EXHIBIT 2
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and among
CNA FINANCIAL CORPORATION,
CHICAGO ACQUISITION CORP.,
and
THE CONTINENTAL CORPORATION
Dated as of December 6, 1994
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER ................... 2
SECTION 1.1. The Merger ........................................ 2
SECTION 1.2. [Intentionally omitted]............................ 2
SECTION 1.3. Closing ........................................... 2
SECTION 1.4. Effective Time..................................... 2
SECTION 1.5. Effect of the Merger .............................. 2
SECTION 1.6. Directors and Officers; Certificate of
Incorporation; By-Laws ......................... 3
SECTION 1.7. Effect on Capital Stock ........................... 3
SECTION 1.8. Payment Fund ...................................... 4
SECTION 1.9. Stock Transfer Books .............................. 6
SECTION 1.10. Employee Stock Options ............................ 6
SECTION 1.11. Dissenting Shares ................................. 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NEW YORK .............. 8
SECTION 2.1. Organization, Good Standing, Power,
Authority, Etc. .................................. 8
SECTION 2.2. Capitalization of New York ........................ 9
SECTION 2.3. SEC Documents ..................................... 9
SECTION 2.4. [Intentionally omitted] ........................... 11
SECTION 2.5. Authority and Qualification of New York ........... 11
SECTION 2.6. Subsidiaries ...................................... 11
SECTION 2.7. Outstanding Securities ............................ 12
SECTION 2.8. No Contravention, Conflict, Breach,
Etc. ............................................ 12
SECTION 2.9. Consents .......................................... 13
SECTION 2.10. No Existing Violation, Default, Etc. .............. 14
SECTION 2.11. Licenses and Permits .............................. 14
SECTION 2.12. Title to Properties ............................... 15
SECTION 2.13. Environmental Matters ............................. 15
SECTION 2.14. Taxes ............................................. 16
SECTION 2.15. Litigation ........................................ 17
SECTION 2.16. Labor Matters ..................................... 17
SECTION 2.17. Contracts ......................................... 17
SECTION 2.18. Finder's Fees ..................................... 18
SECTION 1.19. Financial and Statutory Statements ................ 18
SECTION 2.20. Employee Benefits ................................. 19
SECTION 2.21. Contingent Liabilities ............................ 20
SECTION 2.22. No Material Adverse Change ........................ 20
SECTION 2.23. Investment Company ................................ 21
SECTION 2.24. No Bank Regulatory Oversight ...................... 21
SECTION 2.25. October Agreements ................................ 22
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHICAGO
AND MERGER SUB .................. 22
SECTION 3.1. Organization, Good Standing, Power,
Authority, Etc. .................................. 22
SECTION 3.2. No Conflicts; No Consents .......................... 23
SECTION 3.3. Proxy Statement, Etc. .............................. 23
SECTION 3.4. Available Funds .................................... 24
SECTION 3.5. Finder's Fees ...................................... 24
ARTICLE IV
CONDUCT OF BUSINESSES PENDING THE MERGER ......... 24
SECTION 4.1. Pre-Closing Activities ............................. 24
SECTION 4.2. Acquisition Proposals .............................. 27
SECTION 4.3. Shareholders Rights Plan ........................... 28
ARTICLE V
ADDITIONAL COVENANTS .................... 28
SECTION 5.1. Notification of Certain Matters .................... 28
SECTION 5.2. Action by Shareholders ............................. 28
SECTION 5.3. Regulatory Approvals ............................... 30
SECTION 5.4. Access ............................................. 31
SECTION 5.5. Further Action; Reasonable Best Efforts ............ 31
SECTION 5.6. Employee Matters ................................... 32
SECTION 5.7. Public Announcements ............................... 32
SECTION 5.8. Indemnification .................................... 32
SECTION 5.9. Redemption of the Series A and Series B
Preferred Stock .................................. 33
ARTICLE VI
CLOSING CONDITIONS ...................... 34
SECTION 6.1. Conditions to Obligations of Each
Party to Effect the Merger ....................... 34
SECTION 6.2. Conditions Precedent to the Obligations
of Chicago ....................................... 34
SECTION 6.3. Conditions Precedent to Obligations
of New York ...................................... 35
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER ................. 36
SECTION 7.1. Termination ........................................ 36
SECTION 7.2. Effect of Termination .............................. 37
SECTION 7.3. Amendment .......................................... 38
SECTION 7.4. Waiver ............................................. 38
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ARTICLE VIII
GENERAL PROVISIONS ................. 38
SECTION 8.1. Effectiveness of Representations,
Warranties and Agreements ........................ 38
SECTION 8.2. Fees, Expenses and Other Payments .................. 38
SECTION 8.3. Notices ............................................ 39
SECTION 8.4. Headings ........................................... 40
SECTION 8.5. Severability ....................................... 40
SECTION 8.6. Entire Agreement ................................... 40
SECTION 8.8. Assignment ......................................... 40
SECTION 8.9. Parties in Interest ................................ 41
SECTION 8.9. [Intentionally omitted] ............................ 41
SECTION 8.10. Governing Law ...................................... 41
SECTION 8.11. Counterparts ....................................... 41
Annex A Securities Purchase Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of December 6, 1994 (this "Agreement"),
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by and among CNA FINANCIAL CORPORATION, a Delaware corporation ("Chicago"),
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CHICAGO ACQUISITION CORP., a newly formed New York corporation and a wholly
owned subsidiary of Chicago ("Merger Sub"), and THE CONTINENTAL CORPORATION, a
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New York corporation ("New York").
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WITNESSETH:
WHEREAS, New York has entered into a Securities Purchase
Agreement, dated October 13, 1994 (the "October SPA"), by and between New York
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and TCC-PS Limited Partnership, a Delaware limited partnership (together with
its permitted assignees, "Partnership"), pursuant to which New York has agreed
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to sell to Partnership certain securities of New York (the "October SPA
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Securities"), and has entered into the related Asset Purchase Agreement, dated
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October 13, 1994 (the "October APA" and together with the October SPA, the
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"October Agreements"), by and among New York and the other parties thereto;
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WHEREAS, the Boards of Directors of New York and Chicago
have determined it advisable and in the best interests of their respective
shareholders for Merger Sub, subject to the terms and conditions of this
Agreement, to merge with and into New York, with New York being the surviving
corporation (the "Merger");
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WHEREAS, New York will terminate the October Agreements in
accordance with and subject to the terms and conditions set forth therein;
WHEREAS, Chicago has agreed to purchase certain securities
(the "Chicago SPA Securities" and the shares of preferred stock of New York
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included therein, the "Chicago Preferred Stock") from New York, substantially
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concurrently with the execution of this Agreement pursuant to the terms of a
Securities Purchase Agreement, dated as of the date hereof, by and between New
York and Chicago (the "Chicago SPA"), a copy of which is attached hereto as
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Annex A, in accordance with and subject to the terms and conditions set forth
therein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
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conditions set forth in this Agreement, and in accordance with the New York
Business Corporation Law (the "NYBCL"), at the Effective Time, Merger Sub shall
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be merged with and into New York. As a result of the Merger, the separate
corporate existence of Merger Sub shall cease, and New York shall continue as
the surviving corporation of the Merger (the "Surviving Corporation").
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SECTION 1.2. [Intentionally omitted.]
SECTION 1.3. Closing. Unless this Agreement shall have been
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terminated in accordance with the terms hereof and subject to the satisfaction
or, if permissible, waiver of the conditions set forth in Article VI, the
consummation of the Merger shall take place as promptly as practicable (and, in
any event, within five business days) after satisfaction or waiver of the
conditions set forth in Article VI at the offices of Wachtell, Lipton, Rosen &
Katz, 51 West 52nd Street, New York, New York, unless another date, time or
place is agreed to in writing by the parties hereto.
SECTION 1.4. Effective Time. As promptly as practicable
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after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VI, the parties hereto shall cause a certificate of merger (the "New
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York Certificate") to be executed, verified and delivered to the Department of
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State of the State of New York as provided in Section 907 of the NYBCL. The
Merger shall become effective at such time as the New York Certificate has been
filed by the Department of State of the State of New York in accordance with the
provisions of Section 907 of the NYBCL, or at such later time as may be
specified in the New York Certificate in accordance with applicable law. The
date and time when the Merger shall become effective is herein referred to as
the "Effective Time."
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SECTION 1.5. Effect of the Merger. The Merger shall have
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the effects specified in the NYBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all properties, rights,
privileges, powers and franchises of New York and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of New York and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
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SECTION 1.6. Directors and Officers; Certificate of
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Incorporation; By-Laws. (a) At the Effective Time, the directors of Merger Sub
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shall become the directors, and the officers of New York shall become the
officers, of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
(b) At the Effective Time, the Certificate of Incorporation
and the By-Laws of Merger Sub, as in effect immediately prior the Effective
Time, shall be the Certificate of Incorporation and By-Laws of the Surviving
Corporation.
SECTION 1.7. Effect on Capital Stock. At the Effective
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Time, by virtue of the Merger and without any action on the part of Chicago,
Merger Sub, New York or the holders of any shares of New York Common Stock:
(a) Each share of common stock of New York ("New York
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Common Stock") issued and outstanding immediately prior to the
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Effective Time (other than any shares of New York Common Stock to
be cancelled pursuant to Section 1.7(b) and other than any
Dissenting Shares) (the "Converted Shares") shall be converted
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into the right to receive $20 per share in cash (the "Per Share
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Merger Consideration" and the aggregate amount of cash into which
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all shares of New York Common Stock shall be converted, the
"Merger Consideration"). All such shares of New York Common
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Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each
certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of New York Common
Stock (other than Dissenting Shares) (the "Certificates") shall
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thereafter represent the right to receive, upon the surrender of
such certificate in accordance with the provisions of this
Section, the Per Share Merger Consideration into which such
shares have been converted in accordance herewith. The holders
of Certificates previously evidencing shares of New York Common
Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect thereto (including, without
limitation, any rights to vote or to receive dividends and
distributions in respect of such shares), except as otherwise
provided herein.
