<PAGE> 1
SCHEDULE 13D
(RULE 13d-101)
Information to be Included in Statements Filed Pursuant to Rule 13d-1(a) and
Amendments Thereto Filed Pursuant to Rule 13d-2(a)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CNA Surety Corporation
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
12612L 10 08
- --------------------------------------------------------------------------------
(CUSIP Number)
Susan Obuchowski
Two North Riverside Plaza, Suite 600, Chicago, IL 60606 (312) 466-4010
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
September 30, 1997
- --------------------------------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note. Six copies of this statement, including all exhibits, should be
filed with the Commission See Rule 13d-1(a) for other parties to whom copies
are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
CUSIP No. 12612L 10 08 Page 2 of 32
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1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Equity Capsure Limited Partnership, an Illinois limited partnership
36-4122677
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
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3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2
(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 3,552,862
Owned by ------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ------------------------------------------------------
10 Shared Dispositive Power
3,552,862
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
3,552,862
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.1%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
PN
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<PAGE> 3
CUSIP No. 12612L 10 08 Page 3 of 32
- --------------------------------------------------------------------------------
1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Samuel Zell
###-##-####
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2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
USA
- --------------------------------------------------------------------------------
Number of 7 Sole Voting Power
Shares 65,000
Beneficially ------------------------------------------------------
Owned by 8 Shared Voting Power
Each 3,552,862
Reporting ------------------------------------------------------
Person With 9 Sole Dispositive Power
65,000
------------------------------------------------------
10 Shared Dispositive Power
3,552,862
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
3,617,862
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE> 4
CUSIP No. 12612L 10 08 Page 4 of 32
- --------------------------------------------------------------------------------
1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Samuel Zell Revocable Trust U/T/A 01/17/90
###-##-####
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
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3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 3,552,862
Owned by ------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ------------------------------------------------------
10 Shared Dispositive Power
3,552,862
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
3,552,862
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
(See Instructions)
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.1%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
OO
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<PAGE> 5
CUSIP No. 12612L 10 08 Page 5 of 32
- --------------------------------------------------------------------------------
1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Alphabet Partners, an Illinois general partnership
36-3002855
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ---------------------------------------------------
Shares 8 Shared Voting Power
Beneficially
Owned by ---------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ---------------------------------------------------
10 Shared Dispositive Power
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
730,141
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
1.7%
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14 Type of Reporting Person (See Instructions)
PN
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<PAGE> 6
CUSIP No. 12612L 10 08 Page 6 of 32
- --------------------------------------------------------------------------------
1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
ZFT Partnership, an Illinois general partnership
36-3022976
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2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ---------------------------------------------------
Shares 8 Shared Voting Power
Beneficially
Owned by ---------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ---------------------------------------------------
10 Shared Dispositive Power
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
730,141
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
(See Instructions)
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
1.7%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
PN
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<PAGE> 7
CUSIP No. 12612L 10 08 Page 7 of 32
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1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Ann Lurie
###-##-####
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a)[ ]
(See Instructions) (b)[X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
USA
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ---------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 486,760
Owned by ---------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ---------------------------------------------------
10 Shared Dispositive Power
486,760
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
486,760
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
(See Instructions)
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
1.1%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE> 8
CUSIP No. 12612L 10 08 Page 8 of 32
- --------------------------------------------------------------------------------
1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Ann and Robert H. Lurie Family Foundation
36-3486274
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ---------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 486,760
Owned by ---------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ---------------------------------------------------
10 Shared Dispositive Power
486,760
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
486,760
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
(See Instructions)
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
1.1%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
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<PAGE> 9
CUSIP No. 12612L 10 08 Page 9 of 32
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1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
LFT Partnership, an Illinois general partnership
36-6527526
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ---------------------------------------------------
Shares 8 Shared Voting Power
Beneficially
Owned by ---------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ---------------------------------------------------
10 Shared Dispositive Power
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
486,760
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
(See Instructions)
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
1.1%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
PN
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<PAGE> 10
CUSIP No. 12612L 10 08 Page 10 of 32
- --------------------------------------------------------------------------------
1 Names of Reporting Persons/I.R.S. Identification Nos. of Above Persons
Arlington Leasing Co., a Nevada corporation
88-0132727
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Nevada
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of ---------------------------------------------------
Shares 8 Shared Voting Power
Beneficially
Owned by ---------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person With ---------------------------------------------------
10 Shared Dispositive Power
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially owned by Each Reporting Person
997,369
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
(See Instructions)
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
2.3%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- --------------------------------------------------------------------------------
<PAGE> 11
Page 11 of 32
ITEM 1. SECURITIES AND ISSUER.
The Statement relates to the common stock, par value $0.01 per share
(the "Common Stock") of CNA Surety Corporation (the "Issuer"). The
Issuer's principal executive offices are at CNA Plaza, Chicago,
Illinois, 60685.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c) This Statement is being filed by the following persons or
entities:
(1) Equity Capsure Limited Partnership, an Illinois
limited partnership ("Equity Capsure");
(2) Samuel Zell;
(3) Samuel Zell Revocable Trust under trust agreement
dated January 17, 1990 (the "Zell Trust");
(4) Alphabet Partners, an Illinois general
partnership ("Alphabet Partners");
(5) ZFT Partnership, an Illinois general partnership
("ZFT Partnership");
(6) Ann Lurie;
(7) The Ann and Robert H. Lurie Family Foundation, an
Illinois non-stock not-for-profit corporation
("Lurie Foundation");
(8) LFT Partnership, an Illinois general partnership
("LFT Partnership"); and
(9) Arlington Leasing Co., a Nevada corporation
("Arlington").
Equity Capsure, Mr. Zell, the Zell Trust, Alphabet Partners, ZFT
Partnership, Mrs. Lurie, the Lurie Foundation, LFT Partnership and
Arlington are collectively the "Reporting Persons". The business
address for all of the Reporting Persons is Two North Riverside
Plaza, Chicago, Illinois, 60606. Certain information regarding the
Reporting Persons is set forth in Appendix A hereto.
