**Exhibit 10.18**

 

**AGREEMENT AND PLAN OF REORGANIZATION AND MERGER**

 

This Agreement and Plan of Reorganization andMerger (the “Agreement”) is entered into as of August 20, 2004, by and amongNevada Security Bank (“NSB”), a Nevada banking corporation and wholly-ownedsubsidiary of The Bank Holdings (“Holdings”), CNA Trust Corporation (“CNA”), aCalifornia banking corporation and CNA Financial Corporation (“CNA Financial”),a Delaware corporation and parent company of CNA.

 

**RECITALS:**

 

WHEREAS, the respective Boards of Directorsof CNA and NSB have determined that it is in the best interests of CNA and NSBand their respective shareholders for CNA to merge with NSB upon the terms andsubject to the conditions set forth in this Agreement and in accordance withthe Nevada Revised Statutes, the California Corporations Code, the CaliforniaFinancial Code, the Bank Merger Act (each as hereinafter defined) and otherapplicable laws;

 

WHEREAS, each of the Boards of Directors ofCNA Financial, CNA and NSB and the shareholders of CNA and NSB have approved orwill approve this Agreement and the transactions contemplated hereby; and

 

WHEREAS, upon the consummation of the Merger(as hereinafter defined) of CNA with and into NSB, NSB shall remain awholly-owned subsidiary of Holdings.

 

NOW, THEREFORE, in consideration of thesepremises and the representations, warranties and agreements herein contained,CNA Financial, CNA and NSB hereby agree as follows:

 

**ARTICLE1.  DEFINITIONS**

 

As used in this Agreement, the followingterms shall have the meanings set forth below:

 

“Acquisition Event” shall mean any of thefollowing:

 

CNA’s Board of Directors shall have approvedor CNA shall have authorized, recommended, publicly proposed or publiclyannounced an intention to authorize, recommend or propose, or shall haveentered or announced an intention to enter into a letter of intent, anagreement-in-principle or a definitive agreement with any Person (other thanNSB) to effect, an Acquisition Transaction. As used herein, the term “Acquisition Transaction” shall mean (i) amerger, consolidation or similar transaction involving CNA or (ii) the sale ofthe capital stock of CNA.

 

“Acquisition Proposal” shall have the meaninggiven such term in Section 6.2.4.

 

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“Affiliate” or “affiliate” shall mean, withrespect to any Person, any other Person that, directly or indirectly, controlsor is controlled by or is under common control with such Person provided,however, that with respect to CNA and CNA Financial, “Affiliate” (i) shallinclude only CNA Financial and Persons controlled by CNA Financial, and (ii)shall exclude CNA Surety Corporation, a Delaware corporation, and itsSubsidiaries, First Insurance Company of Hawaii, a Hawaii stock insurancecompany, and its Subsidiaries, Accord Underwriting Agency, Ltd., a Bermudacompany, and RVI Guaranty Co., Ltd., a Bermuda insurance company, and itsSubsidiaries.

 

“Affiliated Group” shall mean any affiliatedgroup within the meaning of Section 1504(a) of the IRC or any similar groupdefined under a similar provision of state, local or foreign law.

 

“Agreement” shall have the meaning given tosuch term in the preamble.

 

“Articles of Merger” shall have the meaninggiven to such term in Section 2.1.

 

“Bank Merger Act” shall mean 12 U.S.C.Section 1828(c), as amended.

 

“BHCA” shall mean the Bank Holding CompanyAct of 1956, as amended.

 

“Business Day” shall mean any day, other thana Saturday, Sunday or any other day, such as a legal holiday, on whichcommercial banks in Chicago, Illinois, California or Nevada are authorized orrequired by law to be closed.

 

“CDFI” shall mean the California Departmentof Financial Institutions or its successor in interest.

 

“California Corporations Code” shall mean theGeneral Corporation Law of the State of California, as amended.

 

“California Financial Code” shall mean theFinancial Code of the State of California, as amended.

 

“Closing” shall have the meaning given tosuch term in Section 2.1.

 

“Closing Date” shall have the meaning givento such term in Section 2.1.

 

“CNA” shall have the meaning given to suchterm in the preamble.

 

“CNA Common Stock” shall mean the commonstock, $100 par value, of CNA.

 

“CNA Financial” shall have the meaning givento such term in the preamble.

 

“CNA Schedules” shall have the meaning givento such term in Section 5.5.

 

“Confidential Information” shall mean allinformation exchanged heretofore or hereafter between CNA and its Affiliatesand agents, on the one hand, and NSB and its Affiliates and

 

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agents, on the other hand, which isinformation related to the business, financial position or operations of thePerson responsible for furnishing the information or an Affiliate of suchPerson (such information to include, by way of example only and not oflimitation, client lists, company manuals, internal memoranda, strategic plans,budgets, forecasts/ projections, computer models, marketing plans, filesrelating to loans originated by such Person, loans and loan participationspurchased by such Person from others, investments, deposits, leases, contracts,employment records, minutes of board of directors meetings (and committeesthereof) and stockholder meetings, legal proceedings, reports of examination byany Governmental Entity, and such other records or documents such Person maysupply to the other Party pursuant to the terms of this Agreement or ascontemplated hereby).  Notwithstandingthe foregoing, “Confidential Information” shall not include any informationthat (i) at the time of disclosure or thereafter is generally available to andknown by the public (other than as a result of a disclosure directly orindirectly by the recipients or any of their officers, directors, employees orother representatives or agents), (ii) was available to the recipients on anonconfidential basis from a source other than Persons responsible forfurnishing the information, provided that such source is not and was not boundby a confidentiality agreement with respect to the information, or (iii) hasbeen independently acquired or developed by the recipients without violatingany obligations under this Agreement.

 

“Confidentiality Agreement” shall mean thatcertain Confidentiality Agreement, dated as of May 25, 2004, between Holdingsand CNA.

 

“Dispute Officer” shall have the meaninggiven to such term in Section 5.7.3(a).

 

“Effective Time” shall have the meaning givensuch term in Section 2.1.

 

“FDIC” shall mean the Federal DepositInsurance Corporation or its successor in interest.

 

“FDI Act” shall mean the Federal DepositInsurance Act, as amended.

 

“Federal Reserve” shall mean the Board ofGovernors of the Federal Reserve System or its successor in interest.

 

“GAAP” shall mean accounting principlesgenerally accepted in the United States of America.

 

“Governmental Entity” shall mean any court,federal, state, local or foreign government or any administrative agency orcommission or other governmental authority or instrumentality whatsoever.

 

“Holdings” shall have the meaning given tosuch term in the preamble.

 

“Indemnified Party” shall have the meaninggiven to such term in Section 5.7.3.

 

“Indemnifying Party” shall have the meaninggiven to such term in Section 5.7.3.

 

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“IRC” shall mean the Internal Revenue Code of1986, as amended and regulations promulgated thereunder.

 

“Knowledge” shall mean, with respect to anyrepresentation or warranty contained in this Agreement, the actual knowledge ofthose individuals listed on Schedule 1.1.

 

“Legal Requirement” shall mean any law,statute, ordinance, regulation, writ, injunction, rule, established principleof common law, directive, decree, administrative ruling or enforceablesupervisory policy of any Governmental Entity or applicable court decision.

 

“Licenses” shall have the meaning given tosuch term in Section 3.2.

 

“License Agreement” shall have the meaninggiven to such term in Section 5.10.

 

“Losses” shall mean losses, liabilities,Taxes, damages, expenses, costs and reasonable legal fees and disbursements,collectively, and specifically includes any other matters for which CNA isobligated to indemnify UBOC pursuant to the UBOC Agreement.

 

“Material Adverse Effect” shall mean amaterial adverse effect: (i) on the ownership or operation of CNA (or itssuccessor) by NSB after the Effective Time; or (ii) on the ability of a Personthat is a party to this Agreement to perform its obligations under thisAgreement or to consummate the transactions contemplated by thisAgreement.  Material Adverse Effectspecifically does not include (a) the transactions contemplated by the UBOCAgreement; (b) any adverse change or effect that is caused by a change in lawsor regulations applicable to any party hereto; (c) any adverse change or effectthat is caused by or that arises out of the closing of any securities orfinancial markets, or conditions affecting the economy or financial, banking,currency or capital markets in general; (d) any adverse change or effect thatis caused by or that arises out of conditions affecting the banking orfinancial services industries generally; and (e) any adverse change or effectthat is caused by or arises out of any outbreak or escalation of national orinternational hostilities or any crisis or calamity, or any attack or act ofterrorism.

 

“Merger” shall have the meaning set forth inSection 2.1.

 

“NCFID” shall mean the Nevada Commissioner ofthe Financial Institutions Division or its successor in interest.

 

“Nevada Revised Statutes” shall mean Chapters92A and 666 of the Nevada Revised Statutes, as amended.

 

“NSB” shall have the meaning given to suchterm in the preamble.

 

“NSB Schedules” shall have the meaning givento such term in Section 5.5.

 

“Persons” or “persons” shall mean anindividual, corporation, partnership, limited liability company, joint venture,trust or unincorporated organization, Governmental Entity or any other legalentity whatsoever.

 

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“Pre-Closing Tax Period” means any taxableperiod (or portion thereof) ending at or before the Effective Time.

 

“Purchase Price” shall mean an amount equalto (i) the sum of $500,000 plus CNA’s cash and cash equivalents plus anyaccrued interest thereon at the Effective Time.

 

“Regulatory Authority” shall mean anyGovernmental Entity, the approval of which is legally required for consummationof the Merger.

 

“Related Agreements” shall mean thisAgreement, the Articles of Merger and the License Agreement.

 

“Requisite Regulatory Approvals” shall havethe meaning set forth in Section 7.1.1.

 

“Returns” shall mean all returns,declarations, reports, statements, and other documents required to be filedwith respect to federal, state, local and foreign Taxes, and the term “Return”means any one of the foregoing Returns.

