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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of October 18, 2000
by and among
ABN AMRO North America Holding Company,
Alleghany Asset Management, Inc.
and
Alleghany Corporation
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE................................................................... 1
Section 1.1 The Merger................................................................... 1
Section 1.2 The Closing.................................................................. 1
Section 1.3 Effective Time of the Merger................................................. 2
Section 1.4 The Certificate of Incorporation and By-Laws................................. 2
Section 1.5 Directors and Officers....................................................... 2
Section 1.6 Effect on Company Stock; Merger Consideration Adjustment..................... 2
Section 1.7 Employment Agreements........................................................ 4
Section 1.8 Post-Closing Payment......................................................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER.................. 6
Section 2.1 Corporate Organization and Qualification..................................... 6
Section 2.2 Authorized Capital........................................................... 7
Section 2.3 Corporate Authority.......................................................... 7
Section 2.4 Consents, No Conflicts....................................................... 7
Section 2.5 Compliance................................................................... 8
Section 2.6 Financial Statements......................................................... 10
Section 2.7 Undisclosed Liabilities...................................................... 11
Section 2.8 No Material Adverse Effect................................................... 11
Section 2.9 No Dividends, Sale of Assets, etc............................................ 11
Section 2.10 Litigation................................................................... 11
Section 2.11 Tax Matters.................................................................. 11
Section 2.12 Investment Advisory Activities............................................... 13
Section 2.13 Registered Investment Company................................................ 15
Section 2.14 Leases....................................................................... 18
Section 2.15 Intellectual Property........................................................ 18
Section 2.16 Material Contracts........................................................... 19
Section 2.17 Benefit Plans................................................................ 19
Section 2.18 Interests of Officers and Directors.......................................... 21
Section 2.19 Insurance.................................................................... 21
Section 2.20 Absence of Bank or Savings and Loan Status................................... 21
Section 2.21 Brokers and Finders.......................................................... 22
Section 2.22 Assets....................................................................... 22
Section 2.23 Intercompany Transactions.................................................... 22
Section 2.24 Assets under Management...................................................... 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..................................... 23
Section 3.1 Corporate Organization....................................................... 23
Section 3.2 Corporate Authority.......................................................... 23
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Section 3.3 Consents, No Conflicts....................................................... 23
Section 3.4 Litigation................................................................... 24
Section 3.5 Brokers and Finders.......................................................... 24
Section 3.6 Investment Advisory Activities............................................... 24
Section 3.7 Information in Proxy......................................................... 25
Section 3.8 Financing.................................................................... 25
Section 3.9 Section 15(f) of the Investment Company Act.................................. 25
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER...................................... 25
Section 4.1 Compliance with Agreement.................................................... 25
Section 4.2 Representations and Warranties............................................... 26
Section 4.3 Opinion of Counsel for the Company and the Stockholder....................... 26
Section 4.4 Approvals.................................................................... 26
Section 4.5 Assets Under Management...................................................... 26
Section 4.6 No Material Adverse Effect................................................... 26
Section 4.7 No Injunction................................................................ 26
Section 4.8 Compliance with Section 15(f)................................................ 26
Section 4.9 Employment Agreements........................................................ 26
ARTICLE V CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER.................... 27
Section 5.1 Compliance with Agreement.................................................... 27
Section 5.2 Representations and Warranties............................................... 27
Section 5.3 Opinion of Counsel for The Purchaser......................................... 27
Section 5.4 Approvals.................................................................... 27
Section 5.5 No Injunction................................................................ 27
Section 5.6 Compliance with Section 15(f)................................................ 27
ARTICLE VI COVENANTS OF THE COMPANY AND THE STOCKHOLDER........................................ 28
Section 6.1 Covenants Pending the Closing................................................ 28
Section 6.2 Confidentiality.............................................................. 29
Section 6.3 Filings and Approvals........................................................ 29
Section 6.4 Commercially Reasonable Efforts.............................................. 29
Section 6.5 Fund Approvals............................................................... 30
Section 6.6 Proxy Statements............................................................. 30
Section 6.7 Non-Fund Clients............................................................. 30
Section 6.8 No Shop...................................................................... 30
Section 6.9 Confidentiality.............................................................. 31
Section 6.10 Non-Competition Agreement.................................................... 31
Section 6.11 Other Investment Company Matters............................................. 32
Section 6.12 Post-Closing Matters......................................................... 32
Section 6.13 Intercompany Transactions.................................................... 32
Section 6.14 FIRPTA Certificate........................................................... 32
Section 6.15 M&C AUM...................................................................... 32
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Section 6.16 Approvals.................................................................... 32
ARTICLE VII COVENANTS OF THE PURCHASER.......................................................... 33
Section 7.1 Confidentiality.............................................................. 33
Section 7.2 Filings and Approvals........................................................ 33
Section 7.3 Commercially Reasonable Efforts.............................................. 33
Section 7.4 Use of the Alleghany Name.................................................... 33
Section 7.5 Transfer Taxes............................................................... 33
Section 7.6 Cooperation with Preparation of Proxy Statements............................. 33
Section 7.7 Information to Board of Trustees............................................. 33
Section 7.8 Certain Post-Closing Fund Matters............................................ 34
Section 7.9 Form ADV..................................................................... 34
Section 7.10 Employee Matters............................................................. 34
Section 7.11 Formation and Actions of Newco............................................... 35
ARTICLE VIII INDEMNITY........................................................................... 35
Section 8.1 Survival of Representations, Warranties, Indemnity Obligations
and Covenants................................................................ 35
Section 8.2 Indemnity by the Stockholder................................................. 35
Section 8.3 Indemnity by the Purchaser................................................... 36
Section 8.4 Certain Indemnification Covenants............................................ 37
Section 8.5 Procedure.................................................................... 38
ARTICLE IX TAX MATTERS......................................................................... 39
Section 9.1 Tax Returns.................................................................. 39
Section 9.2 Post-Closing Tax Matters..................................................... 41
Section 9.3 Stockholder Indemnity for Taxes.............................................. 42
Section 9.4 Matters Involving Tax Claims................................................. 43
Section 9.5 Section 338 Election......................................................... 44
ARTICLE X MISCELLANEOUS PROVISIONS............................................................ 45
Section 10.1 Termination.................................................................. 45
Section 10.2 Expenses..................................................................... 46
Section 10.3 Notices...................................................................... 46
Section 10.4 Public Announcements......................................................... 47
Section 10.5 Notice....................................................................... 47
Section 10.6 Remedies..................................................................... 48
Section 10.7 Entire Agreement; Amendment.................................................. 48
Section 10.8 Assignment................................................................... 48
Section 10.9 Governing Law................................................................ 49
Section 10.10 Counterparts................................................................. 49
Section 10.11 Headings..................................................................... 49
Section 10.12 Severability................................................................. 49
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EXHIBITS
1.7 Employment Agreements
4.3 Opinion of Counsel for the Company and the Stockholder
5.3 Opinion of Counsel for the Purchaser
6.1(c) The Company's Dividend Policy
7.10 Employee Matters
SCHEDULES
2.1 The Company and Subsidiaries
2.2 Authorized Capital
2.4 Company Approvals
2.5 Compliance
2.6 Financial Statements
2.7 Undisclosed Liabilities
2.9 Dividends
2.10 Litigation
2.11 Tax Matters
2.12 Investment Advisory Activities
2.13 Registered Investment Company
2.14 Leases
2.15 Intellectual Property
2.16 Material Contracts
2.17 Benefit Plans
2.18 Interests of Officers and Directors
2.19 Insurance
2.23 Intercompany Transactions
3.3 Purchaser Approvals
4.5 Consenting Clients
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TABLE OF DEFINED TERMS
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Defined Term Section
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Adjustment Factor............................................................................ 1.6(c)(ii)
Advisers Act................................................................................. 2.4
Agreement.................................................................................... Preamble
Annual Financial Statements.................................................................. 2.6(a)
Applicable Laws.............................................................................. 2.4
Approvals.................................................................................... 2.4
Asset Quotient............................................................................... 1.6(c)(i)
Assignment Requirements...................................................................... 2.4
Base Amount.................................................................................. 1.6(c)(iv)
Benefit Plans................................................................................ 2.17(a)
Certificate of Merger........................................................................ 1.3
claim........................................................................................ 8.5(a)
Client Contracts............................................................................. 2.12(b)
Closing...................................................................................... 1.2
Closing Date................................................................................. 1.2
Closing Date Balance Sheet................................................................... 1.8(a)
Closing Date Book Value...................................................................... 1.8(a)
Code......................................................................................... 2.11(b)
Company...................................................................................... Preamble
Company Approvals............................................................................ 2.4
Company Governmental Approvals............................................................... 2.4
Company Stock................................................................................ Preamble
Company Third Party Approvals................................................................ 2.4
Company Material Adverse Effect.............................................................. 2.1
Competitive Activity......................................................................... 6.10
Competitor................................................................................... 6.10
Confidential Information..................................................................... 6.9
Confidentiality Agreement.................................................................... 6.2(a)
Consenting Clients........................................................................... 1.6(c)(v)
Consolidated Income Tax Return............................................................... 9.1(f)
DGCL......................................................................................... 1.1
Effective Time............................................................................... 1.3
Employment Agreements........................................................................ 1.7
Encumbrances................................................................................. 2.2
Enterprise Funds............................................................................. 1.2
ERISA........................................................................................ 2.5(a)
Exchange Act................................................................................. 2.5(a)
Final Allocation............................................................................. 9.5(d)
Financial Statements......................................................................... 2.6(b)
Fund and, collectively, "Funds".............................................................. 2.12(a)
Fund Annual Financial Statements............................................................. 2.13(f)
Fund Financial Statements.................................................................... 2.13(f)
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Fund Interim Financial Statements............................................................ 2.13(f)
Fund Tax Returns............................................................................. 2.13(j)
Governmental Authorities..................................................................... 2.5(b)
Income Tax or Income Taxes................................................................... 9.1(f)
Income Tax Return............................................................................ 9.1(f)
Indemnitee................................................................................... 8.5(b)
Indemnitor................................................................................... 8.5(b)
Independent Accountants ..................................................................... 1.8(e)
Intellectual Property........................................................................ 2.15(a)
Interim Financial Statements................................................................. 2.6(b)
Investment Company........................................................................... 2.12(a)
Investment Company Act....................................................................... 2.4
Investment Partnership....................................................................... 2.12(a)
knowledge.................................................................................... 2.10
Leases....................................................................................... 2.14
Liabilities.................................................................................. 8.2(a)
Litigation................................................................................... 2.10
M&C.......................................................................................... 1.6(c)(iii)
M&C AUM...................................................................................... 1.6(c)(iii)
Material Contracts........................................................................... 2.16
Merger....................................................................................... 1.1
Merger Consideration......................................................................... 1.6(a)
NASD......................................................................................... 2.5(e)
New Advisory Contract........................................................................ 1.6(c)(v)
Newco........................................................................................ Preamble
Non-Fund Client.............................................................................. 2.12(a)
open taxable years........................................................................... 2.13(j)
Pre-Closing Tax Period....................................................................... 9.2(c)
Pre-Closing Tax Return....................................................................... 9.1(e)
Proposed Allocation.......................................................................... 9.5(d)
Purchaser.................................................................................... Preamble
Purchaser Approvals.......................................................................... 3.3
Purchaser Governmental Approvals............................................................. 3.3
Purchaser Third Party Approvals.............................................................. 3.3
Reports...................................................................................... 2.13(g)
Representatives.............................................................................. 6.1(a)
Revised Amount .............................................................................. 1.8(e)
SEC.......................................................................................... 2.5(c)
Section 338 Elections........................................................................ 9.5(a)
Section 338 Forms............................................................................ 9.5(c)
Securities Act............................................................................... 2.13(g)
Self-Regulatory Organization................................................................. 2.4
Stockholder.................................................................................. Preamble
Stockholder's Straddle Period................................................................ 9.2(c)
Straddle Period.............................................................................. 9.1(e)
Subsidiaries................................................................................. 2.1
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Surviving Corporation........................................................................ 1.1
Tax or Taxes................................................................................. 2.11(a)
Tax Claim.................................................................................... 9.4
Tax Returns.................................................................................. 2.11(a)
Taxing Authority............................................................................. 2.11(a)
Termination Date............................................................................. 8.1
Transfer Taxes............................................................................... 7.5
Trust........................................................................................ 2.5(h)
Trust Tax Returns............................................................................ 2.5(h)
12b-1 Plan................................................................................... 2.13(h)
under management............................................................................. 1.6(c)(vi)
Veredus...................................................................................... 2.12(a)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 18, 2000
(together with the Schedules, Annexes and Exhibits hereto, this "Agreement"), by
and among ABN AMRO North America Holding Company, a Delaware corporation (the
"Purchaser"), Alleghany Asset Management, Inc., a Delaware corporation (the
"Company"), and Alleghany Corporation, a Delaware corporation (the
"Stockholder") and the beneficial and record owner of one hundred percent (100%)
of the issued and outstanding capital stock of the Company (the "Company
Stock").
W I T N E S S E T H :
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WHEREAS, the Boards of Directors of the Purchaser and the
Stockholder have each determined that it is in the best interests of their
respective stockholders for a to-be-formed wholly-owned subsidiary of the
Purchaser incorporated in the State of Delaware ("Newco") to be merged with and
into the Company upon the terms and subject to the conditions set forth herein;
and
WHEREAS, the Purchaser, the Company and the Stockholder desire
to make certain representations, warranties, covenants and agreements as set
forth in this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing
premises, the representations, warranties, covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as hereinafter defined), Newco shall be
merged with and into the Company in accordance with this Agreement and the
Delaware General Corporation Law (the "DGCL"), and the separate corporate
existence of Newco shall thereupon cease (the "Merger"). The Company shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"). Upon becoming effective, the Merger shall have the
effects set forth in the DGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all properties, rights, privileges,
powers and franchises of Newco and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Newco and the Company
shall become the debts, liabilities and duties of the Surviving Corporation, and
the Surviving Corporation shall continue its corporate existence under the DGCL.
Section 1.2 The Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Dewey
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Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019, on
the third business day after all of the conditions to the obligations of the
parties under Articles IV and V have been satisfied or waived (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or, where permitted, waiver of those conditions), or at such
time and place as shall be mutually agreed to by the parties (the "Closing
Date"), but in no event shall the Closing Date be a date earlier than January 1,
2001.
Section 1.3 Effective Time of the Merger. Subject to the
provisions of this Agreement, a Certificate of Merger with respect to the
Merger in such form as is required by the DGCL (the "Certificate of Merger")
shall be duly prepared, executed and acknowledged and thereafter filed with the
Secretary of State of the State of Delaware, as soon as practicable on the
Closing Date. The Merger shall become effective at the later of the time of
filing of the Certificate of Merger or at such time as is agreed upon by the
parties and specified in the Certificate of Merger (the "Effective Time").
Section 1.4 The Certificate of Incorporation and By-Laws. The
Certificate of Incorporation and By-Laws of Newco as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation and
By-Laws of the Surviving Corporation until duly amended as provided therein or
by applicable law.
Section 1.5 Directors and Officers. The directors of Newco
immediately prior to the Effective Time and the officers of the Company
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, in each case until their successors are
duly elected and qualified in accordance with applicable law.
Section 1.6 Effect on Company Stock; Merger Consideration
Adjustment.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of the Purchaser, Newco, the Company, the
Stockholder or the Surviving Corporation, the shares of the Company Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive $825,000,000 in cash in the aggregate (the "Merger
Consideration"), and each share of capital stock of Newco shall be converted
into one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation. The Merger Consideration shall be delivered to the
Stockholder by wire transfer of immediately available funds at the Closing in
exchange for certificates representing all outstanding shares of the Company
Stock. As of the Effective Time, all shares of Company Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist.
(b) If the Asset Quotient (as defined below) is less than
0.90, then the Merger Consideration shall be reduced by an amount equal to the
product of the Adjustment Factor (as defined below) multiplied by Seven Hundred
Twenty-Five Million Dollars ($725,000,000).
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(c) The following terms as used in this Agreement shall have
the following meanings:
(i) The term "Asset Quotient" shall mean the number
(rounded to five decimal places) which results from dividing M&C
AUM by the Base Amount.
(ii) The term "Adjustment Factor" shall mean:
(1) if the Asset Quotient is less than 0.9 but equal
to or greater than 0.8, the amount by which the Asset
Quotient is less than 0.9, or
(2) if the Asset Quotient is less than 0.8, 0.1 plus
two times the amount by which the Asset Quotient is less
than 0.8;
provided, however, that the Adjustment Factor shall under no
circumstances be greater than 0.3.
(iii) The term "M&C AUM" shall mean the aggregate market
value at 4:00 p.m. Atlanta time on the date that is ten (10)
business days prior to the Closing Date of assets of the
Consenting Clients (as defined below) under the management of
Montag & Caldwell, Inc. ("M&C"), as adjusted to eliminate
increases or decreases attributable exclusively to positive or
negative changes in the market value of such assets since the
date hereof or the date such assets came under M&C's management.