(d) and (e) None of the Reporting Persons have, during the last
five years (i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or (ii) been a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was, or
is, subject to a judgement, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws, or finding any violation with
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
No funds were expended in the acquisition of the Common Stock
reported
<PAGE> 12
Page 12 of 32
herein. The Reporting Persons acquired the Common Stock reported
herein in connection with the merger of Capsure Holdings Corp.
("Capsure") with and into Surety Acquisition Company, a
wholly-owned subsidiary of the Issuer (the "Merger") in accordance
with the terms of a Reorganization Agreement, dated as of December
19, 1996 and as amended as of July 14, 1997 (the "Reorganization
Agreement"), by and among Capsure, Continental Casualty Company and
certain of its affiliates, Issuer and Surety Acquisition Company.
The terms of the Reorganization Agreement provided for the
conversion of Capsure common stock, par value $0.05 per share
("Capsure Common Stock") into the right to receive one share of
Common Stock of the Issuer upon the occurrence of the Merger. The
Merger was consummated on September 30, 1997.
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the Reporting Persons' acquisition of the shares of
Common Stock reported herein was to exchange the Reporting Persons'
Capsure Common Stock for an equal amount of Common Stock as a
result of the Merger described in Section 3 above. The Reporting
Persons hold the Common Stock for investment purposes.
The Reporting Persons do not have any plans or proposals of the
type referred to in clauses (a) through (j) of Item 4 of Schedule
13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) To the knowledge of the Reporting Persons, there are 43,880,708
shares of Common Stock outstanding as of the date hereof. As of
the date hereof, the Reporting Persons may be deemed to own the
following shares which represent the following percentages of the
shares of Common Stock outstanding:
<TABLE>
<CAPTION>
REPORTING PERSON NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
- ---------------- ---------------- -------------------------
<S> <C> <C>
Equity 3,552,862 8.1%
Samuel Zell 3,617,862(1) 8.2%(1)
Zell Trust 3,552,862(1) 8.1%(1)
Alphabet Partners 730,141(2) 1.7%(2)
ZFT Partnership 730,141(2) 1.7%(2)
Ann Lurie 486,760(2)(3) 1.1%(2)(3)
Lurie Foundation 486,760 1.1%
</TABLE>
<PAGE> 13
Page 13 of 32
<TABLE>
<S> <C> <C>
LFT Partnership 486,760(2) 1.1%(2)
Arlington 997,369(2) 2.3%(2)
</TABLE>
(1) Includes 3,552,862 shares owned by Equity and, for Mr. Zell only, options
to purchase 65,000 shares which are currently exercisable and beneficially
owned by Mr. Zell.
(2) Such shares are included in the 3,552,862 shares beneficially owned by
Equity.
(3) Includes shares reported herein by LFT Partnership.
Arthur A. Greenberg is the sole trustee of the three trusts which are the
general partners of Alphabet Partners. Mr. Greenberg beneficially owns 30,000
shares of Common Stock and a trust in which Mr. Greenberg is the beneficiary
beneficially owns 2,000 shares of Common Stock. Mr. Greenberg disclaims
beneficial ownership of the shares of Common Stock beneficially owned by such
trust.
Sheli Z. Rosenberg is the sole trustee of the fifteen trusts which are the
general partners of ZFT Partnership. Mrs. Rosenberg beneficially owns 41,318
shares of Common Stock and options to purchase 5,000 shares of Common Stock
which are currently exercisable. Additionally, the Rosenberg Family Foundation
is the beneficial owner of 16,388 shares of Common Stock. Mrs. Rosenberg may
be deemed to be the beneficial owner of the shares of Common Stock owned by the
foundation, but she disclaims beneficial ownership of such shares.
(b) Equity, the Zell Trust, as sole general partner of Equity, and Mr. Zell, as
the sole trustee of the Zell Trust, share the power to vote or to direct the
vote of and share the power to dispose or to direct the disposition of the
3,552,862 shares beneficially owned by Equity. Mr. Zell and the Zell Trust
disclaim beneficial ownership of the 3,552,862 shares beneficially owned by
Equity, except for 2,068,733 shares attributable to the Zell Trust, Alphabet
Partnership and ZFT Partners through such entities' ownership in Equity.
Mr. Zell has the sole power to vote or to direct the vote of (assuming exercise
of the options to purchase 65,000 shares of Common Stock) and the sole power to
dispose or to direct the disposition of the options to purchase 65,000 shares
of Common Stock beneficially owned by him.
Arthur A. Greenberg is the sole trustee of the three trusts which are the
general partners of Alphabet Partners, has no power to vote or to direct the
vote of and no power to dispose or direct the disposition of the 3,552,862
shares beneficially owned by Equity or the 730,141 shares attributable to
Alphabet Partners through its ownership in Equity. Mr. Greenberg disclaims
beneficial ownership of the shares owned by Alphabet Partners and Equity. Mr.
Greenberg has the sole power to vote or direct the vote of and the sole power
to dispose or direct the disposition of the 30,000 shares beneficially owned
by him and no power to vote or to direct the vote of and no power to dispose or
direct the disposition of the 2,000 shares beneficially owned by the trust in
which Mr. Greenberg is the beneficiary.
<PAGE> 14
Page 14 of 32
Sheli Z. Rosenberg, as sole trustee of the fifteen trusts which are the general
partners of ZFT Partnership, has no power to vote or to direct the vote of and
no power to dispose or direct the disposition of the 3,552,862 shares
beneficially owned by Equity or the 730,141 shares attributable to ZFT
Partnership through its ownership in Equity. Mrs. Rosenberg disclaims
beneficial ownership of the shares owned by ZFT Partnership and Equity. Mrs.