 

“Subsidiary” shall mean, with respect to anycorporation (the “parent”), any other corporation, association or otherbusiness entity of which more than 50% of the shares of the voting stock areowned or controlled, directly or indirectly, by the parent or by one or moreSubsidiaries of the parent, or by the parent and one or more of itsSubsidiaries.

 

“Surviving Corporation” shall have themeaning given to such term in Section 2.1.

 

“Taxes” shall mean all federal, state, localand foreign net income, gross income, gross receipts, sales, use, ad valorem,transfer, franchise, profits, license, lease, service, service use,withholding, backup withholding, payroll, employment, excise, severance, stamp,occupation, premium, property, windfall profits, customs, duties, or othertaxes, together with any interest and any penalties, including penalties withrespect to information reporting, additions to tax, or additional amounts withrespect thereto, and the term “Tax” means any one of the foregoing Taxes.

 

“UBOC” shall mean Union Bank of California,N.A., a national banking association.

 

“UBOC Agreement” shall mean that certainPurchase and Assumption Agreement between CNA and UBOC, dated as of May 14,2004, as such agreement may be amended from time to time, including but notlimited to the CNA Financial Assignment and Assumption Agreement dated August2, 2004 by and among CNA, CNA Financial and UBOC.

 

“Updated Schedules” shall mean the schedulesprovided by CNA to NSB, and the schedules provided by NSB to CNA, immediatelyprior to the Closing as set forth in Section 5.5.

 

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**ARTICLE2.  THE MERGER**

 

Section 2.1 The Merger.  Subject to theterms and conditions of this Agreement, the closing of the Merger (as definedbelow) under this Agreement (the “Closing”) shall take place at a location andtime to be designated by NSB and reasonably concurred to by CNA on the ClosingDate.  The “Closing Date” shall be thefirst Business Day as is reasonably practicable after all of the conditions setforth in Article 7 have been satisfied. At the Effective Time, CNA shall be merged with NSB, with NSB being thesurviving corporation of the merger, all pursuant to the Articles of Mergerattached to this Agreement as Exhibit 2.1 (the “Articles of Merger”) and inaccordance with the applicable provisions of the Nevada Revised Statutes, theCalifornia Financial Code, the California Corporations Code and the Bank MergerAct (the “Merger”).  The Merger shall beeffective at the Effective Time.  TheArticles of Merger shall have been filed with the Secretary of State of theState of Nevada at or before the Closing. When used in this Agreement, the term “Effective Time” shall mean 12:02a.m., Pacific Coast time, on the first calendar day of the month after theClosing Date occurs, and “Surviving Corporation” shall mean NSB.

 

Section 2.2 Effect of Merger.  TheMerger shall have the effects set forth in the California Corporation Code, theCalifornia Financial Code, the Nevada Revised Statutes and the Bank MergerAct.  By virtue of the Merger and at theEffective Time, all of the rights, privileges, powers and franchises and allproperty and assets of every kind and description of CNA and NSB shall bevested in and be held and enjoyed by the Surviving Corporation, without furtheract or deed, and all the estates and interests of every kind of CNA and NSB,including all debts due to either of them, shall be as effectively the propertyof the Surviving Corporation as they were of CNA and NSB immediately prior tothe Effective Time, and the title to any real estate vested by deed orotherwise in either CNA or NSB shall not revert or be in any way impaired byreason of the Merger; and all rights of creditors and liens upon any propertyof CNA and NSB shall be preserved unimpaired and all debts, liabilities andduties of CNA and NSB shall be debts, liabilities and duties of the SurvivingCorporation and may be enforced against it to the same extent as if such debts,liabilities and duties had been incurred or contracted by it, and none of such debts,liabilities or duties shall be expanded, increased, broadened or enlarged byreason of the Merger.

 

Section 2.3 Articles of Incorporation and Bylaws.  The Articles of Incorporation and Bylaws ofNSB in effect immediately prior to the Effective Time shall be the Articles ofIncorporation and Bylaws of the Surviving Corporation until amended and thename of the Surviving Corporation shall be “Nevada Security Bank.”

 

Section 2.4 NSB Stock.  The authorizedand issued capital stock of NSB immediately prior to the Effective Time, on andafter the Effective Time, pursuant to the Articles of Merger and without anyfurther action on the part of NSB shall remain unchanged and shall be held byHoldings.

 

Section 2.5 Cancellation of CNA Common Stock. At the Effective Time, all of the outstanding shares of CNA Common Stockshall be canceled and CNA Financial shall receive from NSB an amount equal tothe Purchase Price by wire transfer in immediately available funds to theaccount designated by CNA Financial.

 

Section 2.6 Board of Directors of NSB following the Effective Time.  At the Effective Time, the then existingBoard of Directors of NSB shall remain the Board of Directors of the SurvivingCorporation, each to serve until the next annual meeting of shareholder of NSBand until such successors are elected and qualified.

 

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Section 2.7 Executive Officers of NSB following the Effective Time.  At the Effective Time, the then existingexecutive officers of NSB shall remain the executive officers of NSB.

 

**ARTICLE 3. REPRESENTATIONS AND WARRANTIESOF CNA FINANCIAL AND CNA**

 

CNA Financial and CNA represent and warrant to NSB as follows:

 

Section 3.1 Organization; Corporate Power; Etc.  CNA Financial is a Delaware corporation, dulyorganized, validly existing and in good standing under the laws of Delaware,and its common stock is listed on the New York Stock Exchange.  CNA is a California state-chartered bankingcorporation, duly organized, validly existing and in good standing under thelaws of California. CNA is a wholly-owned subsidiary of CNA Financial.  CNA Financial and CNA each have all requisitecorporate power and authority to enter into this Agreement and, subject to obtainingall Requisite Regulatory Approvals, CNA Financial and CNA each will have therequisite corporate power and authority to perform their respective obligationshereunder with respect to the consummation of the transactions contemplatedhereby.

 

Section 3.2 Licenses and Permits.  Setforth on Schedule 3.2 is a list of all material licenses and permits that arecurrently held by CNA (the “Licenses”). The Licenses are in full force and effect, except for any failure to bein full force and effect that would not, individually or in the aggregate, havea Material Adverse Effect on CNA or on the ability of CNA to consummate thetransactions contemplated by this Agreement. Furthermore CNA has all material licenses, certificates, franchises,rights and permits that are necessary for the conduct of the business ofbanking in California.

 

Section 3.3 Subsidiaries.  Other thanas set forth on Schedule 3.3, there is no corporation, partnership, jointventure or other entity in which CNA owns, directly or indirectly (except aspledgee pursuant to loans or stock or other interest held as the result of orin lieu of foreclosure pursuant to pledge or other security arrangement) anyequity or other voting interest or position.

 

Section 3.4 Authorization of Agreement; No Conflicts.

 

3.4.1 The execution and delivery of this Agreement and each Related Agreementto which it is a party by each of CNA Financial and CNA have been dulyauthorized by all necessary corporate action on the part of CNA Financial andCNA respectively.  The consummation ofthe transactions contemplated hereby and by each of the Related Agreements towhich it is a party have been duly authorized by all necessary corporate actionon the part of each of CNA Financial and CNA. This Agreement has been duly executed and delivered by each of CNAFinancial and CNA and, subject to the receipt of all Requisite RegulatoryApprovals, will constitute a legal, valid and binding obligation of CNAFinancial and CNA, respectively, enforceable in accordance with its terms,except as the enforceability thereof may be limited by bankruptcy, liquidation,receivership, conservatorship, insolvency, moratorium or other similar lawsaffecting the rights of creditors generally and by general equitable principlesand by Section 8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C.Section 1818(b)(6)(D).  The Articles ofMerger, upon the receipt of all

 

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Requisite Regulatory Approvals and the due execution and filing of suchArticles of Merger in accordance with the applicable provisions of the NevadaRevised Statutes, will constitute a legal, valid and binding obligation of CNA,enforceable in accordance with its terms, except as the enforceability thereofmay be limited by bankruptcy, liquidation, receivership, conservatorship,insolvency, moratorium or other similar laws affecting the rights of creditorsgenerally or by general equitable principles. At or before the Closing, the License Agreement will be duly executed anddelivered by CNA Financial or one of its Affiliates and will constitute alegal, valid and binding obligation of CNA Financial or one of its Affiliates,enforceable in accordance with its terms, except as the enforceability thereofmay be limited by bankruptcy, liquidation, receivership, conservatorship,insolvency, moratorium or other similar laws affecting the rights of creditorsgenerally and by general equitable principles.

 

3.4.2 Except as disclosed on Schedule 3.4, the execution and delivery of thisAgreement and the Related Agreements, and the consummation of the transactionscontemplated hereby and thereby, do not and will not conflict with, or resultin any violation of or default under, any provision of the Certificate orArticles of Incorporation or Bylaws of CNA Financial or CNA, any materialmortgage, indenture, lease, agreement or other material instrument or anyLicense, judgment, order, decree, statute, law, ordinance or regulationapplicable to CNA Financial or CNA, other than any such conflict, violation ordefault which (i) will not have a Material Adverse Effect on CNA; or (ii) willbe cured or waived prior to the Effective Time.

 

Section 3.5 Capital Structure.  Theauthorized capital stock of CNA consists of 10,000 shares of CNA Common Stock,$100 par value per share.  On the date ofthis Agreement, 10,000 shares of CNA Common Stock were outstanding.  All outstanding shares of CNA Common Stockare validly issued, fully paid and nonassessable and do not possess anypreemptive rights and were not issued in violation of any preemptive rights orany similar rights of any Person.  CNAdoes not have outstanding any options, warrants, calls, rights, commitments,securities or agreements of any character to which CNA is a party or by whichit is bound obligating CNA to issue, deliver or sell, or cause to be issued,delivered or sold, additional shares of capital stock of CNA or obligating CNAto grant, extend or enter into any such option, warrant, call, right,commitment or agreement.

 

Section 3.6 Compliance with Applicable Laws. Except as disclosed on Schedule 3.6, to the Knowledge of CNA, therespective businesses of CNA are not being conducted in violation of any law,ordinance or regulation, except for violations which individually or in theaggregate would not have a Material Adverse Effect on CNA.  Except as set forth in Schedule 3.6, to theKnowledge of CNA no investigation or review by any Governmental Entity withrespect to CNA, other than regular bank examinations, is pending or threatened,nor has any Governmental Entity indicated to CNA an intention to conduct thesame.