For the avoidance of doubt, the M&C AUM shall be calculated as
follows:
(1) assets of the Consenting Clients that are under
M&C's management as of the date hereof shall be valued at
the fair market value of such assets as of the date
hereof;
(2) assets of the Consenting Clients that come under
M&C's management after the date hereof shall be valued at
the fair market value of such assets as of the date that
they came under M&C's management; and
(3) assets of the Consenting Clients that are acquired
directly or indirectly with the proceeds of sales of
assets described in clauses (1) or (2) above (including
indirectly through multiple sales) shall be valued on the
basis of the value of such sold assets as provided in
clauses (1) and (2) above as if no sale of the assets
described in clauses (1) and (2) above had taken place.
(iv) The term "Base Amount" shall mean $28,991,198,352,
which is the aggregate market value as of 4:00 p.m. Atlanta time
on October 16, 2000 of assets under M&C's management.
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(v) The term "Consenting Clients" shall refer to the Funds
and the Non-Fund Clients (together with entities that become
such after the date of this Agreement and prior to the Closing
Date) that shall have consented to the assignment of their
Client Contracts in accordance with the requirements of the
Investment Company Act, the Advisers Act, other Applicable Laws
or such Client Contracts, which consent shall have been
evidenced as follows: (i) with respect to each of the Funds, the
approval by the shareholders thereof, and with respect to the
Enterprise Funds, the approval of the boards of trustees
thereof, of a new investment advisory agreement or sub-advisory
agreement, as the case may be (a "New Advisory Contract"), with
the Subsidiary which acts as the investment advisor or
sub-advisor thereof on the same terms (other than the term
thereof) as the existing investment advisory agreement between
such parties, to take effect at the Closing; (ii) with respect
to each Non-Fund Client whose Client Contract requires a written
consent to the assignment of such Client Contract, a written
consent; (iii) with respect to each Non-Fund Client whose Client
Contract permits an assignment after notice of an impending
assignment to such Non-Fund Client and no receipt by the Company
or any of its Subsidiaries of any communication that such
Non-Fund Client objects to such assignment or terminates or
intends to terminate its Client Contract, a notice delivered to
such Non-Fund Client at least sixty (60) days prior to the
Closing and the receipt of a written consent from such Non-Fund
Client, or no receipt, as certified by an officer of the
Company, of any communication that such Non-Fund Client objects
to such assignment or terminates or intends to terminate its
Client Contract; and (iv) with respect to each Non-Fund Client
whose Client Contract is not subject to the Investment Company
Act or the Advisers Act, satisfaction of the requirements of
other Applicable Laws and such Client Contract for an
assignment, if any, as certified by an officer of the Company.
(vi) Any reference to assets being "under management"
shall mean assets with respect to which the manager thereof
serves as investment advisor or sub-advisor, and not merely in a
capacity as administrator, custodian, trustee, fiduciary or
similar capacity, and assets held and managed in a common or
collective trust as to which a trust company serves as trustee.
Section 1.7 Employment Agreements. Simultaneously with the
execution and delivery of this Agreement, the employment agreements in the forms
set forth in Exhibit 1.7 hereto between the Company and each of the parties
thereto shall be executed and delivered (the "Employment Agreements").
Section 1.8 Post-Closing Payment.
(a) Within 60 days after the Closing Date, the Stockholder
shall prepare a consolidated balance sheet of the Company and the Subsidiaries
as of the time
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immediately preceding the Effective Time (which shall take into account all
transactions contemplated to take place on the Closing Date pursuant to Exhibit
7.10) in accordance with generally accepted accounting principles consistently
applied and consistent with past practice, except for the absence of footnote
disclosures and other financial statements required thereby and except as
explicitly set forth in this Agreement (as it may be audited or changed below,
the "Closing Date Balance Sheet"). Notwithstanding the foregoing, the Closing
Date Balance Sheet shall not include the current provision for Income Taxes or
any current Income Tax liabilities. The Closing Date Balance Sheet shall be
audited by KPMG LLP at the expense of the Stockholder and, as so audited, shall
be issued and delivered to the Stockholder and the Purchaser within 60 days
after the Closing Date. Total assets less total liabilities as shown on the
Closing Date Balance Sheet is hereinafter referred to as the "Closing Date Book
Value."
(b) During the preparation of the Closing Date Balance Sheet
by the Stockholder as provided in Section 1.8(a) hereof, the Purchaser shall (i)
provide the Stockholder and its representatives with reasonable access to all
relevant books, records, work papers and employees of the Company, (ii)
cooperate with the Stockholder and its representatives, including the provision
of all information necessary or useful in the preparation of the Closing Date
Balance Sheet, and (iii) be entitled to observe and review the preparation of
the Closing Date Balance Sheet and the audit, including KPMG's work papers, with
full access to KPMG during such audit, which review shall not constitute any
approval of or acquiescence in the Closing Date Balance Sheet on the part of the
Purchaser.
(c) In the event that the Closing Date Book Value is greater
than $41,309,068 (which amount equals total assets less total liabilities as
shown on the unaudited consolidated balance sheet of the Company and the
Subsidiaries as at June 30, 2000, which balance sheet is included in Schedule
2.6 hereto), then the Purchaser shall pay to the Stockholder an amount equal to
the difference. In the event that the Closing Date Book Value is less than the
$41,309,068, then the Stockholder shall pay to the Purchaser an amount equal to
the difference.
(d) In the event that the Purchaser does not disagree with the
Closing Date Balance Sheet pursuant to Section 1.8(e) hereof, then the payment
to be made pursuant to Section 1.8(c) shall be made in cash by wire transfer of
immediately available funds on the forty-fifth business day after the delivery
of the Closing Date Balance Sheet as provided in Section 1.8(a).
(e) In the event that the Purchaser disagrees with the Closing
Balance Sheet, it shall advise the Stockholder within forty-five business days
after the delivery of the Closing Balance Sheet as provided in Section 1.8(a),
specifying the nature of such disagreement, the reason therefor and its
calculation of the payment it believes is required by Section 1.8(c). The
Stockholder and the Purchaser shall then select a mutually acceptable firm of
certified independent public accountants of national reputation (the
"Independent Accountants") to resolve the disagreement and to determine the
amount of the payment required by Section 1.8(c) (the "Revised Amount"). The
Independent Accountants shall deliver their determination of the Revised Amount
to the Stockholder
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and the Purchaser as soon as practicable and such determination shall be final
and binding upon the Stockholder and the Purchaser. Payment of the Revised
Amount shall be made in cash by wire transfer of immediately available funds
within five business days of the delivery of the determination of the Revised
Amount as provided in this Section 1.8(e).
(f) The fees and expenses of the Independent Accountants shall
be shared equally by the Stockholder and the Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDER
Each of the Company and the Stockholder jointly and severally
represents and warrants to the Purchaser as of the date hereof and as of the
Closing Date as follows:
Section 2.1 Corporate Organization and Qualification. Schedule
2.1 hereto sets forth a true and complete list of the Company and each
corporation, trust company, limited liability company, partnership, joint
venture and similar business organization of which the Company directly or
indirectly owns or controls more than fifty percent (50%) of the ordinary voting
power or profit interest (the "Subsidiaries"), and the jurisdictions of
organization of each and the jurisdictions in which each is qualified to do
business. Each of the Company and the Subsidiaries is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and is in good standing in each jurisdiction where the properties owned, leased
or operated, or the business conducted, by it require such qualification and
where the absence of such qualification, individually or in the aggregate, has
had or would reasonably be expected to have a Company Material Adverse Effect.
The term "Company Material Adverse Effect" as used in this Agreement shall mean
any material adverse effect on the business, operations, financial condition or
results of operations of the Company and the Subsidiaries, taken as a whole, or
on the ability of the Company and the Stockholder to perform their obligations
hereunder, other than effects caused by or resulting from (a) changes in general
economic or securities market conditions, securities market prices or interest
rate levels, or (b) the termination of any employee engaged in the business
conducted by Chicago Deferred Exchange Corporation or Chicago Deferred Exchange
Corporation of California or the loss of any such business. Each of the Company
and the Subsidiaries has the requisite power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted.
The Company has delivered to the Purchaser a true and complete copy of the
charter and bylaws, or other organizational documents, of each of the Company
and the Subsidiaries, each as amended to date, and each is in full force and
effect. Except as set forth on Schedule 2.1, the Company does not directly or
indirectly control, or have any direct or indirect equity participation or
profit interests in, any corporation, partnership, limited liability company,
joint venture or other entity.
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Section 2.2 Authorized Capital. The authorized capital stock
of the Company consists of 1,000 shares of Company Stock, all of which are
issued and outstanding as of the date hereof. All of the issued and outstanding
shares of Company Stock have been duly authorized and are validly issued, fully
paid and nonassessable, and are owned by the Stockholder free and clear of all
liens, pledges, security interests, claims and other encumbrances of any nature
whatsoever ("Encumbrances") except as set forth in Schedule 2.2 hereto (provided
that as of the Closing Date any of such Encumbrances set forth in Schedule 2.2
shall have been terminated or extinguished). Schedule 2.2 hereto sets forth,
with respect to each of the Subsidiaries, its authorized capital stock (which
includes, for purposes of this Agreement, profit interests, partnership,
membership and other ownership interests), its issued and outstanding shares of
capital stock (all of which have been duly authorized and are validly issued,
fully paid and nonassessable), and the record and beneficial holders of such
issued shares of capital stock. All of the issued and outstanding shares of
capital stock of the Subsidiaries owned by the Company or any of the
Subsidiaries are so owned free and clear of all Encumbrances. Except as set
forth above or in Schedule 2.2 hereto, there are no preemptive rights or any
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character relating to the issued or
unissued capital stock of the Company or the Subsidiaries. Except as set forth
on Schedule 2.2, the Company and the Subsidiaries have no obligations for
borrowed money.
Section 2.3 Corporate Authority. Each of the Company and the
Stockholder has full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by the Company and the Stockholder and the
consummation by them of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the Company
and the Stockholder, and no other corporate proceedings on the part of the
Company and the Stockholder are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the Stockholder and the
consummation by them of the transactions contemplated hereby. The approval of
this Agreement and the transactions contemplated hereby by the stockholders of
the Stockholder is not required. This Agreement has been duly executed and
delivered by each of the Company and the Stockholder and constitutes a legal,
valid and binding obligation of each of the Company and the Stockholder,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 2.4 Consents, No Conflicts. Schedule 2.4 hereto is a
true and complete list of all permits, approvals, qualifications, filings,
consents or waiting periods ("Approvals") of Governmental Authorities (as
hereinafter defined) which are required to be obtained or made by the Company,
any Subsidiary, Veredus (as hereinafter defined) or the Stockholder for the
execution, delivery and performance of this Agreement and the consummation of
the transactions (including, without limitation, the transactions
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described in Sections 6.5 and 6.7) contemplated by this Agreement (the "Company
Governmental Approvals"), and all Approvals of third parties that are not
Governmental Authorities which are so required by the Company or the Stockholder
or any Subsidiary that are material or relate to Material Contracts (as
hereinafter defined) ("Company Third Party Approvals", and together with the
Company Governmental Approvals, the "Company Approvals"), except for those
required under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), or the Client Contracts (as hereinafter defined) in connection with the
assignment of such Client Contracts (collectively, the "Assignment
Requirements"). Neither the execution and delivery of this Agreement by the
Company and the Stockholder, nor the consummation by them of the transactions
contemplated hereby, will (a) conflict with or result in a breach or violation
of any of the provisions of the Certificate of Incorporation or Bylaws of the
Company or the Stockholder; (b) subject to the granting of the Company Approvals
and the satisfaction of the Assignment Requirements, conflict with, result in a
breach or violation of, result in a default or loss of a benefit under, or
permit the acceleration of any obligation under any provision of any agreement,
indenture, mortgage, lien, lease or other instrument or restriction of any kind
to which the Company, any Subsidiary, Veredus or the Stockholder is a party or
by which any of their assets or properties is otherwise bound, or otherwise
result in the creation of any Encumbrance on the assets or properties of the
Company, any Subsidiary or Veredus; or (c) subject to the granting of the
Company Approvals and the satisfaction of the Assignment Requirements, violate
any domestic or foreign, federal or state statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree, policy, guideline or other requirement, including without
limitation those of any Governmental Authorities (as hereinafter defined), those
of any domestic or foreign self-regulatory organization ("Self-Regulatory
Organization"), and those related to the environment, health and employee
safety, in each case applicable to the Company, any Subsidiary, Veredus or the
Stockholder or their businesses, assets or properties (collectively, "Applicable
Laws"), except, with respect to each of clauses (b) and (c) of this Section 2.4,
where the effect of such conflict, breach, violation, default, loss or
acceleration, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
Section 2.5 Compliance.
(a) Each of the Company, the Subsidiaries, Veredus and the
Investment Company (as hereinafter defined) is, and since January 1, 1995 has at
all times been, in compliance with all Applicable Laws (including, without
limitation, the Advisers Act, the Investment Company Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, state laws (including those governing trust
companies, trustees and fiduciaries), the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and equal employment opportunity or other
similar laws), with which the failure to so comply would have a Company Material
Adverse Effect.
(b) Each of the Company, each Subsidiary and Veredus which is
required to be registered as a trust company, an investment adviser, a
registered representative, or
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<PAGE> 17
a transfer agent (or in a similar capacity) with any governmental or regulatory
or self-regulatory entity, including without limitation any United States or
foreign government, any state or other political subdivision, and any regulatory
or administrative agency, or any Self-Regulatory Organization (collectively, the
"Governmental Authorities"), is duly registered as such and each such
registration is in full force and effect. None of the Company, any Subsidiary or
Veredus is required to be registered as a broker or dealer, a commodity trading
advisor, a commodity pool operator or a futures commission merchant (or in a
similar capacity) with any Governmental Authorities. Each of the Company's, the
Subsidiaries' and Veredus' permits, licenses, certificates of authority, orders
and approvals that is required in order to permit such person in all material
respects to own or lease its properties and assets and to conduct its business
as presently conducted in all material respects is in full force and effect and,
to the Stockholder's knowledge, no suspension or cancellation of any of them is
threatened or reasonably likely. The use of "soft dollars" by the Company, each
Subsidiary and Veredus complies with the safe harbor provided by Section 28(e)
of the Exchange Act.
(c) Each Form ADV filed by each Subsidiary or Veredus that is
a registered investment adviser under the Advisers Act, in its most recent form
filed with the Securities and Exchange Commission ("SEC"), including any
amendments thereto filed with the SEC, complies in all material respects with
the Advisers Act and is complete and correct in all material respects and omits
no material facts required to be stated therein. The Company has provided the
Purchaser with (i) each Form ADV filed since January 1, 1998 by the Subsidiaries
or Veredus, in its most recent form filed with the SEC, including any amendments
thereto and (ii) all correspondence since January 1, 1998 with any Governmental
Authorities. Each officer, director and employee of and consultant to the
Company, Veredus, and the Subsidiaries holds and has held at all relevant times
while such person served in such capacities all licenses, permits and
authorizations necessary for the lawful performance of such person's duties on
behalf of the Company, Veredus and the Subsidiaries.
(d) Except as set forth in Schedule 2.5 hereto, none of the
Company, any of the Subsidiaries or Veredus is an "investment company" within
the meaning of the Investment Company Act or a trust company under Applicable
Laws.
(e) Except as set forth in Schedule 2.5 hereto, none of the
following has occurred since January 1, 1995: (i) any investigative or
disciplinary proceedings by the SEC, the National Association of Securities
Dealers, Inc. (the "NASD"), the New York Stock Exchange, Inc. or any other
Governmental Authorities against the Company, any of the Subsidiaries or
Veredus; or (ii) the issuance of any consent judgments, decrees, cease and
desist or other orders, disqualifications, penalties or special restrictions
against the Company, any of the Subsidiaries or Veredus, relating to or
affecting the conduct of the business of the Company, any of the Subsidiaries or
Veredus.
(f) Except as set forth on Schedule 2.5 hereto, the Company,
each of the Subsidiaries and Veredus is a "qualified professional asset manager"
within the meaning of Prohibited Transaction Class Exemption 84-14 promulgated
under ERISA.
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<PAGE> 18
(g) The Company and each Subsidiary has properly administered
in all material respects all accounts for which the Company or any Subsidiary
acts as a fiduciary, including accounts for which the Company or any Subsidiary
serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment adviser, in accordance with the terms of the governing
documents and Applicable Laws. None of the Company or any Subsidiary, or any
director, officer or employee of the Company or any Subsidiary, has committed
any material breach of trust with respect to any such fiduciary account and the
accountings for each such fiduciary account are true and correct in all material
respects. All exchange contracts entered into by Chicago Deferred Exchange
Corporation and Chicago Deferred Exchange Corporation of California qualify, in
whole or in part, as like-kind-exchanges within the meaning of Section 1031 of
the Code.