Rosenberg has the sole power to vote or direct the vote of and the sole power
to dispose or direct the disposition of the 41,318 shares and of the 5,000
shares (assuming exercise of the options to purchase 5,000 shares of Common
Stock) and shares the power to vote or to direct the vote of and shares the
power to dispose or direct the disposition of the 16,388 shares beneficially
owned by the Rosenberg Family Foundation.
Ann Lurie, as the trustee of the six trusts which are the general partners of
LFT Partnership, has no power to vote or to direct the vote of and no power to
dispose or direct the disposition of the 3,552,862 shares beneficially owned by
Equity or of the 486,760 shares attributable to LFT Partnership through its
ownership in Equity. Mrs. Lurie disclaims beneficial ownership of the shares
owned by LFT Partnership. Andrew Lurie is the beneficiary of one of the six
trusts which are partners of LFT Partnership. Mr. Lurie has no power to vote
or to direct the vote of and no power to dispose or direct the disposition of
the 3,552,862 shares beneficially owned by Equity or of the 486,760 shares
attributable to LFT Partnership through its ownership in Equity.
The Lurie Foundation, Ann Lurie, Sheli Z. Rosenberg, Samuel Zell, Mark Slezak
and Andrew Lurie (as directors of the Lurie Foundation) share the power to vote
and direct the vote of and share the power to dispose and to direct the
disposition of the 486,760 shares beneficially owned by the Lurie Foundation.
Messrs. Zell, Slezak and Lurie and Mmes. Lurie and Rosenberg disclaim
beneficial ownership of the 486,760 shares beneficially owned by the Lurie
Foundation.
(c) The only transactions in Common Stock by the Reporting Persons were the
transactions previously described in Item 3 hereto.
(d) and (e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SECURITIES OF THE ISSUER.
The Issuer and Equity entered into a Registration Rights Agreement,
(the "Agreement") dated as of September 30, 1997, pursuant to which
the Issuer granted Equity the right to a single demand registration,
for Common Stock held by Equity, the Lurie Foundation, or any
permitted assignee of Equity as of the date of the Agreement (such
Common Stock, the "Registrable Securities"). The Agreement also
grants unlimited "piggy-back" registration rights for the Registrable
Securities. The registration rights granted under the Agreement
become effective six months after the date of execution of the
Agreement and end on the third anniversary of the execution of the
Agreement.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 1 - Joint Filing Agreement dated as of October 10, 1997.
Exhibit 2 - Reorganization Agreement, dated as of December 19, 1997
and amended July 14, 1997 among Capsure, Continental
Casualty Company and certain of its affiliates, Issuer and
Surety Acquisition Company (incorporated herein by
reference to Appendix A of the Registration Statement on
Form S-4, dated as of August 15, 1997 of Issuer).
Exhibit 3 - Registration Rights Agreement dated as of September 30,
1997 between Issuer and Equity.
<PAGE> 15
Page 15 of 32
SIGNATURES
After reasonable inquiry, and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Equity Capsure Limited Partnership, Alphabet Partners, an Illinois general
an Illinois limited partnership partnership
By: Samuel Zell Revocable Trust By: SZA Trust, a general partner
U/T/A 1/17/90, general partner
By: /s/ Samuel Zell By: /s/Arthur A. Greenberg
- ------------------------- ----------------------------
Samuel Zell, Trustee Arthur A. Greenberg, Trustee
Samuel Zell Revocable Trust Arlington Leasing Co., a Nevada
U/T/A 1/17/90 corporation
By: /s/ Samuel Zell By: /s/ Samuel Zell
- ------------------------- -------------------------
Samuel Zell, Trustee Samuel Zell, President
/s/ Samuel Zell /s/ Ann Lurie
- ------------------------- -------------------------
Samuel Zell Ann Lurie
ZFT Partnership, an Illinois general
partnership
By: Samuel Zell Trust, a general partner
By: /s/ Sheli Z. Rosenberg
- -------------------------
Sheli Z. Rosenberg, Trustee
Ann and Robert H. Lurie Family
Foundation
By: /s/ Ann Lurie
- -------------------------
Ann Lurie, President
LFT Partnership, an Illinois general
partnership
By: Jesse Trust, a general partner
By: /s/ Ann Lurie
- ------------------------- Dated: October 10, 1997
Ann Lurie, Trustee
<PAGE> 16
Page 16 of 32
APPENDIX A
SCHEDULE 13D
SAMUEL ZELL:
Mr. Zell is Chairman of the Board of Directors of Equity Group
Investments, Inc. ("EGI"). EGI is a privately owned investment management
firm. Mr. Zell is a citizen of the United States of America.
SAMUEL ZELL REVOCABLE TRUST UNDER TRUST AGREEMENT DATED JANUARY 17, 1990:
Mr. Zell is the trustee and beneficiary of the Samuel Zell Revocable Trust
under trust agreement dated January 17, 1990 (the "Zell Trust"). The Zell
Trust is an Illinois trust. Information concerning Mr. Zell is above.
ALPHABET PARTNERS, AN ILLINOIS GENERAL PARTNERSHIP:
Alphabet Partners ("Alphabet Partners") is composed of three trusts
created for the benefit of Mr. Zell which share equally in the partnership.
Arthur A. Greenberg is the sole trustee of the three trusts. Mr. Greenberg is
the sole proprietor of Arthur A. Greenberg, Certified Public Accountants. Mr.
Greenberg is a citizen of the United States of America.
ZFT PARTNERSHIP, AN ILLINOIS GENERAL PARTNERSHIP:
ZFT Partnership ("ZFT Partnership") is composed of fifteen trusts created
for the benefit of Mr. Zell which share equally in the partnership. Sheli Z.
Rosenberg is the sole trustee of the fifteen trusts. Mrs. Rosenberg is
President and Chief Executive Officer of EGI. Mrs. Rosenberg is a citizen of
the United States of America.