 

Section 3.7 Litigation.  Except as setforth in Schedule 3.7, to the Knowledge of CNA Financial and CNA there is nosuit, action or proceeding or investigation pending or threatened against oraffecting CNA which, if adversely determined, would have a Material AdverseEffect on CNA; nor is there any judgment, decree, injunction, rule or order ofany Governmental Entity or arbitrator outstanding against CNA that has, orwhich, insofar as reasonably can be foreseen, in the future would have, anysuch Material Adverse Effect.

 

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Section 3.8 Agreements with Banking Authorities.  Except as set forth on Schedule 3.8, CNA isnot a party to any written agreement or memorandum of understanding with, ororder or directive (that is not of general applicability) from, anyGovernmental Entity.

 

Section 3.9 Taxes.

 

3.9.1  Filingof Returns.  Except as set forth onSchedule 3.9.1, CNA Financial or CNA has duly prepared and filed or caused tobe duly prepared and filed all federal, state, and local Returns (for Tax orinformational purposes) which were required to be filed by or in respect of CNAor any of their properties, income and/or operations on or prior to the ClosingDate.  As of the time they were filed,the foregoing Returns accurately reflected the material facts regarding theincome, business, asset, operations, activities, status, and any otherinformation required to be shown thereon. Except as set forth on Schedule 3.9.1, no extension of time within whichCNA may file any Return is currently in force.

 

3.9.2  Paymentof Taxes.  Except as disclosed onSchedule 3.9.2 with respect to all amounts in respect of Taxes imposed on CNAor for which CNA is or could be liable, whether to taxing authorities (as, forexample, under law) or to other Persons (as, for example, under Tax allocationagreements), with respect to all taxable periods or portions of periods endingon or before the Closing Date, all applicable tax laws and agreements have beenor will be fully complied with in all material respects, and all such amountsrequired to be paid by or on behalf of CNA to taxing authorities or others onor before the date hereof have been paid.

 

Section 3.10 Brokers and Finders. Except as set forth on Schedule 3.10, CNA is not a party to or obligatedunder any agreement with any broker or finder relating to the transactionscontemplated hereby, and neither the execution of this Agreement, or any otherRelated Agreement, nor the consummation of the transactions provided for hereinor therein, will result in any liability to any broker or finder.

 

Section 3.11 Powers of Attorney.  Exceptas set forth on Schedule 3.11, no power of attorney or similar authorizationgiven by CNA thereof is presently in effect or outstanding other than powers ofattorney given in the ordinary course of business with respect to routinematters.

 

Section 3.12 Corporate Records.  Theminute books of CNA accurately reflect all material actions taken by therespective shareholders, board of directors and committees of CNA.

 

Section 3.13 Approvals of CNA and CNA Financial.  CNA and CNA Financial require no approvals ofor notice filings with any Governmental Entity or other third party except forthose to be obtained prior to the Closing Date and listed on Schedule 3.13 (the“CNA Approvals”) in order to consummate the transactions described in thisAgreement and the Related Agreements.

 

**ARTICLE4.  REPRESENTATIONS AND WARRANTIES OF NSB**

 

NSB represents and warrants to CNA and CNAFinancial that:

 

Section 4.1 Organization; Corporate Power; Etc.  NSB is a Nevada corporation duly organized,validly existing and in good standing under the laws of the State ofNevada.  NSB is a

 

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wholly-owned subsidiary of Holdings. NSB has all requisite corporate power and authority to enter into thisAgreement and, subject to obtaining all Requisite Regulatory Approvals, NSBwill have the requisite corporate power and authority to perform itsobligations hereunder with respect to the consummation of the transactionscontemplated hereby.  NSB is a statechartered banking corporation licensed to conduct banking business in Nevada.  NSB is not a member of the Federal ReserveSystem.  NSB’s deposits are insured bythe FDIC in the manner and to the full extent provided by law.

 

Section 4.2 Licenses and Permits. Except as disclosed on Schedule 4.2, NSB has all material licenses andpermits that are necessary for the conduct of its business, and such licensesand permits are in full force and effect, except for any failure to be in fullforce and effect that would not, individually or in the aggregate, have aMaterial Adverse Effect on NSB, or on the ability of NSB to consummate the transactionscontemplated by this Agreement.

 

Section 4.3 Authorization of Agreement; No Conflicts.

 

4.3.1 The execution and delivery of this Agreement and each Related Agreementand the consummation of the transactions contemplated hereby and thereby havebeen duly authorized by all necessary corporate action on the part of NSB.  NSB has received the approval of its soleshareholder, Holdings, of this Agreement and each Related Agreement, and thetransactions contemplated in those agreements. This Agreement has been duly executed and delivered by NSB, and subjectto receipt of all Requisite Regulatory Approvals, will constitute a legal,valid and binding obligation of NSB, enforceable in accordance with its terms,except as the enforceability thereof may be limited by bankruptcy, liquidation,receivership, conservatorship, insolvency, moratorium or other similar lawsaffecting the rights of creditors generally and by general equitableprinciples.  The Articles of Merger, uponthe receipt of all Requisite Regulatory Approvals and the due execution andfiling of such Articles of Merger in accordance with the applicable provisionsof the Nevada Revised Statutes and the California Corporations Code, willconstitute a legal, valid and binding obligation of NSB, enforceable inaccordance with its terms, except as the enforceability thereof may be limitedby bankruptcy, liquidation, receivership, conservatorship, insolvency,moratorium or other similar laws affecting the rights of creditors generally orby general equitable principles.  At theClosing, the License Agreement will be duly executed and delivered by NSB andwill constitute a legal, valid and binding obligation of NSB, enforceable inaccordance with its terms, except as the enforceability thereof may be limitedby bankruptcy, liquidation, receivership, conservatorship, insolvency,moratorium or other similar laws affecting the rights of creditors generallyand by general equitable principles.

 

4.3.2 Except as set forth on Schedule 4.3, the execution and delivery of thisAgreement and the Related Agreements and the consummation of the transactionscontemplated hereby and thereby do not and will not conflict with, or result inany violation of or default under, any provision of the Articles of Incorporationor Bylaws of NSB, or any material mortgage, indenture, lease, agreement orother material instrument, or any permit, License, judgment, order, decree,statute, law, ordinance or regulation applicable to NSB, other than any suchconflict, violation or default which (i) will not have a Material AdverseEffect on NSB; or (ii) will be cured or waived prior to the Effective Time.

 

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Section 4.4 Agreements with Banking Authorities.  Except as set forth on Schedule 4.4, NSB isnot a party to any written agreement or memorandum of understanding with, ororder or directive (that is not of general applicability) from, anyGovernmental Entity.

 

Section 4.5 Brokers and Finders. Except as set forth on Schedule 4.5, NSB is not a party to or obligatedunder any agreement with any broker or finder relating to the transactionscontemplated hereby, and neither the execution of this Agreement or any RelatedAgreement, nor the consummation of the transactions provided for herein ortherein, will result in any liability to any broker or finder.

 

Section 4.6 Bank Regulatory Matters. To NSB’s knowledge, there are no facts or circumstances, and it hasengaged in no acts, practices or courses of conduct, that reasonably would causea Governmental Entity, including but not limited to the FDIC, the CDFI, theNCFID and any other applicable federal or state bank regulatory authorities, todeny, object to or limit in any material respect any application or noticerequired to be filed or submitted by NSB with respect to the transactionscontemplated by this Agreement, the Related Agreements and any other agreementscontemplated hereby or thereby.

 

Section 4.7 NSB’s Approvals.  NSBrequires no approvals of or notice filings with any Governmental Entity orother third party except for those listed in Schedule 4.7 (the “NSB Approvals”)in order to consummate the transactions described in this Agreement and theRelated Agreements.

 

Section 4.8 Financing.  NSB hasavailable, and at the Closing will have available, sufficient cash toconsummate the transactions contemplated by this Agreement and the RelatedAgreements and to pay all related fees and expenses required to be paid by NSBhereunder and thereunder.

 

Section 4.9 Litigation.  Except as setforth in Schedule 4.9, to the knowledge of NSB there is no suit, action orproceeding or investigation pending or threatened against or affecting NSBwhich, if adversely determined, would have a Material Adverse Effect on NSB;nor is there any judgment, decree, injunction or order of any GovernmentalEntity or arbitrator outstanding against NSB that has, or which, insofar asreasonably can be foreseen, in the future would have, any such Material AdverseEffect.

 

**ARTICLE5.  ADDITIONAL AGREEMENTS**

 

Section 5.1 Access to Information

 

5.1.1 NSB, on the one hand, and CNA and CNA Financial, on the other hand, eachagrees to keep confidential and not divulge to any other party or Person (otherthan to the employees, attorneys, accountants and consultants of each who havea need to receive such information and other than as may be required by law)any Confidential Information received from the other, unless and until suchdocuments and other information otherwise becomes publicly available through nofault of the receiving party or unless the disclosure of such information isauthorized by the other party.  In theevent of termination of this Agreement for any reason, the parties shallpromptly return, or at the election of the other party destroy, all nonpublicdocuments obtained from the other and any

 

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copies or notes of such documents (except as otherwise required by law)and, upon the request of the other party, confirm such destruction to the otherin writing.

 

Section 5.2 Taking of Necessary Action.

 

5.2.1 Subject to the terms and conditions of this Agreement, each of theparties hereto agrees, subject to applicable laws and the fiduciary duties ofCNA’s or NSB’s Boards of Directors, as advised in writing by their respectivecounsel, to use all reasonable best efforts promptly to take or cause to betaken all action and promptly to do or cause to be done all things necessary,proper or advisable under applicable laws and regulations to consummate and makeeffective the transactions contemplated by this Agreement and the RelatedAgreements, including, without limitation, the delivery of any certificate orother document reasonably requested by counsel to a party to this Agreement.  Without limiting the foregoing, NSB and CNAwill use their reasonable best efforts to obtain all consents of third partiesand Governmental Entities necessary or, in the reasonable opinion of NSB or CNAadvisable for the consummation of the transactions contemplated by this Agreement.  In case at any time after the Effective Timeany further action is necessary or desirable to carry out the purposes of thisAgreement or any of the Related Agreements, the proper officers or directors ofNSB or CNA, as the case may be, shall take all such necessary action.

