Exhibit 2.1
-----------
AGREEMENT AND PLAN OF MERGER
AMONG
CHICAGO TITLE OF COLORADO, INC.
(THE "COMPANY"),
ALLEGHANY ACQUISITION CORPORATION,
ALLEGHANY CORPORATION
AND
THE SHAREHOLDERS OF THE COMPANY
DATED AS OF AUGUST 22, 1996
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I The Merger................................... 1
1.1. The Merger....................................... 1
1.2. Pre-Closing and Closing.......................... 2
1.3. Effective Time................................... 2
1.4. Employment and Consulting Agreements............. 2
1.5. Transfer of Surviving Corporation................ 2
ARTICLE II The Surviving Corporation................... 3
2.1. The Articles of Incorporation.................... 3
2.2. The Bylaws....................................... 3
2.3. Officers and Directors........................... 3
ARTICLE III Conversion of Shares in the Merger......... 3
3.1. Conversion of Shares............................. 3
3.2. Payment for Shares .............................. 6
ARTICLE IV Representations and Warranties
of the Company and the Shareholders......... 7
4.1. Corporate Organization and Qualification......... 7
4.2. Authorized Capital............................... 7
4.3. Corporate Authority.............................. 8
4.4. Compliance....................................... 9
4.5. Financial Statements............................. 10
4.6. Undisclosed Liabilities.......................... 12
4.7. No Material Adverse Change....................... 12
4.8. No Dividends, Sale of Assets, etc................ 12
4.9. Litigation....................................... 13
4.10. Tax Matters...................................... 13
4.11. Assets........................................... 15
(a) Material Agreements........................ 15
(b) Real Property.............................. 15
(c) Intangible Property........................ 16
(d) Investment Securities...................... 16
(e) Other Assets............................... 16
(f) Title...................................... 16
4.12. Benefit Plans.................................... 17
-2-
4.13. Interests of Officers, Directors
and Shareholders............................... 19
4.14. Employees........................................ 19
4.15. Banks ........................................... 20
4.16. Insurance........................................ 20
4.17. Absence of Bank or Savings
and Loan Status................................ 20
4.18. Brokers and Finders.............................. 20
4.19. Status of Shareholders........................... 21
4.20. Investment Representation........................ 21
4.21. Shareholder Understandings....................... 22
4.22. Pooling.......................................... 23
4.23. Aggregate Materiality............................ 23
4.24. Disclosure; No Representations as to Earnings,
Client Relationships and Accounting after the
Pre-Closing Date............................... 23
ARTICLE V Representations and Warranties
of Alleghany and Newco....................... 23
5.1. Corporate Organization and Qualification......... 24
5.2. Authorized Capital............................... 24
5.3. Corporate Authority.............................. 24
5.4. Compliance....................................... 25
5.5. Financial Statements............................. 25
5.6. Undisclosed Liabilities.......................... 26
5.7. No Material Adverse Change....................... 26
5.8. Litigation....................................... 27
5.9. Brokers and Finders.............................. 27
5.10. SEC Filings...................................... 27
5.11. Aggregate Materiality............................ 27
5.12. Disclosure....................................... 28
5.13. Transferee Approvals............................. 28
ARTICLE VI Conditions to the Obligations
of Alleghany and Newco...................... 28
6.1. Compliance with Agreement........................ 28
6.2. Representations and Warranties................... 28
6.3. Opinion of Counsel for the Company and
the Shareholders............................... 29
6.4. Approvals........................................ 29
ARTICLE VII Conditions to the Obligations of the
Company and the Shareholders............... 29
7.1. Compliance with Agreement........................ 29
7.2. Representations and Warranties................... 29
-3-
7.3. Opinion of Counsel for Alleghany and Newco....... 30
7.4. Approvals........................................ 30
ARTICLE VIII Covenants of the Company and
the Shareholders.......................... 30
8.1. Covenants Pending the Closing.................... 30
(a) Access to Properties, Books and Records.... 30
(b) Carry On in Regular Course................. 31
(c) Preservation of Organization............... 32
(d) Financial Statements....................... 32
8.2. Filings and Approvals............................ 32
8.3. Best Efforts..................................... 32
8.4. Further Assurances............................... 33
8.5 No Competition; No Solicitation; No
Inducement; Confidentiality.................... 33
8.6. Compliance with Securities Laws.................. 35
ARTICLE IX Covenants of Alleghany and Newco............ 35
9.1. Filings and Approvals............................ 35
9.2. Best Efforts..................................... 35
9.3. Further Assurances............................... 35
9.4. Registration Rights.............................. 36
(a) Registration............................... 36
(b) Effectiveness.............................. 36
(c) Expenses................................... 37
(d) Shareholder Agreements..................... 37
(e) Indemnification under this Section 9.4..... 37
ARTICLE X Covenants of the Shareholders and Alleghany
Relating to Certain Tax and Distribution
Matters...................................... 38
10.1. Pre-Merger and Straddle Period Taxes............. 39
10.2. Access to Information and Retention
of Records..................................... 40
10.3. Section 338(h)(10) Election...................... 40
(a) Triggering Disposition..................... 40
(b) Facilitation of Election................... 41
(c) Allocation of Merger Consideration......... 41
(d) Additional Taxes Due....................... 41
(e) Notice of Disposed Merger Consideration;
Notice of Section 338(h)(10) Election.... 42
-4-
10.4. Miscellaneous Tax Provisions..................... 42
(a) Notice of Disposed Consideration........... 42
(b) Absence of Tax Representations or
Agreements............................... 42
(c) Alleghany Representations.................. 43
10.5. Distributions.................................... 44
ARTICLE XI Indemnity................................... 47
11.1. By the Shareholders and the Company.............. 47
11.2. By Alleghany and Newco........................... 48
11.3. Procedure........................................ 48
11.4. Shareholders' Representative..................... 49
11.5. No Liability of Shareholders..................... 51
ARTICLE XII Miscellaneous Provisions................... 51
12.1. Termination...................................... 51
12.2. Expenses......................................... 52
12.3. Notices.......................................... 52
12.4. Entire Agreement; Amendment...................... 53
12.5. Assignment....................................... 54
12.6. Survival of Representations, Warranties
and Covenants.................................. 54
12.7. Governing Law.................................... 55
12.8. Counterparts..................................... 55
12.9. Headings......................................... 55
12.10. Severability..................................... 55
12.11 Pre-Closing and Closing Procedures............... 55
-5-
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of August 22, 1996, among Chicago Title of Colorado,
Inc., a Colorado corporation (the "Company"), Alleghany
Acquisition Corporation, a Colorado corporation ("Newco")
(the Company and Newco being the constituent corporations in
the Merger, as defined below), Alleghany Corporation, a
Delaware corporation and the owner of all of the issued and
outstanding shares of capital stock of Newco ("Alleghany"),
and each of the shareholders of the Company as listed in
Exhibit 4.2 hereto (the "Shareholders") (Alleghany and the
Shareholders joining as additional parties).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Boards of Directors of Newco, the
Company and Alleghany have each determined that it is in the
best interests of their respective shareholders for the
Company to merge with and into Newco upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Company, Newco, Alleghany and the
Shareholders desire to make certain representations,
warranties, covenants and agreements in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants and agreements hereinafter set
forth, the parties hereto hereby agree as follows:
ARTICLE I
The Merger
1.1. The Merger. Subject to the terms and
----------
conditions of this Agreement, at the Effective Time (as
defined in Section 1.3 hereof), Newco shall be merged with
and into the Company and the separate corporate existence of
Newco shall thereupon cease (the "Merger"). The Company
shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and
shall continue to be governed by the laws of the State of
-6-
Colorado, and the separate corporate existence of the Company
with all of its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Colorado
Business Corporation Act (the "BCA").
1.2. Pre-Closing and Closing. In accordance with
-----------------------
Section 12.11 of this Agreement, a pre-closing shall take
place at the offices of ▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine, ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. on
or before August 28, 1996 or on such date as the Company and
Alleghany may otherwise agree. The date of the Pre-Closing
is hereinafter referred to as the "Pre-Closing Date." In
accordance with Section 12.11 of this Agreement, the closing
of the Merger (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine no later than thirty (30)
days after the Pre-Closing Date. The date of the Closing is
hereinafter referred to as the "Closing Date."
1.3. Effective Time. At the Closing, the Company
--------------
and Alleghany will cause Articles of Merger, in the form set
forth in Exhibit 1.3 hereto (the "Colorado Articles of
Merger"), to be executed by the Constituent Corporations and
filed with the Secretary of State of the State of Colorado as
provided in Section ▇-▇▇▇-▇▇▇ of the BCA. The Colorado
Articles of Merger shall specify that the Merger shall become
effective on the date on which the Colorado Articles of
Merger have been duly filed with the Secretary of State of
the State of Colorado, and such time is hereinafter referred
to as the "Effective Time."
1.4. Employment and Consulting Agreements.
------------------------------------
Simultaneously with the execution and delivery of this
Agreement, an employment agreement in the form set forth as
Exhibit 1.4(a) hereto between the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇
and a consulting agreement in the form set forth as Exhibit
1.4(b) hereto between the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall
be executed and delivered by the parties thereto.
1.5. Transfer of Surviving Corporation. Subject
---------------------------------
to Section 10.4(c) hereof, the Shareholders hereby
acknowledge that Alleghany shall have the right to and
intends to transfer, exchange or contribute the shares of the
capital stock of the Surviving Corporation to or with its
-7-
wholly owned subsidiary Chicago Title and Trust Company or a
subsidiary thereof (the "Transferee") after the Effective
Time.
ARTICLE II
The Surviving Corporation
2.1. The Articles of Incorporation. The Articles
-----------------------------
of Incorporation of the Company (the "Articles") in effect
immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation, except that
such Articles shall be amended at and as of the Effective
Time as set forth in the Colorado Articles of Merger. As so
amended, such Articles shall be the Articles of Incorporation
of the Surviving Corporation until duly amended in accordance
with the terms thereof and the BCA.
2.2. The Bylaws. The Bylaws of Newco (the
----------
"Bylaws") in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the BCA.
2.3. Officers and Directors. The officers of the
----------------------
Company and the directors of Newco (including any directors
elected or appointed at the Effective Time) immediately prior
to the Effective Time shall, from and after the Effective
Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the
Surviving Corporation's Articles of Incorporation and Bylaws;
provided, however, that ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------- -------
shall cease to be officers of the Company from and after the
Effective Time.
-8-
ARTICLE III
Conversion of Shares in the Merger
3.1. Conversion of Shares. The manner of
--------------------
converting shares of the Company and Newco in the Merger
shall be as follows:
(a) At the Effective Time, each share of the
common stock, $.01 par value per share, of the Company (the
"Shares") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into
the right to receive, without interest, the number of shares
(the "Merger Consideration") of common stock, par value $1.00
per share, of Alleghany ("Alleghany Shares") determined
pursuant to this Section 3.1(a). The number of Alleghany
Shares into which each Share shall be converted shall be
determined as follows: $6,000,000 shall be divided by the
"Average Market Price" of an Alleghany Share as of the close
of trading on the New York Stock Exchange on the date that is
five business days prior to the Pre-Closing Date (the
"Determination Date"), and that result shall then be divided
by 1,000 Shares to be outstanding immediately prior to the
Effective Time. For purposes of this Agreement, the "Average
Market Price" of an Alleghany Share is the amount determined
by (i) adding the per share closing sale price (as reported
in The Wall Street Journal for New York Stock Exchange
-----------------------
Composite Transactions) for each business day during the 20
business day period ending on the Determination Date on which
there were any trades in Alleghany Shares, and (ii) dividing
the sum by 20 (reduced by the number of such business days
during which there were no trades in Alleghany Shares). No
more than the number of Alleghany Shares required to convert
the Shares on the foregoing basis shall be issued at the
Effective Time. Any fractional shares resulting from such
conversion to which the holder of Alleghany Shares otherwise
would be entitled shall not be issued but shall be paid in
cash. The Merger Consideration shall be subject to
adjustment as follows:
(i) If on or after the Determination Date and
before the Effective Time Alleghany shall, on a pro rata
basis, (A) declare or pay a dividend or make a
distribution to holders of Alleghany Shares,
(B) subdivide the outstanding Alleghany Shares into a
-9-
greater number of shares, (C) combine the outstanding
Alleghany Shares into a smaller number of shares, or
(D) issue by reclassification of the outstanding
Alleghany Shares any securities, the Merger
Consideration shall be adjusted so that each Shareholder
shall be entitled to receive the kind and number of
shares of Alleghany Shares and/or other securities which
he or she would have owned or been entitled to receive
immediately following such action had the Effective Time
occurred immediately prior thereto.
(ii) If on or after the Determination Date and
before the Effective Time Alleghany shall distribute on
a pro rata basis to holders of Alleghany Shares either
(A) evidences of indebtedness or assets (excluding cash
dividends or distributions), or (B) any other securities
of Alleghany or any rights, warrants, or options to
subscribe for, purchase or otherwise acquire securities
of Alleghany in a transaction not covered by
subsection (i) above (any of which are referred to
herein as "Other Securities"), then Alleghany shall
reserve for the benefit of each Shareholder such amount
of Other Securities as he or she would have owned or
been entitled to receive immediately following such
action had the Effective Time occurred immediately prior
thereto. In addition, from the Determination Date until
the Effective Time Alleghany shall reserve for the
benefit of each Shareholder any principal, interest,
dividends or other property payable with respect to
Other Securities as and when such interest, dividends or
other property is distributed to the holders of
Alleghany Shares. If such a reserve is made, at the
Effective Time each Shareholder shall be entitled to
receive from Alleghany his or her share of Other
Securities, together with the principal, interest,
dividends or other property payable with respect
thereto. In the event that any of the actions set forth
in Section 3.1(a)(i) hereof are taken with respect to
the Other Securities on or before the Effective Time,
then each Shareholder shall be entitled to receive the
kind and number of shares of Other Securities and/or
other securities which he or she would have owned or
been entitled to receive immediately following such
action had the Effective Time occurred immediately prior
thereto.