(b) Each share of New York Common Stock owned by or held
in the treasury of New York or any direct or indirect wholly
owned Subsidiary of New York (other than any share held in a
fiduciary capacity and beneficially owned by a third party or
as a result of debts previously contracted
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and other than any share which is part of the regulatory or
statutory capital of such Subsidiary) immediately prior to the
Effective Time shall automatically be cancelled and extinguished
without any conversion thereof and no consideration shall be
given with respect thereto.
(c) Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock of the Surviving
Corporation.
(d) Each share of Chicago Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be
converted, at Chicago's option, into either (i) the right to
receive a cash payment equal to the liquidation preference of
such share, plus any accrued and unpaid dividends on such share,
at the Effective Time or (ii) one share of preferred stock of
Chicago or its Affiliate ("Chicago Mirror Preferred Stock"),
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having the same terms, designations, preferences, limitations,
privileges, and relative rights as such share of Chicago
Preferred Stock, except that in the case of any series of
convertible preferred stock, the shares shall be convertible
under the same terms and conditions as are set forth in the Cer-
tificate of Amendment creating such series of preferred stock,
including, without limitation, the adjustment provisions thereof,
into such consideration as would have been received by the holder
of such stock had such stock been converted into New York Common
Stock immediately prior to the Effective Time (collectively, the
"Preferred Stock Consideration"). At Chicago's option, and in
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its sole discretion, effective immediately prior to the Effective
Time, any or all shares of Chicago Preferred Stock owned by or
held in the treasury of New York or Chicago or any direct or
indirect wholly owned Subsidiary of New York or Chicago may be
cancelled and extinguished in lieu of the conversion referred to
in the previous sentence.
SECTION 1.8. Payment Fund. (a) Payment Agent. As of the
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Effective Time, Chicago shall deposit, or shall cause to be deposited, with or
for the account of a bank or trust company (the "Payment Agent") designated by
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Chicago and reasonably satisfactory to New York, in trust for the benefit of the
holders of shares of New York Common Stock (other than Dissenting Shares) for
exchange through the Payment Agent in accordance with this Article, cash in the
amount of the product of the Per Share Merger Consideration and the number of
Converted Shares (such cash, the "Payment Fund"). The Payment Agent shall,
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pursuant to irrevocable instructions, deliver the
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Payment Fund to holders of shares of New York Common Stock and the Payment Fund
shall not be used for any other purpose. Such funds shall be invested by the
Payment Agent only in short-term securities issued or guaranteed by the United
States government or certificates of deposit of commercial banks that have con-
solidated total assets of not less than $5,000,000,000 and are "well
capitalized" within the meaning of the applicable Federal bank regulations. Any
interest or other income earned on the investment of cash held in the Payment
Fund shall be for the account of Chicago.
(b) Payment Procedures. Promptly after the Effective Time,
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Chicago shall cause the Payment Agent to mail to each holder of record of a
Certificate, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Payment Agent and shall be
in such customary form and have such other provisions as Chicago may reasonably
specify) and (ii) instructions to effect the surrender of the Certificates in
exchange for cash. Upon surrender of a Certificate for cancellation to the
Payment Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash which such holder has the right to receive in accordance with
Section 1.7, and the Certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of shares of New York Common Stock which
is not registered in the transfer records of New York, cash may be issued and
paid in accordance with this Article I to a transferee if the Certificate
evidencing such shares of New York Common Stock is presented to the Payment
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section, each Certificate shall
be deemed at any time after the Effective Time to evidence only the right to
receive upon such surrender the Per Share Merger Consideration applicable to the
shares of New York Common Stock evidenced by such Certificate.
(c) Termination of Payment Fund. Any portion of the
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Payment Fund which remains undistributed to the holders of New York Common Stock
for six months after the Effective Time shall be delivered to Chicago upon
demand, and any holders of New York Common Stock who have not theretofore
complied with this Article shall thereafter look only to Chicago for the Merger
Consideration to which they are entitled pursuant to this Article. If any
Certificates shall not have been surrendered
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prior to five years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration in respect of such Certificate
would otherwise escheat to or become the property of any government entity), any
cash or other consideration payable in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(d) No Liability. None of Chicago, Merger Sub or the
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Surviving Corporation shall be liable to any holder of shares of New York Common
Stock for any cash from the Payment Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(e) Withholding Rights. Chicago or the Payment Agent shall
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be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of New York Common Stock such
amounts as Chicago or the Payment Agent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld and paid
over to the appropriate taxing authority by Chicago or the Payment Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of New York Common Stock in respect of
which such deduction and withholding was made by Chicago or the Payment Agent.
(f) Transfer Taxes. Except as provided in paragraphs (b)
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or (e) above, Chicago shall pay or cause to be paid any transfer or gains tax
(including, without limitation, any real property gains or transfer tax) imposed
in connection with or as a result of the Merger, including any such tax that is
imposed on a shareholder of New York.
SECTION 1.9. Stock Transfer Books. At the Effective Time,
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the stock transfer books of New York shall be closed, and there shall be no
further registration of transfers of shares of New York Common Stock thereafter
on the records of New York. On or after the Effective Time, any Certificates
presented to the Payment Agent or Chicago for any reason shall be converted into
the Per Share Merger Consideration applicable to the shares of New York Common
Stock evidenced by such shares.
SECTION 1.10. Employee Stock Options. As of the Effective
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Time, the holder of each outstanding employee stock option ("Option") to
purchase shares of capital stock of New York shall be solely entitled to receive
in exchange for such Option a cash payment from New York in an amount equal to
the
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product of (a) the excess, if any, of the Per Share Merger Consideration over
the per share exercise price of such Option and (b) the number of shares of New
York Common Stock covered by such Option, whether or not such Option is then
exercisable, except as specified in the Disclosure Letter. New York shall use
its best efforts to cause each holder of an Option (whether or not presently
exercisable) to execute an agreement consenting to the cancellation prior to the
Effective Time of his outstanding Options.
SECTION 1.11. Dissenting Shares. (a) Notwithstanding any
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other provision of this Agreement to the contrary, shares of New York Common
Stock that are outstanding immediately prior to the Effective Time and which are
held by shareholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such shares in accordance with the NYBCL and who shall not have
withdrawn such demand or otherwise have forfeited appraisal rights
(collectively, the "Dissenting Shares") shall not be converted into or represent
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the right to receive the Merger Consideration. Such shareholders shall be
entitled to receive payment of the appraised value of such shares of New York
Common Stock held by them in accordance with the provisions of the NYBCL, except
that all Dissenting Shares held by shareholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such shares of New York Common Stock under the NYBCL shall thereupon be deemed
to have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration upon surrender, in the manner provided in Section 1.7, of the
certificate or certificates that formerly evidenced such shares of New York
Common Stock.
(b) New York shall give Chicago (i) prompt notice of any
demands for appraisal received by New York, withdrawals of such demands, and any
other instruments served pursuant to the NYBCL and received by New York and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the NYBCL. New York shall not, except with the
prior written consent of Chicago, make any payment with respect to any demands
for appraisal, or offer to settle, or settle, any such demands.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NEW YORK
New York hereby represents and warrants to Chicago and
Merger Sub that, except as specifically disclosed in the single writing from New
York to Chicago and Merger Sub that is identified as such and is dated the date
hereof (the "Disclosure Letter"):
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SECTION 2.1. Organization, Good Standing, Power, Authority,
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Etc. New York is a corporation duly organized, validly existing and in good
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standing under the laws of the State of New York. New York has the full
corporate power and authority to execute and deliver this Agreement and the
Chicago SPA and to perform its obligations under this Agreement and the Chicago
SPA. New York has taken all action required by law, its Certificate of
Incorporation, its By-Laws or otherwise required to be taken by it to authorize
the execution, delivery and, other than the approval and adoption of this
Agreement by the holders of New York Common Stock and Existing Preferred Stock
(if the record date for the Special Meeting is prior to the redemption date
provided in Section 5.9) voting together as a class, performance by it of this
Agreement and the Chicago SPA. This Agreement and the Chicago SPA are valid and
binding obligations of New York, enforceable against New York in accordance with
their respective terms. True and complete copies of the Certificate of
Incorporation and the By-Laws of New York as in effect on the date hereof have
been provided by New York to Chicago. Other than the approval and adoption of
this Agreement by the holders of New York Common Stock and Existing Preferred
Stock (if the record date for the Special Meeting is prior to the redemption
date provided in Section 5.9) voting together as a class, no approval or
authorization of the shareholders and no further approval of the Board of
Directors of New York is required under applicable law, New York's Certificate
of Incorporation or By-laws or the rules of the New York Stock Exchange, Inc.
for the execution and delivery of this Agreement and the Chicago SPA by New York
and, the consummation by New York of this Agreement and the Chicago SPA, other
than such as have been obtained or made and are in full force and effect.
Without limiting the generality of the foregoing, New York has taken actions
necessary to exempt all future transactions contemplated by this Agreement and
the Chicago SPA between New York and its Subsidiaries, on the one hand, and
Chicago and its "affiliates" and "associates" (each as defined in Section 912 of
the NYBCL), on the other hand, from the provisions of such Section 912, and any
and all other applicable state takeover laws.
