<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 1-13995
CHICAGO TITLE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 36-4217886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
171 North Clark Street
Chicago, Illinois 60601-3294
(Address of principal executive offices) (Zip Code)
(888) 431-4288
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES [ ] NO [x]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
21,906,651
(As of June 30, 1998)
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CHICAGO TITLE CORPORATION
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
(In 000's, except share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets June 30, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash on hand and in banks $ 46,639 21,219
Cash pledged to secure trust and escrow deposits 287,170 100,207
Marketable securities, available-for-sale:
Fixed maturities, at fair value (amortized cost of $968,465 and
$1,016,446 in 1998 and 1997, respectively) 984,641 1,032,089
Equity securities, at fair value (cost of $33,103 and $33,232
in 1998 and 1997, respectively) 33,685 34,489
- ------------------------------------------------------------------------------------------------------------------------
Total marketable securities 1,018,326 1,066,578
Receivables, including accrued investment income, less allowance for
doubtful accounts of $10,631 and $7,574 in 1998 and 1997, respectively 77,977 62,558
Deferred Federal income taxes 89,929 75,997
Fixed assets, net 99,633 97,222
Title plants 151,460 150,546
Net assets of Alleghany Asset Management, Inc. to be distributed
to Alleghany Corporation (Note 2) -- 18,097
Other assets 125,072 109,783
- ------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,896,206 1,702,207
========================================================================================================================
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------
Accounts payable $ 125,266 105,692
Accrued expenses and other liabilities 127,703 128,638
Notes payable and other obligations (Note 4) 42,016 32,443
Reserve for title losses 584,826 564,334
Trust and escrow deposits secured by pledged assets 603,308 467,553
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,483,119 1,298,660
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity (Note 2):
Common stock-par value of $1 and $4,000 per share, authorized 66,000,000
and 3,722 shares; issued and outstanding 21,906,651 and 3,419 shares
at June 30, 1998 and December 31, 1997, respectively 21,907 13,676
Additional paid-in capital 127,313 117,381
Unearned compensation-restricted stock (17,808) --
Retained earnings 270,783 261,425
Accumulated other comprehensive income (Note 3) 10,892 11,065
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 413,087 403,547
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,896,206 1,702,207
========================================================================================================================
</TABLE>
See accompanying notes to consolidated quarterly financial statements.
<PAGE> 3
CHICAGO TITLE CORPORATION
Consolidated Statements of Income
For the three months and six months ended June 30, 1998 and 1997 (Unaudited)
(In 000's)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Title, escrow, trust and other revenue $461,757 339,888 847,561 638,296
Investment income 15,748 12,222 30,553 23,984
Net realized investment gains 167 141 538 296
- -------------------------------------------------------------------------------------------------------------------------
Total revenues 477,672 352,251 878,652 662,576
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Salaries and other employee benefits (Note 2) 167,021 106,722 294,624 207,199
Commissions paid to agents 153,743 123,705 285,233 238,105
Provision for title losses 30,467 24,514 56,746 46,286
Interest expense 1,110 1,064 2,405 2,220
Other operating and administrative expenses (Note 2) 104,110 70,898 186,383 135,016
- -------------------------------------------------------------------------------------------------------------------------
Total expenses 456,451 326,903 825,391 628,826
- -------------------------------------------------------------------------------------------------------------------------
Operating income from continuing operations
before income taxes 21,221 25,348 53,261 33,750
Income taxes 10,518 8,510 21,317 10,984
- -------------------------------------------------------------------------------------------------------------------------
Net income from continuing operations 10,703 16,838 31,944 22,766
Net income from discontinued operations 4,034 3,123 9,013 5,319
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 14,737 19,961 40,957 28,085
- -------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per share (Note 2)
Continuing operations $ 0.49 0.77 1.46 1.04
Discontinued operations 0.18 0.14 0.41 0.24
- -------------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 0.67 0.91 1.87 1.28
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated quarterly financial statements.
<PAGE> 4
CHICAGO TITLE CORPORATION
Consolidated Statements of Cash Flows
For the six months ended June 30, 1998 and 1997 (Unaudited)
(In 000's)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six months ended June 30,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from continuing operations activities:
Net income from continuing operations $ 31,944 22,766
Adjustments to reconcile net income from continuing operations
to net cash used in continuing operations activities:
Depreciation and amortization 16,935 15,093
Changes in assets and liabilities:
Cash pledged to secure trust and escrow deposits (186,963) (144,123)
Receivables (9,507) (6,320)
Current and deferred Federal income taxes (13,792) 5,419
Other assets 6,883 8,275
Accounts payable and accrued expenses and other liabilities 10,568 (10,946)
Reserves for title losses 20,120 7,144
Trust and escrow deposits secured by pledged assets 135,677 77,985
Gain on sale of investments (538) (296)
- ----------------------------------------------------------------------------------------------------------------------
Net adjustments (20,617) (47,769)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) continuing operations activities 11,327 (25,003)
- ----------------------------------------------------------------------------------------------------------------------
Dividends received from Alleghany Asset Management, Inc. 7,472 3,900
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 18,799 (21,103)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of long-term marketable securities (206,791) (147,487)
Sales of long-term marketable securities 94,677 56,430
Maturities and redemptions of long-term marketable securities 61,219 80,835
Net sales of short-term investments 99,386 44,717
Purchases of other invested assets (3,418) (3,983)
Sales of other invested assets 1,688 4,950
Purchases of fixed assets (14,385) (24,048)
Sales of fixed assets 2,174 10,627
Purchases of title records and indexes (225) (305)
Purchases of subsidiaries (26,979) --
Cash of acquired subsidiaries 3,606 --
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 10,952 21,736
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal receipts (payments) on notes payable and other obligations (1,288) 168
Cash remaining with discontinued operations (3,043) (2,771)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (4,331) (2,603)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 25,420 (1,970)
Cash at beginning of year 21,219 23,072
- ----------------------------------------------------------------------------------------------------------------------
Cash as of balance sheet date $ 46,639 21,102
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated quarterly financial statements.
<PAGE> 5
CHICAGO TITLE CORPORATION
NOTES TO CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
(IN 000'S)
(1) BASIS OF PRESENTATION
This report should be read in conjunction with the Registration
Statement on Form 10 (File No. 1-13995) (the "Form 10") of Chicago
Title Corporation (the "Company"). The Form 10 was filed with the
Securities and Exchange Commission in connection with the spin-off of
the Company (the "Spin-Off") by Alleghany Corporation ("Alleghany").
The information included in this report is unaudited but reflects all
adjustments which, in the opinion of management, are necessary for a
fair presentation of the results of the interim periods covered
thereby. The results for such interim periods are not indicative of
operating results in future periods.
(2) THE SPIN-OFF
On June 17, 1998, Alleghany completed the Spin-Off through the pro-rata
distribution to its stockholders of 21,523,863 shares of common stock
of the Company. Immediately prior to the Spin-Off, 364,184 shares of
common stock were issued as restricted stock to members of senior
management of the Company. Immediately after the Spin-Off, an
additional 16,000 shares were issued as restricted stock to
non-employee directors of the Company. These shares of restricted stock
will be expensed over their respective vesting periods based upon the
value of such shares as of the first trading day after the Spin-Off,
which was $18.0 million. On the day after the Spin-Off, the
non-employee directors of the Company received a total of 2,604 shares
in lieu of cash as payment of a portion of their annual retainer.
Earnings per share information has been presented as if the 21,906,651
shares referenced above had been outstanding for all periods presented.
On a pre-tax basis, for the three months and six months ended June 30,
1998, salaries and other employee benefits included $19.5 million in
executive compensation associated with the Spin-Off (including $7.2
million attributable to the repurchase of an option that had been
granted to John Rau in connection with the commencement of his
employment as President and Chief Executive Officer of the Company's
subsidiary Chicago Title and Trust Company ("CT&T") in January 1997),
and $3.7 million in related managerial restructuring expenses.
On a pre-tax basis, for the three months and six months ended June 30,
1998, other operating and administrative expenses included $4.8 million
and $5.4 million, respectively, for professional fees, printing costs,
listing fees and other expenses directly associated with the Spin-Off.
In connection with the Spin-Off, effective June 9, 1998, all of the
outstanding stock of Alleghany Asset Management, Inc. ("AAM") was
distributed by CT&T to Alleghany, which resulted in a $22.7 million
reduction in the Company's stockholders' equity. In light
<PAGE> 6
of such distribution, AAM is classified as a discontinued operation for
all periods presented.
(3) NEW ACCOUNTING STANDARD
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of
general-purpose financial statements. Interim financial statements are
required to include only disclosure of total comprehensive income for
the current and prior reporting periods.
The Company's total comprehensive income for the three months ended
June 30, 1998 and 1997 was $14,628 and $25,066, respectively. The
Company's total comprehensive income for the six months ended June 30,
1998 and 1997 was $40,888 and $26,799, respectively. Other
comprehensive income relates to the Company's change in unrealized
appreciation (depreciation) of marketable securities, net of deferred
taxes, and was $(109) and $5,105 for the three months ended June 30,
1998 and 1997, respectively, and $(69) and $(1,286) for the six months
ended June 30, 1998 and 1997, respectively.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share," to which the Company became subject
this year upon becoming a public company. Under SFAS No. 128, the dual
presentation of basic and diluted earnings per share ("EPS") is
required on the face of the income statement for all entities with
complex capital structures. In addition, SFAS No. 128 requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. During the second quarter of 1998, the Company issued
860,000 options to purchase common stock of the Company to management
and employees. These options were anti-dilutive, and as such were
excluded from the diluted EPS calculations in accordance with SFAS No.
128.
(4) NOTE PAYABLE
Prior to the Spin-Off, CT&T issued to Alleghany a promissory note in
the principal amount of $9.0 million payable on December 31, 1998. This
note represents a distribution by CT&T of a portion of its earnings for
the period during 1998 that it was held as a subsidiary of Alleghany.
(5) DIVIDEND
On July 28, 1998, the Company's Board of Directors declared a cash
dividend of $0.34 per share, payable on September 15, 1998 to
stockholders of record on September 1, 1998.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations--Comparison of Three Months and Six Months Ended June 30,
1998 and June 30, 1997
Net Income
For the second quarter of 1998, net income from continuing operations
(exclusive of the costs associated with the Spin-Off and related management
restructuring) was $31.9 million, an increase of 89% from second quarter 1997
net income of $16.8 million. For the first half of 1998, net income from
continuing operations (exclusive of the costs associated with the Spin-Off and
related management restructuring) rose 135% over the prior year to $53.5
million. These increases were attributable to high levels of residential
refinancings, home sales and commercial and industrial ("C&I") transactions.
The following table summarizes the Company's earnings for the second
quarter and first half of 1998 and 1997:
<TABLE>
<CAPTION>
(In 000's, except per share data) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income from continuing operations $ 10,703 16,838 31,944 22,766
Net income from discontinued operations* 4,034 3,123 9,013 5,319
--------------------------- ---------------------------
Net income $ 14,737 19,961 40,957 28,085
=========================== ===========================
BASIC AND DILUTED EARNINGS PER SHARE
Continuing operations $ 0.49 0.77 1.46 1.04
Discontinued operations* 0.18 0.14 0.41 0.24
--------------------------- ---------------------------
Net earnings per share $ 0.67 0.91 1.87 1.28
=========================== ===========================
IMPACT OF SPIN-OFF COSTS AND RELATED
MANAGEMENT RESTRUCTURING COSTS
Net income from continuing operations $ 10,703 16,838 31,944 22,766
Spin-Off and related management restructuring
costs, net of tax benefit 21,196 -- 21,563 --
--------------------------- ---------------------------
Net income from continuing operations,
excluding Spin-Off and related management
restructuring costs $ 31,899 16,838 53,507 22,766
=========================== ===========================
BASIC AND DILUTED EARNINGS PER SHARE
Net income from continuing operations $ 0.49 0.77 1.46 1.04
Spin-Off and related management restructuring
costs, net of tax benefit 0.97 -- 0.98 --
--------------------------- ---------------------------
Net income from continuing operations,
excluding Spin-Off and related management
restructuring costs $ 1.46 0.77 2.44 1.04
=========================== ===========================
</TABLE>
* Alleghany Asset Management, Inc., which was distributed to Alleghany
Corporation on June 9, 1998.
<PAGE> 8
Net income from continuing operations was impacted by Spin-Off and
related management restructuring costs. On a pre-tax basis, for the three months
and six months ended June 30, 1998, salaries and other employee benefits
included $19.5 million in executive compensation associated with the Spin-Off
(including $7.2 million attributable to the repurchase of an option that had
been granted to John Rau in connection with the commencement of his employment
as President and Chief Executive Officer of CT&T in January 1997), and $3.7
million in related managerial restructuring expenses. On a pre-tax basis, for
the three months and six months ended June 30, 1998, other operating and
administrative expenses included $4.8 million and $5.4 million, respectively,
for professional fees, printing costs, listing fees and other expenses directly
associated with the Spin-Off.
Prior to the Spin-Off, the Company performed trust and asset management
services through AAM. Ownership of this subsidiary was transferred to Alleghany
on June 9, 1998, shortly preceding the Spin-Off. Accordingly, the results of
operation of this subsidiary are reported in the Company's statements of income
as a discontinued operation for all periods presented.
Operating Revenues
Real estate markets throughout the first half of 1998 benefited from
favorable economic conditions marked by low levels of unemployment and the
absence of inflationary pressures. The resulting combination of low interest
rates and high consumer confidence led to healthy increases in revenue from
residential purchases, residential refinancings, and C&I transactions.
Title, escrow, trust and other revenue was $461.8 million in the second
quarter of 1998, an increase of $121.9 million or 35.9% from the prior year
period. Direct title premiums increased by $41.9 million and gross title
premiums from agents and approved attorneys increased by $39.9 million. Escrow
fees, real estate related services, and property information sales rose by $15.4
million, $8.6 million, and $7.2 million, respectively. The remainder of the
increase was incurred in other categories.
Of the 1998 second quarter increase in direct title premiums, $20.4
million was attributable to residential refinancings, $13.2 million was due to
residential purchases and $8.3 million was related to C&I transactions.
For the first half of 1998, title, escrow, trust and other revenue was
$847.6 million, an increase of $209.3 million or 32.8% from the first half of
1997. Direct title premiums increased $77.7 million and gross title premiums
from agents and approved attorneys increased by $62.3 million. Escrow fees, real
estate related services, and property information sales rose by $27.5 million,
$16.0 million, and $7.2 million, respectively. The remainder of the increase was
incurred in other categories.
<PAGE> 9
Of the 1998 first half increase in direct title premiums, $40.9 million
were due to residential refinancings, $19.6 million were related to residential
purchases and $17.2 million were attributable to commercial and industrial
transactions.
During the 1998 second quarter, approximately 66% of the Company's
direct title premiums were attributable to residential transactions, of which
44% were purchase transactions and 22% were refinancings. During the 1997 second
quarter, approximately 61% of the Company's direct title premiums were
attributable to residential transactions, of which 49% were purchase
transactions and 12% were refinancings. The remaining direct title premiums for
each period were attributable to C&I transactions.
During the 1998 first half, approximately 65% of the Company's direct
title premiums were attributable to residential transactions, of which 41% were
purchase transactions and 24% were refinancings. During the 1997 second quarter,
approximately 60% of the Company's direct title premiums were attributable to
residential transactions, of which 47% were purchase transactions and 13% were
refinancings. The remaining direct title premiums for each period were
attributable to C&I transactions.
Investment Income
Investment income totaled $15.7 million in the second quarter of 1998
as compared with $12.2 million for the same period last year. For the first six
months of 1998, investment income amounted to $30.6 million as compared with
$24.0 million for the first half of 1997. The increased level of investment
income was attributable to higher levels of investment assets. The average
duration of the portfolio at June 30, 1998 was 2.5 years as compared with 2.2
years at December 31, 1997.
Expenses
COMMISSIONS PAID TO AGENTS. Payment of commissions to title insurance
agents constitutes the largest single expense incurred by the Company. The
commission rate varies by geographic area in which the commission is earned,
primarily due to competitive factors. The percentage of premiums retained by
agents amounted to 76.2% in the second quarter of 1998 as compared with 76.5% in
the second quarter of 1997. For the first half of 1998, the percentage of
premiums retained by agents amounted to 76.1% as compared with 76.2% in the
first half of 1997. The Company reports amounts retained
<PAGE> 10
by agents as commissions paid to agents, along with amounts paid to approved
attorneys, in its consolidated statements of income.
SALARIES AND OTHER EMPLOYEE BENEFITS. This category of expense represents
the cost of salaries, incentive compensation and benefits paid to employees. One
key ratio monitored by management is the amount of these expenses as a
percentage of revenue, net of commissions paid to agents. The following table
summarizes this ratio:
<TABLE>
<CAPTION>
(In 000's) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total revenue $ 477,672 352,251 878,652 662,576
Commissions paid to agents (153,743) (123,705) (285,233) (238,105)
--------- --------- --------- ---------
Net revenue 323,929 228,546 593,419 424,471
--------- --------- --------- ---------
Total salaries and other employee benefits 167,021 106,722 294,624 207,199
Less Spin-Off and related management
restructuring costs (23,196) -- (23,196) --
--------- --------- --------- ---------
Total salaries and other employee benefits, net 143,825 106,722 271,428 207,199
--------- --------- --------- ---------
Percentage 44.4% 46.7% 45.7% 48.8%
========= ========= ========= =========
</TABLE>
The level of total salaries and other employee benefits as a percentage
of net revenue, exclusive of costs associated with the Spin-Off and related
management restructuring, decreased from prior year levels during both the
second quarter and first half of 1998 because the significant increase in
revenue earned in the current year periods allowed greater leveraging of the
fixed components of labor expense. In addition, management is maintaining an
increased focus on controlling this expense.
PROVISION FOR TITLE LOSSES. The following table summarizes key
information pertaining to the Company's provision for title losses:
<TABLE>
<CAPTION>
(In 000's) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Provision for title losses $ 30,467 24,514 56,746 46,286
Title, escrow, trust and other revenue 461,757 339,888 847,561 638,296
Ratio 6.6% 7.2% 6.7% 7.3%
AS OF AS OF
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
Reserve for title losses at period-end $584,826 $564,334
Paid losses, net of recoveries-trailing 12 months 66,384 70,913
Reserve coverage of paid losses-trailing 12 months 8.8 x 8.0 x
</TABLE>
<PAGE> 11
The provision for title losses as a percentage of operating revenue was
reduced in the current year period from the provision in 1997 in recognition of
a continued downward trend in claims paid.
OTHER OPERATING AND ADMINISTRATIVE EXPENSES. Included in other
operating and administrative expenses for 1998 were Spin-Off and related
management restructuring costs of $4.8 million for the second quarter and $5.4
million for the first half of 1998. Exclusive of these costs, other operating
and administrative expenses increased $28.4 million over the second quarter of
1997 and $46.0 million over the first half of 1997. The increased level of
expense was related to increases in variable costs associated with the higher
levels of revenue earned in the current year.
Of the 1998 second quarter increase in these expenses, purchased
property information increased $6.8 million, contract labor increased $3.8
million, premium taxes increased $3.7 million, postage and supplies increased
$2.4 million and the remainder of the increase was incurred in other categories.
Of the 1998 first half increase in these expenses, purchased property
information increased $12.5 million, contract labor increased $5.9 million,
premium taxes increased $5.1 million, postage and supplies increased $3.6
million and the remainder of the increase was incurred in other categories.
Liquidity and Capital Resources
At June 30, 1998, the Company and CT&T (on a stand-alone basis
excluding all other subsidiaries) had total cash and marketable securities of
$641.1 million, $603.9 million of which were pledged to secure escrow and other
liabilities. At December 31, 1997, CT&T (on a stand-alone basis excluding
subsidiaries) had total cash and marketable securities of $511.9 million, $476.2
million of which were pledged to secure escrow and other liabilities.
For the six months ended June 30, 1998, the Company generated cash from
continuing operations of $11.3 million. For the comparable period last year, a
total of $25.0 million in cash was utilized by continuing operations. The
negative cash flow from continuing operations which was experienced in the 1997
first half was primarily attributable to the timing of activities related to
trust and escrow operations. The increase in cash flow from continuing
operations in the 1998 first half over the comparable prior year period was
attributable to improved operating performance and the timing of investment
activities related to trust and escrow operations.
During the 1998 first half, the Company utilized a total of $27.0
million in cash in five acquisitions. The funds used to finance these
acquisitions were internally generated.
<PAGE> 12
On May 29, 1998, CT&T entered into a revolving loan and credit
agreement that provides for borrowings of up to $50 million on a revolving basis
at a floating rate of interest. No amounts were outstanding under this facility
as of June 30, 1998. This facility will terminate in May 2003.
The transfer of AAM preceding the Spin-Off resulted in a $22.7 million
reduction in the Company's stockholders' equity. During the 1998 second quarter,
prior to the Spin-Off, CT&T issued to Alleghany a promissory note in the
principal amount of $9.0 million payable on December 31, 1998. This note
represents a distribution by CT&T of a portion of its earnings for the period
during 1998 that it was held as a subsidiary of Alleghany.
On July 28, 1998, the Company's board of directors declared a dividend
of $0.34 per share payable in cash on September 15, 1998 to stockholders of
record as of September 1, 1998. Based upon a total of 21.9 million shares of
common stock outstanding, this will result in the reduction of stockholders'
equity by $7.4 million.
The Company has announced that it may purchase up to two million shares
of its common stock in open market transactions from time to time over the next
five years. The purpose of the repurchase program is to provide shares for
various employee and director benefit plans.
The Company's common stockholders' equity per share as of June 30, 1998
was $18.86.
Management believes cash generated from operations, investments, and
cash available from financing activities will provide sufficient liquidity to
meet the Company's anticipated needs over the next twelve to twenty-four months.
Year 2000 Issues
Many computer programs utilized by the Company use only two digits to
identify a year in the date field. Failure to correct this situation could
result in a significant disruption to business operations. The Company has
undertaken a program to determine the extent of "Year 2000" compliance issues
within each of its significant computer systems and to take remedial action.
Included within the scope of this review are systems utilized on a company-wide
basis in title plants, title production units, claim processing, human
resources, financial management and company-wide infrastructure. Costs of
approximately $1.0 million were incurred in 1997 and another $2.2 million is
expected to be spent in 1998 in performing this review and all related remedial
work on these centralized systems. By the end of 1998, it is expected that each
of the significant company-wide systems will have been reviewed and remedied for
Year 2000 issues, thus allowing for sufficient time in 1999 for further testing.
<PAGE> 13
In addition to the company-wide systems, there are various other
computer systems used by the Company's business units on a local basis. Regional
managers report on the status of Year 2000 compliance activities within their
area of responsibility to the Company's senior management on a regular basis. To
assist in their compliance programs, a comprehensive questionnaire which
incorporates recommendations of the American Land Title Association has been
developed by the Company's Information Services Division. Due to the diverse
nature of the computer systems used on a local basis, it is difficult to
estimate the total costs to be incurred in performing the necessary review and
remediation activity for Year 2000 issues. However, based upon the results of
reviews that have taken place to date, the Company's management believes that
such costs will not exceed $3.0 million in total over the years 1998 and 1999.
In addition to the review of internal systems, the Company is also in
contact with third parties with which it does business to coordinate action with
respect to Year 2000 issues and to receive confirmation that plans are being
developed to address Year 2000 compliance. Failure by third parties with which
the Company has important business relationships to resolve their Year 2000
issues could have a significant adverse effect on the Company's operations. The
Company has not yet completed its assessment of the risks associated with third
party Year 2000 issues and whether a contingency plan will be needed to address
these risks.
Forward-Looking Statements
The statements made in this report contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934 that involve a number of uncertainties
and risks that could significantly affect current plans and anticipated actions
and the Company's future financial condition and results. In addition to the
matters described in this report, risk factors listed from time to time in the
Company's reports and filings with the Securities and Exchange Commission,
including its Form 10, may affect the results achieved by the Company.
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NUMBER DESCRIPTION
2.1(a) Distribution Agreement dated as of June 16, 1998 by
and between Alleghany Corporation and the Company
(the "Spin-Off Distribution Agreement").
2.1(b) List of Contents of Exhibits to the Spin-Off
Distribution Agreement.
3.2 By-Laws of the Company.
10.1 Revolving Loan and Credit Agreement dated as of May
29, 1998 among Chicago Title and Trust Company,
certain commercial lending institutions and LaSalle
National Bank.
10.2 Tax Sharing Agreement dated as of June 17, 1998 by
and among Alleghany and the Company.
10.3 Chicago Title Corporation 1998 Long-Term Incentive
Plan.
10.4 Chicago Title Corporation Directors' Stock Option
Plan.
10.5 Amended and Restated Employment Agreement dated as of
June 16, 1998 among the Company, Chicago Title and
Trust Company and John Rau.
10.6(a) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and John
Rau.
10.6(b) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Thomas
H. Hodges.
10.6(c) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Michael
J. Keller.
10.6(d) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Peter G.
Leemputte.
10.6(e) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Paul T.
Sands, Jr.
10.6(f) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and
Christopher Abbinante.
10.6(g) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and William
Halvorsen.
27 Financial Data Schedule.
<PAGE> 15
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated June 18, 1998, to report
in Item 5 that the Company issued a press release announcing the completion of
the Spin-Off.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHICAGO TITLE CORPORATION
Registrant
Date: August 14, 1998 /s/ Peter G. Leemputte
----------------------
Peter G. Leemputte
Executive Vice President, Chief Administrative
Officer and Chief Financial Officer
(principal financial officer)
<PAGE> 17
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
2.1(a) Distribution Agreement dated as of June 16, 1998 by
and between Alleghany Corporation and the Company
(the "Spin-Off Distribution Agreement").
2.1(b) List of Contents of Exhibits to the Spin-Off
Distribution Agreement.
3.2 By-Laws of the Company.
10.1 Revolving Loan and Credit Agreement dated as of May
29, 1998 among Chicago Title and Trust Company,
certain commercial lending institutions and LaSalle
National Bank.
10.2 Tax Sharing Agreement dated as of June 17, 1998 by
and among Alleghany and the Company.
10.3 Chicago Title Corporation 1998 Long-Term Incentive
Plan.
10.4 Chicago Title Corporation Directors' Stock Option
Plan.
10.5 Amended and Restated Employment Agreement dated as of
June 16, 1998 among the Company, Chicago Title and
Trust Company and John Rau.
10.6(a) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and John
Rau.
10.6(b) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Thomas
H. Hodges.
10.6(c) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Michael
J. Keller.
10.6(d) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Peter G.
Leemputte.
10.6(e) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and Paul T.
Sands, Jr.
10.6(f) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and
Christopher Abbinante.
10.6(g) Agreement dated as of June 16, 1998 among the
Company, Chicago Title and Trust Company and William
Halvorsen.
27 Financial Data Schedule.
<PAGE> 1
Exhibit 2.1(a)
DISTRIBUTION AGREEMENT
DATED AS OF JUNE 16, 1998
BY AND BETWEEN
ALLEGHANY CORPORATION
AND
CHICAGO TITLE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .........................................................2
Section 1.1. Definitions...............................................2
ARTICLE II THE DISTRIBUTION....................................................5
Section 2.1. Conditions Precedent to the Distribution..................5
Section 2.2. The Distribution..........................................7
ARTICLE III AGREEMENT AS TO LIABILITIES; INSURANCE.............................7
Section 3.1. Discharge of Liabilities..................................7
Section 3.2. Insurance.................................................8
ARTICLE IV INDEMNIFICATION.....................................................8
Section 4.1. Chicago Title Indemnification of the Alleghany Group......8
Section 4.2. Alleghany Indemnification of Chicago Title Group..........8
Section 4.3. Procedures Regarding Indemnification......................8
ARTICLE V TAX MATTERS ........................................................10
Section 5.1. Tax Agreement............................................10
ARTICLE VI ACCOUNTING MATTERS.................................................10
Section 6.1. Allocation of Prepaid Items and Reserves.................10
Section 6.2. Accounting Treatment of Assets Transferred and
Liabilities Assumed....................................10
ARTICLE VII INFORMATION.......................................................10
Section 7.1. Access to Information....................................10
Section 7.2. Litigation Cooperation...................................10
ARTICLE VIII INTEREST ON PAYMENTS.............................................11
Section 8.1. Interest on Payments.....................................11
ARTICLE IX MISCELLANEOUS......................................................11
Section 9.1. Allocation of Costs and Expenses.........................11
Section 9.2. Disputes.................................................11
Section 9.3. Notices .................................................13
Section 9.4. Limitation...............................................13
Section 9.5. Entire Agreement; Amendment..............................13
Section 9.6. Assignment...............................................14
Section 9.7. Survival of Agreements and Covenants.....................14
Section 9.8. Parties in Interest......................................14
<PAGE> 3
Section 9.09. Further Assurances and Consents..........................14
Section 9.10. Certain Plan Liabilities.................................14
Section 9.11. Severability.............................................15
Section 9.12. Governing Law............................................15
Section 9.13. Counterparts.............................................15
Section 9.14. Headings.................................................15
ii
<PAGE> 4
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement") dated as of June 16, 1998
by and between Alleghany Corporation, a Delaware corporation (together with its
successors and permitted assigns, "Alleghany"), and Chicago Title Corporation, a
Delaware corporation (together with its successors and permitted assigns,
"Chicago Title").
W I T N E S S E T H:
WHEREAS, Chicago Title and Trust Company, an Illinois corporation
("CT&T"), is a wholly owned subsidiary of Alleghany; and
WHEREAS, the Board of Directors of Alleghany has determined that it
is in the best interests of Alleghany and the stockholders of Alleghany (i) to
contribute all of the outstanding shares of CT&T Common Stock (as defined
herein) to Chicago Title, (ii) to effect the other transactions referred to in
this Agreement, and (iii) to distribute to the holders of Alleghany Common Stock
(as defined herein) all of the outstanding shares of Chicago Title Common Stock
(as defined herein) owned by Alleghany (which, as of the Distribution Date (as
defined herein) will constitute approximately 98% of the shares of Chicago Title
Common Stock, with the remaining shares of Chicago Title Common Stock to be
awarded, on or about the Distribution Date, as shares of restricted stock to
members of senior management of the Chicago Title Group (as defined herein) and
to non-employee directors of Chicago Title) at the rate of three shares of
Chicago Title Common Stock for each share of Alleghany Common Stock outstanding
as of the Record Date (as defined herein); and
WHEREAS, prior to the date hereof, (i) The Chicago Trust Company, an
Illinois trust company ("TCTC"), has transferred its land trust and release
business to Chicago Title Land Trust Company, an Illinois trust company
("CTLTC") which was formed as a wholly-owned subsidiary of TCTC (the "Land Trust
Business Transfer"), and (ii) subsequent thereto, TCTC has distributed all of
the outstanding CTLTC Common Stock (as defined herein) to Alleghany Asset
Management, Inc., a Delaware corporation ("AAM"), and (iii) subsequent thereto,
AAM has distributed all of the outstanding CTLTC Common Stock to CT&T, and (iv)
subsequent thereto, CT&T has distributed (the "AAM Distribution") all of the
outstanding common stock, par value $1.00 per share, of AAM to Alleghany, and
(v) subsequent thereto, CT&T has distributed all of the outstanding Non-Voting
Preferred Stock, par value $12.50 per share, of TCTC to Alleghany, so that as of
the date hereof CTLTC is a member of the Chicago Title Group (as defined herein)
and AAM and its direct and indirect subsidiaries TCTC, Chicago Deferred Exchange
Corporation, Montag & Caldwell, Inc. and Security Trust Company are members of
the Alleghany Group (as defined herein); and
<PAGE> 5
WHEREAS, the parties have determined that it is necessary and
desirable to set forth in this Agreement the principal corporate transactions
required to effect the Distribution and to set forth other agreements that will
govern certain other matters following such Distribution; and
WHEREAS, in connection with the Distribution, Alleghany and Chicago
Title intend to enter into the Tax Agreement (as such term is defined herein).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used herein, the following terms have
the following meaning:
"AAM Agreements" means the agreements entered into between AAM
and/or subsidiaries of AAM, on the one hand, and Chicago Title and/or
subsidiaries of Chicago Title, on the other hand, in connection with the AAM
Distribution and related transactions including, without limitation, the
Investment Management Agreements, the Investment Management and Custody
Agreements, the Transitional Services Agreement, the Employee Benefits
Transition Agreement and the Sublease.
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated
under the Exchange Act.
"Alleghany Business" means the business now or formerly conducted by
Alleghany and its present and former subsidiaries, but excluding (i) the Chicago
Title Business and (ii) the land trust and release business conducted by TCTC
prior to the date of the Land Trust Business Transfer and currently conducted by
CTLTC.
"Alleghany Common Stock" means the outstanding shares of common
stock, par value $1.00 per share, of Alleghany.
"Alleghany Group" means (i) Alleghany and its subsidiaries,
excluding any member of the Chicago Title Group, and (ii) AAM and its
subsidiaries.
"Alleghany Indemnitees" is defined in Section 4.1.
2
<PAGE> 6
"Alleghany Liabilities" means (i) Liabilities of Alleghany under
this Agreement and (ii) Liabilities, other than Chicago Title Liabilities,
incurred in connection with the operation of the Alleghany Business, whether
arising before, on or after the Distribution Date, including all Liabilities
under any employee benefit plan (as defined in Section 3(3) of ERISA)
established or maintained, or to which contributions were made by, any Alleghany
Business.
"Assets" means all properties, rights, contracts, leases and claims,
of every kind and description, wherever located, whether tangible or intangible,
and whether real, personal or mixed.
"Chicago Title Business" means the business now or formerly
conducted by Chicago Title and its present or former subsidiaries or any other
member of the Chicago Title Group, but excluding the business now or formerly
conducted by AAM and its present and former subsidiaries, except that the
Chicago Title Business shall include the land trust and release business
conducted by TCTC prior to the date of the Land Trust Business Transfer and
presently conducted by CTLTC.
"Chicago Title By-laws" means the By-laws of Chicago Title in the
form attached as Exhibit A hereto.
"Chicago Title Certificate" means the certificate of incorporation
of Chicago Title in the form attached as Exhibit B hereto.
"Chicago Title Common Stock" means the outstanding shares of common
stock, par value $1.00 per share, of Chicago Title.
"Chicago Title Group" means Chicago Title, CT&T, and the
subsidiaries of CT&T, but excluding AAM and its subsidiaries.
"Chicago Title Indemnitees" is defined in Section 4.2.
"Chicago Title Liabilities" means (i) Liabilities of Chicago Title
under this Agreement or any of the AAM Agreements, (ii) Liabilities of any
member of the Chicago Title Group, including all Liabilities incurred in
connection with the conduct or operation of any Chicago Title Business, the
ownership or use of any of the Assets related to any Chicago Title Business,
whether arising before, on or after the Distribution Date, or the establishment
of maintenance of, or contributions to, any employee benefit plan (as defined in
Section 3(3) of ERISA) for the benefit of persons employed by any Chicago Title
Business, (iii) Liabilities arising under or in connection with the Form 10, and
(iv) Liabilities relating to a Sold Business or arising out of the sale thereof.
"Claim" is defined in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
3
<PAGE> 7
"CT&T Common Stock" means the outstanding shares of common stock,
par value $6-2/3 per share, of CT&T.
"CTLTC Common Stock" means the outstanding shares of common stock,
par value $1.00 per share, of CTLTC.
"Dispute" is defined in Section 9.2.
"Distribution" means the distribution on the Distribution Date of
all outstanding shares of Chicago Title Common Stock owned by Alleghany to the
holders of Alleghany Common Stock on the Record Date.
"Distribution Agent" means Harris Trust and Savings Bank in its
capacity as distribution agent.
"Distribution Date" means the date on which the Distribution shall
be effective, as determined by the Board of Directors of Alleghany.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form 10" means the registration statement on Form 10 filed by
Chicago Title with the Commission to effect the registration of the Chicago
Title Common Stock pursuant to the Exchange Act, as such registration statement
may be amended from time to time.
"Governmental Authority" means any government or agency, bureau,
board, commission, court, department, official, or other instrumentality of the
United States or any state or political subdivision of the United States.
"Group" means either the Alleghany Group or the Chicago Title Group,
as the context requires.
"Indemnitor" is defined in Section 4.3.
"Information Statement" means the information statement dated May
28, 1998 and sent to each holder of Alleghany Common Stock in connection with
the Distribution.
"Law" means all laws, statutes and ordinances and all regulations,
rules and other pronouncements of Governmental Authorities having the effect of
law of the United States or any state or political subdivision of the United
States.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses
4
<PAGE> 8
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under this Agreement, under any law, rule, regulation,
action, order or consent decree of any governmental entity or under any award of
any arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
"Lincoln National Indemnity" means all rights of Alleghany and CT&T
and Chicago Title Insurance Company, and all of the corporations, associations
or other business organizations which either of them controls, by ownership, a
management contract or otherwise, to be indemnified by Lincoln National
Corporation, pursuant to the Stock Purchase Agreement by and among Alleghany,
Alleghany Financial Corporation, Alleghany Capital Corporation and Lincoln
National Corporation, dated as of June 18, 1985.
"Record Date" means such date as is designated by Alleghany's Board
of Directors as the record date for determining the stockholders of Alleghany
entitled to receive the Distribution.
"Securities Act" means the Securities Act of 1933, as amended.
"Sold Business" means any Chicago Title Business which has been
sold, terminated or disposed of, whether or not for consideration, on or prior
to the date hereof.
"Tax" has the meaning set forth in the Tax Agreement.
"Tax Agreement" means the Tax Sharing Agreement entered into on or
before the Distribution Date by and among Alleghany and Chicago Title, as
amended from time to time.
ARTICLE II
THE DISTRIBUTION
Section 2.1. Conditions Precedent to the Distribution. The
Distribution shall be subject to, in the sole discretion of Alleghany, the
fulfillment or waiver of each of the following conditions:
(a) Alleghany's Board of Directors, in its discretion, shall have
declared the Distribution, established the Record Date and the
Distribution Date and any appropriate procedures in connection with the
Distribution to the extent not provided for herein;
(b) any necessary regulatory approvals shall have been received;
(c) the Form 10 shall have become effective under the Exchange Act
and no stop order shall have been entered, and no proceeding for that
purpose shall have been initiated or threatened by the Commission with
respect thereto;
5
<PAGE> 9
(d) all necessary permits, registrations and consents required under
the insurance, securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement shall have been received or become
effective;
(e) Chicago Title's Board of Directors, as named in the Form 10,
shall have been elected by Alleghany, as sole stockholder of Chicago
Title, and the Chicago Title Certificate and Chicago Title By-laws shall
be in effect;
(f) the Chicago Title Common Stock shall have been approved for
listing on the New York Stock Exchange, subject to official notice of
issuance;
(g) the Tax Agreement shall have been executed and delivered by the
parties thereto and shall be in full force and effect;
(h) Alleghany shall have received a ruling from the Internal Revenue
Service (in form and substance satisfactory to Alleghany) to the effect
that, by reason of the applicability of Section 355 of the Code, the AAM
Distribution will not be taxable to Alleghany and the Distribution will
not be taxable to the stockholders of Alleghany;
(i) the distribution of all of the CTLTC Common Stock by TCTC to AAM
shall have been effected and, subsequent thereto, the distribution of all
of the CTLTC Common Stock by AAM to CT&T shall have been effected and,
subsequent thereto, the AAM Distribution shall have been effected and,
subsequent thereto, the distribution by CT&T of all of the Non-Voting
Preferred Stock, par value $12.50 per share, of TCTC to Alleghany shall
have been effected;
(j) consummation of the Distribution and the other transactions
contemplated hereby shall not be prohibited by Law and no Governmental
Authority of competent jurisdiction shall have enacted, issued,
promulgated or entered, or shall have threatened to enact, issue,
promulgate or enter, any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or
permanent) which materially restricts, prevents or prohibits consummation
of the Distribution or any transaction contemplated by this Agreement, it
being understood and agreed that the parties hereto shall use all
reasonable efforts to cause any such decree, judgment, injunction or other
order to be vacated or lifted as promptly as possible; and
(k) Alleghany and Chicago Title and the members of their respective
Groups shall have obtained all third-party consents and approvals, the
failure of which to obtain would, in the sole determination of Alleghany's
Board of Directors, have a material adverse effect on the Alleghany Group
or the Chicago Title Group, each taken as a whole, and such consents and
approvals shall be in full force and effect.
6
<PAGE> 10
Section 2.2. The Distribution. On or before the Distribution Date,
subject to satisfaction or waiver of the conditions set forth in this Agreement,
Alleghany shall deliver to the Distribution Agent a certificate or certificates
representing all of the then outstanding shares of Chicago Title Common Stock
owned by Alleghany (which, as of the Distribution Date, will constitute
approximately 98% of the shares of Chicago Title Common Stock, with the
remaining shares of Chicago Title Common Stock to be awarded, on or about the
Distribution Date, to members of senior management of the Chicago Title Group
and to non-employee directors of Chicago Title), endorsed in blank, and shall
instruct the Distribution Agent to distribute to each holder of record of
Alleghany Common Stock on the Record Date a certificate or certificates
representing three shares of Chicago Title Common Stock for each share of
Alleghany Common Stock so held. Chicago Title agrees to provide all certificates
for shares of Chicago Title Common Stock that the Distribution Agent shall
require in order to effect the Distribution.
ARTICLE III
AGREEMENT AS TO LIABILITIES; INSURANCE
Section 3.1. Discharge of Liabilities.
(a) Alleghany and Chicago Title agree that on and after the
Distribution Date each will, and will cause each member of its respective
Group to, use its best efforts to cause any such member who, if the
Distribution had not occurred, would have been entitled to payment
pursuant to the Lincoln National Indemnity in respect of any Liabilities,
whether arising before, on or after the Distribution Date, to receive
payment in respect of any such Liabilities pursuant to the Lincoln
National Indemnity directly from Lincoln National Corporation (or, if
necessary, indirectly from any member of either Group which is directly
entitled to the benefit of the Lincoln National Indemnity). Alleghany and
Chicago Title each further agree that after the Distribution Date, in the
event any payment pursuant to the Lincoln National Indemnity is received
by any member of its respective Group in respect of a Liability of the
other Group, it will, and will cause any involved member of its respective
Group to, pay such amount promptly to such member of the other Group as
may be designated by Alleghany or Chicago Title, as the case may be. It is
the intention of the parties that payments pursuant to the Lincoln
National Indemnity in respect of matters for which reimbursement was
sought prior to the Distribution Date shall be for the benefit of
Alleghany, and that payments pursuant to the Lincoln National Indemnity in
respect of matters for which reimbursement is sought from and after the
Distribution Date shall be for the benefit of Chicago Title.
(b) From and after the Distribution Date, each party shall promptly
transfer or cause the members of its Group promptly to transfer to the
other party or the appropriate member of the other party's Group, from
time to time, any property received that is an Asset of the other party or
a member of its Group.
7
<PAGE> 11
Section 3.2. Insurance. Prior to the Distribution Date, Alleghany
and Chicago Title will cooperate in obtaining insurance (or binders therefor)
providing coverage to the Chicago Title Group similar to the insurance coverage
in place prior to the Distribution Date; provided, however that all expense
involved in procuring such insurance coverage shall constitute Chicago Title
Liabilities.
ARTICLE IV
INDEMNIFICATION
Section 4.1. Chicago Title Indemnification of the Alleghany Group.
On and after the Distribution Date, Chicago Title shall indemnify Alleghany and
its Affiliates (collectively, the "Alleghany Indemnitees") from and against any
and all demands, claims, actions, assessments, losses, damages, liabilities,
reasonable costs and expenses, including, without limitation, interest,
penalties and attorneys' fees and expenses, judgments and, subject to Section
4.3, amounts paid in settlement of or in connection with any threatened, pending
or contemplated claim, action, suit or proceeding, whether criminal, civil,
administrative or investigative, or investigation (the "Claims"), asserted
against, resulting to, imposed upon or incurred by Alleghany Indemnitees,
directly or indirectly, arising out of or due to the failure of Chicago Title,
or any member of the Chicago Title Group, to pay, perform or otherwise discharge
any of the Chicago Title Liabilities.
Section 4.2. Alleghany Indemnification of Chicago Title Group. On
and after the Distribution Date, Alleghany shall indemnify Chicago Title and its
Affiliates (collectively, the "Chicago Title Indemnitees") from and against any
and all Claims asserted against, resulting to, imposed upon or incurred by
Chicago Title Indemnitees, directly or indirectly, arising out of or due to the
failure of Alleghany, or any member of the Alleghany Group, to pay, perform or
otherwise discharge any of the Alleghany Liabilities.
Section 4.3. Procedures Regarding Indemnification.
(a) If Alleghany or Chicago Title has actual knowledge that any
Indemnitee has suffered or incurred any Claim, Alleghany or Chicago Title
shall so notify the other promptly in writing describing such Claim, the
basis for its belief that it is entitled to indemnification and the amount
for which the Indemnitee reasonably believes it is entitled to be
indemnified. If any action at law or suit in equity is instituted by or
against a third party with respect to which any Indemnitee intends to
claim any liability or expense as a Claim hereunder, any such Indemnitee
shall promptly notify the indemnifying party of such action or suit. An
Indemnitee providing such notice of the commencement of any action or
proceeding will permit the party responsible for indemnification thereof
(the "Indemnitor") to assume the defense of such action. Failure by
Indemnitor to notify Indemnitee of its election to defend any such action
within a reasonable time, but in no event more than 30 days after written
notice thereof shall have
8
<PAGE> 12
been given to Indemnitor, shall be deemed a waiver by Indemnitor of its
right to defend such action.