All Shares, by virtue of the Merger and without any action on
the part of the holders thereof, shall no longer be
-10-
outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of a certificate representing
any such Shares shall thereafter cease to have any rights
with respect to such Shares, except the right to receive the
Merger Consideration for such Shares in accordance with
Section 3.1 hereof upon the surrender of such certificate in
accordance with Section 3.2 hereof.
(b) At the Effective Time, each share of the
common stock, par value $.01 per share, of Newco issued and
outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of
Newco or the holder of such shares, be converted into one
share of common stock, par value $.01 per share, of the
Surviving Corporation, which shall thereafter constitute the
only issued and outstanding shares of capital stock of the
Surviving Corporation.
3.2. Payment for Shares.
------------------
(a) At the Effective Time, each registered holder
of a certificate or certificates representing Shares (a
"Holder") shall surrender to Alleghany such certificate or
certificates, and shall receive in exchange therefor a
certificate representing the number of full Alleghany Shares
into which the Shares represented by the surrendered
certificate or certificates shall have been converted, and
cash in lieu of any fractional shares to which the Holder
otherwise would be entitled.
(b) If any certificate or certificates which
immediately prior to the Effective Time represented Shares
are for any reason not surrendered at the Effective Time
pursuant to Section 3.2(a) hereof, such certificate or
certificates shall be deemed for all corporate purposes to
evidence ownership of the number of full Alleghany Shares
into which the Shares represented by such certificate or
certificates shall have been converted and cash in lieu of
any fractional Alleghany Shares. No dividends or
distributions otherwise payable on such Alleghany Shares
after the Effective Time will be paid to a Holder until he or
she has surrendered his or her certificate or certificates
representing Shares, upon which surrender there shall be paid
to such Holder, but without interest thereon, all such
dividends and distributions. No transfers shall be made on
the stock transfer books of the Surviving Corporation at the
-11-
Effective Time, except to Alleghany as provided in Section
3.1(b) hereof.
(c) If a certificate for Alleghany Shares is to be
issued to a person other than the Holder of the certificate
surrendered, it shall be a condition of such issuance that
the certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person
requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance to a person other
than the Holder of the certificate surrendered or establish
to the satisfaction of the Surviving Corporation that such
tax has been paid or is not applicable.
(d) None of Alleghany, Newco or the Company shall
be liable to any Holder for any Alleghany Shares transferred
or any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE IV
Representations and Warranties
of the Company and the Shareholders
Each of the Company and the Shareholders jointly
and severally represents and warrants to Alleghany and Newco
as follows:
4.1. Corporate Organization and Qualification.
----------------------------------------
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado
and is not qualified, and is not required to be qualified, to
do business as a foreign corporation in any jurisdiction.
The Company does not own any equity interest in any entities
except as set forth in Exhibit 4.11(d). The Company has the
requisite corporate power and authority to carry on its
business as it is now being conducted. The Company has
delivered to Alleghany true and complete copies of its
Articles of Incorporation and By-laws, each as amended to
date, and each is in full force and effect.
4.2. Authorized Capital. The authorized capital
------------------
stock of the Company consists of 1,200 shares of capital
stock, consisting of 1,000 Shares, which are issued and
outstanding and entitled to vote on the Merger, and 200
-12-
shares of non-voting preferred stock, par value $1,250.00 per
share, none of which are issued and outstanding and entitled
to vote on the Merger. All of the issued and outstanding
Shares have been duly authorized and are validly issued and
outstanding, are fully paid and nonassessable, and are owned
by the persons listed in Exhibit 4.2 hereto (in the amounts
so listed) free and clear of all liens, pledges, security
interests, claims and other encumbrances of any nature
whatsoever. Except as set forth above, there are no shares
of capital stock of the Company authorized, issued or
outstanding, and there are no preemptive rights or any
outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of
any character relating to the issued or unissued capital
stock or other securities of the Company. Exhibit 4.2 hereto
sets forth a list of all transactions in the Shares of the
Company since January 1, 1994. Neither the Company nor any
of the Shareholders own any Alleghany Shares. Neither the
Company nor any Shareholder is a party to any voting trust or
other agreement or understanding with respect to the voting
of the capital stock of the Company.
4.3. Corporate Authority. Exhibit 4.3 hereto is a
-------------------
true and complete list of all material permits, approvals,
qualifications, filings, notices, consents or waiting periods
of third parties other than Transferee and its affiliates and
regulatory authorities which are required by the Company or
any of the Shareholders for the consummation of the
transactions contemplated by this Agreement (other than the
filing of the Colorado Articles of Merger) and to permit the
continuation of the business of the Company as it is now
conducted (the "Company Approvals"). The Company has full
corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the
Company have been duly and validly authorized by all
necessary corporate action on the part of the Company,
including, without limitation, the effective written consent
of all of the Shareholders approving this Agreement pursuant
to Section ▇-▇▇▇-▇▇▇ of the BCA. A true and complete copy of
such consent is set forth in Exhibit 4.3 hereto. This
Agreement constitutes a legal, valid and binding obligation
of each of the Company and the Shareholders, enforceable
against it, him or her in accordance with its terms. Neither
the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will
(a) conflict with or result in a breach or violation of any
-13-
of the provisions of the Articles of Incorporation or By-laws
of the Company; (b) subject to the granting of the Company
Approvals and the accuracy of Section 5.13 hereof, conflict
with, result in a breach or violation of, result in a default
or loss of a material benefit under, or permit the
acceleration of any obligation under any provision of any
agreement, indenture, mortgage, lien, lease or other
instrument or restriction of any kind to which the Company or
any of the Shareholders is a party or by which any of their
assets or properties is otherwise bound; or (c) subject to
the granting of the Company Approvals, violate any order,
writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of the Shareholders or any
of their assets or properties, the effect of which conflict,
breach, violation, default, loss or acceleration,
individually or in the aggregate, would have a material
adverse effect on the condition (financial or otherwise),
earnings, assets, liabilities or business of the Company.
4.4. Compliance.
----------
(a) The Company is, and has been since October 24,
1988, in compliance with all laws, regulations and
requirements promulgated pursuant to such laws and
regulations applicable to the operation of its business
(including, without limitation, applicable insurance and
trust laws and regulations, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), equal employment
opportunity or other similar laws), with which the failure to
so comply would have a material adverse effect on the
condition (financial or otherwise), earnings, assets,
liabilities or business of the Company.
(b) The Company is, and has been at all times
since October 24, 1988, duly licensed as a title insurance
agency to sell title insurance in the State of Colorado, such
license is in full force and effect, and the Company is not
required to be registered, licensed or qualified to sell
title insurance in any other jurisdiction. Each officer,
director, shareholder, owner, or employee of the Company
required to be licensed as an insurance producer in the State
of Colorado is, and since the later of the date on which such
person was first required to be so licensed or the date on
which such person was first associated with the Company has
been, duly licensed as an insurance producer, and all such
licenses are in full force and effect. The Company does not
conduct and has not conducted since October 24, 1988 any
-14-
insurance business other than the title insurance business in
the State of Colorado. Since October 24, 1988, no proceeding
has been instituted to revoke, restrict or suspend the
license (or other qualification to conduct an insurance
business) of the Company in the State of Colorado nor, to the
best knowledge of the Company and the Shareholders, has any
threat of any action which could lead thereto occurred.
(c) The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended, and the Company is not required to be registered or
licensed as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(d) Since October 24, 1988, none of the following
has occurred or is currently pending: (i) any investigative
or disciplinary proceedings by the Federal Trade Commission
or any other federal, state, local or self-regulatory
authority against the Company or any of its directors,
officers or employees other than (A) Colorado Division of
Insurance disciplinary claims which have been resolved in a
manner not having an adverse impact on the Company, (B)
proceedings resolved in the ordinary course of business which
involved isolated incidents of alleged noncompliance with
laws governing employment matters and in respect of which no
penalty, other than a nominal fine, was assessed against the
Company, and (C) a one time fine of approximately $8,000
assessed against the Company by the Colorado Division of
Insurance in respect of a certain distribution of pamphlets;
or (ii) the issuance of any consent judgments, decrees, cease
and desist or other orders, disqualifications, penalties
(other than the $8,000 assessment referred to above) or
special restrictions against the Company or any of its
directors, officers or employees (including, without
limitation, criminal convictions) relating to or affecting
the conduct of the business of the Company.
(e) No Shareholder has been advised or has any
reasonable grounds to believe that the Company has lost any
client which generated revenues to the Company of more than
$50,000 for 1995.
(f) With respect to the escrow accounts
administered by the Company:
(i) Since October 24, 1988, all accounts in which
cash or securities are or have been held by the Company
as escrow agent have been administered, and all other
-15-
trust, fiduciary and closing services, including without
limitation, the preparation of documents, deeds and
other conveyancing documents, have been performed, in
compliance with law, the terms of any written
instructions, and the terms of any insured closing
letter issued by Chicago Title Insurance Company on
behalf of the Company; and
(ii) without limiting the representations set
forth in Section 4.4(f)(i) hereof, the balances in all
of the accounts in which cash or securities are held by
the Company as escrow agent are as reflected on the
books and records of the Company without any
deficiencies.
4.5. Financial Statements.
--------------------
(a) The audited balance sheets of the Company
as at December 31, 1995 and 1994 and the related audited
statements of income and retained earnings and cash flows for
the twelve months then ended (the "Annual Financial
Statements"), which heretofore have been delivered to
Alleghany, present fairly the financial position and results
of operations of the Company as of the dates and for the
periods indicated therein in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as may otherwise be
specifically indicated in such financial statements.
(b) The unaudited balance sheet of the Company as
at March 31, 1996 and the related unaudited statements of
income and retained earnings and cash flows for the three
months then ended, which heretofore have been delivered to
Alleghany, present fairly the financial position and results
of operations of the Company as of the dates and for the
periods indicated therein in accordance with generally
accepted accounting principles applied on a basis consistent
with the Annual Financial Statements.
(c) The unaudited balance sheet of the Company as
at June 30, 1996 (the "June 30 Balance Sheet") and the
related unaudited statement of income (the "June 30 Income
Statement") and the related unaudited statements of retained
earnings and cash flows for the six months then ended, which
heretofore have been delivered to Alleghany, present fairly
the financial position and results of operations of the
Company as of the dates and for the periods indicated therein
-16-
in accordance with generally accepted accounting principles
applied on a basis consistent with the Annual Financial
Statements.
(d) If available at the time that this Agreement
is executed, the unaudited balance sheet of the Company as at
July 31, 1996 (the "July 31 Balance Sheet") and the related
unaudited statement of income (the "July 31 Income
Statement") and the related unaudited statements of retained
earnings and cash flows for the seven months then ended,
which, if available, have heretofore been delivered to
Alleghany, present fairly the financial position and results
of operations of the Company as of the dates and for the
periods indicated therein in accordance with generally
accepted accounting principles applied on a basis consistent
with the Annual Financial Statements.
(e) Notwithstanding anything in this Agreement to
the contrary, the Shareholders do not represent or warrant
the accuracy of any amounts due to Chicago Title Insurance
Company as reflected in the financial statements or other
documents delivered pursuant to this Agreement and shall have
no liability under any provision of this Agreement to the
extent that any such amounts are incorrect.
4.6. Undisclosed Liabilities. Except as disclosed
-----------------------
on Exhibit 4.6 hereto and except for matters described in
Section 4.4(f) hereto or arising in connection with the
issuance by the Company of policies of title insurance, as at
December 31, 1995, the Company did not have any obligations
or liabilities of any nature, whether absolute, accrued,
contingent or otherwise, which, individually or in the
aggregate, would have a material adverse effect on the
condition (financial or otherwise), earnings, assets,
liabilities or business of the Company except as and to the
extent disclosed in the Annual Financial Statements. Except
as disclosed on Exhibit 4.6 hereto and except for matters
described in Section 4.4(f) hereto or arising in connection
with the issuance by the Company of policies of title
insurance, since December 31, 1995, the Company has not
incurred or become subject to any obligations or liabilities
of any nature, whether absolute, accrued, contingent or
otherwise which, individually or in the aggregate, would have
a material adverse effect on the condition (financial or
otherwise), earnings, assets, liabilities or business of the
Company. Notwithstanding anything in this Agreement to the
contrary, the Shareholders do not represent or warrant the
-17-
accuracy of any amounts due to Chicago Title Insurance
Company as reflected in the financial statements or other
documents delivered pursuant to this Agreement and shall have
no liability under any provision of this Agreement to the
extent that any such amounts are incorrect.
4.7. No Material Adverse Change. Since December
--------------------------
31, 1995, there has not been any material adverse change in
the condition (financial or otherwise), earnings, assets,
liabilities or business of the Company as reflected in the
Annual Financial Statements, whether or not arising from
transactions in the ordinary course of business, and none of
the Shareholders is aware of any fact or condition relating
to the business of the Company which any of them reasonably
believes might result in such a material adverse change after
the Closing Date.
4.8. No Dividends, Sale of Assets, etc. Except
---------------------------------
for dividends in the aggregate amount of $1,000,000 paid on
January 1, 1996, dividends in the aggregate amount of
$1,300,000 paid on April 12, 1996, and as permitted by
Section 10.5 hereof, since December 31, 1995, there has not
been any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital
stock of the Company or direct or indirect redemption,
purchase or other acquisition by the Company of any such
stock; any sale, assignment, transfer or other disposition of
any material tangible or intangible asset; or any amendment,
termination or waiver of any right of substantial value
belonging to or held by the Company.
4.9. Litigation. Except as previously disclosed
----------
to Chicago Title Insurance Company's General Claims Counsel,
there are no actions, suits, proceedings, claims,
investigations or examinations pending or, to the best
knowledge of any Shareholder, threatened against the Company
or its businesses, properties or assets, at law or in equity,
before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any private
arbitration panel, which, if adversely determined, would
result in a judgment of more than $25,000 or which would
otherwise, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise),
earnings, assets, liabilities or business of the Company.