(h) All federal, state, local and foreign Tax Returns (as
defined below) with respect to Taxes (as defined below) for any open taxable
years and during which a Subsidiary has served as trustee that were or are
required to be filed by the Subsidiary by or on behalf of a Trust (as defined
below ) (the "Trust Tax Returns") have been timely filed and are complete and
correct in all material respects, and all federal and other Taxes shown as due
on such Tax Returns have been paid, except where such failure to file Trust Tax
Returns or pay such Taxes would not individually or in the aggregate have a
Company Material Adverse Effect. The term "Trust" for purposes of this Agreement
shall mean any trust or other entity on behalf of which a Subsidiary acts in the
capacity of trustee or on behalf of which a Subsidiary has filed or is required
to file any Tax Return.
Section 2.6 Financial Statements.
(a) The audited consolidated balance sheet of the Company and
the Subsidiaries as at December 31, 1998 and 1999 and the related audited
consolidated statements of income and retained earnings and cash flows for each
of the years then ended (the "Annual Financial Statements"), which are attached
as Schedule 2.6 hereto, fairly present in all material respects the consolidated
financial position and results of operations and cash flows of the Company and
the Subsidiaries as of the date and for the period indicated therein in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, except as may otherwise be
specifically indicated in such financial statements.
(b) The unaudited consolidated balance sheet of the Company
and the Subsidiaries as at June 30, 2000 and the related unaudited consolidated
statement of income for the six months then ended (the "Interim Financial
Statements" and, together with the Annual Financial Statements, the "Financial
Statements"), which are attached as Schedule 2.6 hereto, fairly present in all
material respects (subject to normal, recurring year-end adjustments) the
consolidated financial position and results of operations of the Company and the
Subsidiaries as of the date and for the period indicated therein in accordance
with U.S. generally accepted accounting principles applied on a basis consistent
with the Annual Financial Statements (except for footnote presentation and
except that such statements are unaudited).
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<PAGE> 19
Section 2.7 Undisclosed Liabilities. Neither the Company nor
any of the Subsidiaries has any obligations or liabilities of any nature,
whether absolute, accrued, contingent or otherwise, except to the extent
reflected or reserved against on the Balance Sheet dated as of June 30, 2000
included in the Financial Statements or set forth on Schedule 2.7, or on the
other Schedules hereto, or which, individually or in the aggregate, do not have
or would not reasonably be expected to have a Company Material Adverse Effect.
Section 2.8 No Material Adverse Effect. Since December 31,
1999, there has not been any change, effect or circumstance which, individually
or in the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect.
Section 2.9 No Dividends, Sale of Assets, etc. Except as set
forth in Schedule 2.9 hereto or Section 6.1(c) hereof, since December 31, 1999,
there has not been any declaration, setting aside or payment of any dividend or
other distribution in respect of the Company Stock or any direct or indirect
redemption, purchase or other acquisition by the Company of any such Company
Stock; any sale, assignment, transfer or other disposition of any material
tangible or intangible asset of the Company or any of the Subsidiaries other
than in the ordinary course of business; or any amendment, termination or waiver
of any right of substantial value belonging to or held by the Company or any of
the Subsidiaries.
Section 2.10 Litigation. There are no actions, suits,
proceedings, claims, investigations or examinations pending or, to the knowledge
of the Stockholder, threatened against the Company, any of the Subsidiaries,
Veredus or the Investment Company or their businesses, properties or assets, at
law or in equity, before or by any Governmental Authorities or before any
private arbitration panel ("Litigation"), which, individually or in the
aggregate, has had or would be reasonably likely to result in a Company Material
Adverse Effect. Schedule 2.10 sets forth a list of all Litigation. The term "to
the knowledge" of a party as used in this Agreement means actual knowledge of
the officers of such party (and, in the case of the Stockholder, the officers of
the Company and its Subsidiaries) without any independent investigation.
Section 2.11 Tax Matters.
(a) The Company and each Subsidiary has duly and timely filed
(either separately or on a consolidated or combined basis) with the appropriate
Governmental Authorities, all material returns, declarations, reports,
information returns, statements or extensions relating to Taxes (as hereinafter
defined), including any schedule or attachment thereto or any amendment thereof
(the "Tax Returns"), required to be filed by the Company and each Subsidiary,
and such Tax Returns were true, correct and complete in all material respects as
of the time of such filing or after taking into account any changes thereto
reflected on any amended Tax Returns. The term "Tax" or "Taxes" as used in this
Agreement shall mean all income, profits, gains, gross receipts, net worth,
premium, value added, ad valorem, sales, use, excise, stamp, transfer,
franchise, withholding, payroll, employment, occupation, workers' compensation,
disability,
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<PAGE> 20
severance, unemployment insurance, social security and property taxes, and all
other taxes, levies, fees, imposts, duties and charges of any kind whatsoever
imposed by the United States or any state, county, local or foreign government
or subdivision or agency thereof (each such agency, a "Taxing Authority"),
together with any interest, penalties and additions thereto, whether disputed or
not, imposed in respect of the foregoing, or in respect of any failure to comply
with any requirements regarding Tax Returns. All Taxes shown as due on the Tax
Returns have been timely paid or deposited, and the Company and its Subsidiaries
have made adequate provision for all Taxes payable by them for which no Tax
Return has yet been filed or for which no Tax Return is required to be filed.
All amounts required to be collected or withheld by the Company and the
Subsidiaries have been collected or withheld and any such amounts that are
required to be remitted to any Taxing Authority have been duly remitted.
(b) Except as set forth on Schedule 2.11, (i) neither the
Company nor any of the Subsidiaries has waived any statute of limitation or
granted any waiver or consent providing for an extension of time with respect to
the assessment or payment of any Tax or deficiency against the Company or any of
the Subsidiaries, (ii) no claim or deficiency for any Taxes has been asserted or
initiated in writing against the Company or any of the Subsidiaries by any
Taxing Authority (other than Taxes which are being contested in good faith and
for which an adequate provision has been made), (iii) there is no action, suit,
proceeding, investigation, audit or claim now pending against, or with respect
to, the Company or any of the Subsidiaries with regard to any Taxes, (iv)
neither the Company nor any of its Subsidiaries is a party to any agreement
(other than tax sharing agreements between the Company and Stockholder and
between the Company and its Subsidiaries), whether written or unwritten,
providing for the payment of Taxes, payment for Tax losses, entitlement to
refunds or similar Tax matters, (v) except for the affiliated group of which the
Stockholder is the common parent or for any year for which the statute of
limitations has expired, neither the Company nor any of its Subsidiaries has
been a member of an affiliated, consolidated, combined or unitary group, (vi)
neither the Company nor any of its Subsidiaries has any liability for the Taxes
of any person other than members of the affiliated group of which the
Stockholder is the common parent (as such terms are defined in Section 1504 of
the Internal Revenue Code of 1986, as amended (the "Code")) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise, (vii) no Taxing
Authority in a jurisdiction where the Company or any Subsidiary does not file
Tax Returns has made a claim, assertion or threat that such non-filing entity is
or may be subject to taxation by such jurisdiction, (viii) there are no tax
rulings, requests for rulings, or closing agreements relating to the Company or
any Subsidiary that could affect the liability for Taxes of the Company or any
Subsidiary for any period (or portion of a period) after the Closing Date, and
(ix) there are no Tax liens on any assets of the Company or the Subsidiaries,
except for Taxes not yet due and payable.
(c) True and complete copies or portions of copies of all
Income Tax Returns filed by or with respect to the Company and each of the
Subsidiaries (limited, in the case of the consolidated federal Income Tax Return
which includes the Company and any Subsidiary, to the information relating to
the Company and any Subsidiary included therein), that have been filed with
respect to taxable periods ending on and after
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<PAGE> 21
December 31, 1997, through the date hereof, have been made available by the
Stockholder to the Purchaser prior to the date hereof. There are no revenue
agent's reports and other written assertions of deficiencies or other
liabilities that relate to Taxes of the Company or any Subsidiary with respect
to past periods for which the limitations period has not run.
(d) Except as set forth in Schedule 2.11(d), every entity
which is treated as a partnership (for U.S. federal Income Tax purposes) in
which the Company or any of the Subsidiaries owns an interest (i) determines
each partner's distributive share of the partnership's tax items under the
"interim closing of the partnerships books" method when the partners' interests
"vary" during any partnership taxable year in accordance with Treasury
Regulation Section 1.706-1(c)(2)(ii) and (ii) has made a valid election under
Section 754 of the Code and such election has not been revoked by the
partnership.
(e) The Company and each of its Subsidiaries which is a
corporation is a member of the "selling consolidated group" within the meaning
of the first sentence of Section 338(h)(10)(B) of the Code of which the
Stockholder is the common parent.
Section 2.12 Investment Advisory Activities.
(a) Schedule 2.12 hereto sets forth a true and complete list
of (i) each of the series (a "Fund" and, collectively, the "Funds") of the
Alleghany Funds (the "Investment Company") for which any of the Subsidiaries or
Veredus Asset Management LLC ("Veredus") acts as investment adviser or
sub-adviser, (ii) each Fund that has any other person or entity as its
investment adviser or sub-adviser, (iii) each other investment advisory client
(including any Investment Partnership (as defined below)) of any of the Company,
any Subsidiary or Veredus (each a "Non-Fund Client") having assets of $100
million or more under management of any of the Subsidiaries or Veredus as of
August 31, 2000, (iv) each of the Subsidiaries and Veredus that is registered as
an investment adviser under the Advisers Act, and (v) the aggregate amount of
assets under management with the Company, the Subsidiaries and Veredus as of
August 31, 2000 for the Funds and for all Non-Fund Clients. Other than the
Funds, except as set forth on Schedule 2.12, none of the Subsidiaries or Veredus
acts as investment adviser or sub-adviser of, or is a general partner, manager
or managing member of, any investment company as defined in the Investment
Company Act, or of any entity that would be an investment company as defined in
the Investment Company Act but for the exclusions under Sections 3(c)(1),
3(c)(3) or 3(c)(7) of the Investment Company Act (each, an "Investment
Partnership").
(b) The Company has heretofore made available to the Purchaser
copies of each investment advisory agreement with any of the Funds or Non-Fund
Clients (the "Client Contracts") and the rate of fees payable under such Client
Contracts, except for such information therein with respect to which any of the
Subsidiaries or Veredus has an obligation of confidentiality to such Funds or
Non-Fund Clients. The Company has also heretofore made available to the
Purchaser copies of each partnership, limited liability or other similar
agreement with any of the Funds or Non-Fund Clients. The parties hereto
acknowledge that one of the Subsidiaries, The Chicago Trust Company, is in the
process
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<PAGE> 22
of transferring its institutional Client Contracts to another Subsidiary,
Chicago Capital Management, Inc., which process shall continue.
(c) Each Client Contract and any subsequent renewal (i) has
been duly authorized, executed and delivered by the applicable Subsidiary or
Veredus, (ii) is a valid and legally binding agreement, enforceable against such
Subsidiary or Veredus, as the case may be, and, to the knowledge of the
Stockholder, each other party thereto, except as enforceability may be limited
by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and (iii) has been duly approved
and continued, and has been at all times, in all material respects, in
compliance with Applicable Laws.
(d) None of the Subsidiaries or, to the knowledge of the
Stockholder, Veredus or any other party is currently in material default under
any of the terms of any Client Contract.
(e) None of Veredus, the Subsidiaries that are registered
under the Advisers Act or any other person "associated" (as defined under the
Advisers Act) with Veredus or any of such Subsidiaries has been convicted of any
crime or has been subject to disqualification pursuant to Section 203(e) of the
Advisers Act or subject to disqualification to serve as an investment adviser or
as an associated person to a registered investment adviser, or subject to
disqualification pursuant to Rule 206(4)-3 under the Advisers Act or subject to
disqualification to serve as a broker-dealer under Section 15 of the Exchange
Act or the subject of a rebuttable presumption pursuant to Rule 206(4)-4(b)
under the Advisers Act, unless in each case Veredus, the Subsidiary or other
"associated" person, as applicable, has received exemptive relief from the SEC
with respect to such disqualification. The Purchaser has been provided with a
copy of any exemptive order issued by the SEC in respect of such
disqualification. There is no proceeding or investigation pending, or to the
knowledge of the Stockholder, threatened that would reasonably be expected to
become the basis for such disqualification. None of Veredus, the Subsidiaries or
any "affiliated person" (as defined under the Investment Company Act) thereof
has been convicted of any crime or has been subject to disqualification as an
investment adviser or subject to disqualification to serve in any other capacity
contemplated by the Investment Company Act for any investment company under
Sections 9(a) and 9(b) of the Investment Company Act, unless in each case
Veredus, the Subsidiary or other "affiliated person," as applicable, has
received exemptive relief from the SEC with respect to such disqualification.
The Purchaser has been provided with a copy of any exemptive order issued by the
SEC in respect of such disqualification. There is no proceeding or investigation
pending, or to the knowledge of the Stockholder, threatened that would
reasonably be expected to become the basis for any such disqualification.
(f) Except as set forth in Schedule 2.12, (i) there is no
pending nor, to the knowledge of the Stockholder, threatened termination by any
Fund or Non-Fund Client of its Client Contract or withdrawal of assets from
management by the Company, any of
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<PAGE> 23
the Subsidiaries or Veredus or proposed reduction in any fee rate under any
Client Contract, and (ii) no partner or member of an Investment Partnership has
given any notice of its intention to redeem, or to the knowledge of the
Stockholder threatened to redeem, its partnership or limited liability company
interest or otherwise withdraw a material amount of assets from management by
the Investment Partnership or reduce the fee payable to the Company, any of the
Subsidiaries or Veredus under such partnership or limited liability company
agreement (except for fee waivers agreed to in the ordinary course of business
as to particular investors).
(g) Except as set forth in Schedule 2.12, to the knowledge of
the Stockholder, since January 1, 2000, there has been no Litigation, nor any
material complaints or disputes that have not been resolved, involving a Client
Contract or any investment advisory client of the Company, any Subsidiary or
Veredus.
(h) Each of the Investment Partnerships is excepted from the
definition of investment company (as defined in the Investment Company Act).
Except as set forth on Schedule 2.12, to the knowledge of the Stockholder, no
assets of any Investment Partnership constitute "plan assets" within the meaning
of Department Regulation Section 2510.3-101.
(i) The offering of the partnership or membership interests in
each Investment Partnership that is sponsored by the Company, a Subsidiary or
Veredus was conducted in compliance in all material respects with all Applicable
Laws. None of the offering memoranda used in connection with such offering and
none of the supplemental advertising and marketing materials related thereto, if
any, as of the respective dates of their use, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Except as set forth in Schedule 2.12, none of the Company,
any of the Subsidiaries or Veredus is a party to any underwriting agreement,
distribution plan, transfer agent agreement, shareholder servicing agreement or
other administrative service agreement with respect to the Funds or any other
investment company (within the meaning of the Investment Company Act).
Section 2.13 Registered Investment Company.
(a) The Investment Company is, and at all times since January
1, 1995 has been, duly registered with the SEC as an investment company under
the Investment Company Act and has been duly organized, and is validly existing
and in good standing under the laws of the jurisdiction of its organization and
has the requisite power and authority to carry on its business as it is now
being conducted.
(b) Each Fund, since inception of operations, has been
operated and is currently operating in material compliance with its respective
investment objectives and policies and Applicable Laws.
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<PAGE> 24
(c) Veredus and each Subsidiary that is an investment adviser
or sub-adviser to a Fund has adopted a code of ethics pursuant to Rule 17j-1
under the Investment Company Act, and Veredus and each Subsidiary that is a
registered investment adviser under the Advisers Act has adopted a written
policy regarding insider trading, all of which comply with Applicable Laws. The
policies of Veredus and each Subsidiary that is a registered investment adviser
with respect to avoiding conflicts of interest are as set forth in the most
recent Forms ADV thereof. Since January 1, 1995, there have been no material
violations or, to the knowledge of the Stockholder, allegations of material
violations of the codes or policies referenced in this clause (c).
(d) None of the Company, any Subsidiary, Veredus or any of
their respective affiliates has any express or implied understanding or
arrangement which would reasonably be expected to impose an unfair burden on any
of the Funds for purposes of Section 15(f) of the Investment Company Act as a
result of the transactions contemplated hereby or would in any way violate
Section 15(f) of the Investment Company Act.
(e) Except as set forth on Schedule 2.13 hereto, no exemptive
orders have been obtained, nor are any requests pending therefor, with respect
to the Investment Company under any of the Securities Laws.