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SECTION 2.2. Capitalization of New York. Other than with
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respect to the Chicago SPA Securities, the authorized capital stock of New York
consists of: (A) 100,000,000 shares of Common Stock, par value $1.00 per share,
55,484,091 of which shares were outstanding as of November 30, 1994; and (B)
10,000,000 shares of preferred stock, par value $4.00 per share ("New York
Preferred Stock"), of which (i) 2,750,000 shares have been designated as $2.50
Cumulative Convertible Preferred Stock, Series A ("Series A Preferred Stock"),
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27,816 of which shares were outstanding as of November 30, 1994, (ii) 1,094,096
shares have been designated $2.50 Cumulative Preferred Stock, Series B ("Series
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B Preferred Stock"), 25,563 of which shares were outstanding as of November 30,
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1994, (iii) 20,500 shares were designated $150 Cumulative Convertible Preferred
Stock, Series C, all of which shares have been redeemed and are not outstanding,
and (iv) 40,000 shares were designated Cumulative Preferred Stock, Series D, all
of which shares have been redeemed and are not outstanding. No other capital
stock of New York is authorized and no other capital stock is issued or reserved
for issuance. Since September 30, 1994, New York has only issued shares of New
York Common Stock in the amounts as specified in the Disclosure Letter and in
accordance with the terms of its employee benefit plans as in existence on Sep-
tember 30, 1994, in all cases in the ordinary course of business and in a manner
and in amounts consistent with past practice. All outstanding shares of capital
stock of New York have been duly authorized, are validly issued, fully paid and
nonassessable and have been issued in compliance with applicable federal and
state securities laws. The shareholders of New York have no preemptive or
similar rights with respect to the securities of New York. The shares of Series
A Preferred Stock and of Series B Preferred Stock (collectively, the "Existing
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Preferred Stock") are convertible into an aggregate of 117,847 shares of New
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York Common Stock. 10,240,005 shares of New York Common Stock were held by New
York and it Subsidiaries (other than any shares held in a fiduciary capacity and
beneficially owned by a third party) as of November 16, 1994. Other than as
specified in this paragraph, there is no outstanding capital stock, securities
or indebtedness (or options or other securities or indebtedness convertible or
exchangeable for such capital stock, securities or indebtedness) of New York
carrying the right to vote in any matter requiring the approval of the
shareholders of New York.
SECTION 2.3. SEC Documents. (a) New York has delivered to
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Chicago true and complete copies of: (i) the Annual Report and its Annual
Report on Form 10-K for the fiscal years ended December 31, 1992 and December
31, 1993, as filed with the Securities and Exchange Commission (the "SEC"), (ii)
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New York's Quarterly Reports on Form 10-Q for the quarters ended
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March 31, 1994, June 30, 1994 and September 30, 1994, each as filed with the SEC
(the "Quarterly Reports"), (iii) its Current Reports on Form 8-K filed with the
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SEC since January 1, 1993, (iv) its proxy or information statements relating to
meetings of, or actions without a meeting by, the stockholders of New York held
since January 1, 1993 and (v) all other documents filed by New York with the SEC
since January 1, 1993 (the foregoing clauses (i) through (v), collectively the
"SEC Documents").
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(b) As of its filing date, each SEC Document (including all
exhibits and schedules thereto and documents incorporated by reference therein)
referred to in Section 2.3(a) filed, and each SEC Document (including all
exhibits and schedules thereto and documents incorporated by reference therein)
that will be filed by New York prior to the Effective Time, as amended or
supplemented, if applicable, pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
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Act") (i) complied or will comply in all material respects with the applicable
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requirements of the Exchange Act and (ii) did not or will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) Each such final registration statement (including all
exhibits and schedules thereto and documents incorporated by reference therein)
referred to in Section 2.3(a) filed, and each final registration statement
(including all exhibits and schedules thereto and documents incorporated by
reference therein) that will be filed by New York prior to the Effective Time,
as amended or supplemented, if applicable, pursuant to the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), as of the date such statement or amendment became or will
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become effective (i) complied or will comply in all material respects with the
applicable requirements of the Securities Act and (ii) did not or will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of any prospectus, in light of the circumstances
under which they were made).
(d) New York has (i) delivered to Chicago true and complete
copies of all correspondence between the SEC and New York or its legal counsel,
accountants or other advisors since January 1, 1993, and (ii) disclosed to
Chicago in writing the content of all material discussions between the SEC and
New
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York or its legal counsel, accountants or other advisors concerning the adequacy
or form of any SEC Document filed with the SEC since January 1, 1993. New York
is not aware of any issues raised by the SEC with respect to any of the SEC
Documents, other than those disclosed to Chicago pursuant to clause (i) or (ii)
of this Section 2.3(d).
SECTION 2.4. [Intentionally omitted.]
SECTION 2.5. Authority and Qualification of New York. New
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York has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the SEC Documents and as
currently owned or leased and conducted. New York is duly qualified to transact
business as a foreign corporation and is in good standing (if applicable) in
each jurisdiction in which the conduct of its business or its ownership, leasing
or operation of property requires such qualification, other than any failure to
be so qualified or in good standing as would not, individually or in the
aggregate with all such other failures, reasonably be expected to have a
material adverse effect on the assets, liabilities, results of operations,
business or financial condition of New York and its Subsidiaries, taken as a
whole, or have a material adverse effect on the ability of New York to perform
its obligations under this Agreement (a "Material Adverse Effect"; provided,
----------------------- --------
however, that the termination fees associated with Section 6.10 of the October
- - -------
SPA, severance obligations arising as a result of the transactions contemplated
by this Agreement, and any impact on the business of New York and its
Subsidiaries, including but not limited to its relationships with employees,
agents, brokers and investment advisory clients, resulting from the execution or
announcement of this Agreement and consummation of the transactions contemplated
hereby shall not be considered in determining whether a Material Adverse Effect
shall have occurred). For purposes of this Agreement, "Subsidiary" shall mean,
----------
with respect to any person, any corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated organi-
zation, or other entity analogous to any of the foregoing of which a majority of
the equity ownership (whether voting stock or comparable interest) is, at the
time, owned, directly or indirectly, by such person.
SECTION 2.6. Subsidiaries. Exhibit 21 to New York's Annual
------------
Report on Form 10-K for the year ended December 31, 1993, as filed with the SEC
(the "Annual Report") is an accurate and correct statement of all of the
-------------
information required to be set forth therein by the regulations of the SEC and
is an accurate and correct list of all Subsidiaries of New York as of the date
hereof. Each Subsidiary of New York has been duly
-11-
incorporated or organized and is validly existing as a corporation or other
legal entity in good standing under the laws of the jurisdiction of its
incorporation or formation, has the corporate or other power and authority to
own, lease and operate its properties and to conduct its business as described
in the SEC Documents and as currently owned or leased and conducted and is duly
qualified to transact business as a foreign corporation or other legal entity
and is in good standing (if applicable) in each jurisdiction in which the
conduct of its business or its ownership, leasing or operation of property
requires such qualification, other than any failure to be so qualified or in
good standing as would not, individually or in the aggregate with all such other
failures, reasonably be expected to have a Material Adverse Effect. Except as
disclosed in the SEC Documents filed with the SEC prior to the date of this
Agreement, all of the outstanding capital stock of each Subsidiary of New York
has been duly authorized and validly issued, is fully paid and nonassessable and
is owned by New York, directly or through other Subsidiaries of New York (other
than directors' qualifying shares), free and clear of any mortgage, pledge,
lien, security interest, restrictions upon voting or transfer, claim or
encumbrance of any kind ("Encumbrance") (other than such transfer restrictions
-----------
as may exist under federal and state securities, banking and insurance laws or
any Encumbrances between or among New York and/or any Subsidiary of New York or
any liens for taxes not yet due and payable), and there are no rights granted to
or in favor of any third party (whether acting in an individual, fiduciary or
other capacity), other than New York or any Subsidiary of New York, to acquire
any such capital stock, any additional capital stock or any other securities of
any such Subsidiary. There exists no restriction, other than those pursuant to
applicable law or regulation, on the payment of cash dividends by any Subsidiary
of New York. Neither New York nor any of its Subsidiaries holds any interest in
a partnership or joint venture of any kind or any equity interests in any other
person representing more than 10% of the equity interests of such person.
SECTION 2.7. Outstanding Securities. Except as set forth in
----------------------
Section 2.2 and except pursuant to the Chicago SPA, there are no outstanding (i)
securities or obligations of New York convertible into or exchangeable for any
capital stock of New York, (ii) warrants, rights or options to subscribe for or
purchase from New York any such capital stock or any such convertible or
exchangeable securities or obligations or (iii) obligations of New York to
issue, sell, transfer, repurchase, redeem or otherwise acquire or vote such
shares, any such convertible or exchangeable securities or obligations, or any
such warrants, rights or options.
-12-
SECTION 2.8. No Contravention, Conflict, Breach, Etc. The
----------------------------------------
execution, delivery and performance of each of this Agreement and the Chicago
SPA by New York and the consummation of the transactions contemplated herein and
therein will not (A) conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, give rise to any
right of termination of, result in the material modification of any terms of, or
the forfeiture of any material rights or the loss of any material benefits
under, or result in the creation or imposition of any Encumbrance upon any
assets or properties of it or of any of its Subsidiaries under any statute,
rule, regulation, order or decree of any governmental agency or body or any
court having jurisdiction over it or any such Subsidiary or any of its or their
respective properties, assets or operations, or any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
permit, license or other agreement or instrument to which it or any of such
Subsidiaries is a party or by which it or any such Subsidiary is bound or to
which any of the properties, assets or operations of it or any such Subsidiary
is subject, which conflict, breach, violation, default, creation or imposition
has, or will have, individually or in the aggregate, a Material Adverse Effect
or (B) contravene any provision of the Certificate of Incorporation, By-Laws or
other organizational documents of it or of any of its Subsidiaries.
SECTION 2.9. Consents. (a) No consent, approval,
--------
authorization, order, registration, filing or qualification of or with any (A)
court, (B) government agency or body, (C) stock exchange on which the securities
of New York are traded or (D) other third party (whether acting in an
individual, fiduciary or other capacity) is required to be made or obtained by
New York or any of its Subsidiaries for the consummation of the transactions
contemplated by this Agreement other than (i) the filing of premerger
notification and report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") with respect to the Merger, (ii) the
-------
filings and/or notices required under the insurance laws of the various states
in which New York and its Subsidiaries conduct insurance business (a true and
complete list of which states is contained in the Disclosure Letter) with
respect to the Merger, (iii) the filing with the SEC of the Proxy Statement and
such reports under the Exchange Act as may be required in connection with this
Agreement, the Chicago SPA and the transactions contemplated herein and therein,
(iv) the filing of the New York Certificate and appropriate documents with the
relevant authorities of other states in which New York is qualified to do
business, (v) any required bank regulatory approvals in
-13-
connection with the Bank, (vi) the vote of the stockholders of New York
described in Section 2.9(b) and (vii) such other filings, authorizations,
consents, approvals and notices as are set forth in the Disclosure Letter and
such other filings, authorizations, consents, approvals and notices the failure
to make or obtain which, in the aggregate, would not have a Material Adverse
Effect.