-18-
4.10 Tax Matters.
-----------
(a) Since October 24, 1988, the Company (and any
corporation with regard to which the Company is a successor
in interest) has duly and timely filed (either separately or
on a consolidated or combined basis) with the appropriate
government agencies, all federal income tax returns and
reports and all state, local and foreign tax returns and re-
ports due (or have timely obtained extensions of any returns
due for which extensions may be obtained) with respect to all
income, sales, property, corporate franchise and business
taxes, customs duties, and all other tax returns and reports
of each and every kind in any jurisdiction the filing of
which is necessary or required for the conduct of its
business (the "Tax Returns"), and the Tax Returns filed are
true, correct and complete in all material respects. The
term "Taxes" as used in this Agreement shall mean all
federal, state, local or foreign taxes, assessments,
interest, penalties or deficiencies, duties, fees and other
governmental charges or impositions of each and every kind
whether assessed against or measured by properties,
occupation, assets, wages, purchases, transfers, payments,
sales, use, gross receipts, value added, business, capital
stock, surplus, income, franchise, license, accumulations or
otherwise, in each case whether disputed or not.
(b) Since October 24, 1988, all Taxes imposed upon
or required to be collected or withheld by the Company have
been (i) properly and fully paid to the extent due and
payable, or properly and fully deposited to the extent
required to be collected or withheld and deposited, and (ii)
adequately reserved (in accordance with generally accepted
accounting principles applied on a basis consistent with that
of prior years) in the case of Taxes payable or anticipated
to be payable on account of the operations, acts or omissions
of the Company for any and all periods, or in the case of
Taxes collected or withheld and not yet deposited. The
Company does not and will not have any liability, whether
direct, indirect, fixed or contingent, for any Taxes in
excess of the reserves for Taxes established on the books of
the Company as of the date hereof or, as to liabilities
accruing thereafter, as of the Closing Date. The Company is
not delinquent in the payment of any Taxes, nor has the
Company requested any extension of time within which to pay
any Taxes, except to the extent that such Taxes have since
-19-
been paid. There is no agreement, waiver or consent provid-
ing for an extension of time with respect to the assessment
of any Tax or deficiency against the Company and no power of
attorney granted by the Company with respect to any Tax
matter is currently in force. There is no claim or
deficiency for any Taxes which has been threatened or
asserted against the Company. There is no action, suit,
proceeding, investigation, audit or claim now pending against
or with respect to the Company with regard to any Taxes, nor
is any claim for additional Taxes or assessment of Taxes
asserted by any such authority.
(c) The Tax Returns of the Company have not been
examined by the Internal Revenue Service for any period
commencing on or after October 24, 1988. Further, no state
of facts exists or has existed which would constitute grounds
for the assessment of any Tax liability for any period
commencing on or after October 24, 1988. The Company has
provided Alleghany with true and complete copies of all
federal, state and local income tax returns constituting part
of the Tax Returns which relate to the conduct of the
business of the Company or any entity with regard to which
the Company is a successor in interest, as well as any
correspondence and agreements with the Internal Revenue
Service or such state or local authorities for the
jurisdictions in which such returns are filed for all periods
for which assessments are not barred by operation of the
relevant statute of limitations.
(d) Except as set forth in Exhibit 4.10(d) hereto,
(i) no property of the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code, nor
property that is being treated as owned by another person
pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954, as amended and in effect immediately prior to the en-
actment of the Tax Reform Act of 1986; (ii) the Company is
not a "real property holding company" within the meaning of
Sections 897(c)(2) and 897(c)(1)(A)(ii) of the Code;
(iii) the Company is not a "target" or "target affiliate" as
a result of any transaction to which Section 338 of the Code
may apply; (iv) the Company is not a party to any tax sharing
agreement or tax indemnity agreement which would require the
Company to make any payment to any other person by reason of
any Tax imposed upon such person; (v) none of the
Shareholders is a "foreign person" within the meaning of
Section 1445 of the Code; and (vi) since October 24, 1988,
the Company has never been a member of an affiliated group of
corporations which filed a consolidated federal income tax
-20-
return or been included on any combined or consolidated Tax
Return.
4.11. Assets.
------
(a) Material Agreements. Exhibit 4.11(a) hereto
-------------------
sets forth a true and complete list of all agreements to
which the Company is a party or by which it is bound and
which are material to the business of the Company except for
(i) agreements to which Chicago Title Insurance Company is a
party and (ii) leases for personal property with a remaining
term of less than three years and aggregate remaining
payments of less than $30,000. Each such agreement is in
full force and effect, the Company is not in material breach,
violation or default thereunder, and none of the Shareholders
is aware of a material breach, violation or default
thereunder by any other parties thereto.
(b) Real Property. Exhibit 4.11(b) hereto sets
-------------
forth a true and complete list of the lease for the office
space occupied by the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and each other office occupied by or
storage area used by the Company (collectively, the
"Leases"). A true and complete copy of each of the Leases
has heretofore been delivered to Alleghany. The Leases are
in full force and effect and there are no existing defaults
thereunder nor does there exist any event or condition which,
with notice or lapse of time or both, would give rise to a
default or constitute grounds for termination or re-entry
thereunder. The Company does not own or lease any other real
property.
(c) Intangible Property. Exhibit 4.11(c) hereto
-------------------
is a true and complete list of all copyrights, patents,
trademarks, trade names, logos, assumed or other names and
other intangible property rights owned or used by the Company
in its business. Subject to the accuracy of Section 5.13
hereof, all such rights are valid, subsisting and in full
force and effect without interference by any other person.
Neither the Company nor any Shareholder has received any
notice with respect to any alleged infringement or unlawful
use of any intangible property right owned or alleged to be
owned by others.
-21-
(d) Investment Securities. Exhibit 4.11(d) hereto
---------------------
sets forth a true and complete list of all securities owned
by the Company for its own account (the "Investment
Securities"). The acquisition and ownership of the
Investment Securities complied and complies in all material
respects with all applicable insurance, trust or other laws
and regulations.
(e) Other Assets. Exhibit 4.11(e) hereto sets
------------
forth a true and complete list of all other assets (or
categories of assets) of the Company, including, without
limitation, client lists, books and records, insurance
policies, claims, memberships and licenses.
(f) Title. The Company has good and marketable
-----
title to all of its assets, free and clear of all liens,
security interests, pledges, agreements, claims, charges,
options, covenants, reservations, restrictions and encum-
brances of any nature whatsoever. All assets necessary for
the conduct of the business of the Company as currently
conducted are owned by or leased or licensed to it, and
neither any Shareholder nor any other person owns, or has any
rights whatsoever in, any such assets. To the extent
applicable, such assets have been properly maintained and are
in good operating condition and repair, ordinary wear and
tear excepted.
4.12. Benefit Plans.
-------------
(a) Exhibit 4.12 hereto sets forth a true and
complete list of all employee benefit plans, agreements,
commitments, practices or arrangements of any type,
maintained, sponsored or contributed to by the Company or by
any entity which is affiliated with the Company under
Section 414(b), (c), (m), or (o) of the Code or Section 4001
of ERISA ("ERISA Affiliate") for the benefit of any employee,
former employee, director or consultant of the Company or an
ERISA Affiliate, or with respect to which the Company or an
ERISA Affiliate has a liability, whether direct or indirect,
actual or contingent (the "Plans"). The Plans listed in
Exhibit 4.12 include each Plan that is an "employee benefit
plan" as defined in Section 3(3) of ERISA (the "ERISA
Plans"). The Company does not have any express or implied
commitment to create, incur liability with respect to or
-22-
cause to exist any other employee benefit plan, agreement,
commitment, practice or arrangement, to enter into any
contract or agreement to provide compensation or benefits, or
to modify, change or terminate any of the Plans. With
respect to each Plan, the Company will make available to
Alleghany true and complete copies of:
(i) any and all plan texts and agreements,
including amendments;
(ii) all material employee communications
(including summary plan descriptions or material
modifications, if any);
(iii) the two most recent annual reports and
actuarial reports, if required under ERISA;
(iv) the most recent determination letter received
from the Internal Revenue Service with respect to each
Plan intended to qualify under Section 401(a) of the
Code; and
(v) any other material documents, including any
applicable trust or other funding agreement and the
latest financial statements thereof.
(b) Since October 24, 1988, each Plan has been
operated and administered in accordance with its terms and
applicable law, including but not limited to ERISA and the
Code. All contributions, premiums and other payment
obligations required to be made to or in respect of any Plan
since October 24, 1988 have been made timely and have been
accrued on the consolidated financial statements of the
Company. All contributions made or required to be made under
any Plan since October 24, 1988 meet the requirements for
deductibility under the Code. There are no pending,
threatened, or anticipated claims (other than routine claims
for benefits) involving any Plan. There are no unpaid
penalties, fines or judgments, whether or not past due,
involving any of the Plans. All filings and submissions
required to be made by law since October 24, 1988 in respect
of any of the Plans have been made timely, to the appropriate
authority and were complete in all material respects. All
amendments, changes or modifications to any of the Plans
since October 24, 1988 have been made in accordance with the
terms of such Plan and applicable law. No Plan by its terms
requires the Company or an ERISA Affiliate to continue to
employ any employee, director or consultant. Each Plan, in
-23-
whole or in part, may be amended, modified or terminated by
the Company without liability to itself except for benefits
accrued to the effective date of such termination.
(c) Each ERISA Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified
and each trust maintained thereunder has been determined by
the Internal Revenue Service to be exempt from taxation under
Section 501(a) of the Code; no event has occurred since the
date of such determinations that would adversely affect such
qualification or tax exemption. No breach of fiduciary duty
or prohibited transaction has occurred with respect to which
the Company or any ERISA Plan would be liable or otherwise
damaged. All employee contributions under any ERISA Plan
have been made to such plan before becoming "plan assets"
under Department of Labor Regulation Section 2510.3-102.
(d) With respect to each Plan that provides
welfare benefits of the type described in Section 3(1) of
ERISA: (i) no such plan provides medical or death benefits
with respect to employees, former employees, directors or
consultants of the Company beyond their termination of
employment, other than coverage mandated by Sections 601-608
of ERISA and 4980B(f) of the Code; (ii) each such plan has
been administered in compliance with Sections 601-608 of
ERISA where applicable and 4980B(f) of the Code where
applicable; and (iii) no such plan has reserves, assets,
surpluses or prepaid premiums.
(e) No Plan is (i) a "multiemployer pension plan"
within the meaning of Section 3(37) or 4001(a)(3) of ERISA,
(ii) a plan described in Section 4063 or 4064 of ERISA, or
Section 413(c) of the Code, or (iii) a plan subject to
Section 412 of the Code or Section 302 of ERISA. Neither the
Company nor any ERISA Affiliate has ever maintained,
sponsored or contributed to, or has ever had any liability
with respect to, any plan described in the immediately
preceding sentence.
(f) The consummation of the transactions
contemplated by this Agreement will not (i) entitle any
individual to severance pay, or (ii) accelerate the time of
payment, or increase the amount, of compensation due any
individual. No payment made or contemplated under any of the
Plans constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code.
-24-
4.13. Interests of Officers, Directors and
------------------------------------
Shareholders. Except as set forth in Exhibit 4.13 hereto or
------------
as described in footnotes to any balance sheet of the Company
delivered pursuant to Section 4.5 hereof or related statement
of income and retained earnings and cash flows, and other
than in respect of salaries or amounts due in respect of
ordinary travel and business expenses and Benefit Plans, no
present officer, director or shareholder of the Company nor
any associate thereof has any agreement, loan or other
obligation outstanding with, to or from the Company or for
which the Company may be liable, or has any material interest
in any firm, person or entity with which the Company does
business.
4.14. Employees. Exhibit 4.14 hereto is a true
---------
and complete list of all employees of the Company, their
employment dates and positions, whether any such employee has
a written agreement with the Company, and the current salary
of each such employee, and the salaries, incentive awards,
bonuses and other compensation paid to each such employee for
the year ended December 31, 1995 (shown separately). Except
as set forth in Exhibit 4.14 hereto, since December 31, 1995,
the Company has not terminated or experienced the resignation
of any employee. There are no collective bargaining
agreements relating to any employees of the Company. Within
the last two years the Company has not experienced any work
stoppage or been the subject of any collective bargaining
agreement.
4.15. Banks. Exhibit 4.15 hereto is a true and
-----
complete list of all banks or other financial institutions in
which the Company has an account or a line of credit, showing
a description of each account or line of credit, or in which
the Company has a safe deposit box.
4.16. Insurance. Exhibit 4.16 hereto sets forth a
---------
true and complete list of all policies of insurance
maintained by the Company, a copy of each of which has been
previously delivered to Alleghany. Other than life insurance
policies, the insurance coverage provided by the policies of
insurance in force is reasonably adequate for the conduct of
the business conducted by the Company in accordance with
-25-
sound business practices and is not substantially different
from that which is customary in the industry.
4.17. Absence of Bank or Savings and Loan Status.
------------------------------------------
The Company (a) is not an "insured bank" or eligible for
federal deposit insurance within the meaning of the Federal
Deposit Insurance Act, as amended; (b) is not a "savings
association" for purposes of the Regulations for Savings and
Loan Holding Companies, 12 CFR 583-584 and the Regulations
for the Acquisition of Control of Savings Associations, 12
CFR 574; (c) does not accept deposits within the meaning of
12 U.S.C. 378; (d) is not a "bank" or a "bank holding
company," as such terms are defined in the Bank Holding
Company Act of 1956, as amended, and the regulations
promulgated thereunder (the "Bank Holding Company Act");
(e) does not own or "control" 5 percent or more of the voting
securities of a "bank" or "bank holding company," as such
terms are defined in the Bank Holding Company Act; (f) is not
regulated as a bank under the laws or regulations of its
jurisdiction of incorporation; (g) is not a "savings and loan
holding company"; (h) does not "control" any "savings
association," as such terms are defined in 12 CFR 574 and
583; (i) has not acquired by purchase or otherwise, and does
not retain, more than 5 percent of the voting stock or shares
of a "savings association" or "savings and loan holding
company," as such terms are defined in ▇▇ ▇▇▇ ▇▇▇; and
(j) is not regulated as a savings and loan institution under
the laws or regulations of its jurisdiction of incorporation.
4.18. Brokers and Finders. None of the Company,
-------------------
any of its officers, directors or employees, or any
Shareholder has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees
in connection with the transactions contemplated by this
Agreement.
