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 6, 1994
THE CONTINENTAL CORPORATION
(Exact name of registrant as specified in its charter)
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New York 1-5686 13-2610607
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
180 Maiden Lane New York, New York 10038
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(Address of principal executive offices) (Zip Code)
(212) 440-3000
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(Registrant's telephone number)
Page 1 of 303 Pages
Exhibit Index on Page 5
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Item 2. Acquisitions or Dispositions of Assets.
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On December 6, 1994, The Continental Corporation (the "Company") entered
into a merger agreement under which CNA Financial Corporation ("CNA Financial")
will acquire the Company through a merger with a wholly-owned CNA subsidiary.
Under the merger agreement, holders of Continental common stock will receive $20
per share in cash. The proposed transaction is subject to satisfaction of
certain conditions, including approval by the Company's shareholders, regulatory
approvals and expiration of the Hart-Scott-Rodino waiting period, and is
required to be consummated prior to December 31, 1995. Completion of the
proposed transaction is expected in the first half of 1995.
Under a separate agreement, CNA has agreed to invest $275 million in the
Company. The capital investment by CNA, which is expected to be completed on
or before December 12, 1994, takes the place of an investment in the Company
under a previously announced agreement with Insurance Partners L.P. The Company
has terminated the Insurance Partners agreement and, as provided in the
Insurance Partners agreement, will pay a termination fee to Insurance Partners
not exceeding 1-7/8% of the aggregate merger consideration plus expenses not
exceeding $10 million.
Under the investment agreement, CNA will acquire for cash $200 million in
liquidation value of two series of 9.75% non-convertible preferred stock,
redeemable under certain circumstances at a price reflecting any increase in the
per share price of the Company's common stock over $15.75. CNA will also
receive an option to acquire $125 million in liquidation preference of another
series of 9.75% non-convertible preferred stock. 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 Continental under
certain circumstances. In addition, CNA will acquire for cash $75 million in
liquidation value of a series of 12% non-convertible preferred stock, maturing
in 10 years and redeemable under certain circumstances. If the merger is not
completed,
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CNA may, subject to regulatory approvals, exchange approximately $165 million of
the 9.75% preferred stock for another series of preferred stock that would be
convertible into approximately 19% of the Company's currently outstanding common
shares. Subject to adjustment, the conversion price would be $15.75. Following
such exchange, CNA would be entitled to nominate up to four directors to serve
on Continental's board. CNA would also be subject to certain standstill
agreements and restrictions on transfer.
The merger agreement and securities purchase agreement are filed as
exhibits and this discussion is qualified in its entirety by reference to
those exhibits.
* * *
Item 7. Exhibits
Exhibit 2(a) Agreement and Plan of Merger, dated as of December 6, 1994, by
and among The Continental Corporation, CNA Financial Corporation
and Chicago Acquisition Corp. (Annex A, Securities Purchase
Agreement, filed as Exhibit 10(b)).
Exhibit 10(a) (Filed as Exhibit 2(a).)
Exhibit 10(b) Securities Purchase Agreement, dated as of December 6, 1994,
between The Continental Corporation and CNA Financial
Corporation, with Schedule 1 and Exhibits A through D.
* * *
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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 9, 1994
THE CONTINENTAL CORPORATION
By /s/ William F. Gleason, Jr.
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William F. Gleason, Jr.
Senior Vice President,
General Counsel and
Secretary
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Exhibit Index
Sequentially
Numbered
Page
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Exhibit 2(a) Agreement and Plan of Merger, dated as of December 6, 1994 by,
and among The Continental Corporation, CNA Financial Corporation
and Chicago Acquisition Corp. (Annex A, Securities Purchase
Agreement, filed as Exhibit 10(b).)
Exhibit 10(a) (Filed as Exhibit 2(a).)
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.
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EXHIBIT 2(a)
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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<PAGE>
TABLE OF CONTENTS
Page
----
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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<PAGE>
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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<PAGE>
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
-----------
and TCC-PS Limited Partnership, a Delaware limited partnership (together with
its permitted assignees, "Partnership"), pursuant to which New York has agreed
-----------
to sell to Partnership certain securities of New York (the "October SPA
-----------
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;
------------------
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");
------
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
----------------------
included therein, the "Chicago Preferred Stock") from New York, substantially
-----------------------
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
-----------
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:
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
----------
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").
---------------------
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
--------------
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
---
York Certificate") to be executed, verified and delivered to the Department of
- - ----------------
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
--------------------
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
--------------------------------------
Incorporation; By-Laws. (a) At the Effective Time, the directors of Merger Sub
- - ----------------------
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
-----------------------
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
--------
Common Stock") issued and outstanding immediately prior to the
------------
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
----------------
into the right to receive $20 per share in cash (the "Per Share
---------
Merger Consideration" and the aggregate amount of cash into which
--------------------
all shares of New York Common Stock shall be converted, the
"Merger Consideration"). All such shares of New York Common
--------------------
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
------------
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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<PAGE>
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"),
------------------------------
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
-----------------------------
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
------------ -------------
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
-------------
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,
------------
pursuant to irrevocable instructions, deliver the
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<PAGE>
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,
------------------
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
---------------------------
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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<PAGE>
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
------------
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
------------------
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)
--------------
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,
--------------------
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
----------------------
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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<PAGE>
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
-----------------
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
-----------------
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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<PAGE>
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"):
-----------------
SECTION 2.1. Organization, Good Standing, Power, Authority,
----------------------------------------------
Etc. New York is a corporation duly organized, validly existing and in good
- - ----
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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<PAGE>
SECTION 2.2. Capitalization of New York. Other than with
--------------------------
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"),
------------------------
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
------
B Preferred Stock"), 25,563 of which shares were outstanding as of November 30,
- - -----------------
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
--------
Preferred Stock") are convertible into an aggregate of 117,847 shares of New
- - ---------------
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
-------------
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)
---
New York's Quarterly Reports on Form 10-Q for the quarters ended
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<PAGE>
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
-----------------
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").
-------------
(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
--------
Act") (i) complied or will comply in all material respects with the applicable
- - ---
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
--------------
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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<PAGE>
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
---------------------------------------
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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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
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<PAGE>
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,
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"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
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<PAGE>
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
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<PAGE>
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:
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<PAGE>
(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;
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<PAGE>
(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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
(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
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<PAGE>
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
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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
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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.
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(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
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<PAGE>
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
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<PAGE>
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;
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<PAGE>
(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,
-37-
<PAGE>
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,
-38-
<PAGE>
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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<PAGE>
(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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<PAGE>
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-
<PAGE>
IN WITNESS WHEREOF, CNA Financial Corporation, Chicago
Acquisition Corp. and The Continental Corporation have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
CNA FINANCIAL CORPORATION
By
----------------------
Name:
Title:
CHICAGO ACQUISITION CORP.
By
----------------------
Name:
Title:
THE CONTINENTAL CORPORATION
By
------------------
Name:
Title:
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<PAGE>
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-
<PAGE>
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
EXHIBIT 10(b)
- - ---------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
BETWEEN
THE CONTINENTAL CORPORATION
AND
CNA FINANCIAL CORPORATION
Dated as of December 6, 1994
- - ---------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS: CERTAIN REFERENCES . . . . . . . . . . . . . 2
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Time and Place of the Closing . . . . . . . . . . . . 8
2.2 Transactions at the Closing . . . . . . . . . . . . . 8
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . 9
3. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . 9
3.1 Conditions Precedent to the Obligations of
the Purchaser . . . . . . . . . . . . . . . . . . . 9
3.1.1 Certificate of Amendment . . . . . . 9
3.1.2 Legal Opinion . . . . . . . . . . . 9
3.1.3 Registration Rights Agreement . . . 9
3.1.4 Option . . . . . . . . . . . . . . . 9
3.1.5 Exemption from Special Voting
Requirements . . . . . . . . . . . 9
3.1.6 Termination of the October
Agreements . . . . . . . . . . . . 9
3.2 Conditions Precedent to Obligations of
the Company . . . . . . . . . . . . . . . . . . . . . 10
3.2.1 Certificate of Amendment . . . . . . . . 10
4. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Organization, Good Standing,
Power, Authority, Etc. . . . . . . . . . . . . . . . 10
4.2 Capitalization of the Company . . . . . . . . . . . . 11
4.3 Certain Instruments . . . . . . . . . . . . . . . . . 12
4.4 SEC Documents . . . . . . . . . . . . . . . . . . . . 12
4.5 Authority and Qualification
of the Company . . . . . . . . . . . . . . . . . . 13
4.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . 13
4.7 Outstanding Securities . . . . . . . . . . . . . . . 14
4.8 No Contravention, Conflict,
Breach, Etc. . . . . . . . . . . . . . . . . . . . 14
4.9 Consents . . . . . . . . . . . . . . . . . . . . . . 15
4.10 No Existing Violation,
Default, Etc. . . . . . . . . . . . . . . . . . . . 15
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<PAGE>
4.11 Licenses and Permits . . . . . . . . . . . . . . . . 16
4.12 Title to Properties . . . . . . . . . . . . . . . . . 16
4.13 Environmental Matters . . . . . . . . . . . . . . . . 16
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 17
4.15 Litigation . . . . . . . . . . . . . . . . . . . . . 18
4.16 Labor Matters . . . . . . . . . . . . . . . . . . . . 18
4.17 Contracts . . . . . . . . . . . . . . . . . . . . . . 18
4.18 Finder's Fees . . . . . . . . . . . . . . . . . . . . 19
4.19 Financial and Statutory Statements . . . . . . . . . 19
4.20 Employee Benefits . . . . . . . . . . . . . . . . . . 20
4.21 Contingent Liabilities . . . . . . . . . . . . . . . 21
4.22 No Material Adverse Change . . . . . . . . . . . . . 22
4.23 Investment Company . . . . . . . . . . . . . . . . . 22
4.24 Exemption from Registration;
Restrictions on Offer and
Sale of Same or Similar
Securities . . . . . . . . . . . . . . . . . . . . 22
4.25 Use of Proceeds . . . . . . . . . . . . . . . . . . . 23
4.26 [Intentionally omitted] . . . . . . . . . . . . . . . 23
4.27 No Bank Regulatory Oversight . . . . . . . . . . . . 23
5. REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . 23
5.1 Organization, Good Standing, Power,
Authority, Etc. . . . . . . . . . . . . . . . . . . . 23
5.2 No Conflicts; No Consents . . . . . . . . . . . . . . 24
5.3 Acquisition for Own Account . . . . . . . . . . . . . 24
5.4 Available Funds . . . . . . . . . . . . . . . . . . . 25
6. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . 25
6.1 Restrictions on Transfer . . . . . . . . . . . . . . 25
6.2 Certificates for Shares, Conversion Shares
and Exchange Shares To Bear Legends . . . . . . . . . 27
6.3 Removal of Legends . . . . . . . . . . . . . . . . . 29
6.4 Voting of Shares . . . . . . . . . . . . . . . . . . 29
6.5 Pre-Closing Activities . . . . . . . . . . . . . . . 30
6.6 No Inconsistent Agreements . . . . . . . . . . . . . 30
6.7 Information . . . . . . . . . . . . . . . . . . . . . 30
6.8 [Intentionally omitted] . . . . . . . . . . . . . . . 31
6.9 [Intentionally omitted] . . . . . . . . . . . . . . . 31
6.10 [Intentionally omitted] . . . . . . . . . . . . . . . 31
6.11 [Intentionally omitted] . . . . . . . . . . . . . . . 32
6.12 Publicity . . . . . . . . . . . . . . . . . . . . . . 32
6.13 Restricted Payments . . . . . . . . . . . . . . . . . 32
6.14 Reservation of Shares . . . . . . . . . . . . . . . . 32
-ii-
<PAGE>
6.15 Issuance of New Preferred
Stock or New Senior Notes . . . . . . . . . . . . . . 32
6.16 Shareholders Rights Plan . . . . . . . . . . . . . . . 33
6.17 Board of Directors;
Amendments to By-laws . . . . . . . . . . . . . . . . 33
6.18 Specified Corporate Action . . . . . . . . . . . . . . 39
6.19 Regulatory Approvals . . . . . . . . . . . . . . . . . 39
6.20 Agreed Treatment . . . . . . . . . . . . . . . . . . . 40
7. STANDSTILL . . . . . . . . . . . . . . . . . . . . . . . . 40
7.1 Prohibited Activities . . . . . . . . . . . . . . . . 40
7.2 Voting and Other Rights . . . . . . . . . . . . . . . 42
7.3 Standstill Period . . . . . . . . . . . . . . . . . . 43
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 46
8.1 Indemnification by the Company . . . . . . . . . . . 46
8.2 Notification . . . . . . . . . . . . . . . . . . . . 46
8.3 Registration Rights Agreement . . . . . . . . . . . . 47
9. [Intentionally omitted] . . . . . . . . . . . . . . . . . 48
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 48
11. PERFORMANCE; WAIVER . . . . . . . . . . . . . . . . . . . 48
12. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . 48
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 49
13.1 Notices . . . . . . . . . . . . . . . . . . . . . . 49
13.2 [Intentionally omitted] . . . . . . . . . . . . . . . 50
13.3 Governing Law . . . . . . . . . . . . . . . . . . . . 50
13.4 Severability . . . . . . . . . . . . . . . . . . . . 50
13.5 Headings; Interpretation . . . . . . . . . . . . . . 51
13.6 Entire Agreement . . . . . . . . . . . . . . . . . . 51
13.7 Counterparts . . . . . . . . . . . . . . . . . . . . 51
13.8 Letter Agreement . . . . . . . . . . . . . . . . . . 51
14. EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.1 The Exchange . . . . . . . . . . . . . . . . . . . . 51
14.2 Conditions to Exchange . . . . . . . . . . . . . . . 51
14.3 Stock Exchange Listing . . . . . . . . . . . . . . . 52
14.4 Other . . . . . . . . . . . . . . . . . . . . . . . . 52
15. OTHER . . . . . . . . . . . . . . . . . . . . . . . . 53
-iii-
<PAGE>
1 Sale of Chicago Preferred Stock under
Certain Circumstances . . . . . . . . . . . . . . . 53
EXHIBIT A Form of Certificate of Amendment
EXHIBIT B Form of Option
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Form of Opinion of Debevoise & Plimpton
-iv-
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT"), dated as of
December 6, 1994, between THE CONTINENTAL CORPORATION, a New York corporation
(including its successors and permitted assigns, the "Company"), and CNA
FINANCIAL CORPORATION, a Delaware corporation (including its successors and
permitted assigns, the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
merger agreement (the "Merger Agreement"), dated as of the date hereof, pursuant
to which and subject to the terms and conditions contained therein, a wholly
owned subsidiary of the Purchaser shall merge with and into the Company; and
WHEREAS, the Boards of Directors of the Company and the
Purchaser have determined it advisable and in the best interests of their
respective shareholders for the Company and the Purchaser to enter into this
Agreement and the Merger Agreement and to consummate the transactions
contemplated hereby and thereby, subject to and in accordance with the terms and
conditions hereof and thereof; and
WHEREAS, the Company desires to sell to the Purchaser, and
the Purchaser desires to purchase, (A) shares of the Company's Cumulative
Preferred Stock, Series T, par value $4.00 per share ("Series T Preferred Stock"
and such shares, the "Series T Preferred Shares"), having an aggregate liqui-
dation preference equal to $165,620,000 (which shares shall be exchangeable,
subject to the terms and conditions set forth herein, for shares of the
Company's Cumulative Convertible Preferred Stock, Series E, par value $4.00 per
share ("Series E Preferred Stock" and such shares, the "Series E Preferred
Shares" or the "Exchange Shares") having an equal liquidation preference, (B)
shares of the Company's Cumulative Preferred Stock, Series F, par value $4.00
per share ("Series F Preferred Stock" and such shares, the "Series F Preferred
Shares"), having an aggregate liquidation preference equal to $34,380,000 and
(B) such number of shares of the Company's Cumulative Preferred Stock, Series H,
par value $4.00 per share ("Series H Preferred Stock" which, together with the
Series T Preferred Shares and Series F Preferred Shares, are referred to herein
as the "Shares"), having an aggregate liquidation preference equal to
$75,000,000, for the consideration and upon the terms and subject to the
conditions set forth herein. The Company also desires to grant to the Purchaser
an option to purchase 625,000 shares (the "Option Shares") of the Company's Cu-
mulative Preferred Stock, Series G, par value $4.00 per share (the "Series G
Preferred Stock");
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, each of the Company and the Purchaser agrees as follows:
1. DEFINITIONS: CERTAIN REFERENCES.
The terms defined in this Section 1, whenever used in this
Agreement, shall have the following meanings for all purposes of this Agreement:
"13D Group" has the meaning set forth in Section 7.1(A) of
this Agreement.
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" has the meaning set forth in Rule 12b-2 under
the Exchange Act.
"Agreement" has the meaning set forth in the preamble of
this Agreement.
"Annual Report" means the Company's Annual Report on Form
10-K for the year ended December 31, 1993, as filed with the SEC.
"Bank" has the meaning set forth in Section 6.19 of this
Agreement.
"Bank Regulatory Arrangements" has the meaning set forth in
Section 6.19.
"Bankruptcy Code" has the meaning set forth in Section
7.3(G) of this Agreement.
"Benefit Plans" has the meaning set forth in Section 4.20(a)
of this Agreement.
"CAM" means Continental Asset Management Corp.
"CAM Agreement" means the Asset Purchase Agreement, dated as
of October 13, 1994, by and among CAM Investment Management, L.P., CAM and the
Company.
"Certificate of Amendment" means the Certificate of
Amendment of the Certificate of Incorporation to be filed by the Company with
the Department on or prior to the date and time of the Closing, substantially in
the form attached as Exhibit A hereto.
-2-
<PAGE>
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company as filed for record by the Department, as amended
through the date hereof.
"Change of Control" means: (A) the sale or other
disposition, directly or indirectly, by the Company or any of its Subsidiaries
(other than any sale or other disposition by the Company or any of its
Subsidiaries to the Company or any of its wholly owned Subsidiaries) in one or a
series of related transactions of (i) 30% or more of the gross premiums written
by the Company and its Subsidiaries in the four immediately preceding fiscal
quarters (whether by reinsurance, the sale of assets, the sale of securities of
entities holding the same, or otherwise), calculated in a manner consistent with
the Company's historical financial practices, (ii) Marine Office of America
Corporation (or all or substantially all of its assets), (iii) 50% or more of
the Company's Commercial Lines business (whether by the sale of assets, the sale
of securities of entities holding the same, or otherwise) or (iv) 40% or more of
the Company's Special Operations Group (whether by the sale of assets, the sale
of securities of entities holding the same, or otherwise); or (B) the occurrence
of a Specified Corporate Action.
"Chicago Preferred Stock" means the Series E Preferred
Stock, the Series F Preferred Stock, the Series G Preferred Stock, the Series H
Preferred Stock and the Series T Preferred Stock.
"Chicago Preferred Stock Notes" means notes or preferred
stock exchanged for Series T Preferred Stock pursuant to Article 5, Section 6 of
the Certificate of Amendment.
"Closing" has the meaning set forth in Section 2.1 of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.1 of
this Agreement.
"Code" has the meaning set forth in Section 4.20(a) of this
Agreement.
"Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Company" has the meaning set forth in the preamble of the
Agreement.
"Conversion Price" shall have the meaning specified in the
Certificate of Amendment.
-3-
<PAGE>
"Conversion Shares" means the shares of Common Stock
issuable or issued upon conversion of the Series E Preferred Stock pursuant to
the terms of this Agreement and the Certificate of Amendment.
"Covered Securities" means the Exchange Shares, the Series T
Preferred Shares purchased hereunder, the Conversion Shares and the Exchange
Notes issuable or issued in exchange for the Exchange Shares.
"Department" has the meaning set forth in Section 6.5 of
this Agreement.
"Disclosure Letter" has the meaning set forth in Section 4
of this Agreement.
"Encumbrance" has the meaning set forth in Section 4.6 of
this Agreement.
"Environmental Laws" has the meaning set forth in
Section 4.13 of this Agreement.
"ERISA" has the meaning set forth in Section 4.20(a) of this
Agreement.
"Exchange" has the meaning set forth in Section 14.1 of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Notes" means, collectively, the Convertible
Subordinated Notes of the Company issuable or issued in exchange for the Series
E Preferred Stock, the Subordinated Notes of the Company issuable or issued in
exchange for the Series F Preferred Stock, the Subordinated Notes of the Company
issuable or issued in exchange for the Series G Preferred Stock and the
Subordinated Notes of the Company issuable or issued in exchange for the Series
H Preferred Stock.
"Exchange Shares" has the meaning set forth in the recitals
of this Agreement.
"HSR Act" has the meaning set forth in Section 14.4(i) of
this Agreement.
"Indemnified Party" has the meaning set forth in Section 8.1
of this Agreement.
-4-
<PAGE>
"Liabilities" has the meaning set forth in Section 8.1 of
this Agreement.
"Licenses" has the meaning set forth in Section 4.11 of this
Agreement.
"Mandatory Redemption Date" has the meaning set forth in the
Certificate of Amendment.
"Material Adverse Effect" means a material adverse effect on
the assets, results of operations, business, prospects or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole.
"Material Subsidiaries" means those Subsidiaries of the
Company set forth on Schedule 1 hereto.
"Merger Agreement" has the meaning set forth in the recitals
of this Agreement.
"Merger Period" means the period from the Closing Date
through the earlier of the Effective Time (as defined in the Merger Agreement)
and the date of termination of the Merger Agreement pursuant to Section 7.1
thereof.
"New Preferred Stock" has the meaning set forth in the
Certificate of Amendment.
"New Senior Notes" has the meaning set forth in the
Certificate of Amendment.
"Nominating Committee" has the meaning set forth in
Section 6.17(i).
"October Agreements" means the October SPA together with the
CAM Agreement.
"October SPA" means the Securities Purchase Agreement, dated
October 13, 1994, by and between the Company and Partnership.
"Option" means the Stock Option to be dated as of the
Closing delivered by the Company to the Purchaser substantially in the form of
Exhibit B hereto, as amended, supplemented and modified form time to time in
accordance with the terms thereof.
"Option Shares" has the meaning set forth in the recitals of
this Agreement.
-5-
<PAGE>
"Original Investment" has the meaning set forth in Section
6.17(v) of this Agreement.
"Other Entity" has the meaning set forth in Section 7.1(A)
of this Agreement.
"Partnership" means TCC-PS Limited Partnership, a Delaware
limited partnership and its permitted successors and assigns including Musket,
L.P.C.
"Permitted Dividend" shall have the meaning specified in the
Certificate of Amendment.
"Purchase Price" means $275,000,000.
"Purchaser" has the meaning set forth in the preamble of the
Agreement.
"Purchaser Designee" shall have the meaning specified in
Section 6.17(ii).
"Purchaser Group" means the Purchaser, its Affiliates and
any entity that any of the foregoing has the power to direct or cause the
direction of the management or policies of which (whether through the ownership
of voting securities, by contract or otherwise).
"Purchaser Representative" means the Purchaser or any
Affiliate of the Purchaser designated as Purchaser Representative by written
notice from the Purchaser to the Company.
"Qualified Plan" has the meaning set forth in Section
4.20(b) of this Agreement.
"Quarterly Reports" means the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994, the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994, and the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994, each as filed with
the SEC.
"Registrable Securities" shall have the meaning specified in
the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration
Rights Agreement to be dated as of the date of the Closing between the Company
and the Purchaser, substantially in the form attached as Exhibit C hereto, as
amended, supplemented and modified from time to time in accordance with the
terms thereof.
-6-
<PAGE>
"Restricted Payment" shall have the meaning specified in the
Certificate of Amendment.
"Restricted Period" has the meaning set forth in Section 6.1
of this Agreement.
"Restricted Securities" has the meaning set forth in
Section 7.1(A) of this Agreement.
"Rights" has the meaning set forth in Section 7.1(A) of this
Agreement.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means all documents filed by the Company
with the SEC since January 1, 1993.
"Series E Preferred Shares" has the meaning set forth in the
recitals of this Agreement.
"Series E Preferred Stock" has the meaning set forth in the
recitals of this Agreement.
"Series F Preferred Shares" has the meaning set forth in the
recitals of this Agreement.
"Series F Preferred Stock" has the meaning set forth in the
recitals of this Agreement.
"Series G Preferred Stock" has the meaning set forth in the
recitals of this Agreement.
"Series H Preferred Stock" has the meaning set forth in the
recitals of this Agreement.
"Series T Preferred Shares" has the meaning set forth in the
recitals of this Agreement.
"Series T Preferred Stock" has the meaning set forth in the
recitals of this Agreement.
"Shares" has the meaning set forth in the recitals of this
Agreement.
"Specified Corporate Action" shall have the meaning
specified in the Certificate of Amendment.
"Standstill Period" has the meaning set forth in Section 7.3
of this Agreement.
-7-
<PAGE>
"Statutory Statements" has the meaning set forth in Section
4.19(ii) of this Agreement.
"Subsidiary" means, with respect to any person, any
corporation, limited or general partnership, joint venture, association, joint
stock company, trust, unincorporated organization, 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.
"Termination Date" has the meaning set forth in Section 6.15
of this Agreement.
"Termination Event" has the meaning set forth in Section 7.3
of this Agreement.
"Transaction Documents" means the Certificate of Amendment,
the Option and the Registration Rights Agreement.
"Transfer" means, with respect to any Covered Security, any
sale, assignment, transfer, disposition by gift including, without limitation,
any distribution in liquidation or otherwise by a corporation or partnership;
provided, however, that "Transfer" does not mean, with respect to any such
- - -------- -------
Covered Security, any pledge, mortgage, hypothecation or grant of a security
interest therein or a transfer thereof through the granting of participation
rights and does not mean any redemption, exchange or conversion in accordance
with the terms of the Certificate of Amendment.
2. CLOSING.
2.1 Time and Place of the Closing. (i) The Closing (the
-----------------------------
"Closing") shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York 10019, at 10:00 A.M., New York time, on
December 12, 1994 or, if the conditions to the Closing have not been satisfied
by such date, as soon as practicable thereafter. The "Closing Date" shall be
the date on which the Closing occurs.
2.2 Transactions at the Closing. At the Closing, subject
---------------------------
to the terms and conditions of this Agreement, the Company shall issue and sell
to the Purchaser, and the Purchaser shall purchase, the Shares. At the Closing,
the Company shall deliver to the Purchaser certificates representing the Shares,
each registered in the name of the Purchaser or its nominee against payment of
the Purchase Price with respect thereto by wire transfer of immediately
available funds to an account or accounts previously designated by the Company.
-8-
<PAGE>
2.3 Fees. At the Closing, subject to the terms and
----
provisions of this Agreement, the Company shall pay to the Purchaser (or to an
Affiliate or Affiliates of the Purchaser designated by the Purchaser) a funding
fee of $3,000,000 by wire transfer of immediately available funds to an account
or accounts previously designated by the Purchaser.
3. CONDITIONS TO THE CLOSING.
3.1 Conditions Precedent to the Obligations of the
----------------------------------------------
Purchaser. The obligations of the Purchaser to be discharged under this
- - ---------
Agreement on or prior to the Closing are subject to satisfaction of the
following conditions at or prior to the Closing (unless expressly waived in
writing by the Purchaser at or prior to the Closing):
3.1.1 Certificate of Amendment. The Certificate of Amendment
------------------------
shall have been filed by the Department and shall have become effective.
3.1.2 Legal Opinion. The Company shall have furnished to the
-------------
Purchaser on the Closing Date the opinion of Debevoise & Plimpton, special
counsel for the Company, dated the Closing Date, substantially in the form of
Exhibit D hereto.
3.1.3 Registration Rights Agreement. The Company shall have
-----------------------------
executed and delivered at the Closing for the benefit of the Purchaser the
Registration Rights Agreement.
3.1.4 Option. The Company shall have executed and delivered
------
at the Closing the Option.
3.1.5 Exemption from Special Voting Requirements. The Board
------------------------------------------
of Directors of the Company shall have irrevocably taken all action necessary
under Section 912 of the Business Corporation Law of the State of New York to
exempt future transactions between the Company and its Subsidiaries, on the one
hand, and the Purchaser and its "affiliates" and "associates" (each as defined
in such Section 912) that are members of the Purchaser Group, on the other hand,
from the provisions of such Section 912 by a resolution of the Board of
Directors in the form of resolution previously provided by the Company to the
Purchaser, and the Purchaser shall have received evidence reasonably
satisfactory to it that such action shall have been taken.
3.1.6 Termination of the October Agreements. The October SPA
-------------------------------------
shall have been terminated in accordance with its terms, and, upon such
termination, the Company shall have no
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<PAGE>
liability or obligation (financial or otherwise) pursuant to or in connection
with the October SPA other than the obligation to pay the termination fee
referred to in Section 6.10 of the October SPA.
3.2 Conditions Precedent to Obligations of the Company.
--------------------------------------------------
The obligations of the Company to be discharged under this Agreement on or prior
to the Closing are subject to satisfaction of the following condition at or
prior to the Closing (unless waived by the Company at or prior to the Closing):
3.2.1 Certificate of Amendment. The Certificate of Amendment
------------------------
shall have been filed by the Department and shall have become effective.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser
that, except as specifically disclosed in the single writing from the Company to
the Purchaser that is identified as such and is dated the date hereof (the
"Disclosure Letter"):
4.1 Organization, Good Standing, Power, Authority, Etc.
--------------------------------------------------
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. The Company has the full
corporate power and authority to execute and deliver this Agreement and each
Transaction Document and to perform its obligations under this Agreement and
each Transaction Document. The Company has taken all action required by law,
the Certificate of Incorporation, its By-Laws or otherwise required to be taken
by it to authorize the execution, delivery and performance by it of this
Agreement and each Transaction Document. This Agreement is, and after the
Closing each Transaction Document will be, a valid and binding obligation of the
Company, enforceable against the Company in accordance with their respective
terms. True and complete copies of the Certificate of Incorporation and the By-
Laws of the Company as in effect on the date hereof have been provided by the
Company to the Purchaser. No approval or authorization of the shareholders and
no further approval of the Board of Directors of the Company will be required
under applicable law, Company'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 Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated by this Agreement and each of
the Transaction Documents, other than such as have been obtained or made and are
in full force and effect. As of the Closing Date, future transactions between
the Company and its Subsidiaries, on the one hand, and the
-10-
<PAGE>
Purchaser and its "affiliates" and "associates" (each as defined in Section 912
of the Business Corporation Law of the State of New York) that are members of
the Purchaser Group, on the other hand, shall be exempted from the provisions of
such Section 912 pursuant to a resolution of the Board of Directors in the form
of resolution previously provided by the Company to the Purchaser.
4.2 Capitalization of the Company. After giving effect to
-----------------------------
the Certificate of Amendment, the authorized capital stock of the Company will
at the Closing consist 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,
of which (i) 2,750,000 shares have been designated as $2.50 Cumulative
Convertible Preferred Stock, Series A, 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, 25,563 of which shares were outstanding as
of November 30, 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, (iv) 40,000 shares were designated Cumulative Preferred
Stock, Series D, all of which shares have been redeemed and are not outstanding,
(v) 828,100 shares will be designated Series E Preferred Stock, all of which
shares will be reserved for issuance upon the consummation of the Exchange, (vi)
171,900 shares will be designated Series F Preferred Stock, all of which shares
will be issued and outstanding at the Closing, (vii) 625,000 shares will be
designated Series G Preferred Stock, all of which shares will be reserved for
issuance pursuant to the Option, and (viii) 375,000 shares will be designated
Series H Preferred Stock, all of which shares will be issued and outstanding at
the Closing, (ix) 828,100 shares will be designated Series T Preferred Stock,
all of which shares will be issued and outstanding at the Closing. No other
capital stock of the Company is, or at the Closing will be, authorized and no
other capital stock is issued. Since September 30, 1994, the Company has only
issued shares of Common Stock in accordance with the terms of its employee
benefit plans as in existence on September 30, 1994, in all cases in the
ordinary course of business and in a manner and in amounts consistent with past
practice. At the Closing, all of the Shares will be duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable and entitled to the benefits of, and have the
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<PAGE>
terms and conditions set forth in, the Certificate of Amendment. At the
Closing, all of the Option Shares and the Exchange Shares will be duly
authorized and, when issued in accordance with the Option or pursuant to the
Exchange, as applicable, will be validly issued, fully paid and nonassessable
and entitled to the benefits of, and have the terms and conditions set forth in,
the Certificate of Amendment. The Conversion Shares are duly authorized and,
when issued in accordance with the Certificate of Amendment, will be validly is-
sued, fully paid and nonassessable. All outstanding shares of capital stock of
the Company 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 the Company have no preemptive or
similar rights with respect to the securities of the Company.
4.3 Certain Instruments. (i) The Purchaser shall, by
-------------------
virtue of its purchase of Shares hereunder, be entitled to the rights of a
holder under the Registration Rights Agreement.
(ii) The representations and warranties of the Company
contained in the Merger Agreement are true and correct in all material respects.
The Company has not breached or violated in any material respect any covenant or
agreement contained in the Merger Agreement.
(iii) The Option has been duly and validly authorized and
issued and the holder thereof shall be entitled to all rights and benefits
provided therein.
4.4 SEC Documents. (i) The Company has delivered to the
-------------
Purchaser true and complete copies of: (i) the Annual Report and its Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with
the SEC, (ii) the Quarterly Reports, (iii) its Current Reports on Form 8-K filed
with the SEC since January 1, 1993, (iv) its proxy or information statements
relating to meetings of, or actions without a meeting by, the stockholders of
the Company held since January 1, 1993 and (v) all other SEC Documents.
(ii) As of its filing date, each SEC Document (including
all exhibits and schedules thereto and documents incorporated by reference
therein) as amended or supplemented, which was filed pursuant to the Exchange
Act (i) complied in all material respects with the applicable requirements of
the Exchange Act and (ii) did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
-12-
<PAGE>
(iii) Each such final registration statement (including
all exhibits and schedules thereto and documents incorporated by reference
therein) referred to in clause (i)(v) filed, as amended or supplemented, if
applicable, pursuant to the Act, as of the date such statement or amendment
became effective (i) complied in all material respects with the applicable
requirements of the Act and (ii) did 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).
(iv) The Company has (i) delivered to the Purchaser true
and complete copies of all correspondence between the SEC and the Company or its
legal counsel, accountants or other advisors since January 1, 1993, and (ii)
disclosed to the Purchaser in writing the content of all material discussions
between the SEC and the Company 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. The Company is not aware of any issues raised by the SEC
with respect to any of the SEC Documents, other than those disclosed to the
Purchaser pursuant to clause (i) or (ii) of this Section 4.4(iv).
4.5 Authority and Qualification of the Company. The
------------------------------------------
Company 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. The Company 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.
4.6 Subsidiaries. Exhibit 21 to the Annual Report is a
------------
true, accurate and correct statement of all of the information required to be
set forth therein by the regulations of the SEC. Each Subsidiary of the Company
has been duly 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
-13-
<PAGE>
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 the Company has been duly
authorized and validly issued, is fully paid and nonassessable and is owned
by the Company, directly or through other Subsidiaries of the Company (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 laws or any Encumbrances
between or among the Company and/or any Subsidiary of the Company), 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 the Company or any
Subsidiary of the Company, 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 Material Subsidiary.
4.7 Outstanding Securities. Except as set forth in the SEC
----------------------
Documents filed with the SEC prior to the date of this Agreement and except as
contemplated by this Agreement, there are no outstanding (A) securities or
obligations of the Company convertible into or exchangeable for any capital
stock of the Company, (B) warrants, rights or options to subscribe for or
purchase from the Company any such capital stock or any such convertible or
exchangeable securities or obligations or (C) obligations of the Company to
issue such shares, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
4.8 No Contravention, Conflict, Breach, Etc. The
---------------------------------------
execution, delivery and performance of each of this Agreement and each of the
Transaction Documents by the Company and the consummation of the transactions
herein and therein contemplated 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, 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
-14-
<PAGE>
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.
4.9 Consents. 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 the Company are
traded or (D) other third party (whether acting in an individual, fiduciary or
other capacity) is required to be made or obtained by the Company or any of its
Subsidiaries for the consummation of the transactions contemplated by this
Agreement or by any of the Transaction Documents, except such as may be required
under the Act and state securities laws in connection with the performance by
the Company of its obligations under the Registration Rights Agreement.
4.10 No Existing Violation, Default, Etc. Neither the
-----------------------------------
Company 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
regulation, which violation has or could reasonably be expected to have a
Material Adverse Effect or (C) any order, decree or judgment of any court or
governmental agency or body having jurisdiction over the Company or any such
Subsidiary, which violation has or could reasonably be expected to have a
Material 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 the Company of the transactions
contemplated by this Agreement or any of the Transaction Documents, 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 the Company or any of its Subsidiaries is a party or by which the Company
or any such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject, which event of
default, or event that, but for the giving of
-15-
<PAGE>
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.
4.11 Licenses and Permits. The Company and its Subsidiaries
--------------------
have such certificates, permits, licenses, franchises, consents, approvals,
orders, authorizations and clearances from appropriate governmental agencies and
bodies ("Licenses") as are necessary to own, lease or operate their properties
and to conduct their businesses in 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 the Company
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 the Company's knowledge, after due inquiry,
threatened, to suspend, revoke or limit any such License. To the best of the
Company's knowledge, after due inquiry, the Company 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.
4.12 Title to Properties. The Company and its Subsidiaries
-------------------
have sufficient title to all material properties (real and personal) owned by
the Company and any such Subsidiary that are necessary for the conduct of the
business of the Company 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 the Company and such
Subsidiaries, taken as a whole, and to the best of the Company's knowledge,
after due inquiry, all material properties held under lease by the Company or
the Subsidiaries are held under valid, subsisting and enforceable leases.
4.13 Environmental Matters. Neither the Company nor any of
---------------------
its Subsidiaries is the subject of any federal, state, local or foreign
investigation, and neither the Company nor any of its Subsidiaries has received
any notice or claim (or is aware of any facts that would form a reasonable basis
for any
-16-
<PAGE>
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 the Company 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 the Company,
threatened actions, suits or proceedings against or affecting the Company, 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 the Company 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 the Company 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 the Company, after due inquiry, there are no past, present or
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of the Company 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 in-
terference 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.
4.14 Taxes. The Company 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 as shown on said returns and on all assessments received by it to the
extent that such taxes have become due, except taxes the validity or amount
-17-
<PAGE>
of which is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves, in accordance with generally accepted
accounting principles, have been set aside. The Company and its Subsidiaries
have paid or caused to be paid, or have established reserves that the Company or
such Subsidiaries reasonably believes to be adequate in all material respects,
for all income tax liabilities applicable to the Company 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 the Company 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 Merger Agreement or the consummation of the transactions
contemplated by this Agreement or the Merger Agreement, subject to limitation
under Section 382 of the Code.
4.15 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 or affecting the
Company or any of its Subsidiaries or any of their respective properties, assets
or operations, or with respect to which the Company or any such Subsidiaries is
responsible by way of indemnity or otherwise, that are required under the
Exchange Act to be described in such SEC Documents, that questions the validity
of this Agreement or any of the Transaction Documents or any action to be taken
pursuant to this Agreement or any of the Transaction Documents, 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 or a Material Adverse Effect on the ability of the Company to
perform its obligations under this Agreement or any of the Transaction
Documents; and, to the best knowledge of the Company, 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
or contemplated and there is no basis for any such action, suit, proceeding or
investigation.
4.16 Labor Matters. No labor disturbance by the employees
-------------
of the Company 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
the Company, after due inquiry, is threatened.
4.17 Contracts. All of the material contracts of the
---------
Company or any of its Subsidiaries that are required to be
-18-
<PAGE>
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 the Company to the Purchaser. Neither the Company nor any of its
Subsidiaries nor, to the best knowledge of the Company, 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. Except as described in the Disclosure Letter,
no contract or agreement to which the Company or any Material Subsidiary is a
party contains any restriction with respect to, or any provision that could
restrict, the payment of cash dividends on the Shares, the Option Shares or the
Exchange Shares.
4.18 Finder's Fees. No broker, finder or other party is
-------------
entitled to receive from the Company, any of its Subsidiaries or any other
person any brokerage or finder's fee or any other fee, commission or payment as
a result of the transactions contemplated by this Agreement for which the
Purchaser would have any liability or responsibility.
4.19 Financial and Statutory Statements. (i) 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 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 the Company 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 the Company 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 re-
ferred to above except as otherwise stated therein.
(ii) The Company has heretofore delivered to the
Purchaser true and complete copies of the Annual Statements and Quarterly
Statements of each of the Subsidiaries of the Company engaged in the insurance
business as filed with the applicable insurance regulatory authority for the
years ended
-19-
<PAGE>
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 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 the Company has delivered to the Buyer true and complete
copies of all audit opinions related thereto.
4.20 Employee Benefits. (a) Except for the plans set forth
-----------------
in the Disclosure Letter (the "Benefit Plans"), there are no employee benefit
plans 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 the
Company 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 the Company, 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)). With respect to each Benefit Plan the Company has
delivered or made available to the Purchaser 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 the Company or any of
-20-
<PAGE>
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 the Company, threatened, with respect to any Benefit Plan or
against the assets of any Benefit Plan; (iv) all contributions and premiums 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 have been properly re-
corded on the books of the Company or a Commonly Controlled Entity thereof in
accordance with generally accepted accounting principles.
(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 percent 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.
4.21 Contingent Liabilities. Except as fully reflected or
----------------------
reserved against in the financial statements included in the Annual Report or
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994, or disclosed in the footnotes contained in such financial statements, the
Company and its Subsidiaries had no liabilities (including tax liabilities) at
the date of such financial statements, absolute or contingent, that were
material either individually or in the aggregate to the Company and its Sub-
sidiaries taken as a whole.
-21-
<PAGE>
4.22 No Material Adverse Change. Since the latest date as
--------------------------
of which information is given in the SEC Documents filed prior to the date
immediately preceding the date hereof: (A) the Company 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 that could
reasonably be expected to result in a Material Adverse Effect; (B) the Company
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 the Company and its Subsidiaries (except as
described in the Disclosure Letter with respect to the Credit Agreement
Amendment and Waiver and except for changes relating to intercompany
indebtedness of the Company and/or its Subsidiaries), no change in the stock of
the Company, except for the issuance of shares of 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 the Company or
any of its Subsidiaries (other than dividends or distributions declared, paid or
made by a wholly owned Subsidiary of the Company or First Insurance Company of
Hawaii, Ltd. on any class of its stock; (D) neither the Company 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; and
(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.
4.23 Investment Company. The Company is not an "investment
------------------
company" within the meaning of the Investment Company Act of 1940, as amended.
4.24 Exemption from Registration; Restrictions on Offer and
------------------------------------------------------
Sale of Same or Similar Securities. Assuming the representations and warranties
- - ----------------------------------
of the Purchaser set forth in Section 5.3 hereof are true and correct in all
material respects, the offer and sale of the Shares made pursuant to this
Agreement, the offer and sale of the Option and the issuance and sale of the
Option Shares and the Exchange Shares will be exempt from the registration
requirements of the Act. Neither the Company nor any person acting on its
behalf has, in connection with the offering of the Shares, the Option, the
Option
-22-
<PAGE>
Shares or the Exchange Shares, engaged in (A) any form of general solicitation
or general advertising (as those terms are used within the meaning of Rule
502(c) under the Act), (B) any action involving a public offering within the
meaning of Section 4(2) of the Act, or (C) any action that would require the
registration under the Act of the offering and sale of the Shares pursuant to
this Agreement, the offering and sale of the Option or the issuance and sale of
the Option Shares or the Exchange Shares or that would violate applicable state
securities or "blue sky" laws. The Company has not made and will not make,
directly or indirectly, any offer or sale of Shares or shares of Series G
Preferred Stock or of the Exchange Shares or of securities of the same or a
similar class as the Shares, the Option Shares or the Exchange Shares if as a
result the offer and sale of the Shares contemplated hereby or the offer and
sale of the Option could fail to be entitled to exemption from the registration
requirements of the Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Act.
4.25 Use of Proceeds. The net proceeds of the sale of the
---------------
Shares will be used by the Company and its Subsidiaries for general corporate
purposes, which may include, without limitation, contribution to the common
equity of one or more of the Company's Subsidiaries.
4.26 [Intentionally omitted.]
4.27 No Bank Regulatory Oversight. Upon the taking of the
----------------------------
actions described in Section 6.19 and the consummation of the transactions
contemplated by this Agreement, neither the Purchaser nor any of its Affiliates
shall, as the result of the consummation of the transactions contemplated by
this Agreement, 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 the Company, any Subsidiary of the Company, the
Purchaser or any Affiliate thereof in order to consummate the transactions
contemplated by this Agreement, except in accordance with the Bank Regulatory
Arrangements.
5. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER.
The Purchaser hereby represents and warrants to the Company
that:
5.1 Organization, Good Standing, Power, Authority, Etc.
--------------------------------------------------
The Purchaser has the full power and authority to execute
-23
<PAGE>
and deliver this Agreement and the Registration Rights Agreement, and to perform
its obligations under this Agreement and the Registration Rights Agreement. The
Purchaser 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 Registration Rights Agreement and the consummation of the
transactions contemplated to be performed by it hereby and thereby. Each of
this Agreement and the Registration Rights Agreement is a valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance with
their respective terms.
5.2 No Conflicts; No Consents. Neither the execution and
-------------------------
delivery of this Agreement and the Registration Rights Agreement nor the
consummation by the Purchaser of the purchase contemplated hereby will (A)
conflict with, or result in a breach of, any provision of its organizational
documents or (B) violate any statute or law or any judgment, order, writ, in-
junction, decree, rule or regulation applicable to the Purchaser. 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 the Purchaser of its
obligations under, this Agreement or the Registration Rights Agreement the
consummation by the Purchaser of the transactions to be performed by it as
contemplated hereby and thereby, except such as will have been obtained and made
and will be in full force and effect as of the Closing.
5.3 Acquisition for Own Account. The Shares to be
---------------------------
acquired by the Purchaser pursuant to this Agreement and the Option are being
acquired by it for its own account and with no intention of distributing or
reselling the Shares, the Option, the Option Shares or the Exchange Shares or
any part thereof in any transaction that would be in violation of the Act or the
securities laws of any state, without prejudice, however, to the rights of the
Purchaser at all times to sell or otherwise dispose of all or any part of the
Shares, the Option, the Option Shares, the Conversion Shares, the Exchange
Shares or the Exchange Notes under an effective registration statement under the
Act, under an exemption from such registration available under the Act or
pursuant to the Certificate of Amendment, and subject, nevertheless, to the dis-
position of the Purchaser's property being at all times within its control. The
Purchaser (A) has such knowledge, sophistication and experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in the Shares, (B) fully understands the nature, scope and duration
of the limitations on transfer contained in this Agreement and (C) can bear the
economic risk of an investment in the Shares and can afford a
-24-
<PAGE>
complete loss of such investment. The Purchaser acknowledges receipt of the SEC
Documents and that it has been afforded the opportunity to ask such questions as
it deemed necessary, and to receive answers from, representatives of the Company
concerning the merits and risks of investing in the Shares, the Option, the
Option Shares and the Exchange Shares and to obtain such additional information
that the Company possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy and completeness of the information
contained in the SEC Documents. Notwithstanding the foregoing, nothing con-
tained in this Section 5.3 shall affect or be deemed to modify any
representation or warranty made by the Company.
5.4 Available Funds. The Purchaser (or one or more as-
---------------
signees permitted by Section 12) will at the Closing have available to it
sufficient funds to purchase the Shares pursuant to this Agreement. The
Purchaser and each Affiliate of the Purchaser whose consent is necessary to con-
summate the transactions contemplated by this Agreement has the full legal right
and power and all corporate or partnership authority and approvals required to
consummate the transactions contemplated by this Agreement, and no further
corporate or partnership action on the part of any of such entities is required
for this purpose.