(b) If Indemnitor assumes the defense of any such Claim or
litigation resulting therefrom, the obligations of Indemnitor as to such
Claim shall be limited to taking all steps necessary in the defense or
settlement of such Claim or litigation resulting therefrom and to holding
Indemnitee harmless from and against any and all losses, damages and
liabilities caused by or arising out of any settlement approved by
Indemnitor or any judgment in connection with such Claim or litigation
resulting therefrom. Indemnitee may participate, at its expense, in the
defense of such Claim or litigation provided that Indemnitor shall direct
and control the defense of such Claim or litigation. 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 other than a
judgment or settlement involving only the payment of money, except with
the written consent of Indemnitee, which consent shall not be unreasonably
withheld.
(c) If Indemnitor shall not assume the defense of any such Claim or
litigation resulting therefrom, Indemnitee may defend against such Claim
or litigation in such manner as it may deem appropriate, provided that
Indemnitee shall not settle such Claim or litigation without providing
notice and a description of the proposed settlement to Indemnitor. If
Indemnitee shall not receive from Indemnitor within ten days of the date
of notice of such proposed settlement a notice that Indemnitor reasonably
objects to such proposed settlement accompanied by an acknowledgment by
Indemnitor that the Claim or litigation which is subject of the proposed
settlement is subject to Indemnification pursuant to the provisions of
this Article IV, Indemnitee shall be free to settle such Claim or
litigation. In the case of any such settlement, Indemnitor shall promptly
reimburse Indemnitee for the amount of all reasonable expenses, legal or
otherwise, incurred by Indemnitee in connection with the defense against
or settlement of such Claim or litigation. If no settlement of such Claim
or litigation is made, Indemnitor shall promptly reimburse Indemnitee for
the amount of any final judgment rendered with respect to such Claim or in
such litigation and for the amount of all expenses, legal or otherwise,
incurred by Indemnitee in the defense against such Claim or litigation,
provided that Indemnitee has contested any such Claim or litigation in
good faith.
(d) For purposes hereof, a judgment or decree of a court shall be
deemed final when such judgment or decree may be enforced against the
party bound thereby.
9
<PAGE> 13
ARTICLE V
TAX MATTERS
Section 5.1. Tax Agreement. All matters relating to any Tax shall be
governed exclusively by the Tax Agreement. In the event of any inconsistency
between the Tax Agreement and this Agreement, the Tax Agreement shall govern.
ARTICLE VI
ACCOUNTING MATTERS
Section 6.1. Allocation of Prepaid Items and Reserves. All prepaid
items and reserves that have been maintained by Alleghany on a consolidated
basis but that relate in part to Assets or Liabilities of the Chicago Title
Group shall be allocated between Alleghany and Chicago Title in such reasonable
manner as they shall mutually agree.
Section 6.2. Accounting Treatment of Assets Transferred and
Liabilities Assumed. Any transfers of Assets of the Alleghany Group to the
Chicago Title Group pursuant to this Agreement shall constitute contributions by
Alleghany to the capital of Chicago Title. Any transfers of Assets of the
Chicago Title Group to the Alleghany Group, and any assumption by the Chicago
Title Group of Liabilities of the Alleghany Group pursuant to this Agreement,
net of Assets received, shall be treated as a distribution by Chicago Title to
Alleghany.
ARTICLE VII
INFORMATION
Section 7.1. Access to Information. From and after the Distribution
Date, Alleghany and Chicago Title each shall afford the other (including each
party's accountants, counsel and other designated representatives) reasonable
access (including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information in its possession relating to its business and affairs, insofar as
such access is reasonably required including, without limitation, for audit,
accounting and litigation purposes.
Section 7.2. Litigation Cooperation. Alleghany and Chicago Title
shall each use reasonable efforts to make available to the other, upon written
request, its officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with any
legal, administrative or other proceedings arising out of the business of the
other prior to the Distribution Date in which the requesting party may from time
to time be involved. In the event that either Alleghany or Chicago Title
provides witnesses to the other under this Article VII, the party providing
10
<PAGE> 14
such witnesses shall be entitled to reimbursement from the recipient for all
reasonably incurred out-of-pocket costs and expenses, but not including internal
time charges.
ARTICLE VIII
INTEREST ON PAYMENTS
Section 8.1. Interest on Payments. Except as otherwise expressly
provided in this Agreement, all payments by one party to the other under this
Agreement shall be paid, by wire transfer of immediately available funds to an
account in the United States designated by the recipient, within 30 days after
receipt of an invoice or other written request for payment setting forth the
specific amount due and a description of the basis therefor in reasonable
detail. Any amount remaining unpaid beyond its due date, including disputed
amounts that are ultimately determined to be payable, shall bear interest at a
floating rate of interest equal to the prime commercial lending rate publicly
announced by The Chase Manhattan Bank or any successor thereto at its principal
office (or any alternative rate substituted therefor by such Bank).
ARTICLE IX
MISCELLANEOUS
Section 9.1. Allocation of Costs and Expenses. Except as otherwise
set forth in this Agreement or the Tax Agreement, Chicago Title shall pay for
all fees, costs and expenses incurred in connection with the Distribution and
the consummation of the transactions contemplated by this Agreement, including,
but not limited to, any and all fees, costs and expenses related to (i) the
preparation, printing and filing of the Form 10, including all fees and expenses
of complying with applicable federal and state securities laws and insurance
laws, (ii) the listing of the Chicago Title Common Stock on the New York Stock
Exchange, (iii) the preparation and negotiation of all of the documentation
related to all of the transactions contemplated by this Agreement, (iv) the
preparation, printing and mailing of the Information Statement, and (v) the
fees, costs and expenses of counsel associated with the foregoing; provided,
however, that Alleghany shall pay for (i) all of the fees, costs and expenses
incurred in connection with the preparation and filing of the Ruling Request (as
defined in the Tax Agreement), including all fees, costs and expenses of counsel
associated with the Ruling Request, (ii) the fees, costs and expenses of counsel
for matters related to the Distribution which were invoiced to Alleghany on or
prior to January 31, 1998 for time charges incurred prior to January 1, 1998,
and (iii) the fees, costs and expenses payable to Merrill Lynch & Co. pursuant
to its engagement as financial advisor to Alleghany in connection with the
Distribution.
Section 9.2. Disputes.
(a) Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes in connection with
claims by third parties
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(collectively, "Disputes"), shall be subject to the provisions of this
Section 9.2; provided, however, that a party may, without prejudice to the
provisions of this Section 9.2, file a complaint for statute of
limitations reasons, or to seek a preliminary injunction or other
provisional relief, if in its sole judgment such action is necessary to
avoid irreparable damage or to preserve the status quo. Despite such
action the parties shall continue to participate in good faith in the
procedures specified in this Section 9.2. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled
while the procedures set forth in this Section 9.2 are pending. The
parties will take such action, if any, as is required to effectuate such
tolling.
(b) Any party may give another party written notice of any Dispute
not resolved in the normal course of business. Such notice shall include a
statement of the position of the party giving such notice and a summary of
arguments supporting that position. The parties shall thereupon attempt in
good faith to resolve any Dispute promptly by negotiation between the
Chief Executive Officers of Alleghany and Chicago Title, who shall meet at
a mutually acceptable time and place, within 60 days after the date of
delivery of the written notice, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the Dispute. All reasonable requests
for information made by one party to the other will be honored.
(c) If the Dispute has not been resolved by negotiation within 90
days of delivery of the first notice, or if the Chief Executive Officers
of Alleghany and Chicago Title have failed to meet within 60 days after
the date of delivery of the written notice, the dispute shall be settled
by arbitration in accordance with the then current Center for Public
Resources/Legal Project Non-Administered Arbitration Rules by a sole
arbitrator located in New York, New York. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. ss. 1-16, and any
party seeking an order confirming the award rendered by the arbitrator
shall apply for such order to the United States District Court for the
Southern District of New York or to any other court having jurisdiction
thereof. The arbitrator is not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any right to
recover such damages with respect to any Dispute resolved by arbitration.
(d) Alleghany and Chicago Title each hereby expressly submits and
consents in advance to the jurisdiction of the United States District
Court for the Southern District of New York, and each hereby waives any
objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens.
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Section 9.3. Notices. All notices or other communications required
or permitted under this Agreement shall be in writing and sufficient if sent by
registered or certified mail, postage prepaid, addressed as provided below; or
delivered personally, by private courier or fax, and followed by such mailing:
If to Alleghany, to
Alleghany Corporation
375 Park Avenue
New York, New York 10152
Telecopy: (212) 759-3295
Attention: Robert M. Hart, Esq.
Senior Vice President, General Counsel
and Secretary
If to Chicago Title, to
Chicago Title Corporation
171 North Clark Street
Chicago, Illinois 60601
Telecopy: (312) 223-5912
Attention: Paul T. Sands, Jr., Esq.
Executive Vice President, General Counsel and
Secretary
Either party 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.
Section 9.4. Limitation. From and after the Distribution Date,
Alleghany shall be under no obligation, for any purpose whatsoever, to deliver
shares of Alleghany Common Stock to any member of the Chicago Title Group or in
connection with any employee plan or executive compensation plan maintained by
any member of the Chicago Title Group, whether before or after the Distribution
Date.
Section 9.5. Entire Agreement; Amendment. This Agreement, together
with the other agreements set forth on Exhibit C hereto and 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 or other documents delivered pursuant hereto. This Agreement may
be amended, modified, superseded or supplemented only by an instrument in
writing executed and delivered by Alleghany and Chicago Title. Nothing herein is
intended to diminish any of the rights or obligations of any of the parties to
the Tax Agreement or to any of the AAM Agreements.
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<PAGE> 17
Section 9.6. 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 the other party, which consent shall not be
unreasonably withheld.
Section 9.7. Survival of Agreements and Covenants. Except as
otherwise expressly provided herein, all 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 Distribution 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.
Section 9.8. Parties in Interest. Neither of the parties hereto may
assign its rights or delegate any of its duties under this Agreement without the
prior written consent of each other party. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
Section 9.9. Further Assurances and Consents. In addition to the
actions specifically provided for elsewhere in this Agreement, each of the
parties hereto will use its reasonable efforts to (i) execute and deliver such
further instruments and documents and take such other actions as any other party
may reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof and (ii) take, or cause to be taken, all actions,
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable efforts to obtain any
consents and approvals and to make any filings and applications necessary or
desirable in order to consummate the transactions contemplated by this
Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such consents, approvals and amendments are requested or
to take any action or omit to take any action if the taking of or the omission
to take such action would be unreasonably burdensome to the party or its Group
or the business thereof.
Section 9.10. Certain Plan Liabilities. The allocation of any
Liabilities attributable to any employee pension benefit plan (as defined in
Section 3(2)(A) of ERISA) in which persons employed by the Alleghany Business
and the Chicago Title Business both participated shall be governed by the
Employee Benefits Transition Agreement.
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<PAGE> 18
Section 9.11. 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.
Section 9.12. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware.
Section 9.13. 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.
Section 9.14. 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.
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.
ALLEGHANY CORPORATION
By /s/ John J. Burns, Jr.
----------------------------------------
John J. Burns, Jr.
President and Chief Executive Officer
CHICAGO TITLE CORPORATION
By /s/ John Rau
-----------------------------------------
John Rau
President and Chief Executive Officer
15
<PAGE> 1
Exhibit 2.1(b)
CONTENTS OF EXHIBITS TO
DISTRIBUTION AGREEMENT DATED AS OF JUNE 16, 1998
BY AND BETWEEN ALLEGHANY CORPORATION
AND CHICAGO TITLE CORPORATION
Exhibit A
Certificate of Incorporation of Chicago Title Corporation
Exhibit B
By-laws of Chicago Title Corporation
Exhibit C
List of Ancillary Agreements
<PAGE> 1
Exhibit 3.2
================================================================================
BY-LAWS
OF
CHICAGO TITLE CORPORATION
--------------
DELAWARE
================================================================================
<PAGE> 2
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting
The annual meeting of stockholders for the election of directors and
for the transaction of any other business that may properly come before the
meeting shall be held at such hour and at such place or places within or without
the State of Delaware as may from time to time be determined by the Board of
Directors, on the first Tuesday of May in each year or such other date as may be
set by the Board of Directors not more than fifteen days before, nor fifteen
days after, the first Tuesday of May.
Section 2. Special Meetings
At any time in the interval between regular meetings, special
meetings of stockholders may be called by the Chairman, or by a majority of the
Board of Directors, to be held at such times and at such places within or
without the State of Delaware as may be specified in the notices of such
meetings. The notice of any special meeting shall state the purpose of the
meeting and specify the action to be taken at said meeting and no business shall
be transacted thereat except that specifically named in the notice.
Section 3. Notice of Meeting
Notice of the time and place of every meeting of stockholders shall
be delivered personally or mailed at least ten days and not more than sixty days
prior thereto to each stockholder of record entitled to vote at his address as
it appears on the records of the Corporation. Such further notice shall be given
as may be required by law. Business transacted at any special meeting shall be
confined to the purpose or purposes stated in the notice of such special
meeting. Meetings may be held without notice if all stockholders entitled to
vote are present or if notice is waived by those not present.
Section 4. Voting
At all meetings of stockholders any stockholder entitled to vote may
vote in person or by proxy in writing or by a transmission permitted by law
filed in accordance with the procedure established for the meeting. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this paragraph may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Section 5. Quorum
Unless otherwise required by statute or the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), at any
annual or special meeting of
<PAGE> 3
stockholders the presence in person or by proxy of stockholders entitled to cast
a majority of all the votes entitled to be cast at the meeting shall constitute
a quorum, but if at any meeting of the stockholders there be less than a quorum
present, the stockholders present at such meeting may, without further notice,
adjourn, the same from time to time until a quorum shall attend, but no business
shall be transacted at any such adjournment except such as might have been
lawfully transacted had the meeting not been adjourned.
Section 6. Action at Meetings
Except as otherwise required by law, the Certificate of
Incorporation or these By-Laws, a majority of the votes cast at a meeting at
which a quorum is present shall be sufficient to take or authorize action upon
any matter which may properly come before the meeting, and the stockholders
shall not be entitled to cumulate their votes upon the election of directors or
any other matter. Any action required or permitted to be taken by the
stockholders must be effected at an annual or special meeting of stockholders
and may not be effected by any consent in writing by such stockholders.
Section 7. Procedure at Meetings
The Board of Directors may appoint two or more persons to serve as
inspectors of election at any meeting of stockholders. In the absence of such
appointment, the Chairman of the Meeting may make such appointment. The
inspectors of election shall receive, examine and tabulate all ballots and
proxies, including proxies filed with the Secretary, shall determine the
presence or absence of a quorum and shall report to the officer of the
Corporation or other person presiding over the meeting the result of all voting
taken at the meeting by ballot.
The order of business and all other matters of procedure at every
meeting of the stockholders may be determined by the officer of the Corporation
or other person presiding over the meeting.
Section 8. Nominations and Stockholder Business
Nominations of persons for election to the Board of Directors and
the proposal of business to be transacted by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice with
respect to such meeting, (b) by or at the direction of the Board of Directors or
(c) by any stockholder of record of the Corporation who was a stockholder of
record at the time of the giving of the notice provided for in this Section 8,
who is entitled to vote at the meeting and who has complied with the notice
procedures set forth in this Section 8.
For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to this Section 8, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation,
such business must be a proper matter for stockholder action under the Delaware
General Corporation Law and, if the stockholder, or the beneficial owner on
whose behalf any such proposal or nomination is made, solicits or participates
in the solicitation of proxies in support of such proposal or nomination, the
stockholder must have timely indicated such
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<PAGE> 4
stockholder's, or such beneficial owner's, intention to do so as hereinafter
provided. To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation not less than 90
days prior to the first anniversary of the preceding year's annual meeting of
stockholders; provided, however, that if the date of the annual meeting is
advanced more than 30 days prior to or delayed more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person as
would be required to be disclosed in solicitations of proxies for the election
of such nominees as directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written
consent to serve as a director is elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of such
business, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; (c) as to the stockholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner, (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, and (iii) whether either such stockholder
or beneficial owner intends to solicit or participate in the solicitation of
proxies in favor of such proposal or nominee or nominees.
Notwithstanding anything in this Section 8 to the contrary, in the
event that the number of directors to be elected to the Board of Directors is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least 100 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this section shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
record of the Corporation who is a stockholder of record at the time of giving
of notice provided for in this Section 8, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section 8.
Nominations by stockholders of persons for election to the Board of Directors
may be made at such a special meeting of stockholders if the stockholder's
notice required by this Section 8 shall be delivered to the Secretary at the
principal executive offices of the
3
<PAGE> 5
Corporation not later than the close of business on the later of the 90th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
Only persons nominated in accordance with the procedures set forth
in this section shall be eligible to serve as directors and only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this Section
8. The officer of the Corporation or other person presiding over the meeting
shall have the power and the duty to determine whether a nomination or any
business proposed to be brought before the meeting has been made in compliance
with the procedures set forth in this Section 8 and, if any proposed nomination
or business is not in compliance with this Section 8, to declare that such
defective proposed business or nomination shall not be presented for stockholder
action at the meeting and shall be disregarded.
For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this section, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to matters set forth
in this Section 8. Nothing in this Section 8 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 9. Adjournments
Any meeting of stockholders may be adjourned from time to time,
whether or not a quorum is present, by the affirmative vote of a majority of the
votes present and entitled to be cast at the meeting, or by the officer of the
Corporation presiding over the meeting, or by the Board of Directors.
ARTICLE II
DIRECTORS
Section 1. Number and Election
Directors (other than such directors, if any, as are elected by
holders of preferred stock of the Corporation voting as a separate class) shall
be divided into three classes, which shall be as nearly equal in number as
practicable. Unless changed by the Board of Directors pursuant hereto the number
of directors shall be fourteen. The number of directors and the number of which
each class is to consist may be increased or
4
<PAGE> 6
decreased from time to time by a resolution adopted by the vote of in excess of
75 percent of the Whole Board (as defined in the Certificate of Incorporation);
and provided that no decrease in the number of directors shall affect the tenure
of office of any existing director. The term of office of the first class shall
expire at the 1999 annual meeting of stockholders, the term of office of the
second class shall expire at the 2000 annual meeting of stockholders and the
term of office of the third class shall expire at the 2001 annual meeting of
stockholders, with each director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the 1999 annual meeting, directors elected to succeed those
directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until his or her successor shall
have been duly elected and qualified.
Section 2. Vacancies
Subject to the rights of the holders of any series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and any director so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
such director has been elected expires and until such director's successor shall
have been duly elected and qualified.
Section 3. Regular Meetings
Regular meetings of the Board of Directors shall be held at such
times and places as the Board of Directors may from time to time determine.
Section 4. Special Meetings
Special meetings of the Board of Directors may be called at any
time, at any place and for any purpose by the Chairman of the Board or by any
three directors.
Section 5. Notice of Meeting
Notice of regular meetings of the Board of Directors need not be
given.
Notice of every special meeting of the Board of Directors shall be
given to each director, by (a) deposit in the mail at least seventy-two hours
before the meeting, or (b) telephonic or telefacsimile communication directly
with such person, the dispatch of a telegraphic communication to his address, or
actual delivery to his address, at least forty-eight hours before the meeting.
If given to a director by mail, telegraph or actual delivery to his address,
such notice shall be sent or delivered to his business or residential address as
shown on the records of the Secretary or an Assistant Secretary of the
Corporation, or to such other address as shall have been furnished to the
Secretary or an
5
<PAGE> 7
Assistant Secretary of the Corporation by him for the purpose. Such notice need
not include a statement of the business to be transacted at, or the purpose of,
any such meeting.
Section 6. Quorum; Action at Meetings
A majority of the Board of Directors shall constitute a quorum for
the transaction of business, but if, at any meeting of the Board, there be less
than a quorum present, the members at the meeting may, without further notice,
adjourn the same from time to time until a quorum shall attend. Except as
provided herein or in the Certificate of Incorporation or as required by law, a
majority of such quorum shall decide any questions that may come before the
meeting.
Section 7. Participating in Meeting by Conference Telephone
Members of the Board of Directors, or any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar equipment by means of which all persons participating in
the meeting can hear each other at the same time and such participation shall
constitute presence in person at such meeting.
Section 8. Dividends
Anything in these By-Laws to the contrary notwithstanding, the
declaration of dividends or other distributions on the capital stock of the
Corporation, whether in cash or property (other than the dividend preference
payable on any Preferred Stock of the Corporation outstanding from time to
time), may be authorized only by vote of in excess of 75 percent of the
directors present at a meeting duly called at which a quorum is present.
ARTICLE III
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. Election
The Board of Directors may appoint an Executive Committee and other
committees composed of two or more of its members, and may appoint one of the
members of each such committee to the office of chairman thereof. Members of the
committees of the Board of Directors shall hold office for a term of one year
and until their successors are appointed and qualify or until they shall cease
to be directors.
Section 2. Powers
Subject to such limitations as may from time to time be established
by resolution of the Board of Directors, the Executive Committee shall have any
and may exercise all of the powers of the Board of Directors when the Board of
Directors is not in
6
<PAGE> 8
session except that it shall have no power to (a) declare dividends, (b) issue
stock of the Corporation, (c) recommend to the stockholders any action which
requires stockholder approval, (d) alter, amend or repeal any resolution of the
Board of Directors relating to the Executive Committee, or (e) take any other
action which legally may be taken only by the Board of Directors. Other
committees of the Board of Directors shall have such powers as shall be properly
delegated to them by the Board of Directors.
Section 3. Vacancies
If the office of any member of any committee becomes vacant by
death, resignation, or otherwise, such vacancy may be filled from the members of
the Board by the Board of Directors.
Section 4. Substitute Members
In the event that a member of any committee is absent from a meeting
of the committee, the members of the committee present at the meeting whether or
not they constitute a quorum may appoint another director to act in place of the
absent member.
Section 5. Meetings and Notice of Meetings
The Executive Committee shall meet from time to time on call of the
Chairman of the Board or the Chairman of the Executive Committee, or on call of
any three or more members of the Executive Committee, for the transaction of any
business.
Notice of every meeting of the Executive Committee shall be given to
each member, by (a) deposit in the mail at least seventy-two hours before the
meeting, or (b) telephonic or telefacsimile communication directly with such
person, the dispatch of a telegraphic communication to his address, or actual
delivery to his address, at least forty-eight hours before the meeting. If given
to a member by mail, telegraph or actual delivery to his address, such notice
shall be sent or delivered to his business or residential address as shown on
the records of the Secretary or an Assistant Secretary of the Corporation, or to
such other address as shall have been furnished to the Secretary or an Assistant
Secretary of the Corporation by him for this purpose. Such notice need not
include a statement of the business to be transacted at, or the purpose of, any
such meeting.
All other committees of the Board of Directors shall meet at such
times and upon such notice as they may determine.
Section 6. Quorum; Action at Meetings
At any meeting of any committee, however called, a majority of the
members shall constitute a quorum for the transaction of business. A majority of
such quorum shall decide any questions that may come before the meeting.
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<PAGE> 9
ARTICLE IV
OFFICERS
Section 1. Election and Number
The Board of Directors may appoint one of its number as Chairman of
the Board. The Board of Directors shall appoint a President from among the
directors, and a Secretary and a Treasurer, who need not be directors. The Board
of Directors may also appoint one or more Executive Vice Presidents, Senior Vice
Presidents and/or Vice Presidents, who need not be directors. All officers of
the Corporation shall hold office at the pleasure of the Board of Directors. Any
two or more offices, except those of President and Vice President, may, at the
discretion of the Board of Directors, be held by the same person. The Board of
Directors may from time to time appoint such other officers and agents with such
powers and duties as the Board may prescribe.
Section 2. Chairman of the Board
The Chairman of the Board shall preside at all meetings of the Board
of Directors and shall perform such other duties and exercise such other powers
as may be assigned to him from time to time by the Board of Directors.
Section 3. President
The President shall be the chief executive officer and the chief
operating officer of the Corporation. The President shall preside at all
meetings of stockholders and, in the absence of the Chairman of the Board, shall
preside at all meetings of the Board of Directors. Subject to the control of the
Board of Directors, the President shall have direct power and authority over the
business and affairs of the Corporation. The President shall perform such other
duties and exercise such other powers as may be assigned to him from time to
time by the Board of Directors.
Section 4. Executive Vice Presidents
The Executive Vice President or Executive Vice Presidents shall
perform the duties of the President in his absence or during his disability to
act. In addition, the Executive Vice President or Executive Vice Presidents
shall perform the duties and exercise the powers usually incident to their
respective offices and/or such other duties and powers as may be properly
assigned to them from time to time by the Board of Directors, the Chairman of
the Board or the President.
Section 5. Senior Vice Presidents
The Senior Vice President or Senior Vice Presidents shall perform
the duties of the Executive Vice President or Executive Vice Presidents in his
or their absence or disability to act. In addition, the Senior Vice President or
Senior Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to
8
<PAGE> 10
them from time to time by the Board of Directors, the Chairman of the Board, the
President or any Executive Vice President having supervisory authority over
them.
Section 6. Vice Presidents
The Vice President or Vice Presidents shall perform the duties of
the Senior Vice President or Senior Vice Presidents in his or their absence or
disability to act. In addition, the Vice President or Vice Presidents shall
perform the duties and exercise the powers usually incident to their respective
offices and such other duties and powers as may be properly assigned to them
from time to time by the Board of Directors, the Chairman of the Board, the
President or any Executive Vice President or Senior Vice President having
supervisory authority over them.
Section 7. Secretary
The Secretary shall issue notices of meetings, keep the minutes of
the Board of Directors and its committees, have charge of the corporate seal,
and perform such other duties and exercise such other powers as are usually
incident to such office or are properly assigned thereto by the Board of
Directors, the Chairman of the Board, the President or any Executive Vice
President or Senior Vice President or Vice President having supervisory
authority over him.
Section 8. Treasurer
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies as the Board of Directors or the Executive Committee from time
to time shall designate. He shall sign or countersign such instruments as
require his signature, shall perform all such duties and have all such powers as
are usually incident to such office or are properly assigned to him by the Board
of Directors, the Chairman of the Board, the President or any Executive Vice
President or Senior Vice President or Vice President having supervisory
authority over him, and may be required to give bond for the faithful
performance of his duties in such sum and with such surety as may be required by
the Board of Directors.
Section 9. Controller
The Controller shall be responsible for the accounting policies and
practices of the Corporation, maintain its financial records, collect and
consolidate the financial results of its subsidiaries and other operating units,
prepare its financial reports, determine the amount and source of the funds
required to meet its financial obligations, and perform such other duties and
exercise such other powers as are usually incident to such office or are
properly assigned thereto by the Board of Directors, the Chairman of the Board,
the President or any Executive Vice President or Senior Vice President or Vice
President having supervisory authority over him.
9
<PAGE> 11
Section 10. Assistant Secretary; Assistant Treasurer
The Board of Directors may appoint one or more assistant secretaries
and one or more assistant treasurers, or one appointee to both such positions,
which officers shall have such powers and shall perform such duties as are
provided in these By-Laws to the Secretary or Treasurer, as the case may be, or
as are properly assigned thereto by the Board of Directors, the Chairman of the
Board, the President, the Secretary or Treasurer as the case may be, or any
other officer having supervisory authority over them.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall end on the thirty-first day
of December in each year, or on such other day as may be fixed from time to time
by the Board of Directors.
ARTICLE VI
SEAL
The Board of Directors shall provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the Secretary or
an Assistant Secretary.
ARTICLE VII
STOCK
Section 1. Stock of the Corporation
Shares of stock of the Corporation shall be represented by
certificates, provided that the Board of Directors may provide that some or all
of a class or series of stock shall be uncertificated shares. Certificates
representing shares of stock of the Corporation shall be issued in such form as
may be approved by the Board of Directors and shall be signed, manually or by
facsimile, by the Chairman of the Board, President, or an Executive Vice
President or Senior Vice President or Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary, and sealed with the seal
of the Corporation or a facsimile thereof.
Section 2. Transfers
The Board of Directors shall have power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of stock of the Corporation. The Board of Directors
may appoint Transfer Agents and Registrars thereof.
10
<PAGE> 12
Section 3. Record Date; Closing of Transfer Books
The Board of Directors may fix a record date or direct that the
stock transfer books be closed for a stated period for the purpose of making any
proper determination with respect to stockholders, including which stockholders
are entitled to notice of or to vote at a meeting or any adjournment thereof,
receive payment of any dividend or other distribution, or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock. The record date may not be more than sixty nor less than
ten days before the date on which the action requiring the determination will be
taken; the transfer books may not be closed for a period longer than twenty
days; and, in the case of a meeting of stockholders, the closing of the transfer
books shall be at least ten days before the date of the meeting.
Section 4. Lost Certificates
The Board of Directors may determine the conditions upon which a new
certificate of stock will be issued to replace a certificate which is alleged to
have been lost, stolen, mutilated or destroyed, and the Board of Directors may
delegate to any officer of the Corporation the power to make such determinations
and to cause such replacement certificates to be issued.
Section 5. Warrants
The foregoing provisions relative to certificates of stock shall
also apply to allotment certificates or other certificates or warrants
representing rights with respect to stock in the Corporation, which certificates
or warrants may be issued from time to time by a vote of the Board of Directors
in such form as they may approve.
Section 6. Stock Ledger
The Corporation shall maintain a stock ledger which contains the
name and address of each stockholder and the number of shares of stock of each
class which the stockholder holds. The stock ledger may be in written form or in
any other form which can be converted within a reasonable time into written form
for visual inspection. The original stock ledger shall be kept at the office of
the Corporation's Transfer Agent.
ARTICLE VIII
SIGNATURES
Section 1. Negotiable Instruments
All checks, drafts, notes, or other obligations of the Corporation
shall be signed (a) by any two officers of the Corporation of the rank of
Chairman of the Board, President, Executive Vice President, Senior Vice
President or Vice President, (b) by the Chairman of the Board, President, any
Executive Vice President or any Senior Vice President or any Vice President, and
by the Treasurer or Assistant Treasurer or Secretary
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<PAGE> 13
or Assistant Secretary, or (c) as otherwise authorized by the Board of Directors
or the Executive Committee; provided, however, that bonds, debentures or notes
issued under a mortgage indenture or trust agreement with a bank or trust
company as trustee and coupons attached pertaining to any such bonds, debentures
or notes may be executed manually or by facsimile.
Section 2. Stock Transfers
All endorsements, assignments, transfers, stock powers or other
instruments of transfer of securities standing in the name of the Corporation
shall be executed for and in the name of the Corporation (a) by any two officers
of the Corporation of the rank of Chairman of the Board, President, Executive
Vice President, Senior Vice President or Vice President, or (b) by the Chairman
of the Board, President, any Executive Vice President or any Senior Vice
President or any Vice President, and by the Secretary or any Assistant
Secretary, or (c) as otherwise authorized by the Board of Directors.
ARTICLE IX
WAIVER OF NOTICE OF MEETINGS
Section 1. Stockholders
Notice of the time, place and/or purpose of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy; and if any stockholder shall, in a
writing filed with the records of the meeting, either before or after the
holding thereof, waive notice of any stockholders' meeting, notice thereof need
not be given to him.
Section 2. Directors
Notice of any meeting of the Board of Directors or of any committee
thereof need not be given to any director if he shall attend such meeting in
person, or shall in a writing filed with the records of the meeting, either
before or after the holding thereof, waive such notice; and any meeting of the
Board of Directors or of any committee thereof shall be a legal meeting without
any notice thereof having been given if all such directors shall be present at
such meeting.
ARTICLE X
VOTING OF STOCKS
Unless otherwise ordered by the Board of Directors, the Chairman of
the Board, the President, any Executive Vice President or any Senior Vice
President or any Vice President of this Corporation shall have full power and
authority, on behalf of the Corporation, to attend, act and vote at any meeting
of the stockholders of any corporation in which this Corporation may hold stock
and at such meeting may exercise any or all
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<PAGE> 14
rights and powers incident to the ownership of such stock and which as owner
thereof the Corporation might exercise if present and to execute on behalf of
the Corporation a proxy or proxies empowering others to act as aforesaid. The
Board of Directors by resolution from time to time may confer like powers upon
any other person or persons.
ARTICLE XI
CHECKS, NOTES, ETC.
All checks on the Corporation's bank accounts and all drafts, bills
of exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such person or persons
as shall be authorized to do so from time to time by the Board of Directors or
by the committee or officer or officers of the Corporation to whom the Board
shall have delegated the power to authorize such signing; provided, however,
that the signature of any person so authorized on checks and drafts drawn on the
Corporation's dividend and special accounts may be in facsimile if the Board of
Directors or such committee or officer or officers, whichever shall have
authorized such person to sign such checks or drafts, shall have authorized such
person to sign in facsimile, and provided further that in case notes or other
instruments for the payment of money (other than notes, bonds or debentures
issued under a trust instrument of the Corporation) are required to be signed by
two persons, the signature thereon of only one of the persons signing any such
note or other instrument may be in facsimile, and that in the case of notes,
bonds or debentures issued under a trust instrument of the Corporation and
required to be signed by two officers of the Corporation, the signatures of both
such officers may be in facsimile if specifically authorized and directed by the
Board of Directors of the Corporation and if such notes, bonds or debentures are
required to be authenticated by a corporate trustee which is a party to the
trust instrument and provided further that in case any person or persons who
shall have signed any such note or other instrument, either manually or in
facsimile, shall have ceased to be a person or persons so authorized to sign any
such note or other instrument, whether because of death or by reason of any
other fact or circumstance, before such note or other instrument shall have been
delivered by the Corporation, such note or other instrument may, nevertheless,
be adopted by the Corporation and be issued and delivered as though the person
or persons who so signed such note or other instrument had not ceased to be such
a person or persons.
ARTICLE XII
OFFICES
The Corporation may have offices outside the State of Delaware at
such places as shall be determined from time to time by the Board of Directors.
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<PAGE> 15
ARTICLE XIII
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, (a)
these By-Laws may be amended, altered or repealed by the stockholders at any
annual or special meeting by the affirmative vote of at least 75 percent of the
voting power of the outstanding shares of Voting Stock and (b) these By-Laws may
be amended, altered or repealed by the Board of Directors by the affirmative
vote of a majority of the Whole Board.
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<PAGE> 1
EXHIBIT 10.1
U.S. $50,000,000
REVOLVING LOAN AND CREDIT AGREEMENT
dated as of May 29, 1998
among
CHICAGO TITLE AND TRUST COMPANY
as the Company,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS
as the Lenders,
and
LASALLE NATIONAL BANK
as Administrative Agent for the Lenders.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS 1
SECTION 1.1 Defined Terms 1
SECTION 1.2 Use of Defined Terms 10
SECTION 1.3 Cross-References 10
SECTION 1.4 Accounting Terms; Financial Statements 10
SECTION 2. COMMITMENT OF THE LENDERS; CONDITIONS 11
SECTION 2.1 Commitment 11
SECTION 2.2 Conditions to the Loans 11
SECTION 3. GENERAL PROVISIONS APPLICABLE TO ALL LOANS 11
SECTION 3.1 Applicable Interest Rates 11
SECTION 3.2 Minimum and Maximum Borrowing Amounts 13
SECTION 3.3 Borrowing Procedures 13
SECTION 3.4 Interest Periods 14
SECTION 3.5 Renewals and Conversions 14
SECTION 3.6 Prepayments 15
SECTION 3.7 Default Rate 15
SECTION 3.8 Notes 15
SECTION 3.9 Commitment Terminations 16
SECTION 3.10 Funding Indemnity 16
SECTION 3.11 Change in Circumstances, Etc. 17
SECTION 3.12 Place and Application of Payments 19
SECTION 4. FEES 19
SECTION 4.1 Fees 19
SECTION 4.2 Administrative Agent's Fee 19
SECTION 4.3 Facility Fee 20
SECTION 5. TAXES AND OTHER MATTERS 20
SECTION 5.1 Taxes 20
SECTION 5.2 Making of Loans by Administrative Agent 21
SECTION 5.2.1 Assumptions by Administrative Agent 21
SECTION 5.2.2. Delegation of Authority to Administrative Agent 21
SECTION 5.3 Sharing of Payments 22
SECTION 5.4 Setoff 23
SECTION 5.5 Use of Proceeds 23
SECTION 6. WARRANTIES 23
SECTION 6.1 Organization, etc. 23
SECTION 6.2 Authorization; No Conflict 23
SECTION 6.3 Validity and Binding Nature 24
SECTION 6.4 Financial Statements 24
SECTION 6.5 Litigation and Contingent Liabilities 24
SECTION 6.6 Liens 24
SECTION 6.7 Subsidiaries 24
SECTION 6.8 Investment Company Act 25
SECTION 6.9 Public Utility Holding Company Act 25
SECTION 6.10 Regulation U 25
SECTION 6.11 Ownership of Properties 25
SECTION 6.12 Taxes 25
SECTION 6.13 Pension and Welfare Plans 25
SECTION 6.14 Accuracy of Information 25
SECTION 7. COMPANY'S COVENANTS 26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 7.1 Reports, Certificates and Other Information 26
SECTION 7.1.1 Company Audit Report 26
SECTION 7.1.2 Annual Company Unaudited Statements 26
SECTION 7.1.3 Company Interim Reports 26
SECTION 7.1.4 Certificates 26
SECTION 7.1.5 Annual Statement Blanks 27
SECTION 7.1.6 Quarterly Statement Blanks 27
SECTION 7.1.7 Notice of Default and Litigation 27
SECTION 7.1.8 Subsidiaries 27
SECTION 7.1.9 ERISA 27
SECTION 7.1.10 Additional Information 27
SECTION 7.2 Books, Records and Inspections 28
SECTION 7.3 Insurance 28
SECTION 7.4 Taxes 28
SECTION 7.5 Consolidated Net Worth 28
SECTION 7.6 Statutory Surplus 28
SECTION 7.7 Interest Expense Coverage Ratio 28
SECTION 7.8 Liquidity 28
SECTION 7.9 Loss Reserve Ratio 28
SECTION 7.10 Restricted Payments 28
SECTION 7.11 Indebtedness 29
SECTION 7.12 Liens 29
SECTION 7.13 Mergers, Consolidations, Purchases 30
SECTION 7.14 Asset Dispositions 30
SECTION 7.15 Leverage Ratio 31
SECTION 7.16 Existing Business 31
SECTION 7.17 Other Agreements 31
SECTION 8. CONDITIONS OF LENDING 31
SECTION 8.1 Documents 31
SECTION 8.1.1 Notes 31
SECTION 8.1.2 Corporate Documents 31
SECTION 8.1.3 Incumbency and Signatures 31
SECTION 8.1.4 Confirmatory Certificate 32
SECTION 8.1.5 Good Standing 32
SECTION 8.1.6 Instructions 32
SECTION 8.1.7 Other 32
SECTION 8.2 Further Conditions 32
SECTION 9. EVENTS OF DEFAULT AND THEIR EFFECT 32
SECTION 9.1 Events of Default 32
SECTION 9.1.1 Non-Payment of Notes, etc. 32
SECTION 9.1.2 Non-Payment of Other Indebtedness 32
SECTION 9.1.3 Bankruptcy, Insolvency, etc. 33
SECTION 9.1.4 Non-Compliance with this Agreement 33
SECTION 9.1.5 Warranties 33
SECTION 9.1.6 Change of Control 33
SECTION 9.1.7 Judgments 33
SECTION 9.1.8 Pension Plans 34
SECTION 9.2 Effect of Event of Default 34
SECTION 10. THE ADMINISTRATIVE AGENT 34
SECTION 10.1 Actions 34
SECTION 10.2 Exculpation 35
SECTION 10.3 Successor 35
SECTION 10.4 Loans by LaSalle 35
SECTION 10.5 Credit Decisions 36
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 10.6 Copies, etc. 36
SECTION 11. MISCELLANEOUS PROVISIONS 36
SECTION 11.1 Waivers, Amendments, etc. 36
SECTION 11.2 Notices 37
SECTION 11.3 Costs, Expenses and Taxes 37
SECTION 11.4 Indemnification 37
SECTION 11.5 Survival 38
SECTION 11.6 Severability 38
SECTION 11.7 Captions 38
SECTION 11.8 Execution in Counterparts, Effectiveness, etc. 38
SECTION 11.9 Governing Law 39
SECTION 11.10 Successors and Assigns 39
SECTION 11.11 Sale and Transfer of Notes; Participations in Notes 39
SECTION 11.11.1 Assignments 39
SECTION 11.11.2 Participations 40
SECTION 11.12 Other Transactions 41
SECTION 11.13 Forum Selection and Consent to Jurisdiction 41
SECTION 11.14 Waiver of Jury Trial 42
SECTION 11.15 Confidentiality 42
SECTION 11.16 Special Purpose Funding Vehicle 42
</TABLE>
<PAGE> 5
REVOLVING LOAN AND CREDIT AGREEMENT
This REVOLVING LOAN AND CREDIT AGREEMENT, dated as of May 29, 1998,
among CHICAGO TITLE AND TRUST COMPANY, an Illinois corporation (the "Company"),
the various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), and LASALLE NATIONAL BANK, as administrative
agent (the "Administrative Agent") for the Lenders.
W I T N E S E T H:
WHEREAS, as of the date hereof, the Company is wholly-owned by
Alleghany Corporation, a Delaware corporation ("Alleghany"), and is engaged
directly and through its various Subsidiaries in the business of issuing title
insurance and providing other related services for residential and commercial
real estate transactions; and
WHEREAS, Alleghany has announced its intention to transfer all of the
issued and outstanding shares of the Company owned by Alleghany to Chicago Title
Corporation, a newly formed Delaware corporation ("CTC"), and to distribute the
shares of CTC to Alleghany stockholders, which transaction is expected to be
completed in the second quarter of 1998; and
WHEREAS, the Company wishes to borrow from the Lenders on a revolving
credit basis on and after the date hereof and at any time prior to the
Expiration Date in an aggregate principal amount at any one time outstanding not
to exceed $50,000,000; and
WHEREAS, the Lenders and the Administrative Agent wish to make
available to the Company the loans provided for herein to effect such extension
of credit on a revolving credit basis, in each case on the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto,
intending to be bound hereby, further agree as follows:
SECTION 1. DEFINITIONS
SECTION 1.1 Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its Preamble and Recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
Adjusted Total Assets shall mean for any fiscal year the total assets
of the Company and its Subsidiaries on a consolidated basis as at the
commencement of such fiscal year, as shown on a consolidated balance sheet of
the Company prepared as at the end of the preceding fiscal year in accordance
with generally accepted accounting principles consistently applied, less any
amounts shown on such consolidated balance sheet representing Unrestricted
Assets.
<PAGE> 6
Administrative Agent is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Administrative
Agent pursuant to Section 10.3.
Affiliate of any Person shall mean a corporation which controls, is
controlled by or is under common control with such Person.
Agreement shall mean, on any date, the Revolving Loan and Credit
Agreement as the same may, from time to time, be amended, supplemented, amended
and restated, or otherwise modified and in effect as of such date.
Annual Statement Blank shall mean the annual statement of the
conditions and affairs of each Title Insurance Subsidiary in the form prescribed
by its applicable State regulatory authority for title insurance companies and
prepared in accordance with applicable statutory accounting principles.
Applicable LIBOR Margin, for purposes of determining the interest rate
on a LIBOR Loan, means initially 0.25% (the "Normal LIBOR Margin"), provided,
however, that the Normal LIBOR Margins shall be subject to quarterly adjustment,
commencing with the fiscal quarter commencing July 1, 1998, based on the
following matrix:
<TABLE>
<CAPTION>
Applicable LIBOR Margin
Leverage Ratio for LIBOR Loans
- -------------- ---------------
<S> <C>
Less than 0.20:1.00 0.25%
0.20:1.00 through but less 0.30%
than 0.25:1.00
0.25:1.00 through but less 0.35%
than 0.30:1.00
0.30:1.00 through but less 0.40%
than 0.35:1.00
Greater than or equal to 0.35:1.00 0.50%
</TABLE>
Approved Investments shall mean investments (i) in direct obligations
of, or obligations the principal of and interest on which are fully guaranteed
by, the United States of America, (ii) in obligations issued or guaranteed by
any agency or instrumentality of the United States of America, (iii) in
certificates of deposit of, and time deposits in, any bank organized under the
laws of the United States of America or any State thereof whose short-term
commercial paper rating from Standard & Poor's Corporation is at least A-1 or
the equivalent thereof or from Moody's Investors Service, Inc. is at least P-1
or the equivalent thereof (or in the event that neither such company is
providing such service, any other similar nationally recognized rating service),
or (iv) in short-term notes or other obligations rated P-1 by Moody's Investors
Service,
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<PAGE> 7
Inc. or A-1 by Standard and Poor's Corporation (or in the event that neither
such company is providing such service, any other similar nationally recognized
rating service).
Assignee Lender is defined in Section 11.11.1.
Authorized Officer means one or more officers of the Company duly
authorized (and so certified to the Administrative Agent by the corporate
Secretary of the Company pursuant to a certificate of authority and incumbency
from time to time satisfactory to Administrative Agent), acting alone, to
request Loans hereunder and execute and deliver documents, instruments,
agreements, reports, statements and certificates in connection herewith.