4.19. Status of Shareholders. Each Shareholder
----------------------
represents that: (a) except for ▇▇▇▇▇▇ ▇. ▇▇▇▇, such
Shareholder is an "accredited investor" within the meaning of
Rule 501(a) of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Securities Act"); (b) such
Shareholder has such knowledge and experience in financial
and business matters as to be capable of evaluating the
merits and risks of such Shareholder's acquisition of
Alleghany Shares hereunder (c) such Shareholder has the
-26-
ability to bear the economic risks of such Shareholder's
acquisition hereunder, including a complete loss of his or
her investment in Alleghany Shares; (d) such Shareholder has
been furnished with and has had access to such information as
such Shareholder has considered necessary to make a
determination as to his or her acquisition hereunder
(including, without limitation, reports, statements and
schedules filed by Alleghany with the SEC and delivered
pursuant to Section 5.10 hereof); (e) such Shareholder has
had all questions asked by such Shareholder concerning the
operations of Alleghany and Newco answered by Alleghany and
Newco in a satisfactory manner; (f) such Shareholder has not
been offered the Alleghany Shares by any form of general
solicitation or general advertising, including, without
limitation, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general
solicitation or general advertising; and (g) such Shareholder
has not relied on any representations and warranties of
Alleghany and Newco other than those contained in this
Agreement.
4.20. Investment Representation. The Alleghany
-------------------------
Shares to be acquired by each Shareholder will be acquired by
such Shareholder for his or her own account for purposes of
investment and not with a view to distribution in a manner
which would be in violation of the Securities Act or the
securities or "blue sky" laws of any state or jurisdiction of
the United States, provided that any disposition of such
Shareholder's property shall at all times be within his or
her control. Alleghany acknowledges that the Alleghany
Shares will be registered under the Securities Act pursuant
to Section 9.4 hereof and that a portion of such Alleghany
Shares may be sold upon such registration. Each Shareholder
agrees that he or she will comply with all federal and state
securities or "blue sky" laws with respect to the Alleghany
Shares.
4.21. Shareholder Understandings.
--------------------------
(a) Each Shareholder understands that the
Alleghany Shares to be acquired by the Shareholders have not
been registered under the Securities Act and may be
transferred only if so registered or if an exemption
therefrom is available. Such Shareholder will not sell or
-27-
dispose of any of the Alleghany Shares without (i) the
registration, qualification, approval and listing of such
Alleghany Shares, or (ii) the delivery to Alleghany of an
opinion of counsel, in form and substance reasonably
satisfactory to counsel for Alleghany, that such proposed
sale or disposition is exempt from the provisions of Section
5 of the Securities Act and the applicable securities or
"blue sky" laws of any state or jurisdiction of the United
States.
(b) Until such time as, and unless, the
registration, qualification, approval and listing of the
Alleghany Shares are effective, such Shareholder understands
that the certificate for the Alleghany Shares received by him
or her pursuant to the Merger shall bear a legend to the
effect that the Alleghany Shares represented by such
certificate have not been registered under the Securities Act
and may not be transferred in the absence of such registra-
tion or an exemption therefrom.
(c) Notwithstanding the effectiveness of such
registration, qualification, approval and listing of the
Alleghany Shares, such Shareholder understands that, until
the publication of Alleghany's consolidated financial
statements which include at least thirty days of post-Merger
operations, if such Shareholder is deemed an affiliate of the
Company for purposes of the conditions for the "pooling-of-
interests" method of accounting for business transactions, in
accordance with Accounting Principles Board Opinion No. 16,
Business Combinations, the certificate for Alleghany Shares
---------------------
received by him or her pursuant to the Merger shall continue
to bear a legend to the effect that the Alleghany Shares
represented by such certificate may not be transferred;
provided, however, that, as long as the Closing takes place
-------- -------
no later than November 30, 1996, the Alleghany Shares shall
not be restricted after April 1, 1997, and Alleghany shall
issue unrestricted certificates as soon as the conditions set
forth above expire but not later than April 1, 1997.
4.22. Pooling. Since December 1, 1992, neither
-------
the Company nor any of the Shareholders has taken any of the
actions set forth in Exhibit 4.22 hereto. The statements set
forth in the letter dated August 21, 1996 from the Company to
Chicago Title Insurance Company relating to the Company's
-28-
distributions, a copy of which is set forth in Exhibit 4.22
hereto, are true and correct.
4.23. Aggregate Materiality. There are no events,
---------------------
situations, obligations or liabilities of the types described
in this Article IV and excepted therefrom solely because
individually they do not have a material adverse effect on
the condition (financial or otherwise), earnings, assets,
liabilities or business of the Company which, in the
aggregate, would have a material adverse effect on the
condition (financial or otherwise), earnings, assets,
liabilities or business of the Company.
4.24. Disclosure; No Representations as to
------------------------------------
Earnings, Client Relationships and Accounting after the
-------------------------------------------------------
Pre-Closing Date. The information provided by the Company
----------------
and the Shareholders in this Agreement and in the exhibits
and other documents delivered pursuant hereto does not
contain any untrue statement of a material fact or omit to
state herein or therein a material fact necessary to make the
statements made herein or therein, in light of the
circumstances under which they are made, not misleading.
Except for the extent to which the representations,
warranties, agreements and covenants of the Company and the
Shareholders set forth in this Agreement may bear on such
matters and without in any way limiting the scope of such
representations, warranties, agreements and covenants, the
Company and the Shareholders do not make any representations
or warranties as to (a) the earnings of the Company after the
Pre-Closing Date; (b) the continuation of client
relationships after the Pre-Closing Date; or (c) whether the
acquisition of the Company will qualify for the "pooling-of-
interests" method of accounting for business transactions
referred to in Section 4.21(c) of this Agreement.
ARTICLE V
Representations and Warranties of Alleghany and Newco
Each of Alleghany and Newco hereby jointly and
severally represents and warrants to the Company and the
Shareholders as follows:
-29-
5.1. Corporate Organization and Qualification.
----------------------------------------
Each of Alleghany and Newco is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is in good standing as a
foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it
require such qualification and where the absence of which
would have a material adverse effect on the condition
(financial or otherwise), earnings, assets, liabilities or
business of Alleghany and its subsidiaries taken as a whole.
Each of Alleghany and Newco has the requisite corporate power
and authority to carry on its business as it is now being
conducted. Alleghany has delivered to the Company a true and
complete copy of its Restated Certificate of Incorporation
and By-Laws, and of Newco's Articles of Incorporation and
Bylaws, each as amended to date, and each is in full force
and effect.
5.2. Authorized Capital. The authorized capital
------------------
stock of Alleghany consists of 22,000,000 Alleghany Shares,
of which 7,208,950 Alleghany Shares are issued and
outstanding as of the date hereof, and 8,000,000 shares of
preferred stock, par value $1.00 per share, none of which are
issued and outstanding as of the date hereof. All of the
issued and outstanding Alleghany Shares have been duly
authorized and are validly issued, fully paid and
nonassessable. The authorized capital stock of Newco
consists of 1,000 shares of common stock, par value $.01 per
share, all of which are issued and outstanding as of the date
hereof. Such shares have been duly authorized and are
validly issued, fully paid and nonassessable, and are owned
by Alleghany free and clear of all liens, pledges, security
interests, claims and other encumbrances of any nature
whatsoever.
5.3. Corporate Authority. Exhibit 5.3 hereto is
-------------------
a true and complete list of all material permits, approvals,
qualifications, filings, consents or waiting periods of third
parties and regulatory authorities which are required by
Alleghany or Newco for the consummation of the transactions
contemplated by this Agreement (other than the filing of the
Colorado Articles of Merger) (the "Alleghany and Newco
Approvals"). Each of Alleghany and Newco has full corporate
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The
-30-
execution, delivery and performance of this Agreement by
Alleghany and Newco have been duly and validly authorized by
all necessary corporate action on the part of Alleghany and
Newco, and this Agreement constitutes a legal, valid and
binding obligation of each of Alleghany and Newco,
enforceable against it in accordance with its terms. Neither
the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will
(a) conflict with or result in a breach or violation of any
of the provisions of Alleghany's Restated Certificate of
Incorporation or By-Laws or Newco's Articles of Incorporation
or Bylaws; (b) subject to the granting of the Alleghany and
Newco Approvals, conflict with, result in a breach or
violation of, result in a default or loss of a material
benefit under, or permit the acceleration of any obligation
under any provision of any agreement, indenture, mortgage,
lien, lease or other instrument or restriction of any kind to
which Alleghany or Newco is a party or by which any of their
respective assets or properties is otherwise bound; or (c)
subject to the granting of the Alleghany and Newco Approvals,
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Alleghany or Newco or any of their
respective assets or properties, the effect of which
conflict, breach, violation, default, loss or acceleration,
individually or in the aggregate, would have a material
adverse effect on the condition (financial or otherwise),
earnings, assets, liabilities or business of Alleghany and
its subsidiaries taken as a whole.
5.4. Compliance. Each of Alleghany and Newco is
----------
in compliance with all laws, regulations and requirements
applicable to the operation of its business, with which the
failure to so comply would have a material adverse effect on
the condition (financial or otherwise), earnings, assets,
liabilities or business of Alleghany and its subsidiaries
taken as a whole.
5.5. Financial Statements.
--------------------
(a) The audited consolidated balance sheets of
Alleghany and its subsidiaries as at December 31, 1995 and
1994 and the related audited consolidated statements of
earnings, changes in common stockholders' equity and cash
flows for each of the years then ended ("Alleghany's Annual
Financial Statements"), which heretofore have been delivered
to the Company, present fairly the consolidated financial
-31-
position and results of operations of Alleghany and its
subsidiaries as of the dates and for the periods indicated
therein in accordance with generally accepted accounting
principles applied on a consistent basis throughout the
periods indicated, except as may otherwise be specifically
indicated therein.
(b) The unaudited consolidated balance sheet of
Alleghany as at June 30, 1996 and the related unaudited
consolidated statements of earnings and cash flows for the
three months then ended ("Alleghany's June 30, 1996 Financial
Statements"), which heretofore have been delivered to the
Company, present fairly the consolidated financial position
and results of operations of Alleghany and its subsidiaries
as of the dates and for the periods indicated therein in
accordance with generally accepted accounting principles
applied on a basis consistent with Alleghany's Annual
Financial Statements, except as may otherwise be specifically
indicated therein.
5.6. Undisclosed Liabilities. As at December 31,
-----------------------
1995, Alleghany had no obligations or liabilities of any
nature, whether absolute, accrued, contingent or otherwise,
which, individually or in the aggregate, would have a
material adverse effect on the condition (financial or
otherwise), earnings, assets, liabilities or business of
Alleghany and its subsidiaries taken as a whole, except and
to the extent disclosed in Alleghany's Annual Financial
Statements as at December 31, 1995. Since December 31, 1995,
Alleghany has not incurred or become subject to any
obligations or liabilities of any nature, whether absolute,
accrued, contingent or otherwise, which, individually or in
the aggregate, would have a material adverse effect on the
condition (financial or otherwise), earnings, assets,
liabilities or business of Alleghany and its subsidiaries
taken as a whole, except and to the extent disclosed in
Alleghany's June 30, 1996 Financial Statements.
5.7. No Material Adverse Change. Since
--------------------------
December 31, 1995, there has not been any material adverse
change in the condition (financial or otherwise), earnings,
assets, liabilities or business of Alleghany and its
subsidiaries taken as a whole as reflected in Alleghany's
Annual Financial Statements as at December 31, 1995, whether
or not arising from transactions in the ordinary course of
business, and Alleghany is not aware of any fact or condition
-32-
relating to its business which it reasonably believes might
result in such a material adverse change after the Closing
Date. A fluctuation in the market value of Alleghany Shares
due to general market conditions shall not in and of itself
be deemed to be a material adverse change for purposes of
this Section 5.7.
5.8. Litigation. There are no actions, suits,
----------
proceedings, claims, investigations or examinations pending
or, to the best knowledge of Alleghany, threatened against
Alleghany or its businesses, properties or assets, at law or
in equity, before or by any federal, state, municipal or
other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or before any
private arbitration panel, which, if adversely determined,
would have a material adverse effect on the condition
(financial or otherwise), earnings, assets, liabilities or
business of Alleghany and its subsidiaries taken as a whole.
5.9. Brokers and Finders. None of Alleghany, the
-------------------
Transferee or any of their officers, directors or employees
has employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders fees in
connection with the transactions contemplated by this
Agreement.
5.10. SEC Filings.
-----------
(a) Alleghany has delivered to the Company and to
each Shareholder: (i) its annual reports to stockholders for
the fiscal years ended December 31, 1995 and 1994; its annual
reports on Form 10-K for the fiscal years ended December 31,
1995 and 1994; (ii) its proxy statements relating to the
meetings of the stockholders of Alleghany held April 26, 1996
and April 28, 1995; and (iii) all of its other reports,
statements, schedules and registration statements filed with
the SEC since December 31, 1995.
(b) As of its filing date, no such report or
statement filed pursuant to the Exchange Act contained any
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were
made, not misleading.
-33-
5.11. Aggregate Materiality. There are no events,
---------------------
situations, obligations or liabilities of the types described
in this Article V and excepted therefrom solely because
individually they do not have a material adverse effect on
the condition (financial or otherwise), earnings, assets,
liabilities or business of Alleghany and its subsidiaries
taken as a whole which, in the aggregate, would have a
material adverse effect on the condition (financial or
otherwise), earnings, assets, liabilities or business of
Alleghany and its subsidiaries taken as a whole.
5.12. Disclosure. The information provided by
----------
Alleghany and Newco in this Agreement and in the exhibits and
other documents delivered pursuant hereto does not contain
any untrue statement of a material fact or omit to state
herein or therein a material fact necessary to make the
statements made herein or therein, in light of the circum-
stances under which they are made, not misleading.
5.13. Transferee Approvals. All permits,
--------------------
approvals, qualifications, filings, notices, consents or
waiting periods which are required by the Company from
Chicago Title Insurance Company or its affiliates for the
consummation of the transactions contemplated by this
Agreement have been given or waived; provided, however, that
-------- -------
this provision does not constitute a waiver of any obliga-
tions to make payments under any agreements between the
Company and Chicago Title Insurance Company or its
affiliates.