6. COVENANTS OF THE PARTIES.
6.1 Restrictions on Transfer. The Purchaser agrees that
------------------------
it will not effect any Transfer (including any Transfer upon foreclosure of a
pledge or other security interest), pledge, mortgage, hypothecation or grant of
a security interest of or in any Covered Security that under applicable law re-
quires prior regulatory approval until such regulatory approval has been
obtained. The Purchaser agrees with the Company that the Purchaser will not
Transfer, pledge, mortgage, hypothecate or grant a security interest in any
Covered Security (unless, with respect to such Covered Security, such Covered
Security was previously issued pursuant to an effective registration statement
under the Act) except pursuant to (A) an effective registration statement under
the Act or (B) an applicable exemption from registration under the Act. In
connection with any Transfer by the Purchaser pursuant to clause (B) of the
immediately preceding sentence, the Purchaser shall furnish to the Company an
opinion of counsel reasonably satisfactory to the Company to the effect that the
proposed Transfer would not be in violation of the Act. The Purchaser further
agrees that until the earlier of (i) the Effective Time (as such term is defined
in the Merger Agreement) and (ii) the termination of the Merger Agreement in
accordance with its terms, it will not Transfer any shares of Series T Preferred
Stock, Series E
-25-
<PAGE>
Preferred Stock or Conversion Shares other than to an Affiliate of the Purchaser
who agrees to be bound by the restrictions of this Section 6.1. In the event
the Merger Agreement is terminated in accordance with its terms, the Company
agrees to cooperate with the Purchaser in connection with any proposed Transfer
of the shares of Series T Preferred Stock as permitted hereunder to effect an
Exchange of the Series T Preferred Stock for shares of Series E Preferred Stock,
subject to the satisfaction of the conditions to any such Exchange as set forth
in Section 14.2 by the prospective Transferees of such shares, simultaneously or
as promptly as practicable after any such permitted Transfer. The Purchaser
further agrees that, during the period (the "Restricted Period") ending upon the
earliest to occur of (i) the third anniversary of the Closing Date, (ii) a
Change of Control, (iii) a breach by the Company of any of its obligations under
any of Sections 6.6, 6.13, 6.14, 6.16, 6.17 or 6.18 or any of its material
obligations under the Registration Rights Agreement or the Option or any of its
material obligations under the Merger Agreement giving rise to a right of
termination under Section 7.1(iv) thereof, and (iv) the date on which the full
amount of dividends payable on any of the shares of Chicago Preferred Stock for
any two quarterly dividend periods shall not have been paid or the Purchaser
shall be in default of any obligation to redeem, exchange or convert any of the
shares of the Chicago Preferred Stock, the Purchaser will not Transfer any
Covered Security, except (1) to an Affiliate of the Purchaser who agrees to be
bound by the restrictions of this Section 6.1, (2) to a person or entity who
agrees to be bound by the restrictions of this Section 6.1 and Section 6.4, the
Transfer to whom has been approved in advance by the Board of Directors of the
Company, (3) to a person or entity who after such Transfer will beneficially own
(to the knowledge of the Purchaser, based solely on the representation and
warranty of such person or entity, and knowledge available from a review of
publicly available filings made by such person or entity with respect to the
beneficial ownership of Common Stock under Section 13 of the Exchange Act) less
than 5% of the Common Stock of the Company on a fully diluted basis, (4)
pursuant to Rule 144 under the Act, (5) in a public offering registered under
the Act pursuant to which, if such offering is not an underwritten offering, no
one person or entity obtains (to the knowledge of the Purchaser, based solely on
the representation and warranty of such person or entity, and knowledge
available from a review of publicly available filings made by such person or
entity with respect to the beneficial ownership of Common Stock under Section 13
of the Exchange Act) more than 5% of the Common Stock of the Company on a fully
diluted basis or (6) pursuant to a tender offer (a) commenced by the Company or
(b) commenced by any other person or entity with respect to which the Board of
Directors of the Company
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<PAGE>
shall send to shareholders a statement that the Board of Directors (x)
recommends approval of such tender offer, or (y) is neutral with respect to such
tender offer. Nothing contained in this Section 6.1 shall restrict or prohibit
the Purchaser from pledging, mortgaging, hypothecating or granting a security
interest in, or granting participation rights in, any Covered Security; pro-
----
vided, however, that if a pledgee, mortgagee or holder of such security interest
- - ----- -------
forecloses on such Covered Security, it may do so only if such pledgee,
mortgagee or holder of such security interest agrees to be bound by the
restrictions of this Section 6.1 and Section 6.4. Notwithstanding the fore-
going, if none of the events specified in any of clauses (ii), (iii) or (iv)
above has occurred (whether before or after termination of the Restricted
Period), then the Purchaser shall not, prior to the fifth anniversary of the
Closing Date, Transfer any Covered Security to any person or entity who after
such Transfer will own (to the knowledge of the Purchaser, based solely on the
representation and warranty of such person or entity, and knowledge available
from a review of publicly available filings made by such person or entity with
respect to the beneficial ownership of Common Stock under Section 13 of the
Exchange Act) more than 5% of the Common Stock of the Company on a fully diluted
basis, unless such person or entity agrees to be bound by the terms and restric-
tions of Sections 6.4 and 7 and this penultimate sentence of this Section 6.1.
Notwithstanding the foregoing, nothing contained herein shall prohibit any
Transfer, pledge, mortgage, hypothecation or grant of a security interest of or
in any Covered Security by any insurance regulator acting as conservator or
receiver.
6.2 Certificates for Shares, Conversion Shares and
----------------------------------------------
Exchange Shares To Bear Legends. 11 So long as the Shares are Registrable
- - -------------------------------
Securities, they shall be subject to a stop-transfer order and the certificates
therefor shall bear the following legend by which each holder thereof shall be
bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY
SECURITIES ISSUABLE UPON CONVERSION OR EXCHANGE HEREOF MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE
MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER OF THESE SECURITIES TO THE EFFECT
THAT SUCH SALE IS NOT IN VIOLATION OF THE ACT. IN ADDITION,
THE VOTING, SALE OR TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS WHICH
ARE
-27-
<PAGE>
CONTAINED IN A SECURITIES PURCHASE AGREEMENT DATED AS OF
_______ ___, 1994, A COPY OF WHICH IS ON FILE WITH THE
ISSUER OF THESE SECURITIES AND WILL BE FURNISHED BY THE
ISSUER OF THESE SECURITIES TO THE STOCKHOLDER ON REQUEST AND
WITHOUT CHARGE."
(ii) So long as the Conversion Shares or Exchange Shares
are Registrable Securities, they shall, unless previously issued pursuant to an
effective registration statement under the Act, be subject to a stop-transfer
order and the certificates representing any such Conversion Shares or Exchange
Shares shall bear the following legend by which each holder thereof shall be
bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
AND ANY SHARES OR OTHER SECURITIES ISSUABLE UPON EXCHANGE
HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE
PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OF THESE SE-
CURITIES TO THE EFFECT SUCH SALE IS NOT IN VIOLATION OF THE
ACT. IN ADDITION, THE SALE OR TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT TO
RESTRICTIONS WHICH ARE CONTAINED IN A SECURITIES PURCHASE
AGREEMENT DATED AS OF ________ ___, 1994, A COPY OF WHICH IS
ON FILE WITH THE ISSUER OF THESE SECURITIES AND WILL BE
FURNISHED BY THE ISSUER OF THESE SECURITIES TO THE
STOCKHOLDER ON REQUEST AND WITHOUT CHARGE."
(iii) So long as the Exchange Notes issued with respect
to the Shares or the Exchange Shares are Registrable Securities, they shall be
subject to a stop-transfer order and such Exchange Notes shall bear the
following legend by which each holder thereof shall be bound:
"THESE NOTES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii)
OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OF THESE
SECURITIES TO THE EFFECT THAT SUCH EXEMPTION FROM
REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE. IN
ADDITION, THE SALE OR TRANSFER OF THESE NOTES IS FURTHER
SUBJECT TO RESTRICTIONS WHICH ARE
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<PAGE>
CONTAINED IN A SECURITIES PURCHASE AGREEMENT DATED AS OF
________ ___, 1994, A COPY OF WHICH IS ON FILE WITH THE
ISSUER OF THESE SECURITIES AND WILL BE FURNISHED BY THE
CORPORATION TO THE HOLDER ON REQUEST AND WITHOUT CHARGE."
6.3 Removal of Legends. After termination of the
------------------
requirement that all or part of such legend be placed upon a certificate, the
Company shall, upon receipt by the Company of evidence reasonably satisfactory
to it that such requirement has terminated and upon the written request of the
holders of the Shares, Conversion Shares, Exchange Shares or Exchange Notes
issued with respect to the Shares or the Exchange Shares, issue certificates for
such Shares, Conversion Shares, Exchange Shares or Exchange Notes, as the case
may be, that do not bear such legend.
6.4 Voting of Shares. If the holders of Series E
----------------
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock or Series T Preferred Stock are entitled pursuant to applicable
law to vote separately as a single class with respect to the approval of any
transaction that constitutes a Specified Corporate Action and at the time of
such vote (A) the Company has sufficient funds legally available to it (after
giving effect to such transaction) to redeem at the then applicable price all
outstanding shares of Series E Preferred Stock, Series F Preferred Stock, Series
G Preferred Stock, Series H Preferred Stock and Series T Preferred Stock
pursuant to the Certificate of Amendment, (B) such redemption shall not be
prohibited by any agreement to which the Company or any of its Subsidiaries is a
party, by applicable law or otherwise, (C) the Board of Directors of the
Company, including a majority of the directors who are not officers or employees
of the Company, shall have adopted a resolution confirming that such funds are
available and that the holders of Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock and Series T Preferred
Stock have the right to require such redemption and (D) the Company has set
aside sufficient funds to redeem through the Mandatory Redemption Date or
Specified Corporate Action Redemption Date, as applicable, all the Shares and
Exchange Shares held by such holders (except that no funds need be set aside
with respect to such Shares or Exchange Shares held by any such holder who has
theretofore notified the Company that it will not require redemption of such
shares), then the Purchaser hereby agrees that in the separate class vote of the
shares of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock or Series T Preferred Stock it will vote the
shares of Series E Preferred Stock, Series F Preferred Stock, Series G
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<PAGE>
Preferred Stock, Series H Preferred Stock or Series T Preferred Stock held by it
in the same proportion as the votes cast by the holders of Common Stock and all
other holders (including holders of Series E Preferred Stock) voting as a single
class with the Common Stock entitled to vote with respect to such transaction.
The Purchaser or any other person or entity subject to this Section 6.4 may vote
the shares of Series E Preferred Stock held by it in any manner when voting as a
single class with the Common Stock. So long as the Purchaser shall have the
right to designate any Purchaser Designee pursuant to Section 6.17, the
Purchaser will, at each meeting of shareholders of the Company to elect di-
rectors, vote any and all the shares of Series E Preferred Stock or Conversion
Shares held by it to elect as directors of the Company the slate of nominees
that includes the Purchaser Designees.
6.5 Pre-Closing Activities. From and after the date of
----------------------
this Agreement until the Closing, each of the Company and the Purchaser shall
act with good faith towards, and shall use its best efforts to consummate, the
transactions contemplated by this Agreement, including, without limitation, all
actions as shall be reasonably necessary to cause the Certificate of Amendment
to be filed by the Department of State of the State of New York (the
"Department"), and to satisfy all of the other conditions set forth in Article
II, and neither the Company nor the Purchaser will take any action that would
prohibit or impair its ability to consummate the transactions contemplated by
this Agreement. Without limiting the foregoing, to the extent any provision of
the Certificate of Amendment is found to be objectionable to the Department, the
parties hereto agree to modify such objectionable provision to the satisfaction
of the Department while preserving to the fullest extent possible the respective
economic terms and benefits to the parties of the Certificate of Amendment and
this Agreement.
6.6 No Inconsistent Agreements. Neither the Company nor
--------------------------
any of its Subsidiaries shall enter into any loan or other agreement, or enter
into any amendment or other modification to any currently existing agreement,
that by its terms restricts or prohibits the ability of the Company to issue
Common Stock upon the conversion of the Series E Preferred Stock, to issue
Common Stock upon conversion of the Exchange Notes issued upon the exchange of
the Series E Preferred Stock or to consummate the Exchange, in each case in
accordance with the Certificate of Amendment and this Agreement, except that the
------
Company may enter into, and perform in accordance with the terms of, the Merger
Agreement, and take actions permitted thereby.
6.7 Information. (a) So long as any of the Shares, the
-----------
Option Shares, the Conversion Shares, the Exchange Shares,
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<PAGE>
or the Exchange Notes are outstanding or any portion of the Option is
outstanding, the Company shall file with the SEC the annual reports and quar-
terly reports and the information, documents and other reports that are required
to be filed with the SEC pursuant to Sections 13 and 15 of the Exchange Act,
whether or not the Company has or is required to have a class of securities
registered under the Exchange Act and whether or not the Company is then subject
to the reporting requirements of the Exchange Act, at the time the Company is or
would be required to file the same with the SEC and, promptly after the Company
is or would be required to file such reports, information or documents with the
SEC, to mail copies of such reports, information and documents to the holders of
the Shares, the Option Shares, the Conversion Shares, the Exchange Shares and
the Exchange Notes and the holders of any portion of the Option at their
addresses set forth in the register maintained by the transfer agent therefor.
In addition, for so long as the Purchaser owns at least 10% in aggregate
liquidation preference of the Chicago Preferred Stock, the Company shall permit
the Purchaser to discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the Company's officers, other principal executives and
independent accountants, and those of its Subsidiaries, all at such reasonable
times and as often as the Purchaser may reasonably request.
(b) The Purchaser agrees that it will use reasonable
efforts, and will use reasonable efforts to cause its directors, officers,
employees, agents and representatives, not to disclose without the prior consent
of the Company (other than to its auditors or counsel) any information with
respect to the Company or any Subsidiary which is furnished pursuant to this
Section 6.7, provided that the Purchaser may disclose any such information (A)
--------
as has become generally available to the public, (B) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
you or to the National Association of Insurance Commissioners or similar
organizations or their successors, (C) as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation;
provided further that Purchaser will provide the Company with notice of any
- - -------- -------
proposed disclosure under (C) hereof prior to such disclosure or if such prior
notice is impossible, as soon as practicable after such disclosure.
6.8 [Intentionally omitted.]
6.9 [Intentionally omitted.]
6.10 [Intentionally omitted.]
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<PAGE>
6.11 [Intentionally omitted.]
6.12 Publicity. The Purchaser and the Company 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 the Purchaser or the Company 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.
6.13 Restricted Payments. The Company shall not declare or
-------------------
make any Restricted Payment.
6.14 Reservation of Shares. The Company shall at all times
---------------------
reserve and keep available, out of its authorized and unissued stock, solely for
the purposes of effecting the conversion of Series E Preferred Stock or the
Exchange Notes issued in exchange thereof, effecting the exercise of the Option
and effecting the Exchange, such number of shares of Common Stock, Option Shares
and Exchange Shares free of preemptive rights as shall from time to time be suf-
ficient to effect the conversion of all such shares of Series E Preferred Stock
and Exchange Notes, the exercise of the Option and the consummation of the
Exchange from time to time.
6.15 Issuance of New Preferred Stock or New Senior Notes.
---------------------------------------------------
Within 45 days after any termination of the Merger Agreement in accordance with
its terms (the "Termination Date"), the Company will deliver to the Purchaser a
private placement memorandum with respect to the offering and sale of the New
Preferred Stock or the New Senior Notes pursuant to which the Company will
receive gross proceeds of at least $100,000,000 or within 30 days after the
Termination Date the Company will file a registration statement on Form S-3 (if
the Company is then eligible to use Form S-3) with respect to a public offering
of New Preferred Stock or New Senior Notes. The Company shall use its best
efforts to consummate such private placement or public offering within 360 days
of the Termination Date. Notwithstanding the foregoing, if the Company shall
fail to perform any of its obligations under this Section 6.15, the Purchaser's
sole remedy shall be the increase in the dividend rate on the Shares, Exchange
Shares and the Option Shares in accordance with the Certificate of Amendment
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<PAGE>
or the increase in the interest rate of the Exchange Notes in accordance with
the Exchange Notes.
6.16 Shareholders Rights Plan. The Company shall not adopt
------------------------
a shareholders right plan, poison pill or similar arrangement unless such plan
or arrangement shall not impede the consummation of the transactions
contemplated by the Merger Agreement and this Agreement and unless such plan or
arrangement shall provide that (A) each holder of a share of Series E Preferred
Stock shall be entitled to receive thereunder, upon conversion of a share of
Series E Preferred Stock (in accordance with the terms of the Certificate of
Amendment) prior to the earlier to occur of either the date of redemption of the
rights issued under such plan or the date of expiration of the rights issued
under the plan, rights for each Conversion Share issued upon conversion of such
share of Series E Preferred Stock in an amount equal to the amount of rights
issued with respect to each outstanding share of Common Stock pursuant to such
plan, (B) holders of Conversion Shares shall be paid the redemption price of any
rights issued thereunder when such rights are redeemed (unless the Conversion
Price with respect to such Conversion Shares shall have been adjusted as a
result of such redemption as contemplated by the Certificate of Amendment) and
(C) the acquisition, ownership, voting or other exercise of rights and
privileges with respect thereto by members of the Purchaser Group of Shares,
Option Shares, Exchange Shares, Exchange Notes, shares of Common Stock, the
Option or any other security of the Company or any of its Subsidiaries not pro-
hibited by this Agreement will not trigger any distribution pursuant to such
plan or otherwise cause the Purchaser or the members of the Purchaser Group to
be treated in a manner differently from shareholders of the Company generally.
The provisions of clauses (A) and (B) of this Section 6.16 shall inure to the
benefits of all holders of Series E Preferred Stock or Conversion Shares,
whether or not the Purchaser.
6.17 Board of Directors; Amendments to By-laws. As
-----------------------------------------
promptly as practicable following the receipt of written notice by the Company
of the receipt by the Purchaser of any regulatory approvals required in
connection with the Purchaser Designees being appointed to the Company's Board
of Directors, the Company shall take the following actions:
(i) The Company shall take all actions necessary to provide
that (i) the Board of Directors of the Company shall consist of no less than
thirteen or more than seventeen members (subject to increase in accordance with
the provisions contained in the Certificate of Amendment), (ii) the Nominating
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<PAGE>
Committee of the Board of Directors (the "Nominating Committee") shall consist
of either three or five members and (iii) the number of members of the Board of
Directors may be increased in accordance with the Certificate of Amendment.
(ii) The Company shall cause (i) if the Company's Board of
Directors consists of thirteen or fourteen members, three persons designated by
the Purchaser through the Purchaser Representative ("Purchaser Designees") to be
appointed thereto or (ii) if the Company's Board of Directors consists of fif-
teen, sixteen or seventeen members, four Purchaser Designees to be appointed
thereto, which appointment shall be effective as soon as practicable after the
receipt of notice by the Company as set forth in the first paragraph of this
Section 6.17; provided, however, that if, after customary investigation of any
-------- -------
Purchaser Designee's qualifications, the Board of Directors reasonably
determines in good faith that any Purchaser Designee is not qualified or
acceptable under standards applied fairly and equally to all nominees to the
Board of Directors, the Purchaser through the Purchaser Representative shall
designate another person that meets such standards.
(iii) The Company shall cause (i) (x) if the Nominating
Committee is composed of three members, one Purchaser Designee to be appointed
thereto or (y) if the Nominating Committee is composed of five members, two
Purchaser Designees to be appointed thereto and (ii) such number (which number
shall be at least one and shall be rounded to the nearest whole number) of
Purchaser Designees to be appointed to each other committee of the Board of
Directors equal to the product of the total number of persons on such committee
(including Purchaser Designees) and a fraction the numerator of which is the
number of shares of Common Stock into which the shares of Series E Preferred
Stock owned by the Purchaser or its Affiliates (or issuable to the Purchaser
upon the exchange of Shares of Series T Preferred Stock owned by the Purchaser
or its Affiliates) are convertible and the denominator of which is the total
number of outstanding securities of the Company entitled to vote generally in
the election of directors (assuming conversion of such shares of Series E
Preferred Stock), with all such appointments to be effective as soon as
practicable after the receipt of notice by the Company as set forth in the first
paragraph of this Section 6.17.
(iv) The Board of Directors of the Company shall amend the
By-laws of the Company to provide that (A) the Board of Directors shall consist
of no less than thirteen or more than seventeen members, subject to clause (C)
below, (B) the Nominating Committee shall consist of three or five members, (C)
the number of members of the Board of Directors may be
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<PAGE>
increased in accordance with the Certificate of Amendment and (D) so long as the
Purchaser has the right to nominate at least one director, none of the foregoing
provisions of the Company's By-laws, nor the provision contained in Section 8 of
the Company's By-laws providing that each committee of the Board of Directors
shall consist of no fewer than three members, may be amended by the Board of
Directors of the Company absent the affirmative vote of 95% of the members of
the Board of Directors.
(v) The Purchaser Designees appointed to the Company's Board
of Directors effective as soon as practicable after the receipt of notice by the
Company as set forth in the first paragraph of this Section 6.17 (as
contemplated by this Section) shall be appointed to serve until the next
succeeding annual meeting of shareholders of the Company to be held after such
appointment. Commencing with such annual meeting of shareholders of the Company
and at each annual meeting of shareholders of the Company thereafter, the
Purchaser shall be entitled to nominate to the Company's Board of Directors (in
addition to any rights granted to the holders of Shares, Exchange Shares or
Option Shares as set forth in the Certificate of Amendment) (i) if the Company's
Board of Directors consists of thirteen or fourteen members, three directors or
(ii) if the Company's Board of Directors consists of fifteen, sixteen or
seventeen members, four directors. The Company shall cause such Purchaser Des-
ignees (unless, after customary investigation of any Purchaser Designee's
qualifications, the Board of Directors reasonably determines in good faith that
such person is not qualified or acceptable under standards applied fairly and
equally to all nominees, in which event the Purchaser shall designate another
person that meets the foregoing standards) to be included in the slate of nomi-
nees recommended by the Board of Directors or the Nominating Committee to the
Company's shareholders for election as directors, and the Company shall use its
best efforts to cause the election of such designees, including voting all
shares for which the Company holds proxies (unless otherwise directed by the
shareholder submitting such proxy) or is otherwise entitled to vote, in favor of
the election of such persons. Notwithstanding the foregoing, the Purchaser's
right to nominate members of the Board of Directors shall be reduced as follows,
if, but only if, the Purchaser has Transferred shares of Series T Preferred
Stock, shares of Series E Preferred Stock, Conversion Shares issued with respect
to the Series E Preferred Stock, Exchange Notes issued with respect to the
Series T Preferred Stock or Series E Preferred Stock or Chicago Preferred Stock
Notes and as a result no longer holds at least 75% of the Original Investment:
-35-
<PAGE>
If the Board of Directors is composed of 15, 16 or 17
-----------------------------------------------------
members:
- - -------
Number of Board
Members the
Percentage of Original Purchaser
Investment Not Transferred Shall Have Right
by the Purchaser to Designate
- - -------------------------- ----------------
Less than 75%,
but more than
50% 3
Less than 50%,
but more than
25% 2
Less than 25%,
but more than
10% 1
10% or less 0
If the Board of Directors is composed of 13 or
----------------------------------------------
14 members:
- - ----------
Number of Board
Members the
Original Investment Purchaser
Not Transferred by Shall Have Right
the Purchaser to Designate
- - ------------------ ------------------
Less than 66%,
but more than
33% 2
Less than 33%,
but more than
10% 1
10% or less 0
"Original Investment" shall mean the aggregate number of shares of Series T
Preferred Stock purchased hereunder, the aggregate number of shares of Series E
Preferred Stock issued upon the consummation of the Exchange, the aggregate
number of Conversion Shares into which such shares of Series E Preferred Stock
could be converted, the aggregate principal amount of Exchange Notes for which
such shares have been exchanged, the aggregate
-36-
<PAGE>
liquidation preference or principal amount, as applicable, of Chicago Preferred
Stock Notes for which Series T Stock has been exchanged or any combination of
the foregoing; provided, however, that in determining the amount of the Original
-------- -------
Investment at any time remaining, no shares of Series T Preferred stock shall be
included to the extent that such shares have been exchanged for Series E Pre-
ferred Stock, Series F Preferred Stock or Exchange Notes, no shares of Series E
Preferred Stock shall be included to the extent that such shares have been
converted into Conversion Shares or exchanged for Exchange Notes and no Exchange
Notes shall be included to the extent that such Exchange Notes have been
converted into Conversion Shares.
(vi) For so long as the Purchaser has the right to nominate
at least one director, commencing with the annual meeting of the Board of
Directors of the Company next succeeding the appointment of Purchaser Designees
to the Board of Directors pursuant to subsection (ii) of this Section 6.17, and
at each annual meeting of the Board of Directors thereafter, the Purchaser shall
be entitled to such number of Purchaser Designees to be appointed to each
committee of the Board of Directors (including the Nominating Committee) as
follows: (A) (i) if the Nominating Committee is composed of three members, one
Purchaser Designee shall be appointed thereto or (ii) if the Nominating
Committee is composed of five members, two Purchaser Designees shall be
appointed thereto; and (B) such number (which number shall be at least one and
shall be rounded to the nearest whole number) of Purchaser Designees shall be
appointed to each other committee of the Board of Directors equal to the product
of the total number of persons on such committee (including Purchaser Designees)
and a fraction the numerator of which is the sum of (1) the number of shares of
Common Stock the shares of Series E Preferred Stock owned by the Purchaser (or
for which shares of Series T Preferred Stock owned by the Purchaser are
exchangeable) are convertible into and (2) the number of Conversion Shares owned
by the Purchaser and the denominator of which is the total number of outstanding
securities of the Company entitled to vote generally in the election of
directors (assuming conversion of the outstanding shares of Series E Preferred
Stock). If the Purchaser holds Exchange Notes issued with respect to the Series
E Preferred Stock, the foregoing fraction shall be calculated assuming
conversion of such Exchange Notes. If the Purchaser Transfers shares of Series
E Preferred Stock, Conversion Shares or Exchange Notes issued with respect to
the Series E Preferred Stock and as a result no longer holds all of the Original
Investment, its right to have Purchaser Designees appointed to the committees
(other than the Nominating Committee) of the Board of Directors shall be reduced
so that such number of
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<PAGE>
Purchaser Designees on each such committee equals the product of the total
number of persons on such committee (including Purchaser Designees) and a
fraction the numerator of which is the sum of (a) the number of shares of Common
Stock the shares of Series E Preferred Stock owned by the Purchaser (or for
which shares of Series T Preferred Stock owned by the Purchaser are
exchangeable) are convertible into and (b) the number of Conversion Shares owned
by the Purchaser and the denominator of which is the total number of outstanding
securities of the Company entitled to vote generally in the election of
directors (assuming conversion of the outstanding shares of Series E Preferred
Stock) rounded to the nearest whole number. If the Purchaser holds Exchange
Notes issued with respect to the Series E Preferred Stock, the foregoing
fraction shall be calculated assuming conversion of such Exchange Notes. The
number of Purchaser Designees that the Purchaser shall be entitled to have
appointed to the Nominating Committee shall be reduced only to the extent such
that such number does not exceed the number of Purchaser Designees that the
Purchaser shall have the right to nominate to the Board of Directors.
(vii) In the event any Purchaser Designee shall cease to serve
as a director for any reason (other than by reason of a reduction of the number
of Purchaser Designees entitled to be members of the Board of Directors) the
Company shall cause the vacancy resulting thereby to be filled by another
Purchaser Designee. If a Purchaser Designee ceases to serve on a committee of
the Board of Directors (other than by reason of a reduction of the number of
Purchaser Designees entitled to be members of such committee), such Purchaser
Designee shall be replaced by another Purchaser Designee.
(viii) So long as the Purchaser retains the right pursuant to
this Section 6.17 to designate one or more Purchaser Designees, the Board of
Directors shall be composed of no less than thirteen or more than seventeen mem-
bers (except if additional members are elected in accordance with the Certif-
icate of Amendment or pursuant to the terms of the New Preferred Stock) and the
size of the Nominating Committee shall be either three or five members, except,
in either case, on account of vacancies caused by the resignations of members.
(ix) The Purchaser shall appoint the Purchaser Representative
to act on its behalf, vis-a-vis the Company, concerning the designation of
nominees to the Company's Board of Directors and the Company shall be entitled
to conclusively rely upon any instructions given to it by the Purchaser Rep-
resentative pursuant to this Section 6.17.
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<PAGE>
6.18 Specified Corporate Action. The Company will not
--------------------------
consummate, or agree to consummate, any transaction that would constitute a
Specified Corporate Action unless at the time of the consummation of such
transaction (A) the Company has sufficient funds legally available to it (after
giving effect to such transaction) to redeem at the then applicable price all
outstanding shares of Series E Preferred Stock, Series F Preferred Stock, Series
G Preferred Stock, Series H Preferred Stock and Series T Preferred Stock
pursuant to the Certificate of Amendment, (B) such redemption shall not be
prohibited by any agreement to which the Company or any of its Subsidiaries is a
party, by applicable law or otherwise, (C) the Board of Directors of the
Company, including a majority of the directors who are not officers or employees
of the Company, shall have adopted a resolution confirming that such funds are
available and that the holders of Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock and Series T Preferred
Stock have the right to require such redemption and (D) the Company has set
aside sufficient funds through the Mandatory Redemption Date or Specified
Corporate Action Redemption date, as applicable, to redeem the shares of Series
E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series T Preferred Stock held by such holders (except that
no funds need be set aside with respect to such Shares held by any such holder
who has theretofore notified the Company that it will not require redemption of
such shares).
6.19 Regulatory Approvals. The Company shall take all
--------------------
steps necessary, and the Purchaser and its Affiliates shall reasonably cooperate
therein, such that no approvals by any federal or state bank regulatory
authority will be required to be obtained by the Company, any Subsidiary of the
Company, the Purchaser or any Affiliate thereof in order to consummate the
transactions contemplated by this Agreement (including the Exchange), other than
as may be provided in certain agreed upon arrangements with such authorities,
which shall be reasonably satisfactory to the Purchaser and the Company (the
"Bank Regulatory Arrangements"). Notwithstanding anything contained in this
Section 6.19, the Purchaser shall not be required to take any actions, or enter
into any arrangements that will subject the Purchaser 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 the Purchaser or any of its
Affiliates (other than restrictions on any banking or non-banking transactions
between the Purchaser and its Affiliates and California Central Bank Trust
Corporation (the "Bank") and restrictions on the Purchaser and its Affiliates
seeking to direct the management or policies of the Bank).
-39-
<PAGE>
6.20 Agreed Treatment. So long as any shares of Chicago
----------------
Preferred Stock are outstanding (i) for United States federal income tax
purposes, the Company and the Purchaser shall treat such shares as stock and not
as indebtedness and any distributions thereon as distributions in respect of
stock and not as interest and (ii) the Company shall treat such shares as equity
capital and dividends paid thereon as dividends paid on capital for financial
and regulatory accounting and reporting purposes to the extent it is permitted
to do so under relevant accounting or reporting standards.
7. STANDSTILL.
7.1 Prohibited Activities. The Purchaser hereby agrees
---------------------
that during the Standstill Period it will not, nor will it permit any member of
the Purchaser Group to, directly or indirectly, unless in any such case
specifically requested in advance to do so by the Board of Directors of the
Company (provided, however, that nothing in this Article VII shall prohibit the
-------- -------
Purchaser during the Merger Period from taking any actions in furtherance of the
Merger (as defined in the Merger Agreement) as contemplated by the Merger
Agreement):
(A) acquire, offer to acquire, or agree to acquire by
purchase or by joining a partnership, limited partnership, syndicate or other
"group" (as such term is used in Section 13(d)(3) of the Exchange Act,
hereinafter referred to as "13D Group"), any securities of the Company entitled
to vote generally in the election of directors, or securities convertible into
or exercisable or exchangeable for such securities (collectively, "Restricted
Securities") or any material portion of the assets or businesses of the Company
and its Subsidiaries; provided, however, that nothing contained herein shall
-------- -------
prohibit any member of the Purchaser Group from acquiring any Restricted Secu-
rities (i) upon conversion of convertible securities of the Company currently
owned by the Purchaser Group or acquired pursuant to this Agreement or upon ex-
ercise of the Option or upon the consummation of the Exchange, (ii) as a result
of a stock split, stock dividend or similar recapitalization by the Company,
(iii) upon the execution of unsolicited buy orders by any member of the
Purchaser Group that is a registered broker-dealer for the bona fide account of
accounts managed by it that are unaffiliated and not acting in concert with any
member of the Purchaser Group, (iv) pursuant to the exercise of any warrant,
option or other right to acquire Restricted Securities ("Rights") that it
receives directly from the Company pursuant to a distribution to stockholders or
from acquiring such Rights directly from the Company
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<PAGE>
or (v) as a result of debts previously contracted or in a fiduciary capacity;
provided further, that if during the Standstill Period, as a result of a
- - -------- -------
business combination transaction between the Company or an affiliate of the
Company and any other entity which is not an affiliate of any member of the
Purchaser Group (an "Other Entity"), any one or more members of the Purchaser
Group shall acquire beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of Restricted Securities in such business combination, such
members may continue to own beneficially such Restricted Securities so acquired
by such members and such Restricted Securities shall continue to be subject to
the provisions of this Section;
(B) participate in, or encourage, the formation of any
13D Group which owns or seeks to acquire beneficial ownership of, or otherwise
acts in respect of, Restricted Securities;
(C) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are defined or used
in Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to the Company, or initiate, propose or otherwise
solicit stockholders for the approval of one or more stockholder proposals with
respect to the Company or induce or attempt to induce any other person to
initiate any stockholder proposal, provided, however, that the limitation
contained in this paragraph (C) shall not apply to any matter to be voted on by
the Company's stockholders that is not initiated or proposed by any member of
the Purchaser Group or any Affiliate thereof or the solicitation by any member
of the Purchaser Group of proxies for the election to the Board of Directors of
the Company of any Purchaser Designee;
(D) except as permitted by the Certificate of
Amendment or this Agreement, call or seek to have called any meeting of the
stockholders of the Company; or
(E) otherwise act, directly or indirectly, alone or in
concert with others, to seek to control the management, Board of Directors,
policies or affairs of the Company, or solicit, propose, seek to effect or
negotiate with the Company or any other person with respect to any form of busi-
ness combination transaction with the Company or any affiliate thereof (other
than an Other Entity with respect to which any member of the Purchaser Group or
any affiliate thereof shall have filed a Schedule 13D with the SEC with respect
to any class of equity securities of such Other Entity prior to the public
announcement of the Company's intent to consummate a
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<PAGE>
business transaction with such Other Entity) or any restructuring, recapi-
talization or similar transaction with respect to the Company or any affiliate
thereof (except as aforesaid), or solicit, make or propose or encourage or
negotiate with any other person with respect to, or announce an intent to make,
any tender offer or exchange offer for any Restricted Securities (other than the
Exchange, an exchange of shares of Series E Preferred Stock for Conversion
Shares or the exchange of Shares, Option Shares or Exchange Shares for Exchange
Notes as contemplated hereby or by the Certificate of Amendment) or disclose an
intent, purpose, plan or proposal with respect to the Company or any Restricted
Securities inconsistent with the provisions of this Section 7.1, including an
intent, purpose, plan or proposal that is conditioned on or would require the
Company to waive the benefit of, or amend, any provisions of this Section 7.1,
or assist, participate in, facilitate, encourage or solicit any effort or
attempt by any person to do or seek to do any of the foregoing; provided,
--------
however, that it is agreed that nothing herein shall affect the right of any
- - -------
Purchaser Designee (i) to act as a member of the Board of Directors of the
Company or any committee thereof and (ii) to take any action necessary or
advisable to carry out his obligations as a director of the Company.
Notwithstanding the foregoing, if any breach of Section 7.1(A) caused by an
acquisition of a non-material amount of Restricted Securities shall have been
cured within 30 days after the Purchaser becomes aware of such breach, then no
breach of this Section 7.1 shall be deemed to have occurred. Further not-
withstanding the foregoing, nothing contained in this Section 7.1 shall prohibit
or impede the consummation of the transactions contemplated by the Merger
Agreement or following any event rise to a right of termination under
Section 7.1(vii) of the Merger Agreement, any proposal by Chicago to acquire
100% of the outstanding common stock of New York though a merger, tender offer
or other acquisition transaction at a price equal to or greater than $20 per
common share.
7.2 Voting and Other Rights. Nothing in this Section 7
-----------------------
shall preclude members of the Purchaser Group, (A) from exercising the voting
and other rights granted to the Purchasers pursuant to this Agreement or any of
the Transaction Documents or (B) in the case of any proposed merger, sale of
assets or similar transaction that under the Certificate of Amendment requires a
vote of the holders of Restricted Securities and has been approved or
recommended by the Board of Directors of the Company, or in the case of a tender
or exchange offer made without encouragement by or the participation of the
Purchaser or any of its affiliates (if the Board of Directors of the Company
shall send to shareholders a statement
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<PAGE>
that the Board of Directors (i) recommends approval of such tender or exchange
offer, or (ii) is neutral with respect to such tender or exchange offer) from
making an offer to the Board of Directors of the Company, in respect of such
transaction, upon terms more favorable to the Company or its stockholders than
those of the other transaction, as proposed.
7.3 Standstill Period. As used herein, the term
-----------------
"Standstill Period" shall mean the period from the date that the Closing occurs
until the earliest to occur of (each a "Termination Event"):
(A) the date on which the Purchaser holds Common Stock
which, together with any Common Stock issuable upon the conversion of other
securities held by the Purchaser (including Common Stock into which shares of
Series E Preferred Stock would be convertible assuming Exchange of shares of
Series T Preferred Stock), represents less than 5% of the Common Stock of the
Company on a fully diluted basis;
(B) the designation of any date as the termination
date of the Standstill Period by a majority of the directors of the Company
(excluding any Purchaser Designees and any directors elected by the holders of
Shares, Option Shares or Exchange Shares pursuant to the Certificate of
Amendment) at a duly convened meeting thereof or by all of the directors of the
Company by written consent;
(C) the Company's breach of any of its material
obligations contained in the Registration Rights Agreement or the Merger
Agreement;
(D) default in the payment of principal or interest
when due (whether at maturity, upon acceleration or otherwise) after the
expiration of any grace periods applicable thereto with respect to indebtedness
of the Company or any of its Subsidiaries for money borrowed having an aggregate
outstanding principal amount of $25,000,000 or more;
(E) the date on which the full amount of dividends
payable on the Series E Preferred Stock, the Series F Preferred Stock, the
Series G Preferred Stock, the Series H Preferred Stock or the Series T Preferred
Stock for any two quarterly dividend periods shall not have been paid; provided,
--------
however, that this paragraph (E) shall not be a Termination Event with respect
- - -------
to any provision of Section 7.1 except the provisions contained therein
prohibiting the Purchaser or its Affiliates from making a tender offer for all
the outstanding shares of Common Stock or entering into an agreement of merger
or consolidation (including soliciting, making, proposing or
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<PAGE>
negotiating with respect thereto, or announcing an interest to make such a
tender offer or to consummate such a merger or consolidation);
(F) the date on which the full amount of dividends
payable on the Series E Preferred Stock, the Series F Preferred Stock, the
Series G Preferred Stock, the Series H Preferred Stock or the Series T Preferred
Stock for any six quarterly dividend periods shall not have been paid or the
Company shall be in default of any obligation to exchange any shares of Series T
Preferred Stock pursuant to the terms of Section 14 hereof;
(G) the Company or any of its material Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy" as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code") or any insurance insolvency laws that,
in the case of a Subsidiary of the Company, has had or would have a Material
Adverse Effect; or an involuntary case is commenced against the Company or any
of its Subsidiaries and the petition not controverted within 10 days, or is not
dismissed within 60 days after commencement of the case, which, in the case of a
Subsidiary of the Company, has had or would have a Material Adverse Effect; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or any substantial part of the property of the Company or any of its
Subsidiaries, which, in the case of a Subsidiary of the Company, has had or
would have a Material Adverse Effect; or the Company or any of its Subsidiaries
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, rehabilitation, dissolution, insolvency or
liquidation or similar law of any jurisdiction, whether now or hereafter in
effect, relating to the Company or such Subsidiary, or there is commenced
against the Company or any of its Subsidiaries any such proceeding which remains
undismissed for a period of 60 days, which, in the case of a Subsidiary of the
Company, has had or would have a Material Adverse Effect; or the Company or any
of its Subsidiaries is adjudicated insolvent or bankrupt, which, in the case of
a Subsidiary of the Company, has had or would have a Material Adverse Effect; or
any order of relief or other order approving any such case or proceeding is
entered, which, in the case of a Subsidiary of the Company, has had or would
have a Material Adverse Effect; or the Company or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days, which, in the case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or the Company or any of its Subsidiaries makes
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<PAGE>
a general assignment for the benefit of creditors, which, in the case of a
Subsidiary of the Company, has had or would have a Material Adverse Effect; or
the Company shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts, generally as they become due, which, in the case of
a Subsidiary of the Company, has had or would have a Material Adverse Effect; or
the Company or any of its Subsidiaries shall call a general meeting of its
creditors with a view to arranging a composition or adjustment of its debts,
which, in the case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or any corporate action is taken by the Company or any
of its Subsidiaries for the purpose of effecting any of the foregoing, which, in
the case of a Subsidiary of the Company, has had or would have a Material
Adverse Effect;
(H) without encouragement by or the participation of
the Purchaser or any of its Affiliates, the acquisition by any person or 13D
Group (other than members of the Purchaser Group or Affiliates thereof) of, the
commencement of a tender offer by such person or 13D Group for, or the public
announcement of an intention to acquire, Restricted Securities which, if added
to the Restricted Securities (if any) already owned by such person or 13D Group,
would represent thirty percent (30%) or more of the total voting power
(including rights to acquire voting power) of the Company's Restricted
Securities, or the receipt by such person or 13D Group of the Company's
agreement or consent to make such acquisition; provided, however, that such a
-------- -------
public announcement or commencement of a tender offer shall end the Standstill
Period only if such person or 13D Group shall have received the Company's
agreement or consent to make such intended acquisition, and such a tender offer
shall terminate the Standstill Period only if and when the Board of Directors of
the Company shall end to shareholders a statement that the Board of Directors
(i) recommends approval of such tender offer or (ii) is neutral with respect to
such tender offer; or
(I) after the consummation of the Exchange, the
failure of any of the Purchaser Designees to be elected to the Board of
Directors of the Company or to be appointed to any committee thereof in ac-
cordance with Section 6.17.
Notwithstanding the foregoing, if, in accordance with Section 6.1, a transferee
of the Purchaser (other than an Affiliate of the Purchaser) is required to agree
to be bound by the provisions of this Section 7.1, such agreement shall also
provide that the events described in paragraph (E), (F) or (I) shall not be a
Termination Event with respect to such transferee and its Affiliates.
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<PAGE>
8. INDEMNIFICATION.
8.1 Indemnification by the Company. In addition to all
------------------------------
other sums due hereunder or provided for in this Agreement, the Company agrees
to indemnify and hold harmless the Purchaser and its Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners and
controlling persons (each, an "indemnified party") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from any breach of any covenant,
agreement, representation or warranty of the Company in this Agreement or any
legal, administrative or other actions brought by any person or entity,
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of this Agreement, any
Transaction Document, the transactions contemplated hereby or thereby, or any
indemnified person's role therein or in the transactions contemplated hereby or
thereby; provided, however, that the Company shall not be liable under this
Section 8.1: (i) for any amount paid in settlement of claims without the
Company's consent (which consent shall not be unreasonably withheld) or (ii) to
the extent that it is finally judicially determined that such Liabilities
resulted primarily from a breach by the Purchaser of any representation,
warranty, covenant or agreement of the Purchaser contained in this Agreement or
the willful misconduct of the Purchaser; provided further, that if and to the
-------- -------
extent that such indemnification is unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of such
indemnified liability that shall be permissible under applicable laws. In
connection with the obligation of the Company to indemnify for Liabilities as
set forth above, the Company further agrees to reimburse each indemnified party
for all such expenses (including reasonable fees, disbursements and other
charges of counsel) as they are incurred by such indemnified party.
8.2 Notification. Each indemnified party under this
------------
Section 8 will, promptly after the receipt of notice of the commencement of any
action or other proceeding against such indemnified party in respect of which
indemnity may be sought from the Company under this Section 8, notify the
Company in writing of the commencement thereof. The omission of any indemnified
party so to notify the Company of any such action shall not relieve the Company
from any liability that it may have to such indemnified party (A) other than
pursuant to this Section 8 or (B) under this Section 8 unless, and only to the
extent that, such omission results in the Company's forfeiture of substantive
rights or defenses. In case any such action or
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<PAGE>
other proceeding shall be brought against any indemnified party and it shall
notify the Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that any indemnified party may, at its own expense, retain
- - -------- -------
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action or proceeding in which both the Company and an indemnified party
is, or is reasonably likely to become, a party, such indemnified party shall
have the right to employ separate counsel at the Company's expense and to
control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such indemnified party, (i) there are or may be legal
defenses available to such indemnified party or to other indemnified parties
that are different from or additional to those available to the Company or (ii)
any conflict or potential conflict exists between the Company and such
indemnified party that would make such separate representation advisable;
provided, however, that (1) any such separate counsel employed by the
- - -------- -------
indemnified party at the Company's expense shall be reasonably satisfactory to
the Company, (2) the indemnified party will not, without the prior written
consent of the Company, settle, compromise or consent to the entry of any judg-
ment in such action or proceeding unless such settlement, compromise or consent
includes an unconditional release of the Company from all liability arising or
that may arise out of such action or proceeding relating to any matter subject
to indemnification hereunder and (3) in no event shall the Company be required
to pay fees and expenses under this Section 8 for more than one firm of
attorneys representing the indemnified parties in any jurisdiction in any one
legal action or group of related legal actions. The Company agrees that the
Company will not, without the prior written consent of the Purchaser, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to any matter subject to indemnification
hereunder unless such settlement, compromise or consent includes an
unconditional release of the Purchaser and each other indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
The rights accorded to indemnified parties hereunder shall be in addition to any
rights that any indemnified party may have at common law, by separate agreement
or otherwise.
8.3 Registration Rights Agreement. Notwithstanding
-----------------------------
anything to the contrary in this Section 8, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim made with
respect to registration statements filed pursuant thereto or sales made
thereunder.
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<PAGE>
9. [Intentionally omitted.]
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS.
Notwithstanding any right of the Purchaser fully to
investigate the affairs of the Company and notwithstanding any knowledge of
facts determined or determinable by the Purchaser pursuant to such investigation
or right of investigation, the Purchaser has the right to rely fully upon the
representations, warranties, covenants and agreements of the Company contained
in this Agreement. All such representations, warranties, covenants and
agreements shall survive the execution and delivery of this Agreement and the
Closing hereunder, except that the representations and warranties shall survive
only for a period of two years from the Closing.
11. PERFORMANCE; WAIVER.
The provisions of this Agreement (including this Section 11)
may be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given by written instrument executed and
delivered by the Company and (A) prior to the Closing, by the Purchaser and (B)
after the Closing by the holder or holders of the Shares representing 66-2/3% of
the aggregate outstanding Shares, including Conversion Shares and Exchange
Shares (if Exchange Notes issued with respect to the Shares are outstanding such
percentage shall be calculated on the basis of the aggregate principal amount of
such Exchange Notes). The failure at any time to require performance of any
provision hereof shall in no way affect the full right to require such
performance at any time thereafter (unless performance thereof has been waived
in accordance with the terms hereof for all purposes and at all times by the
parties to whom the benefit of such performance is to be rendered). The waiver
by any party to this Agreement of a breach of any provision hereof shall not be
taken or held to be a waiver of any succeeding breach of such provision of any
other provision or as a waiver of the provision itself.
12. SUCCESSORS AND ASSIGNS.
All covenants and agreements contained in this Agreement by
or on behalf of the parties hereto shall bind, and inure the benefit of, the
respective successors and assigns of the parties hereto; provided, however, that
-------- -------
the rights and obligations of either party hereto may not be assigned without
the prior written consent of the other parties except that (A) prior to the
Closing, the Purchaser may assign all or any
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<PAGE>
portion of its right to purchase the Shares (and the corresponding obligations)
to one or more Affiliates of the Purchaser, in which event the Purchaser will be
relieved of its obligations hereunder to the extent so assumed by such Affiliate
or Affiliates and such Affiliate or Affiliates will be considered to be included
within each of the term "Purchaser" for all purposes of this Agreement and (B)
assignments of all or a portion of the Purchaser's rights and obligations here-
under may be made by the Purchaser in connection with transfers permitted under
clause (1) or (2) of Section 6.1, in which event the assigning Purchaser shall
be relieved of its obligations to the extent so assigned by the transferee.
Each such assignment shall be made by such assignee and assignor, as the case
may be, and the Company executing an Assignment Agreement pursuant to which the
assignee shall expressly agree to become a party to this Agreement and to be
bound by the terms of this Agreement.
13. MISCELLANEOUS.
13.1 Notices. All notices or other communications given or
-------
made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Company:
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
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Edward A. Perell
Fax: (212) 909-6836
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<PAGE>
If to the Purchaser:
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, Esq.
Fax: (212) 403-2000
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
13.2 [Intentionally omitted.]
13.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS IN
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
13.4 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of the Company and the Purchaser directs
that such court interpret and apply the remainder of this Agreement in the
manner that it determines most closely effectuates their intent in entering into
this Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
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<PAGE>
13.5 Headings; Interpretation. The index and section
------------------------
headings herein are for convenience only and shall not affect the construction
hereof. References to sections means sections of this Agreement unless the
context otherwise requires. References to herein or hereof mean this Agreement.
13.6 Entire Agreement. This Agreement, together with the
----------------
Exhibits hereto and the Merger Agreement, embodies the entire agreement between
the parties relating to the subject matter hereof and any and all prior oral or
written agreements, representations or warranties, contracts, understandings,
correspondence, conversations, and memoranda, whether written or oral, between
the Company and the Purchaser, or between or among any agents, representatives,
parents, Subsidiaries, Affiliates, predecessors in interest or successors in
interest, with respect to the subject matter hereof.
