Draft--December 13, 1994
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of earliest event
reported: December 7, 1994
THE CONTINENTAL CORPORATION
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-5686 13-2610607
----------------------------------------------------------------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
180 Maiden Lane New York, New York 10038
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 440-3000
-------------------------------
(Registrant's telephone number)
Page 1 of ___ Pages
Exhibit Index is at Page 6
Item 5. Other Events.
-------------
On December 9, 1994, The Continental Corporation
(the "Company") consummated its sale of certain of its
securities to Continental Casualty Company ("CCC"), a subsidiary
of CNA Financial Corporation ("CNA Financial"), for a cash
purchase price of $275 million, pursuant to a previously
announced securities purchase agreement, dated as of December 6,
1994, with CNA Financial (the "Securities Purchase Agreement").
CCC acquired approximately $166 million in liquidation
value of the Company's 9.75% Cumulative Preferred Stock, Series
T (the "Series T Stock"), and approximately $34 million in
liquidation value of the Company's 9.75% Cumulative Preferred
Stock, Series F. The Series T Stock is redeemable under certain
circumstances at a price reflecting any increase in the per
share price of the Company's common stock over $15.75. CCC also
received an option to acquire $125 million in liquidation
preference of another series of the Company's 9.75% Cumulative
Preferred Stock, Series G. The option and its underlying
preferred stock will be redeemable under certain circumstances
at a price reflecting any increase in the per share price of the
common stock over $17.75. The 9.75% preferred stock will mature
in 40 years, with a right of the holders to require redemption
in 15 years, and may be redeemed by the Company under certain
circumstances. In addition, CCC acquired $75 million in
liquidation value of the Company's 12% Cumulative Preferred
Stock, Series H, maturing in 10 years and redeemable under
certain circumstances.
As previously announced, the Company, CNA Financial
and Chicago Acquisition Corp. ("Acquisition") have entered into
a merger agreement, dated as of December 6, 1994 (the "Merger
Agreement"), pursuant to which Acquisition will be merged with
and into the Company and the Company will become a subsidiary of
CNA Financial. If that merger is not consummated, CCC may,
subject to regulatory approvals, exchange the Series T Stock for
another series of preferred stock that would be convertible into
approximately 19% of the Company's currently outstanding common
shares, at a conversion price of $15.75, subject to adjustment.
Following such exchange, CCC would be entitled to nominate up to
four
2
directors to serve on the Company's Board of Directors. CCC
would also be subject to certain standstill agreements and
restrictions on transfer.
The discussion herein is qualified in its entirety by
reference to the Securities Purchase Agreement and the Merger
Agreement, each of which is incorporated herein by reference.
* * *
On December 7, 1994, an amendment (the "Amendment") to
the Company's Certificate of Incorporation to designate the
provisions relating to the five series of the Company's
preferred stock that are the subject of the Securities Purchase
Agreement, became effective, upon the filing of a Certificate of
Amendment with the Secretary of State of the State of New York.
* * *
On December 7, 1994, three purported class actions
were filed in New York State Supreme Court, New York County,
against the Company and directors of the Company by persons
claiming to be stockholders of the Company. The plaintiffs in
these actions allege that directors of the Company breached
their fiduciary duties by agreeing to enter into a merger with
CNA Financial and its affiliates, as described above. Among
other things, the plaintiffs in these actions allege that the
defendant directors failed to exercise due diligence, failed
adequately to "shop" the Company and failed to maximize value
for the Company's stockholders. The plaintiffs in one or more
of these purported class actions seek, among other relief,
certification of a class; an injunction prohibiting the merger
of Acquisition with and into the Company and a declaration that
the merger is void; injunctive relief requiring the directors to
explore and evaluate alternatives for the Company and to appoint
a disinterested committee or stockholder committee to review
bona fide offers for the Company; a declaration that the
---- ----
defendant directors have committed abuse of trust and breach of
fiduciary duty; and monetary damages.
3
* * *
Item 7. Exhibits.
---------
Exhibit 3 Certificate of Amendment of the Company as filed
with the Secretary of State of the State of New
York on December 7, 1994.
Exhibit 4 Certificate of Amendment of the Company as filed
with the Secretary of State of the State of New
York on December 7, 1994. (Filed as Exhibit 3.)
Exhibit 10(a) Merger Agreement, dated as of December 6, 1994,
by and among CNA Financial Acquisition Corp. and
The Continental Corporation (Previously filed as
Exhibit 2 and Exhibit 10(a) to the Company's
Report on Form 8-K, dated December 9, 1994, and
incorporated herein by reference.
Exhibit 10(b) Securities Purchase Agreement, dated as of
December 6, 1994, between The Continental
Corporation and CNA Financial Corporation, a
Delaware corporation, with Schedule 1 and
Exhibits A through D (Filed as Exhibit 10(b) to
the Company's Report on Form 8-K, dated December
9, 1994, and incorporated herein by reference.)
Exhibit 10(c) Option, dated December 9, 1994.
4
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
Dated: December 14, 1994
THE CONTINENTAL CORPORATION
By/s/ William F. Gleason, Jr.
---------------------------
William F. Gleason, Jr.
Senior Vice President,
General Counsel and
Secretary
5
Exhibit Index
Exhibit 3 Certificate of Amendment of the Company as filed
with the Secretary of State of the State of New
York on December 7, 1994.
Exhibit 4 Certificate of Amendment of the Company as filed
with the Secretary of State of the State of New
York on December 7, 1994. (Filed as Exhibit 3.)
Exhibit 10(a) Merger Agreement, dated as of December 6, 1994,
by and among CNA Financial Acquisition Corp. and
The Continental Corporation (Previously filed as
Exhibit 2 and Exhibit 10(a) to the Company's
Report on Form 8-K, dated December 9, 1994.
Exhibit 10(b) Securities Purchase Agreement, dated as of
December 6, 1994, between The Continental
Corporation and CNA Financial Corporation, a
Delaware corporation, with Schedule 1 and
Exhibits A through D (Filed as Exhibit 10(b) to
the Company's Report on Form 8-K, dated December
9, 1994).
Exhibit 10(c) Option, dated December 9, 1994.
5