks as the largest professional reinsurer in France and among the largest in the world. For the year ended December 31, 1994 and for the six months ended June 30, 1995, Parent had consolidated net income of FRF 282 million and FRF 206 million, in each case calculated in accordance with French generally accepted accounting principles. At December 31, 1994, Parent had total assets of approximately FRF 34.8 billion and total shareholders equity of approximately FRF 5.4 billion, calculated in accordance with French generally accepted accounting principles. As of November 7, 1995, the rate of exchange of FFr into U.S. dollars, based on the noon buying rate in New York City for cable transactions in foreign currencies as certified for customers purposes by the Federal Reserve Bank of New York was $4.880 FFr per U.S. dollar. The name, citizenship, business address, present principal occupation, and material positions held during the past five years of each of the directors and executive officers of Parent and the Purchaser are set forth in "SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser" to this Offer to Purchase. Neither Parent nor the Purchaser is subject to the information requirements of the Exchange Act and, accordingly, neither files reports or other information with the Commission under the Exchange Act relating to its business, financial position, results of operations or other matters. SHARE OWNERSHIP INFORMATION. Parent currently owns 14,547,756 Shares, or approximately 80% of the issued and outstanding Shares. In addition, the following table sets forth the number of Shares beneficially owned as of November 2, 1995 by the persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser" to this Offer to Purchase and any other associate or majority-owned subsidiary of Parent or any of the persons so listed. To Parent's and the Purchaser's knowledge only Mr. Peugeot owns Shares other than through unexercised stock options. Mr. Peugeot has indicated that he intends to tender such Shares into the Offer. Parent and the Purchaser do not believe any of such persons intends to exercise options for the purpose of tendering into the Offer. AMOUNT BENEFICIALLY NAME OF INDIVIDUAL OWNED - ------------------------------------------------------- ------------ Patrick Peugeot........................................ 138,709 Jacques Blondeau....................................... 83,998 Serge Osouf............................................ 1,500 Francois Reach......................................... 1,500 Except as elsewhere set forth in this Offer to Purchase: (i) neither Parent nor the Purchaser nor, to the knowledge of Parent or the Purchaser, any of the persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser" hereto nor any associate or majority-owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any equity securities of the Company; (ii) neither Parent nor the Purchaser nor, to the best knowledge 41 of Parent or the Purchaser, any of the persons or entities referred to above, nor any director, executive officer or subsidiary of any of the foregoing, has effected any transaction in such equity securities during the past 60 days; (iii) neither Parent nor the Purchaser nor, to the knowledge of Parent or the Purchaser, any of the persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser" hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations; (iv) there have been no contacts, negotiations or transactions since January 1, 1993 between Parent or the Purchaser, or, to the knowledge of Parent or the Purchaser, any of the persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser" hereto, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of asset of the Company; and (v) neither Parent nor the Purchaser, nor, to the best knowledge of Parent or the Purchaser, any of the persons listed in "SCHEDULE I -- Directors and Executive Officers of Parent and the Purchaser" hereto, has since January 1, 1992 had any transaction with the Company or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the Commission applicable to the Offer. References herein to the subsidiaries or affiliates of Parent or the Purchaser do not include the Company and its subsidiaries. SHARE REPURCHASES. On November 2, 1994, Parent acquired directly from certain of the Company's executive officers, 82,000 Shares at the then prevailing market price of $11.125 per Share, specifically: 44,000 Shares from John T. Andrews, Jr., Senior Vice President, General Counsel and Secretary of the Company; 9,071 Shares from Nolan E. Asch, Senior Vice President and Chief Actuary of the Company; 3,929 Shares from R. Daniel Brooks, Senior Vice President of the Company; and 25,000 Shares from Jerome Karter, President and Chief Executive Officer of the Company. Each of these senior officers had, at the request of the Company, voluntarily agreed not to sell any Shares held by them in connection with the privately placed offering of convertible subordinated debentures of the Company in 1993, and were prevented from selling during certain other periods thereafter in accordance with Company policy. The proceeds from these sales to Parent were applied exclusively to reduce indebtedness of the sellers to the Company. In addition, on November 2, 1994, under the Company's Stock Incentive Plan for Key Employees, the Company granted to each of such officers options to purchase a corresponding number of Shares at an exercise price of $11.125 per Share, which was equal to the per Share market price on that date. 10. CONTACTS WITH THE COMPANY. DIRECTORS OF THE COMPANY. The Board of Directors of the Company currently consists of thirteen members, five of whom are officers and/or directors of the Purchaser or officers of the Company. The Purchaser currently has, and following the Offer and the Merger will continue to have, the ability to elect the entire Board of Directors of the Company. The members of the Company's Board of Directors are as follows: Jacques P. Blondeau has served as Chairman of the Board of the Company since September 30, 1994 and as a Director since 1988. Mr. Blondeau is also Chairman of SCOR Reinsurance Company ("SCOR Re"), the Company's principal operating subsidiary. Mr. Blondeau serves as a Trustee of the Voting Trust that holds the stock of SCOR Re on behalf of the Company. From November, 1988 to September 30, 1994, Mr. Blondeau had been Vice Chairman and President of the Company and Vice Chairman of the Board of SCOR Re. He also served as Chief Operating 42 Officer of the Company from November, 1988 to June, 1994. From June 16, 1994 to September 30, 1994, he served as Chief Executive Officer of the Company. He is Chairman of the Board and Chief Executive Officer of Parent. Prior to being elected to these positions in Parent, he served as the President and Chief Operating Officer. Mr. Blondeau was President-Operations of SCOR Paris from 1988 until 1990, when SCOR Paris was merged into Parent. From 1984 to 1988, Mr. Blondeau was Chairman and President of Pechiney Australia and President of Howmet Resources, Inc. (U.S.), a subsidiary of Pechiney Corporation. From 1980-1984, he held various top-level positions with the Pechiney Corporation. Mr. Blondeau's business address is that of Parent. Serge M.P. Osouf has served as Vice Chairman of the Board of Directors of the Company and SCOR Re since September 30, 1994, and has been a Director of the Company since September, 1993, and of SCOR Re since December, 1991. Mr. Osouf serves as the General Manager of Parent and prior to taking this position in September, 1994, had been the President-Reinsurance Operations of Parent since 1993. He is currently Chairman of SCOR Vie and from 1987 to 1993 was General Manager of SCOR Reassurance, two subsidiaries of Parent. Mr. Osouf's business address is that of Parent. Jerome Karter has served as a Director of the Company since February, 1989, and as its President and Chief Executive Officer since September 30, 1994. Prior to September, 1994, he had served as Executive Vice President of the Company since December, 1989. Mr. Karter has also served as a Director, President and Chief Executive Officer of SCOR Re since February, 1989. Prior to his employment at SCOR, he held various management positions both in the United States and Europe with major domestic and multinational insurance companies since 1961. He held senior management positions for Factory Mutual International in London and Affiliated F.M. Insurance Company in Paris from 1969 to 1978. He subsequently served as General Manager-Europe for the Insurance Company of North America (now CIGNA Corporation) and INA Reinsurance Company S.A. in Brussels from 1978 to 1984. Immediately prior to joining the Company, Mr. Karter was a Senior Vice President and Manager of the International Department of Johnson & Higgins in New York from 1984 to 1989. Mr. Karter's business address is that of the Company. John R. Cox has served as a Director of the Company and SCOR Re since June, 1994. Mr. Cox has also served as a Director of Firemark Global Insurance Fund since 1993. From 1985 to 1991 he was Chairman of the Board and Chief Executive Officer of ACE Limited ("ACE"). Until February 3, 1995, he was a Director and a Member of the Audit Committee of ACE and its subsidiary companies. From 1990 to 1993 he was a Director of Bankers Insurance Company Limited. From 1983 to 1985, he was Executive Vice President of American Can Company, subsequently known as Primerica Corporation and now The Travelers Corporation, and Chairman and Chief Executive Officer of Associated Madison Companies, Inc., its financial services holding company subsidiary. From 1975 to 1983 Mr. Cox held various key executive positions in CIGNA Corporation. Mr. Cox's business address is 44 Herbert Terrace, West Orange, New Jersey. Raymond H. Deck has served as a Director of the Company since 1986 and of SCOR Re since 1985. He has been President of Chase Insurance Enterprises, Inc., a division of Chase Enterprises, a private company with investments in real estate, communications and the insurance industry, since 1986. He has also been a Director of Accel International Corporation since 1990. Prior to 1986, he was a Director and Executive Vice President of the Hartford Insurance Group. Mr. Deck's business address is that of Chase Insurance Enterprises, Inc., One Commercial Plaza, Hartford, Connecticut 06103. Michel J. Gudefin has served as a Director of the Company since 1989 and of SCOR Re since June 1990 and is a Voting Trustee of SCOR Re. Mr. Gudefin is retired. From 1988 to 1989 he was Vice Chairman of Howmet Corporation, the principal operating subsidiary of Pechiney Corporation. From 1976 to 1988, Mr. Gudefin was President and Chief Executive Officer of Pechiney Corporation. 43 Until December 31, 1993, he was a Director of Pechiney Corporation and Howmet Corporation. He is currently a Director of Southwire Corporation and a Vice President and Director of Intrend Corporation. Mr. Gudefin's business address is that of the Company. Jean P. Masse has served as a Director of the Company and SCOR Re since March 1995. From June 16, 1994 until March 1995, he was Director Emeritus of SCOR Re after having served as a Director of SCOR Re from 1990 to 1994. He served as a Director and President of The Unity Fire and General Insurance Company from December 1982 until 1990, and during that time also served as President and Treasurer of the Rockleigh Management Corporation, which was merged with and into the Company in 1990. Mr. Masse's business address is Tour Voltaire, 1 place Des Dgres, Cedex 58, 92059 Paris La Defense, France. Richard M. Murray has served as a Director of the Company and SCOR Re since 1990. He was Chairman and executive advisor of The Nippon Management Corporation from 1987 to 1991. Since 1990, he has been Vice Chairman of La Prov Corporation, a wholly-owned U.S. subsidiary and liaison office of Grupo Nacional Provincial S.A., a leading Mexican insurance company. He was a Vice President of The Travelers Corporation from 1967 to 1987. Mr. Murray's business address is that of La Prov Corporation, 80 Broad Street, New York, New York 10004-2203. Patrick Peugeot has served as a Director of the Company since 1983 and of SCOR Re since 1985. Mr. Peugeot is also a Voting Trustee of SCOR Re. He served as Chairman of the Board of the Company from 1983 until September 30, 1994, and as Chief Executive Officer of the Company from December 1988 until June 16, 1994. He was also Chairman of the Board of SCOR Re until September 1994. Mr. Peugeot had served as Chairman of the Board and Chief Executive Officer of Parent from 1989 until 1994 and of SCOR Paris from 1983 until 1990. Mr. Peugeot was Chairman of CCR from 1983 to 1985. He is Honorary Chairman of CCR and has served as Honorary Chairman of Parent since August 30, 1994. He is now Vice Chairman and President of La Mondiale, a French mutual life insurance company. He is also Vice Chairman of Partner Europe. Mr. Peugeot's business address is that of La Mondiale, located at 22 boulevard Malesherbes 75008 Paris. John W. Popp, has served as a Director of the Company since March 1990 and SCOR Re since 1989. Mr. Popp also is a business consultant. He was a Partner of Peat, Marwick, Mitchell & Co. (now KPMG Peat Marwick LLP) from 1955 to 1982. Mr. Popp has been a Director of Old Republic International Corporation since 1993. Mr. Popp's business address is that of the Company. Francois Reach has served as a Director of the Company since March 1989 and of SCOR Re since June 1994. Mr. Reach has served as Chairman and CEO of REAFIN, the finance company subsidiary of Parent since October 1994. He was Chief Investment Officer and Treasurer of Parent from 1983 until October, 1994, when he became Deputy General Manager of Parent. From 1986 to 1994, he was President of REAFIN. He is also Managing Director of Finimosa (Spain) and of Finimo Kft (Hungary). Mr. Reach's business address is that of Parent. David J. Sherwood has served as a Director of the Company and of SCOR Re since 1987. He is also a Voting Trustee of SCOR Re. Mr. Sherwood has served as Chairman of the Board of Governors of the New York Insurance Exchange since 1985. He was President of The Prudential Insurance Company of America from 1978 to 1984. Mr. Sherwood's business address is that of the New York Insurance Exchange, c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022. Ellen E. Thrower has served as a director of the Company since July 1995. She has served as President and Chief Executive Officer of The College of Insurance and Chief Executive Officer of its parent organization, The Insurance Society of New York since 1988. She has been a director of the Insurance Education Foundation since 1988; the New York City Council on Economic Education, 44 Inc., since 1992; the Pennsylvania National Mutual Casualty Insurance Co. since 1990; and the United Educators Insurance Risk Retention Group, Inc., since 1994. Ms. Thrower's business address is that of The College of Insurance, 101 Murray Street, New York, New York 10007. CONTRACTS AND AGREEMENTS. The Company and Parent have a number of financial, operating and other arrangements and have engaged in certain intercompany transactions believed to be mutually beneficial. These arrangements include those set forth below. Copies of the Agreements referred to below required to be filed as exhibits to the Schedule 13E-3 and the Schedule 14D-1 are so filed and are available in the same manner as that described in "SPECIAL FACTORS--5. Background of the Offer and the Merger", and the following summaries are qualified in their entirety by reference to the copies of such agreements. (i) Retrocession Agreements: SCOR Re, like most reinsurance companies, enters into retrocession arrangements for many of the same reasons primary insurers seek reinsurance, including increasing their premium writing and risk capacity without requiring additional capital and reducing the effect of individual or aggregate losses. Historically, SCOR Re has retroceded risks to retrocessionaires on both a proportional and excess of loss basis. Since a reinsurer remains liable to a ceding company with respect to any risk subject to a retrocession agreement, such retrocessionaires are subject to an initial review of financial condition before final acceptability is confirmed and to subsequent reviews on an annual basis. From 1974 through 1986, virtually all of SCOR Re's retrocessions had been to affiliates. Based on the increased surplus resulting from the Company's public offering in 1986, SCOR Re significantly decreased the total amount of reinsurance retroceded, a large portion of which continues to be retroceded to affiliates. All reinsurance agreements with affiliates must be submitted to the New York Insurance Department for prior review. In 1994, 11.5% of gross premiums written by the Company were retroceded to Parent, compared with 15.6% and 14.0% in 1993 and 1992, respectively. Under its 1995 retrocessional program, SCOR Re retains a maximum of $2.0 million as to any one ceding company program for treaty business. SCOR Re retains a maximum of $3.9 million and $1.0 million per risk for facultative property and facultative casualty business, respectively. Under its 1994 retrocessional program SCOR Re retained a maximum of $2.0 million as to any one ceding company program for treaty business and a maximum of $3.3 million and $1.1 million per risk for facultative property and facultative casualty business, respectively. SCOR Re purchases coverage against the accumulation of losses resulting from a single catastrophic event. As with most reinsurers, SCOR Re retains a share of its catastrophe exposures. In 1995, SCOR Re has general catastrophe retrocessional coverage, which covers property exposures only, for generally 78% of $48 million in excess of $20 million per occurrence. The Company also has underlying coverage for $15 million in excess of $5 million per occurrence after a $5 million deductible. Parent participates in SCOR Re's 1995 general catastrophe retrocessional program for a total limit of approximately $13.7 million. Pursuant to a Net Aggregate Excess of Loss Retrocessional Agreement dated as of July 1, 1986 ("1986 Retrocessional Agreement"), Parent reinsured SCOR Re for adverse loss development from pre-1986 business that exceeded the total of loss reserves established as of June 30, 1986 and premiums earned after June 30, 1986 from such pre-1986 business. The 1986 Retrocessional Agreement provided protection to the Company for business underwritten by SCOR Re only and did not provide coverage for pre-1986 business underwritten by any other subsidiary. However, business underwritten by General Security and Unity Fire is protected against adverse development by a separate net aggregate excess of loss retrocessional agreement, as described below. The 1986 Retrocessional Agreement terminated on December 31, 1993, at which time, Parent's 45 liability to SCOR Re was $16.2 million. This amount is the actuarially determined expected ultimate loss from the pre-1986 business in excess of the "aggregate deductible" (which is defined as the total of net outstanding loss and loss expense reserves, net incurred but not reported ("IBNR") loss reserves and net unearned premium reserves established as of June 30, 1986 for the pre-1986 business, plus all net premiums and future net premium adjustments earned after June 30, 1986 under retrospectively rated treaties for such business). During the first quarter of 1994, SCOR Re received $16.2 million from Parent in settlement of its liability under this agreement. Given the remaining uncertainty of the ultimate liability of certain exposures underwritten in the pre-1986 SCOR Re business, SCOR Re and Parent entered into a new Net Aggregate Excess of Loss Agreement ("the 1994 Retrocessional Agreement") effective January 1, 1994, which protects the same business covered under the 1986 Retrocessional Agreement. Under this Agreement, SCOR Re is responsible for any further adverse development up to $8.8 million beyond the $16.2 million of adverse development recognized under the 1986 Retrocessional Agreement, at which point (the "attachment point") the 1994 Retrocessional Agreement attaches and provides coverage for up to $10 million of any additional adverse development. Because the losses related to the 1986 Retrocessional Agreement settlements have not yet been paid, the Company earns interest on the funds received. Based on the Company's assumption of the expected payment pattern of these reserves, the Company expects that such investment income would at least equal any adverse development below the attachment point. SCOR Re paid a premium of $2 million for this coverage, which expires on December 31, 2004. At December 31, 1994, no recovery was recognized under the 1994 Retrocessional Agreement. In addition, based on the Agreement's experience, SCOR Re is eligible to receive a contingent commission of up to 27.75% of the premium. SCOR Re is a party to two additional retrocession agreements providing for significant premium payments to Parent. First, pursuant to the Catastrophe Excess of Loss Reinsurance Contract for the 1994 year, SCOR Re paid Parent a premium for that year of $3,797,984 for the coverage specified under that reinsurance contract in respect of losses under policies covering treaty and facultative reinsurance assumed by SCOR Re resulting from certain property exposures. Losses arising out of the Northridge earthquake resulted in the reinstatement of coverage under the contract for an additional premium from SCOR Re to Parent of approximately $3.5 million. Second, pursuant to the Catastrophe Excess of Loss Reinsurance Contract for the 1995 year, SCOR Re is required to pay to each of Parent and one of its affiliates, SCOR Reassurance, by way of quarterly installments, a premium of $2,041,110 for that year for the coverage to be provided by each of them as specified under that reinsurance contract in respect of losses under policies covering treaty and facultative reinsurance assumed by SCOR Re resulting from certain property exposures. Parent entered into a Net Aggregate Excess of Loss Retrocessional Agreement with each of Unity Fire and General Security, pursuant to which Parent agreed to reinsure those companies to the extent that their net ultimate incurred losses (as defined in the agreements) arising in 1989 and prior accident years exceed an aggregate deductible. As a result of the above-described assumption by General Security of the rights, liabilities and obligations of Unity Fire, the Net Aggregate Excess of Loss Retrocessional Agreement with Unity Fire was terminated and the Net Aggregate Excess of Loss Retrocessional Agreement with General Security was amended (as so amended, the "Agreement") to include the protection formerly provided to Unity Fire by its retrocessional agreement with Parent. As a result of the merger of General Security into SCOR Re, the protection under the Agreement is now for the benefit of SCOR Re. The aggregate deductible is defined as the sum of net outstanding loss and loss expense reserves and net IBNR loss reserves as of December 31, 1989, for 1989 and prior accident years, as documented in the 1989 statutory financial statements of Unity Fire and General Security. This amount has been established at a combined 46 aggregate of $93.8 million. The annual premium for this protection is $210,000 through 2004. The Agreement continues in force until all covered losses are settled. At December 31, 1994, Parent's estimated liability to SCOR Re under the Agreement was approximately $11.7 million. The retrocession of risks underwritten by a reinsurer does not legally discharge it from liability for any part of the risk retroceded. Accordingly, the Operating Subsidiaries would be required to pay the full amount of the loss associated with the reinsured risk if for any reason Parent or any other retrocessionaire was unable or failed to meet its reinsurance obligations. Generally, under the New York Insurance Law, retrocessionaires which are not licensed or otherwise authorized reinsurers in New York must provide letters of credit or other permitted assets to secure their obligations to the ceding reinsurer (based on the ceding reinsurer's current estimate of the ceded liability) in order for the ceding reinsurer to take credit on its statutory financial statements for the reinsurance ceded. This security can be applied by the ceding reinsurer toward discharging its own liability in the event of a default by the retrocessionaire. At December 31, 1994, the amount of estimated liability for which retrocessionaires were liable to the Operating Subsidiaries was approximately $265.7 million, of which approximately $215.2 million was secured by letters of credit in favor of, or funds held by, the Operating Subsidiaries. Additionally, an amount of $37.6 million represents the liability on reinsurance ceded to New York licensed or authorized reinsurance companies, which are not required to provide additional security in order for the ceding reinsurer to take credit for the reinsurance ceded. The amounts of estimated liability recoverable from retrocessionaires at December 31, 1993 and 1992 were approximately $285.1 million and $289.2 million, respectively. The Operating Subsidiaries' exposure to amounts deemed unrecoverable from retrocessionaires has been limited and to the extent it has been exposed, paid losses, outstanding losses and incurred but not reported losses recoverable from retrocessionaires which are determined to be uncollectible are charged to operations. (ii) Reinsurance: The Company's operating subsidiaries assume reinsurance from Parent and other affiliated companies primarily on a quota share or surplus share basis. Written premiums assumed from these companies (and the percentage of gross written premiums) were approximately $7,845,000 (2.6%), $8,375,000 (2.5%) and $6,699,000 (2.2%) for the years ended December 31, 1994, 1993 and 1992, respectively. Of these amounts, approximately $6,959,000, $7,925,000 and $6,278,000 for 1994, 1993 and 1992, respectively, were assumed from Parent. The Company's operating subsidiaries also retrocede reinsurance to Parent and other affiliated companies, primarily on a quota share or surplus share basis. For the years ended December 31, 1994, 1993 and 1992 the percentage of assumed premiums written to net premiums written was 126.9%, 131.4% and 145.9%, respectively. Reinsurance does not discharge or diminish the primary liability to insureds of the Company on risks reinsured; however, it does permit the Company to recover the applicable portion of any loss from its retrocessionaires. Retrocessionaires of the Company are subject to an initial review of financial condition before final acceptability is confirmed and subsequent reviews on an annual basis. Parent provides letters of credit in favor of the Company's Operating Subsidiaries in amounts equal to its estimated liability under its reinsurance agreements with such companies (as re-estimated on a quarterly basis). The amount of letters of credit provided by Parent at December 31, 1994 was approximately $134,500,000. (iii) SCOR Re Voting Trust: The New York Insurance Law prohibits (with certain exceptions) the issuance of a license to a company that is owned or financially controlled in whole or in part by a government, unless an insurer was so owned or financially controlled prior to the effective date of 47 such statute. Unity Fire was so owned or financially controlled prior to such effective date. Because Parent, the controlling stockholder of the Company, was indirectly partially owned by certain French insurance companies which were majority owned by the French Government, the Company, in 1984, to permit SCOR Re to obtain a New York insurance license, established a voting trust for its holdings of capital stock of SCOR Re. The voting trust was irrevocable for a period of ten years (through June 6, 1994), unless SCOR Re's New York license was withdrawn. In 1994, in order for SCOR Re to retain its New York license and obtain a California insurance license, the voting trust was renewed for an additional period of three years. The five voting trustees under the voting trust possess and are entitled to exercise all the rights and powers of absolute owners of the capital stock of SCOR Re, except to pass any voting right or ownership interest to others. Decisions of the voting trustees may be made by majority vote, provided that such majority consists of at least two voting trustees who are not officers, directors or stockholders of the Purchasers. The voting trustees are required to forward any dividends paid by SCOR Re to the Company as the registered holder of the voting trust certificates evidencing beneficial ownership of SCOR Re's stock. Transfers of voting trust certificates may only be made by the registered holder thereof. The current voting trustees are as follows: Patrick Peugeot, Jacques P. Blondeau, Allan M. Chapin, Michel J. Gudefin, and David J. Sherwood. All of the voting trustees are directors of the Company with the exception of Mr. Chapin, who is a partner of Sullivan & Cromwell, legal counsel to Parent. Although there can be no assurances as to the actions the voting trustees may or may not take in the future, since the establishment of the voting trust in June 1984, the actions of the voting trustees have been limited primarily to the election of directors of SCOR Re. (iv) Credit Agreement: In 1995, the Company established a $20 million credit agreement with Parent, the proceeds of which are restricted to the repurchase of the Debentures in the market or the repayment of any debt incurred to repurchase Debentures. In addition, Parent may provide the funds or arrange financing necessary for the Company to satisfy its obligation to repurchase Debentures in accordance with the terms of the Indenture (v) Loan Agreement: In 1995, the Company has established a $20 million loan agreement with Parent, the proceeds of which are restricted to the repayment of, or the repayment of indebtedness incurred in respect of the repayment of a bank financing obtained by the Company. In October 1995, the Company borrowed $20 million under this loan agreement (vi) Software: The Company has agreed in principle with Parent for the purchase by Parent of the Company's New Treaty System ("NTS"), at a purchase price of $1.5 million. To date, the Company has expended approximately $10.2 million in researching, developing and implementing NTS. In January 1992, the Company acquired 19.8% of the stock of Commercial Risk, a Bermuda holding company for two insurance subsidiaries. The purchase price was approximately $9.9 million. As a result of a recapitalization of Commercial Risk in 1994, the Company currently owns approximately 12.87% of the outstanding stock of Commercial Risk. Parent owns approximately 52.27% of the outstanding stock of Commercial Risk. 48 11. THE MERGER AGREEMENT; APPRAISAL RIGHTS; EFFECT ON THE DEBENTURES. The Merger. The Merger Agreement provides that, promptly after the purchase of Shares pursuant to the Offer and the receipt of any required approval of the Merger Agreement by the Company's stockholders and the satisfaction or waiver of certain other conditions, the Purchaser will be merged into the Company. Because Parent currently owns a majority of the outstanding Shares, parent will have the vote necessary under Delaware law to approve the Merger. Under Delaware law, if the Purchaser owns at least 90% of the outstanding Shares, which would be the case if the Minimum Tender Condition is satisfied, the Merger may be effected without the vote of the Company's stockholders. Following consummation of the Merger, the Company will continue as the surviving corporation in the Merger (the "Surviving Corporation") and will become a wholly owned subsidiary of Parent. At the Effective Time, each Share outstanding immediately prior to the Effective Time (other than Shares owned by Parent, the Purchaser, the Company or any direct or indirect subsidiary of Parent or the Company or Shares ("Dissenting Shares") held by stockholders of the Company who have properly exercised their appraisal rights in accordance with Section 262 of the DGCL) will be converted into the right to receive, without interest, an amount in cash (the "Merger Consideration") equal to the Offer Price. At the Effective Time each share of common stock, par value $1.00 per share, of Purchaser, issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Purchaser or the holders of such shares, be converted into one share of common stock of the Surviving Corporation. The Merger Agreement provides that the Dissenting Shares will not be converted into or represent the right to receive the Merger Consideration. Holders of such Shares will be entitled to receive payment of the "fair value" of such Shares held by them in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Shares held by stockholders who fail to perfect or who effectively withdraw or lose their rights to dissent will thereupon be deemed to have been converted into, as of the Effective Time, the right to receive, without any interest thereon, the Merger Consideration, upon surrender of the certificate or certificates that formerly evidenced such Shares. The Merger Agreement contemplates that the certificate of incorporation of the Surviving Corporation, which will be the Restated Certificate of Incorporation of the Company, shall be amended to provide that the authorized capital of the Surviving Corporation shall be 1,000 shares of common stock, par value $.01 per share. The Merger Agreement provides that Purchaser shall make available or cause to be made available to the paying agent appointed by Purchaser with the Company's prior approval (the "Paying Agent") amounts sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments described above to holders of Shares issued and outstanding immediately prior to the Effective Time. Promptly after the Effective Time, the Paying Agent shall, pursuant to irrevocable instructions, make the payments provided for in the preceding sentence out of the funds deposited with the Paying Agent for such purpose. One hundred and eighty days following the Effective Time, the Surviving Corporation shall be entitled to cause the Paying Agent to deliver to it any funds (including any interest received with respect thereto) made available to the Paying Agent which have not been disbursed to holders of certificates formerly representing Shares outstanding at the Effective Time, and thereafter such holders shall be entitled to look to the Surviving Corporation only as general creditors thereof with respect to the cash payable under due surrender of their certificates. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of cash for Shares and Purchaser shall reimburse the Surviving Corporation for such charges and expenses. 49 Conditions to Certain Obligations. The obligations of the Company, the Purchaser and Parent to effect the Merger are subject to the satisfaction of certain conditions set forth in the Merger Agreement, including (i) the purchase by the Purchaser (or one or more affiliates of the Purchaser) of Shares pursuant to the Offer, (ii) to the extent required by applicable law, the receipt of stockholder approval of the Merger and the Merger Agreement and (iii) there being no statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) enacted, issued, promulgated, enforced or entered by any governmental, regulatory or administrative authority, agency, tribunal commission or other entity, domestic, international or foreign, including any state insurance governmental or regulatory body and non-governmental self-regulatory organization (a "Governmental Entity"), or any court which is in effect and prohibits consummation of the Merger. Termination. According to its terms, the Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after any approval by the stockholders of the Company, by the mutual consent of Parent and the Company, by action of their respective Boards and Directors. In addition, the Merger Agreement may be terminated by action of the Board of Directors of either Parent or the Company if (i) the Purchaser shall have terminated the Offer without purchasing any Shares pursuant thereto; provided, in the case of termination of the Merger Agreement by Parent, such termination of the Offer is not in violation of the terms of the Offer or (ii) without fault of the terminating party, the Merger shall not have been consummated by March 31, 1996, whether or not such date is before or after any approval by the stockholders of the Company of the Merger and the Merger Agreement. The Merger Agreement may be terminated by Parent at any time prior to the Effective Time, whether before or after any approval by the stockholders of the Company, by the action of the board of directors of the Parent, if (i) the Company shall have failed to comply in any material respect with any of the covenants and agreements contained in the Merger Agreement to be complied with or performed by the Company at or prior to such date of termination or (ii) the Board of Directors of the Company or those directors of the Company who are not officers of Parent or the Company or any affiliate of either of them (the "Independent Directors") shall have withdrawn or modified in a manner adverse to Parent or the Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger or the Board of Directors of the Company or the Independent Directors, upon request by Parent, shall fail to reaffirm such approval or recommendation, or shall have resolved to do any of the foregoing. The Merger Agreement may be terminated at any time prior to the Effective Time, before or after any approval by the stockholders of the Company, by action of the Board of Directors of the Company, if Parent or the Purchaser shall (i) have failed to comply in any material respect with any of the covenants or agreements contained in the Merger Agreement to be complied with or performed by Parent or the Purchaser at or prior to such date of termination or (ii) shall have failed to commence the Offer within the time required by the Merger Agreement. Subject to the applicable provisions of the DGCL, the Merger Agreement may be amended by action taken by the Company, Parent and the Purchaser at any time prior to the Effective Time. Certain Covenants of the Parties. The Purchaser has agreed in the Merger Agreement that it will not, without the prior written consent of the Company, decrease the price per Share or change the form of consideration payable in the Offer, decrease the number of Shares sought or change the conditions to the Offer. Also, the Purchaser shall not terminate or withdraw the Offer or extend the Expiration Date unless at the Expiration Date the conditions set forth in "THE OFFER -- 13. Certain Conditions of the Offer" have not been satisfied or waived. If the Purchaser or Parent or any direct or indirect subsidiary of Parent shall have purchased any Shares pursuant to the Offer, the Merger Agreement provides that the Company shall take all necessary action to enter into a supplemental indenture prior to the Effective Time with the Trustee (as defined in the Debentures) pursuant to the Indenture, to provide, among other things, that on 50 and after the Effective Time the Debentures will be convertible only into the right to receive an amount of cash, without interest, equal to the Offer Price. The Merger Agreement also provides that prior to the Effective Time, the Company shall take such actions as may be necessary such that at the Effective Time each stock option outstanding pursuant to the Company Stock and Option Plans (an "Option"), whether or not then vested, shall be cancelled and only entitle the holder thereof, upon surrender thereof, to receive an amount in cash equal to the difference between the Offer Price and the exercise price per Share of such Option, multiplied by the number of Shares previously subject to such Option. The Merger Agreement provides that for six years after the Effective Time, the Surviving Corporation shall maintain the Company's existing directors' and officers' liability insurance or equivalent liability insurance ("D&O Insurance") so long as the annual premium therefor is not in excess of the last annual premium paid prior to the date of the Merger Agreement (the "Current Premium"); provided, however, if the existing D&O Insurance expires, is terminated or canceled during such six-year period, the Surviving Corporation will use its best efforts to obtain as much D&O Insurance as can be obtained for the remainder of such period for a premium not in excess (on an annualized basis) of 200 percent of the Current Premium. In lieu of the insurance arrangement described above, the Company may, on or before the expiration of the Offer, enter into alternative insurance arrangements, provided that such arrangements are approved by the Independent Directors and Parent. The Merger Agreement also provides that, from and after the Effective Time, Parent and the Surviving Corporation will indemnify and hold harmless each present and former director and/or officer of the Company, determined as of the Effective Time (the "Indemnified Parties") that is made a party or threatened to be made a party to any threatened, pending or completed, action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was a director or officer of the Company or any subsidiary of the Company prior to the Effective Time and arising out of actions or omissions of the Indemnified Party in any such capacity occurring at or prior to the Effective Time (a "Claim") against any costs or expenses (including reasonable attorneys' fees), judgments, fines, amounts paid in settlement pursuant to the provisions of the Merger Agreement described in the next succeeding paragraph, losses, claims, damages or liabilities (collectively, "Costs") reasonably incurred in connection with any Claim, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been permitted under Delaware law. The Merger Agreement further provides that the Surviving Corporation and Purchaser shall also advance expenses (including attorneys' fees), as incurred by the Indemnified Party to the fullest extent permitted under applicable law provided such Indemnified Party provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification. Pursuant to the Merger Agreement, upon learning of any Claim described in the preceding paragraph, such Indemnified Party shall promptly notify the Surviving Corporation and Parent thereof. In the event of any such Claim (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Parent or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that the Surviving Corporation and Parent shall be obligated pursuant to the Merger Agreement (b) to pay for only one firm of counsel for all Indemnified Parties in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate in 51 the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent; and provided further that the Surviving Corporation and Parent, respectively, shall not have any obligation under the Merger Agreement to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and non-appealable, that the indemnification of such Indemnified Party in the manner contemplated by the Merger Agreement is prohibited by applicable law. If such indemnity is not available with respect to any Indemnified Party, then the Surviving Corporation and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. The Merger Agreement further provides that if a claim for indemnification or advancement under the Merger Agreement is not paid in full by the Surviving Corporation or Parent within thirty days after a written claim therefor has been received by the Surviving Corporation or Parent, the Indemnified Party may any time thereafter bring suit against the Surviving Corporation or Purchaser to recover the unpaid amount of the claim and, if successful in whole or in part, the Indemnified Party shall be entitled to be paid also the expense of prosecuting such claims. Under the terms of the Merger Agreement, neither the failure of the Surviving Corporation or Purchaser (including their Boards of Directors, independent legal counsel or shareholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnified Party is proper in the circumstances because he or she has met the applicable standard of conduct, nor an actual determination by the Surviving Corporation or Parent (including their boards of directors, independent legal counsel, or shareholders) that the Indemnified Party has not met such applicable standard of conduct, shall be a defense to the suit or create a presumption that the Indemnified Party has not met the applicable standard of conduct. The Merger Agreement also provides that no amendment to the Certificate of Incorporation or By-laws of the Surviving Corporation shall reduce in any way the elimination of personal liability of the directors of the Company contained therein or adversely affect any then existing right of any director or officer (or former director or officer) to be indemnified with respect to acts, omissions or events occurring prior to the Effective Time. In the Merger Agreement, the Company has agreed that its Board of Directors and a majority of the Independent Directors will recommend acceptance of the Offer to the Company's stockholders and will file with the Commission contemporaneously with the commencement of the Offer, and mail to its stockholders, a Solicitation/Recommendation Statement on Schedule 14D-9 containing the unanimous recommendation of the Company's Board of Directors and the Independent Directors that the Company's stockholders accept the Offer. The Merger Agreement also provides that if the Company's Board of Directors determines that its fiduciary duties require it to amend or withdraw its recommendation, such amendment or withdrawal shall not constitute a breach of the Merger Agreement. The Merger Agreement also contains certain other restrictions as to the conduct of business by the Company pending the Merger, as well as representations and warranties of each of the parties customary in transactions of this kind. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the text of the Merger Agreement, a copy of which has been filed as an exhibit to the Schedule 14D-1 and to the Schedule 13E-3 and may be obtained in the manner described in "THE OFFER -- 8. Certain Information Concerning the Company". The foregoing description of the Merger Agreement is qualified in its entirety by reference to that document. If the Minimum Tender Condition is satisfied, Parent directly or indirectly will hold 90% or more of the outstanding Shares, and Parent intends to contribute its Shares to the Purchaser and cause the Purchaser to effect the Merger without a vote of the Company's stockholders pursuant to the 52 "short-form" merger provisions of the DGCL. As the Purchaser already owns 14,547,756 of the 18,170,971 total outstanding Shares, assuming no additional Shares are issued after November 2, 1995, the Purchaser will need to purchase pursuant to its Offer a minimum of 1,806,118 of the Shares in order to satisfy the Minimum Tender Condition. However, if the Purchaser were to waive the Minimum Tender Condition, resulting in the Purchaser and Parent holding less than 90% of the outstanding Shares, then the Merger would have to be approved by the Company's Board of Directors and by the Company's stockholders. Under the DGCL, the vote of the holders of a majority of the outstanding Shares would be required to approve the Merger under such circumstances. Since Parent currently owns more than a majority of the outstanding Shares, Parent will have sufficient voting power to approve the Merger without the affirmative vote of any other stockholders of the Company, and Parent intends to do so. APPRAISAL RIGHTS. Holders of Shares do not have appraisal rights as a result of the Offer. After the Offer is consummated, the Purchaser anticipates that the Shares will cease to be listed or traded on the NYSE. In connection with the Merger, even if the Merger is consummated pursuant to the short-form merger provisions discussed above, holders of the Shares will have certain rights under the DGCL to dissent and demand appraisal of, and payment in cash for the fair value of, their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from accomplishment or expectation of the Merger) required to be paid in cash, plus a payment in cash of a fair rate of interest from the date of consummation of the Merger, to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares would take into account all relevant factors and could, accordingly, be based upon considerations other than or in addition to the price paid in the Offer and the Merger and the market value of the Shares, asset values, earning capacity and the investment value of the Shares. The value so determined could be more or less than the purchase price per Share pursuant to the Offer or the consideration per Share to be paid in the Merger. The costs of appraisal litigation (including fees of counsel and experts retained by the parties) will be taxed upon the parties, or either of them, in such manner as appears equitable to the court. See "SCHEDULE II -- Appraisal Rights of Dissenting Stockholders under Delaware Law" attached hereto for a summary of appraisal rights under the DGCL. The Purchaser does not intend to object, assuming the proper procedures are followed, to the exercise by any other stockholder of such stockholder's appraisal rights and who demands appraisal of, and payment in cash for the fair value of, such stockholder's Shares, even if the Shares are not delisted prior to the consummation of the Merger. However, Parent intends to cause the Company, as the surviving corporation in the Merger, to argue in any appraisal proceeding that, for the purposes of such a proceeding, the fair value of the Shares is less than the price paid in the Offer and the Merger. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF DELAWARE LAW. Effect on the Debentures. Under the terms of the Indenture, in the event of a Repurchase Event (which would occur in the event that Parent directly or indirectly owns, after giving effect to the purchase of Shares pursuant to the Offer or the acquisition of Shares pursuant to the Merger, in excess of 90% of the outstanding Shares), the holders of the Debentures shall have the right to require the Company to repurchase the Debentures at a repurchase price equal to 100% of the principal amount thereof together with accrued and unpaid interest to the date of such repurchase (the "Repurchase Price"), which date shall be 45 days after the date on which the Company notifies the holders of the Debentures of such Repurchase Event. In addition, in the event the Merger is consummated, the holders of the Debentures will be entitled to convert the Debentures 53 into the right to receive the consideration receivable upon the Merger by a holder of the number of Shares into which such Debentures could have been converted immediately prior to the Merger. In light of the current conversion price at which the Debentures may be converted into Shares, holders of Debentures would receive a greater cash amount in the event they elected to require the Company to repurchase their Debentures at the Repurchase Price than they would if they elected to convert their Debentures into the right to receive the merger consideration in respect of the Shares into which such Debentures could have been converted immediately prior to the Merger. Therefore, the Purchaser expects that substantially all of the holders of the Debentures would elect to require the Company to repurchase their Debentures at the Repurchase Price. Plans for the Company. Except as otherwise set forth in this Offer to Purchase, it is expected that, initially following the Merger, the business and operations of the Company will be continued substantially as they are currently being conducted. 12. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total amount of funds required to purchase 100% of the outstanding Shares pursuant to the Offer and the Merger and to pay related fees and expenses will be approximately $61,500,000. See "THE OFFER -- 16. Fees and Expenses" for additional information as to the fees and expenses payable by the Purchaser. The Purchaser will obtain these funds as capital contributions from Parent's existing working capital. 13. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser shall not be obligated to accept for payment any Shares or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or payment for, any tendered Shares unless the Minimum Tender Condition shall have been satisfied or waived or, if on or after November 2, 1995, and at or before the time of payment for any of such Shares (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer), any of the following events shall occur: (a) there shall be any statute, rule, regulation, judgment, injunction or other order, enacted, promulgated, entered, enforced or deemed applicable to the Offer or the Merger or any other action shall have been taken by any Governmental Entity, or any other person, domestic, supranational or foreign (i) challenging the legality of the acquisition by the Purchaser of the Shares; (ii) restraining, delaying or prohibiting the making or consummation of the Offer or the Merger or obtaining from the Company, Parent or the Purchaser any damages in connection therewith; (iii) relating to assets of, or prohibiting or limiting the ownership or operation by Parent or the Purchaser of all or any portion of the business or assets of, the Company, Parent or the Purchaser (including the business or assets of their respective affiliates and subsidiaries) or imposing any limitation on the ability of Parent or the Purchaser to conduct such business or own such assets; (iv) imposing limitations on the ability of Parent or the Purchaser (or any affiliate of Parent or the Purchaser) to acquire or hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by them on all matters properly presented to the stockholders of the Company or (v) having a substantial likelihood of any of the foregoing; (b) there shall have occurred (i) any general suspension of, or limitation on times or prices for, trading in securities on any national securities exchange or in the over-the-counter market in the United States or France or (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or France (whether or not mandatory); 54 (c) the Company shall have breached or failed to perform in any material respect any of its covenants, obligations or agreements under the Merger Agreement or any representation or warranty of the Company set forth in the Merger Agreement shall have been inaccurate or incomplete in any material respect when made or thereafter shall become inaccurate or incomplete in any material respect; (d) any change, including, without limitation, any change arising out of or related to any natural disaster (including hurricanes and earthquakes), shall have occurred or been threatened or become known (or any condition, event or development shall have occurred or been threatened or become known involving a prospective change) in the business, properties, assets, liabilities, condition (financial or otherwise), or results of operations of the Company or any of its subsidiaries that could reasonably be expected to be materially adverse to the Company and its subsidiaries taken as a whole; (e) all consents, registrations, approvals, permits, authorizations, notices, reports or other filings required to be made or obtained by the Company, Parent, the Purchaser or any stockholder of Parent with or from any Governmental Entity in connection with the Offer and the Merger shall not have been made or obtained except where the failure to make or to obtain, as the case may be, such consents, registrations, approvals, permits, authorizations, notices, reports or other filings could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business or results of operations of the Company and its subsidiaries taken as a whole; (f) the Special Committee shall have adversely amended or modified or shall have withdrawn its recommendation of the Offer or the Merger, or shall have failed to publicly reconfirm such recommendation upon request by Parent or the Purchaser, or shall have resolved to do any of the foregoing; or (g) the Merger Agreement shall have been terminated in accordance with its terms or the Purchaser shall have reached an agreement or understanding with the Special Committee providing for termination of the Offer which, in the reasonable judgment of the Purchaser with respect to each and every matter referred to above, and regardless of the circumstances (including any action or inaction by the Purchaser, Parent or any affiliate of Parent) giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances (including any action or inaction by the Purchaser, Parent or any affiliate of Parent) giving rise to any such conditions or may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Purchaser concerning the events described above will be final and binding on all holders of the Shares. 14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date hereof, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire Shares or otherwise cause a reduction in the number of outstanding Shares, (c) issue or sell additional Shares (other than the issuance of Shares reserved for issuance as of the date of this Offer to Purchase under employee stock option and restricted stock option plans in accordance with their terms, in effect and publicly disclosed as of the date of this Offer to Purchase), shares of any other class of capital stock, other voting securities or any 55 securities convertible into or exchangeable for, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing or (d) disclose that it has taken any such action, then without prejudice to the Purchaser's rights under the provisions of "THE OFFER -- 13. Certain Conditions of the Offer", the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer and Merger consideration and other terms of the Offer and Merger, including, without limitation, the number or type of securities offered to be purchased. If, on or after the date hereof, the Company should declare or pay any cash dividend on the Shares or make any other distribution on the Shares (other than regular quarterly cash dividends on the Shares), or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the name of the Purchaser or its nominees or transferees on the Company's stock transfer records, then, subject to the provisions of "THE OFFER -- 13. Certain Conditions of the Offer" below, (a) the price payable by the Purchaser pursuant to the Offer and Merger may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or distribution and (b) the whole of any such non-cash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution, issuance proceeds or rights and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. Cash dividends of the Company's reinsurance subsidiaries may be paid only out of their statutory earned surplus. For the Operating Subsidiaries domiciled in New York (which, at December 31, 1994, represented approximately 89% of the Company's statutory surplus), the payment of dividends is subject to statutory restrictions imposed by New York insurance law. Generally, the maximum amount of dividends that may be paid in any twelve month period without the prior approval of the relevant authorities is the lesser of net investment income and 10% of statutory surplus, as such terms are defined for the purposes of New York insurance law. 15. CERTAIN LEGAL MATTERS. GENERAL. Except as otherwise disclosed herein, based upon an examination of publicly available filings with respect to the Company, neither the Purchaser nor Parent is aware of any licenses or other regulatory permits which appear to be material to the business of the Company and which might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer or by the Merger or of any approval or other action by any governmental, administrative or regulatory agency or authority which would be required for the acquisition or ownership of Shares by the Purchaser pursuant to the Offer or by the Merger. Should any such approval or other action be required, it is currently contemplated that such approval or action would be sought or taken. There can be no assurance that any such approval or action, if needed, would be obtained or, if obtained, that it will be obtained without substantial conditions or that adverse consequences might not result to the Company's, Parent's or Purchaser's business or that certain parts of the Company's, Parent's or Purchaser's business might not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken, any of which could cause the Purchaser to elect to terminate the Offer without the purchase of the Shares thereunder. The 56 Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See "THE OFFER -- 13. Certain Conditions of the Offer". STATE TAKEOVER LAWS. A number of states have adopted laws and regulations applicable to offers to acquire securities of corporations which are incorporated in such states and/or which have substantial assets, stockholders, principal executive offices or principal places of business therein. In Edgar v. MITE Corporation, the Supreme Court of the United States held that the Illinois Business Takeover Statute, which made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and was therefore unconstitutional. In CTS Corporation v. Dynamics Corporation of America, the Supreme Court held that as a matter of corporate law, and in particular, those laws concerning corporate governance, a state may constitutionally disqualify an acquiror of "Control Shares" (ones representing ownership in excess of certain voting power thresholds e.g. 20%, 33 1/3% or 50%) of a corporation incorporated in its state and meeting certain other jurisdictional requirements from exercising voting power with respect to those shares without the approval of a majority of the disinterested stockholders. The Purchaser has not currently complied with any state takeover laws. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that one or more state takeover laws applies to the Offer or the Merger and it is not determined by an appropriate court that such act or acts do not apply or are invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obligated to accept for payment any Shares tendered. INSURANCE REGULATORY REQUIREMENTS AND APPROVALS. The Company's Operating Subsidiaries are domiciled or "commercially domiciled" for insurance regulatory purposes in the States of New York, Maryland and California and are accordingly subject to the insurance laws and regulations of such states. The Company also has an indirect minority interest in a reinsurance company domiciled in the State of Vermont (together with New York, Maryland and California, the "Domiciliary States"). Under the insurance laws and regulations of the Domiciliary States, transactions involving the acquisition of control of a domestic insurer, as well as certain transactions involving an insurance holding company such as the Company, are generally subject to the prior approval of insurance regulators in each such state. In particular, the acquisition of outstanding Shares of the Company sufficient to satisfy the Minimum Tender Condition, as well as the consummation of the Merger, may be subject to such prior approvals. In light of the fact that Parent already owns approximately 80% of the Company's outstanding common stock and accordingly already "controls" the Company and its insurance company Subsidiaries for purposes of applicable insurance laws. However, Parent has sought confirmation from insurance regulators in the Domiciliary States to the effect that no additional insurance regulatory filings, notifications or approvals would be required in connection with the acquisition of additional Shares or the consummation of the Merger. Based on discussions with such regulators to date, Parent believes that no such filings, notifications or approvals will be required, although there can be no assurances in this regard. CERTAIN LITIGATION. Between September 27 and October 2, 1995 the following actions (the "Underlying Actions") were commenced in the Court of Chancery of the State of Delaware in and for New Castle County (the "Court"): Howard Sande Feldman, Custodian for Jan Sharona Feldman, UGMA v. Jacques P. Blandeau [sic], et al., C.A. No. 14577 57 Crandon Capital Partners v. Jacques P. Blondeau, et al., C.A. No. 14579 Daniel Bruno v. Scor U.S. Corporation, et al., C.A. No. 14582 Jay Baxt v. Jacques P. Blandeau [sic], et al., C.A. No. 14585 Kalter and Kaplan Profit Sharing Plan-- Keogh F/B/O Ivan Kalter v. Jacques P. Blondeau, et al., C.A. No. 14589. The complaints in the Underlying Actions alleged, among other things, (i) Parent's proposal was the product of unfair dealing inasmuch as defendants possess non-public information concerning the financial condition and prospects of the Company, (ii) Parent's proposed offer price of $14.00 cash per Share to be paid to the putative class members was inadequate and unfair, and (iii) the conduct of defendants constituted self-dealing in violation of their fiduciary duties to the putative class members. On October 25, 1995, a motion was served in each of the Underlying Actions, seeking an order (1) consolidating the Underlying Actions for all purposes, (2) designating the complaint in action No. 14577 as the complaint in the Consolidated Action, and (3) designating the law firms of Bernstein Litowitz Berger & Grossmann; Wechsler Harwood Halebian & Feffer LLP; and Wolf Popper Ross Wolf & Jones, L.L.P. as plaintiffs' co-lead counsel and the law firms of Chimicles, Jacobsen & Tikellis and Rosenthal, Monhait, Gross & Goddess, P.A. as plaintiffs' Delaware co-liaison counsel. Copies of the complaints filed in the Underlying Actions are filed as exhibits to the Schedule 14D-1 and the Schedule 13E-3, may be obtained in the manner described in "THE OFFER -- 8. Certain Information Concerning the Company" and are incorporated herein by reference. The foregoing description of the action is qualified in its entirety by reference to such exhibit. On November 1, 1995, representatives of counsel to the plaintiffs in the shareholder actions agreed with representatives of Parent's United States legal counsel that they were prepared to negotiate a setlement if a price per Share of $15.25 were offered to the Company's stockholders. An agreement in principle has been reached with plaintiffs' counsel to settle the litigation based on Purchaser's increase of the Offer Price to $15.25. This settlement is subject to approval of the Court and confirmatory discovery. The defendants have denied, and continue to deny, that they have committed or have threatened to commit any violation of law or breaches of duty to the plaintiffs or the putative class. The defendants have agreed to the proposed settlement because such settlement would eliminate the burden and expense of further litigation and would facilitate the consummation of a transaction that they believe to be in the best interests of the Company and its stockholders. 16. FEES AND EXPENSES. Goldman, Sachs & Co. are acting as Dealer Managers in connection with the Offer and Goldman Sachs has provided certain financial advisory services to Parent in connection with the Offer and the Merger. Neither Parent nor the Purchaser is paying the Dealer Managers a solicitation fee for acting as Dealer Managers. 58 Pursuant to a letter agreement dated September 22, 1995 (the "Engagement Letter"), Parent engaged Goldman Sachs to act as its financial advisor in connection with the possible acquisition of the outstanding Shares not currently beneficially owned directly or indirectly by Parent. Pursuant to the terms of the Engagement Letter, Parent has agreed to pay Goldman Sachs a fee of $540,000 upon execution of the Engagement Letter and, if at least 90% of the outstanding Shares, including the Shares currently beneficially owned directly or indirectly by Parent, are acquired by Parent in one or more transactions, a transaction fee of $900,000, less any fees already paid pursuant to the Engagement Letter. Parent has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including attorney's fees and disbursements, and to indemnify Goldman Sachs against certain liabilities, including certain liabilities under the federal securities laws. The Purchaser and Parent have agreed to reimburse the Dealer Managers for their reasonable out-of-pocket expenses, including the fees and expenses of its counsel, for acting as Dealer Managers, and have agreed to indemnify the Dealer Managers against certain liabilities and expenses in connection with acting as Dealer Managers, including liabilities under the federal securities laws. Goldman Sachs and the Dealer Managers, as part of their investment banking businesses, are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. In selecting Goldman Sachs as its financial advisor (including Goldman, Sachs & Co. as Dealer Managers), Parent considered primarily the reputation of Goldman Sachs and its affiliates as an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. In addition to acting as financial advisor to Parent in connection with the Offer and the Merger, Goldman Sachs and the Dealer Managers have provided certain investment banking services to the Company and Parent from time to time, including the Dealer Managers having acted as financial advisor to the Company in connection with its acquisition of Rockleigh in 1990, acting as dealer in the Company's commercial paper program since 1991 and having acted as lead manager in the placement of the Debentures in 1993, and may provide investment banking services to the Company, the Purchaser and/or Parent in the future. Goldman Sachs provides a full range of financial, advisory and brokerage services and in the course of its normal trading activities may from time to time effect transactions and hold positions in the securities or options on securities of the Company and/or Parent for its own account and for the account of customers. As of the date hereof, Goldman Sachs holds for its own account $90,000 in principal amount of the Debentures. The Purchaser has also retained D.F. King & Co., Inc. to act as the Information Agent in connection with the Offer and the Merger. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer and the Merger to beneficial owners of Shares. The Information Agent will receive $7,000 for such services, plus, in the event the Purchaser extends the term of the Offer, an additional fee of $1,000 for each such extension, plus reimbursement of out-of-pocket expenses and the Purchaser will indemnify the Information Agent against certain liabilities and expenses in connection with the Offer and the Merger, including liabilities under the federal securities laws. The Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer and the Merger, plus reimbursement for out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses in connection therewith, including liabilities under the federal securities laws. Brokers, dealers, commercial 59 banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers. In addition to the fees set forth above, the Purchaser has paid, or will be responsible for paying, the following fees and expenses: filing fees $14,000; legal fees and expenses $250,000; and printing and miscellaneous $175,000. 17. MISCELLANEOUS. The Offer is made solely by the Offer to Purchase and the Letter of Transmittal and any amendments or supplements thereto. The Purchaser is not aware of any state where the making of the Offer is prohibited by the administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such statute. If, after such good faith effort, the Purchaser cannot comply with such statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. To the extent the Purchaser becomes aware of any law that would limit the class of offerees in the Offer, the Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Managers or one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or make any representation on behalf of the Purchaser not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. The Purchaser has filed with the Commission a Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 under the Exchange Act and a Schedule 13E-3, together with exhibits, pursuant to Rule 13e-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. Such Schedules and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the Commission in the manner set forth in "THE OFFER -- 8. Certain Information Concerning the Company" (except that they will not be available at the regional offices of the Commission). SCOR Merger Sub Corporation November 9, 1995. 60 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER The following table sets forth the name and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years of each director and executive officer of Parent and the Purchaser. Each such person is a citizen of France, unless otherwise indicated. Unless otherwise indicated, the address of each such person is Immeuble SCOR, 1, Avenue du President Wilson, Puteaux, 92074 Paris La Defense Cedex, France. PARENT
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION AND (IF REQUIRED) FIVE YEAR EMPLOYMENT HISTORY ------------------------- ---------------------------- 1. DIRECTORS OF PARENT: Jacques Blondeau............................. CHAIRMAN AND CHIEF EXECUTIVE OFFICER Mr. Blondeau was President and Chief Operating Officer of Parent from 1991 through 1992. In January 1993, Mr. Blondeau became General Manager of Parent and in September 1994, he became Chairman and Chief Executive Officer of Parent. Didier Pfeiffer.............................. VICE CHAIRMAN; VICE CHAIRMAN AND 9, Place Vendome PRESIDENT, UNION DES ASSURANCES DE PARIS 75001 Paris, France Mr. Pfeiffer has been Vice Chairman and President of Union des Assurances de Paris since 1984. Jean-Jacques Bonnaud......................... DIRECTOR; CHAIRMAN AND CHIEF EXECUTIVE 2, rue Pillet-Will OFFICER, GROUPE DES ASSURANCES 75448 Paris Cedex 09, France NATIONALES From 1991 to June 1994 Mr. Bonnaud was President of Groupe des Assurances Nationales and since July 1994 he has been Chairman and Chief Executive Officer of Groupe des Assurances Nationales. Regis Bouche................................. DIRECTOR; CHAIRMAN, CAISSE CENTRALE DES 8-10 rue d'Astorg MUTUELLES AGRICOLE 75008 Paris, France From 1991 to September 12, 1994, Mr. Bouche was Vice Chairman of Caisse Centrale des Mutuelles Agricole and on September 12, 1994 he became Chairman of Centrale des Mutuelles Agricole. Louis Chodron de Courcel..................... DIRECTOR; SENIOR VICE PRESIDENT, 1-3 rue Laffitte BANQUE NATIONALE DE PARIS 75009 Paris, France From 1991 to 1993 Mr. Chodron de Courcel was Directeur Central of Banque Nationale de Paris and since then has been Senior Vice President of Banque Nationale de Paris. Pierre Florin................................ DIRECTOR; SENIOR VICE PRESIDENT, La Grande Arche-Cedex 41 AXA FRANCE 92044 Paris La Defense, France From 1990 to 1991 Mr. Florin was a Manager at AXA France. From 1992 to 1994 Mr. Florin was Senior Vice President of Union Europe. Mr. Florin became Senior Vice President of AXA France at the beginning of 1995.
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NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION AND (IF REQUIRED) FIVE YEAR EMPLOYMENT HISTORY ------------------------- ---------------------------- Thierry Fouquet.............................. DIRECTOR Mr. Fouquet has occupied the position of Executive with Parent since 1990. Pierre Labadie............................... DIRECTOR; CHAIRMAN OF THE MANAGEMENT Tour Voltaire-Cedex 58 BOARD, UAP INTERNATIONAL 1 Place des Degres From 1991 to September 1993 Mr. Labadie was a 92059 Paris La Defense, France Member of the Management Board of UAP International and since October 1993 he has been Chairman of the Management Board of UAP International. Jean Louis Meunier........................... DIRECTOR; CHAIRMAN OF THE MANAGEMENT Tour Assur-Cedex 14 BOARDS OF UNION DES ASSURANCES DE PARIS 92038 Paris La Defense, France AND UAP INCENDIE ACCIDENTS ET UAP VIE From 1991 to 1994 Mr. Meunier General Manager in charge of life and non-life insurance at Union dex Assurances de Paris and UAP Incendie Accidents et UAP Vie. Since May 1994 Mr. Meunier has been Chairman of the Management Boards of Union des Assurances de Paris and UAP Incendie Accidents et UAP Vie. Roger Papaz.................................. DIRECTOR; DIRECTOR, ASSURANCES GENERALES 87, rue de Richelieu DE FRANCE 75002 Paris, France Mr. Papaz has been a Director and Honorary General Manager of Assurances Generales de France since 1991. Patrick Peugeot.............................. DIRECTOR; HONORARY CHAIRMAN AND 22, Boulevard Malesherbes PRESIDENT LA MONDIALE 75008 Paris, France From 1991 to August Mr. Peugeot was Chairman and Chief Executive Officer of Parent. In September 1994 Mr. Peugeot became Vice Chairman and President of La Mondiale. Luc Rouge.................................... DIRECTOR Mr. Rouge has occupied the position of Executive with SCOR Reassurances since 1973. Alexis Ruset................................. DIRECTOR; CHAIRMAN AND CHIEF EXECUTIVE 31, rue de Courcelles OFFICER, CAISSE CENTRALE DE REASSURANCE 75008 Paris, France Mr. Ruset has been Chairman and Chief Executive Officer of Caisse Centrale de Reassurance since 1991. Jacques Vandier.............................. DIRECTOR; CHAIRMAN, M.A.C.I.F. 2-4 rue de Pied de Fond Mr. Vandier has been Chairman of M.A.C.I.F. 79037 Niort Cedex, France since 1991.
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NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION AND (IF REQUIRED) FIVE YEAR EMPLOYMENT HISTORY ------------------------- ---------------------------- 2. EXECUTIVE OFFICERS OF PARENT: Serge Osouf.................................. GROUP GENERAL MANAGER From 1991 to March 1993, Mr. Osouf was General Manager of Parent. In April 1993 Mr. Osouf became Parent's Managing Director and President-Reinsurance Operations and since September 1994 he has been Group General Manager of Parent. Francois Reach............................... DEPUTY GROUP GENERAL MANAGER; CHAIRMAN AND CHIEF EXECUTIVE OFFICER, REAFIN From 1991 to September 1994, Mr. Reach was President of REAFIN and in October 1994 he became Chairman and Chief Executive Officer of REAFIN. Since September 1994, Mr. Reach has also occupied the position of Deputy Group General Manager with Parent. Pierre-Denis Champvillard.................... DEPUTY GROUP GENERAL MANAGER; GENERAL MANAGER, SCOR REASSURANCE From 1991 to February 1993 Mr. Champvillard was General Manager of SCOR Vie. In March 1993 Mr. Champvillard became General Manager of SCOR Reassurance and since September 1994 he has also occupied the position of Deputy Group General Manager with Parent. Michel Laparra............................... GROUP GENERAL CONTROLLER From 1991 to 1992 Mr. Laparra was Vice Chairman of Abeille Reassurances and from 1992 to August 1995 he was Chairman of Abeille Reassurances. In September 1995 Mr. Laparra became Group General Controller of Parent. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
PRINCIPAL OCCUPATION AND NAME FIVE YEAR EMPLOYMENT HISTORY ---- ---------------------------- Jacques Blondeau............................. PRESIDENT AND DIRECTOR Mr. Blondeau was President and Chief Operating Officer of Parent from 1991 through 1992. In January 1993, Mr. Blondeau became General Manager of Parent and in September 1994, he became Chairman and Chief Executive Officer of Parent. Serge Osouf.................................. VICE PRESIDENT--TREASURER AND DIRECTOR From 1991 to March 1993, Mr. Osouf was General Manager of Parent. In April 1993 Mr. Osouf became Parent's Managing Director and President-Reinsurance Operations and since September 1994 he has been Group General Manager of Parent. Jean Alisse.................................. VICE PRESIDENT--SECRETARY AND DIRECTOR Mr. Alisse has been Vice President and General Counsel of Parent since 1991.
I-3 SCHEDULE II APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS UNDER DELAWARE LAW In connection with the Merger, a stockholder may have the right to dissent from the Merger and, in lieu of receiving $15.25 net in cash per Share, to seek the "fair value" of all of such stockholder's Shares, as determined in accordance with the applicable provisions of the Delaware General Corporation Law ("DGCL"). In order to perfect such appraisal rights, a stock is required to follow the procedures set forth in Section 262 of the DGCL, as summarized below. The following discussion of the provisions of Section 262 is not intended to be a complete statement of its provisions and is qualified in its entirety by reference to the full text of that section. THE PROCEDURES SET FORTH IN SECTION 262 SHOULD BE STRICTLY COMPLIED WITH. FAILURE TO FOLLOW ANY SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262. Any stockholder of the Company may elect to dissent from the Merger with respect to all of the Shares registered in such stockholder's name. If the Merger is consummated pursuant to a stockholder vote, a stockholder who votes in favor of the Merger, whether in person or by proxy, shall waive such stockholder's appraisal rights. However, a stockholder is not required to vote against the Merger in order to qualify to exercise appraisal rights. If the Merger is to be consummated pursuant to a stockholder vote, the Company, not less than 20 days prior to the meeting of stockholders, shall notify each of its stockholders who was such on the record date for such meeting that appraisal rights are available. Any stockholder electing to exercise the appraisal rights must deliver to the Company, before the taking of the vote on the proposed Merger, a written demand for appraisal of such stockholder's Shares. Such demand must reasonably inform the Company of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's Shares. Within ten (10) days after the effective date of such Merger, the surviving or resulting corporation must notify each stockholder of each constituent corporation who has complied with Section 262(d)(1) and has not voted in favor of or consented to the Merger of the date that the Merger has become effective. FAILURE TO MAKE SUCH WRITTEN DEMAND SHALL CONSTITUTE A WAIVER OF THE STOCKHOLDER'S APPRAISAL RIGHTS. If the Merger is to be consummated pursuant to Section 228 or 253 of the DGCL, the surviving or resulting corporation, either before the effective date of such Merger or within ten (10) days thereafter, shall notify each of the stockholders entitled to appraisal rights of the effective date of such Merger and that appraisal rights are available for any or all of the Shares of the Company. The notice shall be sent by certified or registered mail, return receipt requested, addressed to the stockholder, at such stockholder's address as it appears on the records of the Company. Any stockholder entitled to appraisal rights may, within twenty (20) days after the date of mailing of the notice, demand in writing from the surviving or resulting corporation the appraisal of such stockholder's Shares. Such demand must reasonably inform the Company of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's Shares. FAILURE TO MAKE SUCH WRITTEN DEMAND SHALL CONSTITUTE A WAIVER OF THE STOCKHOLDER'S APPRAISAL RIGHTS. The written demand for appraisal must be made by or for the holder of record of Shares registered in such holder's name. Accordingly, such demand should be executed by or for such II-1 stockholder of record, fully and correctly, as such stockholder's name appears on such stockholder's stock certificates. If the stock is owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in such capacity and if the stock is owned of record by more than one person as in a joint tenancy or tenancy in common, such demand should be executed by or for all joint owners. An authorized agent, including one or two or more joint owners, may execute the demand for appraisal for a stockholder of record. However, the agent must identify the record owner or owners and expressly disclose the fact that in executing the demand he is acting as agent for the record owner. Within 120 days after the day of the effective date of the Merger, any stockholder who has satisfied the foregoing conditions and who is otherwise entitled to appraisal rights under Section 262, may file a petition in the Delaware court of Chancery demanding a determination of the value of the Shares held by all stockholders entitled to appraisal rights. If no such petition is filed, appraisal rights will be lost for all stockholders who had previously demanded appraisal of their shares. Stockholders seeking to exercise appraisal rights should not assume that the surviving or resulting corporation will file a petition with respect to the appraisal of the value of their shares or that the surviving or resulting corporation will initiate any negotiations with respect to the "fair value" of such shares. ACCORDINGLY, STOCKHOLDERS WHO WISH TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD REGARD IT AS THEIR OBLIGATION TO TAKE ALL STEPS NECESSARY TO PERFECT THEIR APPRAISAL RIGHTS IN THE MANNER PRESCRIBED IN SECTION 262. Within 120 days after the day of the effective date of the merger, any stockholder who has complied with the provisions of Section 262 is entitled, upon written request, to receive from the surviving or resulting corporation a statement setting forth the aggregate number of Shares not voted in favor of the Merger and with respect to which demands for appraisal have been received by the surviving or resulting corporation and the aggregate number of holders of such Shares. Such statement must be mailed to the stockholder within 10 days after the written request therefor is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under Section 262, whichever is later. If a stockholder files the petition for appraisal in a timely manner, the surviving or resulting corporation must file, within 20 days of service of the stockholders' petition, a verified list of the names and addresses of all stockholders who have demanded appraisal for their shares and with whom the surviving or resulting corporation has not reached an agreement regarding value. If the surviving or resulting corporation files a petition, it must be accompanied by a similar list. If so ordered by the Court, the Register of Chancery is required to provide notice by registered or certified mail of the hearing to stockholders shown on the list and to provide notice by publication. If a petition for an appraisal is timely filed, at the hearing on such petition, the Delaware Court of Chancery will determine the stockholders entitled to appraisal rights and will appraise the value of the Shares owned by such stockholders, determining its "fair value" exclusive of any element of value arising from the accomplishment or expectation of the Merger. The Court will direct payment of the fair value of such shares together with a fair rate of interest, if any, on such fair value to stockholders entitled thereto upon surrender to the surviving or resulting corporation of share certificates. Upon application of a stockholder, the Court may, in its discretion, order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal proceeding, including without limitation, reasonable attorneys' fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to appraisal. Although the Purchaser believes that the price per Share set out in the offer is fair, it cannot make any representation as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a lower, higher or equivalent value. II-2 Any stockholder who has duly demanded an appraisal in compliance with Section 262 will not, after the effective date of the Merger, be entitled to vote such stockholder's Shares for any purpose nor be entitled to the payment of any dividends or other distributions on such stockholder's Shares (other than those payable to stockholders of record as of a date prior to the effective date of the Merger). If no petition for an appraisal is filed within the time provided, or if a stockholder delivers to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the Merger, either within 60 days or after the effective date of the Merger or, with the written approval of the surviving or resulting corporation, thereafter, then the right of such stockholder to an appraisal will cease and such stockholder shall be entitled to receive in cash, without interest, the amount to which he would have been entitled had he not demanded appraisal of such stockholder's Shares. No appraisal proceeding in the Court of Chancery will be dismissed as to any stockholder without the approval of the Court, which approval may be conditioned on such terms as the Court deems just. Any notice, objection, demand or other written communication required to be given to the Company by a dissenting stockholder should be delivered to the Secretary of such respective corporation at the address set forth in the Schedule 13e-3 or should be delivered as otherwise permitted by law. Although not specifically required, it is recommended that such written communications be sent by registered or certified mail, return receipt requested. IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY STOCKHOLDER WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD CONSULT SUCH STOCKHOLDER'S LEGAL ADVISOR. II-3 [ Dillon, Read & Co. Inc. Letterhead ] November 2, 1995 SCOR U.S. Corporation Two World Trade Center, 23rd Floor New York, New York 10048-0178 Attention: Special Committee of the Board of Directors Gentlemen: You have advised us that SCOR S.A. ("SCOR S.A.") proposes to acquire all of the publicly held outstanding common stock, par value $0.30 per share, (the "Shares") of SCOR U.S. Corporation (the "Company") not currently held by SCOR S.A. from the holders thereof (the "Selling Shareholders") at a purchase price of $15.25 per share (the "Transaction"). You have requested our opinion as to whether the consideration to be paid pursuant to the Transaction is fair to the Selling Shareholders, from a financial point of view, as of the date hereof. In arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and financial information relating to the Company; (ii) reviewed the reported price and trading activity for the Shares of the Company; (iii) reviewed certain internal financial information and other data provided to us by the Company relating to the business and prospects of the Company, including financial projections prepared by the management of the Company; (iv) conducted discussions with members of the senior management of the Company; (v) reviewed the financial terms, to the extent publicly available, of certain acquisition transactions which we considered relevant; (vi) reviewed publicly available financial and securities market data pertaining to certain publicly-held companies in lines of business generally comparable to those of the Company; and (vii) conducted such other financial studies, analyses and investigations, and considered such other information as we deemed necessary and appropriate. In connection with our review, with your consent, we have not assumed any responsibility for independent verification of any of the foregoing information and have relied upon it being complete and accurate in all material respects. We have not been requested to and have not made an independent evaluation or appraisal of any assets or liabilities (contingent or otherwise) of the Company or any of its subsidiaries, nor have we been furnished with any such evaluation or appraisal. Further, we have assumed, with your consent, that all of the information, including the projections provided to us by the Company's management, was prepared in good faith and was reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company's management as to the future financial performance of the Company, and was based upon the historical performance and certain estimates and assumptions which were reasonable at the time made. In addition we have not been asked to, and do not express any opinion as to the after-tax consequences of the Transaction to any Selling Shareholder. In addition, our opinion is based on economic, monetary and market conditions existing on the date hereof. In rendering this opinion, we are not rendering any opinion as to the value of the Company or making any recommendation to the Selling Shareholders with respect to the advisability of voting in favor of the Transaction. Dillon, Read & Co. Inc. ("Dillon Read"), as part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwriting, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations of estate, corporate and other purposes. Dillon Read has received a fee for rendering this opinion. This opinion is being rendered solely to the Special Committee of the Board of Directors of the Company for its use in evaluating the Transaction and is not for the benefit of, nor being rendered to, the Selling Shareholders or any other person. Based upon and subject to the foregoing, we are of the opinion that the consideration to be received in the Transaction by the Selling Shareholders is fair to the Selling Shareholders, from a financial point of view, as of the date hereof. Very truly yours, DILLON, READ & CO. INC. /s/William P. Powell By: William P. Powell Managing Director III-2 APPENDIX A INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders SCOR U.S. Corporation: We have audited the consolidated balance sheets of SCOR U.S. Corporation and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1994 as listed in the accompanying index of the 1994 Annual Report on Form 10-K of SCOR U.S. Corporation. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SCOR U.S. Corporation and subsidiaries as of December 31, 1994 and 1993 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 2(k) to the consolidated financial statements, in 1993 the Company adopted the provisions of the Statement of Financial Accounting Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," and the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and also adopted the consensus opinion regarding the Financial Accounting Standards Board's Emerging Issues Task Force regarding Issue No. 93-6, "Accounting for Multiple-Year Retrospectively-Related Contracts by Ceding and Assuming Enterprises". In 1992, the Company adopted the provisions of SFAS No. 109, "Accounting for Income Taxes", and changed its method of accounting for deferred policy acquisition costs. New York, New York February 2, 1995 A-1
SCOR U.S. CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands) Year Ended December 31, 1994 1993 Assets Investments: Fixed maturities: Available for sale, at fair value (amortized cost: $596,791 and $558,882) $ 563,656 $ 581,104 Held to maturity, at amortized cost (fair value: $22,274 and $27,109) 22,871 24,876 Equity securities, at fair value (cost: $1,897 and $15,581) 1,738 18,951 Short-term investments, at cost 83,303 90,642 Other long-term investments 1,225 1,081 ------- ------- 672,793 716,654 Cash 4,763 17,096 Accrued investment income 10,339 10,169 Premiums receivable 72,018 80,319 Reinsurance recoverable on paid losses Affiliates 4,399 9,498 Other 19,356 27,329 Reinsurance recoverable on unpaid losses Affiliates 127,096 134,154 Other 95,576 87,689 Prepaid reinsurance premiums Affiliates 10,504 14,578 Other 8,803 11,839 Deferred policy acquisition costs 22,844 24,140 Deferred Federal income tax benefits 34,818 11,894 Investment in affiliates 11,532 10,789 Other assets 48,874 37,963 --------- --------- $1,143,715 $1,194,111 ========= =========
See notes to consolidated financial statements. A-2
SCOR U.S. CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands). Year Ended December 31, 1994 1993 Liabilities Losses and loss expenses $ 604,787 $ 562,209 Unearned premiums 110,082 114,376 Funds held under reinsurance treaties Affiliates 3,654 21,777 Other 17,104 17,825 Reinsurance balances payable Affiliates 15,328 18,196 Other 28,357 42,037 Convertible subordinated debentures 82,350 86,250 Notes payable 20,000 20,000 Commercial paper 11,310 10,721 Other liabilities 11,348 10,031 ------- ------- 904,320 903,422 ------- ------- Stockholders' Preferred stock, no par value, 5,000 Equity shares authorized; no shares issued -0- -0- Common stock, $0.30 par value, 50,000 shares authorized; 18,356 and 18,299 shares issued 5,507 5,490 Additional paid-in capital 114,556 112,670 Unrealized appreciation (depreciation) of investments, net of deferred tax effect (21,640) 16,634 Foreign currency translation adjustment (414) 12 Retained earnings 143,153 157,532 Treasury stock, at cost (192 and 190 shares) (1,767) (1,649) ------- ------- 239,395 290,689 --------- --------- $1,143,715 $1,194,111 ========= =========
See notes to consolidated financial statements. A-3
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 1994 1993 1992 Revenues Net premiums earned $228,244 $236,051 $192,050 Net investment income 40,990 42,044 42,880 Net realized investment gains 984 12,930 15,048 ------- ------- ------- 270,218 291,025 249,978 ------- ------- ------- Losses Losses and loss expenses, net 191,270 156,292 160,545 And Commissions, net 59,434 61,324 55,960 Expenses Other underwriting and administration expenses 26,009 26,420 23,918 Other expenses 4,039 4,073 4,346 Interest expense 8,920 8,005 4,579 ------- ------- ------- 289,672 256,114 249,348 ------- ------- ------- Income (loss) from operations before Federal income taxes (benefit) (19,454) 34,911 630 Federal income taxes (benefit) (11,262) 6,983 (3,771) ------- ------- ------- Income (loss) from operations (8,192) 27,928 4,401 Extraordinary gain on redemption of debentures, net of tax 351 -0- -0- Cumulative effect of accounting changes, net of tax -0- (2,600) 2,848 ------- ------- ------- Net income (loss) $(7,841) $25,328 $7,249 ======= ======= =======
See notes to consolidated financial statements. A-4
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 1994 1993 1992 Per Share Average common and common Data equivalent shares outstanding 18,166 18,395 18,256 Primary ======= ======= ======= Income (loss) from operations $ (0.45) $ 1.52 $ 0.25 Extraordinary item 0.02 -0- -0- Cumulative effect of accounting changes -0- (0.14) 0.15 ------- ------- ------- Net income (loss) $ (0.43) $ 1.38 $ 0.40 ======= ======= ======= Fully Average common and common Diluted equivalent shares outstanding 18,166 20,916 18,256 ======= ======= ======= Income (loss) from operations $ (0.45) $ 1.45 $ 0.25 Extraordinary item 0.02 -0- -0- Cumulative effect of accounting changes -0- (0.12) 0.15 ------- ------- ------- Net income (loss) $ (0.43) $ 1.33 $ 0.40 ======= ======= =======
A-5
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 1994 1993 1992 Pro- Pro-forma amounts assuming forma retroactive application of the change in the method of accounting for multiple-year retrospectively rated reinsurance contracts: Income (loss) from operations $27,928 $1,801 ======= ====== Income (loss) from operations per share Primary $ 1.52 $ 0.10 ======= ====== Fully diluted $ 1.45 $ 0.10 ======= ====== Net income (loss) $27,928 $ 4,649 ======= ====== Net income (loss) per share Primary $ 1.52 $ 0.25 ======= ====== Fully diluted $ 1.45 $ 0.25 ======= ======
See notes to consolidated financial statements. A-6
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except per share data) Year Ended December 31, 1994 1993 1992 Common Stock Balance at beginning of year $5,490 $5,453 $5,431 Issuance of common stock 17 37 22 ------- ------- -------- Balance at end of year 5,507 5,490 5,453 ------- ------- -------- Additional paid-in capital Balance at beginning of year 112,670 112,068 111,361 Issuance of common stock 700 1,428 938 Change in unpaid stock options exercised (shares of 55, 87 and 97) 1,175 (768) (346) Deferred compensation 11 (58) 115 ------- ------- -------- Balance at end of year 114,556 112,670 112,068 ------- ------- -------- Unrealized appreciation (depreciation) of investments Balance at beginning of year 16,634 11,416 5,826 Change in unrealized appreciation (38,274) 5,218 5,590 ------- ------- -------- Balance at end of year (21,640) 16,634 11,416 ------- ------- -------- Foreign currency translation adjustment Balance at beginning of year 12 254 1,646 Change in foreign currency translation adjustment (426) (242) (1,392) ------- ------- -------- Balance at end of year $ (414) $ 12 $ 254 ------- ------- --------
See notes to consolidated financial statements. A-7
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except per share data) Year Ended December 31, 1994 1993 1992 Retained earnings Balance at beginning of year $157,532 $138,002 $135,786 Net income (loss) (7,841) 25,328 7,249 Dividends ($.36, $.32 and $.28 per share) (6,538) (5,798) (5,033) ------- ------- ------- Balance at end of year 143,153 157,532 138,002 ------- ------- ------- Treasury stock Balance at beginning of year (1,649) (1,077) (1,305) Net (purchases) reissuance of treasury stock (118) (572) 228 ------- ------- ------- Balance at end of year (1,767) (1,649) (1,077) ------- ------- ------- Total stockholders' equity at end of year $239,395 $290,689 $266,116 ======== ======== ======== Common stock shares Balance at beginning of year 18,299 18,176 18,105 Issuance of common stock 57 123 71 ------- ------- ------- Balance at end of year 18,356 18,299 18,176 ======= ======= ======= Treasury stock shares Balance at beginning of year 190 153 179 Net purchases (reissuance) of treasury stock 2 37 (26) ------- ------- ------- Balance at end of year 192 190 153 ======= ======= =======
A-8 See notes to consolidated financial statements.