13.7 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
13.8 Letter Agreement. Upon consummation of the purchase
----------------
of the Shares as contemplated hereby, the Letter Agreements dated October 12,
1994 and November 27, 1994 between the Purchaser and the Company shall
automatically terminate and be of no further force and effect.
14. EXCHANGE.
14.1 The Exchange. The shares of Series T Preferred Stock
------------
purchased hereunder shall be exchangeable at any time and from time to time by
the holder thereof into shares of Series E Preferred Stock having the same
aggregate liquidation preference as the shares of Series T Preferred Stock
exchanged therefor, upon two business days' written notice by such holder of the
election to effect such exchange (each such exchange, an "Exchange" and all such
Exchanges collectively, the "Exchange"), subject to the satisfaction or waiver
of all applicable conditions set forth in Section 14.2, and, upon any such
Exchange, any accrued and unpaid dividends with respect to the shares of Series
T Preferred Stock exchanged shall become accrued and unpaid dividends on the
shares of Series E Preferred Stock exchanged therefor.
14.2 Conditions to Exchange. The obligations of the
----------------------
Company to effect an Exchange are subject to satisfaction of the following
conditions at or prior to such Exchange (unless expressly waived in writing by
such parties at or prior to such Exchange):
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(i) Hart-Scott-Rodino. The waiting period under the
-----------------
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have
expired or been terminated, to the extent applicable.
(ii) Regulatory Matters. There shall have been re-
------------------
ceived, and shall be in full force and effect, all requisite approvals under the
statutes and regulations of each jurisdiction (x) in the United States of
America or any state, territory or possession thereof and (y) each other
jurisdiction wherever located that is material to the issuance by the Company
and the conduct of the business conducted by the Company and its Subsidiaries,
taken as a whole, in each case with respect to the holding by the Purchaser of
the Exchange Shares.
14.3 Stock Exchange Listing. Promptly following the date
----------------------
hereof, the Company shall take all action necessary so that the Conversion
Shares shall have been approved for listing, subject to notice of issuance, by
the New York Stock Exchange, Inc. and each other securities exchange on which
the Common Stock is listed.
14.4 Other.
-----
(i) From and after the date of this Agreement until
the consummation of the Exchange, each of the Company and the Purchaser shall
act with good faith towards, and shall use its reasonable efforts to consummate,
the transactions contemplated by this Agreement, and neither the Company nor the
Purchaser will take any action that would prohibit or impair its ability to
consummate the Exchange; provided that the Company and the Purchaser shall
--------
consult and coordinate with one another regarding the obtaining of any
regulatory approvals which will be required in connection with the consummation
of the Exchange (including, at the Purchaser's option, to delay in taking ef-
forts to obtain such approvals until the consummation of the transactions
contemplated by the Merger Agreement or the termination thereof); provided,
--------
further, that without the prior written consent of the Company, the Purchaser
- - -------
agrees that prior to the end of the Merger Period it will not file any applica-
tion with any insurance regulatory body seeking approval for the Exchange. The
Purchaser may, at its sole discretion, however, seek approval under the HSR Act
to exchange shares of Series T Preferred Stock into shares of Series E Preferred
Stock prior to the end of the Merger Period, and may exchange shares of Series T
Preferred Stock for shares of Series E Preferred Stock, at any time and from
time to time, to the extent the conditions to the Exchange set forth in Section
14.2 can be satisfied without requiring the receipt of any regulatory approvals
other than in respect of the HSR Act. Without
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<PAGE>
limiting the generality of the foregoing, from and after the end of the Merger
Period the Purchaser and the Company shall make and cause their respective
Subsidiaries to make all necessary filings, as soon as practicable, including,
without limitation, those required under applicable insurance laws, in order to
facilitate prompt consummation of the Exchange and/or the performance of the
covenants contained in Section 6.17. In addition, from and after the end of the
Merger Period the Company and the Purchaser 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 Exchange and/or
the performance of the covenants contained in Section 6.17 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 Exchange and/or the performance of the covenants contained
in Section 6.17. Each of the Company and the Purchaser shall use reasonable
efforts to provide such information and communications to governmental entities
as such governmental entities may reasonably request. Each of the Company and
the Purchaser shall provide to the other party copies of all applications in ad-
vance of filing or submission of such applications to governmental entities in
connection with the Exchange Agreement; provided that the Purchaser may redact
--------
confidential portions that relate solely to the business or financial condition
of the Purchaser or its Affiliates.
(ii) Hart-Scott-Rodino. To the extent applicable, the
-----------------
Company and the Purchaser shall make all filings and furnish all information
required with respect to the transactions contemplated by this Agreement by the
HSR Act and shall use their best efforts to obtain the early termination of the
waiting period thereunder; provided, however, that neither the Company nor the
-------- -------
Purchaser shall be required to agree to dispose of or hold separate any portion
of its business or assets.
15. OTHER.
15.1 Sale of Chicago Preferred Stock Under Certain
---------------------------------------------
Circumstances. In the event that the Merger Agreement is terminated other than
- - -------------
pursuant to Section 7.1(iv) or Section 7.1(vii) thereof, then for a period of up
to 120 days following said Termination Date, the Company shall have the right,
upon 30 days' prior written notice, to cause each holder of shares of Chicago
Preferred Stock to sell all (but not part) of the shares of Chicago Preferred
Stock then owned by such holder to the person designated by the Company in its
written notice at a purchase price (a) equal to the liquidation preference of
such shares plus all accrued and unpaid dividends thereon, in the
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<PAGE>
event the Merger Agreement has been terminated pursuant to Section 7.1(v)
thereof, and (b) equal to the sum of (i) 110% of the liquidation preference of
such shares (other than shares of Series H Preferred Stock) plus all accrued and
unpaid dividends thereon and (ii) with respect to the shares of Series H Pre-
ferred Stock, the liquidation preference of such shares plus accrued and unpaid
dividends thereon, in the event the Merger Agreement has been terminated
pursuant to any of the other provisions of Section 7.1; provided, however, that
-------- -------
the Company may not cause any such sales following the occurrence of a Specified
Corporate Action or in anticipation of or contemplation of a Specified Corporate
Action; provided further, that any Transferee of such securities shall agree in
-------- -------
writing to be bound by the provisions of this paragraph for the duration of such
120-day period.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
THE CONTINENTAL CORPORATION
By:/s/
---------------------------
Name:
Title:
CNA FINANCIAL CORPORATION
By:/s/
----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE CONTINENTAL CORPORATION
UNDER SECTION 805 OF THE BUSINESS
CORPORATION LAW
---------------------------------
The undersigned, being the President and the Secretary,
respectively, of The Continental Corporation, hereby certify and set forth:
1. The name of the corporation is THE CONTINENTAL
CORPORATION (the "Corporation").
2. The certificate of incorporation of the Corporation was
filed by the Department of State on the 15th day of May, 1968.
3. The certificate of incorporation of the Corporation is
hereby amended, pursuant to section 502 of the Business Corporation Law, by the
addition of a provision stating the number, designation, relative rights,
preferences and limitations of the shares of (i) a series of Cumulative
Convertible Preferred Stock, Series E (the "Series E Preferred Stock"), (ii) a
series of Cumulative Preferred Stock, Series F (the "Series F Preferred Stock")
and (iii) a series of Cumulative Preferred Stock, Series G (the "Series G
Preferred Stock"), (iv) a series of Cumulative Preferred Stock, Series H (the
"Series H Preferred Stock") and (v) a series of Cumulative Preferred Stock,
Series T (the "Series T Preferred Stock"). Each of the Series E Preferred
Stock, the Series F Preferred Stock, the Series G Preferred Stock, the Series H
Preferred Stock and the Series T Preferred Stock was established by a resolution
adopted by a majority vote of the board of directors of The Continental
Corporation at a meeting of the board duly called and held on December 6, 1994.
The text of that resolution is set forth below:
RESOLVED that, pursuant to the authority vested in the Board
of Directors of the Corporation in accordance with the provisions of Article 5
of the Certificate of Incorporation, five series of the class of authorized
Preferred Stock, par value $4.00 per share, of the Corporation are hereby cre-
ated and that the number of shares and the designations, relative rights
preferences and limitations of the shares of each such series, and the
qualifications, limitations and restrictions thereof are as follows:
<PAGE>
Article 1. Series E Preferred Stock.
------------------------
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as
"Cumulative Convertible Preferred Stock, Series E" (the "Series E Preferred
Stock"). The number of shares initially constituting the Series E Preferred
Stock shall be 828,100, which number may be decreased (but not increased) by the
Board of Directors without a vote of stockholders; provided, however, that such
-------- -------
number may not be decreased below the sum of (x) the number of then outstanding
shares of Series E Preferred Stock and (y) the number of shares of Series E
Preferred Stock into which the outstanding shares of Series T Preferred Stock
are exchangeable.
(b) The Series E Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank pari
----
passu with the Corporation's $2.50 Cumulative Convertible Preferred Stock,
- - -----
Series A (the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock,
Series B (the "Series B Preferred Stock"), Cumulative Preferred Stock, Series F
(the "Series F Preferred Stock"), Cumulative Preferred Stock, Series G (the
"Series G Preferred Stock"), Cumulative Preferred Stock, Series H (the "Series H
Preferred Stock"), Cumulative Preferred Stock, Series T (the "Series T Preferred
Stock" and together with the Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock, the "Chicago Preferred
Stock") and the New Preferred Stock (if any) (the Series A Preferred Stock,
Series B Preferred Stock, Chicago Preferred Stock (other than the Series E
Preferred Stock) and New Preferred Stock (if any) are collectively defined for
the purposes of this Article 1 as the "Other Preferred Stock") and prior to all
other classes and series of capital stock of the Corporation now or hereafter
authorized including, without limitation, the Common Stock, par value $1.00 per
share, of the Corporation (the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Article 6 below.
Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series E Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
capital stock of the Corporation other than the Other Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the
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<PAGE>
Liquidation Preference thereof equal to 9.75% (subject to increase pursuant to
Section 2(b)), calculated on the basis of a 360-day year consisting of twelve
30-day months, accruing and payable in equal quarterly payments, in immediately
available funds, on the Business Day immediately preceding the last day of
March, June, September and December in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date") commencing on the Business Day
immediately preceding December 31, 1994, provided, however, that with respect to
-------- -------
such first Quarterly Dividend Payment Date, the holders of shares of Series E
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of the assets of the Corporation at the time legally
available therefor, a cumulative cash dividend in respect of each share of
Series E Preferred Stock in the amount of (i) 9.75% (or the then effective
annual rate) of the Liquidation Preference multiplied by (ii) a fraction equal
to (A) the number of days from (and including) the Issue Date to (but excluding)
such Quarterly Dividend Payment Date divided by (B) 360. No interest shall be
payable in respect of any dividend payment on the Series E Preferred Stock that
may be in arrears.
(b) If (i) a private placement or public offering of the
New Preferred Stock or the New Senior Notes, pursuant to which the Corporation
shall receive at least $100,000,000 in gross proceeds is not consummated within
360 days after the termination of the Merger Agreement or (ii) the annual
dividend rate on the New Preferred Stock or the annual interest rate on the New
Senior Notes, as applicable, exceeds 13%, then the annual rate of the cumulative
cash dividends shall be increased to a rate of 10.75%, effective (x) in the case
of clause (i), the date that is 360 days after the termination of the Merger
Agreement, and (y) in the case of clause (ii), the date of the issuance of the
New Preferred Stock or the New Senior Notes, as applicable. If on any date (A)
all of the Purchaser Designees shall not have been elected to the Corporation's
Board of Directors or any such Purchaser Designees shall not have been appointed
to the committees of the Corporation's Board of Directors, in accordance with
the provisions of Section 6.17 of the Securities Purchase Agreement, (B) the
Corporation shall have failed to declare, or shall have failed to pay, the full
amount of dividends payable on the Series E Preferred Stock for six quarterly
dividend periods, (C) the Corporation shall have failed to satisfy its
obligation to convert shares of Series E Preferred Stock pursuant to Section 10
or (D) a breach of any of the Material Provisions of the Securities Purchase
Agreement or any of the Corporation's material obligations under the
Registration Rights Agreement shall have occurred then, effective as of the date
of such failure or breach, the annual rate of the cumulative cash dividends
shall be increased to a
-3-
<PAGE>
rate of 11.75% and shall remain at such rate until such time as (1) the Pur-
chaser Designees shall have been elected to the Corporation's Board of Directors
and appointed to the committees of the Corporation's Board of Directors in
accordance with the provisions of Section 6.17 of the Securities Purchase
Agreement, (2) all dividends accrued to date on the Series E Preferred Stock
shall have been declared and paid in full, (3) any conversion obligations in
respect of the Chicago Preferred Stock that have become due shall have been
fully satisfied and (4) there shall exist no breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement, as the case may
be, at which time the annual rate of the cumulative cash dividends shall be
reduced to a rate of 9.75%, subject to being increased to a rate of 11.75% in
the event of each and every subsequent event of the character indicated above.
(c) Dividends payable pursuant to Section 2(a) shall begin
to accrue and be cumulative from the Issue Date, and shall accrue on a daily
basis, in each case whether or not declared. Dividends paid on the shares of
Series E Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares of Series E Preferred Stock
at the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series E Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be not
more than 60 days, nor less than 10 days, prior to the date fixed for the
payment thereof. Accumulated but unpaid dividends for any past quarterly
dividend periods may be declared and paid at any time, without reference to any
regular Quarterly Dividend Payment Date, to holders of record on such date, not
more than 60 nor less than 10 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(d) The holders of shares of Series E Preferred Stock shall
not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights.
-------------
In addition to any voting rights provided by law, the
holders of shares of Series E Preferred Stock shall have the following voting
rights:
(a) Except as otherwise required by applicable law so long
as the Series E Preferred Stock is outstanding, each
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<PAGE>
share of Series E Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of stockholders, on all
matters voted on by holders of Common Stock voting together as a single class
with other shares entitled to vote thereon. With respect to any such vote, each
share of Series E Preferred Stock shall entitle the holder thereof to cast that
number of votes per share as is equal to the number of votes that such holder
would be entitled to cast had such holder converted his shares of Series E Pre-
ferred Stock into Common Stock on the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Series E Preferred Stock, voting
separately as a single class, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be necessary to (i)
authorize, adopt or approve an amendment to the Certificate of Incorporation
that would increase or decrease the par value of the shares of Series E
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Series E Preferred Stock, (ii) amend, alter or repeal the
Certificate of Incorporation so as to affect the shares of Series E Preferred
Stock adversely or (iii) effect the voluntary liquidation, dissolution, winding
up, recapitalization or reorganization of the Corporation, or the consolidation
or merger of the Corporation with or into any other Person, or the sale or other
distribution to another Person of all or substantially all of the assets of the
Corporation; provided, however, that no separate vote of the holders of Series E
-------- -------
Preferred Stock shall be required to effect any of the transactions described in
clause (iii) above unless such transaction would either require a class vote
pursuant to clause (i) or (ii) above or would require a vote by any shareholders
of the Corporation (other than pursuant to this sentence); provided further,
-------- -------
that no separate vote of the holders of the Series E Preferred Stock as a class
shall be required in the case of a recapitalization, reorganization,
consolidation or merger of, or sale by, the Corporation if (A)(a) such
recapitalization, reorganization, consolidation, merger or sale constitutes a
Specified Corporate Action, (b) the Corporation has sufficient funds legally
available to it (after giving effect to such transaction) to redeem, at the then
applicable price hereunder and pursuant to the terms hereof, all the outstanding
shares of Series E Preferred Stock, (c) such redemption shall not be prohibited
by any agreement to which the Corporation or any of its Subsidiaries is a party,
by applicable law or otherwise, (d) the Board of Directors of the
-5-
<PAGE>
Corporation, including a majority of the directors who are not officers or
employees of the Corporation, shall have adopted a resolution confirming that
such funds are available and that the holders of Series E Preferred Stock have
the right to require such redemption and (e) the Corporation shall have set
aside sufficient funds to redeem through the Mandatory Redemption Date the
shares of Series E Preferred Stock held by such holders (except that no funds
need be set aside with respect to such shares held by any such holder who has
theretofore notified the Corporation (whether pursuant to Section 6(c) or
otherwise) that it will not require redemption of such shares) or (B) (1) the
Corporation shall be the resulting or surviving corporation, (2) the resulting
or surviving corporation will have after such recapitalization, reorganization,
consolidation or merger no Senior Stock or Parity Stock either authorized or
outstanding (except such Parity Stock of the Corporation as may have been
authorized or outstanding immediately preceding such consolidation or merger) or
such stock of the resulting or surviving corporation (having the same powers,
preferences and special rights of any such Parity Stock) as may be issued in
exchange therefor), (3) each holder of shares of Series E Preferred Stock
immediately preceding such recapitalization, reorganization, consolidation or
merger will receive in exchange therefor the same number of shares of stock,
with the same preferences, rights and powers, of the resulting or surviving
corporation, (4) after such recapitalization, reorganization, consolidation or
merger the resulting or surviving corporation shall not be in breach of any of
the terms hereof, any of the Material Provisions of the Securities Purchase
Agreement or any of its material obligations under the Registration Rights
Agreement and (5) all or substantially all the holders of the outstanding shares
of capital stock of the Corporation immediately prior to such consolidation or
merger are entitled to receive shares representing 50% or more of the then
outstanding shares of capital stock of the resulting or surviving corporation
entitled to vote generally in the election of directors.
(c) If on any date (i) the Corporation shall have failed to
declare, or shall have failed to pay, the full amount of dividends payable on
any series of Chicago Preferred Stock, for six quarterly dividend periods or
(ii) a breach of any of the Material Provisions of the Securities Purchase
Agreement or any of the Corporation's material obligations under the Reg-
istration Rights Agreement shall have occurred, then the number of directors
constituting the Board of Directors shall, without further action, be increased
by two and the holders of shares of Series E Preferred Stock shall have, in
addition to the other voting rights set forth herein with respect to the Series
E Preferred Stock, the exclusive right, together with the
-6-
<PAGE>
holders of all other series of Chicago Preferred Stock, voting separately as a
single class together with the holders of such other series of Chicago Preferred
Stock, to elect two directors of the Corporation to fill such newly created
directorship, by written consent as provided herein, or at a special meeting of
such holders called as provided herein. Any such additional directors shall
continue as directors (subject to reelection or removal as provided in Section
3(d)(ii)) and the holders of Series E Preferred Stock shall have such additional
voting rights until such time as (A) dividends then payable on all series of
Chicago Preferred Stock shall have been declared and paid in full and (B) there
shall exist no breach of any of the Material Provisions of the Securities
Purchase Agreement or any of the Corporation's material obligations under the
Registration Rights Agreement, as the case may be, at which time such additional
directors shall cease to be directors, the number of directors constituting the
Board of Directors shall be reduced by two and such additional voting rights of
the holders of all series of Chicago Preferred Stock shall terminate, subject to
revesting in the event of each and every subsequent event of the character
indicated above.
(d) (i) The foregoing right of holders of shares of Series
E Preferred Stock to take any action as provided in Section 3(c) may be
exercised at any annual meeting of stockholders or at a special meeting of
holders of shares of Chicago Preferred Stock held for such purpose as
hereinafter provided or at any adjournment thereof, or by the written consent,
delivered to the Secretary of the Corporation, of the holders of the minimum
number of shares required to take such action.
So long as such right to vote continues (and unless such
right has been exercised by written consent of the minimum number of shares
required to take such action), the President of the Corporation may call, and
upon the written request of holders of record of at least 5% of the aggregate
outstanding shares of Chicago Preferred Stock addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the by-laws
of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series E Preferred Stock shall have the right, voting separately as a
single class together with the holders of all other series of Chicago Preferred
Stock, to elect two directors of the Corporation as provided in Section 3(c) or
to take any action, the presence in person or by proxy
-7-
<PAGE>
of the holders of record of one-third of the total aggregate number of shares of
Chicago Preferred Stock then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At any such meeting
or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares
of Chicago Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of shares
of Chicago Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock
shall not prevent the election of directors to be elected by the
holders of shares of Chicago Preferred Stock or the taking of any
action as provided in Section 3(c); and
(B) in the absence of a quorum of the holders of
shares of Chicago Preferred Stock, a majority of the holders of
such shares present in person or by proxy shall have the power to
adjourn the meeting as to the actions to be taken by the holders
of shares of Chicago Preferred Stock from time to time and place
to place without notice other than announcement at the meeting
until a quorum shall be present.
For taking of any action as provided in Section 3(b) or
Section 3(c) by the holders of shares of Series E Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his name on
the transfer books of the Corporation as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held; provided, however, that shares of Chicago Preferred Stock held
-------- -------
by the Corporation or any Subsidiary of the Corporation shall not be deemed to
be outstanding for purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Chicago
Preferred Stock as provided in Section 3(c) shall, unless his term shall expire
earlier in accordance with the provisions thereof, hold office until the annual
meeting of stockholders next succeeding his election or until his successor, if
any, is elected and qualified.
If any director so elected by the holders of Chicago
Preferred Stock shall cease to serve as a director before his term shall expire
(except by reason of the termination of the voting rights accorded to the
holders of Chicago Preferred
-8-
<PAGE>
Stock in accordance with Section 3(c)), the holders of the Chicago Preferred
Stock then outstanding and entitled to vote for such director may, by written
consent as provided herein, or at a special meeting of such holders called as
provided herein, elect a successor to hold office for the unexpired term of the
director whose place shall be vacant.
Any director elected by the holders of shares of Chicago
Preferred Stock, voting together as a separate class, may be removed from office
with or without cause only by the vote or written consent of the holders of at
least a majority of the aggregate outstanding shares of Chicago Preferred Stock
at the time of removal. A special meeting of the holders of shares of Chicago
Preferred Stock may be called in accordance with the procedures set forth in
Section 3(d)(i).
Section 4. Certain Restrictions.
--------------------
(a) So long as any shares of Series E Preferred Stock
remain outstanding, the Corporation shall not declare or make any Restricted
Payment.
(b) Whenever quarterly dividends payable on shares of
Series E Preferred Stock as provided in Section 2(a) are not paid in full, at
such time and thereafter until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Series E Preferred Stock shall have been
paid in full or declared and set apart for payment, or whenever the Corporation
shall not have converted shares of Series E Preferred Stock at a time required
by Section 10, at such time and thereafter until all conversion obligations
provided in Section 10 that have come due shall have been satisfied or all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Mandatory Redemption
Price, Special Redemption Price or the Maturity Redemption Price when due, at
such time and thereafter until all such amounts have been paid in full or set
apart for payment, the Corporation shall not: (A) declare or pay dividends, or
make any other distributions, on any shares of Junior Stock, or (B) declare or
pay dividends, or make any other distributions, on any shares of Parity Stock,
except dividends or distributions paid ratably on the Series E Preferred Stock
and all Parity Stock on which dividends are payable and in arrears, in pro-
portion to the total amounts to which the holders of all shares of the Series E
Preferred Stock and Parity Stock are then entitled.
(c) Whenever dividends payable on shares of Series E
Preferred Stock as provided in Section 2 are not paid in full, at such time
and thereafter until all unpaid dividends payable,
-9-
<PAGE>
whether or not declared, on the outstanding shares of Series E Preferred Stock
shall have been paid in full or declared and set apart for payment, or whenever
the Corporation shall not have converted shares of Series E Preferred Stock at
a time required by Section 10, at such time and thereafter until all conversion
obligations provided in Section 10 that have come due shall have been satisfied
or all necessary funds have been set apart for payment, or whenever the
Corporation shall not have paid the Optional Redemption Price, the Mandatory
Redemption Price, Special Redemption Price or the Maturity Redemption Price
when due, at such time and thereafter until all such amounts have been paid in
full or set apart for payment, the Corporation shall not redeem, purchase or
otherwise acquire for consideration any shares of Junior Stock or Parity Stock;
provided, however, that (A) the Corporation may accept shares of Parity Stock
- - -------- -------
or Junior Stock for conversion into Junior Stock and (B) the Corporation may at
any time redeem, purchase or otherwise acquire shares of Parity Stock pursuant
to any mandatory redemption, put, sinking fund or other similar obligation
contained in such Parity Stock, pro rata with the Series E Preferred Stock in
proportion to the total amount then required to be applied by the Corporation
to redeem, repurchase, or otherwise acquire shares of Series E Preferred Stock
and shares of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5. Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem
any shares of Series E Preferred Stock prior to December 30, 2001. Thereafter
(A) at any time after December 31, 2001 or (B) at any time, so long as shares of
Common Stock shall have traded on the New York Stock Exchange (or another
national securities exchange or on Nasdaq) on each trading day during a 30-
consecutive trading day period (each of which trading days shall be after
December 30, 2001 and no more than 5 Business Days prior to the date notice is
given of an Optional Redemption (as defined below)) and had a Closing Price on
at least 20 of such trading days in excess of 150% of the Conversion Price in
effect on such trading day, subject to the restrictions contained in Section 4,
the Corporation shall have the right, at its sole option and election, to redeem
(the "Optional Redemption") all or a portion of the shares of Series E Preferred
Stock, on not more than 45 nor less than 30 days' notice of the
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<PAGE>
date of redemption (any such date an "Optional Redemption Date") at a price per
share (the "Optional Redemption Price") equal to (A) the following prices per
share (stated as a percentage of the Liquidation Preference of such share) plus
(B) an amount per share equal to all accrued and unpaid dividends thereon,
whether or not declared or payable, to the applicable Optional Redemption Date,
in immediately available funds:
Optional Redemption Price
If Redeemed as a Percentage of
During the Period Liquidation Preference
----------------- -------------------------
December 30, 2001 to 102.775%
December 29, 2002
December 30, 2002 to 101.850%
December 29, 2003
December 30, 2003 to 100.925%
December 29, 2004
December 30, 2004 and 100%
thereafter
(ii) If the Corporation shall determine to redeem less than
all the shares of Series E Preferred Stock then outstanding pursuant to
paragraph (i), the shares to be redeemed shall be selected pro rata (as nearly
as may be) so that the number of shares redeemed from each holder shall be the
same proportion of all the shares to be redeemed that the total number of shares
of Series E Preferred Stock then held by such holder bears to the total number
of shares of Series E Preferred Stock then outstanding.
(iii) Notwithstanding the foregoing, any shares of Series E
Preferred Stock redeemed pursuant to this Section 5(a) at any time when holders
of shares of Series E Preferred Stock have the right to require the Corporation
to redeem the shares of Series E Preferred Stock pursuant to Section 6 or an
event giving rise to such a right has occurred shall be redeemed at a price
equal to higher of the price to be paid pursuant to Section 5(a) and the price
to be paid pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the
Optional Redemption Date, the Optional Redemption Price, the place or places of
payment, that payment will be made upon presentation and surrender of the shares
of Series E Preferred Stock, that on and after the date of such Optional
Redemption
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<PAGE>
dividends will cease to accrue on such shares, the then effective Conversion
Price and that the right of holders to convert shares of Series E Preferred
Stock shall terminate at the close of business on the Business Day immediately
preceding the Optional Redemption Date (unless the Corporation defaults in the
payment of the Optional Redemption Price) and be given by publication in a
newspaper of general circulation in the Borough of Manhattan, The City of New
York (if such publication shall be required by applicable law, rule, regulation
or securities exchange requirement), not less than 30, nor more than 45, days
prior to the Optional Redemption Date; and, in any case, a similar notice shall
be mailed at least 30, but not more than 45, days prior to the Optional
Redemption Date to each holder of shares of Series E Preferred Stock, at such
holder's address as it appears on the transfer books of the Corporation. In
order to facilitate the redemption of shares of Series E Preferred Stock, the
Board of Directors may fix a record date for the determination of shares of
Series E Preferred Stock to be redeemed, or may cause the transfer books of the
Corporation for the Series E Preferred Stock to be closed, not more than 60 days
or less than 45 days prior to the Optional Redemption Date.
(c) On the date of any Optional Redemption that is
specified in a notice given pursuant to Section 5(b), the Corporation shall, and
at any time after such notice shall have been mailed and before the Optional
Redemption Date the Corporation may, deposit for the benefit of the holders of
shares of Series E Preferred Stock the funds necessary for such redemption with
a bank or trust company in the Borough of Manhattan, The City of New York, that
is "well capitalized" within the meaning of the applicable bank regulations and
having a capital and surplus of at least $500,000,000. Any moneys so deposited
by the Corporation and unclaimed at the end of two years from the Optional
Redemption Date shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series E Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. In the event that
moneys are deposited pursuant to this Section 5(c) in respect of shares of
Series E Preferred Stock that are converted in accordance with the provisions of
Section 10, such moneys shall, upon such conversion, revert to the general funds
of the Corporation and, upon demand, such bank or trust company shall pay over
to the Corporation such moneys and shall be relieved of all responsibilities to
the holders of such converted shares in respect thereof. Any interest accrued
on funds deposited
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pursuant to this Section 5(c) shall be paid from time to time to the Corporation
for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 5(c) in respect of shares of
Series E Preferred Stock to be redeemed pursuant to Section 5(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Optional Redemption Date (i)
the shares represented thereby shall no longer be deemed outstanding, (ii) the
rights to receive dividends thereon shall cease to accrue, and (iii) all rights
of the holders of shares of Series E Preferred Stock to be redeemed shall cease
and terminate, excepting only the right to receive the Optional Redemption Price
therefor and the right to convert such shares into shares of Common Stock until
the close of business on the Business Day immediately preceding the Optional
Redemption Date (and to receive accrued and unpaid dividends thereon), in ac-
cordance with Section 10; provided, however, that if the Corporation shall
-------- -------
default in the payment of the Optional Redemption Price the shares of Series E
Preferred Stock shall thereafter be deemed to be outstanding and the holders
thereof shall have all of the rights of a holder of Series E Preferred Stock
until such time as such default shall no longer be continuing or shall have been
waived by holders of at least 66-2/3% of the then outstanding shares of Series E
Preferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series E Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series E Preferred Stock. On or after the
Optional Redemption Date, each holder of the shares called for redemption,
subject to their right to convert shares of Series E Preferred Stock as provided
in section 10, shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Optional Redemption Price. If less than all
the shares evidenced by any such surrendered certificate are redeemed, a new
certificate shall be issued evidencing the unredeemed shares.
Section 6. Mandatory Redemption at the Option of the Holder.
------------------------------------------------
(a) If one or more events constituting a Specified
Corporate Action shall occur, each holder of shares of the
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Series E Preferred Stock shall have the right, on the date or dates specified in
Section 6(b) (the "Mandatory Redemption Date"), to require the Corporation to
redeem (a "Mandatory Redemption") all or any part of the shares of Series E Pre-
ferred Stock then held by such holder as such holder may elect at a price per
share (the "Mandatory Redemption Price") equal to (A) the following prices per
share (stated as a percentage of the Liquidation Preference of such share) plus
(B) an amount per share equal to all accrued and unpaid dividends thereon,
whether or not declared or payable, to the applicable Mandatory Redemption Date,
in immediately available funds:
If the Mandatory
Redemption Date Mandatory Redemption Price
Occurs During the as a Percentage of
Period Liquidation Preference
---------------- -------------------------
December 30, 1994 to 110.4%
June 29, 1995
June 30, 1995 to 116.8%
December 29, 1995
December 30, 1995 to 126.7%
June 29, 1996
June 30, 1996 and 138.0%
thereafter
(b) The date fixed for each Mandatory Redemption shall be
fixed by the Corporation and shall be not less than 60 days nor more than 90
days following the occurrence of any Specified Corporate Action giving rise
thereto (or, in the case of a Specified Corporate Action described in clause
(iii) of the definition of "Specified Corporate Action," not less than 60 days
nor more than 90 days following the date on which the Corporation obtains actual
knowledge of such Specified Corporate Action); provided, however, that in the
-------- -------
event of a Specified Corporate Action that constitutes a Control Transaction, in
addition to the dates fixed for a Specified Corporate Action Redemption as
specified above, an additional Specified Corporate Action Redemption Date shall
be set for the date and time immediately preceding the consummation of any such
Control Transaction; provided, further, that, upon the request of a holder, the
-------- -------
Board of Directors shall agree to extend the date of redemption in respect of
any such Specified Corporate Action (without changing the consideration that is
otherwise payable
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<PAGE>
in respect of such redemption other than with respect to adjustments to the
amount of accrued and unpaid dividends included in such redemption price) to the
extent necessary for any holder of shares of Series E Preferred Stock to avoid
liability under Section 16(b) of the Exchange Act, provided, that no such
redemption extension shall be for a period greater than six months. The
Corporation shall, within 5 days of the occurrence of a Specified Corporate
Action (or, in the case of a Specified Corporate Action described in clause
(iii) of the definition of "Specified Corporate Action," within 5 days of the
date on which the Corporation obtains actual knowledge of such Specified
Corporate Action), give notice thereof by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), and, in any case, a similar notice shall be mailed to
each holder of shares of the Series E Preferred Stock, at such holder's address
as it appears on the transfer books of the Corporation. Each such notice shall
specify the Specified Corporate Action that has occurred and the date of such
occurrence, the place or places of payment, the then effective Mandatory
Redemption Price and Conversion Price and the date the right of such holder to
require a Mandatory Redemption shall terminate.
(c) If the notice sent by the Corporation pursuant to
Section 6(b) shall contain (i) a form inquiring as to whether a holder of shares
of Series E Preferred Stock intends to surrender the certificate(s) representing
such shares for redemption pursuant to this Section 6 and (ii) a stamped self-
addressed envelope for return of such form to the Corporation or its designee,
within ten Business Days of such notice, each holder shall return such inquiry
form to the Corporation and shall indicate in such form the proportion of such
holder's shares of Series E Preferred Stock that will be surrendered for
redemption pursuant to this Section 6. If such notice shall indicate that if a
holder does not respond prior to ten Business Days after the date of such notice
that such holder will be deemed to have notified the Corporation that it will
not require the redemption of the shares of Series E Preferred Stock held by
such holder for purposes of Section 3(b) and such holder does not respond to the
Corporation's inquiry prior to ten Business Days after the date of such notice,
such holder will be deemed to have notified the Corporation that it will not
require the redemption of the shares of Series E Preferred Stock held by such
holder for purposes of Section 3(b). Nothing contained in this Section 6(c)
shall affect the right of a holder of Series E Preferred Stock to require the
Corporation to redeem such shares pursuant to Section 6(a).
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<PAGE>
(d) Each holder of shares of the Series E Preferred Stock
shall have the right, at such holder's option exercisable at any time on 30
days' notice to the Corporation on or after December 30, 2009 (the date of any
such exercise, the "Special Redemption Date"), to require the Corporation to
redeem (a "Special Redemption") all or any part of the shares of Series E
Preferred Stock then held by such holder as such holder may elect by written
notice delivered at least 30 days prior to the Special Redemption Date at a
price per share equal to the sum of (A) 100% of the Liquidation Preference of
such share and (B) an amount per share equal to all accrued and unpaid dividends
thereon whether or not declared or payable to the Special Redemption Date (the
"Special Redemption Price") in immediately available funds.
(e) On the date fixed for any Mandatory Redemption or on
any Special Redemption Date, each holder of shares of Series E Preferred Stock
who elects to have shares of Series E Preferred Stock held by it redeemed shall
surrender the certificate representing such shares to the Corporation at the
place designated in such notice together with an election to have such
redemption made and shall thereupon be entitled to receive payment therefor
provided in this Section 6. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued rep-
resenting the unredeemed shares. From and after the date of such redemption (i)
the rights to receive dividends thereon shall cease to accrue and (ii) all
rights of the holders of shares of Series E Preferred Stock so redeemed shall
cease and terminate, excepting only the right to receive the Mandatory
Redemption Price or Special Redemption Price therefor; provided, however, that
-------- -------
if the Corporation shall default in the payment of the Mandatory Redemption
Price the shares of Series E Preferred Stock that were to be redeemed shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Series E Preferred Stock until such time as such
default shall no longer be continuing or shall have been waived by holders of at
least 66-2/3% of the then outstanding shares of Series E Preferred Stock.
Section 7. Redemption Upon Maturity.
------------------------
(a) On December 30, 2034 (the "Maturity Date"), the
Corporation shall redeem (the "Maturity Redemption") the remaining outstanding
shares of the Series E Preferred Stock at a price per share (the "Maturity
Redemption Price") equal to (A) 100% of the Liquidation Preference per share
plus (B) an amount equal to accrued and unpaid dividends thereon, whether or not
declared or payable, to the Maturity Date, in immediately available funds.
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<PAGE>
(b) Notice of the Maturity Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Maturity Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Maturity
Date to each holder of shares of Series E Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any
time after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series E
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series E Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Maturity Redemption Price. In the event that
moneys are deposited pursuant to this Section 7(c) in respect of shares of
Series E Preferred Stock that are converted in accordance with the provisions of
Section 10, such moneys shall, upon such conversion, revert to the general funds
of the Corporation and, upon demand, such bank or trust company shall pay over
to the Corporation such moneys and shall be relieved of all responsibilities to
the holders of such converted shares in respect thereof. Any interest accrued
and unpaid on funds deposited pursuant to this Section 5(c) shall be paid from
time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 7(c) in respect of shares of
Series E Preferred Stock to be redeemed pursuant to Section 7(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Maturity Date, (i) the rights
to receive dividends thereon shall cease to accrue and (ii) all rights of the
holders of shares of Series E Preferred Stock shall cease and terminate,
excepting only the right to receive the Maturity Redemption Price therefor;
provided, however, that
- - -------- -------
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<PAGE>
if the Corporation shall default in the payment of the Maturity Redemption
Price, the shares of Series E Preferred Stock that were to be redeemed shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Series E Preferred Stock until such time as such
default shall no longer be continuing.
Section 8. Acquired Shares.
---------------
Any shares of Series E Preferred Stock converted, exchanged,
redeemed, purchased or otherwise acquired by the Corporation or any of its
Subsidiaries in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares of Series E Preferred Stock
shall upon their cancellation become authorized but unissued shares of preferred
stock, par value $4.00 per share, of the Corporation and, upon the filing of an
appropriate certificate with the Department of State of the State of New York,
may be reissued as part of another series of preferred stock, par value $4.00
per share, of the Corporation subject to the conditions or restrictions on
issuance set forth herein, but in any event may not be reissued as shares of
Series E Preferred Stock or Parity Stock unless all of the shares of Series E
Preferred Stock issued on the Issue Date shall have already been redeemed,
converted or exchanged.
Section 9. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case
under the United States bankruptcy laws or any applicable bankruptcy, insolvency
or similar law of any other country, or consent to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made
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<PAGE>
(i) to the holders of shares of Junior Stock unless, prior thereto, the holders
of shares of Series E Preferred Stock, subject to Section 10, shall have
received (A) if a Voluntary Liquidation Event shall have occurred, the Optional
Redemption Price with respect to each share and (B) if a Voluntary Liquidation
Event shall not have occurred, the Liquidation Preference, plus all accrued and
unpaid dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series E Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series E Preferred Stock (which amounts are set forth in
clauses (A) and (B) above) and Parity Stock are entitled upon such liquidation,
dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10. Conversion.
----------
(a) Any holder of Series E Preferred Stock shall have the
right, at its option, at any time and from time to time prior to the Maturity
Date (but subject to the provisions of Section 10(b)) to convert, subject to the
terms and provisions of this Section 10, each share of Series E Preferred Stock
into such number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share of Common
Stock) for each full share of Series E Preferred Stock as is equal, subject to
Section 10(g), to the quotient of (i) the Liquidation Preference divided by (ii)
the Conversion Price (as defined below) then in effect, except that with respect
to any share that shall be called for redemption, such right shall terminate at
the close of business on the date of redemption for such share, unless in any
such case the Corporation shall default in performance or payment due upon
redemption thereof. The Conversion Price initially shall be $15.75, and
thereafter shall be subject to adjustment as set forth in Section 10(d). Such
conversion right shall be exercised by the surrender of the shares of Series E
Preferred Stock to be converted to the Corporation at any time during usual
business hours at its principal place of business to be maintained by it,
accompanied by written notice that the holder elects to convert such shares and
specifying the name or names (with addresses) in which a certificate or
certificates for shares of Common Stock are to be issued and
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<PAGE>
(if so required by the Corporation) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Corporation duly executed by the
holder or its duly authorized legal representative and transfer tax stamps or
funds therefor, if required pursuant to Section 10(k). All shares of Series E
Preferred Stock surrendered for conversion shall be delivered to the Corporation
for cancellation and cancelled by it and no shares shall be issued in lieu
thereof.
(b) As promptly as practicable after the surrender, as
herein provided, of any shares of Series E Preferred Stock for conversion
pursuant to Section 10(a), the Corporation shall deliver to or upon the written
order of the holder of the shares so surrendered a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
into which such shares may be or have been converted in accordance with the
provisions of this Section 10. Subject to the following provisions of this
paragraph and of Section 10(d), such conversion shall be deemed to have been
made immediately prior to the close of business on the date that such shares
shall have been surrendered in satisfactory form for conversion, and the Person
or Persons entitled to receive the Common Stock deliverable upon conversion of
such shares shall be treated for all purposes as having become the record holder
or holders of such Common Stock at such appropriate time, and such conversion
shall be at the Conversion Price in effect at such time; provided, however, that
-------- -------
no surrender shall be effective to constitute the Person or Persons entitled to
receive the Common Stock deliverable upon such conversion as the record holder
or holders of such Common Stock while the share transfer books of the
Corporation shall be closed (but not for any period in excess of five days), but
such surrender shall be effective to constitute the Person or Persons entitled
to receive such Common Stock as the record holder or holders thereof for all
purposes immediately prior to the close of business on the next succeeding day
on which such share transfer books are open, and such conversion shall be deemed
to have been made at, and shall be made at the Conversion Price in effect at,
such time on such next succeeding day. In case of any Optional Redemption,
Special Redemption or Maturity Redemption of any shares of Series E Preferred
Stock, the right of conversion shall cease and terminate, as to the shares to be
redeemed, at the close of business on (A) the Business Day immediately preceding
the Optional Redemption Date, in the case of an Optional Redemption, (B) the
Business Day immediately preceding the Special Redemption Date, in the case of
the Special Redemption, and (C) the Business Day immediately preceding the
Maturity Date, in the case of a Maturity Redemption, unless the Corporation
shall default in the
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payment of the applicable redemption price for the shares to be redeemed.
If the last day for the exercise of the conversion right
shall not be a Business Day, then such conversion right may be exercised on the
next preceding Business Day.
(c) To the extent permitted by law, when shares of Series E
Preferred Stock are converted, all dividends accrued and unpaid (whether or not
declared or currently payable) on the Series E Preferred Stock so converted to
the date of conversion shall be immediately due and payable and must accompany
the shares of Common Stock issued upon such conversion; provided, however, that
-------- -------
if shares being converted are held by a Person other than the original holder or
any of its Affiliates and such shares are not "restricted securities" (as
defined in Rule 144 under the Securities Act of 1933, as amended), then no such
accrued and unpaid dividends shall be payable when such shares are converted.
(d) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from
time to time (A) pay a dividend or make a distribution on the outstanding shares
of Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Series E Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series E Preferred Stock been
converted immediately prior to the occurrence of such event. An adjustment made
pursuant to this Section 10(d)(i) shall become effective retroactively (A) in
the case of any such dividend or distribution, to the opening of business on the
day immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (B) in the case of any such subdivision, combination or
reclassification,
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<PAGE>
to the close of business on the day upon which such corporate action becomes
effective.
(ii) In case the Corporation shall at any time or from
time to time issue or sell shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock (other than (x) options granted
to any employee or director of the Corporation pursuant to a stock option plan
approved by the shareholders of the Corporation or (y) rights issued pursuant to
a shareholder rights plan, "poison pill" or similar arrangement that complies
with Section 10(k))) for a consideration per share less than the Conversion
Price then in effect at the record date or issuance date, as the case may be
(the "Date") referred to in the following sentence (treating the price per share
of any security convertible or exchangeable or exercisable into Common Stock as
equal to (A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable (without
regard to any anti-dilution adjustments) upon the conversion, exchange or
exercise of such security into Common Stock divided by (B) the number of shares
of Common Stock initially underlying such convertible, exchangeable or
exercisable security), other than issuances or sales for which an adjustment is
made pursuant to another paragraph of this Section 10(d), then, and in each such
case, the Conversion Price then in effect shall be adjusted by dividing the
Conversion Price in effect on the day immediately prior to the Date by a
fraction (x) the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the Date plus the number of ad-
ditional shares of Common Stock issued or to be issued (or the maximum number
into which such convertible or exchangeable securities initially may convert or
exchange or for which such options, warrants or other rights initially may be
exercised) and (y) the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the Date plus the number
of shares of Common Stock that the aggregate consideration (if any of such
aggregate consideration is other than cash, as valued by the Board of Directors
including a majority of the Directors who are not officers or employees of the
Corporation or any of its Subsidiaries, which determination shall be conclusive
and described in a resolution of the Board of Directors) for the total number of
such additional shares of Common Stock so issued (or into which such convertible
or exchangeable securities may convert or exchange or for which such options,
warrants or other rights may be exercised plus the aggregate amount of any
additional consideration initially payable upon conversion, exchange or exercise
of such security) would purchase at the Conversion Price. Such
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adjustment shall be made whenever such shares, securities, options, warrants or
other rights are issued, and shall become effective retroactively to a date
immediately following the close of business (i) in the case of issuance to
stockholders of the Corporation, as such, on the record date for the de-
termination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (ii) in all other cases, on the date
("issuance date") of such issuance; provided, however, that the determination as
-------- -------
to whether an adjustment is required to be made pursuant to this Section
10(d)(ii) shall only be made upon the issuance of such shares or such
convertible or exchangeable securities, options, warrants or other rights, and
not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
option, warrants or other right; provided, further, that if any convertible or
-------- -------
exchangeable securities, options, warrants or other rights (or any portions
thereof) that shall have given rise to an adjustment pursuant to this Section
10(d)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Conversion Price hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares of Common Stock cor-
responding to such convertible or exchangeable securities, options, warrants or
other rights as shall have expired or terminated, (y) treating the additional
shares of Common Stock, if any, actually issued or issuable pursuant to the
previous exercise of such convertible or exchangeable securities, options,
warrants or other rights as having been issued for the consideration actually
received and receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights that remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from
time to time distribute to all holders of shares of its Common Stock (including
any such distribution made in connection with a consolidation or merger in which
the Corporation is the resulting or surviving corporation and the Common Stock
is not changed or exchanged or a redemption of any rights or other securities
issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) cash, evidences of indebtedness of the Corporation or another
issuer, securities of the Corporation or another issuer or other assets
(excluding
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(A) Permitted Dividends described in clause (B) of the definition thereof and
(B) securities for which adjustment is made under Section 10(d)(i) or Section
10(d)(ii)), then, and in each such case, the Conversion Price then in effect
shall be adjusted by dividing the Conversion Price in effect immediately prior
to the date of such distribution by a fraction (x) the numerator of which shall
be the Current Market Price of the Common Stock on the record date referred to
below and (y) the denominator of which shall be such Current Market Price of the
Common Stock less the then Fair Market Value (as determined by the Board of
Directors of the Corporation, which determination shall be conclusive) of the
portion of the cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to one share
of Common Stock (but such denominator not to be less than one); provided,
--------
however, that no adjustment shall be made with respect to any distribution of
- - -------
rights to purchase securities of the Corporation if the holder of shares of
Series E Preferred Stock would otherwise be entitled to receive such rights upon
conversion at any time of shares of Series E Preferred Stock into Common Stock
unless such rights are subsequently redeemed by the Corporation, in which case
such redemption shall be treated for purposes of this Section 10(d)(iii) as a
dividend on the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) In the case the Corporation at any time or from
time to time shall take any action affecting its Common Stock, other than an
action described in any of Section 10(d)(i) through Section 10(d)(iii),
inclusive, or Section 10(h), then, the Conversion Price shall be adjusted in
such manner and at such time as the Board of Directors of the Corporation (other
than Purchaser Designees or directors elected pursuant to Section 3(c)) in good
faith determines to be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the Series E Preferred Stock).
(v) The Corporation may make such reductions in the
Conversion Price, in addition to those required by subparagraphs (i), (ii),
(iii) and (iv) of this Section 10(d), as the Board of Directors considers to be
advisable in order to avoid or to diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
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(vi) Notwithstanding anything herein to the contrary,
no adjustment under this Section 10(d) need be made to the Conversion Price
unless such adjustment would require an increase or decrease of at least 1% of
the Conversion Price then in effect. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and
not theretofore made shall be made immediately prior to the conversion of any
shares of Series E Preferred Stock pursuant hereto; provided, however, that any
-------- -------
such adjustment shall in any event be made no later than three years after the
occurrence of the event giving rise to such adjustment.
(e) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Series E Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased Con-
version Price then in effect following such adjustment.