(f) The Company has heretofore made available to the Purchaser
copies of (i) the audited financial statements for each of the Funds for its
fiscal year ended in 1999 (the "Fund Annual Financial Statements") and (ii) the
unaudited semi-annual financial statements for each of the Funds for its
semi-annual period, if any, ended after the date of the Annual Financial
Statements for such Fund and prior to the date hereof (the "Fund Interim
Financial Statements" and, together with the Fund Annual Financial Statements,
the "Fund Financial Statements"). Each Fund Financial Statement fairly presents
in all material respects (subject, in the case of the Fund Interim Financial
Statements, to normal year-end adjustments) the financial position and statement
of net assets of such Fund as of the date thereof and its results of operations
for the period then ended in accordance with U.S. generally accepted accounting
principles applied on a consistent basis (except, in the case of the Fund
Interim Financial Statements, for footnote presentation and except that such
statements are unaudited).
(g) Each current prospectus (which term as used in this
Agreement shall include any related statement of additional information), as
amended or supplemented, relating to each Fund has heretofore been made
available to the Purchaser. Each such prospectus, as amended or supplemented, is
in substantial compliance with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the Investment Company Act, and, where
applicable, the rules of the NASD, except for such non-compliance which,
individually or in the aggregate, has not had or would not reasonably be
expected to have a Company Material Adverse Effect. The Investment Company has
timely filed on behalf of each of the Funds all prospectuses, financial
statements, other forms, reports, sales literature, and advertising, and any
other documents required to be filed with applicable regulatory authorities (the
"Reports"), except where the failure to file, individually or in the aggregate,
has not had and would
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not reasonably be expected to have a Company Material Adverse Effect. The
Reports have been prepared in accordance with the requirements of Applicable
Laws, except for such non-compliance which, individually or in the aggregate,
has not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(h) A copy of each distribution plan adopted by the Board of
Trustees of the Investment Company on behalf of the Funds (other than the
Alleghany/Chicago Trust Money Market Fund) under Rule 12b-1 under the Investment
Company Act ("12b-1 Plan") (or form of 12b-1 Plan adopted by classes of shares
offered by a Fund) has heretofore been made available to the Purchaser, and all
payments due since December 31, 1999 and prior to the most recently ended
payment period under each distribution plan or principal underwriting agreement
to which the Investment Company is a party on behalf of any Fund have been made
in compliance with the related 12b-1 Plan.
(i) Each of the proxy solicitation materials to be distributed
to the shareholders of each Fund in connection with the Company Approvals and
the Assignment Requirements will contain all information necessary in order to
make the disclosure of information therein satisfy the requirements of Section
14 of the Exchange Act and Section 20 of the Investment Company Act and the
rules and regulations thereunder and such materials (except to the extent
supplied by or related to the Purchaser or Newco or their affiliates) will be
complete in all material respects and will not contain (at the time such
materials are distributed, filed or provided to, or at the time of the relevant
vote of, the shareholders of each Fund in connection with the Company Approvals
and the Assignment Requirements) any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(j) The Investment Company on behalf of each Fund has elected
to qualify, and for all taxable years that a Subsidiary served as investment
adviser and with respect to which the applicable statute of limitations
(including any extensions) has not expired ("open taxable years"), each Fund has
continuously qualified, to be treated as a "regulated investment company" under
Subchapter M of the Code and has continuously been eligible to compute, and has
for each such taxable year computed, its federal income tax under Section 852 of
the Code. There is no circumstance that would cause any Fund to fail to qualify
as a regulated investment company under the provisions of Part I of Subchapter M
of the Code (it being understood that this representation will not be deemed to
be violated to the extent the distribution requirement of Section 852 of the
Code can be met by virtue of the election set forth in Section 855(a) of the
Code). At the Closing Date, all federal, state, local and foreign Tax Returns
with respect to Taxes for any open taxable years and during which a Subsidiary
has served as investment adviser that were or are required to be filed on or
before such date (after taking into account any extensions of time to file) by
or on behalf of a Fund ("Fund Tax Returns") were or shall have been timely filed
and were or shall be complete and correct in all material respects, and all
federal and other Taxes, including interest, penalties, and additions to tax,
shown or required to be shown as due on such returns or otherwise due and
payable, shall have been paid or completely and adequately provided for, except
where such failure to file Fund Tax Returns or pay such Taxes would not have a
Company Material Adverse
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<PAGE> 26
Effect. No such Fund Tax Return or other filing is currently under audit, no
assessment has been asserted with respect to such Fund Tax Returns or other
filings, and no requests for waivers of the time to make any such assessment are
pending. None of the Funds is delinquent in the payment of any material Tax,
assessment, or governmental charge.
Section 2.14 Leases. Schedule 2.14 hereto sets forth a true
and complete list of the leases for the office space occupied by the Company or
any of its Subsidiaries, complete copies of which heretofore have been made
available to the Purchaser (the "Leases"). Each of the Leases is in full force
and effect and there are no existing defaults on the part of the lessee
thereunder nor does there exist any event or condition on the part of the lessee
which, with notice or lapse of time or both, would constitute a default or
grounds for termination or reentry thereunder. Neither the Company nor any of
the Subsidiaries occupies, owns or leases any other real property.
Section 2.15 Intellectual Property.
(a) Schedule 2.15 hereto is a true and complete list of all
(i) registered trademarks and service marks, registered domain names, registered
copyrights and issued patents owned by the Company or any Subsidiary, (ii)
applications for registration or grant of any of the foregoing, (iii) material
unregistered trademarks, service marks, trade names, logos and assumed names
owned by the Company or any Subsidiary, and (iv) licenses for any of the
foregoing, in each case that are used in or necessary to the conduct of the
businesses of the Company or any Subsidiary as currently conducted. The
foregoing items, together with all other trademarks, service marks, trade names,
logos, assumed names, patents, copyrights, trade secrets and confidential
business information, computer software (including custom developed software),
licenses, formulae, customer lists or other databases, designs and inventions
(whether patentable or unpatentable) that are used in or necessary to conduct
the businesses of the Company and the Subsidiaries as currently conducted
constitute the "Intellectual Property."
(b) Except as set forth in Schedule 2.15, the Company and each
of the Subsidiaries has ownership of, or such other rights by license, lease or
other agreement in and to, the Intellectual Property necessary for the conduct
of its business as currently conducted. All such rights owned by the Company or
any Subsidiary are valid, subsisting and in full force and effect. Except as set
forth in Schedule 2.15, neither the Company nor any of the Subsidiaries has
infringed, misappropriated or violated any trademark, trade name, copyright,
patent, trade secret right or other proprietary right of any third party except
to the extent any such infringement, misappropriation or violation, individually
or in the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect, and neither the Company nor any of the
Subsidiaries has received any charge, complaint, claim, demand or notice
alleging any such infringement, misappropriation or violation. Except as set
forth in Schedule 2.15, to the knowledge of the Stockholder, no third party has
infringed, misappropriated or violated any Intellectual Property and no
Litigation has been brought, or is pending, or, to the knowledge of the
Stockholder, is threatened, that challenges the legality, enforceability of, or
the Company's or any Subsidiary's right to use, or ownership of, any
Intellectual Property.
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Section 2.16 Material Contracts. Schedule 2.16 sets forth a
list of all of the following agreements and arrangements, whether or not in
writing, to which the Company, Veredus or any Subsidiary is a party or by which
any of them or their assets or properties is bound and with respect to which the
Company, Veredus or any Subsidiary has any current or future liability or
obligation ("Material Contracts"): (a) any partnership, joint venture or similar
agreement and related documentation; (b) any agreement whereby the Company,
Veredus or any Subsidiary acquired or disposed of an interest constituting in
excess of 10% of the ordinary voting power in or profit interests of another
entity; (c) any agreement establishing or evidencing a right to participate in
the profits of any entity; (d) any agreement that creates any material
Encumbrance on the assets or properties of the Company or any Subsidiary; (e)
any guarantee or agreement to indemnify; or (f) any other agreement or other
arrangement which is material to the business or operations of the Company,
Veredus or any of the Subsidiaries. The Material Contracts are in full force and
effect and are enforceable against the Company, Veredus or the applicable
Subsidiary, as the case may be, in accordance with their terms, except as
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
None of the Company, Veredus or any of the Subsidiaries is in default under any
such Material Contract or has received written notice of cancellation of or
default under or intent to cancel or declare a default under any Material
Contract. To the knowledge of the Stockholder, no other party to any Material
Contract with the Company or any Subsidiary is in default thereunder, and there
exists no event or condition which (with or without notice or lapse of time or
both) would result in a breach or default on the part of the Company, Veredus or
the applicable Subsidiary or, to the knowledge of the Stockholder, any other
party under any Material Contract.
Section 2.17 Benefit Plans.
(a) Except as contemplated in Exhibits 1.7 and 7.10, Schedule
2.17(a) hereto sets forth a correct and complete list of (i) all the material
employee benefit plans, agreements, commitments, practices or arrangements of
any type providing any compensation or employee benefits (including, but not
limited to, plans described in Section 3(3) of ERISA) currently maintained by
the Company or any of the Subsidiaries, or to which the Company or any of the
Subsidiaries may have any Liability (as hereinafter defined) (contingent or
otherwise) (the "Benefit Plans"), (ii) any collective bargaining agreements
covering employees of the Company or any Subsidiary and (iii) any other
agreement or arrangement relating to compensation or employee benefits to which
the Stockholder or any of its affiliates (other than the Company or any of the
Subsidiaries) and any member of senior management of the Company or any of the
Subsidiaries are parties.
(b) With respect to each Benefit Plan, the Company has made
available to the Purchaser true and complete copies of: (i) any written plan
texts and agreements; (ii) the summary plan description currently in effect and
all material modifications thereto, if any; (iii) the most recent annual return
in the federal Form 5500 series, if applicable; (iv) the most recent annual and
periodic accounting of plan assets, if
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<PAGE> 28
applicable; (v) the most recent determination letter, if any, received from the
Internal Revenue Service; and (vi) the most recent actuarial valuation, if
applicable.
(c) Except as set forth in Schedule 2.17(c) hereto, with
respect to each Benefit Plan: (i) if intended to qualify under Section 401(a) of
the Code, such plan so qualifies, and its trust, if applicable, is exempt from
taxation under Section 501(a) of the Code; (ii) such Benefit Plan has been
administered and enforced in all material respects in accordance with its terms
and all Applicable Laws; (iii) no breach of fiduciary duty or prohibited
transaction (within the meaning of Section 4975 of the Code or Section 406 of
ERISA) has occurred with respect to which the Company, any of the Subsidiaries
or such Benefit Plan may be liable or otherwise damaged; (iv) no litigation or
claim (other than routine claims for benefits or overpayments of benefits), and
no governmental administrative proceeding, audit or investigation, is pending
or, to the knowledge of the Stockholder, threatened; (v) no "reportable event"
(within the meaning of Section 4043(b) of ERISA) has occurred with respect to
which the Company, any of the Subsidiaries or such Benefit Plan may be liable or
otherwise damaged; (vi) all contributions, premiums, and other payment
obligations and all liabilities for accrued but unfunded obligations for
benefits (using actuarial assumptions which are reasonable, both individually
and in the aggregate) have been accrued on the Financial Statements in
accordance with U.S. generally accepted accounting principles, and all
contributions required to be made to such Benefit Plan by the terms of such plan
or under Applicable Laws have been made on a timely basis; (vii) the Company or
each of the Subsidiaries, as the case may be, has expressly reserved in itself
the right to amend, modify or terminate such Benefit Plan, or any portion of it,
without liability to itself; (viii) no such Benefit Plan requires the Company or
any of the Subsidiaries to continue to employ any employee, director or
consultant; and (ix) with respect to each such Benefit Plan subject to either
Section 412 of the Code or Section 302 of ERISA, no such Benefit Plan has
incurred an accumulated funding deficiency, whether or not waived.
(d) No Benefit Plan is a "multiemployer plan" (within the
meaning of Section 3(37) or Section 4001(a)(3) of ERISA) or, except as set forth
on Schedule 2.17(d), a "multiple employer plan" (within the meaning of Section
4064 of ERISA or Section 413(c) of the Code). Neither the Company nor any of the
Subsidiaries has a current or potential liability or obligation, whether direct
or indirect, with respect to any multiemployer plan or multiple employer plan
for which it is not indemnified.
(e) In the case of each Benefit Plan which provides welfare
benefits of the type described in Section 3(1) of ERISA: (i) the reserves
therefor on the Annual Financial Statements are adequate to discharge when due
the accrued, unfunded liabilities for medical or death benefits with respect to
current or former employees, directors or consultants of the Company or any of
the Subsidiaries beyond their termination of employment (in addition to coverage
mandated by Sections 601-608 of ERISA and 4980B(f) of the Code); and (ii) each
such plan which provides medical or death benefits with respect to current or
former employees of the Company or any of the Subsidiaries has been administered
in all material respects in compliance with Sections 601-608 of ERISA and
4980B(f) of the Code.
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(f) Except as set forth on Schedule 2.17(f), neither the
entering into of this Agreement nor the consummation of the transactions
contemplated by this Agreement (whether alone or in connection with any other
event) will entitle any individual to severance pay or accelerate the time of
payment or vesting, or increase the amount, of compensation or employee benefits
due to any individual.
(g) Schedule 2.17(g) sets forth the amount of the payments
that could be made after the Effective Time to any "disqualified individual"
(within the meaning of Section 280G(c) of the Code) employed by the Company or
any of the Subsidiaries directly or indirectly by the Purchaser, the Company,
the Subsidiaries or any person whose relationship to any of the foregoing is
such as to require attribution of stock ownership between the parties under
Section 318(a) of the Code without any part of such payment being treated as an
"excess parachute payment" (within the meaning of Section 280G(b) of the Code).
Within five business days after the date hereof, Schedule 2.17(g) shall be
amended to include the information for Messrs. Stuart Bilton and Skip Newman.
(h) To the knowledge of the Stockholder, no employee of the
Company or any of the Subsidiaries or Veredus identified on Schedule 2.17(h):
(i) is, on the date of this Agreement, subject to any contract, arrangement,
policy or understanding that in any way could limit such employee's ability to
continue to perform services for such employee's current employer, or (ii) has
committed a crime to which Section 411(a) of ERISA applies.
Section 2.18 Interests of Officers and Directors. Except as
set forth in Exhibits 1.7 and 7.10 or in Schedule 2.18 hereto, and other than in
respect of salaries, incentive plans or arrangements and bonuses or amounts due
in respect of ordinary travel and business expenses and Benefit Plans, no
present officer or director of the Company or any of the Subsidiaries nor any
immediate family member thereof (a) has any agreement, loan or other obligation
outstanding with, to or from the Company or any of the Subsidiaries or for which
the Company or any of the Subsidiaries may be liable, other than the management
by the Subsidiaries of personal assets of such officers and directors in the
ordinary course of business of such Subsidiaries, or (b) to the knowledge of the
Stockholder, has any material interest in any firm, person or entity with which
the Company or any of the Subsidiaries does business.
Section 2.19 Insurance. Schedule 2.19 hereto sets forth a true
and complete list of all policies of insurance maintained by or on behalf of the
Company and any of the Subsidiaries, showing the subject matter, the beneficiary
and the amount of coverage for each policy. All such policies are in force and
all premiums due thereon have been paid.
Section 2.20 Absence of Bank or Savings and Loan Status.
Neither the Company nor any of the Subsidiaries (a) is an "insured bank" or is
eligible for federal deposit insurance within the meaning of the Federal Deposit
Insurance Act, as amended; (b) is a "savings association" for purposes of the
Regulations for Savings and Loan Holding Companies, 12 CFR Sections 583-584 and
the Regulations for the Acquisition of Control of Savings Associations, 12 CFR
Section 574; (c) accepts deposits within the meaning
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<PAGE> 30
of 12 U.S.C. Section 378; (d) is a "bank" or a "bank holding company"; (e) owns
or "controls" 5 percent or more of the voting securities of a "bank" or "bank
holding company," as such terms are defined in the Bank Holding Company Act of
1956, as amended, and the regulations promulgated thereunder; (f) is regulated
as a bank under the laws or regulations of its jurisdiction of incorporation;
(g) is a "savings and loan holding company"; (h) "controls" any "savings
association," as such terms are defined in 12 CFR Sections 574 and 583;
(i) has acquired by purchase or otherwise, or retains, more than 5 percent of
the voting stock or shares of a "savings association" or "savings and loan
holding company," as such terms are defined in 12 CFR Section 583; or (j) is
regulated as a savings and loan institution under the laws or regulations of its
jurisdiction of incorporation.
Section 2.21 Brokers and Finders. None of the Stockholder, the
Company, the Subsidiaries or any of their officers, directors, employees or
agents has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with the transactions
contemplated by this Agreement, except that the Stockholder has retained Merrill
Lynch & Co. and McKinsey and Company as its advisers at Stockholder's expense.
Section 2.22 Assets. The assets, rights and properties used in
the conduct of the business of the Company and the Subsidiaries are owned by the
Company or a Subsidiary free and clear of any material Encumbrance and are not
subject to any Encumbrance imposed by the Stockholder or its subsidiaries.