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 1994 1993 1992 Cash flows Net income (loss) $(7,841) $25,328 $7,249 from Adjustments to reconcile net income operating (loss) to net cash provided by (used in) activities operating activities: Cumulative effect of accounting changes -0- 2,600 (2,848) Realized investment gains (984) (12,930) (15,048) Changes in assets and liabilities net of effects of acquisitions: Accrued investment income (170) 403 203 Premium balances, net (8,247) (13,732) 9,779 Prepaid reinsurance premiums 7,110 (188) (8,517) Reinsurance recoverable on paid losses 13,072 5,528 (23,302) Deferred policy acquisition costs 1,296 (1,969) (5,367) Losses and loss expenses 42,578 396 101,583 Unearned premiums (4,294) 9,552 22,010 Reinsurance recoverable on unpaid losses (829) (1,192) (84,538) Funds held under reinsurance treaties (18,844) 967 7,663 Federal income taxes (11,174) 11,219 (11,769) Other (10,403) 1,794 (5,172) ------- ------- ------- Net cash provided by (used in) operating activities $ 1,270 $27,776 $(8,074) ------- ------- -------
See notes to consolidated financial statements. A-9
SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 1994 1993 1992 Cash flows Sales, maturities or redemptions of from fixed maturities $246,868 $349,423 $464,094 investing Sales of equity securities 19,920 12,105 15,279 activities Net sales (purchases) of short-term investments 9,899 (73,940) 15,181 Investments in fixed maturities (266,174) (375,024) (436,138) Investments in equity securities (16,161) (6,999) (25,316) Acquisitions, net of cash acquired -0- -0- (8,153) Investment in affiliate -0- -0- (9,900) Other (4,138) (9,422) (3,400) -------- ------- ------- Net cash provided by (used in) investing activities (9,786) (103,857) 11,647 -------- ------- ------- Cash flows Dividends paid (6,538) (5,798) (5,033) from Proceeds from issuance of convertible financing subordinated debentures -0- 85,172 -0- activities Proceeds from issuance of commercial paper - net 30 96 10,247 Repayment of notes payable -0- (8,000) -0- Proceeds from stock options exercised 1,533 967 364 Other 1,158 362 (17) -------- ------- ------- Net cash provided by (used in) financing activities (3,817) 72,799 5,561 -------- ------- ------- Net increase (decrease) in cash (12,333) (3,282) 9,134 Cash at beginning of year 17,096 20,378 11,244 -------- ------- ------- Cash at end of year $ 4,763 $17,096 $20,378 ======== ======= =======
A-10 See notes to consolidated financial statements. SCOR U.S. CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ORGANIZATION SCOR U.S. Corporation ("SCOR U.S.") is a Delaware corporation that was formed in December 1981. Prior to the offering of 4,000,000 shares to the public on September 25, 1986, SCOR U.S. was owned by Societe Commerciale de Reassurance ("SCOR Paris"), a French reinsurance company, and by Caisse Centrale de Reassurance ("CCR"), a reinsurer wholly owned by the French government which also owned approximately 30% of SCOR Paris. As a result of a corporate reorganization completed in France in November 1989, SCOR Paris became a wholly owned subsidiary of SCOR S.A. In December 1990, SCOR Paris and another subsidiary of SCOR S.A., UAP Reassurances ("UAP Re") were merged into SCOR S.A. In June 1990, Rockleigh Management Corporation ("Rockleigh"), a wholly owned subsidiary of UAP Re, was merged into SCOR U.S. Rockleigh owned 100% of both The Unity Fire and General Insurance Company ("Unity Fire") and General Security Assurance Corporation of New York ("General Security"), each of which was a professional reinsurance company. On January 1, 1994, General Security was merged into SCOR Reinsurance Company ("SCOR Re"), the Company's principal operating subsidiary. As a result of the issuance of common shares of SCOR U.S. to UAP Re in the Rockleigh merger, SCOR Paris' participation in SCOR U.S. stock repurchase programs and various other purchases, as well as SCOR Paris' purchase of CCR's shares of SCOR U.S., SCOR S.A. owned approximately 80% of the outstanding common stock of SCOR U.S. at December 31, 1994. The remaining 20% is held publicly and represents 3,616,864 shares of the outstanding shares of SCOR U.S. common stock. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying consolidated financial statements are presented in conformity with generally accepted accounting principles ("GAAP"). The consolidated financial statements of SCOR U.S. Corporation and subsidiaries (the "Company") include the accounts of SCOR U.S. and its wholly owned subsidiaries, SCOR Re, Unity Fire, General Security Indemnity Company ("GSIND") (formerly Southwest International Reinsurance Company), Morgard, Inc. ("Morgard"), General Security Insurance Company ("GSIC") (formerly The International Insurance Company of Takoma Park, Maryland ("IIC")), SCOR Services, Inc., and BIND, Inc., and its majority owned subsidiary, California Reinsurance Management Corporation ("Cal Re") and its equity affiliate Commercial Risk Partners Limited ("Commercial Risk"). The Company operates primarily in one significant industry segment; property and casualty reinsurance. Substantially all of the Company's gross premiums written are assumed from domestic ceding companies. All significant intercompany transactions have been eliminated in consolidation. A-11 (b) Premium Income Premium income is recognized as earned on a pro rata basis over the terms of the policies. Unearned premiums are calculated primarily on a pro rata basis on facultative business and as reported by ceding reinsureds on treaty business. (c) Policy Acquisition Costs Costs applicable to the acquisition of new business, principally commissions, are deferred when paid and expensed as the related premiums are earned. Deferred policy acquisition costs considers anticipated losses and loss expenses and maintenance expenses that will be incurred as those premiums are earned. Deferred policy acquisition costs are reviewed periodically to determine that they do not exceed recoverable amounts after allowing for anticipated investment income. Amortization of acquisition costs for 1994, 1993 and 1992 was $59,434,000, $61,324,000 and $55,960,000, respectively. (d) Loss Reserves The reserve for losses and loss expenses is based upon estimates received from ceding reinsureds on treaty contracts, accumulation of case estimates for losses and loss expenses on claims reported on facultative contracts and estimates of losses and loss expenses incurred but not reported ("IBNR") based upon the Company's expectations of what may have been incurred. Such provisions are necessarily based on estimates and, accordingly, there can be no assurance that the ultimate liability will not exceed such estimates. The reserves are reviewed continually during the year and changes in estimates are reflected in operating results currently. (e) Property and Equipment Depreciation and amortization of property and equipment have been provided principally on the straight-line method with estimated useful lives of fifteen years for property and five to ten years for equipment. Leasehold improvements are amortized on a straight-line basis over the term of the corresponding lease. Depreciation and amortization amounted to $1,651,000, $765,000 and $603,000 for the years ended December 31, 1994, 1993 and 1992, respectively. (f) Investments The Company has categorized substantially all of its investments in fixed maturities as securities "available for sale" and, in conformity with Financial Accounting Standards Board Statement No. 115 "Accounting for Certain Investments in Debt and Equity Securities", which was adopted December 31, 1993, carries such investments at fair value. Fixed maturities purchased with the intent to hold to maturity are categorized as securities "held to maturity" and are carried at amortized cost. Equity securities are carried at fair value. Short- term investments are carried at cost, which approximates fair value. The Company's policy is to determine realized gains and losses on investments sold on the specific identification method. The Company includes unrealized gains and losses on equity securities and fixed maturities categorized as available for sale in stockholders' equity, A-12 net of any tax effect. For cash flows statement purposes, the Company does not consider any of its investments to be cash equivalents. (g) Earnings per Share Primary earnings per share data are based on the weighted average number of common shares outstanding during the period and, if dilutive, common shares assumed to be outstanding which are issuable under stock option plans. Fully diluted earnings per share are based on the additional assumption that the Debentures (as defined in Note 6) are converted into common shares, if dilutive. (h) Reclassification of Certain Amounts Certain amounts from prior financial statements have been reclassified to conform with current classifications. (i) Intangibles (1) Goodwill The Company has classified as goodwill the cost in excess of net assets of companies acquired in purchase transactions. Goodwill is amortized on a straight-line basis over a period of 10 years. Amortization charged to operations amounted to $596,000, $542,000 and $499,000 for the years ended December 31, 1994, 1993 and 1992, respectively. (2) Insurance Licenses In conjunction with its acquisition of IIC, the Company acquired licenses for approximately $3,200,000, which are amortized on a straight-line basis over 10 years. Amortization charged to operations amounted to $317,000 and $343,000 for the years ended December 31, 1994 and 1993, respectively. No amount was charged to operations for 1992. (j) Foreign Currency Transactions Revenues and expenses denominated in foreign currencies are translated at the rate of exchange at the transaction date. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the end of a reporting period. Gains or losses resulting from foreign currency transactions are included in the Company's results from operations. Net gains (losses) resulting from foreign currency transactions during 1994, 1993 and 1992 were $(156,000), $(929,000) and $555,000, respectively. (k) Accounting Changes In the first quarter of 1993, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 113 "Accounting and Reporting for Reinsurance of Short- Duration and Long-Duration Contracts" ("SFAS 113"). The adoption of SFAS 113 did not have a material effect on the Company's financial position or its results from operations. A-13 The FASB's Emerging Issues Task Force ("EITF") reached a consensus on July 22, 1993 regarding Issue No. 93-6, "Accounting for Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises" ("EITF 93-6"). EITF 93-6 had an impact on certain of the Company's retrocessional agreements. As a result of the Company's implementation of the change in accounting method, as of January 1, 1993, a charge of $2,600,000 (after an income tax benefit of $1,400,000), or $0.14 per share, is included as a reduction to income as a cumulative adjustment. The effect of this change, excluding the cumulative adjustment, for the year ended December 31, 1993 was to increase net income by $2,600,000, or $0.14 per share. The pro-forma amounts shown in the statements of operations have been adjusted for the effect of retroactive application of the adoption of EITF 93-6, net of related income taxes. Effective as of December 31, 1993, SCOR U.S. adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115 addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. The adoption of SFAS 115 did not have any effect on the Company's financial position or its results of operations. During 1992, the Company adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS 109"), which changes the method of accounting for income taxes under GAAP. As a result of adopting SFAS 109, the Company recognized a cumulative benefit of the change in accounting principle of $2,367,000, or $0.13 per share, as of January 1, 1992. The effect of this change, excluding the cumulative benefit, for the year ended December 31, 1992 was to decrease net income by $480,000. During 1992, the Company also changed its accounting method for deferred policy acquisition costs to consider anticipated investment income in evaluating the recoverability of such costs. This new method is preferable because it is the prevalent method used in the insurance industry. The newly adopted accounting method also allows for a more appropriate matching of the income statement amounts of commissions expense with the related earned premiums and the balance sheet amounts of deferred policy acquisition costs with the related unearned premiums. This change resulted in the recognition of a cumulative benefit of the change in accounting principle of $481,000 (after reduction for income taxes of $248,000), or $0.02 per share, as of January 1, 1992. This change had no effect on net income, excluding the cumulative benefit, for the year ended December 31, 1992. (3) ACQUISITIONS (a) Purchase of Morgard On March 10, 1992, SCOR U.S. acquired 100% of the stock of Morgard, a developer, marketer and administrator of an insurance product that indemnifies monthly mortgage payments after involuntary unemployment. The purchase price was approximately $2,549,000 and the transaction was accounted for using the purchase method of accounting A-14 and, accordingly, Morgard's purchased assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The acquisition did not have a material pro forma impact on operations. In March 1994, the Company issued 31,500 shares of its common stock at an approximate market value of $360,000 as additional consideration pursuant to the Morgard purchase agreements. (b) Investment in Commercial Risk During January 1992, SCOR U.S. acquired 19.8% of the stock of Commercial Risk, a Bermuda holding company for two insurance subsidiaries engaged in writing shared-risk products. The majority shareholder of Commercial Risk is SCOR S.A. The purchase price was approximately $9,900,000, which included equity and debt. As a result of a recapitalization of Commercial Risk in 1994, all of SCOR U.S.'s investment was converted to equity, with SCOR U.S. owning approximately 13% of Commercial Risk. The investment in Commercial Risk is accounted for using the equity method of accounting and, accordingly, the accompanying consolidated financial statements reflect the Company's proportionate share of Commercial Risk's stockholders' equity and operating income. SCOR U.S. accounts for its proportionate share of Commercial Risk's income in its statements of operations under the caption "other expenses (income)". Income (loss) from Commercial Risk amounted to $743,000, $678,000 and ($110,000) in 1994, 1993 and 1992, respectively. (c) Purchase of The International Insurance Company of Takoma Park, Maryland On December 4, 1992, SCOR U.S. acquired 100% of the stock of IIC. The purchase price was approximately $8,200,000 and the transaction was accounted for using the purchase method of accounting and, accordingly, IIC's purchased assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The acquisition did not have a material pro forma impact on operations. During 1993, IIC's name was changed to GSIC. (4) REINSURANCE SCOR U.S.'s operating subsidiaries assume reinsurance from SCOR S.A. and other affiliated companies primarily on a quota share or surplus share basis. Written premiums assumed from these companies (and the percentage of gross written premiums) were approximately $7,845,000 (2.6%), $8,375,000 (2.5%) and $6,699,000 (2.2%) for the years ended December 31, 1994, 1993 and 1992, respectively. Of these amounts, approximately $6,959,000, $7,925,000 and $6,278,000 for 1994, 1993 and 1992, respectively, were assumed from SCOR S.A. SCOR U.S.'s operating subsidiaries also retrocede reinsurance to SCOR S.A. and other affiliated companies, primarily on a quota share or surplus share basis. A-15 The effects of ceded reinsurance on the Statement of Operations for the years ended December 31, 1994, 1993 and 1992 are as follows:
Loss and Loss Premiums Premiums Expenses Written Earned Incurred (in thousands) December 31, 1994 Direct $13,667 $13,927 $ 9,554 Assumed 293,125 297,159 260,073 Ceded - affiliate (35,644) (39,718) (37,651) Ceded - other (40,088) (43,124) (40,706) ------- ------- ------- Net $231,060 $228,244 $191,270 ======= ======= ======= December 31, 1993 Direct $ 11,972 $ 8,677 $ 6,944 Assumed 322,547 316,292 206,603 Ceded - affiliate (51,453) (49,778) (37,986) Ceded - other (37,653) (39,140) (19,269) ------- ------- ------- Net $245,413 $236,051 $156,292 ======= ======= ======= December 31, 1992 Direct $ 4,922 $ 2,682 $ 1,645 Assumed 299,906 280,136 335,954 Ceded - affiliate (43,523) (39,134) (59,473) Ceded - other (55,762) (51,634) (117,581) ------- ------- ------- Net $205,543 $192,050 $160,545 ======= ======= =======
For the years ended December 31, 1994, 1993 and 1992 the percentage of assumed premiums written to net premiums written was 126.9%, 131.4% and 145.9%, respectively. Reinsurance does not discharge or diminish the primary liability to insureds of the Company on risks reinsured; however, it does permit the Company to recover the applicable portion of any loss from its retrocessionaires. Retrocessionaires of SCOR U.S. are subject to an initial review of financial condition before final acceptability is confirmed and subsequent reviews on an annual basis. The Company, like most reinsurance companies, enters into retrocession arrangements for many of the same reasons primary insurers seek reinsurance, including increasing their premium writing and risk capacity without requiring additional capital and reducing the effect of individual or aggregate losses. Historically, SCOR Re has retroceded risks to retro- cessionaires on both a proportional and excess of loss basis. Under its 1994 retrocessional program, SCOR Re retained a maximum of $2.0 million as to any one ceding company program for treaty business and a A-16 maximum of $3.3 million and $1.1 million per risk for facultative property and facultative casualty business, respectively. Paid losses, outstanding losses and IBNR recoverable from retrocessionaires which are determined to be uncollectible are charged to operations. There were no such amounts charged to operations for the years ended December 31, 1994, 1993 and 1992. Pursuant to a Net Aggregate Excess of Loss Retrocessional Agreement dated as of July 1, 1986 ("the 1986 Retrocessional Agreement"), SCOR S.A. reinsured SCOR Re for adverse loss development from pre-1986 business that exceeded the total of loss reserves established as of June 30, 1986, and premiums earned after June 30, 1986, from such pre-1986 business. The 1986 Retrocessional Agreement provided protection to the Company for business underwritten by SCOR Re only and did not provide coverage for pre-1986 business underwritten by any other subsidiary. However, business underwritten by General Security and Unity Fire is protected against adverse development by a separate net aggregate excess of loss retrocessional agreement, as described below. The 1986 Retrocessional Agreement terminated on December 31, 1993, at which time SCOR S.A.'s liability to SCOR Re was $16,224,000. This amount is the actuarially determined expected ultimate loss from the pre-1986 business in excess of the "aggregate deductible" (which is defined as the total of net outstanding loss and loss expense reserves, net incurred but not reported loss reserves and net unearned premium reserves established as of June 30, 1986 for the pre-1986 business, plus all net premiums and future net premium adjustments earned after June 30, 1986 under retrospectively rated treaties for such business). During the first quarter of 1994, SCOR Re received $16,224,000 from SCOR S.A. in settlement of its liability under this agreement. SCOR Re and SCOR S.A. entered into a new Net Aggregate Excess of Loss Agreement ("the 1994 Retrocessional Agreement") effective January 1, 1994, which protects the same business covered under the 1986 Retrocessional Agreement. Under this Agreement, SCOR Re is responsible for any further adverse development up to $8,800,000, at which point the 1994 Retrocessional Agreement attaches and provides coverage for up to $10,000,000 of any additional adverse development. SCOR Re paid a premium of $2,000,000 for this coverage, which expires on December 31, 2004. At December 31, 1994, no recovery was recog- nized under this agreement. In addition, based on the experience of the 1994 Retrocessional Agreement, SCOR Re is eligible to receive a contingent commission of up to 27.75% of the premium. SCOR S.A. entered into a Net Aggregate Excess of Loss Retrocessional Agreement ("the 1990 Retrocessional Agreement") with each of Unity Fire and General Security, pursuant to which SCOR S.A. agreed to reinsure those companies to the extent that their net ultimate incurred losses (as defined in the agreements) arising in 1989 and prior accident years exceed an aggregate deductible. As a result of the January 1, 1991 assumption by General Security of the rights, liabilities and obligations of Unity Fire, the Net Aggregate Excess of Loss Retrocessional Agreement with Unity Fire was terminated and the Net Aggregate Excess of Loss Retrocessional Agreement with General Security was amended (as so amended, the "Agreement") to include the protection formerly provided to Unity Fire by its retrocessional agreement with SCOR S.A. As a result of the merger of A-17 General Security into SCOR Re, the protection under the Agreement is now for the benefit of SCOR Re. The aggregate deductible is defined as the sum of net outstanding loss and loss expense reserves and net incurred but not reported loss reserves as of December 31, 1989, for 1989 and prior accident years, as documented in the 1989 statutory financial statements of Unity Fire and General Security. This amount has been established at a combined aggregate of $93,830,000. The annual premium for this protection is $210,000 through 2004. The Agreement continues in force until all covered losses are settled. At December 31, 1994, SCOR S.A.'s estimated liability under the Agreement was approximately $11,700,000. SCOR S.A. provides letters of credit in amounts equal to its estimated liability under its reinsurance agreements (as reestimated on a quarterly basis). The amount of letters of credit provided by SCOR S.A. at December 31, 1994 was approximately $134,500,000. The amounts recoverable under the Net Aggregate Excess of Loss Retrocessional Agreements are included in "Retrocessions to Affiliates" above and have the effect of reducing the Company's net losses and loss expenses incurred. The Company withholds funds from retrocessionaires in accordance with the retrocessional agreements. Under the terms of the agreements, the Company pays interest on the principal sums of amounts withheld at annual rates of 6% to 7.5% computed and rendered quarterly. The Company incurred interest expense (income) of $1,882,000, $2,191,000 and $1,755,000 in 1994, 1993 and 1992, respectively, of which $(2,000), $1,161,000 and $1,003,000, respectively, relates to SCOR S.A. (5) INVESTMENTS Net investment income of the Company, comprised primarily of interest and dividends, was derived from the following sources:
Year Ended December 31, 1994 1993 1992 (in thousands) Fixed maturities $38,555 $39,859 $41,736 Equity securities 776 999 1,036 Short-term investments 2,855 2,120 1,485 Other 175 428 196 ------- ------- ------- 42,361 43,406 44,453 Investment expense (1,371) (1,362) (1,573) ------- ------- ------- Net investment income $40,990 $42,044 $42,880 ======= ======= =======
A-18 Net realized investment gains (losses) of the Company were derived from the following sources:
Year Ended December 31, 1994 1993 1992 (in thousands) Net realized investment gains (losses): Fixed maturities $ (814) $10,921 $13,245 Equity securities 1,497 1,791 1,642 Other 301 218 161 ----- ------- ------- $ 984 $12,930 $15,048 ====== ======= =======
Proceeds from sales of available for sale securities during 1994, 1993 and 1992 were $260,902,000, $358,168,000 and $480,864,000, respectively. Gross gains of $7,162,000, $14,722,000 and $19,212,000, and gross losses of $6,479,000, $2,016,000 and $4,325,000 during 1994, 1993 and 1992, respectively, were realized on those sales. The changes in net unrealized gains (losses) on investments of the Company (including unrealized gains and losses on fixed maturities held to maturity that are not reflected in stockholders' equity) are derived from the following sources:
Year Ended December 31, 1994 1993 1992 (in thousands) Decrease during period in difference between fair value and cost of investments in equity securities $(3,529) $(722) $(651) Deferred income tax benefit 1,235 212 221 ------- ------- ------- Decrease in net unrealized losses on equity securities (2,294) (510) (430) ------- ------- ------- Increase (decrease) during period in difference between fair value and cost of investments in fixed maturities (58,187) 9,758 (15,165) Deferred income tax benefit (expense) 20,365 (3,562) 5,156 ------- ------- ------- Increase (decrease) in net unrealized gains (losses) on fixed maturities (1) (37,822) 6,196 (10,009) ------- ------- ------ Total increase (decrease) in net unrealized gains (losses) on equity securities and fixed maturities $(40,116) $ 5,686 $(10,439) ======= ======= ========
(1) Includes changes in net unrealized gains (losses) of ($55,357,000), $9,017,000 and $9,118,000, and deferred tax expense (benefit) of ($19,377,000), $3,288,000 and $3,100,000 on fixed maturities carried at market value for 1994, 1993 and 1992, respectively, which is reflected in stockholders' equity. A-19 At December 31, 1994 and 1993, approximately $22,871,000 and $24,876,000, respectively, of bonds carried at amortized cost were on deposit with various regulatory authorities as required by law. The following table presents gross unrealized gains and losses and the related deferred taxes on equity securities and fixed maturities carried at fair value. Year Ended December 31, 1994 1993 (in thousands) Equity securities: Gross unrealized gains $251 $3,987 Gross unrealized losses (410) (617) ------ ------- Net unrealized gains (losses) (159) 3,370 ------ ------- Fixed maturities, at fair value: Gross unrealized gains 1,112 25,937 Gross unrealized losses (34,247) (3,715) ------- ------- Net unrealized gains (losses) (33,135) 22,222 ------- ------- Total net unrealized gains (losses) (33,294) 25,592 Deferred tax asset (liability) 11,654 (8,958) ------- ------- Unrealized appreciation (depreciation) of investments $(21,640) $16,634 ======== ======= The amortized cost and estimated fair values of investments by major security type at December 31, 1994 and 1993 are as follows: A-20 Held to Maturity
December 31, 1994 Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) U.S. Treasury securities and obligations of U.S. government corpor- ations and agencies $14,199 $53 $(824) $13,428 Debt securities issued by foreign governments 8,672 226 (52) 8,846 Total fixed maturities held to maturity $22,871 $279 $(876) $22,274 ======= ======= ======= ========
Available for Sale
December 31, 1994 Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) U.S. Treasury securities and obligations of U.S. government corpor- ations and agencies $96,097 $272 $(4,556) $91,813 Obligations of states and political subdivisions 254,196 135 (12,549) 241,782 Debt securities issued by foreign governments 5,992 77 (106) 5,963 Corporate securities 114,321 474 (6,363) 108,432 Mortgage-backed securities 91,439 148 (7,875) 83,712 Redeemable preferred stocks 34,746 6 (2,798) 31,954 ------- ------- ------- ------- Total fixed maturities available for sale 596,791 1,112 (34,247) 563,656 Equity securities 1,897 251 (410) 1,738 ------- ------- ------- ------- Total investments carried at fair value $598,688 $1,363 $(34,657) $565,394 ======= ======= ======= ========
A-21 Held to Maturity
December 31, 1993 Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) U.S. Treasury securities and obligations of U.S. government corpor- ations and agencies $15,792 $ 976 $ (6) $ 16,762 Obligations of states and political subdivisions 499 21 -0- 520 Debt securities issued by foreign governments 8,459 1,242 -0- 9,701 Corporate securities 126 -0- -0- 126 -------- ------- ------------ ------- Total fixed maturities held to maturity $ 24,876 $ 2,239 $ (6) $ 27,109 ======== ======= ============ ========
Available for Sale
December 31, 1993 Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) U.S. Treasury securities and obligations of U.S. government corpor- ations and agencies $ 64,362 $ 3,780 $ (2,035) $ 66,107 Obligations of states and political subdivisions 265,111 12,677 (396) 277,392 Debt securities issued by foreign governments 3,985 503 -0- 4,488 Corporate securities 132,494 7,243 (538) 139,199 Mortgage-backed securities 59,353 1,116 (457) 60,012 Redeemable preferred stocks 33,577 618 (289) 33,906 ------- ------- -------- ------- Total fixed maturities available for sale 558,882 25,937 (3,715) 581,104 Equity securities 15,581 3,987 (617) 18,951 ------- ------- -------- ------- Total investments carried at fair value $574,463 $ 29,924 $(4,332) $600,055 ======== ======== ======== ========
A-22 The amortized cost and estimated fair value of fixed maturities at December 31, 1994, by contractual maturity, are shown below (expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties):
Available for Sale Held to Maturity ------------------ ---------------- Amortized Fair Amortized Fair Cost Value Cost Value (in thousands) Due in one year or less $13,212 $13,126 $228 $222 Due after one year - five years 136,872 133,061 10,461 10,521 Due after five year - ten years 302,681 284,758 12,022 11,392 Due after ten years 17,841 17,045 160 139 ------- ------- ------- ------- 470,606 447,990 22,871 22,274 Mortgage-backed securities 91,439 83,712 -0- -0- Redeemable preferred stocks 34,746 31,954 -0- -0- ------- ------- ------- ------- Total $596,791 $563,656 $22,871 $22,274 ======== ======== ======== ========
(6) NOTES PAYABLE AND CREDIT ARRANGEMENTS On March 29, 1993, SCOR U.S. sold at par $86,250,000 of 5.25% Convertible Subordinated Debentures due April 1, 2000 ("Debentures") through a private offering. The Debentures are not redeemable by the Company prior to April 3, 1996 and are convertible into approximately 3.4 million shares of SCOR U.S. common stock at a conversion price of $25.375 per share. Expenses incurred in the offering of approximately $1,800,000 were deferred and are being amortized over the life of the Debentures. The Company contributed $50,000,000 of the net proceeds to SCOR Re. Interest expense incurred on the Debentures during 1994 and 1993 was $4,465,000 and $3,484,000, respectively. On October 1, 1990 SCOR U.S. renewed a $20,000,000 note which was payable on that date. The new note is due and payable on October 3, 1995 and bears interest at a fixed annual rate of 9.575%. On March 12, 1993, the Company entered into an intermediate-term interest rate swap agreement with a commercial bank related to this note. The swap agreement has a maturity date of October 1, 1995 and provides for the Company to make floating rate payments in exchange for fixed rate payments due on the loan. The floating rate, which is reset every six months and is capped at 12.375%, was 11.068% as of December 31, 1994, and 8.693% as of December 31, 1993. In addition, SCOR U.S. had an $8,000,000 note at market interest rates which was repaid on May 10, 1993. Interest expense incurred for these notes, including the effect of the interest rate swap, during 1994, 1993 and 1992 was $2,072,000, $1,953,000 and $2,261,000, respectively. In 1990, SCOR U.S. established a commercial paper program that allows the Company to raise up to $50,000,000. The weighted average interest rate of commercial paper outstanding at December 31, 1994 was 6.29%. The maximum outstanding at any month end during 1994 was A-23 $11,310,000, and the average outstanding during 1994 was $10,269,000. The weighted average interest rate during 1994 was 5.68%. Interest expense incurred on commercial paper during 1994, 1993 and 1992 was approximately $501,000, $378,000, $450,000, respectively. Interest paid including interest paid on reinsurance funds withheld, during 1994, 1993 and 1992 was $8,647,000, $6,928,000 and $4,250,000, respectively. (7) RETIREMENT OF DEBENTURES During 1994 the Company repurchased in the open market $3.9 million in principal amount of the Debentures and recognized an extraordinary gain of $351,000 (after deduction for income taxes of $189,000), or $0.02 per share. Funding for the repurchased Debentures which settled in January 1995, was achieved through the issuance of the Company's commercial paper. (8) FINANCIAL INSTRUMENTS Off-Balance-Sheet Risk On March 12, 1993, the Company entered into an interest rate swap agreement to effectively convert underlying fixed-rate debt into variable-rate debt based on LIBOR (See Note 6). The notional principal amount of this agreement, which matures in October 1995, is $20,000,000. The Company has entered into this agreement with a creditworthy international financial institution and considers the risk of nonperformance to be remote. The Company is exposed to market risk due to the possibility of exchanging a lower interest rate for a higher interest rate. The net interest effect of this swap transaction is reported as an adjustment of interest income as incurred. Concentration of Credit Risk At December 31, 1994 the Company did not have a material concentration of financial instruments in any single investee, industry or geographic location. All of the Company's investments in fixed maturities are investment grade securities and virtually all are rated A or better. The Company's client base and their dispersion throughout the United States limits the concentration of credit risk on amounts due from clients. At December 31, 1994, the Company had no significant concentrations of credit risk. Fair Value of Financial Instruments The following methods and assumptions were used by the Company to estimate the fair value disclosures for its assets and liabilities as of December 31, 1994 and 1993: Fixed maturities and equity securities: Fair values are based on quoted market prices or dealer quotes. If a quoted market price is A-24 not available, fair value is estimated using quoted market prices for similar securities. Cash and short-term investments: The carrying amount is a reasonable estimate of fair value. Convertible subordinated debentures: Fair value is based on the prevailing market bid. Notes payable: Fair value is based on the discounted amount of future cash flows using the Company's current estimated borrowing rate for a similar liability. Commercial paper: The carrying amount is a reasonable estimate of fair value due to the short-term variable market rate nature of this liability. Interest rate swap: Fair value is based on the estimated amount that the Company would pay or (receive) to terminate the swap agreement at the reporting date, taking into account current interest rates and current creditworthiness of the counterparty. The estimated fair values of the Company's financial instruments are as follows:
December 31, 1994 1993 Carrying Fair Carrying Fair Amount Value Amount Value (in thousands) Assets Fixed maturities at fair value $563,656 $563,656 $581,104 $581,104 Fixed maturities at amortized cost 22,871 22,274 24,876 27,109 Equity securities 1,738 1,738 18,951 18,951 Short-term investments 83,303 83,303 90,642 90,642 Cash 4,763 4,763 17,096 17,096 Liabilities Convertible subordinated debentures 82,350 69,998 86,250 81,075 Notes payable 20,000 20,000 20,000 21,897 Commercial paper 11,310 11,310 10,721 10,721 Interest rate swap -0- 341 -0- (266)
A-25 (9) FEDERAL INCOME TAXES SCOR U.S. and its subsidiaries file a consolidated Federal income tax return. The components of the provision for Federal income taxes attributed to income from operations were as follows: Year Ended December 31, 1994 1993 1992 (in thousands) Current tax expense (benefit) $ (9,171) $7,882 $(1,853) Deferred tax benefit (2,091) (899) (1,918) -------- ------ ------- $(11,262) $6,983 $(3,771) ======== ====== ======= Income taxes paid $ 1,800(1) $3,546 (1) $8,001 ======== ====== ======= (1) Excludes refunds received in 1994 and 1993 of $1,700,000 and $7,782,000, respectively. Total income tax expense (benefit) for the years ended December 31, 1994, 1993 and 1992 was allocated as follows: Year Ended December 31, 1994 1993 1992 (in thousands) Income (loss) from continuing operations $(11,262) $6,983 $(3,771) Extraordinary item 189 -0- -0- Cummulative effect of accounting changes -0- (1,400) 2,119 Stockholders' equity: Unrealized appreciation (depre- ciation) of investments (20,611) 3,077 2,877 Foreign currency translation (229) (125) (717) ------- ----- ----- $(31,913) $8,535 $508 ======== ====== ==== A-26 The components of the net deferred Federal income tax benefits recognized in the Company's consolidated balance sheet at December 31, 1994 and 1993 were as follows: Deferred Tax Asset (Liability) (in thousands) 1994 1993 Deferred policy acquisition costs $(7,995) $(8,449) Unearned premium reserve 6,354 6,157 Loss reserves 25,052 23,352 Other (469) (214) ------- ------- Tax effect of temporary differences 22,942 20,846 Unrealized (appreciation) depreciation of investments 11,653 (8,958) Foreign currency translation 223 6 ------- ------- $34,818 $ 11,894 ======= ======= SFAS 109 requires the establishment of a valuation allowance for deferred income tax benefits where it is more likely than not that some portion of the deferred income tax benefits will not be realized. Management believes, based on the Company's historical record of generating taxable income and its expectations of future earnings, that the Company's taxable income in future years will be sufficient to realize the net deferred income tax benefits which are reflected on its consolidated balance sheet as of December 31, 1994. In addition, management believes certain tax planning strategies exist, including its ability to alter the mix of its investment portfolio to taxable investments from tax-exempt investments, which could be implemented if necessary to ensure sufficient taxable income to realize fully its net deferred income tax benefits. Management also believes that the Company's net deferred income tax benefits related to unrealized depreciation of fixed maturity investments is recoverable through its ability to hold these investments to maturity. Accordingly, SCOR U.S. has not established a valuation allowance with respect to its net deferred income tax benefits. The Omnibus Budget Reconciliation Act of 1993 (the "Act") was signed into law in August 1993. The Act provided for an increase in the corporate tax rate to 35% from the previous 34% rate. As a result of the revaluation of the Company's net deferred tax assets to reflect the change in tax rates, the Company recognized a net benefit of $472,000, or $0.03 per share, in 1993. This benefit is included in the provision for Federal income taxes attributable to income from operations. A-27 A reconciliation of income tax expense (benefit) computed by applying the United States Federal income tax rate of 35% in 1994 and 1993 and 34% in 1992 to income (loss) from operations before Federal income taxes (benefit) to the provision for Federal income taxes (benefit) is as follows: Year Ended December 31, 1994 1993 1992 (in thousands) Computed tax expense (benefit) at U.S. Federal rate $(6,809) $12,219 $ 214 Tax-exempt interest (4,282) (4,262) (3,587) Dividends received deduction (638) (672) (605) Tax rate change -0- (472) -0- Other 467 170 207 ------- ------- ------- $(11,262) $6,983 $(3,771) ======= ======= ======= (10) RESERVES FOR LOSSES AND LOSS EXPENSES Changes in the Company's reserves for losses and loss expenses for each year in the three year period ended December 31, 1994 is summarized as follows:
December 31, 1994 1993 1992 (in thousands) Reserve for losses and loss expenses at beginning of year, net $340,366 $341,162 $324,117 -------- -------- -------- Provision for losses and loss expenses: Occuring in current year 193,587 160,695 165,468 Occuring in prior years (2,317) (4,403) (4,923) -------- -------- -------- Total 191,270 156,292 160,545 -------- -------- -------- Payment for losses and loss expenses, net of amounts recoverable Occuring in current year 55,155 36,018 51,514 Occuring in prior years 94,366 121,070 91,986 -------- -------- -------- Total 149,521 157,088 143,500 -------- -------- -------- Reserve for losses and loss expenses at end of year, net 382,115 340,366 341,162 Reinsurance recoverable on unpaid losses 222,672 221,843 220,651 -------- -------- -------- Reserve for losses and loss expenses at end of year, gross $604,787 $562,209 $561,813 ======== ======== ========
A-28 The operating companies of SCOR U.S. have not underwritten significant amounts of business in those classes or with those insurers that are known to be exposed to asbestos and environmental- related claims. During the years ended December 31, 1994, 1993 and 1992, the Company has not experienced any significant amount of net loss reporting or development on claims related to these exposures. In addition, the Company is significantly protected from adverse development under the SCOR S.A. Retrocessional Agreements (see Note 4). Any recoveries under such agreements are considered to be fully realizable. Based on the above information, the Company believes that its exposure to asbestos and environmental-related claims is not material to the Company's financial position or results of operations. (11) STATUTORY REQUIREMENTS The Insurance Department of the State of New York ("Department"), in which SCOR Re, GSIND and Unity Fire are domiciled, and the Maryland Insurance Administration, in which GSIC is domiciled, recognizes as net income and surplus (stockholder's equity) those amounts determined in conformity with statutory accounting practices prescribed or permitted by the respective jurisdiction, which differ in certain respects from GAAP. Reconciliations of statutory surplus and net income, as determined using statutory accounting principles, to the amounts included in the accompanying financial statements are as follows: December 31, 1994 1993 (in thousands) Statutory surplus of insurance subsidiaries $243,416 $271,895 Deferred policy acquisition costs 22,844 24,140 Unauthorized reinsurance 12,931 7,076 Non-admitted assets 4,589 3,052 Unrealized appreciation (depreciation) on fixed maturities carried at fair value (33,135) 22,222 Deferred Federal income taxes 34,818 11,894 Parent company and non-insurance subsidiaries' net assets 56,282 56,660 Long-term debt (102,350) (106,250) --------- -------- GAAP stockholders' equity $239,395 $290,689 ======== ======== A-29 Year Ended December 31, 1994 1993 1992 (in thousands) Statutory net income (loss) of insurance subsidiaries $(1,109) $ 34,735 $ 5,164 Deferred policy acquisition costs (1,296) 1,969 5,367 Deferred Federal income taxes 2,091 899 1,918 Cumulative effect of accounting changes -0- -0- 2,848 Parent company operations (5,018) (8,128) (7,377) Non-insurance subsidiary operations (2,509) (4,147) (671) ------- ------- ------- GAAP net income (loss) $(7,841) $25,328 $7,249 ======= ======= ======= Cash dividends of the Company's reinsurance subsidiaries may be paid only out of their statutory earned surplus. For the operating subsidiaries domiciled in New York (which represents approximately 89% of the Company's statutory surplus), the payment of dividends is subject to statutory restrictions imposed by New York insurance law. Generally the maximum amount of dividends that may be paid in any twelve-month period without the prior approval of the Department is the lesser of net investment income or 10% of statutory surplus, as such terms are defined in the New York insurance law. During the year ending December 31, 1994, $11,900,000 of dividends were declared and paid to SCOR U.S. Based on 1994 year-end statutory surplus, the maximum dividend distribution that may be made by the Company's reinsurance subsidiaries during 1995 without prior approval is approximately $24,342,000. The amount of the Company's reinsurance subsidiaries' net assets (stockholders' equity) restricted from payment of dividends to SCOR U.S. without prior approval is approximately $219,074,000, which is 92% of total consolidated net assets. SCOR Re Voting Trust As a result of New York Insurance Department licensing requirements regarding government financial control and ownership of insurers, all of the capital stock of SCOR Re is held in an irrevocable voting trust. The voting trust, which was to expire during 1994, was renewed for an additional three years. The five voting trustees, four of whom are directors of SCOR U.S., are entitled to exercise all of the rights and powers of absolute owners of the capital stock of SCOR Re, subject to certain limitations specified in the voting trust agreement. General Security Voting Trust The Insurance Laws of the State of California generally prohibit the issuance or renewal of a license to a company owned, operated or controlled, in whole or in part, by a government. In connection with A-30 the continuation of General Security's California license, on February 1, 1993, with the approval of the New York Insurance Department, a voting trust was established by SCOR U.S. for its holdings of capital stock in General Security. This voting trust was terminated upon the merger of General Security into SCOR Re, effective January 1, 1994. (12) EMPLOYEE BENEFITS Pension Plans: SCOR U.S. has a qualified defined benefit pension plan ("SCOR U.S. Group Pension Plan") covering substantially all employees of SCOR U.S. and its affiliates. Benefits under the SCOR U.S. Group Pension Plan are based on an employee's years of service and compensation. SCOR U.S.'s funding policy is to contribute at least the minimum amount required by ERISA but not more than the maximum amount that can be deducted for Federal income tax purposes. The SCOR U.S. Group Pension Plan excludes expatriates who are temporarily assigned to the U.S. and covered by other plans sponsored or funded by the Company or a member of the SCOR S.A. Group. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. In 1994, 1993 and 1992, there were no contributions required. The following table sets forth the SCOR U.S. Group Pension Plan funded status and amounts recognized in the SCOR U.S. consolidated balance sheet at December 31, 1994 and 1993 (in thousands): 1994 1993 Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $2,892 and $2,391 in 1994 and 1993, respectively $(3,295) $(3,312) ======= ======= Projected benefit obligation for service rendered to date $(4,678) $(5,656) Plan assets at fair value 5,912 5,560 ------- ------- Plan assets in excess of projected benefit 1,234 (96) obligation Unrecognized transition asset (885) (1,033) Unrecognized net loss from past experience 184 1,495 Unrecognized prior service costs (293) 150 ------- ------- Prepaid pension cost included in other assets $ 240 $ 516 ======= ======= A-31 Net pension expense for 1994, 1993 and 1992 included the following components (in thousands): 1994 1993 1992 Service cost-benefits earned during the period $534 $592 $406 Interest cost on projected benefit obligation 325 333 230 Actual return on plan assets (413) (412) (250) Net amortization and deferral (170) (100) (279) ----- ----- ------ Net pension expense $276 $413 $107 ==== ===== ====== The weighted-average discount rate and the average rate of compensation increase used in determining the actuarial present value of the projected benefit obligation were 8% and 5.5% in 1994, 7.5% and 6.0% in 1993, 8.0% and 6.0% in 1992, respectively. The expected long- term rate of return on assets was 7.5% in 1994 and 8% in 1993. Savings Plans: The SCOR U.S. Group Savings Plan ("SCOR U.S. Savings Plan") is qualified under Sections 401 (a) and 401 (k) of the United States Internal Revenue Code of 1986 as amended. Substantially all employees of SCOR U.S. and affiliates are eligible to participate in the savings plan. The SCOR U.S. Savings Plan excludes expatriates who are temporarily assigned to the U.S. and covered by other plans sponsored or funded by the Company or a member of the SCOR S.A. Group. Contributions to the savings plan are determined by the Board of Directors and are made from the net profits of the current taxable year or the accumulated net profits of SCOR U.S. Contributions for the years ended December 31, 1994, 1993 and 1992 were $575,000, $585,000 and $556,000, respectively. The pension and savings plans may be terminated at any time by the Board of Directors of SCOR U.S. Supplemental Retirement Plan: SCOR U.S. also sponsors the SCOR U.S. Group Supplemental Retirement Plan ("Supplemental Retirement Plan"), an unfunded nonqualified plan established in 1989 which covers a select group of management employees. This plan enables participants in the pension plan and savings plan to earn pension benefits and tax-deferred savings benefits on the same percentage of pay basis without regard to current IRS restrictions. The Supplemental Retirement Plan incurred expenses of approximately $226,000, $133,000 and $143,000 for the years ended 1994, 1993 and 1992, respectively. Employment Contracts: The Company has entered into employment contracts that provide minimum pension benefits to four executives. The benefits under these contracts are unfunded, and expenses of approximately $70,000, $53,000 and $45,000 were accrued in 1994, 1993 and 1992, respectively. A-32 (13) INCENTIVE AND STOCK OPTION PLANS In July 1986, the Company adopted a Stock Incentive Plan for Key Executives ("Incentive Plan"), pursuant to which 786,000 shares of the common stock were reserved for issuance through options for all key executives of the Company, defined to include officers and employees of the Company and those employees of SCOR S.A. who serve on the Executive Committee of the Board of Directors of SCOR U.S. In March 1994, the number of shares available for issuance under the Incentive Plan was increased to 856,740. Nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards and stock bonus awards were available under the Incentive Plan. Certain of these awards may result in future compensation expense to the Company. Incentive stock options were available to be granted at not less than fair market value of the Company's common stock on the date of grant. Non-qualified options were available to be granted at not less than 85% of fair market value of the Company's common stock on the date of grant. Options become exercisable as specified at the date of grant and expire ten years and one month from the date of grant. On September 19, 1990 the shareholders of SCOR U.S. approved a Stock Option Plan for Directors. Under this plan 220,000 shares of the common stock of SCOR U.S. have been reserved for issuance. Grants of options to purchase 3,000 shares will be made to each Director, except Directors employed by the Company, three business days following each SCOR U.S. Annual Meeting. Each option granted becomes exercisable with respect to one-half the shares of SCOR U.S. common stock covered thereby on the first anniversary of the date upon which it was granted and with respect to the balance of the shares on the second anniversary thereof. Under the Stock Option Plan for Key Employees ("SOP") approved by the shareholders of SCOR U.S. at the Annual Meeting in June 1991, 1,426,000 shares of common stock have been reserved for issuance through options for all key employees of SCOR U.S. Corporation and its subsidiaries. In March 1994, the number of shares available for issuance under the SOP was increased to 1,554,340. The per share option price shall never be less than 100% of the fair market value of the shares at the time of the grant. Unless otherwise provided by the Board of Directors, each option granted would become exercisable to the extent of one-third of the total number of the shares of common stock subject to the option on each anniversary of the grant and expire ten years from the date the option is granted. A-33 Information regarding the above option plans is summarized below: Number of Option Price Shares Per Share Range --------- --------------- Outstanding at December 31, 1991 1,045,605 $ 8.00 -- $15.50 Options granted 21,000 $16.75 -- $16.75 Options exercised (71,296) $ 8.00 -- $14.25 Options cancelled (19,535) $12.25 -- $14.25 --------- --------------- Outstanding at December 31, 1992 975,774 $ 8.00 -- $16.75 Options granted 552,693 $15.50 -- $17.00 Options exercised (123,418) $ 8.00 -- $14.25 Options cancelled (30,284) $14.25 -- $17.00 --------- --------------- Outstanding at December 31, 1993 1,374,765 $ 8.00 -- $17.00 Options granted 458,175 $ 9.00 -- $11.125 Options exercised (57,100) $ 8.00 -- $ 9.99 Options cancelled (198,889) $ 9.00 -- $17.00 --------- --------------- Outstanding at December 31, 1994 1,576,951 $ 8.00 -- $17.00 ========= =============== The number of options exercisable at December 31, 1994 was 856,000. The number of shares available for future grant at December 31, 1994 was 552,000. As indicated above, the Incentive Plan allows for the granting of restricted stock awards. The following table summarizes information regarding stock awards, for each year in the three-year period ended December 31, 1994. 1994 1993 1992 Non vested restricted stock grants at the beginning of the year 4,552 -0- 19,263 Restricted stock awards granted -0- 4,552 -0- Restricted stock awards vested -0- -0- (19,263) ----- ----- ------ Non-vested restricted stock awards at the end of the year 4,552 4,552 -0- ===== ===== ====== The Company recognized compensation expense of $11,000, $-0- and $115,000 in 1994, 1993 and 1992, respectively, in connection with these awards. At December 31, 1994, the amount of deferred compensation relating to these grants which will be recognized over the remaining vesting period is $47,000 which is included in additional paid-in capital. During 1993 and 1992 the Company issued 44,000 shares and 40,000 shares of its common stock in exchange for notes receivable from various officers of $523,000 and $358,000, respectively. These shares were issued as a result of stock options exercised under the Company's stock option plans. The balance of unpaid stock options exercised at A-34 December 31, 1994 and 1993 was $27,000 and $1,202,000, respectively, and is recorded as a reduction to additional paid-in capital. The Company has outstanding loans with various officers related to stock options exercised and restricted stock grants. These loans bear interest at rates ranging from 4% to 10%. The aggregate unpaid principal balance at December 31, 1994 and 1993 was $27,000 and $1,202,000, respectively. (14) COMMITMENTS The Company conducts its operations in leased premises. The Company also leases data processing equipment and automobiles. Total rental expense for the years ended December 31, 1994, 1993 and 1992, amounted to $2,412,000, $2,438,000 and $2,088,000, respectively. At December 31, 1994, future minimum rental commitments are as follows (in thousands): Year Ending December 31, 1995 $2,246 1996 1,437 1997 848 1998 776 1999 526 Thereafter 68 ------ $5,901 ====== (15) CONTINGENCIES SCOR Re, GSIC, GSIND and Unity Fire are each party to various lawsuits arising in the normal course of their business. SCOR U.S. does not believe that any of the litigation to which SCOR Re, General Security, GSIC, GSIND or Unity Fire is currently a party will have a material adverse effect on the operating results or financial condition of SCOR U.S. and its subsidiaries. At December 31, 1994 and 1993, the Company's reinsurance subsidiaries had letters of credit outstanding aggregating approximately $1,731,000 and $16,352,000, respectively, in favor of certain insurance companies under terms of reinsurance agreements. The Company guarantees to a commercial bank payment when due of three mortgage loans, with original principal amounts aggregating approximately $2.8 million, issued to former excecutive officers of the Company. The guarantees are secured by the residential premises. (16) FOREIGN OPERATIONS The Company conducts reinsurance business in Canada through branches established for that purpose. The functional currency of such branches is the Canadian dollar. The assets and liabilities of such branches included herein have been translated into United States dollars at exchange rates in effect at the balance sheet dates, and A-35 operations at average exchange rates in effect during the relevant periods. Foreign currency translation adjustments have been recorded as follows: Translation Income Adjustment Taxes Net ----------- ------ ---- (in thousands) Balance, December 31, 1991 $2,494 $ 848 $1,646 Change during the year (2,109) (717) (1,392) ------- ------ ------- Balance, December 31, 1992 385 131 254 Change during the year (367) (125) (242) ------- ------ ------- Balance, December 31, 1993 18 6 12 Change during the year (655) (229) (426) ------- ------ ------- Balance, December 31, 1994 $(637) $(223) $ (414) ======= ====== ======= A-36 (17) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Three Months Ended, March 31, June 30, September 30, December 31, 1994 1994 1994 1994 (in thousands, except per share data) Net premiums earned $62,685 $54,983 $55,542 $55,034 Net investment income 9,998 10,208 10,157 10,627 Net realized investment gains (losses) 323 413 323 (75) Total revenues 73,006 65,604 66,022 65,586 Total expenses 97,570 66,593 64,047 61,462 Income (loss) from operations (14,418) 603 2,447 3,176 Extraordinary gain on redemption of debentures -0- -0- -0- 351 Net income (loss) $(14,418) $ 603 $2,447 $ 3,527 ========== ========== ========== ========== Per share data: Primary Average common and common equivalent shares outstanding 18,221 18,191 18,212 18,214 ========== ========== ========== ========== Income (loss) from operations $(0.79) $0.03 $0.13 $0.17 Extraordinary item -0- -0- -0- 0.02 ---------- ---------- ---------- ---------- Net income (loss) $(0.79) $0.03 $0.13 $0.19 ========== ========== ========== ========== Fully diluted Average common and common equivalent shares outstanding 18,221 18,191 18,212 18,214 ========== ========== ========== ========== Income (loss) from operations $(0.79) $0.03 $ 0.13 $ 0.17 Extraordinary item -0- -0- -0- 0.02 ---------- ---------- ---------- ---------- Net income (loss) $(0.79) $ 0.03 $ 0.13 $ 0.19 ========== ========== ========== ========== Dividends declared $ 0.09 $ 0.09 $ 0.09 $ 0.09 ========== ========== ========== ========== Stock prices (a) High $ 13 $12 1/4 $12 1/4 $11 3/8 Low 10 1/4 10 1/8 11 7 1/2 Close 10 3/8 11 11 1/4 8 3/8
A-37
Three Months Ended, March 31, June 30, September 30, December 31, 1993 1993 1993 1993 (in thousands, except per share data) Net premiums earned 53,760 $ 56,722 $ 59,847 $ 65,722 Net investment income 10,032 10,866 10,893 10,253 Net realized investment gains 3,328 2,029 2,068 5,505 Total revenues 67,120 69,617 72,808 81,480 Total expenses 55,516 62,452 66,428 71,718 Income from operations 8,773 5,873 5,808 7,474 Cumulative effect of accounting changes (2,600) -0- -0- -0- Net income $ 6,173 $ 5,873 $ 5,808 $ 7,474 ========== ========== ========== ========== Per share data: Primary Average common and common equivalent shares outstanding 18,494 18,472 18,425 18,309 ========== ========== ========== ========== Income from operations $ 0.47 $ 0.32 $ 0.32 $ 0.41 Cumulative effect of accounting changes (0.14) -0- -0- -0- ---------- ---------- ---------- ---------- Net income $ 0.33 $ 0.32 $ 0.32 $ 0.41 ========== ========== ========== ========== Fully diluted Average common and common equivalent shares outstanding 18,494 18,472 21,819 21,679 ========== ========== ========== ========== Income from operations $ 0.47 $ 0.32 $ 0.30 $ 0.38 Cumulative effect of accounting changes (0.14) -0- -0- -0- ---------- ---------- ---------- ---------- Net income $ 0.33 $ 0.32 $ 0.30 $ 0.38 ========== ========== ========== ========== Dividends declared $ 0.08 $ 0.08 $ 0.08 $ 0.08 ========== ========== ========== ========== Stock prices (a) High $20 3/4 $19 3/4 $16 7/8 $16 3/4 Low 17 16 1/8 14 7/8 12 3/8 Close 19 3/4 16 3/4 16 3/4 13
(a) High, low and closing sales price per share per NYSE composite tape. A-38 (18) SUBSEQUENT EVENTS The Company believes that its potential for losses from January 17, 1995 Nambu-Jishin earthquake in Kobe, Japan is limited since foreign writings represent an insignificant portion of its portfolio. On March 3, 1995 the Company entered into a lease for office space for its New York headquarters. The term of the lease is approximately 16 years with aggregate minimum rental payments of approximately $30 million. A-39 SCOR U.S. CORPORATION FINANCIAL HIGHLIGHTS (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------------------- 1995 1994 1995 1994 ------- ------- ------------- ------------ OPERATIONS Gross premiums written..................... $69,001 $75,325 $ 281,988 $ 239,266 Net premiums written....................... 54,574 55,791 181,599 184,593 Net premiums earned........................ 53,536 55,542 182,340 175,210 Net investment income...................... 10,579 10,157 31,751 30,363 Revenues................................... 64,336 66,022 214,804 204,632 Income (loss) from operations excluding net realized investment gains............ $ 4,748 $ 2,237 $ 13,038 $ (12,056) After-tax realized investment gains 78 210 463 688 Extraordinary gain on redemption of debentures, net of tax -0- -0- 552 -0- ------- ------- ------------- ------------ NET INCOME (LOSS) $ 4,826 $ 2,447 $ 14,053 $ (11,368) ------- ------- ------------- ------------ ------- ------- ------------- ------------ PER SHARE DATA--PRIMARY Average common shares outstanding.......... 18,372 18,212 18,255 18,146 Income (loss) from operations excluding net realized investment gains............ $ 0.26 $ 0.12 $ 0.71 $ (0.67) After-tax realized investment gains........ -0- 0.01 0.03 0.04 Extraordinary gain on redemption of debentures, net of tax................... -0- -0- 0.03 -0- ------- ------- ------------- ------------ NET INCOME (LOSS).......................... $ 0.25 $ 0.13 $ 0.77 $ (0.63) ------- ------- ------------- ------------ ------- ------- ------------- ------------ GAAP RATIOS Loss ratio 68.1% 70.3% 66.9% 88.1% Expense ratio.............................. 35.4% 40.6% 37.7% 39.7% Combined ratio............................. 103.5% 110.9% 104.6% 127.8% STATUTORY RATIOS Loss ratio................................. 68.2% 70.8% 67.2% 87.3% Expense ratio.............................. 32.5% 36.4% 37.0% 35.0% Combined ratio............................. 100.7% 107.2% 104.2% 122.8% Net premiums written to surplus (1)........ .85:1 .93:1 .94:1 1.05:1 Loss reserves to capital and surplus (2)... 1.6:1 1.6:1 1.6:1 1.6:1 SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------ (UNAUDITED) FINANCIAL POSITION Cash and investments....................... $ 723,360 $ 677,556 Total assets............................... 1,181,172 1,143,715 Combined statutory capital and surplus of operating subsidiaries (3)............ 256,823 243,416 GAAP stockholders' equity.................. 277,386 239,395 Book value per share....................... $ 15.27 $ 13.18
- ------------ (1) Annualized net premiums written for the period divided by ending capital and surplus. (2) Statutory basis. (3) Estimated at September 30, 1995. B-1 SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- 1995 1994 1995 1994 -------- -------- -------- -------- REVENUES Premiums written, gross......................... $ 69,001 $ 75,325 $231,988 $239,266 Premiums ceded.................................. (14,427) (19,534) (50,389) (54,573) -------- -------- -------- -------- Premiums written, net........................... 54,574 55,791 181,599 184,693 Charge in unearned premiums..................... (1,038) (249) 741 (11,483) -------- -------- -------- -------- Net premiums earned............................. 53,536 55,542 182,340 173,210 Net investment income........................... 10,679 10,157 31,751 30,363 Net realized investment gains................... 121 323 713 1,059 -------- -------- -------- -------- 64,336 66,022 214,804 204,632 -------- -------- -------- -------- LOSSES AND EXPENSES Losses and loss expenses, gross................. 45,276 44,787 172,151 213,468 Reinsurance recoverable......................... (8,824) (5,727) (50,199) (60,910) -------- -------- -------- -------- Losses and loss expenses, net................... 36,452 39,060 121,952 152,558 Commissions, net................................ 10,345 14,144 46,896 46,019 Other underwriting and administration expenses.. 7,616 6,799 20,783 19,586 Other expenses.................................. 1,016 1,590 1,040 3,065 Interest expense................................ 2,596 2,454 6,906 6,982 -------- -------- -------- -------- 58,025 64,047 197,577 228,210 -------- -------- -------- -------- Income (loss) from operations before Federal income taxes (benefit).......................... 6,311 1,975 17,227 (23,578) Federal income taxes (benefit).................. 1,485 (472) 3,726 (12,210) -------- -------- -------- -------- Income (loss) from operations................... 4,826 2,447 13,501 (11,368) Extraordinary gain on redemption of debentures, net of tax.................................... -- -- 552 -- -------- -------- -------- -------- Net income (loss)............................... $ 4,826 $ 2,447 $ 14,053 $(11,368) -------- -------- -------- -------- -------- -------- -------- -------- PER SHARE DATA PRIMARY Average common and common equivalent shares outstanding................................... 18,372 18,212 18,255 18,146 -------- -------- -------- -------- -------- -------- -------- -------- Income (loss) from operations................... $ 0.26 $ 0.13 $ 0.74 $ (0.63) Extraordinary item.............................. -- -- 0.03 -- -------- -------- -------- -------- Net income (loss)............................... $ 0.26 $ 0.13 $ 0.77 $ (0.63) -------- -------- -------- -------- -------- -------- -------- -------- FULLY DILUTED Average common and common equivalent shares outstanding................................... 21,513 18,212 21,317 18,146 -------- -------- -------- -------- Income (loss) from operations................... $ 0.26 $ 0.13 $ 0.73 $ (0.63) Extraordinary item.............................. -- -- 0.03 -- -------- -------- -------- -------- Net income (loss)............................... $ 0.26 $ 0.13 $ 0.76 $ (0.63) -------- -------- -------- -------- -------- -------- -------- --------
B-2 SCOR U.S. CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------ (UNAUDITED) ASSETS Investments: Fixed maturities: Available for sale, at fair value (amortized cost: $556,300 and $596,791)................................... $ 563,515 $ 563,656 Hold to maturity, at amortized cost (net value: $22,609 and $22,274)............................................. 22,155 22,871 Equity securities, at fair value (cost: $108 and $1,897)...... 204 1,738 Short-term investments, at cost............................... 122,794 83,303 Other long-term investments................................... 1,374 1,225 ------------- ------------ 710,042 672,793 Cash............................................................ 13,318 4,763 Accrued investment income....................................... 9,608 10,339 Premiums receivable............................................. 80,996 72,018 Reinsurance recoverable on paid losses.......................... 19,939 23,755 Reinsurance recoverable on unpaid losses........................ 226,544 222,672 Prepaid reinsurance premiums.................................... 9,921 19,307 Deferred policy acquisition costs............................... 22,471 22,844 Deferred Federal income tax benefits............................ 22,542 34,818 Investment in affiliate......................................... 12,360 11,232 Other assets.................................................... 53,431 49,174 ------------- ------------ $ 1,181,172 $1,143,715 ------------- ------------ ------------- ------------ LIABILITIES Losses and loss expenses........................................ $ 618,738 $ 604,787 Unearned premiums............................................... 99,955 110,082 Funds held under reinsurance treaties........................... 18,571 20,758 Reinsurance balances payable.................................... 27,000 43,685 Convertible subordinated debentures............................. 75,950 82,350 Notes payable................................................... 25,000 20,000 Commercial paper................................................ 20,639 11,310 Other liabilities............................................... 17,933 11,348 ------------- ------------ 903,786 904,320 ------------- ------------ STOCKHOLDERS' EQUITY Preferred stock, no par value, 5,000 shares authorized; no shares issued.............................................. -- -- Common stock, $.30 par value, 50,000 shares authorized; 18,364 and 18,356 shares issued............................... 5,509 5,507 Additional paid-in capital...................................... 114,669 114,556 Unrealized appreciation (depreciation) of investments, net of deferred tax effect........................................... 4,752 (21,640) Foreign currency translation adjustment......................... (252) (414) Retained earnings............................................... 154,482 143,153 Treasury stock, at cost (193 and 192 shares).................... (1,774) (1,767) ------------- ------------ 277,386 239,395 ------------- ------------ $ 1,181,172 $1,143,715 ------------- ------------ ------------- ------------
B-3 SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- ---------------------- 1995 1994 1995 1994 -------- -------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)............................. $ 4,826 $ 2,447 $ 14,053 $ (11,368) Adjustments to reconcile net income (loss) to net cash provided by (owed to) operating activities: Extraordinary gain on redemption of debentures................................ -0- -0- (522) -0- Realized investment gains................... (121) (321) (713) (1,059) Changes in assets and liabilities: Accrued investment gains.................. 538 (154) 731 (260) Premium balances, net..................... 6,869 29,185 (25,665) 9,019 Prepaid issuance premiums................. 1,218 797 9,336 4,774 Reinsurance recoverable on paid losses.... (8,118) (10,827) 8,816 (29,881) Deferred policy acquisition costs......... 257 (36) 379 (1,905) Losses and loss expenses.................. (14,577) (15,879) 13,051 44,741 Unearned premiums......................... (179) (348) (10,127) 6,709 Reinsurance recoverable on unpaid losses.. 10,516 7,052 (3,872) 4,827 Funds held under reinsurance treaties..... 714 (321) (2,187) (16,719) Federal income taxes...................... (4,715) (472) (3,475) (14,010) Other..................................... 7,477 (3,967) 9,270 (3,766) -------- -------- --------- --------- Net cash provided by (used in) operating activities.................................. 4,705 6,961 2,999 (2,496) -------- -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities or redemptions of fixed maturities.................................. 44,922 54,168 140,362 192,056 Sales of equity securities.................... (38) 207 1,157 4,723 Net sales (purchases) of short-term investments................................. (2,070) 1,792 (35,105) 38,526 Investment in fixed maturities................ (42,971) (66,279) (102,762) (225,947) Investments in equity securities.............. -0- (1,685) -0- (3,500) Other......................................... (4,935) (381) (5,430) (3,361) -------- -------- --------- --------- Net cash provided by (used in) investing activities.................................. (3,112) (12,178) (1,778) 2,997 -------- -------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES.......... Dividends paid................................ (906) (1,638) (2,724) (4,908) Redemption of convertible subordinated debentures.................................. -0- -0- (8,907) -0- Proceeds of notes payable..................... -0- -0- 5,000 -0- Proceeds from issuance of commercial paper-- net......................................... (461) 3 3,473 30 Proceeds from stock options exercised......... 12 565 19 610 Other......................................... 3,570 1,372 5,479 1,747 -------- -------- --------- --------- -------- -------- --------- --------- Net cash provided by (used in) financing activities.................................. 2,213 302 7,340 (2,516) -------- -------- --------- --------- Net increase (decrease) in cash............... 1,806 (4,915) 8,555 (8,017) Cash at beginning of period................... 11,512 13,994 4,763 17,096 -------- -------- --------- --------- Cash at end of period......................... $ 13,318 $ 9,079 $ 13,318 $ 9,079 -------- -------- --------- --------- -------- -------- --------- ---------
B-4 Facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, certificates for the Shares and any other required documents should be sent by each stockholder of the Company or such stockholder's broker-dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission By Hand or Overnight Delivery: (for Eligible Institutions Tender & Exchange Department only): Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station Receive and Deliver Window New York, New York 10286-1248 Confirm by telephone: New York, New York 10286 (800) 507-9357
Questions or requests for assistance may be directed to the Information Agent or the Dealer Managers at their respective telephone numbers and locations listed below. Requests for additional copies of the Offer to Purchase, the Letter of Transmittal and the other tender offer materials may be directed to the Information Agent, the Dealer Managers or to brokers, dealers, commercial banks or trust companies or other nominees, and copies will be furnished promptly at the Purchaser's Expense. THE INFORMATION AGENT FOR THE OFFER IS: D.F. KING & CO., INC. United States Europe 77 Water Street Royex House, Aldermonbury Square New York, New York 10005 London, England ECZV7H CALL TOLL-FREE: 1-800-714-3313 (44) 171-600-5005 (collect) THE DEALER MANAGERS FOR THE OFFER ARE: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (800) 323-5678 (Toll Free) EX-99.(A)(2) 3 Exhibit (a)(2) LETTER OF TRANSMITTAL To Tender Shares of Common Stock of SCOR U.S. CORPORATION Pursuant to the Offer to Purchase dated November 9, 1995 by SCOR MERGER SUB CORPORATION A Wholly Owned Subsidiary of SCOR S.A. ------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. ------------------------------------------------------------------------------- The Depositary for the Offer is: THE BANK OF NEW YORK
By Facsimile Transmission By Mail: (for Eligible Institutions only): By Hand or Overnight Courier: Tender & Exchange Department (212) 815-6213 Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station Confirm by telephone: Receive and Deliver Window New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
------------------- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders ("Stockholders") if certificates for Shares (as defined below) are to be forwarded herewith or if tenders of Shares are to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other Stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates are not immediately available, or who cannot comply with the book-entry transfer procedures on a timely basis or who cannot deliver their certificates and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase), may nevertheless tender their Shares according to the guaranteed delivery procedure set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY FOR THIS OFFER (AS DEFINED HEREIN). Stockholders who wish to tender their Shares must, at a minimum, complete columns (1) through (3) (other than Book-Entry Stockholders, who are not required to complete columns (2) and (3)) in the "Description of Shares Tendered" table below. If only those columns are completed, a Stockholder will be deemed to have tendered all of its Shares listed in the table. If a Certificate Stockholder wishes to tender with respect to less than all of its Shares, column (4) must also be completed, and such Certificate Stockholder should refer to Instruction 4. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________________ Check One: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number _______________________________________________________________ Transaction Code Number ______________________________________________________ / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Stockholder(s) _______________________________________ Window Ticket Number (if any) ______________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution that Guaranteed Delivery _______________________________ If Delivery by Book-Entry Transfer: Name of Tendering Institution ________________________________________________ Check One: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number _______________________________________________________________ Transaction Code Number ______________________________________________________
- ---------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED STOCKHOLDER(S) (PLEASE FILL IN BLANK EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON THE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ---------------------------------------------------------------------------------------------------------------- (1) (2) (3) (4) - ---------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES CERTIFICATE REPRESENTED BY NUMBER NUMBER(S)* CERTIFICATE(S)* OF SHARES TENDERED** -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- TOTAL SHARES - ---------------------------------------------------------------------------------------------------------------- * Need not be completed by Book-Entry Stockholders. ** Unless a Certificate Stockholder otherwise indicates, it will be assumed that all Shares evidenced by any certificate(s) delivered to the Depositary are being tendered. See Instruction 4. - ----------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to SCOR Merger Sub Corporation, a newly organized Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), the above-described shares of Common Stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), pursuant to the Purchaser's Offer to Purchase all of the outstanding Shares not currently beneficially owned directly or indirectly by Parent at a price of $15.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (together with the Offer to Purchase, the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, from time to time, in whole or in part, to one or more of its affiliates, the right to purchase the Shares tendered herewith. Upon the terms and subject to the conditions of the Offer, and effective upon acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, including if the Offer is extended or amended, the terms or conditions of any such extension or amendment, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser, all right, title and interest in and to all of the Shares that are being tendered hereby, and any and all cash dividends, distributions, rights, other Shares and other securities issued or issuable in respect thereof on or after the date of the Offer to Purchase (collectively, "Distributions"), and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all such Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and all such other shares or securities) or transfer ownership of such Shares (and all such Distributions) on the account books maintained by a Book-Entry Transfer Facility, together in any such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, (b) present such Shares (and all such Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and all such Distributions), all in accordance with the terms and the conditions of the Offer. The undersigned hereby irrevocably appoints the designees of the Purchaser, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or any substitute thereof shall deem proper in the sole discretion of such attorney-in-fact and proxy or such substitute, and otherwise act (including pursuant to written consent) with respect to all of the Shares tendered hereby (and any associated Distributions) which have been accepted for payment by the Purchaser, without further action, prior to the time of such vote or action, which the undersigned is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting), by written consent or otherwise. Such appointment shall be effective when, and only to the extent that, the Purchaser deposits the payment for such Shares (and any associated Distributions) with the Depository. This proxy and power of attorney shall be irrevocable and coupled with an interest in the Shares. Upon the effectiveness of such appointment, without further action, all prior proxies with respect to the Shares (and any associated Distributions) at any time given by the undersigned will be revoked, and no subsequent proxies will be given nor subsequent written consents executed (or, if given or executed, will not be deemed effective) with respect thereto by the undersigned. The undersigned understands that in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance of such Shares for payment, the Purchaser or its designees must be able to exercise full voting rights with respect to such Shares (and any associated Distributions). By accepting the Offer through the tender of Shares pursuant to the Offer, the undersigned hereby agrees to release, and hereby releases, all claims with respect to and in respect of the Shares other than the right to receive payment for such tendered shares and that, upon payment for the Shares, the undersigned waives any right to attack, and will be barred from thereafter attacking, in any legal proceeding the fairness of the consideration paid in the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares (and any associated Distributions) tendered hereby and that when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment, and transfer of the Shares (and any associated Distributions) tendered hereby. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer; and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Subject to the withdrawal rights set forth in the section of the Offer to Purchase entitled "THE OFFER--4. Rights of Withdrawal", the tender of Shares hereby made is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares" and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions", please issue the check for the purchase price and/or return any certificates for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered". Similarly, unless otherwise indicated under "Special Delivery Instructions", please mail the check for the purchase price and/or return any certificates for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered". In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or issue any certificates for Shares not so tendered or accepted for payment in the name of, and deliver said check and/or return such certificates to, the person or persons so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned. Issue check and/or certificate(s) to: Name: ____________________________________ PLEASE TYPE OR PRINT __________________________________________ Address: __________________________________ __________________________________________ (INCLUDE ZIP CODE) __________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail check and/or certificate(s) to: Name: ____________________________________ PLEASE TYPE OR PRINT __________________________________________ Address: __________________________________ __________________________________________ (INCLUDE ZIP CODE) __________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) IMPORTANT SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) Signature(s) of Stockholders(s)_______________________________________________ ________________________________________________________________________________ Dated: ____________, 1995 (Must be signed by registered Stockholder(s) exactly as name(s) appear(s) on the certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s)_________________________________________________________________________ ________________________________________________________________________________ (Please Print) Capacity (Full Title)___________________________________________________________ Address_________________________________________________________________________ ________________________________________________________________________________ (Including Zip Code) Area Code and Telephone Number__________________________________________________ Tax Identification or Social Security No._______________________________________ (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature____________________________________________________________ Name and Title__________________________________________________________________ (Please Type or Print) Name of Firm____________________________________________________________________ Address_________________________________________________________________________ (Include Zip Code) Dated: ____________, 1995 INSTRUCTIONS Forming Part of the Terms and Conditions of the Offer 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5 of this Letter of Transmittal. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY CONFIRMATIONS; LOST CERTIFICATES. This Letter of Transmittal is to be used either (i) if certificates are to be forwarded herewith or (ii) unless an Agent's Message (as defined in the Offer to Purchase) is used in lieu of this Letter of Transmittal, if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Certificates for all physically delivered Shares, or confirmation of any book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of Shares tendered by book-entry transfer, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu of this Letter of Transmittal), and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in the Offer to Purchase). Stockholders whose certificates are not immediately available, or who cannot complete the procedures for book-entry transfer on a timely basis or who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date, may nevertheless tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser must be received by the Depositary on or prior to the Expiration Date; and (iii) certificates for physically delivered Shares (or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu of this Letter of Transmittal) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery. If any certificate(s) for the Shares tendered hereby have been lost or destroyed, that fact should be indicated on the face of this Letter of Transmittal. In such event, the Depositary will forward additional information and documentation necessary to be completed in order to effectively deliver such lost or destroyed certificate(s). IF SHARE CERTIFICATES ARE DELIVERED SEPARATELY TO THE DEPOSITARY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL MUST ACCOMPANY EACH SUCH DELIVERY. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or facsimile thereof), a Stockholder waives any right to receive any notice of the acceptance of the Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer than all the Shares evidenced by any certificate submitted are to be tendered by a Certificate Stockholder, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new certificate(s) for the remainder of the Shares that were evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holders of the Shares tendered hereby, the signature must correspond with the names as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or purchased are to be issued in the name of, a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear on the certificates(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. The Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted hereby) if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the purchase price if satisfactory evidence of the payment of such taxes, or exemption therefrom, is not submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such certificates are to be mailed to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for assistance may be directed to, or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer materials may be obtained from, the Information Agent (as defined in the Offer to Purchase) or the Dealer Managers (as defined in the Offer to Purchase) at their respective addresses set forth below or from your broker, dealer, commercial bank or trust company. 9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the stockholder's social security or federal employer identification number, on Substitute Form W-9 below. Failure to provide the information on the form may subject the tendering stockholder to 31% federal income tax withholding on the payment of the purchase price. The box in Part 3 of the form may be checked if the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the box in Part 3 is checked and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price thereafter until a TIN is provided to the Depositary. 10. WAIVER OF CONDITIONS. Subject to the terms of the Offer, the Purchaser reserves the right to waive any of the specified conditions to the Offer, in whole or in part, in the case of any Shares tendered. IMPORTANT: EITHER THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), PROPERLY COMPLETED AND DULY EXECUTED, OR, IN THE CASE OF BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL (TOGETHER WITH CERTIFICATES FOR PHYSICALLY DELIVERED SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER) AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose tendered Shares are accepted for purchase is required by law to provide the Depositary (as payer) with such stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is an individual, the TIN is his or her social security number. If a stockholder fails to provide a TIN to the Depositary, such stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder or payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. SUBSTITUTE TO BE COMPLETED BY ALL STOCKHOLDERS (SEE INSTRUCTION 9) FORM W-9 PAYER'S NAME: THE BANK OF NEW YORK PART 1--PLEASE PROVIDE YOUR TIN IN THE _______________ BOX AT RIGHT AND CERTIFY BY SIGNING SOCIAL SECURITY AND DATING BELOW NUMBER OR__________________________ EMPLOYER IDENTIFICATION NUMBER PART 2--CERTIFICATES--UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me); and DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding because (i) I am exempt from backup withholding (ii) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item(2). PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) PART 3 SIGNATURE ___________________ DATE ____________ AWAITING NAME (PLEASE PRINT)______________________________ TIN / / NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (i) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (ii) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. - ------------------------------------------ ------------- Signature Date - ------------------------------------------ Name (Please Print) The Information Agent for the Offer is: D.F. KING & CO., INC. UNITED STATES EUROPE 77 Water Street Royex House, Aldermarbury Square New York, New York 10005 London, England EC2V 7HR CALL TOLL-FREE: 1-800-714-3313 (44) 171-600-5005 (COLLECT) The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (Toll Free) 800-323-5678 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens; i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals The actual owner of (joint account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint The actual owner of account) the account or, if joint funds, the first individual on the account(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person(3) for a designated ward, minor or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that is not a legal or valid trust under State law 8. Sole proprietorship The owner(4) account - ------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF-- - ------------------------------------------------------ 9. A valid trust, estate, The legal entity (Do or pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program - ------------------------------------------------------ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEE EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under Section 403(b)(7). . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a). . An exempt charitable remainder trust, or a nonexempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to non-resident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and the regulations under those sections. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. Payers must be given the numbers whether or not recipients are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE Unless otherwise noted herein, all references to section numbers or regulations are references to the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. EX-99.(A)(3) 4 Exhibit (a)(3) GOLDMAN, SACHS & CO. 85 Broad Street New York, New York, 10004 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF SCOR U.S. CORPORATION AT $15.25 NET PER SHARE BY SCOR MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF SCOR S.A. - -------------------------------------------------------------------------------- THE OFFER AS DEFINED BELOW AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- November 9, 1995 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by SCOR Merger Sub Corporation, a newly organized Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), to act as dealer managers (the "Dealer Managers") in connection with the Purchaser's offer to purchase all of the outstanding shares of Common Stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), not currently beneficially owned directly or indirectly by Parent, at a price of $15.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated November 9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of Transmittal", and together with the Offer to Purchase, the "Offer"), copies of which are enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR INDIRECTLY BY PARENT, WILL CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase; 2. Letter of Transmittal (together with Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding); 3. Letter to Stockholders of the Company from the Chairman and Chief Executive Officer of the Company accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9; 4. A printed form of letter which may be sent to your clients for whose account you hold Shares in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; and 5. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available, if time will not permit all required documents to reach The Bank of New York, as depositary (the "Depositary"), prior to the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed on a timely basis. The Board of Directors of the Company and the Special Committee (as defined in the Offer to Purchase) have unanimously determined that the Offer and the Merger (as defined in the Offer to Purchase) are fair to and in the best interests of the Company and its stockholders, have approved the Offer and the Merger and recommend that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all outstanding Shares validly tendered prior to the Expiration Date and not theretofore properly withdrawn. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates evidencing such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depositary Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company), a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal) and any other required documents. See the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". The Purchaser will not pay any fees or commissions to any broker or dealer or any other persons (other than the fees of the Dealer Managers and Information Agent (as defined in the Offer to Purchase)) in connection with the solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER EXPIRES AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained by contacting, the Information Agent or the Dealer Managers, at their addresses and telephone number set forth on the back cover of the Offer to Purchase. Very truly yours, GOLDMAN, SACHS & CO. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL APPOINT YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEALER MANAGERS, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(4) 5 Exhibit (a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF SCOR U.S. CORPORATION AT $15.25 NET PER SHARE BY SCOR MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF SCOR S.A. - -------------------------------------------------------------------------------- THE OFFER (AS DEFINED BELOW) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- November 9, 1995 To Our Clients: Enclosed for your consideration are the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of Transmittal", and, together with the Offer to Purchase, the "Offer") pertaining to the offer by SCOR Merger Sub Corporation (the "Purchaser"), a newly organized Delaware corporation and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), to purchase all outstanding shares of Common Stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), not currently beneficially owned directly or indirectly by Parent at a price of $15.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. This material is being forwarded to you as the beneficial owner of Shares carried by us in your account but not registered in your name. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Please note the following: 1. The tender offer price is $15.25 per Share, net to you in cash, without interest thereon. 2. The Offer is being made for all of the outstanding Shares not currently owned directly or indirectly by Parent. 3. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Friday, December 8, 1995, unless the Offer is extended. 4. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which, together with any Shares currently beneficially owned directly or indirectly by Parent, will constitute at least 90% of the total Shares outstanding as of the date the Shares are accepted for payment pursuant to the Offer. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer of Shares pursuant to the Offer. 6. The Board of Directors of the Company and the Special Committee (as defined in the Offer to Purchase) have unanimously determined that the Offer and the Merger (as defined in the Offer to Purchase) are fair to and in the best interests of the Company and its stockholders, have approved the Offer and the Merger and recommend that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise indicated in such instruction form. Please forward your instructions to us as soon as possible to allow us ample time to tender Shares on your behalf prior to the expiration of the Offer. The Offer is made solely by the Offer to Purchase and the Letter of Transmittal and any amendments or supplements thereto. The Purchaser is not aware of any state where the making of the Offer is prohibited by the administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such statute. If, after such good faith effort, the Purchaser cannot comply with such statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Goldman, Sachs & Co. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF SCOR U.S. CORPORATION AT $15.25 NET PER SHARE BY SCOR MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF SCOR S.A. The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of Transmittal", and, together with the Offer to Purchase, the "Offer") relating to the offer by SCOR Merger Sub Corporation, a newly organized Delaware corporation and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), to purchase all of the outstanding shares of Common Stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation, not currently beneficially owned directly or indirectly by Parent. You are instructed to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. - -------------------------------------------------------------------------------- Number of Shares to be Tendered*: / / Shares: shares / / All Shares - -------------------------------------------------------------------------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered - -------------------------------------------------------------------------------- SIGN HERE Signature(s) ___________________________________________________________________ Name(s) ________________________________________________________________________ (please print or type) Address(es) ____________________________________________________________________ ________________________________________________________________________________ (zip code) Area Code(s) and Telephone No(s). (_______) ____________________________________ Tax Identification or Social Security No(s). _________________________________________________________ Dated: _________________________________________________________________________ EX-99.(A)(5) 6 Exhibit (a)(5) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF SCOR U.S. CORPORATION This form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for shares of Common Stock, par value $0.30 per share ("Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis or if the certificates and all other required documents cannot be delivered to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase). Such form may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary, and must include a guarantee by an Eligible Institution (as defined in the Offer to Purchase). See the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". The Depositary: THE BANK OF NEW YORK By Mail: By Facsimile Transmission By Hand or Overnight Courier: Tenders & Exchange Department (for Eligible Institutions Tender & Exchange Department P.O. Box 11248 only): 101 Barclay Street Church Street Station (212) 815-6213 Receive and Deliver Window New York, New York 10286- 1248 Confirm by Telephone: New York, New York 10286 (800) 507-9357