(g) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares of Series E Preferred
Stock. If more than one share of Series E Preferred Stock shall be surrendered
for conversion at one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate Liquidation Preference of the shares of Series E Preferred Stock
so surrendered. If the conversion of any share or shares of Series E Preferred
Stock results in a fraction, an amount equal to such fraction multiplied by the
Current Market Price of the Common Stock on the Business Day preceding the day
of conversion shall be paid to such holder in cash by the Corporation on the
date of issuance
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of the certificates representing the shares issued by the Corporation upon such
conversion.
(h) In case of any capital reorganization or re-
classification or other change of outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value), or in case of any consolidation or merger of the Corporation with
or into another Person (other than a consolidation or merger in which the
Corporation is the resulting or surviving Person and which does not result in
any reclassification or change of outstanding Common Stock), or in case of any
sale or other disposition to another Person of all or substantially all of the
assets of the Corporation (any of the foregoing, a "Transaction"), the
Corporation, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each holder of Series E Preferred Stock at least 10
Business Days prior to effecting any of the foregoing Transactions a certificate
that the holder of each share of Series E Preferred Stock then outstanding shall
have the right thereafter to convert such share of Series E Preferred Stock into
the kind and amount of shares of stock or other securities (of the Corporation
or another issuer) or property or cash receivable upon such Transaction by a
holder of the number of shares of Common Stock into which such share of Series E
Preferred Stock could have been converted immediately prior to such Transaction.
Such certificate shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
10. If, in the case of any such Transaction, the stock, other securities, cash
or property receivable thereupon by a holder of Common Stock includes shares of
stock or other securities of a Person other than the successor or purchasing
Person and other than the Corporation, which controls or is controlled by the
successor or purchasing Person or which, in connection with such Transaction,
issues stock, securities, other property or cash to holders of Common Stock,
then such certificate also shall be executed by such Person, and such Person
shall, in such certificate, specifically acknowledge the obligations of such
successor or purchasing Person and acknowledge its obligations to issue such
stock, securities, other property or cash to the holders of Series E Preferred
Stock upon conversion of the shares of Series E Preferred Stock as provided
above. The provisions of this Section 10(h) and any equivalent thereof in any
such certificate similarly shall apply to successive Transactions. The
provisions of this Section 10(h) and any equivalent thereof in any such
certificate are and shall be in addition to, and not in lieu of, the
requirements with respect to a Mandatory Redemption.
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(i) In case at any time or from time to time:
(A) the Corporation shall declare a dividend (or any
other distribution) on its Common Stock (other than a Permitted Dividend);
(B) the Corporation shall authorize the granting to
the holders of its Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or warrants;
(C) there shall be any reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock,
or a change in par value, or from par value to no par value, or from no par
value to par value), or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of the Corporation is
required, or any sale or other disposition of all or substantially all of the
assets of the Corporation; or
(D) the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; then the Corporation shall mail to
each holder of shares of Series E Preferred Stock at such holder's address as it
appears on the transfer books of the Corporation, as promptly as possible but in
any event at least ten days prior to the applicable date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights or warrants or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up is expected to become effec-
tive; provided that in the case of any event to which Section 10(h) applies, the
--------
Corporation shall give at least 10 days' prior written notice as aforesaid.
Such notice also shall specify the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
shares of stock or other securities or property or cash deliverable upon such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
(j) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series E Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series E Preferred Stock, and shall take all action required to increase
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the authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Series E
Preferred Stock.
(k) The Corporation shall not adopt a shareholders right
plan, "poison pill" or similar arrangement unless such plan or arrangement shall
provide that (i) each holder of a share of Series E Preferred Stock shall be
entitled to receive thereunder, upon conversion of a share of Series E Preferred
Stock (in accordance with the terms hereof) prior to the earlier to occur of
either the date of redemption of the rights issued under such plan or the date
of expiration of the rights issued under such plan, rights for each share of
Common Stock issued upon conversion of such share of Series E Preferred Stock in
an amount equal to the amount of rights issued with respect to each outstanding
share of Common Stock pursuant to such plan and (ii) if such rights are redeemed
prior to the conversion of any share of Series E Preferred Stock into Common
Stock, then upon conversion of such share of Series E Preferred Stock the holder
thereof shall receive an amount in cash equal to the amount in cash that such
holder would have received had he converted such share of Series E Preferred
Stock prior to such redemption (unless prior to such conversion the Conversion
Price applicable to such share of Series E Preferred Stock shall have been
adjusted pursuant to Section 10(d)(iii) as a result of such redemption).
(1) The issuance or delivery of certificates for Common
Stock upon the conversion of shares of Series E Preferred Stock shall be made
without charge to the converting holder of shares of Series E Preferred Stock
for such certificates or for any tax in respect of the issuance or delivery of
such certificates or the securities represented thereby, and such certificates
shall be issued or delivered in the respective names of, or in such names as may
be directed by, the holders of the shares of Series E Preferred Stock converted;
provided, however, that the Corporation shall not be required to pay any tax
- - -------- -------
that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
shares of Series E Preferred Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person or
Persons requesting the issuance or delivery thereof shall have paid to the
Corporation the amount of such tax or shall have established to the reasonable
satisfaction of the Corporation that such tax has been paid.
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Section 11. Exchange.
--------
(a) Subject to the provisions of this Section 11, the
Corporation shall have the right, with the consent of the holders of all of the
outstanding shares of Series E Preferred Stock (which consent may be withheld
for any reason whatsoever), at any time but on only one occasion, to exchange
all (but not less than all) of the shares of Series E Preferred Stock for
Convertible Subordinated Notes of the Corporation ("Convertible Notes"), at a
price per share equal to the Liquidation Preference per share, with the
Convertible Notes valued for such purpose at their face value. Simultaneously
with such exchange the Corporation shall pay to each holder of Series E
Preferred Stock an amount per share in cash equal to all accrued and unpaid
dividends thereon, whether or not declared or currently payable, to the date
fixed for exchange thereof. The Convertible Notes shall have an annual
interest rate equal to the annual dividend rate on Series E Preferred Stock and
shall contain other terms substantially similar to the Series E Preferred Stock,
including the date of maturity thereof and the right to convert such notes into
shares of Common Stock.
(b) Notice of an exchange of shares of Series E Preferred
Stock pursuant to Section 11(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for exchange; and, in any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Series E
Preferred Stock hereunder the Board of Directors may fix a record date for the
determination of shares of Series E Preferred Stock to be exchanged, or may
cause the transfer books of the Corporation for the Series E Preferred Stock to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for exchange.
(c) On the date of any exchange being made pursuant to
Section 11(a) that is specified in a notice given pursuant to Section 11(b), the
Corporation shall, and at any time after the date that is 10 days prior to the
date of exchange the Corporation may, deposit for the benefit of the holders of
shares of Series E Preferred Stock to be exchanged (i) the Convertible Notes
necessary for such exchange and (ii) an amount in cash equal to all dividends
payable with respect thereto upon such exchange with a bank or trust company in
the
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Borough of Manhattan, The City of New York, that is "well capitalized" within
the meaning of the applicable banking regulations and having a capital and
surplus of at least $500,000,000. Any Convertible Notes so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such exchange shall revert to the Corporation. After such reversion, any such
bank or trust company shall, upon demand, return to the Corporation such
unclaimed Convertible Notes and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof and any holder of shares of
Series E Preferred Stock to be exchanged shall look only to the Corporation for
the delivery of the Convertible Notes. In the event that Convertible Notes and
moneys are deposited pursuant to this Section 11(c) in respect of shares of
Series E Preferred Stock that are converted in accordance with the provisions of
Section 10, such Convertible Notes and moneys shall, upon such conversion,
revert to the Corporation and, upon demand, such bank or trust company shall
return to the Corporation such Convertible Notes and moneys and shall be
relieved of all responsibilities to the holders of such converted shares in re-
spect thereof. Any interest accrued on Convertible Notes deposited pursuant to
this Section 11(c) shall accrue for the accounts of, and be payable to, the
holders of shares of Series E Preferred Stock to be exchanged therefor.
(d) Notice of exchange having been given as aforesaid and
not having been deemed terminated as aforesaid, upon the deposit of Convertible
Notes pursuant to clause (i) of Section 11(c) and the deposit of the cash
referred to in clause (ii) of Section 11(c) in respect of shares of Series E
Preferred Stock to be exchanged pursuant to Section 11(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the date of exchange designated in the notice of
exchange (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon (except as provided in
paragraph (b) above) shall cease to accrue, and (iii) all rights of the holders
of shares of Series E Preferred Stock to be exchanged shall cease and terminate,
excepting only the right to receive the Convertible Notes therefor, the right to
receive the dividends described in paragraph (b) above and the right to convert
such shares into shares of Common Stock until the close of business on the
Business Day preceding the date of exchange, in accordance with Section 10;
provided, however, that if the Corporation shall default in the execution and
- - -------- -------
delivery of the Convertible Notes, the shares of Series E Preferred Stock that
were to be exchanged shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Series E Preferred
Stock until
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such time as such default shall no longer be continuing or shall have been
waived by holders of at least 66-2/3% of the then outstanding shares of Series E
Preferred Stock.
Section 12. Sinking Fund.
-------------
(a) So long as any shares of Series E Preferred Stock shall
be outstanding, the Corporation shall, on the final business day (any such date,
the "Sinking Fund Date") of each calendar year after 2003, (i) set aside a sum
of money equal to 3-1/3% of the aggregate liquidation preference of the shares
of Series E Preferred Stock then outstanding, and (ii) apply such money to
redeem such number of shares of Series E Preferred Stock at the Sinking Fund
Redemption Price (the Corporation's obligations described in this paragraph in
respect of any Sinking Fund Date being hereinafter referred to as the "Sinking
Fund Obligation" for such date) at a price per share (the "Sinking Fund
Redemption Price") equal to the sum of (A) the Liquidation Preference of such
share and (B) an amount per share equal to all accrued and unpaid dividends
thereon, whether or not declared or payable, to the applicable Sinking Fund
Date, in immediately available funds; provided, however, that if the Corporation
-------- -------
for any reason fails to discharge its Sinking Fund Obligation on any Sinking
Fund Date, such Sinking Fund Obligation, to the extent not discharged, shall
become an additional Sinking Fund Obligation for each succeeding Sinking Fund
Date until fully discharged; provided, further, that no shares of Series E
-------- -------
Preferred Stock purchased or acquired by the Corporation otherwise than through
redemption pursuant to this paragraph or pursuant to an Optional Redemption may
be credited against the Sinking Fund Obligation in respect of any Sinking Fund
Date.
(b) The shares to be redeemed pursuant to paragraph (a)
shall be selected pro rata (as nearly as may be) so that the number of shares
redeemed from each holder shall be the same proportion of all the shares to be
redeemed that the total number of shares of Series E Preferred Stock then held
by such holder bears to the total number of shares of Series E Preferred Stock
then outstanding.
(c) Notice of the Sinking Fund Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Sinking Fund Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Sinking
Fund Date to each holder of
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shares of Series E Preferred Stock, at such holder's address as it appears on
the transfer books of the Corporation.
(d) On the Sinking Fund Date, the Corporation shall, and at
any time after such notice shall have been mailed and before the Sinking Fund
Date the Corporation may, deposit for the benefit of the holders of shares of
Series E Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series E Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Sinking Fund Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 12(c) shall be
paid from time to time to the Corporation for its own account.
(e) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 12(c) in respect of shares of
Series E Preferred Stock to be redeemed pursuant to Section 12(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Sinking Fund Date, (i) the
rights to receive dividends thereon shall cease to accrue and (ii) all rights of
the holders of shares of Series E Preferred Stock shall cease and terminate,
excepting only the right to receive the Sinking Fund Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
Sinking Fund Redemption Price, the shares of Series E Preferred Stock that were
to be redeemed shall thereafter be deemed to be outstanding and the holders
thereof shall have all of the rights of a holder of Series E Preferred Stock
until such time as such default shall no longer be continuing.
Article 2. Series F Preferred Stock.
------------------------
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as
"Cumulative Preferred Stock, Series F" (the "Series F Preferred Stock"). The
number of shares initially constituting the Series F Preferred Stock shall be
171,900 which number may be
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decreased (but not increased) by the Board of Directors without a vote of
stockholders; provided, however, that such number may not be decreased below the
number of then outstanding shares of Series F Preferred Stock.
(b) The Series F Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank pari
----
passu with the Corporation's $2.50 Cumulative Convertible Preferred Stock,
- - -----
Series A (the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock,
Series B (the "Series B Preferred Stock"), Cumulative Convertible Preferred
Stock, Series E (the "Series E Preferred Stock"), Cumulative Preferred Stock,
Series G (the "Series G Preferred Stock"), Cumulative Preferred Stock, Series H
(the "Series H Preferred Stock"), Cumulative Preferred Stock, Series T (the
"Series T Preferred Stock" and together with the Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock,
the "Chicago Preferred Stock") and the New Preferred Stock (if any) (the Series
A Preferred Stock, Series B Preferred Stock, Chicago Preferred Stock (other than
the Series F Preferred Stock) and New Preferred Stock (if any) are collectively
defined for the purposes of this Article 3 as the "Other Preferred Stock") and
prior to all other classes and series of capital stock of the Corporation now or
hereafter authorized including, without limitation, the Common Stock, par value
$1.00 per share, of the Corporation (the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Article 6 below.
Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series F Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
capital stock of the Corporation other than the Other Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the Liquidation Preference thereof equal to
9.75% (subject to increase pursuant to Section 2(b)), calculated on the basis of
a 360-day year consisting of twelve 30-day months, accruing and payable in equal
quarterly payments, in immediately available funds, on the Business Day
immediately preceding the last day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date") commencing on the Business Day immediately preceding December 31,
1994; provided, however, that with respect to such first Quarterly Dividend
-------- -------
Payment Date, the holders of shares of
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Series F Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of the assets of the Corporation at the time
legally available therefor, a cumulative cash dividend in respect of each share
of Series F Preferred Stock in the amount of (i) 9.75% (or the then effective
annual rate) of the Liquidation Preference multiplied by (ii) a fraction equal
to (A) the number of days from (and including) the Issue Date to (but excluding)
such Quarterly Dividend Payment Date divided by (B) 360. No interest shall be
payable in respect of any dividend payment on the Series F Preferred Stock that
may be in arrears.
(b) If (i) a private placement or public offering of the
New Preferred Stock or the New Senior Notes pursuant to which the Corporation
shall receive at least $100,000,000 in gross proceeds is not consummated within
360 days after the termination of the Merger Agreement or (ii) the annual
dividend rate on the New Preferred Stock or the annual interest rate on the New
Senior Notes, as applicable, exceeds 13%, then the annual rate of the cumulative
cash dividends shall be increased to a rate of 10.75%, effective (x) in the case
of clause (i), the date that is 360 days after the termination of the Merger
Agreement and (y) in the case of clause (ii), the date of the issuance of the
New Preferred Stock or the New Senior Notes, as applicable. If on any date (A)
all of the Purchaser Designees shall not have been elected to the Corporation's
Board of Directors or any such Purchaser Designees shall not have been appointed
to the committees of the Corporation's Board of Directors, in accordance with
the provisions of Section 6.17 of the Securities Purchase Agreement, (B) the
Corporation shall have failed to declare, or shall have failed to pay, the full
amount of dividends payable on the Series F Preferred Stock for six quarterly
dividend periods, (C) the Corporation shall have failed to satisfy its
obligation to convert shares of Series E Preferred Stock pursuant to Article 1,
Section 10 or (D) a breach of any of the Material Provisions of the Securities
Purchase Agreement or any of the Corporation's material obligations under the
Registration Rights Agreement shall have occurred then, effective as of the date
of such failure or breach, the annual rate of the cumulative cash dividends
shall be increased to a rate of 11.75% and shall remain at such rate until such
time as (1) the Purchaser Designees shall have been elected to the Corporation's
Board of Directors and appointed to the committees of the Corporation's Board of
Directors in accordance with the provisions of Section 6.17 of the Securities
Purchase Agreement, (2) all dividends accrued to date on the Series F Preferred
Stock shall have been declared and paid in full, (3) any conversion obligations
in respect of the Chicago Preferred Stock that have become due shall have been
fully satisfied and (4) there shall exist no breach of any of
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the Material Provisions of the Securities Purchase Agreement or any of the
Corporation's material obligations under the Registration Rights Agreement, as
the case may be, at which time the annual rate of the cumulative cash dividends
shall be reduced to a rate of 9.75%, subject to being increased to a rate of
11.75% in the event of each and every subsequent event of the character
indicated above.
(c) Dividends payable pursuant to Section 2(a) shall begin
to accrue and be cumulative from the Issue Date, and shall accrue on a daily
basis, in each case whether or not declared. Dividends paid on the shares of
Series F Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares of Series F Preferred Stock
at the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series F Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be not
more than 60 days nor less than 10 days prior to the date fixed for the payment
thereof. Accumulated but unpaid dividends for any past quarterly dividend
periods may be declared and paid at any time, without reference to any regular
Quarterly Dividend Payment Date, to holders of record on such date, not more
than 60 nor less than 10 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(d) The holders of shares of Series F Preferred Stock shall
not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights.
-------------
In addition to any voting rights provided by law, the
holders of shares of Series F Preferred Stock shall have the following voting
rights:
(a) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Series F Preferred Stock, voting
separately as a single class, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be necessary to (i)
authorize, adopt or approve an amendment to the Certificate of Incorporation
that would increase or decrease the par value of the shares of Series F
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Series F Preferred Stock, (ii) amend, alter or repeal the
Certificate of Incorporation so as to affect the
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<PAGE>
shares of Series F Preferred Stock adversely or (iii) effect the voluntary
liquidation, dissolution, winding up, recapitalization or reorganization of the
Corporation, or the consolidation or merger of the Corporation with or into any
other Person, or the sale or other distribution to another Person of all or
substantially all of the assets of the Corporation; provided, however, that no
-------- -------
separate vote of the holders of Series F Preferred Stock shall be required to
effect any of the transactions described in clause (iii) above unless such
transaction would either require a class vote pursuant to clause (i) or (ii)
above or would require a vote by any shareholders of the Corporation (other than
pursuant to this sentence); provided further, that no separate vote of the
-------- -------
holders of the Series F Preferred Stock as a class shall be required in the case
of a recapitalization, reorganization, consolidation or merger of, or sale by,
the Corporation if (A) (a) such recapitalization, reorganization, consolidation,
merger or sale constitutes a Specified Corporate Action, (b) the Corporation has
sufficient funds legally available to it (after giving effect to such
transaction) to redeem, at the then applicable price hereunder and pursuant to
the terms hereof, all the outstanding shares of Series F Preferred Stock, (c)
such redemption shall not be prohibited by any agreement to which the
Corporation or any of its Subsidiaries is a party, by applicable law or
otherwise, (d) the Board of Directors of the Corporation, including a majority
of the directors who are not officers or employees of the Corporation, shall
have adopted a resolution confirming that such funds are available and that
the holders of Series F Preferred Stock have the right to require such
redemption and (e) the Corporation shall have set aside sufficient
funds through the Specified Corporation Action Redemption Date to redeem the
shares of Series F Preferred Stock held by such holders (except that no funds
need be set aside with respect to such shares held by any such holder who has
theretofore notified the Corporation (whether pursuant to Section 6(a)(iii) or
otherwise) that it will not require redemption of such shares) or (B) (1) the
Corporation shall be the resulting or surviving corporation, (2) the resulting
or surviving corporation will have after such recapitalization, reorganization,
consolidation or merger no Senior Stock or Parity Stock either authorized or
outstanding (except such Parity Stock of the Corporation as may have been
authorized or outstanding immediately preceding such consolidation or merger) or
such stock of the resulting or surviving corporation (having the same powers,
preferences and special rights of any such Parity Stock) as may be issued in
exchange therefor), (3) each holder of shares of Series F Preferred Stock
immediately preceding such recapitalization, reorganization, consolidation or
merger will receive in exchange therefor the same number of shares of stock,
with the same preferences, rights and powers,
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<PAGE>
of the resulting or surviving corporation, (4) after such recapitalization,
reorganization, consolidation or merger the resulting or surviving corporation
shall not be in breach of any of the terms hereof, any of the Material
Provisions of the Securities Purchase Agreement or any of its material obliga-
tions under the Registration Rights Agreement and (5) all or substantially all
the holders of the outstanding shares of capital stock of the Corporation
immediately prior to such consolidation or merger are entitled to receive shares
representing 50% or more of the then outstanding shares of capital stock of the
resulting or surviving corporation entitled to vote generally in the election of
directors.
(b) If on any date (i) the Corporation shall have failed to
declare, or shall have failed to pay, the full amount of dividends payable on
any series of Chicago Preferred Stock for six quarterly dividend periods or (ii)
a breach of any of the Material Provisions of the Securities Purchase Agreement
or any of the Corporation's material obligations under the Registration Rights
Agreement shall have occurred, then the number of directors constituting the
Board of Directors shall, without further action, be increased by two and the
holders of shares of Series F Preferred Stock shall have, in addition to the
other voting rights set forth herein with respect to the Series F Preferred
Stock, the exclusive right, together with the holders of all other series of
Chicago Preferred Stock, voting separately as a single class together with the
holders of such other series of Chicago Preferred Stock, to elect two directors
of the Corporation to fill such newly created directorship, by written consent
as provided herein, or at a special meeting of such holders called as provided
herein. Any such additional directors shall continue as directors (subject to
reelection or removal as provided in Section 3(c)(ii)) and the holders of
Series F Preferred Stock shall have such additional voting rights
until such time as (A) dividends then payable on all series of Chicago Preferred
Stock shall have been declared and paid in full and (B) there shall exist no
breach of any of the Material Provisions of the Securities Purchase Agreement or
any of the Corporation's material obligations under the Registration Rights
Agreement, as the case may be, at which time such additional directors shall
cease to be directors, the number of directors constituting the Board of Di-
rectors shall be reduced by two and such additional voting rights of the holders
of all series of Chicago Preferred Stock shall terminate, subject to revesting
in the event of each and every subsequent event of the character indicated
above.
(c) (i) The foregoing right of holders of shares of Series
F Preferred Stock to take any action as provided in
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Section 3(b) may be exercised at any annual meeting of stockholders or at a
special meeting of holders of shares of Chicago Preferred Stock, held for such
purpose as hereinafter provided or at any adjournment thereof, or by the written
consent, delivered to the Secretary of the Corporation, of the holders of the
minimum number of shares required to take such action.
So long as such right to vote continues (and unless such
right has been exercised by written consent of the minimum number of shares
required to take such action), the President of the Corporation may call, and
upon the written request of holders of record of at least 5% of the aggregate
outstanding shares of Chicago Preferred Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the by-laws
of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series F Preferred Stock shall have the right, voting separately as a
single class together with the holders of all other series of Chicago Preferred
Stock, to elect two directors of the Corporation as provided in Section 3(b) or
to take any action, the presence in person or by proxy of the holders of record
of one-third of the total aggregate number of shares of Chicago Preferred Stock
then outstanding and entitled to vote on the matter shall be necessary and
sufficient to constitute a quorum. At any such meeting or at any adjournment
thereof:
(A) the absence of a quorum of the holders of shares of
Chicago Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of shares
of Chicago Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock
shall not prevent the election of directors to be elected by the
holders of shares of Chicago Preferred Stock, or the taking of
any action as provided in Section 3(b); and
(B) in the absence of a quorum of the holders of shares of
Chicago Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the
meeting as to the actions to be taken by the holders of shares of
Chicago Preferred Stock, from time to time and place to place
without notice other than announcement at the meeting until a
quorum shall be present.
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For taking of any action as provided in Section 3(a) or
Section 3(b) by the holders of shares of Series F Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his name on
the transfer books of the Corporation as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held; provided, however, that shares of Chicago Preferred Stock held
-------- -------
by the Corporation or any Subsidiary of the Corporation shall not be deemed to
be outstanding for purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Chicago
Preferred Stock, as provided in Section 3(b) shall, unless his term shall expire
earlier in accordance with the provisions thereof, hold office until the annual
meeting of stockholders next succeeding his election or until his successor,
if any, is elected and qualified.
If any director so elected by the holders of Chicago Pre-
ferred Stock shall cease to serve as a director before his term shall expire
(except by reason of the termination of the voting rights accorded to the
holders of Chicago Preferred Stock, in accordance with Section 3(b)), the
holders of the Chicago Preferred Stock then outstanding and entitled to vote for
such director may, by written consent as provided herein, or at a special
meeting of such holders called as provided herein, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
Any director elected by the holders of shares of Chicago
Preferred Stock, voting together as a separate class, may be removed from office
with or without cause only by the vote or written consent of the holders of at
least a majority of the aggregate outstanding shares of Chicago Preferred Stock
at the time of removal. A special meeting of the holders of shares of Chicago
Preferred Stock, may be called in accordance with the procedures set forth in
Section 3(c)(i).
Section 4. Certain Restrictions.
--------------------
(a) So long as any shares of Series F Preferred Stock
remain outstanding, the Corporation shall not declare or make any Restricted
Payment.
(b) Whenever quarterly dividends payable on shares of
Series F Preferred Stock as provided in Section 2(a) are not paid in full, at
such time and thereafter until all unpaid
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dividends payable, whether or not declared, on the outstanding shares of
Series F Preferred Stock shall have been paid in full or declared and set apart
for payment at such time and thereafter until all necessary funds have been
set apart for payment, or whenever the Corporation shall not have paid the
Optional Redemption Price, the Specified Corporate Action Redemption Price,
the Conversion Redemption Price, the Special Redemption Price or the Maturity
Redemption Price when due, at such time and thereafter until all such amounts
have been paid in full or set apart for payment, the Corporation shall not:
(A) declare or pay dividends, or make any other distributions, on any shares
of Junior Stock, or (B) declare or pay dividends, or make any other
distributions, on any shares of Parity Stock, except dividends or
distributions paid ratably on the Series F Preferred Stock and all Parity
Stock on which dividends are payable and in arrears, in proportion to the
total amounts to which the holders of all shares of the Series F Preferred
Stock and Parity Stock are then entitled.
(c) Whenever dividends payable on shares of Series F
Preferred Stock as provided in Section 2 are not paid in full, at such time and
thereafter until all unpaid dividends payable, whether or not declared, on the
outstanding shares of Series F Preferred Stock shall have been paid in full or
declared and set apart for payment, at such time and thereafter until all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Specified Corporate
Action Redemption Price, the Conversion Redemption Price, the Special Redemption
Price or the Maturity Redemption Price when due, at such time and thereafter
until all such amounts have been paid in full or set apart for payment, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Stock or Parity Stock; provided, however, that (A) the
-------- -------
Corporation may accept shares of any Parity Stock or Junior Stock for conversion
into Junior Stock and (B) the Corporation may at any time redeem, purchase or
otherwise acquire shares of any Parity Stock pursuant to any mandatory
redemption, put, sinking fund or other similar obligation contained in such
Parity Stock, pro rata with the Series F Preferred Stock in proportion to the
total amount then required to be applied by the Corporation to redeem, repur-
chase, or otherwise acquire shares of Series F Preferred Stock and shares of
such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
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Section 5. Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem
any shares of Series F Preferred Stock prior to December 30, 2001. Thereafter,
(A) at any time so long as shares of Common Stock shall have traded on the New
York Stock Exchange (or another national securities exchange or on Nasdaq) on
each trading day during a 30-consecutive trading day period (each of which
trading days shall be after December 30, 2001 and no more than 5 Business Days
prior to the date notice is given of an Optional Redemption (as defined below))
and had a Closing Price on at least 20 of such trading days in excess of 150% of
the Conversion Amount in effect on such trading day as determined pursuant to
Section 11, subject to the restrictions contained in Section 4 or (B) at any
time after December 30, 2009, the Corporation shall have the right, at its sole
option and election, to redeem (the "Optional Redemption") all or a portion of
the shares of Series F Preferred Stock, on not more than 45 nor less than 30
days' notice of the date of redemption (any such date, an "Optional Redemption
Date") at a price per share (the "Optional Redemption Price") equal to the sum
of (A) the following prices per share (stated as a percentage of the Liquidation
Preference of such share), (B) an amount per share equal to all accrued and
unpaid dividends thereon, whether or not declared or payable, to the applicable
Optional Redemption Date and (C) the Additional Amount (as defined in Section
11), in immediately available funds:
Optional Redemption Price
If Redeemed as a Percentage of
During the Period Liquidation Preference
----------------- -------------------------
December 30, 2001 to 102.775%
December 29, 2002
December 30, 2002 to 101.850%
December 29, 2003
December 30, 2003 to 100.925%
December 29, 2004
December 30, 2004 and 100%
thereafter
(ii) If the Corporation shall have the right to, or shall
determine to, redeem less than all the shares of Series F Preferred Stock then
outstanding pursuant to paragraph (i), the shares to be redeemed shall be
selected pro rata (as nearly as may be) so that the number of shares redeemed
from each holder
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shall be the same proportion of all the shares to be redeemed that the total
number of shares of Series F Preferred Stock then held by such holder bears to
the total number of shares of Series F Preferred Stock then outstanding.
(iii) Notwithstanding the foregoing, any shares of Series F
Preferred Stock redeemed pursuant to this Section 5(a) at any time when the
holders of shares of Series F Preferred Stock have the right to require the
Corporation to redeem the shares of Series F Preferred Stock pursuant to Section
6 or an event giving rise to such a right has occurred shall be redeemed at a
price equal to higher of the price to be paid pursuant to Section 5(a) and the
price to be paid pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the
Optional Redemption Date fixed for redemption, the Optional Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the shares of Series F Preferred Stock and that on and after the
date of such Optional Redemption dividends will cease to accrue on such shares
and be given by publication in a newspaper of general circulation in the Borough
of Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), not less
than 30, nor more than 45, days prior to the Optional Redemption Date; and, in
any case, a similar notice shall be mailed at least 30, but not more than 45,
days prior to the Optional Redemption Date to each holder of shares of Series F
Preferred Stock, at such holder's address as it appears on the transfer books of
the Corporation. In order to facilitate the redemption of shares of Series F
Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series F Preferred Stock to be redeemed, or may cause
the transfer books of the Corporation for the Series F Preferred Stock to be
closed, not more than 60 days or less than 45 days prior to the Optional
Redemption Date.
(c) On the date of any Optional Redemption that is
specified in a notice given pursuant to Section 5(b), the Corporation shall, and
at any time after such notice shall have been mailed and before the Optional
Redemption Date the Corporation may, deposit for the benefit of the holders of
shares of Series F Preferred Stock the funds necessary for such redemption with
a bank or trust company in the Borough of Manhattan, The City of New York, that
is "well capitalized" within the meaning of the applicable bank regulations and
having a capital and surplus of at least $500,000,000. Any moneys so deposited
by the Corporation and unclaimed at the end of two years from the Optional
Redemption Date shall revert to the
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general funds of the Corporation. After such reversion, any such bank or trust
company shall, upon demand, pay over to the Corporation such unclaimed amounts
and thereupon such bank or trust company shall be relieved of all responsibility
in respect thereof and any holder of shares of Series F Preferred Stock to be
redeemed shall look only to the Corporation for the payment of the Optional Re-
demption Price. Any interest accrued on funds deposited pursuant to this
Section 5(c) shall be paid from time to time to the Corporation for its own
account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 5(c) in respect of shares of
Series F Preferred Stock to be redeemed pursuant to Section 5(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Optional Redemption Date (i)
the shares represented thereby shall no longer be deemed outstanding, (ii) the
rights to receive dividends thereon shall cease to accrue, and (iii) all rights
of the holders of shares of Series F Preferred Stock to be redeemed shall cease
and terminate, excepting only the right to receive the Optional Redemption Price
therefor; provided, however, that if the Corporation shall default in the
-------- -------
payment of the Optional Redemption Price, the shares of Series F Preferred Stock
shall thereafter be deemed to be outstanding and the holders thereof shall have
all of the rights of a holder of Series F Preferred Stock until such time as
such default or failure shall no longer be continuing or shall have been waived
by holders of at least 66-2/3% of the then outstanding shares of Series F Pre-
ferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series F Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series F Preferred Stock. On or after the
Optional Redemption Date fixed for redemption as stated in such notice, each
holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Optional Redemption
Price. If less than all the shares evidenced by any such surrendered
certificate are redeemed, a new certificate shall be issued evidencing the
unredeemed shares.
Section 6. Mandatory Redemption at the Option
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<PAGE>
of the Holder.
---------------------------------
(a) (i) If one or more events constituting a Specified
Corporate Action shall occur, each holder of shares of the Series F Preferred
Stock shall have the right, at such holder's option on the date or dates
specified in Section 6(a)(ii) (the "Specified Corporate Action Redemption
Date"), to require the Corporation to redeem (a "Specified Corporate Action
Redemption") all or any part of the shares of Series F Preferred Stock then held
by such holder as such holder may elect at a price per share equal to the
greater of (I) the sum of (A) the following prices per share (stated as a
percentage of the Liquidation Preference of such share) and (B) an amount per
share equal to all accrued and unpaid dividends thereon, whether or not declared
or payable, to the applicable Specified Corporate Action Redemption Date
If the Specified Corporate Specified Corporate Action
Action Redemption Date Redemption as a Percentage of
Occurs During the Period Liquidation Preference
------------------------ ----------------------------
December 30, 1994 to 110.4%
June 29, 1995
June 30, 1995 to 116.8%
December 29, 1995
December 30, 1995 to 126.7%
June 29, 1996
June 30, 1996 and 138.0%
thereafter
and (II) the sum of (x) 100% of the Liquidation Preference of such share, (y) an
amount per share equal to all accrued and unpaid dividends thereon whether or
not declared or payable to the Specified Corporate Action Redemption Date and
(z) the Additional Amount measured as of the date of any such redemption, in
either case in immediately available funds (the "Specified Corporate Action
Redemption Price").
(ii) The date fixed for each Specified Corporate Action
Redemption shall be fixed by the Corporation and shall be not less than 60 days
nor more than 90 days following the occurrence of any Specified Corporate Action
giving rise thereto (or, in the case of a Specified Corporate Action as
described in clause (iii) of the definition of "Specified Corporate Action," not
less than 60 days nor more than 90 days following the date on which the
Corporation obtains actual
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knowledge of such Specified Corporate Action); provided, however, that in the
-------- -------
event of a Specified Corporate Action that constitutes a Control Transaction, in
addition to the dates fixed for a Specified Corporate Action Redemption as
specified above, an additional Specified Corporate Action Redemption Date shall
be set for the date and time immediately preceding the consummation of any such
Control Transaction (and the Market Price utilized in determining the Additional
Amount for the purposes of such Specified Corporate Action Redemption shall be
the highest price per share of Common Stock paid by any acquiror in such Control
Transaction); provided, further, that, upon the request of a holder, the Board
-------- -------
of Directors shall agree to extend the date of redemption in respect of any such
Specified Corporate Action (without changing the consideration that is otherwise
payable in respect of such redemption other than with respect to adjustments to
the amount of accrued and unpaid dividends included in such redemption price) to
the extent necessary for any holder of shares of Series F Preferred Stock to
avoid liability under Section 16(b) of the Exchange Act, provided that no such
--------
redemption extension shall be for a period greater than six months. The
Corporation shall, within 5 days of the occurrence of a Specified Corporate
Action (or, in the case of a Specified Corporate Action described in clause
(iii) of the definition of "Specified Corporate Action," within 5 days of the
date on which the Corporation obtains actual knowledge of such Specified Corpo-
rate Action), give notice thereof by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such pub-
lication shall be required by applicable law, rule, regulation or securities
exchange requirement), and, in any case, a similar notice shall be mailed to
each holder of shares of the Series F Preferred Stock, at such holder's address
as it appears on the transfer books of the Corporation. Each such notice shall
specify the Specified Corporate Action that has occurred and the date of such
occurrence, the place or places of payment, the then effective Specified
Corporate Action Redemption Price and the date the right of such holder to
require a Specified Corporate Action Redemption shall terminate.
(iii) If the notice sent by the Corporation pursuant to
Section 6(a)(ii) shall contain (i) a form inquiring as to whether a holder of
shares of Series F Preferred Stock intends to surrender the certificate(s)
representing such shares for redemption pursuant to this Section 6(a) and (ii) a
stamped self-addressed envelope for return of such form to the Corporation or
its designee, within ten Business Days of such notice, each holder shall return
such inquiry form to the Corporation and shall indicate in such form the
proportion of such holder's shares of Series F Preferred Stock that will be
surrendered for redemption pursuant to this Section 6(a). If
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such notice shall indicate that if a holder does not respond prior to ten
Business Days after the date of such notice that such holder will be deemed to
have notified the Corporation that it will not require the redemption of the
shares of Series F Preferred Stock held by such holder for purposes of Section
3(b) and such holder does not respond to the Corporation's inquiry prior to ten
Business Days after the date of such notice, such holder will be deemed to have
notified the Corporation that it will not require the redemption of the shares
of Series F Preferred Stock held by such holder for purposes of Section 3(b).
Nothing contained in this Section 6(a)(iii) shall affect the right of a holder
of Series F Preferred Stock to require the Corporation to redeem such shares
pursuant to Section 6(a)(i).
(b) (i) If at any time the Additional Amount is greater
than 0, then each holder of shares of the Series F Preferred Stock shall have
the right, at such holder's option exercisable at any time (such time, the
"Conversion Date") on 30 days' notice to the Corporation, to require the
Corporation to redeem (a "Conversion Redemption") all or any part of the shares
of Series F Preferred Stock then held by such holder at a price per share (the
"Conversion Redemption Price") equal to the sum of (A) 100% of the Liquidation
Preference of such shares, (B) an amount per share equal to all accrued and
unpaid dividends thereon, whether or not declared or payable, to the applicable
Conversion Redemption Date and (C) the Additional Amount, in immediately
available funds. Notwithstanding the foregoing, if the redemption of any
portion of such shares occurs during the first two years following the Issue
Date or would in the judgment of the Board of Directors of the Corporation have
a material adverse effect on the Corporation, then the Corporation may elect to
deliver with respect to such shares, in lieu of cash, notes, including
subordinated notes, of the Corporation ("Notes") (x) having a final maturity
date no later than ten years from the date of issuance, and (y) having such
other terms and conditions as shall result in a determination that such Notes
have a fair market value as of the date of their proposed issuance at least
equal to the sum of (1) the Conversion Redemption Price with respect to such
shares and (2) customary underwriting discounts and commissions payable with
respect to the sale of securities of a type comparable to the Notes, or shares
of nonconvertible preferred stock ("Redemption Preferred Stock") having the
terms and conditions described in clauses (x) and (y) in lieu of Notes. The
Corporation shall use its best efforts to cause the Notes or the Redemption
Preferred Stock to be registered for immediate resale pursuant to an effective
registration statement under the Securities Act prior to the issuance thereof.
If such registration statement is not effective within 120 days of
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the date of such issuance then the annual interest rate of the Notes or the
annual dividend rate of the Redemption Preferred Stock, as applicable, shall be
increased by 0.5% per annum until such securities are sold pursuant to an
effective registration statement under the Securities Act. For purposes of this
Section 6(b), "fair market value" shall mean the fair market value of the Notes
or Redemption Preferred Stock, as the case may be, as determined by an
investment banking firm of national standing selected by the Corporation and
reasonably acceptable to the holders of a majority of the shares of Series F
Preferred Stock electing to effect such Conversion Redemption. In the case that
the Corporation shall be entitled to deliver either Notes or Redemption
Preferred Stock, it shall be the election of the Corporation whether to deliver
such Notes or Redemption Preferred Stock, except that, if, the sale of the
security to be delivered by the Corporation to effect a Conversion Redemption
would give rise to an additional liability on the part of such holder upon the
sale thereof and it shall so notify the Corporation in writing, the Corporation
shall deliver to such holder the other type of security specified in such
notice.
(c) Each holder of shares of the Series F Preferred Stock
shall have the right, at such holder's option exercisable at any time on 30
days' notice to the Corporation on or after December 30, 2009 (the date of any
such exercise, the "Special Redemption Date"), to require the Corporation to
redeem (a "Special Redemption") all or any part of the shares of Series F
Preferred Stock then held by such holder as such holder may elect by written
notice delivered at least 30 days prior to the Special Redemption Date at a
price per share equal to the sum of (A) 100% of the Liquidation Preference of
such share, (B) an amount per share equal to all accrued and unpaid dividends
thereon whether or not declared or payable to the Special Redemption Date and
(C) the Additional Amount, determined as of the date immediately prior to the
Special Redemption Date (the "Special Redemption Price") in immediately
available funds.
(d) On the date fixed for any Specified Corporate Action
Redemption or on any Conversion Redemption Date or Special Redemption Date, each
holder of shares of Series F Preferred Stock who elects to have shares of Series
F Preferred Stock held by it redeemed shall surrender the certificate
representing such shares to the Corporation (i) at the place designated in such
notice in the case of a Specified Corporate Action Redemption or (ii) at the
Corporation's principal place of business to be maintained by it, in the case of
a Conversion Redemption or Special Redemption, together with an election to have
such redemption made and shall thereupon be entitled to receive payment therefor
provided in this Section 6. If less
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than all the shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after the date of such redemption (i) the rights to receive dividends
thereon shall cease to accrue and (ii) all rights of the holders of shares of
Series F Preferred Stock so redeemed shall cease and terminate, excepting only
the right to receive the Specified Corporate Action Redemption Price or
Conversion Redemption Price or Special Redemption Price therefor, as applicable;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
applicable redemption price the shares of Series F Preferred Stock that were to
be redeemed shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series F Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Series F Preferred
Stock.
Section 7. Redemption Upon Maturity.
------------------------
(a) On December 30, 2034 (the "Maturity Date"), the
Corporation shall redeem (the "Maturity Redemption") the remaining outstanding
shares of the Series F Preferred Stock at a price per share (the "Maturity
Redemption Price") equal to the sum of (A) 100% of the Liquidation Preference
per share, (B) an amount equal to accrued and unpaid dividends thereon, whether
or not declared or payable, to the Maturity Date and (C) the Additional Amount,
determined as of the date immediately prior to the Maturity Date, in immediately
available funds.
(b) Notice of the Maturity Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Maturity Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Maturity
Date to each holder of shares of Series F Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any
time after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series F
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and
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<PAGE>
unclaimed at the end of two years from the date designated for such redemption
shall revert to the general funds of the Corporation. After such reversion, any
such bank or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall be relieved of
all responsibility in respect thereof and any holder of shares of Series F
Preferred Stock to be redeemed shall look only to the Corporation for the
payment of the Maturity Redemption Price. Any interest accrued and unpaid on
funds deposited pursuant to this Section 5(c) shall be paid from time to time to
the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 7(c) in respect of shares of
Series F Preferred Stock to be redeemed pursuant to Section 7(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Maturity Date, (i) the rights
to receive dividends thereon shall cease to accrue and (ii) all rights of the
holders of shares of Series F Preferred Stock shall cease and terminate,
excepting only the right to receive the Maturity Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
Maturity Redemption Price, the shares of Series F Preferred Stock that were to
be redeemed shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series F Preferred Stock until such
time as such default shall no longer be continuing.
Section 8. Acquired Shares.
---------------
Any shares of Series F Preferred Stock exchanged, redeemed,
purchased or otherwise acquired by the Corporation or any of its Subsidiaries in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares of Series F Preferred Stock shall upon
their cancellation become authorized but unissued shares of preferred stock, par
value $4.00 per share, of the Corporation and, upon the filing of an appropriate
certificate with the Department of State of the State of New York, may be
reissued as part of another series of preferred stock, par value $4.00 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein, but in any event may not be reissued as shares of Series F
Preferred Stock or Parity Stock unless all of the shares of Series F Preferred
Stock issued on the Issue Date shall have already been redeemed or exchanged.
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Section 9. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case
under the United States bankruptcy laws or any applicable bankruptcy, insolvency
or similar law of any other country, or consent to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series F Preferred Stock shall have received
(A) if a Voluntary Liquidation Event shall have occurred, the Optional Redemp-
tion Price with respect to each share and (B) if a Voluntary Liquidation Event
shall not have occurred, the Liquidation Preference and all accrued and unpaid
dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series F Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series F Preferred Stock (which amounts are set forth in
clauses (A) and (B) above) and Parity Stock are entitled upon such liquidation,
dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
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Section 10. Exchange.
--------
(a) Subject to the provisions of this Section 10, the
Corporation shall have the right, with the consent of the holders of all of the
outstanding shares of Series F Preferred Stock (which consent may be withheld
for any reason whatsoever), at any time but on only one occasion, to exchange
all (but not less than all) of the shares of Series F Preferred Stock for
Subordinated Notes of the Corporation ("Subordinated Notes"), at a price per
share equal to the Liquidation Preference per share, with the Subordinated Notes
valued for such purpose at their face value. Simultaneously with such exchange
the Corporation shall pay to each holder of Series F Preferred Stock an amount
per share in cash equal to all accrued and unpaid dividends thereon, whether or
not declared or currently payable, to the date fixed for exchange thereof. The
Subordinated Notes shall have an annual interest rate equal to the annual
dividend rate on Series F Preferred Stock and shall contain other terms
substantially similar to the Series F Preferred Stock, including the date of
maturity thereof.
(b) Notice of an exchange of shares of Series F Preferred
Stock pursuant to Section 10(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for exchange; and, in any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Series F
Preferred Stock hereunder the Board of Directors may fix a record date for the
determination of shares of Series F Preferred Stock to be exchanged, or may
cause the transfer books of the Corporation for the Series F Preferred Stock to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for exchange.
(c) On the date of any exchange being made pursuant to
Section 10(a) that is specified in a notice given pursuant to Section 10(b), the
Corporation shall, and at any time after the date that is 10 days prior to the
date of exchange the Corporation may, deposit for the benefit of the holders of
shares of Series F Preferred Stock to be exchanged (i) the Subordinated Notes
necessary for such exchange and (ii) an amount in cash equal to all dividends
payable with respect thereto upon such exchange with a bank or trust company in
the Borough of Manhattan, The City of New York, that is "well capitalized"
within the meaning of the applicable banking
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regulations and having a capital and surplus of at least $500,000,000. Any
Subordinated Notes so deposited by the Corporation and unclaimed at the end of
two years from the date designated for such exchange shall revert to the Corpo-
ration. After such reversion, any such bank or trust company shall, upon
demand, return to the Corporation such unclaimed Subordinated Notes and
thereupon such bank or trust company shall be relieved of all responsibility in
respect thereof and any holder of shares of Series F Preferred Stock to be ex-
changed shall look only to the Corporation for the delivery of the Subordinated
Notes. Any interest accrued on Subordinated Notes deposited pursuant to this
Section 10(c) shall accrue for the accounts of, and be payable to, the holders
of shares of Series F Preferred Stock to be exchanged therefor.
(d) Notice of exchange having been given as aforesaid and
not having been deemed terminated as aforesaid, upon the deposit of Subordinated
Notes pursuant to clause (i) of Section 10(c) and the deposit of the cash
referred to in clause (ii) of Section 10(c) in respect of shares of Series F
Preferred Stock to be exchanged pursuant to Section 10(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the date of exchange designated in the notice of
exchange (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon (except as provided in
paragraph (b) above) shall cease to accrue, and (iii) all rights of the holders
of shares of Series F Preferred Stock to be exchanged shall cease and terminate,
excepting only the right to receive the Subordinated Notes therefor and the
right to receive the dividends described in paragraph (b) above; provided,
--------
however, that if the Corporation shall default in the execution and delivery of
- - -------
the Convertible Notes, the shares of Series F Preferred Stock that were to be
exchanged shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series F Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Series F Preferred
Stock.
Section 11. Additional Amount.
-----------------
(a) For the purposes of this Article 2, "Additional Amount"
shall mean an amount per share equal to the product of (i) the excess of the sum
of (1) the Market Price of a share of Common Stock and (2) if the Corporation
shall have issued a right or rights with respect to its outstanding shares of
Common Stock pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, during the period commencing on
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the "distribution date" of such right or rights (i.e., the date on which such
----
right or rights commence to trade separately from the Common Stock) and ending
on the "triggering date" of such right or rights (i.e., the date on which such
----
right or rights commence to be exercisable), the Market Price of such right or
rights over the Conversion Amount, in effect as hereinafter determined and (ii)
(x) the Liquidation Preference divided by (y) such Conversion Amount, in all
cases calculated as of the applicable determination date. The Additional Amount
shall in no event be less than zero. The Conversion Amount initially shall be
$15.75, and shall thereafter be subject to adjustment as set forth in Section
11(b). For the purpose of calculating the Additional Amount in connection with
an Optional Redemption, Specified Corporate Action Redemption, Special
Redemption or Conversion Redemption, except as otherwise set forth in Section
6(a)(ii), the Market Price of the Common Stock and, if applicable, rights shall
be the average of the Market Price of such securities on the five trading days
immediately preceding and the five trading days immediately following the date
of notice of such redemption.