Section 2.23 Intercompany Transactions. Schedule 2.23 sets
forth a list of all transactions between the Stockholder or its subsidiaries
(other than the Company and the Subsidiaries), on the one hand, and the Company
and the Subsidiaries, on the other hand, since January 1, 2000; (b) a list of
all material assets, properties and services of the Company or any Subsidiary
used by the Stockholder or its subsidiaries (other than the Company or its
Subsidiaries), or vice versa, at any time since January 1, 2000 and (c) a list
of all agreements between the Stockholder or its subsidiaries (other than the
Company and its Subsidiaries), on the one hand, and the Company or its
Subsidiaries, on the other hand.
Section 2.24 Assets under Management. As of September 30,
2000, the aggregate market value of the assets under management with the
Company, the Subsidiaries and Veredus was $39.721 billion. As of 4:00 p.m.
Atlanta time on October 16, 2000, the aggregate market value of the assets under
M&C's management was $28,991,198,352.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company
and the Stockholder as of the date hereof, with respect to the Purchaser only,
and as of the Closing Date, with respect to each of the Purchaser and Newco, as
follows:
Section 3.1 Corporate Organization. Each of the Purchaser and
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted. The authorized capital stock of Newco consists of
100 shares of common stock, par value $0.01 per share, all of which shares have
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable and are owned directly or indirectly by the Purchaser free and
clear of all Encumbrances. Newco has not engaged in any activity other than in
connection with its formation and the transactions contemplated by this
Agreement.
Section 3.2 Corporate Authority. The Purchaser has full
corporate power and authority to enter into this Agreement. Each of the
Purchaser and Newco has full corporate power and authority to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Purchaser and the consummation by the Purchaser and Newco
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate and stockholder action on the part of the Purchaser and
Newco, and no other corporate or stockholder proceedings on the part of the
Purchaser or Newco are necessary to authorize the execution, delivery and
performance of this Agreement by the Purchaser and the consummation by the
Purchaser and Newco of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Purchaser and constitutes the legal,
valid and binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 3.3 Consents, No Conflicts. Schedule 3.3 hereto is a
true and complete list of all Approvals of Governmental Authorities which are
required to be obtained or made by the Purchaser or Newco for the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement (the "Purchaser Governmental
Approvals") and all Approvals of third parties that are not Governmental
Authorities which are so required by the Purchaser or Newco that are material to
the ability of the Purchaser or Newco to perform their obligations hereunder
("Purchaser Third Party Approvals", and together with Purchaser Governmental
Approvals, the "Purchaser Approvals"). Neither the execution and delivery of
this Agreement by the Purchaser nor the consummation by the Purchaser and Newco
of the transactions contemplated hereby, will (a) conflict with or result in a
breach
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<PAGE> 32
or violation of any provision of the certificate of incorporation and by-laws of
the Purchaser or Newco; (b) subject to the granting of the Purchaser Approvals,
conflict with, result in a breach or violation of, result in a default or loss
of a benefit under, or permit the acceleration of any obligation under any
provision of any agreement, indenture, mortgage, lien, lease or other instrument
or restriction of any kind to which the Purchaser or Newco is a party or by
which any of their assets or properties is otherwise bound; or (c) subject to
the granting of the Purchaser Approvals, violate any domestic or foreign,
federal or state statute, law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, policy,
guideline or other requirement, including, without limitation, those of any
Governmental Authorities, those of any Self-Regulatory Organizations, and those
related to the environment, health and employee safety, in each case applicable
to the Purchaser or Newco or any of their businesses, assets or properties,
except, with respect to each of clauses (b) and (c) of this Section 3.3, where
the effect of such conflict, breach, violation, default, loss or acceleration,
individually or in the aggregate, would not materially impair the ability of the
Purchaser or Newco to perform their obligations hereunder.
Section 3.4 Litigation. There are no actions, suits,
proceedings, claims, investigations or examinations pending or, to the knowledge
of the Purchaser, threatened against the Purchaser or Newco or their businesses,
properties or assets, at law or in equity, before or by any Governmental
Authorities or before any private arbitration panel, which would be reasonably
likely to materially impair the ability of the Purchaser and Newco to perform
their obligations hereunder.
Section 3.5 Brokers and Finders. None of the Purchaser, Newco
or any of their officers, directors, employees or agents has employed any broker
or finder or incurred any liability for any brokerage fees, commissions or
finders fees in connection with the transactions contemplated by this Agreement,
except that the Purchaser has retained ABN AMRO Incorporated as its adviser at
the Purchaser's expense.
Section 3.6 Investment Advisory Activities. None of the
Purchaser, Newco or any other person "associated" (as defined under the Advisers
Act) with the Purchaser or Newco has been convicted of any crime or has been
subject to disqualification pursuant to Section 203(e) of the Advisers Act or
subject to disqualification to serve as an investment adviser or as an
associated person to a registered investment adviser, or subject to
disqualification pursuant to Rule 206(4)-3 under the Advisers Act or subject to
disqualification to serve as a broker-dealer under Section 15 of the Exchange
Act or the subject of a rebuttable presumption pursuant to Rule 206(4)-4(b)
under the Advisers Act, unless in each case the Purchaser, Newco or other
"associated" person, as applicable, has received exemptive relief from the SEC
with respect to such disqualification. The Company and the Stockholder have been
provided with a copy of any exemptive order issued by the SEC in respect of such
disqualification. There is no proceeding or investigation pending or, to the
knowledge of the Purchaser, threatened that would reasonably be expected to
become the basis for any such disqualification. None of the Purchaser, Newco or
any "affiliated person" (as defined under the Investment Company Act) thereof
has been convicted of any crime or has been subject to disqualification as an
investment adviser or subject to disqualification to serve
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in any other capacity contemplated by the Investment Company Act for any
investment company under Sections 9(a) and 9(b) of the Investment Company Act,
unless in each case the Purchaser, Newco or other "affiliated person," as
applicable, has received exemptive relief from the SEC with respect to such
disqualification. The Company and the Stockholder have been provided with a copy
of any exemptive order issued by the SEC in respect of such disqualification.
There is no proceeding or investigation pending or, to the knowledge of the
Purchaser, threatened that would reasonably be expected to become the basis for
any such disqualification.
Section 3.7 Information in Proxy. The information relating to
the Purchaser or Newco furnished by them in writing for inclusion in the proxy
solicitation materials to be distributed to the shareholders of each Fund will
include all disclosures of information regarding the Purchaser and Newco as are
necessary in order to make the disclosure of information therein satisfy the
requirements of Section 14 of the Exchange Act, Section 20 of the Investment
Company Act and the rules and regulations thereunder and such information shall
not contain (at the time such information is distributed) any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 3.8 Financing. The Purchaser has, and at the Effective
Time will have, funds and financing arrangements available to it sufficient to
deliver the Merger Consideration and to fulfill its obligations hereunder.
Section 3.9 Section 15(f) of the Investment Company Act. None
of the Purchaser, Newco or any of their affiliates has any express or implied
understanding or arrangement which would reasonably be expected to impose an
unfair burden on any of the Funds for purposes of Section 15(f) of the
Investment Company Act as a result of the transactions contemplated hereby or
would in any way violate Section 15(f) of the Investment Company Act.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement are
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions (unless waived by the Purchaser):
Section 4.1 Compliance with Agreement. The Company and the
Stockholder shall have performed and complied in all material respects with all
the terms, covenants and agreements required by this Agreement to be performed
or complied with by them on or before the Closing Date, and the Purchaser shall
have received from each of the Company and the Stockholder at the Closing a
certificate, dated the Closing Date, to that effect.
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Section 4.2 Representations and Warranties. The
representations and warranties made by the Company and the Stockholder in this
Agreement in the aggregate shall be true and correct in all material respects
(except that materiality and Company Material Adverse Effect qualifiers
contained in the representations and warranties made by the Company and the
Stockholder shall be disregarded for purposes of this Section 4.2) as of the
date of this Agreement and, except for any representations and warranties which
are made as of a particular date (which shall be true and correct as of such
date), as of the Closing Date, except for any changes permitted by the terms
hereof or consented to in writing by the Purchaser, and the Purchaser shall have
received from each of the Company and the Stockholder at the Closing a
certificate, dated the Closing Date, to that effect.
Section 4.3 Opinion of Counsel for the Company and the
Stockholder. The Purchaser shall have received an opinion from Dewey Ballantine
LLP, counsel for the Company and the Stockholder, dated the Closing Date,
substantially in the form set forth in Exhibit 4.3 hereto.
Section 4.4 Approvals. All Company Approvals and all Purchaser
Governmental Approvals shall have been obtained and be in effect on the Closing
Date.
Section 4.5 Assets Under Management. The Asset Quotient shall
not be less than 0.70, and the Consenting Clients shall include those entities
in the manner set forth in Schedule 4.5 hereto.
Section 4.6 No Material Adverse Effect. Since the date of this
Agreement, no change or event shall have occurred that, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect.
Section 4.7 No Injunction. No Governmental Authorities of
competent jurisdiction shall have issued any order, injunction or decree that is
in effect and restrains, enjoins or otherwise prohibits the consummation of the
Merger.
Section 4.8 Compliance with Section 15(f). At least 75% of the
Board of Trustees of the Investment Company shall not be "interested persons" of
the Stockholder, the Company, the Purchaser, Newco, a Subsidiary or any of their
affiliates, as that term is defined under applicable provisions of the
Investment Company Act and interpreted by the SEC.
Section 4.9 Employment Agreements. Each of the Employment
Agreements shall be in full force and effect, and each individual party to an
Employment Agreement shall be employed by the counterparty to such Employment
Agreement, and shall not have given notice of or, to the knowledge of the
Stockholder, threatened any termination of such employment.
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ARTICLE V
CONDITIONS TO THE OBLIGATIONS
OF THE COMPANY AND THE STOCKHOLDER
The obligations of the Company and the Stockholder under this
Agreement are subject to the satisfaction, on or before the Closing Date, of
each of the following conditions (unless waived by the Stockholder):
Section 5.1 Compliance with Agreement. Each of the Purchaser
and Newco shall have performed and complied in all material respects with all
the terms, covenants and agreements required by this Agreement to be performed
or complied with by it on or before the Closing Date, and the Company and the
Stockholder shall have received from each of the Purchaser and Newco at the
Closing a certificate, dated the Closing Date, to that effect.
Section 5.2 Representations and Warranties. The
representations and warranties made by the Purchaser in this Agreement in the
aggregate shall be true and correct in all material respects (except that
materiality qualifiers contained in the representations and warranties made by
the Purchaser shall be disregarded for purposes of this Section 5.2) as of the
date of this Agreement and, except for any representations and warranties which
are made as of a particular date (which shall be true and correct as of such
date), as of the Closing Date, except for any changes permitted by the terms
hereof or consented to in writing by the Company and the Stockholder, and the
Company and the Stockholder shall have received from the Purchaser at the
Closing a certificate, dated the Closing Date, to that effect.
Section 5.3 Opinion of Counsel for The Purchaser. The Company
and the Stockholder shall have received an opinion from Fried, Frank, Harris,
Shriver & Jacobson, counsel for the Purchaser, dated the Closing Date,
substantially in the form set forth in Exhibit 5.3 hereto.
Section 5.4 Approvals. All Company Governmental Approvals and
all Purchaser Approvals shall have been obtained and be in effect on the Closing
Date.
Section 5.5 No Injunction. No governmental authority of
competent jurisdiction shall have issued any order, injunction or decree that is
in effect and restrains, enjoins or otherwise prohibits the consummation of the
Merger.
Section 5.6 Compliance with Section 15(f). At least 75% of the
Board of Trustees of the Investment Company shall not be "interested persons" of
the Stockholder, the Company, the Purchaser, Newco, a Subsidiary or any of their
affiliates, as that term is defined under applicable provisions of the
Investment Company Act and interpreted by the SEC.
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ARTICLE VI
COVENANTS OF THE COMPANY AND THE STOCKHOLDER
Section 6.1 Covenants Pending the Closing. From and after the
date hereof and until the Effective Time:
(a) Access to Properties, Books and Records. The Company and
the Stockholder shall afford or cause to be afforded to the Purchaser and to the
attorneys, accountants and other authorized representatives (collectively,
"Representatives") of the Purchaser reasonable access, during normal business
hours and upon reasonable notice as often as they reasonably desire, to the
Company, the Subsidiaries, Veredus and their employees, properties, books and
records in order to afford the Purchaser the opportunity to make such
investigations of the affairs of the Company, Veredus and the Subsidiaries as it
deems desirable. The Company and the Stockholder shall also furnish or cause to
be furnished to the Purchaser such information relating to the businesses and
affairs of the Company, Veredus and the Subsidiaries as the Purchaser shall from
time to time reasonably request.
(b) Carry On in Regular Course. Except as set forth in the
exhibits or schedules hereto or as otherwise contemplated by this Agreement or
as consented to in writing by the Purchaser, (i) the Company shall, and the
Company shall cause the Subsidiaries and Veredus to, carry on their businesses
in the ordinary course consistent in all material respects with past practice;
and (ii) the Stockholder and the Company shall not, and the Company shall cause
the Subsidiaries and Veredus not to: (1) amend the charter or bylaws or other
organizational document of the Company or any of the Subsidiaries or Veredus;
(2) alter or increase the present compensation or employee benefits of any of
the employees of the Company or any of the Subsidiaries or Veredus, amend the
current terms of any of the Benefit Plans or adopt any new plan or arrangement
providing compensation or employee benefits, in each case except with respect to
actions consistent with past practice; (3) incur or contract for, by or on
behalf of the Company or any of the Subsidiaries, any capital expenditures other
than expenditures consistent with past practice that do not exceed One Million
Dollars ($1,000,000) in the aggregate and other than expenditures included in
the budget or other plans of the Company, any of the Subsidiaries or Veredus;
(4) issue, sell, pledge or permit any Encumbrance to be created on any of its
capital stock; (5) declare, set aside, make or pay any dividend or other
distribution in cash, stock or property in respect of its capital stock, or
repurchase, redeem or otherwise acquire any of its capital stock, except as
expressly permitted in this Agreement; (6) implement or change any of its
accounting practices, policies or principles; (7) waive any material right; (8)
enter into any joint venture, partnership or similar agreement; (9) make any
change in any Tax accounting methods, any new election with respect to Taxes or
any modification or revocation of any existing election with respect to Taxes;
(10) settle or otherwise dispose of any Tax audit, dispute, or other Tax
proceeding; or (11) agree to any do any of the foregoing.
(c) Dividends. Notwithstanding anything to the contrary in
this Agreement, from the date hereof until the close of business on the day
immediately
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preceding the Closing Date, the Subsidiaries may pay dividends to the Company,
and the Company shall declare and pay cash (but not non-cash) dividends on the
Company Stock payable to the Stockholder in accordance with the Company's
dividend policy as set forth in Exhibit 6.1(c) hereto.
(d) Preservation of Organization. Except as set forth in the
exhibits or schedules hereto or as otherwise contemplated by this Agreement or
as consented to in writing by the Purchaser, the Company shall, and shall cause
each of the Subsidiaries and Veredus to (1) maintain their existence and powers
and its qualification in the states listed in Schedule 2.1 hereto; (2) preserve
intact their business organization; (3) use commercially reasonable efforts to
keep available to the Purchaser the present key officers and employees of the
Company, the Subsidiaries and Veredus, including without limitation the
employees engaged in the business conducted by Chicago Deferred Exchange
Corporation and Chicago Deferred Exchange Corporation of California; (4) use
commercially reasonable efforts to preserve for the Purchaser the relationships
of the Company, the Subsidiaries and Veredus with their clients, suppliers and
others having business relations with them; (5) maintain all of the properties
of the Company, the Subsidiaries and Veredus in customary repair, order and
condition; and (6) take all steps reasonably necessary to maintain the
intangible assets of the Company, the Subsidiaries and Veredus.
Section 6.2 Confidentiality.
(a) The Confidentiality Agreement dated June 2, 2000 between
the Purchaser and the Stockholder (the "Confidentiality Agreement") shall
continue in full force and effect until the Effective Time.
(b) At the Closing, the Stockholder shall provide to the
Purchaser a list of all parties who received confidential information with
respect to the Company in connection with the potential acquisition of the
Company and copies of any confidentiality agreements entered into with respect
thereto in each to the extent permitted to do so by the terms of such agreements
or by the consent of such parties. To the extent that assignment is permitted,
the Stockholder shall assign all of its rights under such confidentiality
agreements to the Purchaser. The Stockholder agrees, at the request of the
Purchaser or the Company, to use commercially reasonable efforts at the request
and expense of the Purchaser to enforce rights under such confidentiality
agreements on behalf of the Purchaser or the Company to the extent any such
agreements are not assignable by the Stockholder to the Purchaser.
Section 6.3 Filings and Approvals. Each of the Company and the
Stockholder shall duly make all regulatory filings required to be made by it
prior to the Effective Time in respect of this Agreement and the transactions
contemplated hereby.
Section 6.4 Commercially Reasonable Efforts. Subject to the
terms and conditions hereof, each of the Company and the Stockholder agrees to
use commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and
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regulations to consummate the transactions contemplated hereby, including,
without limitation, satisfaction of the conditions set forth in Article IV
hereof.