Base Rate means, for any day, the higher of (a) the sum of (x) one-half
percent (0.50%) plus (y) the latest Federal Funds Rate; and (b) the rate of
interest in effect for such day as publicly announced from time to time by the
Administrative Agent in Chicago, Illinois as its "prime" commercial rate. The
"prime" commercial rate is a rate set by the Administrative Agent based upon
various factors including the Administrative Agent's costs and desired return,
general economic conditions and other factors and is used as a reference point
for pricing some loans, which may be priced at, above or below such announced
rate; any change in the Base Rate resulting from a change in said prime
commercial rate shall be effective as of the date of the relevant change in said
prime commercial rate.
Base Rate Loan means a Loan bearing interest at the rate specified in
Section 3.1(a) hereof.
Borrowing Notice means the request of the Company for Loans, as further
described in Section 3.3 hereof.
Business Day shall mean
(a) any day which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in Chicago, Illinois and
New York, New York; and
(b) relative to the making, continuing, prepaying or repaying of any
LIBOR Loans, any day on which dealings in Dollars are carried on in the London
interbank market.
Capitalized Lease of a Person means any lease of real or personal
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with generally accepted accounting
principles.
Capitalized Lease Obligations of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles.
Cash and Marketable Securities shall mean as at the end of any fiscal
quarter (i) with respect to the Title Insurance Subsidiaries all assets on a
combined basis for the Title Insurance Subsidiaries which are included on page
2, lines 1, 2.1, 2.2, and 6 (excluding preferred stock and
3
<PAGE> 8
common stock of Affiliates) of the Form 9 Annual Statement Blank and the
Quarterly Statement Blank of the Title Insurance Subsidiaries as at such date
(or the equivalent items if the forms of said Annual Statement Blank or
Quarterly Statement Blank shall be amended) and (ii) with respect to the
Company, all assets which would be included on page 2, lines 1, 2.1, 2.2, and 6
(excluding preferred stock and common stock of Affiliates) of the Form 9 Annual
Statement Blank of the Company (or the equivalent items if the form of said
Annual Statement Blank shall be amended) if the Company was filing such form
based on applicable statutory accounting principles applied on a basis
consistent with those applied on December 31, 1997.
Commitment shall mean, relative to any Lender, such Lender's obligation
to make Loans pursuant to Section 2.1.
Company - see Preamble.
Commitment Amount shall mean, on any date $50,000,000, or such lesser
amount resulting from any termination by the Company pursuant to Section 3.9.
Consolidated Net Income shall mean consolidated total revenues of the
Company and its Subsidiaries, less all consolidated charges which should be
deducted before arriving at net income, as determined in accordance with
generally accepted accounting principles.
Consolidated Net Worth shall mean the sum of the capital stock,
additional paid-in capital and retained earnings accounts of the Company and its
Subsidiaries as shown on the Company's consolidated balance sheet prepared in
accordance with generally accepted accounting principles; provided, however that
Consolidated Net Worth shall be reduced by the face amount of any debt
instruments of Affiliates which are not Subsidiaries of the Company owned by the
Company or its Subsidiaries. The Company implemented at December 31, 1993, the
provisions of Statement of Financial Accounting Standards Bulletin Number 115.
Under this statement, the Company's investments in certain marketable securities
are periodically valued at fair values, with the changes in such values being
recorded directly in stockholder's equity. The Company and the Lenders agree
that for purposes of the computation of Consolidated Net Worth, unrealized gains
and losses resulting from such changes in fair values shall be excluded from
such computations.
Controlled Group shall mean all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of the
Internal Revenue Code or Section 4001 of ERISA.
CTI shall mean Chicago Title Insurance Company, a Missouri corporation
and Subsidiary of the Company.
Debt Service shall mean, for any fiscal period, the sum of (i) Interest
Expense for such period, plus (ii) all amounts of principal paid or payable on
all indebtedness for borrowed money or for the deferred purchase price of
property (including the Notes for such period, plus (iii) any reductions from
time to time in Capitalized Lease Obligations appearing as indebtedness on the
4
<PAGE> 9
liability side of a balance sheet in accordance with generally accepted
accounting principles; provided that the term "Debt Service" shall not include
any obligation to the extent such obligation is permitted by Section 7.11(v),
7.11(vii) or 7.11(x).
Default Rate is defined in Section 3.7.
Dollar and $ shall mean lawful money of the United States.
Domestic Office shall mean, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
Earnings Before Interest and Taxes shall mean, for any fiscal period,
the sum of (i) Consolidated Net Income of the Company for such period, plus (ii)
all Interest Expense of the Company and its Subsidiaries deducted in determining
Consolidated Net Income for such period, plus (iii) any provision for federal,
state or local income taxes or franchise taxes deducted in determining
Consolidated Net Income for such period, as determined in accordance with
generally accepted accounting principles.
Environmental Laws shall mean all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
Eurodollar Reserve Percentage is defined in Section 3.1(b) hereof.
Event of Default shall mean any of the events described in Section 9.1.
Expiration Date is defined in Section 2.1.
Facility Fee is the amount per annum equal to the following percentage
multiplied by the Commitment Amount payable in arrears on the last day of each
calendar quarter, commencing June 30, 1998 (initially 0.10%):
<TABLE>
<CAPTION>
Leverage Ratio Applicable Facility Fee
- -------------- -----------------------
<S> <C>
Less than 0.20:1.00 0.10%
0.20:1.00 through but less
than 0.25:1.00 0.125%
</TABLE>
5
<PAGE> 10
<TABLE>
<S> <C>
0.25:1.00 through but less 0.15%
than 0.30:1.00
0.30:1.00 through but less 0.20%
than 0.35:1.00
Greater than or equal to 0.35:1.00 0.25%
</TABLE>
The Administrative Agent shall determine the Facility Fee, and its determination
thereof shall be conclusive and binding except in the case of manifest error.
Not later than fifteen (15) days after the Administrative Agent's receipt of the
quarterly financial statements required by Section 7.1.3 hereof for a given
fiscal quarter (or, in the case of year end, the receipt of the annual financial
statements required by Section 7.1.2 hereof for a given fiscal year) and the
letter from the Company, accompanied by a certificate signed by the Chief
Financial Officer or Treasurer of the Company computing the Leverage Ratio as of
the close of the most recently completed fiscal quarter required by Section
3.1(c) hereof, the Administrative Agent shall determine whether such financial
information indicates such a change in the Leverage Ratio as would justify a
change in the Facility Fee and shall then notify the Company of such
determination and of any change in the Facility Fee resulting therefrom. Any
change in the Facility Fee shall be effective retroactively as of the close of
the most recently completed fiscal quarter and with such new Facility Fee to
continue in effect until the effectiveness of the next redetermination thereof.
Any determination by the Administrative Agent of the Leverage Ratio shall be
conclusive and binding upon the Company except in the case of manifest error.
Federal Funds Rate shall mean, for any period, a fluctuating interest
rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on transactions in an amount
equal to the outstanding principal amount of the Notes received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.
Indemnified Liabilities is defined in Section 11.4.
Indemnified Parties is defined in Section 11.4.
Interest Expense shall mean, for any fiscal period, all amounts paid or
payable by the Company and its Subsidiaries on a consolidated basis as interest
expense on all indebtedness for borrowed money or for the deferred purchase
price of property or as the implicit interest expense on all obligations which
are regarded as Capitalized Lease Obligations for accounting purposes,
6
<PAGE> 11
as determined in accordance with generally accepted accounting principles,
provided that the term "Interest Expense" shall not include any interest on any
obligation to the extent such obligation is permitted by Section 7.11(v),
7.11(vii) or 7.11(x).
Interest Period is defined in Section 3.4 hereof.
Investment Borrowings shall mean indebtedness of the Company or a
Subsidiary having a maturity of 92 days or less representing borrowings from a
bank or banks with which the Company or such Subsidiary has a depositary
relationship, which borrowings shall be fully secured by Approved Investments
purchased by the Company with the proceeds of such borrowings.
LaSalle shall mean LaSalle National Bank, and any successor corporation
thereto by merger, consolidation or otherwise.
Lender Assignment Agreement shall mean a Lender Assignment Agreement
substantially in the form of Exhibit C hereto.
Lenders - see Preamble.
Leverage Ratio means the ratio of Long-Term Indebtedness to
Consolidated Net Worth.
LIBOR Loan means a Loan bearing interest at the rate specified in
Section 3.1(b) hereof.
Loans is defined in Section 2.1.
Loan Documents shall mean this Agreement, the Notes and each Borrowing
Notice.
Long-Term Indebtedness shall mean all indebtedness of the Company and
its Subsidiaries for borrowed money or on account of deposits (other than trust
and escrow balances) or advances, all indebtedness of the Company and its
Subsidiaries for the deferred purchase price of property and services to the
extent provided in Section 7.11, all indebtedness of others assumed or
guaranteed by the Company or any of its Subsidiaries or in respect of which the
Company or any Subsidiary is secondarily or contingently liable (other than (x)
by endorsement of negotiable instruments in the course of collection, and (y)
other indebtedness of others guaranteed by the Company or any of its
Subsidiaries or in respect of which the Company or any Subsidiary is secondarily
or contingently liable not exceeding at any one time an aggregate of
$15,000,000) and all Capitalized Lease Obligations of the Company and its
Subsidiaries, which indebtedness or obligation is in each case by its terms
payable more than one year after the date of such determination; provided that
the term "Long-Term Indebtedness" shall not include any obligation which is
permitted by Section 7.11(vii), 7.11(viii) or 7.12 nor shall it include any
obligation to the extent such obligation is permitted by Section 7.11(x).
Loss Reserves shall mean as at the end of any fiscal quarter all
amounts for the Title Insurance Subsidiaries on a combined basis which are shown
as "Reserve for undetermined title losses of which notice has been received" on
line 1, page 3 of the Form 9 Annual Statement
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<PAGE> 12
Blank and the Quarterly Statement Blank of the Title Insurance Subsidiaries as
at such date (or the equivalent item if the forms of said Annual Statement Blank
or Quarterly Statement Blank shall be amended).
Material Adverse Effect means, relative to any occurrence, event,
condition or circumstance, or any change therein, of whatever nature (including
any adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), a materially adverse effect on: (i) the assets of
or the business, financial condition, or operations of the Company and its
Subsidiaries taken as a whole; (ii) the ability of the Company to timely or
fully perform any of the payment, performance or other material obligations
involving the Loan Documents or a payment default in respect of any of their
debt in excess of $10,000,000 or other default the effect of which is to
accelerate the maturity of any of their debt in excess of $10,000,000; (iii) the
legality, validity, binding effect, enforceability or admissibility into
evidence of any Loan Document or the ability of the Administrative Agent or any
Lender to enforce any rights or remedies under or in connection with any Loan
Document.
Net Asset Sales shall mean, for any fiscal year, the excess, if any, of
(i) sales or other dispositions of assets in such fiscal year, over (ii)
purchases or other acquisitions of assets in such fiscal year; provided,
however, that Net Asset Sales shall not include sales or purchases of
Unrestricted Assets. Repayments by third parties to the Company or any
Subsidiary of loans and other amounts receivable shall not be deemed to be sales
or other dispositions of assets for purposes of the foregoing definition.
Note shall mean a promissory note of the Company payable to any Lender,
in the form of Exhibit A hereto (as such promissory note may be amended,
endorsed, supplemented, substituted, renewed, extended, restated, or otherwise
modified from time to time), evidencing the aggregate indebtedness of the
Company to such Lender resulting from outstanding Loans, and also means all
other promissory notes accepted from time to time in substitution therefor or
renewal thereof.
Obligations shall mean all obligations (monetary or otherwise) of the
Company arising under and in connection with this Agreement, the Notes or any
other Loan Document.
Participant is defined in Section 11.11.2.
PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Company or any corporation, trade or business that is, along with the Company, a
member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
8
<PAGE> 13
Percentage shall mean, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in the Lender Assignment Agreement,
as such percentage may be adjusted from time to time pursuant to Lender
Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to Section 11.11.
Person shall mean any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
Plan shall mean any Pension Plan or Welfare Plan.
Quarterly Statement Blank shall mean the quarterly statement of the
conditions and affairs of each Title Insurance Subsidiary in the form prescribed
by its applicable State regulatory authority for title insurance companies and
prepared in accordance with applicable statutory accounting principles.
Reference Bank means ABN/AMRO Bank.
Required Lenders shall mean, at any time, Lenders holding at least 51%
of the then aggregate outstanding principal amount of the Notes then held by the
Lenders, or, if no such principal amount is then outstanding, Lenders having at
least 51% of the Commitments.
Restricted Payments is defined in Section 7.10.
Revolving Loan or Revolving Loans is defined in Section 2.1.
Scheduled Properties shall mean the real property listed on Exhibit D
hereto.
Security Union shall mean Security Union Title Insurance Company, a
California corporation.
Statutory Premium Reserve shall mean as at the end of any fiscal
quarter all amounts on a combined basis for the Title Insurance Subsidiaries
which would be shown as "statutory premium reserve" on line 2, page 3 of the
Form 9 Annual Statement Blank and the Quarterly Statement Blank of the Title
Insurance Subsidiaries as at such date (or the equivalent item if the forms of
said Annual Statement Blank or Quarterly Statement Blank shall be amended).
Statutory Surplus shall mean as at the end of any fiscal quarter the
combined surplus of all Title Insurance Subsidiaries, computed for them in the
same manner as the item that is required to be filed as "Surplus as Regards
Policy Holders" on line 26, page 3 of the Form 9 Annual Statement Blank and the
Quarterly Statement Blank of the Title Insurance Subsidiaries as at such date
(or the equivalent item if the forms of said Annual Statement Blank or Quarterly
Statement Blank shall be amended).
Subsidiary shall mean a corporation of which the Company and/or its
other Subsidiaries own, directly or indirectly, such number of outstanding
shares as have more than 50% of the
9
<PAGE> 14
ordinary voting power for the election of directors.
Taxes is defined in Section 5.1.
Termination Date means May __, 2003.
Title Insurance Subsidiaries shall mean CTI, Security Union and TT;
provided, however, that in the event a Subsidiary of CTI, Security Union or TT
in existence on the date of execution and delivery hereof subsequently becomes a
direct Subsidiary of the Company, the term "Title Insurance Subsidiaries" shall
mean CTI, Security Union, TT and such Subsidiary. In determining compliance by
the Title Insurance Subsidiaries with the various covenants applicable to them
in Section 7, such determinations shall be based on applicable statutory
accounting principles applied on a basis consistent with those at the time in
effect. It is understood and agreed that statutory accounting principles require
that all Subsidiaries of Title Insurance Subsidiaries be carried on the books of
such Title Insurance Subsidiaries on a statutory equity basis.
TT shall mean Ticor Title Insurance Company, a California corporation.
Type means, with regard to each Loan, such Loan is either a Base Rate
Loan or a LIBOR Loan.
Unmatured Event of Default shall mean any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
Unrestricted Assets shall mean cash and marketable securities
(including, without limitation, certificates of deposit and assets pledged to
secure trust and escrow deposits), mortgages and non-operating real estate
(including, without limitation, claims acquired properties).
Welfare Plan shall mean a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Note, Borrowing Notice,
notice and other communication delivered from time to time in connection with
this Agreement.
SECTION 1.3 Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Section are references to
such Section of this Agreement.
SECTION 1.4 Accounting Terms; Financial Statements. All accounting
terms used herein but not expressly defined in this Agreement have the
respective meanings given to them in accordance with generally accepted
accounting principles. Unless otherwise provided herein, all computations and
determinations for purposes of determining compliance with the financial
10
<PAGE> 15
requirements of this Agreement shall be made in accordance with generally
accepted accounting principles on a basis consistent with those at the time in
effect; provided, however, that if any changes in generally accepted accounting
principles are hereafter required or permitted and are adopted by the Company
and such changes result in a material change in the method of calculation of any
of the financial covenants or restrictions contained in Section 7 or in the
related definitions or terms used herein, the parties hereto agree to enter into
negotiations in good faith in order to amend such provisions so as to reflect
equitably such changes with the desired result that the criteria for evaluating
the Company's financial condition shall be the same after such changes as if
such changes had not been made.
SECTION 2. COMMITMENT OF THE LENDERS; CONDITIONS.
SECTION 2.1 Commitment. Subject to the terms and conditions of this
Agreement, the Lenders severally agree to lend to the Company at any time and
from time to time, from the date hereof until the earlier of the Termination
Date or the occurrence of an Event of Default or Unmatured Event of Default
hereunder (the earlier of such dates hereinafter referred to as the "Expiration
Date"), such sums, in a minimum amount(s) as set forth in Section 3.2 hereof, as
the Company may request from time to time by a Borrowing Notice pursuant to
Section 3.3 hereof; provided, however, that the aggregate principal amount of
all loans outstanding under this Section 2.1 (individually, a "Revolving Loan"
or "Loan" or, collectively, the "Revolving Loans" or "Loans") at any one time
shall not exceed Fifty Million Dollars ($50,000,000) (such obligations
hereinafter referred to as the "Commitment"). Subject to the terms and
conditions hereof, the Company may borrow or repay and reborrow hereunder, from
the date hereof until the Expiration Date, either the full amount of the
Commitment or any lesser sum in the minimum amounts referred to herein. If, at
any time, the Revolving Loans exceed the Commitment, the Company shall
immediately notify the Administrative Agent of the existence of and pay to the
Administrative Agent the amount of such excess. Borrowings of the Loans shall be
made ratably from the Lenders in proportion to their respective Percentages.
SECTION 2.2 Conditions to the Loans. Notwithstanding any other
provision of this Agreement, no Lender shall be required to make the Loans
provided for hereunder if the conditions precedent to the making of the Loans
specified in Section 8 have not been satisfied.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO ALL LOANS.
SECTION 3.1 Applicable Interest Rates. The Company may elect that each
borrowing of Loans be made by means of a Base Rate Loan or a LIBOR Loan;
provided, however, that there shall not be more than eight borrowings of LIBOR
Loans outstanding at any time.
(a) Base Rate Loans. Each Base Rate Loan made by the Lenders shall bear
interest (computed on the basis of a year of 360 days and actual days elapsed)
on the unpaid principal amount thereof from the date such Loan is made until
maturity (whether by acceleration or otherwise) at a rate per annum equal to the
Base Rate from time to time in effect. Interest on all Base Rate Loans is
payable on the last day of each calendar quarter and at maturity (whether by
acceleration or otherwise) commencing June 30, 1998.
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<PAGE> 16
(b) LIBOR Loans. Each LIBOR Loan made by the Lenders shall bear
interest (computed on the basis of a year of 360 days and actual days elapsed)
on the unpaid principal amount thereof from the date such Loan is made until
maturity (whether by acceleration or otherwise) at a rate per annum equal to the
sum of (x) the Applicable LIBOR Margin for LIBOR Loans plus (y) the Adjusted
LIBOR, payable on the last day of the applicable Interest Period and at maturity
(whether by acceleration or otherwise), and, if the applicable Interest Period
is longer than three months, on each day occurring every three months after the
date such Loan is made.
Adjusted LIBOR means, for any borrowing of LIBOR Loans, a rate per
annum determined in accordance with the following formula:
LIBOR
-----------------------------
Adjusted LIBOR = 100% - Eurodollar Reserve Percentage
LIBOR means, for an Interest Period for a borrowing of LIBOR Loans, the
offered rate per annum for deposits of Dollars for the requested period that
appears on Telerate Page 3750 as of 11:00 A.M. (London, England time) two (2)
Business Days prior to the first day in such Interest Period. If no such offered
rate exists, such rate will be the rate of interest per annum, as determined by
the Administrative Agent (rounded upwards, if necessary, to the nearest 1/100th
of 1%) at which deposits of Dollars in immediately available funds are offered
at 11:00 A.M. (London, England time) two (2) Business Days prior to the first
day in such Interest Period by major financial institutions reasonably
satisfactory to the Administrative Agent in the London interbank market for the
requested period and for an amount equal or comparable to the principal amount
of the LIBOR Loans outstanding on such date of determination. If no such
deposits are offered by such institutions, such rate will be the rate in effect
for the prior Interest Period.
Eurodollar Reserve Percentage means, for any borrowing of LIBOR Loans,
the daily average for the applicable Interest Period of the maximum rate at
which reserves (including, without limitation, any supplemental, marginal and
emergency reserves) are imposed during such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) under Regulation D on
"eurocurrency liabilities," as defined in such Board's Regulation D, (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on LIBOR Loans is determined or any category of
extension of credit or other assets that include loans by non-United States
offices of Lender to United States residents) subject to any amendments of such
reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the LIBOR
Loans shall be deemed to be "eurocurrency liabilities" as defined in Regulation
D.
(c) Margin and Rate Determinations. The Administrative Agent shall
determine each interest rate applicable to the Loans hereunder, and its
determination thereof shall be conclusive and binding except in the case of
manifest error. Not later than fifteen (15) days after the Administrative
Agent's receipt of the quarterly financial statements required by Section 7.1.3
hereof for a given fiscal quarter (or, in the case of a year end, the receipt of
the annual financial statements required by Section 7.1.2 hereof for a given
fiscal year) and a letter from the Company requesting a change in the Applicable
LIBOR Margin, accompanied by a certificate
12
<PAGE> 17
signed by the Chief Financial Officer or Treasurer of the Company computing the
Leverage Ratio as of the close of the most recently completed fiscal quarter,
the Administrative Agent shall determine whether such financial information
indicates such a change in the Leverage Ratio as would justify a change in the
Applicable LIBOR Margin and shall then notify the Company of such determination
and of any change in the Applicable LIBOR Margin resulting therefrom. Any change
in the Applicable LIBOR Margin shall be effective retroactively as of the close
of the most recently completed fiscal quarter and with such new Applicable LIBOR
Margin to continue in effect until the effectiveness of the next redetermination
thereof. Any determination by the Administrative Agent of the Leverage Ratio
shall be conclusive and binding upon the Company except in the case of manifest
error.
SECTION 3.2 Minimum and Maximum Borrowing Amounts. Each borrowing of
Base Rate Loans shall be in an amount not less than $500,000 or any larger
amount that is an integral multiple of $100,000. Each borrowing of LIBOR Loans
shall be in an amount not less than $1,000,000, or any larger amount that is an
integral multiple of $100,000.
SECTION 3.3 Borrowing Procedures.
(a) Notice to the Administrative Agent. The Company shall give
telephonic or telecopy notice to the Administrative Agent in the form attached
hereto as Exhibit B (the "Borrowing Notice") (which notice shall be irrevocable
once given and, if by telephone, shall be promptly confirmed in writing) by no
later than 12:00 noon (Chicago time) (i) on the date at least three (3) Business
Days prior to the date of each requested borrowing of LIBOR Loans and (ii) on
the date of any requested borrowing of Base Rate Loans. Each such notice shall
specify (i) the date of the requested borrowing (which shall be a Business Day),
(ii) the amount of the requested borrowing, (iii) the type of Loans requested
(if no election as to type of borrowing is specified in any such notice, then
the requested borrowing shall be of Base Rate Loans), and (iv) if such borrowing
is to be comprised of LIBOR Loans, the Interest Period applicable thereto. The
Company agrees that the Administrative Agent may rely on any such telephonic or
telecopy notice given by any person the Administrative Agent in good faith
believes is an Authorized Officer without the necessity of independent
investigation and in the event any notice by such means conflicts with the
written confirmation, such telephone or telecopy notice shall govern if the
Administrative Agent has acted in reliance thereon.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Chicago time) on
the date of any borrowing (a "Funding Date") of LIBOR Loans or Base Rate Loans,
each Lender shall make available its Loan in funds immediately available in
Chicago, Illinois, except to the extent such borrowing is either a reborrowing,
in whole or in part, of the principal amount of a maturing borrowing of Loans (a
"Refunding Borrowing") in which case Lender shall record the Loan made by it as
a part of such Refunding Borrowing on its books or records or on a schedule to
the appropriate Note, as provided in Section 3.8(b) hereof, and shall effect the
repayment, in whole or in part, as appropriate, of its maturing Loan or
reimbursement obligation through the proceeds of such new Loan. Subject to
Section 8 hereof, the Lenders shall make the proceeds of each borrowing
available to the Company at the Administrative Agent's principal office in
Chicago, Illinois.
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<PAGE> 18
SECTION 3.4 Interest Periods. As provided in Section 3.3 hereof, at the
time of each request for the borrowing of LIBOR Loans hereunder the Company
shall select an Interest Period applicable to such Loans from among the
available options. The term "Interest Period" means the period commencing on the
date a borrowing of LIBOR Loans is made and ending on the date, as the Company
may select, 1, 2 or 3, 6 or 12 months thereafter; provided, however, that:
(a) the Company may not select an Interest Period that extends beyond
the Termination Date;
(b) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall be
extended to the next succeeding Business Day, provided that, if such extension
would cause the last day of such Interest Period to occur in the following
calendar month, the last day of such Interest Period shall be the immediately
preceding Business Day; and
(c) for purposes of determining the Interest Period for a borrowing of
LIBOR Loans, a month means a period starting on one day in a calendar month and
ending on the numerically corresponding day in the next calendar month;
provided, however, that if there is no numerically corresponding day in the
month in which such an Interest Period is to end or if such an Interest Period
begins on the last Business Day of a calendar month, then such Interest Period
shall end on the last Business Day of the calendar month in which such Interest
Period is to end.
SECTION 3.5 Renewals and Conversions. The Company may elect from time
to time to convert all or a part of one Type of Loan into another Type of Loan
or to renew all or part of a Loan by giving the Administrative Agent notice
(effective upon receipt) by 12:00 noon (Chicago time) on the proposed date of
conversion into a Base Rate Loan, and at least three (3) Business Days before
the conversion into or renewal of a LIBOR Loan, specifying (i) the renewal or
conversion date, (ii) the amount of the Loans to be converted or renewed, (iii)
in the case of conversions, the Type of Loan to be converted into, and (iv) in
the case of renewals of or conversion into LIBOR Loans, the duration of the
Interest Period applicable to such Loan, provided that (a) after such renewal or
conversion the minimum principal amount of each Loan with the same Interest
Period shall be One Million Dollars ($1,000,000), and (b) LIBOR Loans can only
be renewed or converted on the last day of the Interest Period for such Loan.
The Administrative Agent shall promptly notify each applicable Lender of each
such notice. All conversions shall be made on a proportional basis among the
Lenders providing such converted Loan.
The Company shall give telephonic or telecopy notice to the
Administrative Agent (which notice shall be irrevocable once given, and if by
telephone, shall be promptly confirmed in writing) and shall be given not later
than 12:00 noon (Chicago time) on a Business Day which is not less than the
number of Business Days specified above for such notice. If the Company fails to
give the Administrative Agent the notice specified above for the renewal or
conversion of a LIBOR Loan prior to the end of the Interest Period of such Loan,
such Loan shall automatically be converted into a Base Rate Loan on the last day
of the Interest Period for such Loan.
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<PAGE> 19
SECTION 3.6 Prepayments.
(a) Generally. The Company shall have the privilege of prepaying
without premium or penalty and in whole or in part (but, if in part, then: (i)
in an amount not less than $500,000 or any larger amount that is an integral
multiple of $100,000 in the case of Base Rate Loans, and in an amount not less
than $1,000,000 or any larger amount that is an integral multiple of $100,000 in
the case of LIBOR Loans and (ii) in an amount such that the minimum amount
required for a borrowing pursuant to Section 3.2 hereof remains outstanding) on
any Business Day upon prior notice to the Administrative Agent which must be
received by the Administrative Agent by no later than 12:00 noon (Chicago time)
on the date of such prepayment in the case of Base Rate Loans and by no later
than 12:00 noon (Chicago time) on the date three Business Days in advance of the
date of such prepayment in the case of LIBOR Loans, such prepayment to be made
by the payment of the principal amount to be prepaid and accrued interest
thereon and, in the case of LIBOR Loans, any compensation required by Section
3.10 hereof. Partial prepayments of any outstanding type of Loan shall be
applied to the various borrowings at the direction of the Company.
(b) Reborrowings. Any amount paid or prepaid on the Revolving Loans
before the Expiration Date may, subject to the terms and conditions of this
Agreement, be borrowed, repaid and borrowed again.
SECTION 3.7 Default Rate. If any Event of Default has occurred and is
continuing, then each Loan or other monetary Obligation shall bear interest,
after as well as before judgment (computed on the basis of a year of 360 days
and actual days elapsed) from the date of such Event of Default until such Loan
or other monetary Obligation is paid in full, payable on demand, at a rate per
annum (the "Default Rate") equal to:
(a) with respect to any Base Rate Loan, the sum of two percent (2%)
plus the Base Rate from time to time in effect; and
(b) with respect to any LIBOR Loan, the sum of two percent (2%) plus
the rate of interest in effect thereon at the time of such default until the end
of the Interest Period applicable thereto and, thereafter, at a rate per annum
equal to the sum of two percent (2%) plus the Base Rate from time to time in
effect; and
(c) with respect to other monetary Obligations for which a Default Rate
is not otherwise specified, the sum of two percent (2%) plus the Base Rate from
time to time in effect.
SECTION 3.8 Notes.
(a) Form of Notes. In order to evidence the Revolving Loans, at the
time of the making of the initial Revolving Loans, the Company will execute and
deliver promissory notes, dated the date hereof, payable to the order of each
Lender in the principal amount of its Commitment (together with any and all
amendments, modifications, supplements, substitutions, renewals, extensions and
restatements, thereof and therefor, individually, the "Note" or collectively,
the "Notes"), substantially in the form of Exhibit A hereto.
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<PAGE> 20
(b) Recording Procedures. The Administrative Agent and each Lender
shall record on their books or records or on a schedule to the appropriate Note
the amount of each Loan made by such Lender to the Company, the Interest Period
thereof (if applicable), all payments of principal and interest and the
principal balance from time to time outstanding thereon, the interest rate
applicable thereto, and, in respect of any Loan, the type of such Loan; provided
that prior to the transfer of any Note all such amounts shall be recorded on a
schedule to such Note. The record thereof, whether shown on such books or
records of such Lender and the Administrative Agent or on a schedule to any
Note, shall be prima facie evidence as to all such amounts (and, in the case of
any discrepancy therein, in the absence of manifest error, the books and records
of the Administrative Agent shall control); provided, however, that the failure
of the Administrative Agent to record any of the foregoing or any error in any
such record shall not limit or otherwise affect the obligation of the Company to
repay all Loans made hereunder together with accrued interest thereon. The
Administrative Agent will account separately to the Company monthly with a
statement of Loans, charges and payments made to and by the Company pursuant to
this Agreement, and such accounts shall be deemed final, binding and conclusive,
save for manifest error, unless the Administrative Agent is notified by the
Company in writing to the contrary within 30 days of the date the account to the
Company was so rendered. Such notice by the Company shall be deemed an objection
to only those items specifically objected to therein. Failure of the
Administrative Agent to render such account shall in no way offset the rights of
the Administrative Agent or of the Lenders hereunder. At the request of any
Lender and upon such Lender tendering to the Company the Note to be replaced,
the Company shall furnish a new Note to such Lender to replace any outstanding
Note and at such time the first notation appearing on a schedule on the reverse
side of, or attached to, such Note shall set forth the aggregate unpaid
principal amount of all Loans, if any, then outstanding thereon.
SECTION 3.9 Commitment Terminations. The Company shall have the right
at any time and from time to time, upon prior written notice to the
Administrative Agent, to terminate without premium or penalty, in whole or in
part, any Commitment, each such termination (whether in whole or in part) to be
effective as of the close of the calendar quarter specified in such notice
(provided such effective date occurs no earlier than five (5) Business Days
after such notice) and each partial termination to be in an amount not less than
$500,000 or any larger amount that is an integral multiple of $100,000; provided
that the Commitments may not be reduced to an amount less than the aggregate
principal amount of the utilization then outstanding thereunder. Any termination
of Commitments pursuant to this Section 3.9 may not be reinstated.
SECTION 3.10 Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss of profit, and
any loss, cost or expense incurred by reason of the liquidation or re-employment
of deposits or other funds acquired by such Lender to fund or maintain any LIBOR
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Lender) as a result of:
(a) any payment (including prepayment) of a LIBOR Loan on a date other
than the last day of its Interest Period for any reason, whether before or after
default, and whether or not such payment is required by any provisions of this
Agreement, or
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(b) any failure (because of a failure to meet the conditions of
Sections 2.2, 8 or otherwise) by the Company to borrow a LIBOR Loan on the date
specified in a notice given pursuant to Section 3.3 hereof,
then, upon the demand of such Lender, the Company shall pay to such Lender such
amount as will reimburse such Lender for such loss, cost or expense. If such
Lender makes such a claim for compensation, it shall provide to the Company a
certificate executed by an officer of such Lender setting forth the amount of
such loss, cost or expense in reasonable detail (including an explanation of the
basis for and the computation of such loss, cost or expense) and the amounts
shown on such certificate shall be deemed rebuttably presumptive evidence of the
correctness thereof.
SECTION 3.11 Change in Circumstances, Etc.
(a) Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable Law or in the interpretation thereof makes it unlawful for any Lender
to make or continue to maintain LIBOR Loans or to give effect to its obligations
as contemplated hereby, such Lender shall promptly give notice thereof to the
Company and the Administrative Agent, and such Lender's obligations to make or
maintain LIBOR Loans under this Agreement shall terminate until it is no longer
unlawful for such Lender to make or maintain LIBOR Loans. The Company shall
prepay on demand the outstanding principal amount of any such affected LIBOR
Loans, together with all interest accrued thereon and all other amounts then due
and payable to such Lender under this Agreement; provided, however, subject to
all of the terms and conditions of this Agreement, the Company may then elect to
borrow the principal amount of the affected LIBOR Loan from such Lender by means
of a Base Rate Loan from Lenders.
(b) Unavailability of Deposits or Inability to Ascertain, or Inadequacy
of, LIBOR. If on or prior to the first day of any Interest Period for any
borrowing of LIBOR Loans:
(i) the Administrative Agent advises the Company that deposits
in United States Dollars (in the applicable amounts) are not being
offered to it or the Reference Bank in the interbank eurodollar market,
for such Interest Period, or
(ii) the Administrative Agent advises the Company that LIBOR
as determined by the Reference Bank will not adequately and fairly
reflect the cost to Lenders of funding LIBOR Loans for such Interest
Period,
then, until the Administrative Agent notifies the Company and the Lenders that
the circumstances giving rise to such suspension no longer exist, the obligation
of the Lenders to make LIBOR Loans shall be suspended.
(c) Increased Cost and Reduced Return.
(1) If on or after the date hereof, the adoption of any
applicable Law, or any change therein, or any change in the
interpretation or administration thereof by any
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governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any
Lender with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:
(i) shall subject any Lender to any tax, duty or
other charge with respect to the Loans, the Notes or its
obligation to make Loans, or shall change the basis of
taxation of payments of such Lender of the principal of or
interest on the Loans or any other amounts due under this
Agreement in respect of its Loans or its obligation to make
Loans (except for changes in the rate of tax on the overall
net income of such Lender imposed by the jurisdiction in which
such Lender's principal executive office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposition or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding with
respect to any LIBOR Loans any such requirement included in an
applicable Eurodollar Reserve Percentage) against assets of,
deposits with or for the account of, or credit extended by,
any Lender or shall impose on such Lender or on the interbank
market any other condition affecting the Loans, the Notes or
such Lender's obligation to make Loans;
and the result of any of the foregoing is to increase the cost to such Lender of
making or maintaining any Loan, or to reduce the amount of any sum received or
receivable by any Lender or the Administrative Agent under this Agreement or
under the Notes with respect thereto, by an amount deemed by the Administrative
Agent or such Lender to be material, then, within fifteen (15) days after demand
by the Administrative Agent or such Lender, the Company shall be obligated to
pay such Lender such additional amount or amounts as will compensate the
Administrative Agent and such Lender for such increased cost or reduction
(computed commencing on the effective date of any event mentioned herein). The
Administrative Agent or such Lender agree to use their best efforts to give the
Company notice of the occurrence of any event mentioned herein.
(2) If the Administrative Agent or any Lender shall determine
that the adoption after the date hereof of any applicable Law regarding
capital adequacy, or any change in any existing Law, or any change in
the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Administrative Agent or any Lender (or any of their branches or any
corporation controlling the Administrative Agent or any Lender (or any
of its branches or any corporation controlling the Administrative Agent
or any Lender) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the
rate of return on the Administrative Agent's or any Lender's or such
corporation's capital, as the case may be, as a consequence of the
Administrative Agent's or any Lender's obligations hereunder or for the
credit which is the subject matter hereof to a level below that which
the
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Administrative Agent or any Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into
consideration the Administrative Agent's or any Lender's or such
corporation's policies with respect to liquidity and capital adequacy)
by an amount deemed by the Administrative Agent or any Lender to be
material, then from time to time, within fifteen (15) days after demand
by the Administrative Agent or any Lender, the Company shall pay to the
Administrative Agent or such Lender such additional amount or amounts
reasonably determined by the Administrative Agent or such Lender as
will compensate the Administrative Agent or such Lender for the
reduction.
(d) Discretion of Lenders as to Manner of Funding. Notwithstanding any
other provision of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of the Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Lender had actually funded and
maintained each LIBOR Loan through the purchase of deposits in the relevant
market having a maturity corresponding to such Loan's Interest Period and
bearing an interest rate equal to LIBOR, for such Interest Period.
SECTION 3.12 Place and Application of Payments. All payments of
principal of and interest on the Loans, and all payments of fees and all other
amounts payable under this Agreement shall be made to the Administrative Agent
no later than 12:00 Noon (Chicago time) at the principal office of the
Administrative Agent in Chicago, Illinois (or such other location in the State
of Illinois as the Lender may designate to the Company). Any payments received
after such time shall be deemed to have been received by the Lenders on the next
Business Day. All such payments shall be made in lawful money of the United
States of America, in immediately available funds at the place of payment,
without setoff or counterclaim. Alternatively, at its sole discretion, the
Administrative Agent or any Lender may charge against or debit any deposit
account or other monies of the Company on deposit with or in possession of the
Administrative Agent or such Lender (other than accounts held in a fiduciary
capacity), all or any part of any amount due hereunder or under the Notes. The
Administrative Agent's and the Lender's right from time to time after the
occurrence or happening of an Event of Default hereunder (which has not been
cured or waived in a writing signed by the Administrative Agent and such Lender)
to set off indebtedness owing by the Company to the Administrative Agent or such
Lender against any Company's monies, deposits, credits, accounts or other
property now or at any time in the possession or control of the Administrative
Agent or such Lender, except as provided herein, is hereby acknowledged and
agreed to by the Company.
SECTION 4. FEES.
SECTION 4.1 Fees. The Company agrees to pay the fees set forth in this
Section 4. All such fees shall be non-refundable.
SECTION 4.2 Administrative Agent's Fee. The Company agrees to pay to
the Administrative Agent for its own account fees in the respective amounts
equal to the amounts previously agreed to in separate writings by the Company
and the Administrative Agent.
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SECTION 4.3 Facility Fee. The Company agrees to pay to the
Administrative Agent on behalf of the Lenders the Facility Fee.
SECTION 5. TAXES AND OTHER MATTERS
SECTION 5.1 Taxes. All payments by the Company of principal of, and
interest on, the Notes and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes"). In the event
that any withholding or deduction from any payment to be made by the Company
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Company will
(a) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official receipt or
other documentation satisfactory to the Administrative Agent evidencing such
payment to such authority; and
(c) pay to the Administrative Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net amount
actually received by each Lender will equal the full amount such Lender would
have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Lender with respect to any payment received by the Administrative Agent or
such Lender hereunder, the Administrative Agent or such Lender may pay such
Taxes and the Company will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such Person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such Person would have received
had not such Taxes been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, the Company shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 5.1, a distribution hereunder by the
Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Company.
Upon the request of the Company or the Administrative Agent, each
Lender that is organized under the laws of a jurisdiction other than the United
States shall, prior to the due date of any payments under the Notes, execute and
deliver to the Company and the Administrative Agent, on or about the first
scheduled payment date in each fiscal year, one or more (as the
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Company or the Administrative Agent may reasonably request) United States
Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents (or successor forms or documents), appropriately completed, as may be
applicable to establish the extent, if any, to which a payment to such Lender is
exempt from withholding or deduction of Taxes.
SECTION 5.2 Making of Loans by Administrative Agent.
SECTION 5.2.1 Assumptions by Administrative Agent. Notwithstanding the
occurrence or continuance of an Unmatured Event of Default or Event of Default
or other failure of any condition to the making of Loans hereunder, unless the
Administrative Agent shall have received notice from a Lender in accordance with
the provisions of Section 5.2.2 prior to a proposed borrowing date that such
Lender will not make available to the Administrative Agent such Lender's
Percentage of the amount to be borrowed on such date, the Administrative Agent
may assume that such Lender will make such portion available to the
Administrative Agent in immediately available funds, and the Administrative
Agent may (but shall not be so required), in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the
Administrative Agent in immediately available funds and the Administrative Agent
in such circumstances has made available to the Company such amount, that Lender
shall on the next Business Day following the date of such borrowing make such
amount available to the Administrative Agent, together with interest at the
Federal Funds Rate for and determined as of each day during such period. A
notice of the Administrative Agent submitted to any Lender with respect to
amounts owing under this Section 5.2.1 shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Administrative
Agent shall constitute such Lender's Loan on the date of borrowing for all
purposes of this Agreement. If such amount is not made available to the
Administrative Agent on the next Business Day following the date of such
borrowing, the Administrative Agent shall notify the Company of such failure to
fund and, upon demand by the Administrative Agent, the Company shall pay such
amount to the Administrative Agent for the Administrative Agent's account,
together with interest thereon for each day elapsed since the date of such
borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such borrowing. If such Lender shall repay to the
Administrative Agent such corresponding amount, the amount so repaid shall
constitute such Lender's Percentage of the Loan made on such borrowing date for
purposes of this Agreement. The failure of any Lender to make its Percentage of
any Loan available shall not (without regard to whether the Company shall have
returned the amount thereof to the Administrative Agent in accordance with this
Section 5.2.1) relieve it or any other Lender of its obligation, if any,
hereunder to make its Percentage of such Loan available on such borrowing date,
but no Lender shall be responsible for the failure of any other Lender to make
its Percentage of such Loan available on the borrowing date.
SECTION 5.2.2. Delegation of Authority to Administrative Agent. Without
limiting the generality of Section 10, each Lender expressly authorizes the
Administrative Agent to determine on behalf of such Lender the creation or
elimination of any reserves against the Revolving Loans. Such authorization may
be withdrawn by the Required Lenders by giving the Administrative Agent written
notice of such withdrawal signed by the Required Lenders; provided, however,
that unless otherwise agreed by the Administrative Agent such withdrawal of
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authorization shall not become effective until the thirtieth Business Day after
receipt of such notice by the Administrative Agent. Thereafter, the Required
Lenders shall jointly instruct the Administrative Agent in writing regarding
such matters with such frequency as the Required Lenders shall jointly
determine. Unless and until the Administrative Agent shall have received written
notice from the Required Lenders as to the existence of an Unmatured Event of
Default, an Event of Default or some other circumstance which would relieve the
Lenders of their respective obligations to make Loans hereunder, which notice
shall be in writing and shall be signed by the Required Lenders and shall
expressly state that the Required Lenders do not intend to make available to the
Administrative Agent such Lenders' ratable share of Loans made after the
effective date of such notice, the Administrative Agent shall be entitled to
continue to make the assumptions described in Section 5.2.1. After receipt of
the notice described in the preceding sentence, which shall become effective on
the third Business Day after receipt of such notice by the Administrative Agent
unless otherwise agreed by the Administrative Agent, the Administrative Agent
shall be entitled to make the assumptions described in Section 5.2.2 as to any
Loans as to which it has not received a written notice to the contrary prior to
11:00 a.m. (Chicago time) on the Business Day next preceding the day on which
the Loan is to be made. The Administrative Agent shall not be required to make
any Loan as to which it shall have received notice by a Lender of such Lender's
intention not to make its ratable portion of such Loan available to the
Administrative Agent. Any withdrawal of authorization under this Section 5.2.2
shall not affect the validity of any Loans made prior to the effectiveness
thereof.
SECTION 5.3 Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Sections
3.10 and 3.11) in excess of its pro rata share of payments then or therewith
obtained by all Lenders, such Lender shall purchase from the other Lenders such
participations in their Notes as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in respect of
the total amount so recovered. The Company agrees that any Lender so purchasing
a participation from another Lender pursuant to this Section may, to the fullest
extent permitted by law, exercise all its rights of payment (including pursuant
to Section 5.4) with respect to such participation as fully as if such Lender
were the direct creditor of the Company in the amount of such participation. If
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders
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entitled under this Section to share in the benefits of any recovery on such
secured claim.
SECTION 5.4 Setoff. Each Lender shall, upon the occurrence of any
Default described in Section 9.1.3 or any other Event of Default, have the right
to appropriate and apply to the payment of the Obligations owing to it (whether
or not then due), and (as security for such Obligations) the Company hereby
grants to each Lender a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Company (other than accounts held
in a fiduciary capacity) then or thereafter maintained with such Lender;
provided, however, that any such appropriation and application shall be subject
to the provisions of Section 5.3. Each Lender agrees promptly to notify the
Company and the Administrative Agent after any such setoff and application made
by such Lender; provided, however, that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Lender may have.