(b) The Conversion Amount shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from
time to time (A) pay a dividend or make a distribution on the outstanding shares
of Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the out-
standing shares of Common Stock into a larger number of shares, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D) issue
any shares of its capital stock in a reclassification of the Common Stock, then,
and in each such case, the Conversion Amount in effect immediately prior to such
event shall be adjusted so that if the holder of any share of Series F Preferred
Stock were entitled to convert such share into such number of shares of Common
Stock as equals the Liquidation Preference divided by the Conversion Amount and
such holder thereafter surrendered such share for conversion, such holder would
be entitled to receive the number of shares of Common Stock or other securities
of the Corporation that such holder would have owned or would have been entitled
to receive upon or by reason of any of the events described above had such share
of Series F Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 11(b)(i) shall
become effective retroactively (A) in the case of any such dividend or distri-
bution, to the opening of business on the day immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to
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receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from
time to time issue or sell shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock (other than options granted to
any employee or director of the Corporation pursuant to a stock option plan
approved by the shareholders of the Corporation)) for a consideration per share
less than the Conversion Amount then in effect at the record date or issuance
date, as the case may be (the "Date") referred to in the following sentence,
including, without limitation, upon exercise of rights issued pursuant to a
shareholder rights plan, "poison pill" or similar arrangement (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any antidilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (B) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), other than issuances or sales for which
an adjustment is made pursuant to another paragraph of this Section 11(b), then,
and in each such case, the Conversion Amount then in effect shall be adjusted by
dividing the Conversion Amount in effect on the day immediately prior to the
Date by a fraction (x) the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the Date plus the number
of additional shares of Common Stock issued or to be issued (or the maximum
number into which such convertible or exchangeable securities initially may
convert or exchange or for which such options, warrants or other rights
initially may be exercised) and (y) the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to the Date
plus the number of shares of Common Stock that the aggregate consideration (if
any of such aggregate consideration is other than cash, as valued by the Board
of Directors including a majority of the Directors who are not officers or
employees of the Corporation or any of its Subsidiaries, which determination
shall be conclusive and described in a resolution of the Board of Directors) for
the total number of such additional shares of Common Stock so issued (or into
which such convertible or exchangeable securities may convert or exchange or for
which such options, warrants or other rights may be
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exercised plus the aggregate amount of any additional consideration initially
payable upon conversion, exchange or exercise of such security) would purchase
at the Conversion Amount. Such adjustment shall be made whenever such shares,
securities, options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close of business
(i) in the case of issuance to stockholders of the Corporation, as such, on the
record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (ii) in all other
cases, on the date ("issuance date") of such issuance; provided, however, that
-------- -------
the determination as to whether an adjustment is required to be made pursuant to
this Section 11(b)(ii) shall only be made upon the issuance of such shares or
such convertible or exchangeable securities, options, warrants or other rights,
and not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
option, warrants or other right; provided, further, that if any convertible or
-------- -------
exchangeable securities, options, warrants or other rights (or any portions
thereof) that shall have given rise to an adjustment pursuant to this Section
11(b)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Conversion Amount hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares of Common Stock cor-
responding to such convertible or exchangeable securities, options, warrants or
other rights as shall have expired or terminated, (y) treating the additional
shares of Common Stock, if any, actually issued or issuable pursuant to the
previous exercise of such convertible or exchangeable securities, options,
warrants or other rights as having been issued for the consideration actually
received and receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights that remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from
time to time distribute to all holders of shares of its Common Stock (including
any such distribution made in connection with a consolidation or merger in which
the Corporation is the resulting or surviving corporation and the Common Stock
is not changed or exchanged or a redemption of any rights or other securities
issued pursuant to a shareholder rights plan,
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"poison pill" or similar arrangement) cash, evidences of indebtedness of the
Corporation or another issuer, securities of the Corporation or another issuer
or other assets (excluding (A) Permitted Dividends described in clause (B) of
the definition thereof and (B) securities for which adjustment is made under
Section 11(b)(i) or Section 11(b)(ii)), then, and in each such case, the
Conversion Amount then in effect shall be adjusted by dividing the Conversion
Amount in effect immediately prior to the date of such distribution by a
fraction (x) the numerator of which shall be the Current Market Price of the
Common Stock on the record date referred to below and (y) the denominator of
which shall be such Current Market Price of the Common Stock less the then Fair
Market Value (as determined by the Board of Directors of the Corporation, which
determination shall be conclusive) of the portion of the cash, evidences of
indebtedness, securities or other assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock (but such denominator
not to be less than one). Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date im-
mediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) In the case the Corporation at any time or from
time to time shall take any action affecting its Common Stock, other than an
action described in any of Section 11(b)(i) through Section 11(b)(iii),
inclusive, then, the Conversion Amount shall be adjusted in such manner and at
such time as the Board of Directors of the Corporation (other than Purchaser
Designees or directors elected pursuant to Section 3(b)) in good faith
determines to be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the Series F Preferred Stock).
(v) The Corporation may make such reductions in the
Conversion Amount, in addition to those required by subparagraphs (i), (ii),
(iii) or (iv) of this Section 11(b), as the Board of Directors considers to be
advisable in order to avoid or to diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
(vi) Notwithstanding anything contained in this Section
11(b), no adjustment to the Conversion Amount shall be made with respect to any
rights issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement unless the "triggering date" (i.e., the date on which such rights
----
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commence to be exercisable) shall have occurred or such rights shall have been
redeemed, in which event adjustments under clause (ii) and clause (iii),
respectively, shall be made.
(c) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Amount then in
effect shall be required by reason of the taking of such record.
(d) Upon any increase or decrease in the Conversion Amount,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Series F Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased Con-
version Amount then in effect following such adjustment.
Section 12. Sinking Fund.
-------------
(a) So long as any shares of Series F Preferred Stock shall
be outstanding, the Corporation shall, on the final business day (any such date,
the "Sinking Fund Date") of each calendar year after 2003, (i) set aside a sum
of money equal to 3-1/3% of the aggregate liquidation preference of the shares
of Series F Preferred Stock then outstanding, and (ii) apply such money to
redeem such number of shares of Series F Preferred Stock at the Sinking Fund
Redemption Price (the Corporation's obligations described in this paragraph in
respect of any Sinking Fund Date being hereinafter referred to as the "Sinking
Fund Obligation" for such date) at a price per share (the "Sinking Fund
Redemption Price") equal to the sum of (A) the Liquidation Preference of such
share, (B) an amount per share equal to all accrued and unpaid dividends
thereon, whether or not declared or payable, to the applicable Sinking Fund Date
and (C) the Additional Amount (as defined in Section 11), determined as of the
date immediately prior to the Sinking Fund Date, in immediately available funds;
provided, however, that if the Corporation for any reason fails to discharge its
- - -------- -------
Sinking Fund Obligation on any Sinking Fund Date, such Sinking Fund Obligation,
to the extent not discharged, shall become an additional Sinking Fund Obligation
for each succeeding Sinking Fund Date until fully discharged; provided, further,
-------- -------
that no
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shares of Series F Preferred Stock purchased or acquired by the Corporation
otherwise than through redemption pursuant to this paragraph or pursuant to an
Optional Redemption may be credited against the Sinking Fund Obligation in
respect of any Sinking Fund Date.
(b) Notice of the Sinking Fund Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Sinking Fund Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Sinking
Fund Date to each holder of shares of Series F Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation.
(c) The shares to be redeemed pursuant to paragraph (a)
shall be selected pro rata (as nearly as may be) so that the number of shares
redeemed from each holder shall be the same proportion of all the shares to be
redeemed that the total number of shares of Series F Preferred Stock then held
by such holder bears to the total number of shares of Series F Preferred Stock
then outstanding.
(d) On the Sinking Fund Date, the Corporation shall, and at
any time after such notice shall have been mailed and before the Sinking Fund
Date the Corporation may, deposit for the benefit of the holders of shares of
Series F Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series F Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Sinking Fund Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 12(c) shall be
paid from time to time to the Corporation for its own account.
(e) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 12(c) in respect of shares of
Series F Preferred Stock to be redeemed
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pursuant to Section 12(a), notwithstanding that any certificates for such
shares shall not have been surrendered for cancellation, from and after the
Sinking Fund Date, (i) the rights to receive dividends thereon shall cease to
accrue and (ii) all rights of the holders of shares of Series F Preferred Stock
shall cease and terminate, excepting only the right to receive the Sinking Fund
Redemption Price therefor; provided, however, that if the Corporation shall
-------- -------
default in the payment of the Sinking Fund Redemption Price, the shares of
Series F Preferred Stock that were to be redeemed shall thereafter be deemed
to be outstanding and the holders thereof shall have all of the rights of a
holder of Series F Preferred Stock until such time as such default shall no
longer be continuing.
Article 3. Series G Preferred Stock.
------------------------
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as
"Cumulative Preferred Stock, Series G" (the "Series G Preferred Stock"). The
number of shares initially constituting the Series G Preferred Stock shall be
625,000, which number may be decreased (but not increased) by the Board of
Directors without a vote of stockholders; provided, however, that such number
-------- -------
may not be decreased below the number of then outstanding shares of Series G
Preferred Stock or the number of shares of Series G Preferred Stock issuable
upon exercise of the Option (as defined in the Securities Purchase Agreement).
(b) The Series G Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank pari
----
passu with the Corporation's $2.50 Cumulative Convertible Preferred Stock,
- - -----
Series A (the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock,
Series B (the "Series B Preferred Stock"), Cumulative Convertible Preferred
Stock, Series E (the "Series E Preferred Stock"), Cumulative Preferred Stock,
Series F (the "Series F Preferred Stock"), Cumulative Preferred Stock, Series H
(the "Series H Preferred Stock"), Cumulative Preferred Stock, Series T (the
"Series T Preferred Stock" and together with the Series E Preferred Stock,
Series G Preferred Stock, the Series G Preferred Stock and the Series H
Preferred Stock, the "Chicago Preferred Stock") and the New Preferred Stock (if
any) (the Series A Preferred Stock, Series B Preferred Stock, Chicago Preferred
Stock (other than the Series G Preferred Stock) and New Preferred Stock (if any)
are collectively defined for the purposes of this Article 2 as the "Other
Preferred Stock") and prior to all other classes and series of capital stock of
the Corporation now or hereafter authorized including, without
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limitation, the Common Stock, par value $1.00 per share, of the Corporation
(the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Article 6 below.
Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series G Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
capital stock of the Corporation other than the Other Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the Liquidation Preference thereof equal to
9.75% (subject to increase pursuant to Section 2(b)), calculated on the basis of
a 360-day year consisting of twelve 30-day months, accruing and payable in equal
quarterly payments, in immediately available funds, on the Business Day
immediately preceding the last day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date") commencing on the Business Day immediately preceding the date of
the issuance of such shares of Series G Preferred Stock; provided, however, that
-------- -------
with respect to such first Quarterly Dividend Payment Date with respect to any
shares of Series G Preferred Stock, the holders of shares of Series G Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation at the time legally available
therefor, a cumulative cash dividend in respect of each share of Series G Pre-
ferred Stock in the amount of (i) 9.75% (or the then effective annual rate) of
the Liquidation Preference multiplied by (ii) a fraction equal to (A) the number
of days from (and including) the date of the issuance of such shares of Series G
Preferred Stock to (but excluding) such Quarterly Dividend Payment Date divided
by (B) 360. No interest shall be payable in respect of any dividend payment on
the Series G Preferred Stock that may be in arrears.
(b) If (i) a private placement or public offering of the
New Preferred Stock or the New Senior Notes, pursuant to which the Corporation
shall receive at least $100,000,000 in gross proceeds is not consummated within
360 days after the termination of the Merger Agreement or (ii) the annual
dividend rate on the New Preferred Stock or the annual interest rate on the New
Senior Notes, as applicable, exceeds 13%, then the annual rate of the cumulative
cash dividends shall be increased to a rate of 10.75%, effective (x) in the case
of clause (i), the date that is 360 days after the termination of the Merger
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Agreement, and (y) in the case of clause (ii) the date of the issuance of the
New Preferred Stock or the New Senior Notes, as applicable. If on any date (A)
all of the Purchaser Designees shall not have been elected to the Corporation's
Board of Directors or any such Purchaser Designees shall not have been appointed
to the committees of the Corporation's Board of Directors, in accordance with
the provisions of Section 6.17 of the Securities Purchase Agreement, (B) the
Corporation shall have failed to declare, or shall have failed to pay, the full
amount of dividends payable on the Series G Preferred Stock for six quarterly
dividend periods, (C) the Corporation shall have failed to satisfy its
obligation to convert shares of Series E Preferred Stock pursuant to Article 1,
Section 10 or (D) a breach of any of the Material Provisions of the Securities
Purchase Agreement or any of the Corporation's material obligations under the
Registration Rights Agreement shall have occurred then, effective as of the date
of such failure or breach, the annual rate of the cumulative cash dividends
shall be increased to a rate of 11.75% and shall remain at such rate until such
time as (1) the Purchaser Designees shall have been elected to the Corporation's
Board of Directors and appointed to the committees of the Corporation's Board of
Directors in accordance with the provisions of Section 6.17 of the Securities
Purchase Agreement, (2) all dividends accrued to date on the Series G Preferred
Stock shall have been declared and paid in full, (3) any conversion obligations
in respect of the Chicago Preferred Stock that have become due shall have been
fully satisfied and (4) there shall exist no breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement, as the case may
be, at which time the annual rate of the cumulative cash dividends shall be re-
duced to a rate of 9.75%, subject to being increased to a rate of 11.75% in the
event of each and every subsequent event of the character indicated above.
(c) Dividends payable on a share of Series G Preferred
Stock pursuant to Section 2(a) shall begin to accrue and be cumulative from the
date of issuance of such share of Series G Preferred Stock, and shall accrue on
a daily basis, in each case whether or not declared. Dividends paid on the
shares of Series G Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares of Series G
Preferred Stock at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series G Preferred Stock
entitled to receive payment of a dividend declared thereon, which record date
shall be not more than 60 days nor less than 10 days prior to the date fixed for
the payment
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thereof. Accumulated but unpaid dividends for any past quarterly
dividend periods may be declared and paid at any time, without reference to any
regular Quarterly Dividend Payment Date, to holders of record on such date, not
more than 60 nor less than 10 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(d) The holders of shares of Series G Preferred Stock shall
not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights.
-------------
In addition to any voting rights provided by law, the
holders of shares of Series G Preferred Stock shall have the following voting
rights:
(a) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Series G Preferred Stock, voting
separately as a single class, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be necessary to (i)
authorize, adopt or approve an amendment to the Certificate of Incorporation
that would increase or decrease the par value of the shares of Series G
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Series G Preferred Stock, (ii) amend, alter or repeal the
Certificate of Incorporation so as to affect the shares of Series G Preferred
Stock adversely or (iii) effect the voluntary liquidation, dissolution, winding
up, recapitalization or reorganization of the Corporation, or the consolidation
or merger of the Corporation with or into any other Person, or the sale or other
distribution to another Person of all or substantially all of the assets of the
Corporation; provided, however, that no separate vote of the holders of Series G
-------- -------
Preferred Stock shall be required to effect any of the transactions described in
clause (iii) above unless such transaction would either require a class vote
pursuant to clause (i) or (ii) above or would require a vote by any shareholders
of the Corporation (other than pursuant to this sentence); provided further,
-------- -------
that no separate vote of the holders of the Series G Preferred Stock as a class
shall be required in the case of a recapitalization, reorganization,
consolidation or merger of, or sale by, the Corporation if (A) (a) such
recapitalization, reorganization, consolidation, merger or sale constitutes a
Specified Corporate Action, (b) the Corporation has sufficient funds legally
available to it (after giving effect to such transaction) to redeem, at the then
applicable price hereunder and pursuant to the terms
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hereof, all the outstanding shares of Series G Preferred Stock, (c) such
redemption shall not be prohibited by any agreement to which the Corporation
or any of its Subsidiaries is a party, by applicable law or otherwise, (d) the
Board of Directors of the Corporation, including a majority of the directors
who are not officers or employees of the Corporation, shall have adopted a
resolution confirming that such funds are available and that the holders of
Series G Preferred Stock have the right to require such redemption and (e)
the Corporation shall have set aside sufficient funds through the Specified
Corporation Action Redemption Date to redeem the shares of Series G Preferred
Stock held by such holders (except that no funds need be set aside with respect
to such shares held by any such holder who has theretofore notified the
Corporation (whether pursuant to Section 6(a)(iii) or otherwise) that it will
not require redemption of such shares) or (B) (1) the Corporation shall be the
resulting or surviving corporation, (2) the resulting or surviving corporation
will have after such recapitalization, reorganization, consolidation or merger
no Senior Stock or Parity Stock either authorized or outstanding (except such
Parity Stock of the Corporation as may have been authorized or outstanding
immediately preceding such consolidation or merger) or such stock of the
resulting or surviving corporation (having the same powers, preferences and
special rights of any such Parity Stock) as may be issued in
exchange therefor), (3) each holder of shares of Series G Preferred Stock
immediately preceding such recapitalization, reorganization, consolidation or
merger will receive in exchange therefor the same number of shares of stock,
with the same preferences, rights and powers, of the resulting or surviving
corporation, (4) after such recapitalization, reorganization, consolidation or
merger the resulting or surviving corporation shall not be in breach of any of
the terms hereof, any of the Material Provisions of the Securities Purchase
Agreement or any of its material obligations under the Registration Rights
Agreement and (5) all or substantially all the holders of the outstanding shares
of capital stock of the Corporation immediately prior to such consolidation or
merger are entitled to receive shares representing 50% or more of the then
outstanding shares of capital stock of the resulting or surviving corporation
entitled to vote generally in the election of directors.
(b) If on any date (i) the Corporation shall have failed to
declare, or shall have failed to pay, the full amount of dividends payable on
any series of Chicago Preferred Stock for six quarterly dividend periods or (ii)
a breach of any of the Material Provisions of the Securities Purchase Agreement
or any of the Corporation's material obligations under the Registration Rights
Agreement shall have occurred, then the number of directors constituting the
Board of Directors shall, without
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further action, be increased by two and the holders of shares of Series G
Preferred Stock shall have, in addition to the other voting rights set forth
herein with respect to the Series G Preferred Stock, the exclusive right,
together with the holders of all other series of Chicago Preferred Stock
voting separately as a single class together with the holders of such other
series of Chicago Preferred Stock, to elect two directors of the Corporation
to fill such newly created directorship, by written consent as provided herein,
or at a special meeting of such holders called as provided herein. Any such
additional directors shall continue as directors (subject to reelection or
removal as provided in Section 3(c)(ii)) and the holders of Series
G Preferred Stock shall have such additional voting rights until such time as
(A) dividends then payable on all series of Chicago Preferred Stock shall have
been declared and paid in full and (B) there shall exist no breach of any of the
Material Provisions of the Securities Purchase Agreement or any of the
Corporation's material obligations under the Registration Rights Agreement, as
the case may be, at which time such additional directors shall cease to be
directors, the number of directors constituting the Board of Directors shall be
reduced by two and such additional voting rights of the holders of all series of
Chicago Preferred Stock shall terminate, subject to revesting in the event of
each and every subsequent event of the character indicated above.
(c) (i) The foregoing right of holders of shares of Series
G Preferred Stock to take any action as provided in Section 3(b) may be
exercised at any annual meeting of stockholders or at a special meeting of
holders of shares of Chicago Preferred Stock, held for such purpose as
hereinafter provided or at any adjournment thereof, or by the written consent,
delivered to the Secretary of the Corporation, of the holders of the minimum
number of shares required to take such action.
So long as such right to vote continues (and unless such
right has been exercised by written consent of the minimum number of shares
required to take such action), the President of the Corporation may call, and
upon the written request of holders of record of at least 5% of the aggregate
outstanding shares of Chicago Preferred Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the by-laws
of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the
holders of shares of Series G Preferred Stock shall have
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the right, voting separately as a single class together with the holders of
all other series of Chicago Preferred Stock, to elect two directors of the
Corporation as provided in Section 3(b) or to take any action, the presence in
person or by proxy of the holders of record of one-third of the total aggregate
number of shares of Chicago Preferred Stock then outstanding and entitled to
vote on the matter shall be necessary and sufficient to constitute a quorum.
At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares
of Chicago Preferred Stock, shall not prevent the election of
directors other than those to be elected by the holders of shares
of Chicago Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock
shall not prevent the election of directors to be elected by the
holders of shares of Chicago Preferred Stock, or the taking of
any action as provided in Section 3(b); and
(B) in the absence of a quorum of the holders of
shares of Chicago Preferred Stock, a majority of the holders of
such shares present in person or by proxy shall have the power to
adjourn the meeting as to the actions to be taken by the holders
of shares of Chicago Preferred Stock, from time to time and place
to place without notice other than announcement at the meeting
until a quorum shall be present.
For taking of any action as provided in Section 3(a) or
Section 3(b) by the holders of shares of Series G Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his name on
the transfer books of the Corporation as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held; provided, however, that shares of Chicago Preferred Stock held
-------- -------
by the Corporation or any Subsidiary of the Corporation shall not be deemed to
be outstanding for purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Chicago
Preferred Stock, as provided in Section 3(b) shall, unless his term shall expire
earlier in accordance with the provisions thereof, hold office until the annual
meeting of stockholders next succeeding his election or until his successor,
if any, is elected and qualified.
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If any director so elected by the holders of Chicago
Preferred Stock shall cease to serve as a director before his term shall expire
(except by reason of the termination of the voting rights accorded to the
holders of Chicago Preferred Stock, in accordance with Section 3(b)), the
holders of the Chicago Preferred Stock then outstanding and entitled to vote for
such director may, by written consent as provided herein, or at a special
meeting of such holders called as provided herein, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
Any director elected by the holders of shares of Chicago
Preferred Stock, voting together as a separate class, may be removed from office
with or without cause only by the vote or written consent of the holders of at
least a majority of the aggregate outstanding shares of Chicago Preferred Stock
at the time of removal. A special meeting of the holders of shares of Chicago
Preferred Stock may be called in accordance with the procedures set forth in
Section 3(c)(i).
Section 4. Certain Restrictions.
--------------------
(a) So long as any shares of Series G Preferred Stock
remain outstanding, the Corporation shall not declare or make any Restricted
Payment.
(b) Whenever quarterly dividends payable on shares of
Series G Preferred Stock as provided in Section 2(a) are not paid in full, at
such time and thereafter until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Series G Preferred Stock shall have been
paid in full or declared and set apart for payment at such time and thereafter
until all necessary funds have been set apart for payment, or whenever the
Corporation shall not have paid the Optional Redemption Price, the Specified
Corporate Action Redemption Price, the Conversion Redemption Price, the Holder's
Election Redemption Price, the Special Redemption Price or the Maturity
Redemption Price when due, at such time and thereafter from and until all such
amounts have been paid in full or set apart for payment, the Corporation shall
not: (A) declare or pay dividends, or make any other distributions, on any
shares of Junior Stock, or (B) declare or pay dividends, or make any other
distributions, on any shares of Parity Stock, except dividends or distributions
paid ratably on the Series G Preferred Stock and all Parity Stock on which
dividends are payable and in arrears, in proportion to the total amounts to
which the holders of all shares of the Series G Preferred Stock and Parity Stock
are then entitled.
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(c) Whenever dividends payable on shares of Series G
Preferred Stock as provided in Section 2 are not paid in full, at such time and
thereafter until all unpaid dividends payable, whether or not declared, on the
outstanding shares of Series G Preferred Stock shall have been paid in full or
declared and set apart for payment, at such time and thereafter until all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Specified Corporate
Action Redemption Price, the Conversion Redemption Price, the Holder's Election
Redemption Price, the Special Redemption Price or the Maturity Redemption Price
when due, at such time and thereafter until all such amounts have been paid in
full or set apart for payment, the Corporation shall not redeem, purchase or
otherwise acquire for consideration any shares of Junior Stock or Parity Stock;
provided, however, that (A) the Corporation may accept shares of any Parity
- - -------- -------
Stock or Junior Stock for conversion into Junior Stock and (B) the Corporation
may at any time redeem, purchase or otherwise acquire shares of any Parity Stock
pursuant to any mandatory redemption, put, sinking fund or other similar ob-
ligation contained in such Parity Stock, pro rata with the Series G Preferred
Stock in proportion to the total amount then required to be applied by the
Corporation to redeem, repurchase, or otherwise acquire shares of Series G
Preferred Stock and shares of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5. Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem
any shares of Series G Preferred Stock prior to December 30, 2001. Thereafter,
(A) at any time, if no shares of the Series E Preferred Stock remain
outstanding, so long as shares of Common Stock shall have traded on the New York
Stock Exchange (or another national securities exchange or on Nasdaq) on each
trading day during a 30-consecutive trading day period (each of which trading
days shall be after December 30, 2001 and no more than 5 Business Days prior to
the date notice is given of an Optional Redemption (as defined below)) and had
a Closing Price on at least 20 of such trading days in excess of 150% of the
Conversion Amount in effect on such trading day as determined pursuant to
Section 11, subject to the restrictions contained in Section 4 or (B) at any
time after December 30, 2009, the Corporation shall have the right, at its sole
option
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and election, to redeem (the "Optional Redemption") all or a portion of
the shares of Series G Preferred Stock, on not more than 45 nor less than 30
days' notice of the date of redemption (any such date an "Optional Redemption
Date") at a price per share (the "Optional Redemption Price") equal to the sum
of (A) the following prices per share (stated as a percentage of the Liquidation
Preference of such share), (B) an amount per share equal to all accrued and
unpaid dividends thereon, whether or not declared or payable, to the applicable
Optional Redemption Date and (C) the Additional Amount (as defined in Section
11), in immediately available funds:
Optional Redemption Price
If Redeemed as a Percentage of
During the Period Liquidation Preference
----------------- -------------------------
December 30, 2001 to 102.775%
December 29, 2002
December 30, 2002 to 101.850%
December 29, 2003
December 30, 2003 to 100.925%
December 29, 2004
December 30, 2004 and 100%
thereafter
(ii) If the Corporation shall have the right to, or shall
determine to, redeem less than all the shares of Series G Preferred Stock then
outstanding pursuant to paragraph (i), the shares to be redeemed shall be
selected pro rata (as nearly as may be) so that the number of shares redeemed
from each holder shall be the same proportion of all the shares to be redeemed
that the total number of shares of Series G Preferred Stock then held by such
holder bears to the total number of shares of Series G Preferred Stock then
outstanding.
(iii) Notwithstanding the foregoing, any shares of Series G
Preferred Stock redeemed pursuant to this Section 5(a) at any time when holders
of shares of Series G Preferred Stock have the right to require the Corporation
to redeem the shares of Series G Preferred Stock pursuant to Section 6 or an
event giving rise to such a right has occurred shall be redeemed at a price
equal to the higher of the price to be paid pursuant to Section 5(a) and the
price to be paid pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the
Optional Redemption Date fixed for redemption, the Optional
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Redemption Price, the place or places of payment, that payment will be made
upon presentation and surrender of the shares of Series G Preferred Stock and
that on and after the date of such Optional Redemption dividends will cease
to accrue on such shares and be given by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or
securities exchange requirement), not less than 30, nor more than 45, days
prior to the Optional Redemption Date; and, in any case, a similar notice
shall be mailed at least 30, but not more than 45, days prior to the Optional
Redemption Date to each holder of shares of Series G Preferred Stock, at such
holder's address as it appears on the transfer books of the Corporation. In
order to facilitate the redemption of shares of Series G Preferred Stock,
the Board of Directors may fix a record date for the determination of shares
of Series G Preferred Stock to be redeemed, or may cause the transfer books
of the Corporation for the Series G Preferred Stock to be closed, not more
than 60 days or less than 45 days prior to the Optional Redemption Date.
(c) On the date of any Optional Redemption that is
specified in a notice given pursuant to Section 5(b), the Corporation shall, and
at any time after such notice shall have been mailed and before the Optional
Redemption Date the Corporation may, deposit for the benefit of the holders of
shares of Series G Preferred Stock the funds necessary for such redemption with
a bank or trust company in the Borough of Manhattan, The City of New York, that
is "well capitalized" within the meaning of the applicable bank regulations and
having a capital and surplus of at least $500,000,000. Any moneys so deposited
by the Corporation and unclaimed at the end of two years from the Optional
Redemption Date shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series G Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. Any interest
accrued on funds deposited pursuant to this Section 5(c) shall be paid from time
to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 5(c) in respect of shares of
Series G Preferred Stock to be redeemed pursuant to Section 5(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Optional Redemption Date (i)
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the shares represented thereby shall no longer be deemed outstanding, (ii) the
rights to receive dividends thereon shall cease to accrue, and (iii) all rights
of the holders of shares of Series G Preferred Stock to be redeemed shall cease
and terminate, excepting only the right to receive the Optional Redemption Price
therefor; provided, however, that if the Corporation shall default in the
-------- -------
payment of the Optional Redemption Price, the shares of Series G Preferred Stock
shall thereafter be deemed to be outstanding and the holders thereof shall have
all of the rights of a holder of Series G Preferred Stock until such time as
such default or failure shall no longer be continuing or shall have been waived
by holders of at least 66-2/3% of the then outstanding shares of Series G Pre-
ferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series G Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series G Preferred Stock. On or after the
Optional Redemption Date fixed for redemption as stated in such notice, each
holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Optional Redemption
Price. If less than all the shares evidenced by any such surrendered
certificate are redeemed, a new certificate shall be issued evidencing the
unredeemed shares.
Section 6. Mandatory Redemption at the
Option of the Holder.
--------------------------
(a) (i) If one or more events constituting a Specified
Corporate Action shall occur, each holder of shares of the Series G Preferred
Stock shall have the right, at such holder's option on the date or dates
specified in Section 6(a)(ii) (the "Specified Corporate Action Redemption
Date"), to require the Corporation to redeem (a "Specified Corporate Action
Redemption") all or any part of the shares of Series G Preferred Stock then held
by such holder as such holder may elect at a price per share equal to the
greater of (I) the sum of (A) the following prices per share (stated as a
percentage of the Liquidation Preference of such share) and (B) an amount per
share equal to all accrued and unpaid dividends thereon, whether or not declared
or payable, to the applicable Specified Corporate Action Redemption Date
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If the Specified Corporate Specified Corporate Action
Action Redemption Date Redemption as a Percentage of
Occurs During the Period Liquidation Preference
------------------------ ----------------------------
December 30, 1994 to 110.4%
June 29, 1995
June 30, 1995 to 116.8%
December 29, 1995
December 30, 1995 to 126.7%
June 29, 1996
June 30, 1996 and 138.0%
thereafter
and (II) the sum of (x) 100% of the Liquidation Preference of such share, (y) an
amount per share equal to all accrued and unpaid dividends thereon, whether or
not declared or payable, to the Specified Corporate Action Redemption Date and
(z) the Additional Amount measured as of the date of any such redemption, in
either case in immediately available funds (the "Specified Corporate Action
Redemption Price"); provided, however, that the holder of any share of Series G
-------- -------
Preferred Stock that was not outstanding for at least ten Business Days prior to
the date of the notice of the Specified Corporate Action shall only be entitled
to receive upon such Specified Corporate Action Redemption the amount specified
in clause (II) above.
(ii) The date fixed for each Specified Corporate Action
Redemption shall be fixed by the Corporation and shall be not less than 60 days
nor more than 90 days following the occurrence of any Specified Corporate Action
giving rise thereto (or, in the case of a Specified Corporate Action as
described in clause (iii) of the definition of "Specified Corporate Action," not
less than 60 days nor more than 90 days following the date on which the
Corporation obtains actual knowledge of such Specified Corporate Action);
provided, however, that in the event of a Specified Corporate Action that
- - -------- -------
constitutes a Control Transaction, in addition to the dates fixed for a
Specified Corporate Action Redemption as specified above, an additional
Specified Corporate Action Redemption Date shall be set for the date and time
immediately preceding the consummation of any such Control Transaction (and the
Market Price utilized in determining the Additional Amount for the purposes of
such Specified Corporate Action Redemption shall be the highest price per share
of Common Stock paid by any acquiror in such Control Transaction); provided,
--------
further, that,
- - -------
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upon the request of a holder, the Board of Directors shall agree
to extend the date of redemption in respect of any such Specified Corporate
Action (without changing the consideration that is otherwise payable in respect
of such redemption other than with respect to adjustments to the amount of
accrued and unpaid dividends included in such redemption price) to the extent
necessary for any holder of shares of Series G Preferred Stock to avoid
liability under Section 16(b) of the Exchange Act, provided that no such
--------
redemption extension shall be for a period greater than six months. The
Corporation shall, within 5 days of the occurrence of a Specified Corporate
Action (or, in the case of a Specified Corporate Action described in clause
(iii) of the definition of "Specified Corporate Action," within 5 days of the
date on which the Corporation obtains actual knowledge of such Specified Corpo-
rate Action), give notice thereof by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such pub-
lication shall be required by applicable law, rule, regulation or securities
exchange requirement), and, in any case, a similar notice shall be mailed to
each holder of shares of the Series G Preferred Stock, at such holder's address
as it appears on the transfer books of the Corporation. Each such notice shall
specify the Specified Corporate Action that has occurred and the date of such
occurrence, the place or places of payment, the then effective Specified
Corporate Action Redemption Price and the date the right of such holder to
require a Specified Corporate Action Redemption shall terminate.
(iii) If the notice sent by the Corporation pursuant to
Section 6(a)(ii) shall contain (i) a form inquiring as to whether a holder of
shares of Series G Preferred Stock intends to surrender the certificate(s)
representing such shares for redemption pursuant to this Section 6(a) and (ii) a
stamped self-addressed envelope for return of such form to the Corporation or
its designee, within ten Business Days of such notice, each holder shall return
such inquiry form to the Corporation and shall indicate in such form the
proportion of such holder's shares of Series G Preferred Stock that will be sur-
rendered for redemption pursuant to this Section 6. If such notice shall
indicate that if a holder does not respond prior to ten Business Days after the
date of such notice that such holder will be deemed to have notified the
Corporation that it will not require the redemption of the shares of Series G
Preferred Stock held by such holder for purposes of Section 3(b) and such
holder does not respond to the Corporation's inquiry prior to ten Business Days
after the date of such notice, such holder will be deemed to have notified the
Corporation that it will not require the redemption of the shares of Series G
Preferred Stock held by such holder for purposes of Section 3(b). Nothing
contained in this Section 6(a)(iii)
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shall effect the right of a holder of Series G Preferred Stock to require the
Corporation to redeem such shares pursuant to Section 6(a)(i).
(b) At any time after December 30, 1995, the holder of any
shares of Series G Preferred Stock shall have the right, at such holder's option
exercisable at any time upon 30 days' notice to the Corporation, to require the
Corporation to redeem (a "Holder's Election Redemption") all or any part of the
shares of Series G Preferred Stock then held by such holder at a price per share
(the "Holder's Election Redemption Price") equal to the sum of (A) 100% of the
Liquidation Preference of such share, (B) an amount per share equal to all
accrued and unpaid dividends thereon, whether or not declared or payable, to the
date specified for such Holder's Election Redemption and (C) the Additional
Amount measured as of the date of any such redemption, in immediately available
funds. Notwithstanding the foregoing, if the redemption of any portion of such
shares would in the judgment of the Board of Directors of the Corporation have a
material adverse effect on the Corporation, then the Corporation may elect to
deliver with respect to such shares, in lieu of cash, notes, including
subordinated notes, of the Corporation ("Notes") (x) having a final maturity
date no later than ten years from the date of issuance, and (y) having such
other terms and conditions as shall result in a determination that such Notes
have a fair market value as of the date of their proposed issuance at least
equal to the sum of (1) the Holder's Election Redemption Price with respect to
such shares and (2) customary underwriting discounts and commissions payable
with respect to the sale of securities of a type comparable to the Notes or
shares of nonconvertible preferred stock ("Redemption Preferred Stock") having
the terms and conditions described in clauses (x) and (y) in lieu of Notes. The
Corporation shall use its best efforts to cause the Notes or the Redemption
Preferred Stock to be registered for immediate resale pursuant to an effective
registration statement under the Securities Act prior to the issuance thereof.
If such registration statement is not effective within 120 days of the date of
such issuance then the annual interest rate of the Notes or the annual dividend
rate of the Redemption Preferred Stock, as applicable, shall be increased by
0.5% per annum until such securities are sold pursuant to an effective
registration statement under the Securities Act. For purposes of this Section
6(b), "fair market value" shall mean the fair market value of the Notes or Re-
demption Preferred Stock, as the case may be, as determined by an investment
banking firm of national standing selected by the Corporation and reasonably
acceptable to the holders of a majority of the shares of Series G Preferred
Stock electing to effect such Holder's Election Redemption. In the case that
the Corporation shall be entitled
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to deliver either Notes or Redemption Preferred Stock, it shall be the
election of the Corporation whether to deliver such Notes or Redemption
Preferred Stock, except that, if, the sale of the security to be delivered
by the Corporation to effect a Holder's Election Redemption would give rise
to an additional liability on the part of such holder upon the sale thereof
and it shall so notify the Corporation in writing, the Corporation shall
deliver to such holder the other type of security specified in such notice.
(c) Each holder of shares of the Series G Preferred Stock
shall have the right, at such holder's option exercisable at any time on 30
days' notice to the Corporation on or after December 30, 2009 (the date of any
such exercise, the "Special Redemption Date"), to require the Corporation to
redeem (a "Special Redemption") all or any part of the shares of Series G
Preferred Stock then held by such holder as such holder may elect by written
notice delivered at least 30 days prior to the Special Redemption Date at a
price per share equal to the sum of (A) 100% of the Liquidation Preference of
such share, (B) an amount per share equal to all accrued and unpaid dividends
thereon whether or not declared or payable to the Special Redemption Date and
(C) the Additional Amount, determined as of the date immediately prior to the
Special Redemption Date (the "Special Redemption Price") in immediately
available funds.
(d) On the date fixed for any Specified Corporate Action
Redemption, Holder's Election Redemption or Special Redemption, each holder of
shares of Series G Preferred Stock who elects to have shares of Series G
Preferred Stock held by it redeemed shall surrender the certificate representing
such shares to the Corporation (i) at the place designated in such notice in the
case of a Specified Corporate Action Redemption or (ii) at the Corporation's
principal place of business to be maintained by it, in the case of a Holder's
Election Redemption or Special Redemption, together with an election to have
such redemption made and shall thereupon be entitled to receive payment therefor
provided in this Section 6. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued rep-
resenting the unredeemed shares. From and after the date of such redemption (i)
the rights to receive dividends thereon shall cease to accrue and (ii) all
rights of the holders of shares of Series G Preferred Stock so redeemed shall
cease and terminate, excepting only the right to receive the Specified Corporate
Action Redemption Price or Holder's Election Redemption Price or Special
Redemption Price therefor, as applicable; provided, however, that if the
-------- -------
Corporation shall default in the payment of the applicable redemption price or,
in the case of a Holder's Election Redemption, elect to postpone payment thereof
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in accordance with Section 6(b), the shares of Series G Preferred Stock that
were to be redeemed shall thereafter be deemed to be outstanding and the holders
thereof shall have all of the rights of a holder of Series G Preferred Stock
until such time as such default shall no longer be continuing or shall have been
waived by holders of at least 66-2/3% of the then outstanding shares of Series G
Preferred Stock or, in the case of a Holder's Election Redemption, so postponed,
the date on which the Holder's Election Redemption Price is paid.
Section 7. Redemption Upon Maturity.
------------------------
(a) On December 30, 2034 (the "Maturity Date"), the
Corporation shall redeem (the "Maturity Redemption") the remaining outstanding
shares of the Series G Preferred Stock at a price per share (the "Maturity
Redemption Price") equal to the sum of (A) 100% of the Liquidation Preference
per share, (B) an amount equal to accrued and unpaid dividends thereon, whether
or not declared or payable, to the Maturity Date and (C) the Additional Amount,
determined as of the date immediately prior to the Maturity Date, in immediately
available funds.
(b) Notice of the Maturity Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Maturity Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Maturity
Date to each holder of shares of Series G Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any
time after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series G
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series G Preferred Stock to be redeemed shall look
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only to the Corporation for the payment of the Maturity Redemption Price. Any
interest accrued and unpaid on funds deposited pursuant to this Section 5(c)
shall be paid from time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 7(c) in respect of shares of
Series G Preferred Stock to be redeemed pursuant to Section 7(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Maturity Date, (i) the rights
to receive dividends thereon shall cease to accrue and (ii) all rights of the
holders of shares of Series G Preferred Stock shall cease and terminate,
excepting only the right to receive the Maturity Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
Maturity Redemption Price, the shares of Series G Preferred Stock that were to
be redeemed shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series G Preferred Stock until such
time as such default shall no longer be continuing.
Section 8. Acquired Shares.
---------------
Any shares of Series G Preferred Stock exchanged, redeemed,
purchased or otherwise acquired by the Corporation or any of its Subsidiaries in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares of Series G Preferred Stock shall upon
their cancellation become authorized but unissued shares of preferred stock, par
value $4.00 per share, of the Corporation and, upon the filing of an appropriate
certificate with the Department of State of the State of New York, may be
reissued as part of another series of preferred stock, par value $4.00 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein, but in any event may not be reissued as shares of Series G
Preferred Stock or Parity Stock unless all of the issued and outstanding shares
of Series G Preferred Stock shall have already been redeemed or exchanged.
Section 9. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case
under the United States bankruptcy laws or any applicable bankruptcy,
insolvency or similar law of any other country, or consent to the entry of an
order for relief in an involuntary case under any such law or to the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
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other similar official) of the Corporation or of any substantial part of its
property, or make an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become due (any such
event, a "Voluntary Liquidation Event"), or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the United States bankruptcy laws or
any applicable bankruptcy, insolvency or similar law of any other country, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and on
account of any such event the Corporation shall liquidate, dissolve or wind up,
or if the Corporation shall otherwise liquidate, dissolve or wind up, no
distribution shall be made (i) to the holders of shares of Junior Stock unless,
prior thereto, the holders of shares of Series G Preferred Stock shall have
received (A) if a Voluntary Liquidation Event shall have occurred, the Optional
Redemption Price with respect to each share and (B) if a Voluntary Liquidation
Event shall not have occurred, the Liquidation Preference and all accrued and
unpaid dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series G Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series G Preferred Stock (which amounts are set forth in
clauses (A) and (B) above) and Parity Stock are entitled upon such liquidation,
dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10. Exchange.
--------
(a) Subject to the provisions of this Section 10, the
Corporation shall have the right, with the consent of the holders of all of the
outstanding shares of Series G Preferred Stock (which consent may be withheld
for any reason whatsoever), at any time but on only one occasion, to exchange
all (but not less than all) of the shares of Series G Preferred Stock for
Subordinated Notes of the Corporation ("Subordinated Notes"), at a price per
share equal to the Liquidation Preference per share, with the Subordinated Notes
valued for such
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purpose at their face value. Simultaneously with such exchange the Corporation
shall pay to each holder of Series G Preferred Stock an amount per share in cash
equal to all accrued and unpaid dividends thereon, whether or not declared or
currently payable, to the date fixed for exchange thereof. The Subordinated
Notes shall have an annual interest rate equal to the annual dividend rate on
Series G Preferred Stock and shall contain other terms substantially similar to
the Series G Preferred Stock, including the date of maturity thereof.
(b) Notice of an exchange of shares of Series G Preferred
Stock pursuant to Section 10(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for exchange; and, in any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Series G
Preferred Stock hereunder the Board of Directors may fix a record date for the
determination of shares of Series G Preferred Stock to be exchanged, or may
cause the transfer books of the Corporation for the Series G Preferred Stock to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for exchange.
(c) On the date of any exchange being made pursuant to
Section 10(a) that is specified in a notice given pursuant to Section 10(b), the
Corporation shall, and at any time after the date that is 10 days prior to the
date of exchange the Corporation may, deposit for the benefit of the holders of
shares of Series G Preferred Stock to be exchanged (i) the Subordinated Notes
necessary for such exchange and (ii) an amount in cash equal to all dividends
payable with respect thereto upon such exchange with a bank or trust company in
the Borough of Manhattan, The City of New York, that is "well capitalized"
within the meaning of the applicable banking regulations and having a capital
and surplus of at least $500,000,000. Any Subordinated Notes so deposited by
the Corporation and unclaimed at the end of two years from the date designated
for such exchange shall revert to the Corporation. After such reversion, any
such bank or trust company shall, upon demand, return to the Corporation such
unclaimed Subordinated Notes and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof and any holder of shares of
Series G Preferred Stock to be exchanged shall look only to the Corporation for
the delivery of the Subordinated Notes. Any interest accrued on Subordinated
Notes
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deposited pursuant to this Section 10(c) shall accrue for the accounts of, and
be payable to, the holders of shares of Series G Preferred Stock to be exchanged
therefor.
(d) Notice of exchange having been given as aforesaid and
not having been deemed terminated as aforesaid, upon the deposit of Subordinated
Notes pursuant to clause (i) of Section 10(c) and the deposit of the cash
referred to in clause (ii) of Section 10(c) in respect of shares of Series G
Preferred Stock to be exchanged pursuant to Section 10(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the date of exchange designated in the notice of
exchange (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon (except as provided in
paragraph (b) above) shall cease to accrue, and (iii) all rights of the holders
of shares of Series G Preferred Stock to be exchanged shall cease and terminate,
excepting only the right to receive the Subordinated Notes therefor and the
right to receive the dividends described in paragraph (b) above; provided,
--------
however, that if the Corporation shall default in the execution and delivery of
- - -------
the Convertible Notes, the shares of Series G Preferred Stock that were to be
exchanged shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series G Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Series G Preferred
Stock.
Section 11. Additional Amount.
-----------------
(a) For the purposes of this Article 3, "Additional Amount"
shall mean an amount per share equal to the product of (i) the excess of the sum
of (1) the Market Price of a share of Common Stock and (2) if the Corporation
shall have issued a right or rights with respect to its outstanding shares of
Common Stock pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, during the period commencing on the "distribution date" of such
right or rights (i.e., the date on which such right or rights commence to trade
----
separately from the Common Stock) and ending on the "triggering date" of such
right or rights (i.e., the date on which such right or rights commence to be
----
exercisable), the Market Price of such right or rights over the Conversion
Amount, in effect as hereinafter determined and (ii) (x) the Liquidation
Preference divided by (y) such Conversion Amount, in all cases calculated as of
the applicable determination date. The Additional Amount shall in no event be
less than zero. The Conversion Amount initially shall be $17.75, and shall
thereafter be subject to adjustment as set forth in Section 11(b). For the
purpose of calculating
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the Additional Amount in connection with an Optional Redemption, Specified
Corporate Action Redemption, Special Redemption or Holder's Election Redemption,
except as otherwise set forth in Section 6(a)(ii), the Market Price of the
Common Stock and, if applicable, rights shall be the average of the Market Price
of such securities on the five trading days immediately preceding and the five
trading days immediately following the date of notice of such redemption.
(b) The Conversion Amount shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from
time to time (A) pay a dividend or make a distribution on the outstanding shares
of Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Amount in effect immediately prior
to such event shall be adjusted so that if the holder of any share of Series G
Preferred Stock were entitled to convert such share into such number of shares
of Common Stock as equals the Liquidation Preference divided by the Conversion
Amount and such holder thereafter surrendered such share for conversion, such
holder would be entitled to receive the number of shares of Common Stock or
other securities of the Corporation that such holder would have owned or would
have been entitled to receive upon or by reason of any of the events described
above had such share of Series G Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 11(b)(i) shall become effective retroactively (A) in the case of any
such dividend or distribution, to the opening of business on the day immediately
following the close of business on the record date for the determination of
holders of Common Stock entitled to receive such dividend or distribution or (B)
in the case of any such subdivision, combination or reclassification, to the
close of business on the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from
time to time issue or sell shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock (other than options granted to
any employee or director of the Corporation pursuant to a stock option plan
approved by the shareholders of the Corporation))
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for a consideration per share less than the Conversion Amount then in effect at
the record date or issuance date, as the case may be (the "Date") referred to in
the following sentence, including, without limitation, upon exercise of rights
issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement (treating the price per share of any security convertible or
exchangeable or exercisable into Common Stock as equal to (A) the sum of the
price for such security convertible, exchangeable or exercisable into Common
Stock plus any additional consideration payable (without regard to any anti-
dilution adjustments) upon the conversion, exchange or exercise of such security
into Common Stock divided by (B) the number of shares of Common Stock initially
underlying such convertible, exchangeable or exercisable security), other than
issuances or sales for which an adjustment is made pursuant to another paragraph
of this Section 11(b), then, and in each such case, the Conversion Amount then
in effect shall be adjusted by dividing the Conversion Amount in effect on the
day immediately prior to the Date by a fraction (x) the numerator of which shall
be the sum of the number of shares of Common Stock outstanding immediately prior
to the Date plus the number of additional shares of Common Stock issued or to be
issued (or the maximum number into which such convertible or exchangeable
securities initially may convert or exchange or for which such options, warrants
or other rights initially may be exercised) and (y) the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to the Date plus the number of shares of Common Stock that the aggregate
consideration (if any of such aggregate consideration is other than cash, as
valued by the Board of Directors including a majority of the Directors who are
not officers or employees of the Corporation or any of its Subsidiaries, which
determination shall be conclusive and described in a resolution of the Board of
Directors) for the total number of such additional shares of Common Stock so
issued (or into which such convertible or exchangeable securities may convert or
exchange or for which such options, warrants or other rights may be exercised
plus the aggregate amount of any additional consideration initially payable upon
conversion, exchange or exercise of such security) would purchase at the
Conversion Amount. Such adjustment shall be made whenever such shares,
securities, options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close of business
(i) in the case of issuance to stockholders of the Corporation, as such, on the
record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (ii) in all other
cases, on the date ("issuance date") of such issuance; provided, however, that
-------- -------
the determination as to whether an adjustment is required to be made pursuant to
this Section
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11(b)(ii) shall only be made upon the issuance of such shares or
such convertible or exchangeable securities, options, warrants or other rights,
and not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
option, warrants or other right; provided, further, that if any convertible or
-------- -------
exchangeable securities, options, warrants or other rights (or any portions
thereof) that shall have given rise to an adjustment pursuant to this Section
11(b)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Conversion Amount hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares of Common Stock
corresponding to such convertible or exchangeable securities, options, warrants
or other rights as shall have expired or terminated, (y) treating the additional
shares of Common Stock, if any, actually issued or issuable pursuant to the
previous exercise of such convertible or exchangeable securities, options,
warrants or other rights as having been issued for the consideration actually
received and receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights that remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from
time to time distribute to all holders of shares of its Common Stock (including
any such distribution made in connection with a consolidation or merger in which
the Corporation is the resulting or surviving corporation and the Common Stock
is not changed or exchanged or a redemption of any rights or other securities
issued pursuant to a shareholder rights plan, "poison pill" or similar arrange-
ment) cash, evidences of indebtedness of the Corporation or another issuer,
securities of the Corporation or another issuer or other assets (excluding (A)
Permitted Dividends described in clause (B) of the definition thereof and (B)
securities for which adjustment is made under Section 11(b)(i) or Section
11(b)(ii)), then, and in each such case, the Conversion Amount then in effect
shall be adjusted by dividing the Conversion Amount in effect immediately prior
to the date of such distribution by a fraction (x) the numerator of which shall
be the Current Market Price of the Common Stock on the record date referred to
below and (y) the denominator of which shall be such Current Market Price of the
Common Stock less the then Fair Market Value (as determined by
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the Board of Directors of the Corporation, which determination shall be
conclusive) of the portion of the cash, evidences of indebtedness, securities or
other assets so distributed or of such subscription rights or warrants
applicable to one share of Common Stock (but such denominator not to be less
than one). Such adjustment shall be made whenever any such distribution is made
and shall become effective retroactively to a date immediately following the
close of business on the record date for the determination of stockholders
entitled to receive such distribution.