Section 6.5 Fund Approvals. Each of the Company and the
Stockholder agrees to use commercially reasonable efforts to obtain the required
approvals of the New Advisory Contracts on the same terms (other than term
thereof) as the existing investment advisory agreements between the parties
thereto.
Section 6.6 Proxy Statements. The Company and the Stockholder
will use commercially reasonable efforts to cause the Investment Company to call
a special meeting of the shareholders of each Fund as soon as practicable after
the date hereof and to mail to that Fund's shareholders of record entitled to
vote at the special meeting of shareholders at which action is to be considered
regarding the New Advisory Contracts, in sufficient time to comply with
requirements as to notice thereof, a proxy statement which complies in all
material respects with the applicable provisions of Section 14 of the Exchange
Act and Section 20 of the Investment Company Act, and the rules and regulations
promulgated thereunder. Any portion of such proxy statement prepared by the
Company or the Stockholder shall be subject to the review and consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed.
Section 6.7 Non-Fund Clients. Each of the Company and the
Stockholder agrees (a) to notify, in a manner mutually acceptable to the parties
hereto, all of the Non-Fund Clients as soon as practicable after the execution
and delivery of this Agreement of the prospective change of control of the
Company and the Subsidiaries, and (b) to use commercially reasonable efforts to
obtain the consents of Non-Fund Clients relating to their Client Contracts. The
form of correspondence and consents prepared by the Company or the Stockholder
in connection therewith shall be subject to the review and consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed. The
parties hereto acknowledge that there shall be no obligation to obtain any board
of trustee or shareholder approval with respect to the Pimco International Fund.
Section 6.8 No Shop. From the date of this Agreement until the
Closing Date, other than in connection with the transactions contemplated
hereby, the Stockholder shall not, and shall cause the Company and its
Subsidiaries and its and their officers, directors, employees, representatives
and agents not to, solicit, propose or facilitate (including by way of providing
information regarding the Company or any Subsidiary to any third party),
directly or indirectly, any inquiries, discussions or proposals for, continue or
enter into negotiations looking toward, or enter into or consummate any
agreement or understanding in connection with any proposal regarding any
purchase or other acquisition of all or any portion of the assets or capital
stock (whether newly issued or currently outstanding) of the Company or any
Subsidiary (other than the sale of services or inventory or replacement of
assets or other routine activities in the ordinary course of business) or any
merger, business combination or recapitalization involving the Company or any
Subsidiary.
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Section 6.9 Confidentiality. The Stockholder agrees that
neither the Stockholder nor any of its subsidiaries or their respective officers
and directors will disclose any Confidential Information (as defined below)
after the date hereof to any third party, except as required by Applicable Laws.
"Confidential Information" shall mean any confidential information of the
Company, any of the Subsidiaries or Veredus which is in the possession of the
Stockholder or any of its subsidiaries or their respective officers and
directors on the date hereof or on the Closing Date other than confidential
information which becomes available to the public (other than as a result of the
disclosure of such information by the Stockholder or any of its subsidiaries or
their respective officers and directors not in contravention of the covenant set
forth in this Section 6.9).
Section 6.10 Non-Competition Agreement. The Stockholder agrees
that (a) for a period of five years immediately following the Closing Date, (i)
the Stockholder and its subsidiaries shall not, without the prior written
consent of the Company, directly or indirectly solicit for employment or hire
any person who as of the date hereof or as of the Closing Date is an officer or
employee of the Company, any Subsidiary or Veredus and (ii) the Stockholder
shall not, without the prior written consent of the Company, use its knowledge
of any current client of the Company, any of the Subsidiaries or Veredus to
indirectly or directly assist in any way any of the Stockholder's subsidiaries
or any other entity in soliciting, and shall not itself solicit, any such
clients; and (b) for a period of eighteen months immediately following the
Closing Date, the Stockholder and its subsidiaries shall not, without the prior
written consent of the Company, (i) solicit any client of the Company, any of
the Subsidiaries or Veredus, or (ii) engage in any Competitive Activity anywhere
in the world (including, without limitation, anywhere in the United States of
America). The parties acknowledge and agree that (x) the Stockholder will
receive substantial and valuable benefits under this Agreement in consideration
of the covenants and agreements of the Stockholder set forth in this Section
6.10, (y) the Purchaser would not have executed and delivered this Agreement, or
agreed to consummate the transactions contemplated hereby upon the terms and
conditions set forth in this Agreement, if the Stockholder had not entered into
the covenants and agreements set forth in this Section 6.10 and (z) the parties
intend that such agreements and covenants be enforceable and that it would be
grossly inequitable if a court or judicial tribunal were not to enforce such
covenants and agreements to the fullest extent provided herein, and in arriving
at such intention the parties took into account the fact that such agreements
and covenants have been made in the context of a sale of a business.
"Competitive Activity" shall mean engaging in any of the following activities:
(i) directly or indirectly (x) controlling the business operations of any
Competitor, or (y) owning any equity interests in any Competitor (other than
equity interests which are publicly traded and do not exceed 10% of the
particular class of interests then outstanding); or (ii) knowingly interfering
with the business relationship between the Company and any of its clients or
suppliers. The term "Competitor" as used in this Agreement shall mean any entity
that is engaged in the asset management and investment advisory businesses
engaged in by the Company or any of the Subsidiaries as of the date hereof or as
of the Closing Date; provided, however, that any entity or group of affiliated
entities that has assets under management of $3 billion or less when control
thereof or equity interests therein are acquired shall not be deemed to be a
"Competitor."
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Section 6.11 Other Investment Company Matters. The Stockholder
shall use commercially reasonable efforts to cause the Company, each Subsidiary
and Veredus, subject to any fiduciary requirements to the Investment Company or
any Fund, to ensure that neither the Investment Company nor any Fund takes any
action that would (a) prevent the Investment Company from qualifying as a
"regulated investment company," within the meaning of Section 851 of the Code,
or (b) be inconsistent in any material respect with the Investment Company's or
any Fund's prospectus or other offering, advertising or marketing materials.
Section 6.12 Post-Closing Matters. The Stockholder shall
comply with the requirements of Section 15(f) of the Investment Company Act,
including, without limitation, by refraining from imposing or seeking to impose,
for a period of two years after the Closing, any "unfair burden" on any Fund,
within the meaning of the Investment Company Act.
Section 6.13 Intercompany Transactions. Immediately prior to
the Closing Date, the Stockholder shall contribute the shares of preferred stock
of The Chicago Trust Company owned by it to the capital of the Company. All
agreements and all intercompany transactions or obligations, including all
income tax assets and liabilities, involving the Company or the Subsidiaries, on
the one hand, and the Stockholder and its subsidiaries (other than the Company
or the Subsidiaries), on the other hand, shall be cancelled as of the Closing
Date; provided, however, that any agreements between the Company and the
Subsidiaries, on the one hand, and the Stockholder and its subsidiaries (other
than the Company or the Subsidiaries), on the other hand, pertaining to the
management by the Company or the Subsidiaries of funds of the Stockholder or its
subsidiaries shall continue in full force and effect subject to the terms of any
agreements relating thereto or applicable law.
Section 6.14 FIRPTA Certificate. At or prior to the Closing,
the Stockholder shall deliver to the Purchaser a certificate in the form
required by Section 1445(b)(2) of the Code and the regulations promulgated
thereunder to the effect that the Stockholder is not a "foreign person" within
the meaning of Section 1445 of the Code.
Section 6.15 M&C AUM. The Stockholder shall provide the
Purchaser with a certificate of an officer of the Stockholder setting forth the
M&C AUM and the calculation thereof as soon as practicable but not later than
the date that is five (5) business days prior to the Closing Date.
Section 6.16 Approvals. As soon as practicable hereafter, the
Stockholder (a) shall cause the board of directors of the Company to approve
this Agreement and the transactions contemplated hereby, and use its best
efforts to cause such approval to be obtained by October 20, 2000, and (b) shall
execute and deliver to the Purchaser a stockholder consent pursuant to Section
228 of the DGCL authorizing and approving the Merger and this Agreement, and the
Stockholder hereby agrees that it shall not revoke or withdraw such consent
while this Agreement is in effect.
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ARTICLE VII
COVENANTS OF THE PURCHASER
Section 7.1 Confidentiality. The Confidentiality Agreement
shall continue in full force and effect until the Closing.
Section 7.2 Filings and Approvals. Each of the Purchaser and
Newco shall duly make all regulatory filings required to be made by it prior to
the Effective Time in respect of this Agreement and the transactions
contemplated hereby.
Section 7.3 Commercially Reasonable Efforts. Subject to the
terms and conditions hereof, the Purchaser agrees to use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated hereby, including,
without limitation, satisfaction of the conditions set forth in Article V
hereof.
Section 7.4 Use of the Alleghany Name. Promptly after the
Closing, the Purchaser shall use commercially reasonable efforts to cause the
Company, the Subsidiaries, the Investment Company and the Funds to change their
corporate or organizational names to names that do not contain the word
"Alleghany" or any variation thereof and to cease thereafter from using the word
"Alleghany" or any variation thereof.
Section 7.5 Transfer Taxes. The Purchaser shall prepare and
attend to the filing of any and all returns, applications or other documents
regarding any transfer, transfer gains or similar Taxes which become payable in
connection with, or by virtue of, the Merger and the other transactions
contemplated by this Agreement (collectively, "Transfer Taxes"), and the
Stockholder shall reasonably cooperate with the Purchaser with respect to the
preparation and filing of such returns, applications or other documents. The
Purchaser and Stockholder shall each pay (and shall indemnify and hold the other
harmless against) one-half of all Transfer Taxes payable with respect to the
Merger and the other transactions contemplated hereby.
Section 7.6 Cooperation with Preparation of Proxy Statements.
The Purchaser agrees to cooperate with the Company in the preparation and
mailing of the proxy statements contemplated by Section 6.6 hereof. The
Purchaser agrees to promptly provide in writing all information concerning the
Purchaser, Newco and their respective affiliates required to be included in the
Funds' proxy statements under the Exchange Act, the Investment Company Act or
the rules and regulations promulgated thereunder. The Purchaser agrees to
promptly correct such information if and to the extent that the information
regarding the Purchaser, Newco or any of their respective affiliates in a Fund's
proxy statement becomes false or misleading in any material respect.
Section 7.7 Information to Board of Trustees. With respect to
each Fund, the Purchaser promptly shall provide to the Board of Trustees of the
Investment Company all information relating to the Purchaser and its affiliates
that is necessary
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and/or reasonably requested by such Board to enable it to evaluate the terms of
the New Advisory Contract (including any sub-advisory agreement) proposed in
connection with the transactions contemplated hereby and relating to any such
Fund in accordance with such Board's responsibilities under Sections 15 and 36
of the Investment Company Act. In addition, the Purchaser promptly shall provide
to the Board of Trustees of the Investment Company all information necessary
and/or reasonably requested by such Board to approve the terms of new
distribution agreements, if any, proposed in connection with the transactions
contemplated hereby and to permit preparation and approval of proxy materials or
prospectuses, as the case may be, to be sent to the shareholders of each Fund in
connection with the special shareholders' meetings referred to in Section 6.6
hereof. The Purchaser promptly shall provide to the Company and the Stockholder
copies of all information provided to the Board of Trustees of the Investment
Company in accordance with this Section 7.7.
Section 7.8 Certain Post-Closing Fund Matters. The Purchaser
acknowledges that the Merger is intended to qualify for the treatment described
in Section 15(f) of the Investment Company Act. In this regard, the Purchaser
shall, and from and after the Effective Time shall cause the Surviving
Corporation and each of the Subsidiaries to, comply with the requirements of
Section 15(f) of the Investment Company Act, including, without limitation, (i)
using all commercially reasonable efforts to assure that, for a period of three
years after the Effective Time, at least 75% of the Board of Trustees of the
Investment Company or any permitted successor thereto are not "interested
persons" of the Stockholder, the Company, the Surviving Corporation, the
Purchaser, Newco, a Subsidiary or any of their affiliates, as that term is
defined under applicable provisions of the Investment Company Act and
interpreted by the SEC; such efforts to include (x) causing any employee,
officer, director or agent of the Stockholder, the Company, the Surviving
Corporation, the Purchaser, Newco, a Subsidiary or any of their respective
affiliates who shall be a trustee of the Investment Company to resign when
required to maintain such percentage, and (y) using all reasonable efforts to
ensure that vacancies on the Board of Trustees of the Investment Company shall
be filled by a person who is not an "interested person" of the Stockholder, the
Company, the Surviving Corporation, the Purchaser, Newco, a Subsidiary or any of
their respective affiliates, who has been selected and proposed for election by
a majority of the Trustees who are not such interested persons, and who has been
elected by shareholders in accordance with Section 16(b) of the Investment
Company Act; and (ii) refraining from imposing or seeking to impose, for a
period of two years after the Effective Time, any "unfair burden" on any Fund,
within the meaning of the Investment Company Act.
Section 7.9 Form ADV. Following the Closing, the Purchaser
agrees to cause each Subsidiary that is a registered investment adviser under
the Advisers Act to amend its Form ADV and promptly to file such amendment with
the SEC and any applicable state authorities, for the purpose of disclosing
information about the change in control of the respective Subsidiary and any
change in personnel following the Merger.
Section 7.10 Employee Matters. Prior to, at and after the
Closing, the Purchaser shall, and shall cause the Surviving Corporation to, and
the Stockholder and the Company are permitted to, take such actions as are
necessary, including, without
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limitation, the amendment of any Benefit Plan, in order to provide the benefits
to the employees of the Company and the Subsidiaries as set forth in Exhibit
7.10 hereto.
Section 7.11 Formation and Actions of Newco. The Purchaser
shall take all necessary actions in connection with the formation and
qualification of Newco, and shall cause Newco to take all of the actions
required on its part for the consummation of the transactions contemplated
hereby.
ARTICLE VIII
Indemnity
Section 8.1 Survival of Representations, Warranties, Indemnity
Obligations and Covenants. All representations, warranties and covenants,
including without limitation any indemnity obligations, of the parties hereto
which are contained in this Agreement, together with the certificates delivered
pursuant hereto, shall survive the Closing and remain operative and in full
force and effect, regardless of any investigation heretofore or hereafter made
by or on behalf of any of the parties hereto; provided, however, that the
obligations of the parties for any breach of any representation, warranty or
covenant, including without limitation any indemnity obligation, made by them
herein or therein shall survive the Closing Date only until the later of the
first anniversary of the Closing Date and March 31, 2002 (the "Termination
Date") or, for any claim thereon made during that period, until such claim is
resolved, and no claim thereon may be first asserted after the Termination Date,
except that the representations and warranties contained in Sections 2.2, 2.11
and 2.17(g) and in the third sentence of Section 2.3 hereof, and the covenants
set forth in Sections 1.8, 6.9, 6.10, 6.11, 6.12, 7.4, 7.5, 7.8, 7.9, 7.10,
7.11, 10.2, 10.3, 10.4, 10.9, 10.12 and Articles VIII and IX hereof, shall
survive the Closing Date until 60 days after the expiration of the statute of
limitations applicable to any claim which could be made hereunder or thereunder
or for any claim thereon made during that period until such claim is resolved.
Section 8.2 Indemnity by the Stockholder.
(a) Subject to the limitations in Section 8.1 hereof, and
except for the Stockholder's indemnity (i) for Taxes, which shall be governed
exclusively by Section 9.3(a) hereof to the extent of any indemnification for
Taxes for Pre-Closing Tax Periods or Section 9.5(b) hereof to the extent
relating to the Section 338 Elections (as hereinafter defined), and (ii) for
Liabilities (as hereinafter defined) arising out of Section 4001(b) of ERISA or
Section 414(b), (c), (m) or (o) of the Code and Liabilities arising out of any
discontinued business of the Company or any of its present or former
subsidiaries or parents or any of their predecessors, or any business of the
Stockholder or any of its present or former subsidiaries (other than the Company
and the Subsidiaries) or any of its predecessors, which shall be governed
exclusively by Section 8.2(b) hereof, the Stockholder agrees to indemnify the
Purchaser and hold it harmless at all times after the date of this Agreement
from and against and in respect of any and all Liabilities (as hereinafter
defined) arising out of or due to the breach of any representation, warranty or
covenant of the Company or the Stockholder set forth in this Agreement or in any
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certificate delivered pursuant hereto, and any and all actions, suits and
proceedings incident to any of the foregoing. The term "Liabilities" for
purposes of this Agreement shall mean all liabilities, losses, judgments,
damages, settlements, assessments, claims, costs or expenses, including, without
limitation, attorneys' fees and expenses. In computing the amount of any
Liabilities, such amount shall be limited to the amount that remains after
deduction therefrom of the amount of any insurance proceeds received by the
indemnified party in respect of such Liabilities.