SECTION 5.5 Use of Proceeds. The Company will apply the proceeds of the
Loans for working capital, acquisitions and general corporate purposes; without
limiting the foregoing, no proceeds of any Loan will be used to acquire any
equity security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or any "margin stock", as defined in Regulation
U of the Board of Governors of the Federal Reserve System.
SECTION 6. WARRANTIES. To induce the Lenders and the Administrative
Agent to enter into this Agreement and to make the Loans hereunder, the Company
represents and warrants unto the Administrative Agent and each Lender, as of the
date hereof, and as of the date of each disbursement of each of the Loans, the
following, which shall survive the execution and delivery of this Agreement, the
Notes and the Loan Documents and until all of the Obligations have been paid,
satisfied or discharged in full, regardless of any investigation by the
Administrative Agent or any Lender of the Company's financial condition or
assets:
SECTION 6.1 Organization, etc. The Company is a corporation duly
existing and in good standing under the laws of the State of Illinois; each
Subsidiary is a corporation duly existing and in good standing under the laws of
the state of its respective incorporation; the Company and each Subsidiary is
duly qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the failure to be so qualified would have a
Material Adverse Effect; and the Company has full power and authority and holds
all requisite governmental licenses, permits and other approvals to own and hold
its properties and to conduct its business substantially as currently conducted
by it.
SECTION 6.2 Authorization; No Conflict. The execution and delivery of
this Agreement, the borrowing hereunder, the execution and delivery of the
Notes, and the performance by the Company of its obligations under this
Agreement and the Notes, are within the Company's corporate powers, have been
duly authorized by all necessary corporate action on the part of the Company,
and do not and will not contravene or conflict with any provision of law,
governmental regulation or court decree or order to which the Company is subject
or of the charter or by-laws of the Company or of any agreement binding upon the
Company, or result in or require the imposition of, a lien on any of the
Company's or its Subsidiaries' properties.
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SECTION 6.3 Validity and Binding Nature. This Agreement is, and the
Notes when duly executed and delivered will be, legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms.
SECTION 6.4 Financial Statements. The Company's audited consolidated
financial statements as at December 31, 1997, copies of which have been
furnished to the Lenders, have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with that of the
preceding fiscal year (except as otherwise set forth therein with respect to the
discontinued operations of Alleghany Asset Management), and present fairly the
financial condition of the Company and its Subsidiaries as at December 31, 1997
and the results of their operations for the fiscal year ended December 31, 1997;
and since December 31, 1997 there has been no Material Adverse Effect. Each of
the Annual Statement Blank for CTI, TT and Security Union as at December 31,
1997, copies of which have been furnished to the Lenders, has been prepared in
conformity with applicable statutory accounting principles applied on a basis
consistent with that of the preceding fiscal year, and presents fairly the
financial condition of CTI, TT or Security Union, as the case may be, as at such
date and the results of their operations for the period then ended, and since
such date there has been no Material Adverse Effect in their statutory condition
as reflected in such Annual Statement Blanks taken as a whole.
SECTION 6.5 Litigation and Contingent Liabilities. Schedule 6.5 hereto
sets forth a list, as of the date specified, of all pending litigation,
including, without limitation, title insurance claims and claims arising under
Environmental Laws, which, if adversely determined, are likely to result in a
judgment in any one case against the Company or any Subsidiary of $100,000 or
more over and above any applicable insurance coverage. All pending litigation,
including, without limitation, title insurance claims and claims arising under
Environmental Laws, which, if adversely determined, is likely to result in a
judgment in any one case against the Company or any Subsidiary of less than
$100,000 over and above any applicable insurance coverage does not exceed (x)
$60,000,000 in the aggregate from the date hereof until December 31, 1998, (y)
$100,000,000 for Loans made thereafter until June 1, 2001 and (z) $150,000,000
for Loans made after June 1, 2001 until the Expiration Date). Except as set
forth in such Schedule, no litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings are pending or, to
the best knowledge of the Company, threatened against the Company or any
Subsidiary which would, if adversely determined, have a Material Adverse Effect.
Other than any liability incident to such litigation or proceedings and
contingent liabilities of the Title Insurance Subsidiaries incurred in the
ordinary course of their business, neither the Company nor its Subsidiaries have
any contingent liabilities which would have a Material Adverse Effect, which are
not provided for or disclosed in the financial statements referred to in Section
6.4.
SECTION 6.6 Liens. None of the assets of the Company or any Subsidiary
is subject to any mortgage, pledge, title retention lien, or other lien,
encumbrance or security interest, except as permitted under Section 7.12.
SECTION 6.7 Subsidiaries. The Company has no Subsidiaries except those
listed in Schedule 6.7.
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SECTION 6.8 Investment Company Act. The Company is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 6.9 Public Utility Holding Company Act. Neither the Company nor
any Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate", of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 6.10 Regulation U. The Company is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System).
SECTION 6.11 Ownership of Properties. The Company and each of its
Subsidiaries owns good and marketable title to all of its properties and assets,
real and personal, tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all liens, charges or claims (including infringement claims with respect to
patents, trademarks, copyrights and the like) except as permitted pursuant to
Section 7.12. The Company and each of its Subsidiaries is in compliance with all
material requirements of law, including Environmental Laws, and all terms and
provisions of all contracts and other instruments binding upon the Company or
any of its properties or other assets, the failure to comply with which would
have a Material Adverse Effect.
SECTION 6.12 Taxes. The Company and its Subsidiaries have filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted accounting principles shall have been set aside on its books.
SECTION 6.13 Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date hereof, no steps have been taken to
terminate any plan, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a lien in excess of $10,000,000 under
Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the incurrence
by the Company or any member of the Controlled Group of any liability, fine or
penalty in excess of $10,000,000. Except as disclosed in Schedule 6.13, neither
the Company nor any member of the Controlled Group has any contingent liability
with respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.14 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Company in
writing to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf
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of the Company to the Administrative Agent or any Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of this
Agreement by the Administrative Agent and such Lender, and such information is
not, or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
SECTION 7. COMPANY'S COVENANTS.
Until the expiration or termination of the Commitment and thereafter
until all Obligations of the Company hereunder have been satisfied and
discharged in full, the Company agrees that it will:
SECTION 7.1 Reports, Certificates and Other Information. Furnish to the
Administrative Agent (with sufficient copies for the Lenders):
SECTION 7.1.1 Company Audit Report. Within 90 days after each fiscal
year of the Company, a copy of an annual audit report of the Company and its
Subsidiaries prepared on a consolidated basis and in conformity with generally
accepted accounting principles applied on a basis consistent (to the extent
possible) with the audited consolidated financial statements of the Company and
its Subsidiaries as at December 31, 1997, duly certified by independent
certified public accountants of recognized standing selected by the Company,
together with (i) a certificate from such accountants containing a computation
(prepared either by such accountants or the Company) of, and showing compliance
with, each of the financial ratios and restrictions contained in this Section 7
and to the effect that, in making the examination necessary for the signing of
such annual audit report by such accountants, they have not become aware of any
Event of Default or Unmatured Event of Default that has occurred and is
continuing, or if they have become aware of any such event, describing it and
the steps, if any, being taken by the Company to cure it and (ii) a letter
addressed to the Company, the Administrative Agent and the Lenders from such
accountants in substantially the same form as Exhibit E.
SECTION 7.1.2 Annual Company Unaudited Statements. Within 90 days after
each fiscal year of the Company, a copy of its unaudited balance sheet as at the
end of such fiscal year and a statement of earnings for such fiscal year,
prepared on an unconsolidated basis and signed by a proper accounting officer of
the Company.
SECTION 7.1.3 Company Interim Reports. Within 60 days after each
quarter (except the last quarter) of each fiscal year of the Company, a copy of
unaudited financial statements of the Company and its Subsidiaries prepared in
the same manner as the audit report referred to in Section 7.1.1, subject to
normal recurring year-end adjustments, signed by a proper accounting officer of
the Company and consisting of at least a balance sheet as at the close of such
quarter and statements of earnings and statement of cash flows for the period
from the beginning of such fiscal year to the close of such quarter; provided,
however, that such unaudited financial statements need not be more detailed than
what would be required for a quarterly report to the Securities and Exchange
Commission on Form 10-Q.
SECTION 7.1.4 Certificates. Contemporaneously with the furnishing of a
copy of
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each annual Company audit report and of each set of quarterly Company statements
provided for in this Section 7.1, a certificate dated the date of such annual
report or such set of quarterly statements and signed by the President, the
Chief Financial Officer or the Treasurer of the Company, to the effect that no
Event of Default, or Unmatured Event of Default, has occurred and is continuing,
or, if there is any such an event, describing it and the steps, if any, being
taken to cure it and containing (except in the case of the certificate dated the
date of such annual report) a computation of, and showing compliance with, each
of the financial ratios and restrictions contained in this Section 7 and a
statement of the maximum amount of any Investment Borrowings during such quarter
and that the security therefor consisted of Approved Investments.
SECTION 7.1.5 Annual Statement Blanks. Within 90 days after each fiscal
year of each Title Insurance Subsidiary, a copy of its Annual Statement Blank
filed with its applicable State regulatory commission for such fiscal year and
prepared in accordance with applicable statutory accounting requirements from
time to time in effect.
SECTION 7.1.6 Quarterly Statement Blanks. Within 60 days after each
quarter (except the last quarter) of each fiscal quarter of each Title Insurance
Subsidiary, a copy of its Quarterly Statement Blank filed with its applicable
State regulatory commission for such fiscal quarter and prepared in accordance
with applicable statutory accounting requirements from time to time in effect.
SECTION 7.1.7 Notice of Default and Litigation. Forthwith upon learning
of the occurrence of any of the following, written notice thereof, describing
the same and the steps being taken by the Company or the Subsidiary affected
with respect thereto: (i) the occurrence of an Event of Default or an Unmatured
Event of Default, or (ii) the institution of, or any adverse determination in,
any litigation, arbitration proceeding or governmental proceeding which would
have, or has, a Material Adverse Effect.
SECTION 7.1.8 Subsidiaries. Contemporaneously with the furnishing of a
copy of each annual audit report of the Company pursuant to Section 7.1.1, a
written report of any changes in the list of Subsidiaries.
SECTION 7.1.9 ERISA. Immediately upon becoming aware of the institution
of any steps by the Company or any other Person to terminate any Pension Plan,
or the failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a lien under Section 302(f) of ERISA, or
the taking of any action with respect to a Pension Plan which could result in
the requirement that the Company furnish a bond or other security to the PBGC or
such Pension Plan, which could result in the incurrence by the Company of any
material liability, fine or penalty, or any material increase in the contingent
liability Welfare Plan benefit, notice thereof and copies of all documentation
relating thereto.
SECTION 7.1.10 Additional Information. Such other information
respecting the conditions or operations, financial or otherwise, of the Company
or any of its Subsidiaries as any Lender through the Administrative Agent may
from time to time reasonably request.
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SECTION 7.2 Books, Records and Inspections. Maintain, and cause each
Subsidiary to maintain, complete and accurate books and records; permit, and
cause each Subsidiary to permit, access by the Administrative Agent and each
Lender to the books and records of the Company and of any Subsidiary; provided,
however, that such access shall not unreasonably interfere with the normal
business operations of the Company or such Subsidiary.
SECTION 7.3 Insurance. Maintain, and cause each Subsidiary to maintain,
such insurance as may be required by law and such other insurance, to such
extent as is reasonably available (as determined by the Company) and against
such hazards and liabilities, as is customarily maintained by companies
similarly situated; provided, however, that, in lieu of or supplemental to any
insurance referred to in this Section 7.3, the Company may adopt such other plan
or method of protection in respect of its properties or other risks, whether by
establishment of an insurance fund or reserve or by otherwise conforming to the
practices of similar companies maintaining systems of self-insurance, as may be
determined by the Company in its reasonable business judgment.
SECTION 7.4 Taxes. Pay, and cause each Subsidiary to pay, when due all
taxes, assessments, and other governmental charges or levies imposed upon it, as
well as all lawful claims for labor, materials, and supplies or otherwise which,
if unpaid, might give rise to liens or charges upon its property, except as
contested in good faith and by appropriate proceedings and for which adequate
reserves in accordance with generally accepted accounting principles shall have
been set aside on its books.
SECTION 7.5 Consolidated Net Worth. Not permit Consolidated Net Worth
at the close of any fiscal quarter to be less than $275,000,000.
SECTION 7.6 Statutory Surplus. Not permit Statutory Surplus of the
Title Insurance Subsidiaries on a combined basis at the close of any fiscal
quarter to be less than $185,000,000.
SECTION 7.7 Interest Expense Coverage Ratio. Not permit the ratio
during any period of six consecutive fiscal quarters of Earnings Before Interest
and Taxes to Interest Expense to be less than 2.5 to 1.0.
SECTION 7.8 Liquidity. Not permit Cash and Marketable Securities of the
Title Insurance Subsidiaries on a combined basis at the close of any fiscal
quarter plus Cash and Marketable Securities of the Company on an unconsolidated
basis at the close of any fiscal quarter to be less than the Statutory Premium
Reserve of the Title Insurance Subsidiaries on a combined basis plus the next
twelve months of Debt Service.
SECTION 7.9 Loss Reserve Ratio. Not permit the ratio as at the close of
any fiscal quarter of Loss Reserves of the Title Insurance Subsidiaries to their
Statutory Surplus on a combined basis to be greater than 0.9 to 1.0.
SECTION 7.10 Restricted Payments. Not purchase or redeem any shares of
the capital stock of the Company, declare or pay any dividends thereon (other
than stock dividends),
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make any distribution to stockholders or set aside any funds for any such
purpose, or make any loans or advances to Affiliates which are not Subsidiaries
of the Company (all of which purchases, redemptions, declarations, payments,
distributions or loans and advances hereinabove referred to being collectively
called "Restricted Payments"); provided, however, that so long as no Event of
Default, or Unmatured Event of Default, has occurred and is continuing (or would
occur as the result of a Restricted Payment hereinbelow permitted), the Company
may (i) make Restricted Payments to its parent corporation or purchase debt
instruments of Affiliates which are not Subsidiaries of the Company from time to
time provided that the Company's Consolidated Net Worth would not be reduced
thereby below $275,000,000 and (ii) make Restricted Payments to its parent
corporation of an amount which represents the income taxes that would have been
payable by the Company and the Subsidiaries of the Company forming part of the
affiliated group for income tax purposes if the Company had not filed
consolidated income tax returns as part of an affiliated group with CTC.
SECTION 7.11 Indebtedness. Not, and not permit any Subsidiary to, incur
or permit to exist any indebtedness for borrowed money, or for the deferred
purchase price of any property, or for the deferred purchase price of any
services the obligations for which would be reflected on an audited consolidated
balance sheet of the Company and its Subsidiaries (or which contract would be
reflected in the footnotes thereto, but excluding all leases accounted for as
operating leases) prepared in accordance with generally accepted accounting
principles, or under capitalized leases, except (i) the Notes, (ii) short term
indebtedness of the Company and its Subsidiaries in an aggregate amount not in
excess of $50,000,000 for working capital purposes, provided that no such
indebtedness referred to in this clause (ii) shall be outstanding for a period
of at least 2 consecutive months in each fiscal year, (iii) indebtedness of
Subsidiaries to the Company and to other Subsidiaries and of the Company to
Subsidiaries, (iv) current accounts payable arising in the ordinary course of
business, (v) Investment Borrowings, (vi) other Long-Term Indebtedness of the
Company and any Subsidiary to the extent permitted by Section 7.15; provided,
however, any such Long-Term Indebtedness of any Subsidiary shall not exceed an
aggregate amount of $35,000,000, (vii) indebtedness incurred by Subsidiaries
engaged in the title insurance business in the ordinary course of business in
aid of recoupment or reduction or settlement of title claims and losses,
provided that the principal amount of all such indebtedness outstanding plus the
then remaining Loss Reserves, if all treated as Loss Reserves, would not result
in a violation of Section 7.9, (viii) Capitalized Lease Obligations of the
Company and its Subsidiaries which at any one time in the aggregate do not
exceed an amount equal to (x) $30,000,000, minus (y) the aggregate outstanding
principal amount of indebtedness in connection with which liens permitted by
Section 7.12(i) exist, (ix) other indebtedness outstanding on the date hereof
and listed in Schedule 7.11 or hereafter incurred in connection with liens
permitted by Section 7.12, and (x) indebtedness incurred by the Company in
connection with any sale and leaseback involving only Scheduled Properties or
any indebtedness secured only by a lien on Scheduled Properties, to the extent
such lease or other indebtedness is either non-recourse to the Company or the
present value of such lease payments or the principal amount of such
indebtedness, as the case may be does not exceed 75% of the appraised value of
such Scheduled Properties.
SECTION 7.12 Liens. Not, and not permit any Subsidiary to, create or
permit to exist any mortgage, pledge, title retention lien, or other lien,
encumbrance or security interest with
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respect to any assets now owned or hereafter acquired, except (i) in connection
with the acquisition of real or personal property after the date hereof, and
attaching only to the real or personal property being acquired, if the
indebtedness of the Company and all Subsidiaries secured thereby does not exceed
in the aggregate at any one time outstanding an amount equal to (x) $30,000,000,
minus (y) the then aggregate amount of Capitalized Lease Obligations permitted
by Section 7.11(viii); (ii) for current taxes, assessments and governmental
charges or levies not delinquent or being contested in good faith and by
appropriate proceedings for which adequate reserves have been made; (iii) liens
incurred or pledges or deposits made in connection with worker's compensation,
unemployment insurance, old-age pensions, social security and public liability
and similar legislation; (iv) liens, pledges or deposits to secure the
performance of bids, tenders, leases, contracts (other than for the repayment of
borrowed money), statutory and regulatory obligations, surety and appeal bonds
and other obligations of like nature, incurred as an incident to the ordinary
course of business; (v) statutory liens of landlords and other liens imposed by
law, such as carriers', warehousemen's, mechanics', materialmen's and vendors'
liens, incurred in good faith in the ordinary course of business; (vi) liens
arising in the ordinary course of business for sums not due or sums being
contested in good faith and by appropriate proceedings and not involving any
deposits or advances or borrowed money or the deferred purchase price of
property or services; (vii) liens granted by any Subsidiary to secure
indebtedness of such Subsidiary to the Company or to any other Subsidiary or
liens granted by the Company to secure indebtedness of the Company to any
Subsidiary; (viii) liens in connection with Investment Borrowings; (ix) liens
existing or incurred on claims acquired property in the ordinary course of
business of Subsidiaries engaged in the title insurance business, (x) any other
liens securing indebtedness or obligations which in the aggregate do not exceed
$10,000,000; (xi) liens existing on the date hereof and disclosed on Schedule
6.6 or in the financial statements delivered pursuant to Section 6.4 and (xii)
liens granted in connection with indebtedness permitted under Section 7.11(x).
SECTION 7.13 Mergers, Consolidations, Purchases. Not, and not permit
any Subsidiary to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or stock of any class
of, or any partnership or joint venture interest in, any other person or entity,
except for (i) any such merger or consolidation by any wholly-owned Subsidiary
into the Company or into, with or to any other wholly-owned Subsidiary and any
such purchase or other acquisition by the Company or any wholly-owned Subsidiary
of the assets or stock of any wholly-owned Subsidiary and (ii) any such merger,
consolidation, purchase, or other acquisition of assets or stock by the Company
or any Subsidiary if (x) in the case of a merger or consolidation involving the
Company, the surviving corporation shall be the Company, (y) as of the date of
the execution of the agreement providing for such merger, consolidation,
purchase, or other acquisition, the fair value of the consideration to be paid
in connection therewith shall not exceed $60,000,000, and (z) no Event of
Default or Unmatured Event of Default shall have occurred and be continuing at
the time of such merger, consolidation, purchase, or other acquisition, or shall
occur as a result of such merger, consolidation, purchase, or other acquisition.
For the purposes of this Section 7.13, the consideration to be paid in
connection with any merger, consolidation, purchase, or other acquisition shall
be valued in accordance with generally accepted accounting principles.
SECTION 7.14 Asset Dispositions. Not, and not permit any Subsidiary to
sell,
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transfer, convey or lease all or any substantial part of its assets except in
the ordinary course of business; provided, however, there shall be excluded from
the restrictions of this Section 7.14 (i) sales or other dispositions of the
stock or assets of the Company or a Subsidiary required by governmental or
regulatory authorities; (ii) Net Asset Sales in an amount not exceeding 10% of
Adjusted Total Assets in each fiscal year; (iii) sales or other dispositions of
Unrestricted Assets; and (iv) sales or other dispositions of assets by a
Subsidiary to the Company or another Subsidiary, or by the Company to a
Subsidiary. For purposes of this Section 7.14, sales of Scheduled Properties
shall be included in computing Net Asset Sales but the Company shall not be in
default hereunder if Net Asset Sales exceed the amount permitted by Section
7.14(ii) solely as a result of such inclusion.
SECTION 7.15 Leverage Ratio. Not permit the Leverage Ratio as at the
close of any fiscal quarter to be greater than 0.45 to 1.0.
SECTION 7.16 Existing Business. Carry on, and cause each Subsidiary to
carry on, its title insurance, escrow, trust company and/or other real estate
related services, business, or businesses in substantially the same manner as
presently being conducted.
SECTION 7.17 Other Agreements. Not enter into any agreement containing
any material provision which would be violated or breached in a material way by
the performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith.
SECTION 8. CONDITIONS OF LENDING.
Notwithstanding any other provisions of this Agreement, the Lenders, at
their sole option and in their sole discretion, need not make any Loans
available to the Company unless the conditions precedent described below are
fulfilled:
SECTION 8.1 Documents. The obligation of each Lender to make its Loan
is, in addition to the conditions precedent specified in Section 8.2, subject to
the condition precedent that the Administrative Agent shall have received all of
the following, each duly executed and dated as of the date hereof, in form and
substance satisfactory to the Administrative Agent:
SECTION 8.1.1 Notes. The Administrative Agent shall have received, for
the account of each Lender, its Note duly executed and delivered by the Company.
SECTION 8.1.2 Corporate Documents. Certified copies of the articles of
incorporation and bylaws of the Company and certified copies of resolutions of
the Board of Directors of the Company authorizing the execution, delivery and
performance, respectively, of this Agreement, the Notes, and other documents
provided for in this Agreement.
SECTION 8.1.3 Incumbency and Signatures. A certificate of the Secretary
or an Assistant Secretary of the Company certifying the names of the officer or
officers of the Company authorized to sign this Agreement and the Notes and
other documents provided for in this Agreement, together with a sample of the
true signature of each such officer.
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SECTION 8.1.4 Confirmatory Certificate. A certificate signed by the
President, the Chief Financial Officer or the Treasurer of the Company as to the
matters set out in Section 8.2.
SECTION 8.1.5 Good Standing. Certificate of the Secretary of State of
Illinois as to the good standing of the Company.
SECTION 8.1.6 Instructions. Written instructions from the Company to
the Administrative Agent directing the distribution of the proceeds of the
initial Revolving Loans made pursuant to this Agreement.
SECTION 8.1.7 Other. Such other documents as the Administrative Agent
or any Lender may reasonably request.
SECTION 8.2 Further Conditions. The obligation of each Lender to make
its Loan is subject to the following further conditions precedent: (a) no Event
of Default, or Unmatured Event of Default, has occurred and is continuing or
will result from the making of the Loans, (b) the warranties of the Company
contained in Section 6 are true and correct as of each borrowing of a Loan
hereunder, with the same effect as though made on the Loan Date, (except for the
warranties made as of a specific date, which were true and correct as of such
date), (c) all governmental approvals and court orders that are necessary for
the Company to consummate the transactions contemplated by this Agreement and
the Notes and to perform its obligations thereunder have been received, (d)
after giving effect to the Loans, the aggregate principal amount of all such
Loans shall not exceed the Commitment, (e) such loan shall not violate any
order, judgment or decree of any court or other authority or any provision of
law applicable to the Administrative Agent or the Lenders, as then in effect,
and (f) the Administrative Agent shall have received the Notes, the Borrowing
Notice and the fees as required hereunder.
SECTION 9. EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 9.1 Events of Default. Each of the following shall constitute
an Event of Default under this Agreement:
SECTION 9.1.1 Non-Payment of Notes, etc. Default, and the continuance
thereof for one day, in the payment when due of any principal of the Notes or
default, and continuance thereof for five days, in the payment when due of any
interest on the Notes or any fees payable or amounts due by the Company
hereunder.
SECTION 9.1.2 Non-Payment of Other Indebtedness. Default in the payment
when due (subject to any applicable grace period), whether by acceleration or
otherwise, of any other indebtedness for borrowed money or the deferred purchase
price of property of, or guaranteed by, the Company or any Subsidiary (except
any such indebtedness of any Subsidiary to the Company or to any other
Subsidiary) in excess of $10,000,000 or default in the performance or observance
of any obligation or condition with respect to any such other indebtedness in
excess of $10,000,000 if the effect of such default is to accelerate the
maturity of any such indebtedness or to permit the holder or holders thereof, or
any trustee or agent for such holders, to cause such
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indebtedness to become due and payable prior to its expressed maturity, and such
default shall not have been remedied or discharged within any applicable grace
period.
SECTION 9.1.3 Bankruptcy, Insolvency, etc. The Company or any
Subsidiary admits in writing its inability to pay debts as they become due; or
the Company or any Subsidiary applies for, consents to, or acquiesces in the
appointment of, a trustee, receiver or other custodian for the Company or such
Subsidiary or any property thereof, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for the
Company or any Subsidiary or for a substantial part of the property of any
thereof and is not discharged within 60 days; or any bankruptcy, reorganization,
debt arrangement, or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding (except the voluntary
dissolution, not under any bankruptcy or insolvency law, of a Subsidiary other
than a Title Insurance Subsidiary), is commenced in respect of the Company or
any Subsidiary, and if such case or proceeding is not commenced by the Company
or such Subsidiary, it is consented to or acquiesced in by the Company or such
Subsidiary or remains for 60 days undismissed; or the Company or any Subsidiary
takes any corporate action to authorize, or in furtherance of, any of the
foregoing.
SECTION 9.1.4 Non-Compliance with this Agreement. Failure by the
Company to comply with or to perform any provision of this Agreement (and not
constituting an Event of Default under any of the preceding provisions of this
Section 9) and continuance of such failure for 30 days after notice thereof to
the Company from the Administrative Agent, or from any Lender.
SECTION 9.1.5 Warranties. Any warranty made by the Company herein is
breached or is false or misleading in any material respect, or any schedule,
certificate, financial statement, report, notice, or other writing furnished by
the Company to the Administrative Agent or the Lenders is false or misleading in
any material respect, in each case on the date as of which the facts therein set
forth are stated or certified.
SECTION 9.1.6 Change of Control. At any time after the completion of
the distribution of shares of CTC by Alleghany to the stockholders of Alleghany,
as contemplated by the Registration Statement on Form 10 filed with the
Securities and Exchange Commission by CTC on March 27, 1998, as amended, CTC, or
a Subsidiary of CTC, shall not own, directly or indirectly, 100% of the issued
and outstanding voting capital stock of the Company.
SECTION 9.1.7 Judgments. Any judgment or order for the payment of money
in excess of $10,000,000 shall be rendered against the Company or any of its
Subsidiaries and either
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or
(b) there shall be any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be
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in effect.
SECTION 9.1.8 Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Company, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a result
of such termination, the Company or any such member could be required to make a
contribution to such Pension Plan, or could reasonably expect to incur a
liability or obligation to such Pension Plan, in excess of $10,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a lien in excess of $ 10,000,000 under Section 302(f)
of ERISA.
SECTION 9.2 Effect of Event of Default. If any Event of Default
described in Section 9.1.3 shall occur, the Notes shall become immediately due
and payable, all without notice of any kind; and in the case of any other Event
of Default, the Administrative Agent, upon the direction of the Required
Lenders, shall by written notice to the Company, declare the Notes to be due and
payable, whereupon the Notes shall become immediately due and payable, all
without any other notice of any kind.
SECTION 10. THE ADMINISTRATIVE AGENT
SECTION 10.1 Actions. Each Lender hereby appoints LaSalle as its
Administrative Agent under and for purposes of this Agreement, the Notes and
each other Loan Document. Each Lender authorizes the Administrative Agent to act
on behalf of such Lender under this Agreement, the Notes and each other Loan
Document and, in the absence of other written instructions from the Required
Lenders received from time to time by the Administrative Agent (with respect to
which the Administrative Agent agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are specifically delegated to or required of
the Administrative Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender hereby indemnifies
(which indemnity shall survive any termination of this Agreement) the
Administrative Agent, pro rata according to such Lender's Percentage, from and
against any and all liabilities, obligations, losses, damages, claims, costs or
expenses of any kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, the Administrative Agent in any way relating
to or arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees, and as to which the Administrative Agent
is not reimbursed by the Company; provided, however, that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from the
Administrative Agent's gross negligence or wilful misconduct. The Administrative
Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Administrative
Agent shall be or become, in the Administrative
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Agent's determination, inadequate, the Administrative Agent may call for
additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
SECTION 10.2 Exculpation. Neither the Administrative Agent nor any of
its directors, officers, employees or agents shall be liable to any Lender for
any action taken or omitted to be taken by it under this Agreement or any other
Loan Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor to make any inquiry
respecting the performance by the Company of its obligations hereunder or under
any other Loan Document. Any such inquiry which may be made by the
Administrative Agent shall not obligate it to make any further inquiry or to
take any action. The Administrative Agent shall be entitled to rely upon advice
of counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which the Administrative Agent believes to be genuine and
to have been presented by a proper Person.
SECTION 10.3 Successor. The Administrative Agent may resign as such at
any time upon at least 30 days' prior notice to the Company and all Lenders. If
the Administrative Agent at any time shall resign, the Required Lenders may
appoint another Lender as a successor Administrative Agent which shall thereupon
become the Administrative Agent hereunder. If no successor Administrative Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Administrative Agent's
giving notice of resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent, which shall be
one of the Lenders or, with the approval of the Company (such approval not to be
unreasonably withheld), a commercial banking institution organized under the
laws of the U.S. (or any State thereof) or a U.S. branch or agency of a
commercial banking institution, and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such successor
Administrative Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation hereunder as the Administrative Agent, the
provisions of
(a) this Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Administrative Agent under this
Agreement; and
(b) Section 10.2 and Section 10.3 shall continue to inure to its
benefit.
SECTION 10.4 Loans by LaSalle. LaSalle shall have the same rights and
powers with respect to (x) the Loans made by it or any of its Affiliates, and
(y) the Notes held by it or any of its Affiliates as any other Lender and may
exercise the same as if it were not the Administrative Agent. LaSalle and its
Affiliates may accept deposits from, lend money to, and
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generally engage in any kind of business with the Company or any Subsidiary or
Affiliate of the Company as if LaSalle were not the Administrative Agent
hereunder.
SECTION 10.5 Credit Decisions. Each Lender acknowledges that it has,
independently of the Administrative Agent and each other Lender, and based on
such Lender's review of the financial information of the Company, this
Agreement, the other Loan Documents (the terms and provisions of which being
satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitment. Each Lender also acknowledges that it will,
independently of the Administrative Agent and each other Lender, and based on
such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 10.6 Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Company pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Company). The
Administrative Agent will distribute to each Lender each document or instrument
received for its account and copies of all other communications received by the
Administrative Agent from the Company for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement.
SECTION 11. MISCELLANEOUS PROVISIONS
SECTION 11.1 Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Company and the Required Lenders; provided, however, that no such
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective unless
consented to by each Lender;
(b) modify this Section 11.1, change the definition of "Required
Lenders", increase the Commitment Amount or the Percentage of any Lender or
reduce the Facility Fee in Section 4.3 shall be made without the consent of each
Lender and each holder of a Note;
(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on the Notes (or reduce the
principal amount of or rate of interest on the Notes) shall be made without the
consent of the holder of that Note; or
(d) affect adversely the interests, rights or obligations of the
Administrative Agent qua the Administrative Agent shall be made without the
consent of the Administrative Agent.
No failure or delay on the part of the Administrative Agent, any Lender or the
holder of any Note in exercising any power or right under this Agreement or any
other Loan Document shall operate
36
<PAGE> 41
as a waiver thereof, nor shall any single or partial exercise of any such power
or right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the Company in any case shall
entitle it to any notice or demand in similar or other circumstances. No waiver
or approval by the Administrative Agent, any Lender or the holder of any Note
under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2 Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by Telex or by facsimile and addressed, delivered or transmitted to
such party at its address, Telex or facsimile number set forth below its
signature hereto or set forth in the Lender Assignment Agreement or at such
other address, Telex or facsimile number as may be designated by such party in a
notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by Telex or
facsimile, shall be deemed given when transmitted (answerback confirmed in the
case of Telexes).
SECTION 11.3 Costs, Expenses and Taxes. The Company agrees to pay on
demand all out-of-pocket costs and expenses of the Administrative Agent
(including the reasonable fees and out-of-pocket expenses of Lord, Bissell &
Brook, counsel for the Administrative Agent and of local counsel, if any, who
may be retained by said counsel) in connection with the preparation, execution,
delivery, administration, syndication and marketing of this Agreement, the Notes
and all other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith, in the case of the foregoing
subject to limitations previously agreed by the Company and the Administrative
Agent, and all out-of-pocket costs and expenses (including reasonable attorneys'
fees and legal expenses) incurred by the Administrative Agent in connection with
the enforcement of this Agreement, the Notes, any such other instruments or
documents or any collateral security. In addition, the Company agrees to pay,
and to save the Administrative Agent and the Lenders harmless from all liability
for, any stamp or other taxes (excluding franchise taxes and taxes imposed on or
measured by any Lender's net income or receipts) which may be payable in
connection with the execution or delivery of this Agreement, the borrowing
hereunder, or the issuance of the Notes or of any other instruments or documents
provided for herein or delivered or to be delivered hereunder or in connection
herewith. The Company also agrees to reimburse the Administrative Agent and each
Lender upon demand for all reasonable out-of-pocket expenses (including
attorneys' fees and legal expenses including the allocated time charges of each
Lender's legal departments, as their respective internal counsel) incurred by
the Administrative Agent or such Lender in connection with (x) the negotiation
of any restructuring or "work-out", whether or not consummated, of any
Obligations and (y) the enforcement of any Obligations.
SECTION 11.4 Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Company hereby indemnifies, exonerates and holds the Administrative Agent
and each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free
37
<PAGE> 42
and harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in connection
therewith (irrespective of whether any such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"),
incurred by the Indemnified Parties or any of them as a result of, or arising
out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the Loans; or
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (including any action brought by
or on behalf of the Company as the result of any determination by the Required
Lenders pursuant to Section 8 not to fund the Loans); except for (i) any such
Indemnified Liabilities arising for the account of a particular Indemnified
Party by reason of the relevant Indemnified Party's gross negligence or wilful
misconduct or (ii) any such Indemnified Liabilities resulting from claims by the
Administrative Agent or any Lender against any other Lender or any Lender
against the Administrative Agent that are not attributable to the Company's
actions and for which the Company otherwise has no liability. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Each Indemnified Party agrees to notify the Company of any event
which could give rise to any Indemnified Liabilities and to consult with the
Company to determine the best defense with respect to the same.
SECTION 11.5 Survival. The obligations of the Company under Sections
3.10, 3.11, 5.1, 11.3 and 11.4, and the obligations of the Lenders under Section
11.1, shall in each case survive any termination of this Agreement, the payment
in full of all Obligations and the termination of all Commitments. The
representations and warranties made by the Company in this Agreement and in each
other Loan Document shall survive the execution and delivery of this Agreement
and each such other Loan Document.
SECTION 11.6 Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 11.7 Captions. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
SECTION 11.8 Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Company and each Lender (or
notice thereof satisfactory to the Administrative Agent) shall have been
received by the Administrative Agent and notice thereof shall have been given by
the
38
<PAGE> 43
Administrative Agent to the Company and each Lender.
SECTION 11.9 Governing Law. THIS AGREEMENT AND THE NOTES SHALL EACH BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS. All obligations of the Company and the rights of the Administrative
Agent and any Lender expressed herein or in the Notes shall be in addition to
and not in limitation of those provided by applicable law. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 11.10 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Company may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Administrative Agent and all
Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 11.11.
SECTION 11.11 Sale and Transfer of Notes; Participations in Notes. Each
Lender may assign, or sell participations in, its Note and Commitment to one or
more other Persons in accordance with this Section 11.11.
SECTION 11.11.1 Assignments. Any Lender,
(a) with the written consents of the Company and the Administrative
Agent (which consents shall not be unreasonably delayed or withheld and which
consent, in the case of the Company, shall be deemed to have been given in the
absence of a written notice delivered by the Company to the Administrative
Agent, on or before the tenth Business Day after receipt by the Company of such
Lender's request for consent, stating, in reasonable detail, the reasons why the
Company proposes to withhold such consent) may at any time assign and delegate
to one or more commercial banks or other financial institutions, and
(b) with notice to the Company and the Administrative Agent, but
without the consent of the Company or the Administrative Agent, may assign and
delegate to any of its Affiliates or to any other Lender (each Person described
in either of the foregoing clauses as being the Person to whom such assignment
and delegation is to be made, being hereinafter referred to as an "Assignee
Lender"), all or any fraction of such Lender's Note and Commitment (which
assignment and delegation shall be of a constant, and not a varying, percentage
of all the assigning Lender's Note and Commitment) in a minimum aggregate amount
of $4,000,000; provided, however, that any such Assignee Lender will comply, if
applicable, with the provisions contained in the penultimate sentence of Section
5.1 and further, provided, however, that, the Company and the Administrative
Agent shall be entitled to continue to deal solely and directly with such Lender
in connection with the interests so assigned and delegated to an Assignee
39
<PAGE> 44
Lender until
(i) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Company
and the Administrative Agent by such Lender and such Assignee Lender,
(ii) such Assignee Lender shall have executed and delivered to
the Company and the Administrative Agent a Lender Assignment Agreement,
accepted by the Administrative Agent, and
(iii) the processing fees described below shall have been
paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Administrative Agent has received an executed Lender Assignment Agreement, the
Company shall execute and deliver to the Administrative Agent (for delivery to
the relevant Assignee Lender) a new Note evidencing such Assignee Lender's
assigned Note and Commitment and, if the assignor Lender has retained a portion
of its Note and its Commitment hereunder, a replacement Note in the principal
amount of the portion of the Note and Commitment retained by the assignor Lender
hereunder (such Notes to be in exchange for, but not in payment of, that Note
then held by such assignor Lender). Each such Note shall be dated the date of
the predecessor Note. The assignor Lender shall mark the predecessor Note
"exchanged" and deliver it to the Company. Accrued interest on that part of the
predecessor Note evidenced by the new Note shall be paid as provided in the
Lender Assignment Agreement. Accrued interest on that part of the predecessor
Note evidenced by the replacement Note shall be paid to the assignor Lender.
Accrued interest shall be paid at the same time or times provided in the
predecessor Note and in this Agreement. Such assignor Lender or such Assignee
Lender must also pay a processing fee to the Administrative Agent upon delivery
of any Lender Assignment Agreement in the amount of $3,000. Any attempted
assignment and delegation not made in accordance with this Section 11.11.1 shall
be null and void.
SECTION 11.11.2 Participations. Any Lender may at any time sell to one
or more financial institutions (each of such financial institution being herein
called a "Participant") participating interests in its Note or Commitment, or
other interests of such Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 11.11 shall relieve
such Lender from its Commitment or its other obligations hereunder or under any
other Loan Document,
(b) such Lender shall remain solely responsible for the performance of
its
40
<PAGE> 45
Commitment and such other obligations,
(c) the Company and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and each of the other Loan Documents,
(d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such Lender to take
or refrain from taking any action hereunder or under any other Loan Document,
except that such Lender may agree with any Participant that such Lender will
not, without such Participant's consent, take any actions of the type described
in clause (b) or (c) of Section 11.1, and
(e) the Company shall not be required to pay any amount under Section
5.1 that is greater than the amount which it would have been required to pay had
no participating interest been sold.
The Company acknowledges and agrees that each Participant, for purposes of
Sections 3.10, 3.11, 5.1, 5.3, 5.4, 11.3 and 11.4, shall be considered a Lender.
SECTION 11.12 Other Transactions. Nothing contained herein shall
preclude the Administrative Agent or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Company or any of its Affiliates in which the Company or
such Affiliate is not restricted hereby from engaging with any other Person.
SECTION 11.13 Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE LENDERS OR THE COMPANY SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
41
<PAGE> 46
INCONVENIENT FORUM. TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.14 Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
LENDERS AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS
OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL
AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 11.15 Confidentiality. The Administrative Agent and each Lender
shall hold nonpublic information obtained pursuant to the requirements of this
Agreement other than information (a) that is, or generally becomes, available to
the public, (b) that was or becomes available to the Administrative Agent or any
Lender on a nonconfidential basis, or (c) that becomes available to the
Administrative Agent or any Lender from a Person or other source that is not to
the knowledge of Administrative Agent or such Lender (as the case may be),
otherwise bound by a confidentiality obligation to the Company, in accordance
with its customary procedures for treatment of confidential information and in
accordance with safe and sound banking practices and in any event, may make
disclosure reasonably required by any bona fide transferee or participant in
connection with the contemplated transfer of any Loan or Note or participation
therein or as required or requested by any governmental agency or representative
thereof pursuant to legal process.
SECTION 11.16 Special Purpose Funding Vehicle. Notwithstanding anything
to the contrary contained herein, any Lender (a "Granting Bank") may grant to a
special purpose funding vehicle (an "SPC") of such Granting Bank, identified as
such in writing from time to time by the Granting Bank to the Administrative
Agent and the Company, the option to provide all or any part of any Loan that
such Granting Bank would otherwise be obligated to make hereunder, provided that
(i) nothing herein shall constitute a commitment to make any Loan by any SPC,
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Bank shall be obligated to make such
Loan pursuant to the terms hereof, and (iii) the rights of any such SPC shall be
derivative of the rights of the Granting Bank,
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<PAGE> 47
and each SPC shall be subject to all of the restrictions upon the Granting Bank
herein contained. Each SPC shall be conclusively presumed to have made
arrangements with its Granting Bank for the exercise of voting and other rights
hereunder in a manner which is acceptable to the SPC, and the Administrative
Agent, the other Lenders and the Company shall be entitled to rely upon and deal
solely with the Granting Bank with respect to Loans made by or through its SPC.
The making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Bank to the same extent, and as if, such Loan were made by the Granting
Bank. Each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the payment in full of all outstanding senior indebtedness of any SPC,
it will not institute against, or join any other person in instituting against,
such SPC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceedings under the laws of the United States or any
State thereof, provided that the Granting Bank for each SPC hereby agrees to
indemnify, save and hold harmless each other party hereto for any loss, cost,
damage and expense arising out of their inability to institute any such
proceeding against its SPC. In addition, notwithstanding anything to the
contrary contained in this Section 11.16, any SPC may (i) with notice to, but
without the prior written consent of, the Company or the Administrative Agent
and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to its Granting Bank or to any financial institutions
providing liquidity and/or credit facilities to or for the account of such SPC
to fund the Loans made by such SPC or to support the securities (if any) issued
by such SPC to fund such Loans (but nothing contained herein shall be construed
in derogation of the obligation of the Granting Bank to make Loans hereunder),
provided that neither the consent of the SPC or of any such assignee shall be
required for amendments or waivers of provisions of the Loan Documents, and (ii)
disclose on a confidential basis (in the same manner described in Section 11.15)
any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of a surety, guarantee or credit or
liquidity enhancement to such SPC.
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<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CHICAGO TITLE AND TRUST COMPANY
By: /s/ Peter G. Leemputte
-----------------------------------
Its: Executive VP, CFO, CAO
-----------------------------------
By: /s/ A. Larry Sisk
-----------------------------------
Its: Vice President and Treasurer
-----------------------------------
171 North Clark Street
Chicago, Illinois 60601
Facsimile No: (312) 223-5955
Attention: A. Larry Sisk
LASALLE NATIONAL BANK
as Administrative Agent
By: /s/ Janet R. Gates
-----------------------------------
Its: First Vice President
-----------------------------------
135 South LaSalle Street
Chicago, Illinois 60603
Facsimile No: (312) 904-6189
Attention: Janet R. Gates
44
<PAGE> 49
<TABLE>
<CAPTION>
PERCENTAGE LENDERS
---------- -------
<S> <C>
40% LASALLE NATIONAL BANK
By: /s/ Janet R. Gates
----------------------------------
Title: First Vice President
----------------------------------
Domestic
Office: 135 South LaSalle Street
Chicago, Illinois 60603
Facsimile No.: (312) 904-6189
Attention: Janet R. Gates
LIBOR Office: Same as above
20% CHASE BANK OF TEXAS, N.A.
By: /s/ James M. Chuckray
----------------------------------
Title: Senior Vice President
----------------------------------
Domestic
Office: 2200 Ross Avenue
Suite 710
Dallas, Texas 75201
Facsimile No.: (214) 965-2290
Attention: Jim Chuckray
LIBOR Office: Same as above
</TABLE>
45
<PAGE> 50
<TABLE>
<S> <C>
20% U.S. BANK NATIONAL ASSOCIATION
By: /s/ Steven T. Williams
----------------------------------
Title: Vice President
----------------------------------
Domestic
Office: 555 S.W. Oak Street, PL-4
Portland, Oregon 97204
Facsimile No.: (503) 275-5428
Attention: Steven T. Williams
LIBOR Office: Same as above
20% BANK OF MONTREAL
By: /s/ John T. Mead, Jr.