(iv) In the case the Corporation at any time or from
time to time shall take any action affecting its Common Stock, other than an
action described in any of Section 11(b)(i) through Section 11(b)(iii),
inclusive, then, the Conversion Amount shall be adjusted in such manner and at
such time as the Board of Directors of the Corporation (other than Purchaser
Designees or directors elected pursuant to Section 3(b)) in good faith
determines to be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the Series G Preferred Stock).
(v) The Corporation may make such reductions in the
Conversion Amount, in addition to those required by subparagraphs (i), (ii),
(iii) or (iv) of this Section 11(b), as the Board of Directors considers to be
advisable in order to avoid or to diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
(vi) Notwithstanding anything contained in this Section
11(b), no adjustment to the Conversion Amount shall be made with respect to any
rights issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement unless the "triggering date" (i.e. the date on which such rights
----
commence to be exercisable) shall have occurred or such rights shall have been
redeemed, in which event adjustments under clause (ii) and clause (iii),
respectively, shall be made.
(c) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Amount then in
effect shall be required by reason of the taking of such record.
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(d) Upon any increase or decrease in the Conversion Amount,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Series G Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased Con-
version Amount then in effect following such adjustment.
Section 12. Sinking Fund.
-------------
(a) So long as any shares of Series G Preferred Stock shall
be outstanding, the Corporation shall, on the final business day (any such date,
the "Sinking Fund Date") of each calendar year after 2003, (i) set aside a sum
of money equal to 3-1/3% of the aggregate liquidation preference of the shares
of Series G Preferred Stock then outstanding, and (ii) apply such money to
redeem such number of shares of Series G Preferred Stock at the Sinking Fund
Redemption Price (the Corporation's obligations described in this paragraph in
respect of any Sinking Fund Date being hereinafter referred to as the "Sinking
Fund Obligation" for such date) at a price per share (the "Sinking Fund
Redemption Price") equal to the sum of (A) the Liquidation Preference of such
share, (B) an amount per share equal to all accrued and unpaid dividends
thereon, whether or not declared or payable, to the applicable Sinking Fund Date
and (C) the Additional Amount (as defined in Section 11), determined as of the
date immediately prior to the Sinking Fund Date, in immediately available funds;
provided, however, that if the Corporation for any reason fails to discharge its
- - -------- -------
Sinking Fund Obligation on any Sinking Fund Date, such Sinking Fund Obligation,
to the extent not discharged, shall become an additional Sinking Fund Obligation
for each succeeding Sinking Fund Date until fully discharged; provided, further,
-------- -------
that no shares of Series G Preferred Stock purchased or acquired by the
Corporation otherwise than through redemption pursuant to this paragraph or
pursuant to an Optional Redemption may be credited against the Sinking Fund
Obligation in respect of any Sinking Fund Date.
(b) The shares to be redeemed pursuant to paragraph (a)
shall be selected pro rata (as nearly as may be) so that the number of shares
redeemed from each holder shall be the same proportion of all the shares to be
redeemed that the total number of shares of Series G Preferred Stock then held
by such holder bears to the total number of shares of Series G Preferred Stock
then outstanding.
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(c) Notice of the Sinking Fund Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Sinking Fund Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Sinking
Fund Date to each holder of shares of Series G Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation.
(d) The shares to be redeemed pursuant to paragraph (a)
shall be selected pro rata (as nearly as may be) so that the number of shares
redeemed from each holder shall be the same proportion of all the shares to be
redeemed that the total number of shares of Series G Preferred Stock then held
by such holder bears to the total number of shares of Series G Preferred Stock
then outstanding.
(e) On the Sinking Fund Date, the Corporation shall, and at
any time after such notice shall have been mailed and before the Sinking Fund
Date the Corporation may, deposit for the benefit of the holders of shares of
Series G Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series G Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Sinking Fund Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 5(c) shall be
paid from time to time to the Corporation for its own account.
(f) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 12(c) in respect of shares of
Series G Preferred Stock to be redeemed pursuant to Section 12(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Sinking Fund Date, (i)
the rights to receive dividends thereon shall cease to accrue and (ii) all
rights of the holders of shares of Series G Preferred Stock shall cease
and terminate, excepting only the right to
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receive the Sinking Fund Redemption Price therefor; provided, however, that
-------- -------
if the Corporation shall default in the payment of the Sinking Fund Redemption
Price, the shares of Series G Preferred Stock that were to be redeemed shall
thereafter be deemed to be outstanding and the holders thereof shall have all
of the rights of a holder of Series G Preferred Stock until such time as such
default shall no longer be continuing.
Article 4. Series H Preferred Stock.
------------------------
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as
"Cumulative Preferred Stock, Series H" (the "Series H Preferred Stock"). The
number of shares initially constituting the Series H Preferred Stock shall be
400,000 which number may be decreased (but not increased) by the Board of
Directors without a vote of stockholders; provided, however, that such number
may not be decreased below the sum of (x) the number of then outstanding shares
of Series H Preferred Stock and (y) such number of shares as may be necessary to
satisfy the dividend payments referenced in Section 2 hereof.
(b) The Series H Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank pari
----
passu with the Corporation's $2.50 Cumulative Convertible Preferred Stock,
- - -----
Series A (the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock,
Series B (the "Series B Preferred Stock"), Cumulative Convertible Preferred
Stock, Series E (the "Series E Preferred Stock"), Cumulative Preferred Stock,
Series F (the "Series F Preferred Stock"), Cumulative Preferred Stock, Series G
(the "Series G Preferred Stock"), Cumulative Preferred Stock, Series T (the
"Series T Preferred Stock" and together with the Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock,
the "Chicago Preferred Stock") and the New Preferred Stock (if any) (the Series
A Preferred Stock, Series B Preferred Stock, Chicago Preferred Stock (other than
the Series H Preferred Stock) and New Preferred Stock (if any) are collectively
defined for the purposes of this Article 4 as the "Other Preferred Stock") and
prior to all other classes and series of capital stock of the Corporation now or
hereafter authorized including, without limitation, the Common Stock, par
value $1.00 per share, of the Corporation (the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Article 6 below.
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Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series H Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
capital stock of the Corporation other than the Other Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the Liquidation Preference thereof equal to
12%, calculated on the basis of a 360-day year consisting of twelve 30-day
months, accruing and payable in equal quarterly payments, in immediately
available funds or, with respect to any dividends declared before the third
anniversary of the Issue Date, in additional shares of Series H Preferred Stock
having an aggregate Liquidation Preference equal to the aggregate amount of such
dividends (provided, however, that to the extent the amount of any such dividend
-------- -------
payable to any holder, valued at the Liquidation Preference thereof, does not
equal an integral multiple of one one-twentieth (1/20th) of a share of Series H
Preferred Stock, such fractional amount shall be paid in cash to such holder),
on the Business Day immediately preceding the last day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date") commencing on the Business Day immediately
preceding December 31, 1994; provided, however, that with respect to such first
-------- -------
Quarterly Dividend Payment Date, the holders of shares of Series H Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation at the time legally available
therefor, a cumulative dividend in respect of each share of Series H Preferred
Stock in the amount of (i) 12% of the Liquidation Preference multiplied by (ii)
a fraction equal to (A) the number of days from (and including) the Issue Date
to (but excluding) such Quarterly Dividend Payment Date divided by (B) 360. No
interest shall be payable in respect of any dividend payment on the Series H
Preferred Stock that may be in arrears.
(b) Dividends payable pursuant to Section 2(a) shall begin
to accrue and be cumulative from the Issue Date, and shall accrue on a daily
basis, in each case whether or not declared. Dividends paid on the shares of
Series H Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares of Series H Preferred Stock
at the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series H Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be not
more than 60 days nor less than 10
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days prior to the date fixed for the payment thereof. Accumulated but unpaid
dividends for any past quarterly dividend periods may be declared and paid at
any time, without reference to any regular Quarterly Dividend Payment Date, to
holders of record on such date, not more than 60 nor less than 10 days preceding
the payment date thereof, as may be fixed by the Board of Directors.
(c) The holders of shares of Series H Preferred Stock shall
not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights.
-------------
In addition to any voting rights provided by law, the
holders of shares of Series H Preferred Stock shall have the following voting
rights:
(a) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Series H Preferred Stock, voting
separately as a single class, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be necessary to (i)
authorize, adopt or approve an amendment to the Certificate of Incorporation
that would increase or decrease the par value of the shares of Series H
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Series H Preferred Stock, (ii) amend, alter or repeal the
Certificate of Incorporation so as to affect the shares of Series H Preferred
Stock adversely or (iii) effect the voluntary liquidation, dissolution, winding
up, recapitalization or reorganization of the Corporation, or the consolidation
or merger of the Corporation with or into any other Person, or the sale or other
distribution to another Person of all or substantially all of the assets of the
Corporation; provided, however, that no separate vote of the holders of Series H
-------- -------
Preferred Stock shall be required to effect any of the transactions described in
clause (iii) above unless such transaction would either require a class vote
pursuant to clause (i) or (ii) above or would require a vote by any shareholders
of the Corporation (other than pursuant to this sentence); provided further,
-------- -------
that no separate vote of the holders of the Series H Preferred Stock as a class
shall be required in the case of a recapitalization, reorganization,
consolidation or merger of, or sale by, the Corporation if (A) (a) such re-
capitalization, reorganization, consolidation, merger or sale constitutes a
Specified Corporate Action, (b) the Corporation has sufficient funds legally
available to it (after giving effect to such transaction) to redeem, at the then
applicable
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price hereunder and pursuant to the terms hereof, all the outstanding
shares of Series H Preferred Stock, (c) such redemption shall not be prohibited
by any agreement to which the Corporation or any of its Subsidiaries is a party,
by applicable law or otherwise, (d) the Board of Directors of the Corporation,
including a majority of the directors who are not officers or employees of the
Corporation, shall have adopted a resolution confirming that such funds are
available and that the holders of Series H Preferred Stock have the right to re-
quire such redemption and (e) the Corporation shall have set aside sufficient
funds through the Specified Corporation Action Redemption Date to redeem the
shares of Series H Preferred Stock held by such holders (except that no funds
need be set aside with respect to such shares held by any such holder who has
theretofore notified the Corporation (whether pursuant to Section 6(a)(iii) or
otherwise) that it will not require redemption of such shares) or (B) (1) the
Corporation shall be the resulting or surviving corporation, (2) the resulting
or surviving corporation will have after such recapitalization, reorganization,
consolidation or merger no Senior Stock or Parity Stock either authorized or
outstanding (except such Parity Stock of the Corporation as may have been
authorized or outstanding immediately preceding such consolidation or merger) or
such stock of the resulting or surviving corporation (having the same powers,
preferences and special rights of any such Parity Stock) as may be issued in
exchange therefor), (3) each holder of shares of Series H Preferred Stock
immediately preceding such recapitalization, reorganization, consolidation or
merger will receive in exchange therefor the same number of shares of stock,
with the same preferences, rights and powers, of the resulting or surviving
corporation, (4) after such recapitalization, reorganization, consolidation or
merger the resulting or surviving corporation shall not be in breach of any of
the terms hereof, any of the Material Provisions of the Securities Purchase
Agreement or any of its material obligations under the Registration Rights
Agreement and (5) all or substantially all the holders of the outstanding shares
of capital stock of the Corporation immediately prior to such consolidation or
merger are entitled to receive shares representing 50% or more of the then
outstanding shares of capital stock of the resulting or surviving corporation
entitled to vote generally in the election of directors.
(b) If on any date (i) the Corporation shall have failed to
declare, or shall have failed to pay, the full amount of dividends payable on
any series of Chicago Preferred Stock for six quarterly dividend periods or (ii)
a breach of any of the Material Provisions of the Securities Purchase Agreement
or any of the Corporation's material obligations under the Registration Rights
Agreement shall have occurred, then the number
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of directors constituting the Board of Directors shall, without further
action, be increased by two and the holders of shares of Series H Preferred
Stock shall have, in addition to the other voting rights set forth herein
with respect to the Series H Preferred Stock, the exclusive right, together
with the holders of all other series of Chicago Preferred Stock, voting
separately as a single class together with the holders of such other series
of Chicago Preferred Stock, to elect two directors of the Corporation to
fill such newly created directorship, by written consent as provided herein,
or at a special meeting of such holders called as provided herein. Any such
additional directors shall continue as directors (subject to reelection or
removal as provided in Section 3(c)(ii)) and the holders of Series H Preferred
Stock shall have such additional voting rights until such time as (A)
dividends then payable on all series of Chicago Preferred Stock shall have
been declared and paid in full and (B) there shall exist no breach of any of the
Material Provisions of the Securities Purchase Agreement or any of the Corpora-
tion's material obligations under the Registration Rights Agreement, as the case
may be, at which time such additional directors shall cease to be directors, the
number of directors constituting the Board of Directors shall be reduced by two
and such additional voting rights of the holders of all series of Chicago
Preferred Stock shall terminate, subject to revesting in the event of each and
every subsequent event of the character indicated above.
(c) (i) The foregoing right of holders of shares of Series
H Preferred Stock to take any action as provided in Section 3(b) may be
exercised at any annual meeting of stockholders or at a special meeting of
holders of shares of Chicago Preferred Stock, held for such purpose as
hereinafter provided or at any adjournment thereof, or by the written consent,
delivered to the Secretary of the Corporation, of the holders of the minimum
number of shares required to take such action.
So long as such right to vote continues (and unless such
right has been exercised by written consent of the minimum number of shares
required to take such action), the President of the Corporation may call, and
upon the written request of holders of record of at least 5% of the aggregate
outstanding shares of Chicago Preferred Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the by-laws
of the Corporation for the holding of meetings of stockholders.
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(ii) At each meeting of stockholders at which the holders of
shares of Series H Preferred Stock shall have the right, voting separately as a
single class together with the holders of all other series of Chicago Preferred
Stock, to elect two directors of the Corporation as provided in Section 3(b) or
to take any action, the presence in person or by proxy of the holders of record
of one-third of the total aggregate number of shares of Chicago Preferred Stock
then outstanding and entitled to vote on the matter shall be necessary and suf-
ficient to constitute a quorum. At any such meeting or at any adjournment
thereof:
(A) the absence of a quorum of the holders of shares of
Chicago Preferred Stock, shall not prevent the election of
directors other than those to be elected by the holders of shares
of Chicago Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock
shall not prevent the election of directors to be elected by the
holders of shares of Chicago Preferred Stock, or the taking of
any action as provided in Section 3(b); and
(B) in the absence of a quorum of the holders of shares of
Chicago Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the
meeting as to the actions to be taken by the holders of shares of
Chicago Preferred Stock, from time to time and place to place
without notice other than announcement at the meeting until a
quorum shall be present.
For taking of any action as provided in Section 3(a) or
Section 3(b) by the holders of shares of Series H Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his name on
the transfer books of the Corporation as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held; provided, however, that shares of Chicago Preferred Stock held
-------- -------
by the Corporation or any Subsidiary of the Corporation shall not be deemed to
be outstanding for purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Chicago
Preferred Stock, as provided in Section 3(b) shall, unless his term shall expire
earlier in accordance with the provisions thereof, hold office until the annual
meeting of
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stockholders next succeeding his election or until his successor, if
any, is elected and qualified.
If any director so elected by the holders of Chicago
Preferred Stock shall cease to serve as a director before his term shall expire
(except by reason of the termination of the voting rights accorded to the
holders of Chicago Preferred Stock, in accordance with Section 3(b)), the
holders of the Chicago Preferred Stock then outstanding and entitled to vote for
such director may, by written consent as provided herein, or at a special
meeting of such holders called as provided herein, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
Any director elected by the holders of shares of Chicago
Preferred Stock, voting together as a separate class, may be removed from office
with or without cause only by the vote or written consent of the holders of at
least a majority of the aggregate outstanding shares of Chicago Preferred Stock
at the time of removal. A special meeting of the holders of shares of Chicago
Preferred Stock, may be called in accordance with the procedures set forth in
Section 3(c)(i).
Section 4. Certain Restrictions.
--------------------
(a) So long as any shares of Series H Preferred Stock
remain outstanding, the Corporation shall not declare or make any Restricted
Payment.
(b) Whenever quarterly dividends payable on shares of
Series H Preferred Stock as provided in Section 2(a) are not paid in full, at
such time and thereafter until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Series H Preferred Stock shall have been
paid in full or declared and set apart for payment at such time and thereafter
until all necessary funds have been set apart for payment, or whenever the
Corporation shall not have paid the Optional Redemption Price, the Specified
Corporate Action Redemption Price or the Maturity Redemption Price when due, at
such time and thereafter until all such amounts have been paid in full or set
apart for payment, the Corporation shall not: (A) declare or pay dividends, or
make any other distributions, on any shares of Junior Stock, or (B) declare or
pay dividends, or make any other distributions, on any shares of Parity Stock,
except dividends or distributions paid ratably on the Series H Preferred Stock
and all Parity Stock on which dividends are payable and in arrears, in
proportion to the total amounts to which the holders of all shares of the Series
H Preferred Stock and Parity Stock are then entitled.
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(c) Whenever dividends payable on shares of Series H
Preferred Stock as provided in Section 2 are not paid in full, at such time and
thereafter until all unpaid dividends payable, whether or not declared, on the
outstanding shares of Series H Preferred Stock shall have been paid in full or
declared and set apart for payment, at such time and thereafter until all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Specified Corporate
Action Redemption Price or the Maturity Redemption Price when due, at such time
and thereafter until all such amounts have been paid in full or set apart for
payment, the Corporation shall not redeem, purchase or otherwise acquire for
consideration any shares of Junior Stock or Parity Stock; provided, however,
-------- -------
that (A) the Corporation may accept shares of any Parity Stock or Junior Stock
for conversion into Junior Stock and (B) the Corporation may at any time redeem,
purchase or otherwise acquire shares of any Parity Stock pursuant to any
mandatory redemption, put, sinking fund or other similar obligation contained in
such Parity Stock, pro rata with the Series H Preferred Stock in proportion to
the total amount then required to be applied by the Corporation to redeem,
repurchase, or otherwise acquire shares of Series H Preferred Stock and shares
of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5. Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem
any shares of Series H Preferred Stock prior to December 30, 1999. Thereafter,
subject to the restrictions contained in Section 4, the Corporation shall have
the right, at its sole option and election, to redeem (the "Optional Redemp-
tion") all or a portion of the shares of Series H Preferred Stock, on not more
than 45 nor less than 30 days' notice of the date of redemption (any such date,
an "Optional Redemption Date") at a price per share (the "Optional Redemption
Price") equal to the sum of (A) the following prices per share (stated as a per-
centage of the Liquidation Preference of such share) and (B) an amount per share
equal to all accrued and unpaid dividends thereon, whether or not declared or
payable, to the applicable Optional Redemption Date in immediately available
funds:
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Optional Redemption Price
If Redeemed as a Percentage of
During the Period Liquidation Preference
- - ----------------- ------------------------
December 30, 1999 to 106%
December 29, 2000
December 30, 2000 to 104.8%
December 29, 2001
December 30, 2001 to 103.6%
December 29, 2002
December 30, 2002 to 102.4%
December 29, 2003
December 30, 2003 to 101.2%
December 29, 2004
(ii) If the Corporation shall have the right to, or shall
determine to, redeem less than all the shares of Series H Preferred Stock then
outstanding pursuant to paragraph (i), the shares to be redeemed shall be
selected pro rata (as nearly as may be) so that the number of shares redeemed
from each holder shall be the same proportion of all the shares to be redeemed
that the total number of shares of Series H Preferred Stock then held by such
holder bears to the total number of shares of Series H Preferred Stock then
outstanding.
(iii) Notwithstanding the foregoing, any shares of Series H
Preferred Stock redeemed pursuant to this Section 5(a) at any time when the
holders of shares of Series H Preferred Stock have the right to require the
Corporation to redeem the shares of Series H Preferred Stock pursuant to Section
6 or an event giving rise to such a right has occurred shall be redeemed at a
price equal to higher of the price to be paid in Section 5(a) and the price to
be paid pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the
Optional Redemption Date fixed for redemption, the Optional Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the shares of Series H Preferred Stock and that on and after the
date of such Optional Redemption dividends will cease to accrue on such shares
and be given by publication in a newspaper of general circulation in the Borough
of Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), not less
than 30, nor more than 45, days prior to the Optional Redemption
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Date; and, in any case, a similar notice shall be mailed at least 30, but not
more than 45, days prior to the Optional Redemption Date to each holder of
shares of Series H Preferred Stock, at such holder's address as it appears on
the transfer books of the Corporation. In order to facilitate the redemption of
shares of Series H Preferred Stock, the Board of Directors may fix a record date
for the determination of shares of Series H Preferred Stock to be redeemed, or
may cause the transfer books of the Corporation for the Series H Preferred Stock
to be closed, not more than 60 days or less than 45 days prior to the Optional
Redemption Date.
(c) On the date of any Optional Redemption that is
specified in a notice given pursuant to Section 5(b), the Corporation shall, and
at any time after such notice shall have been mailed and before the Optional
Redemption Date the Corporation may, deposit for the benefit of the holders of
shares of Series H Preferred Stock the funds necessary for such redemption with
a bank or trust company in the Borough of Manhattan, The City of New York, that
is "well capitalized" within the meaning of applicable bank regulations and
having a capital and surplus of at least $500,000,000. Any moneys so deposited
by the Corporation and unclaimed at the end of two years from the Optional
Redemption Date shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series H Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. Any interest
accrued on funds deposited pursuant to this Section 5(c) shall be paid from time
to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 5(c) in respect of shares of
Series H Preferred Stock to be redeemed pursuant to Section 5(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Optional Redemption Date (i)
the shares represented thereby shall no longer be deemed outstanding, (ii) the
rights to receive dividends thereon shall cease to accrue, and (iii) all rights
of the holders of shares of Series H Preferred Stock to be redeemed shall cease
and terminate, excepting only the right to receive the Optional Redemption Price
therefor; provided, however, that if the Corporation shall default in the
-------- -------
payment of the Optional Redemption Price, the shares of Series H Preferred Stock
shall thereafter be deemed to be outstanding and the holders thereof shall have
all of the rights of a holder of Series H Preferred
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Stock until such time as such default or failure shall no longer be continuing
or shall have been waived by holders of at least 66-2/3% of the then outstanding
shares of Series H Preferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series H Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series H Preferred Stock. On or after the
Optional Redemption Date fixed for redemption as stated in such notice, each
holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Optional Redemption
Price. If less than all the shares evidenced by any such surrendered
certificate are redeemed, a new certificate shall be issued evidencing the
unredeemed shares.
Section 6. Mandatory Redemption at the Option
of the Holder.
---------------------------------
(a) (i) If one or more events constituting a Specified
Corporate Action shall occur, each holder of shares of the Series H Preferred
Stock shall have the right, at such holder's option on the date or dates
specified in Section 6(a)(ii) (the "Specified Corporate Action Redemption
Date"), to require the Corporation to redeem (a "Specified Corporate Action
Redemption") all or any part of the shares of Series H Preferred Stock then held
by such holder as such holder may elect at a price per share equal to the sum of
(A) the Liquidation Preference of such share and (B) an amount per share equal
to all accrued and unpaid dividends thereon, whether or not declared or payable,
to the applicable Specified Corporate Action Redemption Date, in immediately
available funds (the "Specified Corporate Action Redemption Price").
(ii) The date fixed for each Specified Corporate Action
Redemption shall be fixed by the Corporation and shall be not less than 60 days
nor more than 90 days following the occurrence of any Specified Corporate Action
giving rise thereto (or, in the case of a Specified Corporate Action as
described in clause (iii) of the definition of "Specified Corporate Action,"
not less than 60 days nor more than 90 days following the date on which the
Corporation obtains actual knowledge of such Specified Corporate Action);
provided, however, that in the event of a Specified Corporate Action that
- - -------- -------
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constitutes a Control Transaction, in addition to the dates fixed for a
Specified Corporate Action Redemption as specified above, an additional
Specified Corporate Action Redemption Date shall be set for the date and time
immediately preceding the consummation of any such Control Transaction;
provided, further, that, upon the request of a holder, the Board of Directors
- - -------- -------
shall agree to extend the date of redemption in respect of any such Specified
Corporate Action (without changing the consideration that is otherwise payable
in respect of such redemption other than with respect to adjustments to the
amount of accrued and unpaid dividends included in such redemption price) to the
extent necessary for any holder of shares of Series H Preferred Stock to avoid
liability under Section 16(b) of the Exchange Act, provided that no such
--------
redemption extension shall be for a period greater than six months. The
Corporation shall, within 5 days of the occurrence of a Specified Corporate
Action (or, in the case of a Specified Corporate Action described in clause
(iii) of the definition of "Specified Corporate Action," within 5 days of the
date on which the Corporation obtains actual knowledge of such Specified Corpo-
rate Action), give notice thereof by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), and, in any case, a similar notice shall be mailed to
each holder of shares of the Series H Preferred Stock, at such holder's address
as it appears on the transfer books of the Corporation. Each such notice shall
specify the Specified Corporate Action that has occurred and the date of such
occurrence, the place or places of payment, the then effective Specified
Corporate Action Redemption Price and the date the right of such holder to
require a Specified Corporate Action Redemption shall terminate.
(iii) If the notice sent by the Corporation pursuant to
Section 6(a)(ii) shall contain (i) a form inquiring as to whether a holder of
shares of Series H Preferred Stock intends to surrender the certificate(s)
representing such shares for redemption pursuant to this Section 6(a) and (ii) a
stamped self-addressed envelope for return of such form to the Corporation or
its designee, within ten Business Days of such notice, each holder shall return
such inquiry form to the Corporation and shall indicate in such form the
proportion of such holder's shares of Series H Preferred Stock that will be
surrendered for redemption pursuant to this Section 6(a). If such notice shall
indicate that if a holder does not respond prior to ten Business Days after the
date of such notice that such holder will be deemed to have notified the
Corporation that it will not require the redemption of the shares of Series H
Preferred Stock held by such holder for purposes of Section
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3(b) and such holder does not respond to the Corporation's inquiry prior to ten
Business Days after the date of such notice, such holder will be deemed to have
notified the Corporation that it will not require the redemption of the shares
of Series H Preferred Stock held by such holder for purposes of Section 3(b).
Nothing contained in this Section 6(a)(iii) shall affect the right of a holder
of Series H Preferred Stock to require the Corporation to redeem such shares
pursuant to Section 6(a)(i).
(b) On the date fixed for any Specified Corporate Action
Redemption, each holder of shares of Series H Preferred Stock who elects to have
shares of Series H Preferred Stock held by it redeemed shall surrender the
certificate representing such shares to the Corporation at the place designated
in such notice, together with an election to have such redemption made and shall
thereupon be entitled to receive payment therefor provided in this Section 6.
If less than all the shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after the date of such redemption (i) the rights to receive dividends
thereon shall cease to accrue and (ii) all rights of the holders of shares of
Series H Preferred Stock so redeemed shall cease and terminate, excepting only
the right to receive the Specified Corporate Action Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
applicable redemption price the shares of Series H Preferred Stock that were to
be redeemed shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series H Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Series H Preferred
Stock.
Section 7. Redemption Upon Maturity.
------------------------
(a) On December 30, 2004 (the "Maturity Date"), the
Corporation shall redeem (the "Maturity Redemption") the remaining outstanding
shares of the Series H Preferred Stock at a price per share (the "Maturity
Redemption Price") equal to the sum of (A) 100% of the Liquidation Preference
per share, and (B) an amount equal to accrued and unpaid dividends thereon,
whether or not declared or payable, to the Maturity Date in immediately
available funds.
(b) Notice of the Maturity Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication
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shall be required by applicable law, rule, regulation or securities exchange
requirement), not less than 30, nor more than 60, days prior to the Maturity
Date and, in any case, a similar notice shall be mailed at least 30, but not
more than 60, days prior to the Maturity Date to each holder of shares of Series
H Preferred Stock, at such holder's address as it appears on the transfer books
of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any
time after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series H
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, that is "well
capitalized within the meaning of applicable banking regulations and having a
capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series H Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Maturity Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 5(c) shall be
paid from time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 7(c) in respect of shares of
Series H Preferred Stock to be redeemed pursuant to Section 7(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Maturity Date, (i) the rights
to receive dividends thereon shall cease to accrue and (ii) all rights of the
holders of shares of Series H Preferred Stock shall cease and terminate,
excepting only the right to receive the Maturity Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
Maturity Redemption Price, the shares of Series H Preferred Stock that were to
be redeemed shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series H Preferred Stock until such
time as such default shall no longer be continuing.
Section 8. Acquired Shares.
---------------
Any shares of Series H Preferred Stock exchanged, redeemed,
purchased or otherwise acquired by the Corporation or
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any of its Subsidiaries in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares of Series H Preferred
Stock shall upon their cancellation become authorized but unissued shares of
preferred stock, par value $4.00 per share, of the Corporation and, upon the
filing of an appropriate certificate with the Department of State of the State
of New York, may be reissued as part of another series of preferred stock, par
value $4.00 per share, of the Corporation subject to the conditions or
restrictions of issuance set forth herein, but in any event may not be reissued
as shares of Series H Preferred Stock or Parity Stock unless all of the shares
of Series H Preferred Stock issued on the Issue Date shall have already been
redeemed or exchanged.
Section 9. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case
under the United States bankruptcy laws or any applicable bankruptcy, insolvency
or similar law of any other country, or consent to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series H Preferred Stock shall have received
(A) if a Voluntary Liquidation Event shall have occurred, the Optional
Redemption Price with respect to each share and (B) if a Voluntary Liquidation
Event shall not have occurred, the Liquidation Preference and all accrued and
unpaid dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series H Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series H Preferred Stock (which
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amounts are set forth in clauses (A) and (B) above) and Parity Stock are
entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10. Exchange.
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(a) Subject to the provisions of this Section 10, the
Corporation shall have the right, with the consent of the holders of all of the
outstanding shares of Series H Preferred Stock (which consent may be withheld
for any reason whatsoever), at any time but on only one occasion, to exchange
all (but not less than all) of the shares of Series H Preferred Stock for
Subordinated Notes of the Corporation ("Subordinated Notes"), at a price per
share equal to the Liquidation Preference per share, with the Subordinated Notes
valued for such purpose at their face value. Simultaneously with such exchange
the Corporation shall pay to each holder of Series H Preferred Stock an amount
per share in cash equal to all accrued and unpaid dividends thereon, whether or
not declared or currently payable, to the date fixed for exchange thereof. The
Subordinated Notes shall have an annual interest rate equal to the annual
dividend rate on Series H Preferred Stock and shall contain other terms
substantially similar to the Series H Preferred Stock, including the date of
maturity thereof.
(b) Notice of an exchange of shares of Series H Preferred
Stock pursuant to Section 10(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for exchange; and, in any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Series H
Preferred Stock hereunder the Board of Directors may fix a record date for the
determination of shares of Series H Preferred Stock to be exchanged, or may
cause the transfer books of the Corporation for the Series H Preferred Stock to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for exchange.
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(c) On the date of any exchange being made pursuant to
Section 10(a) that is specified in a notice given pursuant to Section 10(b), the
Corporation shall, and at any time after the date that is 10 days prior to the
date of exchange the Corporation may, deposit for the benefit of the holders of
shares of Series H Preferred Stock to be exchanged (i) the Subordinated Notes
necessary for such exchange and (ii) an amount in cash equal to all dividends
payable with respect thereto upon such exchange with a bank or trust company in
the Borough of Manhattan, The City of New York, that is "well capitalized"
within the meaning of applicable banking regulations and having a capital and
surplus of at least $500,000,000. Any Subordinated Notes so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such exchange shall revert to the Corporation. After such reversion, any such
bank or trust company shall, upon demand, return to the Corporation such
unclaimed Subordinated Notes and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof and any holder of shares of
Series H Preferred Stock to be exchanged shall look only to the Corporation for
the delivery of the Subordinated Notes. Any interest accrued on Subordinated
Notes deposited pursuant to this Section 10(c) shall accrue for the accounts of,
and be payable to, the holders of shares of Series H Preferred Stock to be
exchanged therefor.
(d) Notice of exchange having been given as aforesaid and
not having been deemed terminated as aforesaid, upon the deposit of Subordinated
Notes pursuant to clause (i) of Section 10(c) and the deposit of the cash
referred to in clause (ii) of Section 10(c) in respect of shares of Series H
Preferred Stock to be exchanged pursuant to Section 10(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the date of exchange designated in the notice of
exchange (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon (except as provided in
paragraph (b) above) shall cease to accrue, and (iii) all rights of the holders
of shares of Series H Preferred Stock to be exchanged shall cease and terminate,
excepting only the right to receive the Subordinated Notes therefor and the
right to receive the dividends described in paragraph (b) above; provided,
--------
however, that if the Corporation shall default in the execution and delivery of
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the Convertible Notes, the shares of Series H Preferred Stock that were to be
exchanged shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series H Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least
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66-2/3% of the then outstanding shares of Series H Preferred Stock.
Article 5. Series T Preferred Stock.
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Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as
"Cumulative Preferred Stock, Series T" (the "Series T Preferred Stock"). The
number of shares initially constituting the Series T Preferred Stock shall be
828,100, which number may be decreased (but not increased) by the Board of
Directors without a vote of stockholders; provided, however, that such number
may not be decreased below the number of then outstanding shares of Series T
Preferred Stock.
(b) The Series T Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank pari
----
passu with the Corporation's $2.50 Cumulative Convertible Preferred Stock,
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Series A (the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock,
Series B (the "Series B Preferred Stock"), Cumulative Convertible Preferred
Stock, Series E (the "Series E Preferred Stock"), Cumulative Preferred Stock,
Series G (the "Series G Preferred Stock"), Cumulative Preferred Stock, Series H
(the "Series H Preferred Stock"), Cumulative Preferred Stock, Series F (the
"Series F Preferred Stock" and together with the Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock,
the "Chicago Preferred Stock") and the New Preferred Stock (if any) (the Series
A Preferred Stock, Series B Preferred Stock, Chicago Preferred Stock (other than
the Series T Preferred Stock) and New Preferred Stock (if any) are collectively
defined for the purposes of this Article 5 as the "Other Preferred Stock") and
prior to all other classes and series of capital stock of the Corporation now or
hereafter authorized including, without limitation, the Common Stock, par value
$1.00 per share, of the Corporation (the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Article 6 below.
Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series T Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
capital stock of the Corporation other than the Other Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation at the time legally available
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therefor, cumulative cash dividends at an annual rate on the Liquidation
Preference thereof equal to 9.75% (subject to increase pursuant to Section
2(b)), calculated on the basis of a 360-day year consisting of twelve 30-day
months, accruing and payable in equal quarterly payments, in immediately
available funds, on the Business Day immediately preceding the last day of
March, June, September and December in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date") commencing on the Business Day
immediately preceding December 31, 1994; provided, however, that with respect to
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such first Quarterly Dividend Payment Date, the holders of shares of Series T
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of the assets of the Corporation at the time legally
available therefor, a cumulative cash dividend in respect of each share of
Series T Preferred Stock in the amount of (i) 9.75% (or the then effective
annual rate) of the Liquidation Preference multiplied by (ii) a fraction equal
to (A) the number of days from (and including) the Issue Date to (but excluding)
such Quarterly Dividend Payment Date divided by (B) 360. No interest shall be
payable in respect of any dividend payment on the Series T Preferred Stock that
may be in arrears.
(b) If (i) a private placement or public offering of the
New Preferred Stock or the New Senior Notes pursuant to which the Corporation
shall receive at least $100,000,000 in gross proceeds is not consummated within
360 days after the termination of the Merger Agreement or (ii) the annual
dividend rate on the New Preferred Stock or the annual interest rate on the New
Senior Notes, as applicable, exceeds 13%, then the annual rate of the cumulative
cash dividends shall be increased to a rate of 10.75%, effective (x) in the case
of clause (i), the date that is 360 days after the termination of the Merger
Agreement and (y) in the case of clause (ii), the date of the issuance of the
New Preferred Stock or the New Senior Notes, as applicable. If on any date (A)
all of the Purchaser Designees shall not have been elected to the Corporation's
Board of Directors or any such Purchaser Designees shall not have been appointed
to the committees of the Corporation's Board of Directors, in accordance with
the provisions of Section 6.17 of the Securities Purchase Agreement, (B) the
Corporation shall have failed to declare, or shall have failed to pay, the full
amount of dividends payable on the Series T Preferred Stock for six quarterly
dividend periods, (C) the Corporation shall have failed to satisfy its
obligation to convert shares of Series E Preferred Stock pursuant to Article 1,
Section 10 or (D) a breach of any of the Material Provisions of the Securities
Purchase Agreement or any of the Corporation's material obligations under the
Registration Rights Agreement shall have occurred then, effective as of the date
of such failure or
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breach, the annual rate of the cumulative cash dividends shall be increased to a
rate of 11.75% and shall remain at such rate until such time as (1) the Pur-
chaser Designees shall have been elected to the Corporation's Board of Directors
and appointed to the committees of the Corporation's Board of Directors in
accordance with the provisions of Section 6.17 of the Securities Purchase
Agreement, (2) all dividends accrued to date on the Series T Preferred Stock
shall have been declared and paid in full, (3) any conversion obligations in
respect of the Chicago Preferred Stock that have become due shall have been
fully satisfied and (4) there shall exist no breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement, as the case may
be, at which time the annual rate of the cumulative cash dividends shall be re-
duced to a rate of 9.75%, subject to being increased to a rate of 11.75% in the
event of each and every subsequent event of the character indicated above.
(c) Dividends payable pursuant to Section 2(a) shall begin
to accrue and be cumulative from the Issue Date, and shall accrue on a daily
basis, in each case whether or not declared. Dividends paid on the shares of
Series T Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares of Series T Preferred Stock
at the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series T Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be not
more than 60 days nor less than 10 days prior to the date fixed for the payment
thereof. Accumulated but unpaid dividends for any past quarterly dividend
periods may be declared and paid at any time, without reference to any regular
Quarterly Dividend Payment Date, to holders of record on such date, not more
than 60 nor less than 10 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(d) The holders of shares of Series T Preferred Stock shall
not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights.
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In addition to any voting rights provided by law, the
holders of shares of Series T Preferred Stock shall have the following voting
rights:
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(a) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Series T Preferred Stock, voting
separately as a single class, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be necessary to (i)
authorize, adopt or approve an amendment to the Certificate of Incorporation
that would increase or decrease the par value of the shares of Series T
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Series T Preferred Stock, (ii) amend, alter or repeal the
Certificate of Incorporation so as to affect the shares of Series T Preferred
Stock adversely or (iii) effect the voluntary liquidation, dissolution, winding
up, recapitalization or reorganization of the Corporation, or the consolidation
or merger of the Corporation with or into any other Person, or the sale or other
distribution to another Person of all or substantially all of the assets of the
Corporation; provided, however, that no separate vote of the holders of Series T
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Preferred Stock shall be required to effect any of the transactions described in
clause (iii) above unless such transaction would either require a class vote
pursuant to clause (i) or (ii) above or would require a vote by any shareholders
of the Corporation (other than pursuant to this sentence); provided further,
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that no separate vote of the holders of the Series T Preferred Stock as a class
shall be required in the case of a recapitalization, reorganization,
consolidation or merger of, or sale by, the Corporation if (A) (a) such
recapitalization, reorganization, consolidation, merger or sale constitutes a
Specified Corporate Action, (b) the Corporation has sufficient funds legally
available to it (after giving effect to such transaction) to redeem, at the then
applicable price hereunder and pursuant to the terms hereof, all the
outstanding shares of Series T Preferred Stock, (c) such redemption shall not
be prohibited by any agreement to which the Corporation or any of its
Subsidiaries is a party, by applicable law or otherwise, (d) the Board of
Directors of the Corporation, including a majority of the directors who
are not officers or employees of the Corporation, shall have adopted a
resolution confirming that such funds are available and that the holders of
Series T Preferred Stock have the right to require such redemption and (e) the
Corporation shall have set aside sufficient funds through the Specified
Corporation Action Redemption Date to redeem the shares of Series T Preferred
Stock held by such holders (except that no funds need be set aside with respect
to such shares held by any such holder who has theretofore notified the Cor-
poration (whether pursuant to Section 6(a)(iii) or otherwise) that it will not
require redemption of such shares) or (B) (1) the Corporation shall be the
resulting or surviving corporation, (2) the resulting or
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surviving corporation will have after such recapitalization, reorganization,
consolidation or merger no Senior Stock or Parity Stock either authorized or
outstanding (except such Parity Stock of the Corporation as may have been
authorized or outstanding immediately preceding such consolidation or merger) or
such stock of the resulting or surviving corporation (having the same powers,
preferences and special rights of any such Parity Stock) as may be issued in
exchange therefor), (3) each holder of shares of Series T Preferred Stock
immediately preceding such recapitalization, reorganization, consolidation or
merger will receive in exchange therefor the same number of shares of stock,
with the same preferences, rights and powers, of the resulting or surviving
corporation, (4) after such recapitalization, reorganization, consolidation or
merger the resulting or surviving corporation shall not be in breach of any of
the terms hereof, any of the Material Provisions of the Securities Purchase
Agreement or any of its material obligations under the Registration Rights
Agreement and (5) all or substantially all the holders of the outstanding shares
of capital stock of the Corporation immediately prior to such consolidation or
merger are entitled to receive shares representing 50% or more of the then
outstanding shares of capital stock of the resulting or surviving corporation
entitled to vote generally in the election of directors.
(b) If on any date (i) the Corporation shall have failed to
declare, or shall have failed to pay, the full amount of dividends payable on
any series of Chicago Preferred Stock for six quarterly dividend periods or (ii)
a breach of any of the Material Provisions of the Securities Purchase Agreement
or any of the Corporation's material obligations under the Registration Rights
Agreement shall have occurred, then the number of directors constituting the
Board of Directors shall, without further action, be increased by two and the
holders of shares of Series T Preferred Stock shall have, in addition to the
other voting rights set forth herein with respect to the Series T
Preferred Stock, the exclusive right, together with the holders of all
other series of Chicago Preferred Stock, voting separately as a single
class together with the holders of such other series of Chicago
Preferred Stock, to elect two directors of the Corporation to fill such
newly created directorship, by written consent as provided herein, or
at a special meeting of such holders called as provided herein. Any
such additional directors shall continue as directors (subject to
reelection or removal as provided in Section 3(c)(ii)) and the holders
of Series T Preferred Stock shall have such additional voting rights
until such time as (A) dividends then payable on all series of Chicago
Preferred Stock shall have been declared and paid in full and (B) there
shall exist no breach of any of the Material Provisions of the
Securities Purchase Agreement or any
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of the Corporation's material obligations under the Registration Rights
Agreement, as the case may be, at which time such additional directors shall
cease to be directors, the number of directors constituting the Board of Di-
rectors shall be reduced by two and such additional voting rights of the holders
of all series of Chicago Preferred Stock shall terminate, subject to revesting
in the event of each and every subsequent event of the character indicated
above.
(c) (i) The foregoing right of holders of shares of Series
T Preferred Stock to take any action as provided in Section 3(b) may be
exercised at any annual meeting of stockholders or at a special meeting of
holders of shares of Chicago Preferred Stock, held for such purpose as
hereinafter provided or at any adjournment thereof, or by the written consent,
delivered to the Secretary of the Corporation, of the holders of the minimum
number of shares required to take such action.
So long as such right to vote continues (and unless such
right has been exercised by written consent of the minimum number of shares
required to take such action), the President of the Corporation may call, and
upon the written request of holders of record of at least 5% of the aggregate
outstanding shares of Chicago Preferred Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the by-laws
of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders
of shares of Series T Preferred Stock shall have the right, voting
separately as a class together with the holders of all other series of
Chicago Preferred Stock, to elect two directors of the Corporation as provided
in Section 3(b) or to take any action, the presence in person or by proxy of
the holders of record of one-third of the total aggregate number of shares of
Chicago Preferred Stock then outstanding and entitled to vote on the matter
shall be necessary and to constitute a quorum. At any such meeting or at any
adjournment thereof:
(A) the absence of a quorum of the holders of shares of
Chicago Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of shares
of Chicago Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock
shall not prevent the election of
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directors to be elected by the holders of shares of Chicago
Preferred Stock, or the taking of any action as provided in
Section 3(b); and
(B) in the absence of a quorum of the holders of shares of
Chicago Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the
meeting as to the actions to be taken by the holders of shares of
Chicago Preferred Stock, from time to time and place to place
without notice other than announcement at the meeting until a
quorum shall be present.
For taking of any action as provided in Section 3(a) or
Section 3(b) by the holders of shares of Series T Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his name on
the transfer books of the Corporation as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held; provided, however, that shares of Chicago Preferred Stock held
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by the Corporation or any Subsidiary of the Corporation shall not be deemed to
be outstanding for purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Chicago
Preferred Stock, as provided in Section 3(b) shall, unless his term shall expire
earlier in accordance with the provisions thereof, hold office until the annual
meeting of stockholders next succeeding his election or until his successor, if
any, is elected and qualified.
If any director so elected by the holders of Chicago Pre-
ferred Stock shall cease to serve as a director before his term shall expire
(except by reason of the termination of the voting rights accorded to the
holders of Chicago Preferred Stock, in accordance with Section 3(b)), the
holders of the Chicago Preferred Stock then outstanding and entitled to vote for
such director may, by written consent as provided herein, or at a special
meeting of such holders called as provided herein, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
Any director elected by the holders of shares of Chicago
Preferred Stock, voting together as a separate class, may be removed from office
with or without cause only by the vote or written consent of the holders of at
least a majority of the aggregate outstanding shares of Chicago Preferred Stock
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at the time of removal. A special meeting of the holders of shares of Chicago
Preferred Stock, may be called in accordance with the procedures set forth in
Section 3(c)(i).
Section 4. Certain Restrictions.
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(a) So long as any shares of Series T Preferred Stock
remain outstanding, the Corporation shall not declare or make any Restricted
Payment.
(b) Whenever quarterly dividends payable on shares of
Series T Preferred Stock as provided in Section 2(a) are not paid in full, at
such time and thereafter until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Series T Preferred Stock shall have been
paid in full or declared and set apart for payment at such time and thereafter
until all necessary funds have been set apart for payment, or whenever the
Corporation shall not have paid the Optional Redemption Price, the Specified
Corporate Action Redemption Price, the Conversion Redemption Price, the Special
Redemption Price or the Maturity Redemption Price when due, at such time and
thereafter until all such amounts have been paid in full or set apart for pay-
ment, the Corporation shall not: (A) declare or pay dividends, or make any
other distributions, on any shares of Junior Stock, or (B) declare or pay
dividends, or make any other distributions, on any shares of Parity Stock,
except dividends or distributions paid ratably on the Series T Preferred Stock
and all Parity Stock on which dividends are payable and in arrears, in
proportion to the total amounts to which the holders of all shares of the Series
T Preferred Stock and Parity Stock are then entitled.