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tenders to SCOR Merger Sub Corporation, a newly organized Delaware corporation, and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of Transmittal", and, together with the Offer to Purchase, the "Offer"), receipt of which is hereby acknowledged, the number of Shares shown below pursuant to the guaranteed delivery procedures set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Number of Shares _______________ Name(s) of Record Holder(s): ___________________________________________ CHECK ONE BOX IF SHARES WILL BE TENDERED BY BOOK-ENTRY ___________________________________________ TRANSFER: (Please Type or Print) Address(es): / / The Depository Trust Company ___________________________________________ / / Midwest Securities Trust Company ___________________________________________ (Zip Code) / / Philadelphia Depository Area Code and Tel. No(s). Trust Company ___________________________________________ Account Number: __________________ Signature(s): ___________________________________________ Date: ___________________________ ___________________________________________ THE GUARANTEE BELOW MUST BE COMPLETED. GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a financial institution which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program, guarantees (a) that the above named person(s) has (have) a "net long position" in the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (b) to deliver to the Depositary, at one of its addresses set forth above, certificates representing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company, with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile copy thereof) with any required signature guarantee (or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal, within three New York Stock Exchange, Inc. trading days of the date hereof. Name of Firm: __________________ Title: _________________________________ Address: _______________________ Name: __________________________________ ________________________________ __________________________________ (Zip Code) (Please type or print) Area Code and Telephone Date: _____________________________, 1995 Number: ______________________ ______________________________ (Authorized Signature) NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.(A)(7) 7 Exhibit (a)(7) LOGO NEWS RELEASE FOR IMMEDIATE RELEASE Contact: John T. Andrews, Jr. Jean Alisse General Counsel General Counsel SCOR U.S. Corporation SCOR S.A. (212) 390-5224 (33-1) 46-98-73-63 SCOR U.S. BOARD AGREES TO SCOR S.A. $15.25 PER SHARE OFFER New York, N.Y./Paris, France, November 3, 1995--SCOR U.S. Corporation (NYSE:SUR) ("SCOR U.S.") and SCOR S.A. announced today that they have entered into a definitive agreement (the "Merger Agreement") providing for the merger (the "Merger") of SCOR Merger Sub Corporation ("Merger Sub"), a newly organized Delaware corporation and a wholly owned subsidiary of SCOR S.A., into SCOR U.S. upon the terms and subject to the conditions contained in the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub has agreed to commence a tender offer (the "Offer") for all of the outstanding shares of common stock, par value $0.30 per share, of SCOR U.S. at a price of $15.25 per share, net to the seller in cash, without interest thereon, subject to terms and conditions set forth in the Merger Agreement and to be set forth in the tender offer documents. If the Offer is successfully completed, holders of the 5-1/4% Convertible Subordinated Debentures due April 1, 2000 of SCOR U.S. would have the right to require SCOR U.S. to repurchase such Convertible Debentures at a price equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the repurchase date. The Board of Directors, and Special Committee of the Board of Directors, of SCOR U.S. have unanimously approved the Merger Agreement, the Offer and the Merger - more- and determined that the terms of the Offer and the Merger are fair to, and in the best interest of, the stockholders of SCOR U.S. The Board of Directors has recommended that all stockholders of SCOR U.S. accept the Offer and tender their shares. Dillon, Read & Co. Inc. has acted as financial advisor to the Special Committee of the Board of Directors of SCOR U.S. and has advised the Special Committee that the consideration to be received by the stockholders of SCOR U.S. is fair to the stockholders (other than SCOR S.A.) from a financial point of view as of the date hereof. SCOR S.A. currently owns approximately 80% of the outstanding shares of common stock of SCOR U.S. Approximately 3.6 million shares of SCOR U.S. common stock are owned by the public. SCOR U.S. Corporation, a holding company, provides property and casualty insurance and reinsurance in the treaty and facultative market through its operating subsidiaries. All of SCOR U.S. Corporation's operating insurance and reinsurance subsidiaries are rated "A" (excellent) by A.M. Best Company. SCOR S.A., a French company, operates principally as a reinsurance company. Together with its subsidiaries, it ranks as the largest professional reinsurer in France and among the largest in the world. Goldman, Sachs & Co. are acting as dealer managers for the Offer and Goldman Sachs International has acted as financial advisor to SCOR S.A. EX-99.(A)(8) 8 Exhibit (a)(8) This announcement is neither an offer to purchase nor a solicitation of an offer to sell the Shares (as defined below). The Offer ( as defined below) is made solely by the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) the holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Goldman, Sachs & Co. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of SCOR U.S. Corporation at $15.25 Net Per Share by SCOR Merger Sub Corporation A Wholly Owned Subsidiary of SCOR S.A. SCOR Merger Sub Corporation, a newly organized Delaware corporation (the "Purchaser") and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), hereby offers to purchase all of the outstanding shares of common stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), not currently beneficially owned directly or indirectly by Parent at a price of $15.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (together with the Offer to Purchase, the "Offer"). Parent currently beneficially owns approximately 80% of the outstanding Shares. Following the Offer, Parent intends to cause the Purchaser to effect the Merger (as defined below). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES CURRENTLY BENEFICIALLY OWNED DIRECTLY OR INDIRECTLY BY PARENT, WILL CONSTITUTE AT LEAST 90% OF THE TOTAL SHARES OUTSTANDING AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER (THE "MINIMUM TENDER CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE INTRODUCTION AND SECTION 13 OF THE OFFER TO PURCHASE. THE BOARD OF DIRECTORS OF THE COMPANY AND THE SPECIAL COMMITTEE (AS DEFINED IN THE OFFER TO PURCHASE) HAVE UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 2, 1995 (the "Merger Agreement"), among Parent, the Purchaser and the Company. The Merger Agreement provides that, among other things, promptly after the purchase of Shares pursuant to the Offer and the receipt of any required approval of the Merger Agreement by the Company's stockholders and the satisfaction or waiver of certain other conditions, the Purchaser will be merged (the "Merger") into the Company. Following consummation of the Merger, the Company will continue as the surviving corporation and will become a wholly owned subsidiary of Parent. Upon consummation of the Merger (the "Effective Time"), each then outstanding Share not owned by Parent or any subsidiary of Parent (other than Shares held by stockholders of the Company who have properly exercised their appraisal rights in accordance with Section 262 of the Delaware General Corporation Law) will be converted into the right to receive an amount in cash equal to the per Share price paid pursuant to the Offer (the "Offer Price"). Pursuant to the Merger Agreement, at the Effective Time each outstanding option to purchase Shares, whether or not then vested, will be cancelled and each holder thereof will be thereafter entitled to receive only the difference, if positive, between the Offer Price and the exercise price of such options, multiplied by the number of Shares subject to such options. Under the terms of the indenture pursuant to which the Company's 5 1/4% Convertible Subordinated Debentures (the "Debentures") were issued, in the event that Parent directly or indirectly owns, after giving effect to the purchase of Shares pursuant to the Offer, in excess of 90% of the outstanding Shares, the holders of the Debentures shall have the right to require the Company to repurchase the Debentures at a repurchase price equal to 100% of the principal amount thereof together with accrued and unpaid interest to the date of such repurchase (the "Repurchase Price"). In addition, in the event the Merger is consummated, the holders of the Debentures will be entitled to convert the Debentures into the right to receive the consideration receivable upon the Merger by a holder of the number of Shares into which such Debentures could have been converted immediately prior to the Merger. Holders of Debentures would receive a greater cash amount in the event they elect to require the Company to repurchase their Debentures at the Repurchase Price than they would if they elect to convert their Debentures into the right to receive the consideration receivable upon the Merger. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn if and when the Purchaser gives oral or written notice to The Bank of New York, as depositary (the "Depositary"), of the Purchaser's acceptance of such Shares for payment. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which shall act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to the tendering stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN ACCEPTING FOR PAYMENT OR MAKING SUCH PAYMENT. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase) pursuant to the procedures set forth in the Offer to Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal) and (iii) any other documents required by the Letter of Transmittal. The Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time to extend for any reason (including the occurrence of any condition specified in the Offer to Purchase) the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. Any such extension will also be publicly announced by a press release issued no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled expiration date of the Offer. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of tendering stockholders to withdraw their Shares. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date (as defined in the Offer to Purchase) and, unless theretofore accepted for payment, may also be withdrawn at any time after January 8, 1996. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder if different from the name of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the name of the registered holder and the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered for the account of any Eligible Institution (as defined in the Offer to Purchase), the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures for such withdrawal, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the second sentence of this paragraph. Withdrawals of tenders may not be rescinded, and any Share properly withdrawn will thereafter be deemed not validly tendered for the purpose of the Offer. However, withdrawn Shares may be retendeed by again following one of the procedures described in the Offer to Purchase at any time on or prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of a notice of withdrawal will be determined by the Purchaser, in its sole discretion, and its determination shall be final and binding on all parties. None of the Purchaser, Parent, the Dealer Managers, the Depositary, the Information Agent, or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for a failure to give such notification. The information required to be disclosed by Paragraph (e)(1)(vii) of Rule 14d-6 of the General Rules and Regulations under the Securities Exchange Act, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided to the Purchaser its stockholder list and security position lists for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other related materials are being mailed to record holders of Shares whose names appear on the Company's stockholder list and will be mailed to brokers, dealers, commercial brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers as set forth below. Requests for additional copies of the Offer to Purchase, the Letter of Transmittal and the other tender offer materials may be directed to the Information Agent, the Dealer Managers or to brokers, dealers, commercial banks or trust companies, and copies will be furnished promptly at the Purchaser's expense. No fees or commissions will be payable to brokers, dealers or other persons (other than the Information Agent and the Dealer Managers) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: D.F. KING & CO., INC. United States Europe ------------- ------ 77 Water Street Royex House, Aldermanbury Square New York, New York 10005 London, England EC2V 7HR 1-800-714-3313 (Toll Free) (44) 171-600-5005 (Collect) The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (Toll Free) (800) 323-5678 November 9, 1995 EX-99.(C)(2) 9 Exhibit (c)(2) November 8, 1995 SCOR U.S. Corporation Two World Trade Center New York, New York 10177 Dear Sirs: By this letter agreement, each of the undersigned hereby confirms that, notwithstanding the introductory language contained in Annex A to the Agreement and Plan of Merger, dated as of November 2, 1995 (the "Merger Agreement"), by and among SCOR U.S. Corporation, SCOR S.A. and SCOR Merger Sub Corporation, the Minimum Tender Condition shall be satisfied if there shall have been validly tendered and not withdrawn prior to the expiration date of the Offer a number of Shares that, together with any Shares currently beneficially owned directly or indirectly by Purchaser, constitutes at least 90% of the total Shares outstanding as of the date the Shares are accepted for payment pursuant to the Offer. Terms used but not defined in this letter agreement shall have the meanings given such terms in the Merger Agreement. Except as expressly set forth in this letter agreement, the Merger Agreement, as originally executed, shall remain in full force and effect. This letter agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. Please confirm your agreement to the provisions of this letter agreement by signing in the space provided below. Very truly yours, SCOR S.A. By:/s/ Jacques Blondeau -------------------------- Name : Jacques Blondeau Title: Chairman and Chief Executive Officer SCOR Merger Sub Corporation By:/s/ Jacques Blondeau --------------------- Name : Jacques Blondeau Title: President Agreed and confirmed: SCOR U.S. Corporation By: /s/ Jerome Karter -------------------------- Name : Jerome Karter Title: President and Chief Executive Officer EX-99.(C)(5) 10 Exhibit (c)(5) INTERESTS AND LIABILITIES AGREEMENT to the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT No. 000000015 No. 000000016 No. 000000017 No. 000000018 between SCOR REINSURANCE COMPANY and its Quota Share Retrocessionaire (Dai Tokyo Fire and Marine Insurance Company Ltd.) (all hereinafter referred to as "Company") and SCOR SA Paris, France (hereinafter referred to as "Subscribing Retrocessionaire") It is hereby mutually agreed by and between the Company on the one part and the Subscribing Retrocessionaire on the other part that the Subscribing Retrocessionaire's share in the Interests and Liabilities of the Retrocessionaires as set forth in the Exhibits attached to and forming an integral part of the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT shall be for 95.00% of Exhibit A 30.21% of Exhibit B 25.00% of Exhibit C 51.46% of Exhibit D The share of the Subscribing Retrocessionaire in the Interests and Liabilities of the Retrocessionaires in respect of the said Contract shall be separate and apart from the shares of the other Subscribing Retrocessionaires to the said Contract, and the Interests and Liabilities of the Subscribing Retrocessionaire shall not be joint with those of the other Subscribing Retrocessionaires and in no event shall the Subscribing Retrocessionaire participate in the Interests and Liabilities of the other Subscribing Retrocessionaires. This Interests and Liabilities Agreement shall take effect at 12:01 a.m., Eastern Standard Time, January 1, 1994 and shall remain in force until 12:01 a.m., Eastern Standard Time, January 1, 1995 but may be terminated in accordance with the provisions of the paragraph of ARTICLE 3, COMMENCEMENT AND TERMINATION, of the Catastrophe Excess of Loss Reinsurance Contract attached hereto. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed, in duplicate, by their duly authorized representatives this day of 1995. For and on behalf of: SCOR REINSURANCE COMPANY and its Quota Share Retrocessionaire (Dai-Tokio Fire and Marine Insurance Company Ltd.) ---------------------------------------------------------- Sr. Vice President Assistant Vice President And on this day of , 1995. For and on behalf of: SCOR S.A. Paris, France ---------------------------------------------------------- CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS ----------------- Article Page ------- ---- 1 Business Covered 1 2 Exclusions 1 3 Commencement and Termination 5 4 Extended Expiration 5 5 Insuring Clause 5 6 Premium 5 7 Reinstatement 5 8 Definition of "Loss Occurrence" 6 9 Extra Contractual Obligations Clause 6 10 Ultimate Net Loss 6 11 Warranty 7 12 Excess of Original Policy Limits 7 13 Net Retained Lines 8 14 War Inclusion Clause (Ocean Marine Only) 8 15 Notice of Loss and Loss Settlements 9 16 Loss Reserves 9 17 Reinsurance Tax 11 Federal Excise Tax 11 18 Currency 11 19 Access to Records 12 20 Service of Suit Clause 12 21 Indemnification and Errors and Omission 13 22 Insolvency 13 23 Arbitration 14 Exhibits: A1-A2, B1-B2, C1-C2 and D1-D2. Attachments: Pools, Associations and Syndicates Exclusion Clause; Nuclear Energy Risks Exclusion Clause (Reinsurance) (1984) (Worldwide Excluding U.S.A. & Canada); Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A. and Canada; Nuclear Incident Exclusion Clause - Physical Damage and Liability (Boiler and Machinery Policies) - Reinsurance; - U.S.A. and Canada; Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A. and Canada; Insolvency Funds Exclusion Clause. CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT (hereinafter referred to as "Contract") In consideration of the mutual covenants hereinafter contained and subject to all the terms and conditions hereinafter set forth VARIOUS INSURANCE AND/OR REINSURANCE COMPANIES AND/OR UNDERWRITING MEMBERS OF LLOYD'S (hereinafter collectively referred to as "Retrocessionaires") do hereby indemnify, as herein provided and specified, the SCOR REINSURANCE COMPANY and its Quota Share Retrocessionaire (Dai-Tokio Fire and Marine Insurance Company Ltd.) (all hereinafter referred to as "Company") ARTICLE 1 --------- BUSINESS COVERED - ---------------- This Contract shall indemnify the Company as set forth in the attached Exhibit(s) in respect of the excess liability which may accrue to the Company under all policies, bonds, binders and contracts, oral or written, (hereinafter referred to as "policy" or "policies" and/or "contract" or "contracts") covering all Treaty and Facultative reinsurance assumed by the Company including but not limited to the following classes of business: Fire, Extended coverage, other Allied Lines, Homeowners or Farmowners Multiple Peril, Commercial Multiple Peril, Earthquake, Boiler & Machinery, Automobile Physical Damage (excluding Collision), Inland Marine business (including pleasure watercraft classified as Inland Marine), Ocean Marine, and Workers Compensation and/or Employers Liability arising out of the Company's Property/Multi-line portfolio, subject to the exclusions set forth in ARTICLE 2, EXCLUSIONS and the other terms and conditions of this agreement as set forth herein. ARTICLE 2 --------- EXCLUSIONS - ---------- This Contract does not apply to and excludes from coverage hereunder: 1. Business written on behalf of, or as a member or direct reinsurer of any pools, syndicates and associations as per the "Pools Exclusions Clause". This exclusion 1 shall not, however, apply as respects the Company's interest in the following: a) Allendale Mutual Insurance Company and its subsidiary companies; b) Arkwright Mutual Insurance Company and Arkwright Insurance Company; c) Improved Risk Mutuals; d) Industrial Risk Insurers; e) Protection Mutual Insurance Company; f) Starr Technical Risks Agency, Inc.; g) California Reinsurance Management Corporation; It is, however, understood and agreed that the amount of the Retrocessionaires' liability hereunder shall not be increased by reason of the failure of any other participant in any of the above- named pools, syndicates, or associations to meet its liability, not shall any such liability be included in the Company's net retained liability for purposes of claim hereunder. 2. Nuclear Energy risks Exclusion Clause (Worldwide Excluding U.S.A. & Canada), N.M.A. 1975 Nuclear Incident Exclusion Clause - Liability - Reinsurance Nuclear Incident Exclusion Clause - Physical Damage and Liability (Boiler and Machinery Policies) - Reinsurance Nuclear Incident Exclusion Clause - Physical Damage -Reinsurance Nuclear Incident Exclusion Clause - Physical Damage -Reinsurance - Canada Nuclear Incident Exclusion Clause - Physical Damage and Liability (Boiler and Machinery Policies) - Reinsurance - Canada Nuclear Incident Exclusion Clause - Liability - Reinsurance -Canada (as per clauses attached). 3. Business written under policies, contracts, and binders of reinsurance which the Company elects to exclude hereunder, provided, however, that the Company shall properly identify each such policy, contract, and binder or reinsurance on its 2 records at the time it is written (this Exclusion applies primarily to Banking and Funding Plans); 4. Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law or confiscation by order of any government or public authority, but the foregoing shall not apply to: (1) Workers' Compensation, Employers' Liability, Registered Mail or any other classes of business which are traditionally written without a War Exclusion Clause. (2) Ocean Marine business when war is an included peril, subject to the war inclusion clause of 1977 per ARTICLE 14, WAR INCLUSION CLAUSE IN RESPECT OCEAN MARINE. (3) Original Reinsurance Contracts or Original Policies containing a standard War Exclusion Clause. 5. Life Business. 6. Aviation business (including satellites). This exclusion shall not, however, exclude aviation business when assumed by the Company as an incidental portion of a multiple-line reinsurance contract that is otherwise covered hereunder; 7. Business classified as Surety, Financial Guarantee, Insolvency and Credit. 8. The Company's interest either direct or by way of reinsurance in loss arising from another party or parties. Notwithstanding the foregoing, this Contract shall not exclude: (a) Workers' Compensation and/or Employers' Liability arising from the following perils: Fire, Lightning, Explosion, Structural Collapse, Windstorm, Hail, Flood, Falling Objects, Seismic Activity, Volcanic Eruption, Collision, Riot, Strikes, Civil Commotion, Malicious Damage. (b) Any Physical Damage and/or Consequential Loss coverage contingent thereon effected by an insured on behalf of another party (this applies principally to care, custody and control exposures under bailee coverages). 9. Crop Hail business. 3 10. Losses arising, by contract, operation of law, or otherwise, whether voluntary or involuntary, under any insolvency fund. "Insolvency Fund" includes any insolvency fund, guaranty fund, plan, pool, association, or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part. 11. LMX and reinsurance assumed business. 12. All losses which may be sustained by the Company howsoever and wheresoever arising including all Business Interruption, Consequential Loss and/or other contingent losses proximately caused by a peril insured in respect of the Company's exposures from: a. All marine business when written as such, howsoever not to exclude such exposures if they emanate from a multiline insurance contract and/or policy. b. All Offshore exposures arising from business of any description connected with the oil and/or gas and/or sulphur and/or uranium exploration and production industries in all their phases and including all associated support and/or service industries. "Offshore" shall be defined as: (1) That area encompassing locations covered by oceans or seas in which the water ebbs and flows and/or (2) Other navigable waters or waterways which shall mean any water which is in fact navigable by ships or vessels, whether or not the tide ebbs and flows there, and whether or not there is a public right of navigation in that water. 13. Losses from overhead transmission and distribution lines on a new and renewal basis. 14. All business of reassureds domiciled outside the United States, Canada and Bermuda and their possessions. However, not to exclude reassureds domiciled outside of these areas where the exposures are predominantly derived from the United States, Canada and Bermuda and their territories and possessions. 4 ARTICLE 3 --------- COMMENCEMENT AND TERMINATION - ---------------------------- The term of this Contract shall be from 12:01 a.m., Eastern Standard Time, January 1, 1994 to 12:01 a.m., Eastern Standard Time, January 1, 1995. In respect to all business covered hereunder except as provided for in the following paragraphs of this Article and except as provided for in Section I, Insuring Clause of the Exhibit(s), this Contract shall apply to all loss occurrences taking place during the term of this Contract. In the case of a missing vessel or aircraft the date of the loss occurrence shall be deemed to be the date on which the vessel or aircraft is posted as missing at Lloyd's or, in the case of a missing vessel or aircraft not so posted, the last known safe date. If any law or regulation of the federal, state or local government of any jurisdiction in which the Company is doing business shall render illegal the arrangements made in this Contract, this Contract can be terminated immediately, insofar as it applies to such jurisdiction, by the Company giving notice to the Retrocessionaires to such effect. ARTICLE 4 --------- EXTENDED EXPIRATION - ------------------- If this Contract terminates while a loss covered hereunder is in progress, it is agreed that, subject to the other conditions of this Contract, the Retrocessionaires shall indemnify the Company as if the entire loss had occurred during the term of this Contract. ARTICLE 5 --------- INSURING CLAUSE - --------------- See Section I of the Exhibit(s) attached hereto. ARTICLE 6 --------- PREMIUM - ------- See Section II of the Exhibit(s) attached hereto. ARTICLE 7 --------- REINSTATEMENT - ------------- See Section III of the Exhibit(s) attached hereto. 5 ARTICLE 8 --------- DEFINITION OF "LOSS OCCURRENCE" - ------------------------------- The term "loss occurrence" as used herein shall mean any one accident, casualty, disaster or occurrence, or series of accidents, casualties, disasters or occurrences arising out of or caused by one event regardless of the number of interests reinsured or the number of policies or contracts involved or the number or kinds of perils involved, subject to the warranties set forth in ARTICLE 11, WARRANTY. Furthermore, all losses arising out of or resulting from the same occurrence or disaster shall be considered one occurrence or one disaster. ARTICLE 9 ------------- EXTRA CONTRACTUAL OBLIGATIONS CLAUSE - ------------------------------------ This Contract shall protect the Company within the limits hereof, where the ultimate net loss includes any extra contractual obligations. The term "extra contractual obligations" is defined as those liabilities not covered under any other provision of this Contract and which arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. In no event shall coverage be provided to the extent that such coverage is not permitted under New York State Insurance Law. The date on which any extra contractual obligation is incurred by the Company shall be deemed, in all circumstances, to be the date of the original disaster and/or casualty. However, this Article shall not apply where the loss has been incurred due to fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation of any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. ARTICLE 10 ---------- ULTIMATE NET LOSS - ----------------- The term "ultimate net loss" shall be understood to mean the actual loss or losses paid or payable by the Company under its contracts of reinsurance, and 80% of extra contractual obligations as defined in ARTICLE 9, EXTRA CONTRACTUAL OBLIGATIONS CLAUSE, and 100% of excess of policy limits losses as defined in ARTICLE 12, EXCESS OF ORIGINAL POLICY LIMITS CLAUSE, such loss or losses to include the Company's expenses of litigation 6 if any, and all other loss expenses covered under the Company's original policies, (including a pro rata share of salaries and expenses of the Company's field employees according to the time occupied in adjusting such loss and expenses of the Company's officials incurred in connection with the loss but salaries of officials and any office expenses of the Company shall not be included) less proper deductions for all recoveries (including amounts recoverable under other reinsurance except as stated in the following paragraph). All salvages, recoveries, and payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the said settlement and all necessary adjustments shall be made by the parties hereto. Notwithstanding the preceding paragraph, recoveries from Reinsurance afforded under the Company's Contingency Excess of Loss Cover and/or Per Risk Excess of Loss Cover shall be deducted when arriving at the ultimate net loss hereunder. Recoveries afforded from Aggregate or Stop Loss reinsurances, if any, as well as underlying catastrophe excess of loss covers, if any, shall be disregarded when arriving at the ultimate net loss hereunder. Whenever the Company or its ceding companies issue a lost instrument bond or a loss instrument letter of indemnity for salvage purposes or in lieu of loss payment under its policy, Retrocessionaires agree to accept liability under such bond or letter of indemnity in accordance with the terms of this Contract. ARTICLE 11 ---------- WARRANTY - -------- It is warranted that Retrocessionaires shall not be liable under this Contract unless two or more original risks are involved in the same loss occurrence. It is warranted that as respects Property Facultative business assumed by the Company, the maximum net line will be $3,800,000 any one original risk or so deemed. As respects Treaty business assumed by the Company, the maximum net line will be $2,000,000 any one program or so deemed. The Company will be the sole judge as to what constitutes one risk and/or program. It is further warranted that the Company will retain net for its own account and unreinsured not less that 5% of the ultimate net loss covered hereunder, not including the Company's first loss retention hereunder. ARTICLE 12 -------------- EXCESS OF ORIGINAL POLICY LIMITS - -------------------------------- This Contract shall protect the Company, within the limits hereof, in connection with ultimate net loss in excess of the limit of its original policy, such loss in excess of the limit having been incurred because of failure by it to settle within the policy limit or by reason of alleged or actual 7 negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. In no event shall coverage be provided to the extent that such coverage is not permitted under New York State Insurance Law. However, this Article shall not apply where the loss has been incurred due to fraud by a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. For the purposes of this Article, the word "loss" shall mean any amounts for which the Company would have been contractually liable to pay had it not been for the limit of the original policy. ARTICLE 13 ---------- NET RETAINED LINES - ------------------ This Contract applies only to that portion of any reinsurance which the Company retains net for its own account and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any reinsurance which the Company retains net for its own account shall be included. The amount of Retrocessionaires' liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other Retrocessionaires whether specific or general, any amounts which may have become due from them whether such inability arises from the insolvency of such other Retrocessionaires or otherwise. ARTICLE 14 ---------- WAR INCLUSION CLAUSE IN RESPECT OF OCEAN MARINE ONLY - ---------------------------------------------------- This Contract includes loss, damage, liability or expense caused by or resulting from the risks of War as covered in the original policy(ies) provided that such loss, damage, liability or expense would be recoverable under the terms and conditions of the Institute War Clauses in current use at the inception of this Contract or at the time when the War risks cover would have commenced under the original insurance within the terms of these clauses, whichever is the earlier; except that if the risks of War are covered in the original policy(ies) under clauses approved by the London Hull War Risks Joint Sub-Committee, or in respect of Cargo interests, under the Standard War Risk Clause of any country which complies with the limitations of the United Kingdom Waterborne Agreement, the foregoing provision shall not apply. In the event of loss or losses occurring under War Inclusion Clause the indemnity under this Contract shall be automatically reinstated to its full amount from the time of such loss or losses 8 until the next succeeding of the Contract Anniversary in accordance with the general reinstatement conditions (if any) of the Contract. Nevertheless, and irrespective of any other reinstatement conditions of the Contract, the Retrocessionaires shall never be liable for more than the indemnity provided hereunder in respect of any one loss occurring and in respect of all losses occurring during the term of this Contract. ARTICLE 15 ---------- NOTICE OF LOSS AND LOSS SETTLEMENTS - ----------------------------------- In the event of a loss occurrence which either results in or appears to be of serious enough nature as probably to result in a loss involving this Contract, the Company shall give notice as soon as reasonably practicable to Retrocessionaires. Subject to all the terms and conditions of this Contract, the Retrocessionaires agree to abide by the loss settlements of the Company, including any award resulting from an arbitration between the Company and its ceding companies under the terms of any underlying policies or contracts, such settlements to be considered as satisfactory proofs of loss, and amounts falling to the share of the Retrocessionaires shall be immediately payable to the Company by them upon reasonable evidence of the amount paid or payable by the Company being presented to Retrocessionaires. ARTICLE 16 ---------- LOSS RESERVES - ------------- (This clause applies to those Retrocessionaires who do not qualify for credit by any state or any other governmental authority having jurisdiction over the Company's loss reserves.) A: Where a Letter of Credit Trust Agreement is used, the following clause shall apply: It is agreed that when the Company files with the Insurance Department or establishes reserves for claims covered hereunder, as required by law, the Company will forward to the Retrocessionaires a statement showing the proportion of such loss reserves which is applicable to Retrocessionaires. The Retrocessionaires hereby agree to apply for and secure delivery to the Company of a clean, irrevocable and unconditional Letter of Credit, with a minimum term of one year, issued by Citibank, N.A., in a format acceptable to the governmental authority having jurisdiction over the Company's loss reserves in an amount equal to the Retrocessionaires' proportion of said loss reserves. Under no circumstances shall any amount relating to reserves in respect of incurred but not reported losses be funded in the amount of the Letter of Credit. The foregoing shall not affect the Company's authority to draw upon the Letter of Credit to cover all obligations due or which become due to the Company under this Contract, including losses incurred but not reported, in the event that a nonrenewal or nonextension notice is received from the issuing bank. 9 The Company and the Retrocessionaires agree that such Letter of Credit will be subject to the terms of a separate Letter of Credit Trust Agreement, and that said trust agreement shall be in a form acceptable to the governmental authority having jurisdiction over the Company's loss reserves. Citibank, N.A., shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to see that withdrawals are made only upon the order of properly authorized representatives of the Company. B: Where a Letter of Credit Trust Agreement is not used, the following clause shall apply: It is agreed that when the Company files with the Insurance Department or establishes reserves for claims covered under this Contract, as required by law, the Company will forward to the Retrocessionaires a statement showing the proportion of such loss reserves which is applicable to Retrocessionaires. The Retrocessionaires hereby agree to apply for and secure delivery to the Company of a clean, irrevocable and unconditional Letter of Credit, with a minimum term of one year, issued by Citibank, N.A., in a format acceptable to the governmental authority having jurisdiction over the Company's loss reserves in an amount equal to the Retrocessionaires' proportion of said loss reserves. Under no circumstances shall any amount relating to reserves in respect of incurred but not reported losses be funded in the amount of the Letter of Credit. The foregoing shall not affect the Company's authority to draw upon the Letter of Credit to cover all obligations due or which become due to the Company under this Contract, including losses incurred but not reported, in the event that a nonrenewal or nonextension notice is received from the issuing bank. The Company and the Retrocessionaires agree that the Letter of Credit provided by the Retrocessionaires under this provision may be drawn upon at any time, notwithstanding any other provisions in this Contract, and be utilized by the Company or any successor by operation of law of the Company, including, without limitation, any liquidator, rehabilitator, receiver or conservator of such insurer for the following purposes: (a) to reimburse the Company for the Retrocessionaires' share of surrenders and benefits or losses paid by the Company under the terms and provisions of the policies reinsured under this Contract, (b) to fund an account with the Company in an amount at least equal to the deduction, for reinsurance ceded, from the Company's liabilities for policies ceded under this Contract. Such amount shall include, but not be limited to, amounts for policy reserves, reserves for claims and losses incurred (including losses incurred but not reported), and loss adjustment expenses, (c) to pay any other amounts the Company claims are due under this Contract, 10 (d) to return any amounts drawn down on Letters of Credit in excess of the actual amounts required for (a) and (b) above, or in case of (c) above, any amounts which are subsequently determined not to be due. All of the foregoing should be applied without diminution because of insolvency on the part of the Company or Retrocessionaires. Citibank, N.A., shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to see that withdrawals are made only upon the order of properly authorized representatives of the Company. ARTICLE 17 ---------- REINSURANCE TAX - --------------- In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any State or Territory of the United States of America or to the District of Columbia. FEDERAL EXCISE TAX - ------------------ (This clause applies only to those Retrocessionaires, domiciled outside the United States of America who are not exempt from the Federal Excise Tax.) The Retrocessionaires have agreed to allow for the purpose of paying the Federal Excise Tax the percentage specified by United States law of the premium payable hereon to the extent such premium is subject to Federal Excise Tax. In the event of any return of premium becoming due hereunder, the Retrocessionaires will deduct the percentage specified by United States law from the amount of the return and the Company or its agent should take steps to recover the Tax from the United States Government. ARTICLE 18 ---------- CURRENCY - -------- Wherever the word "Dollars" or the sign "$" appear in this Contract they shall be construed to mean United States Dollars. For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States currency, such premiums and losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums and losses are entered in the Company's books. 11 ARTICLE 19 ---------- ACCESS TO RECORDS - ----------------- The Retrocessionaires or their duly designated representative shall have access to the books and records of the Company at all reasonable times for the purpose of obtaining information concerning this Contract or the subject matter thereof. ARTICLE 20 ---------- SERVICE OF SUIT CLAUSE - ---------------------- (This clause applies only to those Retrocessionaires not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States where authorization is required by insurance regulatory authorities.) It is agreed that in the event of the failure of the Retrocessionaires to pay any amount claimed to be due under this Contract, the Retrocessionaires, at the request of the Company, will submit to the jurisdiction of any court of competent jurisdiction within the United States of America and will comply with all requirements necessary to give such court jurisdiction; and all matters arising hereunder shall be determined in accordance with the law and practice of such court. Nothing in this Clause constitutes or should be understood to constitute a waiver of Retrocessionaires' rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. Service of process in such suit may be made upon Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019 (hereinafter, "agent for service of process") and in any suit instituted against any Retrocessionaire(s) upon this Contract, Retrocessionaire(s) will abide by the final decision of such court or of any appellate court in the event of an appeal. The above named are authorized and directed to accept service of process on behalf of Retrocessionaires in any such suit and/or upon the request of the Company to give a written undertaking to the Company that the agent for service of process will enter a general appearance on behalf of Retrocessionaires in the event such a suit shall be instituted. Further, pursuant to any statute of any state, territory or district of the United States of America which makes provision therefore, the Retrocessionaires hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract and hereby designate the agent for service of process as the firm to whom the said officer is authorized to mail such process or a true copy thereof. 12 ARTICLE 21 ---------- INDEMNIFICATION AND ERRORS AND OMISSIONS - ---------------------------------------- Any recitals in this Contract of the terms and provisions of the original policy or policies are merely descriptive and the Retrocessionaires are reinsuring, to the amounts herein provided, the obligations of the Company under the original policy or policies. The Company shall be the sole judge as to what shall constitute a claim or loss covered under its policy or policies and as to its liability thereunder and as to amount or amounts which it shall be proper for the Company to pay thereunder and the Retrocessionaires shall be bound by the judgment of the Company as to the liability and obligation of the Company under its policy or policies. Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to it hereunder if such delay, omission or error had not been made, provided such delay, omission or error is rectified immediately upon discovery. ARTICLE 22 ---------- INSOLVENCY - ---------- In the event of the insolvency of the Company, this reinsurance shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Retrocessionaires of the pendency of a claim against the Company indicating the policy or bond reinsured, which claim would involve a possible liability on the part of the Retrocessionaires within a reasonable time after such claim is flied in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Retrocessionaires may investigate such claim and interpose, at their own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that they may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Retrocessionaires shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Retrocessionaires. Where two or more Retrocessionaires are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of the reinsurance Contract as though such expense had been incurred by the Company. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Retrocessionaires to the Company or to its liquidator, receiver, conservator or statutory successor, except as provided by Sections 13 4118(a)(1)(A) and 1114(c) of the New York Insurance Law or except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, and (2) where the Retrocessionaires, with the consent of the direct insured or insureds, have assumed such policy obligations of the Company as direct obligations of the Retrocessionaires to the payees under such policies and in substitution for the obligations of the Company to such payees. Then, and in that event only, the Company, with the prior approval of the certificate of assumption on New York risks by the Superintendent of Insurance of the State of New York, is entirely released from its obligation and the Retrocessionaires pay any loss directly to payees under such policy. ARTICLE 23 ---------- ARBITRATION - ----------- As a precedent to any right of action hereunder, if any dispute shall arise between the parties to this Contract with reference to the interpretation of this Contract or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Contract, such dispute, upon the written request of either party, shall be submitted to three arbitrators, one to be chosen by each party, and the third by the two so chosen. If either party refuses or neglects to appoint an arbitrator within thirty days after the receipt of written notice from the other party requesting it to do so, the requesting party may appoint two arbitrators. If the two arbitrators fail to agree in the selection of a third arbitrator within thirty days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots. All arbitrators shall be executive officers of insurance or reinsurance companies or Underwriters at Lloyd's, London or their appointed representatives not under the control of either party to this Contract. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this Contract in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to its arbitrator within thirty days of the appointment of the third arbitrator. The decision in writing of any two arbitrators, when filed with the parties hereto, shall be final and binding on both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expense of the third arbitrator and of the arbitration. Said arbitration shall take place in the city in which the Company's Head Office is located unless some other place is mutually agreed upon by the parties to this Contract. 14 EXHIBIT A --------- FIRST CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $24,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $24,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $2,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III- Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $650,000 shall be paid to the Retrocessionaires in quarterly installments of $162,500 each payable at January 1, April 1, July 1, and October 1, 1994 adjustable at a rate of .05% of the Company's 1994 calendar year Gross Net Earned A1 Premium Income for Non-Standard Auto plus rate of 0.667% of 1994 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respect the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $2,000,000 with respect to any one loss occurrence and shall not exceed $4,000,000 with respect to all losses arising during the term of the Contract. A2 EXHIBIT B --------- SECOND CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $26,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $26,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $12,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III - Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $3,900,000 shall be paid to the Retrocessionaires in quarterly installments of $975,000 each payable at January 1, April 1, July 1 and October 1, 1994 adjustable at a rate of .30% of the Company's 1994 calendar year Gross Net B1 Earned Premium Income for Non-Standard Auto business plus rate of 4.0% of 1994 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $12,000,000 with respect to any one loss occurrence and shall not exceed $24,000,000 with respect to all losses arising during the term of the Contract. B2 EXHIBIT C --------- THIRD CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $38,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $38,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $10,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III- Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $2,575,000 shall be paid to the Retrocessionaires in quarterly installments of $643,750 each payable at January 1, April 1, July 1 and October 1, 1994, adjustable at a rate of .20% of the Company's 1994 calendar year Gross Net C1 Earned Premium Income for Non-Standard Auto business plus rate of 2.63 % of 1994 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $10,000,000 with respect to any one loss occurrence and shall not exceed $20,000,000 with respect to all losses arising during the term of the Contract. C2 EXHIBIT D --------- FOURTH CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $48,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $48,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $12,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III-Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $2,640,000 shall be paid to the Retrocessionaires in quarterly installments of $660,000 each payable at January 1, April 1, July 1 and October 1, 1994, adjustable at a rate of .20% of the Company's 1994 calendar year Gross Net D1 Earned Premium Income for Non-Standard Auto business plus rate of 2.70% of 1994 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $12,000,000 with respect to any one loss occurrence and shall not exceed $24,000,000 with respect to all losses arising during the term of the Contract. D2 INTERESTS AND LIABILITIES AGREEMENT to the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT between SCOR REINSURANCE COMPANY (hereinafter referred to as "Company") and SCOR SA Paris, France (hereinafter referred to as "Subscribing Retrocessionaire") It is hereby mutually agreed by and between the Company on the one part and the Subscribing Retrocessionaire on the other part that the Subscribing Retrocessionaire's share in the Interests and Liabilities of the Retrocessionaires as set forth in the Exhibits attached to and forming an integral part of the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT shall be for 12.50% of Exhibit A 19.16% of Exhibit B 7.50 % of Exhibit C 15.00% of Exhibit D 25.00% of Exhibit E The share of the Subscribing Retrocessionaire in the Interests and Liabilities of the Retrocessionaires in respect of the said Contract shall be separate and apart from the shares of the other Subscribing Retrocessionaires to the said Contract, and the Interests and Liabilities of the Subscribing Retrocessionaire shall not be joint with those of the other Subscribing Retrocessionaires and in no event shall the Subscribing Retrocessionaire participate in the Interests and Liabilities of the other Subscribing Retrocessionaires. This Interests and Liabilities Agreement shall take effect at 12:01 a.m., Eastern Standard Time, January 1, 1995 and shall remain in force until 12:01 a.m., Eastern Standard Time, January 1, 1996 but may be terminated in accordance with the provisions of the paragraph of ARTICLE 3, COMMENCEMENT AND TERMINATION, of the Catastrophe Excess of Loss Reinsurance Contract attached hereto. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed, in duplicate, by their duly authorized representatives this day of 1995. For and on behalf of: SCOR REINSURANCE COMPANY ------------------------------------------------------------ Sr. Vice President Assistant Vice President And on this day of , 1995. For and on behalf of: SCOR S.A. Paris, France ------------------------------------------------------------ EX-99.(C)(6) 11 Exhibit (c)(6) INTERESTS AND LIABILITIES AGREEMENT to the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT between SCOR REINSURANCE COMPANY (hereinafter referred to as "Company") and SCOR Reassurance Paris, France (hereinafter referred to as "Subscribing Retrocessionaire") It is hereby mutually agreed by and between the Company on the one part and the Subscribing Retrocessionaire on the other part that the Subscribing Retrocessionaire's share in the Interests and Liabilities of the Retrocessionaires as set forth in the Exhibits attached to and forming an integral part of the CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT shall be for 12.50% of Exhibit A 19.16% of Exhibit B 7.50% of Exhibit C 15.00% of Exhibit D 25.00% of Exhibit E The share of the Subscribing Retrocessionaire in the Interests and Liabilities of the Retrocessionaires in respect of the said Contract shall be separate and apart from the shares of the other Subscribing Retrocessionaires to the said Contract, and the Interests and Liabilities of the Subscribing Retrocessionaire shall not be joint with those of the other Subscribing Retrocessionaires and in no event shall the Subscribing Retrocessionaire participate in the Interests and Liabilities of the other Subscribing Retrocessionaires. This Interests and Liabilities Agreement shall take effect at 12:01 a.m., Eastern Standard Time, January 1, 1995 and shall remain in force until 12:01 a.m., Eastern Standard Time, January 1, 1996 but may be terminated in accordance with the provisions of the paragraph of ARTICLE 3, COMMENCEMENT AND TERMINATION, of the Catastrophe Excess of Loss Reinsurance Contract attached hereto. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed, in duplicate, by their duly authorized representatives this day of 1995. For and on behalf of: SCOR REINSURANCE COMPANY ---------------------------------------------------------------- Sr. Vice President Assistant Vice President And on this day of , 1995. For and on behalf of: SCOR Reassurance Paris, France ---------------------------------------------------------------- CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS ----------------- Article Page ------- ---- 1 Business Covered 1 2 Exclusions 1 3 Commencement and Termination 5 4 Extended Expiration 5 5 Insuring Clause 5 6 Premium 5 7 Reinstatement 5 8 Definition of "Loss Occurrence" 6 9 Extra Contractual Obligations Clause 6 10 Ultimate Net Loss 6 11 Warranty 7 12 Excess of Original Policy Limits 8 13 Net Retained Lines 8 14 War Inclusion Clause (Ocean Marine Only) 8 15 Notice of Loss and Loss Settlements 9 16 Loss Reserves 9 17 Reinsurance Tax 11 Federal Excise Tax 11 18 Currency 12 19 Access to Records 12 20 Service of Suit Clause 12 21 Indemnification and Errors and Omission 13 22 Insolvency 13 23 Arbitration 14 Exhibits: A1-A2, B1-B2, C1-C2, D1-D2 and El-E2. Attachments: Pools, Associations and Syndicates Exclusion Clause; Nuclear Energy Risks Exclusion Clause (Reinsurance) (1984) (Worldwide Excluding U.S.A. & Canada); Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A. and Canada; Nuclear Incident Exclusion Clause - Physical Damage and Liability (Boiler and Machinery Policies) - Reinsurance; - U.S.A. and Canada; Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A. and Canada; Insolvency Funds Exclusion Clause. Several Liability Notice. CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT (hereinafter referred to as "Contract") In consideration of the mutual covenants hereinafter contained and subject to all the terms and conditions hereinafter set forth VARIOUS INSURANCE AND/OR REINSURANCE COMPANIES AND/OR UNDERWRITING MEMBERS OF LLOYD'S (hereinafter collectively referred to as "Retrocessionaires") do hereby indemnify, as herein provided and specified, the SCOR REINSURANCE COMPANY (hereinafter referred to as "Company") ARTICLE 1 --------- BUSINESS COVERED - ---------------- This Contract shall indemnify the Company as set forth in the attached Exhibit(s) in respect of the excess liability which may accrue to the Company under all policies, bonds, binders and contracts, oral or written, (hereinafter referred to as "policy" or "policies" and/or "contract" or "contracts") covering all Treaty and Facultative reinsurance assumed by the Company including but not limited to the following classes of business: Fire, Extended coverage, other Allied Lines, Homeowners or Farmowners Multiple Peril, Commercial Multiple Peril, Earthquake, Boiler & Machinery, Automobile Physical Damage (excluding Collision), Inland Marine business (including pleasure watercraft classified as Inland Marine), Ocean Marine, and Workers Compensation and/or Employers Liability arising out of the Company's Property/Multi-line portfolio, subject to the exclusions set forth in ARTICLE 2, EXCLUSIONS and the other terms and conditions of this agreement as set forth herein. ARTICLE 2 --------- EXCLUSIONS - ---------- This Contract does not apply to and excludes from coverage hereunder: 1. Business written on behalf of, or as a member or direct reinsurer of any pools, syndicates and associations as per the "Pools Exclusions Clause". This exclusion shall not, however, apply as respects the Company's interest in the following: a) Allendale Mutual Insurance Company and its subsidiary companies; b) Arkwright Mutual Insurance Company and Arkwright Insurance Company; c) Improved Risk Mutuals; d) Industrial Risk Insurers; e) Protection Mutual Insurance Company; f) Starr Technical Risks Agency, Inc.; g) California Reinsurance Management Corporation; It is, however, understood and agreed that the amount of the Retrocessionaires' liability hereunder shall not be increased by reason of the failure of any other participant in any of the above-named pools, syndicates, or associations to meet its liability, nor shall any such liability be included in the Company's net retained liability for purposes of claim hereunder. 2. Nuclear Energy risks Exclusion Clause (Worldwide Excluding U.S.A. & Canada), N.M.A. 1975 Nuclear Incident Exclusion Clause - Liability - Reinsurance Nuclear Incident Exclusion Clause - Physical Damage and Liability (Boiler and Machinery Policies) - Reinsurance Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - Canada Nuclear Incident Exclusion Clause - Physical Damage and Liability (Boiler and Machinery Policies) - Reinsurance - Canada Nuclear Incident Exclusion Clause - Liability - Reinsurance - Canada (as per clauses attached). 3. Business written under policies, contracts, and binders of reinsurance which the Company elects to exclude hereunder, provided, however, that the Company shall properly identify each such policy, contract, and binder or reinsurance on its records at the time it is written (this Exclusion applies primarily to Banking and Funding Plans); 2 4. Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law or confiscation by order of any government or public authority, but the foregoing shall not apply to: (1) Workers' Compensation, Employers' Liability, Registered Mail or any other classes of business which are traditionally written without a War Exclusion Clause. (2) Ocean Marine business when war is an included peril, subject to the war inclusion clause of 1977 per ARTICLE 14, WAR INCLUSION CLAUSE IN RESPECT OCEAN MARINE. (3) Original Reinsurance Contracts or Original Policies containing a standard War Exclusion Clause. 5. Life Business. 6. Aviation business (including satellites). This exclusion shall not, however, exclude aviation business when assumed by the Company as an incidental portion of a multiple-line reinsurance contract that is otherwise covered hereunder; 7. Business classified as Surety, Financial Guarantee, Insolvency and Credit. 8. The Company's interest either direct or by way of reinsurance in loss arising from another party or parties. Notwithstanding the foregoing, this Contract shall not exclude: (a) Workers' Compensation and/or Employers' Liability arising from the following perils: Fire, Lightning, Explosion, Structural Collapse, Windstorm, Hail, Flood, Falling Objects, Seismic Activity, Volcanic Eruption, Collision, Riot, Strikes, Civil Commotion, Malicious Damage. (b) Any Physical Damage and/or Consequential Loss coverage contingent thereon effected by an insured on behalf of another party (this applies principally to care, custody and control exposures under bailee coverages). 9. Crop Hail business. 10. Losses arising, by contract, operation of law, or otherwise, whether voluntary or involuntary, under any insolvency fund. "Insolvency Fund" includes any 3 insolvency fund, guaranty fund, plan, pool, association, or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part. 11. LMX and reinsurance assumed business. 12. All losses which may be sustained by the Company howsoever and wheresoever arising including all Business Interruption, Consequential Loss and/or other contingent losses proximately caused by a peril insured in respect of the Company's exposures from: a. All marine business when written as such, howsoever not to exclude such exposures if they emanate from a multiline insurance contract and/or policy. b. All Offshore exposures arising from business of any description connected with the oil and/or gas and/or sulphur and/or uranium exploration and production industries in all their phases and including all associated support and/or service industries. "Offshore" shall be defined as: (1) That area encompassing locations covered by oceans or seas in which the water ebbs and flows and/or (2) Other navigable waters or waterways which shall mean any water which is in fact navigable by ships or vessels, whether or not the tide ebbs and flows there, and whether or not there is a public right of navigation in that water. 13. Losses from overhead transmission and distribution lines on a new and renewal basis. 14. All business of reassureds domiciled outside the United States, Canada and Bermuda and their possessions. However, not to exclude reassureds domiciled outside of these areas where the exposures are predominantly derived from the United States, Canada and Bermuda and their territories and possessions. 4 ARTICLE 3 --------- COMMENCEMENT AND TERMINATION - ---------------------------- The term of this Contract shall be from 12:01 a.m., Eastern Standard Time, January 1, 1995 to 12:01 a.m., Eastern Standard Time, January 1, 1996. In respect to all business covered hereunder except as provided for in the following paragraphs of this Article and except as provided for in Section I, Insuring Clause of the Exhibit(s), this Contract shall apply to all loss occurrences taking place during the term of this Contract. In the case of a missing vessel or aircraft the date of the loss occurrence shall be deemed to be the date on which the vessel or aircraft is posted as missing at Lloyd's or, in the case of a missing vessel or aircraft not so posted, the last known safe date. If any law or regulation of the federal, state or local government of any jurisdiction in which the Company is doing business shall render illegal the arrangements made in this Contract, this Contract can be terminated immediately, insofar as it applies to such jurisdiction, by the Company giving notice to the Retrocessionaires to such effect. ARTICLE 4 --------- EXTENDED EXPIRATION - ------------------- If this Contract terminates while a loss covered hereunder is in progress, it is agreed that, subject to the other conditions of this Contract, the Retrocessionaires shall indemnify the Company as if the entire loss had occurred during the term of this Contract. ARTICLE 5 --------- INSURING CLAUSE - --------------- See Section I of the Exhibit(s) attached hereto. ARTICLE 6 --------- PREMIUM - ------- See Section II of the Exhibit(s) attached hereto. ARTICLE 7 --------- REINSTATEMENT - ------------- See Section III of the Exhibit(s) attached hereto. 5 ARTICLE 8 --------- DEFINITION OF "LOSS OCCURRENCE" - ------------------------------- The term "loss occurrence" as used herein shall mean any one accident, casualty, disaster or occurrence, or series of accidents, casualties, disasters or occurrences arising out of or caused by one event regardless of the number of interests reinsured or the number of policies or contracts involved or the number or kinds of perils involved, subject to the warranties set forth in ARTICLE 11, WARRANTY. Furthermore, all losses arising out of or resulting from the same occurrence or disaster shall be considered one occurrence or one disaster. ARTICLE 9 --------- EXTRA CONTRACTUAL OBLIGATIONS CLAUSE - ------------------------------------ This Contract shall protect the Company within the limits hereof, where the ultimate net loss includes any extra contractual obligations. The term "extra contractual obligations" is defined as those liabilities not covered under any other provision of this Contract and which arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. In no event shall coverage be provided to the extent that such coverage is not permitted under New York State Insurance Law. The date on which any extra contractual obligation is incurred by the Company shall be deemed, in all circumstances, to be the date of the original disaster and/or casualty. However, this Article shall not apply where the loss has been incurred due to fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation of any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. ARTICLE 10 ---------- ULTIMATE NET LOSS - ----------------- The term "ultimate net loss" shall be understood to mean the actual loss or losses paid or payable by the Company under its contracts of reinsurance, and 80% of extra contractual obligations as defined in ARTICLE 9, EXTRA CONTRACTUAL OBLIGATIONS CLAUSE, and 100% of excess of policy limits losses as defined in ARTICLE 12, EXCESS OF ORIGINAL POLICY LIMITS CLAUSE, such loss or losses to include the Company's expenses of litigation 6 if any, and all other loss expenses covered under the Company's original policies, (including a pro rata share of salaries and expenses of the Company's field employees according to the time occupied in adjusting such loss and expenses of the Company's officials incurred in connection with the loss but salaries of officials and any office expenses of the Company shall not be included) less proper deductions for all recoveries (including amounts recoverable under other reinsurance except as stated in the following paragraph). All salvages, recoveries, and payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the said settlement and all necessary adjustments shall be made by the parties hereto. Notwithstanding the preceding paragraph, recoveries from Reinsurance afforded under the Company's Contingency Excess of Loss Cover and/or Per Risk Excess of Loss Cover shall be deducted when arriving at the ultimate net loss hereunder. Recoveries afforded from Aggregate or Stop Loss reinsurances, if any, as well as underlying catastrophe excess of loss covers, if any, shall be disregarded when arriving at the ultimate net loss hereunder. Whenever the Company or its ceding companies issue a lost instrument bond or a loss instrument letter of indemnity for salvage purposes or in lieu of loss payment under its policy, Retrocessionaires agree to accept liability under such bond or letter of indemnity in accordance with the terms of this Contract. ARTICLE 11 ---------- WARRANTY - -------- It is warranted that Retrocessionaires shall not be liable under this Contract unless two or more original risks are involved in the same loss occurrence. It is warranted that as respects Treaty business assumed by the Company, the maximum net line will be $2,000,000 any one program or so deemed. It is warranted the maximum amount of loss any one occurrence to be included in the Ultimate Net Loss hereon as respects each individual proportional treaty participation is limited to 2.5 times the premium income for each individual proportional treaty participation, or so deemed. The Company will be the sole judge as to what constitutes one risk and/or program. It is further warranted that the Company will retain net for its own account and unreinsured not less that 5% of the ultimate net loss covered hereunder, not including the Company's first loss retention hereunder. 7 ARTICLE 12 ---------- EXCESS OF ORIGINAL POLICY LIMITS - -------------------------------- This Contract shall protect the Company, within the limits hereof, in connection with ultimate net loss in excess of the limit of its original policy, such loss in excess of the limit having been incurred because of failure by it to settle within the policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. In no event shall coverage be provided to the extent that such coverage is not permitted under New York State Insurance Law. However, this Article shall not apply where the loss has been incurred due to fraud by a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. For the purposes of this Article, the word "loss" shall mean any amounts for which the Company would have been contractually liable to pay had it not been for the limit of the original policy. ARTICLE 13 ---------- NET RETAINED LINES - ------------------ This Contract applies only to that portion of any reinsurance which the Company retains net for its own account and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any reinsurance which the Company retains net for its own account shall be included. The amount of Retrocessionaires' liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other Retrocessionaires whether specific or general, any amounts which may have become due from them whether such inability arises from the insolvency of such other Retrocessionaires or otherwise. ARTICLE 14 ---------- WAR INCLUSION CLAUSE IN RESPECT OF OCEAN MARINE ONLY - ---------------------------------------------------- This Contract includes loss, damage, liability or expense caused by or resulting from the risks of War as covered in the original policy(ies) provided that such loss, damage, liability or expense would be recoverable under the terms and conditions of the Institute War Clauses in current use at the inception of this Contract or at the time when the War risks cover would have commenced under the original insurance within the terms of these clauses, whichever is the 8 earlier; except that if the risks of War are covered in the original policy(ies) under clauses approved by the London Hull War Risks Joint Sub- Committee, or in respect of Cargo interests, under the Standard War Risk Clause of any country which complies with the limitations of the United Kingdom Waterborne Agreement, the foregoing provision shall not apply. In the event of loss or losses occurring under War Inclusion Clause the indemnity under this Contract shall be automatically reinstated to its full amount from the time of such loss or losses until the next succeeding of the Contract Anniversary in accordance with the general reinstatement conditions (if any) of the Contract. Nevertheless, and irrespective of any other reinstatement conditions of the Contract, the Retrocessionaires shall never be liable for more than the indemnity provided hereunder in respect of any one loss occurring and in respect of all losses occurring during the term of this Contract. ARTICLE 15 ---------- NOTICE OF LOSS AND LOSS SETTLEMENTS - ----------------------------------- In the event of a loss occurrence which either results in or appears to be of serious enough nature as probably to result in a loss involving this Contract, the Company shall give notice as soon as reasonably practicable to Retrocessionaires. Subject to all the terms and conditions of this Contract, the Retrocessionaires agree to abide by the loss settlements of the Company, including any award resulting from an arbitration between the Company and its ceding companies under the terms of any underlying policies or contracts, such settlements to be considered as satisfactory proofs of loss, and amounts falling to the share of the Retrocessionaires shall be immediately payable to the Company by them upon reasonable evidence of the amount paid or payable by the Company being presented to Retrocessionaires. ARTICLE 16 ---------- LOSS RESERVES - ------------- (This clause applies to those Retrocessionaires who do not qualify for credit by any state or any other governmental authority having jurisdiction over the Company's loss reserves.) A: Where a Letter of Credit Trust Agreement is used, the following clause shall apply: It is agreed that when the Company files with the Insurance Department or establishes reserves for claims covered hereunder, as required by law, the Company will forward to the Retrocessionaires a statement showing the proportion of such loss reserves which is applicable to Retrocessionaires. The Retrocessionaires hereby agree to apply for and secure delivery to the Company of a clean, irrevocable and unconditional Letter of Credit, with a minimum term of one year, issued by Citibank, N.A., in a format acceptable to the governmental authority having jurisdiction over the Company's loss reserves in an amount equal to the Retrocessionaires' proportion of said loss reserves. 9 Under no circumstances shall any amount relating to reserves in respect of incurred but not reported losses be funded in the amount of the Letter of Credit. The foregoing shall not affect the Company's authority to draw upon the Letter of Credit to cover all obligations due or which become due to the Company under this Contract, including losses incurred but not reported, in the event that a nonrenewal or nonextension notice is received from the issuing bank. The Company and the Retrocessionaires agree that such Letter of Credit will be subject to the terms of a separate Letter of Credit Trust Agreement, and that said trust agreement shall be in a form acceptable to the governmental authority having jurisdiction over the Company's loss reserves. Citibank, N.A., shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to see that withdrawals are made only upon the order of properly authorized representatives of the Company. B: Where a Letter of Credit Trust Agreement is not used, the following clause shall apply: It is agreed that when the Company files with the Insurance Department or establishes reserves for claims covered under this Contract, as required by law, the Company will forward to the Retrocessionaires a statement showing the proportion of such loss reserves which is applicable to Retrocessionaires. The Retrocessionaires hereby agree to apply for and secure delivery to the Company of a clean, irrevocable and unconditional Letter of Credit, with a minimum term of one year, issued by Citibank, N.A., in a format acceptable to the governmental authority having jurisdiction over the Company's loss reserves in an amount equal to the Retrocessionaires' proportion of said loss reserves. Under no circumstances shall any amount relating to reserves in respect of incurred but not reported losses be funded in the amount of the Letter of Credit. The foregoing shall not affect the Company's authority to draw upon the Letter of Credit to cover all obligations due or which become due to the Company under this Contract, including losses incurred but not reported, in the event that a nonrenewal or nonextension notice is received from the issuing bank. The Company and the Retrocessionaires agree that the Letter of Credit provided by the Retrocessionaires under this provision may be drawn upon at any time, notwithstanding any other provisions in this Contract, and be utilized by the Company or any successor by operation of law of the Company, including, without limitation, any liquidator, rehabilitator, receiver or conservator of such insurer for the following purposes: (a) to reimburse the Company for the Retrocessionaires' share of surrenders and benefits or losses paid by the Company under the terms and provisions of the policies reinsured under this Contract, (b) to fund an account with the Company in an amount at least equal to the 10 deduction, for reinsurance ceded, from the Company's liabilities for policies ceded under this Contract. Such amount shall include, but not be limited to, amounts for policy reserves, reserves for claims and losses incurred (including losses incurred but not reported), and loss adjustment expenses, (c) to pay any other amounts the Company claims are due under this Contract, (d) to return any amounts drawn down on Letters of Credit in excess of the actual amounts required for (a) and (b) above, or in case of (c) above, any amounts which are subsequently determined not to be due. All of the foregoing should be applied without diminution because of insolvency on the part of the Company or Retrocessionaires. Citibank, N.A., shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to see that withdrawals are made only upon the order of properly authorized representatives of the Company. ARTICLE 17 ---------- REINSURANCE TAX - --------------- In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any State or Territory of the United States of America or to the District of Columbia. FEDERAL EXCISE TAX - ------------------ (This clause applies only to those Retrocessionaires, domiciled outside the United States of America who are not exempt from the Federal Excise Tax.) The Retrocessionaires have agreed to allow for the purpose of paying the Federal Excise Tax the percentage specified by United States law of the premium payable hereon to the extent such premium is subject to Federal Excise Tax. In the event of any return of premium becoming due hereunder, the Retrocessionaires will deduct the percentage specified by United States law from the amount of the return and the Company or its agent should take steps to recover the Tax from the United States Government. 11 ARTICLE 18 ---------- CURRENCY - -------- Wherever the word "Dollars" or the sign "$" appear in this Contract they shall be construed to mean United States Dollars. For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States currency, such premiums and losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums and losses are entered in the Company's books. ARTICLE 19 ---------- ACCESS TO RECORDS - ----------------- The Retrocessionaires or their duly designated representative shall have access to the books and records of the Company at all reasonable times for the purpose of obtaining information concerning this Contract or the subject matter thereof. ARTICLE 20 ---------- SERVICE OF SUIT CLAUSE - ---------------------- (This clause applies only to those Retrocessionaires not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States where authorization is required by insurance regulatory authorities.) It is agreed that in the event of the failure of the Retrocessionaires to pay any amount claimed to be due under this Contract, the Retrocessionaires, at the request of the Company, will submit to the jurisdiction of any court of competent jurisdiction within the United States of America and will comply with all requirements necessary to give such court jurisdiction; and all matters arising hereunder shall be determined in accordance with the law and practice of such court. Nothing in this Clause constitutes or should be understood to constitute a waiver of Retrocessionaires' rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. Service of process in such suit may be made upon Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019 (hereinafter, "agent for service of process") and in any suit instituted against any Retrocessionaire(s) upon this Contract, Retrocessionaire(s) will abide by the final decision of such court or of any appellate court in the event of an appeal. The above named are authorized and directed to accept service of process on behalf of Retrocessionaires in any such suit and/or upon the request of the Company to give a written 12 undertaking to the Company that the agent for service of process will enter a general appearance on behalf of Retrocessionaires in the event such a suit shall be instituted. Further, pursuant to any statute of any state, territory or district of the United States of America which makes provision therefor, the Retrocessionaires hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract and hereby designate the agent for service of process as the firm to whom the said officer is authorized to mail such process or a true copy thereof. ARTICLE 21 ---------- INDEMNIFICATION AND ERRORS AND OMISSIONS - ---------------------------------------- Any recitals in this Contract of the terms and provisions of the original policy or policies are merely descriptive and the Retrocessionaires are reinsuring, to the amounts herein provided, the obligations of the Company under the original policy or policies. The Company shall be the sole judge as to what shall constitute a claim or loss covered under its policy or policies and as to its liability thereunder and as to amount or amounts which it shall be proper for the Company to pay thereunder and the Retrocessionaires shall be bound by the judgment of the Company as to the liability and obligation of the Company under its policy or policies. Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to it hereunder if such delay, omission or error had not been made, provided such delay, omission or error is rectified immediately upon discovery. ARTICLE 22 ---------- INSOLVENCY - ---------- In the event of the insolvency of the Company, this reinsurance shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Retrocessionaires of the pendency of a claim against the Company indicating the policy or bond reinsured, which claim would involve a possible liability on the part of the Retrocessionaires within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Retrocessionaires may investigate such claim and interpose, at their own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that they may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the 13 Retrocessionaires shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Retrocessionaires. Where two or more Retrocessionaires are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of the reinsurance Contract as though such expense had been incurred by the Company. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Retrocessionaires to the Company or to its liquidator, receiver, conservator or statutory successor, except as provided by Sections 4118(a)(1)(A) and 1114(c) of the New York Insurance Law or except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, and (2) where the Retrocessionaires, with the consent of the direct insured or insureds, have assumed such policy obligations of the Company as direct obligations of the Retrocessionaires to the payees under such policies and in substitution for the obligations of the Company to such payees. Then, and in that event only, the Company, with the prior approval of the certificate of assumption on New York risks by the Superintendent of Insurance of the State of New York, is entirely released from its obligation and the Retrocessionaires pay any loss directly to payees under such policy. ARTICLE 23 ---------- ARBITRATION - ----------- As a precedent to any right of action hereunder, if any dispute shall arise between the parties to this Contract with reference to the interpretation of this Contract or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Contract, such dispute, upon the written request of either party, shall be submitted to three arbitrators, one to be chosen by each party, and the third by the two so chosen. If either party refuses or neglects to appoint an arbitrator within thirty days after the receipt of written notice from the other party requesting it to do so, the requesting party may appoint two arbitrators. If the two arbitrators fail to agree in the selection of a third arbitrator within thirty days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots. All arbitrators shall be executive officers of insurance or reinsurance companies or Underwriters at Lloyd's, London or their appointed representatives not under the control of either party to this Contract. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this Contract in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to its arbitrator within thirty days of the appointment of the third arbitrator. 14 The decision in writing of any two arbitrators, when filed with the parties hereto, shall be final and binding on both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expense of the third arbitrator and of the arbitration. Said arbitration shall take place in the city in which the Company's Head Office is located unless some other place is mutually agreed upon by the parties to this Contract. 15 EXHIBIT A --------- FIRST CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $20,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $20,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $6,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III - Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $2,400,000 shall be paid to the Retrocessionaires in quarterly installments of $600,000 each payable at January 1, April 1, July 1, and October 1, 1994 adjustable at a rate of .425 % of the Company's 1995 calendar year Gross Net Earned A1 Premium Income for Non-Standard Auto plus rate of 3.20% of 1995 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respect the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $6,000,000 with respect to any one loss occurrence and shall not exceed $12,000,000 with respect to all losses arising during the term of the Contract. A2 EXHIBIT B --------- SECOND CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $26,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $26,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $6,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III - Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $2,100,000 shall be paid to the Retrocessionaires in quarterly installments of $525,000 each payable at January 1, April 1, July 1 and October 1, 1995 adjustable at a rate of .40% of the Company's 1995 calendar year Gross Net B1 Earned Premium Income for Non-Standard Auto business plus rate of 2.8 % of 1995 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $6,000,000 with respect to any one loss occurrence and shall not exceed $12,000,000 with respect to all losses arising during the term of the Contract. B2 EXHIBIT C --------- THIRD CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $32,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $32,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $6,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III - Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $1,950,000 shall be paid to the Retrocessionaires in quarterly installments of $487,500 each payable at January 1, April 1, July 1 and October 1, 1995, adjustable at a rate of .35% of the Company's 1995 calendar year Gross Net C1 Earned Premium Income for Non-Standard Auto business plus rate of 2.60% of 1995 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $6,000,000 with respect to any one loss occurrence and shall not exceed $12,000,000 with respect to all losses arising during the term of the Contract. C2 EXHIBIT D --------- FOURTH CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $38,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $38,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $10,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III - Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $2,950,000 shall be paid to the Retrocessionaires in quarterly installments of $737,500 each payable at January 1, April 1, July 1 and October 1, 1994, adjustable at a rate of .55% of the Company's 1995 calendar year Gross Net D1 Earned Premium Income for Non-Standard Auto business plus rate of 3.93% of 1995 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $10,000,000 with respect to any one loss occurrence and shall not exceed $20,000,000 with respect to all losses arising during the term of the Contract. D2 EXHIBIT E --------- FOURTH CATASTROPHE EXCESS OF LOSS COVER -------------------- SECTION I - INSURING CLAUSE --------------------------- 1. As respects the ultimate net loss of the Company arising out of each loss occurrence covered hereunder on which the Company has paid or advanced, or agreed to pay or advance, or becomes liable to pay to or on behalf of its reinsured an amount in excess of $48,000,000 ultimate net loss, the Retrocessionaires shall pay to the Company the amount the excess of $48,000,000 ultimate net loss in respect of each loss occurrence but the amount recoverable hereunder shall not exceed $12,000,000 in respect of each such loss occurrence; and the Retrocessionaires' liability shall be further subject to the limitations set forth in Section III - Reinstatement. 2. It is further agreed, the term "each loss occurrence" shall also include all losses under aggregate and/or stop loss contracts assumed by the Company irrespective of the time of loss or losses occurring under such contracts providing that all or a portion of said losses occur during the time of this Contract is in force. The proportion of such loss or losses that form a part of the Company's ultimate net loss under this Contract shall be the proportion of the whole aggregate recovery that the original ceding Reinsured's individual catastrophe loss bears to its total losses used in arriving at aggregate loss recoveries. 3. The Company shall have the option to extract from one or more aggregate policies or contracts the amount of loss sustained by the Company arising from one occurrence or series of occurrences arising out of one event in order that such loss can be added to the Company's losses from accidents or series of accidents arising from the same event on other policies or contracts provided the loss occurs during the term of this Contract and subject to the terms of paragraph 4 below. 4. For the purpose of paragraph 3 above, the amount of loss resulting from one occurrence or series of occurrences arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Company on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original insured or reinsured on the business protected. SECTION II - PREMIUM -------------------- An annual minimum and deposit premium of $3,000,000 shall be paid to the Retrocessionaires in quarterly installments of $750,000 each payable at January 1, April 1, July 1 and October 1, 1994, adjustable at a rate of .55% of the Company's 1995 calendar year Gross Net E1 Earned Premium Income for Non-Standard Auto business plus rate of 4.00% of 1995 calendar year Gross Net Earned Premium Income for all other business. For the purpose of adjusting the premium for each layer of this catastrophe program, the Net Earned Premium Income shall be the premium as accounted for during the reinsurance period net after all original deductions and after deduction of the cost of reinsurance which inures to the benefit of reinsurers hereunder. It is furthermore agreed that for the purpose of adjustment, the Earned Premium Income shall be composed of the premium of all classes underwritten by the Company except for premiums attributable to casualty business and as per Exclusion No. 3 in Article 2 of the Contract Wording attached hereto. It is nevertheless agreed that such exclusion of casualty premiums shall in no way limit the coverage as respects Workers' Compensation as afforded under this program. SECTION III - REINSTATEMENT --------------------------- Each loss hereon reduces the amount of indemnity provided under this Contract by the amount paid. Any amount so exhausted shall be automatically reinstated from the time of occurrence of the loss and for each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium as respects the fraction of indemnity exhausted and 100% of the annual premium as respects the unexpired term of this Contract, regardless of the time of loss, to be paid simultaneously with the payment of loss by the Retrocessionaires. Nevertheless, Retrocessionaires' liability shall not exceed $12,000,000 with respect to any one loss occurrence and shall not exceed $24,000,000 with respect to all losses arising during the term of the Contract. E2 EX-99.(C)(7) 12 Exhibit (c)(7) CREDIT AGREEMENT US $20,000,000 SCOR U.S. CORPORATION Borrower SCOR S.A. Lender January 24, 1995 This Credit AGREEMENT, dated January 24, 1995, between SCOR U.S. Corporation, a Delaware Corporation, with its principal office at 110 William Street, New York, NY, (the "Borrower"), and SCOR S.A. a company incorporated in France with its head office in PUTEAUX - Hauts de Seine- France, Avenue du President Wilson, (the "Lender"), sets forth the binding Agreement of the parties. SECTION 1. INTERPRETATIONS AND DEFINITIONS ------------------------------- 1.01 Definitions ----------- The following terms, as used herein, shall have the following respective meanings: "Commitment" means the obligation of the Lender to lend the amount set forth in Section 2.1 hereof. "Convertible Subordinated Debentures" means the 5-1/4% convertible subordinated debentures due April 1, 2000 issued by Borrower. "Control" (including, with its correlative meanings, "controlled by" and "under common control with") means, with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of the management or policies of such Person. "Debt" means at any date, without duplication, (i) all obligations for borrowed money, including, without limitation, reimbursement obligations related to letters of credit, and (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time, or both, would unless cured or waived become an Event of Default. "Dollars" and the sign "$" mean lawful money of the United States of America. "Business Day" means any day, except a Saturday or Sunday or other day on which commercial banks in New York City are open. "Interest Period" means: with respect to each Loan, the period commencing on the date of such Loan and ending 3 months thereafter, with a new Interest Period commencing at the end of each such 3 month period and each succeeding 3 month period thereafter. 