----------------------------------
Title: Director
----------------------------------
Domestic
Office: 115 South LaSalle Street
12th Floor
Chicago, Illinois 60603
Facsimile No.: (312) 845-2199
Attention: John T. Mead, Jr., Director
LIBOR Office: Same as above
</TABLE>
46
<PAGE> 1
EXHIBIT 10.2
TAX SHARING AGREEMENT
AMONG
ALLEGHANY CORPORATION
AND
CHICAGO TITLE CORPORATION
<PAGE> 2
TAX SHARING AGREEMENT
This Tax Sharing Agreement ("Agreement") is entered into as of June
17th, 1998, by and among Alleghany Corporation, a Delaware corporation
("Alleghany"), and Chicago Title Corporation, a Delaware corporation ("Chicago
Title").
RECITALS
WHEREAS, Alleghany is the common parent of an affiliated group of
corporations filing a consolidated Federal income tax return, which affiliated
group includes Chicago Title and Trust Company ("CT&T"); and
WHEREAS, The Chicago Trust Company ("TCTC") organized a new
corporation ("Newco"), and TCTC transferred all of the assets used in the
conduct of its land trust and land release business (the "Land Trust Business")
to Newco and Newco assumed all of the liabilities of, or relating to, the Land
Trust Business (the "Land Trust Contribution"); and
WHEREAS, TCTC distributed all of the shares of Newco to Alleghany
Asset Management, Inc. ("AAM"), and AAM distributed all of the Newco shares to
CT&T (together, the "Newco Distributions"); and
WHEREAS, CT&T has distributed all of the outstanding shares of
AAM to Alleghany (the "AAM Distribution"); and
WHEREAS, Alleghany will contribute all of the outstanding shares of
CT&T to Chicago Title, a newly-formed subsidiary of Alleghany (the date of such
contribution being the "CT&T Contribution Date"), and thereafter Alleghany will
distribute all of the outstanding shares of Chicago Title to Alleghany's
shareholders (the "Chicago Title Distribution"); and
<PAGE> 3
WHEREAS, the Newco Distributions, the AAM Distribution and the
Chicago Title Distribution are all intended to qualify as tax-free distributions
under Section 355 of the Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, the parties desire to provide for, and agree upon, the
allocation between them of liabilities for all Taxes (as hereinafter defined)
arising prior to, as a result of, and subsequent to the transactions
contemplated by the Newco Distributions, the AAM Distribution and the Chicago
Title Distribution, and to provide for and agree upon other matters relating to
Taxes.
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereby agree as follows:
SECTION 1. Definition of Terms.
(a) Defined Terms. In addition to the capitalized terms otherwise
defined herein, the following terms shall have the following meaning:
"AAM Group" means AAM and each corporation which on the date of the
AAM Distribution was a member of the "affiliated group" of which AAM would be
the "common parent" (as such terms are defined or used in Section 1504(a) of the
Code), determined as if AAM were owned by individuals.
"Alleghany Consolidated Return" means any consolidated Federal
income tax return for the Alleghany Group.
"Alleghany Group" means Alleghany and all corporations which at the
time of reference would be members of the "affiliated group" of which Alleghany
is the "common parent" (as such terms are defined or used in Section 1504(a) of
the Code), so that on the day
2
<PAGE> 4
after the Chicago Title Distribution Date, the term "Alleghany Group" excludes
any entity that is then a member of the Chicago Title Group.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a day on which banks in New York, New York are authorized or obligated by law or
executive order to be closed for the transaction of business.
"Chicago Title Consolidated Tax Liability" means the hypothetical
liability for the Taxes imposed by Subtitle A or F of the Code which the Chicago
Title Group would have for the Tax Period of reference if the Chicago Title
Group had always filed its own consolidated Federal income tax return, computed
by assuming that (i) the Chicago Title Group was subject to Tax on all of its
taxable income at the applicable maximum federal income tax rates specified in
the Code, (ii) intercompany transactions between members of the Chicago Title
Group and the Alleghany Group that would be deferred under Treasury Regulation
Section 1.1502-13 are deferred and will be taken into account at the earlier of
the time provided under Treasury Regulation Section 1.1502-13 or on the Chicago
Title Distribution Date, (iii) any excess loss accounts (pursuant to Treasury
Regulation Section 1.1502-19) with respect to any stock of a member of the
Chicago Title Group shall be taken into account on the Chicago Title
Distribution Date, and (iv) with respect to any Pre-Distribution Period, in the
case of any item of income, gain, loss, deduction or credit that is computed or
subject to a limitation only on a consolidated basis, including but not limited
to, charitable contributions, capital losses, foreign tax credit, research and
experimentation credit and Section 1231 gains and losses, such items shall be
taken into account by Chicago Title only if, and to the extent (determined by
Alleghany on any
3
<PAGE> 5
reasonable basis) that, such items are taken into account, and actually effects,
the amount of the liability for Tax of the Alleghany Group for the Tax Period of
reference.
"Chicago Title Distribution Date" means the date as of which
Alleghany exchanges with, or distributes to, its shareholders sufficient common
stock of Chicago Title as a result of which Chicago Title ceases to be a member
of the Alleghany Group as of the end of such day pursuant to Treasury Regulation
Section 1.1502-76(b)(1)(ii).
"Chicago Title Group" means, as the case may be, (i) Chicago Title
and those corporations which on the day after the Chicago Title Distribution
Date would be members of the "affiliated group" of which Chicago Title would be
the "common parent" (as such terms are defined or used in Section 1504(a) of the
Code), determined as if Chicago Title were owned by individuals, and (ii) with
respect to any Tax Period which includes or ends prior to the CT&T Contribution
Date, CT&T and those corporations which at and for the time of reference would
be members of the "affiliated group" of which CT&T would be the "common parent"
(as such terms are defined or used in Section 1504(a) of the Code), determined
as if CT&T were owned by individuals. Notwithstanding the foregoing, no member
of the AAM Group shall be treated as having ever been a member of the Chicago
Title Group, and Newco shall be treated as having always been a member of the
Chicago Title Group (but the foregoing shall not be construed as conferring any
liability upon the Chicago Title Group for any Tax imposed by Subtitle A or
Subtitle F of the Code with respect to the Land Trust Business prior to the date
of the Land Trust Contribution).
"Consolidated or Combined State Tax" means any Tax imposed by any
State or any political subdivision thereof which is (i) imposed on, or measured
by, gross or net receipts,
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income, capital or net worth, including State and local franchise or similar
Taxes measured by net income, and (ii) computed on a consolidated, unitary or
combined basis by reference to the assets and/or activities of members of both
the Alleghany Group and the Chicago Title Group. Liability for
telecommunications, gross receipts (other than taxes on gross receipts that are
imposed in lieu of a tax on net receipts), transactional taxes, and sales and
use taxes, or other similar types of transactional taxes shall not be considered
a Consolidated or Combined State Tax for purposes of this Agreement.
"Payment Date" means the due date for any required installment of
estimated Taxes determined under Section 6655 of the Code, the due date
(determined without regard to extensions) for filing the Alleghany Consolidated
Return determined under Section 6072 of the Code, and the date the Alleghany
Consolidated Return is filed.
"Post-Distribution Period" means any Tax Period beginning on the day
after the Chicago Title Distribution Date, and, in the case of any Straddle
Period, the portion of such Straddle Period beginning on the day after the
Chicago Title Distribution Date.
"Pre-Distribution Period" means any Tax Period ending on or before
the Chicago Title Distribution Date, and, in the case of any Straddle Period,
the portion of such Straddle Period ending on the Chicago Title Distribution
Date.
"Ruling Request" means the letter, dated November 12, 1997,
submitted on behalf of Alleghany to the Internal Revenue Service requesting a
letter ruling regarding certain income tax consequences of the AAM Distribution
and the Chicago Title Distribution (including all attachments, exhibits, and
other materials submitted with such ruling request letter), and all amendments
or supplements to such ruling request letter.
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"Straddle Period" means any Tax Period that begins on or before and
ends after the Chicago Title Distribution Date.
"Tax" or "Taxes" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem, stamp,
excise, severance, occupation, service, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment, or other charge in the nature of or in lieu of
any tax) imposed by any governmental entity or political subdivision thereof,
and any interest, penalties, additions to tax, or additional amounts in respect
of the foregoing.
"Tax Law" means any law (other than the Code) of any governmental
entity or political subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for which
the Tax is reported as provided under the Code or other applicable Tax Law.
"Treasury Regulations" means the regulations promulgated from time
to time under the Code as in effect for the relevant Tax Period.
(b) Interpretation of Terms. Unless otherwise indicated, the words
and concepts used in this Agreement shall be given the same definitions and
meanings ascribed to them by the Code, the Treasury Regulations or other Tax
Law. Any alteration, modification, addition, deletion, or other change in the
applicable provisions of the Code, the Treasury Regulations or other Tax Law
shall automatically be applicable to this Agreement mutatis mutandis. Unless
otherwise indicated, all references herein to a particular section of the Code,
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the Treasury Regulations or other Tax Law shall include any successor provision
designated by a different or additional section reference.
SECTION 2. Allocation of Tax Liabilities.
2.01 Chicago Title Liability. For each Tax Period for which any
member of the Chicago Title Group was also a member of the Alleghany Group,
Chicago Title shall be liable for, and shall indemnify and hold harmless
Alleghany and each member of the Alleghany Group (excluding any member of the
Chicago Title Group) from and against, the amount of (a) the Chicago Title
Consolidated Tax Liability for the Tax Period of reference over (b) the net
amount theretofore paid by the Chicago Title Group to Alleghany on account of
the Chicago Title Consolidated Tax Liability for the Tax Period of reference.
2.02 Alleghany Liability. Provided that Chicago Title and the
members of the Chicago Title Group have performed all of their obligations under
this Agreement, Alleghany shall be liable for, and shall indemnify and hold
harmless Chicago Title and each member of the Chicago Title Group from and
against any liability for Taxes of the Alleghany Group imposed by Subtitle A or
F of the Code or Chapter 43 of Subtitle D of the Code.
2.03 AAM Liability. Except as otherwise provided herein with respect
to Consolidated or Combined State Income Taxes and as may be required to allow
CT&T to exclude from its income pursuant to Treasury Regulation
1.1502-13(f)(2)(ii) any dividend from AAM, AAM shall be treated as having never
been a member of the Chicago Title Group, and, except as specifically provided
herein, Chicago Title shall have no liability for, and shall be indemnified and
be held harmless from, the liability for Taxes of AAM or any member of the AAM
Group imposed by Subtitle A or F of the Code.
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2.04 Allocation of All Other Taxes. Except as provided in Section
2.05, all Taxes other than those specifically allocated pursuant to Sections
2.01 through 2.03 shall be allocated based on the legal entity on which the
legal incidence of the Tax is imposed, determined without regard to any joint
and several liability any other legal entity would have as a result of
membership in any controlled group.
2.05 Chicago Title Liability for Transaction and Certain Other
Taxes.
Except as otherwise specifically provided in this Agreement, Chicago
Title shall be liable for, and shall indemnify and hold harmless Alleghany from
and against any liability for, Taxes arising from the Land Trust Contribution,
the Newco Distributions, the AAM Distribution or the Chicago Title Distribution
as follows:
(a) any sales, use, stock, real property or other transfer Taxes
imposed on the transfers occurring in connection with, or pursuant to, the Land
Trust Contribution, the Newco Distributions and the Chicago Title Distribution;
(b) any Tax resulting from any income or gain recognized by the
Chicago Title Group under Treasury Regulation Sections 1.1502-13 or 1.1502-19
(or any corresponding provisions of other applicable Tax Laws) as a result of
the Chicago Title Distribution; and
(c) any Tax resulting for any reason whatsoever from any income or
gain recognized by Alleghany as a result of either the contribution of CT&T to
Chicago Title or the Chicago Title Distribution failing to qualify for tax-free
treatment under Sections 351, 355, 361, 368 or other provisions of the Code (as
contemplated in the Ruling Request) or other applicable Tax Laws;
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(d) any Tax resulting from any income or gain recognized by
Alleghany (including any member of the AAM Group) as a result of the AAM
Distribution failing to qualify for tax-free treatment under Sections 351, 355,
361, 368 or other provisions of the Code (as contemplated in the Ruling Request)
or other applicable Tax Laws by reason of the inaccuracy of any factual
statements or representations relating to Chicago Title or any member of the
Chicago Title Group in connection with the Ruling Request, or from any breach of
Chicago Title's representations or covenants under Section 9 or any Chicago
Title Tainting Act (as defined in Section 9) by Chicago Title or any member of
the Chicago Title Group; and
(e) any Tax resulting for any reason whatsoever from any income or
gain recognized by Alleghany (including any member of the AAM Group) as a result
of either the Land Trust Contribution or the Newco Distributions failing to
qualify for tax-free treatment under Sections 351, 355, 361, 368 or other
provisions of the Code or other applicable Tax laws.
2.06 General Method of Proration. In determining the Tax for the
Pre-Distribution Period and the Post-Distribution Period, items of income, gain,
loss, deduction, and credit shall be apportioned between such periods based upon
a closing of the books for Tax purposes and in accordance with the principles of
Treasury Regulation Section 1.1502-76(b), as reasonably interpreted and applied
by Alleghany and Chicago Title. For this purpose, Chicago Title's books for
accounting and Tax purposes shall close at the close of business on the Chicago
Title Distribution Date. No election shall be made under Treasury Regulation
Section 1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items),
and Treasury Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably
allocate the items (other than extraordinary items, including, without limiting
the generality of the foregoing, compensation items) for the
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month which includes the Chicago Title Distribution Date. Any items of income,
gain, loss, deduction and credit relating to the Chicago Title Distribution
shall be treated as an extraordinary item described in Treasury Regulation
Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to the Pre-Distribution
Period, and any Taxes related to such items shall be treated under Treasury
Regulation Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item
and shall be allocated to the Pre-Distribution Period.
2.07 Consolidated or Combined State Taxes for Straddle Periods. Any
Consolidated or Combined State Taxes for a Straddle Period shall be allocated
between the members of the Alleghany Group and the Chicago Title Group first on
the basis of, and to the extent, that the receipts, income, capital or net worth
of a member resulted in, or increased, any Consolidated or Combined State Taxes.
Any remaining Consolidated or Combined State Taxes for a Straddle Period shall
be allocated among the members on the basis on which each member's relative
attribute (whether positive or negative) was taken into account in determining
the amount of any Consolidated or Combined State Tax contributed to the
remainder of the Consolidated or Combined State Taxes for the Straddle Period.
2.08 Adjustment of Tax Liability. If any item of income, gain, loss,
expense, deduction or credit that enters into the computation of the Chicago
Title Consolidated Tax Liability or the Consolidated or Combined State Taxes for
the Straddle Period is changed or adjusted by the Internal Revenue Service or by
a State or local tax authority and such change or adjustment is part of a final
settlement with the Internal Revenue Service or a State or local tax authority
that is binding on all parties or, if applicable, a final judicial decision upon
the expiration of the time for the decision to be appealed (a "final
determination"), Alleghany shall
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make such payments to Chicago Title or Chicago Title shall make such payments to
Alleghany (including interest, penalties and additions to Tax imposed on the
Alleghany Group or any member of the Alleghany Group) in connection with the
adjustment or change as may be necessary to adjust the payments between Chicago
Title and Alleghany to reflect payments that would have been made under Sections
2.01 through 2.07 of this Agreement had the adjustments as finally determined
been taken into account in determining the amount of the payments under Sections
2.01 through 2.07. A payment required under this Section 2.08 shall be due and
payable ten (10) Business Days following the date that one party gives notice to
the other party that a payment is due. Notice under this Section 2.08 shall
include a copy of the notice of deficiency or other written communication from a
Tax authority describing the final determination and, if appropriate or
necessary, detailed calculations supporting the amount due.
SECTION 3. Preparation and Filing of Tax Returns.
3.01 Alleghany Consolidated Returns. The Alleghany Consolidated
Return required to be filed for any Tax Period shall be prepared by Alleghany.
For any prior Tax Period for which the Alleghany Consolidated Return has not
been filed by the Chicago Title Distribution Date and for the Tax Period which
includes the Chicago Title Distribution Date, Chicago Title shall provide
Alleghany with (i) a true and correct tax return for the Chicago Title Group,
together with an accompanying computation of Tax liability of the Chicago Title
Group, (ii) separate tax returns for each member of the Chicago Title Group
together with accompanying computations of the separate return Tax liabilities
of each member of the Chicago Title Group, and (iii) a reconciliation of book
income to Federal taxable income for each member of the Chicago Title Group.
Chicago Title agrees to use reasonable efforts in good faith to provide
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Alleghany with such returns and computations no later than the first day of the
sixth month following the end of the Tax Period to which such returns and
computations relate, but in any event shall provide such returns and
computations to Alleghany no later than the fifteenth day of the seventh month
following the end of the Tax Period to which such returns and computations
relate.
3.02 Consolidated or Combined State Tax Returns. Any returns
reporting Consolidated or Combined State Tax for any Pre-Distribution Period and
any Straddle Period shall be prepared and filed when due (including extensions)
by the person obligated to file such return of Consolidated or Combined State
Tax under the applicable Tax Law. Alleghany and Chicago Title shall provide, and
shall cause the members of their respective affiliated groups to provide,
assistance and shall cooperate with one another in accordance with Section 5
with respect to the preparation and filing of any return reporting Consolidated
or Combined State Tax, including providing information required to be provided
in Section 5, for Pre-Distribution Periods or Straddle Periods not filed by the
Chicago Title Distribution Date.
3.03 Manner of Filing. All returns of Tax filed, or caused to be
filed, by Alleghany or Chicago Title after the Chicago Title Distribution Date
shall be (in the absence of a controlling change in law, facts or
circumstances), (a) prepared on a basis that is consistent with the Ruling
Request and any letter ruling of the Internal Revenue Service obtained by
Alleghany in connection with the AAM Distribution and the Chicago Title
Distribution, (b) with respect to any Tax Period that includes the Chicago Title
Distribution Date, filed on a timely basis (including permitted extensions of
time for filing) by the party responsible for such filing under this Agreement
and (c) with respect to any Tax Period that includes the Chicago Title
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Distribution Date, prepared consistent with past practices, elections,
accounting methods, conventions, and principles of taxation used for the most
recent taxable periods for which the Tax returns involving similar items have
been filed prior to the Chicago Title Distribution Date. With respect to all
Pre-Distribution Tax Periods and the Tax Period which includes the Chicago Title
Distribution Date, all elections that are available to the Alleghany Group under
the Treasury Regulations relating to the filing of consolidated Federal income
tax returns and all Tax return filing positions for all Tax Periods shall be
made by Alleghany in its sole discretion.
SECTION 4. Tax Payments.
4.01 Payment of Taxes with Respect to Alleghany Consolidated Returns
Filed After the Chicago Title Distribution Date. In the case of any Alleghany
Consolidated Return the due date for which (including extensions) is after the
Chicago Title Distribution Date, at least ten (10) Business Days prior to any
Payment Date, Chicago Title shall compute and submit to Alleghany its estimate
of the amount of the Chicago Title Consolidated Tax Liability for the Tax Period
which would be required to be paid by Chicago Title on such Payment Date if the
Chicago Title Group were a separate affiliated group, assuming that the required
payment was sufficient to avoid incurring any addition to tax under Section 6655
of the Code by reason of an underpayment by a "large corporation" within the
meaning of Section 6655(g)(2) of the Code. The amount so estimated shall be
consistent with the elections under Section 6655(d) and (e) of the Code made or
to be made by Alleghany, in its sole discretion, for such taxable year.
Alleghany shall review the estimated amount as calculated by Chicago
Title, and Alleghany shall conclusively determine in good faith the amount of
Tax required to be paid by Chicago Title on that Payment Date. Alleghany shall
notify Chicago Title in writing at least
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three (3) Business Days prior to any Payment Date of the amount of Tax required
to be paid by Chicago Title to Alleghany prior to such Payment Date. Within one
(1) business day preceding any Payment Date, Chicago Title will pay to Alleghany
the excess (if any) of:
(i) the Chicago Title Consolidated Tax Liability determined as of
such Payment Date with respect to the applicable Tax Period, over
(ii) the cumulative payments with respect to such Tax Period prior
to such Payment Date made by Chicago Title or by CT&T.
4.02 Agreement Regarding Cumulative 1997 and 1998 Federal Income Tax
Payments. Alleghany and Chicago Title agree that, as of the date hereof, the
cumulative payments made, or deemed made for purposes of this Agreement by
Chicago Title with respect to the year 1997 is $37,765,466, and with respect to
the year 1998 is $29,356,050.
4.03 Payment of Consolidated or Combined State Tax Relating to
Returns Filed After the Chicago Title Distribution Date. The provisions of
Section 4.01 shall be equally applicable with respect to any Consolidated or
Combined State Tax relating to any Pre-Distribution Period or Straddle Period.
4.04 Method of Payment. All payments required by this Agreement
shall be made by (i) wire transfer (by no later than 1:00 p.m. Eastern time on
the required date of payment) to the appropriate bank account as may from time
to time be designated by the parties for such purpose, provided that on the date
of such wire transfer notice of the transfer is given to the recipient thereof
in accordance with Section 17.01 of this Agreement or (ii) any other method
agreed to by the parties. All payments due under this Agreement shall be deemed
to be paid when available funds are actually received by the payee.
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SECTION 5. Assistance and Cooperation. After the Chicago Title
Distribution Date, each of Alleghany and Chicago Title shall cooperate in good
faith (and cause the respective members of their affiliated groups to cooperate)
with each other and with each other's agents, including accounting firms and
legal counsel, in connection with Tax matters relating to the Alleghany Group
and the Chicago Title Group, including (i) preparation and filing of Tax
returns, (ii) determining the liability for, and amount of, any Taxes due
(including estimated Taxes) or the right to and amount of any refund of Taxes,
(iii) examinations of Tax returns, (iv) the determination of the basis of the
stock of any corporation, and (v) any administrative or judicial proceeding in
respect of Taxes assessed or proposed to be assessed. Each of Alleghany and
Chicago Title shall also make available to each other, as reasonably requested
and available, personnel (including officers, directors, employees and agents of
Alleghany and Chicago Title or members of their respective affiliated group)
responsible for preparing, maintaining, and interpreting information and
documents relevant to Taxes, and personnel reasonably required as witnesses or
for purposes of providing information or documents in connection with any
administrative or judicial proceeding relating to Taxes. Any information or
documents provided under this Section 5 shall be kept confidential by the person
receiving the information or documents, except as may otherwise be necessary in
connection with the filing of Tax returns or in connection with any
administrative or judicial proceeding relating to Taxes.
SECTION 6. Tax Records.
6.01 Retention of Tax Records. Each of Alleghany and Chicago Title
shall, and shall cause the members of their respective affiliated groups, to
preserve and keep all reports of Taxes due, any claims for refund of Taxes paid,
any information return with respect to Taxes,
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or any other similar report, statement, declaration, or document required to be
filed under the Code or other Tax Law, including any attachments, exhibits, or
other materials submitted with any of the foregoing, and including any
amendments or supplements to any of the foregoing ("Tax Returns"), Tax Return
work papers, documentation relating to any audit, review, examination, or any
other administrative or judicial proceeding with the purpose or effect of
redetermining Taxes, and any other books of account or records required to be
maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Tax authority ("Tax Records") exclusively relating
to the assets and activities of their respective affiliated groups for
Pre-Distribution Tax Periods and any Straddle Periods for so long as the
contents thereof may become material in the administration of any matter under
the Code or other applicable Tax Law, but in any event until the later of (i)
the expiration of any applicable statutes of limitation, and (ii) seven years
after the Chicago Title Distribution Date. If, prior to the expiration of the
applicable statute of limitation and such seven-year period, Alleghany or
Chicago Title reasonably determines that any Tax Records which it is required to
preserve and keep under this Section 6 are no longer material in the
administration of any matter under the Code or other applicable Tax Law,
Alleghany or Chicago Title, as the case may be, may dispose, or may permit the
members of their respective affiliated groups to dispose, of such records upon
90 days' prior notice to the other party. Such notice shall include a list of
the records to be disposed of describing in reasonable detail each file, book,
or other record accumulation being disposed. The notified person shall have the
opportunity, at its cost and expense, to copy or remove, within such 90-day
period, all or any part of such Tax Records.
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6.02 Access to Tax Records. Alleghany and Chicago Title shall make,
and shall cause the members of their respective affiliated groups to make,
available to each other for inspection and copying during normal business hours
upon reasonable notice all Tax Records in their possession to the extent
reasonably required by the other party in connection with the preparation of Tax
Returns, audits, litigation, the determination of basis, or the resolution of
items under this Agreement.
SECTION 7. Tax Contests.
7.01 Notice. Each of Alleghany or Chicago Title, as the case may be,
shall provide prompt notice to the other of any pending or threatened Tax audit,
assessment or proceeding or other Tax contest of which it or any member of their
respective affiliated groups receives any written communication related to Taxes
for Tax Periods for which Alleghany or Chicago Title is, or may be, indemnified
by the other party hereunder. Such notice shall contain factual information (to
the extent known) describing any asserted Tax liability in reasonable detail and
shall be accompanied by copies of any notice and other documents received from
any Tax authority in respect of any such matters. If an indemnified party
receives any written communication of an asserted Tax liability with respect to
a matter for which it is to be indemnified hereunder and such party fails to
give the indemnifying party prompt notice of such asserted Tax liability, then
(i) if the indemnifying party is precluded from contesting the asserted Tax
liability in any forum as a result of the failure to give prompt notice, the
indemnifying party shall have no obligation to indemnify the indemnified party
for any Taxes arising out of such asserted Tax liability, and (ii) if the
indemnifying party is not precluded from contesting the asserted Tax liability
in any forum, but such failure to give prompt notice results in a monetary
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detriment to the indemnifying party, then any amount which the indemnifying
party is otherwise required to pay the indemnified party pursuant to this
Agreement shall be reduced by the amount of such detriment.
7.02 Control of Tax Contests. Alleghany shall have full
responsibility and discretion in handling, settling or contesting any Tax audit
or contest involving a Tax reported on the Alleghany Consolidated Return;
provided, however, that with respect to any Tax for which Chicago Title has
liability under this Agreement, Alleghany shall consult with, and consider in
good faith any suggestions of, Chicago Title, shall keep Chicago Title informed
as to the progress of any Tax audit or contest and, if requested by Chicago
Title, shall consult with, and consider in good faith any recommendation by,
Chicago Title (or its counsel) concerning the conduct of such Tax audit or
contest.
In the case of any return involving any Combined or Consolidated
State Tax, the person responsible under the Tax Law for the preparation and
filing of such return shall have full responsibility and discretion in handling,
settling or contesting any Tax audit or contest involving any Combined or
Consolidated State Tax; provided, however, that the person with such
responsibility shall consult with, and consider in good faith any suggestions
of, the other with respect to any Tax for which such other person has liability
under this Agreement.
SECTION 8. Effective Date; Termination of Prior Tax Sharing
Agreements. This Agreement shall be effective on the Chicago Title Distribution
Date. Immediately prior to the Chicago Title Distribution Date, any written or
oral agreement or any other arrangements relating to the allocation of Taxes
existing between Alleghany and any member of the Alleghany Group and any member
of the Chicago Title Group (other than this Agreement) shall be
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terminated, and neither party shall thereafter have any liability or obligation
(whether in respect of past or future Taxes) to the other under any prior tax
allocation agreement.
SECTION 9. No Inconsistent Actions.
9.01 Chicago Title Agreements. Chicago Title covenants and agrees
that it will not take any action, and it will cause each member of the Chicago
Title Group to refrain from taking any action, which may be inconsistent with
the Tax treatment of the AAM Distribution or the Chicago Title Distribution as
contemplated in the Ruling Request (any such action is referred to in this
Section 9 as a "Chicago Title Tainting Act"), unless (i) Chicago Title either
(A) obtains a ruling with respect to the Tainting Act from the Internal Revenue
Service or other applicable Tax Authority that is reasonably satisfactory to
Alleghany (except that neither Chicago Title nor any member of the Chicago Title
Group shall submit any such ruling request if Alleghany determines in good faith
that filing such request might have a materially adverse effect upon Alleghany),
or (B) obtains an unqualified opinion of independent nationally recognized tax
counsel acceptable to Alleghany, on a basis of assumed facts and representations
consistent with the facts at the time of such action, that such Tainting Act
will not adversely affect the Tax treatment of the AAM Distribution or the
Chicago Title Distribution as contemplated in the Ruling Request, or (ii)
Alleghany consents in writing to such Tainting Act, which consent shall be
granted or withheld in the sole and absolute discretion of Alleghany.
Without limiting the foregoing, during the two-year period following
the Chicago Title Distribution Date, unless clause (i) or (ii) of the preceding
paragraph is satisfied with respect to the applicable action, neither Chicago
Title nor CT&T will (a) liquidate or merge with or into any other corporation;
(b) issue more than 20 percent, by vote or value, of its capital stock
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in one or more transactions; (c) redeem, purchase or otherwise reacquire more
than five (5) percent, by vote or value, of its capital stock in one or more
transactions (other than in connection with future employee benefit plans or
pursuant to a future market purchase program involving five (5) percent or less
of its publicly traded stock); (d) sell, exchange, distribute or otherwise
dispose of, other than in the ordinary course of business, more than 25 percent
of the assets constituting the trades or businesses relied upon in the Ruling
Request to satisfy Section 355(b) of the Code; or (e) discontinue or cause to be
discontinued the active conduct of the trades or businesses relied upon in the
Ruling Request to satisfy Section 355(b) of the Code.
9.02 No Inconsistent Plan or Intent. Chicago Title represents and
warrants that neither Chicago Title nor any of the members of the Chicago Title
Group has any plan or intent to take any action which is inconsistent with any
factual statements or representations in the Ruling Request. Regardless of any
change in circumstances, Chicago Title covenants and agrees that Chicago Title
will not take, and it will cause the members of the Chicago Title Group to
refrain from taking, any such inconsistent action on or before the second
anniversary of the Chicago Title Distribution Date, other than as permitted in
this Section 9.
9.03 Chicago Title Indemnity. Notwithstanding anything to the
contrary in this Agreement, Chicago Title shall be solely liable for, and shall
indemnify and hold harmless Alleghany and members of the Alleghany Group
(including members of the AAM Group) from any Tax (a) resulting from a Chicago
Title Tainting Act by Chicago Title or the members of the Chicago Title Group,
regardless of whether clause (i) or (ii) of Section 9.01 was satisfied with
respect to such Tainting Act and (b) on, based upon, or resulting from, the Land
Trust Contribution and the Newco Distributions.
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9.04 Exclusion From Indemnity. Notwithstanding the provisions of
Section 2.05 and this Section 9, Chicago Title shall have no liability for, and
shall not be obligated to indemnify and hold harmless Alleghany and members of
the Alleghany Group (including members of the AAM Group) from any Tax which
results solely and directly from, and then only to the extent attributable to,
(a) any errors or omissions in the factual statements or representations made in
the Ruling Request relating to Alleghany or members of the Alleghany Group,
excluding the Chicago Title Group, or (b) the taking, or the failure to take, by
Alleghany or, after the date of the AAM Distribution, any member of the AAM
Group of any action which is inconsistent with any factual statements or
representations relating to Alleghany or, as to actions or inactions after the
date of the AAM Distribution, by any members of the AAM Group, in the Ruling
Request (any error or omission in clause (a) or the taking or failure to take in
clause (b) being referred to herein as an "Alleghany Tainting Act."). Chicago
Title shall be relieved of its liability for, or its obligation to indemnify
hereunder only if, or to the extent that, Chicago Title would have had no
liability, or its liability would have been reduced, had no Alleghany Tainting
Act occurred. For this purpose, no account shall be taken of the increased
possibility of discovery caused by reason of any Alleghany Tainting Act nor the
effect of any other act (including by way of illustration and not by way of
limitation, any extension by Alleghany of any statute of limitations).
SECTION 10. Carrybacks.
10.01 Waiver of Carrybacks. Chicago Title agrees that Chicago Title
shall make all available elections to waive or relinquish the right to claim in,
or carryback to, any Tax Period for which any member of the Chicago Title Group
was also a member of the Alleghany Group
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arising in a Post-Distribution Period, and Chicago Title shall make no
affirmative election to claim any such carryback of any net operating loss, net
capital loss, unused or excess tax credit, or other similar deductible or
creditable Tax items which may or must be carried from any Post-Distribution
Period back to a Pre-Distribution Period under the Code.
10.02 Permitted Carrybacks. If notwithstanding the making of all
available elections, Chicago Title is required to claim in, or carryback to, any
Tax Period for which any member of the Chicago Title Group was also a member of
the Alleghany Group any deductible or creditable Tax items from any
Post-Distribution Period (a "carryback item"), then Alleghany shall pay to
Chicago Title promptly after the same is received (or credited against any other
Tax obligation of Alleghany) the amount of any refund of Tax in a
Pre-Distribution Period received (or credited against another Tax) attributable
to a carryback item; provided, however, that the amount of such refund payable
to Chicago Title shall not exceed the reduction in the Chicago Title
Consolidated Tax Liability for the Pre-Distribution Period attributable to the
carryback item.
SECTION 11. Survival of Obligations. The representations,
warranties, covenants and agreements set forth in this Agreement shall be
unconditional and absolute and shall remain in effect without limitation as to
time.
SECTION 12. Treatment of Payments; Tax Gross Up.
12.01 Treatment of Tax Indemnity Payments. In the absence of any
change in tax treatment under the Code or other applicable Tax Law, any Tax
indemnity payments made by Alleghany or Chicago Title under Sections 2 or 9,
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring
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immediately before the Chicago Title Distribution Date, but only to the extent
the payment does not relate to a Tax allocated to the payor in accordance with
Treasury Regulation Section 1.1502-33(d) (or under corresponding principles of
other applicable Tax Laws).
12.02 Tax Gross-Up. If notwithstanding the manner in which Tax
indemnity payments were reported, there is an adjustment to the Tax liability of
Alleghany or Chicago Title as a result of its receipt or accrual of a payment
pursuant to this Agreement, such payment shall be appropriately adjusted so that
the amount of such payment, reduced by the amount of all Taxes payable with
respect to the receipt or accrual thereof (but taking into account all
correlative Tax savings resulting from the payment of such Taxes), shall equal
the amount of the payment which the company receiving such payment would
otherwise be entitled to receive pursuant to this Agreement.
SECTION 13. Disagreements and Disputes.
13.01 Disagreements as to Calculations, Returns, etc. If after good
faith negotiations Alleghany and Chicago Title cannot agree on the application
of this Agreement to the matters referred to in Sections 2.06, 2.08, 3.03,
10.01, 10.02 and 12.02, then such matter (and only such matters) will be
referred to a nationally recognized accounting firm acceptable to both Alleghany
and Chicago Title (the "Accounting Firm"). The Accounting Firm shall furnish
written notice to Alleghany and Chicago Title of its resolution of any such
disagreement as soon as practical, but in any event no later than 45 days after
its acceptance of the matter for resolution. Any such resolution by the
Accounting Firm will be conclusive and binding on Alleghany and Chicago Title.
In accordance with Section 16, each of Alleghany and Chicago Title shall pay its
own fees and expenses (including the fees and expenses of its representatives)
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incurred in connection with the referral of the matter to the Accounting Firm.
All fees and expenses of the Accounting Firm in connection with such referral
shall be shared equally by Alleghany and Chicago Title.
SECTION 14. Late Payments. Any amount owed by one party to another
party under this Agreement which is not paid when due shall bear interest at the
base rate on corporate loans charged by Chase Manhattan Bank, N.A., New York,
New York from time to time, compounded daily on the basis of a year of 365 or
366 (as applicable) days and actual days elapsed, plus two (2) percentage
points, compounded semiannually, from the due date of the payment to the date
paid. To the extent interest required to be paid under this Section 14
duplicates interest required to be paid under any other provision of this
Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 14 or the interest rate provided under such other
provision.
SECTION 15. Setoff. Notwithstanding anything to the contrary in this
Agreement, each of Alleghany and Chicago Title has the right to collect payments
under this Agreement that are more than sixty (60) calendar days past due by
setoff against payments due to the other party under this Agreement or any other
agreement between them. Notwithstanding the preceding sentence, in the event and
to the extent that any payment to be made under this Agreement is in dispute
between the parties and the disputed matter is subject to the dispute resolution
procedure set forth in Section 13 of this Agreement, the setoff provision of
this Section 15 shall not apply to the extent of the disputed amount.
SECTION 16. Expenses. Except as provided in Section 13, each of
Alleghany and Chicago Title and members of their respective affiliated groups
shall bear their own
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expenses incurred in connection with preparation of Tax returns, Tax contests,
and other matters related to Taxes under the provisions of this Agreement.
SECTION 17. General Provisions.
17.01 Addresses and Notices. Any notice, demand, request or report
required or permitted to be given or made to any party under this Agreement
shall be in writing and shall be deemed given or made when delivered to a party
or when sent by first class mail or by other commercially reasonable means of
written communication (including delivery by an internationally recognized
courier service or by facsimile transmission) to the party at the party's
address as follows:
If to Alleghany, at:
Alleghany Corporation
375 Park Avenue
New York, New York 10152
Attn: General Counsel
Telecopy number: (212) 759-3295
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022-9998
Attn: Richard D. Belford, Esq.
Telecopy number: (212) 758-9526
If to Chicago Title, at:
Chicago Title Corp.
171 North Clark Street
Chicago, Illinois 60601
Attn: General Counsel
Telecopy number: (312) 223-5912
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with a copy to:
Chicago Title Corp.
171 North Clark Street
Chicago, Illinois 60601
Attn: Chief Financial Officer
Telecopy number: (312) 223-3377
A party may change the address for receiving notices under this
Agreement by providing written notice of the change of address to the other
parties.
17.02 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.
17.03 Waiver. No failure by any party to insist upon the strict
performance of any obligation under this Agreement or to exercise any right or
remedy under this Agreement shall constitute waiver of any such obligation,
right, or remedy or any other obligation, rights, or remedies under this
Agreement.
17.04 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
17.05 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
contests (or portions thereof) under the control of such other parties in
accordance with Section 7.
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17.06 Integration. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter of this Agreement and
supersedes all prior agreements and understanding pertaining thereto.
17.07 Construction. The language in all parts of this Agreement
shall in all cases be construed according to its fair meaning and shall not be
strictly construed for or against any party
17.08 No Double Recovery; Subrogation. No provision of this
Agreement shall be construed to provide an indemnity or other recovery for any
costs, damages, or other amounts for which the damaged party has been fully
compensated under any other provision of this Agreement or under any other
agreement or action at law or equity. Unless expressly required in this
Agreement, a party shall not be required to exhaust all remedies available under
other agreements or at law or equity before recovering under the remedies
provided in this Agreement. Subject to any limitations provided in this
Agreement, the indemnifying party shall be subrogated to all rights of the
indemnified party for recovery from any third party.
17.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
17.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by the respective officers as of the date set forth above.
ALLEGHANY CORPORATION
By: /s/ Peter R. Sismondo
----------------------------------
Title:
CHICAGO TITLE CORPORATION
By: /s/ Paul T. Sands, Jr.
----------------------------------
Title: Executive Vice President
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CHICAGO TITLE CORPORATION
1998 LONG-TERM INCENTIVE PLAN
ARTICLE 1.
GENERAL
1.1 Purpose. The purpose of the Chicago Title Corporation 1998 Long-Term
Incentive Plan (the "Plan") is to promote the longer-term financial success of
Chicago Title Corporation (the "Corporation") by (i) attracting, retaining and
rewarding individuals who can and do contribute to such success; (ii) motivating
Participants, by means of appropriate incentives, to achieve long-range goals;
and (iii) further identifying Participants' interests with those of the
Corporation's other shareholders through compensation that is based on the
Corporation's Common Stock.
1.2 Administration of the Plan. The Plan shall be administered by the
Compensation Committee of the Board (the "Committee"). The Committee shall be
selected by the Board, and shall consist of two or more members of the Board.
The Committee's powers and authority include, but are not limited to, selecting
from among the Eligible Individuals those persons who shall receive Awards;
determining the types and terms and conditions of all Awards granted; permitting
transferability of Awards to third parties; interpreting the Plan's provisions;
and administering the Plan in a manner that is consistent with its purpose. Any
interpretation of the Plan by the Committee and any decision made by it under
the Plan is final and binding. Except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, the Committee may allocate all or
any portion of its responsibilities and powers to any one or more of its members
and may delegate all or any part of its responsibilities and powers to any
person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
1.3 Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Individuals, those persons who will be granted one or more Awards under
the Plan, and thereby become participants ("Participants") in the Plan. In the
discretion of the Committee, a Participant may be granted any Award permitted
under the provisions of the Plan.
1.4 Effective Date and Term of Plan. The Plan shall be effective as of the date
that it is approved by Alleghany Corporation, as the sole shareholder of the
Corporation (the "Effective Date"). No Awards may be granted under the Plan
after the close of business on April 30, 2003.
1.5 Defined Terms. Capitalized terms in the Plan shall be as defined in the Plan
(including the definition provisions of Article 8 of the Plan).
<PAGE> 2
ARTICLE 2.
TYPES OF AWARDS
2.1 General. An Award may be granted singularly, in combination with another
Award(s) or in tandem whereby exercise or vesting of one Award held by a
Participant cancels another Award held by the Participant. Awards may be granted
as alternatives to or replacement of awards outstanding under the Plan, or any
other plan or arrangement of the Corporation or a Related Company (including a
plan or arrangement of a business or entity, all or a portion of which is
acquired by the Corporation or a Related Company). Every Award shall be subject
to such conditions, restrictions and contingencies as the Committee shall
determine. These may include completion of specified periods of continuous
service in the employ of the Corporation or its Related Companies and/or the
achievement of specified business and/or personal performance goals, and may
provide for the forfeiture of all or any portion of such Award in specified
circumstances. The Committee may also specify by whom and/or in what manner the
accomplishment of such performance goals (if any) shall be determined.
2.2 Certain Qualifying Awards. The Committee, in its sole discretion, may grant
an Award to any Participant who is a key employee of the Corporation or a member
of its affiliated group (as defined in Section 1504 of the Code) with the intent
that such Award qualifies as "performance-based compensation" under Section
162(m) of the Code, as amended (a "Qualifying Award"). The right to receive (or
retain) any Award granted as a Qualifying Award, other than Options and Stock
Appreciation Rights granted at Option Prices and Exercise Prices, respectively,
of not less than 100% of Fair Market Value on the date of grant, shall be
conditional upon the achievement of performance goals established by the
Committee in writing at the time such award is granted. Such performance goals,
which may vary from Participant to Participant and from Qualifying Award to
Qualifying Award, shall be based upon the attainment of specific amounts of, or
increases or decreases in, one or more of the following: revenues, market share,
title losses, claims ratios, expense ratios, paid losses, contribution margins,
reserves, return on expenses, operating income, cash flow, income before income
taxes, net income, earnings or earnings per share, net worth, stockholders'
equity, market value, return on equity or assets or total return to
stockholders, whether applicable to the Corporation or any relevant subsidiary
or business unit or entity in which the Corporation has a significant
investment, or any other company or companies, or any combination thereof as the
Committee may deem appropriate. Prior to the payment of any Award granted as a
Qualifying Award, the Committee shall certify in writing that the performance
goals applicable to the Qualifying Award were satisfied.
The maximum amount which may be granted as Qualifying Awards to any Participant
in any calendar year shall not in the aggregate exceed (i) Common Stock-based
Awards (pursuant to Sections 2.3, 2.4 and 2.5 hereof), 150,000 shares of Common
Stock (whether payable in cash or
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Common Stock), subject to adjustment as provided in Section 3.2 hereof, and (ii)
for awards payable in cash, a Tax Bonus payable with respect to the Common
Stock-based Awards described in clause (i), and cash payments (other than Tax
Bonuses) of $1,000,000.
2.3 Options.
(a) The grant of an option (an "Option") entitles the Participant to
purchase shares of Common Stock at an exercise price per share which is
specified by the Committee (the "Option Price").
(b) Upon exercise of an Option, the Option Price may be paid by means of a
cash payment or such other means as the Committee may from time to time
permit, including (i) tendering (either actually or by attestation) shares
of Common Stock purchased upon exercise of the Option, with such shares
valued at Fair Market Value at the time of exercise, (ii) authorizing a
third party to sell shares of Common Stock (or a sufficient portion
thereof) acquired upon exercise of the Option and to remit to the
Corporation a sufficient portion of the sale proceeds to pay for all the
shares of Common Stock acquired through such exercise or (iii) any
combination of the above.
(c) The Corporation may, if the Committee so determines, accept the
surrender by a Participant, or the personal representative of a
Participant, of an Option, in consideration of a payment by the
Corporation equal to the difference obtained by subtracting the aggregate
Option Price from the aggregate Fair Market Value of the Common Stock
covered by the Option on the date of such surrender, such payment to be in
cash, or, if the Committee so provides, in shares of Common Stock valued
at Fair Market Value on the date of such surrender, or partly in shares of
Common Stock and partly in cash.
(d) An Option granted by the Committee to a Participant who is a key
employee of the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code) may be designated as an ISO. The terms of any
Option granted as an ISO shall comply in all respects with the provisions
of Section 422 of the Code.