ARTICLE VI
Conditions to the Obligations of Alleghany and Newco
The obligations of each of Alleghany and Newco
under this Agreement are subject to the satisfaction, on or
before the Closing Date in accordance with the procedures set
forth in Section 12.11 of this Agreement, of each of the
following conditions:
6.1. Compliance with Agreement. The Company and
-------------------------
each Shareholder shall have performed and complied in all
-34-
material respects with all the terms, covenants and
conditions required by this Agreement to be performed or
complied with by it, him or her on or before the Closing
Date, and Alleghany and Newco shall have received from the
Company and each Shareholder the certificates required to be
delivered by it, him or her pursuant to Section 12.11 of this
Agreement.
6.2. Representations and Warranties. The
------------------------------
representations and warranties made by the Company and each
Shareholder in this Agreement shall be true and correct in
all material respects (except that each of the representa-
tions and warranties made by the Company and each Shareholder
which is qualified by materiality shall be true and correct
in all respects) as of the Closing Date, except for any
changes permitted by the terms hereof or consented to by
Alleghany and Newco, and Alleghany and Newco shall have
received from the Company and each Shareholder the
certificates required to be delivered by it, him or her
pursuant to Section 12.11 of this Agreement.
6.3. Opinion of Counsel for the Company and the
------------------------------------------
Shareholders. Alleghany and Newco shall have received an
------------
opinion from ▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇ P.C., counsel for the
Company and the Shareholders, dated the Closing Date,
substantially in the form set forth in Exhibit 6.3 hereto.
6.4. Approvals. All Company Approvals and all
---------
Alleghany and Newco Approvals shall have been obtained and be
in effect on the Closing Date; provided, however, that the
-------- -------
Company Approvals required under the leases for the Arvada
and Colorado Springs offices need not be obtained.
ARTICLE VII
Conditions to the Obligations
of the Company and the Shareholders
The obligations of the Company and the Shareholders
under this Agreement are subject to the satisfaction, on or
before the Closing Date in accordance with the procedures set
-35-
forth in Section 12.11 of this Agreement, of each of the
following conditions:
7.1. Compliance with Agreement. Each of Alleghany
-------------------------
and Newco shall have performed and complied in all material
respects with all the terms, covenants and conditions
required by this Agreement to be performed or complied with
by it on or before the Closing Date, and the Company and the
Shareholders shall have received from each of Alleghany and
Newco the certificates required to be delivered by them
pursuant to Section 12.11 of this Agreement.
7.2. Representations and Warranties. The
------------------------------
representations and warranties made by Alleghany and Newco in
this Agreement shall be true and correct in all material
respects (except that each of the representations and
warranties made by Alleghany and Newco which is qualified by
materiality shall be true and correct in all respects) as of
the Closing Date except for any changes permitted by the
terms hereof or consented to by the Company and the
Shareholders, and the Company and the Shareholders shall have
received from each of Alleghany and Newco the certificates
required to be delivered by them pursuant to Section 12.11 of
this Agreement.
7.3. Opinion of Counsel for Alleghany and Newco.
------------------------------------------
The Company and the Shareholders shall have received an
opinion from ▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine, counsel for
Alleghany and Newco, dated the Closing Date, substantially in
the form set forth in Exhibit 7.3 hereto.
7.4. Approvals. All Company Approvals (except for
---------
the Company Approvals required under the leases for the
Arvada and Colorado Springs offices) and all Alleghany and
Newco Approvals shall have been obtained and be in effect on
the Closing Date, and the Board of Directors of Alleghany
shall have approved the execution, delivery and performance
of this Agreement by Alleghany.
-36-
ARTICLE VIII
Covenants of the Company and the Shareholders
8.1. Covenants Pending the Closing. From and
-----------------------------
after the date hereof and until the Closing Date:
(a) Access to Properties, Books and Records. The
---------------------------------------
Company and the Shareholders shall afford or cause to be
afforded to Alleghany and to the attorneys, accountants
and other authorized representatives (collectively,
"Representatives") of Alleghany reasonable access during
normal business hours as often as they reasonably desire to
▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the Company and its
properties, books and records in order to afford Alleghany
the opportunity to make such investigations of the affairs of
the Company as it deems desirable. In the event Alleghany
determines that in order to investigate reasonably defined
matters relating to the Company it desires access to
employees other than ▇▇▇▇▇▇ ▇. ▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the
Company, the Shareholders and Alleghany shall mutually
identify employees who are knowledgeable about such matters
and Alleghany shall be afforded reasonable access during
normal business hours as often as they reasonably desire to
such employees. The Company and the Shareholders shall also
furnish or cause to be furnished to Alleghany such
information relating to the business and affairs of the
Company as Alleghany shall from time to time reasonably
request. Alleghany shall, and shall cause its attorneys,
accountants and other authorized representatives to, hold in
confidence information which is obtained from the Company or
the Shareholders and is not otherwise publicly available or
ascertainable; provided, however, that (i) any such
-------- -------
information may be disclosed to government officials pursuant
to a court order or similar legal compulsion after advising
the Company and the Shareholders of such requests for
disclosures and giving the Company and the Shareholders
reasonable opportunity to seek a protective order with
respect to such disclosure, and (ii) any such information may
be disclosed if the Shareholders consent to such disclosure
in writing. In the event of any termination of this
Agreement pursuant to Section 12.1 hereof, Alleghany shall
return to the Company all materials obtained from the Company
containing information of a confidential or proprietary
nature, shall destroy all other materials which reflect or
-37-
contain any such information, and shall maintain the
confidentiality of information of a confidential or
proprietary nature which is obtained from the Company or the
Shareholders.
(b) Carry On in Regular Course. The Company shall
--------------------------
carry on its business diligently and substantially in the
same manner as presently being conducted and shall not make
or institute any material change in its methods of operations
or doing business; provided, however, that the Company shall
-------- -------
not enter into, terminate, amend or renew (except for the
renewal of insurance policies that would otherwise expire
prior to the Closing) any agreement which is, or if in
existence as of the date hereof would have been required to
be, set forth on any exhibit delivered pursuant to Section
4.11 hereof, without the prior written consent of Alleghany.
Without the prior written consent of Alleghany, neither the
Company nor any of the Shareholders shall grant any bonuses
to any of the employees of the Company, alter or increase the
present compensation of such employees by an amount greater
than $3,000 on an annual basis, amend the current terms of
the Benefit Plans, make a loan or gift to any of the
Shareholders or employees of the Company or, except as
permitted by Section 10.5 hereof, declare, set aside or pay
any dividend or other distribution in respect of the capital
stock of the Company or directly or indirectly redeem,
purchase or otherwise acquire any such stock. No capital
expenditures shall be incurred or contracted for by or on
behalf of the Company in excess of $10,000 in the aggregate
prior to September 30, 1996 or $20,000 thereafter without the
prior written consent of Alleghany. No sale, assignment,
transfer or other disposition of any material tangible or
intangible asset of the Company and no amendment, termination
or waiver of any right of substantial value belonging to or
held by the Company shall be made or contracted for by or on
behalf of the Company without the prior written consent of
Alleghany.
(c) Preservation of Organization. The Company
----------------------------
shall maintain its corporate existence and powers in
Colorado. The Company shall not amend its Articles of
Incorporation or By-laws without the prior written consent of
Alleghany, and the Company shall not make any change in its
-38-
authorized or issued capital stock; provided, however, that
-------- -------
the Company shall amend its By-laws immediately prior to the
Effective Time in any manner as Alleghany shall, in its sole
discretion, request. Each of the Company and the
Shareholders shall use its, his or her best efforts to
(i) preserve intact the business organization of the Company,
(ii) keep available to Alleghany the present key officers and
employees of the Company other than ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, (iii) preserve for Alleghany the relationships of
the Company with its clients, suppliers and others having
business relations with it, (iv) maintain all of the proper-
ties of the Company in customary repair, order and condition,
and (v) take all steps reasonably necessary to maintain the
intangible assets of the Company.
(d) Financial Statements. The Company shall
--------------------
deliver to Alleghany as promptly as practicable, but in any
event within twenty days, after the end of each quarter, the
unaudited balance sheet of the Company and the related
statements of income and retained earnings for the period
then ended, which shall present fairly the financial position
and results of operations of the Company as of the dates and
for the periods indicated therein in accordance with
generally accepted accounting principles applied on a basis
consistent with the Annual Financial Statements.
8.2. Filings and Approvals. Each of the Company
---------------------
and the Shareholders shall duly make all regulatory filings
required to be made by it in respect of this Agreement or the
transactions contemplated hereby.
8.3. Best Efforts. Each of the Company and the
------------
Shareholders agrees to use its, his or her reasonable best
efforts to consummate the transactions contemplated hereby,
including, without limitation, satisfaction of the conditions
set forth in Article VI hereof in accordance with the
procedures set forth in Section 12.11 of this Agreement.
8.4. Further Assurances. Each of the Shareholders
------------------
agrees that he or she will, from time to time at and
subsequent to the Closing Date, at the request of Alleghany
and without further consideration, execute and deliver such
other instruments of conveyance, assignment and transfer and
-39-
take such other actions as Alleghany may reasonably request
in order more effectively to consummate the transactions
contemplated hereby, including, without limitation, a
representation letter from the Company to KPMG Peat Marwick
LLP in the form set forth in Exhibit 8.4 hereto. None of the
Shareholders will take any of the actions set forth in
Exhibit 8.4 hereto.
8.5. No Competition; No Solicitation; No
-----------------------------------
Inducement; Confidentiality.
---------------------------
(a) Each Shareholder agrees that for a period
commencing on the Closing Date and ending five years
thereafter he or she shall not, without the express prior
written consent of the Surviving Corporation:
(i) engage in the title insurance agency business
of the type conducted currently by the Company (or
conducted during the period commencing on the Closing
Date and ending five years thereafter by the Surviving
Corporation or any subsidiary or affiliate thereof),
either directly, or as a consultant or advisor, or as a
shareholder (other than as the holder of less than 5
percent of the shares of any corporation whose shares
are traded on a national securities exchange or over the
counter) or partner, in direct competition with the
Surviving Corporation or any subsidiary or affiliate
thereof within the counties in the State of Colorado
listed on Exhibit 8.5;
(ii) for himself or herself, on behalf of any
other person, firm or entity or in connection with any
other person, firm or entity, approach, counsel or
attempt to induce any employee of the Surviving
Corporation to leave the employ of the Surviving
Corporation or to terminate such engagement, or employ
or attempt to employ, or engage or attempt to engage,
any such person who at any time during the preceding
twelve months was in the employ of the Company or the
Surviving Corporation or engaged by the Company or the
Surviving Corporation; or
(iii) for himself or herself, on behalf of any
other person, firm or entity or in conjunction with any
other person, firm or entity (other than the Surviving
Corporation) do business with, solicit, call upon,
-40-
accept business from or engage in business with any
person, firm or entity which is a customer of the
Surviving Corporation on the Closing Date for the
purpose of providing the same or similar services as
that conducted by the Surviving Corporation as of the
Closing Date or entered into by the Surviving
Corporation after the Closing Date.
(b) Each Shareholder agrees that he or she will
not at any time from and after the date hereof divulge,
furnish or make accessible to any person, or himself or
herself make use of any confidential information obtained by
him or her in respect of the Company, the Surviving
Corporation or any subsidiary or affiliate thereof,
including, without limitation, information with respect to
any trade secrets, products, programs, methodologies,
finances, financial condition, organization, personnel,
business activities, budgets, plans or objectives of the
Company, the Surviving Corporation or any subsidiary or
affiliate thereof, and that, except for ▇▇▇▇▇▇ ▇. ▇▇▇▇, he or
she will, prior to the Closing Date, return to the Company
all such information which has been reduced to written or
other physical form, and all copies thereof, in his or her
possession or custody or under his control; provided,
--------
however, that (i) confidential information shall not include
-------
publicly available information or information known generally
to the public or in the industry, and (ii) a Shareholder may
disclose such information as may be required in connection
with any judicial or administrative proceeding or inquiry.
(c) In view of the geographic scope and nature of
the business in which the Company is, and the Surviving
Corporation will be, engaged, and recognizing the substantial
sums to be paid to the Shareholders pursuant to the terms
hereof, each Shareholder expressly acknowledges that the
restrictive covenants set forth in this Section 8.5,
including, without limitation, the geographic scope of such
covenants, are necessary in order to protect and maintain the
proprietary interests and other legitimate business interests
of the Surviving Corporation and that the enforcement of such
restrictive covenants will not prevent him or her from
earning a livelihood. Each Shareholder also acknowledges
that the scope of the operations of the Company is, and the
Surviving Corporation will be, such that it is reasonable
that the restrictions set forth in this Section 8.5 are not
more limited as to geographic area than is set forth herein.
-41-
Each Shareholder further acknowledges that the remedy at law
for any breach or threatened breach of this Section 8.5 will
be inadequate and, accordingly, that Alleghany and the
Surviving Corporation shall, in addition to all other
available remedies (including, without limitation, seeking
such damages as it can show it has sustained by reason of
such breach), be entitled to injunctive relief.
(d) The provisions of this Section 8.5 shall be
construed as independent covenants; and the existence of any
claim, demand, action or cause of action of a Shareholder
against any party hereto, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement of any of the covenants in this Section 8.5.
8.6. Compliance with Securities Laws. Each of the
-------------------------------
Shareholders agrees that he will comply with all federal and
state securities and "blue sky" laws with respect to the
Alleghany Shares.
ARTICLE IX
Covenants of Alleghany and Newco
9.1. Filings and Approvals. Each of Alleghany and
---------------------
Newco shall duly make all regulatory filings required to be
made by it in respect of this Agreement or the transactions
contemplated hereby.
9.2. Best Efforts. Each of Alleghany and Newco
------------
agrees to use its reasonable best efforts to consummate the
transactions contemplated hereby, including, without
limitation, satisfaction of the conditions set forth in
Article VII hereof in accordance with the procedures set
forth in Section 12.11 of this Agreement.
9.3. Further Assurances. Alleghany agrees that it
------------------
will, from time to time at and subsequent to the Closing
Date, at the request of the Shareholders and without further
consideration, execute and deliver such other instruments of
conveyance, assignment and transfer and take such other
actions as the Shareholders may reasonably request in order
-42-
more effectively to consummate the transactions contemplated
hereby.