 

5.2.2 CNA and NSB shall cooperate and use all commercially reasonable effortsto obtain all consents, approvals and agreements of, and to give and make allnotices and filings with, any Governmental Entity necessary to authorize,approve or permit the consummation of the transactions contemplated by thisAgreement and the Related Agreements and any other agreements contemplatedhereby or thereby, including, without limitation, as set forth on Schedule 3.13and Schedule 4.7.  Without limiting thegenerality of the foregoing, NSB and its Affiliates shall, within ten (10)Business Days after the date hereof, file with the CDFI, the NCFID and the FDICfor approval of the Merger.  NSB willprovide CNA and its counsel the opportunity to review in advance and to providecomments no later than three (3) Business Day following receipt of all suchfilings with any Governmental Entity. Each party shall provide to the other at the request of the other party:(i) immediately prior to the filing thereof, copies of all material statements,applications, correspondence or forms to be filed with the appropriateregulatory authorities to obtain the Requisite Regulatory Approvals; (ii)promptly after delivery to, or receipt from, such regulatory authorities allwritten communications, letters, reports or other documents relating to thetransactions contemplated by this Agreement; and (iii) reports of all materialoral communications between the other party and any appropriate bank regulatoryauthorities regarding the Requisite Regulatory Approvals.

 

Section 5.3 Expenses.  Whether or notthe Merger is consummated, all costs and expenses incurred in connection withthis Agreement and the transactions contemplated hereby shall be paid by theparty incurring the same.

 

Section 5.4 Notification of Certain Events.

 

5.4.1 CNA shall provide to NSB, as soon as practicable, written notice (sentvia facsimile and overnight mail or courier) of the occurrence or failure tooccur of any of the events,

 

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circumstances or conditions that are the subject of Sections 6.1 and6.2, which notice shall provide reasonable detail as to the subject matterthereof.

 

5.4.2 NSB shall provide to CNA, as soon as practicable, written notice (sentvia facsimile and overnight mail or courier) of the occurrence or failure tooccur of any of the events, circumstances or conditions that are the subject ofSection 6.3 and 6.4, which notice shall provide reasonable detail as to the subjectmatter thereof.

 

5.4.3 Each party shall promptly advise the others in writing of any change orevent which could reasonably be expected to have a Material Adverse Effect onsuch party or on its ability to consummate the transactions contemplated by thisAgreement or any Related Agreement.

 

Section 5.5 Updated Schedules.  CNA hasdelivered to NSB on or before the date of this Agreement all of the Schedulesto this Agreement which CNA is required to deliver to NSB hereunder (the “CNASchedules”).  NSB has delivered to CNA onor before the date of this Agreement all of the Schedules to this Agreementwhich NSB is required to deliver to CNA hereunder ( the “NSB Schedules”).  Immediately prior to the Closing Date, CNAshall have prepared updates of the CNA Schedules provided for in this Agreementand shall deliver to NSB revised schedules containing the updated information(or a certificate signed by CNA’s Chief Executive Officer stating that therehave been no changes on the applicable schedules); and NSB shall have preparedupdates of the NSB Schedules provided for in this Agreement and shall deliverto CNA revised Schedules containing updated information (or a certificatesigned by NSB’s Chief Executive Officer stating that there has been no changeon the applicable schedules).

 

Section 5.6 Tax Matters.

 

5.6.1  Post-ClosingAccess to Records; Cooperation. After the Closing, CNA Financial and NSB will each afford to the otheror to such other’s representatives or agents and auditors reasonable accessduring normal business hours (on terms not unreasonably disruptive to thebusiness, operations or employees of the party or parties of which access issought) to the records and all other data and information relating to Taxespertaining to taxable years or periods ending at or prior to the Effective Time(and the Straddle Period) for the purpose of obtaining information relating toTaxes, to the extent such access is reasonably necessary: (i) to prepare andcomplete any Returns required to be made hereunder; (ii) to prosecute or defendany Tax dispute relating to CNA; and (iii) to comply with requests made by anyTax authority conducting an audit, investigation or inquiry relating to CNA’sactivities; provided that in no case will NSB (or its Affiliates) have accessto the consolidated Tax Returns of the Loews Corporation Affiliated Group.  After the Closing, CNA Financial and NSBagree (i) to retain all books and records with respect to Tax matters pertinentto CNA relating to any Tax period beginning before the Effective Time until theexpiration of the statute of limitations (and, to the extent notified by NSB orCNA Financial, any extensions thereof) of the respective Tax periods, and toabide by all record retention agreements entered into with any governmentalauthority; and (ii) to give the other party hereto reasonable written noticeprior to transferring, destroying or discarding any such books and records and,if the other party so requests, CNA Financial or NSB, as the case may be, shallallow the other party hereto to take possession of such books and records.

 

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5.6.2  Taxesfor Short Taxable Year.  For purposesof allocating liability for Taxes for purposes of Section 5.7.4(c)(iii) , inthe case of any taxable period that includes (but does not end at) theEffective Time (a “Straddle Period”), Taxes of CNA allocable to the Pre-ClosingTax Period shall be determined on the basis of an interim closing of the booksas of the close of business at the Effective Time, except that exemptions,allowances, deductions or minimum amounts that are calculated on an annualbasis, such as the deduction for depreciation, shall be ratably apportioned ona time basis.

 

5.6.3  Adjustmentto Purchase Price.  Any payment by CNAFinancial or NSB under Section 5.7 will be an adjustment to the Purchase Priceand will also be a purchase price adjustment for federal income tax purposesunless a determination (as defined in Section 1313 of the IRC) causes any suchpayment not to constitute an adjustment to the purchase price for federalincome tax purposes.

 

5.6.4  Preparationand Filing of Tax Returns.

 

(a) CNA Financial shall cause to be prepared and timely filed, taking intoaccount all valid extensions of time to file, all Returns of CNA (or Returns inwhich CNA is required to be included) that are due to be filed for any taxableyears or periods ending at or before the Effective Time.  All such Returns shall be prepared consistentwith past practices.  CNA shall pay orcause to be paid all Taxes shown to be due on Returns that it is responsiblefor preparing and filing under this Agreement.

 

(b) NSB shall cause to be prepared and timely filed, taking into account allvalid extensions of time to file, all Returns of CNA or relating to theoperations or assets of CNA that are due to be filed for any StraddlePeriod.  Taxes for a Straddle Periodshall be the joint responsibility of CNA Financial and NSB and shall beapportioned between CNA Financial and NSB based on an interim closing of thebooks.  NSB shall pay to the appropriatetaxing authority the full amount of Taxes shown on any Straddle PeriodReturn.  NSB shall promptly provide toCNA Financial a copy of all such Straddle Period Returns as filed andthereafter CNA Financial shall promptly reimburse NSB for CNA Financial’s shareof such Taxes as determined under this Section 5.6.4.

 

(c) NSB shall be responsible for preparing and filing all Returns and payingall Taxes not covered by Sections 5.6.4(a) and (b).

 

5.6.5  ContestProvisions.

 

(a) NSB shall promptly notify CNA Financial in writing upon receipt by NSBor any of NSB’s Affiliates of notice of any pending or threatened federal,state, local or foreign Tax audits or assessments which may affect CNAFinancial’s liability to NSB pursuant to Section 5.7.4(c)(ii) and (iii).

 

(b) CNA Financial shall have the sole right to represent CNA’s interests inany Tax audit or administrative or court proceeding relating to taxable yearsor periods ending at or before the Effective Time, and to employ counsel of itschoice and expense.  To the extent anysuch audit or proceeding could reasonably be expected to increase the taxliability of NSB after the

 

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Effective Time, (i) CNA Financial shall provide notice to NSB of anysuch audit or proceeding, (ii) NSB shall have the right to participate in (butnot control) any such audit or proceeding at its own expense and (iii) CNAFinancial shall not settle any such audit or proceeding without prior writtenauthorization from NSB.

 

(c) With respect to Straddle Periods, the Parties shall jointly control anyaudits or proceedings, and neither Party shall settle or compromise any matterwithout the prior written consent of the other Party.

 

5.6.6  TaxSharing Agreements.  All tax sharingagreements or similar agreements (other than this Agreement) with respect to orinvolving CNA shall be terminated at or before the Effective Time.

 

5.6.7  CertainTaxes.  All transfer, documentary,sales, use, stamp, registration and other such Taxes and fees (including anypenalties and interest) incurred in connection with this Agreement shall bepaid by NSB when due, and NSB will, at its own expense, file all necessaryReturns and other documentation with respect to all such transfer, documentary,sales, use, stamp, registration and other Taxes and fees, and, if required byapplicable Legal Requirements, CNA Financial will join in the execution of anysuch Returns and other documentation.

 

Section 5.7 Indemnification.

 

5.7.1  CNAFinancial’s Indemnification.  CNAFinancial shall indemnify and hold harmless NSB and Holdings and theirrespective directors, officers and employees (all of the foregoingcollectively, the “NSB Affiliates”), from and against any and all Losses whichany of the NSB Affiliates may suffer, incur or sustain arising out of orattributable to (i) any material breach of any agreement to be performedby CNA Financial or CNA pursuant to this Agreement (excluding breaches afterthe Effective Time of CNA or its successor), (ii) any claim, penaltyasserted, legal action or administrative proceeding based upon any action takenor omitted to be taken by CNA Financial or CNA or resulting from anytransaction or event occurring prior to the Effective Time, relating in anysuch case to the operation of CNA, (iii) any liability, obligation or dutyof CNA, relating to the operation of the business of CNA prior to the EffectiveTime,  (iv) any material breach of any representationor warranty contained in this Agreement on the part of CNA Financial or CNA(excluding breaches of CNA or the Surviving Corporation after the EffectiveTime) or (v) any acts or omissions by Continental Casualty Company carried outpursuant to the power of attorney referred to in Section 5.8.