(b) The Stockholder agrees to indemnify the Purchaser, the
Company and the Subsidiaries and hold them harmless at all times after the
Closing Date from and against and in respect of any and all Liabilities for any
obligation, liability (including any liability under Sections 4062, 4063 and
4064 of ERISA), lien, fine, penalty or tax with respect to, or by reason of, (x)
any employee benefit plan (within the meaning of Section 3(3) of ERISA) of any
entity (other than the Company and the Subsidiaries) which has ever been
considered a single employer with the Stockholder under Section 4001(b) of ERISA
or Section 414(b), (c), (m) or (o) of the Code prior to the Closing Date, (y)
any business of the Company or any of its present or former Subsidiaries or any
of their predecessors which has been discontinued prior to the Closing Date, or
(z) any business of the Stockholder or any of its present or former subsidiaries
(other than the Company and the Subsidiaries) or any of its predecessors.
(c) The Purchaser agrees that indemnification pursuant to this
Article VIII and pursuant to Article IX hereof, subject to all limitations on
such indemnification set forth in this Agreement, shall be the sole and
exclusive remedy and means of recovery by the Purchaser, Newco, the Company or
the Subsidiaries, as the case may be, against the Stockholder with respect to
any claim or action seeking damages or any other form of monetary relief brought
by the Purchaser, Newco, the Company or the Subsidiaries, other than with
respect to fraud or willful misconduct.
Section 8.3 Indemnity by the Purchaser.
(a) Subject to the limitations set forth in Section 8.1 hereof
and except for the Purchaser's indemnity (i) for Taxes, which shall be governed
exclusively by Section 8.3(b) hereof, and (ii) for breach of Section 7.8 hereof,
which shall be governed exclusively by Section 8.3(c) hereof, the Purchaser
agrees to indemnify the Stockholder and hold it harmless at all times after the
date of this Agreement from and against and in respect of any and all
Liabilities arising out of or due to the breach of any representation, warranty
or covenant of the Purchaser set forth in this Agreement or in any certificate
delivered pursuant hereto, and any and all actions, suits and proceedings
incident to the foregoing.
(b) The Purchaser agrees to indemnify and hold harmless the
Stockholder (and each member of the affiliated group of which the Stockholder is
the common parent, as such terms are defined in Section 1504 of the Code)
against any additional Tax imposed upon the Stockholder (or any member of its
affiliated group) if any payment made by the Stockholder, the Company or the
Subsidiaries prior to the Closing Date to any "disqualified person" (within the
meaning of Section 280G(c) of the Code) employed
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by the Company or the Subsidiaries on the Closing Date is treated as an "excess
parachute payment" (within the meaning of Section 280G(b) of the Code) by reason
of any payment (including by reason of any transfer of property) to such person
on or after the Closing Date made directly or indirectly by the Purchaser, the
Company, the Subsidiaries or any person whose relationship to any of the
foregoing is such as to require attribution of stock ownership between the
parties under Section 318(a) of the Code; provided, however, that the Purchaser
shall not be obligated to indemnify the Stockholder (or any member of its
affiliated group) pursuant to the foregoing, if the information on Schedule
2.17(g) with respect to the amount of the payments that could be made to such
disqualified person without causing any part of such payment to be treated as an
"excess parachute payment" is inaccurate.
(c) The Purchaser agrees to indemnify the Stockholder and hold
it harmless at all times after the date of this Agreement from and against and
in respect of any and all Liabilities arising out of or due to the breach of
Section 7.8 hereof.
(d) The Stockholder agrees that indemnification pursuant to
this Article VIII, subject to all limitations on such indemnification set forth
in this Agreement, shall be the sole and exclusive remedy and means of recovery
by the Stockholder against the Purchaser and Newco with respect to any claim or
action seeking damages or any other form of monetary relief brought by the
Stockholder, other than with respect to fraud or willful misconduct.
Section 8.4 Certain Indemnification Covenants.
(a) Subject to Section 8.4(c) hereof, the obligations of the
Stockholder to indemnify the Purchaser under Section 8.2(a) hereof shall be
limited to $206,250,000, and the Stockholder shall have no obligation to
indemnify the Purchaser under Section 8.2(a) hereof until such time as the
aggregate amount of the Liabilities claimed by the Purchaser exceeds Twenty-Five
Million Dollars ($25,000,000), and then only in an amount in excess of such
Twenty-Five Million Dollars ($25,000,000).
(b) Subject to Section 8.4(c) hereof, the obligations of the
Purchaser to indemnify the Stockholder under Section 8.3(a) hereof shall be
limited to $206,250,000, and the Purchaser shall have no obligation to indemnify
the Stockholder under Section 8.3(a) hereof until such time as the aggregate
amount of Liabilities claimed by the Stockholder exceeds Twenty-Five Million
Dollars ($25,000,000), and then only in an amount in excess of such Twenty-Five
Million Dollars ($25,000,000).
(c) Notwithstanding anything to the contrary in Sections
8.4(a) and 8.4(b) hereof, there shall be no limits (including any $25,000,000
deductible or $206,250,000 cap) on the obligations of the parties hereto to
indemnify any other party hereto pursuant to Sections 8.2(b), 8.3(b), 8.3(c) and
Article IX hereof, pursuant to Section 8.2(a) with respect to breaches of
Sections 2.2, 2.11 and 2.17(g) and the third sentence of Section 2.3, and
breaches of any covenants contained in this Agreement, and therefore obligations
to indemnify in respect of such provisions shall be from the first dollar to the
last dollar of such Liability or Tax, as the case may be. Notwithstanding
anything in this
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Agreement to the contrary, for purposes of the provisions set forth in this
Article VIII, all Company Material Adverse Effect, materiality and correlative
qualifications included in any of the representations and warranties contained
in this Agreement shall be disregarded (including for purposes of determining
whether a breach has occurred and for purposes of determining the amount of
Liability associated with a breach).
Section 8.5 Procedure.
(a) The Purchaser on the one hand, and the Company and the
Stockholder, on the other hand, each agree to promptly notify each other if any
of them becomes aware of any Liabilities with respect to which indemnity may be
asserted under this Article VIII (hereinafter referred to as a "claim"),
provided that failure to notify the indemnifying party shall not relieve such
party from liability except to the extent such party is materially prejudiced
thereby.
(b) The party entitled to indemnity (the "Indemnitee") shall
permit the party responsible for such indemnity (the "Indemnitor") to assume, by
giving written notice to the Indemnitee within 30 calendar days of receipt of
notice of such claim, the defense of, so long as it agreed to irrevocably
provide indemnification with respect to, any such claim or any Litigation
resulting from such claim at its own cost. If the Indemnitor assumes the defense
of any such claim or Litigation resulting therefrom, the Indemnitee may
participate, at its expense, in the defense of such claim or Litigation provided
that the Indemnitor shall direct and control the defense of such claim or
Litigation; provided that, if the Indemnitor proposes that the same counsel
represent both the Indemnitee (or subsidiaries thereof) and the Indemnitor (or
subsidiaries thereof) and representation of both parties by the same counsel is
subject to a conflict of interest in the written opinion of counsel reasonably
satisfactory to the Indemnitor, then the Indemnitee shall have the right to
retain its own counsel at the cost and expense of the Indemnitor. The Indemnitee
shall make available to the Indemnitor all records and other materials in the
possession or under the control of the Indemnitee and required by the Indemnitor
in defending any such claim, and shall in all respects give reasonable
cooperation in such defense. Except with the written consent of Indemnitee,
which consent shall not be unreasonably withheld or delayed, the Indemnitor
shall not, in the defense of such claim or any Litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement of such claim or
Litigation which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnitee of a release from all liability
in respect of such claim or Litigation.
(c) If the Indemnitor shall not assume the defense of any such
claim or Litigation resulting therefrom, by giving written notice to the
Indemnitee within 30 calendar days of receipt of notice of such claim, the
Indemnitee may defend against such claim or Litigation in such manner as it may
deem appropriate. The Indemnitee shall not consent to entry of any judgment or
enter into any settlement of such claim or Litigation without the written
consent of the Indemnitor, which consent shall not be unreasonably withheld or
delayed. The Indemnitor shall promptly reimburse the Indemnitee from time to
time for any and all amounts paid for or incurred by the Indemnitee and for
which the Indemnitor is obligated pursuant to this Article VIII, upon submission
by the Indemnitee
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of a statement reflecting the basis upon which such indemnification is sought
and the computation of such amounts.
(d) If the Indemnitor assumes the defense of the claim in
accordance with Section 8.5(b) and the Indemnitor fails to take reasonable steps
necessary to defend diligently such claim within 30 calendar days after
receiving written notice from the Indemnitee, the Indemnitee may, at its option,
elect to settle or assume its own defense, assisted by counsel of its own
choosing, and the Indemnitor will be liable for all Liabilities incurred in
connection therewith; provided, however, that the Indemnitee shall not, in the
defense of such claim or any Litigation resulting therefrom, consent to entry of
any judgment or enter into any settlement of such claim or Litigation except
with the written consent of Indemnitor, which consent shall not be unreasonably
withheld or delayed.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns.
(a) The Stockholder shall cause the Company and each
Subsidiary that is a corporation for federal income tax purposes to join, for
all taxable periods of the Company and such Subsidiary ending on or prior to the
Closing Date, in any Consolidated Income Tax Return (as defined below).
(b) The Stockholder shall, or shall cause the Company and its
Subsidiaries to, prepare and timely file all Tax Returns of or including the
Company and/or its Subsidiaries that are required to be filed (with extensions)
on or before the Closing Date and shall timely pay all Taxes due as shown on
such Tax Returns. All such Tax Returns will be prepared and filed by the
Stockholder, the Company or its Subsidiaries in a manner consistent with the
prior practice of the Stockholder, the Company or its Subsidiaries, as
applicable.
(c) For each taxable year of the Stockholder for which the
Company and its Subsidiaries are included for all or any part of such taxable
year on any Consolidated Income Tax Return of the Stockholder which is due (with
all extensions) to be filed after the Closing Date, the Company shall prepare,
or shall cause the Subsidiaries to prepare, in a manner consistent with the
prior practice of the Company and the Subsidiaries, and deliver to the
Stockholder no later than June 15th, all relevant Tax schedules, forms and
information relating to the Company and its Subsidiaries, complete in all
material respects, to permit their inclusion in such Consolidated Income Tax
Returns of the Stockholder for each such taxable year. The Stockholder shall
timely file all Consolidated Income Tax Returns and shall timely pay all Taxes
due as shown on such Consolidated Income Tax Returns.
(d) The Stockholder and the Purchaser and the Company agree
that for all Income Tax purposes, the taxable period of the Company and its
Subsidiaries which
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began on January 1st of the calendar year in which the Closing Date occurs shall
be terminated as of the close of business on the Closing Date in accordance with
Treasury Regulations Section 1.1502-76(b)(1) (other than transactions properly
allocable thereunder to the portion of the day after the Closing shall occur)
and items of income, gain, loss, deduction or credit shall be apportioned based
upon a closing of the books for Tax purposes in accordance with Treasury
Regulation Section 1.1502-76(b). 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 month which includes the Closing Date. The Stockholder and the Purchaser
and the Company further agree to file all Tax Returns (including, without
limitation, all state income Tax Returns), handle the contest of any audit and
otherwise act for all Tax purposes consistent with the provisions of this
Section 9.1(d).
(e) In the case of any Tax Return for any (i) taxable period
of the Company or any Subsidiary beginning before and ending after the Closing
Date (a "Straddle Period"), or (ii) any taxable period of the Company or any
Subsidiary ending on or before the Closing Date that is required to be filed
after the Closing Date (other than Tax Returns described in Section 9.1(b) and
9.1(c)) (a "Pre-Closing Tax Return"), the Company shall provide the Stockholder
with copies of the completed Tax Return for such taxable period, together with
such related work papers and other documents as the Stockholder shall reasonably
request, no later than 30 days before the due date for the filing of such Tax
Return. The Stockholder and its authorized representatives shall have the right
to review the Tax Returns received from the Company pursuant to this Section
9.1(e), and the Company shall make such changes to any Pre-Closing Return as is
requested by Stockholder for which there is a reasonable basis in fact and law
to the extent consistent with the prior practice of the Stockholder, the Company
or the Subsidiaries, as applicable, and subject to Section 9.5(c). No fewer than
5 days before the due date of the filing (such date to mean the last date that
the filing can be made without incurring interest or penalties) of the Tax
Return (i) in respect of a Straddle Period, the Stockholder shall pay to the
Company an amount equal to the portion of any Tax relating to a Straddle Period
that is attributable to the Stockholder pursuant to Section 9.3(b) hereof in
excess of the accruals for such Taxes reflected in the Closing Date Balance
Sheet, and (ii) in respect of any Pre-Closing Tax Return, the Stockholder shall
pay to the Company an amount equal to all Taxes due as shown on such Pre-Closing
Tax Returns in excess of the accruals for such Taxes reflected in the Closing
Date Balance Sheet. If as a result of the review of any Tax Returns relating to
a Straddle Period received from the Company the Stockholder disputes the
treatment of any items on the Tax Returns prepared by the Company, the
Stockholder and the Purchaser agree to consult with each other and attempt to
resolve in good faith any such dispute. If the parties are unable to resolve any
dispute within 60 business days after the receipt of any such Tax Returns, the
parties shall submit such dispute to a mutually acceptable national accounting
firm (which shall not be the accountants who regularly audit the financial
statements of the Stockholder or the Purchaser), whose decision shall be
conclusive and binding on the parties. The Stockholder and the Company shall
each pay one-half of the fees and expenses of such accounting firm. If such
disputes have not been resolved prior
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to the due date for the filing of such Tax Return relating to a Straddle Period,
the Tax Return in question, to the extent any issues thereon remain unresolved,
shall be filed (and the Stockholder shall make payments pursuant to this Section
9.1(e)) in accordance with the positions taken by the Purchaser, provided that
the fact that such Tax Return will have been filed in accordance with the
Purchaser's position shall not be taken into account for purposes of any dispute
resolution under this Section 9.1(e). If a determination is made through the
dispute resolution process after a Tax Return relating to a Straddle Period is
filed that the Purchaser's position was inappropriate, the Purchaser shall
promptly file an amended Tax Return relating to a Straddle Period (to the extent
permitted by applicable law) reflecting the final decision of the accounting
firm and an adjusting payment will be made by the Stockholder to the Purchaser
or the Purchaser to the Stockholder, as the case may be, to reflect any
difference between the Tax due with respect to the amended Tax Return relating
to a Straddle Period and the Tax due with respect to the Tax Return as
originally filed. In addition, if at the time of any payment under this Section
9.1(e) the Closing Date Balance Sheet has not been finalized, then the payments
under this Section 9.1(e) shall be made on the basis of the then best available
estimates of the Stockholder of the accruals for Taxes that will be reflected in
the Closing Date Balance Sheet as certified by the Stockholder in writing
(together with its calculation of such estimate and a description in reasonable
detail of the manner in which such estimate was calculated), and within five (5)
business days after the Closing Date Balance Sheet is finalized an adjusting
payment will be made by the Stockholder to the Purchaser or by the Purchaser to
the Stockholder, as the case may be, to reflect any difference between the
estimate and the actual accruals.
(f) For purposes of this agreement, "Consolidated Income Tax
Return" means any consolidated, combined, unitary or affiliated Income Tax
Return of the Stockholder which the Company is required or eligible to join;
"Income Tax" or "Income Taxes" means all Taxes (x) based upon, measured by, or
calculated with respect to, net income or net receipts, proceeds or profits, or
(y) based upon, measured by, or calculated with respect to multiple bases
(including, but not limited to, corporate franchise and occupation Taxes) if
such Tax may be based upon, measured by, or calculated with respect to one or
more bases described in clause (x) above and shall include, without limitation,
the Illinois personal property replacement tax under 35 ILCS 5/201; and "Income
Tax Return" means any Tax Return relating to Income Taxes.
Section 9.2 Post-Closing Tax Matters.
(a) To the extent relevant for a taxable period for which the
requesting party is charged with payment responsibility for Taxes under this
Agreement, each of the Stockholder and the Purchaser will provide the other (and
the other's attorneys, accountants and agents) with, and the Company, after the
Closing Date, shall cause the Subsidiaries to provide the Stockholder (and the
Stockholder's attorneys, accountants and agents) with, the right, at reasonable
times and upon reasonable notice, to have access to, and to copy and use, any
records or information and personnel which may be relevant for the preparation
of any Tax Returns, the determination of amounts due under Section 9.3 hereof,
any audit or other examination by any Taxing Authority, the filing of any claim
for a refund of Tax or for the allowance of any Tax credit, or any judicial or
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administrative proceedings relating to liability for Taxes. The party requesting
assistance hereunder shall reimburse the other party for reasonable
out-of-pocket expenses incurred in providing such assistance. Any information
obtained pursuant to this Section 9.2(a) shall be held in strict confidence and
shall be used solely in connection with the reason for which it was requested.