(c) Whenever dividends payable on shares of Series T
Preferred Stock as provided in Section 2 are not paid in full, at such time and
thereafter until all unpaid dividends payable, whether or not declared, on the
outstanding shares of Series T Preferred Stock shall have been paid in full or
declared and set apart for payment, at such time and thereafter until all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Specified Corporate
Action Redemption Price, the Conversion Redemption Price, the Special Redemption
Price or the Maturity Redemption Price when due, at such time and thereafter
until all such amounts have been paid in full or set apart for payment, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Stock or Parity Stock; provided, however, that (A) the
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Corporation may accept shares of any
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Parity Stock or Junior Stock for conversion into Junior Stock and (B) the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
Parity Stock pursuant to any mandatory redemption, put, sinking fund or other
similar obligation contained in such Parity Stock, pro rata with the Series T
Preferred Stock in proportion to the total amount then required to be applied by
the Corporation to redeem, repurchase, or otherwise acquire shares of Series T
Preferred Stock and shares of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5. Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem
any shares of Series T Preferred Stock prior to December 30, 2001. Thereafter,
(A) at any time, so long as shares of Common Stock shall have traded on the New
York Stock Exchange (or another national securities exchange or on Nasdaq) on
each trading day during a 30-consecutive trading day period (each of which
trading days shall be after December 30, 2001 and no more than 5 Business Days
prior to the date notice is given of an Optional Redemption (as defined below))
and had a Closing Price on at least 20 of such trading days in excess of 150% of
the Conversion Amount in effect on such trading day as determined pursuant to
Section 11, subject to the restrictions contained in Section 4 or (B) at any
time after December 30, 2009, the Corporation shall have the right, at its sole
option and election, to redeem (the "Optional Redemption") all or a portion of
the shares of Series T Preferred Stock, on not more than 45 nor less than 30
days' notice of the date of redemption (any such date, an "Optional Redemption
Date") at a price per share (the "Optional Redemption Price") equal to the sum
of (A) the following prices per share (stated as a percentage of the Liquidation
Preference of such share), (B) an amount per share equal to all accrued and
unpaid dividends thereon, whether or not declared or payable, to the applicable
Optional Redemption Date and (C) the Additional Amount (as defined in Section
11), in immediately available funds:
Optional Redemption Price
If Redeemed as a Percentage of
During the Period Liquidation Preference
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December 30, 2001 to 102.775%
December 29, 2002
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December 30, 2002 to 101.850%
December 29, 2003
December 30, 2003 to 100.925%
December 29, 2004
December 30, 2004 and 100%
thereafter
(ii) If the Corporation shall have the right to, or shall
determine to, redeem less than all the shares of Series T Preferred Stock then
outstanding pursuant to paragraph (i), the shares to be redeemed shall be
selected pro rata (as nearly as may be) so that the number of shares redeemed
from each holder shall be the same proportion of all the shares to be redeemed
that the total number of shares of Series T Preferred Stock then held by such
holder bears to the total number of shares of Series T Preferred Stock then
outstanding.
(iii) Notwithstanding the foregoing, any shares of Series T
Preferred Stock redeemed pursuant to this Section 5(a) at any time when the
holders of shares of Series T Preferred Stock have the right to require the
Corporation to redeem the shares of Series T Preferred Stock pursuant to Section
6 or an event giving rise to such a right has occurred shall be redeemed at a
price equal to higher of the price to be paid in Section 5(a) and the price to
be paid pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the
Optional Redemption Date fixed for redemption, the Optional Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the shares of Series T Preferred Stock and that on and after the
date of such Optional Redemption dividends will cease to accrue on such shares
and be given by publication in a newspaper of general circulation in the Borough
of Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), not less
than 30, nor more than 45, days prior to the Optional Redemption Date; and, in
any case, a similar notice shall be mailed at least 30, but not more than 45,
days prior to the Optional Redemption Date to each holder of shares of Series T
Preferred Stock, at such holder's address as it appears on the transfer books
of the Corporation. In order to facilitate the redemption of shares of Series T
Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series T Preferred Stock to be redeemed, or may cause
the transfer books of the Corporation for the Series T Preferred
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Stock to be closed, not more than 60 days or less than 45 days prior to the
Optional Redemption Date.
(c) On the date of any Optional Redemption that is
specified in a notice given pursuant to Section 5(b), the Corporation shall, and
at any time after such notice shall have been mailed and before the Optional
Redemption Date the Corporation may, deposit for the benefit of the holders of
shares of Series T Preferred Stock the funds necessary for such redemption with
a bank or trust company in the Borough of Manhattan, The City of New York, that
is "well capitalized" within the meaning of the applicable bank regulations and
having a capital and surplus of at least $500,000,000. Any moneys so deposited
by the Corporation and unclaimed at the end of two years from the Optional
Redemption Date shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series T Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. Any interest
accrued on funds deposited pursuant to this Section 5(c) shall be paid from time
to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 5(c) in respect of shares of
Series T Preferred Stock to be redeemed pursuant to Section 5(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Optional Redemption Date (i)
the shares represented thereby shall no longer be deemed outstanding, (ii) the
rights to receive dividends thereon shall cease to accrue, and (iii) all rights
of the holders of shares of Series T Preferred Stock to be redeemed shall cease
and terminate, excepting only the right to receive the Optional Redemption Price
therefor; provided, however, that if the Corporation shall default in the
-------- -------
payment of the Optional Redemption Price, the shares of Series T Preferred Stock
shall thereafter be deemed to be outstanding and the holders thereof shall have
all of the rights of a holder of Series T Preferred Stock until such time as
such default or failure shall no longer be continuing or shall have been waived
by holders of at least 66-2/3% of the then outstanding shares of Series T Pre-
ferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series T Preferred Stock receives such notice, and failure to give
such notice by mail, or
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any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Series T Preferred Stock. On or after the Optional
Redemption Date fixed for redemption as stated in such notice, each holder of
the shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Optional Redemption Price. If
less than all the shares evidenced by any such surrendered certificate are
redeemed, a new certificate shall be issued evidencing the unredeemed shares.
Section 6 Mandatory Redemption at the Option
of the Holder.
---------------------------------
(a) (i) If one or more events constituting a Specified
Corporate Action shall occur, each holder of shares of the Series T Preferred
Stock shall have the right, at such holder's option on the date or dates
specified in Section 6(a)(ii) (the "Specified Corporate Action Redemption
Date"), to require the Corporation to redeem (a "Specified Corporate Action
Redemption") all or any part of the shares of Series T Preferred Stock then held
by such holder as such holder may elect at a price per share equal to the
greater of (I) the sum of (A) the following prices per share (stated as a
percentage of the Liquidation Preference of such share) and (B) an amount per
share equal to all accrued and unpaid dividends thereon, whether or not declared
or payable, to the applicable Specified Corporate Action Redemption Date
If the Specified Corporate Specified Corporate Action
Action Redemption Date Redemption as a Percentage of
Occurs During the Period Liquidation Preference
------------------------ ----------------------------
December 30, 1994 to 110.4%
June 29, 1995
June 30, 1995 to 116.8%
December 29, 1995
December 30, 1995 to 126.7%
June 29, 1996
June 30, 1996 and 138.0%
thereafter
and (II) the sum of (x) 100% of the Liquidation Preference of such share, (y) an
amount per share equal to all accrued and
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unpaid dividends thereon whether or not declared or payable to the Specified
Corporate Action Redemption Date and (z) the Additional Amount measured as of
the date of any such redemption, in either case in immediately available funds
(the "Specified Corporate Action Redemption Price").
(ii) The date fixed for each Specified Corporate Action
Redemption shall be fixed by the Corporation and shall be not less than 60 days
nor more than 90 days following the occurrence of any Specified Corporate Action
giving rise thereto (or, in the case of a Specified Corporate Action as
described in clause (iii) of the definition of "Specified Corporate Action," not
less than 60 days nor more than 90 days following the date on which the
Corporation obtains actual knowledge of such Specified Corporate Action);
provided, however, that in the event of a Specified Corporate Action that
- - -------- -------
constitutes a Control Transaction, in addition to the dates fixed for a
Specified Corporate Action Redemption as specified above, an additional
Specified Corporate Action Redemption Date shall be set for the date and time
immediately preceding the consummation of any such Control Transaction (and the
Market Price utilized in determining the Additional Amount for the purposes of
such Specified Corporate Action Redemption shall be the highest price per share
of Common Stock paid by any acquiror in such Control Transaction); provided,
--------
further, that, upon the request of a holder, the Board of Directors shall
- - -------
agree to extend the date of redemption in respect of any such Specified
Corporate Action (without changing the consideration that is otherwise
payable in respect of such redemption other than with respect to
adjustments to the amount of accrued and unpaid dividends included in
such redemption price) to the extent necessary for any holder of
shares of Series T Preferred Stock to avoid liability under
Section 16(b) of the Exchange Act, provided that no such redemption extension
--------
shall be for a period greater than six months. The Corporation shall, within 5
days of the occurrence of a Specified Corporate Action (or, in the case of a
Specified Corporate Action described in clause (iii) of the definition of
"Specified Corporate Action," within 5 days of the date on which the Corporation
obtains actual knowledge of such Specified Corporate Action), give notice
thereof by publication in a newspaper of general circulation in the Borough of
Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), and, in
any case, a similar notice shall be mailed to each holder of shares of the
Series T Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation. Each such notice shall specify the Specified
Corporate Action that has occurred and the date of such occurrence, the place or
places
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of payment, the then effective Specified Corporate Action Redemption Price and
the date the right of such holder to require a Specified Corporate Action
Redemption shall terminate.
(iii) If the notice sent by the Corporation pursuant to
Section 6(a)(ii) shall contain (i) a form inquiring as to whether a holder of
shares of Series T Preferred Stock intends to surrender the certificate(s)
representing such shares for redemption pursuant to this Section 6(a) and (ii) a
stamped self-addressed envelope for return of such form to the Corporation or
its designee, within ten Business Days of such notice, each holder shall return
such inquiry form to the Corporation and shall indicate in such form the
proportion of such holder's shares of Series T Preferred Stock that will be
surrendered for redemption pursuant to this Section 6(a). If such notice shall
indicate that if a holder does not respond prior to ten Business Days after the
date of such notice that such holder will be deemed to have notified the
Corporation that it will not require the redemption of the shares of Series T
Preferred Stock held by such holder for purposes of Section 3(b) and such holder
does not respond to the Corporation's inquiry prior to ten Business Days after
the date of such notice, such holder will be deemed to have notified the Corpo-
ration that it will not require the redemption of the shares of Series T
Preferred Stock held by such holder for purposes of Section 3(b). Nothing
contained in this Section 6(a)(iii) shall affect the right of a holder of Series
T Preferred Stock to require the Corporation to redeem such shares pursuant to
Section 6(a)(i).
(b) If at any time the Additional Amount is greater than 0,
then each holder of shares of the Series T Preferred Stock shall have the right,
at such holder's option exercisable at any time (such time, the "Conversion
Date") on 30 days' notice to the Corporation, to require the Corporation to
redeem (a "Conversion Redemption") all or any part of the shares of Series T
Preferred Stock then held by such holder at a price per share (the "Conversion
Redemption Price") equal to the sum of (A) 100% of the Liquidation Preference of
such shares, (B) an amount per share equal to all accrued and unpaid dividends
thereon, whether or not declared or payable, to the applicable Conversion
Redemption Date and (C) the Additional Amount, in immediately available funds.
Notwithstanding the foregoing, if the redemption of any portion of such shares
would in the judgment of the Board of Directors of the Corporation have a
material adverse effect on the Corporation, then the Corporation may elect to
deliver with respect to such shares, in lieu of cash, notes, including
subordinated notes, of the Corporation ("Notes") (x) having a final maturity
date no later than ten years from the date of issuance, and (y) having such
other
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terms and conditions as shall result in a determination that such Notes have a
fair market value as of the date of their proposed issuance at least equal to
the sum of (1) the Conversion Redemption Price with respect to such shares and
(2) customary underwriting discounts and commissions payable with respect to the
sale of securities of a type comparable to the Notes, or shares of
nonconvertible preferred stock ("Redemption Preferred Stock") having the terms
and conditions described in clauses (x) and (y) in lieu of Notes. The
Corporation shall use its best efforts to cause the Notes or the Redemption
Preferred Stock to be registered for immediate resale pursuant to an effective
registration statement under the Securities Act prior to the issuance thereof.
If such registration statement is not effective within 120 days of the date of
such issuance then the annual interest rate of the Notes or the annual dividend
rate of the Redemption Preferred Stock, as applicable, shall be increased by
0.5% per annum until such securities are sold pursuant to an effective reg-
istration statement under the Securities Act. For purposes of this Section
6(b), "fair market value" shall mean the fair market value of the Notes or Re-
demption Preferred Stock, as the case may be, as determined by an investment
banking firm of national standing selected by the Corporation and reasonably
acceptable to the holders of a majority of the shares of Series T Preferred
Stock electing to effect such Conversion Redemption. In the case that the Cor-
poration shall be entitled to deliver either Notes or Redemption Preferred
Stock, it shall be the election of the Corporation whether to deliver such Notes
or Redemption Preferred Stock, except that, if, the sale of the security to be
delivered by the Corporation to effect a Conversion Redemption would give rise
to an additional liability on the part of such holder upon the sale thereof and
it shall so notify the Corporation in writing, the Corporation shall deliver to
such holder the other type of security specified in such notice.
(c) Each holder of shares of the Series T Preferred Stock
shall have the right, at such holder's option exercisable at any time on 30
days' notice to the Corporation on or after December 30, 2009 (the date of any
such exercise, the "Special Redemption Date"), to require the Corporation to
redeem (a "Special Redemption") all or any part of the shares of Series T
Preferred Stock then held by such holder as such holder may elect by written
notice delivered at least 30 days prior to the Special Redemption Date at a
price per share equal to the sum of (A) 100% of the Liquidation Preference of
such share, (B) an amount per share equal to all accrued and unpaid dividends
thereon whether or not declared or payable to the Special Redemption Date and
(C) the Additional Amount, determined as of the date immediately prior to the
Special Redemption Date (the "Special Redemption Price") in immediately
available funds.
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(d) On the date fixed for any Specified Corporate Action
Redemption or on any Conversion Redemption Date or Special Redemption Date, each
holder of shares of Series T Preferred Stock who elects to have shares of Series
T Preferred Stock held by it redeemed shall surrender the certificate
representing such shares to the Corporation (i) at the place designated in such
notice in the case of a Specified Corporate Action Redemption or (ii) at the
Corporation's principal place of business to be maintained by it, in the case of
a Conversion Redemption or Special Redemption, together with an election to have
such redemption made and shall thereupon be entitled to receive payment therefor
provided in this Section 6. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued rep-
resenting the unredeemed shares. From and after the date of such redemption (i)
the rights to receive dividends thereon shall cease to accrue and (ii) all
rights of the holders of shares of Series T Preferred Stock so redeemed shall
cease and terminate, excepting only the right to receive the Specified Corporate
Action Redemption Price or Conversion Redemption Price or Special Redemption
Price therefor, as applicable; provided, however, that if the Corporation shall
-------- -------
default in the payment of the applicable redemption price the shares of Series T
Preferred Stock that were to be redeemed shall thereafter be deemed to be
outstanding and the holders thereof shall have all of the rights of a holder of
Series T Preferred Stock until such time as such default shall no longer be
continuing or shall have been waived by holders of at least 66-2/3% of the then
outstanding shares of Series T Preferred Stock.
Section 7. Redemption Upon Maturity.
------------------------
(a) On December 30, 2034 (the "Maturity Date"), the
Corporation shall redeem (the "Maturity Redemption") the remaining outstanding
shares of the Series T Preferred Stock at a price per share (the "Maturity
Redemption Price") equal to the sum of (A) 100% of the Liquidation Preference
per share, (B) an amount equal to accrued and unpaid dividends thereon, whether
or not declared or payable, to the Maturity Date and (C) the Additional Amount,
determined as of the date immediately prior to the Maturity Date, in immediately
available funds.
(b) Notice of the Maturity Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Maturity Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Maturity
Date to each holder of shares of Series T
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Preferred Stock, at such holder's address as it appears on the transfer books
of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any
time after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series T
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, that is "well
capitalized" within the meaning of the applicable banking regulations and having
a capital and surplus of at least $500,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series T Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Maturity Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 5(c) shall be
paid from time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 7(c) in respect of shares of
Series T Preferred Stock to be redeemed pursuant to Section 7(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Maturity Date, (i) the rights
to receive dividends thereon shall cease to accrue and (ii) all rights of the
holders of shares of Series T Preferred Stock shall cease and terminate,
excepting only the right to receive the Maturity Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
Maturity Redemption Price, the shares of Series T Preferred Stock that were to
be redeemed shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series T Preferred Stock until such
time as such default shall no longer be continuing.
Section 8. Acquired Shares.
---------------
Any shares of Series T Preferred Stock exchanged, redeemed,
purchased or otherwise acquired by the Corporation or any of its Subsidiaries in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares of Series T Preferred Stock shall upon
their cancellation become authorized but unissued shares of preferred stock, par
value $4.00 per share, of the Corporation and, upon
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the filing of an appropriate certificate with the Department of State of the
State of New York, may be reissued as part of another series of preferred stock,
par value $4.00 per share, of the Corporation subject to the conditions or
restrictions on issuance set forth herein, but in any event may not be reissued
as shares of Series T Preferred Stock or Parity Stock unless all of the shares
of Series T Preferred Stock issued on the Issue Date shall have already been
redeemed or exchanged.
Section 9. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case
under the United States bankruptcy laws or any applicable bankruptcy, insolvency
or similar law of any other country, or consent to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series T Preferred Stock shall have received
(A) if a Voluntary Liquidation Event shall have occurred, the Optional Redemp-
tion Price with respect to each share and (B) if a Voluntary Liquidation Event
shall not have occurred, the Liquidation Preference and all accrued and unpaid
dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series T Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series T Preferred Stock (which amounts are set forth in
clauses (A) and (B) above) and Parity Stock are entitled upon such liquidation,
dissolution or winding up.
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(b) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10. [Intentionally omitted.]
Section 11. Additional Amount.
-----------------
(a) For the purposes of this Article 5, "Additional Amount"
shall mean an amount per share equal to the product of (i) the excess of the sum
of (1) the Market Price of a share of Common Stock and (2) if the Corporation
shall have issued a right or rights with respect to its outstanding shares of
Common Stock pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, during the period commencing on the "distribution date" of such
right or rights (i.e., the date on which such right or rights commence to trade
----
separately from the Common Stock) and ending on the "triggering date" of such
right or rights (i.e., the date on which such right or rights commence to be
----
exercisable), the Market Price of such right or rights over the Conversion
Amount, in effect as hereinafter determined and (ii) (x) the Liquidation
Preference divided by (y) such Conversion Amount, in all cases calculated as of
the applicable determination date. The Additional Amount shall in no event be
less than zero. The Conversion Amount initially shall be $15.75, and shall
thereafter be subject to adjustment as set forth in Section 11(b). For the
purpose of calculating the Additional Amount in connection with an Optional
Redemption, Specified Corporate Action Redemption, Special Redemption or
Conversion Redemption, except as otherwise set forth in Section 6(a)(ii), the
Market Price of the Common Stock and, if applicable, rights shall be the average
of the Market Price of such securities on the five trading days immediately
preceding and the five trading days immediately following the date of notice of
such redemption.
(b) The Conversion Amount shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from
time to time (A) pay a dividend or make a distribution on the outstanding shares
of Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the out-
standing shares of Common Stock into a larger number of shares, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D) issue
any shares of its
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capital stock in a reclassification of the Common Stock, then, and in each such
case, the Conversion Amount in effect immediately prior to such event shall be
adjusted so that if the holder of any share of Series T Preferred Stock were
entitled to convert such share into such number of shares of Common Stock as
equals the Liquidation Preference divided by the Conversion Amount and such
holder thereafter surrendered such share for conversion, such holder would be
entitled to receive the number of shares of Common Stock or other securities of
the Corporation that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above had such share of
Series T Preferred Stock been converted immediately prior to the occurrence of
such event. An adjustment made pursuant to this Section 11(b)(i) shall become
effective retroactively (A) in the case of any such dividend or distribution, to
the opening of business on the day immediately following the close of business
on the record date for the determination of holders of Common Stock entitled to
receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from
time to time issue or sell shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock (other than options granted to
any employee or director of the Corporation pursuant to a stock option plan
approved by the shareholders of the Corporation)) for a consideration per share
less than the Conversion Amount then in effect at the record date or issuance
date, as the case may be (the "Date") referred to in the following sentence,
including, without limitation, upon exercise of rights issued pursuant to a
shareholder rights plan, "poison pill" or similar arrangement (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any antidilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (B) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), other than issuances or sales for which
an adjustment is made pursuant to another paragraph of this Section 11(b), then,
and in each such case, the Conversion Amount then in effect shall be adjusted by
dividing the Conversion Amount in effect on the day immediately prior to the
Date by a fraction (x) the numerator of which
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shall be the sum of the number of shares of Common Stock outstanding immediately
prior to the Date plus the number of additional shares of Common Stock issued or
to be issued (or the maximum number into which such convertible or exchangeable
securities initially may convert or exchange or for which such options, warrants
or other rights initially may be exercised) and (y) the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to the Date plus the number of shares of Common Stock that the aggregate
consideration (if any of such aggregate consideration is other than cash, as
valued by the Board of Directors including a majority of the Directors who are
not officers or employees of the Corporation or any of its Subsidiaries, which
determination shall be conclusive and described in a resolution of the Board of
Directors) for the total number of such additional shares of Common Stock so
issued (or into which such convertible or exchangeable securities may convert or
exchange or for which such options, warrants or other rights may be exercised
plus the aggregate amount of any additional consideration initially payable upon
conversion, exchange or exercise of such security) would purchase at the
Conversion Amount. Such adjustment shall be made whenever such shares,
securities, options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close of business
(i) in the case of issuance to stockholders of the Corporation, as such, on the
record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (ii) in all other
cases, on the date ("issuance date") of such issuance; provided, however, that
-------- -------
the determination as to whether an adjustment is required to be made pursuant to
this Section 11(b)(ii) shall only be made upon the issuance of such shares or
such convertible or exchangeable securities, options, warrants or other rights,
and not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
option, warrants or other right; provided, further, that if any convertible or
-------- -------
exchangeable securities, options, warrants or other rights (or any portions
thereof) that shall have given rise to an adjustment pursuant to this Section
11(b)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Conversion Amount hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares of Common Stock cor-
responding to such convertible or exchangeable securities, options, warrants or
other rights
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as shall have expired or terminated, (y) treating the additional shares of
Common Stock, if any, actually issued or issuable pursuant to the previous
exercise of such convertible or exchangeable securities, options, warrants or
other rights as having been issued for the consideration actually received and
receivable therefor and (z) treating any of such convertible or exchangeable
securities, options, warrants or other rights that remain outstanding as being
subject to exercise or conversion on the basis of such exercise or conversion
price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from
time to time distribute to all holders of shares of its Common Stock (including
any such distribution made in connection with a consolidation or merger in which
the Corporation is the resulting or surviving corporation and the Common Stock
is not changed or exchanged or a redemption of any rights or other securities
issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) cash, evidences of indebtedness of the Corporation or another
issuer, securities of the Corporation or another issuer or other assets
(excluding (A) Permitted Dividends described in clause (B) of the definition
thereof and (B) securities for which adjustment is made under Section 11(b)(i)
or Section 11(b)(ii)), then, and in each such case, the Conversion Amount then
in effect shall be adjusted by dividing the Conversion Amount in effect
immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Current Market Price of the Common Stock on the
record date referred to below and (y) the denominator of which shall be such
Current Market Price of the Common Stock less the then Fair Market Value (as
determined by the Board of Directors of the Corporation, which determination
shall be conclusive) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock (but such denominator not to be
less than one). Such adjustment shall be made whenever any such distribution is
made and shall become effective retroactively to a date immediately following
the close of business on the record date for the determination of stockholders
entitled to receive such distribution.
(iv) In the case the Corporation at any time or from
time to time shall take any action affecting its Common Stock, other than an
action described in any of Section 11(b)(i) through Section 11(b)(iii),
inclusive, then, the Conversion Amount shall be adjusted in such manner and at
such time as the Board of Directors of the Corporation (other than Purchaser
Designees or directors elected pursuant to Section
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3(b)) in good faith determines to be equitable in the circumstances (such
determination to be evidenced in a resolution, a certified copy of which shall
be mailed to the holders of the Series T Preferred Stock).
(v) The Corporation may make such reductions in the
Conversion Amount, in addition to those required by subparagraphs (i), (ii),
(iii) or (iv) of this Section 11(b), as the Board of Directors considers to be
advisable in order to avoid or to diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
(vi) Notwithstanding anything contained in this Section
11(b), no adjustment to the Conversion Amount shall be made with respect to any
rights issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement unless the "triggering date" (i.e., the date on which such rights
----
commence to be exercisable) shall have occurred or such rights shall have been
redeemed, in which event adjustments under clause (ii) and clause (iii),
respectively, shall be made.
(c) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Amount then in
effect shall be required by reason of the taking of such record.
(d) Upon any increase or decrease in the Conversion Amount,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Series T Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased Con-
version Amount then in effect following such adjustment.
Section 12. Sinking Fund.
-------------
(a) So long as any shares of Series T Preferred Stock shall
be outstanding, the Corporation shall, on the final business day (any such date,
the "Sinking Fund Date") of each calendar year after 2003, (i) set aside a sum
of money equal to
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<PAGE>
3-1/3% of the aggregate liquidation preference of the shares of Series T
Preferred Stock then outstanding, and (ii) apply such money to redeem such
number of shares of Series T Preferred Stock at the Sinking Fund Redemption
Price (the Corporation's obligations described in this paragraph in respect of
any Sinking Fund Date being hereinafter referred to as the "Sinking Fund
Obligation" for such date) at a price per share (the "Sinking Fund Redemption
Price") equal to the sum of (A) the Liquidation Preference of such share, (B) an
amount per share equal to all accrued and unpaid dividends thereon, whether or
not declared or payable, to the applicable Sinking Fund Date and (C) the
Additional Amount (as defined in Section 11), determined as of the date
immediately prior to the Sinking Fund Date, in immediately available funds;
provided, however, that if the Corporation for any reason fails to discharge its
- - -------- -------
Sinking Fund Obligation on any Sinking Fund Date, such Sinking Fund Obligation,
to the extent not discharged, shall become an additional Sinking Fund Obligation
for each succeeding Sinking Fund Date until fully discharged; provided, further,
-------- -------
that no shares of Series T Preferred Stock purchased or acquired by the
Corporation otherwise than through redemption pursuant to this paragraph or
pursuant to an Optional Redemption may be credited against the Sinking Fund
Obligation in respect of any Sinking Fund Date.
(b) Notice of the Sinking Fund Redemption shall be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York (if such publication shall be required by applicable law,
rule, regulation or securities exchange requirement), not less than 30, nor more
than 60, days prior to the Sinking Fund Date and, in any case, a similar notice
shall be mailed at least 30, but not more than 60, days prior to the Sinking
Fund Date to each holder of shares of Series T Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation.
(c) The shares to be redeemed pursuant to paragraph (a)
shall be selected pro rata (as nearly as may be) so that the number of shares
redeemed from each holder shall be the same proportion of all the shares to be
redeemed that the total number of shares of Series T Preferred Stock then held
by such holder bears to the total number of shares of Series T Preferred Stock
then outstanding.
(d) On the Sinking Fund Date, the Corporation shall, and at
any time after such notice shall have been mailed and before the Sinking Fund
Date the Corporation may, deposit for the benefit of the holders of shares of
Series T Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New
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<PAGE>
York, that is "well capitalized" within the meaning of the applicable banking
regulations and having a capital and surplus of at least $500,000,000. Any
moneys so deposited by the Corporation and unclaimed at the end of two years
from the date designated for such redemption shall revert to the general funds
of the Corporation. After such reversion, any such bank or trust company shall,
upon demand, pay over to the Corporation such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof and any holder of shares of Series T Preferred Stock to be redeemed
shall look only to the Corporation for the payment of the Sinking Fund Re-
demption Price. Any interest accrued and unpaid on funds deposited pursuant to
this Section 12(c) shall be paid from time to time to the Corporation for its
own account.
(e) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 12(c) in respect of shares of
Series T Preferred Stock to be redeemed pursuant to Section 12(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the Sinking Fund Date, (i) the
rights to receive dividends thereon shall cease to accrue and (ii) all rights of
the holders of shares of Series T Preferred Stock shall cease and terminate,
excepting only the right to receive the Sinking Fund Redemption Price therefor;
provided, however, that if the Corporation shall default in the payment of the
- - -------- -------
Sinking Fund Redemption Price, the shares of Series T Preferred Stock that were
to be redeemed shall thereafter be deemed to be outstanding and the holders
thereof shall have all of the rights of a holder of Series T Preferred Stock
until such time as such default shall no longer be continuing.
Section 13. Exchange for Series E Preferred Stock.
--------------------------------------
(a) Exchange. Outstanding shares of Series T Preferred
--------
Stock shall be exchangeable at any time and from time to time by the holder
thereof into shares of Series E Preferred Stock having the same aggregate liqui-
dation preference as the shares of Series T Preferred Stock exchanged therefor,
upon two business days' written notice by such holder of the election to effect
such exchange (each such exchange, an "Exchange" and all such Exchanges
collectively, the "Exchange"), subject to the satisfaction or waiver of all
applicable conditions set forth in Section 13(b), and, upon any such Exchange,
any accrued and unpaid dividends with respect to the shares of Series T Pre-
ferred Stock exchanged shall become accrued and unpaid dividends on the shares
of Series E Preferred Stock exchanged therefor.
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<PAGE>
(b) Conditions to Exchange. The obligations of the
----------------------
Corporation to effect an Exchange are subject to satisfaction of the following
conditions at or prior to such Exchange (unless expressly waived in writing by
such parties at or prior to such Exchange):
(i) Hart-Scott-Rodino. The waiting period under the
-----------------
Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or been
terminated, to the extent applicable.
(ii) Regulatory Matters. There shall have been re-
------------------
ceived, and shall be in full force and effect, all requisite approvals under the
statutes and regulations of each jurisdiction (x) in the United States of
America or any state, territory or possession thereof and (y) each other
jurisdiction wherever located that is material to the issuance by the Cor-
poration and the conduct of the business conducted by the Corporation and its
subsidiaries, taken as a whole, in each case with respect to the holding by the
holder of the shares of Series E Preferred Stock to be issued upon the Exchange
of the shares of Series T Preferred Stock.
Article 6. Definitions.
-----------
For the purposes of this Certificate of Amendment of
Certificate of Incorporation, the following terms shall have the meanings
indicated:
"Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Chicago Preferred Stock" shall mean the Series E Preferred
Stock, the Series F Preferred Stock, the Series G Preferred Stock, the Series H
Preferred Stock and the Series T Preferred Stock.
"Closing Price" on any day shall mean the closing sale price
of the Common Stock regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices of the
Common Stock regular way, in each case on the New York Stock Exchange or, if the
Common Stock is not listed or admitted to trading on such exchange, on the
principal national securities exchange on
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<PAGE>
which it is then traded or, if the Common Stock is not listed or admitted to
trading on such an exchange, on Nasdaq.
"Control Transaction" shall mean any of (i) a merger,
consolidation or business combination to which the Corporation is a party that
would result in a change in ownership of more than 50% of the securities of the
Corporation entitled to vote generally in the election of directors, (ii) the
sale of all or substantially all of the Corporation's assets, and (iii) the sale
of more than 50% of the outstanding securities of the Corporation entitled to
vote generally in the election of directors; in any case, other than pursuant to
a transaction between the Corporation and CNA Financial Corporation or its
Affiliates.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the Common Stock for those days during the period of 30 days, ending on
such date, on which the national securities exchanges were open for trading, and
(b) if the Common Stock is not then listed or admitted to trading on any
national securities exchange or quoted in the over-counter market, the Market
Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.
"Fair Market Value" shall mean the amount that a willing
buyer would pay a willing seller in an arm's-length transaction.
"Issue Date" shall mean the first date of issuance of any
shares of Chicago Preferred Stock in December, 1994.
"Junior Stock" shall mean any capital stock of the
Corporation ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) (a) for the purposes of Article 1, to the Series E
Preferred Stock, (b) for the purposes of Article 2, to the Series F Preferred
Stock, (c) for the purposes of Article 3, to the Series G Preferred Stock, (d)
for the purposes of Article 4, to the Series H Preferred Stock (c) for the
purposes of Article 5, to the Series T Preferred Stock.
"Liquidation Preference" with respect to a share of Chicago
Preferred Stock shall mean $200.
"Market Price" shall mean, per share of Common Stock, on any
date specified herein: (a) the closing price per share
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<PAGE>
of the Common Stock on such date published in The Wall Street Journal or, if no
such closing price on such date is published in The Wall Street Journal, the
average of the closing bid and asked prices on such date, as officially reported
on the principal national securities exchange on which the Common Stock is then
listed or admitted to trading; or (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of the
Common Stock on such date; or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked prices of the Common Stock, on such date as shown by
Nasdaq and reported by any member firm of the New York Stock Exchange selected
by the Corporation; or (d) if none of (a), (b) or (c) is applicable, a market
price per share determined at the Corporation's expense by an appraiser chosen
by the holders of a majority of the shares of Series E Preferred Stock or, if
such calculations shall also be utilized in connection with the Series F
Preferred Stock, Series G Preferred Stock or Series T Preferred Stock, the
holders of a majority of the aggregate shares of Series E Preferred Stock and,
as applicable, Series F Preferred Stock, Series G Preferred Stock and Series T
Preferred Stock or, if no such appraiser is so chosen more than twenty Business
Days after notice of the necessity of such calculation shall have been delivered
by the Corporation to the holders of Series E Preferred Stock or, if such
calculation shall also be utilized in connection with the Series F Preferred
Stock or Series G Preferred Stock, the holders of Series E Preferred Stock and,
as applicable, Series F Preferred Stock and Series G Preferred Stock, then by an
appraiser chosen by the Corporation.
"Material Provision of the Securities Purchase Agreement"
shall mean any of the provisions contained in any of Sections 6.6, 6.13, 6.14,
6.16, 6.17, 6.18 or 14.1 of the Securities Purchase Agreement.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of December 6, 1994, by and among the Corporation, Chicago
Financial Corporation and CNA Acquisition Corp.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Nasdaq" shall mean the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotations System.
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<PAGE>
"New Preferred Stock" means nonconvertible, non-exchangeable
shares of Preferred Stock to be issued by the Corporation that have an aggregate
liquidation preference not exceeding $100,000,000.
"New Senior Notes" means senior notes to be issued by the
Corporation that have an aggregate principal amount not exceeding $100,000,000.
"Parity Stock" shall mean, with respect to any series of the
Chicago Preferred Stock, any capital stock of the Corporation, including any
other series of Chicago Preferred Stock, the Other Preferred Stock and the New
Preferred Stock (if any), ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with such series of Chicago Preferred
Stock.
"Permitted Dividend" shall mean (A) a dividend on the Common
Stock payable solely in shares of Junior Stock or (B) a dividend on the Common
Stock payable solely in cash that has been declared by the Board of Directors
subsequent to the third anniversary of the Issue Date; provided, however, that
-------- -------
if at the time of the declaration of such dividend (i) each series of Chicago
Preferred Stock or Parity Stock is not rated at least BBB- by Standard & Poor's
and at least based by Moody's Investor Services or (ii) the Corporation has
received written notice from either such rating agency that (x) the rating is-
sued thereby with respect to any such capital stock is likely to be downgraded
by such rating agency or (y) such rating agency has placed the Corporation on
credit watch with negative implications of a downgrade of the rating issued with
respect to any such capital stock by Standard & Poor's to below BBB- or by
Moody's Investor Services to below Baa-3 (the time during which such minimum
ratings are not in effect or such time after the Corporation has received such
written notice until such time as the Corporation has received written notice
from such rating agency that it no longer intends to downgrade such rating or
that the Corporation has been removed from such credit watch shall be referred
to as the "Dividend Maximum Period"), then the aggregate per share amount of
cash dividends on the Common Stock that may thereafter be declared or paid in
such fiscal year and each fiscal year thereafter during the Dividend Maximum
Period (including cash dividends declared or paid prior to the commencement of
the Dividend Maximum Period) shall not exceed an amount equal to 25% of the
average of consolidated net operating income of the Corporation and its
Subsidiaries (excluding capital gains or loss either realized or unrealized) per
share of Common Stock (as determined in accordance with generally accepted
accounting principles) for the two immediately preceding fiscal years (the
"Dividend
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<PAGE>
Maximum Amount") provided further, that (x) if in any fiscal year in which there
-------- -------
is a Dividend Maximum Period cash dividends in excess of the Dividend Maximum
Amount (the "Excess Amount") shall have been paid prior to the commencement of
the Dividend Maximum Period, such dividends shall nevertheless be considered
Permitted Dividends so long as (I) no other cash dividends shall have been
declared or paid during the portion of such fiscal year that was a Dividend
Maximum Period and (II) in the next succeeding fiscal year, if a Dividend
Maximum Period exists the aggregate per share amount of cash dividends on the
Common Stock shall not exceed the excess of the Dividend Maximum Amount for such
year over the Excess Amount.
"Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger or oth-
erwise) of such entity.
"Preferred Stock" shall mean preferred stock, par value
$4.00 per share, of the Corporation.
"Purchaser Designee" shall have the meaning specified in the
Securities Purchase Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of the Issue Date, between the Corporation and the
original holders of the Chicago Preferred Stock and the option to purchase the
shares of Series G Preferred Stock, as the same may be amended from time to
time.
"Restricted Payment" shall mean any dividend payment (other
than a Permitted Dividend) or other distribution of assets, properties, cash,
rights, obligations or securities by the Corporation on account of any shares of
Common Stock or any other class of Junior Stock or the purchase, redemption or
other acquisition for value by the Corporation or any Subsidiary of the
Corporation of any shares of Common Stock or any other class of Junior Stock or
any warrants, rights or options to acquire such shares, now or hereafter
outstanding.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement, dated as of December 6, 1994, by and between the Corporation
and CNA Financial Corporation as the same may be amended from time to time.
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<PAGE>
"Senior Stock" shall mean, with respect to any series of
Chicago Preferred Stock, any capital stock of the Corporation ranking senior
(either as to dividends or upon liquidation, dissolution or winding up) to such
series of Chicago Preferred Stock.
"Specified Corporate Action" shall mean such time as: (i)
the Corporation shall consent or agree to the acquisition of, or the
commencement of a tender offer for, or the Board of Directors of the Corporation
shall make a statement that the Board of Directors recommends, or is neutral
with respect to, a tender offer for, "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act) by any "Person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) other than Chicago Financial Corporation and its Affili-
ates, of securities of the Corporation entitled to vote generally in the
election of directors, or securities convertible into, exchangeable for or
exercisable into such securities (collectively, "Designated Securities"), repre-
senting, when added to the Designated Securities already owned by any such
Person or group, thirty percent (30%) or more of such Designated Securities;
(ii) the Board of Directors of the Corporation shall take any action under
Section 912 of the Business Corporation Law of the State of New York to exempt
from the provisions of Section 912 of the Business Corporation Law of the State
of New York any transaction between the Corporation and any of its Subsidiaries,
on the one hand, and any Person or group (other than Chicago Financial
Corporation and its Affiliates or any transferee thereof), or any Affiliates of
any such Person or group, on the other hand, who (A) acquire, own or hold ben-
eficial ownership of Designated Securities representing thirty percent (30%) or
more of such Designated Securities or (B) acquire, own or hold beneficial
ownership of Designated Securities representing ten percent (10%) or more of
such Designated Securities unless such other Person or group, or any Affiliate
of such Person or group, enters into a standstill agreement with the Corporation
limiting the acquisition of Designated Securities by such other Person or group,
or any Affiliates of such Person or group, to less than thirty percent (30%) of
the Designated Securities and such standstill agreement remains in full force
and effect; (iii) any Person or group (other than Chicago Financial Corporation
and its Affiliates or any transferee thereof) shall acquire, or shall have the
then contractual right to acquire through conversion, exercise of warrants or
otherwise, more than thirty percent (30%) of the Designated Securities; (iv) the
Corporation shall agree to merge or consolidate with or into any Person, (other
than Chicago Financial Corporation and its Affiliates or any transferee thereof)
or shall agree to sell all or substantially
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<PAGE>
all its assets to any such Person other than (a) a merger or consolidation of
one Subsidiary of the Corporation into another or the Corporation, or (b) a
merger or consolidation immediately subsequent to which all or substantially all
the holders of the outstanding shares of capital stock immediately prior to such
consolidation or merger are entitled to receive shares representing 50% or more
of the then outstanding shares of capital stock of the resulting or surviving
corporation entitled to vote generally in the election of directors; or (v) a
majority of the Board of Directors of the Corporation shall consist of Persons
other than Continuing Directors (and such term shall not include the
transactions contemplated by the Merger Agreement). The term "Continuing
Director" shall mean any member of the Board of Directors on the Issue Date and
any directors elected pursuant to Sections 3.1.18 and 6.17 of the Securities
Purchase Agreement and any other member of the Board of Directors who shall be
recommended or elected to succeed a Continuing Director by a majority of
Continuing Directors who are then members of the Board of Directors. "Specified
Corporate Action" shall not include the execution of the Merger Agreement or the
consummation of the Merger (as defined in the Merger Agreement).
"Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Article 7. Preemptive Rights.
-----------------
None of the holders of any series of Chicago Preferred
Stock, shall be entitled to any preemptive or subscription rights in respect of
any securities of the Corporation.
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<PAGE>
IN WITNESS WHEREOF, we have signed this certificate on this
6th day of December, 1994. It is affirmed that the statements contained herein
are true under penalties of perjury.
-------------------------------
Name:
Title: President
-------------------------------
Name:
Title: Secretary
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<PAGE>
EXHIBIT B
THIS OPTION AND SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER OF THIS OPTION TO THE EFFECT THAT SUCH SALE IS
NOT IN VIOLATION OF THE ACT.
STOCK OPTION
------------
1. Grant of Option. Pursuant to the Securities Purchase Agreement,
---------------
dated as of December 6, 1994 (the "Securities Purchase Agreement"), between the
Continental Corporation, a New York corporation (the "Corporation"), and CNA
Financial Corporation, a Delaware corporation (the "Optionee"), the Corporation
hereby grants to the Optionee, for the period beginning on (x) if the Merger
-
Agreement terminates pursuant to Section 7.1(iv) or Section 7.1(vii) thereof,
the Termination Date or (y) if the Merger Agreement terminates other than
-
pursuant to Section 7.1(iv) or Section 7.1(vii) thereof, the earlier of the
120th day after the Termination Date or the date of the occurrence of a
Specified Corporate Action (the "Commencement Date"), and ending at
December __, 2001 (the "Expiration Date"), the exclusive and irrevocable right
and option (this "Option")
<PAGE>
to purchase from the Corporation for cash in an amount equal to $125,000,000.00
(the "Exercise Price") a total of 62,500 shares (the "Shares") of Cumulative
Preferred Stock, Series G (the "Series G Preferred Stock"), par value $4.00 per
share, of the Corporation, as such Series G Preferred Stock is designated in the
Certificate of Incorporation of the Corporation. Accordingly, the exercise
price per Share shall be $200.00 (the "Exercise Price Per Share"). Notwith-
standing the foregoing, if, prior to the Commencement Date, all then outstanding
Chicago Preferred Stock is redeemed or purchased pursuant to Section 15 of the
Securities Purchase Agreement, the Option will terminate and such date of re-
demption or purchase will be deemed to be the Expiration Date.
2. Defined Terms. Capitalized terms used but not defined herein
-------------
shall have the meanings specified in the Securities Purchase Agreement.
3. Exercise of Option. This Option may be exercised in whole or in
------------------
part by the Optionee from time to time between the Commencement Date and the
Expiration Date. Upon any partial exercise of this Option, the remainder of
this Option shall remain in effect and may be exercised at any time or times
thereafter until the Expiration Date. If the Optionee wishes to exercise this
Option, the Optionee
2
<PAGE>
shall send a written notice to the Corporation specifying its intention to
exercise this Option and setting forth a date (not less than 5 business days and
not more than 10 business days from the date of such notice), time and place for
the closing of such purchase. The place specified in such notice shall be the
offices of the Corporation unless otherwise agreed to by the Optionee and the
Corporation. Each date on which the notice is sent to the Corporation by a
means provided for in Section 8.3 hereof shall be deemed to be the exercise date
with respect to such purchase and is referred to herein as the "Exercise Date."
The Option may be exercised only with respect to full shares of Series G
Preferred Stock. No fractional shares of Series G Preferred Stock shall be
issued.
4. Payment and Delivery of Certificates.
------------------------------------
a. Delivery of Funds and the Acknowledgement. Upon any
-----------------------------------------
exercise of all or any part of this Option, the Optionee shall on the Exercise
Date (i) deliver to the Corporation an Election to Exercise in the form of
Exhibit A hereto and (ii) make payment to the Corporation of the aggregate
Exercise Price Per Share for the Shares being purchased by delivery of a
certified or bank check or by wire transfer of immediately available funds to a
bank designated by the Corporation.
3
<PAGE>
b. Delivery of the Shares. Upon payment (or deemed payment in
----------------------
accordance with Section 4.1) of the Exercise Price Per Share for the Shares
being purchased, the Corporation shall deliver to the Optionee certificates
representing the number of Shares being purchased by the Optionee from the
Corporation, registered in the name of the Optionee. The issuance of any Shares
upon the exercise of this Option and the delivery of certificates representing
such Shares shall be made without charge to the Holder for any tax or other
charge in respect of such issuance.
c. Put Option. At any time that the Optionee would be entitled
----------
to cause the redemption of any Shares pursuant to Article 3, Section 6 of the
Certificate of Amendment if it were the holder of such Shares, in lieu of
exercising all or any part of this Option, the Optionee may, in the case of the
Holder's Election Redemption, the first anniversary of the Commencement Date or,
in the case of any other redemption, at any time on or after the Commencement
Date, instead require the Corporation to repurchase this Option (or any portion
thereof) for cash at a price equal to the Value (as hereinafter defined for pur-
poses of this Section 4.3) of this Option. For purposes of this Section 4.3,
the Value of this Option (or such portion) shall equal the product of (i) the
-
number of Shares for
4
<PAGE>
which this Option (or such portion) is exercisable, multiplied by (ii) the
--
excess, if any, of (A) the applicable redemption price per Share at such time
-
pursuant to Article 3, Section 6 of the Certificate of Amendment (which will be,
in each case hereunder, the sum of (x) 100% of the Liquidation Preference of
such share and (y) the Additional Amount), over (B) the Exercise Price Per
-
Share. Notwithstanding the foregoing, if the applicable redemption price is the
Holder's Election Redemption Price and the redemption of any portion of this
Option would (I) cause any two of Standard's & Poor's ("S&P"), Moody's Investor
-
Services ("Moody's") and A.M. Best Company ("A.M. Best") to downgrade the rating
of (a) the Corporation's securities, in the case of S&P or Moody's or (b) the
pooled rating of the Subsidiaries of the Corporation engaged in the insurance
business, in the case of A.M. Best or (II) in the reasonable judgment of the
--
Board of Directors of the Corporation have a material adverse effect on the
financial condition of the Corporation, then the Corporation may elect to
deliver with respect to such portion of this Option in lieu of cash senior non-
convertible notes of the Corporation ("Notes") (x) having a final maturity date
no later than December 31, 2006, and (y) having such other terms and conditions
as shall result in a determination that such Notes have a fair market value as
of
5
<PAGE>
the date of their proposed issuance at least equal to the sum of (1) the Value
of this Option (or such portion) and (2) customary underwriting discounts and
commissions payable with respect to the sale of securities of a type comparable
to the Notes; provided, however, that if the issuance of senior nonconvertible
-------- -------
notes would cause the event described in clause (I) of this sentence or in the
-
reasonable judgment of the Board of Directors of the Corporation have a material
adverse effect on the financial condition of the Corporation, then the
Corporation may elect to issue, in lieu of senior nonconvertible notes, subordi-
nated nonconvertible notes (in which case the term "Notes" shall mean such
subordinated nonconvertible notes) or shares of nonconvertible preferred stock
("Redemption Preferred Stock"), in each case having the terms and conditions
described in clauses (x) and (y) of this sentence. The Corporation shall use
its best efforts to cause the Notes or the Redemption Preferred Stock to be
registered for immediate resale pursuant to an effective registration under the
Act prior to the issuance thereof. If such registration statement is not
effective within 60 days of the date of such issuance then the annual interest
rate of the Notes or the annual dividend rate of the Redemption Preferred Stock,
as applicable, shall be increased by 0.5% per annum until such securities are
sold
6
<PAGE>
pursuant to an effective registration statement under the Act. For purposes of
this Section 4.3 "fair market value" shall mean the fair market value of the
Notes or Redemption Preferred Stock, as the case may be, as determined by an
investment banking firm of national standing selected by the Corporation and
reasonably acceptable to the Optionees electing to effect such Holder's Election
Redemption. In the case that the Corporation shall be entitled to deliver
either subordinated nonconvertible notes or Redemption Preferred Stock, it shall
be the election of the Corporation whether to deliver such Notes or Redemption
Preferred Stock, except that, if the sale of the security to be delivered by the
Corporation pursuant to the terms hereof would give rise to an additional
liability on the part of the Optionee and it shall so notify the Corporation in
writing, the Corporation shall deliver the type of security specified in such
notice.