 

5.7.2  NSB’sIndemnification.  In addition to anyother provisions of this Agreement or the Related Agreements under which NSBhas agreed to indemnify CNA Financial or any of its Affiliates, and except asexpressly provided in this Agreement, NSB shall indemnify and hold CNAFinancial and its Affiliates harmless from and against any Loss arising orresulting from any material breach of any representation or warranty containedin this Agreement or any Related Agreement or nonfulfillment of any agreementon the part of NSB or the Surviving Corporation under this Agreement (excludingbreaches prior to the Effective Time of CNA) or any Related Agreement or fromany misrepresentation in any certificate furnished or to be furnished by CNAFinancial hereunder.

 

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5.7.3 Additional IndemnificationProvisions.  The respectiveobligations and liabilities of CNA Financial and NSB (herein sometimes calledthe “Indemnifying Party”) to the other and to the other Persons entitled toindemnification (herein sometimes called the “Indemnified Party”) for Lossesfor which indemnification is provided under Sections 5.7.1 and 5.7.2 hereofshall include the following:

 

(a) CNA Financial and NSB each agree to designate a single point of contactwithin each of their respective corporate organizations to give and receivenotices of disputes under this Agreement and the Related Agreements (the “DisputeOfficer”), who shall be acceptable to the other party and shall be a senior managerwho either reports directly to the Chief Executive Officer or a person whoreports to a person who reports directly to the Chief Executive Officer.  In the event of any claim against NSB or CNAFinancial covered by this Section 5.7 that does not involve a claim, audit orinquiry by a third party to which a response must be served in order to avoiddefault or waiver of any defense, the Parties agree that for a period of notless than 15 days following receipt of the claim by the Party against which theclaim has been asserted, they each will respond to reasonable inquiries by theother Party and will hold at least one meeting in person or by telephoneconference of the Dispute Officers to attempt to resolve the claim and toprovide prompt reimbursement to the Indemnified Party of the amount agreed tobe owed to such Indemnified Party.  Tothe extent that any amount of any claim remains in dispute at the end of theagreed period for consideration by the Dispute Officers, which shall not beless than 15 days following receipt of the claim by the Party against whom theclaim has been made, the Indemnified Party seeking recovery may proceed withits claim under Section 5.7.3(b).  Anyundisputed portion of any invoice or other claim that has been submitted pursuantto this Section 5.7.3 shall be paid to the Indemnified Party to which suchamount is owed within 15 days of the date the invoice or claim is received bythe Indemnifying Party.

 

(b)  Onor before the earliest of (i) the 20th day after receipt of notice (referred toherein as “notice”) by the Indemnified Party of commencement of any action orthe assertion in writing, formal or informal, of any claim, audit or inquiryimplicating a Loss (referred to herein as a “claim”), (ii) the tenth daypreceding the day on which a responsive pleading must be served in order toprevent judgment by default in favor of the person asserting the claim, or(iii), in the case of a claim described in (a) above, the 30th day afterexpiration of the agreed period of consideration by the Dispute Officers, theIndemnified Party shall give the Indemnifying Party written notice thereoftogether with a copy of the document asserting such claim.  Failure to give such notice timely shall notrelieve the Indemnifying Party from any obligation under this Agreement exceptto the extent that the Indemnifying Party is prejudiced, except that theIndemnifying Party shall not be responsible for expenses incurred during theperiod within which the Indemnified Party failed to give notice.  The Indemnifying Party shall acknowledgereceipt thereof to the Indemnified Party and, if the claim is brought by athird party, the Indemnifying Party shall undertake and pay for the defensethereof by a representative of its own choosing (which shall be reasonablysatisfactory to the Indemnified Party).

 

(c)  Ifthe Indemnifying Party determines during the course of its defense that theIndemnifying Party is not responsible for indemnifying the Indemnified Partyfor all or part of the claim, the Indemnifying Party shall give written noticethereof to the Indemnified Party, but shall continue to defend such claim andpay for such defense.  Within 30 days ofreceipt of such a notice, the Indemnified Party shall notify the IndemnifyingParty in writing either (i) that the Indemnified

 

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Party agrees that such claim or any portion thereof is notindemnifiable under Section 5.7.1 or 5.7.2, respectively, or (ii) that theIndemnified Party disagrees with the determination of the IndemnifyingParty.  In the event the IndemnifiedParty notifies the Indemnifying Party under (ii) above, the matter shall bereferred to the Dispute Officers for a period of 120 days during which the IndemnifyingParty shall continue to defend and pay for the defense of the IndemnifiedParty.  If the matter is not resolved bythe Dispute Officers within such 120-day period, the Indemnifying Party shallcontinue to defend and pay for the defense of the claim or part thereof and maypursue its remedies to collect its expenses from the Indemnified Party.  The Indemnifying Party may not resign fromdefending and paying for the defense of any such claim or part thereof as towhich the Indemnified Party in good faith disputes responsibility until suchtime as a court of competent jurisdiction finally determines that theIndemnifying Party is not responsible for indemnification.  Upon the judicial determination that theIndemnifying Party is not responsible for indemnification, the IndemnifyingParty may resign from defending and paying for the defense of the claim bygiving written notice to the Indemnified Party of the Indemnifying Party’sresignation, including an effective date that will permit a reasonable time forsubstitution of counsel and any other necessary transition, and the IndemnifiedParty shall assume the defense of the claim and pay for such defense from andafter the effective date of such notice or such later time as may be necessaryto effect transition and substitution of counsel.  The party finally determined to beresponsible for indemnification shall reimburse the other party for anyexpenses incurred by the other party in connection therewith, including but notlimited to the payment of any Loss by such party, and for any expenses incurredin the successful contest of responsibility for indemnification, plus intereston each payment from the time when payment was first due to be reimbursed bythe responsible party to the time of actual reimbursement at an annualpercentage rate of two hundred basis points above the floating prime rate (asof the first business day of each calendar quarter as published in the WallStreet Journal) for each calendar quarter between the date the payment wasfirst due to be reimbursed and the time of actual reimbursement.

 

(d) Subject to subsection (c) above, the Indemnifying Party shall defend anyclaim and/or enter into a settlement or compromise thereof or consent to ajudgment with respect thereto; provided, however, the Indemnifying Party shallnot, without the prior written consent of the Indemnified Party, settle orcompromise any claim by any third party or consent to the entry of judgment (i)that does not include as an unconditional term thereof the giving by theclaimant or the plaintiff to the Indemnified Party a release from all liabilityin respect of such claim, or (ii) that contemplates any payment or performanceby the Indemnified Party.  TheIndemnified Party may retain separate counsel at its sole cost and expense torepresent it in any proceedings involving any claim.

 

(e)  Ifthe Indemnifying Party, at any time after the 10th day after receipt of noticeof a claim by a third party (or, if earlier, at any time after the fifth daypreceding the day on which a responsive pleading must be served in order toprevent judgment by default in favor of the person asserting such claim) doesnot provide reasonable assurances to the Indemnified Party of (i) theIndemnifying Party’s (or its insurer’s) ability to pay defense costs andindemnity costs likely to be incurred with respect to the claim, or (ii) theIndemnifying Party’s active and diligent defense of the claim, the IndemnifiedParty will, upon notice to the Indemnifying Party and the failure of theIndemnifying Party to discharge its obligations under this sentence withinthree days of receiving such notice, have the right to respond to such claimand to undertake to defend, compromise or settle such claim on behalf of andfor the account and risk of loss of the Indemnifying Party, provided that

 

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the Indemnifying Party shall be given at least 15 days’ prior writtennotice of the effectiveness of any such proposed settlement or compromise, andsubject to the right of the Indemnifying Party to assume the defense of suchclaim upon satisfying conditions (i) and (ii) above at any time prior to a datenot less than 90 days before the start of any trial or other hearing for thepresentation of facts with respect to such claim.

 

(d)  Inconnection with any such indemnification, the Indemnifying Party shallcooperate in all reasonable requests of the Indemnified Party.

 

(e)  Noviolation of or failure to observe any of the notice or other obligations ofthe Indemnified Party under this Section 5.7.3 shall operate to waive or excuseIndemnifying Party’s obligations under this Section 5.7 except and only to theextent that the Indemnifying Party is demonstrably and materially prejudicedthereby, provided, however, that the Indemnifying Party shall not be responsiblefor expenses of the Indemnified Party with respect to any period prior toreceipt by the Indemnifying Party of written notice of the applicable claimunder Section 5.7.3(b).

 

5.7.4  IndemnificationLimits.

 

(a)  Exclusionsfrom Indemnification.  Requiredpayments by an Indemnifying Party pursuant to this Section 5.7 shall be limitedto the amount of any Loss remaining after deducting therefrom (i) any insuranceproceeds actually recovered by the Indemnified Party on account of the Loss,(ii) any actual Tax benefit to the Indemnified Party, which shall be themarginal, discounted present value of Tax benefit to the Indemnified Party,taking into account the Indemnified Party’s existing Tax strategy at the timethe Loss is payable, and (iii) any indemnity, contribution, or other similarpayment actually recovered by any Indemnified Party from any third party, ineach case with respect to such Loss.  TheIndemnified Party shall use commercially reasonable efforts to collect all suchindemnity, contribution or other similar payments.

 

(b)  TimeLimits.  Each party agrees that itwill not waive the statute of limitations with respect to any third party claimfor which indemnification may be sought under this Section 5.7 and in no eventshall any Indemnified Party be permitted to recover any Losses from theIndemnifying Party pursuant to this Section 5.7 as a result of any such waiver.