ANN LURIE:
Mrs. Lurie is a private investor. Mrs. Lurie is a citizen of the United
States of America.
LFT PARTNERSHIP, AN ILLINOIS GENERAL PARTNERSHIP:
LFT Partnership ("LFT Partnership") is composed of six trusts each created
for one of Mrs. Lurie's six children which each shares equally in the
partnership. Mrs. Lurie is the sole trustee of the six trusts. Information
concerning Mrs. Lurie is above.
EQUITY CAPSURE LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP:
Equity Capsure Limited Partnership is a limited partnership, whose sole
general partner is the Zell Trust. Information concerning the Zell Trust is
above.
<PAGE> 17
Page 17 of 32
THE ANN AND ROBERT H. LURIE FAMILY FOUNDATION, AN ILLINOIS NON-STOCK
NOT-FOR-PROFIT CORPORATION:
The Ann and Robert H. Lurie Family Foundation (the "Lurie Foundation") is
an Illinois non-stock not-for-profit corporation. The directors of the Lurie
Foundation are: Ann Lurie, Sheli Z. Rosenberg, Samuel Zell, Mark Slezak and
Andrew Lurie. The officers of the Lurie Foundation are: Mrs. Lurie, president
and treasurer; Mrs. Rosenberg, vice president and secretary; Mr. Slezak and Mr.
Lurie, vice presidents. Information concerning Mrs. Lurie, Mrs. Rosenberg and
Mr. Zell is above. Mr. Slezak is a Vice President and Treasurer of Lurie
Investments, Inc., an Illinois corporation, and Mr. Lurie is a student. Both
are citizens of the United States of America with addresses of Two North
Riverside Plaza, Chicago, IL 60606.
ARLINGTON LEASING CO., A NEVADA CORPORATION:
Arlington Leasing Co. is a Nevada corporation whose directors are: Samuel
Zell, Sheli Z. Rosenberg, Timothy Callahan and Donald J. Leibentritt.
Information concerning Mr. Zell and Mrs. Rosenberg is above. Mr. Callahan is
Chief Executive Officer of Equity Office Properties Trust, an owner and
operator of office buildings. Mr. Callahan is a citizen of the United States
of America. Mr. Liebentritt is an Executive Vice President and General Counsel
of EGI and a member and Chairman of the Board of Rosenberg & Liebentritt, P.C.
Mr. Leibentritt is a citizen of the United States of America.
<PAGE> 18
Page 18 of 32
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------- ----
1. Joint Filing Agreement dated as of 19
October 10, 1997.
2. Reorganization Agreement, dated as
of December 19, 1997 and amended
July 14, 1997 among Capsure, Continental
Casualty Company and certain of its
affiliates, Issuer and Surety Acquisition
Company (incorporated herein by reference
to Appendix A of the Registration Statement
on Form S-4, dated as of August 15, 1997, of
Issuer).
3. Registration Rights Agreement dated as of 21
September 30, 1997 between Issuer and Equity.
<PAGE> 1
Page 19 of 32
EXHIBIT 1
JOINT FILING AGREEMENT
AGREEMENT dated as of October 10, 1997 among Samuel Zell; Samuel Zell as
Trustee of the Samuel Zell Revocable Trust under trust agreement dated January
17, 1990; Alphabet Partners, an Illinois general partnership; ZFT Partnership,
an Illinois general partnership; Ann Lurie; LFT Partnership, an Illinois
general partnership, Equity Capsure Limited Partnership, an Illinois limited
partnership, the Ann and Robert H. Lurie Family Foundation, an Illinois
non-stock not-for-profit corporation and Arlington Leasing Co., a Nevada
corporation (collectively, the "Reporting Persons").
WHEREAS, the Reporting Persons beneficially own shares of Common Stock,
par value $.01 per share, of CNA Surety Corporation, a Delaware corporation.
WHEREAS, the parties hereto may be deemed to constitute a "group" for
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amend
(the "Act"); and
WHEREAS, each of the parties hereto desire by this Agreement to provide
for the joint filing of a Schedule 13D, and all amendments thereto, with the
Securities and Exchange Commission.
NOW, THEREFORE, the parties hereto agree as follows:
1. The parties hereto will join in the preparation and filing of a
single statement containing the information required by Schedule
13D, and all amendments thereto, and the Schedule 13D and all such
amendments will be filed on behalf of each party hereto;
2. Each party hereto will be responsible for the timely filing of
the Schedule 13D, and all amendments thereto, and for the
completeness and accuracy of the information concerning such party
contained therein. No party hereto will be responsible for the
completeness or accuracy of the information concerning any other
party contained in the Schedule 13D or any amendment thereto,
except to the extent such party knows or has reason to believe that
such information is accurate.
3. Susan Obuchowski will be designated as the person authorized to
receive notices and communications with respect to the Schedule 13D
and all amendments thereto.
4. This Agreement may be executed in counterparts, all of which
when taken together will constitute one and the same instrument.
<PAGE> 2
Page 20 of 20
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Equity Capsure Limited Partnership, Alphabet Partners, an Illinois general
an Illinois limited partnership partnership
By: Samuel Zell Revocable Trust By: SZA Trust, a general partner
U/T/A 1/17/90, general partner
By: /s/ Samuel Zell By: /s/Arthur A. Greenberg
- ------------------------- ----------------------------
Samuel Zell, Trustee Arthur A. Greenberg, Trustee
Samuel Zell Revocable Trust Arlington Leasing Co., a Nevada
U/T/A 1/17/90 corporation
By: /s/ Samuel Zell By: /s/ Samuel Zell
- ------------------------- -------------------------
Samuel Zell, Trustee Samuel Zell, President
/s/ Samuel Zell /s/ Ann Lurie
- ------------------------- -------------------------
Samuel Zell Ann Lurie
ZFT Partnership, an Illinois general
partnership
By: Samuel Zell Trust, a general partner
By: /s/ Sheli Z. Rosenberg
- -------------------------
Sheli Z. Rosenberg, Trustee
Ann and Robert H. Lurie Family
Foundation
By: /s/ Ann Lurie
- -------------------------
Ann Lurie, President
LFT Partnership, an Illinois general
partnership
By: Jesse Trust, a general partner
By: /s/ Ann Lurie
- ------------------------- Dated: October 10, 1997
Ann Lurie, Trustee
<PAGE> 1
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of September 30, 1997
("Agreement"), between CNA Surety Corporation, a Delaware corporation (the
"Company") and Equity Capsure Limited Partnership, an Illinois limited
partnership (the "Major Stockholder").