2 "London Interbank Offered Rate" has the meaning set forth in Section 2.04 hereof. "Note" means the promissory note of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans. "Notice" shall mean notice delivered by a party to this Agreement to the other party hereto in the manner provided in Section 7.06. "Repayment Date" shall mean the earlier of the period ending 5 years from the date of each Loan, or the end of the applicable Interest Period immediately preceding December 31, 2000. "Revolving Credit Period" means the period from and including the date of the execution of this Agreement to and including the Termination Date. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Termination Date" means the earlier of December 31, 2000, or termination of the Commitment pursuant to Section 2.06 or 2.07 hereof. SECTION 2. THE LOAN -------- 2.01 Agreement to Lend ----------------- During the Revolving Credit Period the Lender agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time in amounts not exceeding in the aggregate at any one time outstanding $20,000,000 (the "Commitment"). The initial Loan under this Section 2.01 shall be in the minimum principal amount of $5,000,000 and each Loan thereafter shall be in the minimum principal amount of $2,000,000 or any $1,000,000 multiple in excess thereof (except that any such Loan may be in the amount of the unused Commitment). During such Period and within the foregoing limits, the Borrower may borrow under this Section 2.01, repay or, to the extent permitted by Section 2.05 hereof, prepay Loans and reborrow under this Section 2.01. 2.02 Method of Borrowing ------------------- (a) With respect to each Loan made pursuant to Section 2.01 hereof, the borrower shall give the Lender written notice not later than 10:00 a.m. (New York City time) five (5) Business Days before each Loan, specifying: (i) the date of such Loan, which shall be a Business Day; and (ii) the principal amount of such Loan. 3 (b) On the date of each Loan the Lender will make the proceeds thereof available to the Borrower by depositing the proceeds of such Loan in the account of the Borrower, at the Bank designated by the Borrower from time to time, by the time requested by the Borrower; provided, however, that such time is not earlier than 9:00 a.m. (New - -------- York City time). 2.03 The Note -------- The Loans shall be evidenced by a single Note in the form of Exhibit A hereto, payable to the order of the Lender. Such Note shall be dated on or before the date of the first Loan and shall set forth the Commitment as the maximum principal amount thereof. 2.04 Interest -------- Each Loan shall bear interest on the principal amount thereof, for each day from the date such Loan is made to the date on which it becomes due. Interest for each Loan during the applicable Interest Period shall be at a rate equal to the sum of the Margin plus the applicable three (3) month London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof; provided, however, if not less than two (2) days prior to the -------- ------- end of such Interest Period, Borrower has given Lender notice of its intent to include such interest in the outstanding principal balance of the applicable Loan, then any interest on any Loan shall be added to the outstanding principal balance and shall bear interest at the rate of interest applicable to such Loan. The "Margin" means 1/2 of 1%. The "London Interbank Offered Rate" applicable to any Interest Period means the rate at which 3 month deposits in Dollars are offered in the London Interbank market based on quotations at five major banks at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. 2.05 Optional Prepayments -------------------- The Borrower may, at the end of an Interest Period and upon at least two (2) Business Day's notice to the Lender, prepay any Loan without premium or penalty in whole or in part in amounts aggregating $1,000,000 or any multiple thereof by paying the principal amount being prepaid together with accrued interest thereon to the date of prepayment. 2.06 Mandatory Termination --------------------- The Commitment shall terminate on the Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. 4 2.07 Optional Termination or Reduction of Commitment ----------------------------------------------- During the Revolving Credit Period the Borrower may, upon at least three Business Days' notice to the Lender terminate the Commitment at any time, if no Loans are outstanding at such time; or may reduce the Commitment to an amount not less than the aggregate amount of Loans outstanding. 2.08 General Provisions as to Payments --------------------------------- Except as permitted by Section 2.05 hereof payment of principal of, and interest on, the Loans shall be due on the Repayment Date. The Borrower shall make each payment of principal of, and interest on, the Loans hereunder not later than 11:00 a.m. (New York City time) on the date when due by depositing the funds in the account of Lender at the New York City branch of a bank designated by Lender. Whenever any payment of principal of, or interest on, the Loans shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day unless as a result thereof it would fall in the next calendar month, in which case it shall be advanced to the next preceding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest shall be payable for such extended time. SECTION 3. CONDITIONS ---------- 3.01 Initial Loan ------------ The obligation of the Lender to make the initial Loan hereunder shall be subject to the satisfaction by the Borrower of the following conditions: (a) receipt by the Lender of counterparts hereof signed by the Borrower; (b) receipt by the Lender of a duly executed Note dated on or before the date of the initial Loan complying with the provisions of Section 2.03 hereof. 3.02 All Loans --------- The obligation of the Lender to make a Loan on the occasion of any borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Lender of the notice from the Borrower required by Section 2.02 hereof; and 5 (b) the fact that, immediately after such Loan, no Default shall have occurred and be continuing. SECTION 4. PURPOSES OF LOANS ----------------- 4.01 Use of Proceeds --------------- The Borrower will not use the proceeds of any Loans for any purposes other than: (a) the redemption of Convertible Subordinated Debentures issued by the Borrower; or (b) to refund any Debt incurred by Borrower, including but not limited to a Loan, for such redemption. SECTION 5. EVENTS OF DEFAULT ----------------- 5.01 Events of Default ----------------- Each of the following events and occurrences shall constitute an Event of Default under this Agreement: (a) Payment Default. The Borrower fails for any reason --------------- whatsoever to make payment of any amount under this Agreement on the date on which such amount is due and payable whether by the terms hereof or by acceleration and continuance of such failure for five business days. Acceptance of partial payment shall not constitute a waiver of the failure to make payment in full. (b) Representation Default. If any one or more of the following ---------------------- events ("Events of Default") shall have occurred and be continuing: (i) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement other than that covered by Section 5.01(a) for 30 days after written notice thereof has been given to the Borrower by the Lender; or (ii) the Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make case or other proceeding commenced against it, or 6 shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (iii) an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect. 5.02 Consequences of Default ----------------------- If an Event of Default shall occur and be continuing beyond any grace period permitted therefor, the Lender may, by Notice to the Borrower, declare the outstanding amount of the Commitment together with accrued interest and other sums payable hereunder to be immediately due and payable without presentment, demand or notice of any kind other than the Notice specifically required by this Section, all other notice being expressly waived by the Borrower. If an Event of Default shall occur, such default may be waived by Notice from the Lender. SECTION 6. LOAN ADMINISTRATION ------------------- 6.01 Term ---- The term of this Agreement shall commence on January 24, 1995 and shall end upon payment in full of all principal, interest and other sums payable by the Borrower in respect of this Agreement which payment in full shall occur at the latest on December 31, 2000. SECTION 7. MISCELLANEOUS ------------- 7.01 Legal Action and Governmental and Corporate Approvals ----------------------------------------------------- Borrower and Lender each represent and warrant that they have taken all necessary legal and corporate action to authorize the execution and delivery of this Agreement, and there are no governmental approvals required on the part of either in connection therewith or for the performance by the Borrower or Lender of its obligations under this Agreement. This Agreement constitutes a valid and binding agreement of the parties. 7 7.02 Entire Agreement and Amendment ------------------------------ This Agreement, together with the Note of even date constitute the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior expressions of intent or understanding with respect to this transaction. This Agreement may be amended, or the benefit of any provisions hereof may be waived, only by an instrument in writing executed by both parties hereto. 7.03 Cumulative Rights and Waiver ---------------------------- The failure or delay of the Lender to require performance by the Borrower or to enforce its rights under any provision of this Agreement shall not affect its right to require performance and to enforce its rights with respect to such provision unless and until such performance has been waived in writing by the Lender. Any waiver of an Event of Default shall be effective only in accordance with its terms and may be restricted or conditioned in any way. No waiver of any event of Default shall constitute a waiver of continuance or reoccurrence of such Event of Default or of any other Event of Default except as provided in such waiver. The rights granted to the Lender hereunder or under any other document or instrument delivered hereunder and any rights available to it at law or in equity shall be cumulative and may be exercised in part or in whole from time to time. 7.04 Assignment ---------- This Agreement and the Note shall be binding upon and shall be enforceable by the Borrower and the Lender and their respective successors, except that neither party has any right to assign or transfer its rights or obligations hereunder. 7.05 Governing Law ------------- This Agreement shall be governed by and interpreted in accordance with the Laws of the Republic of France. The Borrower irrevocably submits to the non-exclusive jurisdiction of the Tribunal de Commerce of Nanterre (Hauts de Seine) over any suit, action or proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and waives, to the fullest extent it may effectively do so under applicable law, any objection which it may have or hereafter have to the laying of the venue of any such suit, action, proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that a final judgment in any such suit, action or proceeding may be enforced in the above courts and any other court of the jurisdiction of which the Borrower is or may be subject by a suit upon such judgment, provided that service of process is effected on the Borrower in the manner specified below or as otherwise permitted by law. 8 The Borrower consents to process being served in any suit, action or proceeding of the nature referred to above by the mailing of a copy thereof by registered or certified airmail postage prepaid, return receipt requested, to its address, set forth in Section 7.06, or to any other address of which the Borrower shall have given written notice to the Lender. Nothing herein shall affect the right of the Lender to serve process in any other manner permitted by law, or limit the right of the Lender to bring proceedings against the Borrower in the court of any other jurisdiction. 7.06 Notices ------- (a) Any Notice required or permitted to be given hereunder shall be in writing and shall be (i) personally delivered, (ii) transmitted by postage prepaid mail (airmail if international), or (iii) transmitted by telex or telefax to the parties as follows, as elected by the party giving such Notice: To the Borrower: SCOR U.S. Corporation 110 William Street New York, New York 10038 Attn: Treasurer To the Lender: SCOR S.A. - Immeuble SCOR One Avenue du President Wilson Cedex 39 92074 Paris La Defense 8, France Attn: Francois Reach (b) All Notices and other communications shall be effective on (i) the date of receipt if delivered personally, (ii) the date of receipt if transmitted by telex or telefax, whichever shall first occur. Any party may change its address for purposes hereof by Notice to the other party. 9 7.07 Headings -------- The section and subsection headings used herein have been inserted for convenience of reference only and do not constitute matters to be considered in interpreting this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized signatories in New York on the date first written above. BORROWER: SCOR U.S. CORPORATION By: ------------------------------- Name: Jeffrey D. Cropsey Title: Senior VP & Chief Financial Officer LENDER: SCOR S.A. By: ------------------------------- Name: Francois Reach Title: Deputy General Manager 10 Exhibit A NOTE U.S. $20,000,000 January 24, 1995 New York, New York FOR VALUE RECEIVED, SCOR U.S. CORPORATION, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of SCOR S.A. (the "Lender"), the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the Repayment Date relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States of America in Federal or other immediately available funds at One Avenue du President Wilson, Cedex 39, 92074 Paris La Defense 8, France or such other place as may be designated in writing from time to time by Lender. All Loans made by the Lender, the respective maturities thereof and all of the principal thereof shall be recorded by the Lender and, with respect to each such Loan then outstanding shall be endorsed by the Lender on the schedule attached hereto and made a part hereof; provided that the failure of the Lender to make any such recordation - -------- or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is the Note referred to in the Credit Agreement dated as of January 24, 1995, between the Borrower and the Lender (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. SCOR U.S, CORPORATION By: ------------------------------- Title: Senior V.P. and Chief Financial Officer 11
LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Amount Amount of of Principal Maturity Notation Date Loan Repaid Date Made by - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------
EX-99.(C)(8) 13 Exhibit (c)(8) LOAN AGREEMENT U.S.$20,000,000 SCOR U.S. CORPORATION Borrower SCOR S.A. Lender October 2, 1995 This Loan AGREEMENT, dated October 2, 1995, between SCOR U.S. Corporation, a Delaware Corporation, with its principal office at 2 World Trade Center, New York, NY, (the "Borrower"), and SCOR S.A. a company incorporated in France with its head office in PUTEAUX - Hauts de Seine - France, Avenue du President Wilson, (the "Lender"), sets forth the binding Agreement of the parties. SECTION 1. INTERPRETATIONS AND DEFINITIONS ------------------------------- 1.01 Definitions ----------- The following terms, as used herein, shall have the following respective meanings: "Borrower" means Scor U.S. Corporation. "Business Day" means any day, except a Saturday or Sunday or other day on which commercial banks in New York City are not open. "Control" (including, with its correlative meanings, "controlled by" and "under common control with") means, with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of the management or policies of such Person. "Debt" means at any date, without duplication, (i) all obligations for borrowed money, including, without limitation, reimbursement obligations related to letters of credit, and (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time, or both, would unless cured or waived become an Event of Default. "Dollars" and the sign "$" mean lawful money of the United States of America. "Interest Period" means the period commencing on the date of this Agreement and ending 3 months thereafter, with a new Interest Period commencing at the end of each such 3 month period and each succeeding 3 month period thereafter until the principal is repaid. "Lender" means Scor S.A. "Loan" shall mean the aggregate principal amount advanced by the Lender as a loan to the Borrower hereunder or, where the context so requires, the amount thereof then outstanding. "London Interbank Offered Rate" has the meaning set forth in Section 2.04 hereof. "Note" means the promissory note of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loan. 2 "Notice" shall mean notice delivered by a party to this Agreement to the other party hereto in the manner provided in Section 7.06. "Original Period" means the period commencing October 2, 1995 and ending October 2, 1996. "Renewal Period" means the one (1) year period commencing October 2nd 1996 and ending October 2, 1997. "Repayment Date" shall mean October 2, 1996 or October 2, 1997. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. SECTION 2. THE LOAN -------- 2.01 Agreement to Lend ----------------- The Lender hereby agrees, on the terms and conditions set forth in this Agreement, to lend to the Borrower and Borrower hereby agrees to borrow, the principal sum of $20,000,000 ( the "Loan"). 2.02 Method of Borrowing ------------------- On the date of this Agreement the Lender will make the proceeds of the Loan available to the Borrower by depositing the proceeds of such Loan in the account of the Borrower, at the Bank designated by the Borrower as of the date hereof by the time requested by the Borrower; provided, however, -------- that such time is not earlier than 2:00 p.m. (New York City time). 2.03 The Note -------- The Loan shall be evidenced by a single Note in the form of Exhibit A hereto, payable to the order of the Lender. Such Note shall be dated as of the date hereof. 2.04 Interest -------- The Loan shall bear interest on the outstanding principal amount for each day from the date the Loan is made to the date on which it is repaid in full. Interest for the Loan during the applicable Interest Period shall be at a rate equal to the sum of the Margin plus the applicable three (3) month London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof; provided, however, if not less than two (2) days prior to the end of such Interest Period, Borrower has given Lender notice of its intent to include such interest in the outstanding principal balance of the Loan, then any interest on the Loan shall be added to the outstanding principal balance and shall bear interest at the applicable rate of interest. 3 The "Margin" means 2/10 of 1%. The "London Interbank Offered Rate" applicable to any Interest Period means the rate at which 3 month deposits in Dollars are offered in the London Interbank market based on quotations at five major banks at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. 2.05 Repayment of the Loan --------------------- The Borrower shall repay the Loan (together with accrued interest thereon) on the Repayment Date. 2.06 Optional Prepayments --------------------- The Borrower may, at the end of an Interest Period and upon at least thirty (30) day's notice to the Lender, prepay the Loan without premium or penalty in whole or in part in amounts aggregating $1,000,000 or any multiple thereof by paying the principal amount being prepaid together with accrued interest thereon to the date of prepayment. 2.07 Loan Termination and Renewal ---------------------------- The term of the Loan shall be a period of one (1) year commencing October 2, 1995 and ending October 2, 1996, subject to renewal for an additional term of one (1) year upon not less than sixty (60) days written notice prior to the expiration of the Original Period from Borrower to Lender of its intention to renew the Loan. In the event such notice is not given the Loan shall terminate. Upon termination of the Loan Borrower shall repay the Loan in accordance with Sections 2.05 and 2.08 hereof 2.08 General Provisions as to Payments --------------------------------- Except as permitted by Section 2.06 hereof payment of principal of, and interest on, the Loan shall be due on the Repayment Date. The Borrower shall make payments of principal of, and interest on, the Loan not later than 11:00 a.m. (New York City time) on the date when due by depositing the funds in the account of Lender at the New York City branch of a bank designated by Lender. Whenever any payment of principal of, or interest on, the Loan shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day unless as a result thereof it would fall in the next calendar month, in which case it shall be advanced to the next preceding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest shall be payable for such extended time. 4 SECTION 3. CONDITIONS -------- 3.01 Initial Loan. ------------- The obligation of the Lender to make the Loan hereunder shall be subject to the satisfation by the Borrower of the following conditions: (a) receipt by the Lender of counterparts hereof signed by the Borrower: (b) receipt by the Lender of a duly executed Note dated on or before the date of the initial Loan complying with the provisions of Section 2.03 hereof. SECTION 4. PURPOSES OF LOAN ---------------- 4.01 Use of Proceeds --------------- The Borrower will not use the Loan proceeds for any purposes other than repayment of its Debt to Banque Worms under an agreement dated October 4, 1990. SECTION 5. EVENTS OF DEFAULT ----------------- 5.01 Events of Default ----------------- Each of the following events and occurrences shall constitute an Event of Default under this Agreement: (a) Payment Default. The Borrower fails for any reason whatsoever to ----------------- make payment of any amount under this Agreement on the date on which such amount is due and payable whether by the terms hereof or by acceleration and continuance of such failure for five business days. Acceptance of partial payment shall not constitute a waiver of the failure to make payment in full. (b) Representation Default. If any one or more of the following events ----------------------- ("Events of Default") shall have occurred and be continuing: (i) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement other than that covered by Section 5.01(a) for 30 days after written notice thereof has been given to the Borrower by the Lender; or (ii) the Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or 5 (iii) an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect. SECTION 6.CONSEQUENCES OF DEFAULT ----------------------- 6.01 Consequences of Default ----------------------- If an Event of Default shall occur and be continuing beyond any grace period permitted therefor, the Lender may, by Notice to the Borrower, declare the outstanding amount of the Commitment together with accrued interest and other sums payable hereunder to be immediately due and payable without presentment, demand or notice of any kind other than the Notice specifically required by this Section, all other notice being expressly waived by the Borrower. If an Event of Default shall occur, such default may be waived by Notice from the Lender. SECTION 7.LOAN ADMINISTRATION ------------------- 7.01 Term of Agreement ------------------ The term of this Agreement shall commence on October 2, 1995 and shall end upon payment in full of all principal, interest and other sums payable by the Borrower in respect of this Agreement, but in no event later than October 2, 1997. SECTION 7.MISCELLANEOUS ------------- 7.01 Legal Action and Governmental and Corporate Approvals ----------------------------------------------------- Borrower and Lender each represent and warrant that they have taken all necessary legal and corporate action to authorize the execution and delivery of this Agreement, and there are no governmental approvals required on the part of either in connection therewith or for the performance by the Borrower or Lender of its obligations under this Agreement. This Agreement constitutes a valid and binding agreement of the parties. 7.02 Entire Agreement and Amendment ------------------------------ This Agreement, together with the Note of even date constitute the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior expressions of intent or understanding with respect to this transaction. This Agreement may be amended, or the benefit of any provisions hereof may be waived, only by an instrument in writing executed by both parties hereto. 6 7.03 Cumulative Rights and Waiver ---------------------------- The failure or delay of the Lender to require performance by the Borrower or to enforce its rights under any provision of this Agreement shall not affect its right to require performance and to enforce its rights with respect to such provision unless and until such performance has been waived in writing by the Lender. Any waiver of an Event of Default shall be effective only in accordance with its terms and may be restricted or conditioned in any way. No waiver of any Event of Default shall constitute a waiver of continuance or reoccurrence of such Event of Default or of any other Event of Default except as provided in such waiver. The rights granted to the Lender hereunder or under any other document or instrument delivered hereunder and any rights available to it at law or in equity shall be cumulative and may be exercised in part or in whole from time to time. 7.04 Assignment ---------- This Agreement and the Note shall be binding upon and shall be enforceable by the Borrower and the Lender and their respective successors, except that neither party has any right to assign or transfer its rights or obligations hereunder. 7.05 Governing Law ------------- This Agreement shall be governed by and interpreted in accordance with the Laws of the Republic of France. The Borrower irrevocably submits to the non-exclusive jurisdiction of the Tribunal de Commerce of Nanterre (Hauts de Seine) over any suit, action or proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and waives, to the fullest extent it may effectively do so under applicable law, any objection which it may have or hereafter have to the laying of the venue of any such suit, action, proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that a final judgment in any such suit, action or proceeding may be enforced in the above courts and any other court of the jurisdiction of which the Borrower is or may be subject by a suit upon such judgment, provided that service of process is effected on the Borrower in the manner specified below or as otherwise permitted by law. The Borrower consents to process being served in any suit, action or proceeding of the nature referred to above by the mailing of a copy thereof by registered or certified airmail postage prepaid, return receipt requested, to its address, set forth in Section 7.06, or to any other address of which the Borrower shall have given written notice to the Lender. Nothing herein shall affect the right of the Lender to serve process in any other manner permitted by law, or limit the right of the Lender to bring proceedings against the Borrower in the court of any other jurisdiction. 7.06 Notices ------- 7 (a) Any Notice required or permitted to be given hereunder shall be in writing and shall be (i) personally delivered,(ii) transmitted by postage prepaid mail (airmail if international), or (iii) transmitted by telex or telefax to the parties as follows, as elected by the party giving such Notice: To the Borrower: SCOR U.S. Corporation 2 World Trade Center New York, New York 10045 Attn: Treasurer To the Lender: SCOR S.A. - Immeuble SCOR One Avenue du President Wilson Cedex 39 92074 Paris La Defense 8, France Attn: Francois Reach (b) All Notices and other communications shall be effective on (i) the date of receipt if delivered personally, (ii) the date of receipt if transmitted by telex or telefax, whichever shall first occur. Any party may change its address for purposes hereof by Notice to the other party. 7.07 Headings -------- The section and subsection headings used herein have been inserted for convenience of reference only and do not constitute matters to be considered in interpreting this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized signatories in New York on the date first written above. BORROWER: SCOR U.S. CORPORATION By: /s/ Jeffrey D. Cropsey ------------------------------------------- Name: Jeffrey D. Cropsey Title:Senior V.P. & Chief Financial Officer LENDER: SCOR S.A. By: /s/ Francois Reach ------------------------------------------- Name: Francois Reach Title: Deputy General Manager 8 Exhibit A NOTE U.S. $20,000,000 October 2, 1995 New York, New York FOR VALUE RECEIVED, SCOR U.S. CORPORATION, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of SCOR S.A. (the "Lender"), the unpaid principal amount of the Loan made by the Lender to the Borrower pursuant to the Loan Agreement referred to below on the Repayment Date. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Loan Agreement. All such payments of principal and interest shall be made in lawful money of the United States of America in Federal or other immediately available funds at One Avenue du President Wilson, Cedex 39, 92074 Paris La Defense 8, France or such other place as may be designated in writing from time to time by Lender. This note is the Note referred to in the Loan Agreement dated as of October 2, 1995, between the Borrower and the Lender (as the same may be amended from time to time, the "Loan Agreement"). Terms defined in the Loan Agreement are used herein with the same meanings. Reference is made to the Loan Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. SCOR U.S. CORPORATION By: /s/ Jeffrey D. Cropsey ------------------------------------------ Title:Senior V.P. and Chief Financial Officer 9 EX-99.(G)(1) 14 Exhibit (g)(1) SUMMONS IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY HOWARD SANDE FELDMAN, CUSTODIAN FOR CIVIL ACTION NO. 14577 JAN SHARONA FELDMAN, UGMA, Plaintiff. SUMMONS v JACQUES P. BLANDEAU, SERGE M. P. OSOUF, JEROME KARTER, JOHN R. COX, RAYMOND H. DECK, MICHEL J. GUDEFIN, JEAN P. MASSE, RICHARD M. MURRAY, PATRICK PEUGOT, JOHN W. POPP, FRANCOIS REACH, DAVID J. SHERWOOD, SCOR SA AND SCOR U.S. CORPORATION, Defendants. THE STATE OF DELAWARE TO THE SPECIAL PROCESS SERVER YOU ARE COMMANDED: To Summon the above named defendants so that, within 20 days after service hereof upon defendants, exclusive of the day of service, defendants shall serve upon Joseph A. Rosenthal, Esquire, plaintiff's attorney whose address is First Federal Plaza, PO Box 1070, Wilmington, DE 19899 an answer to the complaint. To serve upon defendants a copy hereof and of the complaint. Dated September 29, 1995 /s/ Priscilla B. Rabestraw ---------------------------- Register in Chancery TO THE ABOVE NAMED DEFENDANTS: In case of your failure, within 20 days after service hereof upon you, exclusive of the day of service, to serve on plaintiff's attorney named above an answer to the complaint, judgement by default will be rendered against you for the relief demanded in the complaint. /s/ Priscilla B. Rabestraw ----------------------------- Register in Chancery IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ----------------------------------------x HOWARD SANDE FELDMAN, CUSTODIAN FOR : JAN SHARONA FELDMAN, UGMA, : : Plaintiff, : Civil Action No.14577 : - against - : : JACQUES P. BLONDEAU; SERGE M.P. OSOUF; : CLASS ACTION COMPLAINT JEROME KARTER; JOHN R. COX; RAYMOND H. : ---------------------- DECK; MICHEL J. GUDEFIN; JEAN P. MASSE; : RICHARD M. MURRAY; PATRICK PEUGOT; : JOHN W. POPP; FRANCOIS REACH; DAVID : J. SHERWOOD; SCOR SA and SCOR U. S. : CORPORATION, : : Defendants. : : - ----------------------------------------x Plaintiff, Howard Sande Feldman, Custodian for Jan Sharona Feldman, UGMA, individually and on behalf of all others similarly situated, by his attorneys, alleges the following upon information and belief based upon the investigation of his counsel, which included, among other things, a review of various public filings by the corporate defendants with the Securities and Exchange Commission ("S.E.C.") and various public articles detailed herein (except for those allegations which pertain to plaintiff, which allegations are based upon personal knowledge): 1. This action arises out of an unlawful scheme and plan to acquire the remaining approximately 20% ownership of Scor U. S. Corporation ("Scor U.S." or the "Company") in a going-private transaction by its parent, Scor SA, a French Company ("Scor SA") for grossly inadequate consideration and in breach of defendants' fiduciary duties. Plaintiff alleges that he and the other public stockholders of Scor U.S. common stock are entitled to enjoin the proposed transaction, or alternatively, recover damages in the event the transaction is consummated. THE PARTIES ----------- 2. Plaintiff Howard Sande Feldman, Custodian for Jan Sharona Feldman, UGMA is and at all relevant times was the owner of 200 shares of common stock of Scor U.S. 3. Defendant Scor U.S. is a corporation organized and existing under the laws of the State of Delaware with its principal executive offices located at 110 William Street, Suite 1800, New York, New York 10038. It is a subsidiary of defendant Scor SA. Scor U.S., through its subsidiaries, provides property and casualty insurance and reinsurance. Reinsurance is provided to primary insurance companies on both a treaty and facultative basis. Scor U.S.' subsidiary Scor Reinsurance Company specializes in underwriting treaties covering standard and non-standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. 4. Defendant Scor SA is a corporation organized and existing under the laws of France with its principal executive offices located at 1 avenue du President Wilson, 92800 Puteaux, France. Scor SA is the largest shareholder of Scor U.S. It owns approximately 80% of the Company's common stock. As such, Scor SA has effective control over the Company. 2 5. Defendant Jacques P. Blondeau ("Blondeau") is Chairman of the Board of Directors of Scor U.S. Blondeau is also Chairman of the Board and Chief Executive Officer of defendant Scor SA. 6. Defendant Serge M.P. Osouf ("Osouf") is a Vice Chairman of the Board of Directors of Scor U.S. Osouf is also the General Manager of defendant Scor SA. 7. Defendant Patrick Peugeot ( "Peugeot" ) is a director of Scor U.S. Peugeot is Honorary Chairman and the former Chairman of the Board and Chief Executive Officer of defendant Scor SA. 8. Defendant Francois Reach ("Reach") is a director of Scor U.S. Reach is Deputy General Manager and the former Chief Investment Officer and Treasurer of defendant Scor SA. 9. Defendant David J. Sherwood ("Sherwood") is a director of Scor U.S. 10. Defendant John W. Popp ("Popp") is a director of Scor U. S. 11. Defendant Jerome Karter ("Karter") is a director of Scor U. S. 12. Defendant John R. Cox. ("Cox") is a director of Scor U. S. 13. Defendant Raymond H. Deck ("Deck") is a director of Scor U. S. 14. Defendant Michel J. Gudefin ("Gudefin") is a director of Scor U.S. 3 15. Defendant Jean P. Masse ("Masse") is a director of Scor U.S. 16. Defendant Richard M. Murray ("Murray") is a director of Scor U.S. 17. The above-named individual defendants (collectively the "Individual Defendants") as officers and/or directors of the Company and/or as significant shareholders of the Company, owe fiduciary duties of good faith, loyalty, fair dealing, due care, and candor to plaintiff and the other members of the Class (as defined below). CLASS ACTION ALLEGATIONS ------------------------ 18. Plaintiff brings this action pursuant to Rule 23 of the Rules of this Court, on behalf of himself and all other stockholders of the Company as of September 26, 1995 (the "Class"). Excluded from the Class are the defendants herein, members of their immediate families, and any subsidiary, firm, trust, corporation, or other entity related to or affiliated with any of the defendants and their successors in interest, who are or will be threatened with injury arising from defendants' actions. 19. This action is properly maintainable as a class action for the following reasons: (a) the Class is so numerous that joinder of all members is impracticable. While the exact number of class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, there are more than 4 three million shares of Scort U.S. common stock outstanding held by hundreds of shareholders of record. The holders of these shares are believed to be geographically dispersed throughout the United States. Scor U.S. common stock is listed and actively traded on the New York Stock Exchange; (b) there are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the ---------- following: (i) whether defendants have engaged and are continuing to engage in a plan and scheme to benefit themselves at the expense of the members of the Class; (ii) whether the Individual Defendants, as directors and/or officers of the Company and/or as significant shareholders of the Company, have breached their fiduciary duties owed to plaintiff and the other members of the Class, including their duties of entire fairness, loyalty, due care, and candor; (iii) whether defendants have disclosed all material facts in connection with the challenged transaction; and (iv) whether plaintiff and the other members of the Class would be irreparably damaged were defendants not enjoined from the conduct described herein; (c) the claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has no interest that are adverse or antagonistic to the interests of the Class; 5 (d) the plaintiff is committed to prosecuting this action and has retained counsel competent and experienced in litigation of this nature. Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; (e) plaintiff anticipates that there will be no difficulty in the management of this litigation; and (f) a class action is superior to other available methods for adjudication of this controversy. SUBSTANTIVE ALLEGATIONS ----------------------- 20. On September 26, 1995, the Dow Jones News Wire announced that Scor SA would acquire the remaining shares of Scor U.S. that it does not already own. Pursuant to the proposed transaction, each of Scor U.S.' minority owned common shares will be converted into the right to receive $14 in cash (the "Buyout Transaction"). 21. The purpose of the Buyout Transaction is to enable Scor SA to acquire one hundred (100%) percent equity ownership of Scor U.S. and its valuable assets for its own benefit and the benefit of Scor SA, at the expense of Scor U.S.' public stockholders who will be deprived of their equity investment and the benefits thereof including, among other things, the expected growth in the Company's profitability. Indeed, as disclosed on the Bloomberg Newswire on September 26, 1995, after it purchased the remaining 20% of Scor U.S., Scor SA intends to merge with 6 Holding Company Scor, which controls Scor SA, thus increasing the value of Scor U.S. 22. The Buyout Transaction is the product of unfair dealing, and the price of $14 cash per share to be paid to class members is unconscionable and unfair and so grossly inadequate as to constitute a gross breach of trust committed by defendants against the public stockholders because, among other things: (a) the announcement of the proposed Buyout Transaction was made when the Company was poised for significant future growth and earnings as illustrated, inter alia, in the jump in the Company's net ---------- income to $4.8 million or $.27 per share, on a primary basis, in the second quarter of 1995 from $600,000, or $.03 per share on a primary basis, for the second quarter of 1994 and earnings estimates compiled by Nelsons estimate earnings per share of $.90 for fiscal 1995 and $.97 for fiscal 1996 up from the actual loss of $.43 per share in fiscal 1994; (b) the proposed Buyout Transaction comes at a time when according to analysts, the reinsurance industry is recovering from a series of natural catastrophes including Hurricane Andrew in 1992 and the Northridge earthquake in Los Angeles, California. As noted by Derek Elias, an analyst at Paribas Capital markets, "[w]e're seeing the effect of fewer natural catastrophes as well as pricing increases throughout the sector"; 7 (c) defendants undervalued Scor U.S.' common stock by ignoring the full value of its assets and future prospects. The Buyout Transaction does not reflect that Scor U.S.' financial condition is positive and will continue to improve as the national economy recovers. (d) because Scor SA controls an overwhelming majority of the Company's common stock, no third party will bid for Scor U.S. Thus, defendants will be able to proceed with the Buyout Transaction without an auction or other type of market check to maximize value for Scor U.S.' public shareholders. (e) defendants timed the announcement of the Buyout Transaction to place an artificial lid or cap on the market price for Scor U.S.' stock to enable Scor SA to acquire the minority stock at the lowest possible price. The agreed to merger price of $14 cash per Scor U.S. share represents an approximate 28% premium over the closing price prior to the announcement, but is below the closing market price of 15 on September 26, 1995, and the trading price of 15 1/4 on September 27, 1995. 23. By reason of their positions with Scor U.S. and the controlling ownership of the Company, defendants are in possession of non-public information concerning the financial condition and prospects of Scor U.S., and especially the true value and expected increased future value of Scor U.S. and its assets, which they have not disclosed to Scor U.S.' public stockholders. Such concealed information is of critical 8 importance to class members in determining whether or not to seek the appraised value of their stock pursuant to the General Corporation Law of Delaware. 24. Scor SA is intent on paying the lowest buyout price to class members, whereas it and the Individual Defendants are duty-bound to maximize shareholder value. The defendant fiduciaries have clear and material conflicts of interest and are acting to better the interests of Scor SA at the expense of the Scor U.S. public shareholders. 25. The proposed Buyout Transaction is wrongful, unfair and harmful to Scor U.S.' minority public stockholders, and represents an effort by Scor SA to aggrandize its own financial position and interests at the expense of and to the detriment of class members. The Buyout Transaction is an attempt to deny plaintiff and the other members of the Class their right to share proportionately in the true value of Scor U.S.' valuable assets, future growth in profits, earnings and dividends, while usurping the same for the benefit of Scor SA on unfair and inadequate terms. 26. Defendants, in failing to disclose the material non-public information in their possession as to the value of Scor U.S.' assets, the full extent of the future earnings potential of Scor SA and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached 9 and are breaching their fiduciary duties to the members of the Class. 27. As a result of defendants' unlawful actions, plaintiff and the other members of the Class will be damaged in that they will not receive their fair portion of the value of Scor U.S.' assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed Buyout Transaction is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to the plaintiff and the members of the Class, will not engage in arm's- length negotiations on the merger terms, and will consummate and close the proposed merger complained of and succeed in their plan described above, all to the irreparable harm of the members of the Class. 28. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) declaring this action to be a proper class action and certifying plaintiff as the representative of the Class; (b) ordering defendants to carry out their fiduciary duties to plaintiff and the other members of the Class, including those duties of care, loyalty, and candor; (c) granting preliminary and permanent injunctive relief against the consummation of the Buyout Transaction as described herein; 10 (d) in the event the Buyout Transaction is consummated, rescinding the Buyout Transaction and/or awarding rescissory damages to the Class; (e) ordering defendants, jointly and severally, to account to plaintiff and other members of the Class all damages suffered and to be suffered by them as the result of the acts and transactions alleged herein; (f) awarding plaintiff the costs and disbursements of the action including allowances for plaintiff's reasonable attorneys and experts fees; and (g) granting such other and further relief as the Court may deem just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ J. Monhait ---------------------------- First Federal Plaza P.O. Box 1070 Wilmington, DE 19899 Attorneys for Plaintiff OF COUNSEL: WOLF POPPER ROSS WOLF & JONES, L.L.P. 845 Third Avenue New York, New York 10022 (212) 759-4600 11 EX-99.(G)(2) 15 Exhibit (g)(2) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE. IN AND FOR NEW CASTLE COUNTY - ------------------------------------------X ) CRANDON CAPITAL PARTNERS, ) a Florida Partnership, ) ) Plaintiff, ) C.A. No. 14579 ) - against - ) CLASS ACTION ) COMPLAINT JACQUES P. BLONDEAU, JEROME ) ------------ KARTER, SERGE M. P. OSOUF, ) JOHN R. COX,' RAYMOND H. DECK, ) MICHEL J. GUDEFIN, JEAN MASSE, ) RICHARD M. MURRAY, JOHN W. POPP, ) FRANCOIS REACH SHERWOOD, ) ELLEN E. THROWER and ) SCOR U. S. CORPORATION, ) ) Defendants. ) ) ) - ------------------------------------------X Plaintiff, Crandon Capital Partners ("Crandon"), by its undersigned attorneys, for its complaint against defendants, alleges upon information and belief, except as to paragraph 2 which is alleged upon knowledge, as follows: NATURE OF THE ACTION -------------------- 1. Plaintiff brings this action individually and as a class action on behalf of all persons, other than defendants, who own the securities of SCOR U.S. Corporation ("SCOR U.S." or the "Company") and who are similarly situated, for injunctive and other appropriate relief. Plaintiff seeks the injunctive relief herein, inter alia, to enjoin the consummation of an acquisition offer (the - ----- ---- "Offer") announced on September 26, 1995 by SCOR SA, the 80% parent of SCOR U.S., pursuant to which SCOR SA will pay $14.00 for each of the outstanding shares of the Company's common stock it does not own, totalling about $50.6 million in the aggregate. Alternatively, in the event that the Offer is consummated, plaintiff seeks to recover damages caused by the breach of fiduciary duties owed by the director defendants (as defined below) and by the majority shareholder, SCOR SA. The proposed transaction and the acts of SCOR SA and the Company's director defendants, as more particularly alleged herein, constitute a breach of the defendants' fiduciary duties to the plaintiff and the class and a violation of applicable legal standards governing the defendants' conduct. PARTIES ------- 2. Plaintiff is and has been an owner of shares of SCOR U.S. common stock at all relevant times described herein. 3. SCOR U.S. is a corporation duly organized and existing under the laws of the State of Delaware, with its principal offices located at Two World Trade Center, New York, N.Y, 10048-0178. As of August 11, 1995, the Company had approximately 18.16 million shares of common stock outstanding. SCOR U.S.'s principal business is as a holding company with subsidiaries which provide property and casualty insurance and reinsurance to primary insurance companies on both a treaty and facultative basis. 4. Defendant SCOR SA, a French corporation, owns and at all times owned, directly or indirectly, 80 percent of the Company's outstanding shares. 2 5. Defendant Jacques P. Blondeau ("B1ondeau") at all times material hereto has been the Chairman of the Board of Directors of SCOR U.S. Defendant Blondeau is also Chairman of the Board and Chief Executive Officer of SCOR SA. 6. Defendant Jerome Karter ("Karter") at all times material hereto has been President, Chief Executive Officer, and a director of SCOR U.S. 7. Defendant Serge M. P. Osouf ("Osouf") at all times material hereto has been Vice Chairman of the Board. Defendant Osouf is also General Manager of SCOR SA. 8. Defendants John R. Cox ("Cox"), Raymond H. Deck ("Deck"), Michel J. Gudefin ("Gudefin"), Jean Masse ("Masse"), Richard M. Murray ("Murray"), John W. Popp ("Popp"), Francois Reach Sherwood ("Sherwood") and Ellen E. Thrower ("Thrower") at all times material hereto have been directors of the Company. 9. The defendants named in paragraphs 5 through 8 above are hereinafter referred to as the "Individual Defendants". 