2.4 Stock Appreciation Rights. A stock appreciation right (a "Stock Appreciation
Right") is a right to receive a payment equal to the excess of the aggregate
Fair Market Value at time of exercise of a specified number of shares of Common
Stock over the aggregate exercise price of the Stock Appreciation Rights being
exercised. Such payment shall be made in cash, or, if the Committee so provides,
in shares of Common Stock valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right, or partly in shares of Common Stock and partly in
cash. The Committee shall establish an exercise price in connection with each
grant of a Stock Appreciation Right (the "Exercise Price").
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<PAGE> 4
2.5 Stock Awards. A stock award ("Stock Award") is a grant of shares of Common
Stock or of a right to receive shares of Common Stock (or their cash equivalent
or a combination of both) in the future.
2.6 Cash Awards. A cash award ("Cash Award") is a right denominated in cash or
cash units to receive a payment, which may be in the form of cash, shares of
Common Stock or a combination of both, in the future.
2.7 Tax Bonuses. The Committee is authorized, subject to limitations under
applicable law, to grant Tax Bonuses to Participants. The Committee shall
determine the terms and conditions of such Awards of Tax Bonuses.
2.8 Agreements. An Award under the Plan may, in the Committee's discretion, be
evidenced by an agreement (the "Agreement"), which may contain such terms and
conditions as may be approved by the Committee, and shall be executed by an
officer on behalf of the Corporation and by the Participant.
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1 Maximum Shares Available for Delivery Subject to adjustment as provided in
Section 3.2 hereof, the maximum number of shares of Common Stock that may be
delivered to Participants and their beneficiaries under the Plan shall be
2,230,000 shares of Common Stock, of which (i) a maximum of 1,580,000 shares may
be issued in connection with Awards granted pursuant to Sections 2.3 and 2.4
(relating to Options and Stock Appreciation Rights) and (ii) a maximum of
650,000 shares may be issued in connection with Awards granted pursuant to
Section 2.5 (relating to Stock Awards). In addition, any shares of Common Stock
granted under the Plan which are forfeited back to the Corporation because of
the failure to meet an Award contingency or condition shall again be available
for delivery pursuant to new Awards granted under the Plan. Any shares of Common
Stock covered by an Award (or portion of an Award) granted under the Plan which
is forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been delivered for purposes of determining the maximum number of shares of
Common Stock available for delivery under the Plan. Likewise, if any Option is
exercised by tendering shares of Common Stock, either actually or by
attestation, to the Corporation as full or partial payment in connection with
the exercise of an Option under this Plan, only the number of shares of Common
Stock issued net of the shares of Common Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of Common
Stock available for delivery under the Plan. Similarly, if an Option shall be
surrendered as provided in Section 2.3(c) hereof, only the number of shares of
Common Stock (if any) paid in consideration of such surrender, but not the
shares which had been covered by the Option, shall be deemed delivered for
purposes of determining the maximum number of shares of Common Stock
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<PAGE> 5
available for delivery under the Plan. Shares of Common Stock to be delivered or
purchased under the Plan may be either authorized but unissued shares of Common
Stock or shares of Common Stock held by the Corporation as treasury shares.
3.2 Changes in Capital Structure. In the event of any corporate transaction
involving the Corporation (including, without limitation, any subdivision or
combination or exchange of the outstanding shares of Common Stock, stock
dividend, stock split, spin-off, split-off, recapitalization, capital
reorganization, liquidation, reclassification of shares of Common Stock, merger,
consolidation, extraordinary cash dividend, or sale, lease or transfer of
substantially all of the assets of the Corporation), the Committee shall make
such equitable adjustments as it may deem appropriate in the Plan and the Awards
thereunder. Action by the Committee may include adjustment of: (i) the number
and kind of shares which may be delivered under the Plan; (ii) the number and
kind of shares subject to outstanding Awards; (iii) the maximum number of shares
of Common Stock with respect to which Qualifying Awards may be granted to any
Participant in any calendar year under Section 2.2 hereof; and (iv) the Option
Prices of outstanding Options and the Exercise Prices of outstanding Stock
Appreciation Rights; as well as any other adjustments that the Committee
determines to be equitable.
3.3 Change in Control. In the event of a Change in Control, all outstanding
Options and Stock Appreciation Rights shall become immediately exercisable in
full, and any Stock Awards shall immediately vest or shall become immediately
payable in full.
3.4 Tender Offers and Exchange Offers. In the event of any tender offer or
exchange offer, by any person other than the Corporation, for shares of Common
Stock, the Committee may make such adjustments in outstanding Awards and
authorize such further action as it may deem appropriate to enable the
recipients of outstanding Awards to avail themselves of the benefits of such
offer, including, without limitation, acceleration of the exercise date of
outstanding Options and/or Stock Appreciation Rights so that they become
immediately exercisable in whole or in part, or offering to acquire all or any
portion of specified categories of Options for a price determined pursuant to
Section 2.3(c) hereof, or acceleration of the payment of outstanding Awards
payable, in whole or in part, in shares of Common Stock.
3.5 Limitation on Discretion to Make Adjustments. Notwithstanding any provision
of this Article 3 to the contrary, no adjustment shall be made in (a) any
outstanding Qualifying Award to the extent that such adjustment would adversely
affect the status of that Qualifying Award as "performance-based compensation"
under Section 162(m) of the Code or (b) any Award to the extent that such
adjustment would cause the Plan to violate Section 422(b)(1) of the Code with
respect to ISOs.
ARTICLE 4.
MISCELLANEOUS
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4.1 Form and Time of Elections. Unless otherwise specified herein, each election
required or permitted to be made by a Participant or other person entitled to
benefits under the Plan, and any permitted modification or revocation thereof,
shall be in writing filed with the Committee at such times, in such form, and
subject to such restrictions and limitations as the Committee shall require.
4.2 Limitation of Implied Rights.
(a) No Eligible Individual shall have any claim or right to be granted
any Award under the Plan.
(b) A Participant shall have no rights as a holder of Common Stock by
reason of Awards under the Plan, unless and until certificates for
shares of Common Stock are issued to the Participant or the issuance
of such shares of Common Stock is effected on a non-certificate
basis.
(c) Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the
Corporation or any subsidiary.
4.3 Costs and Expenses. All costs and expenses incurred in administering the
Plan shall be borne by the Corporation.
4.4 Unfunded Plan. The Plan shall be unfunded. The Corporation shall not be
required to establish any special or separate fund nor to make any other
segregation of assets to assure the payment of any Award under the Plan.
4.5 Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.
4.6 Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, encumbered, or
hypothecated to, or in favor of, or subject to any lien, obligation, or
liability of such Participant to, any party other than the Corporation or any
Related Company, or assigned or transferred by such Participant otherwise than
by will or the laws of descent and distribution, and such Awards and rights
shall be exercisable during the lifetime of the Participant only by the
Participant or his or her guardian or legal representative. Notwithstanding the
foregoing, the Committee may, in its discretion, provide that Awards or other
rights or interests of a Participant granted pursuant to the Plan (other than an
ISO) be transferable, without consideration, to immediate family members (i.e.,
children, grandchildren or spouse), to trusts for the benefit of such immediate
family members and to partnerships in which such family members are the only
partners. The Committee may attach to such transferability feature such terms
and conditions as it deems advisable. In addition, a Participant may, in the
manner established by the Committee, designate a beneficiary
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(which may be a person or a trust) to exercise the rights of the Participant,
and to receive any distribution, with respect to any Award upon the death of the
Participant. A beneficiary, guardian, legal representative or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award Agreement
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional restrictions deemed necessary or appropriate by the
Committee.
ARTICLE 5.
PLAN AMENDMENT AND TERMINATION
5.1 Amendment, Modification and Termination. The Board or the Committee may at
any time and from time to time alter, amend, suspend or terminate the Plan in
whole or in part.
5.2 Awards Previously Granted. No termination, amendment or modification of the
Plan shall adversely affect in any material way any Award previously granted
under the Plan, without the written consent of the Participant holding such
Award.
ARTICLE 6.
AWARD SETTLEMENTS AND PAYMENTS
6.1 Payments. Awards may be settled through cash payments, the delivery of
shares of Common Stock, the granting of replacement Awards, or any combination
thereof as the Committee shall determine. No fractional shares of Common Stock
shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash shall be paid or transferred in lieu of
any fractional shares of Common Stock, or whether such fractional shares of
Common Stock or any rights thereto shall be canceled. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. The Committee may permit or
require the deferral of any Award payment, subject to such rules and procedures
as it may establish, which may include provisions for the payment or crediting
of interest, or dividend equivalents, including converting such credits into
deferred Common Stock equivalents.
6.2 Limit on Distribution. Distribution of shares of Common Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Corporation shall
have no liability to deliver any shares of Common Stock under the Plan or
make any other distribution of benefits under the Plan unless such
delivery or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Securities
7
<PAGE> 8
Act of 1933), and the applicable requirements of any securities exchange
or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Common Stock, the
issuance may be effected on a non-certificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock
exchange.
6.3 Tax Withholding. Whenever the Corporation proposes or is required to
distribute Common Stock under the Plan, the Corporation may require the
recipient to remit to the Corporation an amount sufficient to satisfy any
Federal, state and local tax withholding requirements prior to the issuance of
such shares or, in the discretion of the Committee, the Corporation may permit
to be delivered, or may withhold from the shares to be delivered, shares
sufficient to satisfy all or a portion of such tax withholding requirements.
Whenever under the Plan payments are to be made in cash, such payments may be
net of an amount sufficient to satisfy any Federal, state and local tax
withholding requirements.
ARTICLE 7.
GOVERNING LAW
7.1 Law Governing. The validity and construction of the Plan and any Agreements
entered into hereunder shall be governed by the laws of the State of Delaware.
ARTICLE 8.
DEFINED TERMS
8.1 Definitions. For purposes of the Plan, the terms listed below shall be
defined as follows:
(a) Award. The term "Award" means any award or benefit granted to any
Participant under the Plan, including, without limitation, the grant of
Options (including ISOs), Stock Appreciation Rights, Stock Awards, Cash
Awards and Tax Bonuses.
(b) Board. The term "Board" means the Board of Directors of the
Corporation.
(c) Change in Control. The term "Change in Control" of the Corporation
means:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial
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ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of either (A) the then
outstanding shares of capital stock of the Corporation (the
"Outstanding Corporation Capital Stock") or (B) the combined voting
power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the
"Corporation Voting Securities") in a tender offer or exchange offer
made to all of the stockholders of the Corporation (provided,
however, that a Change in Control shall not include any of the
following transactions: (1) any acquisition by or from the
Corporation or any of its subsidiaries, (2) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Corporation or any of its subsidiaries, or (3) any acquisition
by any corporation with respect to which, following such
acquisition, more than fifty percent (50%) of the then outstanding
shares of capital stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Corporation Capital Stock and
Corporation Voting Securities immediately prior to such acquisition,
in substantially the same proportion as their ownership immediately
prior to such acquisition of the Outstanding Corporation Capital
Stock and Corporation Voting Securities, as the case may be); or
(ii) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation (a "Business Combination")
with respect to which all or substantially all of the individuals
and entities who were the respective beneficial owners of the
Outstanding Corporation Capital Stock and Corporation Voting
Securities immediately prior to such Business Combination will not,
following such Business Combination, beneficially own, directly or
indirectly, more than fifty percent (50%) of, respectively, the then
outstanding shares of capital stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from the Business Combination, in substantially the same
proportion as their ownership immediately prior to such Business
Combination of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be; or
(iii) Approval by the stockholders of the Corporation of a sale or
other disposition of all or substantially all of the assets of the
Corporation, other than to a corporation with respect to which,
following such sale or disposition, more than fifty percent (50%)
of, respectively, the then
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outstanding shares of capital stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Corporation Capital Stock and Corporation Voting
Securities immediately prior to such sale or disposition, in
substantially the same proportion as their ownership immediately
prior to such sale or disposition of the Outstanding Corporation
Capital Stock and Corporation Voting Securities, as the case may be;
or
(iv) Approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference
to any successor provision of the income tax laws.
(e) Common Stock. The term "Common Stock" means shares of common stock of
the Corporation, par value $1.00 per share.
(f) Eligible Individual. The term "Eligible Individual" means any director
or employee of the Corporation or a Related Company, and any other person
providing services to the Corporation or a Related Company.
(g) Fair Market Value. The "Fair Market Value" of the Common Stock on a
particular date is the mean of the high and low sales price of a share of
Common Stock on such date as reported on the stock exchange or market on
which the Common Stock is primarily traded, or if no sale is made on such
date, the weighted average of the mean of the high and low sales prices of
a share of Common Stock on the next preceding day and the next succeeding
day on which such sales were made as reported on the stock exchange or
market on which the Common Stock is primarily traded.
(h) ISO. The term "ISO" means any Option designated as an incentive stock
option within the meaning of Section 422 of the Code.
(i) Related Company. The term "Related Company" means (i) any corporation
during any period in which the Corporation owns, directly or indirectly,
at least fifty percent (50%) of the voting power of all classes of stock
of the entity entitled to vote; and (ii) any partnership, joint venture or
other entity during any period in which at least fifty percent (50%) of
the voting or profits
10
<PAGE> 11
interest is owned, directly or indirectly, by the Corporation, or by any
entity that is a Related Company by reason of clause (i) next above.
(j) Tax Bonus. The term "Tax Bonus" means a payment in cash, in the year
in which an amount is included in the gross income of a Participant in
respect of an Award, of an amount equal to the federal, foreign, if any,
and applicable state and local income and employment tax liabilities
payable by the Participant as a result of (i) the amount included in gross
income in respect of the Award (without regard to the Tax Bonus) and (ii)
the amount of the Tax Bonus. For purposes of determining the amount to be
paid to the Participant pursuant to the preceding sentence, the
Participant shall be deemed to pay federal, foreign, if any, and state and
local income taxes at the highest marginal rate of tax imposed upon
ordinary income for the year in which an amount in respect of the Award is
included in gross income, after giving effect to any deductions therefrom
or credits available with respect to the payment of any such taxes.
11
<PAGE> 1
Exhibit 10.4
CHICAGO TITLE CORPORATION
DIRECTORS' STOCK OPTION PLAN
1. Purpose. The purpose of the Chicago Title Corporation Directors' Stock Option
Plan (the "Plan") is to advance the interests of Chicago Title Corporation (the
"Corporation") and its stockholders by encouraging increased stock ownership by
members of the Board of Directors (the "Board") of the Corporation who are not
employees of the Corporation or any of its subsidiaries, in order to promote
long-term stockholder value through continuing ownership of the Corporation's
common stock.
2. Administration. The Plan shall be administered by the Board. The Board shall
have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of nonqualified stock options made under
the Plan ("Options" ). The Board shall have the power to construe the Plan, to
determine all questions arising thereunder and, subject to the provisions of the
Plan, to adopt and amend such rules and regulations for the administration of
the Plan as it may deem desirable. Any decision of the Board in the
administration of the Plan shall be final and conclusive. The Board may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other officer
of the Corporation to execute and deliver documents on behalf of the
Corporation. No member of the Board shall be liable for anything done or omitted
to be done by him or by any other member of the Board in connection with the
Plan, except for his own willful misconduct or as expressly provided by statute.
3. Participation. Each member of the Board of the Corporation who is not an
employee of the Corporation or any of its subsidiaries (a "Non-Employee
Director") shall be eligible to receive an Option in accordance with Paragraph 5
below. As used herein, the term "subsidiary" means any corporation at least 40
percent of whose outstanding voting stock is owned, directly or indirectly, by
the Corporation.
4. Awards Under the Plan.
(a) Types of Awards. Awards under the Plan shall consist only of Options,
which are rights to purchase shares of common stock, par value $1.00 per share,
of the Corporation (the "Common Stock" ). Such Options are subject to the terms,
conditions and restrictions specified in Paragraph 5 below.
(b) Maximum Number of Shares That May Be Issued. There may be issued under
the Plan pursuant to the exercise of Options an aggregate of not more than
100,000 shares of Common Stock, subject to adjustment as provided in Paragraph 6
below.
(c) Rights With Respect to Shares. A Non-Employee Director to whom an
Option is granted (and any person succeeding to such a Non-Employee Director's
rights pursuant to the Plan) shall have no rights as a stockholder with respect
to any shares of Common Stock issuable pursuant to any such Option until the
date of the issuance of a
<PAGE> 2
stock certificate to him for such shares. Except as provided in Paragraph 6
below, no adjustment shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, securities or other
property) for which the record date is prior to the date such stock certificate
is issued.
5. Nonqualified Stock Options. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions:
(a) The Option exercise price shall be the fair market value of the shares
of Common Stock subject to such Option on the date the Option is granted, which
shall be the average of the high and the low sales prices of a share of Common
Stock on the date of grant as reported on the New York Stock Exchange Composite
Transactions Tape or, if the New York Stock Exchange is closed on that date, on
the last preceding date on which the New York Stock Exchange was open for
trading.
(b) Subject to Section 5(e) hereof and except as otherwise determined by
the Board of Directors, the Option shall have a term of 10 years from the date
it is granted.
(c) Each Non-Employee Director shall automatically receive an Option for
1,000 shares of Common Stock on June 18, 1998. Thereafter, beginning in calendar
year 1999, as of the first business day after the conclusion of each annual
meeting of stockholders of the Corporation, each Non-Employee Director shall
automatically receive an Option for 1,000 shares of Common Stock.
(d) The Option shall be transferable only by will or the laws of descent
and distribution, and shall be exercisable during the optionee's lifetime only
by him.
(e) The Option shall not be exercisable:
(i) before the expiration of one year from the date it is granted or
after the expiration of ten years from the date it is granted and may be
exercised during such period as follows: one-third (33 1/3 percent) of the
total number of shares of Common Stock covered by the Option shall become
exercisable each year beginning with the first anniversary of the date it
is granted; provided that an Option shall automatically become immediately
exercisable in full (A) in the event of a Change in Control of the
Corporation, or (B) when the Non-Employee Director ceases to be a
Non-Employee Director for any reason other than death;
(ii) unless payment in full is made for the shares of Common Stock
being acquired thereunder at the time of exercise; such payment shall be
made
(A) in United States dollars by cash or check, or
(B) in lieu thereof, by tendering to the Corporation shares of
Common Stock owned by the person exercising the Option and having a
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<PAGE> 3
fair market value equal to the cash exercise price applicable to
such Option, such fair market value to be the average of the high
and the low sales prices of a share of Common Stock on the date of
exercise as reported on the New York Stock Exchange Composite
Transactions Tape, or, if the New York Stock Exchange is closed on
that date, on the last preceding date on which the New York Stock
Exchange was open for trading, or
(C) by a combination of United States dollars and shares of
Common Stock as aforesaid; and
(iii) unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option and
ending on the date of such exercise, a Non-Employee Director of the
Corporation, except that
(A) if such person shall cease to be such a Non-Employee
Director for reasons other than death, while holding an Option that
has not expired and has not been fully exercised, such person, at
any time within one year of the date he ceased to be such a
Non-Employee Director (but in no event after the Option has expired
under the provisions of subparagraph 5(e)(i) above), may exercise
the Option with respect to any shares of Common Stock as to which he
has not exercised the Option on the date he ceased to be such a
Non-Employee Director; or
(B) if any person to whom an Option has been granted shall die
holding an Option that has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may, at
any time within one year after the date of such death (but in no
event after the Option has expired under the provisions of
subparagraph 5(e)(i) above), exercise the Option with respect to any
shares of Common Stock as to which the decedent could have exercised
the Option at the time of his death.
6. Dilution and Other Adjustments. In the event of any corporate transaction
involving the Corporation (including, without limitation, any subdivision or
combination or exchange of the outstanding shares of Common Stock, stock
dividend, stock split, spin-off, split-off, recapitalization, capital
reorganization, liquidation, reclassification of shares of Common Stock, merger,
consolidation, extraordinary cash dividend, or sale, lease or transfer of
substantially all of the assets of the Corporation), the number or kind of
shares that may be issued under the Plan pursuant to subparagraphs 4(a), 4(b)
and 5(c) above shall be automatically adjusted to give effect to the occurrence
of such event, and the number or kind of shares subject to, or the Option price
per share under, any outstanding Option shall be automatically adjusted so that
the proportionate interest of the participant shall be maintained as before the
occurrence of such event; such adjustment in outstanding Options shall be made
without change in the total Option
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<PAGE> 4
exercise price applicable to the unexercised portion of such Options and with a
corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.
7. Miscellaneous Provisions.
(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Corporation.
(b) A participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of law or
otherwise (except, in the event of a participant's death, by will or the laws of
descent and distribution), including, but not by way of limitation, execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no
such right or interest of any participant in the Plan shall be subject to any
obligation or liability of such participant.
(c) No shares of Common Stock shall be issued hereunder unless counsel for
the Corporation shall be satisfied that such issuance will be in compliance with
applicable federal, state and other securities laws.
(d) It shall be a condition to the obligation of the Corporation to issue
shares of Common Stock upon exercise of an Option, that the participant (or any
beneficiary or person entitled to act under subparagraph 5(e)(iii)(B) above) pay
to the Corporation, upon its demand, such amount as may be requested by the
Corporation for the purpose of satisfying any liability to withhold federal,
state, local or foreign income or other taxes. If the amount requested is not
paid, the Corporation may refuse to issue shares of Common Stock.
(e) The expenses of the Plan shall be borne by the Corporation.
(f) The Plan shall be unfunded. The Corporation shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares upon exercise of any Option under the
Plan and issuance of shares upon exercise of Options shall be subordinate to the
claims of the Corporation's general creditors.
(g) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, the
Plan, the terms and conditions of any agreement embodying awards of Options and
any action taken under the Plan by the Corporation or the Board.
(h) The masculine pronoun means the feminine and the singular means the
plural wherever appropriate.
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<PAGE> 5
(i) The appropriate officers of the Corporation shall cause to be filed
any reports, returns or other information regarding Options hereunder or any
shares of Common Stock issued pursuant hereto as may be required by Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, or any other
applicable statute, rule or regulation.
(j) For purposes of the Plan, the term "Change in Control" of the
Corporation means:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of fifty percent (50%) or more of either (A) the then outstanding
shares of capital stock of the Corporation (the "Outstanding Corporation
Capital Stock") or (B) the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote generally in the
election of directors (the "Corporation Voting Securities") in a tender
offer or exchange offer made to all of the stockholders of the Corporation
(provided, however, that a Change in Control shall not include any of the
following transactions: (1) any acquisition by or from the Corporation or
any of its subsidiaries, (2) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or any of
its subsidiaries, or (3) any acquisition by any corporation with respect
to which, following such acquisition, more than fifty percent (50%) of the
then outstanding shares of capital stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Corporation Capital Stock and Corporation
Voting Securities immediately prior to such acquisition, in substantially
the same proportion as their ownership immediately prior to such
acquisition of the Outstanding Corporation Capital Stock and Corporation
Voting Securities, as the case may be); or
(ii) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation (a "Business Combination") with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Corporation
Capital Stock and Corporation Voting Securities immediately prior to such
Business Combination will not, following such Business Combination,
beneficially own, directly or indirectly, more than fifty percent (50%)
of, respectively, the then outstanding shares of capital stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from the Business Combination, in substantially the
same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Corporation Capital Stock and Corporation
Voting Securities, as the case may be; or
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<PAGE> 6
(iii) Approval by the stockholders of the Corporation of a sale or
other disposition of all or substantially all of the assets of the
Corporation, other than to a corporation with respect to which, following
such sale or disposition, more than fifty percent (50%) of, respectively,
the then outstanding shares of capital stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in
the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding
Corporation Capital Stock and Corporation Voting Securities immediately
prior to such sale or disposition, in substantially the same proportion as
their ownership immediately prior to such sale or disposition of the
Outstanding Corporation Capital Stock and Corporation Voting Securities,
as the case may be; or
(iv) Approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
8. Amendment or Discontinuance. The Plan may be amended at any time and from
time to time by the Board as the Board shall deem advisable, provided, however,
that (a) no amendment or modification may become effective without approval by
the stockholders of the Corporation if the Corporation, on advice of counsel,
determines that stockholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if the Corporation
determines that stockholder approval is otherwise necessary or desirable; and
(b) Paragraph 3 and subparagraphs 5(a) and 5(d) shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of
1974, as amended, or the rules under either of such laws. Except to the extent
otherwise required by the Corporation's Certificate of Incorporation or the
Corporation's By-Laws, the stockholders shall be deemed to have approved an
amendment or modification to the Plan which is submitted to the stockholders for
approval if and when such amendment or modification is approved at a meeting of
the stockholders by a majority of the voting power of the Voting Stock (all as
defined in the Corporation's Certificate of Incorporation) present in person or
represented by proxy and entitled to vote at such meeting. No amendment of the
Plan shall materially and adversely affect any right of any participant with
respect to any Option theretofore granted without such participant's written
consent.
9. Termination. The Plan shall terminate upon the earlier of the following dates
or events to occur: (a) upon the adoption of a resolution of the Board
terminating the Plan; or (b) June 30, 2002. No termination of the Plan shall
materially and adversely affect any of the rights or obligations of any person,
without his consent, under any Option theretofore granted under the Plan.
June 15, 1998
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Exhibit 10.5
June 16, 1998
Mr. John Rau
President and Chief Executive Officer
Chicago Title and Trust Company
171 North Clark Street
Chicago, Illinois 60601
Dear John:
This letter is to amend and restate the employment agreement between
you and Chicago Title and Trust Company ("CT&T"), a subsidiary of Alleghany
Corporation ("Alleghany"), dated October 22, 1996, in connection with the
pending spin-off by Alleghany of Chicago Title Corporation ("Chicago Title"), a
newly formed holding company for CT&T. As you know, Alleghany intends to
transfer all of the issued and outstanding common stock of CT&T to Chicago Title
and, thereafter, to distribute all of the outstanding common stock of Chicago
Title ("Chicago Title Common Stock"), other than shares of restricted stock
issued to senior management and non-employee directors, to the stockholders of
Alleghany (the "Distribution"). Prior to the transfer of CT&T to Chicago Title,
CT&T will distribute all of the outstanding stock of CT&T's subsidiary Alleghany
Asset Management, Inc., to Alleghany. It is currently expected that three shares
of Chicago Title Common Stock will be distributed in respect of each outstanding
share of common stock of Alleghany ("Alleghany Common Stock"), so that the
exchange ratio (the "Exchange Ratio") for the Distribution will be three to one.
The Distribution will be effective on a distribution or payment date determined
by the Board of Directors of Alleghany and set forth in its declaration of the
Distribution (the "Distribution Date").
1. On January 1, 1997, you commenced employment as President and
Chief Executive Officer of CT&T. Effective as of the Distribution Date, you will
serve as President and Chief Executive Officer of both Chicago Title and CT&T.
The term of your employment hereunder will extend through December 31, 2001,
with automatic annual renewals thereafter for terms of one year each, unless
either you or Chicago Title gives written notice of termination of this
agreement at least nine months prior to the end of the initial term or any
subsequent renewal term.
2. As President and Chief Executive Officer of Chicago Title and
CT&T, you will have general charge, direction and supervision of Chicago Title
and their subsidiaries. You will devote your full time to your duties as
President and Chief Executive Officer of Chicago Title and CT&T and you will
report directly to the Chicago Title Board of Directors.
3. Your annual base salary for calendar year 1998 will be $400,000.
Your annual base salary will be adjusted periodically as recommended by the
Compensation Committee of the Board of Directors of Chicago Title (the
"Compensation Committee").
<PAGE> 2
4. You will participate in Chicago Title's Annual Incentive Plan
with the opportunity to earn each year an annual bonus at a maximum amount equal
to not less than 150% of your base salary. For calendar year 1998, your bonus
opportunity will be an amount equal to 150% of your base salary, with two-thirds
of such bonus opportunity (an amount equal to 100% of your 1998 base salary)
dependent upon the accomplishment of specified corporate financial goals, and
one-third of such bonus opportunity (an amount equal to 50% of your 1998 base
salary) dependent upon the accomplishment of personal objectives, agreed to by
you and the Compensation Committee. The bonus earned in any year will be paid in
a combination of cash and shares of Chicago Title Common Stock, as determined or
directed by the Chicago Title Board of Directors; provided, however, that not
more than 25% of such bonus shall be paid in shares of Chicago Title Common
Stock.
5. As President and Chief Executive Officer of CT&T, you
participated in CT&T's Executive Performance Unit Plan of 1995, pursuant to
which you received 2,500 performance units for the 1995-98 cycle under that plan
and 5,000 performance units for the 1997-2000 cycle under that plan (the "1995
Plan Awards"). In connection with the execution of this amended and restated
employment agreement, you have entered into a 1995 Plan Agreement among you,
CT&T and Chicago Title ("1995 Plan Award Agreement"). Effective on the
Distribution Date, you will have only such rights in respect of the 1995 Plan
Awards as are set forth in the 1995 Plan Award Agreement. You expressly
represent and warrant that you have elected to enter into the 1995 Plan Award
Agreement in consideration of the grant of restricted stock provided for in
paragraph 10 hereof and other valuable consideration provided hereunder and that
you were advised that you had the right to forego said restricted stock and
other consideration and continue your 1995 Plan Awards in accordance with their
terms.
6. You received a restricted stock award of 6,400 shares of
Alleghany common stock (the "Alleghany Restricted Stock") in connection with
your employment as President and Chief Executive Officer of CT&T, of which 2,800
shares vested on January 1, 1997 and the remaining 3,600 shares vest at the rate
of 75 shares per month over the period from January 1997 to December 2000. The
shares of Chicago Title Common Stock which you receive in the Distribution in
respect of your shares of Alleghany Restricted Stock will be similarly
restricted and will vest on the same schedule that your shares of Alleghany
Restricted Stock vest (i.e., assuming that the Distribution occurs in April
1998, and assuming that the Exchange Ratio is three to one, 11,775 of such
shares of Chicago Title Common Stock will be vested immediately and the
remaining shares of Chicago Title Common Stock which you receive in respect of
your shares of Alleghany Restricted Stock will vest at the rate of 225 shares
per month over the period from May 1998 to December 2000). In connection with
the award of Alleghany Restricted Stock made to you in January 1997, you made an
election under Section 83(b) of the Internal Revenue Code, and CT&T made a tax
gross-up payment to you to cover your Federal and state income taxes on the
shares of Alleghany Restricted Stock and the gross-up payment. Neither the
shares of Alleghany Restricted Stock nor the shares of Chicago Title Common
Stock which you receive in respect of your shares of Alleghany Restricted Stock
will be transferable during your employment with CT&T or Chicago Title or for
two years thereafter. In the event of termination of your employment, any
unvested shares of Alleghany Restricted Stock and any unvested shares of Chicago
Title Common Stock distributed in respect thereof will be subject to
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<PAGE> 3
mandatory sale, in the case of unvested shares of Alleghany Restricted Stock, to
Alleghany at $0.66 per share and, in the case of unvested shares of Chicago
Title Common Stock, to Chicago Title at $0.34 per share. Vesting of all of your
shares of Alleghany Restricted Stock and shares of Chicago Title Common Stock
distributed in respect thereof will be accelerated if the Board of Directors of
Chicago Title approves an acquisition of Chicago Title prior to January 1, 2001.
7. You will receive vacation and all other benefits normally
provided to senior executives of CT&T.
8. In connection with your commencement of employment as President
and Chief Executive Officer of CT&T in January 1997, CT&T paid you a
commencement bonus of $360,000 (less applicable tax withholding). CT&T also
reimbursed you for various costs incurred by you in connection with your
relocation from Bloomington to Chicago.
9. In connection with your commencement of employment as President
and Chief Executive Officer of CT&T in January 1997, CT&T granted you a
nontransferable option to purchase an amount of common stock of CT&T equal to
1.0% of the common stock of CT&T outstanding on the date of exercise (the
"Option") for a cash purchase price of $3.5 million. In connection with the
Distribution, on the Distribution Date, Chicago Title will repurchase the Option
from you for a cash purchase price equal to (A)(x) 222,000, which number is
subject to adjustment in the event of a change in the Exchange Ratio, multiplied
by (y) the average of the daily averages of the high and low when-issued or
regular way market prices of Chicago Title Common Stock as reported on the New
York Stock Exchange Composite Tape for the five trading days preceding the
Distribution Date (or, in the event that there is no when-issued or regular way
trading of Chicago Title Common Stock on any day during such five-trading-day
period, for such lesser number of days during such five-trading-day period when
Chicago Title Common Stock is traded), less (B) $3.5 million. Promptly after the
Distribution Date, such cash purchase price shall be recomputed by substituting
for (A)(x) above in the preceding sentence 1% of the outstanding shares of
Chicago Title Common Stock on the first trading day after the Distribution Date
and for (A)(y) above in the preceding sentence the average of the high and low
market prices of Chicago Title Common Stock as reported on the New York Stock
Exchange Composite Tape for the first trading day after the Distribution Date.
If the recomputed purchase price is higher than the first purchase price,
Chicago Title will pay such excess to you and if the recomputed purchase price
is less than the first purchase price, you will pay the difference to Chicago
Title. Chicago Title will deduct from the purchase price for the Option any
taxes or other deductions required by law to be withheld with respect to such
payment or payments. Upon payment to you of the cash purchase price so
determined and any adjustment resulting from the recomputation of such purchase
price, you will have no further rights, and neither Alleghany, Chicago Title nor
CT&T shall have any further obligations to you, in respect of the Option.
10. On the day prior to the Distribution Date, Chicago Title will
grant to you an award of restricted shares of Chicago Title Common Stock in an
amount equal to .5% of the outstanding shares of Chicago Title Common Stock at
the close of business on the Distribution Date (exclusive of shares of
restricted stock issued on or prior to the Distribution Date to you and
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<PAGE> 4
other executives of Chicago Title), plus an amount of restricted shares having a
fair market value of $50,000 on the Distribution Date, pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest (including as to
dividends) on the third anniversary of the Distribution Date. The terms of such
award will be governed by a restricted stock agreement to be entered into by you
and Chicago Title (the "Restricted Stock Agreement") under the 1998 Long-Term
Incentive Plan. In connection with such restricted stock award, on the same date
as the date of the grant of the restricted award, you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes (including the
Medicaid portion of F.I.C.A.) on the restricted stock award and the gross-up
payment in accordance with the terms of the Restricted Stock Agreement.
11. On the day after the Distribution Date, the Compensation
Committee of the Chicago Title Board will consider a recommendation to award you
non-qualified stock options to purchase shares of Chicago Title Common Stock in
an amount equal to .5% of the outstanding shares of Chicago Title Common Stock
at the close of business on the Distribution Date (inclusive of shares of
restricted stock issued on or prior to the Distribution Date to you and other
executives of Chicago Title) pursuant to Chicago Title's 1998 Long-Term
Incentive Plan, the terms of which stock options will be governed by a stock
option agreement to be entered into by you and Chicago Title (the "Stock Option
Agreement") under the 1998 Long-Term Incentive Plan. It is expressly understood
that any such grant, and the terms thereof, shall be at the sole discretion of
said Compensation Committee.
12. You will be entitled to participate in all qualified and
supplemental retirement plans made available by Chicago Title or CT&T in which
you are eligible to participate, including a nonqualified supplemental defined
contribution retirement plan, and you will be credited under such qualified and
non-qualified defined contribution plans and the Executives' Salary Continuation
Plan, for purposes of computing benefits and contributions, with years of
service credit beginning with June 1972 and extending through the period of your
employment with Chicago Title or CT&T.
13. Your employment with Chicago Title and CT&T may be terminated on
or after January 1, 1999 by you or Chicago Title without cause upon 60 days
written notice. However, if Chicago Title terminates your employment without
cause, you will receive severance benefits based upon the remaining term of this
agreement. Such severance benefits will consist of (a) continuation of all
employee benefits for that remaining term, and (b) continuation of your base
salary and annual bonuses for that remaining term, at the rate of your then
current annual base salary and 60% of maximum annual bonus, and (c) not less
than pro rata vesting of all awards under any long-term equity or other
incentive award. If you resign due to a reduction in base salary or a material
reduction in your duties or authority, or if you resign within 90 days after
Chicago Title gives notice of termination under paragraph 1 of this letter, such
resignation will be deemed a termination by Chicago Title without cause. Your
employment may also be terminated for cause (defined as wilful failure to
perform your duties after written notice from the Board of Directors of Chicago
Title, gross misconduct or conviction of a felony involving personal
dishonesty), or disability (inability to perform your duties for 90 or more days
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<PAGE> 5
within any twelve-month period). In the event of termination for cause or
disability or death or voluntary resignation as provided herein, you shall not
be entitled to further compensation except as provided under the terms of the
various incentive and benefit plans in which you participate at the time of
termination.
14. You will not, directly or indirectly through employment or
association with any other person or company, solicit the employment or
engagement of any employees or agents of Chicago Title or any of its
subsidiaries for two years after any termination of your employment and you will
not, at any time, disclose any confidential information of Chicago Title or its
subsidiaries. In addition, you will not compete, directly or indirectly through
employment or association with any other person or company, with the title
insurance business, or title related businesses, of Chicago Title or any of its
subsidiaries for one year after any termination of your employment. However, at
any time following termination by Chicago Title without cause, you may elect to
waive further payment of all severance benefits described in paragraph 13 and,
in return for that waiver, be released from your covenant not to compete.
15. All payments made to you pursuant hereto, including payments
made pursuant to the agreements referred to herein, shall be subject to any
applicable tax withholding.
16. This amended and restated letter agreement shall be effective as
of the Distribution Date and, together with the 1995 Plan Award Agreement, the
Restricted Stock Award Agreement and the Stock Option Agreement, sets forth our
entire agreement with respect to the subject matter hereof, and supersedes all
prior agreements or understandings. In the event of any conflict in the express
terms of this amended and restated letter agreement and any of the other three
agreements referred to in the preceding sentence (or any other agreement or
arrangement contemplated thereby), the terms of this amended and restated letter
agreement shall control.
-5-
<PAGE> 6
If the foregoing is consistent with your understanding, please
countersign the enclosed copy of this letter and return it to me.
Sincerely,
CHICAGO TITLE CORPORATION
By /s/ Peter R. Sismondo
-----------------------------------
Peter R. Sismondo
Executive Vice President
CHICAGO TITLE AND TRUST
COMPANY
By /s/ Paul T. Sands, Jr.
-----------------------------------
Paul T. Sands, Jr.
Executive Vice President, General
Counsel and Secretary
Accepted and agreed to
this 16th day of June, 1998
/s/ John Rau
-----------------------------
John Rau
-6-
<PAGE> 1
Exhibit 10.6(a)
June 16, 1998
Mr. John Rau
President and Chief Executive Officer
Chicago Title and Trust Company
171 North Clark Street
Chicago, Illinois 60601
Dear John:
This letter agreement (the "1995 Plan Award Agreement") is to set
forth our agreement regarding the disposition of the 2,500 performance units for
the 1995-1998 cycle (the "First Cycle Units") and the 5,000 performance units
for the 1997-2000 cycle (the "Second Cycle Units") previously awarded to you
pursuant to Chicago Title and Trust Company's 1995 Performance Unit Plan (the
"1995 Plan"). As you know, Alleghany Corporation ("Alleghany") intends to
transfer all of the issued and outstanding common stock of Chicago Title and
Trust Company ("CT&T") to Chicago Title Corporation, a newly formed holding
company for CT&T ("Chicago Title"), and, thereafter, to distribute all of the
outstanding common stock of Chicago Title ("Chicago Title Common Stock"), other
than shares of restricted stock issued to senior management and non-employee
directors, to the stockholders of Alleghany (the "Distribution"). Prior to the
transfer of CT&T to Chicago Title, CT&T will distribute all of the outstanding
stock of CT&T's subsidiary Alleghany Asset Management, Inc. ("AAM"), to
Alleghany. The Distribution will be effective on June 17, 1998 as determined by
the Board of Directors of Alleghany and set forth in its declaration of the
Distribution (the "Distribution Date").
A. Amount and Timing of Payout
1. With regard to your Second Cycle Units, such Units shall be
cancelled on the Distribution Date and no payments shall thereafter be payable
in respect thereof.
2. In computing benefits payable in respect of your First Cycle
Units, subject to Paragraph B.1. hereof, benefits will be calculated in the
manner set forth in Sections 6 and 13 of the 1995 Plan, except that, for 1998,
benefits will be calculated on the assumption that AAM had remained a subsidiary
of CT&T throughout 1998 and that AAM had achieved 100% of its post-separation
planned results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e.,
benefits will take into account (x) actual CT&T (or Chicago Title, after it
becomes the parent of CT&T) results through December 31, 1998, and (y) to the
extent that AAM results are not included in subparagraph (x) above, AAM planned
results for such portions of 1998 during which AAM is not a subsidiary of CT&T).
No values will be calculated and no benefits will be accrued for periods
subsequent to December 31, 1998.
3. The payout in respect of your First Cycle Units will be made in
the form of cash.
4. In determining the amount of the payout in respect of your First
Cycle Units, you shall be entitled to the excess of the value on the
Distribution Date of the shares of
<PAGE> 2
common stock of Alleghany ("Alleghany Common Stock") that you were required to
purchase, or that you elected to purchase, in accordance with the terms of the
1995 Plan over the purchase price therefor as provided in the 1995 Plan. Such
value on the Distribution Date will be based upon the average of the daily
averages of the high and low sales prices of Alleghany Common Stock as reported
on the New York Stock Exchange Composite Tape for the five trading days
preceding the Distribution Date (or, in the event that there is no trading of
Alleghany Common Stock on any day during such five-trading-day period, for such
lesser number of days within such five-trading-day period that Alleghany Common
Stock is traded). For purposes of the valuation of Alleghany Common Stock in the
manner described in the preceding sentence, regular way prices (i.e., with due
bills for the shares of Chicago Title Common Stock to be distributed in respect
of a share of Alleghany Common Stock) shall be used or, in the absence of such
regular way trading on any day during such five-trading-day period, the
valuation of Alleghany Common Stock on such day shall be an amount equal to the
sum of (a) the average of the high and low ex-distribution or when-issued sales
prices of Alleghany Common Stock as reported on the New York Stock Exchange
Composite Tape on such date, plus (b) the average of the high and low
when-issued or regular way sales prices of Chicago Title Common Stock as
reported on the New York Stock Exchange Composite Tape on such date.
5. Distribution of the payout in respect of your First Cycle Units
will be made during the first calendar quarter of 1999 as soon as reasonably
practicable after the completion of 1998 audited financial statements of Chicago
Title. As a condition to your right to receive any such payout, you must be an
employee of Chicago Title or one of its subsidiaries on the date of the payout;
provided, however, that, in the event of death, Total Disability (as defined in
the Chicago Title and Trust Company Pension Plan, as amended from time to time),
or normal retirement after age 55 (each a "Termination Event") prior to the date
of the payout, you shall be entitled to a payout of an amount determined by
multiplying the payout to which you would have been entitled hereunder absent a
Termination Event by a fraction the numerator of which is the number of whole
months between January 1, 1995 and the Termination Event (but not more than 48)
and the denominator of which is 48.
6. Examples of the valuation of your First Cycle Units and the
fulfillment of the options pursuant thereto are set forth in Exhibit A attached
hereto.
B. Other
1. For purposes of computation of benefits, references in the 1995
Plan to "dividends paid to Alleghany" shall be deemed to include cash dividends
paid by Chicago Title to its stockholders as well as cash dividends paid to
Alleghany by CT&T or Chicago Title prior to the Distribution, and references to
"approval by Alleghany" shall be deemed to mean approval by Alleghany or by the
Compensation Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company"
shall be deemed replaced by reference to the Compensation Committee of the Board
of Directors of Chicago Title and references in the 1995 Plan to administration
by "the Vice Chairman of the Company" shall be deemed replaced by references to
the Chief Executive Officer of Chicago Title.
-2-
<PAGE> 3
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G.,
Sections 8 through 11, and Sections 13 and 14, the terms of which shall remain
in effect as modified by the provisions set forth in this 1995 Plan Award
Agreement, the provisions of the 1995 Plan are of no further force and effect
with respect to the First Cycle Units previously awarded to you.
4. Effective on the Distribution Date, you will only have such
rights in respect of the First Cycle Units and Second Cycle Units as are set
forth in this 1995 Plan Award Agreement. You expressly represent and warrant
that you have elected to enter into this 1995 Plan Award Agreement in
consideration of the grant of restricted stock provided for in the amended and
restated letter agreement which amends and restates the employment agreement
between you and CT&T and other valuable consideration provided thereunder and
hereunder and that you were advised that you had the right (i) to forego said
restricted stock and other consideration and (ii) to continue your First Cycle
Units and Second Cycle Units in accordance with their terms. Accordingly, you
agree that your entering into this 1995 Plan Award Agreement shall not be deemed
to constitute a termination of the 1995 Plan.
If the foregoing is consistent with your understanding, please
countersign the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ Peter R. Sismondo
-----------------------------------
Peter R. Sismondo
Executive Vice President
CHICAGO TITLE AND TRUST
COMPANY
By /s/ Paul T. Sands, Jr.
-----------------------------------
Paul T. Sands, Jr.