RECITALS
(A) Pursuant to the Reorganization Agreement (the "Reorganization
Agreement") by and among Capsure Holdings Corp., a Delaware corporation
("Capsure"), Continental Casualty Company, an Illinois corporation ("Parent"),
the Company and Surety Acquisition Company, a Delaware corporation, dated as of
December 19, 1996, the Major Stockholder agreed to, among other things, vote
all of the 4,039,622 shares of common stock, $.05 par value per share of
Capsure, held by it in favor of the adoption of the Merger.
(B) As a condition to the consummation of the Merger contemplated by the
Reorganization Agreement, the Company and the Major Stockholder have entered
into this Agreement to provide certain securities registration rights with
respect to the shares of CNA Surety Common Stock issued to the Major
Stockholder.
Capitalized terms used in this Agreement without definition shall have the
respective meanings given to them in the Reorganization Agreement.
AGREEMENTS
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Effectiveness of Registration Rights. The registration rights
pursuant to Sections 2 and 3 hereof shall become effective as of the first day
of the sixth month following the Closing Date and terminate on the 3rd
anniversary of the Closing Date; provided, that the rights set forth herein
shall continue as necessary to effect a written notice submitted prior to the
termination of this Agreement.
Section 2. Registration on Request.
2.1 Notice. Upon written notice from the Major Stockholder or the
Holders (as defined in Section 8 hereof) of at least a majority of the
Registrable Securities (as defined in Section 9 hereof) requesting (i) that
the Company effect the registration under the Securities Act of all or part of
the Registrable Securities held by it or them or (ii) that the Company effect
the registration under the Securities Act of all but not less than all of the
Registrable Securities on a Form S-3 registration statement pursuant to Rule
415 under the Securities Act (or any similar rule) ("shelf registration"),
which notice shall specify the intended method or methods of disposition of
such Registrable Securities, the Company shall use its best efforts to effect
(at the
Page 21 of 32
<PAGE> 2
earliest possible date) the registration, under the Securities Act, of such
Registrable Securities for disposition in accordance with the intended method
or methods of disposition stated in such request, provided that:
(a) except in the case of a shelf registration, if the Company shall
have previously effected a registration with respect to Registrable
Securities pursuant to this Section 2 or Section 3 hereof, the Company
shall not be required to effect a registration pursuant to this Section 2
until a period of 120 days shall have elapsed from the effective date of
the most recent such previous registration;
(b) if, in the reasonable judgment of the Company, a registration at
the time and on the terms requested would adversely affect any public
financing by the Company that had been contemplated by the Company prior
to the notice by such Holder requesting registration, the Company shall
not be required to commence using its best efforts to effect a
registration pursuant to this Section 2 until the earlier of (i) 60 days
after the completion or abandonment of such financing and (ii) the
termination of any "black out" period required by the underwriters, if
any, in connection with such financing;
(c) the Company shall not be required to file a registration statement
if, as a result, the Company would be required to include in such
registration statement (i) audited financial statements as of any date
other than a fiscal year end or (ii) pro forma financial statements
pursuant to Regulation S-X under the Securities Act if such pro forma
statements cannot be reasonably prepared in a timely fashion, until such
audited financial statements or such pro forma financial statements have
been prepared; provided that the Company shall use its reasonable efforts
to prepare on a timely basis any audited financial statements or pro forma
financial statements required to be included;
(d) if the Company determines, based on the good faith judgment of the
Company's general counsel, that the filing of a registration statement
would require the disclosure of material information which the Company has
a bona fide business purpose for preserving as confidential or the Company
is unable to comply with Securities and Exchange Commission requirements,
the Company shall not be required to commence using its best efforts to
effect a registration pursuant to this Section 2 until the earlier of (i)
the date upon which such material information is disclosed to the public
(it being understood that nothing herein shall require such disclosure) or
ceases to be material or (ii) 90 days after the Company makes such good
faith determination; and
(e) if, at any time the Company informs the Holder or Holders that it
believes that any fact or circumstance concerning the Company exists
which, in the opinion of the Company, constitutes material information
which has not been publicly disclosed and which the Company believes, in
its sole opinion, it is inappropriate or inadvisable to so disclose, the
Company may instruct orally (such oral instructions to be confirmed
promptly in writing) such Holder or Holders not to sell any of its or
their Registrable Securities until the Company either (i) discloses such
fact or circumstance and delivers to the Holder or Holders (in the context
of a public offering) copies of an amended or
-2-
Page 22 of 32
<PAGE> 3
supplemented prospectus in accordance with the provisions of Section 4.1
hereof, or (ii) delivers written notice to each Holder that it may proceed
with such sale; provided, that no such limitation on the Holders' ability
to sell its Registrable Securities shall continue for more than a period
of 60 business days.
(f) the Holders, cumulatively, shall have the right to exercise
registration rights pursuant to this Section 2.1 only once.