 

(c)  Limitationson Amount of Certain Claims.  In noevent shall the aggregate of all indemnifiable claims paid by CNA Financial toNSB and the other Indemnified Parties for breaches of Sections 3.1, 3.4.1 and3.5 exceed $500,000.  The limitations onamount set forth in this Section shall not apply to limit recovery by NSB andthe other Indemnified Parties for any Losses arising or resulting from (i) theoperations and business of CNA, including, but not limited to those matterslisted on Schedule 3.6, CNA’s employment practices, employee benefit plans,customer relationships and regulatory matters, as well as the ownership of anyassets by CNA, any other acts or omissions by CNA, and any liabilities andobligations of CNA, in each case to the extent arising or occurring at or priorto the Effective Time; (ii) Unpaid Taxes of any member of the Loews CorporationAffiliated Group (other than CNA or its successor) under Internal RevenueService Reg. §1.1502-6 (or any similar provision of state, local or foreignlaw), as a transferee or successor, by contract or otherwise; and (iii) anyTaxes of CNA with respect to any Tax year or portion thereof ending at orbefore the Effective Time.

 

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(d)  ExclusiveRemedy.  The Parties expresslyacknowledge that (i) the provisions of this Section 5.7 shall be the sole andexclusive remedy for Losses caused as a result of breaches of therepresentations, warranties and agreements contained in this Agreement (exceptto the extent additionally provided in Section 5.6) and the Related Agreementsand any certificate furnished or to be furnished hereunder, except that theremedies of injunction and specific performance shall remain available to theParties hereto, and (ii) no Indemnifying Party shall be liable or responsibleto any other party hereto and the other Indemnified Parties for punitive, incidentaland consequential or multiplied damages or for lost profits, in accordance withSection 9.8.

 

Section 5.8 Assets and Liabilities of CNA at the Effective Time.  Immediately prior to the Effective Time, CNAshall have assets consisting only of its charter, cash and cash equivalents,and no liabilities other than the License Agreement and the Licenses.  To the extent that CNA has any liabilities orcontingent liabilities that are not known at the Effective Time, CNA Financialagrees to assume all of such liabilities. At any time prior to the Effective Time, CNA shall be permitted to (i)make distributions to CNA Financial, (ii) transfer any of its assets (otherthan the Licenses) to CNA Financial or one or more of its Affiliates and (iii)undertake any actions necessary, advisable or appropriate to consummate thetransactions contemplated by the UBOC Agreement, provided that CNA shall retainan amount of cash and cash equivalents in an amount not less than the sum of$100,000.  NSB hereby consents to the executionand delivery of all documents and the taking of all other actions by CNA as arenecessary, advisable or appropriate to effect the foregoing.  Not later than 30 days after the ClosingDate, CNA Financial shall deliver to NSB an income statement of CNA for theperiod beginning January 1, 2004, and ended as of the Closing Date, and abalance sheet of CNA as of the Closing Date, in the same form used by CNA priorto the Closing Date for reporting month end results internally (the “ClosingFinancial Statements”).  After theEffective Time, in the event any additional assets and/or liabilities arediscovered to have been held by CNA prior to the Effective Time, the Partiesshall take such action as is necessary to transfer such additional assetsand/or liabilities to CNA Financial.  Atthe Closing, NSB shall deliver to CNA Financial a limited power of attorney infavor of Continental Casualty Company in substantially the form attached heretoas Exhibit 5.8.

 

Section 5.9 Post-Acquisition Cooperation. To the extent any CNA corporate document is requested by legal processor by any Governmental Entity, that is in the actual possession of CNAFinancial, CNA Financial agrees to produce such documents to NSB within areasonable period of time.  To the extentany CNA corporate document is requested by legal process or by any GovernmentalEntity, that is in the actual possession of NSB, NSB agrees to produce suchdocuments to CNA Financial within a reasonable period of time.

 

Section 5.10 Short-term License of Premises. CNA Financial or one of its Affiliates agrees to sublease to CNA at orprior to the Closing, certain office space at 3080 South Bristol Street, FourthFloor, Costa Mesa, California pursuant to a License Agreement in substantiallythe form attached hereto as Exhibit 5.10.

 

Section 5.11 Names Owned by CNA. Notwithstanding any implication contained herein or prior course ofconduct to the contrary, in no event shall NSB or any of its Affiliates haveany right to use, nor shall NSB or any of its Affiliates use, any trademark,service mark, trade name, corporate name or acronym of CNA Financial or any ofits Affiliates in any jurisdiction or any domain name or

 

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URL or any application or registration therefor, owned by, licensed toor used by CNA Financial or any of its Affiliates (including, withoutlimitation, the names “CNA” and “CNA Trust”), or any other mark, name, term oridentification that suggests, simulates or is otherwise confusing due to itssimilarity to the foregoing.

 

Section 5.12 Rights Retained by CNA. NSB acknowledges that it is not acquiring any interest in anyconfidential or proprietary information concerning the enterprise of CNAFinancial and its Affiliates, including, but not limited to, (i) the customersand employees of CNA Financial and its Affiliates, or (ii) information (x) inwhich CNA Financial has an ownership interest (either through creation,license, other contractual relation or through acquisition from CNA Financialand its Affiliates), (y) that is confidential, and (z) relates to the databases, marketing strategies, marketing relationships, products, productdevelopment, product pricing, and customers of the enterprise of CNA Financialand its Affiliates.

 

Section 5.13 Communications.  Exceptpursuant to any Legal Requirements (including, without limitation, the filingof periodic and other reports with the Securities and Exchange Commission orother Governmental Entities concerning the transactions contemplated by thisAgreement and the Related Agreements) or the rules of any applicable stockexchange, no release or announcement concerning this Agreement or thetransactions contemplated hereby, shall be made without advance writtenapproval thereof by CNA Financial and NSB, which approval shall not beunreasonably conditioned, delayed or withheld. CNA Financial approves the proposed press release attached as Schedule5.13 to this Agreement for use by NSB at the date this Agreement isentered.  All parties shall cooperatewith each other in making any such release or announcement.  Each party shall request confidentialtreatment of information concerning the transactions contemplated by thisAgreement and the Related Agreements when filing such information with, or communicatingsuch information to, banking agencies and other Governmental Entities whichallow confidential treatment of such type of information.  CNA Financial and NSB have prepared amutually acceptable communications plan for announcing the status of thetransactions contemplated hereby and any related events that will occur priorto the Closing.

 

**ARTICLE 6.  CONDUCT OF BUSINESS**

 

Section 6.1 Affirmative Conduct of CNA. During the period from the date of execution of this Agreement until theEffective Time, CNA shall use commercially reasonable efforts to preserve itsbanking charter and, to these ends, shall fulfill each of the following:

 

6.1.1 Use its commercially reasonable efforts, or cooperate with others, toexpeditiously bring about the satisfaction of the conditions specified inArticle 7 hereof;

 

6.1.2 Keep in full force and effect all of the Licenses; and

 

6.1.3 Duly observe and conform to all legal requirements applicable to itsbusiness, except for any failure to so observe and conform that would not,individually or in the aggregate, and, in the future will not, have a MaterialAdverse Effect on CNA.

 

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Section 6.2 Negative Covenants of CNA. Between the date hereof and the Effective Time, except as contemplatedby this Agreement, and subject to requirements of law and regulation generallyapplicable to banks, CNA shall not, without prior written consent of NSB:

 

6.2.1 Take any action that would result in any of the representations and warrantiesof CNA set forth in the Agreement becoming untrue in any material respect orany of the conditions to the Merger set forth in Article 7 not being satisfied,except to the extent such actions are contemplated by this Agreement orrequired to be undertaken by applicable law, regulation or at the direction ofany Regulatory Authority;

 

6.2.2 Issue, deliver, sell, or grant, or authorize the issuance, delivery,sale or grant of, or purchase, any shares of the capital stock of CNA or anysecurities convertible or exercisable into or exchangeable for such capitalstock, or any rights, warrants or options, including options under any stockoption plans or enter into any agreements to do any of the foregoing;

 

6.2.3 Amend its Articles of Incorporation or Bylaws, except as required byapplicable law or by the terms of this Agreement;

 

6.2.4 Authorize or knowingly permit any of its representatives, directly orindirectly, to solicit any Acquisition Proposal (as hereinafter defined) orparticipate in any discussions or negotiations with, or provide any nonpublicinformation to, any Person or group of persons (other than NSB, and itsrepresentatives) concerning any such solicited Acquisition Proposal.  For purposes of this Section 6.2.4, “AcquisitionProposal” shall mean (a) any proposal pursuant to which any Person other thanNSB would acquire or participate in a merger or other business combination orreorganization involving CNA; or (b) any proposal by which any Person orgroup, other than NSB, would acquire CNA’s banking charter; or

 

6.2.5 Acquire or agree to acquire by merging, consolidating with, or bypurchasing all or a substantial portion of the assets of, or in any othermanner, any business or any Person or otherwise acquire or agree to acquire anyassets which are material to CNA, other than in the ordinary course of businessconsistent with prior practice.

 

Section 6.3 Affirmative Conduct of NSB. During the period from the date of execution of this Agreement throughthe Effective Time, NSB shall carry on its business in a reasonable mannerconsistent with applicable laws and use all commercially reasonable efforts topreserve intact its business organization and preserve its relationships withcustomers; and, to these ends, shall fulfill each of the following:

 

6.3.1 Use its commercially reasonable efforts, or cooperate with others, toexpeditiously bring about the satisfaction of the conditions specified inArticle 7 hereof;

 

6.3.2 Duly observe and conform to all legal requirements applicable to itsbusiness, except for any failure to so observe and conform that would not,individually or in the aggregate, and, in the future will not, have a MaterialAdverse Effect on NSB; and

 

6.3.3 File all necessary applications to obtain all Requisite RegulatoryApprovals or waivers thereof with the NCFID, the FDIC and the CDFI for thetransaction as soon as possible.