(b) The affirmative vote of the holders of two-thirds of
the outstanding shares of New York Common Stock and Existing Preferred Stock
(if the record date for the Special Meeting is prior to the redemption date
provided in Section 5.9) voting together as a class is the only vote of the
holders of any class or series of New York capital stock, securities or
indebtedness necessary to approve this Agreement, the Chicago SPA and the
transactions contemplated herein and therein.
SECTION 2.10. No Existing Violation, Default, Etc. Neither
------------------------------------
New York nor any of its Subsidiaries is in violation of (A) its Certificate of
Incorporation, By-Laws or other organization documents or (B) any applicable
law, ordinance, administrative, governmental or stock exchange rule or regula-
tion, which violation has or could reasonably be expected to have a Material
Adverse Effect or (C) any applicable order, decree or judgment of any court or
governmental agency or body having jurisdiction over New York or such
Subsidiary, which violation has or could reasonably be expected to have a Mate-
rial Adverse Effect. Except as set forth in SEC Documents filed with the SEC
prior to the date of this Agreement, no event of default or event that, but for
the giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by New York of the transactions
contemplated by this Agreement or the Chicago SPA, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument to which New York
or any of its Subsidiaries is a party or by which New York or any such Sub-
sidiary is bound or to which any of the properties or assets of New York or any
such Subsidiary is subject, which event of default, or event that, but for the
giving of notice or the lapse of time or both, would constitute an event of
default, has or could reasonably be expected to have a Material Adverse Effect.
SECTION 2.11. Licenses and Permits. New York and its
--------------------
Subsidiaries have such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate insurance and
other governmental agencies and bodies ("Licenses") as are necessary to own,
--------
lease or operate their properties and to conduct their businesses in
-14-
the manner described in the SEC Documents and as currently owned or leased and
conducted and all such Licenses are valid and in full force and effect except
such licenses that the failure to have or to be in full force and effect,
individually or in the aggregate, do not have, and are not reasonably expected
to have, a Material Adverse Effect. Neither New York nor any of its
Subsidiaries has received any written notice that any violations are being or
have been alleged in respect of any such License and no proceeding is pending
or, to the best of New York's knowledge, after due inquiry, threatened, to
suspend, revoke or limit any such License. To the best of New York's knowledge,
after due inquiry, New York and its Subsidiaries are in compliance in all
material respects with their respective obligations under such Licenses, with
such exceptions as individually or in the aggregate do not have, and are not
reasonably expected to have, a Material Adverse Effect, and no event has
occurred that allows, or after notice or lapse of time would allow, revocation,
suspension, limitation or termination of such Licenses, except such events as
would have not have, or could not reasonably be expected to have, a Material
Adverse Effect.
SECTION 2.12. Title to Properties. New York and its
-------------------
Subsidiaries have sufficient title to all material properties (real and
personal) owned by New York and any such Subsidiary that are necessary for the
conduct of the business of New York and such Subsidiaries as described in the
SEC Documents and as currently conducted, free and clear of any Encumbrance that
may materially interfere with the conduct of the business of New York and such
Subsidiaries, taken as a whole, and to the best of New York's knowledge, after
due inquiry, all material properties held under lease by New York or the
Subsidiaries are held under valid, subsisting and enforceable leases, other than
such imperfections or Encumbrances as would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 2.13. Environmental Matters. Neither New York nor
---------------------
any of its Subsidiaries is the subject of any federal, state, local or foreign
investigation, and neither New York nor any of its Subsidiaries has received any
notice or claim (or is aware on the date hereof of any facts that would form a
reasonable basis for any claim), nor entered into any negotiations or agreements
with any third party, relating to any material liability or remedial action or
potential material liability or remedial action under Environmental Laws (other
than in respect of or related to insurance policies issued by or of New York or
any of its Subsidiaries), except such liability or remedial action as has not
had, or could not reasonably be expected to have, a Material Adverse Effect, nor
are there any pending, reasonably anticipated or, to the best knowledge of New
York,
-15-
threatened actions, suits or proceedings against or affecting New York, any of
the Subsidiaries or their properties, assets or operations in connection with
any such Environmental Laws (other than in respect of or related to insurance
policies issued by or of New York or any of its Subsidiaries), except such
actions, suits or proceedings as have not had, or could not reasonably be
expected to have, a Material Adverse Effect. The properties, assets and
operations of New York and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local and foreign laws, rules and
regulations, orders, decrees, judgments, permits and licenses relating to public
and worker health and safety and to the protection and clean-up of the natural
environment and activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal, transportation
or release of hazardous materials (collectively, "Environmental Laws"), other
------------------
than any such failure to be in compliance as would not, individually or in the
aggregate with all such other failures, have a Material Adverse Effect. With
respect to such properties, assets and operations, including any previously
owned, leased or operated properties, assets or operations, to the best
knowledge of New York on the date hereof, after due inquiry, there are no past,
present or reasonably anticipated future events, conditions, circumstances,
activities, practices, incidents, actions or plans of New York or any of its
Subsidiaries that may interfere with or prevent compliance or continued
compliance in all material respects with applicable Environmental Laws, other
than any such interference or prevention as would not, individually or in the
aggregate with any such other interference or prevention, reasonably be expected
to have a Material Adverse Effect. The term "hazardous materials" shall mean
-------------------
those substances that are regulated by or form the basis for liability under any
applicable Environmental Laws.
SECTION 2.14. Taxes. New York and its Subsidiaries have
-----
filed or caused to be filed, or have properly filed extensions for, all income
tax returns that are required to be filed and have paid or caused to be paid all
taxes due with respect to the periods covered by said returns and on all as-
sessments received by it to the extent that such taxes have become due, except
taxes the validity or amount of which is being contested in good faith by appro-
priate proceedings and with respect to which adequate reserves, in accordance
with generally accepted accounting principles applied on a consistent basis
except as set forth in the SEC Reports, have been set aside. New York and its
Subsidiaries have paid or caused to be paid, or have established reserves that
New York or such Subsidiaries reasonably believes to be adequate in all material
respects, for all income tax liabilities applicable to New York
-16-
and its Subsidiaries for all fiscal years that have not been examined and
reported on by the taxing authorities (or closed by applicable statutes).
United States Federal income tax returns of New York and its Subsidiaries have
been examined and closed through the fiscal year ended December 31, 1978. The
net operating loss of the Company is not, as of the date hereof (without regard
to the execution of this Agreement or the Chicago SPA or the consummation of the
transactions contemplated by this Agreement or the Chicago SPA), subject to lim-
itation under Section 382 of the Code.
SECTION 2.15. Litigation. Except as set forth in SEC
----------
Documents filed with the SEC prior to the date of this Agreement, there are no
pending actions, suits, proceedings, arbitrations or investigations against New
York or any of its Subsidiaries or any of their respective properties or assets
that would prevent or materially delay the consummation of the transactions
contemplated by this Agreement, or that would, individually or in the aggregate
taken net of claims reserves established and after giving effect to reinsurance,
with all such other actions, suits, investigations or proceedings, reasonably be
expected to have, a Material Adverse Effect; and, to the best knowledge of New
York on the date hereof, after due inquiry, except as set forth in SEC Documents
filed with the SEC prior to the date of this Agreement, no such actions, suits,
proceedings or investigations are threatened.
SECTION 2.16. Labor Matters. No labor disturbance by the employees of New York
-------------
or any of its Subsidiaries that has had or that is reasonably expected to have a
Material Adverse Effect exists or, to the best knowledge of New York on the date
hereof, after due inquiry, is threatened, except that New York makes no
representation hereunder as to the effect of this Agreement on any such matters.
Employees of neither New York nor any of its Subsidiaries are represented by any
labor union or any collective bargaining organization.
SECTION 2.17. Contracts. All of the material contracts of
---------
New York or any of its Subsidiaries that are required to be described in the SEC
Documents or to be filed as exhibits thereto are described in the SEC Documents
or filed as exhibits thereto and are in full force and effect. True and
complete copies of all such material contracts have been delivered by New York
to Chicago. Neither New York nor any of its Subsidiaries nor, to the best
knowledge of New York, any other party is in breach of or in default under any
such contract except for such breaches and defaults as in the aggregate have not
had and are not reasonably expected to have a Material Adverse Effect. Neither
New York nor any of its subsidiaries is party to any agreement containing any
provision or covenant limiting
-17-
in any material respect the ability of New York or any Subsidiary to (A) sell
any products or services of any other person, (B) engage in any line of
business, or (C) compete with or to obtain products or services from any person
or limiting the ability of any person to provide products or services to New
York or any Subsidiary.
SECTION 2.18. Finder's Fees. Other than pursuant to the
-------------
arrangements with Goldman, Sachs & Co. as described in the Disclosure Letter, no
broker, finder or other party is entitled to receive from New York or any of its
Subsidiaries any brokerage or finder's fee or any other fee, commission or
payment as a result of the transactions contemplated by this Agreement or the
Chicago SPA.
SECTION 2.19. Financial and Statutory Statements. (a) The
----------------------------------
audited consolidated financial statements and related schedules and notes
included in the SEC Documents comply in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder, were prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved and fairly present the financial condition, results of operations, cash
flows and changes in stockholders' equity of New York and its Subsidiaries at
the dates and for the periods presented. The unaudited quarterly consolidated
financial statements and the related notes included in the SEC Documents present
fairly the financial condition, results of operations and cash flows of New York
and its Subsidiaries at the dates and for the periods to which they relate,
subject to year-end audit adjustments (consisting only of normal recurring
accruals), have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as otherwise stated therein and
have been prepared on a basis consistent with that of the audited financial
statements referred to above except as otherwise stated therein.