9.4. Registration Rights.
-------------------
(a) Registration. Subject to this Section 9.4(a),
------------
Alleghany shall use its reasonable best efforts to file
within 30 days after the Closing Date a registration
statement on Form S-3 under the Securities Act and agrees to
effect no earlier than the first day after the publication of
Alleghany's consolidated financial statements which include
at least thirty days of post-Merger operations, but in all
events no later than April 1, 1997 (provided that the Closing
takes place no later than September 30, 1996), (i) such
registration and/or qualification with, or the approval of,
any governmental authority under any federal or state
securities laws of all Alleghany Shares acquired by the
Shareholders under this Agreement, and (ii) the listing of
such Alleghany Shares with any domestic securities exchange
on which Alleghany's common stock is then listed, in each
case as may be required to permit the sale or other
disposition of such Alleghany Shares by the Shareholders.
Alleghany may, upon written notice to the Shareholders, defer
such registration for a reasonable period, but not in excess
of 90 days, if it has made a good faith determination that
the filing of a registration statement at such time would
require the disclosure of material information which
Alleghany has a bona fide business purpose for preserving as
confidential or that Alleghany is unable to comply with SEC
requirements. Alleghany shall be under no obligation to
effect an underwritten offering of the Alleghany Shares.
Alleghany shall not be required to effect more than one
registration pursuant to this Section 9.4(a).
(b) Effectiveness. Alleghany shall keep effective
-------------
and maintain any registration, qualification, approval or
listing of the Alleghany Shares required pursuant to this
Section 9.4, and from time to time to amend or supplement the
prospectus used in connection therewith to the extent
necessary in order to comply with applicable federal and
state securities laws, until the earlier of the date on which
all of the Alleghany Shares covered by the registration
statement have been sold by the Shareholders or two years
after the effectiveness of such registration statement.
Alleghany shall furnish to each Shareholder such number of
-43-
copies of such prospectus, as amended from time to time, and
supplements thereto, as such Shareholder may reasonably
request.
(c) Expenses. All expenses incident to the
--------
obligations of Alleghany under Sections 9.4(a) and 9.4(b)
hereof (including, without limitation, registration fees,
printing or document reproduction expenses, and fees and
expenses of its counsel and accountants) shall be borne by
Alleghany, and all other expenses incident to the disposition
by each Shareholder of the Alleghany Shares held by him or
her (including, without limitation, fees and expenses of his
or her counsel and all underwriting discounts, if any,
brokerage commissions and similar fees) shall be borne by
such Shareholder.
(d) Shareholder Agreements. Each Shareholder
----------------------
shall (i) furnish to Alleghany such information as Alleghany
may from time to time reasonably request in connection with
the registration statement and prospectus, any amendment or
supplement thereto or any other filings required by this
Section 9.4; (ii) from and after the Closing Date and for so
long as the registration, qualification, approval or listing
remains effective, promptly after the sale or any other
disposition by him or her of Alleghany Shares, give Alleghany
written notice of same; (iii) promptly notify Alleghany of
any event which comes to his or her attention which would
necessitate an amendment or supplement to the registration
statement, prospectus or any of the other filings required by
this Section 9.4; and (iv) suspend sales of Alleghany Shares
under such registration statement promptly upon receipt of
notice from Alleghany that such sales may not be made until
such registration statement and prospectus are amended or
supplemented as necessary, provided that Alleghany do so as
expeditiously as possible.
(e) Indemnification under this Section 9.4.
--------------------------------------
(i) Alleghany agrees to indemnify, to the extent
permitted by law, the Shareholders and hold them
harmless at all times after the date of this Agreement
from and against and in respect of any and all
liabilities, losses, damages, settlements, claims, costs
or expenses, including, without limitation, attorneys'
fees (collectively, "Liabilities"), under the Securities
-44-
Act, state securities laws, common law or otherwise,
arising out of or due to (A) any untrue statement or
alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the
registration or qualification of the Alleghany Shares,
or (B) any omission or alleged omission to state in such
registration statement or prospectus a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as
such Liabilities arise out of or are due to any untrue
statement of a material fact contained in, or omission
of a material fact from, information furnished in
writing to Alleghany by the Shareholders expressly for
use in such registration statement or prospectus. If
the offering pursuant to this Section 9.4 is made
through underwriters, Alleghany agrees to enter into an
underwriting agreement in customary form with such
underwriters and to indemnify such underwriters to the
same extent as provided above with respect to the
indemnification of the Shareholders.
(ii) The Shareholders jointly and severally agree
to indemnify, to the extent permitted by law, Alleghany,
its directors and officers and each person, if any, who
controls Alleghany within the meaning of Section 15 of
the Securities Act and hold them harmless at all times
after the date of this Agreement from and against and in
respect of any and all Liabilities under the Securities
Act, state securities laws, common law or otherwise,
arising out of or due to (A) any untrue statement or
alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the
registration or qualification of the Alleghany Shares,
or (B) any omission or alleged omission to state in such
registration statement or prospectus a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading, but only to the
extent that such Liabilities arise out of or are due to
any untrue statement of a material fact contained in, or
omission of a material fact from, information furnished
in writing to Alleghany by the Shareholders expressly
for use in such registration statement or prospectus.
(iii) The procedures to be followed in connection
with the rights of indemnification provided in this
Section 9.4(e) are set forth in Section 11.3 hereof.
-45-
ARTICLE X
Covenants of the Shareholders and Alleghany
Relating to Certain Tax and Distribution Matters
10.1. Pre-Merger and Straddle Period Taxes.
------------------------------------
(a) The Company, at its cost or expense, shall
prepare or cause to be prepared, and file or cause to be
filed, on a timely basis, each of the income Tax Returns of
the Company (including any amendments thereto) in respect of
(a) the taxable period beginning January 1, 1996 and ending
on the day before the Effective Time (the "Pre-Merger
Period"), and (b) the taxable period consisting of the day of
the Effective Time (the "One-Day Period"). The Shareholders
shall pay, or cause to be paid, all income Taxes in respect
of the Pre-Merger Period, and the Company shall pay, or cause
to be paid, all income Taxes in respect of the One-Day
Period.
(b) The Tax Returns for each of the Pre-Merger
Period and the One-Day Period shall be prepared on the basis
of the Company's normal tax accounting method and shall be
consistent with the preparation of the Pre-Closing Date
Balance Sheet (as hereinafter defined). In furtherance
thereof, the Shareholders and Alleghany each agree to make
the election provided by Section 1362(e)(3) of the Code and
each further agrees to execute and deliver to the Company (at
least 30 days prior to the due date for filing (determined
without any extensions) for each of the Pre-Merger Period and
One-Day Period income Tax Returns) the statement required by
Treasury Regulation Section 1.1362-6(b). The Pre-Merger and
One-Day Period income Tax Returns shall otherwise be prepared
in a manner consistent with the past practices of the Company
and, in any event, as to which there shall be "substantial
authority" (within the meaning of Section 6662(d)(2)(B)(i) of
the Code) as to the treatment of any item shown on such Tax
Returns. The Company shall furnish a copy of each such Tax
Return to Alleghany at least thirty days prior to the due
date (determined without any extensions) for the filing
thereof so that Alleghany may satisfy itself that such Tax
Return was prepared in compliance with the foregoing
sentence. In the event that Alleghany determines that there
is not "substantial authority" for the treatment of any item
on any such Tax Return, such Tax Return shall not be filed
-46-
until the Company and Alleghany mutually agree as to the
treatment of any such item.
(c) All transfer, gains, stamp, recording or other
similar Taxes incurred in connection with the transactions
contemplated by this Agreement, including any interest, pen-
alties, fines, assessments or additions to tax, whether dis-
puted or not, imposed in respect of the foregoing, will be
borne by the Shareholders. The Shareholders will, at their
own expense, file all necessary Tax Returns and other docu-
mentation with respect to all such transfer Taxes as required
by applicable law, and assume all responsibility for filing
such Tax Returns and documentation on an accurate, complete
and timely basis. Alleghany, as appropriate, will join in
the execution of any such Tax Return or other documentation.
10.2. Access to Information and Retention of
--------------------------------------
Records.
-------
(a) Each of the Shareholders and Alleghany will
provide the other, and Alleghany, after the Closing, shall
cause the Surviving Corporation to provide the Shareholders,
at reasonable times and upon reasonable notice, access to,
and a right to copy and use where appropriate, any records or
information and personnel which may be relevant for the
taxable period for which the requesting party is charged with
payment responsibility for Taxes under this Agreement in
connection with the preparation of any Tax Returns, any audit
or other examination, the filing of any claim for a refund of
Tax or for the allowance of any Tax credit, or any judicial
or administrative proceedings relating to liability for
Taxes. The party requesting assistance hereunder shall
reimburse the other party for reasonable out-of-pocket
expenses incurred in providing such assistance. Any
information obtained pursuant to this Section 10.2(a) shall
be held in strict confidence and shall be used solely in
connection with the reason for which it was requested.
(b) The Shareholders shall promptly forward to
Alleghany, and Alleghany shall promptly forward to the
Shareholders' Representative (as defined below), all written
notifications and other written communications received by
the Shareholders or Alleghany, respectively, relating to any
liability for Taxes for a taxable period, including the One-
Day Period, for which the Shareholders or Alleghany, as the
-47-
case may be, are or is charged with payment responsibility
under this Agreement.
10.3. Section 338(h)(10) Election.
---------------------------
(a) Triggering Disposition. If the Shareholders
----------------------
dispose of, in the aggregate, more than fifty percent of the
Alleghany Shares received pursuant to Article III of this
Agreement within eight months after the Closing Date (a
"Triggering Disposition"), the Shareholders shall give
Alleghany and ▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine, as escrow
agents, written notice of such Triggering Disposition and, at
the request of Alleghany, each of the Shareholders shall join
with Alleghany in making an election under Section 338(h)(10)
of the Code and the Treasury Regulations thereunder (a
"Section 338(h)(10) Election") with respect to the Company.
(b) Facilitation of Election. To facilitate the
------------------------
timely filing of any Section 338(h)(10) Election, at the
Closing each Shareholder agrees to execute and deliver to
▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine, as escrow agent, Internal
Revenue Service Form 8023-A, Corporate Qualified Stock
-------------------------
Purchases, prepared by Alleghany, for the Company. The
---------
escrow agent shall not release Form 8023-A to Alleghany until
such time as the Shareholders have notified Alleghany and the
escrow agent that a Triggering Disposition has occurred
pursuant to Section 10.3(a) hereof. The escrow agent shall
deliver Form 8023-A to the Shareholders following the
expiration of the eight-month period referenced in Section
10.3(a) hereof.
(c) Allocation of Merger Consideration. Alleghany
----------------------------------
and the Shareholders agree that, if Alleghany makes a Section
338(h)(10) Election upon a Triggering Disposition, the Merger
Consideration and the liabilities of the Company (plus other
relevant items) shall be allocated to the assets of the
Company for all Tax purposes in a manner consistent with the
Treasury Regulations under Section 338 of the Code and on the
basis of the fair market values as reasonably determined by
Alleghany, provided that the fair market value as so
determined shall not be less than the tax basis thereof on
the Closing Date and that, in the event Alleghany determines
-48-
to allocate Merger Consideration to assets described in
Section 1245 or Section 1250 of the Code, or assets the sale
of which at a gain would produce ordinary income, in excess
of the tax basis of such assets, the fair market value of
such assets shall be determined by the mutual agreement of
Alleghany and the Shareholders. Alleghany, the Company and
each of the Shareholders agree that each shall file all Tax
Returns (including amended returns and claims for refund) and
information reports for the Company in a manner consistent
with such election and such values.
(d) Additional Taxes Due. Any additional Taxes
--------------------
imposed upon the Company by reason of the Section 338(h)(10)
Election shall be paid by the Company.
(e) Notice of Disposed Merger Consideration;
----------------------------------------
Notice of Section 338(h)(10) Election. If any Shareholder
-------------------------------------
disposes of any Alleghany Shares within eight months after
the Closing Date, such Shareholder shall promptly (and, in
the case of any disposition occurring more than six months
after the Closing Date in no event later than five days after
such disposition) notify Alleghany of such disposition, which
notice shall include the number of Alleghany Shares disposed
of. If Alleghany makes a Section 338(h)(10) Election upon a
Triggering Disposition, Alleghany shall promptly notify the
affected Shareholders of such election.
10.4. Miscellaneous Tax Provisions.
----------------------------
(a) Notice of Disposed Consideration. If any
--------------------------------
Shareholder disposes of any Alleghany Shares within two years
after the Closing Date, such Shareholder shall promptly
notify Alleghany of such disposition, which notice shall
include the number of Alleghany Shares disposed of.
(b) Absence of Tax Representations or Agreements.
--------------------------------------------
(i) Except as set forth in Section 10.4(c) below,
Alleghany makes no representations or warranties with
respect to the income Tax consequences of the
transactions contemplated by this Agreement or the
effect thereon of, or any agreements as to any
-49-
restrictions on, any transactions involving the Company
(or its assets) after the Closing Date. Further,
nothing contained herein shall be construed or
interpreted to impose any liability or obligation upon
Alleghany, Newco and/or any Transferee for any Taxes
imposed upon any Shareholder by reason of any of the
transactions contemplated by this Agreement except upon
breach of Section 10.4(c) hereof.
(ii) The Shareholders make no representations or
warranties with respect to the income Tax consequences
of the transactions contemplated by this Agreement or
the effect thereon of or, except as expressly set forth
in this Agreement, any agreements as to any restrictions
on, any transactions involving the Alleghany Shares
after the Closing Date. Further, except as expressly
set forth in this Agreement, nothing contained herein
shall be construed or interpreted to impose any
liability or obligation upon the Shareholders for any
Taxes imposed upon Alleghany, Newco and/or any
Transferee by reason of any of the transactions
contemplated by this Agreement.
(c) Alleghany Representations. Solely for
-------------------------
purposes of permitting each of the Shareholders to determine
the income Tax consequences to them of the Merger, Alleghany
represents to the Shareholders that:
(i) At the Effective Time, Alleghany will have no
plan or intention to reacquire any of the Alleghany
Shares issued in the Merger to the Shareholders.