(b) The Stockholder shall cause any tax sharing agreement or
similar arrangement with respect to Taxes involving the Company or its
Subsidiaries to be terminated effective as of the Closing Date. To the extent
any such agreement or arrangement obligates the Company or its Subsidiaries to
make any payments with respect to Taxes after the Closing Date, none of the
Company, the Subsidiaries or the Stockholder shall have any obligation under any
such agreement or arrangement for any past, present or future period. All powers
of attorney granted by the Company and any Subsidiary with respect to Taxes
shall be revoked as of the Closing Date.
(c) Except as otherwise provided in this Agreement: (i) any
refund of Taxes with respect to the Company or any of its Subsidiaries that is
received with respect to any taxable period of the Company and its Subsidiaries
ending on or before the Closing Date (each, a "Pre-Closing Tax Period") in
excess of the accruals for such refunds reflected in the Closing Date Balance
Sheet or the portion of any Straddle Period for which the Stockholder is
responsible pursuant to Section 9.3(b) hereof (such portion being referred to
herein as the "Stockholder's Straddle Period") in excess of the accruals for
such refunds reflected in the Closing Date Balance Sheet shall be for the
account of the Stockholder, and to the extent that the Purchaser, the Company or
any Subsidiary receives any such refund after the Closing Date with respect to
any such Pre-Closing Tax Period or the Stockholder's Straddle Period, the amount
of such excess (net of any Taxes imposed with respect to the receipt or accrual
of such excess and any expenses incurred in connection with obtaining the
refund) shall be promptly paid to the Stockholder.
(d) Notwithstanding Section 6.1(c), the Company may pay or
cause the Subsidiaries to pay to the Stockholder on the day preceding the
Closing Date (i) the amount of any reserve or provision for Income Taxes (not
including any deferred Income Taxes) on the June 30, 2000 balance sheet and (ii)
the amount of any reserve or provision for Income Taxes (not including any
deferred Income Taxes) on its books and records in respect of income of the
Company or the Subsidiaries derived in the ordinary course of business for the
period from July 1, 2000 through the day preceding the Closing Date, in each
case in excess of the amount, if any, paid out of such reserves since June 30,
2000 to any Tax Authority or to the Stockholder.
Section 9.3 Stockholder Indemnity for Taxes.
(a) The Stockholder shall pay and shall indemnify and hold
harmless Purchaser, the Company and the Subsidiaries from: (i) all Liability in
respect of Income Taxes of the Company and its Subsidiaries for all Pre-Closing
Tax Periods and the Stockholder's Straddle Period (including, without
limitation, all Liability for any Tax arising from the Section 338 Elections);
(ii) all Liability in respect of any Tax (other than Liability in respect of any
Income Taxes) to the extent that the amount of the Liability
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exceeds the amount of accrual (if any) for such Taxes reflected in the Closing
Date Balance Sheet of the Company and its Subsidiaries for all Pre-Closing Tax
Periods and the Stockholder's Straddle Period; (iii) any additional Taxes of the
Company or the Subsidiaries as a result of the disallowance of any deduction for
any excess parachute payment made to any person identified on Schedule 2.17(g)
hereof and attributable to any inaccuracy in the amount of the payment which
could be made to such person as set forth on Schedule 2.17(g) hereof; (iv) all
liability resulting by reason of the several liability of the Company and its
Subsidiaries pursuant to Treasury Regulation Section 1.1502-6 or any analogous
state, local or foreign law or regulation or by reason of the Company and its
Subsidiaries having been a member of any consolidated, combined or unitary group
on or prior to the Closing Date; and (v) all liability of the Company and its
Subsidiaries in respect of Taxes of any other person or entity pursuant to any
agreement or contract, whether written or unwritten, entered into on or before
the Closing Date, or as a transferor or successor, by contract or otherwise.
(b) In the case of any Straddle Period, the Stockholder shall
be solely responsible for all Taxes of the Company and its Subsidiaries
attributable to the portion of the period ending on, and which includes, the
Closing Date and the Purchaser shall be solely responsible for all Taxes
attributable to the portion of the period which begins after the Closing Date.
For purposes of this Agreement, the portion of any Tax that is attributable to
the portion of a Straddle Period up to and including the Closing Date shall be
(i) in the case of a Tax that is not an Income Tax or any Tax based on gross
income, sales or gross receipts (including real property taxes), the total
amount of such Tax for the period in question multiplied by a fraction, the
numerator of which is the number of days in the Straddle Period through and
including the Closing Date, and the denominator of which is the total number of
days in such Straddle Period, and (ii) in the case of an Income Tax and any Tax
that is based on any of gross income, sales or gross receipts, the Tax that
would be due with respect to the portion of the Straddle Period through and
including the Closing Date, if such portion of the Straddle Period were a
separate taxable Pre-Closing Tax Period, except that exemptions, allowances,
deductions or credits that are calculated on an annual basis (such as the
deduction for depreciation or capital allowances) shall be apportioned on a per
diem basis.
Section 9.4 Matters Involving Tax Claims. If a claim is made
or threatened by any Taxing Authority that, if successful, may result in an
indemnity payment under Section 9.3(a) or Section 9.5(b) hereof (a "Tax Claim"),
the Purchaser shall notify the Stockholder stating the nature and basis of such
claim, and the amount thereof, to the extent known. Failure to give such notice
shall not relieve the Stockholder from any liability that it may have on account
of this indemnification or otherwise, except to the extent that the Stockholder
is materially prejudiced in the defense of such claim thereby. The Stockholder
will have the right, at its option, upon timely notice to the Purchaser, to
assume at its own expense control of any audit or other defense of any Tax Claim
with its own counsel. The Stockholder's right to control a Tax Claim will be
limited to issues in respect of which amounts in dispute would be paid by the
Stockholder or for which the Stockholder would be liable pursuant to Section
9.3(a) or Section 9.5(b) hereof, which determination shall be made by the
Stockholder in its sole discretion. Costs of such Tax Claims are to be borne by
the Stockholder unless the Tax Claim relates
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to a Straddle Period, in which event such costs shall be fairly apportioned. The
Purchaser, the Company and the Subsidiaries at their own expense shall cooperate
with the Stockholder in contesting any Tax Claim, which cooperation shall
include the retention and, upon the Stockholder's request, providing of records
and information that are reasonably relevant to such Tax Claim and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder. Notwithstanding
the foregoing, (i) the Stockholder shall not have the right to control any Tax
Claim unless it first acknowledges in writing its obligation to fully indemnify
the Purchaser for Taxes at issue in the proceeding, (ii) no settlement or
disposition of any Tax Claim shall be made without the Purchaser's consent
(which consent shall not be unreasonably withheld) if the same could reasonably
be expected to adversely affect the Purchaser's, the Company's or any
Subsidiary's Liability for Taxes in a taxable year or period beginning after the
Closing Date, and (iii) the Purchaser and the Stockholder shall jointly control
all proceedings taken in connection with any claims for Taxes relating solely to
a Straddle Period of any of the Company or the Subsidiaries, and each party
shall bear its own out-of-pocket costs and expenses of the contest and all joint
costs and expenses of the contest shall be borne in the same ratio as the
applicable proposed Tax would be allocated.
Section 9.5 Section 338 Election.
(a) The Stockholder shall join with the Purchaser in making a
timely and irrevocable election under Section 338(h)(10) of the Code with
respect to the Company and each Subsidiary which is a corporation and, if
permissible, shall make all similar elections requested by the Purchaser under
any applicable state or local Tax laws with respect to the Company and each
Subsidiary (collectively, the "Section 338 Elections"). The Stockholder shall
report the acquisition of the Company by the Purchaser in a manner consistent
with the making of the Section 338 Elections and shall take no position contrary
thereto in any Tax Return or audit or any proceeding before any Tax authority
without the written consent of the Purchaser.
(b) The Stockholder shall be responsible for and indemnify and
hold harmless the Purchaser and its affiliates (including the Company) from and
against any and all Liabilities arising from any Section 338 Elections being
ineffective, invalid, improperly or untimely filed to the extent attributable to
(i.e., that would not have been incurred but for) (i) the Stockholder's failure
to timely or validly execute any Section 338 Forms (as defined below) or file
any Section 338 Forms with any applicable Tax Return, (ii) any information
provided by the Stockholder in connection with the Section 338 Forms being
inaccurate, untimely, or incomplete or (iii) the inaccuracy of the
representation set forth in Section 2.11(e) of this Agreement.
(c) The Purchaser shall be solely responsible for preparing
drafts of all forms, attachments and schedules necessary to effectuate the
Section 338 Elections, including, without limitation, IRS Form 8023 or
applicable successor form, and any similar forms or applicable successor forms
under applicable state or local income tax laws (the "Section 338 Forms"). The
Stockholder shall cooperate in good faith with the Purchaser in Purchaser's
preparation of the Section 338 Forms and shall promptly
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provide to the Purchaser all relevant information reasonably requested by the
Purchaser and necessary to complete the Section 338 Forms.
(d) At least 45 days prior to the latest date for the filing
of any Section 338 Form by the Stockholder, the Purchaser shall furnish the
Stockholder with a copy of each such form for its review and comment, and if the
Purchaser's proposed determination of the ADSP (as defined in applicable
Treasury Regulations under Section 338) and allocation of the ADSP to the assets
of the Company and other relevant items (the "Proposed Allocation") is set forth
on such Section 338 Election Form and the Proposed Allocation has not previously
been provided to Stockholder, together with the Proposed Allocation, along with
a copy of the appraisals, if any, on which such Proposed Allocation is based.
The Purchaser and the Stockholder each agree to consult in good faith with
regard to the proposed determination of the ADSP and the Proposed Allocation,
provided that the Stockholder shall accept Purchaser's final determination of
the ADSP and the Proposed Allocation (which the Purchaser shall provide to the
Stockholder at least fifteen days prior to the due date for filing of the
Section 338 Forms), to the extent that they are reasonable and consistent with
applicable Tax law (which, when accepted, shall become the "Final Allocation").
If requested by Purchaser, Stockholder shall attempt in good faith to execute
the Section 338 Forms at or prior to the Closing, and, if any Section 338 Forms
are not executed at the Closing, the Stockholder shall execute and deliver to
Purchaser such Section 338 Forms within ten (10) days after such forms are
received by the Stockholder. The Stockholder and Purchaser will reflect such
Final Allocation in all applicable Tax Returns filed by any of them, including
but not limited to the Section 338 Forms. The Stockholder and the Purchaser, and
the Company shall not take a position before any Tax authority or otherwise
(including in any Tax Return) inconsistent with the Purchaser's determination of
the ADSP and the Final Allocation unless and to the extent required to do so
pursuant to a determination (as defined in Section 1313(a) of the Code or any
similar state or local law).
(e) The Purchaser shall bear all of the costs and expenses of
preparing the Section 338 Elections and the Proposed and Final Allocations other
than costs and expenses incurred by the Stockholder in connection with the
review of the Proposed Allocation or any Section 338 Election or the execution
of any Section 338 Election.
(f) For purposes of this Agreement, the deemed purchaser in
the Section 338 Election hereby expressly assumes all liabilities of the Company
and the Subsidiaries taken into account in determining the ADSP (it being
understood that this provision shall have no effect on any party's obligation
under this Agreement to be responsible for or indemnify for any Liability).
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Termination. At any time prior to the Closing
Date, this Agreement may be terminated:
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(a) by mutual written consent of the Purchaser and the
Stockholder;
(b) by either the Purchaser, on the one hand, or by the
Stockholder, on the other hand, upon written notice to the other if, without
fault of the terminating party, the Closing shall not have occurred on or before
April 18, 2001; provided, however, that, if the only reason that the Closing
shall not have occurred by such date is the fact that any of the conditions set
forth in Sections 4.4, 4.5, 4.7, 5.4 or 5.5 have not been satisfied or waived,
then neither the Purchaser nor the Stockholder may terminate this Agreement
unless the Closing shall not have occurred on or before July 18, 2001;
notwithstanding the foregoing, the right to terminate this Agreement under this
Section 10.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholder if an event occurs that makes it
impossible to satisfy any condition set forth in Article V of this Agreement or
by the Purchaser if an event occurs that makes it impossible to satisfy any
condition set forth in Article IV of this Agreement; provided, however, that the
right to terminate this Agreement under this Section 10.1(c) shall not be
available to a party if its failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, such impossibility;
In the event of any termination pursuant to this Section 10.1, the parties
hereto shall be released from all liabilities and obligations arising under this
Agreement with respect to matters contemplated by this Agreement other than for
damages to the extent arising from a prior breach of this Agreement; provided,
however, that the Confidentiality Agreement shall continue in full force and
effect in accordance with its terms.
Section 10.2 Expenses. Whether or not the Closing takes place
and regardless of whether this Agreement is terminated, each party hereto shall
pay all of the costs and expenses incurred by it in connection with this
Agreement or in consummating the transactions contemplated hereby (including,
without limitation, disbursements and expenses of its attorneys, accountants and
advisers); provided, however, that each of the Purchaser and the Stockholder
shall pay one-half of all fees and expenses incurred by the Investment Company
and the Funds in connection with obtaining the required approvals of the New
Advisory Contracts as contemplated in Section 6.5 of this Agreement.
Section 10.3 Notices. All notices or other communications
required or permitted under this Agreement shall be in writing and sufficient if
delivered personally, by private courier or fax, or sent by registered or
certified mail, postage prepaid, addressed as follows:
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If to the Purchaser or Newco, to
ABN AMRO North America Holding Company
c/o ABN AMRO Asset Management
82 Bishopsgate
London EC2N 4BN
United Kingdom
Attention: Mr. Tom Cross Brown
with a copy to
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Mr. Lawrence N. Barshay
If to the Company or the Stockholder, to
Alleghany Corporation
375 Park Avenue
New York, New York 10152
Attention: Mr. Robert M. Hart
with a copy to
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Ms. Linda E. Ransom
Any 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 10.4 Public Announcements. Each party hereto agrees
that it will not issue a press release or otherwise make any public announcement
with respect to this Agreement and the transactions contemplated hereby without
the prior consent of the other parties hereto (such consent not to be
unreasonably withheld or delayed), unless such party determines in good faith
that it is so obligated by applicable law, in which case such party shall
consult, to the extent practicable, with the other parties prior to issuing such
press release or making such public announcement.
Section 10.5 Notice. From the date hereof until the Closing,
each party shall give prompt written notice to the other parties of (a) the
occurrence, or failure to
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occur, of any event which occurrence or failure would cause or be likely to
cause any representation or warranty of the party giving notice contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Closing, or (b) any failure of the party giving
notice to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder; provided, however, that the
delivery of any notice pursuant to this Section 10.5 shall not limit or
otherwise affect the remedies available hereunder to the parties receiving
notice, or modify in any way any disclosure made in this Agreement or the
Schedules hereto as of the date hereof.
Section 10.6 Remedies. Without intending to limit the remedies
available to any party hereto, each party (i) acknowledges that breach of this
Agreement will result in irreparable harm for which there is no adequate remedy
at law, and (ii) agrees that any party seeking to enforce this Agreement shall
be entitled to injunctive relief, including specific performance, or other
equitable remedies upon any such breach.
Section 10.7 Entire Agreement; Amendment. This Agreement,
together with the exhibits and other documents delivered pursuant hereto and the
letters from the Stockholder to the Purchaser dated the date hereof, 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 except for
the Confidentiality Agreement, which shall continue in full force and effect
until Closing. 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 schedules, certificates or
exhibits delivered pursuant hereto. Disclosure on any one of the schedules
hereto constitutes disclosure on each other schedule as applicable (to the
extent that the relevance of such disclosure for each such other schedule is
reasonably evident from the text thereof). This Agreement may be amended,
modified, superseded or supplemented only by an instrument in writing executed
and delivered by the parties hereto.
Section 10.8 Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the respective successors, heirs, executors,
administrators, legal representatives and permitted assigns of the parties
hereto; provided, however, that no assignment of any rights or delegation of any
obligations provided for herein shall be made by any party hereto without the
express prior written consent of each other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the Purchaser
may assign all or some of its rights under this Agreement to any of its
affiliates or its direct or indirect wholly owned subsidiaries, provided that no
such assignment shall relieve the Purchaser of its obligations hereunder.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective successors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as provided in Exhibits 1.7 and 7.10 hereto.
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Section 10.9 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to agreements made and to be performed entirely within such State,
except for matters relating to the validity of corporate or similar action,
which shall be governed by the laws of the jurisdiction of organization of the
relevant entity.
Section 10.10 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 10.11 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.
Section 10.12 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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
ABN AMRO NORTH AMERICA HOLDING COMPANY
By:/s/ Carol Tenyak
--------------------------------------
Name: Carol Tenyak
Title: Vice President
ALLEGHANY ASSET MANAGEMENT, INC.
By:/s/ Stuart D. Bilton
--------------------------------------
Name: Stuart D. Bilton
Title: President and Chief
Executive Officer
ALLEGHANY CORPORATION
By:/s/ John J. Burns, Jr.
--------------------------------------
Name: John J. Burns, Jr.
Title: President
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