10. The Individual Defendants, by reason of their corporate directorship and/or executive positions, are fiduciaries to and for the Company's shareholders, which fiduciary relationship requires them to exercise their best judgment, and to act in a prudent manner and in the best interests of the Company's shareholders. 11. By virtue of its stock ownership and control of SCOR U.S., SCOR SA is in a fiduciary relationship with plaintiff and the other public stockholders of SCOR U.S., and owes them the highest 3 obligations of good faith, fair dealing, due care, loyalty and full and candid disclosure. 12. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his/her/its capacity as an officer and/or director of the Company or controlling shareholder, and the liability of each arises from the fact that he, she or it has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS ------------------------ 13. Plaintiff brings this action individually on its own behalf and as a class action, on behalf of all stockholders of the Company (except the defendants ~herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein (the "Class"). 14. This action is properly maintainable as a class action. 15. The Class is so numerous that joinder of all members is impracticable. There are at least 140 record shareholders and many more beneficial holders who hold the approximately 3.6 million shares of SCOR U.S. common stock outstanding which are not held by SCOR SA. 16. There is a well-defined community of interest in the questions of law and fact involved affecting the members of the Class. Among the questions of law and fact which are common to the 4 Class, which predominate over questions affecting any individual class member are, inter alia, the following: ----- ---- (a) whether defendants have engaged in conduct constituting unfair dealing to the detriment of the public stockholders of SCOR U.S.; (b) whether defendants are engaging in self-dealing to benefit SCOR SA and are effectuating the proposed transaction at a grossly unfair price; (c) whether defendants have breached or aided and abetted the breach of the fiduciary and other common law duties owed by them to plaintiff and the members of the Class; and (d) whether plaintiff and the other members of the Class would be irreparably damaged were the transaction complained of herein consummated. 17. Plaintiff is a member of the Class and is committed to prosecuting this action. Plaintiff has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of other members of the Class, and plaintiff has the same interests as the other members of the Class. Plaintiff does not have interests antagonistic to or in conflict with those he seeks to represent. Plaintiff is an adequate representative of the Class. 18. The likelihood of individual class members prosecuting separate individual actions is remote due to the relatively small loss suffered by each Class member as compared to the burden and expense of prosecuting litigation of this nature and 5 magnitude. Absent a class action, defendants are likely to avoid liability for their wrongdoing, and Class members are unlikely to obtain redress for the wrongs alleged herein. SUBSTANTIVE ALLEGATIONS ----------------------- 19. In the September 18, 1995 issue of Business -------- Insurance, defendant Blondeau, speaking as Chairman of SCOR SA (he - --------- is also Chairman of SCOR U.S.), reported that SCOR SA would not attempt any acquisitions in the United States. According to that published report, defendant Blondeau stated instead that: "We will grow by ourselves .... We will not buy anything in the U.S., (though) there are still opportunities in Europe." Thus, according to defendant Blondeau, as of September 18, 1995, SCOR SA would pursue possible "opportunities in Europe," not in the United States. 20. Barely less than a week later, however, on September 26, 1995, Reuters reported that SCOR SA had offered to pay $14 per share cash for the remaining 20 percent of the Company that it did not already own in order to acquire 100% ownership of the Company. The proposed transaction is valued in excess of $50.6 million. 21. In response to this offer, shares of the Company rose from a close of $11 1/8 per share on September 25, 1995 to $15 per share at the close of business on September 26, 1995 on the New York Stock Exchange. 22. The consideration to be paid to the SCOR U.S. shareholders in the merger is grossly unfair, inadequate, and 6 substantially below the fair or inherent value of the Company. The $14.00 per share offering price is approximately $1.00 per share less than the present trading price of the Company's shares. The intrinsic value of the equity of SCOR U.S. is materially greater than the consideration of the Offer, taking into account SCOR U.S.'s asset value, its expected growth, and the strength of its business. 23. The proposed transaction price was not the result of arm's-length negotiations, but was fixed arbitrarily by SCOR SA as part of its unlawful plan and scheme to take advantage of its control over the Company by obtaining 100% ownership of SCOR U.S. at the lowest possible price. These facts have not been disclosed by defendants. 24. Given the dominance and control of SCOR SA over the Company and its entire Board, the purported independence of the directors of the Company is open to serious question and there is substantial reason to doubt that the board will evaluate the proposed Offer with the requisite independence. 25. The proposed transaction is wrongful, unfair, and harmful to SCOR U.S. stockholders, and represents an attempt by SCOR SA to aggrandize itself at the expense and to the detriment of the public stockholders of the Company. The proposed transaction will deny class members their right to share proportionately in the true value of SCOR U.S.'s valuable assets, profitable business, and future growth in profits and earnings, while usurping the same for the benefit of SCOR SA at an unfair and inadequate price. 7 26. Because SCOR SA and the Individual Defendants are in possession of corporate information concerning the Company's future financial prospects, the degree of knowledge and economic power between defendants and the Class members is unequal, making it grossly and inherently unfair for SCOR SA to obtain ownership of the Company's assets from the public stockholders as the unfair and inadequate price which defendants have set. 27. By reason of all of the foregoing, defendants herein have willfully participated in unfair dealing toward thc plaintiff and the other members of the Class and have engaged in and substantially assisted and aided and abetted each other in breach of the fiduciary duties owed by them to the Class. 28. Defendants have violated fiduciary and other common law duties owed to the plaintiff and the other members of the Class in that they have not and are not exercising independent business judgment, have acted and are acting to the detriment of the Class to usurp for SCOR SA the true value of the Company's shares at an unfair price, and for which the Company's public shareholders are entitled to receive fair value. 29. As a result of the action of defendants, plaintiff and the Class have been and will be damaged in that they have been deceived, are the victims of unfair dealing, and are not receiving the fair value of SCOR U.S.'s assets and businesses. 30. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the Class, and will succeed in their plan to enrich SCOR SA by 8 excluding the Class from its fair proportionate share of SCOR U.S.'s valuable assets and businesses, all to the irreparable harm of the Class. 31. The plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff prays for judgment and relief as follows: (a) declaring that this lawsuit is properly maintainable as a class action and certifying the plaintiff as proper representative of the Class; (b) declaring that the defendants and each of them have committed or aided and abetted a gross abuse of trust and have breached their fiduciary duties to the plaintiff and the other members of the Class; (c) preliminarily and permanently enjoining defendants and their counsel, agents, employees, and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the Offer; (d) in the event the Offer is consummated, rescinding it and setting it aside; (e) awarding rescissory and/or compensatory damages against defendants, jointly and severally, in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; 9 (f) awarding plaintiff and the Class their costs and disbursements and reasonable allowances for plaintiff's counsel and experts' fees and expenses; and (g) granting such other and further relief as may be just and proper. Dated: September 27, 1995 ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ Joseph A. Rosenthal ------------------------------ Joseph A. Rosenthal First Federal Plaza, Suite 214 P.O. Box 1070 Wilmington, Delaware 19899 Attorneys for Plaintiff Of Counsel: WECHSLERR SKIRNICK HARWOOD HALEBIAN & FEFFER LLP 805 Third Avenue New York, New York 10022 (212) 935-7400 10 EX-99.(G)(3) 16 Exhibit (g)(3) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ----------------------------------------------X ) DANIEL BRUNO, ) ) Plaintiff, ) CIVIL ACTION NO. ) 14582 v. ) ) SCOR U.S. CORPORATION, SCOR S.A., ) JACQUES P. BLANDEAU, SERGE M.P. OSOUF, ) JOHN R. COX, RAYMOND H. DECK, ) MICHEL J. GUDEFIN, JEROME KARTER, ) JEAN MASSE, RICHARD M. MURRAY, ) PATRICK PEUGEOT, JOHN W. POPP, ) FRANCOIS REACH and DAVID J. SHERWOOD, ) ) Defendants. ) - ----------------------------------------------X CLASS ACTION COMPLAINT ---------------------- Plaintiff, by his attorneys, for his Complaint alleges, upon information and belief, except as to the allegations contained in paragraph 2, which plaintiff alleges upon knowledge, as follows: NATURE OF ACTION ---------------- 1. Plaintiff brings this class action on behalf of himself and all other public shareholders of defendant SCOR U.S. Corporation ("SCOR U.S." or the "Company") similarly situated (the "Class") to enjoin defendants from effectuating an unfair cash-out acquisition by SCOR S.A. ("SCOR S.A."), designed to force the sale of minority shareholders' equity interest in SCOR U.S. at a grossly inadequate and unfair price of $14 per share. As set forth below, pursuant to the proposed acquisition, SCOR S.A., which now controls approximately 80% of the Company's total common stock outstanding, will acquire the remaining 20% of the Company's common stock. The proposed transaction is manifestly unfair as it is substantially below the true value of the Company and, as the $14.00 per share acquisition price represents a discount of $1.00 per share below the Company's common stock closing price on the day that the proposal transaction was announced. PARTIES ------- 2. Plaintiff Daniel Bruno, at all times relevant thereto, owned shares of SCOR U.S. common stock. 3. Defendant SCOR U.S. is a Delaware corporation with principal executive offices located at Two World Trade Center, New York, New York 10048. SCOR U.S. is a holding company that provides property and casualty insurance and reinsurance in the treaty and facultative markets through its operating subsidiaries. As of March 28, 1995, the Company had 18,164,620 shares of common stock outstanding. 4. At all relevant times herein, defendant Jacques P. Blondeau ("Blondeau") was Chairman of the Board of Directors of SCOR U.S. ("Board"), and a member of the Board's Executive Committee and Finance Committee. He is also Chairman of the Board and Chief Executive Officer of SCOR S.A. For the fiscal year ended December 31, 1994, Blondeau received cash compensation from SCOR U.S. totalling $175,000. 5. At all relevant times herein, the following Individual Defendants were also members of the Board of SCOR U.S.: (a) Defendant Jerome Karter ("Karter") is Chief Executive Officer, a member of the Board as well as a member of its Executive Committee. 2 (b) Defendant Serge M.P. Osouf ("Osouf") is Vice Chairman of the Board as well as a member of its Executive and Finance Committees. He is also the General Manager of SCOR S.A. (c) Defendant John R. Cox ("Cox") is a member of the Board, as well as a member of its Executive and Audit Committees. (d) Defendant Raymond H. Deck ("Deck") is a member of the Board, as well as a member of its Executive, Finance, Audit and Compensation Committees. (e) Defendant Michel J. Gudefin ("Gudefin") is a member of the Board, as well as a member of its Audit and Compensation Committees. (f) Defendant Jean Masse ("Masse") is a member of the Board, as well as a member of its Finance Committee. (g) Defendant Richard M. Murray ("Murray") is a member of the Board, as well as a member of its Audit Committee. (h) Defendant Patrick Peugeot ("Peugeot") is a member of the Board, as well as a member of its Finance Committee. (i) Defendant John W. Popp ("Popp") is a member of the Board, as well as a member of its Audit and Compensation Committees. (j) Defendant Francois Reach ("Reach") is a member of the Board, as well as a member of its Finance Committee. He is also the Chairman and Chief Executive Officer of Reafin, the finance company subsidiary of SCOR S.A. 3 (k) Defendant David J. Sherwood ("Sherwood") is a member of the Board, as well as its Executive, Audit and Compensation Committees. 6. By virtue of their positions as directors and/or senior executive officers of SCOR U.S. and their exercise of control over its business and corporate affairs, defendants Blondeau, Osouf, Cox, Deck, Gudefin, Karter, Masse, Murray, Peugeot, Popp, Reach and Sherwood (collectively the "Individual Defendants") had, at all relevant times, the power to control and influence, and did control and influence, SCOR U.S. Each Individual Defendant owes SCOR U.S. and its public stockholders fiduciary obligations and is required to: use his ability to control and manage SCOR U.S. in a fair, just and equitable manner; maximize shareholder value; act in furtherance of the best interests of SCOR U.S. and its public stockholders; govern SCOR U.S. in such a manner as to heed the expressed views of its public shareholders; refrain from abusing his position of control; provide full disclosure to the public shareholders; and not favor his own or any other party's interests at the expense of SCOR U.S. and its public shareholders. 7. At all relevant times herein, defendant SCOR S.A. owned and/or controlled approximately 80 percent of the outstanding shares of SCOR U.S. common stock. Defendant SCOR S.A. dominates and controls the affairs of SCOR U.S., including the Company's Board. As a result of this domination and control, said defendant has determined unfairly to acquire the remaining outstanding shares 4 of SCOR U.S. at a grossly inadequate price to the detriment of the minority public shareholders, in breach of its fiduciary duties. CLASS ACTION ALLEGATIONS ------------------------ 8. Plaintiff brings this action pursuant to Rule 23 of the Rules of the Court of Chancery, for declaratory, injunctive and other relief on his own behalf and as a class action, on behalf of all public stockholders of SCOR U.S. (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) and their successors in interest. 9. This action is properly maintainable as a class action for the following reasons: (a) The class of stockholders for whose benefit this action is brought is so numerous that joinder of all class members is impracticable. As of March 28, 1995, SCOR U.S. had approximately 18,164,620 shares of common stock duly issued and outstanding, which traded on the New York Stock Exchange, and were owned by 140 shareholders of record. Members of the Class are scattered throughout the United States. (b) There are questions of law and fact that are common to the members of the Class and that predominate over any questions affecting any individual members. The common questions include, inter alia, the following: ----- ---- (i) whether defendants have engaged in conduct constituting unfair dealing to the detriment of the public stockholders of SCOR U.S.; 5 (ii) whether the acquisition proposal by SCOR S.A. of $14 per share is unfair to the public stockholders of SCOR U.S. because it does not constitute a fair price for the shares of the Company; and (iii) whether the defendants have breached fiduciary and common law duties owed by them to plaintiff and the other members of the Class. (c) The claims of plaintiff are typical of the claims of the other members of the Class, and plaintiff has no interests that are adverse or antagonistic to the interests of the Class. (d) Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. (e) The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class, and would establish incompatible standards of conduct for the party opposing the Class. (f) Defendants have acted, and are about to act, on grounds generally applicable to the Class, thereby making appropriate final injunctive or corresponding declaratory relief with respect to the Class as a whole. 6 (g) Plaintiff anticipates that there will be no difficulty in the management of this litigation. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. SUBSTANTIVE ALLEGATIONS ----------------------- 10. SCOR U.S. is one of the largest domestic insurance holding companies, which provides, through its subsidiaries, property and casualty insurance and reinsurance on both a treaty and facultative basis. Its operating subsidiaries have emphasized the development of long-term relationships with medium-size regional and specialty companies. The Company is based in New York and has recently embarked on a growth plan to focus on writings of business in certain targeted areas that the Company believes hold greater profit potential. 11. The Company has also recently reduced costs, strengthened its balance sheet and developed an investment strategy that emphasizes quality and liquidity. For the first two quarters of fiscal-year 1995, ended June 30, 1995, the Company reported revenues of $150.5 million, which represented an increase of 9.2% when compared to the same period for the prior fiscal year. 12. On April 3, 1995, the Company received an "A" (Excellent) rating from A.M. Best Co. A.M. Best Co. stated that SCOR U.S.'s "Excellent" rating "reflects its solid capital position and strong majority owner, good long-term performance and recognized leadership position." 7 13. On September 26, 1995, SCOR S.A. announced that it intended to commence an offer to acquire the 20% of SCOR U.S. it does not own for $14 per share, or about $50.4 million. The offer price represents a discount of approximately 6.6% below SCOR U.S.'s closing price of $15 per share on the day the announcement was made. 14. Given SCOR S.A.'s domination and control of SCOR U.S., the SCOR U.S. Board cannot be expected independently to act and advocate the best interests of SCOR U.S.'s public shareholders. Moreover, by virtue of its control and domination of SCOR U.S., SCOR S.A. has unique knowledge of the Company and has access to information denied or unavailable to the public. 15. Given the domination and control of SCOR S.A., the Individual Defendants cannot be expected to negotiate for the best and highest price for SCOR U.S.'s public shareholders. 16. In view of defendant SCOR S.A.'s control of SCOR U.S., it is unfair and in violation of defendants' fiduciary duties to consummate the transaction without first obtaining a recommendation and input by a truly independent representative of the public stockholders or obtaining the majority approval of the public stockholders. 17. By virtue of the acts and conduct alleged herein, the defendants are carrying out a preconceived plan whereby SCOR S.A. will acquire the minority public shares of SCOR U.S. pursuant to a price that is grossly inadequate and intrinsically unfair to SCOR U.S. public stockholders, is substantially below true value and is 8 a product of defendants' conflicts of interest. As a result, the public common stockholders of SCOR U.S. will be wrongfully deprived of their valuable investment in the Company and all of its present and continuing profitability and growth and will receive, in return for their investment, grossly inadequate consideration. 18. The proposed acquisition constitutes an improper and unlawful attempt by the defendants unfairly to cash-out the minority shareholders of SCOR U.S. 19. Unless enjoined by this Court, defendants will continue to breach fiduciary duties owed to plaintiff and the other members of the Class, and will succeed in consummating an unfair transaction by virtue of the unfair dealing complained of herein, all to the irreparable harm of the Class. 20. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment and relief in his favor and in favor of the Class and against defendants, as follows: A. Declaring that this action be certified as a proper class action and certifying plaintiff as class representative; B. Declaring that the defendants and each of them have committed a gross abuse of trust and have breached their fiduciary duties to plaintiff and other members of the Class; C. Preliminarily and permanently enjoining defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating or 9 closing the proposed transaction which will irreparably harm plaintiff and the Class; D. In the event the acquisition proposal is consummated, rescinding it and setting it aside and/or granting rescissory damages; E. Awarding compensatory damages in an amount to be determined upon the proof submitted to the court; F. Awarding the costs and disbursements of this action; G. Awarding plaintiff counsel fees; and H. Awarding such other and further relief which the Court may deem just and proper. Dated: September 28, 1995 CHIMICLES, JACOBSEN & TIKELLIS /s/ Pamela S. Tikellis ---------------------- Pamela S. Tikellis James C. Strum Robert J. Kriner, Jr. One Rodney Square P.O. Box 1035 Wilmington, Delaware 19899 (302) 686-2500 Attorneys for Plaintiff OF COUNSEL: BERNSTEIN LITOWITZ BERGER & GROSSMANN Vincent R. Cappucci 1285 Avenue of the Americas New York, New York 10019 (212) 554-1400 10 EX-99.(G)(4) 17 Exhibit (g)(4) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ---------------------------------------------x JAY BAXT, : : Plaintiff, : : Civil Action No. 14585 - against - : : JACQUES P. BLANDEAU; SERGE M.P. OSOUF; : CLASS ACTION COMPLAINT JEROME KARTER; JOHN R. COX; RAYMOND H. : ---------------------- DECK; MICHEL J. GUDEFIN; JEAN P. MASSE; : RICHARD M. MURRAY; PATRICK PEUGOT; : JOHN W. POPP; FRANCOIS REACH; DAVID : J. SHERWOOD; SCOR SA and SCOR U.S. : CORPORATION, : : Defendants. : : - ---------------------------------------------x Plaintiff, individually and on behalf of all others similarly situated, by his attorneys, alleges the following upon information and belief based upon the investigation of his counsel, which included, among other things, a review of various public filings by the corporate defendants with the Securities and Exchange Commission ("S.E.C.") and various public articles detailed herein (except for those allegations which pertain to plaintiff, which allegations are based upon personal knowledge): 1. This action arises out of an unlawful scheme and plan to acquire the remaining approximately 20% ownership of Scor U. S. Corporation ("Scor U.S." or the "Company") in a going- private transaction by its parent, Scor SA, a French Company ("Scor SA") for grossly inadequate consideration and in breach of defendants' fiduciary duties. Plaintiff alleges that he and the other public stockholders of Scor U.S. common stock are entitled to enjoin the proposed transaction, or alternatively, recover damages in the event the transaction is consummated. THE PARTIES ----------- 2. Plaintiff is and at all relevant times was the owner of shares of common stock of Scor U.S. 3. Defendant Scor U.S. is a corporation organized and existing under the laws of the State of Delaware with its principal executive offices located at 110 William Street, Suite 1800, New York, New York 10038. It is a subsidiary of defendant Scor SA. Scor U.S., through its subsidiaries, provides property and casualty insurance and reinsurance. Reinsurance is provided to primary insurance companies on both a treaty and facultative basis. Scor U.S.' subsidiary Scor Reinsurance Company specializes in underwriting treaties covering standard and non- standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. 4. Defendant Scor SA is a corporation organized and existing under the laws of France with its principal executive offices located at 1 avenue du President Wilson, 92800 Puteaux, France. Scor SA is the largest shareholder of Scor U.S. It owns approximately 80% of the Company's common stock. As such, Scor SA has effective control over the Company. 5. Defendant Jacques P. Blondeau ("Blondeau") is Chairman of the Board of Directors of Scor U.S. Blondeau is also 2 Chairman of the Board and Chief Executive Officer of defendant Scor SA. 6. Defendant Serge M.P. Osouf ("Osouf") is a Vice Chairman of the Board of Directors of Scor U.S. Osouf is also the General Manager of defendant Scor SA. 7. Defendant Patrick Peugeot ("Peugeot") is a director of Scor U.S. Peugeot is Honorary Chairman and the former Chairman of the Board and Chief Executive Officer of defendant Scor SA. 8. Defendant Francois Reach ("Reach") is a director of Scor U.S. Reach is Deputy General Manager and the former Chief Investment Officer and Treasurer of defendant Scor SA. 9. Defendant David J. Sherwood ("Sherwood") is a director of Scor U.S. 10. Defendant John W. Popp ("Popp") is a director of Scor U.S. 11. Defendant Jerome Karter ("Karter"} is a director of Scor U.S. 12. Defendant John R. Cox ("Cox") is a director of Scor U.S. 13. Defendant Raymond H. Deck ("Deck") is a director of Scor U.S. 14. Defendant Michel J. Gudefin ("Gudefin") is a director of Scor U.S. 15. Defendant Jean P. Masse ("Masse") is a director of Scor U.S. 3 16. Defendant Richard M. Murray ("Murray") is a director of Scor U.S. 17. The above-named individual defendants (collectively the "Individual Defendants") as officers and/or directors of the Company and/or as significant shareholders of the Company, owe fiduciary duties of good faith, loyalty, fair dealing, due care, and candor to plaintiff and the other members of the Class (as defined below). CLASS ACTION ALLEGATIONS ------------------------ 18. Plaintiff brings this action pursuant to Rule 23 of the Rules of this Court, on behalf of himself and all other stockholders of the Company as of September 26, 1995 (the "Class"). Excluded from the Class are the defendants herein, members of their immediate families, and any subsidiary, firm, trust, corporation, or other entity related to or affiliated with any of the defendants and their successors in interest, who are or will be threatened with injury arising from defendants' actions. 19. This action is properly maintainable as a class action for the following reasons: (a) the Class is so numerous that joinder of all members is impracticable. While the exact number of class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, there are more than three million shares of Scor U.S. common stock outstanding held by hundreds of shareholders of record. The holders of these 4 shares are believed to be geographically dispersed throughout the United States. Scor U.S. common stock is listed and actively traded on the New York Stock Exchange; (b) there are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following: ----- ---- (i) whether defendants have engaged and are continuing to engage in a plan and scheme to benefit themselves at the expense of the members of the Class; (ii) whether the Individual Defendants, as directors and/or officers of the Company and/or as significant shareholders of the Company, have breached their fiduciary duties owed to plaintiff and the other members of the Class, including their duties of entire fairness, loyalty, due care, and candor; (iii) whether defendants have disclosed all material facts in connection with the challenged transaction; and (iv) whether plaintiff and the other members of the Class would be irreparably damaged were defendants not enjoined from the conduct described herein; (c) the claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has no interest that are adverse or antagonistic to the interests of the Class; (d) the plaintiff is committed to prosecuting this action and has retained counsel competent and experienced in 5 litigation of this nature. Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; (e) plaintiff anticipates that there will be no difficulty in the management of this litigation; and (f) a class action is superior to other available methods for adjudication of this controversy. SUBSTANTIVE ALLEGATIONS ----------------------- 20. On September 26, 1995, the Dow Jones News Wire announced that Scor SA would acquire the remaining shares of Scor U.S. that it does not already own. Pursuant to the proposed transaction, each of Scor U.S.' minority owned common shares will be converted into the right to receive $14 in cash (the "Buyout Transaction"). 21. The purpose of the Buyout Transaction is to enable Scor SA to acquire one hundred (100%) percent equity ownership of Scor U.S. and its valuable assets for its own benefit and the benefit of Scor SA, at the expense of Scor U.S.' public stockholders who will be deprived of their equity investment and the benefits thereof including, among other things, the expected growth in the Company's profitability. Indeed, as disclosed on the Bloomberg Newswire on September 26, 1995, after it purchased the remaining 20% of Scor U.S., Scor SA intends to merge with Holding Company Scor, which controls Scor SA, thus increasing the value of Scor U.S. 6 22. The Buyout Transaction is the product of unfair dealing, and the price of $14 cash per share to be paid to class members is unconscionable and unfair and so grossly inadequate as to constitute a gross breach of trust committed by defendants against the public stockholders because, among other things: (a) the announcement of the proposed Buyout Transaction was made when the Company was poised for significant future growth and earnings as illustrated, inter alia, in the ----- ---- jump in the Company's net income to $4.8 million or $.27 per share, on a primary basis, in the second quarter of 1995 from $600,000, or $.03 per share on a primary basis, for the second quarter of 1994 and earnings estimates compiled by Nelsons estimate earnings per share of $.90 for fiscal 1995 and $.97 for fiscal 1996 up from the actual loss of $.43 per share in fiscal 1994; (b) the proposed Buyout Transaction comes at a time when according to analysts, the reinsurance industry is recovering from a series of natural catastrophes including Hurricane Andrew in 1992 and the Northridge earthquake in Los Angeles, California. As noted by Derek Elias, an analyst at Paribas Capital markets, "[w]e're seeing the effect of fewer natural catastrophes as well as pricing increases throughout the sector"; (c) defendants undervalued Scor U.S.' common stock by ignoring the full value of its assets and future prospects. The Buyout Transaction does not reflect that Scor U.S.' financial 7 condition is positive and will continue to improve as the national economy recovers. (d) because Scor SA controls an overwhelmingly majority of the Company's common stock, no third party will bid for Scor U.S. Thus, defendants will be able to proceed with the Buyout Transaction without an auction or other type of market check to maximize value for Scor U.S.' public shareholders. (e) defendants timed the announcement of the Buyout Transaction to place an artificial lid or cap on the market price for Scor U.S.' stock to enable Scor SA to acquire the minority stock at the lowest possible price. The agreed to merger price of $14 cash per Scor U.S. share represents an approximate 28% premium over the closing price prior to the announcement, but is below the closing market price of 15 on September 26, 1995, and the trading price of 15 1/4 on September 27, 1995. 23. By reason of their positions with Scor U.S. and the controlling ownership of the Company, defendants are in possession of non-public information concerning the financial condition and prospects of Scor U.S., and especially the true value and expected increased future value of Scor U.S. and its assets, which they have not disclosed to Scor U.S.' public stockholders. Such concealed information is of critical importance to class members in determining whether or not to seek the appraised value of their stock pursuant to the General Corporation Law of Delaware. 8 24. Scor SA is intent on paying the lowest buyout price to class members, whereas it and the Individual Defendants are duty-bound to maximize shareholder value. The defendant fiduciaries have clear and material conflicts of interest and are acting to better the interests of Scor SA at the expense of the Scor U.S. public shareholders. 25. The proposed Buyout Transaction is wrongful, unfair and harmful to Scor U.S.' minority public stockholders, and represents an effort by Scor SA to aggrandize its own financial position and interests at the expense of and to the detriment of class members. The Buyout Transaction is an attempt to deny plaintiff and the other members of the Class their right to share proportionately in the true value of Scor U.S.' valuable assets, future growth in profits, earnings and dividends, while usurping the same for the benefit of Scor SA on unfair and inadequate terms. 26. Defendants, in failing to disclose the material non-public information in their possession as to the value of Scor U.S.' assets, the full extent of the future earnings potential of Scor SA and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the members of the Class. 27. As a result of defendants' unlawful actions, plaintiff and the other members of the Class will be damaged in 9 that they will not receive their fair portion of the value of Scor U.S.' assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed Buyout Transaction is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to the plaintiff and the members of the Class, will not engage in arm's-length negotiations on the merger terms, and will consummate and close the proposed merger complained of and succeed in their plan described above, all to the irreparable harm of the members of the Class. 28. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) declaring this action to be a proper class action and certifying plaintiff as the representative of the Class; (b) ordering defendants to carry out their fiduciary duties to plaintiff and the other members of the Class, including those duties of care, loyalty, and candor; (c) granting preliminary and permanent injunctive relief against the consummation of the Buyout Transaction as described herein; (d) in the event the Buyout Transaction is consummated, rescinding the Buyout Transaction and/or awarding rescissory damages to the class; (e) ordering defendants, jointly and severally, to account to plaintiff and other members of the Class all damages 10 suffered and to be suffered by them as the result of the acts and transactions alleged herein; (f) awarding plaintiff the costs and disbursements of the action including allowances for plaintiff's reasonable attorneys and experts fees; and (g) granting such other and further relief as the Court may deem just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ Joseph A. Rosenthal ----------------------- First Federal Plaza P.O. Box 1070 Wilmington, Delaware 19899 Attorneys for Plaintiff OF COUNSEL: BLUMENTHAL & OSTROFF Norm Blumenthal 1420 Kettner Blvd. 7th Floor San Diego, CA 92101 SULLIVAN, HILL, LEWIN & MARKHAM David R. Markham 550 West C Street Suite 1500 San Diego, CA 92101 11 EX-99.(G)(5) 18 Exhibit (g)(5) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ------------------------------------------x KALTER AND KAPLAN PROFIT SHARING PLAN - : Keogh F/B/O IVAN KALTER, : : Plaintiff, : : Civil Action No.14589 - against - : : : : JACQUES P. BLONDEAU; SERGE M.P. OSOUF; : CLASS ACTION COMPLAINT JEROME KARTER; JOHN R. COX; RAYMOND H. : ---------------------- DECK; MICHAEL J. GUDEFIN; JEAN P. MASSE; : RICHARD M. MURRAY; PATRICK PEUGEOT; : JOHN W. POPP; FRANCOIS REACH; DAVID : J. SHERWOOD; SCOR SA and SCOR U. S. : CORPORATION, : : Defendants. : : - ------------------------------------------x Plaintiff, by its attorneys, alleges the following upon information and belief based upon the investigation of its counsel, which included, among other things, a review of various public filings by the corporate defendants with the Securities and Exchange Commission ("S.E.C.") and various public articles detailed herein (except for those allegations which pertain to plaintiff, which allegations are based upon personal knowledge): 1. This action arises out of an unlawful scheme and plan to acquire the remaining approximately 20% ownership of Scor U. S. Corporation ("Scor U.S." or the "Company") in a going- private transaction by its parent, Scor SA, a French Company ("Scor SA") for grossly inadequate consideration and in breach of defendants' fiduciary duties. Plaintiff alleges that it and the other public stockholders of Scor U.S. common stock are entitled to enjoin the proposed transaction, or alternatively, recover damages in the event the transaction is consummated. THE PARTIES ----------- 2. Plaintiff is and at all relevant times was the owner of 400 shares of common stock of Scor U.S. 3. Defendant Scor U.S. is a corporation organized and existing under the laws of the State of Delaware with its principal executive offices located at 110 William Street, Suite 1800, New York, New York 10038. It is a subsidiary of defendant Scor SA. Scor U.S., through its subsidiaries, provides property and casualty insurance and reinsurance. Reinsurance is provided to primary insurance companies on both a treaty and facultative basis. Scor U.S.' subsidiary Scor Reinsurance Company specializes in underwriting treaties covering standard and non- standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. 4. Defendant Scor SA is a corporation organized and existing under the laws of France with its principal executive offices located at 1 Avenue du President Wilson, 92800 Puteaux, France. Scor SA is the largest shareholder of Scor U.S. It owns approximately 80% of the Company's common stock. As such, Scor SA has effective control over the Company. 5. Defendant Jacques P. Blondeau ("Blondeau") is Chairman of the Board of Directors of Scor U.S. Blondeau is also 2 Chairman of the Board and Chief Executive Officer of defendant Scor S.A. 6. Defendant Serge M.P. Osouf ("Osouf") is a Vice Chairman of the Board of Directors of Scor U.S. Osouf is also the General Manager of defendant Scor SA. 7. Defendant Patrick Peugeot ("Peugeot") is a director of Scor U.S. Peugeot is Honorary Chairman and the former Chairman of the Board and Chief Executive Officer of defendant Scor SA. 8. Defendant Francois Reach ("Reach") is a director of Scor U.S. Reach is Deputy General Manager and the former Chief Investment Officer and Treasurer of defendant Scor SA. 9. Defendant David J. Sherwood ("Sherwood") is a director of Scor U.S. 10. Defendant John W. Popp ("Popp") is a director of Scor U.S. 11. Defendant Jerome Karter ("Karter") is a director of Scor U.S. 12. Defendant John R. Cox ("Cox") is a director of Scor U.S. 13. Defendant Raymond H. Deck ("Deck") is a director of Scor U.S. 14. Defendant Michel J. Gudefin ("Gudefin") is a director of Scor U.S. 15. Defendant Jean P. Masse ("Masse") is a director of Scor U.S. 3 16. Defendant Richard M. Murray ("Murray") is a director of Scor U.S. 17. The above-named individual defendants (collectively the "individual Defendants") as officers and/or directors of the Company and/or as significant shareholders of the Company, owe fiduciary duties of good faith, loyalty, fair dealing, due care, and candor to plaintiff and the other members of the Class (as defined below). CLASS ACTION ALLEGATIONS ------------------------ 18. Plaintiff brings this action pursuant to Rule 23 of the Rules of this Court, on behalf of itself and all other stockholders of the Company as of September 26, 1995 (the "Class"). Excluded from the Class are the defendants herein, members of their immediate families, and any subsidiary, firm, trust, corporation, or other entity related to or affiliated with any of the defendants and their successors in interest, who are or will be threatened with injury arising from defendants' actions. 19. This action is properly maintainable as a class action for the following reasons: (a) the Class is so numerous that joinder of all members is impracticable. While the exact number of class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, there are more than three million shares of Scor U.S. common stock outstanding held by hundreds of shareholders of record. The holders of these 4 shares are believed to be geographically dispersed throughout the United States. Scor U.S. common stock is listed and actively traded on the New York Stock Exchange; (b) there are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia the following: ----- ---- (i) whether defendants have engaged and are continuing to engage in a plan and scheme to benefit themselves at the expense of the members of the Class; (ii) whether the Individual Defendants, as directors and/or officers of the Company and/or as significant shareholders of the Company, have breached their fiduciary duties owed to plaintiff and the other members of the Class, including their duties of entire fairness, loyalty, due care, and candor; (iii) whether defendants have disclosed all material facts in connection with the challenged transaction; and (iv) whether plaintiff and the other members of the Class would be irreparably damaged were defendants not enjoined from the conduct described herein; (c) the claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has no interest that is adverse or antagonistic to the interests of the Class; (d) the plaintiff is committed to prosecuting this action and has retained counsel competent and experienced in 5 litigation of this nature. Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; (e) plaintiff anticipates that there will be no difficulty in the management of this litigation; and (f) a class action is superior to other available methods for adjudication of this controversy. SUBSTANTIVE ALLEGATIONS ----------------------- 20. On September 26, 1995, the Dow Jones News Wire announced that Scor SA would acquire the remaining shares of Scor U.S. that it does not already own. Pursuant to the proposed transaction, each of Scor U.S.' minority owned common shares will be converted into the right to receive $14 in cash (the "Buyout Transaction"). 21. The purpose of the Buyout Transaction is to enable Scor SA to acquire one hundred (100%) percent equity ownership of Scor U.S. and its valuable assets for its own benefit and the benefit of Scor SA, at the expense of Scor U.S.' public stockholders who will be deprived of their equity investment and the benefits thereof including, among other things, the expected growth in the Company's profitability. Indeed, as disclosed on the Bloomberg Newswire on September 26, 1995, after it purchased the remaining 20% of Scor U.S., Scor SA intends to merge with Holding Company Scor, which controls Scor SA, thus increasing the value of Scor U.S. 6 22. The Buyout Transaction is the product of unfair dealing, and the price of $14 cash per share to be paid to class members is unconscionable and unfair and so grossly inadequate as to constitute a gross breach of trust committed by defendants against the public stockholders because, among other things: (a) the announcement of the proposed Buyout Transaction was made when the Company was poised for significant future growth and earnings as illustrated, inter alia, in the ----- ---- jump in the Company's net income to $4.8 million or $.27 per share, on a primary basis, in the second quarter of 1995 from $600,000, or $.03 per share on a primary basis, for the second quarter of 1994 and earnings estimates compiled by Nelsons estimate earnings per share of $.90 for fiscal 1995 and $.97 for fiscal 1996 up from the actual loss of $.43 per share in fiscal 1994; (b) the proposed Buyout Transaction comes at a time when according to analysts, the reinsurance industry is recovering from a series of natural catastrophes including Hurricane Andrew in 1992 and the Northridge earthquake in Los Angeles, California. As noted by Derek Elias, an analyst at Paribas Capital markets, "[w]e're seeing the effect of fewer natural catastrophes as well as pricing increases throughout the sector"; (c) defendants undervalued Scor U.S.' common stock by ignoring the full value of its assets and future prospects. The Buyout Transaction does not reflect that Scor U.S.' financial 7 condition is positive and will continue to improve as the national economy recovers. (d) because Scor SA controls an overwhelming majority of the Company's common stock, no third party will bid for Scor U.S. Thus, defendants will be able to proceed with the Buyout Transaction without an auction or other type of market check to maximize value for Scor U.S.' public shareholders. (e) defendants timed the announcement of the Buyout Transaction to place an artificial lid or cap on the market price for Scor U.S.' stock to enable Scor SA to acquire the minority stock at the lowest possible price. The agreed to merger price of $14 cash per Scor U.S. share represents an approximate 28% premium over the closing price prior to the announcement, but is below the closing market price of 15 on September 26, 1995, and the trading price of 15 1/4 on September 27, 1995. 23. By reason of their positions with Scor U.S. and the controlling ownership of the Company, defendants are in possession of non-public information concerning the financial condition and prospects of Scor U.S., and especially the true value and expected increased future value of Scor U.S. and its assets, which they have not disclosed to Scor U.S.' public stockholders. Such concealed information is of critical importance to class members in determining whether or not to seek the appraised value of their stock pursuant to the General Corporation Law of Delaware. 8 24. Scor SA is intent on paying the lowest buyout price to class members, whereas it and the Individual Defendants are duty-bound to maximize shareholder value. The defendant fiduciaries have clear and material conflicts of interest and are acting to better thc interests of Scor SA at the expense of the Scor U.S. public shareholders. 25. The proposed Buyout Transaction is wrongful, unfair and harmful to Scor U.S.' minority public stockholders, and represents an effort by Scor SA to aggrandize its own financial position and interests at the expense of and to the detriment of class members. The Buyout Transaction is an attempt to deny plaintiff and the other members of the Class their right to share proportionately in the true value of Scor U.S.' valuable assets, future growth in profits, earnings and dividends, while usurping the same for the benefit of Scor SA on unfair and inadequate terms. 26. Defendants, in failing to disclose the material non-public information in their possession as to the value of Scor U.S.' assets, the full extent of the future earnings potential of Scor SA and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the members of the Class. 27. As a result of defendants' unlawful actions, plaintiff and the other members of the Class will be damaged in 9 that they will not receive their fair portion of the value of Scor U.S.' assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed Buyout Transaction is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to the plaintiff and the members of the Class, will not engage in arm's-length negotiations on the merger terms, and will consummate and close the proposed merger complained of and succeed in their plan described above, all to the irreparable harm of the members of the Class. 28. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) declaring this action to be a proper classs action and certifying plaintiff as the representative of the Class; (b) ordering defendants to carry out their fiduciary duties to plaintiff and the other members of the Class, including those duties of care, loyalty, and candor; (c) granting preliminary and permanent injunctive relief against the consummation of the Buyout Transaction as described herein; (d) in the event the Buyout Transaction is consummated, rescinding the Buyout Transaction and/or awarding rescissory damages to the Class; (e) ordering defendants, jointly and severally, to account to plaintiff and other members of the Class for all 10 damages suffered and to be suffered by them as the result of the acts and transactions alleged herein; (f) awarding plaintiff the costs and disbursements of the action including allowances for plaintiff's reasonable attorneys and experts fees; and (g) granting such other and further relief as the Court may deem just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ Joseph A. Rosenthal ---------------------------------- First Federal Plaza P.O Box 1070 Wilmington, DE 19899 Attorneys for Plaintiff OF COUNSEL: ZWERLING, SCHACHTER, ZWERLING & KOPPELL, LLP 767 Third Avenue New York, NY 10017-2023 11 -----END PRIVACY-ENHANCED MESSAGE-----