If in any case the Company shall under any of foregoing clauses (a) through (d)
postpone the filing of a registration statement requested by a Holder or
Holders, the Holder or Holders shall have the right to withdraw, in whole but
not in part, the request for registration by giving written notice to the
Company 30 days after receipt of the notice of postponement, and in the event
of such withdrawal such request shall not be counted as the exercise of the
right permitted under the foregoing clause (f) to this Section 2.1. In
addition, in no event shall a registration request be counted if the
Registrable Securities with respect to which a request is made are not
registered pursuant to an effective registration statement due to default by
the Company of its obligations hereunder. If the Company shall have filed a
shelf registration with respect to the Registrable Securities, the Company may
withdraw such registration statement upon the third anniversary date of the
Closing Date.
2.2 Third Person Shares. The Company shall have the right to cause the
registration of securities for sale for the account of any person (excluding
the Company in a primary offering of its voting securities) in any registration
of Registrable Securities requested pursuant to this Section 2, provided that
the Company shall not have the right to cause the registration of such
securities if:
(a) in the reasonable judgment of the Holder or Holders requesting
such registration pursuant to this Section 2, registration of such
securities would adversely affect the offering and sale of Registrable
Securities then contemplated by the Holders; or
(b) such Holder or Holders do not receive assurances satisfactory to
it or them that the person for which such securities are being registered
will pay any transfer taxes applicable to their securities being
registered, all commissions, discounts and other compensation payable to
the underwriters (including fees and expenses of underwriters' counsel
other than those referred to in clause (iv) of the definition of
Registration Expenses) in respect of such securities and the fees and
expenses of their own counsel (provided that for purposes of this clause
(b), the guarantee by the Company to each Holder of payment of such
amounts shall be satisfactory assurance to the Holders).
2.3 Registration Expenses. The Company shall pay or cause to be paid all
Registration Expenses in connection with any registration pursuant to this
Section 2; provided that with respect to any such registration each Holder
requesting such registration shall bear any transfer taxes applicable to such
Holder's Registrable Securities registered thereunder, all commissions,
discounts or other compensation payable to the underwriters in respect of such
Registrable Securities and the fees and expenses of such Holder's own counsel;
and provided further that
-3-
Page 23 of 32
<PAGE> 4
in no event shall any Holder be required to pay any internal costs of the
Company or the Company be required to pay any internal costs of any Holder.
Section 3. Incidental Registration.
3.1 Notice and Registration. If the Company proposes to register any of
its voting securities ("Other Securities") for public sale under the Securities
Act, on a form and in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give prompt
written notice to each Holder of its intention to do so, and upon the written
request of a Holder delivered to the Company within fifteen Business Days after
the giving of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof) the Company will use its best efforts to effect, in
connection with the registration of the Other Securities, the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by such Holder, to the extent required to permit
the disposition (in accordance with the intended method or methods thereof as
aforesaid) of the Registrable Securities so to be registered, provided that:
(a) if, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company receives the written opinion of the managing underwriters of such
offering or offerings that the aggregate amount of shares to be registered
by the Holders of the Registrable Securities could materially and
adversely affect such offering, then the Company may reduce the number of
Registrable Securities of such Holders to be included in such offering;
provided, that such Holders will be entitled to register the maximum
number of Registrable Securities which the underwriters deem advisable in
such written opinion (without regard to the limitations set forth in
Section 7) and the Company will allocate the number of Registrable Shares
to be registered for each such Holder on a pro rata basis in accordance
with the number of shares each Holder initially requested to be sold;
(b) the Company shall not be required to effect any registration of
Registrable Securities under this Section 3 incidental to the registration
of any of its securities in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock option or other
employee benefit plans; and
(c) Holders, cumulatively, shall have the right to exercise
registration rights pursuant to this Section 3 without limit during the
term hereof.
No registration of Registrable Securities effected under this Section 3 shall
relieve the Company of its obligation to effect registrations of Registrable
Securities pursuant to Section 2.
3.2 Registration Expenses. The Company will pay all Registration
Expenses in connection with any registration pursuant to this Section 3;
provided that with respect to any such registration a Holder requesting such
registration shall bear all transfer taxes applicable to such Holder's
Registrable Securities registered thereunder, as such Holder's pro rata share
of
-4-
Page 24 of 32
<PAGE> 5
all commissions, discounts or other compensation payable to the underwriters
in respect of such Registrable Securities and the fees and expenses of a
Holder's own counsel; and provided, further, that in no event shall any Holder
be required to pay any internal costs of the Company or the Company be required
to pay any internal costs of any Holder.
Section 4. Registration Procedures.
4.1 Registration and Qualification.
(a) If and whenever the Company is required to use its best efforts to
effect the registration of any Registrable Securities under the Securities
Act as provided in Sections 2 and 3, the Company will as promptly as is
practicable:
(i) prepare, file and use its best efforts to cause to become
effective a registration statement under the Securities Act regarding the
Registrable Securities to be offered;
(ii) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities until the earlier of such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods
of disposition by the Holder set forth in such registration statement or
the expiration of five months after such registration statement becomes
effective (except in the case of a shelf registration statement on Form
S-3 the parties shall mutually agree upon an appropriate expiration period
which in no event shall be later than the end of the term of this
Agreement);
(iii) furnish to each Holder and to any underwriter of such
Registrable Securities such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in the case of a Holder or managing underwriter, including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus) or filed under the Securities Act, in conformity with the
requirements of the Securities Act, such documents as may be incorporated
by reference in such registration statement or prospectus, and such other
documents, as each Holder or such underwriter may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as a Holder or any
underwriter of such Registrable Securities shall reasonably request, and
do any and all other acts and things which may be necessary or advisable
to enable each Holder or any underwriter to consummate the disposition in
such jurisdictions of its Registrable Securities covered by such
registration statement, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to
-5-
Page 25 of 32
<PAGE> 6
subject itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(v) furnish to each such Holder and the underwriters, addressed to
them, (A) an opinion of counsel for the Company, dated the date of the
closing under the underwriting agreement relating to any underwritten
offering, and (B) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included
in such registration statement, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters, respectively, delivered to underwriters in underwritten public
offerings of securities and such other matters as a Holder may reasonably
request;
(vi) immediately notify each such Holder at any time when a prospectus
relating to a registration pursuant to Section 2 or 3 is or was required
to be delivered under the Securities Act, of the happening of any event as
a result of which the prospectus included in such registration statement,
as then in effect, includes or included an untrue statement of a material
fact or omits or omitted to state any material fact required to be stated
therein or necessary, in the light of the circumstances then existing, to
make the statements therein not misleading, and at the request of each
such Holder prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary, in the light of the circumstances then
existing, to make the statements therein not misleading; and
(vii) use reasonable efforts to do any and all other acts any Holder
may reasonably request and which are customary for a registration of
equity securities.