5. Transfer.
--------
a. Restrictions on Transferability. The Optionee will not
-------------------------------
effect any sale, assignment, transfer, disposition by gift or distribution in
liquidation or otherwise ("Transfer") (including any Transfer upon foreclosure
of a pledge or other security interest), pledge, mortgage, hypothecation or
grant of a security interest of or in this
7
<PAGE>
Option or any of the Shares or any Subordinated Notes issued upon exchange for
the Shares (the "Exchange Notes") that under applicable law requires prior
regulatory approval until such regulatory approval has been obtained. The
Optionee agrees that, until the earlier of (i) the Effective Time (as such term
is defined in the Merger Agreement) and (ii) the Termination Date, it will not
Transfer any portion of the Option, except to an Affiliate of the Optionee who
agrees to be bound by the restrictions of this Section 5 and of Sections 6.1 and
6.4 of the Securities Purchase Agreement. The Optionee will not Transfer,
pledge, mortgage, hypothecate or grant a security interest in this Option, any
of the Shares or Exchange Notes (unless, with respect to such Shares or Exchange
Notes, such Shares or Exchange Notes were previously issued pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act")) except pursuant to (A) an effective registration statement under
the Act or (B) an applicable exemption from registration under the Act. In
connection with any Transfer by the Optionee pursuant to clause (B) of the
immediately preceding sentence, the Optionee shall furnish to the Corporation an
opinion of counsel reasonably satisfactory to the Corporation to the effect that
the proposed transfer or conveyance would not be in violation of the Act. The
8
<PAGE>
Optionee may not, during the period (the "Restricted Period") ending upon the
earliest to occur of (i) the third anniversary of the date hereof, (ii) a Change
of Control, (iii) a breach by the Corporation of any of its obligations under
any of Sections 6.6, 6.13, 6.14, 6.16, 6.17, 6.18 or Section 14 of the
Securities Purchase Agreement or any of its material obligations under the
Registration Rights Agreement or any of its material obligations under the
Merger Agreement giving rise to a right of termination under Section 7.1(iv)
thereof, and (iv) the date on which the full amount of dividends payable on the
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock or Series T Preferred Stock for any two quarterly
dividend periods shall not have been paid, the Optionee will not Transfer any
portion of the Option, the Shares or the Exchange Notes except (1) to an
Affiliate of the Purchaser, who agrees to be bound by the restrictions of this
Section 5.1 and Sections 6.1 and 6.4 of the Securities Purchase Agreement,
(2) to a person or entity who agrees to be bound by the restrictions of this
Section 5.1 and Sections 6.1 and 6.4 of the Securities Purchase Agreement, the
Transfer to whom has been approved in advance by the Board of Directors of the
Corporation, (3) to a person or entity who after such Transfer will beneficially
own (to the know
9
<PAGE>
ledge of the Optionee, based solely on the representation and warranty of such
person or entity, and knowledge available from a review of publicly available
filings made by such person or entity with respect to the beneficial ownership
of Common Stock under Section 13 of the Exchange Act) less than 5% of the Common
Stock on a fully diluted basis, (4) pursuant to Rule 144 under the Act, or (5)
pursuant to a tender offer (a) commenced by the Corporation or (b) commenced by
any other person or entity with respect to which the Board of Directors of the
Corporation shall send to shareholders a statement that the Board of Directors
(x) recommends approval of such tender offer, or (y) is neutral with respect to
such tender offer. Other than as set forth in the first sentence of this
Section 5.1, nothing contained in this Section 5.1 shall restrict or prohibit
the Purchaser from pledging, mortgaging, hypothecating or granting a security
interest in, or granting participation rights in, the Option, the Shares or the
Exchange Notes; provided, however, that if a pledgee, mortgagee or holder of
-------- -------
such security interest forecloses on the Option, the Shares or the Exchange
Notes during the Restricted Period, it may do so only if such pledgee, mortgagee
or holder of such security interest agrees to be bound by the restrictions of
this Section 5.1 and Sections 6.1 and 6.4 of the Securities
10
<PAGE>
Purchase Agreement. Notwithstanding the foregoing, if none of the events
specified in any of clauses (ii), (iii) or (iv) above has occurred (whether
before or after termination of the Restricted Period), then the Purchaser shall
not, prior to the fifth anniversary of December __, 1994, Transfer any portion
of the Option, the Shares or the Exchange Notes to any person or entity who
after such Transfer will own (to the knowledge of the Purchaser, based solely on
the representations and warranty of the Person, and knowledge available from a
review of publicly available filings made by such person or entity with respect
to the beneficial ownership of Common Stock under Section 13 of the Exchange
Act) more than 5% of the Common Stock of the Company on a fully diluted basis,
unless such person or entity agrees to be bound by the terms and restrictions of
the penultimate sentence of Section 6.1, Section 6.4 and Section 7 of the
Purchase Agreement and this penultimate sentence of Section 6.1 of the Purchase
Agreement. Notwithstanding the foregoing, nothing contained herein shall
prohibit any Transfer, pledge, mortgage, hypothecation or grant of a security
interest of or in the Option by any insurance regulator acting as conservator or
receiver.
b. Restrictive Legend. Until such time as (i) a registration
------------------
statement with respect to the sale of
11
<PAGE>
this Option shall have become effective under the Act and the Option shall have
been disposed of in accordance with such registration statement, (ii) this
Option shall have been sold as permitted by Rule 144 under the Act and the
purchaser thereof does not receive "restricted securities" as defined in Rule
144 or (iii) this Option shall have been otherwise transferred, a new Option not
bearing a legend restricting further transfer shall have been delivered by the
Corporation and subsequent public distribution of this Option shall not in the
opinion of counsel to the Optionee require registration under the Act, this
Option shall be subject to a stop-transfer order and shall bear the legend set
forth hereon. So long as the Shares or Exchange Notes are Registrable
Securities, the Shares or Exchange Notes shall be subject to a stop-transfer
order and shall bear the following legend by which each holder thereof shall be
bound:
"[THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OR OTHER
SECURITIES ISSUABLE UPON EXCHANGE HEREOF] [THIS NOTE] MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREOF. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST
BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER OF THESE SECURITIES TO THE EFFECT SUCH SALE IS NOT IN VIOLATION OF
THE ACT."
c. Removal of Legends. After termination of the requirement
------------------
that all or part of such legend be placed
12
<PAGE>
upon this Option, a certificate representing the Shares or an Exchange Note, the
Corporation shall, upon receipt by the Corporation of evidence reasonably
satisfactory to it that such requirement has terminated and upon the written
request of the holder of this Option, such Shares or such Exchange Note, issue a
new Option, certificate for such Shares or Exchange Note that does not bear such
legend.
d. Transfer of Option. Subject to Section 5.1, this Option
-------------------
shall be transferable, in whole or in part, upon delivery thereof to the
Corporation accompanied by an Assignment substantially in the form of Exhibit B
hereto duly endorsed by the Optionee. Upon any registration of transfer, the
Corporation shall deliver a new Option to the person entitled thereto. This
Option may be exchanged, at the option of the Optionee, for another Option, or
other Options of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Shares upon surrender to the
Corporation.
6. Reservation of Shares. The Corporation shall retain and reserve
----------------------
a sufficient number of shares of Series G Preferred Stock in order to meet its
obligation hereunder. The Corporation agrees not to issue, sell, assign,
pledge, hypothecate, transfer or otherwise dispose of any shares of
13
<PAGE>
Series G Preferred Stock except in accordance with this Option.
7. Amendment of Certificate of Amendment. Prior to the issuance of
-------------------------------------
any Shares upon exercise of this Option, without the prior written consent of
the Optionee, the Corporation will not (i) alter or repeal the Certificate of
Incorporation so as to affect the holders of Series G Preferred Stock adversely
or (ii) authorize, adopt or approve an amendment to the Certificate of
Incorporation that would increase or decrease the par value of the Series G
Preferred Stock, or alter or change the powers, preference or special rights of
the Series G Preferred Stock. Notwithstanding the foregoing, nothing in this
Section 7 shall prohibit the Corporation from effecting a recapitalization,
reorganization, consolidation or merger of, or sale by, the Corporation prior to
the Commencement Date or, if after the Commencement Date, if (A)(a) such
recapitalization, reorganization, consolidation, merger or sale constitutes a
Specified Corporate Action, (b) the Corporation has sufficient funds legally
available to it (after giving effect to such transaction) to redeem, at the then
applicable price under Section 4.3 pursuant to the terms hereof, the Option,
(c) such redemption shall not be prohibited by any agreement to which the
Corporation or any of its Subsidiaries is a party, by
14
<PAGE>
applicable law or otherwise, (d) the Board of Directors of the Corporation,
including a majority of the directors who are not officers or employees of the
Corporation, shall have adopted a resolution confirming that such funds are
available and that the Optionee (pursuant to Section 4.3) has the right to
require such redemption and (e) the Corporation shall have set aside sufficient
funds to meet the applicable redemption payments through the Specified Corporate
Action Redemption Date (except that no funds need be set aside with respect to
any portion of the Option if the Optionee has notified the Corporation that it
will not require redemption of such portion under Section 4.3) or (B) (1) the
Corporation shall be the resulting or surviving corporation, (2) the resulting
or surviving corporation will have after such recapitalization, reorganization,
consolidation or merger no Senior Stock or Parity Stock (each as defined in the
Certificate of Amendment) either authorized or outstanding (except such Parity
Stock of the Corporation as may have been authorized or outstanding immediately
preceding such consolidation or merger) or such stock of the resulting or
surviving corporation (having the same powers, preferences and special rights of
any such Parity Stock) as may be issued in exchange therefor), (3) the Optionee
will receive in exchange for this Option an option to purchase the same
15
<PAGE>
number of shares of stock, with the same preferences, rights and powers, of the
resulting or surviving corporation, (4) after such recapitalization,
reorganization, consolidation or merger the resulting or surviving corporation
shall not be in breach of any of the terms hereof, any of the Material
Provisions of the Securities Purchase Agreement (as defined in the Certificate
of Amendment) or any of its material obligations under the Registration Rights
Agreement and (5) all or substantially all the holders of the outstanding shares
of capital stock of the Corporation immediately prior to such consolidation or
merger are entitled to receive shares representing 50% or more of the then
outstanding shares of capital stock of the resulting or surviving corporation
entitled to vote generally in the election of directors.
8. Miscellaneous.
-------------
a. Binding Effect and Assignment. This Option and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the Optionee
and the Corporation and their respective successors and assigns.
b. Amendments and Modifications. This Option may not be
----------------------------
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
16
<PAGE>
c. Notices. All notices or other communications given or made
-------
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Corporation:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-3857
Attention: Chief Executive Officer
with copies to:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-3857
Attention: General Counsel
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Edward A. Perell, Esq.
If to the Optionee:
CNA Financial Corporation
CNA Plaza
Chicago, Illinois 60685
Telecopy: (312) 822-1297
Attention: General Counsel
17
<PAGE>
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Craig M. Wasserman, Esq.
or to such other address as the person or entity to whom notice is to be given
may have previously furnished notice in writing to the other in the manner set
forth above.
d. Lost Options. Upon receipt of evidence satisfactory to the
-------------
Corporation of the loss, theft, destruction or mutilation of this Option and
upon reimbursement of the Corporation's reasonable incidental expenses, the Cor-
poration shall execute and deliver to the Optionee a new Option of like date,
tenor and denomination.
e. No Rights of a Shareholder. The Optionee shall not have,
--------------------------
solely on account of such status, any rights of a shareholder of the
Corporation, either at law or in equity, or to any notice of meetings of share-
holders or of any other proceedings of the Corporation. No adjustment shall be
made for dividends or other rights for which the record date is prior to the
issuance of a certificate or certificates for Shares upon each exercise of this
Option.
18
<PAGE>
f. Entire Agreement. This Option, together with the Securities
----------------
Purchase Agreement and the Certificate of Amendment, contains the entire
understanding of the Optionee and the Corporation in respect of the subject
matter hereof, and supersedes all prior negotiations and understandings between
the parties with respect to such subject matter. Subsequent to exercise of this
Option into Shares, all rights and preferences of such Shares shall be as
specified in the Certificate of Amendment.
g. Governing Law. The validity, construction, enforcement and
-------------
interpretation of this Option shall be governed by the laws of the State of New
York applicable to agreements made and to be performed entirely within such
State.
h. Captions. The captions, headings and arrangements used in
--------
this Option are for convenience only and do not in any way affect, limit,
amplify or modify the terms and provisions hereof.
19
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed on the day of December, 1994.
THE CONTINENTAL CORPORATION
By:____________________________
Name:
Title:
Attest:
___________________________
Name:
Title:
20
<PAGE>
Exhibit A
---------
FORM OF ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase ______
shares of Cumulative Preferred Stock, Series G ("Series G Preferred Stock"), par
value $4.00 per share, of The Continental Corporation covered by the within
Option and tenders payment herewith in the amount of $_____ in accordance with
the terms thereof, and requests that certificates for such securities be issued
in the name of, and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of shares of Series G Preferred Stock shall not be all the
shares of Series G Preferred Stock covered by the within Option, that a new
Option for the balance of the shares of Series G Preferred Stock covered by the
within Option be registered in the name of, and delivered to, the undersigned at
the address stated below.
Dated: ___________________
Signature:__________________________
Witness: __________________
21
<PAGE>
EXHIBIT B
---------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ___________________ hereby sells, assigns, and
transfers unto ______________________ an Option to purchase __________ shares of
Cumulative Preferred Stock, Series G, par value $4.00 per share, of The Conti-
nental Corporation
22
<PAGE>
EXHIBIT C
================================================================================
REGISTRATION RIGHTS AGREEMENT
between
THE CONTINENTAL CORPORATION
and
CNA FINANCIAL CORPORATION
_______________________________________
Dated: December __, 1994
_______________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Registration Under Securities Act, etc. . . . . . . . . . . . . . . . 2
2.1 Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Incidental Registration . . . . . . . . . . . . . . . . . . . . . 4
2.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . . 6
2.4 Underwritten Offerings . . . . . . . . . . . . . . . . . . . . . 10
2.5 Preparation; Reasonable Investigation . . . . . . . . . . . . . . 12
2.6 Limitations, Conditions and Qualifications to Obligations under
Registration Covenants . . . . . . . . . . . . . . . . . . . . . 13
2.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . 23
5. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Nominees for Beneficial Owners . . . . . . . . . . . . . . . . . . . . 24
7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Calculation of Percentage Interests in Registrable Securities . . . . 25
10. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . 25
11. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. Certain Distributions . . . . . . . . . . . . . . . . . . . . . . . . 26
13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated December __, 1994 between The
Continental Corporation, a New York corporation (the "Company"), and CNA
Financial Corporation, a Delaware corporation (the "Purchaser").
1. Background. Pursuant to a Securities Purchase Agreement, dated
as of December 6, 1994, between the Company and the Purchaser (the "Purchase
Agreement"), the Purchaser has agreed to purchase from the Company, and the
Company has agreed to issue to the Purchaser, (i) shares of the Company's
Cumulative Preferred Stock, Series T, par value $4.00 per share (the "Series T
Preferred Stock"), having an aggregate liquidation preference equal to
$165,620,000 (which shares shall be exchangeable, subject to the terms and
conditions set forth in the Purchase Agreement, for shares of the Company's
Cumulative Convertible Preferred Stock, Series E, par value $4.00 per share)
(the "Series E Preferred Stock"), (ii) shares of the Company's Cumulative
Preferred Stock, Series F, par value $4.00 per share (the "Series F Preferred
Stock"), having an aggregate liquidation preference equal to $34,380,000 and
(iii) such number of the Company's Cumulative Preferred Stock, Series H, par
value $4.00 per share (the "Series H Preferred Stock"), having an aggregate
liquidation preference equal to $75,000,000. Pursuant to an Option (the
"Option") dated as of the date hereof, the Company has granted to the Purchaser
an option (the "Option") to purchase up to 625,000 shares of Cumulative
Preferred Stock, Series G, par value $4.00 per share (the "Series G Preferred
Stock" and, together with the Series E Preferred Stock, the Series F Preferred
Stock, Series H Preferred Stock and Series T Preferred Stock, the "Preferred
Stock"). The Series E Preferred Stock may be converted at the election of the
holders thereof into shares of the Company's Common Stock, par value $1.00 per
share. The Series E Preferred Stock may be exchanged for Convertible
Subordinated Notes ("Convertible Subordinated Notes") and the Series F Preferred
Stock and the Series G Preferred Stock may be exchanged for Subordinated Notes
("Subordinated Notes"), in each case upon the election of the Company with the
consent of all the holders of the applicable series of Preferred Stock.
Capitalized terms used herein but not otherwise defined shall have the meanings
given them in Section 3.
<PAGE>
2. Registration Under Securities Act, etc.
2.1 Shelf Registration.
(a) (I) Filing and Effectiveness of Shelf Registration.
If the Purchaser or the holders of 50% of the Registrable Securities shall so
request, on or before eleven months after the Merger Termination Date, the
Company shall file a "shelf" registration statement with respect to the
Registrable Securities (as defined below) and pursuant to Rule 415 under the
Securities Act (the "Shelf Registration"); provided, however, that if the
Company and a majority of the holders of Registrable Securities agree that it
would not be in the best interest of the Company or the holders to file a
"shelf" registration statement, the Company may file such other registration
statement or registration statements as is appropriate, each of which registra-
tion statement will be deemed to be a Shelf Registration Statement for all
purposes of this Agreement except those relating to the continuous effectiveness
of such registration statement. The Shelf Registration shall be on Form S-3 (or
any successor form) if the Company is then eligible to use Form S-3 (or such
successor form). The Company shall use its best efforts to have the Shelf
Registration declared effective as soon as reasonably practicable after such
filing, and shall use its best efforts to keep the Shelf Registration
continuously effective, subject to Section 2.6(a), from the date such Shelf
Registration is declared effective until such time as all of the Registrable
Securities shall cease to be Registrable Securities.
(II) Series T Demand Registration. At any time after the
Merger Termination Date, if the Purchaser shall hold shares of Series T
Preferred Stock, the Purchaser shall have the right to make one written request
that the Company effect the registration under the Securities Act of all (but
not less than all) of the outstanding shares of Series T Preferred Stock owned
by the Purchaser (the "Series T Demand Registration") and all Series E Preferred
Stock exchangeable for such Series T Preferred Stock, which Series T Demand
Registration shall specify that the Series T Preferred Stock is to be
distributed in a widely disbursed, underwritten public offering, that will not
require regulatory approval of any governmental agency (other than under the
Securities Act or the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 (the
"HSR")). The Series T Demand Registration will require that consummation of the
Exchange of Series T Preferred Stock for Series E Preferred Stock on
2
<PAGE>
a share for share basis occurs upon purchase of the Series T Preferred Stock in
such underwritten public offering. The Series T Preferred Stock Demand
Registration will require, in conformity with the terms of the Certificate of
Amendment, and Sections 14.1 and 14.2 of the Purchase Agreement, that the terms
of the applicable underwriting agreement shall obligate the several underwriters
to ensure that the distribution of Series E Preferred Stock does not require
regulatory approval (other than under the Securities Act or the HSR). Included
as part of the Purchaser's notice to the Company of the Series T Demand
Registration shall be separate opinions of counsel to the Purchaser and counsel
to the managing underwriter(s), each of which counsel shall be acceptable to the
Company, which opinions shall each state, in terms satisfactory to the Company,
that the sale of securities contemplated by, and in the manner set forth in, the
Series T Demand Registration does not require regulatory approval.
(III) Obligation to Effect Registration. Upon receipt of
the Series T Demand Registration and the opinion of counsel referenced in
section 2.1(a)(II) hereof, the Company will promptly use commercially reasonable
efforts to effect the registration under the Securities Act of the Series T
Preferred Stock and the Series E Preferred Stock relating to such Series T
Preferred Stock, which the Company has been so requested to register pursuant to
section 2.1(a)(II), all to the extent required to permit the disposition (in
accordance with the required method of disposition as aforesaid) of the Series T
Preferred Stock and the Series E Preferred Stock so to be registered and will
use commercially reasonable efforts to file with the SEC within 60 days of such
demand a Registration Statement (the "Series T Demand Registration Statement")
for such Series T Preferred Stock and Series F Preferred Stock; provided that
the Company will not be required to effect any Series T Preferred Stock Demand
Registration if the terms of such registration, including but not limited to the
proposed method of distribution, violate the provisions of the Certificate of
Amendment.
(b) Supplements and Amendments; Expenses. The Company
shall supplement or amend, if necessary, the Shelf Registration and such other
registration statement(s) as may be filed pursuant to section 2.1(a) (the "Other
Registration Statements") as required by the regis
3
<PAGE>
tration form utilized by the Company or by the instructions applicable to such
registration form or by the Securities Act or as reasonably required by the
Purchaser or the holder or holders of (or any underwriter for) a majority of the
Registrable Securities and the Company shall furnish to the holders of the
Registrable Securities to which the Shelf Registration relates copies of any
such supplement or amendment prior to its being used and/or filed with the
Commission. The Company shall pay all Registration Expenses in connection with
the Shelf Registration and the Other Registration Statements, if any, whether or
not they become effective, and whether all, none or some of the Registrable
Securities are sold pursuant to the Shelf Registration or the Other Registration
Statements, if any. In no event shall the Shelf Registration or the Other
Registration Statements, if any, include securities other than Registrable
Securities, unless the Purchaser consents to such inclusion.
(c) Underwriting Procedures. If the Purchaser so elects
or, in the event the Purchaser does not hold 50% of the Registrable Securities,
if the holders of a majority of the Registrable Securities so elect, the offer-
ing of all or a portion of such Registrable Securities pursuant to the Shelf
Registration shall be in the form of an underwritten offering and the managing
underwriter or underwriters selected for such offering shall be selected by the
Purchaser or such holders, as the case may be, and reasonably acceptable to the
Company. The Purchaser or such holders shall provide the Company with notice of
the identity of the managing underwriter or underwriters it or they have
selected a reasonable time prior to the commencement of any such underwritten
offering.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If at any
time subsequent to the first anniversary of the Merger Termination Date the
Company at any time proposes to register any of its Common Stock under the
Securities Act by registration on any form other than Form S-4 or S-8, whether
or not for sale for its own account, it will each such time give prompt written
notice to all registered holders of Registrable Securities of its intention to
do so and of such holders' rights under this Section 2.2. Upon the written
request of any such holder (a "Requesting Holder") made as promptly as
practicable and in any event within 20 days after the receipt of any such notice
(10 days
4
<PAGE>
if the Company states in such written notice or gives telephonic or telecopied
notice to all registered holders of Registrable Securities, with written
confirmation to follow promptly thereafter, stating that (i) such registration
will be on Form S-3 and (ii) such shorter period of time is required because of
a planned filing date) (which request shall specify the Registrable Securities
intended to be disposed of by such Requesting Holder and the intended method of
disposition), the Company will use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities that the
Company has been so requested to register by the Requesting Holders thereof to
the extent required to permit the disposition of such Registrable Securities in
accordance with the intended methods thereof described as aforesaid; provided,
however, that prior to the effective date of the registration statement filed in
connection with such registration, immediately upon notification to the Company
from the managing underwriter of the price at which such securities are to be
sold, if such price is below the price which any Requesting Holder shall have
indicated to be acceptable to such Requesting Holder, the Company shall so
advise such Requesting Holder of such price, and such Requesting Holder shall
then have the right to withdraw its request to have its Registrable Securities
included in such registration statement; provided further, that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Requesting Holder of
Registrable Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from any obligation of the Company to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities under
Section 2.1, and (ii) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Securities, for the same
period as the delay in registering such other securities. No registration
effected under this Section 2.2 shall relieve the Company of its obligations
under Section 2.1. Notwithstanding the foregoing, if the Shelf Registration is
effective at the time the Company proposes to effect a registration subject to
this Section 2.2(a), the Company shall have no obligation to
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notify the holders of Registrable Securities or effect the registration of any
such securities under this Section 2.2(a) unless the securities to be registered
by the Company are to be disposed of in an underwritten offering.
(b) Priority in Incidental Registrations. If the managing
underwriter of any underwritten offering shall inform the Company by letter
that, in its opinion, the number or type of Registrable Securities requested to
be included in such registration would adversely affect such offering, and the
Company has so advised the Requesting Holders in writing, then the Company will
include in such registration, to the extent of the number and type that the
Company is so advised can be sold in (or during the time of) such offering,
first, all securities proposed by the Company to be sold for its own account,
second, such Registrable Securities requested to be included in such
registration pursuant to this Agreement, pro rata among such Requesting Holders
on the basis of the estimated proceeds from the sale thereof and, third, all
other securities proposed to be registered.
(c) Expenses. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this Section
2.2.
2.3 Registration Procedures. If and when-ever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1 and 2.2, the Company will, as
expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use its
best efforts to cause such registration statement to become effective;
provided, however, that the Company may discontinue any registration of its
securities that are not Registrable Securities (and, under the circum-
stances specified in Section 2.2(a), its securities that are Registrable
Securities) at any time prior to the effective date of the registration
statement relating thereto;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
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statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement; provided, however, that in the case of a registration statement
filed pursuant to Section 2.2(a) or 2.1(a)(II), not later than 135 days
after the effective date thereof;
(iii) furnish to each selling holder of Registrable
Securities covered by such registration statement, such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits, appropriately
redacted in the case of those exhibits filed on a confidential basis), and
so long as the Company is required to keep such registration statement
effective pursuant to subdivision (ii) such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
selling holder may reasonably request;
(iv) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of
the United States of America where an exemption is not available and as the
selling holder of Registrable Securities covered by such registration
statement shall reasonably request, (y) to keep such registration or
qualification in effect for so long as such registration statement remains
in effect and (z) to take any other action that may be necessary or
advisable to enable such selling holders to consummate the disposition in
such jurisdictions of the securities to be sold by such selling holders,
except that the Company shall not for any such purpose be required to (a)
qualify generally to do business as a foreign corporation in any jurisdic-
tion wherein it would not, but for the requirements of this subdivision
(iv), be obligated to be so qualified, (b) become subject to taxation in
any
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jurisdiction where it would not then so subject or (c) take any action that
would subject it to general service of process in any such jurisdiction;
(v) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of counsel to
the Company and counsel to the selling holder or selling holders of
Registrable Securities to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(vi) furnish at the effective date of such registration
statement and the date of closing of the sale of the Registrable Securities
(whether or not such sale is underwritten), to each selling holder of
Registrable Securities, and each such selling holder's underwriters, if
any, a signed counterpart of:
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (or such date of sale,
as applicable), and
(y) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference 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 the
accountants' comfort 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' comfort letters delivered to the
underwriters in underwritten public offerings of securities;
(vii) notify each selling holder of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event known to the Company as
a result of which, the prospectus included in such registration statement,
as
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<PAGE>
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, in the light of the circumstances
under which they were made, and, subject to Section 2.6(a), promptly
prepare and, at the request of any such selling holder, furnish to it 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 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 to make the statements therein not
misleading in the light of the circumstances under which they were made;
(viii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and, if
required, make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to each such selling holder of Registrable Securities a copy of any
amendment or supplement to such registration statement or prospectus;
(ix) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such registration; and
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on The New York Stock Exchange.
The Company may require each selling holder of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such selling holder and the distribution of such securities as the
Company may from time to time reasonably request in writing.
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<PAGE>
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to the Shelf Registration Statement or any Other Registration
Statement, the Company will use all reasonable efforts to enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, the
Purchaser (or, if the Purchaser does not hold 50% of the Registrable Securities
to be included in such underwritten offering, the holders of a majority of the
Registrable Securities to be included in such underwritten offering) and the
underwriters and to contain such representations and warranties by the Company,
such other terms as are customary in agreements of that type, including, without
limitation, indemnities to the effect and to the extent provided in Section 2.7
and, in the case of a Series T Demand Registration, the distribution
requirements set forth in the Certificate of Amendment. The holders of the
Registrable Securities proposed to be sold by such underwriters will reasonably
cooperate with the Company in the negotiation of the underwriting agreement.
Such holders of Registrable Securities to be sold by such underwriters shall be
parties to such underwriting agreement and may, at their option, require that
any or all of 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 such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions
10
<PAGE>
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required to make any representations
or warranties to or agreements with the Company other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution or any other
representations required by applicable law.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities in the notice given to the Company
by such Requesting Holder under Section 2.2(a), use its reasonable best efforts
to arrange for such underwriters to include all the Registrable Securities to be
offered and sold by such Requesting Holder among the securities of the Company
to be distributed by such underwriters, subject to the provisions of Section
2.2(b). The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of 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 such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such Requesting Holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Requesting Holder, such Requesting
Holder's Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by applicable law. The
holders of Registrable Securities, if requested by the managing underwriter or
underwriters of such underwritten offering, shall not, except as part of such
underwritten offering, effect any public sale or distribution of Registrable
Securities of the same class as any securities included in such underwritten
offering (including a sale pursuant to Rule 144) during the 10-day period prior
to, and during the 90-day period beginning on, the closing date of such
underwritten offering, to the extent timely
11
<PAGE>
notified in writing by the Company or the managing underwriter or underwriters.
No holder of Registrable Securities may participate in any such underwritten
offering unless such holder (i) agrees to sell such holder's Registrable
Securities on the basis provided in the underwriting agreement and
(ii) completes and executes all questionnaires, powers of attorney, and other
documents reasonably required under the terms of the underwriting agreement.
(c) Underwriting Discounts and Commissions. The holders of
Registrable Securities sold in any offering pursuant to Section 2.4(a) or
Section 2.4(b) shall pay all underwriting discounts and commissions of the
underwriter or underwriters with respect to the Registrable Securities sold
thereby.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such reasonable access to its books and 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 holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act; provided, however, that each such holder, underwriter or
counsel shall receive such information only if such holder, underwriter or
counsel and their respective agents and representatives shall have expressly
agreed that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information, shall
be kept confidential by such holder, underwriters, counsel, agent or
representative and not be used for any purpose other than in connection with the
review by such holder, underwriter, counsel, agent or representative of the
registration statement except to the extent (i) disclosure of such information
is required by court or administrative order or applicable law, (ii) disclosure
of such information, in the opinion of counsel to such holder, underwriter,
counsel, agent or representative is necessary to avoid or correct a misstatement
or omission
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<PAGE>
of a material fact in the registration statement, prospectus or any supplement
or post-effective amendment thereto, (iii) disclosure of such information is in
the opinion of counsel for any such holder, underwriter, counsel, agent or
representative necessary or advisable in connection with any action, claim, suit
or proceeding, directly or indirectly, involving or potentially involving such
holder, underwriter, counsel, agent or representative and arising out of, or
based upon, relating to or involving this Agreement or any of the transactions
contemplated hereunder or (iv) such information becomes generally available to
the public other than as a result of a disclosure or failure to safeguard by
such holder, underwriter, counsel, agent or representative. Each selling holder
of such Registrable Securities further agrees that it will, upon learning that
disclosure of any such information is sought pursuant to a court or administra-
tive order, give prompt notice thereof to the Company and allow the Company, at
the Company's expense, to undertake appropriate action to prevent disclosure of
the information deemed confidential. The Company shall promptly notify the
holders of Registrable Securities and their counsel of any stop order issued or
threatened by the Commission and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered.
2.6 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants.
(a) Limitation on Requirement to File or Amend Registration
Statement. Anything in this Agreement to the contrary notwithstanding, it is
understood and agreed that the Company shall not be required to file a Registra-
tion Statement, amendment or post-effective amendment thereto or prospectus
supplement or to supplement or amend any Registration Statement if the Company
is then involved in discussions concerning, or otherwise engaged in, an acquisi-
tion, disposition, financing or other material transaction and the Company
determines in good faith that the making of such a filing, supplement or
amendment at such time would materially adversely effect or interfere with such
transaction so long as the Company shall, as soon as practicable thereafter (but
in no event more than 90 days thereafter) make such filing, supplement or
amendment. The Company shall promptly give the holders of Registrable
Securities written notice of such postponement, containing a general statement
of the reasons for such postponement and an approximation of the anticipated
delay, provided, however, that nothing herein shall require the Company to
disclose
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<PAGE>
any terms of any such transaction or the identity of any party thereto. Upon
receipt by a holder of notice of an event of the kind described in this Section
2.6(a), such holder shall forthwith discontinue such holder's disposition of
Registrable Securities until such holder's receipt of notice from the Company
that such disposition may continue and of any supplemented or amended prospectus
indicated in such notice.
(b) Provision of Information by Holder. Each selling
holder of Registrable Securities as to which any registration is being effected
agrees, as a condition to the registration obligations with respect to such
selling holder provided herein, to furnish promptly to the Company such
information regarding the selling holder and the distribution of such
Registrable Securities as the Company may, from time to time, reasonably request
in writing to comply with the Securities Act and other applicable law. The
Company may exclude from such registration the Registrable Securities of any
selling holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request. If the identity of a selling
holder of Registrable Securities is to be disclosed in a registration statement,
such selling holder shall be permitted to include all information regarding such
selling holder as it shall reasonably request.
(c) Discontinuation of Offering. Each holder of
Registrable Securities agrees that, upon receipt of written notice from the
Company of (i) the issuance by the Commission of a stop order suspending the
effectiveness of a registration statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose or (ii) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a registration statement or any Registrable Securities
covered thereby for offer or sale in any jurisdiction or the initiation of any
proceeding for such purpose, such holder shall forthwith discontinue the
disposition of such Registrable Securities covered by such registration
statement or prospectus (but in the case of clause (ii), solely in the
applicable jurisdiction) until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by the Company, or until it is
advised in writing by the Company that the use of the applicable prospectus may
be resumed, and has received copies of any amendments or supplements thereto,
and, if so directed
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<PAGE>
by the Company, such holder will deliver to the Company all copies, other than
permanent file copies, then in such holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
2.7 Indemnification.
(a) Indemnification by the Company. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 2.1 or 2.2, each holder of any Registrable
Securities covered by such registration statement, and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such holder or any such underwriter
within the meaning of Section 15 of the Securities Act, and their respective
directors, officers, partners, agents and affiliates, against any losses,
claims, damages or liabilities, joint or several, to which such holder or
underwriter or any such director, officer, partner, agent, affiliate or
controlling person may become subject under the Securities Act or otherwise,
including, without limitation, the fees and expenses of legal counsel, insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
filed by the Company under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such holder or underwriter and each such director, officer, partner,
employee, agent, affiliate and controlling 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,
however, 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 registra-
tion statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in
15
<PAGE>
conformity with written information furnished to the Company by or on behalf of
such holder, underwriter, director, officer, partner, employee, agent, affiliate
or controlling Person, as the case may be, expressly for use in the preparation
thereof; provided further, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement of any
material fact contained in any such registration statement, preliminary
prospectus, final prospectus or summary prospectus contained therein or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading in a prospectus or prospectus supplement, if
(i) such untrue statement or omission is completely corrected in an amendment or
supplement to such prospectus or prospectus supplement, the seller of the
Registrable Securities has an obligation under the Securities Act to deliver a
prospectus or prospectus supplement in connection with such sale of Registrable
Securities and the seller of Registrable Securities thereafter fails to deliver
such prospectus or prospectus supplement as so amended or supplemented prior to
or concurrently with the sale of Registrable Securities to the person asserting
such loss, claim, damage or liability after the Company has furnished such
seller with a sufficient number of copies of the same or (ii) if the seller
received written notice from the Company of the existence of such an untrue
statement or such an omission and the seller continued to dispose of Registrable
Securities prior to the time of the receipt of either (a) an amended or
supplemented prospectus or prospectus supplement that completely corrected the
untrue statement or the omission or (b) a notice from the Company that the use
of the existing prospectus or prospectus supplement may be resumed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, partner,
employee, agent, affiliate or controlling person and shall survive the transfer
of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.7(a)) the Company,
and each director of the
16
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Company, each officer of the Company and each other Person, if any, who
participates as an underwriter in the offering or sale of such securities and
each other Person who controls the Company or any such underwriter within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, that (A) the indemnifying party shall not be liable in any
such case to the extent that any such statement or omission is completely
corrected (x) in the final prospectus, in the case of a preliminary prospectus,
or (y) in an amendment or supplement to a prospectus or prospectus supplement
(provided, however, that nothing in this clause (y) shall limit the indemnifying
party's liability with respect to sales made prior to the receipt by the Company
from the indemnifying party of written notice of such an untrue statement or
such an omission) and (B) the liability of such indemnifying party under this
Section 2.7(b) shall be limited to the amount of proceeds received by such
indemnifying party in the offering giving rise to such liability. 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 such securities by such holder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.7(a) or (b), such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 2.7, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be enti-
17
<PAGE>
tled to participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that (i) if the indemnified party reasonably believes that it
is advisable for it to be represented by separate counsel because there exists
or may exist a conflict of interest between its interests and those of the
indemnifying party with respect to such claim, or there exist defenses available
to such indemnified party that may not be available to the indemnifying party,
or (ii) if the indemnifying party shall fail to assume responsibility for such
defense, the indemnified party may retain counsel satisfactory to it and, in the
case of clause (i), reasonably satisfactory to the indemnifying party, and the
indemnifying party shall pay all fees and expenses of such counsel; provided
further, that the indemnifying party shall not be deemed to have failed to
assume responsibility for such defense if the indemnifying party has not
received notice of such claim pursuant to this Section 2.7(c). In the event an
indemnifying party elects not to assume, or shall not be entitled to assume
because of a conflict of interest between its interests and those of the
indemnified party, the defense of a claim, such indemnifying party shall not be
obligated to pay the fees and expenses of more than one counsel or firm of
counsel in any jurisdiction in any one legal action or group of related legal
actions for all parties indemnified by such indemnifying party in respect of
such claim, unless in the reasonable judgment of any such indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties in respect of such claim. No indemnifying party shall
be liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld or delayed.
No indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation or that requires action other than the payment of money by
the indemnifying party.
(d) Contribution. If the indemnification provided for in
this Section 2.7 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.7(a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 2.7(a) or (b), the indemnified party
and the indemnify-
18
<PAGE>
ing party under Section 2.7(a) or (b) shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating the same), (i) in such proportion as
is appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement that
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement; provided, however, that for
purposes of this clause (ii), the relative benefits received by the prospective
sellers shall be deemed not to exceed the amount of proceeds received by such
prospective sellers. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to contri-
bution from any Person who was not guilty of such fraudulent misrepresentation.
Such prospective sellers' obligations to contribute as provided in this Section
2.7(d) are several in proportion to the relative value of their respective
Registrable Securities covered by such registration statement and not joint. In
addition, no Person shall be obligated to contribute hereunder any amounts in
payment for any settlement of any action or claim effected without such Person's
consent, which consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 2.7 (with appropriate modifications) shall be given by the Company and
each holder of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense,
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<PAGE>
as and when bills are received or expense, loss, damage or liability is
incurred.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean and include the Common Stock, par value
$1.00 per share, of the Company and each other class of capital stock of the
Company that does not have a preference over any other class of capital stock of
the Company as to dividends or upon liquidation, dissolution or winding up of
the Company and, in each case, shall include any other class of capital stock of
the Company into which such stock is reclassified or reconstituted.
"Conversion Shares" means the shares of Common Stock issued or
issuable upon conversion of the Series E Preferred Stock or the Convertible
Subordinated Notes pursuant to the terms of the Certificate of Amendment (as
defined in the Purchase Agreement).
"Convertible Subordinated Notes" has the meaning set forth in Section
1.
"Exchange" has the meaning set forth in the Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"Exchange Notes" means, collectively, the Convertible Subordinated
Notes and the Subordinated Notes.
"HSR" has the meaning set forth in Section 2.1(a)(II).
"Merger Termination Date" means the date, if any, on which the
Agreement and Plan of Merger, dated as of
20
<PAGE>
December 6, 1994, by among CNA Financial Corporation, Merger Sub and The
Continental Corporation, shall terminate pursuant to its terms.
"Option" has the meaning set forth in Section 1.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Purchaser" has the meaning set forth in the initial paragraph of this
Agreement.
"Registrable Securities" means (i) any Conversion Shares and any
Related Registrable Securities (ii) any Exchange Notes and any Related
Registrable Securities and (iii) any shares of the Preferred Stock and any
Related Registrable Securities; provided that shares of Series T Preferred
Stock and Related Registrable Securities with respect to such Series T Preferred
Stock (other than shares of Series E Preferred Stock) shall not be Registrable
Securities for purposes of Sections 2.1(a)(I), 2.2, 2.3(x) and 2.4. As to any
particular Registrable Securities, once issued, such securities shall cease to
be Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by Rule 144 and the
purchaser thereof does not receive "restricted securities" as defined in Rule
144, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent public distribution of them shall not in the opinion
of counsel to the holders, require registration of them under the Securities Act
or (d) they shall have ceased to be outstanding. All references to percentages
of Registrable Securities shall be calculated pursuant to Section 9.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration and filing fees, all fees of the New York Stock Exchange, Inc.,
other applicable national securities exchanges or the National Association of
Securities Dealers, Inc., all fees
21
<PAGE>
and expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "comfort" letters required by or incident
to such performance and compliance, any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (excluding any underwriting
discounts or commissions with respect to the Registrable Securities) and the
reasonable fees and expenses of one special counsel retained by the selling
holders (selected by selling holders representing a majority of the Registrable
Securities covered by such registration); provided, however, that in the event
the Company shall determine, in accordance with Section 2.2(a) or Section 2.6,
not to register any securities with respect to which it had given written notice
of its intention to so register to holders of Registrable Securities, all of the
costs of the type set forth in this definition and incurred by Requesting
Holders in connection with such registration on or prior to the date on which
the Company notifies the Requesting Holders of such determination shall be
deemed Registration Expenses.
"Related Registrable Securities" means with respect to Conversion
Shares, Exchange Notes, Preferred Stock or Common Stock, any securities of the
Company issued or issuable with respect to any Conversion Shares, Exchange
Notes, Preferred Stock or Common Stock by way of a dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise.
"Requesting Holder" is defined in Section 2.2.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
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<PAGE>
"Series E Preferred Stock" has the meaning set forth in Section 1.
"Series F Preferred Stock" has the meaning set forth in Section 1.
"Series G Preferred Stock" has the meaning set forth in Section 1.
"Series H Preferred Stock" has the meaning set forth in Section 1.
"Series T Preferred Stock" has the meaning set forth in Section 1.
"Series T Demand Registration" has the meaning set forth in Section
2.8(a).
"Series T Demand Registration Statement" has the meaning set forth in
Section 2.8(b).
"Shelf Registration" has the meaning set forth in Section 2.1(a).
"Subordinated Notes" has the meaning set forth in Section 1.
4. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the provisions of (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, (b) Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or (c) any similar rules or regulations here-
after adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of at least 50% of the Registrable
Securities affected by such amendment, action or omission to act. Each
23
<PAGE>
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
7. Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Purchaser, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as it shall have
furnished to the Company in writing in the manner set forth herein;
(b) if to any other holder of Registrable Securities, at
the address that such holder shall have furnished to the Company in writing in
the manner set forth herein, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as the Company shall
have furnished to each holder of Registrable Securities at the time outstanding
in the manner set forth herein.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered to a
courier, if deliv
24
<PAGE>
ered by overnight courier service; two business days after being deposited in
the mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied.
8. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and permitted assigns and, with respect to
the Purchaser, any holder of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. Except by operation of law, this
Agreement may not be assigned by the Company without the prior written consent
of the holders of 50% of the Registrable Securities at the time such consent is
requested.
9. Calculation of Percentage Interests in Registrable Securities.
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated as follows: such percentage of each
of the total number of Conversion Shares and shares of Preferred Stock
outstanding at the time such calculation is made and such percentage of the
outstanding principal amount of Exchange Notes outstanding at such time.
10. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities that grants, or modify
any existing agreement with respect to its securities to grant, to the holder of
its securities in connection with an incidental registration of such securities
equal or higher priority to the rights granted to the Purchasers under this
Section 2.2(b).
11. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for spe-
cific performance that a remedy at law would be adequate.
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<PAGE>
12. Certain Distributions. The Company shall not at any time make a
distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the securities
so distributed are registered under the Securities Act, unless the securities to
be distributed to the holders of Registrable Securities are also registered
under the Securities Act.
13. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
14. Entire Agreement. This Agreement, together with the Purchase
Agreement (including the exhibits and schedules thereto), the Option and the
Preferred Stock, is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Purchase Agreement (including the exhibits and schedules
thereto) and the Preferred Stock supersede all prior agreements and under-
standings between the parties with respect to such subject matter.
15. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
26
<PAGE>
17. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
an original and both of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
THE CONTINENTAL CORPORATION
By:______________________________
Name:
Title:
CNA FINANCIAL CORPORATION
By:______________________________
Name:
Title:
27
<PAGE>
Exhibit D
[LETTERHEAD OF DEBEVOISE & PLIMPTON]
December __, 1994
CNA Financial Corporation
CNA Plaza
Chicago, Illinois 60685
Attention: General Counsel
THE CONTINENTAL CORPORATION
---------------------------
Dear Ladies and Gentlemen:
We have acted as special counsel to The
Continental Corporation, a New York corporation (the
"Company"), in connection with the Company's issuance and
sale to CNA Financial Corporation, pursuant to the
Securities Purchase Agreement, dated as of December 6, 1994,
between the Company and CNA Financial Corporation, a
Delaware corporation (the "Purchase Agreement"), of (a)
-
828,100 shares of Cumulative Preferred Stock, Series T, par
value $4.00 per share, of the Company, with an aggregate
liquidation preference of $165,620,000, (b) 171,900 shares
-
of Cumulative Preferred Stock, Series F, par value $4.00 per
share, of the Company, with an aggregate liquidation
preference of $34,380,000, (c) 325,000 shares of Cumulative
-
Preferred Stock, Series H, par value $4.00 per share, of the
Company, with an aggregate liquidation preference of
$75,000,000, and (d) an option to purchase, for
-
$125,000,000, 625,000 shares of Cumulative Preferred Stock,
Series G, par value $4.00 per share, of the Company, with an
aggregate liquidation preference of $125,000,000. Capital
<PAGE>
CNA Financial Corporation 2 December __, 1994
ized terms used herein without definition have the respec-
tive meanings specified in the Purchase Agreement.
In so acting, we have examined the Purchase Agree-
ment, the Option, the Certificate of Incorporation, the
Company's By-laws, and the Certificate of Amendment, and
have also examined and relied upon the representations and
warranties as to factual matters contained in or made pursu-
ant to such documents and upon the originals, or copies
certified or otherwise identified to our satisfaction, of
such records, documents, certificates and other instruments
as in our judgment are necessary or appropriate to enable us
to render the opinion expressed below. We have reviewed,
and rely upon, the receipt, dated December __, 1994, of the
Department of State of the State of New York (the "Depart-
ment") showing the date upon which the Certificate of Amend-
ment was filed with the Department. In rendering the fol-
lowing opinions, we have assumed, with your permission, that
the Certificate of Amendment filed with the Department on
December __, 1994 was accepted by the Department on that
date.
Based upon the foregoing, we are of the following
opinion:
(1) The Company is validly existing as a corpora-
tion in good standing under the laws of the State of
New York;
(2) The Shares, the Option, the Option Shares,
the Exchange Shares and the Conversion Shares and the
Certificate of Amendment have been duly authorized and
(a) the Shares, the Exchange Shares and the Conversion
-
Shares when issued and delivered in accordance with the
terms of the Purchase Agreement and (b) the Option
-
Shares when issued and delivered in accordance with the
terms of the Option, will be validly issued, fully paid
and nonassessable; and
(3) Each of the Purchase Agreement and the Option
has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and
delivery thereof by the other party thereto, are the
valid and binding obligations of the Company, subject
to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as
to enforceability, to general principles of equity
<PAGE>
CNA Financial Corporation 3 December __, 1994
(regardless of whether enforcement is sought in a pro-
ceeding in equity or at law) and except that no opinion
has been requested and we express no opinion as to
Section 8.1 of the Purchase Agreement insofar as such
Section 8.1 relates to indemnification for liabilities
under the Act, the Exchange Act or state securities
laws.
Our opinions expressed above are limited to the
laws of the State of New York and the Federal laws of the
United States of America.
We are delivering this opinion to you pursuant to
Section 3.1.7 of the Purchase Agreement, and no other person
is entitled to rely on this opinion.
Very truly yours,