(b) New York has heretofore delivered to Chicago true and
complete copies of the Annual Statements and Quarterly Statements of each of the
Subsidiaries of New York engaged in the insurance business as filed with the
applicable insurance regulatory authority for the years ended December 31, 1992
and December 31, 1993 and for the quarterly periods ended March 31, 1994, June
30, 1994 and September 30, 1994, including all exhibits, interrogatories, notes,
schedules and any actuarial opinions, affirmations or certifications or other
supporting documents filed in connection therewith (collectively, the "Statutory
---------
Statements"). The Statutory Statements were prepared in conformity with
- - ----------
statutory accounting practices prescribed or permitted by the applicable
insurance regulatory
-18-
authority consistently applied for the periods covered thereby and present
fairly the statutory financial position of such Subsidiary as at the respective
dates thereof and the results of operations of such Subsidiary for the
respective periods then ended. The Statutory Statements complied in all
material respects with all applicable laws, rules and regulations when filed,
and no material deficiency has been asserted with respect to any Statutory
Statements by the applicable insurance regulatory body or any other governmental
agency or body. The statutory balance sheets and income statements included in
the Statutory Statements have been audited by KPMG Peat Marwick, and New York
has delivered to Chicago true and complete copies of all audit opinions related
thereto.
SECTION 2.20. Employee Benefits. (a) Except for the plans
-----------------
set forth in the Disclosure Letter (the "Benefit Plans"), there are no employee
-------------
benefit plans, agreements or arrangements of any type (including, without
limitation, plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended and the regulations thereunder ("ERISA")),
-----
under which New York or any of its Subsidiaries has or in the future could have
directly, or indirectly through a Commonly Controlled Entity (within the meaning
of Sections 414(b), (c), (m) and (o) of the Internal Revenue Code of 1986, as
amended (the "Code")), any liability with respect to any current or former
----
employee of New York, any of its Subsidiaries, or any Commonly Controlled
Entity. No such Benefit Plan is a "multiemployer plan" (within the meaning of
ERISA Section 4001(a)(3)) or a multiple employer plan described in Section 4063
of ERISA. With respect to each Benefit Plan New York has delivered or made
available to Chicago complete and accurate copies of (A) all plan texts and
agreements, (B) all material employee communications (including summary plan
descriptions), (C) the most recent annual report, (D) the most recent annual and
periodic accounting of plan assets, (E) the most recent determination letter
received from the Internal Revenue Service and (F) the most recent actuarial
valuation. With respect to each Benefit Plan: (i) such Benefit Plan has been
maintained and administered at all times in material compliance with its terms
and applicable law and regulation; (ii) no event has occurred and there exists
no circumstance under which New York or any of its Subsidiaries could directly,
or indirectly through a Commonly Controlled Entity, incur any material liability
under ERISA, the Code or otherwise (other than routine claims for benefits and
other liabilities arising in the ordinary course pursuant to the normal
operation of such Benefit Plan); (iii) there are no actions, suits or claims
(other than routine claims for benefits) pending or, to the knowledge of New
York, threatened, with respect to any Benefit Plan or against the assets of any
Benefit Plan; (iv) all contributions and premiums
-19-
due and owing have been made or paid on a timely basis; and (v) all
contributions made under any Benefit Plan have met the requirements for
deductibility under the Code, and all contributions that have not been made and
all unpaid premiums with respect to Benefit Plans have been properly recorded on
the books of New York or a Commonly Controlled Entity thereof in accordance with
generally accepted accounting principles. The Disclosure Letter contains a true
and complete list of each outstanding Option, identifying the grant date and
exercise price of such Option.
(b) With respect to each Benefit Plan that is intended to
be a "qualified plan" within the meaning of Section 401(a) of the Code (each, a
"Qualified Plan"), the Internal Revenue Service has issued a favorable
--------------
determination letter that has not been revoked, and New York knows of no circum-
stance or event that could adversely affect the qualified status of any
Qualified Plan or the related trust.
(c) Except as set forth in the Disclosure Letter with
respect to each Benefit Plan that is subject to Title IV or Section 302 of ERISA
or Section 412 or 4971 of the Code: (i) there does not exist any accumulated
funding deficiency within the meaning of Section 412 of the Code or Section 302
of ERISA, whether or not waived; (ii) the fair market value of the assets of
such Plan equals at least 90% of the actuarial present value of all accrued
benefits under Plan (whether or not vested), on a termination basis; (iii) no
reportable event within the meaning of Section 4043(b) of ERISA has occurred;
and (iv) all premiums to the Pension Benefit Guaranty Corporation have been
timely paid in full.
SECTION 2.21. Contingent Liabilities. Except as fully
----------------------
reflected or reserved against in the financial statements included in the Annual
Report or New York's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994, or disclosed in the footnotes contained in such financial
statements, New York and its Subsidiaries had no liabilities (including tax
liabilities) at the date of such financial statements, absolute or contingent,
other than such liabilities as would not, individually or in the aggregate, have
a Material Adverse Effect.
SECTION 2.22. No Material Adverse Change. Since September
--------------------------
30, 1994, other than as set forth in SEC Documents filed with the SEC prior to
the date of this Agreement: (A) New York and its Subsidiaries have not incurred
any material liability or obligation (indirect, direct or contingent), or
entered into any material oral or written agreement or other transaction, that
is not in the ordinary course of business or
-20-
that could reasonably be expected to result in a Material Adverse Effect; (B)
New York and its Subsidiaries have not sustained any loss or interference with
its business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had or that could
reasonably be expected to have a Material Adverse Effect; (C) there has been no
material change in the indebtedness of New York and its Subsidiaries (except for
changes relating to intercompany indebtedness of New York and/or its
Subsidiaries), no change in the stock of New York, except for the issuance of
the Chicago SPA Securities or shares of New York Common Stock pursuant to
options or conversion rights in existence at the date of this Agreement, and no
dividend or distribution of any kind declared, paid or made by New York or any
of its Subsidiaries (other than dividends or distributions declared, paid or
made by a wholly owned Subsidiary of New York and regular quarterly dividends
declared or paid on New York Preferred Stock) on any class of its stock; (D)
neither New York nor any of its Subsidiaries has made (nor does it propose to
make) (i) any material change in its accounting or reserving methods or
practices or (ii) any material change in the depreciation or amortization
policies or rates adopted by it, in either case, except as may be required by
law or applicable accounting standards; (E) there has been no event causing a
Material Adverse Effect, nor any development that could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect; and
(F) none of New York or any of its Subsidiaries has taken, or agreed or com-
mitted to take, any action which would violate Section 4.1 in any material
respect if taken, or agreed or committed to be taken, after the date hereof.
SECTION 2.23. Investment Company. None of New York or any
------------------
of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 2.24. No Bank Regulatory Oversight. Upon the
----------------------------
consummation of the transactions contemplated by this Agreement and the Chicago
SPA, including but not limited to the actions described in Section 5.3, neither
Chicago nor any of its Affiliates shall, as the result of the consummation of
the transactions contemplated by this Agreement and the Chicago SPA, be subject
to regulation or oversight by any federal or state bank regulatory authority nor
will the approval of any such regulatory authority be required to be obtained by
New York, any Subsidiary of New York, Chicago or any Affiliate thereof in order
to consummate the transactions contemplated by this Agreement and the Chicago
SPA other than the Bank Restrictions and the Bank Trust. For purposes of this
Agreement,
-21-
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the Exchange
---------
Act.
SECTION 2.25. October Agreements. (a) Prior to the issuance
------------------
of the Chicago SPA Securities, the October Agreements will have been terminated
in accordance with their respective terms, and, upon such termination, New York
will have no liability or obligation (financial or otherwise) pursuant to or in
connection with the October Agreements other than under Section 6.10 of the
October SPA. New York has not modified or waived, and will not modify or waive,
its rights to terminate the October Agreements as provided therein.
(b) None of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, violates or
constitutes a breach under any provision of any of the October Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHICAGO AND MERGER SUB
Chicago and Merger Sub hereby jointly and severally
represent and warrant to New York that:
SECTION 3.1. Organization, Good Standing, Power, Authority,
----------------------------------------------
Etc. Each of Chicago and Merger Sub is a corporation duly organized, validly
- - ----
existing and in good standing under the laws of its respective state of
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Each of Chicago and Merger Sub has the full power and authority to execute and
deliver this Agreement and the Chicago SPA and to perform its obligations under
and to consummate the transactions contemplated by this Agreement and the
Chicago SPA. Each of Chicago and Merger Sub has taken all action required by
law, its organizational documents or otherwise required to be taken by it to
authorize the execution and delivery of this Agreement and the Chicago SPA and
the consummation of the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Chicago SPA and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the respective boards of directors of Chicago and
Merger Sub and by Chicago as the sole stockholder of Merger Sub and no other
corporate proceedings on the part of Chicago or Merger Sub are necessary to
authorize this Agreement or the Chicago SPA or to consummate the transactions
contemplated hereby or thereby. This Agreement is a valid and binding agreement
of
-22-
each of Chicago and Merger Sub, enforceable against each of Chicago and Merger
Sub in accordance with its terms. The Chicago SPA is a valid and binding
agreement of Chicago, enforceable against Chicago in accordance with its terms.
SECTION 3.2. No Conflicts; No Consents. Neither the
-------------------------
execution and delivery of this Agreement and the Chicago SPA nor the
consummation by Chicago and Merger Sub of the transactions contemplated hereby
and thereby will (A) conflict with, or result in a breach of, any provision of
their respective organizational documents (B) violate any statute or law or any
judgment, order, writ, injunction, decree, rule or regulation applicable to
Chicago or Merger Sub or (C) result in a breach or violation of, or constitute
(with or without notice or lapse of time or both) a default under or give rise
to any right of termination, amendment, cancellation or acceleration under, any
of the terms, conditions or provisions of any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee or any agreement or instrument for borrowed money or any lease,
permit, license or other agreement or instrument to which it or any of its
subsidiaries is a party or by which any of their assets or properties are
subject which has or will have, individually or in the aggregate, a material
adverse effect on the ability of Chicago or Merger Sub to consummate the
transactions contemplated hereby or by the Chicago SPA including but not limited
to the Merger. No consent, authorization or approval of, or declaration, filing
or registration with, or exemption by, any governmental or regulatory authority
is required in connection with the execution and delivery of, and the
performance by Chicago and Merger Sub of their respective obligations under,
this Agreement and the Chicago SPA or the consummation by Chicago and Merger Sub
of the transactions contemplated hereby and by Chicago of the transactions con-
templated thereby, other than (i) the filing of premerger notification and
report forms under the HSR Act with respect to the Merger, (ii) the filings
and/or notices required under state insurance laws, (iii) the filing of the New
York Certificate and appropriate documents with the relevant authorities of
other states in which Merger Sub is qualified to do business, (iv) such other
consents, approvals, authorizations, filings or notices the failure to make or
obtain which, individually or in the aggregate, will not prevent or materially
delay the consummation of the transactions contemplated hereby.