The Company may require each Holder to furnish the Company such information
regarding such Holder and the distribution of such securities as the Company
may from time to time reasonably request in writing and as shall be required by
law or by the SEC in connection with any registration.
(b) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
4.1(a)(vi) hereof, such Holder shall use its best effort to discontinue
forthwith disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4.l(a)(vi) hereof.
-6-
Page 26 of 32
<PAGE> 7
4.2 Underwriting.
(a) If requested by the managing underwriter for any underwritten
offering of Registrable Securities pursuant to a registration requested
hereunder, the Company will enter into an underwriting agreement with the
underwriters for such offering, such agreement to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect provided in Section 6 and the
provision of opinions of counsel and accountants' letters to the effect
provided in Section 4.1(a)(v). Each Holder involved shall be a party to
any such underwriting agreement and the representations and warranties by,
and the other agreements on the part of, the Company to and for the
benefit of such underwriters, shall also be made to and for the benefit of
each such Holder.
(b) In the event that any registration pursuant to Section 3 shall
involve, in whole or in part, an underwritten offering, the Company may
require the Registrable Securities requested to be registered pursuant to
Section 3 by any Holder, to be included in such underwriting on the same
terms and conditions as shall be applicable to the Other Securities being
sold through underwriters under such registration. In any such case, the
requesting Holder shall be a party to any such underwriting agreement.
Such agreement shall contain such representations, warranties and
covenants by each such Holder and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution
to the effect provided in Section 6. The representations and warranties in
such underwriting agreement by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters, shall also be
made to and for the benefit of such Holder.
Section 5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give each Holder involved
and the underwriters, if any, and their respective counsel and accountants
(collectively, the "Inspectors"), such reasonable and customary access to its
books and records (collectively, the "Records") and such opportunities to
discuss the business of the Company with its officers and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of such Holder and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. Records which the Company reasonably determines to be
confidential and which it notifies the Inspectors in writing are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary or appropriate to avoid or correct a misstatement or
omission in the registration statement, (ii) the portion of the Records to be
disclosed has otherwise become publicly known, (iii) the information in such
Records is to be used in connection with any litigation or governmental
investigation or hearing relating to any registration statement or (iv) the
release of such Records is ordered pursuant to a subpoena or other order. Each
Holder agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company.
-7-
Page 27 of 32
<PAGE> 8
Section 6. Indemnification and Contribution.
(a) In the event of any registration of any Registrable Securities
hereunder, the Company will enter into customary indemnification
arrangements to indemnify and hold harmless a Holder, its general and
limited partners, directors and officers, each other person who
participates as an underwriter in the offering or sale of such securities,
each officer and director of each underwriter, and each other person, if
any, who controls such Holder or any such underwriter within the meaning
of the Securities Act against any losses, claims, damages, liabilities and
expenses, joint or several, to which such person may be subject under the
Securities Act or otherwise insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus included therein or filed under
the Securities Act, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
the Company will reimburse each such person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided
that the Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in such registration statement, any such preliminary prospectus or final
prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by a Holder or an
underwriter for use in the preparation thereof; and provided, further,
that the Company shall not be liable to any person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
person who controls such underwriter within the meaning of the Securities
Act under the indemnity agreement in this subsection (a) with respect to
any preliminary prospectus to the extent that any such loss, claim, damage
or liability or expense (or actions or proceedings in respect thereof) of
such person results from the fact that such underwriter sold Registrable
Securities to a purchaser to whom there was not sent or given, at or prior
to the written confirmation of such sale, a copy of the prospectus
(excluding documents incorporated by reference) or of the prospectus as
then amended or supplemented (excluding documents incorporated by
reference) in any case where such delivery is required by the Securities
Act if the Company has previously made available copies thereof to such
underwriter and the loss, claim, damage or liability of such person
results from an untrue statement or omission of a material fact contained
in the preliminary prospectus which was corrected in the prospectus (or
the prospectus as amended or supplemented). Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of a Holder or any such underwriter and shall survive the transfer
of such securities by a Holder. The Company also shall agree to provide
provision for contribution as shall be reasonably requested by a Holder or
any underwriters regarding circumstances where such indemnity may be held
unenforceable.