 

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Section 6.4 Negative Covenants of NSB. During the period from the date of execution of this Agreement throughthe Effective Time, NSB agrees that without CNA’s prior written consent, itshall not and its Subsidiaries shall not:

 

6.4.1 Take any action that would result in any of the representations andwarranties of NSB set forth in the Agreement becoming untrue in any materialrespect or any of the conditions to the Merger set forth in Article 7 not beingsatisfied or otherwise materially delay or impair completion of the Merger,except to the extent such actions are contemplated by this Agreement orrequired to be undertaken by applicable law, regulation or at the direction ofany Regulatory Authority; or

 

6.4.2 Take any action which would or is reasonably likely to (i) adverselyaffect the ability of NSB to obtain any necessary approval of any GovernmentalEntity required for the transactions contemplated hereby; (ii) adversely affectNSB’s ability to perform its covenants and agreements under this Agreement; or(iii) result in any of the conditions to the performance of NSB’s obligationshereunder, as set forth in Article 7 herein, not being satisfied.

 

**ARTICLE 7.  CONDITIONS PRECEDENTTO CLOSING**

 

Section 7.1 Conditions to the Parties’ Obligations.  The obligations of all the parties to thisAgreement to effect the Merger shall be subject to the fulfillment of thefollowing conditions:

 

7.1.1 All approvals and consents of any Governmental Entity listed in Schedule3.13 and Schedule 4.7 (all such approvals and consents being referred to as the“Requisite Regulatory Approvals”) shall have been received or deemed received,in each case, without the imposition of any condition which in the reasonablegood faith judgment of any party to be affected by such condition is materiallyburdensome upon such party or its respective Affiliates or the SurvivingCorporation (the parties agree that any condition that materially impairs theability of the Surviving Corporation post-Merger to conduct business as a fullservice bank in California is materially burdensome);

 

7.1.2 There shall not be any action taken, or any statute, rule, regulation ororder enacted, entered, enforced or deemed applicable to the Merger, by anyGovernment Entity which: (i) makes the consummation of the Merger illegal; (ii)requires the divestiture by NSB of any material asset or of a material portionof the business of NSB; or (iii) imposes any condition upon NSB or itsSubsidiaries (other than provisions of law generally applicable to banks andbank holding companies) which in the reasonable judgment of NSB and CNA wouldbe materially burdensome;

 

7.1.3 No action, suit or proceeding shall have been instituted by anyGovernmental Entity before any court or governmental body seeking to challengeor restrain the transactions contemplated by this Agreement or the RelatedAgreements which presents a substantial risk that such transactions will berestrained or that either party hereto may suffer material damages or otherrelief as a result of consummating such transactions; and

 

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Section 7.2 Conditions to NSB’ Obligations.  The obligations of NSB to effect the Mergershall be subject to the fulfillment (or waiver, in writing, by NSB) of each ofthe following conditions:

 

7.2.1 Except as otherwise provided in this Section 7.2, (a) the representationsand warranties of CNA contained in Article 3 shall be true in all materialrespects as of the Closing as though made at the Closing, except to the extentthey expressly refer to an earlier time and except where the failure to betrue, individually or in the aggregate, would not have or would not bereasonably likely to have, a Material Adverse Effect on the SurvivingCorporation or upon the consummation of the transactions contemplated hereby;(b) CNA shall have duly performed and complied in all material respects withall agreements and covenants required by this Agreement to be performed orcomplied with by it prior to or at the Closing, except where the failure to soperform and comply, individually or in the aggregate, would not have or wouldnot be reasonably likely to have a Material Adverse Effect on CNA, or upon theconsummation of the transactions contemplated hereby; and (c) CNA shall havedelivered to NSB a certificate dated the date of the Closing Date and signed bythe President and Chief Executive Officer and Chief Financial Officer to theeffect set forth in Subsections 7.2.1(a) and (b);

 

7.2.2 CNA shall have delivered its Updated Schedules to NSB on the dayimmediately preceding the Closing Date and none of such Updated Schedules shallreflect any item that was not on the CNA Schedules delivered on the date ofexecution of this Agreement that has had, would have, or could be reasonablylikely to have, a Material Adverse Effect on CNA, or on the consummation of thetransactions contemplated hereby; and

 

7.2.3 Between the date of this Agreement and the Effective Time, no event orcircumstance shall have occurred which event or circumstance is continuing andwhich has had or would reasonably be expected to have a Material Adverse Effecton CNA, and NSB shall have received a certificate signed on behalf of CNA bythe President and Chief Executive Officer of CNA to such effect.

 

7.2.4 CNA shall have delivered to NSB no later than the day immediatelypreceding the Closing Date a copy of the closing letter from the U.S.Department of Labor in connection with the formal fiduciary investigation ofCNA in 2004.

 

Section 7.3 Conditions to CNA’s Obligations. The obligations of CNA Financial and CNA to effect the Merger shall besubject to the fulfillment (or waiver, in writing, by CNA Financial) of each ofthe following conditions:

 

7.3.1 Except as otherwise provided in this Section 7.3, (a) therepresentations and warranties of NSB contained in Article 4 shall be true inall material respects as of the Closing as though made at the Closing, exceptto the extent they expressly refer to an earlier time and except where thefailure to be true, individually or in the aggregate, would not have or wouldnot be reasonably likely to have, a Material Adverse Effect on NSB or uponconsummation of the transactions contemplated hereby; (b) NSB shall have dulyperformed and complied in all material respects with all agreements andcovenants required by this Agreement to be performed or complied with it priorto or at the Closing, except where the failure to so perform and comply,individually or in the aggregate, would not have or would not be reasonablylikely to have a Material Adverse Effect on NSB, or upon the consummation ofthe transactions contemplated hereby; and (c) NSB shall have

 

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delivered to CNA certificates dated the date of the Closing Date andsigned by the Chief Executive Officer and Chief Financial Officer of NSB to theeffect set forth in Subsections 7.3.1(a) and (b); and

 

7.3.2 NSB shall have delivered its Updated Schedules to CNA on the dayimmediately preceding the Closing Date and none of such Updated Schedules shallreflect any item that was not on the NSB Schedules delivered on the date ofexecution of this Agreement that has had, or would have, or could be reasonablylikely to have, a Material Adverse Effect on NSB at or after the EffectiveTime, or on the consummation of the transactions contemplated hereby.

 

Section 7.4 Stock Sale.  In the eventthat any condition set forth in Section 7.1, 7.2 or 7.3 has not been satisfiedand would be reasonably expected to be satisfied if the transactionscontemplated by this Agreement were structured as a sale of the capital stockof CNA, instead of a merger of CNA into NSB, the parties agree to use allcommercially reasonable efforts to restructure such transactions as such a saleon terms as similar as possible to the terms of this Agreement.

 

**ARTICLE 8.  TERMINATION,AMENDMENTS AND WAIVERS**

 

Section 8.1 Termination of Agreement. Anything herein to the contrary notwithstanding, this Agreement and thetransactions contemplated hereby including the Merger may be terminated at anytime before the Effective Time, as follows, and in no other manner:

 

8.1.1 By mutual consent of NSB, on the one hand, and CNA and CNA Financial, onthe other;

 

8.1.2 By NSB or CNA Financial, if any conditions set forth in Section 7.1shall not have been met by November 30, 2004, which date may be extended toFebruary 28, 2005 by any party by giving written notice to the other parties atany time during the month of November 2004 if such first party reasonablybelieves that the conditions to closing in Article 7 of this Agreement will besatisfied on or before February 28, 2005;

 

8.1.3 By NSB, if any conditions set forth in Section 7.2 shall not have beenmet, or by CNA Financial, if any conditions set forth in Section 7.3 shall nothave been met, in each case by November 30, 2004, which date may be extended toFebruary 28, 2005 by any party by giving written notice to the other parties atany time during the month of November 2004 if such first party reasonablybelieves that the conditions to closing in Article 7 of this Agreement will besatisfied on or before February 28, 2005;

 

8.1.4 By NSB if there shall have been (i) a breach of any of therepresentations or warranties of CNA set forth in this Agreement, or (ii) adefault in the observance or in the due and timely performance of any of CNA’scovenants and agreements herein contained, which breach or default, in thereasonable opinion of NSB, by its nature cannot be cured or is not cured priorto the Closing and which breach or default would, in the reasonable opinion ofNSB, individually or in the aggregate, have, or be reasonably likely to have, aMaterial Adverse Effect on CNA or upon the consummation of the transactionscontemplated hereby;

 

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8.1.5 By CNA Financial if there shall have been (i) a breach of any of therepresentations or warranties of NSB set forth in this Agreement, or (ii) adefault in the observance or in the due and timely performance of any of NSB’scovenants and agreements herein contained, which breach or default, in thereasonable opinion of CNA Financial, by its nature cannot be cured or is notcured prior to the Closing and which breach or default would, in the reasonableopinion of CNA Financial, individually or in the aggregate, have, or bereasonably likely to have, a Material Adverse Effect on NSB or upon theconsummation of the transactions contemplated hereby; or

 

8.1.6 By NSB or CNA Financial, if an Acquisition Event involving CNA shallhave occurred.

 

Section 8.2 Effect of Termination.  Inthe event that this Agreement shall be terminated pursuant to Section 8.1hereof, all further obligations of the Parties hereto under this Agreementshall terminate without further liability of any Party to another; provided,however, that no termination of this Agreement under Section 8.1 for any reasonor in any manner shall release, or be construed as so releasing, any Party fromits obligations under Sections 5.1 or 5.3, hereof and notwithstanding theforegoing if such termination shall result from the willful failure of a Partyto fulfill a condition to the performance of the obligations of any other Partyor to perform a covenant of such Party in this Agreement, such Party shall,subject to the provision of Section 8.5, be fully liable for any and alldamages, costs and expenses incurred by the other party in connection with suchwillful failure to fulfill a condition or perform a covenant.

 

Section 8.3 Waiver of Conditions.  Ifany of the conditions specified in Section 7.2 have not been satisfied, NSB maynevertheless, at its election, proceed with the transactions contemplated inthis Agreement.  If any of the conditionsspecified in Section 7.3 have not been satisfied, CNA Financial maynevertheless, at its election, proceed with the transactions contemplated inthis Agreement.  If any Party elects toproceed pursuant to the provisions hereof, the conditions that are unsatisfiedimmediately prior to the Effective Time shall be deemed to be satisfied, asevidenced by a written waiver delivered by the electing party or parties.