SECTION 3.3. Proxy Statement, Etc. None of the information
---------------------
supplied by Chicago or Merger Sub for inclusion in the Proxy Statement will, at
the respective times, the Proxy Statement or any amendments or supplements
thereto are filed with the SEC and are first mailed to holders of New York
Common
-23-
Stock, and at the time of the Special Meeting or at the Effective Time, contain
any untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 3.4. Available Funds. Chicago has or will have at
---------------
the Effective Time sufficient funds available to consummate the transactions
contemplated hereby.
SECTION 3.5. Finder's Fees. No broker, finder or other
-------------
party is entitled to receive any brokerage or finder's fees or other fee,
commission or payment as a result of the transactions contemplated by this
Agreement or the Chicago SPA based upon arrangements made by or on behalf of
Chicago or Merger Sub.
ARTICLE IV
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 4.1. Pre-Closing Activities. (a) Except as set
----------------------
forth in the Disclosure Letter, from the date hereof until the Effective Time,
New York shall conduct the business of it and its Subsidiaries in the ordinary
course and shall use all reasonable efforts to preserve intact its business
organizations and relationships with third parties and to keep available the
services of the present officers and key employees.
(b) Without limiting the generality of the foregoing, except
as contemplated by this Agreement, New York shall not, and shall cause each of
its Subsidiaries not to, take or agree to commit to take any action that would
(x) make any representation or warranty of New York hereunder required to be
true at and as of the Closing as a condition to Chicago's obligations to con-
summate the transactions contemplated hereby inaccurate in any material respect
at the Closing or (y) result in any of the conditions to the Merger set forth in
Article VI not being satisfied. Without limiting the generality of the
foregoing, except as set forth in the Disclosure Letter or as expressly provided
herein or in the Chicago SPA, New York shall, and shall cause each of its
Subsidiaries to, not take any of the following actions (it being understood that
the term "material," as used in this Section, shall mean "material to New York
and its Subsidiaries, taken as a whole") without the consent of Chicago, which
consent shall not be unreasonably withheld or denied:
-24-
(1) adopt or propose (or agree to commit to) any change in
its respective Certificate of Incorporation, By-Laws or other
organizational documents except as contemplated by the Chicago
SPA;
(2) make any material change in its investment policies,
accounting methods, principles or practices, in any case except
as may be required by law or applicable accounting standards;
(3) except as may be required to satisfy contractual
obligations existing as of the date hereof, a full and complete
description of which are contained in the SEC Documents, or to
satisfy the requirements of applicable law, enter into or amend
any employment, severance or similar agreement or arrangement
with any director or officer or employee, or modify any of
Benefit Plans or grant any salary or wage increase or increase
any employee benefit (including incentive or bonus payments),
except normal individual increases in compensation to employees
consistent with past practice, or change in any material respect
the compensation (whether in respect of terms or method) of its
agents, unless such action has the effect of reducing the
aggregate liabilities of New York under any such agreements or
arrangements;
(4) (i) enter into any loan or other agreement pursuant to
which New York or such Subsidiary incurs or guarantees
indebtedness for borrowed money in excess of $25,000,000 (other
than any such agreement among New York and its wholly owned
Subsidiaries or among New York's wholly owned Subsidiaries) or
(ii) amend in any material respect any such existing agreement;
(5) sell any of the assets of New York or any of its
Subsidiaries (or the securities of entities holding the same) the
total consideration for which exceeds $10,000,000 other than (i)
the sale of assets or securities in the ordinary course of
business or (ii) the sale or other disposal on the terms as
described in the Disclosure Letter of all or any substantial
portion of the capital stock or assets of Casualty Insurance
Company, Worker's Compensation and Indemnity Company of
California, The Continental Insurance Company of Canada, The
Dominion Insurance Corporation, Lombard Insurance Company
Limited, Lombard General Insurance or California Central Trust
Bank Corporation;
-25-
(6) enter into any new quota share or reinsurance
transaction pursuant to which $50,000,000 or more in gross
written premiums are ceded by Subsidiaries of New York;
(7) (i) split, combine or reclassify any outstanding
capital stock; (ii) declare, set aside or pay any dividend or
distribution payable in cash, stock or property with respect to
any of its capital stock, other than dividends paid exclusively
to New York or any of its wholly owned Subsidiaries or Regular
Quarterly Cash Dividends; or (iii) except for the redemption of
the Existing Preferred Stock, repurchase, redeem or otherwise
acquire, or permit any subsidiary to purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock
or any securities convertible into or exercisable for any shares
of its capital stock (for purposes of this Section, "Regular
Quarterly Cash Dividends" means quarterly cash dividends
declared, set aside and paid in the ordinary and usual course of
business on dates consistent with past practice in amounts not
exceeding such amounts as are prescribed in New York's
Certificate of Incorporation with respect to outstanding shares
of Existing Preferred Stock and Chicago Preferred Stock);
(8) (i) issue, sell, pledge, dispose of or encumber, or
authorize or propose the issuance, sale, pledge, disposition or
encumbrance of, any shares of, or securities convertible or
exchangeable for, or options, puts, warrants, calls, commitments
or rights of any kind to acquire, any shares of its capital stock
of any class other than shares of New York Common Stock issuable
pursuant to convertible securities or Options outstanding on the
date hereof; (ii) mortgage, pledge or encumber any material
property or assets other than in the ordinary and usual course of
business and for fair consideration; or (iii) make any material
acquisition of, or investment in, assets, stock or other
securities of any other person or entity other than its wholly
owned Subsidiaries or in the ordinary and usual course of
business;
(9) make any tax election or settle or compromise any
income tax liability that could reasonably be expected to be
material;
(10) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of claims, liabilities or obligations
(i) in the ordinary course of business consistent with past
practice, in accordance with
-26-
their terms or within the amounts reflected, reserved or
contemplated by the most recent consolidated financial statements
(or the notes thereto) of New York included in the SEC Documents
or (ii) incurred since the date of such financial statements in
the ordinary course of business consistent with past practice;
(11) enter into any agreement containing any provision or
covenant limiting in any material respect the ability of New York
or any Subsidiary or Affiliate to (A) sell any products or
services of any other person, (B) engage in any line of business,
or (C) compete with or to obtain products or services from any
person or limiting the ability of any person to provide products
or services to New York or any Subsidiary or Affiliate; or
(12) agree or commit to do any of the foregoing.
SECTION 4.2. Acquisition Proposals. Prior to the Effective
---------------------
Time, New York agrees that neither New York nor any of its Affiliates nor any of
the respective officers and directors of New York or any of its Affiliates
shall, and New York shall direct and use its best efforts to cause its em-
ployees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by New York or any of its
Affiliates) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to shareholders of New York) with respect to a merger,
consolidation or similar transaction involving, or any purchase of any of the
equity securities of, New York, any purchase of any substantial portion of the
assets of New York or any of its Subsidiaries (or the securities of entities
holding the same) (any such proposal or offer being hereinafter referred to as
an "Acquisition Proposal," except that "Acquisition Proposal" shall not include
-------------------- --------------------
any such transaction among New York and its wholly owned Subsidiaries or among
New York's wholly owned Subsidiaries and sales of assets and securities
permitted by Section 4.1) or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate directly or
indirectly any effort or attempt to make or implement an Acquisition Proposal;
provided, however, that the Board of Directors of New York may furnish or cause
- - -------- -------
to be furnished information and may participate or cause its representatives to
participate in such discussions and negotiations if the failure to provide such
information could in the opinion of its outside counsel be deemed to cause the
members of such Board of Directors to
-27-
breach their fiduciary duties under applicable law; and provided, further, that
-------- -------
nothing contained in this Agreement shall prohibit New York and its directors
from making to its stockholders any recommendation and related filing with the
SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect to
any tender offer. New York will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. New York will take the nec-
essary steps to inform the individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section. New York will
promptly notify Chicago if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with New York.
SECTION 4.3. Shareholders Rights Plan. New York shall not,
------------------------
and shall not permit any of its Subsidiaries to, adopt a shareholders right
plan, poison pill or similar arrangement.
ARTICLE V
ADDITIONAL COVENANTS
SECTION 5.1. Notification of Certain Matters. New York
-------------------------------
shall give prompt notice to Chicago, and Chicago shall give prompt notice to New
York, of (A) the occurrence or non-occurrence of any event which would be likely
to cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate or (y) any covenant, condition or agreement contained in
this Agreement not to be complied with or satisfied and (B) any failure of New
York or Chicago, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that the delivery of any notice pursuant to
-------- -------
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.2. Action by Shareholders. (a) New York, acting
----------------------
through its Board of Directors, shall, in accordance with applicable law, its
Certificate of Incorporation and By-Laws: (i) duly call, give notice of,
convene and hold a special meeting (the "Special Meeting") of shareholders for
---------------
the purpose of adopting and approving this Agreement and the Merger; (ii)
include in any proxy statement for such Special Meeting the determination and
recommendation of the Board of Directors to the effect that the Board of
Directors, having
-28-
determined that this Agreement and the transactions contemplated hereby are in
the best interests of New York and its shareholders, has approved this Agreement
and such transactions and recommends that the shareholders vote in favor of the
adoption and approval of this Agreement and the Merger; and (iii) use its best
efforts to solicit from its shareholders proxies in favor of the adoption and
approval of this Agreement and the Merger and New York shall take all other
action necessary or advisable to secure the vote or consent of shareholders
required to obtain such approval. The Board of Directors of New York may fail
to make such a recommendation, or may withdraw, modify, or change any such
recommendation, or recommend any other offer or proposal, if such Board of Di-
rectors, based on the opinion of its outside counsel, determines that making
such recommendation, or the failure to so withdraw, modify or change its
recommendation, or the failure to recommend any other offer or proposal, could
be deemed to cause the members of such Board of Directors to breach their
fiduciary duties under applicable law. Any actions taken by the Board of
Directors of New York in accordance with the previous sentence shall not be
considered a default under this Agreement.