Executive Vice President, General
Counsel and Secretary
Accepted and agreed to
this 16th day of June, 1998
/s/ John Rau
- ----------------------------
John Rau
-3-
<PAGE> 1
Exhibit 10.6(b)
[LETTERHEAD OF CHICAGO TITLE AND TRUST COMPANY]
June 16, 1998
Mr. Thomas Hodges
Chicago Title Insurance Company
171 North Clark Street
MLC 32CA
Chicago, IL 60601
Dear Tom:
This letter agreement (the "1995 Plan Award Agreement") is to set forth
our agreement regarding the disposition of the 500 performance units for the
1995-1998 cycle (the "First Cycle Units") and the 1,300 performance units for
the 1997-2000 cycle (the "Second Cycle Units") previously awarded to you
pursuant to Chicago Title and Trust Company's 1995 Performance Unit Plan (the
"1995 Plan"). As you know, Alleghany Corporation ("Alleghany") intends to
transfer all of the issued and outstanding common stock of Chicago Title and
Trust Company ("CT&T") to Chicago Title Corporation, a newly formed holding
company for CT&T ("Chicago Title"), and, thereafter, to distribute all of the
outstanding common stock of Chicago Title ("Chicago Title Common Stock"), other
than shares of restricted stock issued to senior management and non-employee
directors, to the stockholders of Alleghany (the "Distribution"). Prior to the
transfer of CT&T to Chicago Title, CT&T will distribute all of the outstanding
stock of CT&T's subsidiary Alleghany Asset Management, Inc. ("AAM"), to
Alleghany. The Distribution will be effective on June 17, 1998 as determined by
the Board of Directors of Alleghany and set forth in its declaration of the
Distribution (the "Distribution Date").
A. Additional Incentive Awards
1. On the Distribution Date, Chicago Title will grant to you an award of
30,000 restricted shares of Chicago Title Common Stock pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest as to 50% on the second
anniversary of the Distribution Date and 50% on the third anniversary of the
Distribution Date. The terms of such award will be governed by a restricted
stock agreement to be entered into by you and Chicago Title (the "Restricted
Stock Agreement") under the 1998 Long-Term Incentive Plan. In connection with
such restricted stock award, on the Distribution Date you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes
<PAGE> 2
(including the Medicaid portion of F.I.C.A.) on the restricted stock award and
the gross-up payment.
2. On the day after the Distribution Date, the Compensation Committee of
the Chicago Title Board will be asked to consider a recommendation that you be
awarded non-qualified stock options to purchase 30,000 shares of Chicago Title
Common Stock pursuant to Chicago Title's 1998 Long-Term Incentive Plan, the
terms of which stock options will be governed by a stock option agreement to be
entered into by you and Chicago Title (the "Stock Option Agreement") under the
1998 Long-Term Incentive Plan. It is expressly understood that any such grant,
and the terms thereof, shall be at the sole discretion of the Compensation
Committee.
3. Effective on the Distribution Date, you will only have such rights in
respect of the First Cycle Units and the Second Cycle Units as are set forth in
this 1995 Plan Award Agreement. You expressly represent and warrant that you
have elected to enter into this 1995 Plan Award Agreement in consideration of
the grant of restricted stock provided for in Paragraph A.1. above and other
valuable consideration provided hereunder and that you were advised that you had
the right (i) to forego said restricted stock and other consideration and (ii)
to continue your First Cycle Units and Second Cycle Units in accordance with
their terms. Accordingly, you agree that your entering into this 1995 Plan Award
Agreement shall not be deemed to constitute a termination of the 1995 Plan.
B. First Cycle Units and Second Cycle Units
1. The values of both your First Cycle Units and your Second Cycle Units
will be fixed at year-end 1998. In computing benefits payable both in respect of
your First Cycle Units and in respect of your Second Cycle Units, subject to
paragraph D.1. hereof, benefits will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998 and (y) to the extent that AAM
results are not included in subparagraph (x) above, AAM planned results for such
portions of 1998 during which AAM is not a subsidiary of CT&T). No values will
be calculated and no benefits will be accrued for periods subsequent to December
31, 1998.
C. Manner of Payment
1. All payouts in respect of your First Cycle Units and in respect of your
Second Cycle Units will be made in the form of cash.
2. In determining the amounts of your payouts in respect of your First
Cycle Units and in respect of your Second Cycle Units, you shall be entitled to
the excess of the value on the Distribution Date of the shares of common stock
of Alleghany ("Alleghany Common Stock") that you were required to purchase, or
that you elected to purchase, in accordance with the terms of the 1995 Plan over
the purchase price therefor as provided in the 1995 Plan. Such value on the
2
<PAGE> 3
Distribution Date will be based upon the average of the daily averages of the
high and low sales prices of Alleghany Common Stock as reported on the New York
Stock Exchange Composite Tape for the five trading days preceding the
Distribution Date (or, in the event that there is no trading of Alleghany Common
Stock on any day during such five-trading-day period, for such lesser number of
days within such five-trading-day period that Alleghany Common Stock is traded).
For purposes of the valuation of Alleghany Common Stock in the manner described
in the preceding sentence, regular way prices (i.e., with due bills for the
shares of Chicago Title Common Stock to be distributed in respect of a share of
Alleghany Common Stock) shall be used or, in the absence of such regular way
trading on any day during such five-trading-day period, the valuation of
Alleghany Common Stock on such day shall be an amount equal to the sum of (a)
the average of the high and low ex-distribution or when-issued sales prices of
Alleghany Common Stock as reported on the New York Stock Exchange Composite Tape
on such date, plus (b) the average of the high and low when-issued or regular
way sales prices of Chicago Title Common Stock as reported on the New York Stock
Exchange Composite Tape on such date.
3. Distribution of payouts in respect of your First Cycle Units will be
made during the first calendar quarter of 1999 as soon as reasonably practicable
after completion of 1998 audited financial statements of Chicago Title, and
distribution of payouts in respect of your Second Cycle Units will be made
during the first calendar quarter of 2000. As a condition to your right to
receive any such payout, you must be an employee of Chicago Title or one of its
subsidiaries on the date of the payout; provided, however, that (a) with respect
to your First Cycle Units, in the event of death, Total Disability (as defined
in the Chicago Title and Trust Company Pension Plan, as amended from time to
time), or normal retirement after age 55 (each a "Termination Event") prior to
the date of the payout, you shall be entitled to a payout of an amount
determined by multiplying the payout to which you would have been entitled
hereunder absent a Termination Event by a fraction the numerator of which is the
number of whole months between January 1, 1995 and the Termination Event (but
not more than 48) and the denominator of which is 48; and (b) with respect to
your Second Cycle Units, in the event of a Termination Event prior to the date
of payout, you shall be entitled to a payout of an amount determined by
multiplying the payout to which you would have been entitled hereunder absent a
Termination Event by a fraction the numerator of which is the number of whole
months between January 1, 1997 and the Termination Event (but not more than 24)
and the denominator of which is 24.
4. Examples of the valuation of your First Cycle Units and Second Cycle
Units and the fulfillment of the options pursuant thereto are set forth in
Exhibit A attached hereto.
D. Other
1. For purposes of computation of benefits, references in the 1995 Plan to
"dividends paid to Alleghany" shall be deemed to include cash dividends paid by
Chicago Title to its stockholders as well as cash dividends paid to Alleghany by
CT&T or Chicago Title prior to the Distribution, and references to "approval by
Alleghany" shall be deemed to mean approval by Alleghany or by the Compensation
Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company" shall be
deemed replaced by reference to the Compensation Committee of the Board of
Directors of Chicago Title
3
<PAGE> 4
and references in the 1995 Plan to administration by "the Vice Chairman of the
Company" shall be deemed replaced by references to the Chief Executive Officer
of Chicago Title.
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G., Sections
8 through 11, and Sections 13 and 14, the terms of which shall remain in effect
as modified by the provisions set forth in this 1995 Plan Award Agreement, the
provisions of the 1995 Plan are of no further force and effect with respect to
the First Cycle Units and the Second Cycle Units previously awarded to you.
4. All payments made to you pursuant hereto, including payments made
pursuant to agreements referred to herein, shall be subject to any applicable
tax withholding.
If the foregoing is consistent with your understanding, please countersign
the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ John Rau
------------------------------
CHICAGO TITLE AND TRUST COMPANY
By /s/ Paul T. Sands, Jr.
------------------------------
Accepted and agreed to
this 15th day of
June, 1998
/s/ Thomas Hodges
- --------------------------------
Thomas Hodges
4
<PAGE> 5
EXHIBIT A
1995 PLAN AWARD AGREEMENT -- EXECUTIVES
Participant: T. Hodges
------------------- Page 1 of 4
1) If you accept the terms specified in the 1995 Plan Award Agreement:
- -------------------------------------------------------------------------------
PLAN INFORMATION
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
--------------------------------
1995 1997
--------------- ----------------
<S> <C> <C>
**Estimated Unit Value: $397.22 $330.33
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Est. Market Price of Alleghany Stock on Dist. Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
</TABLE>
- -------------------------------------------------------------------------------
ESTIMATED PARTICIPANT VALUE
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
--------------------------------
1995 1997
----------------- --------------
<S> <C> <C>
Number of Units Issued: 500.00 1,300.00
Estimated Value of Units (Unit Value x # of Units) $198,610.00 $429,429.00
Estimated 25% Mandatory Stock Dollars: $49,652.50 $107,357.25
Early Stock Election Made in Year of Unit Award: 0.00% 0.00%
Estimated Available Dollars for Early Stock Election: $0.00 $0.00
Estimated Total Dollars for Stock:
(Mandatory + Early Stock Election): $49,652.50 $107,357.25
Mandatory/Early Election # of Shares Available: 346.52 528.41
Estimated Stock Appreciation on # of Shares Available: $71,629.15 $77,586.44
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $270,239.15 $507,015.44
PLUS:
</TABLE>
- ---------------------------
STOCK OPTION AWARD
- ---------------------------
<TABLE>
<CAPTION>
1998 Award
----------------------
<S> <C> <C>
Non-Qualified Stock Options to Purchase # of
Shares of Chicago Title Corporation Common Stock: 30,000
Estimated Range of Values of Each Stock Option
Assuming a Stock Price of $35 on the Grant Date: $6.00- $7.00
Estimated Range of the Total Value
of your Stock Option Award: $180,000.00 $210,000.00
PLUS:
- ---------------------------
RESTRICTED STOCK AWARD
- ---------------------------
1998 Award
----------------------
# of Restricted Shares of
Chicago Title Corporation Common Stock: 30,000
Estimated Market Value of Each Share: $35.00
Estimated Value of Restricted Stock Award: $1,050,000.00
</TABLE>
<PAGE> 6
EXHIBIT A
1995 PLAN AWARD AGREEMENT -- EXECUTIVES
1) IF YOU ACCEPT THE TERMS SPECIFIED IN THE 1995 PLAN AWARD AGREEMENT
PAGE 2 OF 4
CALCULATION OF UNIT VALUES:
The Estimated Unit Values of units issued in 1995 ("First
Cycle Units") and in 1997 ("Second Cycle Units") as shown in the illustration of
the calculation of your "Estimated Participant Value" on Page 1 of 4 of this
Exhibit A were calculated based on the assumption that the Distribution Date of
Chicago Title Common Stock had occurred as of April 30, 1998 (the assumed
separation date). Actual Unit Values used to determine cash payouts under the
Plan, in accordance with the "1995 Plan Award Agreement", will be calculated
using actual financial results of CT&T through the actual separation date, as
follows:
First Cycle Units and Second Cycle Units
The values of both your First Cycle Units and your Second Cycle Units will be
fixed at year-end 1998, and benefits will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998, and (y) to the extent that
AAM results are not included in subparagraph (x) above, AAM planned results for
such portions of 1998 during which AAM is not a subsidiary of CT&T). No values
will be calculated and no benefits will be accrued for periods subsequent to
December 31, 1998.
VALUE OF STOCK OPTIONS:
The fair value of a stock option award can be estimated using an option-pricing
model that considers certain variables and assumptions. Over the years, a
number of mathematical models for estimating the fair value of options have
been developed. Among the most commonly used methodologies is the Black-Sholes
model. This model says the expected value of an option depends on six factors:
(1) the market price of the underlying stock at the grant date; (2) the
exercise price of the option; (3) the dividend yield of the underlying stock;
(4) the length of the option term; (5) volatility of the underlying stock; and,
(6) the "risk-free" interest rate.
The Estimated Range of Values of Each Stock Option shown on Page 1 of 4 of this
Exhibit A was determined using the Black-Sholes model, incorporating assumptions
about the six factors referred to above as they relate to Chicago Title
Corporation. Among the assumptions used were a $35 market price for a share of
Chicago Title Corporation stock on the grant date and an average option duration
of 6 years. Changes in any of the six assumptions will result in a different
estimated value. The Black-Sholes model produced an estimated option value equal
to 20%-23.3% of the estimated market value of Chicago Title Corporation stock as
of the spin-off.
<PAGE> 7
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
PARTICIPANT: T. HODGES PAGE 3 OF 4
2) IF YOU DO NOT ACCEPT THE TERMS SPECIFIED IN THE 1995 PLAN AWARD AGREEMENT:
PLAN INFORMATION
<TABLE>
<CAPTION>
Units Issued in:
-----------------------
1995 1997
-------- --------
<S> <C> <C>
**Estimated Unit Value: $360.97 $308.82
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Estimated Market Price of Alleghany Stock
on Distribution Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
</TABLE>
ESTIMATED PARTICIPANT VALUE
<TABLE>
<CAPTION>
Units Issued in:
------------------------------
1995 1997
-------- --------
<S> <C> <C>
Number of Units Issued: 500.00 1,300.00
Estimated Value of Units (Unit Value x # of Units): $180,485.00 $401,466.00
Estimated 25% Mandatory Stock Dollars: $45,121.25 $100,366.50
Early Stock Election Made in Year of Unit Award: 0.00% 0.00%
Estimated Available Dollars for Early Stock Election: $0.00 $0.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $45,121.25 $100,366.50
Mandatory/Early Election # of Shares Available: 314.89 494.00
Estimated Stock Appreciation on # of Shares Available: $65,090.91 $72,534.02
ESTIMATED TOTAL CASH PAYMENT
(ESTIMATED VALUE OF UNITS + EST. STOCK APPREC.): $245,575.91 $474,000.02
</TABLE>
<PAGE> 8
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
2) IF YOU DO NOT ACCEPT THE TERMS SPECIFIED IN THE 1995 PLAN AWARD AGREEMENT
PAGE 4 of 4
- -------------------
CALCULATION OF UNIT
VALUES:
- -------------------
The ESTIMATED UNIT VALUES of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 3 of 4 of this Exhibit A were
calculated based on the assumption that the DISTRIBUTION DATE of Chicago Title
Common Stock had occurred as of APRIL 30, 1998 (THE ASSUMED SEPARATION DATE).
ACTUAL UNIT VALUES used to determine cash payouts under the Plan, in the event
that you DO NOT accept the terms specified in the "1995 Plan Award Agreement",
will be calculated using actual financial results of CT&T through the ACTUAL
SEPARATION DATE, as follows:
First Cycle Units
The value of First Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated excluding AAM results after the separation date. That is, actual
Chicago Title (excluding AAM) results will be used in the calculation for the
post-separation portion of 1998.
Second Cycle Units
The value of Second Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, 1999 and 2000,
benefits will be calculated excluding AAM results after the separation date.
That is, actual Chicago Title (excluding AAM) results will be used in the
calculation for the post-separation portion of 1998 and calendar years 1999 and
2000.
<PAGE> 1
Exhibit 10.6(c)
[LETTERHEAD OF CHICAGO TITLE AND TRUST COMPANY]
June 16, 1998
Mr. Michael Keller
Chicago Title Insurance Company
171 North Clark Street
MLC 32RS
Chicago, IL 60601
Dear Mike:
This letter agreement (the "1995 Plan Award Agreement") is to set forth
our agreement regarding the disposition of the 750 performance units for the
1995-1998 cycle (the "First Cycle Units") and the 1,500 performance units for
the 1997-2000 cycle (the "Second Cycle Units") previously awarded to you
pursuant to Chicago Title and Trust Company's 1995 Performance Unit Plan (the
"1995 Plan"). As you know, Alleghany Corporation ("Alleghany") intends to
transfer all of the issued and outstanding common stock of Chicago Title and
Trust Company ("CT&T") to Chicago Title Corporation, a newly formed holding
company for CT&T ("Chicago Title"), and, thereafter, to distribute all of the
outstanding common stock of Chicago Title ("Chicago Title Common Stock"), other
than shares of restricted stock issued to senior management and non-employee
directors, to the stockholders of Alleghany (the "Distribution"). Prior to the
transfer of CT&T to Chicago Title, CT&T will distribute all of the outstanding
stock of CT&T's subsidiary Alleghany Asset Management, Inc. ("AAM"), to
Alleghany. The Distribution will be effective on June 17, 1998 as determined by
the Board of Directors of Alleghany and set forth in its declaration of the
Distribution (the "Distribution Date").
A. Additional Incentive Awards
1. On the Distribution Date, Chicago Title will grant to you an award of
30,000 restricted shares of Chicago Title Common Stock pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest as to 50% on the second
anniversary of the Distribution Date and 50% on the third anniversary of the
Distribution Date. The terms of such award will be governed by a restricted
stock agreement to be entered into by you and Chicago Title (the "Restricted
Stock Agreement") under the 1998 Long-Term Incentive Plan. In connection with
such restricted stock award, on the Distribution Date you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes
<PAGE> 2
(including the Medicaid portion of F.I.C.A.) on the restricted stock award and
the gross-up payment.
2. On the day after the Distribution Date, the Compensation Committee of
the Chicago Title Board will be asked to consider a recommendation that you be
awarded non-qualified stock options to purchase 30,000 shares of Chicago Title
Common Stock pursuant to Chicago Title's 1998 Long-Term Incentive Plan, the
terms of which stock options will be governed by a stock option agreement to be
entered into by you and Chicago Title (the "Stock Option Agreement") under the
1998 Long-Term Incentive Plan. It is expressly understood that any such grant,
and the terms thereof, shall be at the sole discretion of the Compensation
Committee.
3. Effective on the Distribution Date, you will only have such rights in
respect of the First Cycle Units and the Second Cycle Units as are set forth in
this 1995 Plan Award Agreement. You expressly represent and warrant that you
have elected to enter into this 1995 Plan Award Agreement in consideration of
the grant of restricted stock provided for in Paragraph A.1. above and other
valuable consideration provided hereunder and that you were advised that you had
the right (i) to forego said restricted stock and other consideration and (ii)
to continue your First Cycle Units and Second Cycle Units in accordance with
their terms. Accordingly, you agree that your entering into this 1995 Plan Award
Agreement shall not be deemed to constitute a termination of the 1995 Plan.
B. First Cycle Units and Second Cycle Units
1. The values of both your First Cycle Units and your Second Cycle Units
will be fixed at year-end 1998. In computing benefits payable both in respect of
your First Cycle Units and in respect of your Second Cycle Units, subject to
paragraph D.1. hereof, benefits will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998 and (y) to the extent that AAM
results are not included in subparagraph (x) above, AAM planned results for such
portions of 1998 during which AAM is not a subsidiary of CT&T). No values will
be calculated and no benefits will be accrued for periods subsequent to December
31, 1998.
C. Manner of Payment
1. All payouts in respect of your First Cycle Units and in respect of your
Second Cycle Units will be made in the form of cash.
2. In determining the amounts of your payouts in respect of your First
Cycle Units and in respect of your Second Cycle Units, you shall be entitled to
the excess of the value on the Distribution Date of the shares of common stock
of Alleghany ("Alleghany Common Stock") that you were required to purchase, or
that you elected to purchase, in accordance with the terms of the 1995 Plan over
the purchase price therefor as provided in the 1995 Plan. Such value on the
2
<PAGE> 3
Distribution Date will be based upon the average of the daily averages of the
high and low sales prices of Alleghany Common Stock as reported on the New York
Stock Exchange Composite Tape for the five trading days preceding the
Distribution Date (or, in the event that there is no trading of Alleghany Common
Stock on any day during such five-trading-day period, for such lesser number of
days within such five-trading-day period that Alleghany Common Stock is traded).
For purposes of the valuation of Alleghany Common Stock in the manner described
in the preceding sentence, regular way prices (i.e., with due bills for the
shares of Chicago Title Common Stock to be distributed in respect of a share of
Alleghany Common Stock) shall be used or, in the absence of such regular way
trading on any day during such five-trading-day period, the valuation of
Alleghany Common Stock on such day shall be an amount equal to the sum of (a)
the average of the high and low ex-distribution or when-issued sales prices of
Alleghany Common Stock as reported on the New York Stock Exchange Composite Tape
on such date, plus (b) the average of the high and low when-issued or regular
way sales prices of Chicago Title Common Stock as reported on the New York Stock
Exchange Composite Tape on such date.
3. Distribution of payouts in respect of your First Cycle Units will be
made during the first calendar quarter of 1999 as soon as reasonably practicable
after completion of 1998 audited financial statements of Chicago Title, and
distribution of payouts in respect of your Second Cycle Units will be made
during the first calendar quarter of 2000. As a condition to your right to
receive any such payout, you must be an employee of Chicago Title or one of its
subsidiaries on the date of the payout; provided, however, that (a) with respect
to your First Cycle Units, in the event of death, Total Disability (as defined
in the Chicago Title and Trust Company Pension Plan, as amended from time to
time), or normal retirement after age 55 (each a "Termination Event") prior to
the date of the payout, you shall be entitled to a payout of an amount
determined by multiplying the payout to which you would have been entitled
hereunder absent a Termination Event by a fraction the numerator of which is the
number of whole months between January 1, 1995 and the Termination Event (but
not more than 48) and the denominator of which is 48; and (b) with respect to
your Second Cycle Units, in the event of a Termination Event prior to the date
of payout, you shall be entitled to a payout of an amount determined by
multiplying the payout to which you would have been entitled hereunder absent a
Termination Event by a fraction the numerator of which is the number of whole
months between January 1, 1997 and the Termination Event (but not more than 24)
and the denominator of which is 24.
4. Examples of the valuation of your First Cycle Units and Second Cycle
Units and the fulfillment of the options pursuant thereto are set forth in
Exhibit A attached hereto.
D. Other
1. For purposes of computation of benefits, references in the 1995 Plan to
"dividends paid to Alleghany" shall be deemed to include cash dividends paid by
Chicago Title to its stockholders as well as cash dividends paid to Alleghany by
CT&T or Chicago Title prior to the Distribution, and references to "approval by
Alleghany" shall be deemed to mean approval by Alleghany or by the Compensation
Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company" shall be
deemed replaced by reference to the Compensation Committee of the Board of
Directors of Chicago Title
3
<PAGE> 4
and references in the 1995 Plan to administration by "the Vice Chairman of the
Company" shall be deemed replaced by references to the Chief Executive Officer
of Chicago Title.
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G., Sections
8 through 11, and Sections 13 and 14, the terms of which shall remain in effect
as modified by the provisions set forth in this 1995 Plan Award Agreement, the
provisions of the 1995 Plan are of no further force and effect with respect to
the First Cycle Units and the Second Cycle Units previously awarded to you.
4. All payments made to you pursuant hereto, including payments made
pursuant to agreements referred to herein, shall be subject to any applicable
tax withholding.
If the foregoing is consistent with your understanding, please countersign
the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ John Rau
------------------------------
CHICAGO TITLE AND TRUST COMPANY
By /s/ Paul T. Sands, Jr.
------------------------------
Accepted and agreed to
this 8th day of
June, 1998
/s/ Michael Keller
- --------------------------------
Michael Keller
4
<PAGE> 5
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: M. Keller Page 1 of 4
1) If you accept the terms specified in the 1995 Plan Award Agreement:
- -------------------------------------------------------------------------------
- ----------------
Plan Information
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
----------------------
1995 1997
----------- ---------
<S> <C> <C>
** Estimated Unit Value: $397.22 $330.33
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Est. Market Price of Alleghany Stock on Dist. Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
----------- -----------
1995 1997
----------- -----------
<S> <C> <C>
Number of Units Issued: 750.00 1,500.00
Estimated Value of Units (Unit Value x # of Units): $297,915.00 $495,495.00
Estimated 25% Mandatory Stock Dollars: $74,478.75 $123,873.75
Early Stock Election Made in Year of Unit Award: 0.00% 0.00%
Estimated Available Dollars for Early Stock Election: $0.00 $0.00
Estimated Total Dollars for Stock:
(Mandatory + Early Stock Election): $74,478.75 $123,873.75
Mandatory/Early Election # of Shares Available: 519.78 609.70
Estimated Stock Appreciation on # of Shares Available: $107,443.72 $89,522.25
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $405,358.72 $585,017.25
</TABLE>
Plus:
- ------------------
Stock Option Award
- ------------------
<TABLE>
<CAPTION>
1998 Award
--------------------
<S> <C> <C>
Non-Qualified Stock Options to Purchase # of
Shares of Chicago Title Corporation Common Stock: 30,000
Estimated Range of Values of Each Stock Option
Assuming a Stock Price of $35 on the Grant Date: $6.00 $7.00
Estimated Range of the Total Value
of your Stock Option Award: $180,000.00 $210,000.00
</TABLE>
Plus:
- ----------------------
Restricted Stock Award
- ----------------------
<TABLE>
<CAPTION>
1998 Award
------------------
<S> <C>
# of Restricted Shares of
Chicago Title Corporation Common Stock: 30,000
Estimated Market Value of Each Share: $35.00
Estimated Market Value of Restricted Stock Award: $1,050,000.00
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 6
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
1) If you accept the terms specified in the 1995 Plan Award Agreement
Page 2 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 1 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
in Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in accordance
with the "1995 Plan Award Agreement", will be calculated using actual financial
results of CT&T through the actual separation date, as follows:
First Cycle Units and Second Cycle Units
The values of both your First Cycle Units and your Second Cycle Units will be
fixed at year-end 1998, and benefits will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998, and (y) to the extent that
AAM results are not included in subparagraph (x) above, AAM planned results for
such portions of 1998 during which AAM is not a subsidiary of CT&T). No values
will be calculated and no benefits will be accrued for periods subsequent to
December 31, 1998.
- -----------------------
Value of Stock Options:
- -----------------------
The fair value of a stock option award can be estimated using an option-pricing
model that considers certain variables and assumptions. Over the years, a number
of mathematical models for estimating the fair value of options have been
developed. Among the most commonly used methodologies is the Black Sholes model.
This model says the expected value of an option depends on six factors: (1) the
market price of the underlying stock at the grant date; (2) the exercise price
of the option; (3) the dividend yield of the underlying stock; (4) the length of
the option term; (5) volatility of the underlying stock; and, (6) the
"risk-free" interest rate.
The Estimated Range of Values of Each Stock Option shown on Page 1 of 4 of this
Exhibit A was determined using the Black-Sholes model, incorporating assumptions
about the six factors referred to above as they relate to Chicago Title
Corporation. Among the assumptions used were a $35 market price for a share of
Chicago Title Corporation stock on the grant date and an average option duration
of 6 years. Changes in any of the six assumptions will result in a different
estimated value. The Black-Sholes model produced an estimated option value equal
to 20% - 23.3% of the estimated market value of Chicago Title Corporation stock
as of the spin-off.
<PAGE> 7
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: M. Keller Page 3 of 4
2) If you do not accept the terms specified in the 1995 Plan Award Agreement:
- --------------------------------------------------------------------------------
- ----------------
Plan Information
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
------------------------
1995 1997
----------- -----------
<S> <C> <C>
** Estimated Unit Value: $360.97 $308.82
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Estimated Market Price of Alleghany Stock
on Distribution Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
------------------------
1995 1997
----------- -----------
<S> <C> <C>
Number of Units Issued: 750.00 1,500.00
Estimated Value of Units (Unit Value x # of Units): $270,727.50 $463,230.00
Estimated 25% Mandatory Stock Dollars: $67,681.88 $115,807.50
Early Stock Election Made in Year of Unit Award: 0.00% 0.00%
Estimated Available Dollars for Early Stock Election: $0.00 $0.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $67,681.88 $115,807.50
Mandatory/Early Election # of Shares Available: 472.34 570.00
Estimated Stock Appreciation on # of Shares Available: $97,637.40 $83,693.10
Estimated Total Cash Payment
(Estimated Value of Units + Est Stock Apprec.): $368,364.90 $546,923.l0
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 8
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
2) If you do not accept the terms specified in the 1995 Plan Award Agreement
Page 4 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 3 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in the event
that you do not accept the terms specified in the "1995 Plan Award Agreement",
will be calculated using actual financial results of CT&T through the actual
separation date, as follows:
First Cycle Units
The value of First Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated excluding AAM results after the separation date. That is, actual
Chicago Title (excluding AAM) results will be used in the calculation for the
post-separation portion of 1998.
Second Cycle Units
The value of Second Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, 1999 and 2000,
benefits will be calculated excluding AAM results after the separation date.
That is, actual Chicago Title (excluding AAM) results will be used in the
calculation for the post-separation portion of 1998 and calendar years 1999 and
2000.
<PAGE> 1
Exhibit 10.6(d)
[Letterhead of Chicago Title and Trust Company]
June 16, 1998
Mr. Peter Leemputte
Chicago Title and Trust Company
171 North Clark Street
MLC 32CF
Chicago, IL 60601
Dear Pete:
This letter agreement (the "1995 Plan Award Agreement") is to set forth
our agreement regarding the disposition of the 250 performance units for the
1995-1998 cycle (the "First Cycle Units") and the 750 performance units for the
1997-2000 cycle (the "Second Cycle Units") previously awarded to you pursuant to
Chicago Title and Trust Company's 1995 Performance Unit Plan (the "1995 Plan").
As you know, Alleghany Corporation ("Alleghany") intends to transfer all of the
issued and outstanding common stock of Chicago Title and Trust Company ("CT&T")
to Chicago Title Corporation, a newly formed holding company for CT&T ("Chicago
Title"), and, thereafter, to distribute all of the outstanding common stock of
Chicago Title ("Chicago Title Common Stock"), other than shares of restricted
stock issued to senior management and non-employee directors, to the
stockholders of Alleghany (the "Distribution"). Prior to the transfer of CT&T to
Chicago Title, CT&T will distribute all of the outstanding stock of CT&T's
subsidiary Alleghany Asset Management, Inc. ("AAM"), to Alleghany. The
Distribution will be effective on June 17, 1998 as determined by the Board of
Directors of Alleghany and set forth in its declaration of the Distribution (the
"Distribution Date").
A. Additional Incentive Awards
1. On the Distribution Date, Chicago Title will grant to you an award of
30,000 restricted shares of Chicago Title Common Stock pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest as to 50% on the second
anniversary of the Distribution Date and 50% on the third anniversary of the
Distribution Date. The terms of such award will be governed by a restricted
stock agreement to be entered into by you and Chicago Title (the "Restricted
Stock Agreement") under the 1998 Long-Term Incentive Plan. In connection with
such restricted stock award, on the Distribution Date you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes (including the
Medicaid portion of F.I.C.A.) on the restricted stock award and the gross-up
payment.
<PAGE> 2
(including the Medicaid portion of F.I.C.A.) on the restricted stock award and
the gross-up payment.
2. On the day after the Distribution Date, the Compensation Committee of
the Chicago Title Board will be asked to consider a recommendation that you be
awarded non-qualified stock options to purchase 30,000 shares of Chicago Title
Common Stock pursuant to Chicago Title's 1998 Long-Term Incentive Plan, the
terms of which stock options will be governed by a stock option agreement to be
entered into by you and Chicago Title (the "Stock Option Agreement") under the
1998 Long-Term Incentive Plan. It is expressly understood that any such grant,
and the terms thereof, shall be at the sole discretion of the Compensation
Committee.
3. Effective on the Distribution Date, you will only have such rights in
respect of the First Cycle Units and the Second Cycle Units as are set forth in
this 1995 Plan Award Agreement. You expressly represent and warrant that you
have elected to enter into this 1995 Plan Award Agreement in consideration of
the grant of restricted stock provided for in Paragraph A.1. above and other
valuable consideration provided hereunder and that you were advised that you had
the right (i) to forego said restricted stock and other consideration and (ii)
to continue your First Cycle Units and Second Cycle Units in accordance with
their terms. Accordingly, you agree that your entering into this 1995 Plan Award
Agreement shall not be deemed to constitute a termination of the 1995 Plan.
B. First Cycle Units and Second Cycle Units
1. The values of both your First Cycle Units and your Second Cycle Units
will be fixed at year-end 1998. In computing benefits payable both in respect of
your First Cycle Units and in respect of your Second Cycle Units, subject to
paragraph D.1. hereof, benefits will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998 and (y) to the extent that AAM
results are not included in subparagraph (x) above, AAM planned results for such
portions of 1998 during which AAM is not a subsidiary of CT&T). No values will
be calculated and no benefits will be accrued for periods subsequent to December
31, 1998.
C. Manner of Payment
1. All payouts in respect of your First Cycle Units and in respect of your
Second Cycle Units will be made in the form of cash.
2. In determining the amounts of your payouts in respect of your First
Cycle Units and in respect of your Second Cycle Units, you shall be entitled to
the excess of the value on the Distribution Date of the shares of common stock
of Alleghany ("Alleghany Common Stock") that you were required to purchase, or
that you elected to purchase, in accordance with the terms of the 1995 Plan over
the purchase price therefor as provided in the 1995 Plan. Such value on the
2
<PAGE> 3
Distribution Date will be based upon the average of the daily averages of the
high and low sales prices of Alleghany Common Stock as reported on the New York
Stock Exchange Composite Tape for the five trading days preceding the
Distribution Date (or, in the event that there is no trading of Alleghany Common
Stock on any day during such five-trading-day period, for such lesser number of
days within such five-trading-day period that Alleghany Common Stock is traded).
For purposes of the valuation of Alleghany Common Stock in the manner described
in the preceding sentence, regular way prices (i.e., with due bills for the
shares of Chicago Title Common Stock to be distributed in respect of a share of
Alleghany Common Stock) shall be used or, in the absence of such regular way
trading on any day during such five-trading-day period, the valuation of
Alleghany Common Stock on such day shall be an amount equal to the sum of (a)
the average of the high and low ex-distribution or when-issued sales prices of
Alleghany Common Stock as reported on the New York Stock Exchange Composite Tape
on such date, plus (b) the average of the high and low when-issued or regular
way sales prices of Chicago Title Common Stock as reported on the New York Stock
Exchange Composite Tape on such date.
3. Distribution of payouts in respect of your First Cycle Units will be
made during the first calendar quarter of 1999 as soon as reasonably practicable
after completion of 1998 audited financial statements of Chicago Title, and
distribution of payouts in respect of your Second Cycle Units will be made
during the first calendar quarter of 2000. As a condition to your right to
receive any such payout, you must be an employee of Chicago Title or one of its
subsidiaries on the date of the payout; provided, however, that (a) with respect
to your First Cycle Units, in the event of death, Total Disability (as defined
in the Chicago Title and Trust Company Pension Plan, as amended from time to
time), or normal retirement after age 55 (each a "Termination Event") prior to
the date of the payout, you shall be entitled to a payout of an amount
determined by multiplying the payout to which you would have been entitled
hereunder absent a Termination Event by a fraction the numerator of which is the
number of whole months between January 1, 1995 and the Termination Event (but
not more than 48) and the denominator of which is 48; and (b) with respect to
your Second Cycle Units, in the event of a Termination Event prior to the date
of payout, you shall be entitled to a payout of an amount determined by
multiplying the payout to which you would have been entitled hereunder absent a
Termination Event by a fraction the numerator of which is the number of whole
months between January 1, 1997 and the Termination Event (but not more than 24)
and the denominator of which is 24.
4. Examples of the valuation of your First Cycle Units and Second Cycle
Units and the fulfillment of the options pursuant thereto are set forth in
Exhibit A attached hereto.
D. Other
1. For purposes of computation of benefits, references in the 1995 Plan to
"dividends paid to Alleghany" shall be deemed to include cash dividends paid by
Chicago Title to its stockholders as well as cash dividends paid to Alleghany by
CT&T or Chicago Title prior to the Distribution, and references to "approval by
Alleghany" shall be deemed to mean approval by Alleghany or by the Compensation
Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company" shall be
deemed replaced by reference to the Compensation Committee of the Board of
Directors of Chicago Title
3
<PAGE> 4
and references in the 1995 Plan to administration by "the Vice Chairman of the
Company" shall be deemed replaced by references to the Chief Executive Officer
of Chicago Title.
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G., Sections
8 through 11, and Sections 13 and 14, the terms of which shall remain in effect
as modified by the provisions set forth in this 1995 Plan Award Agreement, the
provisions of the 1995 Plan are of no further force and effect with respect to
the First Cycle Units and the Second Cycle Units previously awarded to you.
4. All payments made to you pursuant hereto, including payments made
pursuant to agreements referred to herein, shall be subject to any applicable
tax withholding.
If the foregoing is consistent with your understanding, please countersign
the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ John Rau
--------------------------
CHICAGO TITLE AND TRUST COMPANY
By /s/ S. La Nette Zimmerman
--------------------------
Accepted and agreed to
this 9th day of
June, 1998
/s/ Peter G. Leemputte
- -----------------------------
Peter Leemputte
4
<PAGE> 5
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: P. Leemputte Page 1 of 4
1) If you accept the terms specified in the 1995 Plan Award Agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- ----------------
Plan Information Units Issued in:
- ---------------- ----------------------
1995 1997
-------- --------
<S> <C> <C>
**Estimated Unit Value: $397.22 $330.33
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.06121 1.02000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Est. Market Price of Alleghany Stock on Dist. Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value Units Issued in:
- --------------------------- ---------------------------
1995 1997
------------ ------------
<S> <C> <C>
Number of Units Issued: 250.00 750.00
Estimated Value of Units (Unit Value x# of Units): $99,305.00 $247,747.50
Estimated 25% Mandatory Stock Dollars: $24,826.25 $61,936.88
Early Stock Election Made in Year of Unit Award: 0.00% 0.00%
Estimated Available Dollars for Early Stock Election: $0.00 $0.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $24,826.25 $61,936.88
Mandatory/Early Election # of Shares Available: 173.26 304.85
Estimated Stock Appreciation on # of Shares Available: $35,814.57 $44,761.13
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $135,119.57 $292,508.63
</TABLE>
Plus:
<TABLE>
<CAPTION>
- ------------------
Stock Option Award
- ------------------ 1998 Award
---------------------------
<S> <C> <C>
Non-Qualified Stock Options to Purchase # of
Shares of Chicago Title Corporation Common Stock: 30,000
Estimated Range of Values of Each Stock Option
Assuming a Stock Price of $35 on the Grant Date: $6.00 - $7.00
Estimated Range of the Total Value
of your Stock Option Award: $180,000.00 $210,000.00
</TABLE>
Plus:
<TABLE>
<CAPTION>
- ----------------------
Restricted Stock Award
- ---------------------- 1998 Award
---------------------------
<S> <C> <C>
# of Restricted Shares of
Chicago Title Corporation Common Stock: 30,000
Estimated Market Value of Each Share: $35.00
Estimated Market Value of Restricted Stock Award: $1,050,000.00
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
1) If you accept the terms specified in the 1995 Plan Award Agreement
Page 2 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 1 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in accordance
with the "1995 Plan Award Agreement", will be calculated using actual financial
results of CT&T through the actual separation date, as follows:
First Cycle Units and Second Cycle Units
The values of both your First Cycle Units and your Second Cycle Units will be
fixed at year-end 1998, and benefits will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998, and (y) to the extent that
AAM results are not included in subparagraph (x) above, AAM planned results for
such portions of 1998 during which AAM is not a subsidiary of CT&T). No values
will be calculated and no benefits will be accrued for periods subsequent to
December 31, 1998.
- -----------------------
Value of Stock Options:
- -----------------------
The fair value of a stock option award can be estimated using an option-pricing
model that considers certain variables and assumptions. Over the years, a number
of mathematical models for estimating the fair value of options have been
developed. Among the most commonly used methodologies in the Black-Sholes model.
This model says the expected value of an option depends on six factors: (1) the
market price of the underlying stock at the grant date; (2) the exercise price
of the option; (3) the dividend yield of the underlying stock; (4) the length of
the option term; (5) volatility of the underlying stock; and (6) the "risk-free"
interest rate.
The Estimated Range of Values of Each Stock Option shown on Page 1 of 4 of this
Exhibit A was determined using the Black-Sholes model, incorporating assumptions
about the six factors referred to above as they relate to Chicago Title
Corporation. Among the assumptions used were a $35 market price for a share of
Chicago Title Corporation stock on the grant date and an average option duration
of 6 years. Changes in any of the six assumptions will result in a different
estimated value. The Black-Sholes model produced an estimated option value equal
to 20% - 23% of the estimated market value of Chicago Title Corporation stock as
of the spin-off.
<PAGE> 7
EXHBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: P. Leemputte Page 3 of 4
1) If you do not accept the terms specified in the 1995 Plan Award Agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- ----------------
Plan Information Units Issued in:
- ---------------- -----------------------
1995 1997
-------- --------
<S> <C> <C>
**Estimated Unit Value: $360.97 $308.82
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Estimated Market Price of Alleghany Stock
on Distribution Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value Units Issued in:
- --------------------------- ---------------------------
1995 1997
------------ ------------
<S> <C> <C>
Number of Units Issued: 250.00 750.00
Estimated Value of Units (Unit Value x # of Units): $90,242.50 $231,615.00
Estimated 25% Mandatory Stock Dollars: $22,560.63 $57,903.75
Early Stock Election Made in Year of Unit Award: 0.00% 0.00%
Estimated Available Dollars for Early Stock Election: $0.00 $0.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $22,560.63 $57,903.75
Mandatory/Early Election # of Shares Available: 157.45 285.00
Estimated Stock Appreciation on # of Shares Available: $32,546.49 $41,846.55
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $122,788.99 $273,461.55
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
2) If you do not accept the terms specified in the 1995 Plan Award Agreement
Page 4 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 3 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in the event
that you do not accept the terms specified in the "1995 Plan Award Agreement",
will be calculated using actual financial results of CT&T through the actual
separation date, as follows:
First Cycle Units
The values of First Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated excluding AAM results after the separation date. That is, actual
Chicago Title (excluding AAM) results will be used in the calculation for the
post-separation portion of 1998.
Second Cycle Units
The values of your Second Cycle Units will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, 1999 and 2000,
benefits will be calculated excluding AAM results after the separation date.
That is, actual Chicago Title (excluding AAM) results will be used in the
calculation for the post-separation portion of 1998 and calendar years 1999 and
2000.
<PAGE> 1
Exhibit 10.6(e)
[Letterhead of Chicago Title and Trust Company]
June 16, 1998
Mr. Paul Sands, Jr.
Chicago Title and Trust Company
171 North Clark Street
MLC 08GC
Chicago, IL 60601
Dear Paul:
This letter agreement (the "1995 Plan Award Agreement") is to set forth
our agreement regarding the disposition of the 1,100 performance units for the
1995-1998 cycle (the "First Cycle Units") and the 1,100 performance units for
the 1997-2000 cycle (the "Second Cycle Units") previously awarded to you
pursuant to Chicago Title and Trust Company's 1995 Performance Unit Plan (the
"1995 Plan"). As you know, Alleghany Corporation ("Alleghany") intends to
transfer all of the issued and outstanding common stock of Chicago Title and
Trust Company ("CT&T") to Chicago Title Corporation, a newly formed holding
company for CT&T ("Chicago Title"), and, thereafter, to distribute all of the
outstanding common stock of Chicago Title ("Chicago Title Common Stock"), other
than shares of restricted stock issued to senior management and non-employee
directors, to the stockholders of Alleghany (the "Distribution"). Prior to the
transfer of CT&T to Chicago Title, CT&T will distribute all of the outstanding
stock of CT&T's subsidiary Alleghany Asset Management, Inc. ("AAM"), to
Alleghany. The Distribution will be effective on June 17, 1998 as determined by
the Board of Directors of Alleghany and set forth in its declaration of the
Distribution (the "Distribution Date").
A. Additional Incentive Awards
1. On the Distribution Date, Chicago Title will grant to you an award of
30,000 restricted shares of Chicago Title Common Stock pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest as to 50% on the second
anniversary of the Distribution Date and 50% on the third anniversary of the
Distribution Date. The terms of such award will be governed by a restricted
stock agreement to be entered into by you and Chicago Title (the "Restricted
Stock Agreement") under the 1998 Long-Term Incentive Plan. In connection with
such restricted stock award, on the Distribution Date you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes
<PAGE> 2
(including the Medicaid portion of F.I.C.A.) on the restricted stock award and
the gross-up payment.
2. On the day after the Distribution Date, the Compensation Committee of
the Chicago Title Board will be asked to consider a recommendation that you be
awarded non-qualified stock options to purchase 30,000 shares of Chicago Title
Common Stock pursuant to Chicago Title's 1998 Long-Term Incentive Plan, the
terms of which stock options will be governed by a stock option agreement to be
entered into by you and Chicago Title (the "Stock Option Agreement") under the
1998 Long-Term Incentive Plan. It is expressly understood that any such grant,
and the terms thereof, shall be at the sole discretion of the Compensation
Committee.
3. Effective on the Distribution Date, you will only have such rights in
respect of the First Cycle Units and the Second Cycle Units as are set forth in
this 1995 Plan Award Agreement. You expressly represent and warrant that you
have elected to enter into this 1995 Plan Award Agreement in consideration of
the grant of restricted stock provided for in Paragraph A.1. above and other
valuable consideration provided hereunder and that you were advised that you had
the right (i) to forego said restricted stock and other consideration and (ii)
to continue your First Cycle Units and Second Cycle Units in accordance with
their terms. Accordingly, you agree that your entering into this 1995 Plan Award
Agreement shall not be deemed to constitute a termination of the 1995 Plan.