-8-
Page 28 of 32
<PAGE> 9
(b) A Holder, by virtue of exercising its registration rights
hereunder, agrees and undertakes severally, and the Company may require,
as a condition to filing a registration statement, that the Company shall
have received from the underwriters an agreement to enter into customary
indemnification arrangements to indemnify and hold harmless (in the same
manner and to the same extent as set forth in clause (a) of this Section
6) the Company, each director of the Company, each officer of the Company
who shall sign such registration statement, each other person who
participates as an underwriter in the offering or sale of such securities,
each officer and director of each underwriter, and each other person, if
any, who controls the Company or any such underwriter within the meaning
of the Securities Act, with respect to any statement in or omission from
such registration statement, any preliminary prospectus or final
prospectus included therein, or any amendment or supplement thereto, if
such statement or omission was made in reliance upon and in conformity
with written information furnished by it to the Company. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or on behalf of the Company or any such director, officer or
controlling person and shall survive the transfer of the Registrable
Securities by such Holder of Registrable Securities. Each Holder also
shall agree to provide provision for contribution as shall reasonably be
requested by the Company or any underwriters regarding circumstances where
such indemnity may be held unenforceable.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any indemnified person in respect of which
indemnity may be sought pursuant to this Section, such indemnified person
shall promptly notify the indemnifying person in writing and the
indemnifying person, upon request of the indemnified person, promptly
shall retain counsel satisfactory to the indemnified person to represent
the indemnified person and any others the indemnifying person may
designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified person shall have the right to retain its own counsel, but the
fees and disbursements of such counsel shall be at the expense of such
indemnified person unless (i) the indemnifying person shall have failed to
retain counsel for the indemnified person as aforesaid, (ii) the
indemnifying person and such indemnified person shall have mutually agreed
to the retention of such counsel or (iii) in the reasonable opinion of
such indemnified person representation of such indemnified person by the
counsel retained by the indemnifying person would be inappropriate due to
actual or potential differing interests between such indemnified person
and any other person represented by such counsel in such proceeding. The
indemnifying person shall not be liable for any settlement of any
proceeding effected without its written consent (which shall not be
unreasonably withheld) but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying person agrees to
indemnify the indemnified person from and against any loss or liability by
reason of such settlement or judgment.
(d) Indemnification and contribution similar to that specified in the
preceding subdivisions of this Section 6 (with appropriate modifications)
shall be given by the Company and each Holder with respect to any required
registration or other qualification
-9-
Page 29 of 32
<PAGE> 10
of such Registrable Securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
Section 7. Limitation on Rights. Each Holder agrees that no requests for
registration shall be made hereunder for less than 500,000 shares, in
aggregate, of Registrable Securities.
Section 8. Definition of Holder. The term "Holder" means the Major
Stockholder and shall also mean any Permitted Assignee (as defined hereinafter)
that is a holder of Registrable Securities; provided that in the case of such
Permitted Assignee, the Major Stockholder shall have assigned rights hereunder
in writing and the Permitted Assignee shall have agreed in writing, addressed
to the Major Stockholder and the Company, to be bound hereby; and provided
further, that there shall be no more than 20 Permitted Assignees considered
Holders hereunder at any one time without the consent of the Company, which
consent will not be unreasonably withheld. For purposes of this Agreement, a
"Permitted Assignee" shall mean (i) an affiliate (as defined under the Exchange
Act, as defined in the Reorganization Agreement) of the Holder or its partners,
(ii) a lender or other pledgee of Registrable Securities as collateral or
(iii) a charitable foundation receiving Registrable Securities from the Holder
or an affiliate of the Holder. Rights hereunder assigned to any Permitted
Assignee covered by clauses (ii) or (iii) in the preceding sentence shall not,
without the consent of the Company, be further assignable by such Permitted
Assignee other than to a successor to all or substantially all of such
Permitted Assignee's business or assets which successor shall have agreed in
writing to be bound hereby. The Company shall not be obligated to effect any
registration pursuant to Section 3 hereof if, in the written opinion of counsel
to the Company who shall be reasonably satisfactory to any affected Holder, the
intended method or methods of disposition of any Registrable Securities by such
Holder may be effected without registration under the Securities Act.
Section 9. Definition of Registrable Securities. The term "Registrable
Securities" shall mean (a) the common stock of the Company held by the Major
Stockholder on the date hereof (and 486,760 shares of Common Stock held by the
Robert H. and Ann Lurie Family Foundation (charitable foundation) on the date
hereof), (b) any common stock referred to in clause (a) held by a Permitted
Assignee, (c) any common stock issued or issuable with respect to the
securities referred to in clause (a) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (d) any common stock issued or
issuable pursuant to the exercise of stock options. For purposes of
determining the aggregate amount of Registrable Securities outstanding at any
time, shares with respect to which the Company shall not be obligated to effect
registration pursuant to the last sentence of Section 8 hereof shall not be
deemed Registrable Securities.
Section 10. Entire Agreement. This Agreement and the agreements
referenced herein constitute the entire agreement between the parties hereto
with respect to the subject matter hereof.
Section 11. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by fax, by
nationally-recognized overnight delivery service
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or by registered or certified mail (postage prepaid, return receipt requested),
to the other party as follows:
if to the Company:
CNA Surety Corporation
c/o CNA Insurance Companies
CNA Plaza; 42 South
Chicago, IL 60685
Attention: David T. Cumming, Group Vice President
& Associate General Counsel
Facsimile: (312) 822-1186
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
Attention: Mitchell L. Hollins
Arthur J. Simon
Facsimile: (312) 876-7934
If to any Holder, addressed to such Holder at such Holder's address as
shown on the books of the Company or its transfer agent or to such other
address or person as the person to whom notice is given may have previously
furnished to the other in writing in the manner set forth above.
Section 12. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW; HOWEVER, ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN AND DECIDED BY
THE FEDERAL OR STATE COURTS IN CHICAGO, ILLINOIS, SUCH COURTS BEING A PROPER
FORUM IN WHICH TO ADJUDICATE SUCH ACTION OR PROCEEDING, AND EACH PARTY HEREBY
WAIVES ANY CLAIM OF INCONVENIENT FORUM.
Section 13. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 14. Amendments; Severability. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the Company
and the Major Stockholder or the Holders of a majority of the Registrable
Securities hereunder. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of the other provisions hereof. If any
provision
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<PAGE> 12
of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid and unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 15. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement. The parties hereto agree that
facsimile signatures shall constitute and shall be accepted as original
signatures.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its representatives thereunto duly authorized, all as
of the day and year first above written.
CNA SURETY CORPORATION
By: /s/ Mark Vonnahme
-----------------------------
Name: Mark Vonnahme
Title: President & CEO
EQUITY CAPSURE LIMITED
PARTNERSHIP
By: /s/ Samuel Zell
-----------------------------
Name: Samuel Zell
Title: Trustee of General Partner
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