(b) As soon as practicable after the date hereof, New York
shall file with the SEC under the Exchange Act, and shall use its best efforts
to clear with the SEC, a proxy statement with respect to the Special Meeting
(the "Proxy Statement"). Chicago and New York shall cooperate with each other
---------------
in the preparation of any Proxy Statement. Chicago and Merger Sub agree, upon
request and except as otherwise may be required by applicable law, to furnish
New York with all information concerning itself, its subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement. New York agrees that the
Proxy Statement shall comply in all material respects with the Exchange Act and
the rules and regulations thereunder. Chicago and its counsel shall be given a
reasonable opportunity to review and comment on the Proxy Statement prior to the
filing thereof with the SEC, and New York shall use its best efforts to make the
Proxy Statement reflect such comments.
(c) Chicago and New York each agrees to use its best
efforts, after consultation with the other parties hereto, to respond promptly
to any comments made by the SEC with respect to the Proxy Statement or any
preliminary version thereof filed by it and cause such Proxy Statement to be
mailed to the holders of New York Common Stock entitled to vote at the Special
Meeting at the earliest practicable time following the date hereof.
-29-
(d) The information included by New York in the Proxy
Statement, and the information furnished by Chicago and Merger Sub for inclusion
in the Proxy Statement, shall not, at the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the shareholders of
New York, at the time of the Special Meeting, and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event or
circumstance relating to Chicago or its officers or directors should be
discovered by Chicago which should be set forth in an amendment or a supplement
to the Proxy Statement, Chicago shall promptly inform New York.
SECTION 5.3. Regulatory Approvals. (a) Each of New York
--------------------
and Chicago shall use all reasonable efforts, and shall reasonably cooperate
with the other in such efforts, to obtain approvals of any regulatory authority
required to be obtained by New York, any Subsidiary of New York, Chicago or any
Affiliate thereof in order to consummate the transactions contemplated by this
Agreement. Notwithstanding anything contained in this Section, Chicago shall
not be required to take any actions, or enter into any arrangements that will
subject Chicago or any of its Affiliates to regulation or oversight by any
federal or state bank regulatory authority or impose any restrictions upon the
operations of Chicago or any of its Affiliates (other than restrictions (the
"Bank Restrictions") on any banking or nonbanking transactions between Chicago
or any of its Affiliates and California Central Bank Trust Corporation (the
"Bank") and restrictions on Chicago and its Affiliates seeking to direct the
management and policies of the Bank). In addition, to the extent New York's
ownership interest in the Bank has not been disposed of prior to the Effective
Time, the parties shall take such actions as are reasonably necessary to
establish at or prior to the Effective Time a trust (the "Bank Trust") on terms
---- -----
satisfactory to the appropriate bank regulators providing for the disposition of
New York's ownership interest in the Bank following the Effective Time.
(b) Without limiting the generality of the foregoing, New
York and Chicago shall make and cause their respective Subsidiaries to make all
necessary filings, as soon as practicable, including, without limitation, those
required under the HSR Act and applicable insurance laws in order to facilitate
prompt consummation of the Merger and the transactions contemplated hereby. In
addition, New York and Chicago shall each use their respective best efforts, and
shall cooperate fully with each other (i) to comply as promptly as practicable
with all governmental requirements applicable to the Merger and
-30-
the other transactions contemplated hereby and (ii) to obtain as promptly as
practicable all necessary permits, orders or other consents of governmental
entities and consents of all third parties necessary for the consummation of the
Merger and the other transactions contemplated hereby. Each of the New York and
Chicago shall use reasonable efforts to provide such information and
communications to governmental entities as such governmental entities may
reasonably request.
(c) Each of the parties shall provide to the other party
copies of all applications in advance of filing or submission of such
applications to governmental entities in connection with this Agreement and
shall keep the other party apprised of the status of matters relating to
completion of the transactions contemplated hereby; provided that Chicago may
--------
redact confidential portions that relate solely to the business or financial
condition of Chicago or its Affiliates.
SECTION 5.4. Access. Upon reasonable notice prior to the
------
Effective Time, New York shall (and shall cause each of its Subsidiaries to)
afford the officers, employees, counsel, accountants and other authorized
representatives of Chicago or any of its Affiliates ("Representatives")
---------------
reasonable access during normal business hours to its properties, books, con-
tracts and records and personnel and advisors (who will be instructed by New
York to cooperate) and New York shall (and shall cause each of the Subsidiaries
to) furnish promptly to Chicago all information concerning its business,
properties and personnel as Chicago or its Representatives may reasonably
request; provided that any review will be conducted in a way that will not
--------
interfere unreasonably with the conduct of New York's business; provided,
--------
further, that no review pursuant to this Section shall affect or be deemed to
- - -------
modify any representation or warranty made by New York. Chicago will keep all
information and documents obtained pursuant to this Section on a confidential
basis in accordance with the previously executed Agreement between New York (or
its agent) and Chicago (the "Confidentiality Agreement").
-------------------------
SECTION 5.5. Further Action; Reasonable Best Efforts. Upon
---------------------------------------
the terms and subject to the conditions hereof, each of the parties hereto shall
act in good faith toward and use its reasonable best efforts to consummate the
transactions contemplated by this Agreement and to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, including, without limitation,
using its reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders
-31-
of governmental entities and parties to contracts with Chicago or New York and
their respective Subsidiaries as are necessary for the consummation of the
transactions contemplated hereby. Neither Chicago nor any of its Subsidiaries
shall enter into any agreement, arrangement or understanding with any person
that could materially delay or prevent completion of the Merger or any other
transaction contemplated by this Agreement or the Chicago SPA.
SECTION 5.6. Employee Matters. Chicago agrees that it will
----------------
maintain in effect New York's current severance policies as disclosed pursuant
to Section 2.20 hereof for the benefit of New York's existing employees for a
period of not less than twelve months following the Effective Time (and, in the
case of officers eligible for benefits under New York's Executive Severance Plan
and Management Severance Plan, two years).
SECTION 5.7. Public Announcements. Chicago and New York
--------------------
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
-------- -------
consent of the other party, issue such press release or make such public
statement as may be required by law or any listing agreement with a national se-
curities exchange to which Chicago or New York is a party if it has used all
reasonable efforts to consult with the other party and to obtain such party's
consent but has been unable to do so in a timely manner.
SECTION 5.8. Indemnification. (a) From the Effective Time
---------------
through the sixth anniversary of the date on which the Effective Time occurs,
the Surviving Corporation shall indemnify and hold harmless each present and
former director and officer of New York and its Subsidiaries, determined as of
the Effective Time (the "Indemnified Parties"), against any costs or expenses
-------------------
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
-----
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that New
York or such Subsidiary would have been permitted under applicable law and the
Certificate of Incorporation or By-Laws of New York or such Subsidiary in effect
on the date hereof to indemnify
-32-
such person (and the Surviving Corporation shall also advance expenses as
incurred to the fullest extent permitted under applicable law provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to in-
demnification).
(b) Any Indemnified Party wishing to claim indemnification
under this Section, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any li-
ability it may have to such Indemnified Party if such failure does not
materially prejudice the Surviving Corporation. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), the Surviving Corporation shall have the right to assume the
defense thereof and the Surviving Corporation 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 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 the Surviving Corporation
and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received. 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. In the event that any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
final disposition of any and all such claims.
(c) Chicago shall cause the Surviving Corporation to
maintain officers' and directors' liability insurance ("D&O Insurance") for the
--- ---------
Indemnified Parties comparable in coverage to the directors' and officers'
insurance policy currently maintained by New York for a period of at least six
years from the Effective Time; provided, however, that Chicago shall not be
-------- -------
required to spend in respect of such coverage annual premiums in excess of 200%
of the premium currently paid by New York for such coverage.
-33-
(d) The provisions of this Section 5.8 are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
SECTION 5.9. Redemption of the Series A and Series B
---------------------------------------
Preferred Stock. New York agrees to take all actions as are necessary so as to
- - ---------------
cause the redemption of the Series A Preferred Stock and the Series B Preferred
Stock in accordance with their terms as set forth in the New York Certificate of
Incorporation prior to the Special Meeting.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.1. Conditions to Obligations of Each Party to
------------------------------------------
Effect the Merger. The respective obligations of each party to effect the
- - -----------------
Merger and the other transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Shareholder Approval. This Agreement and the Merger
--------------------
shall have been approved and adopted by the requisite vote of the
shareholders of New York.
(b) No Order. No governmental entity or federal or state
--------
court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which
prohibits consummation of the Merger or any transaction
contemplated hereby and there shall be pending no action by any
governmental authority to enjoin or otherwise prohibit the
consummation of the transactions contemplated hereby; provided,
--------
however, that the parties shall use their reasonable best efforts
-------
to cause any such decree, judgment, injunction or other order to
be vacated or lifted.
(c) HSR Act. The waiting period (and any extension
-------
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have otherwise expired.
(d) Governmental Approvals. All filings required to be
----------------------
made prior to the Effective Time with, and all material consents,
approvals, permits and authorizations required
-34-
to be obtained prior to the Effective Time from any federal or
state insurance, securities, banking or other governmental
authority or agency in connection with the consummation of the
transactions contemplated hereby ("Consents") shall have been
--------
obtained without the imposition of any terms or conditions which
would have a materially burdensome impact on New York or Chicago
or any or their respective Subsidiaries, and all waiting periods
relating to such approvals shall have expired.
SECTION 6.2. Conditions Precedent to the Obligations of
------------------------------------------
Chicago. The obligation of Chicago and Merger Sub to effect the Merger and the
- - -------
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Compliance by New York. All of the terms, covenants and
----------------------
conditions of this Agreement to be complied with and performed by
New York at or prior to the Closing shall have been complied with
and performed by it in all material respects, and the
representations and warranties made by New York in this Agreement
shall be true and correct in all material respects at and as of
the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the
Closing, except for changes expressly contemplated by this
Agreement and except for representations and warranties that are
made as of a specific time, which shall be true and correct in
all material respects only as of such time. New York shall have
delivered a certificate, dated as of the Closing Date and signed
by its chief executive officer, of New York to Chicago to the
foregoing effect.