 

Section 8.4 Force Majeure.  NSB and CNAagree that, notwithstanding anything to the contrary in this Agreement, in theevent this Agreement is terminated as a result of a failure of a condition,which failure is due to a natural disaster or other act of God, or an act of waror of terror, and provided neither Party has materially failed to observe theobligations of such Party under this Agreement, neither Party shall beobligated to the other Party to this Agreement for any expenses or otherwise beliable hereunder.

 

Section 8.5 Effect of Termination.  Notermination under Section 8.1 for any reason or in any manner shall release, orbe construed as so releasing, any party hereto from its obligations pursuant toSections 5.1 or 5.3 hereof or from any liability or damage to any other partyhereto arising out of, in connection with, or otherwise relating to, directlyor indirectly, said party’s willful breach of any of its covenants, agreements,duties or obligations arising hereunder, or any willful breaches of anyrepresentation or warranty contained herein arising prior to the date oftermination of this Agreement.

 

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**ARTICLE 9.  GENERAL PROVISIONS**

 

Section 9.1 Notices.  All notices andother communications hereunder shall be in writing and shall be deliveredpersonally, mailed by registered or certified mail (return receipt requested),sent by confirmed overnight courier or telecopied (with written confirmation oferror-free transmission).  Any suchnotice shall be deemed given when so delivered personally or sent by facsimiletransmission (and immediately after transmission confirmed by telephone), ifmailed, on the date shown on the receipt therefor, or if sent by overnightcourier, on the date shown on the written confirmation of delivery.  Such notices shall be given to the followingaddresses (or any such other address for a party as shall be specified by likenotice):

 
| If to CNA at:           | CNA Trust Corporation                |
|-------------------------|--------------------------------------|
|                    | 3080 South Bristol Street, Suite 430 |
|                    | Costa Mesa, California 92626         |
|                    | Fax No. (714) 430-5200               |
|                    | Attention: Roy A. Henderson,         |
|                    | Chairman and President               |
|                    |                                 |
| With copies to:         | CNA Trust Corporation                |
|                    | c/o CNA Financial Corporation        |
|                    | CNA Plaza                            |
|                    | Chicago, Illinois 60685              |
|                    | Fax No. (312) 822-1297               |
|                    | Attention: Secretary                 |
|                    |                                 |
| and                     | Matthew A. Posthuma                  |
|                    | Mayer, Brown, Rowe & Maw LLP     |
|                    | 190 South LaSalle Street             |
|                    | Chicago, Illinois 60603-3441         |
|                    | Fax No. (312) 701-7711               |
|                    |                                 |
| If to CNA Financial at: | CNA Financial Corporation            |
|                    | CNA Plaza                            |
|                    | Chicago, Illinois 60685              |
|                    | Fax No. (312) 822-1297               |
|                    | Attention: Secretary                 |
|                    |                                 |
| with a copy to:         | Matthew A. Posthuma                  |
|                    | Mayer, Brown, Rowe & Maw LLP     |
|                    | 190 South LaSalle Street             |
|                    | Chicago, Illinois 60603-3441         |
|                    | Fax No. (312) 701-7711               |
|                    |                                 |
| If to NSB at:           | Nevada Security Bank                 |
|                    | 9990 Double R Boulevard              |
|                    | P.O. Box 19579                       |
|                    | Reno, Nevada 89511-2119              |
|                    | Fax No. (775) 853-2056               |
|                    | Attention: Hal Giomi, CEO            |

 

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| with a copy to: | Gary Steven Findley & Associates |
|-----------------|--------------------------------------|
|            | 1470 North Hundley Street            |
|            | Anaheim, California 92806            |
|            | Fax No. (714) 630-7910               |
|            | Attention: Gary Steven Findley, Esq. |

 

Section 9.2 Counterparts.  ThisAgreement may be executed in one or more counterparts, all of which shall beconsidered one and the same agreement, and shall become effective when one ormore counterparts have been signed by each of the parties and delivered to theother parties, it being understood that all parties need not sign the samecounterpart.

 

Section 9.3 Entire Agreement/No Third Party Rights/Assignment.  This Agreement (including the documents andinstruments referred to herein): (a) together with the ConfidentialityAgreement and the Related Agreements, constitutes the entire agreement andsupersedes all prior agreements and understandings, both written and oral,among the parties with respect to the subject matter hereof; (b) except asexpressly set forth herein, is not intended to confer upon any person otherthan the parties hereto any rights or remedies hereunder; (c) shall not beassigned by a party, by operation of law or otherwise, without the consent ofthe other parties; and (d) subject to the foregoing, shall be binding upon andshall inure to the benefit of the parties hereto and their permitted successorsand assigns.  EXCEPT TO THE EXTENT OF THEEXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 3, EACH OF CNAFINANCIAL AND CNA DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS ANDGUARANTEES, WHETHER EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, ALLIMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE ANDNON-INFRINGEMENT.

 

Section 9.4 Governing Law.  ThisAgreement shall be governed and construed in accordance with the laws of theState of California applicable to contracts entered into therein, withoutreference to principles of choice of law or conflicts of laws.  NSB, CNA and CNA Financial each herebyirrevocably and unconditionally submits to the exclusive jurisdiction of anyState or Federal Court sitting in the State of California, over any suit,action or proceeding arising out of or relating to this Agreement.  NSB, CNA and CNA Financial each hereby agreesthat service of any process, summons, notice or document by U.S. registeredmail addressed to such Party shall be effective service of process for anyaction, suit or proceeding brought against such Party in such court.  NSB, CNA and CNA Financial each herebyirrevocably and unconditionally waives any objection to the laying of venue ofany such suit, action or proceeding brought in any such court and any claim thatany such action, suit or proceeding brought in any such court has been broughtin an inconvenient forum.  NSB, CNA andCNA Financial each agrees that final judgment in any such action, suit orproceeding brought in any such court shall be conclusive and binding upon suchParty and may be enforced in any other courts to whose jurisdiction such Partymay be subject, by suit upon such judgment.

 

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Section 9.5 Headings/Table of Contents. The table of contents and headings contained in this Agreement are forreference purposes only and shall not affect in any way the meaning orinterpretation of this Agreement.

 

Section 9.6 Enforcement of Agreement. The parties hereto agree that irreparable damage will occur in the eventthat any of the provisions of this Agreement or the Related Agreements is notperformed in accordance with its specific terms or is otherwise breached.  It is accordingly agreed that the partiesshall be entitled to an injunction or injunctions to prevent breaches of thisAgreement and to enforce specifically the terms and provisions hereof in anycourt of the State of California or any state having jurisdiction.

 

Section 9.7 Severability.  Any term orprovision of this Agreement which is invalid or unenforceable in anyjurisdiction shall, as to that jurisdiction, be ineffective to the extent ofsuch invalidity or unenforceability without rendering invalid or unenforceablethe remaining terms and provisions of this Agreement or affecting the validityor enforceability of any of the terms or provisions of this Agreement in anyother jurisdiction.  If any provision ofthis Agreement is so broad as to be unenforceable, the provision shall beinterpreted to be only so broad as is enforceable.

 

Section 9.8 Waiver of Jury Trial; Damages.

 

(a)                                  EACHPARTY HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSEOF ACTION, IN ANY ACTION OR PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHTBY A PARTY AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS,TORT CLAIMS, OR OTHERWISE, BASED UPON OR ARISING OUT OF OR RELATED TO THISAGREEMENT OR ANY OF THE RELATED AGREEMENTS OR THE TRANSACTIONS CONTEMPLATEDHEREBY OR THEREBY.  EACH PARTY HERETOAGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUTA JURY.  WITHOUT LIMITING THE FOREGOING,EACH PARTY HERETO FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY A JURY IS WAIVEDBY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDINGWHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITYOF THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR ANY PROVISION HEREOF ORTHEREOF.  THIS WAIVER SHALL APPLY TO ANYSUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENTOR ANY OF THE RELATED AGREEMENTS.

 

(b)                                 Eachof the Parties hereto irrevocably waives, with respect to any first partyaction filed by the other party (but not as to any action by one party againstthe other seeking indemnification for a third party claim against the partyinitiating the action, to the extent that such damages may be recoverable aspart of the indemnification by the indemnified party) any right to punitive,incidental and consequential or multiplied damages or lost profits, eitherpursuant to common law or statute, in any legal proceedings arising out of orrelated to this Agreement or the transactions contemplated hereby.

 

Section 9.9 Attorneys’ Fees.  If anylegal action or any arbitration upon mutual agreement is brought for theenforcement of this Agreement or because of an alleged dispute, breach ordefault in

 

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connection with this Agreement, the prevailing party shall be entitledto recover reasonable attorneys’ fees and other costs and expenses incurred inthat action or proceeding, in addition to any other relief to which it may beentitled.

 

Section 9.10 Amendment.  This Agreementmay not be amended or modified in any respect whatsoever except by aninstrument in writing signed by the Parties hereto.

 

Section 9.11 Nonsurvival ofRepresentations and Warranties.  Noneof the representations, warranties, covenants and agreements in this Agreementor in any instrument delivered pursuant to this Agreement shall survive theEffective Time, except for those covenants and agreements contained herein andtherein which by their terms apply in whole or in part after the Effective Timeor to a termination of this Agreement.

 

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IN WITNESS WHEREOF, NSB, CNA and CNA Financial have caused thisAgreement to be signed by their respective officers thereunto duly authorized,all as of the date first above written.

 
| **NEVADA SECURITY BANK** | **CNA TRUST CORPORATION** |
|--------------------------|---------------------------|
|                     |                      |
|                     |                      |
| By:                      |                      |   | By: |   |   |
| Name: Hal Giomi          | Name: Roy A. Henderson    |
|                          |                           |  |  |  |  |

 

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| ** ** | **CNA  FINANCIAL CORPORATION** |
|------------|--------------------------------|
|       | ** **                     |
|       | ** **                     |
|       | By:                            |
|       | Name:                          |   |   |

 

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