(ii) Following the Merger, the Surviving
Corporation will continue the historic business of the
Company or use a significant portion of the Company's
historic business assets in a business (as contemplated
by Treas. Reg. Section 1.368-1(d)).
(iii) Immediately prior to the Merger, Alleghany
will be in control of Newco (within the meaning of
Section 368(c) of the Code).
(iv) Immediately following the Merger, the
Surviving Corporation will not issue additional shares
of its stock that would result in Alleghany losing
control of the Surviving Corporation (within the meaning
of Section 368(c) of the Code).
-50-
(v) At the Effective Time, Alleghany will have no
plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with and
into another corporation; to sell or otherwise dispose
of the stock of the Surviving Corporation for a period
of two years after the Effective Time, except for any
transfer of the stock of the Surviving Corporation to a
corporation which is controlled (within the meaning of
Section 368(c) of the Code) by Alleghany or to a
corporation controlled (within the meaning of Section
368(c) of the Code) by a corporation which is controlled
(within the meaning of Section 368(c) of the Code) by
Alleghany; or to cause the Surviving Corporation to sell
or otherwise dispose of any of its assets or any of the
assets acquired in the Merger, except for dispositions
made in the ordinary course of business.
(vi) Immediately prior to the Merger, Newco will
not constitute an investment company (as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code).
(vii) At the Effective Time, Newco will have no
liabilities other than those arising under this
Agreement.
(d) In the event that the United States Tax Court
shall render a final decision (as such term is used in
Section 7481(a) of the Code), or in the event that a District
Court of the United States or the United States Court of
Federal Claims shall make a final decision determining the
Federal income tax consequences to one or more of the
Shareholders of the Merger, and such decision becomes final
(including any appeals) holding that any representation in
Section 10.4(c) hereof was not true at the time provided for
in the representation, then such factual determination that
the representation in Section 10.4(c) hereof was not true
shall be binding upon Alleghany in any subsequent proceeding
with the Shareholders; provided that: (1) counsel
representing the Shareholders in the proceeding before the
Tax Court, the District Court or the Court of Claims
(including in any appeals therefrom) was a law firm
experienced in such matters and reasonably acceptable to
Alleghany, and (2) (A) such counsel acknowledged in writing
that such counsel also represented the interests of Alleghany
to be determined in such proceeding, and Alleghany was given
the opportunity to consult with and make recommendations to
such counsel in the conduct of such proceeding or (B)
Alleghany was given the opportunity by the Shareholders in
-51-
writing to control the handling by such counsel in such
proceeding of the issues relating to the representations in
Section 10.4(c) hereof.
10.5. Distributions.
-------------
(a) Before the Effective Time but not before the
completion of the Pre-Closing Date Balance Sheet and the
resolution of any disagreements with respect thereto, the
Company may declare and pay to the Shareholders distributions
in an amount equal to the Tax Distribution and in an
aggregate amount equal to the Earnings Distribution (each as
defined below).
(b) The Tax Distribution shall be an amount equal
to the aggregate Federal and Colorado income Taxes estimated
to be imposed on each Shareholder computed using a combined,
aggregate tax rate of 43.808 percent, by reason of the
inclusion in each Shareholder's taxable income for 1996 of
(x) the Shareholder's pro rata share of the Company's
estimated items of income, loss, deduction or credit for its
taxable period beginning on January 1, 1996 and ending on
March 31, 1996 (the "First Quarter Income"), and (y) an
amount equal to the Shareholder's pro rata share of the
Company's estimated taxable income for the period beginning
on the day after the Pre-Closing Date and ending on the day
prior to the Effective Time (the "Short-Period Income"). The
First Quarter Income shall be computed based upon the
unaudited statement of income for the Company at March 31,
1996, delivered pursuant to Section 4.5(b) hereof, with such
adjustments thereto as are appropriate and proper to reflect
the differences, if any, between the computation of taxable
income under the Code and income for financial statements in
accordance with generally accepted accounting principles.
Alleghany and the Shareholders shall mutually agree upon the
estimate of the Company's First Quarter Income. The Short-
Period Income shall be equal to the product of (i) the
Company's average daily net income, derived by dividing (x)
the income of the Company during the first six months of
1996, as shown on the June 30 Income Statement (or, if
available, the income of the Company during the first seven
months of 1996, as shown on the July 31 Income Statement),
with such adjustments thereto as are appropriate to reflect
the differences, if any, between the computation of taxable
income under the Code and income for financial statements in
accordance with generally accepted accounting principles, by
(y) the number of business days (a business day being each
-52-
day that banks in Denver, Colorado are open for the conduct
of business) during the first six months of 1996 (or the
first seven months of 1996 if using the July 31 Income
Statement), times (ii) the number of business days (as
heretofore defined) from the day after the Pre-Closing Date
to and including the day prior to the Effective Time.
(c)(i) The Company may declare and pay to the
Shareholders as the Earnings Distribution an amount up
to the difference between the Retained Earnings
(including Current Year Retained Earnings) of the
Company as shown on the Pre-Closing Date Balance Sheet
(as defined below) and the Retained Earnings (including
Current Year Retained Earnings) as shown on the balance
sheet of the Company as at March 31, 1996 delivered
pursuant to Section 4.5(b) hereof; provided, however,
-------- -------
that, after such Earnings Distribution, (A) Total
Current Assets (excluding any accounts receivable first
established more than 90 days prior to the Pre-Closing
Date) shall equal or exceed Total Current Liabilities
(reduced by an amount equal to the lesser of the amount
accrued on the Pre-Closing Date Balance Sheet for the
"accrued rent" account and $210,386), all as shown on
the Pre-Closing Date Balance Sheet, and (B) cash and
Cash Equivalents (as defined below) of the Company shall
equal or exceed the sum of $400,000 plus the Transaction
Fees (as defined below), all as shown on the Pre-Closing
Date Balance Sheet.
(ii) The unaudited balance sheet of the Company as
at the Pre-Closing Date (the "Pre-Closing Date Balance
Sheet") and related unaudited statements of income and
retained earnings shall be prepared by the Company and
delivered to the parties hereto. Such Pre-Closing Date
Balance Sheet and related unaudited statements of income
and retained earnings will present fairly the financial
position of the Company as at the Pre-Closing Date in
accordance with generally accepted accounting principles
applied on a basis consistent with the Annual Financial
Statements; provided, however, that such Pre-Closing
-------- -------
Date Balance Sheet and related unaudited statements of
income and retained earnings shall be prepared without
regard to the effect thereon of any of the transactions
contemplated by this Agreement. Without limiting the
generality of the foregoing, all accruals of revenues,
obligations and expenses will be properly reflected on
-53-
the Pre-Closing Date Balance Sheet and related unaudited
statements of income and retained earnings in accordance
with generally accepted accounting principles,
including, without limitation, (i) all accruals for the
preparation of income Tax Returns for the Pre-Merger
Period, and (ii) all legal, accounting, tax and other
advisory fees and expenses of the Company incurred in
connection with the transactions contemplated hereby
(the "Transaction Fees"). The Shareholders shall be
liable for any Transaction Fees not reflected as
accruals on the Pre-Closing Date Balance Sheet, and the
Company shall have no liability whatsoever therefor.
Any disagreements relating to the Pre-Closing Date
Balance Sheet shall be resolved in accordance with
Section 12.11 hereof.
(iii) "Cash Equivalents" shall mean investments
held in money market accounts, checking accounts, or
federally insured certificates of deposit for terms not
exceeding 30 days and shall be shown separately on the
Pre-Closing Date Balance Sheet; provided, however, that
-------- -------
no such investment shall have been pledged to secure any
obligation in any manner whatsoever.
ARTICLE XI
Indemnity
11.1. By the Shareholders and the Company. The
-----------------------------------
Shareholders and, prior to the Closing, the Company jointly
and severally agree to indemnify Alleghany, Newco and
Transferee and hold them harmless at all times after the date
of this Agreement from and against and in respect of any and
all Liabilities arising out of or due to the breach of any
representation, warranty, agreement or covenant of the
Company or the Shareholders set forth in this Agreement, or
in any of the exhibits or other documents delivered pursuant
hereto, and any and all actions, suits, proceedings, demands,
assessments or judgments, and costs and expenses, incident to
any of the foregoing, but only if and to the extent that any
claim in respect of any such breach is asserted during the
period during which such representation, warranty, agreement
or covenant shall survive in accordance with Section 12.6
-54-
hereof; provided, however, that the Shareholders and the
-------- -------
Company shall have no obligation to indemnify Alleghany,
Newco and Transferee under this Agreement until such time as
the aggregate amount of Liabilities claimed by Alleghany,
Newco and Transferee exceeds Two Hundred Fifty Thousand
Dollars ($250,000), and then only in amounts in excess of
such Two Hundred Fifty Thousand Dollars ($250,000), except
that (a) Alleghany, Newco and Transferee shall be indemnified
for any and all Liabilities resulting from any breach of
Section 4.2 hereof, whether or not such Liabilities exceed
Two Hundred Fifty Thousand Dollars ($250,000), and (b) the
Shareholders and the Company shall have no obligation to
indemnify Alleghany, Newco and Transferee under this
Agreement for Liabilities resulting from any breach of
Section 4.4(f)(ii) hereof until such time as the aggregate
amount of such Liabilities claimed by Alleghany, Newco and
Transferee exceeds One Hundred Thousand Dollars ($100,000),
and then only in amounts in excess of such One Hundred
Thousand Dollars ($100,000). Liabilities resulting from any
breach of Section 4.4(f)(ii) up to $100,000 shall also be
counted as Liabilities for the breach of any representation,
warranty, agreement or covenant of the Company or the
Shareholders for purposes of reaching the threshold of Two
Hundred Fifty Thousand Dollars ($250,000) applicable to such
Liabilities. Notwithstanding the foregoing, the Shareholders
shall not be required to make any payments under this Section
11.1 to the extent that such payments have been made under
any applicable policy of insurance after the insureds under
any such policy have used reasonable good faith efforts to
make any potentially covered claim and obtain payment on such
claim; provided, however, that there shall be no obligation
-------- -------
to maintain any such insurance, except that the Company shall
be obligated to maintain, until the first anniversary of the
Closing Date, a "dishonesty policy" which provides coverage
of $500,000 for an annual premium of about $1,000.
11.2. By Alleghany and Newco. Alleghany and Newco
----------------------
jointly and severally agree to indemnify the Shareholders
and, prior to the Closing, the Company and hold them harmless
at all times after the date of this Agreement from and
against and in respect of any and all Liabilities arising out
of or due to the breach of any representation, warranty,
agreement or covenant of Alleghany or Newco set forth in this
Agreement or in any of the exhibits or other documents
delivered pursuant hereto, and any and all actions, suits,
-55-
proceedings, demands, assessments or judgments, and costs and
expenses, incident to any of the foregoing, but only if and
to the extent that any claim in respect of any such breach is
asserted during the period during which such representation,
warranty, agreement or covenant shall survive in accordance
with Section 12.6 hereof; provided, however, that Alleghany
-------- -------
and Newco shall have no obligation to indemnify the
Shareholders and the Company under this Agreement until such
time as the aggregate amount of Liabilities claimed by the
Company and the Shareholders exceeds Two Hundred Fifty
Thousand Dollars ($250,000), and then only in amounts in
excess of such Two Hundred Fifty Thousand Dollars ($250,000),
except that the Shareholders shall be indemnified for any and
all Liabilities resulting from any breach of Sections 9.4(a)
and 9.4(b) hereof, whether or not such Liabilities exceed Two
Hundred Fifty Thousand Dollars ($250,000).
11.3. Procedure.
---------
(a) Alleghany, Newco and/or Transferee, on the one
hand, and the Company and/or the Shareholders, on the other
hand, each agree to promptly notify each other if any of them
becomes aware of any Liabilities with respect to which
indemnity may be asserted under Section 9.4 hereof or this
Article XI (hereinafter referred to as a "claim"), provided
that failure to notify the indemnifying party shall not re-
lieve such party from liability except to the extent such
party is prejudiced thereby. The party entitled to indemnity
(the "Indemnitee") shall permit the party responsible for
such indemnity (the "Indemnitor") to assume the defense of
any such claim or any litigation resulting from such claim.
(b) If the Indemnitor assumes the defense of any
such claim or litigation resulting therefrom, the Indemnitee
may participate, at its expense, in the defense of such claim
or litigation provided that the Indemnitor shall direct and
control the defense of such claim or litigation. Except with
the written consent of Indemnitee, which consent shall not be
unreasonably withheld, the Indemnitor shall not, in the
defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnitee of
a release from all liability in respect of such claim or
litigation.
-56-
(c) If the Indemnitor shall not assume the defense
of any such claim or litigation resulting therefrom, the
Indemnitee may defend against such claim or litigation in
such manner as it may deem appropriate. The Indemnitee shall
not enter into any settlement of such claim or litigation
without the written consent of the Indemnitor, which consent
shall not be unreasonably withheld. The Indemnitor shall
promptly reimburse the Indemnitee from time to time for any
and all amounts paid for or incurred by the Indemnitee and
for which the Indemnitor is obligated pursuant to Section 9.4
hereof or this Article XI, upon submission by the Indemnitee
of a statement reflecting the basis upon which such
indemnification is sought and the computation of such
amounts.
11.4. Shareholders' Representative.
----------------------------
(a) The parties agree that ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall
act as the representative of the Shareholders (the
"Shareholders' Representative") for the purpose of settling
on behalf of the Shareholders claims made by the Shareholders
under Sections 9.4(e)(i) or 11.2 hereof, and representing the
Shareholders in any indemnification proceedings by Newco,
Alleghany or Transferee under Sections 9.4(e)(ii) and 11.1
hereof, in each case pursuant to the procedures set forth in
Section 11.3 hereof.
(b) The Shareholders shall be bound by any and all
actions taken by the Shareholders' Representative on their
behalf.
(c) Newco, Alleghany and Transferee shall be
entitled to rely upon any communication or writings given or
executed by the Shareholders' Representative. All notices to
be sent to the Shareholders pursuant to the indemnification
provisions hereof may be addressed to the Shareholders'
Representative and any notice so sent shall be deemed notice
to all of the Shareholders hereunder. The Shareholders
hereby consent and agree that the Shareholders'
Representative is authorized to accept notice on behalf of
the Shareholders pursuant hereto.