(b) Consents. All material consents required for the lawful
--------
consummation of the transactions contemplated herein or the
failure to obtain which would have a Material Adverse Effect
shall have been obtained.
(c) Absence of Material Adverse Effect. Except as set forth
----------------------------------
in the Disclosure Letter, there shall not have occurred after
September 30, 1994 any Material Adverse Effect.
SECTION 6.3. Conditions Precedent to Obligations of New
------------------------------------------
York. The obligations of New York to be discharged under this Agreement on or
- - ----
prior to the Effective Time are subject to satisfaction of the following
condition at or prior to the
-35-
Effective Time (unless waived by New York at or prior to the Effective
Time):
(a) Compliance by Chicago. All of the terms, covenants and
---------------------
conditions of this Agreement to be complied with and performed by
Chicago at or prior to the Closing shall have been complied with
and performed by Chicago in all material respects, and the
representations and warranties made by Chicago in this Agreement
shall be true and correct in all material respects at and as of
the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the
Closing, except for changes contemplated by this Agreement.
Chicago shall have delivered a certificate, dated as of the
Closing Date and signed by the an executive officer, of Chicago
to New York to the foregoing effect.
(b) Consents. All material consents required for the lawful
--------
consummation of the transactions contemplated herein shall have
been obtained.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated
-----------
at any time prior to the Effective Time:
(i) by mutual written consent of New York and Chicago;
(ii) by New York or Chicago, if the Effective Time
shall not have occurred on or before December 31, 1995; provided,
--------
however, that the right to terminate this Agreement under this
-------
clause (ii) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the closing to occur on or
before such date;
(iii) by New York or Chicago, if any judgment,
injunction, order or decree enjoining New York or Chicago from
consummating the transactions contemplated hereby is entered and
such judgment, injunction, order or decree shall become final and
nonappealable; provided, however, that the party seeking to
-------- -------
terminate this Agreement pursuant to this clause (iii) shall have
used all reasonable efforts to remove such judgment, injunction,
order or decree;
-36-
(iv) by Chicago if there has been a material breach of
any representation, warranty or material covenant or agreement of
New York contained in this Agreement which breach is incurable or
which is not cured after 30 days' written notice by Chicago to
New York;
(v) by New York if there has been a material breach of
any representation, warranty, or covenant or agreement of Chicago
or Merger Sub contained in this Agreement, which breach is
incurable or has not been cured after 30 days' written notice by
New York to Chicago;
(vi) by either Chicago or New York, if this Agreement
and the Merger shall fail to receive the requisite vote for
approval and adoption of this Agreement and the Merger by the
shareholders of New York at the Special Meeting;
(vii) by Chicago, if (a) the Board of Directors of New
York shall withdraw, modify or change its approval or
recommendation of this Agreement or the Merger in a manner
adverse to Chicago or Merger Sub or shall have resolved to do any
of the foregoing or (b) any person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of or any
"group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder) shall have been formed which beneficially owns, or
has the right to acquire beneficial ownership of, more than 20%
of the then outstanding shares of New York Common Stock;
(viii) by New York, upon the failure of Chicago to
purchase the Chicago SPA Securities by December 31, 1994 other
than as a result of the failure of the conditions to Chicago's
obligations to purchase such securities under the Chicago SPA to
be satisfied as of such date; and
(ix) by Chicago, if the October SPA has not been
terminated by December 31, 1994 or if Chicago has not purchased
the Chicago SPA Securities by December 31, 1994 as a result of
the failure of any of the conditions to Chicago's obligations to
purchase such securities to be satisfied as of such date.
SECTION 7.2. Effect of Termination. (a) Except for the
---------------------
covenant contained in the final sentence of Section 5.4, paragraph (b) of this
Section and Section 8.2, in the event of termination of this Agreement pursuant
to Section 7.1, no party to this Agreement (or any of its directors or officers)
shall have any liability or further obligation to any other party,
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except that nothing herein will relieve any party from liability for any
intentional breach of any provision of this Agreement.
(b) If Chicago shall not be in material breach of its
covenants or agreements contained in this Agreement at the time of termination
of this Agreement then, in the event that this Agreement shall be terminated
pursuant to Section 7.1 (iv) or (vii), New York shall pay to Chicago upon such
termination an amount equal to its reasonable out-of-pocket expenses (including,
without limitation, disbursements and fees paid to outside advisors and
consultants (including, without limitation, counsel and accountants) incurred,
arising from or in any way related to the possible business combination between
the parties hereto).
SECTION 7.3. Amendment. Subject to applicable law, this
---------
Agreement may be amended by the parties hereto at any time prior to the
Effective Time; provided, however, that, after approval of the Merger by the
-------- -------
shareholders of New York, no amendment which under applicable law may not be
made without the approval of the shareholders of New York, may be made without
such approval. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 7.4. Waiver. At any time prior to the Effective
------
Time, either party hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance by
the other party with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Effectiveness of Representations, Warranties
--------------------------------------------
and Agreements. Except as set forth in the following sentence, the
- - --------------
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations,
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warranties and agreements in this Agreement shall terminate at the Effective
Time.
SECTION 8.2. Fees, Expenses and Other Payments. Other than
---------------------------------
as provided in Section 7.2(b), all costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by the parties hereto shall be borne solely and entirely
by the party which has incurred such costs and expenses including without
limitation all costs and expenses related to printing, filing and mailing the
Proxy Statement and all SEC and other regulatory filing fees.
SECTION 8.3. Notices. All notices and other communications
-------
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date delivered, mailed or transmitted, and
shall be effective upon receipt, if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to Chicago or Merger Sub:
CNA Financial Corporation
CNA Plaza
Chicago, Illinois 60685
Attention: Chief Executive Officer
Fax: (312) 822-4053
with copies to:
CNA Financial Corporation
CNA Plaza
Chicago, Illinois 60685
Attention: General Counsel
Fax: (312) 822-1297
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Craig M. Wasserman
Fax: (212) 403-2000
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(b) If to New York:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Attention: Chief Executive Officer
Fax: (212) 440-3857
with copies to:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Attention: General Counsel
Fax: (212) 440-3857
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Edward A. Perell
Fax: (212) 909-6836
SECTION 8.4. Headings. The headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 8.5. Severability. If any term or other provision
------------
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.6. Entire Agreement. This Agreement (together
----------------
with the Annex hereto, the Disclosure Letter, the Chicago SPA (and the exhibits
thereto) and the other documents delivered pursuant hereto) and the Confiden-
tiality Agreement constitute the entire agreement of the parties and supersede
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all prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof.
SECTION 8.7. Assignment. This Agreement shall not be
----------
assigned by operation of law or otherwise.
SECTION 8.8. Parties in Interest. This Agreement shall be
-------------------
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including to confer third party beneficiary rights, except
that the provisions of Section 5.8 shall inure to the benefit of the directors
of New York.
SECTION 8.9. [Intentionally omitted.]
SECTION 8.10. Governing Law. THIS AGREEMENT SHALL BE
-------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD FOR ANY APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
SECTION 8.11. Counterparts. This Agreement may be executed
------------
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
-41-
IN WITNESS WHEREOF, CNA Financial Corporation, Chicago
Acquisition Corp. and The Continental Corporation have caused this written
Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CNA FINANCIAL CORPORATION
By
----------------------
Name: Daniel M. Lowry
Title: Senior Vice President,
Secretary and General Counsel
CHICAGO ACQUISITION CORP.
By
----------------------
Name: Dennis Chookaszian
Title: President
THE CONTINENTAL CORPORATION
By
------------------
Name: John P. Mascotte
Title: Chairman and Chief
Executive Officer
-42-
LOCATION OF DEFINITIONS
TERM SECTION
- - ---- -------
Acquisition Proposal Section 4.2
Affiliate Section 2.24
Agreement Preamble
Annual Report Section 2.6
Bank Section 5.3(a)
Bank Restrictions Section 5.3(a)
Bank Trust Section 5.3(a)
Benefit Plans Section 2.20(a)
Certificates Section 1.7(a)
Chicago Preamble
Chicago Mirror Preferred Stock Section 1.7(d)
Chicago Preferred Stock Recitals
Chicago SPA Recitals
Chicago SPA Securities Recitals
Consents Section 6.1(d)
Code Section 2.20(a)
Confidentiality Agreement Section 5.4
Converted Shares Section 1.7(a)
Costs Section 5.8(a)
Disclosure Letter Article II
Dissenting Shares Section 1.11
D&O Insurance Section 5.8(c)
Effective Time Section 1.4
Encumbrance Section 2.6
Environmental Laws Section 2.13
ERISA Section 2.20(a)
Exchange Act Section 2.3(b)
Existing Preferred Stock Section 2.2
Hazardous materials Section 2.13
HSR Act Section 2.9(a)
Indemnified Parties Section 5.8(a)
Licenses Section 2.11
Material Adverse Effect Section 2.5
Merger Recitals
Merger Consideration Section 1.7(a)
Merger Sub Preamble
New York Preamble
New York Certificate Section 1.4
New York Common Stock Section 1.7(a)
New York Preferred Stock Section 2.2
NYBCL Section 1.1
October Agreements Recitals
October APA Recitals
October SPA Recitals
October SPA Securities Recitals
-1-
Options Section 1.10
Partnership Recitals
Payment Agent Section 1.8(a)
Payment Fund Section 1.8(a)
Per Share Merger Consideration Section 1.7(a)
Proxy Statement Section 5.2(b)
Qualified Plan Section 2.20(b)
Quarterly Reports Section 2.3(a)
Regular Quarterly Cash Dividends Section 4.1(7)
Representatives Section 5.4
SEC Section 2.3(a)
SEC Documents Section 2.3(a)
Securities Act Section 2.3(c)
Series A Preferred Stock Section 2.2
Series B Preferred Stock Section 2.2
Special Meeting Section 5.2(a)
Statutory Statements Section 2.19(b)
Subsidiary Section 2.5
Surviving Corporation Section 1.1