B. First Cycle Units and Second Cycle Units
1. The values of both your First Cycle Units and your Second Cycle Units
will be fixed at year-end 1998. In computing benefits payable both in respect of
your First Cycle Units and in respect of your Second Cycle Units, subject to
paragraph D.1. hereof, benefits will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998 and (y) to the extent that AAM
results are not included in subparagraph (x) above, AAM planned results for such
portions of 1998 during which AAM is not a subsidiary of CT&T). No values will
be calculated and no benefits will be accrued for periods subsequent to December
31, 1998.
C. Manner of Payment
1. All payouts in respect of your First Cycle Units and in respect of your
Second Cycle Units will be made in the form of cash.
2. In determining the amounts of your payouts in respect of your First
Cycle Units and in respect of your Second Cycle Units, you shall be entitled to
the excess of the value on the Distribution Date of the shares of common stock
of Alleghany ("Alleghany Common Stock") that you were required to purchase, or
that you elected to purchase, in accordance with the terms of the 1995 Plan over
the purchase price therefor as provided in the 1995 Plan. Such value on the
2
<PAGE> 3
Distribution Date will be based upon the average of the daily averages of the
high and low sales prices of Alleghany Common Stock as reported on the New York
Stock Exchange Composite Tape for the five trading days preceding the
Distribution Date (or, in the event that there is no trading of Alleghany Common
Stock on any day during such five-trading-day period, for such lesser number of
days within such five-trading-day period that Alleghany Common Stock is traded).
For purposes of the valuation of Alleghany Common Stock in the manner described
in the preceding sentence, regular way prices (i.e., with due bills for the
shares of Chicago Title Common Stock to be distributed in respect of a share of
Alleghany Common Stock) shall be used or, in the absence of such regular way
trading on any day during such five-trading-day period, the valuation of
Alleghany Common Stock on such day shall be an amount equal to the sum of (a)
the average of the high and low ex-distribution or when-issued sales prices of
Alleghany Common Stock as reported on the New York Stock Exchange Composite Tape
on such date, plus (b) the average of the high and low when-issued or regular
way sales prices of Chicago Title Common Stock as reported on the New York Stock
Exchange Composite Tape on such date.
3. Distribution of payouts in respect of your First Cycle Units will be
made during the first calendar quarter of 1999 as soon as reasonably practicable
after completion of 1998 audited financial statements of Chicago Title, and
distribution of payouts in respect of your Second Cycle Units will be made
during the first calendar quarter of 2000. As a condition to your right to
receive any such payout, you must be an employee of Chicago Title or one of its
subsidiaries on the date of the payout; provided, however, that (a) with respect
to your First Cycle Units, in the event of death, Total Disability (as defined
in the Chicago Title and Trust Company Pension Plan, as amended from time to
time), or normal retirement after age 55 (each a "Termination Event") prior to
the date of the payout, you shall be entitled to a payout of an amount
determined by multiplying the payout to which you would have been entitled
hereunder absent a Termination Event by a fraction the numerator of which is the
number of whole months between January 1, 1995 and the Termination Event (but
not more than 48) and the denominator of which is 48; and (b) with respect to
your Second Cycle Units, in the event of a Termination Event prior to the date
of payout, you shall be entitled to a payout of an amount determined by
multiplying the payout to which you would have been entitled hereunder absent a
Termination Event by a fraction the numerator of which is the number of whole
months between January 1, 1997 and the Termination Event (but not more than 24)
and the denominator of which is 24.
4. Examples of the valuation of your First Cycle Units and Second Cycle
Units and the fulfillment of the options pursuant thereto are set forth in
Exhibit A attached hereto.
D. Other
1. For purposes of computation of benefits, references in the 1995 Plan to
"dividends paid to Alleghany" shall be deemed to include cash dividends paid by
Chicago Title to its stockholders as well as cash dividends paid to Alleghany by
CT&T or Chicago Title prior to the Distribution, and references to "approval by
Alleghany" shall be deemed to mean approval by Alleghany or by the Compensation
Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company" shall be
deemed replaced by reference to the Compensation Committee of the Board of
Directors of Chicago Title
3
<PAGE> 4
and references in the 1995 Plan to administration by "the Vice Chairman of the
Company" shall be deemed replaced by references to the Chief Executive Officer
of Chicago Title.
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G., Sections
8 through 11, and Sections 13 and 14, the terms of which shall remain in effect
as modified by the provisions set forth in this 1995 Plan Award Agreement, the
provisions of the 1995 Plan are of no further force and effect with respect to
the First Cycle Units and the Second Cycle Units previously awarded to you.
4. All payments made to you pursuant hereto, including payments made
pursuant to agreements referred to herein, shall be subject to any applicable
tax withholding.
If the foregoing is consistent with your understanding, please countersign
the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ John Rau
--------------------------
CHICAGO TITLE AND TRUST COMPANY
By /s/ S. La Nette Zimmerman
--------------------------
Accepted and agreed to
this 10th day of
June, 1998
/s/ Paul Sands, Jr.
- -----------------------------
Paul Sands, Jr.
4
<PAGE> 5
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: P. Sands, Jr. Page 1 of 4
1) If you accept the terms specified in the 1995 Plan Award Agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- ----------------
Plan Information Units Issued in:
- ---------------- ----------------------
1995 1997
-------- --------
<S> <C> <C>
**Estimated Unit Value: $397.22 $330.33
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061206 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Est. Market Price of Alleghany Stock on Dist. Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value Units Issued in:
- --------------------------- ---------------------------
1995 1997
------------ ------------
<S> <C> <C>
Number of Units Issued: 1,100.00 1,100.00
Estimated Value of Units (Unit Value x# of Units): $436,942.00 $363,363.00
Estimated 25% Mandatory Stock Dollars: $109,235.50 $90,840.75
Early Stock Election Made in Year of Unit Award: 0.00% 15.00%
Estimated Available Dollars for Early Stock Election: $0.00 $54,504.45
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $109,235.50 $145,345.20
Mandatory/Early Election # of Shares Available: 762.34 715.39
Estimated Stock Appreciation on # of Shares Available: $157,583.30 $105,040.71
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $594,525.30 $468,403.71
</TABLE>
Plus:
<TABLE>
<CAPTION>
- ------------------
Stock Option Award
- ------------------ 1998 Award
---------------------------
<S> <C> <C>
Non-Qualified Stock Options to Purchase # of
Shares of Chicago Title Corporation Common Stock: 30,000
Estimated Range of Values of Each Stock Option
Assuming a Stock Price of $35 on the Grant Date: $6.00 - $7.00
Estimated Range of the Total Value
of your Stock Option Award: $180,000.00 $210,000.00
</TABLE>
Plus:
<TABLE>
<CAPTION>
- ----------------------
Restricted Stock Award
- ---------------------- 1998 Award
---------------------------
<S> <C> <C>
# of Restricted Shares of
Chicago Title Corporation Common Stock: 30,000
Estimated Market Value of Each Share: $35.00
Estimated Market Value of Restricted Stock Award: $1,050,000.00
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
1) If you accept the terms specified in the 1995 Plan Award Agreement
Page 2 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 1 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in accordance
with the "1995 Plan Award Agreement", will be calculated using actual financial
results of CT&T through the actual separation date, as follows:
First Cycle Units and Second Cycle Units
The values of both your First Cycle Units and your Second Cycle Units will be
fixed at year-end 1998, and benefits will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998, and (y) to the extent that
AAM results are not included in subparagraph (x) above, AAM planned results for
such portions of 1998 during which AAM is not a subsidiary of CT&T). No values
will be calculated and no benefits will be accrued for periods subsequent to
December 31, 1998.
- -----------------------
Value of Stock Options:
- -----------------------
The fair value of a stock option award can be estimated using an option-pricing
model that considers certain variables and assumptions. Over the years, a number
of mathematical models for estimating the fair value of options have been
developed. Among the most commonly used methodologies is the Black-Sholes model.
This model says the expected value of an option depends on six factors: (1) the
market price of the underlying stock at the grant date; (2) the exercise price
of the option; (3) the dividend yield of the underlying stock; (4) the length of
the option term; (5) volatility of the underlying stock; and, (6) the
"risk-free" interest rate.
The Estimated Range of Values of Each Stock Option shown on Page 1 of 4 of this
Exhibit A was determined using the Black-Sholes model, incorporating assumptions
about the six factors referred to above as they relate to Chicago Title
Corporation. Among the assumptions used were a $35 market price for a share of
Chicago Title Corporation stock on the grant date and an average option duration
of 6 years. Changes in any of the six assumptions will result in a different
estimated value. The Black-Sholes model produced an estimated option value equal
to 20% - 23% of the estimated market value of Chicago Title Corporation stock as
of the spin-off.
<PAGE> 7
EXHBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: P. Sands, Jr. Page 3 of 4
2) If you do not accept the terms specified in the 1995 Plan Award Agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- ----------------
Plan Information Units Issued in:
- ---------------- -----------------------
1995 1997
-------- --------
<S> <C> <C>
**Estimated Unit Value: $360.97 $308.82
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Estimated Market Price of Alleghany Stock
on Distribution Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value Units Issued in:
- --------------------------- ---------------------------
1995 1997
------------ ------------
<S> <C> <C>
Number of Units Issued: 1,100.00 1,100.00
Estimated Value of Units (Unit Value x# of Units): $397,067.00 $339,702.00
Estimated 25% Mandatory Stock Dollars: $99,266.75 $84,925.50
Early Stock Election Made in Year of Unit Award: 0.00% 15.00%
Estimated Available Dollars for Early Stock Election: $0.00 $50,955.30
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $99,266.75 $135,880.80
Mandatory/Early Election # of Shares Available: 692.77 668.80
Estimated Stock Appreciation on # of Shares Available: $143,202.49 $98,199.90
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $540,269.49 $437,901.90
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
2) If you do not accept the terms specified in the 1995 Plan Award Agreement
Page 4 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 3 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in the event
that you do not accept the terms specified in the "1995 Plan Award Agreement",
will be calculated using actual financial results of CT&T through the actual
separation date, as follows:
First Cycle Units
The values of First Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated excluding AAM results after the separation date. That is, actual
Chicago Title (excluding AAM) results will be used in the calculation for the
post-separation portion of 1998.
Second Cycle Units
The values of your Second Cycle Units will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, 1999 and 2000,
benefits will be calculated excluding AAM results after the separation date.
That is, actual Chicago Title (excluding AAM) results will be used in the
calculation for the post-separation portion of 1998 and calendar years 1999 and
2000.
<PAGE> 1
Exhibit 10.6(f)
[LETTERHEAD OF CHICAGO TITLE AND TRUST COMPANY]
June 16, 1998
Mr. Christopher Abbinante
Chicago Title Insurance Company
171 North Clark Street
MLC 32ED
Chicago, IL 60601
Dear Chris:
You have recently received certain distributions regarding the performance
units for the 1995-1997 cycle (the First Cycle Units-Managers Section) as
awarded to you under Chicago Title and Trust Company's 1995 Performance Unit
Incentive Plan (the "1995 Plan"). This letter agreement (the "1995 Plan Award
Agreement") is to set forth our agreement regarding:
(1) the disposition of the 800 performance units for the 1996-1998 cycle (the
"Second Cycle Units-Managers Section") previously awarded to you pursuant
to the 1995 Plan-Managers Section,(1) and
(2) the disposition of the 1,000 performance units for the 1997-2000 cycle
(the "Second Cycle Units-Executives Section") previously awarded to you
pursuant to the 1995 Plan-Executives Section.(2)
As you know, Alleghany Corporation ("Alleghany") intends to transfer all
of the issued and outstanding common stock of Chicago Title and Trust Company
("CT&T") to Chicago Title Corporation, a newly formed holding company for CT&T
("Chicago Title"), and, thereafter, to distribute all of the outstanding common
stock of Chicago Title ("Chicago Title Common Stock"), other than shares of
restricted stock issued to senior management and non-employee directors, to the
stockholders of Alleghany (the "Distribution"). Prior to the transfer of CT&T to
Chicago Title, CT&T will distribute all of the outstanding stock of CT&T's
subsidiary Alleghany Asset Management, Inc. ("AAM"), to Alleghany. The
Distribution will be effective on June 17,
- ---------
(1) No Third Cycle performance units have been awarded to you under the 1995
Plan-Managers Section.
(2) No First Cycle performance units have been awarded to you under the 1995
Plan-Executives Section.
<PAGE> 2
1998 as determined by the Board of Directors of Alleghany and set forth in its
declaration of the Distribution (the "Distribution Date").
A. Additional Incentive Awards
1. On the Distribution Date, Chicago Title will grant to you an award of
30,000 restricted shares of Chicago Title Common Stock pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest as to 50% on the second
anniversary of the Distribution Date and 50% on the third anniversary of the
Distribution Date. The terms of such award will be governed by a restricted
stock agreement to be entered into by you and Chicago Title (the "Restricted
Stock Agreement") under the 1998 Long-Term Incentive Plan. In connection with
such restricted stock award, on the Distribution Date you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes (including the
Medicaid portion of F.I.C.A.) on the restricted stock award and the gross-up
payment.
2. On the day after the Distribution Date, the Compensation Committee of
the Chicago Title Board will be asked to consider a recommendation that you be
awarded non-qualified stock options to purchase 30,000 shares of Chicago Title
Common Stock pursuant to Chicago Title's 1998 Long-Term Incentive Plan, the
terms of which stock options will be governed by a stock option agreement to be
entered into by you and Chicago Title (the "Stock Option Agreement") under the
1998 Long-Term Incentive Plan. It is expressly understood that any such grant,
and the terms thereof, shall be at the sole discretion of the Compensation
Committee.
3. Effective on the Distribution Date, you will only have such rights in
respect of the Second Cycle Units-Managers Section and the Second Cycle
Units-Executives Section as are set forth in this 1995 Plan Award Agreement. You
expressly represent and warrant that you have elected to enter into this 1995
Plan Award Agreement in consideration of the grant of restricted stock provided
for in Paragraph A. 1. above and other valuable consideration provided hereunder
and that you were advised that you had the right (i) to forego said restricted
stock and other consideration and (ii) to continue your Second Cycle
Units-Managers Section and your Second Cycle Units-Executives Section in
accordance with their terms. Accordingly, you agree that your entering into this
1995 Plan Award Agreement shall not be deemed to constitute a termination of the
1995 Plan.
B. Second Cycle Units
1. As regards your Second Cycle Units-Managers Section, the value of such
units will be fixed at year-end 1998, and benefits will be calculated in the
manner set forth in Sections 6, 16 and 17 of the 1995 Plan, except that, for
1998, benefits will be calculated on the assumption that AAM had remained a
subsidiary of CT&T throughout 1998 and that AAM had achieved 100% of its
post-separation planned results for 1998 (as included in Alleghany's Plan for
1998-2002) (i.e., benefits will take into account (x) actual CT&T (or Chicago
Title, after it becomes the parent of
-2-
<PAGE> 3
CT&T) results through December 31, 1998, and (y) to the extent that AAM results
are not included in subparagraph (x) above, AAM planned results for such
portions of 1998 during which AAM is not a subsidiary of CT&T). No values will
be calculated and no benefits will be accrued for periods subsequent to December
31, 1998.
2. As regards your Second Cycle Units-Executives Section, the value of
such units will be fixed at year-end 1998. In computing benefits payable in
respect of your Second Cycle Units-Executives Section, subject to paragraph D.
1. hereof, benefits will be calculated in the manner set forth in Sections 6 and
13 of the 1995 Plan, except that, for 1998, benefits will be calculated on the
assumption that AAM had remained a subsidiary of CT&T throughout 1998 and that
AAM had achieved 100% of its post-separation planned results for 1998 (as
included in Alleghany's Plan for 1998-2002) (i.e., benefits will take into
account (x) actual CT&T (or Chicago Title, after it becomes the parent of CT&T)
results through December 31, 1998 and (y) to the extent that AAM results are not
included in subparagraph (x) above, AAM planned results for such portions of
1998 during which AAM is not a subsidiary of CT&T). No values will be calculated
and no benefits will be accrued for periods subsequent to December 31, 1998.
C. Manner of Payment
1. All payouts in respect of your Second Cycle Units-Managers Section and
your Second Cycle Units-Executives Section will be made in the form of cash.
2. In determining the amounts of your payouts in respect of your Second
Cycle Units-Managers Section and your Second Cycle Units-Executives Section, you
shall be entitled to the excess of the value on the Distribution Date of the
shares of common stock of Alleghany ("Alleghany Common Stock") that you were
required to purchase, or that you elected to purchase, in accordance with the
terms of the 1995 Plan over the purchase price therefor as provided in the 1995
Plan. Such value on the Distribution Date will be based upon the average of the
daily averages of the high and low sales prices of Alleghany Common Stock as
reported on the New York Stock Exchange Composite Tape for the five trading days
preceding the Distribution Date (or, in the event that there is no trading of
Alleghany Common Stock on any day during such five-trading-day period, for such
lesser number of days within such five-trading-day period that Alleghany Common
Stock is traded). For purposes of the valuation of Alleghany Common Stock in the
manner described in the preceding sentence, regular way prices (i.e., with due
bills for the shares of Chicago Title Common Stock to be distributed in respect
of a share of Alleghany Common Stock) shall be used or, in the absence of such
regular way trading on any day during such five-trading-day period, the
valuation of Alleghany Common Stock on such day shall be an amount equal to the
sum of (a) the average of the high and low ex-distribution or when-issued sales
prices of Alleghany Common Stock as reported on the New York Stock Exchange
Composite Tape on such date, plus (b) the average of the high and low
when-issued or regular way sales prices of Chicago Title Common Stock as
reported on the New York Stock Exchange Composite Tape on such date.
3. Distribution of payouts in respect of your Second Cycle Units-Managers
Section will be made during the first calendar quarter of 1999 as soon as
reasonably practicable after completion of 1998 audited financial statements of
Chicago Title. As a condition to your right to
-3-
<PAGE> 4
receive any such payout, you must be an employee of Chicago Title or one of its
subsidiaries on the date of the payout; provided, however, that in the event of
death, Total Disability (as defined in the Chicago Title and Trust Company
Pension Plan, as amended from time to time), or normal retirement after age 55
(each a "Termination Event") prior to the date of the payout, you shall be
entitled to a payout of an amount determined by multiplying the payout to which
you would have been entitled hereunder absent a Termination Event by a fraction
the numerator of which is the number of whole months between January 1, 1996 and
the Termination Event (but not more than 36) and the denominator of which is 36.
4. Distribution of payouts in respect of your Second Cycle
Units-Executives Section will be made during the first calendar quarter of 2000.
As a condition to your right to receive any such payout, you must be an employee
of Chicago Title or one of its subsidiaries on the date of the payout; provided,
however, that in the event of death, Total Disability (as defined in the Chicago
Title and Trust Company Pension Plan, as amended from time to time), or normal
retirement after age 55 (each a "Termination Event") prior to the date of the
payout, you shall be entitled to a payout of an amount determined by multiplying
the payout to which you would have been entitled hereunder absent a Termination
Event by a fraction the numerator of which is the number of whole months between
January 1, 1997 and the Termination Event (but not more than 24) and the
denominator of which is 24.
5. An example of the valuation of your Second Cycle Units-Managers
Section and the fulfillment of the options pursuant thereto are set forth in
Exhibit A attached hereto. An example of the valuation of your Second Cycle
Units-Executives Section and the fulfillment of the options pursuant thereto are
set forth in Exhibit B attached hereto.
D. Other
1. For purposes of computation of benefits, references in the 1995 Plan
to "dividends paid to Alleghany" shall be deemed to include cash dividends paid
by Chicago Title to its stockholders as well as cash dividends paid to Alleghany
by CT&T or Chicago Title prior to the Distribution, and references to "approval
by Alleghany" shall be deemed to mean approval by Alleghany or by the
Compensation Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company" shall
be deemed replaced by reference to the Compensation Committee of the Board of
Directors of Chicago Title and references in the 1995 Plan to administration by
"the Vice Chairman of the Company" shall be deemed replaced by references to the
Chief Executive Officer of Chicago Title.
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G.,
Sections 8 through 11, and Sections 16 through 18, the terms of which shall
remain in effect as modified by the provisions set forth in this 1995 Plan Award
Agreement, the provisions of the 1995 Plan are of no further force and effect
with respect to the Second Cycle Units-Managers Section previously awarded to
you.
4. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G.,
Sections 8 through 11, and Sections 13 and 14, the terms of which shall remain
in effect as modified by the provisions
-4-
<PAGE> 5
set forth in this 1995 Plan Award Agreement, the provisions of the 1995 Plan are
of no further force and effect with respect to the Second Cycle Units-Executives
Section previously awarded to you.
5. All payments made to you pursuant hereto, including payments made
pursuant to agreements referred to herein, shall be subject to any applicable
tax withholding.
If the foregoing is consistent with your understanding, please countersign
the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ John Rau
-----------------------------------
CHICAGO TITLE AND TRUST COMPANY
By /s/ Paul T. Sands, Jr.
-----------------------------------
Accepted and agreed to
this 12th day of
June, 1998
/s/ Christopher Abbinante
- --------------------------------------------
Christopher Abbinante
-5-
<PAGE> 6
EXHIBIT A
1995 PLAN AWARD AGREEMENT - MANAGERS SECTION
Participant: C. Abbinante Page 1 of 4
1) If you accept the terms specified in the 1995 Plan Award Agreement:
- --------------------------------------------------------------------------------
- ----------------
Plan Information
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
** Estimated Unit Value: $ 40.00 N/A
Stock Dividend Issued 1996: 2.00%
Stock Dividend Issued 1997: 2.00%
Total Stock Dividend Adjustment Factor: 1.0404
Employee Purchase Price of Stock Per Plan: $193.34
Purchase Price Adjusted for Stock Dividends: $185.83
Est. Market Price of Alleghany Stock on Dist. Date: $350.00
Estimated Stock Appreciation Per Share:
1996 = $350.00 - $185.83 $164.17
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
---------------------------
1996 1997
------------- ------------
<S> <C> <C>
Number of Units Issued: 800.00 N/A
Estimated Value of Units (Unit Value x # of Units): $32,000.00
Estimated 25% Mandatory Stock Dollars: $8,000.00
Early Stock Election Made in Year of Unit Award: 10.00%
Estimated Available Dollars for Early Stock Election: $3,200.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $11,200.00
Mandatory/Early Election # of Shares Available: 60.27
Estimated Stock Appreciation on # of Shares Available: $9,894.53
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $41,894.53
Plus:
- ------------------
Stock Option Award (also see Exhibit B re: Executive Section)
- ------------------
<CAPTION>
1998 Award
--------------------------
<S> <C> <C>
Non-Qualified Stock Options to Purchase # of
Shares of Chicago Title Corporation Common Stock: 30,000
Estimated Range of Values of Each Stock Option
Assuming a Stock Price of $35 on the Grant Date: $6.00- $7.00
Estimated Range of the Total Value
of your Stock Option Award: $180,000.00 $210,000.00
Plus:
- ----------------------
Restricted Stock Award (also see Exhibit B re: Executive Section)
- ----------------------
<CAPTION>
1998 Award
-----------------------------
<S> <C>
# of Restricted Shares of
Chicago Title Corporation Common Stock: 30,000
Estimated Market Value of Each Share: $35.00
Estimated Market Value of Restricted Stock Award: $1,050,000.00
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 7
EXHIBIT A
1995 PLAN AWARD AGREEMENT - MANAGERS
1) If you accept the terms specified in the 1995 Plan Award Agreement
Page 2 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1996 ("Second Cycle Units") and in
1997 ("Third Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 1 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in accordance
with the "1995 Plan Award Agreement", will be calculated using actual financial
results of CT&T through the actual separation date, as follows:
Second Cycle Units
The value of Second Cycle Units will be fixed at year-end 1998, and benefits
will be calculated in the manner set forth in Sections 6, 16 and 17 of the 1995
Plan, except that, for 1998, benefits will be calculated on the assumption that
AAM had remained a subsidiary of CT&T throughout 1998 and that AAM had achieved
100% of its post-separation planned results for 1998 (as included in Alleghany's
Plan for 1998-2002) (i.e., benefits will take into account (x) actual CT&T (or
Chicago Title, after it becomes the parent of CT&T) results through December 31,
1998, and (y) to the extent that AAM results are not included in subparagraph
(x) above, AAM planned results for such portions of 1998 during which AAM is not
a subsidiary of CT&T). No values will be calculated and no benefits will be
accrued for periods subsequent to December 31, 1998.
Third Cycle Units
The value of Third Cycle Units will be fixed at year-end 1998, and benefits will
be calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and 1999, that AAM had achieved 100% of its post-separation
planned results for 1998 and 1999 (as included in Alleghany's Plan for
1998-2002) and that CT&T had achieved 100% of planned results for 1999 (as
included in Alleghany's Plan for 1998-2002) (i.e., benefits will take into
account (x) actual CT&T (or Chicago Title, after it becomes the parent of CT&T)
results through December 31, 1998, (y) CT&T planned results for 1999 and (z) to
the extent that AAM results are not included in subparagraphs (x) and (y) above,
AAM planned results for such portions of 1998 and 1999 during which AAM is not a
subsidiary of CT&T). Except as specifically provided in the immediately
preceding sentence, no values will be calculated and no benefits will be accrued
for periods subsequent to December 31, 1999.
- -----------------------
Value of Stock 0ptions:
- -----------------------
The fair value of a stock option award can be estimated using an option-pricing
model that considers certain variables and assumptions. Over the years, a number
of mathematical models for estimating the fair value of options have been
developed. Among the most commonly used methodologies is the Black-Sholes model.
This model says the expected value of an option depends on six factors: (1) the
market price of the underlying stock at the grant date; (2) the exercise price
of the option; (3) the dividend yield of the underlying stock; (4) the length of
the option term; (5) volatility of the underlying stock; and, (6) the
"risk-free" interest rate.
The Estimated Range of Values of Each Stock Option shown on Page 1 of 4 of this
Exhibit A was determined using the Black-Sholes model, incorporating assumptions
about the six factors referred to above as they relate to Chicago Title
Corporation. Among the assumptions used were a $35 market price for a share of
Chicago Title Corporation stock on the grant date and an average option duration
of 6 years. Changes in any of the six assumptions will result in a different
estimated value. The Black-Sholes model produced an estimated option value equal
to 20% - 23.3% of the estimated market value of Chicago Tide Corporation stock
as of the spin-off.
<PAGE> 8
EXHIBIT A
1995 PLAN AWARD AGREEMENT - MANAGERS SECTION
Participant: C. Abbinante Page 3 of 4
2) If you do not accept the terms specified in the 1995 Plan Award Agreement:
- --------------------------------------------------------------------------------
- ----------------
Plan Information
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
------------------------
1996 1997
----------- -----------
<S> <C> <C>
** Estimated Unit Value: $40.00 N/A
Stock Dividend Issued 1996: 2.00%
Stock Dividend Issued 1997: 2.00%
Total Stock Dividend Adjustment Factor: 1.0404
Employee Purchase Price of Stock Per Plan: $193.34
Purchase Price Adjusted for Stock Dividends: $185.83
Estimated Market Price of Alleghany Stock
on Distribution Date: $350.00
Estimated Stock Appreciation Per Share:
1996 = $350.00 - $143.29 $164.17
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Number of Units Issued: 800.00 N/A
Estimated Value of Units (Unit Value x # of Units): $32,000.00
Estimated 25% Mandatory Stock Dollars: $8,000.00
Early Stock Election Made in Year of Unit Award: 10.00%
Estimated Available Dollars for Early Stock Election: $3,200.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $11,200.00
Mandatory/Early Election # of Shares Available: 60.27
Estimated Stock Appreciation on # of Shares Available: $9,894.53
Estimated Total Cash Payment
(Estimated Value of Units + Est Stock Apprec.): $41,894.53
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 9
EXHIBIT A
1995 PLAN AWARD AGREEMENT - MANAGERS
2) If you do not accept the terms specified in the 1995 Plan Award Agreement
Page 4 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1996 ("Second Cycle Units") and in
1997 ("Third Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 3 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in the
event that you do not accept the terms specified in the "1995 Plan Award
Agreement", will be calculated using actual financial results of CT&T through
the actual separation date, as follows:
Second Cycle Units
The value of Second Cycle Units will be calculated in the manner set forth in
Sections 6, 16 and 17 of the 1995 Plan, except that, for 1998, benefits will be
calculated excluding AAM results after the separation date. That is, actual
Chicago Title (excluding AAM) results will be used in the calculation for the
post-separation portion of 1998.
Third Cycle Units
The value of Third Cycle Units will be calculated in the manner set forth in
Sections 6, 16 and 17 of the 1995 Plan, except that, for 1998 and 1999, benefits
will be calculated excluding AAM results after the separation date. That is,
actual Chicago Title (excluding AAM) results will be used in the calculation for
the post-separation portion of 1998 and calendar year 1999.
<PAGE> 1
Exhibit 10.6(g)
[LETTERHEAD OF CHICAGO TITLE AND TRUST COMPANY]
June 16, 1998
Mr. William Halvorsen
Chicago Title Company
245 South Los Robles Avenue
Pasadena, CA 91101
Dear Bill:
This letter agreement (the "1995 Plan Award Agreement") is to set forth
our agreement regarding the disposition of the 1,800 performance units for the
1995-1998 cycle (the "First Cycle Units") and the 1,600 performance units for
the 1997-2000 cycle (the "Second Cycle Units") previously awarded to you
pursuant to Chicago Title and Trust Company's 1995 Performance Unit Plan (the
"1995 Plan"). As you know, Alleghany Corporation ("Alleghany") intends to
transfer all of the issued and outstanding common stock of Chicago Title and
Trust Company ("CT&T") to Chicago Title Corporation, a newly formed holding
company for CT&T ("Chicago Title"), and, thereafter, to distribute all of the
outstanding common stock of Chicago Title ("Chicago Title Common Stock"), other
than shares of restricted stock issued to senior management and non-employee
directors, to the stockholders of Alleghany (the "Distribution"). Prior to the
transfer of CT&T to Chicago Title, CT&T will distribute all of the outstanding
stock of CT&T's subsidiary Alleghany Asset Management, Inc. ("AAM"), to
Alleghany. The Distribution will be effective on June 17, 1998 as determined by
the Board of Directors of Alleghany and set forth in its declaration of the
Distribution (the "Distribution Date").
A. Additional Incentive Awards
1. On the Distribution Date, Chicago Title will grant to you an award of
30,000 restricted shares of Chicago Title Common Stock pursuant to Chicago
Title's 1998 Long-Term Incentive Plan, which will vest as to 50% on the second
anniversary of the Distribution Date and 50% on the third anniversary of the
Distribution Date. The terms of such award will be governed by a restricted
stock agreement to be entered into by you and Chicago Title (the "Restricted
Stock Agreement") under the 1998 Long-Term Incentive Plan. In connection with
such restricted stock award, on the Distribution Date you will make an election
under Section 83(b) of the Internal Revenue Code, and Chicago Title will make a
tax gross-up payment to you in cash, or on your behalf through withholding
payments, to cover your Federal, state and local income taxes
<PAGE> 2
(including the Medicaid portion of F.I.C.A.) on the restricted stock award and
the gross-up payment.
2. On the day after the Distribution Date, the Compensation Committee of
the Chicago Title Board will be asked to consider a recommendation that you be
awarded non-qualified stock options to purchase 30,000 shares of Chicago Title
Common Stock pursuant to Chicago Title's 1998 Long-Term Incentive Plan, the
terms of which stock options will be governed by a stock option agreement to be
entered into by you and Chicago Title (the "Stock Option Agreement") under the
1998 Long-Term Incentive Plan. It is expressly understood that any such grant,
and the terms thereof, shall be at the sole discretion of the Compensation
Committee.
3. Effective on the Distribution Date, you will only have such rights in
respect of the First Cycle Units and the Second Cycle Units as are set forth in
this 1995 Plan Award Agreement. You expressly represent and warrant that you
have elected to enter into this 1995 Plan Award Agreement in consideration of
the grant of restricted stock provided for in Paragraph A. 1. above and other
valuable consideration provided hereunder and that you were advised that you had
the right (i) to forego said restricted stock and other consideration and (ii)
to continue your First Cycle Units and Second Cycle Units in accordance with
their terms. Accordingly, you agree that your entering into this 1995 Plan Award
Agreement shall not be deemed to constitute a termination of the 1995 Plan.
B. First Cycle Units and Second Cycle Units
1. The values of both your First Cycle Units and your Second Cycle Units
will be fixed at year-end 1998. In computing benefits payable both in respect of
your First Cycle Units and in respect of your Second Cycle Units, subject to
paragraph D. 1. hereof, benefits will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results though December 31, 1998 and (y) to the extent that AAM
results are not included in subparagraph (x) above, AAM planned results for such
portions of 1998 during which AAM is not a subsidiary of CT&T). No values will
be calculated and no benefits will be accrued for periods subsequent to December
31, 1998.
C. Manner of Payment
1. All payouts in respect of your First Cycle Units and in respect of your
Second Cycle Units will be made in the form of cash.
2. In determining the amounts of your payouts in respect of your First
Cycle Units and in respect of your Second Cycle Units, you shall be entitled to
the excess of the value on the Distribution Date of the shares of common stock
of Alleghany ("Alleghany Common Stock") that you were required to purchase, or
that you elected to purchase, in accordance with the terms of the 1995 Plan over
the purchase price therefor as provided in the 1995 Plan. Such value on the
2
<PAGE> 3
Distribution Date will be based upon the average of the daily averages of the
high and low sales prices of Alleghany Common Stock as reported on the New York
Stock Exchange Composite Tape for the five trading days preceding the
Distribution Date (or, in the event that there is no trading of Alleghany Common
Stock on any day during such five-trading-day period, for such lesser number of
days within such five-trading-day period that Alleghany Common Stock is traded).
For purposes of the valuation of Alleghany Common Stock in the manner described
in the preceding sentence, regular way prices (i.e., with due bills for the
shares of Chicago Title Common Stock to be distributed in respect of a share of
Alleghany Common Stock) shall be used or, in the absence of such regular way
trading on any day during such five-trading-day period, the valuation of
Alleghany Common Stock on such day shall be an amount equal to the sum of (a)
the average of the high and low ex-distribution or when-issued sales prices of
Alleghany Common Stock as reported on the New York Stock Exchange Composite Tape
on such date, plus (b) the average of the high and low when-issued or regular
way sales prices of Chicago Title Common Stock as reported on the New York Stock
Exchange Composite Tape on such date.
3. Distribution of payouts in respect of your First Cycle Units will be
made during the first calendar quarter of 1999 as soon as reasonably practicable
after completion of 1998 audited financial statements of Chicago Title, and
distribution of payouts in respect of your Second Cycle Units will be made
during the first calendar quarter of 2000. As a condition to your right to
receive any such payout, you must be an employee of Chicago Title or one of its
subsidiaries on the date of the payout; provided, however, that (a) with respect
to your First Cycle Units, in the event of death, Total Disability (as defined
in the Chicago Title and Trust Company Pension Plan, as amended from time to
time), or normal retirement after age 55 (each a "Termination Event") prior to
the date of the payout, you shall be entitled to a payout of an amount
determined by multiplying the payout to which you would have been entitled
hereunder absent a Termination Event by a fraction the numerator of which is the
number of whole months between January 1, 1995 and the Termination Event (but
not more than 48) and the denominator of which is 48; and (b) with respect to
your Second Cycle Units, in the event of a Termination Event prior to the date
of payout, you shall be entitled to a payout of an amount determined by
multiplying the payout to which you would have been entitled hereunder absent a
Termination Event by a fraction the numerator of which is the number of whole
months between January 1, 1997 and the Termination Event (but not more than 24)
and the denominator of which is 24.
4. Examples of the valuation of your First Cycle Units and Second Cycle
Units and the fulfillment of the options pursuant thereto are set forth in
Exhibit A attached hereto.
D. Other
1. For purposes of computation of benefits, references in the 1995 Plan to
"dividends paid to Alleghany" shall be deemed to include cash dividends paid by
Chicago Title to its stockholders as well as cash dividends paid to Alleghany by
CT&T or Chicago Title prior to the Distribution, and references to "approval by
Alleghany" shall be deemed to mean approval by Alleghany or by the Compensation
Committee of the Board of Directors of Chicago Title.
2. References in the 1995 Plan to administration by "the Company" shall be
deemed replaced by reference to the Compensation Committee of the Board of
Directors of Chicago Title
3
<PAGE> 4
and references in the 1995 Plan to administration by "the Vice Chairman of the
Company" shall be deemed replaced by references to the Chief Executive Officer
of Chicago Title.
3. Except for Sections 1 through 6, Sections 7.E., 7.F. and 7.G., Sections
8 through 11, and Sections 13 and 14, the terms of which shall remain in effect
as modified by the provisions set forth in this 1995 Plan Award Agreement, the
provisions of the 1995 Plan are of no further force and effect with respect to
the First Cycle Units and the Second Cycle Units previously awarded to you.
4. All payments made to you pursuant hereto, including payments made
pursuant to agreements referred to herein, shall be subject to any applicable
tax withholding.
If the foregoing is consistent with your understanding, please countersign
the enclosed copy of this letter and return it to me.
CHICAGO TITLE CORPORATION
By /s/ John Rau
---------------------------------
CHICAGO TITLE AND TRUST COMPANY
By /s/ Paul T. Sands, Jr.
---------------------------------
Accepted and agreed
to this 11 day of June, 1998
/s/ William Halvorsen
- --------------------------------
William Halvorsen
4
<PAGE> 5
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: W. Halvorsen Page 1 of 4
1) If you accept the terms specified in the 1995 Plan Award Agreement:
- --------------------------------------------------------------------------------
- ----------------
Plan Information
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
-------------------------
1995 1997
----------- -----------
<S> <C> <C>
** Estimated Unit Value: $397.22 $330.33
Stock Dividend Issued 1995: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Est. Market Price of Alleghany Stock on Dist. Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $206.71
1997 = $350.00 - $203.17 $146.83
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
-------------------------
1995 1997
------------- -----------
<S> <C> <C>
Number of Units Issued: 1,800.00 1,600.00
Estimated Value of Units (Unit Value x # of Units): $714,996.00 $528,528.00
Estimated 25% Mandatory Stock Dollars: $178,749.00 $132,132.00
Early Stock Election Made in Year of Unit Award: 0.00% 25.00%
Estimated Available Dollars for Early Stock Election $0.00 $132,132.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $178,749.00 $264,264.00
Mandatory/Early Election # of Shares Available: 1,247.46 1,300.70
Estimated Stock Appreciation on # of Shares Available: $257,862.46 $190,981.78
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $972,858.46 $719,509.78
Plus:
- ------------------
Stock Option Award
- ------------------
<CAPTION>
1998 Award
--------------------------
<S> <C> <C>
Non-Qualified Stock Options to Purchase # of
Shares of Chicago Title Corporation Common Stock: 30,000
Estimated Range of Values of Each Stock Option
Assuming a Stock Price of $35 on the Grant Date: $6.00 $7.00
Estimated Range of the Total Value
of your Stock Option Award: $180,000.00 $210,000.00
Plus:
- ----------------------
Restricted Stock Award
- ----------------------
<CAPTION>
1998 Award
--------------------------
<S> <C>
# of Restricted Shares of
Chicago Title Corporation Common Stock: 30,000
Estimated Market Value of Each Share: $35.00
Estimated Market Value of Restricted Stock Award: $1,050,000.00
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 6
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
1) If you accept the terms specified in the 1995 Plan Award Agreement
Page 2 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your "Estimated Participant Value" on Page 1 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in accordance
with the "1995 Plan Award Agreement", will be calculated using actual financial
results of CT&T through the actual separation date, as follows:
First Cycle Units and Second Cycle Units
The values of both your First Cycle Units and your Second Cycle Units will be
fixed at year-end 1998, and benefits will be calculated in the manner set forth
in Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated on the assumption that AAM had remained a subsidiary of CT&T
throughout 1998 and that AAM had achieved 100% of its post-separation planned
results for 1998 (as included in Alleghany's Plan for 1998-2002) (i.e., benefits
will take into account (x) actual CT&T (or Chicago Title, after it becomes the
parent of CT&T) results through December 31, 1998, and (y) to the extent that
AAM results are not included in subparagraph (x) above, AAM planned results for
such portions of 1998 during which AAM is not a subsidiary of CT&T). No values
will be calculated and no benefits will be accrued for periods subsequent to
December 31, 1998.
- -----------------------
Value of Stock 0ptions:
- -----------------------
The fair value of a stock option award can be estimated using an option-pricing
model that considers certain variables and assumptions. Over the years, a number
of mathematical models for estimating the fair value of options have been
developed. Among the most commonly used methodologies is the Black-Sholes model.
This model says the expected value of an option depends on six factors: (1) the
market price of the underlying stock at the grant date; (2) the exercise price
of the option; (3) the dividend yield of the underlying stock; (4) the length of
the option term; (5) volatility of the underlying stock; and, (6) the
"risk-free" interest rate.
The Estimated Range of Values of Each Stock Option shown on Page 1 of 4 of this
Exhibit A was determined using the Black-Sholes model, incorporating assumptions
about the six factors referred to above as they relate to Chicago Title
Corporation. Among the assumptions used were a $35 market price for a share of
Chicago Tide Corporation stock on the grant date and an average option duration
of 6 years. Changes in any of the six assumptions will result in a different
estimated value. The Black-Sholes model produced an estimated option value equal
to 20% -23.3% of the estimated market value of Chicago Title Corporation stock
as of the spin-off.
<PAGE> 7
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
Participant: W. Halvorsen Page 3 of 4
2) If you do not accept the terms specified in the 1995 Plan Award Agreement:
- --------------------------------------------------------------------------------
- ----------------
Plan Information
- ----------------
<TABLE>
<CAPTION>
Units Issued in:
------------------------
1995 1997
----------- -----------
<S> <C> <C>
** Estimated Unit Value: $360.97 $308.82
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1996: 2.00% --
Stock Dividend Issued 1997: 2.00% 2.00%
Total Stock Dividend Adjustment Factor: 1.061208 1.020000
Employee Purchase Price of Stock Per Plan: $152.06 $207.23
Purchase Price Adjusted for Stock Dividends: $143.29 $203.17
Estimated Market Price of Alleghany Stock
on Distribution Date: $350.00 $350.00
Estimated Stock Appreciation Per Share:
1995 = $350.00 - $143.29 $164.71
1997 = $350.00 - $203.17 $146.83
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------
Estimated Participant Value
- ---------------------------
<TABLE>
<CAPTION>
Units Issued in:
------------------------
1995 1997
----------- -----------
<S> <C> <C>
Number of Units Issued: 1,800.00 1,600.00
Estimated Value of Units (Unit Value x # of Units): $649.746.00 $494,112.00
Estimated 25% Mandatory Stock Dollars: $162,436.50 $123,528.00
Early Stock Election Made in Year of Unit Award: 0.00% 25.00%
Estimated Available Dollars for Early Stock Election: $0.00 $123.528.00
Estimated Total Dollars for Stock
(Mandatory + Early Stock Election): $162,436.50 $247,056.00
Mandatory/Early Election # of Shares Available: 1,133.62 1,216.01
Estimated Stock Appreciation on # of Shares Available: $234,330.59 $178,546.75
Estimated Total Cash Payment
(Estimated Value of Units + Est. Stock Apprec.): $884,076.59 $672,658.75
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 8
EXHIBIT A
1995 PLAN AWARD AGREEMENT - EXECUTIVES
2) if you do not accept the terms specified in the 1995 Plan Award Agreement
Page 4 of 4
- ---------------------------
Calculation of Unit Values:
- ---------------------------
The Estimated Unit Values of units issued in 1995 ("First Cycle Units") and in
1997 ("Second Cycle Units") as shown in the illustration of the calculation of
your Estimated Participant Value" on Page 3 of 4 of this Exhibit A were
calculated based on the assumption that the Distribution Date of Chicago Title
Common Stock had occurred as of April 30, 1998 (the assumed separation date).
Actual Unit Values used to determine cash payouts under the Plan, in the
event that you do not accept the terms specified in the "1995 Plan Award
Agreement", will be calculated using actual financial results of CT&T through
the actual separation date, as follows:
First Cycle Units
The value of First Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, benefits will be
calculated excluding AAM results after the separation date. That is, actual
Chicago Title (excluding AAM) results will be used in the calculation for the
post-separation portion of 1998.
Second Cycle Units
The value of Second Cycle Units will be calculated in the manner set forth in
Sections 6 and 13 of the 1995 Plan, except that, for 1998, 1999 and 2000,
benefits will be calculated excluding AAM results after the separation date.
That is, actual Chicago Title (excluding AAM) results will be used in the
calculation for the post-separation portion of 1998 and calendar years 1999 and
2000.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from Chicago
Title Corporation's consolidated balance sheet at 6/30/98 and the consolidated
statement of income for the 6 months then ended.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 984,641
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 33,685
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,018,326
<CASH> 46,639
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,896,206
<POLICY-LOSSES> 584,826
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 42,016
0
0
<COMMON> 21,907
<OTHER-SE> 391,180
<TOTAL-LIABILITY-AND-EQUITY> 1,896,206
847,561
<INVESTMENT-INCOME> 30,553
<INVESTMENT-GAINS> 538
<OTHER-INCOME> 0
<BENEFITS> 56,746
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 768,645
<INCOME-PRETAX> 53,261
<INCOME-TAX> 21,317
<INCOME-CONTINUING> 31,944
<DISCONTINUED> 9,013
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,957
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