(d) If for any reason ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall cease
to act as the Shareholders' Representative hereunder, the
Shareholders shall promptly appoint a new representative.
Such appointment shall be deemed to have been made when set
forth in a written communication to Alleghany, signed by
-57-
shareholders who own, or will receive, at least fifty-one
percent (51%) of the Alleghany Shares acquired or to be
acquired pursuant to this Agreement.
(e) The Shareholders' Representative is hereby
appointed and constituted the true and lawful attorney-in-
fact of each Shareholder, with full power in his or her name
and on his or her behalf:
(i) To act on such Shareholder's behalf according
to the terms of this Agreement, including, without
limitation, the power to act on their behalf in
connection with any matter as to which the Shareholders
are an "Indemnitor" or "Indemnitee" under this Article
XI or under Section 9.4 hereof, all in the absolute
discretion of the Shareholders' Representative; and
(ii) In general to do all things and to perform
all acts including, without limitation, executing and
delivering all agreements, certificates, receipts,
instructions and other instruments contemplated by or
deemed advisable in connection with this Agreement.
This power of attorney and all authority hereby
conferred is granted subject to the interest of the other
Shareholders hereunder and in consideration of the mutual
covenants and agreements made herein, and shall be
irrevocable and shall not be terminated by any act of any
Shareholder, by operation of law, whether by the death or
incapacity of any Shareholder, or by the occurrence of any
other event. Each Shareholder shall jointly and severally
hold the Shareholders' Representative free and harmless from
any and all loss, damage or liability which he may sustain as
a result of any action taken in good faith hereunder.
(f) The Shareholders' Representative shall not be
liable to the Shareholders for any action taken or omitted to
be taken by him except in the case of willful misconduct.
Each Shareholder agrees to pay his or her pro rata portion
(based upon his or her proportionate share of the Alleghany
Shares acquired or to be acquired pursuant to this Agreement)
of all costs and expenses reasonably incurred by the
Shareholders' Representative arising out of or in connection
with the administration of his duties as Shareholders'
Representative, including but not limited to reasonable legal
fees and other costs and expenses of defending or preparing
to defend against any claim or liability hereunder.
-58-
11.5. No Liability of Shareholders.
----------------------------
Notwithstanding anything in this Agreement to the contrary,
Alleghany and its affiliates shall not assert against the
Shareholders any liability for (1) any activities of the
Company relating to the issuance of title policies by the
Company (except for those activities referred to in Section
4.4(f) hereof) or (2) any obligation arising under any
agreements between the Company and Chicago Title Insurance
Company or its affiliates.
ARTICLE XII
Miscellaneous Provisions
12.1. Termination. At any time prior to the
-----------
Closing Date, this Agreement may be terminated:
(a) by mutual written consent of the Boards of
Directors of Alleghany and the Company;
(b) by Alleghany or the Shareholders at any time
prior to the Pre-Closing Date in the event that they cannot
agree on the June 30 Balance Sheet and the June 30 Income
Statement (or, if available, the July 31 Balance Sheet and
the July 31 Income Statement), and the balance sheet of the
Company as at March 31, 1996;
(c) by Alleghany or the Shareholders no earlier
than thirty (30) days after the Pre-Closing Date in the event
that they cannot agree on the Pre-Closing Date Balance Sheet,
the Earnings Distribution or the Tax Distribution; or
(d) by Alleghany or the Shareholders no earlier
than thirty (30) days after the Pre-Closing Date in the event
that the Closing cannot be completed within such thirty-day
period due to the failure to satisfy any of the requirements
of Section 12.11 of this Agreement.
In the event of any termination pursuant to this Section
12.1, the parties hereto shall be released from all
liabilities and obligations arising under this Agreement with
respect to matters contemplated by this Agreement other than
for damages to the extent arising from a prior breach of this
Agreement.
-59-
12.2. Expenses. Whether or not the Closing takes
--------
place and regardless of whether this Agreement is terminated,
each party hereto shall pay all of the costs and expenses
incurred by it, him or her in connection with this Agreement
or in consummating the transactions contemplated hereby
(including, without limitation, disbursements and expenses of
its, his or her attorneys, accountants and advisers);
provided, however, that in the event any party hereto is
-------- -------
finally determined by a court of competent jurisdiction to
have breached any representation, warranty, agreement or
covenant set forth in this Agreement, such party shall pay
the costs and expenses (including without limitation,
disbursements and expenses of its, his or her attorneys,
accountants and advisors) reasonably and actually incurred by
each other party at any time in connection with any action or
proceeding to enforce this Agreement in respect of such
breach.
12.3. Notices. All notices or other
-------
communications required or permitted under this Agreement
shall be in writing and sufficient if delivered personally,
by private courier or fax, or sent by registered or certified
mail, postage prepaid, addressed as follows:
If to Alleghany or Newco, to
Alleghany Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
with a copy to
▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
-60-
If to the Company, to
Chicago Title of Colorado, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
with a copy to
▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇ P.C.
2900 Lincoln Center Building
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to any of the Shareholders, to the Shareholders'
Representative at
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Robinson, Waters, ▇'▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Alleghany, Newco, the Company or the Shareholders'
Representative may change the person and address to which
notices or other communications are to be sent to it by
giving written notice of any such change in the manner
provided herein.
12.4. Entire Agreement; Amendment. This
---------------------------
Agreement, together with the exhibits and other documents
delivered pursuant hereto, sets forth the entire agreement
and understanding of the parties hereto in respect of the
transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings relating to the
subject matter hereof. No party hereto has relied upon any
oral or written statement, representation, warranty,
covenant, condition, understanding or agreement made by any
other party or any representative, agent or employee thereof,
except for those expressly set forth in this Agreement or in
the exhibits delivered pursuant hereto. This Agreement may
-61-
be amended, modified, superseded or supplemented only by an
instrument in writing executed and delivered by Alleghany,
Newco, the Shareholders and the Company.
12.5. Assignment. This Agreement shall inure
----------
to the benefit of, and be binding upon, the respective
successors, heirs, executors, administrators, legal
representatives and permitted assigns of the parties hereto;
provided, however, that no assignment of any rights or
-------- -------
delegation of any obligations provided for herein shall be
made by any party hereto without the express prior written
consent of each other party, which consent shall not be
unreasonably withheld.
12.6. Survival of Representations, Warranties and
--------------------------------------------
Covenants. All representations, warranties agreements and
---------
covenants of the parties hereto which are contained in this
Agreement, together with the exhibits and other documents
delivered pursuant hereto, shall survive the Closing and
remain operative and in full force and effect, regardless of
any investigation heretofore or hereafter made by or on
behalf of any of the parties hereto; provided, however, that
-------- -------
the obligations of the parties for any breach of any
representation, warranty, agreement or covenant made by them
herein or therein shall survive the Closing only until the
first anniversary of the Closing Date, and no claim thereon
may first be asserted after that time, except that (a) the
obligations of the parties for any breach of any
representation, warranty, agreement or covenant set forth in
Sections 4.22, 8.6, 9.4(a), 9.4(b), 9.4(c) and 9.4(d) and the
last sentence of Section 8.4 shall survive the Closing only
until the third anniversary of the Closing Date, and no claim
thereon may first be asserted after that time; (b) the
obligations of the parties for any breach of any
representation, warranty, agreement or covenant set forth in
Section 8.5 shall survive the Closing only until the fifth
anniversary of the Closing Date, and no claim thereon may
first be asserted after that time; and (c) the obligations of
the parties for any breach of any representation, warranty,
agreement or covenant set forth in Sections 4.2, 4.3, 4.10,
5.2, 5.3, 9.4(e), 10.1, 10.2, 10.3, and 10.4 and Articles XI
and XII hereof shall survive the Closing forever.
-62-
12.7. Governing Law. This Agreement shall be
-------------
governed by, and construed in accordance with, the laws of
the State of Colorado applicable to agreements made and to be
performed entirely within such State, except for matters
relating to the validity of corporate action, which shall be
governed by the laws of the jurisdiction of incorporation or
organization of the relevant corporation.
12.8. Counterparts. This Agreement may be
------------
executed in any number of separate counterparts, each of
which shall be deemed to be an original, but which together
shall constitute one and the same instrument.
12.9 Headings. The section headings contained in
--------
this Agreement are inserted for convenience of reference only
and shall not affect the meaning or interpretation of this
Agreement.
12.10. Severability. In the event that any
------------
provision hereof is prohibited or unenforceable in any
jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
12.11. Pre-Closing and Closing Procedures.
----------------------------------
(a) At the Pre-Closing:
(i) Each of Alleghany and Newco shall deliver to
the Company and the Shareholders a certificate, dated
the Pre-Closing Date, to the effect that (A) each of
Alleghany and Newco have performed and complied in all
material respects with all the terms, covenants and
conditions required by this Agreement to be performed or
complied with by it on or before the Closing Date, and
(B) the representations and warranties made by Alleghany
and Newco in this Agreement are true and correct in all
material respects (except that each of the
representations and warranties made by Alleghany and
Newco which is qualified by materiality shall be true
and correct in all respects) as of the Pre-Closing Date
-63-
except for any changes permitted by the terms hereof or
consented to by the Company and the Shareholders.
Attached to Newco's certificate shall be a certified
copy of the resolutions of the Board of Directors of
Newco, and a certified copy of the written consent of
Alleghany as the sole stockholder of Newco, and attached
to Alleghany's certificate shall be a certified copy of
the resolutions of the Board of Directors of Alleghany,
in each case adopting or approving this Agreement and
authorizing the transactions contemplated hereby.
(ii) Each of the Company and the Shareholders
shall deliver to Alleghany and Newco a certificate,
dated the Pre-Closing Date, to the effect that (A) each
of the Company and the Shareholders have performed and
complied in all material respects with all the terms,
covenants and conditions required by this Agreement to
be performed or complied with by it, him or her on or
before the Closing Date (other than in respect of the
Company Approval required to be obtained under the lease
for the Denver office (the "Denver Lease")), and (B) the
representations and warranties made by the Company and
the Shareholders in this Agreement are true and correct
in all material respects (except that each of the
representations and warranties made by the Company and
the Shareholders which is qualified by materiality shall
be true and correct in all respects) as of the Pre-
Closing Date except for any changes permitted by the
terms hereof or consented to by Alleghany and Newco.
Attached to the Company's certificate shall be a
certified copy of the resolutions of its Board of
Directors, and a certified copy of the written consent
of the Shareholders, in each case adopting or approving
this Agreement and authorizing the transactions
contemplated hereby.
(iii) The Shareholders, the Company, Alleghany and
Newco shall present all other certificates and documents
required or otherwise to be delivered at the Closing,
which certificates and documents shall thereafter be
held by ▇▇▇▇▇▇▇ Leisure ▇▇▇▇▇▇ & Irvine in escrow until
the Closing.
(b) Upon presentation of the certificates and
other documents described in Section 12.11(a) of this
Agreement, Alleghany shall deliver a certificate dated as of
the Pre-Closing Date to the Shareholders and the Company to
the effect that the conditions set forth in Sections 6.1,
-64-
6.2, 6.3 and 6.4 (other than in respect of the Company
Approval required to be obtained under the Denver Lease) have
been satisfied (except for the dating of certificates
presented pursuant to Section 12.11(a)(iii) hereof and the
execution of legal opinions), and the Shareholders and the
Company shall deliver a certificate dated as of the Pre-
Closing Date to Alleghany and Newco to the effect that the
conditions set forth in Article VII (other than in respect of
the Company Approval required to be obtained under the Denver
Lease) have been satisfied (except for the dating of
certificates presented pursuant to Section 12.11(a)(iii)
hereof and the execution of legal opinions).
(c) After the Pre-Closing:
(i) The Shareholders and the Company shall use
their reasonable best efforts to obtain the Company
Approval required to be obtained under the Denver Lease
prior to the Closing Date; and
(ii) The Shareholders and Alleghany shall use
their reasonable best efforts to resolve any
disagreements relating to the Pre-Closing Date Balance
Sheet prior to the Closing Date.
(d) The Closing shall be held not later than
thirty (30) days after the Pre-Closing Date. At the Closing:
(i) The Shareholders shall present evidence
satisfactory to Alleghany and Newco of the Company
Approval required to be obtained under the Denver Lease;
(ii) As of the Closing Date:
(A) The representations and warranties made
by each of the Shareholders and the Company in
Section 4.22 shall be true and correct in all
material respects;
(B) None of the Shareholders shall have taken
any of the actions set forth in Exhibit 8.4 hereto;
and
(C) None of the Shareholders shall have taken
any action, and each of the Shareholders shall have
refrained from taking any action, subsequent to the
Pre-Closing Date which would result in a breach of
any representations, warranties, agreements or
-65-
covenants made by him or her without Alleghany's
prior written consent.
(iii) The Shareholders and the Company shall
deliver a certificate dated the Closing Date to the
effect set forth in Section 12.11(d)(ii) above.
(e) Subsequent to the Pre-Closing Date, no party
may assert as a basis for avoiding such party's obligations
hereunder the failure to satisfy any condition set forth in
Articles VI or VII, except that Alleghany or Newco may assert
(i) the failure to obtain the Company Approval required to be
obtained under the Denver Lease, (ii) the breach of Section
4.22 and the last sentence of Section 8.4 of this Agreement,
or (iii) the breach of any representation or warranty due to
the failure to comply with Section 12.11(d)(ii)(C) of this
Agreement.
(f) In the event this Agreement is terminated
without Closing, Alleghany and Newco shall cause ▇▇▇▇▇▇▇
Leisure ▇▇▇▇▇▇ & Irvine to return the certificates and other
documents presented pursuant to Section 12.11(a)(iii) hereof
to the party who presented each such certificate or document.
-66-
IN WITNESS WHEREOF, each party hereto has duly
executed this Agreement, or has caused this Agreement to be
duly executed, as of the date first above written.
CHICAGO TITLE OF COLORADO, INC.
Attest:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
ALLEGHANY ACQUISITION CORPORATION
Attest:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
ALLEGHANY CORPORATION
Attest:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------- ---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: President
Witnesses: SHAREHOLDERS
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- -----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- -----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------- -----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
-67-